TG Therapeutics(TGTX) - 2023 Q3 - Quarterly Report

Special Cautionary Notice Regarding Forward-Looking Statements This section cautions that forward-looking statements involve known and unknown risks and are not guarantees of future performance - The company identifies several areas covered by forward-looking statements, including but not limited to[10] - Ability to obtain and maintain regulatory approvals for product candidates like TG-1701 and TG-1801, and maintain approval for BRIUMVI® - Success of the commercial launch and market acceptance of BRIUMVI® - Progress and results of pre-clinical studies and clinical trials - Estimates of expenses, future revenues, capital requirements, and financial performance - Ability to obtain sufficient capital and manage cash burn Summary Risk Factors This section summarizes the principal risks impacting the company's operations, financial condition, and future prospects Risks Related to Commercialization This section outlines key risks associated with product commercialization, including market acceptance, intense competition, and potential for limited revenue generation - The company has limited experience as a commercial entity, which may impact the success of the BRIUMVI launch[14] - Market acceptance of BRIUMVI is not guaranteed and depends on factors like physician and patient adoption, pricing, and reimbursement[14] - Substantial competition exists from companies with greater resources, which could reduce or eliminate the commercial opportunity for the company's products[14] Risks Related to Drug Development and Regulatory Approval This section details risks inherent in drug development and regulatory processes, including approval uncertainties, potential side effects, and the non-predictive nature of early trial results - Failure to obtain or maintain regulatory approval for products like BRIUMVI or candidates like TG-1701 and TG-1801 would materially harm the business[14] - Undesirable side effects could delay or prevent regulatory approval, or lead to market withdrawal if discovered post-approval[14] - Positive results from early-stage clinical trials do not guarantee favorable results in later, more definitive trials[14] Risks Related to Dependence on Third Parties This section summarizes risks from heavy reliance on third parties for manufacturing, clinical trials, and in-licensing agreements, which could disrupt operations - Reliance on third parties for manufacturing and supply of products and raw materials creates a risk of insufficient quantities or quality, which could impair commercialization[18] - The company depends on third parties to conduct clinical trials; poor performance by these parties could jeopardize regulatory approval[18] - Since products are in-licensed, any disputes or non-performance by licensors could adversely affect the ability to develop and commercialize them[18] Risks Related to Intellectual Property This section covers risks related to intellectual property, including the ability to obtain and protect patents, and potential infringement lawsuits - The company's success is dependent on its ability to obtain and protect its intellectual property. If patent protection is not sufficiently broad, competitors could develop similar products[16] - Lawsuits alleging infringement of third-party intellectual property rights could be costly and time-consuming, with an unfavorable outcome having a material adverse effect[16] Risks Related to Financial Position and Need for Additional Capital This section highlights financial risks, including a history of operating losses, potential need for additional capital, and the adverse effects of indebtedness - The company has a history of significant operating losses and may incur losses in the future[17] - While not currently expected, the company may need to raise additional capital. An inability to do so could force a reduction in development or commercialization efforts[17] - The company's level of debt could adversely affect its financial condition and make it more difficult to fund operations[17] 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 This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and notes on key accounting policies Condensed Consolidated Balance Sheets The balance sheet shows a significant increase in total assets to $331.1 million driven by cash, receivables, and inventory, alongside an increase in total liabilities due to higher loan payable Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $150,902 | $102,304 | | Accounts receivable, net | $39,320 | $0 | | Inventories | $33,553 | $0 | | Total Assets | $331,067 | $193,572 | | Liabilities & Equity | | | | Loan payable – non-current | $98,908 | $71,135 | | Total Liabilities | $166,298 | $134,985 | | Total Stockholders' Equity | $164,769 | $58,587 | Condensed Consolidated Statements of Operations The company achieved significant profitability in Q3 2023 with $113.9 million net income, driven by $140.7 million license revenue and $25.1 million product sales Q3 2023 vs Q3 2022 Performance (in thousands) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Product revenue, net | $25,068 | $56 | | License, milestone and other revenue | $140,747 | $38 | | Total Revenue | $165,815 | $94 | | Total costs and expenses | $51,031 | $35,057 | | Operating Income (Loss) | $114,784 | ($34,963) | | Net Income (Loss) | $113,930 | ($35,818) | | Diluted EPS | $0.73 | ($0.26) | Nine Months 2023 vs 2022 Performance (in thousands) | Metric | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | | Product revenue, net | $48,868 | $2,591 | | License, milestone and other revenue | $140,823 | $114 | | Total Revenue | $189,691 | $2,705 | | Total costs and expenses | $156,573 | $143,482 | | Operating Income (Loss) | $33,118 | ($140,777) | | Net Income (Loss) | $27,088 | ($145,341) | | Diluted EPS | $0.19 | ($1.08) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly decreased to $18.2 million, while financing activities provided $72.7 million, resulting in a $48.6 million net increase in cash for the nine months ended September 30, 2023 Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($18,203) | ($152,300) | | Net cash used in investing activities | ($5,896) | ($36,282) | | Net cash provided by (used in) financing activities | $72,706 | ($440) | | Net Increase (Decrease) in Cash | $48,607 | ($189,022) | Notes to Condensed Consolidated Financial Statements These notes detail the company's commercial transition, the $140 million Neuraxpharm agreement, liquidity, and key accounting policies for revenue, inventory, and debt - The company is now a fully-integrated, commercial-stage biopharmaceutical company following the FDA, EC, and MHRA approvals of BRIUMVI for relapsing forms of multiple sclerosis (RMS)[32] - The company achieved profitability in Q3 2023 due to a $140.0 million non-refundable upfront payment from a commercialization agreement with Neuraxpharm[35][70] - As of September 30, 2023, the company had $229.2 million in cash, cash equivalents, and investment securities, which is believed to be sufficient to fund operations for at least the next twelve months[37][156] - On March 31, 2023, the company amended its loan agreement with Hercules, drawing an additional $25.0 million. The total loan payable as of September 30, 2023 was $98.9 million[92][99] - Costs to manufacture BRIUMVI are now capitalized as inventory following its FDA approval on December 28, 2022. Prior to this date, these costs were expensed as R&D[61][76] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results, highlighting BRIUMVI's successful launch, the Neuraxpharm agreement, and a shift to profitability Overview and Recent Business Updates This section provides an overview of the company's transition to a commercial-stage entity, highlighting BRIUMVI's regulatory approvals and the Neuraxpharm commercialization agreement - Announced an agreement with Neuraxpharm on August 1, 2023, for the ex-U.S. commercialization of BRIUMVI[120][128] - Received approval for BRIUMVI from the UK's MHRA on November 1, 2023, for adult patients with active RMS[120][131] - The U.S. commercial launch of BRIUMVI began on January 26, 2023, with the first patient receiving an infusion on February 1, 2023[126][129] Results of Operations Analysis of operations shows dramatic financial improvement, with total revenue surging to $165.8 million in Q3 2023, driven by license fees and product sales, resulting in $113.9 million net income Comparison of Three Months Ended September 30 (in thousands) | Item | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $165,815 | $94 | +$165,721 | | Product revenue, net | $25,068 | $56 | +$25,012 | | License revenue | $140,747 | $38 | +$140,709 | | Total R&D Expense | $14,753 | $20,801 | -$6,048 | | Total SG&A Expense | $32,769 | $14,254 | +$18,515 | | Net Income (Loss) | $113,930 | ($35,818) | +$149,748 | Comparison of Nine Months Ended September 30 (in thousands) | Item | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $189,691 | $2,705 | +$186,986 | | Product revenue, net | $48,868 | $2,591 | +$46,277 | | License revenue | $140,823 | $114 | +$140,709 | | Total R&D Expense | $58,743 | $95,717 | -$36,974 | | Total SG&A Expense | $91,553 | $47,503 | +$44,050 | | Net Income (Loss) | $27,088 | ($145,341) | +$172,429 | Liquidity and Capital Resources Liquidity has strengthened due to equity offerings, debt financing, and the Neuraxpharm payment, with $229.2 million in cash and investments deemed sufficient for the next twelve months - Major sources of cash have been equity offerings, debt financing from Hercules, and the upfront payment from the Neuraxpharm Commercialization Agreement[153] - As of September 30, 2023, the company had $229.2 million in cash, cash equivalents, and investment securities[156] - Management believes existing cash and projected revenues are sufficient to fund operating requirements for at least twelve months from the filing date[156] Cash Flow Changes (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($18,203) | ($152,300) | | Net cash provided by (used in) financing activities | $72,706 | ($440) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk exposure since the Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes in the company's market risk exposure since the end of 2022[164] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective[165] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[166] PART II: OTHER INFORMATION This section provides additional information, including legal proceedings, detailed risk factors, and other disclosures not covered in the financial information section Item 1. Legal Proceedings The company reports no material pending legal proceedings involving itself, its subsidiaries, or its property - The company is not currently involved in any material legal proceedings[167] Item 1A. Risk Factors This section extensively discusses risks and uncertainties that could materially harm the company, categorized by commercialization, financial position, drug development, third-party dependence, and intellectual property Risks Related to Commercialization This subsection details risks associated with product commercialization, including market acceptance, intense competition, and securing adequate reimbursement - The success of BRIUMVI is uncertain and depends on market acceptance, which is influenced by efficacy, safety, pricing, reimbursement, and competition[171] - The company faces substantial competition from well-resourced pharmaceutical companies, which may commercialize drugs more successfully[183] - The ability to commercialize products depends on securing adequate coverage and reimbursement from government and private payors, who are increasingly focused on cost containment[188] Risks Related to Financial Position and Need for Additional Capital This part outlines financial vulnerabilities, including a history of operating losses, potential need for additional capital, and risks associated with indebtedness and restrictive covenants - The company has a history of significant operating losses and expects to continue incurring significant expenses for commercialization and R&D[198] - While not currently anticipated, a future need to raise capital may arise. Failure to secure funding could require delaying or reducing programs[202] - The company's debt obligations under its agreement with Hercules could adversely affect its financial condition and restrict operations due to covenants[211][212] Risks Related to Drug Development and Regulatory Approval This subsection covers inherent uncertainties of drug development, including high clinical trial failure rates, non-predictive early results, potential side effects, and lengthy regulatory processes - Early-stage clinical trial results are not predictive of later-stage outcomes, and product candidates face a high rate of failure[220] - Clinical drug development is a long, expensive, and uncertain process, with potential delays in trial completion and enrollment[227] - Undesirable side effects discovered during trials could delay or prevent regulatory approval, while those found after approval could impact commercial potential[237] Risks Related to Dependence on Third Parties This subsection details significant risks from reliance on third parties for clinical trials, manufacturing (including single sources), and in-licensing agreements - The company relies on CROs to conduct clinical trials; failure by these CROs to perform as required could delay or terminate trials[295] - The company depends on third-party CMOs for manufacturing, including a single source for BRIUMVI supply, which increases the risk of supply disruptions[299] - As products are in-licensed, any dispute with or non-performance by licensors could adversely affect the ability to commercialize the products[310] Risks Relating to Intellectual Property This subsection discusses critical intellectual property risks, including obtaining and defending patents, potential litigation, and protecting trade secrets - Commercial success depends on obtaining and maintaining patent protection, but there is no guarantee that patent applications will issue or that issued patents will provide sufficient protection[323][324] - The company may be involved in expensive and time-consuming lawsuits to protect its patents or defend against claims of infringing third-party patents[346][353] - In addition to patents, the company relies on trade secrets, which are vulnerable to unauthorized disclosure or independent discovery by competitors[360] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is reported as not applicable for the period - Not applicable[397] Item 5. Other Information The company reports no adoption or termination of Rule 10b5-1 trading plans by directors or executive officers during Q3 2023 - No directors or executive officers adopted or terminated a Rule 10b5-1 trading plan during the three months ended September 30, 2023[400] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements in iXBRL format - Exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[404] - The filing also includes financial information formatted in Inline Extensible Business Reporting Language (iXBRL)[404]