TG Therapeutics(TGTX) - 2021 Q1 - Quarterly Report

Special Cautionary Notice Regarding Forward-Looking Statements The report contains forward-looking statements regarding the company's future results, performance, and achievements, subject to known and unknown risks and uncertainties, protected by safe harbor provisions - The report contains forward-looking statements regarding the company's future results, performance, and achievements, which are subject to known and unknown risks and uncertainties. These statements are protected by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[7][8] - Key forward-looking statements include the ability to commercialize UKONIQ™ (umbralisib) and future products, obtain regulatory approvals, manage clinical trials, establish third-party relationships, implement business strategies, protect intellectual property, manage finances, and respond to competitive developments[8] Summary Risk Factors The company faces various risks across commercialization, finance, drug development, regulation, IP, and general operations Risks Related to Commercialization The company faces significant risks in commercializing UKONIQ and future products due to limited commercial experience, potential market acceptance issues, intense competition, and the impact of the COVID-19 pandemic on sales and marketing efforts - Limited commercial experience and potential for less successful marketing and sales of UKONIQ or future approved products[13] - The COVID-19 pandemic has impacted sales and marketing efforts for UKONIQ and could adversely affect the launch of ublituximab, if approved[13] - Risk of UKONIQ or future products not achieving broad market acceptance among physicians, patients, and payors, limiting revenue[13] - Substantial competition for target indications may lead to competitors commercializing drugs more successfully, reducing commercial opportunity[13] Risks Related to our Financial Position and Need for Additional Capital The company has incurred significant operating losses and will require substantial additional funding to support its drug development and commercialization efforts, with the risk of delays or elimination of programs if capital is not raised - Significant operating losses incurred since inception, with anticipated continued losses for the foreseeable future[13] - Need to raise substantial additional funding; inability to do so could force delays, reductions, or elimination of drug development or commercialization efforts[13] - Level of indebtedness and debt service obligations could adversely affect financial condition and funding operations[13] Risks Related to Drug Development and Regulatory Approval Drug development and regulatory approval processes are complex and uncertain, with risks including conditional approvals, undesirable side effects, and the unpredictability of clinical trial results, which could significantly harm the business - Conditional approval for UKONIQ in MZL and FL is contingent on confirmatory trials; failure to maintain approval or obtain/maintain approval for other candidates would materially harm the business[13] - Products and product candidates may cause undesirable side effects, potentially delaying or preventing regulatory approval or limiting commercial profile[13] - Results of preclinical studies and early clinical trials are not necessarily predictive of future results, and interim data may change[13] - Extensive, costly, and time-consuming regulation for product candidates can cause delays or prevent required approvals[13] - Fast Track or Breakthrough Therapy designations do not guarantee faster development, regulatory review, or approval[13] - Unsuccessful in obtaining or maintaining orphan drug status benefits for UKONIQ and other drug candidates[13] Risks Related to Governmental Regulation of the Pharmaceutical Industry The pharmaceutical industry is subject to extensive and evolving governmental regulations, including new legislation and third-party payor initiatives, which could increase compliance costs and negatively impact the company's ability to market products, secure collaborations, and raise capital - Extensive regulation, new legislation, regulatory proposals, and third-party payor initiatives may increase compliance costs and adversely affect marketability, collaborations, and capital raising[20] - Failure to comply with various healthcare laws and regulations could lead to losses or liability[20] - Non-compliance with regulatory requirements could result in restrictions or market withdrawal of approved products and penalties[20] Risks Related to our Dependence on Third Parties The company heavily relies on third parties for clinical trials, manufacturing, and licensing, which introduces risks such as non-performance, supply chain disruptions, and disputes that could impede development and commercialization efforts - Reliance on third parties for clinical trials and data generation; non-performance could delay or prevent regulatory approval and commercialization[20] - Reliance on third parties for commercial and clinical supply increases the risk of insufficient quantities, unacceptable cost, or quality, impairing development/commercialization[20] - In-licensed products and candidates mean disputes or non-performance by licensors would adversely affect development and commercialization[20] Risks Related to Intellectual Property The company's success depends on obtaining and protecting intellectual property rights, but there's a risk that patent protection may not be broad enough, could be challenged, or that the company may infringe on third-party rights, leading to costly litigation and impaired commercialization - Ability to obtain and protect intellectual property is crucial; insufficient patent protection could allow competitors to commercialize similar products[20] - Patent protection could be reduced or eliminated due to non-compliance with procedural requirements by governmental patent agencies[20] - Need to license certain intellectual property from third parties, which may not be available or on commercially reasonable terms[20] - Risk of costly and time-consuming lawsuits for infringing third-party intellectual property rights, with potentially unfavorable outcomes[20] - Inability to protect trade secret confidentiality could harm business and competitive position[20] Risks Related to COVID-19 The COVID-19 pandemic poses a significant risk to the company's financial condition, operations, and commercialization efforts, potentially causing delays in clinical trials, supply chain disruptions, and impacts on interactions with healthcare providers - Public health issues, specifically the COVID-19 pandemic, could have an adverse impact on financial condition, results of operations, and other business aspects[18] General Risks Related to Our Business Organization and Governance, Strategy, Employees and Growth Management The company faces general business risks related to organizational growth, attracting and retaining key personnel, and potential anti-takeover provisions, all of which could disrupt operations and affect stock price - Need to develop and expand the business, with potential difficulties in managing this growth and expansion[20] - Ability to continue clinical development and commercialization depends on attracting and maintaining key management and other personnel[20] - Certain executive officers, directors, and stockholders owning >10% of common stock may influence management and shareholder approvals[20] - Anti-takeover provisions in charter documents and Delaware law could make third-party acquisition more difficult, limiting stock price[20] - Stock price is, and is expected to remain, volatile, which could limit investors' ability to sell stock at a profit[20] PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements and management's discussion and analysis ITEM 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for TG Therapeutics, Inc., including the balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, revenue recognition, investments, fair value measurements, equity, debt, leases, license agreements, and related party transactions Condensed Consolidated Balance Sheets This section presents the company's condensed consolidated balance sheets for March 31, 2021, and December 31, 2020 Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------- | :--------------- | :---------------- | | Cash and cash equivalents | $471,514 | $553,439 | | Total current assets | $535,013 | $611,740 | | Total assets | $548,699 | $625,642 | | Total current liabilities | $92,494 | $87,554 | | Total liabilities | $103,414 | $106,292 | | Total stockholders' equity | $445,285 | $519,350 | - Total assets decreased from $625.6 million at December 31, 2020, to $548.7 million at March 31, 2021, primarily driven by a decrease in cash and cash equivalents[24] - Total stockholders' equity decreased from $519.4 million to $445.3 million, largely due to the accumulated deficit increasing to $1.07 billion[24] Condensed Consolidated Statements of Operations (unaudited) This section presents the company's unaudited consolidated statements of operations for the three months ended March 31, 2021 and 2020 Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Product revenue, net | $755 | $0 | | License revenue | $38 | $38 | | Total revenue | $793 | $38 | | Total research and development | $63,094 | $36,022 | | Total selling, general and administrative | $26,762 | $14,261 | | Total costs and expenses | $89,995 | $50,283 | | Operating loss | $(89,202) | $(50,245) | | Net loss | $(90,628) | $(51,116) | | Basic and diluted net loss per common share | $(0.69) | $(0.48) | - Total revenue significantly increased to $793 thousand in Q1 2021 from $38 thousand in Q1 2020, driven by the first product revenue from UKONIQ ($755 thousand)[26] - Net loss widened to $(90.6) million in Q1 2021 from $(51.1) million in Q1 2020, primarily due to increased research and development expenses and selling, general and administrative expenses[26] - Research and development expenses increased by 75% to $63.1 million in Q1 2021, and selling, general and administrative expenses nearly doubled to $26.8 million[26] Condensed Consolidated Statements of Changes in Stockholders' (Defited) Equity (unaudited) This section presents the company's unaudited consolidated statements of changes in stockholders' equity for the three months ended March 31, 2021 Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric (in thousands) | Balance at Jan 1, 2021 | Issuance of common stock | Offering costs paid | Compensation (restricted stock) | Net loss | Balance at Mar 31, 2021 | | :-------------------- | :--------------------- | :----------------------- | :------------------ | :------------------------------ | :------- | :---------------------- | | Common Stock (Amount) | $141 | $1 | $0 | $0 | $0 | $142 | | Additional paid-in capital | $1,500,040 | $128 | $(183) | $16,618 | $0 | $1,516,602 | | Accumulated Deficit | $(980,597) | $0 | $0 | $0 | $(90,628) | $(1,071,225) | | Total Stockholders' Equity | $519,350 | $128 | $(183) | $16,618 | $(90,628) | $445,285 | - Total stockholders' equity decreased by $74.1 million from $519.4 million at January 1, 2021, to $445.3 million at March 31, 2021, primarily due to a net loss of $90.6 million[30] - Additional paid-in capital increased by $16.6 million from stock-based compensation and $0.1 million from option exercises, partially offset by offering costs[30] Condensed Consolidated Statements of Cash Flows (unaudited) This section presents the company's unaudited consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(81,355) | $(62,115) | | Net cash (used in) provided by investing activities | $(514) | $1,450 | | Net cash (used in) provided by financing activities | $(55) | $81 | | Net decrease in cash, cash equivalents and restricted cash | $(81,924) | $(60,584) | | Cash, cash equivalents and restricted cash at end of period | $472,774 | $53,303 | - Net cash used in operating activities increased to $81.4 million in Q1 2021 from $62.1 million in Q1 2020, reflecting higher net loss and increased expenditures[33] - Cash, cash equivalents, and restricted cash at the end of the period were $472.8 million, a decrease of $81.9 million during Q1 2021[33] Notes to Condensed Consolidated Financial Statements (unaudited) This note describes TG Therapeutics' business as a commercial-stage biopharmaceutical company focused on B-cell malignancies and autoimmune diseases, highlights the accelerated FDA approval of UKONIQ, and outlines the basis of financial statement presentation, liquidity, capital resources, and key accounting policies including revenue recognition, accounts receivable, cost of product revenue, inventory, and net loss per share NOTE 1 Organization and Summary of Significant Accounting Policies This note describes TG Therapeutics' business as a commercial-stage biopharmaceutical company focused on B-cell malignancies and autoimmune diseases, highlights the accelerated FDA approval of UKONIQ, and outlines the basis of financial statement presentation, liquidity, capital resources, and key accounting policies including revenue recognition, accounts receivable, cost of product revenue, inventory, and net loss per share - TG Therapeutics is a fully integrated, commercial-stage biopharmaceutical company focused on B-cell malignancies and autoimmune diseases[35] - UKONIQ received accelerated FDA approval for relapsed or refractory marginal zone lymphoma (MZL) and follicular lymphoma (FL) in Q1 2021, with commercial sales commencing in the same quarter[35][39] - The company has incurred operating losses since inception, with an accumulated deficit of $1.1 billion as of March 31, 2021, and expects continued losses[38] - Cash and cash equivalents, and investment securities totaled $523.8 million as of March 31, 2021, anticipated to provide liquidity for more than twelve months[42] - Revenue recognition follows Topic 606, recognizing product revenue net of variable consideration (chargebacks, rebates, discounts, returns, co-payment assistance) upon customer control of the product[44][46][47] - Manufacturing costs for UKONIQ units recognized as revenue in Q1 2021 were expensed as R&D prior to FDA approval and are not included in current cost of product revenue[58] - Basic and diluted net loss per common share was $(0.69) for the three months ended March 31, 2021, compared to $(0.48) for the same period in 2020[26][61] NOTE 2 Revenue Recognition This note details the gross-to-net sales adjustments for UKONIQ, the company's sole product revenue source, for the three months ended March 31, 2021, including chargebacks, government rebates, trade discounts, and sales returns - Product revenue from U.S. sales of UKONIQ began in February 2021[67] Gross-to-Net Sales Adjustments (in thousands) | (in thousands) | Amount | | :-------------------------------- | :----- | | Gross product revenue | $906 | | Gross-to-net adjustments: | | | Chargebacks and administrative fees | $(75) | | Government rebates and co-payment assistance | $(37) | | Trade discounts and allowances | $(35) | | Sales returns and allowances | $(4) | | Total gross-to-net adjustments | $(151) | | Net product revenue | $755 | - Approximately $0.1 million of estimated gross-to-net accruals were recorded as a reduction of accounts receivable and within accounts payable and accrued expenses[67] NOTE 3 Investment Securities This note summarizes the company's investment securities, classified as held-to-maturity, for March 31, 2021, and December 31, 2020, primarily consisting of obligations of domestic governmental agencies - Investments are classified as held-to-maturity and recorded at amortized cost[68] Investment Securities (in thousands) | (in thousands) | March 31, 2021 (Amortized cost) | December 31, 2020 (Amortized cost) | | :-------------------------------------------------------------------------------- | :------------------------------ | :------------------------------- | | Short-term investments: Obligations of domestic governmental agencies (held-to-maturity) | $52,334 | $51,987 | NOTE 4 Fair Value Measurements This note details the fair value measurements of financial liabilities, specifically the 5% Notes, which are valued using Level 3 unobservable inputs based on their conversion feature due to the unlikelihood of product cash flows - The company measures certain financial assets and liabilities at fair value, classified into Level 1, Level 2, or Level 3 based on input observability[70][75] - The 5% Notes, issued in 2010, are valued using the fair value option, with their fair value estimated based on the conversion feature due to the unlikelihood of net product cash flows from Ariston's product candidates[71][73][74] Fair Value Measurements of 5% Notes (in thousands) | (in thousands) | March 31, 2021 (Level 3) | December 31, 2020 (Level 3) | | :------------- | :----------------------- | :-------------------------- | | 5% Notes | $880 | $938 | - The fair value of the 5% Notes decreased from $938 thousand at December 31, 2020, to $880 thousand at March 31, 2021, with the change reported in other (income) expense[75][76] NOTE 5 Stockholders' Equity This note outlines the company's capital structure, including authorized preferred and common stock, and details equity incentive plans, stock option and restricted stock activity, and stock-based compensation expenses for the three months ended March 31, 2021 and 2020 - Authorized 10,000,000 shares of preferred stock ($0.001 par value) and 150,000,000 shares of common stock ($0.001 par value)[77][78] - As of March 31, 2021, 141,520,696 common shares were issued and 141,479,387 shares outstanding[24] Stock Option Activity | Stock Option Activity | Outstanding at Dec 31, 2020 | Exercised | Forfeited | Outstanding at Mar 31, 2021 | | :-------------------- | :-------------------------- | :-------- | :-------- | :-------------------------- | | Number of shares | 2,526,166 | (31,245) | (4,525) | 2,490,396 | | Weighted-average exercise price | $6.99 | $4.10 | $4.10 | $7.03 | - Total stock option expense was $0.6 million in Q1 2021, down from $3.9 million in Q1 2020[82] Restricted Stock Activity | Restricted Stock Activity | Outstanding at Dec 31, 2020 | Granted | Vested | Forfeited | Outstanding at Mar 31, 2021 | | :------------------------ | :-------------------------- | :------ | :----- | :-------- | :-------------------------- | | Number of shares | 10,785,034 | 893,488 | (682,840) | (21,643) | 10,974,039 | | Weighted-average grant date fair value | $13.38 | $51.77 | $13.81 | $22.98 | $16.46 | - Total restricted stock expense was $16.0 million in Q1 2021, up from $7.1 million in Q1 2020[84][85] - Total stock-based compensation expense was $16.6 million in Q1 2021, compared to $11.1 million in Q1 2020[85] NOTE 6 Loan Payable This note details the $60.0 million Term Loan facility with Hercules Capital, Inc., including its maturity date, interest rate, prepayment terms, final payment, and security. It also covers the associated Hercules Warrant and debt issuance costs - The company entered into a $60.0 million Term Loan facility with Hercules Capital, Inc. in February 2019, with an initial draw of $30.0 million[87] - The Term Loan matures on March 1, 2022, with interest accruing at the greater of (i) prime rate + 4.75% or (ii) 10.25%[88] - A Hercules Warrant to purchase 147,058 common shares at $4.08 was issued, accounted for as an equity instrument and treated as debt issuance cost[92] Loan Payable (in thousands) | (in thousands) | March 31, 2021 | December 31, 2020 | | :------------- | :--------------- | :---------------- | | Loan payable | $30,000 | $30,000 | | End of term fee | $975 | $975 | | Less: unamortized debt issuance costs | $(848) | $(1,080) | | Loan payable, net | $30,127 | $29,895 | | Less: current portion | $(30,127) | $(22,179) | | Loan payable non-current | $0 | $7,716 | - The company was in compliance with all loan covenants as of March 31, 2021[89] NOTE 7 Leases This note details the company's lease obligations for office spaces in New York City and New Jersey, including average annual rental obligations, ROU assets, lease liabilities, and lease expense for the three months ended March 31, 2021 and 2020 - The company has lease obligations for office space in New York City (shared with Fortress Biotech, Inc.) and New Jersey[95][99] - The present values of lease liability and corresponding Right-of-Use (ROU) asset were $11.9 million and $9.1 million, respectively, as of March 31, 2021[95] Lease Costs (in thousands) | (in thousands) | March 31, 2021 | March 31, 2020 | | :------------- | :--------------- | :--------------- | | Operating lease cost | $532 | $507 | | Net lease cost | $532 | $507 | - Weighted-average remaining operating lease term was 7.6 years, and the weighted-average discount rate was 10.25% as of March 31, 2021[100][101] NOTE 8 License Agreements This note details the company's various exclusive license agreements for its drug candidates, including ublituximab (TG-1101), umbralisib (TGR-1202/UKONIQ), cosibelimab (TG-1501), TG-1701 (BTK inhibitor), and TG-1801 (anti-CD47/anti-CD19 bispecific antibody), outlining upfront payments, milestone payments, and royalty structures - For TG-1101 (Ublituximab), an exclusive sublicense agreement with Ildong Pharmaceutical Co. Ltd. for South Korea and Southeast Asia generates license revenue of approximately $38,000 per quarter[102] - For TGR-1202 (Umbralisib/UKONIQ), the company exercised global rights from Rhizen Pharmaceuticals, SA. A $12.0 million primary indication approval milestone was paid to Rhizen in Q1 2021, with potential for additional milestones and tiered royalties[105][106] - For TG-1501 (Cosibelimab), a Global Collaboration Agreement with Checkpoint Therapeutics, Inc. exists, with $0.9 million in expenses incurred in Q1 2020 for a milestone event[109] - For TG-1701 (BTK inhibitor), a global exclusive license agreement with Jiangsu Hengrui Medicine Co. involves potential milestone payments totaling $350 million and low double-digit royalties. Expenses of $0.5 million were incurred in Q1 2021[110] - For TG-1801 (anti-CD47/anti-CD19 bispecific mAb), a Joint Venture and License Option Agreement with Novimmune SA involves a $3.0 million upfront payment in common stock and accrued $2.0 million in milestone expense related to patient enrollment as of March 31, 2021[111] NOTE 9 Related Party Transactions This note discloses related party transactions, including a Shared Services Agreement with Fortress Biotech, Inc. (FBIO) for shared costs and an Office Agreement for shared office space - The company has a Shared Services Agreement with Fortress Biotech, Inc. (FBIO) for shared facilities, personnel, and administrative costs, incurring approximately $0.2 million in expenses for Q1 2021 and Q1 2020[113] - References Note 7 for details on the Office Agreement with FBIO and Note 8 for the Collaboration Agreement with Checkpoint[114] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2021, discussing the business overview, recent FDA approval and commercial launch of UKONIQ, product development pipeline, detailed analysis of revenues and expenses, liquidity, capital resources, and critical accounting policies Overview TG Therapeutics is a commercial-stage biopharmaceutical company focused on B-cell malignancies and autoimmune diseases. The section highlights the accelerated FDA approval and commercial launch of UKONIQ, details the company's active research pipeline, and provides updates on key Phase 3 and registration-directed clinical trials for ublituximab and UKONIQ - TG Therapeutics is a fully integrated, commercial-stage biopharmaceutical company focused on B-cell malignancies and autoimmune diseases[117] - UKONIQ received accelerated FDA approval on February 5, 2021, for relapsed or refractory MZL and FL, and its commercial launch commenced in Q1 2021[118][119] - The company's pipeline includes ublituximab (anti-CD20 mAb) and UKONIQ (PI3K-delta inhibitor) in Phase 3 for CLL and RMS, and other investigational medicines (Cosibelimab, TG-1701, TG-1801) in Phase 1[122] - UNITY-CLL Phase 3 trial demonstrated U2 (UKONIQ + ublituximab) significantly improved PFS over obinutuzumab plus chlorambucil (HR=0.54, p<0.0001) in CLL patients, supporting a completed rolling BLA submission in March 2021[125] - ULTIMATE I & II Phase 3 trials for ublituximab in RMS met their primary endpoint, showing a statistically significant reduction in annualized relapse rate (ARR) over 96 weeks (p<0.005 in each trial)[125] Results of Operations This section provides a detailed comparison of the company's financial performance for the three months ended March 31, 2021, versus 2020, highlighting the new product revenue from UKONIQ, increased R&D and SG&A expenses, and the resulting wider net loss Key Financial Results (Three months ended March 31, in thousands) | Metric (in thousands) | 2021 | 2020 | Change ($) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Product Revenues (Net) | $755 | $0 | $755 | N/A | | License Revenue | $38 | $38 | $0 | 0% | | Total Revenue | $793 | $38 | $755 | 1986.8% | | Cost of Product Revenue | $139 | $0 | $139 | N/A | | Noncash R&D Compensation | $7,511 | $1,979 | $5,532 | 279.5% | | Other R&D Expenses | $55,583 | $34,043 | $21,540 | 63.3% | | Noncash SG&A Compensation | $9,107 | $9,089 | $18 | 0.2% | | Other SG&A Expenses | $17,655 | $5,172 | $12,483 | 241.3% | | Interest Expense | $1,898 | $1,201 | $697 | 58.0% | | Other Income | $(472) | $(330) | $(142) | 43.0% | | Net Loss | $(90,628) | $(51,116) | $(39,512) | 77.3% | - Product revenues of $0.8 million in Q1 2021 were the first generated by the company, following UKONIQ's FDA approval[127] - Total research and development expenses increased by $27.1 million (75%) to $63.1 million, primarily due to milestone achievements and ublituximab manufacturing costs[130][132] - Other selling, general and administrative expenses increased by $12.5 million (241%) to $17.7 million, driven by the commercial launch of UKONIQ[136] Liquidity and Capital Resources The company's liquidity is primarily from equity offerings, with UKONIQ sales beginning in Q1 2021. As of March 31, 2021, cash and investments totaled $523.8 million, expected to provide over twelve months of liquidity, but significant future financing is still required for ongoing operations and commercialization - Major cash sources are proceeds from private placements and public offerings of equity securities[139] - As of March 31, 2021, cash and cash equivalents, and investment securities totaled $523.8 million, providing sufficient liquidity for more than a twelve-month period[140] - The company remains dependent on significant future financing to execute ongoing and future operations, including commercialization of drug candidates[140] Discussion of Cash Flows Cash used in operating activities increased to $81.4 million in Q1 2021, primarily due to higher manufacturing and clinical development expenditures. Investing activities shifted to a net cash use of $0.5 million, while financing activities resulted in a net cash use of $0.1 million - Net cash used in operating activities increased to $81.4 million in Q1 2021 from $62.1 million in Q1 2020, driven by increased manufacturing and clinical development expenditures[141] - Net cash used in investing activities was $0.5 million in Q1 2021, compared to $1.5 million provided by investing activities in Q1 2020, mainly due to greater investment in short-term securities[142] - Net cash used in financing activities was $0.1 million in Q1 2021, related to offering costs offset by proceeds from option exercises[143] Off-Balance Sheet Arrangements The company has not entered into any off-balance sheet arrangements that expose it to material continuing risks, contingent liabilities, or other obligations under variable interests in unconsolidated entities - The company has not entered into transactions with unconsolidated entities involving financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose it to material continuing risks or liabilities[144][146] Critical Accounting Policies and Accounting Estimates This section identifies critical accounting policies and estimates important to the company's financial reporting, including stock-based compensation expenses and fair value measurement of financial liabilities, which require significant management judgment - Critical accounting policies include revenue recognition, gross-to-net sales adjustments, accounts receivable, inventory, cost of product revenue, stock-based compensation expenses, and fair value measurement of financial liabilities[148] - These policies require management's most difficult, subjective, or complex judgments and estimates[147][148] Recently Issued Accounting Standards This section refers to Note 1 for a discussion of recently issued accounting pronouncements and their expected impact on the company's financial position and results of operations - Refer to Note 1 for details on recently issued accounting pronouncements, including ASU No 2019-12 (Income Taxes) and ASU No. 2017-04 (Goodwill Impairment), neither of which had a material impact on the financial statements[63][64][66][149] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risk, primarily interest rate risk, and its investment strategy focused on preserving principal. It concludes that the effect of hypothetical interest rate changes on financial instruments and net loss has been immaterial - The primary objective of investment activities is to preserve principal, maximize income, and minimize market risk[150] - The company's assets and liabilities are denominated in U.S. dollars, and it does not use derivative financial instruments for speculative purposes[150] - Interest rate sensitivity analysis, assuming a hypothetical 100 basis point increase, determined the effect on financial instruments and net loss to be immaterial for the periods presented[152][155] ITEM 4. Controls and Procedures Management, under CEO and CFO supervision, evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of March 31, 2021. Material changes were implemented in internal controls over financial reporting due to the commercial launch of UKONIQ - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2021[156] - Material changes were implemented in internal controls over financial reporting during Q1 2021 to record product revenue, cost of product revenues, and accounts receivable following UKONIQ's FDA approval and commercial launch[157] PART II. OTHER INFORMATION This section covers legal proceedings, detailed risk factors, and exhibits for the company's quarterly report ITEM 1. Legal Proceedings The company and its subsidiaries are not currently involved in any material pending legal proceedings - The company and its subsidiaries are not a party to, and their property is not the subject of, any material pending legal proceedings[158] ITEM 1A. Risk Factors This section details various risks that could materially harm the company's business, financial condition, or operating results. These risks are categorized into commercialization, financial position, drug development, governmental regulation, dependence on third parties, intellectual property, business organization, and the ongoing COVID-19 pandemic Risks Related to Commercialization Commercialization risks include the potential for UKONIQ or future products to not achieve broad market acceptance, the adverse impact of the COVID-19 pandemic on sales, limitations on approved uses, undesirable side effects, smaller-than-estimated market opportunities, substantial competition, and the challenges of expanding commercial operations - UKONIQ or future approved products may not achieve broad market acceptance among physicians, patients, and payors, limiting revenue generation[161][164] - The COVID-19 pandemic has impacted commercial launch strategies, limiting in-person interactions and potentially delaying future product launches[163] - Regulatory approvals may be conditional (e.g., UKONIQ's accelerated approval requires confirmatory trials) or subject to post-marketing requirements, potentially leading to withdrawal or labeling restrictions[165] - Undesirable side effects emerging post-approval could lead to regulatory actions, market withdrawal, or product liability lawsuits[168][169][191] - Market opportunities for products may be smaller than estimated, or approvals may be for narrower patient populations, adversely affecting revenue[170][172] - Substantial competition from companies with greater resources and established therapies (e.g., ibrutinib, rituximab, venetoclax) could reduce or eliminate commercial opportunities[174][176][177][179] - Risk of unfavorable pricing regulations or third-party payor coverage and reimbursement policies, which could harm business and profitability[180][184] - Inability to expand commercial operations (sales, marketing) or secure third-party agreements could hinder successful commercialization and revenue generation[186][190] Risks Related to Our Financial Position and Need for Additional Capital The company has a history of significant operating losses and an accumulated deficit, necessitating substantial future funding. Failure to raise capital could delay or eliminate development programs. High indebtedness and restrictive covenants from the Term Loan with Hercules Capital could also adversely affect financial condition and operations - Incurred significant operating losses since inception, with an accumulated deficit of $1.1 billion as of March 31, 2021, and expects continued losses[193][197] - Substantial additional funding is required for ongoing R&D, clinical trials, and commercialization efforts; inability to raise capital could force delays or elimination of programs[200][201] - Raising additional capital may dilute stockholders, restrict operations, or require relinquishing rights to technologies or drug candidates[202] - The company's level of indebtedness ($30 million outstanding under Term Loan) and debt service obligations could adversely affect financial condition and funding operations[208][209] - Failure to meet debt obligations or breach covenants could lead to acceleration of amounts due, potentially forcing delays or termination of product development[210] - Restrictive covenants in the Loan Agreement limit the company's ability to dispose of assets, incur additional debt, or engage in certain corporate actions[211] Risks Related to Drug Development and Regulatory Approval Drug development is a lengthy, expensive, and uncertain process. Risks include failure to obtain regulatory approval, unpredictable clinical trial results (especially with interim data), undesirable side effects, and challenges in conducting international trials. Manufacturing process changes and scale-up also pose risks to product activity, function, and supply - Inability to obtain regulatory approval for product candidates or significant delays would materially harm the business[212][213] - Preclinical and early clinical trial results are not necessarily predictive of future outcomes, and interim/top-line data may change upon full analysis[216][218][219] - Clinical drug development is lengthy and expensive, with uncertain outcomes, potential for delays, and increased costs due to factors like patient enrollment, regulatory requirements, or adverse events[222][224][233] - Product candidates may cause undesirable side effects, leading to delays or denial of regulatory approval, or impacting commercial potential post-approval[235][236][237] - Combination drug studies (e.g., ublituximab and UKONIQ) carry inherent risks of drug-drug interactions, unforeseen toxicities, and difficulty in attributing adverse events[238] - Extensive regulation by FDA and foreign authorities can be costly, time-consuming, and cause delays or prevent approvals, even with Breakthrough Therapy or Fast Track designations[239][240][242][245] - Orphan drug designation does not guarantee market exclusivity or faster approval, and benefits may not be maintained[246][247] - Clinical trials conducted outside the U.S. may face challenges in monitoring and oversight, and data from such trials may not be accepted by the FDA[249] - Manufacturing site additions, scale-up, and process improvements for product candidates may affect their ultimate activity or function, potentially impacting safety and efficacy[251][255] Risks Related to Governmental Regulation of Pharmaceutical Industry and Legal Compliance Matters The pharmaceutical industry is heavily regulated, with ongoing legislative and regulatory changes, particularly concerning drug pricing and healthcare costs, which could increase compliance burdens and adversely affect profitability. The company is also subject to fraud and abuse laws, data privacy regulations, and environmental laws, with potential for significant penalties for non-compliance - New legislation, regulatory proposals, and third-party payor initiatives (e.g., ACA, drug pricing reforms) may increase compliance costs and adversely affect marketability and capital raising[256][257][258][259][260][261][262][263][265][266][267] - Relationships with customers and payors are subject to fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act), transparency laws, and health information security laws (e.g., HIPAA), risking criminal sanctions, civil penalties, and exclusion from government programs[268][270][271][273][275] - Violation of data privacy and security laws (e.g., HIPAA, CCPA, GDPR) could lead to penalties, damages, fines, and operational restructuring[276][277][278][279] - Failure to comply with local laws and customs in international markets could lead to losses or adverse effects on business[282] - Approved products are subject to ongoing regulatory requirements; non-compliance or unanticipated problems could lead to restrictions, market withdrawal, or penalties[283][284][286] - Third-party manufacturers' use of hazardous materials requires compliance with environmental laws, which can be expensive and restrict business operations[287] Risks Related to Our Dependence on Third Parties The company's reliance on third parties for clinical data generation, trial conduct, manufacturing, and supply of materials introduces significant risks. These include non-performance by CROs, manufacturing quality and supply issues, dependence on single-source suppliers, and potential disputes with licensors or collaborators, all of which could delay or impair development and commercialization - Reliance on third parties (CROs, licensing partners) for clinical, preclinical, and other data necessary for regulatory applications; failure to obtain sufficient data could cause significant delays[288][289] - Dependence on CROs, investigators, and other third parties for clinical trial conduct; their failure to meet deadlines or adhere to protocols could extend, delay, or terminate trials[290][294][297] - Reliance on third parties for manufacturing, packaging, and labeling of products (UKONIQ) and product candidates increases risk of insufficient quantities, unacceptable cost, or quality[298][299] - Contract manufacturers must comply with cGMP regulations; non-compliance could lead to sanctions, delays, or withdrawal of approvals[300] - Dependence on single-source suppliers for starting materials, intermediates, API/drug substance, and drug product; loss or disruption of these suppliers could significantly harm the business[308][310] - Disputes with licensors regarding rights under license agreements could adversely affect the ability to develop and commercialize products[314][315][318] - Conflicts with future collaborators or strategic partners may lead to adverse actions, limiting the ability to implement strategies[319] - Inability to establish additional collaborations on commercially reasonable terms could alter development and commercialization plans[320][323] Risks Relating to Our Intellectual Property The company's success hinges on robust intellectual property protection, but faces risks such as insufficient patent breadth, challenges to patent validity, limited patent lifespan, and the high cost and uncertainty of patent prosecution and enforcement. There's also a risk of infringing third-party IP, leading to costly litigation, and the challenge of protecting trade secrets - Success depends on obtaining and protecting intellectual property; insufficient patent protection could allow competitors to commercialize similar drugs[327][329][335] - Patents have a limited lifespan, and the development timeline for drugs means patents might expire before or shortly after commercialization[330] - Patent applications may not result in issued patents, or claims may be narrowed, challenged, invalidated, or circumvented[331][332][336][342] - Obtaining and maintaining patent protection requires compliance with procedural requirements; non-compliance could lead to abandonment or lapse of patent rights[345][346] - Failure to obtain patent term extensions under Hatch-Waxman Amendments could shorten exclusive marketing rights[347][348] - Enforcing intellectual property rights globally is expensive and challenging, with varying levels of protection in different countries[349][350][351] - Risk of costly, time-consuming, and potentially unsuccessful lawsuits to protect or enforce patents against infringers or challenges[352][354][355][357][358][359] - Risk of being sued for infringing third-party intellectual property rights, leading to costly litigation, potential license requirements, or forced cessation of development/commercialization[360][361][362][363][364] - Need to license certain intellectual property from third parties, which may not be available on commercially reasonable terms[366] - Inability to protect the confidentiality of trade secrets could harm business and competitive position[367][368] - Risk of claims for wrongful use or disclosure of competitors' trade secrets or breach of non-competition agreements[369] Risks Related to Our Business Organization and Governance, Strategy, Employees and Growth Management The company's growth and success depend on attracting and retaining key personnel, effectively managing business expansion, and integrating potential acquisitions. Anti-takeover provisions and significant influence by certain stockholders could limit acquisition opportunities. Additionally, the ability to utilize net operating loss carryforwards may be limited, and internal IT systems are vulnerable to security breaches - Failure to attract and retain key management, commercial, and clinical development personnel could impede successful development or commercialization[370][371] - Difficulties in managing business development and expansion (e.g., acquisitions, strategic alliances) could disrupt operations and hinder realization of benefits[373][374] - Reliance on outside vendors and consultants for key functions requires effective management to ensure contractual obligations and deadlines are met[375] - Anti-takeover provisions in governing documents and Delaware law could make third-party acquisition difficult, potentially limiting stock price[376][378] - Ability to utilize net operating loss carryforwards and other tax attributes may be limited by ownership changes or tax law changes (e.g., Section 382, Tax Act)[379][391][392] - Certain executive officers, directors, and principal stockholders maintain significant influence over the company, potentially affecting management and stockholder approvals[380] - Internal information technology systems, or those of third-party contractors, may fail or suffer security breaches, disrupting development programs and commercialization[381][383] - Unfavorable global economic conditions (e.g., COVID-19, Brexit) could adversely affect business, financial condition, or results of operations[385][386] - Risk of misconduct or improper activities by employees, principal investigators, CROs, CMOs, and consultants, including non-compliance with regulations and insider trading[387] Risks Related to the COVID-19 Pandemic The COVID-19 pandemic continues to pose substantial public health and economic challenges, potentially causing delays or disruptions to clinical development programs, supply chains, regulatory reviews, and commercialization efforts. The remote work environment and global restrictions could negatively impact productivity, increase cybersecurity risks, and lead to significant economic slowdowns - The COVID-19 pandemic has negatively impacted the global economy, supply chains, and financial markets, with uncertain future impacts on the company's business and operating results[393][394] - Ongoing clinical trials may be delayed or compromised, and the ability to conduct new trials may be adversely impacted due to patient enrollment issues, travel restrictions, and healthcare system prioritization of COVID-19[395][396][405][407] - Supply chain disruptions are a risk, particularly for products manufactured in countries affected by quarantines and travel restrictions (e.g., UKONIQ in India, ublituximab in South Korea, TG-1701 in China)[312][398] - Health authority inspections and regulatory reviews may be delayed, impacting approval timelines[397] - Increased reliance on remote work arrangements may negatively impact productivity, increase cybersecurity risks, and disrupt business operations[399] - Commercialization efforts for UKONIQ and future products may be adversely impacted by restrictions and safety measures, affecting interactions with healthcare providers[400] - The pandemic could lead to a global recession, reducing access to capital and adversely affecting the company's stock value[401] General Risks (Risks Related to Our Common Stock and Being a Publicly-Traded Company) The company's common stock price is highly volatile, influenced by clinical results, regulatory approvals, competition, and economic factors. As a public company, it incurs significant compliance costs and management time. Future sales of common stock could cause price declines, and the absence of cash dividends means capital appreciation is the sole source of gain for stockholders - The trading price of common stock is highly volatile and subject to wide fluctuations due to various factors, including clinical results, regulatory approvals, competition, and economic conditions[411][412] - The company does not anticipate paying cash dividends in the foreseeable future; capital appreciation will be the sole source of gain for stockholders[413] - An active trading market for common stock may not be sustained, limiting investors' ability to resell shares[416] - Lack of equity research analyst coverage or negative evaluations could cause the stock price to decline[417] - Operating as a public company incurs significant legal, accounting, and compliance costs (e.g., Sarbanes-Oxley Act), diverting management time and resources[418][419] - Volatility in stock price may lead to securities litigation, incurring substantial costs and diverting management's attention[420][422] - Future sales of common stock by the company or insiders, or shares issued upon option exercise, could cause the stock price to decline[423] ITEM 6. Exhibits This section lists the exhibits included with the quarterly report, such as certifications from the CEO and CFO, and financial information formatted in Inline Extensible Business Reporting Language (iXBRL) - Exhibits include certifications of the Chief Executive Officer and Chief Financial Officer (pursuant to Rule 13a-14(a)/15d-14(a) and 18 U.S.C. 1350)[427] - Financial information from the Quarterly Report on Form 10-Q is formatted in Inline Extensible Business Reporting Language (iXBRL)[427] Signatures This section contains the required signatures for the Quarterly Report on Form 10-Q, confirming its submission on behalf of TG Therapeutics, Inc. by the Chief Financial Officer - The report is signed by Sean A. Power, Chief Financial Officer and Principal Financial and Accounting Officer, on behalf of TG Therapeutics, Inc. on May 10, 2021[428][429][430]