TG Therapeutics(TGTX) - 2020 Q3 - Quarterly Report

Special Cautionary Notice Regarding Forward-Looking Statements This section highlights that the report contains forward-looking statements, which are subject to various risks and may differ from actual outcomes - This report contains forward-looking statements concerning the company's expectations for expenses, clinical development, regulatory approval, commercialization of product candidates, and the potential impact of the COVID-19 pandemic. These statements are protected under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[7] - Actual results may differ materially from those anticipated in forward-looking statements due to a variety of factors, including those discussed in the "Risk Factors" and "Management's Discussion and Analysis" sections of the report[8] Summary Risk Factors This section summarizes the company's key business risks, including its limited operating history, ongoing losses, regulatory approval challenges, and reliance on third parties - The company is a biopharmaceutical firm with a limited operating history, no revenue from drug sales, and a history of significant operating losses which are expected to continue[13] - Key business risks include the inability to obtain regulatory approval for drug candidates, the need to raise substantial additional funding, competition, reliance on third parties for manufacturing and clinical trials, and the potential adverse impact of the COVID-19 pandemic[13][16] - Success is dependent on obtaining and protecting intellectual property, as the company has in-licensed its product candidates from third parties[16] Part I: Financial Information This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1: Financial Statements The unaudited condensed consolidated financial statements for the period ended September 30, 2020, show a significant increase in cash and total assets, primarily driven by financing activities. The company continues to incur substantial operating losses, with a significant increase in general and administrative expenses related to pre-commercialization activities. Net loss for the nine-month period widened compared to the prior year Condensed Consolidated Balance Sheets As of September 30, 2020, the company's balance sheet reflects a substantial increase in cash and cash equivalents to $254.2 million from $112.6 million at year-end 2019. This was primarily driven by equity offerings, leading to a significant rise in total stockholders' equity to $170.7 million from $38.6 million. Total liabilities decreased, mainly due to a reduction in 'Other current liabilities' and long-term debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2020 (Unaudited) | Dec 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $254,154 | $112,637 | | Total current assets | $260,335 | $149,151 | | Total assets | $273,856 | $163,014 | | Liabilities & Equity | | | | Total current liabilities | $77,670 | $84,449 | | Total liabilities | $103,198 | $124,399 | | Accumulated deficit | $(892,379) | $(701,216) | | Total stockholders' equity | $170,658 | $38,615 | Condensed Consolidated Statements of Operations For the three and nine months ended September 30, 2020, the company reported a net loss of $87.2 million and $191.2 million, respectively. This represents a significant increase from the net losses of $61.9 million and $133.3 million in the corresponding periods of 2019. The wider loss was primarily driven by a substantial increase in general and administrative expenses, particularly noncash compensation, while research and development costs remained relatively stable Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Q3 2020 | Q3 2019 | 9 Months 2020 | 9 Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Total research and development | $50,464 | $57,985 | $122,935 | $123,237 | | Total general and administrative | $35,296 | $2,914 | $63,991 | $7,971 | | Operating loss | $(85,722) | $(60,861) | $(186,812) | $(131,094) | | Net loss | $(87,163) | $(61,930) | $(191,163) | $(133,299) | | Net loss per share (basic & diluted) | $(0.73) | $(0.69) | $(1.70) | $(1.55) | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2020, net cash used in operating activities was $162.5 million. Net cash provided by investing activities was $27.6 million, mainly from the maturity of short-term securities. A significant $276.4 million in net cash was provided by financing activities, primarily from the sale of common stock. This resulted in a net increase in cash, cash equivalents, and restricted cash of $141.5 million Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(162,481) | $(102,413) | | Net cash provided by (used in) investing activities | $27,566 | $(722) | | Net cash provided by financing activities | $276,438 | $105,859 | | Net increase in cash | $141,523 | $2,724 | Notes to Condensed Consolidated Financial Statements The notes provide detailed information on the company's business, accounting policies, and financial items. Key details include the company's focus on developing medicines for B-cell mediated diseases with five drug candidates in clinical development. The company has an accumulated deficit of $892.4 million and believes its current cash will be sufficient for more than twelve months. Significant financial events include raising capital through stock offerings, a term loan facility, and milestone payments related to its licensed drug candidates - The company is a biopharmaceutical firm focused on B-cell mediated diseases, with five drug candidates in clinical development, including lead therapies ublituximab and umbralisib[27] - As of September 30, 2020, the company had an accumulated deficit of approximately $892.4 million and has incurred operating losses since inception[31] - During the nine months ended September 30, 2020, the company raised approximately $111.3 million net from its At-the-Market (ATM) program and $165.1 million net from an underwritten public offering in May 2020[79][80] - The company has a term loan facility of up to $60.0 million with Hercules Capital, of which $30.0 million was drawn as of the reporting date[95] Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's business overview, clinical trial progress, financial results, and liquidity. Key clinical updates include the FDA's acceptance of the New Drug Application (NDA) for umbralisib in MZL and FL, with PDUFA dates in February and June 2021, and the UNITY-CLL Phase 3 trial meeting its primary endpoint early. The financial analysis highlights a decrease in R&D expenses due to lower manufacturing costs and a significant increase in G&A expenses for commercial launch preparations. The company ended the quarter with $254.2 million in cash, which is expected to fund operations for more than twelve months Overview The company is a biopharmaceutical firm developing medicines for B-cell mediated diseases like CLL, NHL, and MS. Its pipeline includes five drug candidates, with lead therapies ublituximab and umbralisib in pivotal trials. The company has not yet generated any product sales and actively evaluates in-licensing and partnership opportunities Advanced Drug Candidate Pipeline | Clinical Drug Candidate | Initial Target Disease | Stage of Development | | :--- | :--- | :--- | | Ublituximab (anti-CD20 mAb) | Chronic Lymphocytic Leukemia | Phase 3 (UNITY-CLL) | | | Relapsing Multiple Sclerosis | Phase 3 (ULTIMATE I & II) | | Umbralisib (PI3K-delta inhibitor) | Marginal Zone Lymphoma | Phase 2b (UNITY-NHL) | | | Follicular Lymphoma | Phase 2b (UNITY-NHL) | | Cosibelimab (anti-PDL1 mAb) | B-cell cancers | Phase 1 trial | | TG-1701 (BTK inhibitor) | B-cell cancers | Phase 1 trial | | TG-1801 (anti-CD47/CD19) | B-cell cancers | Phase 1 trial | Clinical Trial Highlights The company provided key updates on its late-stage clinical trials. The UNITY-NHL trial for umbralisib met its primary endpoint in both MZL and FL cohorts, leading to an NDA submission that the FDA accepted for review. The UNITY-CLL Phase 3 trial for the U2 combination (ublituximab + umbralisib) also met its primary endpoint early for superior efficacy. The ULTIMATE I & II trials for ublituximab in MS have completed enrollment - The FDA accepted the New Drug Application (NDA) for umbralisib for Marginal Zone Lymphoma (MZL) and Follicular Lymphoma (FL). The MZL indication received Priority Review with a PDUFA goal date of February 15, 2021, while the FL indication has a standard review PDUFA goal date of June 15, 2021[136] - The UNITY-CLL Phase 3 trial met its primary endpoint at an interim analysis, showing a statistically significant improvement in Progression-Free Survival (PFS) for the U2 combination versus the control arm (p<0.0001), and was stopped early for efficacy[138] - The ULTIMATE I & II Phase 3 trials evaluating single-agent ublituximab in Relapsing Multiple Sclerosis (RMS) completed full enrollment in October 2018 with approximately 1,100 subjects[140] Results of Operations Comparing the third quarter and first nine months of 2020 to 2019, total operating expenses increased. While 'Other R&D' expenses decreased due to lower manufacturing costs for ublituximab and umbralisib, this was more than offset by a significant rise in G&A expenses. The G&A increase was driven by higher noncash stock compensation and costs associated with building out the commercial infrastructure in preparation for a potential product launch Comparison of Operating Expenses (in millions) | Expense Category | Q3 2020 | Q3 2019 | 9 Months 2020 | 9 Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Other R&D Expenses | $45.8 | $56.5 | $114.8 | $118.8 | | Other G&A Expenses | $11.6 | $2.3 | $25.4 | $6.6 | | Noncash Compensation (G&A) | $23.7 | $0.6 | $38.6 | $1.4 | Liquidity and Capital Resources The company's liquidity is primarily sourced from equity and debt financings. As of September 30, 2020, the company held $254.2 million in cash and cash equivalents. Management believes these funds, along with capital raised in Q4 2020, are sufficient to support operations for more than twelve months. For the first nine months of 2020, cash used in operations was $162.5 million, while cash provided by financing activities was a substantial $276.4 million - The company had approximately $254.2 million in cash and cash equivalents as of September 30, 2020[164] - Cash used in operating activities for the nine months ended September 30, 2020, was $162.5 million, an increase from $102.4 million in the prior-year period, due to manufacturing scale-up and clinical development program costs[165] - Net cash provided by financing activities was $276.4 million for the nine months ended September 30, 2020, primarily from an underwritten public offering and the ATM program[168] Item 3: Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is related to interest rate fluctuations on its investments, which consist of cash equivalents. The company does not use derivative financial instruments for speculative purposes. Management has determined that the effect of a hypothetical 100 basis point change in interest rates on its financial instruments and net loss would be immaterial - The company's primary market risk is interest rate risk on its cash and cash equivalents[191][192] - An analysis determined that the effect of a 100 basis point change in interest rates on the value of financial instruments and the resultant effect on net loss would be immaterial[195] Item 4: Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2020. There were no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[196] - No changes occurred in the company's internal control over financial reporting during the quarter ended September 30, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[197] Part II: Other Information This section provides information on legal proceedings, detailed risk factors, and exhibits filed with the report Item 1: Legal Proceedings The company reports that it and its subsidiaries are not party to any material pending legal proceedings - As of the filing date, the company and its subsidiaries are not a party to, and their property is not the subject of, any material pending legal proceedings[198] Item 1A: Risk Factors This section details numerous risks that could materially harm the company's business, financial condition, and operating results. Major risk categories include the adverse impact of the COVID-19 pandemic on operations, the company's financial position and need for capital, the inherent uncertainties of drug development and regulatory approval, challenges related to commercialization, dependence on third parties for manufacturing and clinical trials, and risks associated with intellectual property and public company status Risks Related to the COVID-19 Pandemic The COVID-19 pandemic poses significant risks to the company's business, including potential delays to ongoing and new clinical trials, disruptions to the global supply chain for its drug candidates, and challenges to commercialization efforts. The company relies on third-party manufacturers in India, South Korea, and China, which have been subject to pandemic-related restrictions - The COVID-19 pandemic could delay or compromise ongoing clinical trials, adversely impact the ability to conduct new trials, disrupt the supply chain, and delay health authority review of regulatory submissions[203] - The company's drug candidates are manufactured by single-source suppliers in countries that have been impacted by COVID-19, including India (umbralisib), South Korea (ublituximab), and China (TG-1701), increasing supply chain risk[217][218] Risks Related to Financial Position and Need for Additional Capital The company has a limited operating history, has never generated revenue from drug sales, and has an accumulated deficit of $892.4 million as of September 30, 2020. It will need to raise substantial additional funding to continue its drug development and commercialization efforts, which may cause dilution to existing stockholders - The company has incurred significant operating losses since inception, with an accumulated deficit of $892.4 million as of September 30, 2020, and expects to incur continued losses[226] - Substantial additional funding is required to continue operations, particularly for clinical trials, seeking marketing approval, and building commercial infrastructure. Failure to raise capital could force the company to delay, reduce, or eliminate programs[229] Risks Related to Drug Development and Regulatory Approval The company faces significant risks inherent in drug development, where early positive clinical trial results are not predictive of future success. The lengthy and expensive process of clinical development has an uncertain outcome, and drug candidates may cause undesirable side effects that could delay or prevent regulatory approval - The outcome of preclinical studies and early clinical trials may not be predictive of later clinical trial results, and interim or top-line data may change as more patient data becomes available[252][257] - The company has submitted an NDA for accelerated approval of umbralisib, but there is no guarantee it will be approved, as the FDA has discretion over the sufficiency of clinical trial results[273] - Manufacturing process improvements for ublituximab have resulted in analytical differences between materials used in the Phase 3 UNITY-CLL trial, which could impact the regulatory review and approvability of the drug combination[296] Risks Related to Commercialization Even if approved, the company's products face substantial competition from established therapies. Success depends on market acceptance, favorable pricing, and reimbursement from payors. The company is also building its commercial infrastructure, which involves significant expense and risk before any potential revenue is generated - The company faces substantial competition for its target indications from major pharmaceutical companies with greater resources. Key competitors include ibrutinib, venetoclax, and ocrelizumab[304][306][307] - The company is making significant investments to build a commercial organization before knowing if its lead product, umbralisib, will receive FDA approval, which could result in significant unrecoverable expenses if approval is delayed or denied[341] - The business will be subject to extensive healthcare laws, including anti-kickback and false claims statutes, which could expose the company to significant penalties if its practices are found to be non-compliant[346][347] Risks Related to Dependence on Third Parties The company relies heavily on third parties for critical functions. This includes contract research organizations (CROs) to conduct clinical trials and contract manufacturing organizations (CMOs) for the supply of its drug candidates. This dependence increases risks related to quality, cost, and timelines - The company relies on third-party CROs to conduct clinical trials. If these parties do not perform as required, trials may be delayed or terminated, and data may be compromised[362][364] - The company does not own manufacturing facilities and depends on third-party CMOs for clinical and potential commercial supply. This reliance creates risks related to supply sufficiency, quality, cost, and cGMP compliance[371] - As the company's product candidates are in-licensed, any dispute or non-performance by its licensors regarding intellectual property or other obligations could adversely affect development and commercialization[382] Risks Related to Intellectual Property The company's success is highly dependent on its ability to obtain and maintain patent protection for its in-licensed product candidates. The patent landscape is uncertain and litigious, and the company faces risks of its patents being challenged, invalidated, or circumvented by competitors - Commercial success depends on obtaining and maintaining patent and trade secret protection for its product candidates. The company relies on its licensors to protect the necessary intellectual property rights[393][394] - The company may be sued for infringing the intellectual property rights of third parties, which could be costly and time-consuming and could force the company to cease development or commercialization of a product[414][417] - The company may be involved in expensive and unsuccessful lawsuits to protect or enforce its patents, which could provoke counterclaims of invalidity or infringement[421] Item 6: Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial data formatted in iXBRL - The exhibits filed with this report include certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[464]