(to
Prospectus dated June 13, 2017)
4,100,000 Shares
Common
Stock
We are offering
4,100,000 shares of our common stock, $0.001 par value per share,
in this offering. Our common stock is traded on the Nasdaq Capital
Market under the symbol “TGTX.” On February 27, 2019,
the last reported sale price of our common stock on the Nasdaq
Capital Market was $5.19 per share.
The underwriter has
agreed to purchase the common stock from us at a price of $5.87 per
share, which will result in approximately $24.1 million of proceeds
to us, before offering expenses and assuming no exercise by the
underwriter of the option described below. The underwriter proposes
to offer the shares of common stock from time to time for sale in
one or more transactions on The Nasdaq Capital Market, the existing
trading market for our common stock, in negotiated transactions or
otherwise at market prices prevailing at the time of sale, at
prices related to prevailing market prices or at negotiated prices,
subject to receipt and acceptance by it and subject to its right to
reject any order in whole or in part. See
“Underwriting.”
We have
granted the underwriter an option for a period of 30 days to
purchase up to an additional 615,000 shares of our common stock at
the price per share set forth above. If the underwriter exercises
the option in full, the total proceeds to us, before expenses, will
be approximately $27.7 million.
Investing
in our common stock involves risks. You should carefully consider
all of the information set forth in this prospectus supplement, the
accompanying base prospectus and the documents incorporated by
reference in this prospectus supplement before deciding to invest
in our common stock. Please see “Risk Factors” on page S-5
of this prospectus supplement and in the documents incorporated by
reference in this prospectus supplement and the accompanying base
prospectus to read about factors you should consider before buying
shares of our common stock.
Neither
the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus supplement.
Any representation to the contrary is a criminal
offense.
The
underwriter expects to deliver the shares of common stock against
payment on or about, March 5, 2019.
Sole Book-Running Manager
Cantor
The
date of this prospectus supplement is March 1,
2019
TABLE
OF CONTENTS
Prospectus
Supplement
|
|
Page
|
|
About this
prospectus supplement
|
(i)
|
|
Summary
|
S-1
|
|
Risk
factors
|
S-5
|
|
Dilution
|
S-42
|
|
Use of
proceeds
|
S-43
|
|
Dividend
policy
|
S-43
|
|
Underwriting
|
S-44
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|
Notice to
Investors
|
S-47
|
|
Legal
matters
|
S-51
|
|
Experts
|
S-51
|
|
Where you can find
more information
|
S-51
|
|
Incorporation of
certain information by reference
|
S-51
|
Prospectus
|
|
Page
|
|
TG Therapeutics,
Inc.
|
1
|
|
The
Offering
|
1
|
|
Forward-Looking
Statements
|
2
|
|
Where You Can Find
More Information
|
2
|
|
Important
Information About This Prospectus
|
3
|
|
Incorporation of
Certain Information by Reference
|
3
|
|
Ratio of
Earnings/Deficiency to Fixed Charges
|
4
|
|
Description of
Capital Stock
|
5
|
|
Description of
Warrants
|
7
|
|
Description of Debt
Securities
|
8
|
|
Description of
Units
|
12
|
|
Plan of
Distribution
|
13
|
|
Legal
Matters
|
14
|
|
Experts
|
14
|
ABOUT
THIS PROSPECTUS SUPPLEMENT
This document is in
two parts. The first part is this prospectus supplement, which
describes the specific terms of this common stock offering and also
adds to and updates information contained in the accompanying
prospectus and the documents incorporated by reference herein and
therein. The second part, the accompanying prospectus, provides
more general information. Generally, when we refer to this
prospectus, we are referring to both parts of this document
combined. To the extent there is a conflict between the information
contained in this prospectus supplement and the information
contained in the accompanying prospectus or any document
incorporated by reference therein filed prior to the date of this
prospectus supplement, you should rely on the information in this
prospectus supplement; provided that if any statement in one of
these documents is inconsistent with a statement in another
document having a later date — for example, a document
incorporated by reference in the accompanying
prospectus — the statement in the document having the
later date modifies or supersedes the earlier
statement.
We further note
that the representations, warranties and covenants made by us in
any agreement that is filed as an exhibit to any document that is
incorporated by reference herein were made solely for the benefit
of the parties to such agreement, including, in some cases, for the
purpose of allocating risk among the parties to such agreements,
and should not be deemed to be a representation, warranty or
covenant to you. Moreover, such representations, warranties or
covenants were accurate only as of the date when made. Accordingly,
such representations, warranties and covenants should not be relied
on as accurately representing the current state of our
affairs.
Neither we nor the
underwriter have authorized anyone to provide information different
from that contained in this prospectus supplement and the
accompanying prospectus, including any free writing prospectus that
we have authorized for use in this offering. When you make a
decision about whether to invest in our common stock, you should
not rely upon any information other than the information in this
prospectus supplement or the accompanying prospectus, including any
free writing prospectus that we have authorized for use in this
offering. Neither the delivery of this prospectus supplement
or the accompanying prospectus, including any free writing
prospectus that we have authorized for use in this offering, nor
the sale of our common stock means that information contained in
this prospectus supplement and the accompanying prospectus,
including any free writing prospectus that we have authorized for
use in this offering, is correct after their respective dates. It
is important for you to read and consider all information contained
in this prospectus supplement and the accompanying prospectus,
including the information incorporated by reference into this
prospectus supplement and the accompanying prospectus, and any free
writing prospectus that we have authorized for use in connection
with this offering in making your investment decision. You should
also read and consider the information in the documents to which we
have referred you in the sections entitled “Where You Can
Find More Information” and “Incorporation of Certain
Information by Reference” in this prospectus
supplement.
We are offering to
sell, and seeking offers to buy, shares of our common stock only in
jurisdictions where offers and sales are permitted. The
distribution of this prospectus supplement and the accompanying
prospectus and the offering of the common stock in certain
jurisdictions may be restricted by law. Persons outside the United
States who come into possession of this prospectus supplement and
the accompanying prospectus must inform themselves about, and
observe any restrictions relating to, the offering of the common
stock and the distribution of this prospectus supplement and the
accompanying prospectus outside the United States. This prospectus
supplement and the accompanying prospectus do not constitute, and
may not be used in connection with, an offer to sell, or a
solicitation of an offer to buy, any securities offered by this
prospectus supplement and the accompanying prospectus by any person
in any jurisdiction in which it is unlawful for such person to make
such an offer or solicitation.
Unless otherwise
stated, all references in this prospectus to “we,”
“us,” “our,” “TG,” the
“Company” and similar designations refer to TG
Therapeutics, Inc. and our subsidiaries. This prospectus supplement
contains trademarks and trade names of TG Therapeutics, Inc.,
including our name and logo. Other service marks, trademarks and
trade names referred to in this document are the property of their
respective owners.
(i)
PROSPECTUS
SUPPLEMENT SUMMARY
This summary highlights information contained elsewhere or
incorporated by reference in this prospectus supplement and the
accompanying prospectus and in the documents we incorporate by
reference. This summary does not contain all of the information
that you should consider before deciding to invest in our common
stock. You should read this entire prospectus supplement and the
accompanying prospectus carefully, including the ‘‘Risk
Factors’’ section contained in this prospectus
supplement and our consolidated financial statements and the
related notes and the other documents incorporated by reference
herein.
Our
Business
We are a
biopharmaceutical company dedicated to developing and delivering
medicines for patients with B-cell mediated diseases, including
Chronic Lymphocytic Leukemia ("CLL"), non-Hodgkin’s Lymphoma
("NHL") and Multiple Sclerosis ("MS"). We have developed a robust
B-cell directed research and development ("R&D") platform for
identification of key B-cell pathways of interest and rapid
clinical testing. Currently, we have five B-cell targeted drug
candidates in clinical development, with the lead two therapies,
ublituximab (TG-1101) and umbralisib (TGR-1202), in pivotal trials
for CLL, NHL and MS. Ublituximab is a novel anti-CD20 monoclonal
antibody ("mAb") that has been glycoengineered for enhanced potency
over first generation antibodies. Umbralisib is an oral, once daily
inhibitor of PI3K delta. Umbralisib also uniquely inhibits
CK1-epsilon, which may allow it to overcome certain tolerability
issues associated with first generation PI3K delta inhibitors. When
used together in combination therapy, ublituximab and umbralisib
are referred to as ("U2"), or "1303". Additionally, in early
clinical development we have an anti-PD-L1 monoclonal antibody
referred to as TG-1501, an oral Bruton’s Tyrosine Kinase
(“BTK”) inhibitor referred to as TG-1701, and an
anti-CD47/CD19 bispecific antibody referred to as
TG-1801.
We also
actively evaluate
complementary products, technologies and companies for
in-licensing, partnership, acquisition and/or investment
opportunities. To date, we have not received approval for the sale
of any of our drug candidates in any market and, therefore, have
not generated any product sales from our drug
candidates.
●
Umbralisib Single
Agent Cohorts of UNITY-NHL Phase 2b Trial: UNITY-NHL is a
Phase 2b registration-directed clinical trial evaluating umbralisib
monotherapy and the U2 combination in previously treated patients
with NHL. Currently the follicular lymphoma ("FL")/ small
lymphocytic leukemia ("SLL") and marginal zone lymphoma ("MZL")
single agent umbralisib cohorts of this trial have been fully
enrolled. In February 2019, we announced that the MZL cohort met
the primary endpoint of Overall Response Rate ("ORR") as determined
by Independent Review Committee ("IRC") for all treated patients
(n=69). The results met the Company’s target guidance of
40-50% ORR. Interim safety and efficacy data from the MZL cohort
will be presented in an oral presentation at the upcoming American
Association for Cancer Research ("AACR") annual meeting on April 1,
2019. Previously, in January 2019, the U.S. Food and Drug
Administration ("FDA") granted Breakthrough Therapy Designation for
umbralisib for the treatment of adult patients with MZL who
have received at least one prior anti-CD20 regimen, the same
population currently being evaluated in the UNITY-NHL MZL cohort.
We plan to discuss the results with the FDA regarding a potential
new drug application ("NDA") filing for accelerated approval. For
the FL/SLL cohort, we are targeting topline data readout in second
half-2019.
●
Umbralisib plus
Ublituximab UNITY-CLL Phase 3 Trial: UNITY-CLL is a
global Phase 3 randomized controlled clinical trial comparing the
U2 combination, to an active control arm of obinutuzumab plus
chlorambucil in patients with both treatment naïve and
relapsed or refractory CLL. The primary endpoint for this study is
to demonstrate superiority in Progression Free Survival ("PFS") for
the U2 combination over the control arm to support the submission
for full approval of the U2 combination in CLL. We cannot predict
precisely when the PFS readout will occur, however our current
estimate is PFS readout may be available by year-end 2019 or first
half 2020. This trial is being conducted under Special Protocol
Assessment ("SPA") with FDA.
●
Ublituximab Single
Agent ULTIMATE I & II Trials: ULTIMATE I and
ULTIMATE II are two independent Phase 3 trials. Each trial is a
global, randomized, multi-center, double-blinded, double-dummy,
active-controlled study comparing ublituximab to teriflunomide in
subjects with relapsing forms of Multiple Sclerosis ("RMS"). The
primary endpoint for each study is Annualized Relapse Rate ("ARR")
following 96 weeks of treatment over the control arm to support the
submission for full approval of ublituximab in RMS. We are
targeting topline data from this trial in mid-2020. These trials
are being conducted under an SPA with the FDA.
Recent
Developments
On February 28, 2019, we entered into a secured
term loan facility of up to $60.0 million (the “Term
Loan”) with Hercules Capital, Inc. (“Hercules”),
the proceeds of which will be used for our ongoing research and
development programs and for general corporate purposes. The Term
Loan provides for up to four separate advances. The
first advance of $30 million was drawn on the closing date,
February 28, 2019. Two additional advances of $10
million each may be drawn at our option but subject to certain
clinical trial milestones, and the fourth advance of $10 million,
available in minimum increments of $5 million, will be available
through December 15, 2020, subject to the approval of
Hercules’ investment committee. The Term Loan will mature
on
March
1, 2022. Each
advance accrues interest at a per annum rate of interest equal to
the greater of either the “prime rate” plus 4.75%, and
10.25%.
S-1
The Term Loan
provides for interest-only payments until October 1, 2020. The
interest-only period may be extended to April 1, 2021 if the
Company, on or before September 30, 2020, achieves either the third
milestone or the Company has raised at least an amount equal to
$150.0 million in unrestricted net cash proceeds from one or more
equity financings, subordinated indebtedness and/or upfront
proceeds from business development transactions permitted under the
Loan Agreement, in each case after February 7, 2019, and prior to
September 30, 2020. Thereafter, amortization payments will be
payable monthly in eighteen installments (or, if the period
requiring interest-only payments has been extended to April 1,
2021, in twelve installments) of principal and interest (subject to
recalculation upon a change in prime rates). At its
option upon seven business days’ prior written notice to
Hercules, the Company may prepay all or any portion greater than or
equal to $5.0 million of the outstanding advances by paying the
entire principal balance (or portion thereof), all accrued and
unpaid interest, subject to a prepayment charge of 3.0%, if such
advance is prepaid in any of the first twelve months following the
Closing Date, 1.5%, if such advance is prepaid after twelve months
following the Closing Date but on or prior to twenty-four months
following the Closing Date, and 0% thereafter. In
addition, a final payment equal to 3.5% of the aggregate principal
amount of the loan extended by Hercules is due on the maturity
date. Amounts outstanding during an event of default shall be
payable on demand and shall accrue interest at an additional rate
of 4.0% per annum of the past due amount
outstanding.
The Term Loan is
secured by a lien on substantially all of the assets of the
Company, other than intellectual property and contains customary
covenants and representations, including a liquidity covenant,
financial reporting covenant and limitations on dividends,
indebtedness, collateral, investments, distributions, transfers,
mergers or acquisitions, taxes, corporate changes, deposit
accounts, and subsidiaries.
The events of
default under the Loan Agreement include, without limitation, and
subject to customary grace periods, (1) the Company’s failure
to make any payments of principal or interest under the Loan
Agreement, promissory notes or other loan documents, (2) the
Company’s breach or default in the performance of any
covenant under the Loan Agreement, (3) the occurrence of a material
adverse effect, (4) the Company making a false or misleading
representation or warranty in any material respect, (5) the
Company’s insolvency or bankruptcy, (6) certain attachments
or judgments on the Company’s assets, or (7) the occurrence
of any material default under certain agreements or obligations of
the Company involving indebtedness in excess of $750,000. If an
event of default occurs, Hercules is entitled to take enforcement
action, including acceleration of amounts due under the Loan
Agreement.
The Loan Agreement
also contains warrant coverage of 2% of the total amount funded. A
warrant (the “Warrant”) was issued by Company to
Hercules to purchase 147,058 shares of common stock with an
exercise price of $4.08 per share, for the amount drawn at closing.
The Warrant shall be exercisable for seven years from the date of
issuance. Hercules may exercise the Warrant either by (a) cash or
check or (b) through a net issuance conversion. The shares will be
registered and freely tradeable within six months of
issuance.
As of December 31,
2018, we had approximately $68.9 million of cash and cash
equivalents, investment securities and interest receivable. The
Company incurred a net loss of $173.5 million and $30.9 million for
the year ended December 31, 2018 and the three months ended
December 31, 2018, respectively.
In May 2017, we
filed a shelf registration statement on Form S-3 (the "2017 S-3"),
which was declared effective in June 2017, replacing the 2015 S-3.
Under the 2017 S-3, the Company may sell up to a total of $300
million of its securities. In connection with the 2017 S-3, we
entered into an At-the-Market Issuance Sales Agreement (the "2017
ATM") with Jefferies LLC, Cantor Fitzgerald & Co., FBR Capital
Markets & Co., SunTrust Robinson Humphrey, Inc., Raymond James
& Associates, Inc., Ladenburg Thalmann & Co. Inc. and H.C.
Wainwright & Co., LLC (each a "2017 Agent" and collectively,
the "2017 Agents"), relating to the sale of shares of our common
stock. Under the 2017 ATM we pay the 2017 Agents a commission rate
of up to 3.0% of the gross proceeds from the sale of any shares of
common stock.
During the three
months ended December 31, 2018, we sold a total of 933,273 shares
of common stock under the 2017 ATM for aggregate total gross
proceeds of approximately $4.8 million at an average selling price
of $5.12 per share, resulting in net proceeds of approximately $4.7
million after deducting commissions and other transactions
costs.
S-2
The cash amount
presented above is a preliminary financial estimate based solely
upon information available to us as of the date of this prospectus
supplement. The preliminary estimate presented above has been
prepared by and is the responsibility of our management. Our
independent accountant, CohnReznick LLP, has not audited, reviewed,
compiled or performed any procedures with respect to the
preliminary estimate. Accordingly, CohnReznick LLP does not express
an opinion or any other form of assurance with respect
thereto.
The preliminary
estimate presented above does not present all information necessary
for an understanding of our financial condition as of December 31,
2018, and should not be viewed as a substitute for full financial
statements prepared in accordance with accounting principles
generally accepted in the United States of America. In addition,
the preliminary estimate is not necessarily indicative of our
future financial condition.
Additional
Business Updates
In 2018, we entered
into an agreement with a contract manufacturer for the clinical and
potential commercial supply of one of our product candidates. As
part of this agreement, the contract manufacturer has agreed to
defer payment of certain costs and expenses under the agreement in
exchange for the payment of an administrative fee. As of December
31, 2018, we have incurred costs related to this agreement of
approximately $18.4 million, which includes both service fees and
raw material costs. All costs incurred in 2018 are to be invoiced
in 2019 and shall be due in 2020. We will incur an administrative
fee of six percent (6%) per year starting from the date of invoice
issuance. No payments have been made to the contract manufacturer
as of December 31, 2018 and accordingly the entire amount has been
classified as long-term liabilities included in our consolidated
balance sheet.
Company
Information
Our principal
executive offices are located at 2 Gansevoort St., 9th Floor, New York,
New York 10014, and our telephone number is 212-554-4484. We
maintain a website on the Internet at www.tgtherapeutics.com and
our e-mail address is info@tgtxinc.com. Our Internet website, and
the information contained on it, are not to be considered part of
this prospectus supplement or the accompanying prospectus. For
further information regarding us and our financial information, you
should refer to our recent filings with the SEC. See “Where
You Can Find More Information” and “Incorporation of
Certain Information by Reference.”
S-3
THE
OFFERING
|
Issuer
|
TG Therapeutics,
Inc.
|
|
Common stock
offered by us
|
4,100,000
Shares
|
|
Common stock to be
outstanding after the offering
|
87,970,546
Shares
|
|
Option to Purchase
Additional Shares
|
We have granted the
underwriter an option for a period of up to 30 days from the date
of this prospectus supplement to purchase up to an aggregate of
615,000 additional shares of our common stock at the price set
forth on the cover page of this prospectus supplement.
|
|
Use of
Proceeds
|
We intend to use
the net proceeds of this offering for the continued development of
ublituximab and umbralisib, the potential in-license, acquisition,
development and commercialization of other pharmaceutical products,
and for general corporate purposes. See “Use of
Proceeds” on page S-43.
|
|
Risk
Factors
|
See “Risk
Factors” beginning on page S-5 for a discussion of factors
that you should consider before buying shares of our common
stock.
|
|
Nasdaq Capital
Market Symbol
|
TGTX
|
The number of
shares of common stock to be outstanding after the offering assumes
no exercise of the underwriters’ option to purchase
additional shares of common stock and is based on 83,870,546 shares
of common stock outstanding as of December 31, 2018.
The number of
shares of common stock to be outstanding after this offering does
not take into account as of December 31, 2018:
●
1,916,900 shares of
common stock issuable upon the exercise of outstanding stock
options with a weighted average exercise price of $6.50 per
share;
●
16,343 shares of
common stock issuable upon the conversion of outstanding notes
payable with a weighted average conversion price of $1,125 per
share;
●
an aggregate of
3,279,841 shares of common stock reserved for future issuance under
our stock option and incentive plans; and
●
147,058 shares of
common stock issuable upon the exercise of outstanding warrants
with a weighted average exercise price of $4.08 per share.
S-4
RISK
FACTORS
Investment in our common stock involves risks. Before deciding
whether to invest in our common stock, you should consider
carefully the risk factors discussed below and those contained in
the section entitled “Risk Factors” contained in our
Annual Report on Form 10-K for the year ended December 31, 2017 and
our Quarterly Reports for the periods ended March 31, 2018, June
30, 2018 and September 30, 2018, as filed with the SEC on March 15,
2018, May 10, 2018, August 9, 2018 and November 9, 2018,
respectively, which are incorporated herein by reference in their
entirety, as well as any amendment or update to our risk factors
reflected in subsequent filings with the SEC. If any of the risks
or uncertainties described in our SEC filings actually occurs, our
business, financial condition, results of operations or cash flow
could be materially and adversely affected. This could cause the
trading price of our common stock to decline, resulting in a loss
of all or part of your investment. The risks and uncertainties we
have described are not the only ones facing our company. Additional
risks and uncertainties not presently known to us or that we
currently deem immaterial may also affect our business
operations.
Risks
related to this offering
Future sales or other issuances of our common stock could depress
the market for our common stock.
Sales of a
substantial number of shares of our common stock, or the perception
by the market that those sales could occur, could cause the market
price of our common stock to decline or could make it more
difficult for us to raise funds through the sale of equity in the
future.
In connection with
this offering, we, our directors and officers, and certain of our
significant shareholders have entered into lock-up agreements for a
period of 90 days following this offering, subject to certain
exceptions including the ability to make sales under the 2017 ATM
starting 45 days following the date of this offering. We and our
directors and officers may be released from lock-up prior to the
expiration of the lock-up period at the sole discretion of Cantor
Fitzgerald & Co. See “Underwriting.” Upon
expiration or earlier release of the lock-up, we and our directors
and officers may sell shares into the market, which could adversely
affect the market price of shares of our common stock.
Future issuances of
common stock could further depress the market for our common
stock.
If we make one or
more significant acquisitions in which the consideration includes
stock or other securities, our stockholders’ holdings may be
significantly diluted. In addition, stockholders’ holdings
may also be diluted if we enter into arrangements with third
parties permitting us to issue shares of common stock in lieu of
certain cash payments upon the achievement of
milestones.
Our stock price is, and we expect it to remain, volatile, which
could limit investors’ ability to sell stock at a
profit.
The trading price
of our common stock is likely to be highly volatile and subject to
wide fluctuations in price in response to various factors, many of
which are beyond our control. These factors include:
●
publicity regarding
actual or potential clinical results relating to products under
development by our competitors or us;
●
delay or failure in
initiating, completing or analyzing nonclinical or clinical trials
or the unsatisfactory design or results of these
trials;
●
achievement or
rejection of regulatory approvals by our competitors or
us;
●
announcements of
technological innovations or new commercial products by our
competitors or us;
●
developments
concerning proprietary rights, including patents;
●
developments
concerning our collaborations;
●
regulatory
developments in the United States and foreign
countries;
●
economic or other
crises and other external factors;
●
period-to-period
fluctuations in our revenues and other results of
operations;
●
changes in
financial estimates by securities analysts; and
●
sales of our common
stock by us.
We will not be able
to control many of these factors, and we believe that
period-to-period comparisons of our financial results will not
necessarily be indicative of our future performance.
In addition, the
stock market in general, and the market for biotechnology companies
in particular, has experienced extreme price and volume
fluctuations that may have been unrelated or disproportionate to
the operating performance of individual companies. These broad
market and industry factors may seriously harm the market price of
our common stock, regardless of our operating
performance.
S-5
Our preliminary estimate of our cash, cash equivalents and
investments could vary materially from our final
results.
Our preliminary
estimate of our cash, cash equivalents and investments at December
31, 2018 is the responsibility of our management, was prepared by
our management in connection with the preparation of our financial
statements and is based upon a number of assumptions. Estimates of
operating results are inherently uncertain. A variance between our
estimated and final results may materially reduce the market price
of our common stock. See “Summary—Recent
Developments.”
Certain anti-takeover provisions in our charter documents and
Delaware law could make a third-party acquisition of us difficult.
This could limit the price investors might be willing to pay in the
future for our common stock.
Provisions in our
amended and restated certificate of incorporation and restated
bylaws could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from
attempting to acquire, or control us. These factors could limit the
price that certain investors might be willing to pay in the future
for shares of our common stock. Our amended and restated
certificate of incorporation allows us to issue preferred stock
without the approval of our stockholders, including pursuant to our
shareholder rights plan. The issuance of preferred stock could
decrease the amount of earnings and assets available for
distribution to the holders of our common stock or could adversely
affect the rights and powers, including voting rights, of such
holders. In certain circumstances, such issuance could have the
effect of decreasing the market price of our common stock. Our
shareholder rights plan could be used by our board to deter any
third party offer to acquire a significant portion of our common
stock, even an offer at a premium to the market price. Our restated
bylaws eliminate the right of stockholders to call a special
meeting of stockholders, which could make it more difficult for
stockholders to effect certain corporate actions. Any of these
provisions could also have the effect of delaying or preventing a
change in control.
We have broad discretion to use the net proceeds from this offering
and our investment of these proceeds pending any such use may not
yield a favorable return.
Our
management has broad discretion as to how to spend the proceeds
from this offering and may spend these proceeds in ways with which
our stockholders may not agree. Pending any such uses, we plan to
invest the net proceeds of this offering in short-term and
long-term, investment-grade, interest-bearing securities. These
investments may not yield a favorable return to our
stockholders.
You will experience immediate and substantial
dilution.
Since
the public offering price of the shares of common stock offered
pursuant to this prospectus supplement and the accompanying
prospectus is higher than the net tangible book value per share of
our common stock, you will suffer substantial dilution in the net
tangible book value of the common stock you purchase in this
offering.
Risks Related to Our Financial Position and Need for Additional
Capital
We are a biopharmaceutical company with a limited operating history
and have not generated any revenue from drug sales. We have
incurred significant operating losses since our inception and
anticipate that we will incur continued losses for the foreseeable
future.
We are a biopharmaceutical company with a limited
operating history on which investors can base an investment
decision. Biopharmaceutical drug development is a highly
speculative undertaking and involves a substantial degree of risk.
We commenced operations in January 2012. Our operations to date
have been limited primarily to organizing and staffing our company,
business planning, raising capital, developing our technology,
identifying potential drug candidates and undertaking pre-clinical
studies and commencing clinical trials and conducting Phase 3 and
registration directed clinical trials for our most advanced drug
candidates, ublituximab and umbralisib. We have never generated any revenue from drug
sales. We have not obtained regulatory approvals for any of our
drug candidates.
We
have not yet demonstrated our ability to successfully complete
large-scale, pivotal clinical trials, obtain regulatory approvals,
manufacture a commercial scale drug, or arrange for a third party
to do so on our behalf, or conduct sales and marketing activities
necessary for successful commercialization. Typically, it takes
many years to develop one new drug from the time it is discovered
to when it is available for treating patients. Consequently, any
predictions you make about our future success or viability may not
be as accurate as they could be if we had a longer operating
history. We will need to transition from a company with a research
and development focus to a company capable of supporting commercial
activities. We may not be successful in such a
transition.
S-6
Since inception, we have focused substantially all
of our efforts and financial resources on clinical trials and
manufacturing of our drug candidates. To date, we have financed our
operations primarily through public offerings of our common stock
and a debt financing. Through December 31, 2018, we have received
an aggregate of approximately $450 million from such transactions, including
approximately $420 million in
aggregate gross proceeds from the sale of common stock in one or
more offerings and through the use of our ATM from January 2012
through December 2018 but excluding $30.0 million in gross
proceeds from the debt financing in February
2019.
Since
inception, we have incurred significant operating losses. As of
December 31, 2018, we had an accumulated deficit of $528.3 million.
Substantially all of our operating losses have resulted from costs
incurred in connection with our research and development programs
and from general and administrative costs associated with our
operations. We expect to continue to incur significant expenses and
operating losses for the foreseeable future. Our prior losses,
combined with expected future losses, have had and will continue to
have an adverse effect on our stockholders’ deficit and
working capital. We expect our research and development expenses to
significantly increase in connection with continuing our existing
clinical trials and beginning additional clinical trials. In
addition, if we obtain marketing approval for our drug candidates,
we will incur significant sales, marketing and
outsourced-manufacturing expenses. We have incurred and will
continue to incur additional costs associated with operating as a
public company. As a result, we expect to continue to incur
significant and increasing operating losses for the foreseeable
future. Because of the numerous risks and uncertainties associated
with developing pharmaceuticals, we are unable to predict the
extent of any future losses or when we will become profitable, if
at all. Even if we do become profitable, we may not be able to
sustain or increase our profitability on a quarterly or annual
basis. Our ability to become profitable depends upon our ability to
generate revenue.
To
date, we have not generated any significant revenue from our drug
candidates and we do not expect to generate any revenue from the
sale of drugs in the near future. Our ability to become
profitable depends upon our ability to generate significant
continuing revenues. To obtain significant continuing revenues, we
must succeed, either alone or with others, in developing, obtaining
regulatory approval for and manufacturing and marketing our product
candidates. Accordingly, we do not
expect to generate significant and sustained revenue unless and
until we obtain marketing approval of, and begin to sell
umbralisib, ublituximab and/or one of our other product candidates.
Our ability to generate revenue depends on a number of factors,
including, but not limited to, our ability to:
●
Successfully
complete clinical trials that meet their clinical
endpoints;
●
Initiate
and successfully complete all safety, pharmacokinetic,
biodistribution, non-clinical studies required to obtain US and
Foreign marketing approval for our drug candidates;
●
Obtain
approval from the US FDA and Foreign equivalent to market and sell
our drug candidates;
●
Establish
commercial manufacturing capabilities alone and/or with third
parties that are satisfactory to the regulatory authorities, cost
effective, and that are capable of providing commercial supply of
our drug candidates;
●
Establish a
commercial infrastructure to commercialize our drug candidates, if
approved, by developing a sales force and/or entering into
collaborations with third parties; and
●
achieve market
acceptance of our drug candidates in the medical community and with
third-party payors.
If we are unable to
generate significant continuing revenues, we will not become
profitable and we may be unable to continue our operations without
continued funding.
We will need to raise substantial additional funding. If
we are unable to raise capital when needed, we would be forced to
delay, reduce or eliminate some of our drug development programs or
commercialization efforts.
The development of pharmaceuticals is
capital-intensive. We are currently advancing our most advanced
drug candidates, umbralisib,
ublituximab, TG-1501, TG-1701 and TG-1801
through clinical
development. While we may experience short-term
decreases in clinical trial expenses as our larger phase 3 clinical
trials complete and before our Phase 1 and 2 programs can advance
into Phase 2 and 3, we do expect over time our overall expenses
will increase in connection with our ongoing activities,
particularly as we continue the research and development of,
initiate or continue
clinical trials of, and seek marketing approval for, our drug
candidates. In addition, depending on the status of regulatory
approval or, if we obtain marketing approval for any of our drug
candidates, we expect to incur significant commercialization
expenses related to drug sales, marketing, manufacturing and
distribution. Moreover, in anticipation of filing for regulatory
approvals for umbralisib and ublituximab we will need to expend
substantial resources on manufacturing and new drug application
(NDA)/ new biologics license application (BLA) preparation over the
next 12-24+ months, which could exceed any cost savings associated
with lower clinical trial expenses during the same
period.
S-7
While this timing
is our current estimate, the amount and timing of our future
funding requirements will depend on many factors, including, but
not limited to, the following:
●
the progress of our
clinical trials, including expenses to support the trials and
milestone payments that may become payable under our license
agreements;
●
the costs and
timing of regulatory approvals;
●
the costs and
timing of clinical and commercial manufacturing supply arrangements
for each product candidate;
●
the costs of
establishing sales or distribution capabilities;
●
the success of the
commercialization of our products;
●
our ability to
establish and maintain strategic collaborations, including
licensing and other arrangements;
●
the costs involved
in enforcing or defending patent claims or other intellectual
property rights; and
●
the extent to which
we in-license or invest in other indications or product
candidates.
Required additional
sources of financing to continue our operations in the future might
not be available on favorable terms, if at all. If we do not
succeed in raising additional funds on acceptable terms, we might
be unable to complete planned preclinical and clinical trials or
obtain approval of any of our product candidates from the FDA or
any foreign regulatory authorities. In addition, we could be forced
to discontinue product development, reduce or forego sales,
marketing and medical educational efforts that are required for a
successful launch of umbralisib and/or ublituximab or any of our
product candidates and otherwise forego attractive business
opportunities. Any additional sources of financing will likely
involve the issuance of our equity securities, which would have a
dilutive effect to stockholders. Currently, none of our product
candidates have been approved by the FDA or any foreign regulatory
authority for sale. Therefore, for the foreseeable future, we will
have to fund all of our operations and capital expenditures from
cash on hand and amounts raised in future offerings or financings.
Accordingly, our prospects must be considered in light of the
uncertainties, risks, expenses and difficulties frequently
encountered by companies in the early stages of operations and the
competitive environment in which we operate.
Raising additional capital may cause dilution to our stockholders,
restrict our operations or require us to relinquish rights to our
technologies or drug candidates and occupy valuable management time
and resources.
Until such time, if ever, as we can generate
substantial drug revenues, we expect to finance our cash needs
through a combination of public and private equity offerings, debt financings,
collaborations, strategic alliances and licensing arrangements. We
do not have any committed external source of funds, other than
funds already borrowed under the loan and security agreement that we entered into with Hercules in February
2019. To the extent that we raise additional capital through the
sale of common stock or securities convertible or exchangeable into
common stock, the ownership interest of our stockholders will be
diluted, and the terms of these securities may include liquidation
or other preferences that materially adversely affect the rights of
our common stockholders. Debt financing, if available, would
increase our fixed payment obligations and may involve agreements
that include restrictive covenants limiting or restricting our
ability to take specific actions, such as incurring additional
debt, making capital expenditures, declaring dividends, acquiring,
selling or licensing intellectual property rights and other
operating restrictions that could adversely impact our ability to
conduct our business. We could also be required to seek funds
through collaborations, strategic alliances or licensing
arrangements with third parties at a time that is not desirable to
us and we may be required to relinquish valuable rights to some
intellectual property, future revenue streams, research programs or
drug candidates or to grant licenses on terms that may not be
favorable to us, any of which may have a material adverse effect on
our business, operating results and prospects. Debt financing, if
available, may involve agreements that include covenants limiting
or restricting our ability to take specific actions, such as
incurring additional debt, making capital expenditures or declaring
dividends. For example, see our risk factors under the heading
“Risks Related to Our
Indebtedness.”
Additionally,
fundraising efforts may divert our management from their day-to-day
activities, which may adversely affect our ability to develop and
commercialize our drug candidates. Dislocations in the financial
markets have generally made equity and debt financing more
difficult to obtain and may have a material adverse effect on our
ability to meet our fundraising needs. We cannot guarantee that
future financing will be available in sufficient amounts or on
terms acceptable to us, if at all. Moreover, the terms of any
financing may adversely affect the holdings or the rights of our
stockholders and the issuance of additional securities, whether
equity or debt, by us, or the possibility of such issuance, may
cause the market price of our shares to decline. The sale of
additional equity or convertible securities would dilute all of our
stockholders.
S-8
All product candidate development timelines and projections in this
report are based on the assumption of further
financing.
The timelines and
projections in this report are predicated upon the assumption that
we will raise additional financing in the future to continue the
development of our product candidates. In the event we do not
successfully raise subsequent financing, our product development
activities will necessarily be curtailed commensurate with the
magnitude of the shortfall. If our product development activities
are slowed or stopped, we would be unable to meet the timelines and
projections outlined in this filing. Failure to progress our
product candidates as anticipated will have a negative effect on
our business, future prospects, and ability to obtain further
financing on acceptable terms, if at all, and the value of the
enterprise.
Due to limited resources
we may fail
to capitalize on programs or product candidates that may present a
greater commercial opportunity or for which there is a greater
likelihood of success.
Because we have limited resources, we may forego
or delay pursuit of opportunities with certain programs or product
candidates or for indications that later prove to have greater
commercial potential. Our estimates regarding the potential market
for a product candidate could be inaccurate, and our spending on
current and future research and development programs may not yield
any commercially viable products. If we do not accurately evaluate
the commercial potential for a particular product candidate, we may
relinquish valuable rights to that product candidate through
strategic collaboration, licensing or other arrangements in cases
in which it would have been more advantageous for us to retain sole
development and commercialization rights to such product candidate.
Alternatively, we may allocate internal resources to a product
candidate in a therapeutic area in which it would have been more
advantageous to enter into a partnering
arrangement.
If
any of these events occur, we may be forced to abandon or delay our
development efforts with respect to a particular product candidate
or fail to develop a potentially successful product candidate,
which could have a material adverse effect on our business,
financial condition, results of operations and
prospects.
Risks Related to our Indebtedness
Our level of indebtedness and debt service obligations could
adversely affect our financial condition, and may make it more
difficult for us to fund our operations.
In
February 2019, we entered into a Loan and Security Agreement (the
Loan Agreement), with Hercules Capital, Inc., a Maryland
corporation (“Hercules”). Under the Loan
Agreement, Hercules will provide access to term loans with an
aggregate principal amount of up to $60.0 million (the Term
Loan). Concurrently with the closing of the Loan
Agreement, we borrowed an initial tranche of $30.0 million. In
addition, we have incurred long term liabilities of approximately
$18.0 million with a contract manufacturing organization (CMO) for
the scale-up, tech-transfer, and long-term supply of one of our
drug candidates. This is an expensive and lengthy process
and we expect to incur additional obligations associated with these
ongoing activities over the course of the next 24 months, and
potentially longer. To date, this CMO has provided payment terms
which we believe are reasonable, however no assurance can be given
that such terms will continue to be available to us in the future.
No assurances can be made that the obligations associated with the
Loan Agreement and the CMO will not have a material adverse impact
on our financial condition.
All
obligations under the Loan Agreement are secured by substantially
all of our existing property and assets, excluding intellectual
property. This indebtedness may create additional financing risk
for us, particularly if our business or prevailing financial market
conditions are not conducive to paying off or refinancing its
outstanding debt obligations at maturity. This indebtedness could
also have important negative
consequences, including:
●
We
will need to repay the indebtedness by making payments of interest
and principal, which will reduce the amount of money available to
finance our operations, our research and development efforts and
other general corporate activities; and
●
our
failure to comply with the restrictive covenants in the Loan
Agreement could result in an event of default that, if not cured or
waived, would accelerate our obligation to repay this indebtedness,
and Hercules could seek to enforce its security interest in the
assets securing such indebtedness.
To
the extent additional debt is added to our current debt levels, the
risks described above could increase.
S-9
We may not
have cash available in an amount sufficient to enable it to make
interest or principal payments on its indebtedness when
due.
Failure
to satisfy our current and future debt obligations under the Loan
Agreement, or breaching any of its covenants under the Loan
Agreement, subject to specified cure periods with respect to
certain breaches, could result in an event of default and, as a
result, Hercules could accelerate all of the amounts due. In the
event of an acceleration of amounts due under the Loan Agreement as
a result of an event of default, we may not have enough available
cash or be able to raise additional funds through equity or debt
financings to repay such indebtedness at the time of such
acceleration. In that case, we may be required to delay, limit,
reduce or terminate our product candidate development or
commercialization efforts or grant to others rights to develop and
market product candidates that we would otherwise prefer to develop
and market our self. Hercules could also exercise its rights as
collateral agent to take possession and dispose of the collateral
securing the term loans for its benefit, which collateral includes
substantially all of our property other than intellectual property.
Our business, financial condition and results of operations could
be materially adversely affected as a result of any of these
events. We are subject to certain restrictive covenants which, if
breached, could have a material adverse effect on our business and
prospects.
The
Loan Agreement imposes operating and other restrictions on the
Company. Such restrictions will affect, and in many
respects limit or prohibit, our ability and the ability of any
future subsidiary to, among other things:
●
dispose
of certain assets;
●
change
its lines of business;
●
engage
in mergers, acquisitions or consolidations;
●
incur
additional indebtedness;
●
create
liens on assets;
●
pay
dividends and make contributions or repurchase our capital stock;
and
●
engage
in certain transactions with affiliates.
Risks
Related to Drug Development and Regulatory Approval
If we are unable to
obtain regulatory
approval for our most
advanced drug candidates or other drug candidates and ultimately
commercialize our most advanced drug
candidates or other drug
candidates, or experience significant delays in doing so, our
business will be materially harmed.
We are a
development-stage biopharmaceutical company, and do not currently
have any commercial products that generate revenues or any other
sources of revenue. We may never be able to successfully develop
marketable products. Our pharmaceutical development methods are
unproven and may not lead to commercially viable products for a
variety of reasons. We have invested
substantially all of our efforts and financial resources in the
identification, pre-clinical and clinical development of our drug
candidates, including ublituximab, umbralisib, TG-1501, TG-1701 and
TG-1801. Our ability to generate drug revenues, which we do not
expect will occur for a number of years, if ever, will depend
heavily on the successful completion of our current and future
Phase 3 and registration-directed clinical trials and eventual
commercialization of our drug candidates, which may never occur. We
currently generate no revenues from sales of any drugs, and we may
never be able to develop or commercialize a marketable drug. Each
of our drug candidates will require additional pre-clinical or
clinical development, management of clinical, pre-clinical and manufacturing activities,
regulatory approval in multiple jurisdictions, obtaining
manufacturing supply, building of a commercial organization,
substantial investment and significant marketing efforts before we
generate any revenues from drug sales. The success of our most
advanced drug candidates and other drug candidates will depend on
several factors, including the following:
●
successful
completion of our UNITY-NHL trial, UNITY-CLL trial and our ULTIMATE
I and II trials;
●
receipt
of regulatory approvals from applicable regulatory authorities for
our drug candidates;
●
establishing
commercial manufacturing capabilities or making arrangements with
third-party manufacturers for clinical supply and commercial
manufacturing;
●
obtaining and
maintaining patent and trade secret protection or regulatory
exclusivity for our drug candidates;
●
Launching
commercial sales of our drug candidates, if and when approved,
whether alone or in collaboration with others;
●
Acceptance
of the drug candidates, if and when approved, by patients, the
medical community and third-party payors;
●
Effectively
differentiating and competing with other therapies;
●
Obtaining
and maintaining healthcare coverage and adequate
reimbursement;
●
Enforcing
and defending intellectual property rights and claims;
and
●
Maintaining
an acceptable safety profile of the drug candidates following
approval.
If
we do not achieve one or more of these factors in a timely manner
or at all, we could experience significant delays or an inability
to successfully commercialize our drug candidates, which would
materially harm our business.
If we are unable to
develop or receive regulatory approval for or successfully
commercialize any of our product candidates, we will not be able to
generate product revenues and we may
not be able to continue our operations. Even if we are able
to develop or receive regulatory approval for or successfully
commercialize any of our product candidates, we may not be able to
gain market acceptance for our product candidates and future
products and may never become profitable.
S-10
Because the results of preclinical studies and early clinical
trials are not necessarily predictive of future results, any
product candidate we advance into clinical trials may not have
favorable results in later clinical trials, if any, or receive
regulatory approval.
Pharmaceutical
development has inherent risks. The
outcome of pre-clinical development testing and early clinical
trials may not be predictive of the outcome of later clinical
trials, and interim results of a clinical trial do not necessarily
predict final results. Moreover, pre-clinical and clinical data are
often susceptible to varying interpretations and analyses, and many
companies that have believed their drug candidates performed
satisfactorily in pre-clinical studies and clinical trials have
nonetheless failed to obtain marketing approval of their drug
candidates. Once a drug candidate has displayed sufficient
pre-clinical data to warrant clinical investigation, we will
be required to demonstrate through adequate and well-controlled
clinical trials that our product candidates are effective with a
favorable benefit-risk profile for use in populations for their
target indications before we can seek regulatory approvals for
their commercial sale. Success in early clinical trials does not
mean that later clinical trials will be successful because product
candidates in later-stage clinical trials may fail to demonstrate
sufficient safety or efficacy despite having progressed through
initial clinical testing. Companies frequently experience
significant setbacks in advanced clinical trials, even after
earlier clinical trials have shown promising results. In addition,
there is typically an extremely high rate of failure of
pharmaceutical candidates proceeding through clinical
trials.
For instance, early
clinical results seen with ublituximab (TG-1101) and umbralisib
(TGR-1202) in a small number of patients may not be reproduced in
expanded or larger clinical trials such as in our UNITY-CLL,
UNITY-NHL and ULTIMATE I and II programs. Additionally,
individually reported outcomes of patients treated in clinical
trials may not be representative of the entire population of
treated patients in such studies. Further, larger scale Phase 3
studies, which are often conducted internationally, are inherently
subject to increased operational risks compared to earlier stage
studies, including the risk that the results could vary on a region
to region, or country to country basis which could materially
adversely affect the study’s outcome or the opinion of the
validity of the study results by applicable regulatory agencies. In
addition, early clinical trial results from interim analysis or
from the review of a Data Safety Monitoring Board (DSMB) or similar
safety committee may not be reflective of the results of the entire
study, when completed. Clinical trial
results can change over time as additional patients are accrued to
a study or as additional follow-up is conducted, which may result
in a material negative impact on the preliminary results.
For instance, we recently announced that the MZL cohort of the
UNITY-NHL study met the primary endpoint of ORR, falling within our
target range which was between 40%-50%, and while we believe that
the ORR results have the potential to
increase over time within this range, or beyond,
as patients continue to be
followed, no assurance can be given that that will be the
case, and the results may ultimately fall at the lower end of the
range. Further, time to event based
endpoints such as duration of response (DOR) and progression-free
survival (PFS) have the potential to change, sometimes drastically,
with longer follow-up. No assurance can be provided that the ORR,
DOR and PFS data from the MZL cohort of the UNITY-NHL study will be
supportive of an FDA approval or will support broad market uptake
based on the profile of competitor drugs which may be available.
Additionally, while the MZL cohort of the UNITY-NHL study met its
primary endpoint, each cohort of this study is operated and
analyzed independently, and no assurance can be given that other
cohorts from the UNITY-NHL study, including the FL/SLL cohort and
the DLBCL cohort, will meet their primary endpoint, have a positive
outcome, or will be supportive of an FDA
filing.
All of our Phase 3
and registration directed clinical trials such as UNITY-CLL,
UNITY-NHL and ULTIMATE I and II utilize international clinical
research sites, including sites in eastern European countries. The
Company works with what we believe are reputable Clinical Research
Organization’s (CRO) and clinical research sites in
conducting our studies internationally. Nevertheless, the risk of
fraud, incompetence, unexpected patient variability and other
issues affecting the quality and the outcome of our Phase 3 and
registration directed studies could arise from US or international
sites. If that were to occur, the study could be negatively
impacted, potentially even preventing it from being useful for
regulatory approval. If such event were to occur, it would have a
substantial negative impact on the Company.
Additionally, many
of the results reported in our early clinical trials rely on local
investigator assessed safety and efficacy outcomes which may differ
from results assessed in a blinded, independent, centrally reviewed
manner, often required of adequate and well controlled registration
directed clinical trials which may be undertaken at a later date.
All of our current Phase 3 and registration directed studies such
as UNITY-CLL, UNITY-NHL and ULTIMATE I and II trials utilize
blinded, independent, centrally review to assess the primary
endpoint of such studies. If the results from interim analysis are
not consistent with final results or results from our registration
directed trials are different from the results found in the earlier
studies of ublituximab and umbralisib, we may need to terminate or
revise our clinical development plan, which could extend the time
for conducting our development program and could have a material
adverse effect on our business. For example, we recently presented
to the FDA, interim results from the Marginal Zone Lymphoma (MZL)
cohort of our UNITY-NHL trial that supported the granting of BTD.
These interim results were also accepted for presentation at the
2019 American Association of Cancer Research (AACR) annual meeting.
No assurance can be given that the final results from that cohort
will reflect the activity seen in these interim results, or that
the final results will be sufficient to file for accelerated
approval for umbralisib for the treatment of MZL, and if filed that
umbralisib will receive accelerated approval. Similarly, while
early Phase 1 data for umbralisib and ublituximab alone and
together looked promising there is no assurance that the UNITY-CLL
trial will be positive. Moreover, while we believe one of the key
differentiators for umbralisib is its tolerability and side effect
profile compared to other drugs in the same class, no assurance can
be given that a differentiated safety and tolerability profile will
be realized in our Phase 3 or registration directed trials such as
UNITY-CLL or UNITY-NHL. Specifically, we have not yet analyzed the
safety data from the MZL cohort of the UNITY-NHL study, therefore
there can be no assurance given that the safety data, once
analyzed, will be consistent with prior safety data presented on
umbralisib, will be differentiated from other similar agents in the
same class, or that it will be favorable enough to support an FDA
filing. In addition, no assurance can be given that new toxicities,
or an increase in the severity or frequency of previously seen
toxicities, will not be observed, which could have a material
negative impact on the approvability or marketability of umbralisib
or any of our product candidates. Finally, while the Phase 2 data
for ublituximab in MS looked promising, no assurance can be given
that the profile will carry into Phase 3 and that the ULTIMATE I
and II clinical trials will be positive.
S-11
In addition to
umbralisib and ublituximab, we have a number of compounds in early
clinical development, such as TG-1501, TG-1701 and TG-1801. Many
drugs fail in the early stages of clinical development for safety
and tolerability issues, despite promising pre-clinical results.
Accordingly, no assurance can be made that a safe and efficacious
dose can be found for these compounds or that they will ever enter
into advanced clinical trials alone or in combination with
umbralisib and/or ublituximab.
Clinical drug development involves a lengthy and expensive process,
with an uncertain outcome. We may incur additional costs or
experience delays in completing, or ultimately be unable to
complete, the development and commercialization of our drug
candidates.
Our drug candidates umbralisib and ublituximab are
in several Phase 3 and registration directed clinical trials such
as UNITY-CLL, UNITY-NHL and ULTIMATE I and II. As with all clinical
trials, the risk of failure for our drug candidates is high. It is
impossible to predict when or if any of our drug candidates will
prove effective and safe in humans or will receive regulatory
approval. Before obtaining marketing approval from regulatory
authorities for the sale of any drug candidate, we must complete
pre-clinical studies and then conduct extensive clinical trials to
demonstrate the safety and efficacy of our drug candidates in
humans. Clinical testing is expensive, difficult to design and
implement, can take many years to complete and is uncertain as to
outcome. A failure of one or more clinical trials can occur at any
stage of testing. Accordingly, our current Phase 3 and registration directed trials,
such as UNITY-CLL, UNITY-NHL and ULTIMATE I and II and future
clinical trials may not be successful.
Successful completion of our clinical trials is a
prerequisite to submitting an NDA, a BLA to the U.S. FDA and a
Marketing Authorization Application (“MAA”), in the
European Union for each drug candidate and, consequently, the
ultimate approval and commercial marketing of our drug candidates.
We do not know whether any of our clinical
trials for our drug
candidates will be completed on schedule, if at
all.
Whether or not and
how quickly we complete clinical trials is dependent in part upon
the rate at which we are able to engage clinical research/trial
sites and, thereafter, the rate of enrollment of patients, and the
rate we collect, clean, lock and analyze the clinical trial
database. Patient enrollment is a function of many factors,
including the size of the patient population, the proximity of
patients to clinical sites, the eligibility criteria for the study,
the existence of competitive clinical trials, and whether existing
or new drugs are approved for the indication we are studying. We
are aware that other companies are currently conducting or planning
clinical trials that seek to enroll patients with the same diseases
that we are studying. We may
experience numerous unforeseen events during, or as a result of,
any current or future clinical trials that we could conduct that
could delay or prevent our ability to receive marketing approval or
commercialize our drug candidates, including:
●
the FDA or other
regulatory authorities may require us to submit additional data or
impose other requirements before permitting us to initiate a
clinical trial;
●
health authorities
or institutional review boards (“IRBs”), or ethics
committees may not authorize us or our investigators to commence a
clinical trial or conduct a clinical trial at a prospective trial
site or country;
●
we may experience
delays in reaching, or fail to reach, agreement on acceptable terms
with prospective trial sites and prospective contract research
organizations, or CROs, the terms of which can be subject to
extensive negotiation and may vary significantly among different
CROs and trial sites;
●
clinical trials of
our drug candidates may produce negative or inconclusive results,
and we may decide, or health authorities may require us, to conduct
additional pre-clinical studies or clinical trials or we may decide
to abandon drug development programs;
●
the number of
patients required for clinical trials of our drug candidates may be
larger than we anticipate, and enrollment in these clinical trials
may be slower than we anticipate or participants may drop out of
these clinical trials or fail to return for post-treatment
follow-up at a higher rate than we anticipate;
●
our third-party
contractors, including our clinical trial sites, may fail to comply
with regulatory requirements or meet their contractual obligations
to us in a timely manner, or at all, or may deviate from the
clinical trial protocol or drop out of the trial, which may require
that we add new clinical trial sites or investigators;
●
we may elect to, or
health authorities or IRBs or ethics committees may require that we
or our investigators suspend or terminate clinical research for
various reasons, including noncompliance with regulatory
requirements or a finding that the participants are being exposed
to unacceptable health risks;
●
the cost of
clinical trials of our drug candidates may be greater than we
anticipate;
●
the supply or
quality of our drug candidates or other materials necessary to
conduct clinical trials of our drug candidates may be insufficient
or inadequate; and
●
our drug candidates
may have undesirable side effects or other unexpected
characteristics, causing us or our investigators, health
authorities, IRBs or ethics committees to suspend or terminate the
trials, or reports may arise from pre-clinical or clinical testing
of other cancer therapies that raise safety or efficacy concerns
about our drug candidates.
S-12
We could encounter delays if a clinical trial is
suspended or terminated by us, by the IRBs of the institutions in
which such trials are being conducted, by the DSMB for such trial
or by the FDA or other regulatory authorities. Such health
authorities may impose a suspension or termination due to a number
of factors, including failure to conduct the clinical trial in
accordance with regulatory requirements or our clinical protocols,
inspection of the clinical trial operations or trial site by the
FDA or other regulatory authorities resulting in the imposition of
a clinical hold, unforeseen safety issues or adverse side effects,
failure to demonstrate a benefit from using a drug, changes in
governmental regulations or administrative actions or lack of
adequate funding to continue the clinical trial. Many of the
factors that cause, or lead to, a delay in the commencement or
completion of clinical trials may also ultimately lead to the
denial of regulatory approval of our drug candidates. Further, the
FDA may disagree with our clinical trial design and our
interpretation of data from clinical trials, or may change the
requirements for approval even after it has reviewed and commented
on the design for our clinical trials. This could happen even for a
protocol that has received an SPA. In September 2015, we announced a
Phase 3 clinical trial for the combination of ublituximab plus
umbralisib for patients with CLL, which is being conducted pursuant
to a SPA with the FDA and in August 2017 we announced an SPA for
our registration program for ublituximab in RMS. Many companies
which have been granted SPAs have ultimately failed to obtain final
approval to market their drugs. Since we are seeking approvals
under SPAs for some of our product registration strategies, based
on protocol designs negotiated with the FDA, we may be subject to
enhanced scrutiny. Further, any changes or amendments to a protocol
that is being conducted under SPA will have to be reviewed and
approved by the FDA to verify that the SPA agreement is still
valid. Even if the primary endpoint in a Phase 3 clinical trial is
achieved, a SPA does not guarantee approval. The FDA may raise
issues of safety, study conduct, bias, deviation from the protocol,
statistical power, patient completion rates, changes in scientific
or medical parameters or internal inconsistencies in the study
design or data prior to making its final decision. The FDA may also
seek the guidance of an outside advisory committee prior to making
its final decision.
Negative or
inconclusive results from the clinical trials we conduct or
unanticipated adverse medical events could cause us to have to
repeat or terminate the clinical trials. If we are required to repeat or conduct additional
clinical trials or other testing of our drug candidates beyond
those that we currently contemplate, if we are unable to
successfully complete clinical trials of our drug candidates or
other testing, if the results of these trials or tests are not
positive or are only modestly positive or if there are safety
concerns, we may:
●
be delayed in
obtaining marketing approval for our drug candidates;
●
not obtain
marketing approval at all;
●
obtain approval for
indications or patient populations that are not as broad as
intended or desired;
●
be subject to
post-marketing testing requirements; or
●
have the drug
removed from the market after obtaining marketing
approval.
Our
drug development costs will also increase if we experience delays
in testing or regulatory approvals. We may also incur
additional costs if enrollment is increased. All our current Phase
3 and registration-directed clinical trials, such as UNITY-CLL, UNITY-NHL and ULTIMATE I and II
enrolled larger number of patients than our initial projections,
adding significant costs to those studies over and above what had
been projected. We do not know whether
any of our clinical trials will begin as planned, will need to be
restructured or will be completed on schedule, or at all.
Certain clinical trials are designed to continue until a
pre-determined number of events have occurred in the patients
enrolled. Trials such as this are subject to delays stemming from
patient withdrawal and from lower than expected event rates.
UNITY-CLL is an event-driven study, which means the study can only
end when a certain pre-specified number of events have occurred. In
the case of UNITY-CLL, an event is defined as disease progression
or death. Given that these events cannot be predicted with
certainty, predicting accurately when this study will reach a
sufficient number of events to be complete is impossible. We have
stated we believe the number of events can be reached by YE19 or in
2020 but there can be no assurance that that will occur and
timelines for the completion of this study should not be relied on
given the inherent uncertainty. Delays beyond early 2020 could have
a material and adverse impact on the Company. Significant clinical trial delays also could
shorten any periods during which we may have the exclusive right to
commercialize our drug candidates or allow our competitors to bring
products to market before we do and impair our ability to
successfully commercialize our drug candidates. Any delays in our
pre-clinical or future clinical development programs may harm our
business, financial condition and prospects
significantly.
S-13
The sufficiency of our
clinical trial results for accelerated approval are subject to
FDA’s discretion.
We have and will
continue to explore strategies for ublituximab and/or umbralisib
that involve use of the FDA’s accelerated approval pathway.
Obtaining accelerated approval for an agent requires demonstration
of meaningful benefit over all available therapies for a serious
condition. While we believe we have an understanding of what is
considered available therapy today, ultimately the determination of
what constitutes available therapy is wholly up to the FDA and is
subject to change. No assurance can be given that other agents will
not receive full approval prior to our potential receipt of
accelerated approval. If that were to occur, no assurance can be
given that we would be successful in proving meaningful benefit
over those later approved drugs. If we were unable to prove
meaningful benefit over any such agents, we would be effectively
blocked from receiving accelerated approval. We are currently
awaiting final results from our UNITY-NHL trial, in particular the
MZL cohort, which we are hoping will be useful for accelerated
approval if positive. Even if the results are positive, no
assurance can be given that umbralisib will obtain accelerated
approval for a variety of reasons, including if a new treatment
receives full approval prior to our potential receipt of
accelerated approval. Previously, we were hopeful to utilize the
results from our GENUINE study for accelerated approval but the
intervening full approval of a drug called venetoclax for
relapsed/refractory CLL has made that potential application more
challenging. While no final decision has been made as to the filing
of the GENUINE study for accelerated approval, the Company has no
plans to pursue that filing at this time. No assurance can be given
that a filing based on the GENUINE results will ever be
made.
Finally, if any of
our drugs were ever to receive accelerated approval, we would be
required to conduct a post-market confirmatory study, which we may
not complete, or if completed, may prove unsuccessful. In such
instance, the FDA can remove the product from the
market.
In addition,
principal investigators for our clinical trials may serve as
scientific advisors or consultants to us from time to time and
receive cash or equity compensation in connection with such
services. If these relationships and any related compensation
result in perceived or actual conflicts of interest, the integrity
of the data generated at the applicable clinical trial site, or
FDA’s willingness to accept such data, may be
jeopardized.
Our drug candidates may cause undesirable side effects that could
delay or prevent their regulatory approval, limit the commercial
profile of an approved label, or result in significant negative
consequences following marketing approval, if any.
Unacceptable or
undesirable adverse events caused by any of our product candidates
that we take into clinical trials could cause either us,
a DSMB, or regulatory
authorities to interrupt, delay, modify or halt clinical trials
and could result in a more restrictive
label or the delay or denial of regulatory approval by the FDA or
other regulatory authorities. This, in turn, could prevent
us from commercializing the affected product candidate and
generating revenues from its sale.
As
is the case with all drugs, it is likely that there will be side
effects associated with the use of our drug candidates. Results of
our trials could reveal a high and unacceptable severity and
prevalence of side effects. In such an event, our trials could be
suspended or terminated and the FDA or comparable foreign
regulatory authorities could order us to cease further development
of or deny approval of our drug candidates for any or all targeted
indications. The drug-related side effects could also affect
patient recruitment or the ability of enrolled patients to complete
the trial or result in potential product liability claims. Any of
these occurrences may harm our business, financial condition and
prospects significantly.
Many
compounds that initially showed promise in early stage testing have
later been found to cause side effects that prevented further
development of the compound. Further, early clinical trials by
their nature utilize a small sample of the potential patient
population. With a limited number of patients and limited duration
of exposure, rare and severe side effects of our drug candidates
may only be uncovered with a significantly larger number of
patients exposed to the drug candidate in Phase 3 or registration
directed trials and on the market.
We are currently
running our Phase 3 and registration-directed trials, such as
UNITY-CLL, UNITY-NHL and ULTIMATE I and II and have not completed
testing of any of our product candidates for the treatment of the
indications for which we intend to seek product approval in humans,
and we currently do not know the extent that the adverse events, if
any, will be observed in patients who receive any of our product
candidates. To date, clinical trials using ublituximab and
umbralisib have demonstrated a toxicity profile that was deemed
acceptable by the investigators performing such studies. Such
interpretation may not be shared by future investigators or by the
health authorities and in the case of ublituximab and umbralisib,
even if deemed acceptable for oncology and/or autoimmune
indications, it may not be acceptable for diseases outside the
oncology and autoimmune settings, and likewise for any other
product candidates we may develop. Additionally, the severity,
duration and incidence of adverse events may increase in larger
study populations such as found in our on-going Phase 3 and
registration-directed trials. Particularly, with respect to
umbralisib, although over 1,000 patients to date have been dosed
amongst all ongoing umbralisib studies, the full adverse effect
profile of umbralisib is not known. It is also unknown as
additional patients are exposed for longer durations to umbralisib,
whether greater frequency and/or severity of adverse events are
likely to occur. Common toxicities of other drugs in the same class
as umbralisib include high levels of liver toxicity, infections and
colitis, the latter of which notably has presented with later
onset, with incidence increasing with duration of exposure. No
assurance can be given that an acceptable safety and tolerability
profile for umbralisib will continue to be demonstrated in the
future with longer durations of exposure, at the fixed 800mg dose
being evaluated in our registration-directed trials and in multiple
drug combinations. If any of our product candidates cause
unacceptable adverse events in clinical trials, we may not be able
to obtain marketing approval and generate revenues from its sale,
or even if approved for sale may lack differentiation from
competitive products, which could have a material adverse impact on
our business and operations.
S-14
Additionally, in
drug-combination clinical development, there is an inherent risk of
drug-drug interactions between combination agents which may affect
each component’s individual pharmacologic properties and the
overall efficacy and safety of the combination regimen. Both
ublituximab and umbralisib are being evaluated in combination with
each other, as well as with a variety of other active anti-cancer
agents, which may cause unforeseen toxicity, or impact the
severity, duration, and incidence of adverse events observed
compared to those seen in the single agent studies of these agents.
We also intend to explore multiple combination studies involving
TG-1501, TG-1701, and TG-1801. Further, with multi-drug
combinations, it is often difficult to interpret or properly assign
attribution of an adverse event to any one particular agent,
introducing the risk that toxicity caused by a component of a
combination regimen could have a material adverse impact on the
development of our product candidates. There can be no assurances
given that the combination regimens being studied will display
tolerability or efficacy suitable to warrant further testing or
produce data that is sufficient to obtain marketing
approval.
If
any of our drug candidates receive marketing approval and we or
others later identify undesirable or unacceptable side effects
caused by such drug candidates (or any other similar drugs) after
such approval, a number of potentially significant negative
consequences could result, including:
●
regulatory
authorities may withdraw or limit their approval of such drug
candidates;
●
regulatory
authorities may require a more significant clinical benefit for
approval to offset the risk;
●
regulatory
authorities may require the addition of labeling statements,
including warnings, contra-indications, or precautions, that could
diminish the usage of the product or otherwise limit the commercial
success of the affected product;
●
we may be required
to create a medication guide outlining the risks of such side
effects for distribution to patients;
●
we may be required
to change the way such drug candidates are distributed or
administered, conduct additional clinical trials;
●
regulatory
authorities may require a Risk Evaluation and Mitigation Strategy
(“REMS”), plan to mitigate risks, which could include
medication guides, physician communication plans, or elements to
assure safe use, such as restricted distribution methods, patient
registries and other risk minimization tools;
●
we may be subject
to regulatory investigations and government enforcement
actions;
●
we may decide to
remove such drug candidates from the marketplace;
●
we may not be able
to enter into collaboration agreements on acceptable terms and
execute on our business model;
●
we could be sued
and held liable for injury caused to individuals exposed to or
taking our drug candidates; and
●
our reputation may
suffer.
Any
one or a combination of these events could prevent us from
obtaining or maintaining regulatory approval and achieving or
maintaining market acceptance of the affected product or could
substantially increase the costs and expenses of commercializing
the affected product, which in turn could significantly impact our ability to successfully
commercialize our drug candidates and generate
revenues.
Any product candidates we may advance through clinical development
are subject to extensive regulation, which can be costly and time
consuming, cause unanticipated delays or prevent the receipt of the
required approvals.
The clinical
development, manufacturing, labeling, storage, record-keeping,
advertising, promotion, import, export, marketing and distribution
of our product candidates or any future product candidates are
subject to extensive regulation by the FDA in the United States and
by comparable health authorities worldwide. In the United States,
we are not permitted to market a product candidate until we receive
approval of a BLA or NDA from the FDA. The process of obtaining BLA
and NDA approval is expensive, often takes many years and can vary
substantially based upon the type, complexity and novelty of the
products involved. Approval policies or regulations may change and
the FDA has substantial discretion in the pharmaceutical approval
process, including the ability to delay, limit or deny approval of
a product candidate for many reasons. In addition, the FDA may
require post-approval clinical trials or studies which also may be
costly. The FDA approval for a limited indication or approval with
required warning language, such as a boxed warning, could
significantly impact our ability to successfully market our product
candidates. Finally, the FDA may require adoption of a REMS
requiring prescriber training, post-market registries, or otherwise
restricting the marketing and dissemination of these products.
Despite the time and expense invested in the clinical development
of product candidates, regulatory approval is never guaranteed.
Assuming successful clinical development, we intend to seek product
approvals in countries outside the United States. As a result, we
would be subject to regulation by the European Medicines Agency
(“EMA”), as well as the other regulatory agencies in
these countries.
S-15
Approval procedures
vary among countries and can involve additional product testing and
additional administrative review periods. The time required to
obtain approval in other countries might differ from that required
to obtain FDA approval. Regulatory approval in one country does not
ensure regulatory approval in another, but a failure or delay in
obtaining regulatory approval in one country may negatively impact
the regulatory process in others. As in the United States, the
regulatory approval process in Europe and in other countries is a
lengthy and challenging process. The FDA, and any other regulatory
body around the world can delay, limit or deny approval of a
product candidate for many reasons, including:
●
the FDA or
comparable foreign regulatory authorities may disagree with the
design or implementation of our clinical trials;
●
we may be unable to
demonstrate to the satisfaction of the FDA or comparable foreign
regulatory authorities that a product candidate is safe and
effective for an indication;
●
the FDA may not
accept clinical data from trials conducted by individual
investigators or in countries where the standard of care is
potentially different from the United States;
●
the results of
clinical trials may not meet the level of statistical significance
required by the FDA or comparable foreign regulatory authorities
for approval;
●
we may be unable to
demonstrate that a product candidate's clinical and other benefits
outweigh its safety risks;
●
the FDA or
comparable foreign regulatory authorities may disagree with our
interpretation of data from preclinical studies or clinical
trials;
●
the data collected
from clinical trials of our product candidates may not be
sufficient to support the submission of a BLA, NDA or other
submission or to obtain regulatory approval in the United States or
elsewhere;
●
the FDA or
comparable foreign regulatory authorities may not approve the
manufacturing processes or facilities of third-party manufacturers
with which we or our collaborators currently contract for clinical
supplies and plan to contract for commercial supplies;
or
●
the approval
policies or regulations of the FDA or comparable foreign regulatory
authorities may significantly change in a manner rendering our
clinical data insufficient for approval.
In addition,
raising questions about the safety of marketed pharmaceuticals may
result in increased cautiousness by the FDA and other regulatory
authorities in reviewing new pharmaceuticals based on safety,
efficacy or other regulatory considerations and may result in
significant delays in obtaining regulatory approvals. Regulatory
approvals for our product candidates may not be obtained without
lengthy delays, if at all. Any delay in obtaining, or inability to
obtain, applicable regulatory approvals would prevent us from
commercializing our product candidates.
A breakthrough therapy designation by the FDA for our drug
candidates, including umbralisib for the treatment of adult
patients with relapsed or refractory Marginal Zone Lymphoma (MZL)
who have received at least one prior treatment including an
anti-CD20 monoclonal antibody, may not lead to a faster development
or regulatory review or approval process, and it does not ensure
that our drug candidates will receive marketing
approval.
In
January 2019, the FDA granted breakthrough therapy designation to
umbralisib for the treatment of adult patients with relapsed or
refractory MZL who have received at least one prior treatment
including an anti-CD20 monoclonal antibody. We may also seek
breakthrough therapy designation for some of our other drug
candidates. A breakthrough therapy is defined as a drug that is
intended, alone or in combination with one or more other drugs, to
treat a serious or life-threatening disease or condition, and
preliminary clinical evidence indicates that the drug may
demonstrate substantial improvement over existing therapies on one
or more clinically significant endpoints, such as substantial
treatment effects observed early in clinical development. Our
breakthrough therapy designation was based on interim data from the
MZL cohort of the UNITY-NHL clinical trial. No assurance can be
given that the full results from the MZL cohort of the UNITY-NHL
clinical trial will be positive and support a filing for
accelerated approval.
For
drugs that have been designated as breakthrough therapies,
interaction and communication between the FDA and the sponsor of
the trial can help to identify the most efficient path for clinical
development while minimizing the number of patients placed in
ineffective control regimens. Drugs designated as breakthrough
therapies by the FDA are also eligible for accelerated approval.
Designation as a breakthrough therapy is wholly within the
discretion of the FDA. Accordingly, even if we believe one of our
drug candidates meets the criteria for designation as a
breakthrough therapy, the FDA may disagree and instead determine
not to grant such designation to the drug candidate. In any event,
the receipt of a breakthrough therapy designation for a drug
candidate may not result in a faster development process, review or
approval compared to drugs considered for approval under
conventional FDA procedures and does not assure ultimate approval
by the FDA. In addition, even if one or more of our drug candidates
qualify as breakthrough therapies, the FDA may later decide that
the drugs no longer meet the conditions for qualification and
rescind the designation.
S-16
A fast track designation by the FDA may not actually lead to a
faster development or regulatory review or approval
process.
We
may seek fast track designation for some of our other drug
candidates. If a drug is intended for the treatment of a serious or
life-threatening condition and the drug demonstrates the potential
to address unmet medical needs for this condition, the drug sponsor
may apply for fast track designation. The FDA has broad discretion
whether or not to grant this designation, so even if we believe a
particular drug candidate is eligible for this designation, we
cannot assure you that the FDA would decide to grant it. Even if we
receive fast track designation for our other drug candidates, we
may not experience a faster development process, review or approval
compared to conventional FDA procedures. The FDA may withdraw fast
track designation if it believes that the designation is no longer
supported by data from our clinical development
program.
While
we have received orphan drug designation for umbralisib and
ublituximab for specified indications, we may seek additional
orphan drug designation for those and some of our other drug
candidates. However, we may be
unsuccessful in obtaining
or may be unable to maintain the benefits associated with orphan
drug designation, including the potential for market
exclusivity.
Ublituximab
received orphan-drug designation from the FDA for the treatment of
Marginal Zone Lymphoma (Nodal and Extranodal) in September 2013,
for the treatment of CLL in August of 2010, and orphan-drug
designation by the EMA for the treatment of CLL in November of
2009. We also obtained orphan drug designation for umbralisib as
monotherapy for the treatment of CLL in August 2016, and in January
2017, we announced that the FDA granted Orphan Drug designation
covering the combination of ublituximab and umbralisib for the
treatment of patients with CLL and DLBCL. As part of our business strategy, we may seek
orphan drug designation for our other drug candidates, and we may
be unsuccessful. Regulatory authorities in some jurisdictions,
including the United States and the European Union, may designate
drugs for relatively small patient populations as orphan drugs.
Under the Orphan Drug Act, the FDA may designate a drug as an
orphan drug if it is a drug intended to treat a rare disease or
condition, which is generally defined as a patient population of
fewer than 200,000 individuals annually in the United States,
or a patient population greater than 200,000 in the United States
where there is no reasonable expectation that the cost of
developing the drug will be recovered from sales in the United
States. In the United States, orphan drug designation entitles a
party to financial incentives such as opportunities for grant
funding towards clinical trial costs, tax advantages and user-fee
waivers.
Even
if we obtain orphan drug exclusivity for a drug, that exclusivity
may not effectively protect the designated drug from competition
because different drugs can be approved for the same condition.
Even after an orphan drug is approved, the FDA can subsequently
approve the same drug for the same condition if the FDA concludes
that the later drug is clinically superior in that it is shown to
be safer, more effective or makes a major contribution to patient
care. In addition, a designated orphan drug may not receive orphan
drug exclusivity if it is approved for a use that is broader than
the indication for which it received orphan designation. Moreover,
orphan drug exclusive marketing rights in the United States may be
lost if the FDA later determines that the request for designation
was materially defective or if the manufacturer is unable to assure
sufficient quantity of the drug to meet the needs of patients with
the rare disease or condition. Orphan drug designation neither
shortens the development time or regulatory review time of a drug
nor gives the drug any advantage in the regulatory review or
approval process. While we intend to seek additional orphan drug
designation for our other drug candidates, we may never receive
such designations. Even if we receive orphan drug designation for
any of our drug candidates, there is no guarantee that we will
enjoy the benefits of those designations.
As all of our product candidates are still under development,
manufacturing site additions, scale-up and process improvements
implemented in the production of those product candidates may
affect their ultimate activity or function.
Our product
candidates are in the initial stages of development and are
currently manufactured in relatively small batches for use in
pre-clinical and clinical studies. Process improvements implemented
to date have changed, and process improvements in the future may
change, the activity and analytical profile of the product
candidates, which may affect the safety and efficacy of the
products. For instance, the manufacturing process for ublituximab
has undergone several process improvements during the clinical
trial process which have resulted in analytical differences between
the materials. Such process improvements continued during the
conduct of Phase 3 and material from more than one manufacturing
process were utilized in the Phase 3 UNITY-CLL trial. While
analytical differences exist between those materials, we do not
believe the differences will alter the safety or efficacy profile
of ublituximab. However, it is possible that additional and/or
different adverse events may appear among patients exposed to drug
product manufactured under one process compared to the other, or
that adverse events may arise with greater frequency, intensity and
duration among patients exposed to drug product manufactured under
one process compared to the other. Additionally, the efficacy of
ublituximab also can be negatively impacted by such process
changes. Given the uncertainty of the impact on product
specifications, quality and performance, process improvements made
during Phase 3 development carry a higher level of risk then those
made prior to Phase 3 development. If there are significant
differences product attributes between the two materials, we may
need to adjust our statistical analysis plans of the Phase 3 study
to confirm that there is no difference in safety or efficacy
between product made by each process in order to and allow us to
utilize data from all enrolled patients, as well as be able to
integrate clinical safety and/or efficacy results across studies to
support any potential marketing application. There can be no
assurance given that such analyses will be successful in
demonstrating no clinical differences between these drug products,
which could substantially impact the approvability of the U2
combination based on the results of the UNITY-CLL study. In such
circumstances, that would have a material adverse effect on the
Company.
Further, no
assurance can be given that the material manufactured from any
future optimized processes, if any, for ublituximab or any of our
product candidates will perform comparably to the product
candidates as manufactured to date which could result in an
unexpected safety or efficacy outcome as compared to the data
published or presented to date. Similarly, following each round of
process improvements, if any, for any of our drug candidates,
future clinical trial results conducted with the new material will
be subject to uncertainty related to the effects, if any, of those
additional process improvements that were made.
S-17
In addition, we
have engaged a secondary manufacturer for ublituximab to meet our
current clinical and future commercial needs and anticipate
engaging additional manufacturing sources for umbralisib to meet
expanded clinical trial and commercial needs. If a secondary
manufacturer is not successful in replicating the product or
experiences delays, or if regulatory authorities impose unforeseen
requirements with respect to product comparability from multiple
manufacturing sources, we may experience delays in clinical
development. No assurance can be given that any additional
manufacturers will be successful or that material manufactured by
the additional manufacturers will perform comparably to ublituximab
or umbralisib as manufactured to date and used in currently
available pre-clinical data and or in early clinical trials
presented publicly or reported in this or any previous filing, or
that the relevant regulatory agencies will agree with our
interpretation of comparability.
In addition, as we
move closer to commercialization for ublituximab and umbralisib we
will need to scale-up production to ensure adequate commercial
supply. We are currently in the process of scaling up ublituximab.
This is an expensive process and there can be no assurance given
that such scale-up will be successful in providing pharmaceutical
product that is of sufficient quantity, or of a quality that is
consistent with our previously established specifications, or that
meets the requirements set by regulatory agencies under which we
may seek approval of our product candidates. If scale-up were not
to succeed our ability to supply our anticipated market at a
reasonable cost of goods would be negatively impacted. In such
event, that would have a material adverse effect on the Company.
Scale up could also require additional process improvement that
might be required to accommodate new and larger equipment utilized
in the scaled-up process. If that were to occur and we could not
demonstrate to the FDA that the materials were analytically
substantially similar, we might be required to run additional
clinical testing to demonstrate that they are substantially
similar. That would entail a significant delay and significant
increase in total cost, all of which would have a material adverse
effect on the Company.
Risks Related to Commercialization
The incidence and prevalence for target patient populations of our
drug candidates have not been established with precision. If the
market opportunities for our drug candidates are smaller than we
estimate or if any approval that we obtain is based on a narrower
definition of the patient population, our revenue and ability to
achieve profitability will be adversely affected, possibly
materially.
The precise incidence and/or prevalence of CLL,
relapsed/refractory MZL, relapsed/refractory FL and RMS are
unknown. Our projections of
both the number of people who are affected by disease within our
target indications, as well as the subset of these people who have
the potential to benefit from treatment with our
product candidates, are based on our
beliefs and estimates. Our beliefs are typically based on one on
one and group interactions with target physicians and our estimates
have been derived from a variety of sources, including the
scientific literature, healthcare utilization databases and market
research, and may prove to be incorrect. Further, new studies may
change the estimated incidence or prevalence of these
diseases.
The
total addressable market opportunity for umbralisib and ublituximab
for the treatment of patients with CLL, MZL, FL and MS will
ultimately depend upon, among other things, the final label
indication, approved for sale for these indications, acceptance by
the medical community, patient access, drug pricing and
reimbursement. The number of patients in major markets, including
the number of addressable patients in those markets, may turn out
to be lower than expected, patients may not be otherwise amenable
to treatment with our drugs, new patients may become increasingly
difficult to identify or gain access to, or patients and physicians
may choose to utilize competitive products, all of which would
adversely affect our results of operations and our
business.
We face substantial competition for treatments for our target
indications, which may result in others commercializing drugs
before or more successfully than we do resulting in the reduction
or elimination of our commercial opportunity.
We operate in a highly competitive segment of the biotechnology and
biopharmaceutical market. We face competition from numerous
sources, including commercial pharmaceutical and biotechnology
enterprises, academic institutions, government agencies, and
private and public research institutions. Many of our competitors
have significantly greater financial, product development,
manufacturing and marketing resources. Large pharmaceutical
companies have extensive experience in clinical testing and
obtaining regulatory approval for drugs. Additionally, many
universities and private and public research institutes are active
in cancer research, some in direct competition with us. We may also
compete with these organizations to recruit scientists and clinical
development personnel. Smaller or early-stage companies may also
prove to be significant competitors, particularly through
collaborative arrangements with large and established
companies.
S-18
Our
commercial opportunity could be reduced or eliminated if our
competitors develop and commercialize drugs that are safer, more
effective, have fewer or less severe side effects, are more
convenient or are less expensive than any drugs that we or our
collaborators may develop. Our competitors also may obtain FDA or
other regulatory approval for their drugs more rapidly than we may
obtain approval for ours, which could result in our competitors
establishing a strong market position before we or our
collaborators are able to enter the market. The key competitive
factors affecting the success of all of our drug candidates, if
approved, are likely to be their efficacy, safety, convenience,
price, the effectiveness of any related companion diagnostic tests,
the level of generic competition and the availability of
reimbursement from government and other third-party
payors.
For the cancer
indications for which we are developing our products there are a
number of established therapies with which we will
compete:
●
For the treatment
of CLL, if U2 is approved, we expect U2 to compete with recently
approved drugs such as ibrutinib (AbbVie and Janssen), venetoclax
(AbbVie and Roche), obinutuzumab (Roche), idelalisib (Gilead) and
duvelisib (Verastem), and established treatments such as rituximab
(Roche), and several generically available chemotherapies.
Additionally, there are two second generation BTK inhibitors
similar to ibrutinib in late-stage clinical testing for CLL that
could enter the market in the next 12-36 months. Each of these
agents can be used as monotherapy or in combination with one or
more of the other agents.
●
For the treatment
of Marginal Zone Lymphoma, if approved, we expect umbralisib to
compete with ibrutinib (AbbVie and Janssen) and established
treatments such as rituximab and several generically available
chemotherapies. Additionally, the combination of rituximab and
lenalidomide (Celgene) has been studied in MZL and may be
approved.
●
For the treatment
of Follicular Lymphoma, if approved, we expect umbralisib to
compete with recently approved drugs such as obinutuzumab (Roche),
idelalisib (Gilead), copanlisib (Bayer), and duvelisib (Verastem),
and established treatments such as rituximab (Roche), and several
generically available chemotherapies. Each of these agents can be
used as monotherapy or in combination with one or more of the other
agents. The combination of rituximab and lenalidomide (Celgene) has
also been studied in FL and may be approved. There are also several
PI3K delta inhibitors in earlier stages of
development.
●
In addition, a
number of pharmaceutical companies are developing antibodies and
bispecific antibodies targeting CD20, CD19, CD47 and other B-cell
associated targets, chimeric antigen receptor T-cell
(“CAR-T”) immunotherapy, and other B-cell ablative
therapy which, if approved, would potentially compete with U2 and
umbralisib.
For Multiple
Sclerosis for which we are developing ublituximab there are a
number of established therapies with which we will
compete:
●
If ublituximab is
approved, we expect ublituximab will primarily compete against
other CD20 targeted agents, while the group of CD20 targeted agents
will also compete broadly against a number of already approved MS
therapies. Currently, there is one anti-CD20 monoclonal antibody
approved, ocrelizumab (Roche), and another in Phase 3 development,
ofatumumab (Novartis), which is expected to enter the market in the
next 12-24 months.
TG-1501, TG-1701
and TG-1801 if approved will also face competition from drugs on
the market and under development that have the same mechanism of
action as each of those drugs.
New developments,
including the development of other pharmaceutical technologies and
methods of treating disease, occur in the pharmaceutical and life
sciences industries at a rapid pace. These developments may render
our product candidates obsolete or noncompetitive. Compared to us,
many of our potential competitors have substantially
greater:
●
research and
development resources, including personnel and
technology;
●
regulatory
experience;
●
pharmaceutical
development, clinical trial and pharmaceutical commercialization
experience;
●
experience and
expertise in exploitation of intellectual property rights;
and
●
capital
resources.
We will also face
competition from these third parties in recruiting and retaining
qualified personnel, establishing clinical trial sites, patient
registration for clinical trials, and in identifying and
in-licensing new product candidates.
S-19
Product liability lawsuits against us could cause us to incur
substantial liabilities and could limit commercialization of any
drug candidates that we may develop.
We
will face an inherent risk of product liability exposure related to
the testing of our drug candidates in human clinical trials and use
of our drug candidates through compassionate use programs, and we
will face an even greater risk if we commercially sell any drug
candidates that we may develop. If we cannot successfully defend
ourselves against claims that our drug candidates caused injuries,
we could incur substantial liabilities. Regardless of merit or
eventual outcome, liability claims may result in:
●
decreased demand
for any drug candidates that we may develop;
●
injury to our
reputation and significant negative media attention;
●
withdrawal of
clinical trial participants;
●
significant costs
to defend the related litigation;
●
substantial
monetary awards to trial participants or patients;
●
loss
of revenue; and
●
the
inability to commercialize any drug candidates that we may
develop.
Although
we maintain product liability insurance coverage, it may not be
adequate to cover all liabilities that we may incur. We anticipate
that we will need to increase our insurance coverage if we
successfully commercialize any drug candidate. Insurance coverage
is increasingly expensive. We may not be able to maintain insurance
coverage at a reasonable cost or in an amount adequate to satisfy
any liability that may arise.
If any product candidate that we successfully develop does not
achieve broad market acceptance among physicians, patients,
healthcare payors, and the medical community, the revenues that we
generate from its sales will be limited.
Even if our product
candidates receive regulatory approval, they may not gain market
acceptance among physicians, patients, healthcare payors, and the
medical community. Coverage and reimbursement of our product
candidates by third-party payors, including government payors,
generally would also be necessary for commercial success. The
degree of market acceptance of any approved product would depend on
a number of factors, including:
●
the efficacy and
safety as demonstrated in clinical trials;
●
the timing of
market introduction of such product candidate as well as
competitive products;
●
the clinical
indications for which the product is approved;
●
acceptance by
physicians, major operators of cancer clinics and patients of the
product as a safe and effective treatment;
●
the potential and
perceived advantages of the product candidate over alternative
treatments;
●
the safety of the
product candidate in a broader patient group;
●
the cost of
treatment in relation to alternative treatments;
●
the availability of
adequate reimbursement and pricing by third parties and government
authorities;
●
changes in
regulatory requirements by government authorities for the product
candidate;
●
relative
convenience and ease of administration;
●
the prevalence and
severity of side effects and adverse events;
●
the effectiveness
of our sales and marketing efforts; and
●
unfavorable
publicity relating to the product.
If any product
candidate is approved but does not achieve an adequate level of
acceptance by physicians, hospitals, healthcare payors and
patients, we may not generate sufficient revenue from these
products and we may not become or remain
profitable.
Even if we are able to commercialize any drug candidates, such
drugs may become subject to unfavorable pricing regulations or
third-party coverage and reimbursement policies, which would harm
our business.
The
regulations that govern regulatory approvals, pricing and
reimbursement for new drugs vary widely from country to country.
Some countries require approval of the sale price of a drug before
it can be marketed. In many countries, the pricing review period
begins after marketing approval is granted. In some foreign
markets, prescription pharmaceutical pricing remains subject to
continuing governmental control even after initial approval is
granted. As a result, we might obtain marketing approval for a drug
candidate in a particular country, but then be subject to price
regulations that delay our commercial launch of the drug candidate,
possibly for lengthy time periods, and negatively impact the
revenues we are able to generate from the sale of the drug
candidate in that country. Adverse pricing limitations may hinder
our ability to recoup our investment in one or more drug
candidates, even if our drug candidates obtain marketing
approval.
S-20
Our
ability to commercialize any drug candidates successfully also will
depend in part on the extent to which coverage and reimbursement
for these drug candidates and related treatments will be available
from government authorities, private health insurers and other
organizations. Government authorities and third-party payors, such
as private health insurers and health maintenance organizations,
decide which medications they will pay for and establish
reimbursement levels. A primary trend in the U.S. healthcare
industry and elsewhere is cost containment. Government authorities
and third-party payors have attempted to control costs by limiting
coverage and the amount of reimbursement for particular drugs.
Increasingly, third-party payors are requiring that drug companies
provide them with predetermined discounts from list prices and are
challenging the prices charged for drugs. We cannot be sure that
coverage will be available for any drug candidate that we
commercialize and, if coverage is available, the level of
reimbursement. Reimbursement may impact the demand for, or the
price of, any drug candidate for which we obtain marketing
approval. If reimbursement is not available or is available only to
limited levels, we may not be able to successfully commercialize
any drug candidate for which we obtain marketing
approval.
There may be significant delays in obtaining
reimbursement for newly approved drugs, and coverage may be more
limited than the purposes for which the drug is approved by the FDA
or similar regulatory authorities outside the United States.
Moreover, eligibility for reimbursement does not imply that any
drug will be paid for in all cases or at a rate that covers our
costs, including research, development, manufacture, sale and
distribution. Interim reimbursement levels for new drugs, if
applicable, may also not be sufficient to cover our costs and may
not be made permanent. Reimbursement rates may vary according to
the use of the drug and the clinical setting in which it is used,
may be based on reimbursement levels already set for lower-cost
drugs and may be incorporated into existing payments for other
services. Net prices for drugs may be reduced by mandatory
discounts or rebates required by government healthcare programs or
private payors and by any future relaxation of laws that presently
restrict imports of drugs from countries where they may be sold at
lower prices than in the United States. Third-party payors often
rely upon Medicare coverage policy and payment limitations in
setting their own reimbursement policies. Our inability to promptly
obtain coverage and profitable payment rates from both
government-funded and private payors for any approved drugs that we
develop could have a material adverse effect on our operating
results, our ability to raise capital needed to commercialize drugs
and our overall financial condition.
We are subject to new legislation, regulatory proposals and managed
care initiatives that may increase our costs of compliance and
adversely affect our ability to market our products, obtain
collaborators and raise capital.
In both the United
States and certain foreign countries, there have been a number of
legislative and regulatory changes to the healthcare system that
could impact our ability to sell our products profitably. In
particular, the Medicare Modernization Act of 2003 revised the
payment methodology for many products reimbursed by Medicare,
resulting in lower rates of reimbursement for many types of drugs,
and added a prescription drug benefit to the Medicare program that
involves commercial plans negotiating drug prices for their
members. Since 2003, there have been a number of other legislative
and regulatory changes to the coverage and reimbursement landscape
for pharmaceuticals.
The Patient
Protection and Affordable Care Act, as amended by the Health Care
and Education Reconciliation Act of 2010, collectively, the
“ACA,” was enacted in 2010 and made significant changes
to the United States’ healthcare system. The ACA and any
revisions or replacements of that Act, any substitute legislation,
and other changes in the law or regulatory framework could have a
material adverse effect on our business.
S-21
Among the
provisions of the ACA, those of importance to our potential product
candidates are:
●
an annual,
nondeductible fee on any entity that manufactures or imports
specified branded prescription drugs and biologic agents,
apportioned among these entities according to their market share in
certain government healthcare programs;
●
an increase in the
statutory minimum rebates a manufacturer must pay under the
Medicaid Drug Rebate Program to 23.1% and 13.0% of the average
manufacturer price for branded and generic drugs,
respectively;
●
expansion of
healthcare fraud and abuse laws, including the federal False Claims
Act and the federal Anti-Kickback Statute, new government
investigative powers and enhanced penalties for
non-compliance;
●
a new Medicare Part
D coverage gap discount program, in which manufacturers must agree
to offer 50% point-of-sale discounts off negotiated prices of
applicable brand drugs to eligible beneficiaries during their
coverage gap period, as a condition for a manufacturer’s
outpatient drugs to be covered under Medicare Part D;
●
extension of a
manufacturer’s Medicaid rebate liability to covered drugs
dispensed to individuals who are enrolled in Medicaid managed care
organizations;
●
expansion of
eligibility criteria for Medicaid programs by, among other things,
allowing states to offer Medicaid coverage to additional
individuals and by adding new mandatory eligibility categories for
certain individuals with income at or below 138% of the federal
poverty level, thereby potentially increasing a
manufacturer’s Medicaid rebate liability;
●
expansion of the
entities eligible for discounts under the 340B Drug Pricing
Program;
●
the new
requirements under the federal Open Payments program and its
implementing regulations;
●
a new requirement
to annually report drug samples that manufacturers and distributors
provide to physicians;
●
a new regulatory
pathway for the approval of biosimilar biological products, all of
which will impact existing government healthcare programs and will
result in the development of new programs; and
●
a new
Patient-Centered Outcomes Research Institute to oversee, identify
priorities in, and conduct comparative clinical effectiveness
research, along with funding for such research.
President Trump ran
for office on a platform that supported the repeal of the ACA, and
one of his first actions after his inauguration was to sign an
Executive Order instructing federal agencies to waive or delay
requirements of the ACA that impose economic or regulatory burdens
on states, families, the health-care industry and others.
Modifications to or repeal of all or certain provisions of the ACA
have been attempted in Congress as a result of the outcome of the
recent presidential and congressional elections, consistent with
statements made by the incoming administration and members of
Congress during the presidential and congressional campaigns and
following the election.
In
January 2017, Congress voted to adopt a budget resolution for
fiscal year 2017, or the Budget Resolution, that authorizes the
implementation of legislation that would repeal portions of the
ACA. The Budget Resolution is not a law. However, it is widely
viewed as the first step toward the passage of legislation that
would repeal certain aspects of the ACA. In March 2017, following
the passage of the budget resolution for fiscal year 2017, the
United States House of Representatives passed legislation known as
the American Health Care Act of 2017, which, if enacted, would
amend or repeal significant portions of the ACA. Attempts in the
Senate in 2017 to pass ACA repeal legislation, including the Better
Care Reconciliation Act of 2017, so far have been unsuccessful. At
the end of 2017, Congress passed the Tax Cuts and Jobs Act, which
repealed the penalty for individuals who fail to maintain minimum
essential health coverage as required by the ACA. Following this
legislation, Texas and 19 other states filed a lawsuit alleging
that the ACA is unconstitutional as the individual mandate was
repealed, undermining the legal basis for the Supreme Court’s
prior decision. On December 14, 2018, Texas federal district court
judge Reed O’Connor issued a ruling declaring that the ACA in
it is entirety is unconstitutional. While this decision has no
immediate legal effect on the ACA and its provisions, this lawsuit
is ongoing and the outcome through the appeals process may have a
significant impact on our business.
Most
recently, the Bipartisan Budget Act of 2018, the “BBA,”
which set government spending levels for Fiscal Years 2018 and
2019, revised certain provisions of the ACA. Specifically,
beginning in 2019, the BBA increased manufacturer point-of-sale
discounts off negotiated prices of applicable brand drugs in the
Medicare Part D coverage gap from 50% to 70%, ultimately increasing
the liability for brand drug manufacturers. Further, this mandatory
manufacturer discount applies to biosimilars beginning in
2019.
The Trump Administration has also taken several
regulatory steps to redirect ACA implementation. The
Department of Health and Human
Services (“HHS”) finalized Medicare fee-for-service
hospital payment reductions for Part B drugs acquired through the
340B Drug Pricing Program, which has been overturned by the courts.
HHS also has signaled its intent to continue to pursue
reimbursement policy changes for Medicare Part B drugs as a whole
that likely would reduce hospital and physician reimbursement for
these drugs.
HHS
has made numerous other proposals aimed at lowering drug prices for
Medicare beneficiaries and increasing price transparency. These
proposals include giving Medicare Advantage and Part D plans
flexibility in the availability of drugs in “protected
classes,” more transparency in the cost of drugs, including
the beneficiary’s financial liability, and less costly
alternatives and permitting the use of step therapy as a means of
prior authorization. HHS has also proposed requiring pharmaceutical
manufacturers disclose the prices of certain drugs in
direct-to-consumer television advertisements.
S-22
HHS
also has taken steps to increase the availability of cheaper health
insurance options, typically with fewer benefits and less generous.
The Administration has also signaled its intention to address drug
prices and to increase competition, including by increasing the
availability of biosimilars and generic drugs. As these are
regulatory actions, a new administration could undo or modify these
efforts.
We
expect that the ACA, as well as other healthcare reform measures
that may be adopted in the future, may result in more rigorous
coverage criteria and in additional downward pressure on the price
that we receive for any approved drug. Any reduction in
reimbursement from Medicare or other government healthcare programs
may result in a similar reduction in payments from private payors.
The implementation of cost containment measures or other healthcare
reforms may prevent us from being able to generate revenue, attain
profitability or commercialize our drugs.
Legislative
and regulatory proposals have been made to expand post-approval
requirements and restrict sales and promotional activities for
drugs. We cannot be sure whether additional legislative changes
will be enacted, or whether the FDA regulations, guidance or
interpretations will be changed, or what the impact of such changes
on the marketing approvals of our product candidates, if any, may
be. In addition, increased scrutiny by the US Congress of the
FDA’s approval process may significantly delay or prevent
marketing approval, as well as subject us to more stringent product
labeling and post-marketing testing and other
requirements.
There likely will
continue to be, legislative and regulatory proposals at the federal
and state levels directed at broadening the availability of
healthcare and containing or lowering the cost of healthcare
products and services. We cannot predict the initiatives that may
be adopted in the future. The continuing efforts of the government,
insurance companies, managed care organizations and other payors of
healthcare services to contain or reduce costs of healthcare may
adversely affect:
●
our ability to
generate revenues and achieve or maintain
profitability;
●
the demand for any
products for which we may obtain regulatory approval;
●
our ability to set
a price that we believe is fair for our products;
●
the level of taxes
that we are required to pay; and
●
the availability of
capital.
In addition,
governments may impose price controls, which may adversely affect
our future profitability.
We cannot predict the likelihood, nature or extent of government
regulation that may arise from future legislation or administrative
or executive action, either in the United States or
abroad.
We cannot predict
the likelihood, nature or extent of how government regulation that
may arise from future legislation or administrative or executive
action taken by the U.S. presidential administration may impact our
business and industry. In particular, the U.S. President has taken
several executive actions, including the issuance of a number of
Executive Orders, that could impose significant burdens on, or
otherwise materially delay, the FDA’s ability to engage in
routine regulatory and oversight activities such as implementing
statutes through rulemaking, issuance of guidance, and review and
approval of marketing applications. Notably, on January 23, 2017,
President Trump ordered a civilian hiring freeze for all executive
departments and agencies, including the FDA, which prohibits the
FDA from filling employee vacancies or creating new positions.
Under the terms of the order, the freeze was to remain in effect
until implementation of a plan to be recommended by the Director
for the Office of Management and Budget (“OMB”) in
consultation with the Director of the Office of Personnel
Management, to reduce the size of the federal workforce through
attrition. An under-staffed FDA could result in delays in
FDA’s responsiveness or in its ability to review submissions
or applications, issue regulations or guidance or implement or
enforce regulatory requirements in a timely fashion or at all. This
hiring freeze was lifted later in 2017. Moreover, on January 30,
2017, President Trump issued an Executive Order, applicable to all
executive agencies, including the FDA, which requires that for each
notice of proposed rulemaking or final regulation to be issued in
fiscal year 2017, the agency shall identify at least two existing
regulations to be repealed, unless prohibited by law. These
requirements are referred to as the “two-for-one”
provisions. This Executive Order includes a budget neutrality
provision that requires the total incremental cost of all new
regulations in the 2017 fiscal year, including repealed
regulations, to be no greater than zero, except in limited
circumstances. For fiscal years 2018 and beyond, the Executive
Order requires agencies to identify regulations to offset any
incremental cost of a new regulation and approximate the total
costs or savings associated with each new regulation or repealed
regulation. In interim guidance issued by the Office of Information
and Regulatory Affairs within OMB on February 2, 2017, the
administration indicates that the “two-for-one”
provisions may apply not only to agency regulations, but also to
significant agency guidance documents. It is difficult to predict
how these requirements will be implemented, and the extent to which
they will impact the FDA’s ability to exercise its regulatory
authority. If these executive actions impose constraints on the
FDA’s ability to engage in oversight and implementation
activities in the normal course, our business may be negatively
impacted.
S-23
If, in the future, we are unable to establish sales and marketing
capabilities or enter into agreements with third parties to sell
and market our drug candidates, we may not be successful in
commercializing our drug candidates if and when they are approved,
and we may not be able to generate any revenue.
We
do not currently have a sales or marketing infrastructure and have
limited experience in the sale, marketing or distribution of drugs.
To achieve commercial success for any approved drug candidate for
which we retain sales and marketing responsibilities, we must build
our sales, marketing, managerial, and other non-technical
capabilities or make arrangements with third parties to perform
these services. In the future, we may choose to build a focused
sales and marketing infrastructure to sell, or participate in sales
activities with our collaborators for, some of our drug candidates
if and when they are approved.
In
advance of FDA approval of our first product, we will need to make
significant investments to build a commercial organization and
infrastructure. We will need to hire a sales force and commercial
support personnel, in order to build processes and systems to
support a commercial launch prior to knowing whether our product
will receive FDA approval. It is possible that the FDA approval is
unexpectedly delayed or our product is not approved at all. In
either case we will incur delays that may impede or significantly
delay our ability to generate revenue and at the same time will
incur significant expenses. If this were to occur, it would have a
material adverse effect on the Company.
There
are risks involved with both establishing our own sales and
marketing capabilities and entering into arrangements with third
parties to perform these services. For example, recruiting and
training a sales force is expensive and time-consuming and could
delay any drug launch. If the commercial launch of a drug candidate
for which we recruit a sales force and establish marketing
capabilities is delayed or does not occur for any reason, we would
have prematurely or unnecessarily incurred these commercialization
expenses. This may be costly, and our investment would be lost if
we cannot retain or reposition our sales and marketing
personnel.
Factors
that may inhibit our efforts to commercialize our drug candidates
on our own include:
●
our inability to
recruit and retain adequate numbers of effective sales and
marketing personnel;
●
the inability of
sales personnel to obtain access to physicians or persuade adequate
numbers of physicians to prescribe any future drugs;
●
the lack of
complementary drugs to be offered by sales personnel, which may put
us at a competitive disadvantage relative to companies with more
extensive product lines; and
●
unforeseen costs
and expenses associated with creating an independent sales and
marketing organization.
If
we enter into arrangements with third parties to perform sales,
marketing and distribution services, our drug revenues or the
profitability of these drug revenues to us are likely to be lower
than if we were to market and sell any drug candidates that we
develop ourselves. In addition, we may not be successful in
entering into arrangements with third parties to sell and market
our drug candidates or may be unable to do so on terms that are
favorable to us. We likely will have little control over such third
parties, and any of them may fail to devote the necessary resources
and attention to sell and market our drug candidates effectively.
If we do not establish sales and marketing capabilities
successfully, either on our own or in collaboration with third
parties, we will not be successful in commercializing our drug
candidates. Further, our business, results of operations, financial
condition and prospects will be materially adversely
affected.
Our relationships with customers and third-party payors will be
subject to applicable anti-kickback, fraud and abuse and other
healthcare laws and regulations, which could expose us to criminal
sanctions, civil penalties, exclusion from government healthcare
programs, contractual damages, reputational harm and diminished
profits and future earnings.
Although
we do not currently have any drugs on the market, once we begin
commercializing our drug candidates, we will be subject to
additional healthcare statutory and regulatory requirements and
enforcement by the federal government and the states and foreign
governments in which we conduct our business. Healthcare providers,
physicians and third-party payors play a primary role in the
recommendation and prescription of any drug candidates for which we
obtain marketing approval. Our future arrangements with third-party
payors and customers may expose us to broadly applicable fraud and
abuse and other healthcare laws and regulations that may constrain
the business or financial arrangements and relationships through
which we market, sell and distribute our drug candidates for which
we obtain marketing approval. Restrictions under applicable federal
and state healthcare laws and regulations include the
following:
S-24
●
the federal
Anti-Kickback Statute prohibits, among other things, persons from
knowingly and willfully soliciting, offering, receiving or
providing remuneration, directly or indirectly, in cash or in kind,
to induce or reward either the referral of an individual for, or
the purchase, order or recommendation of, any good or service, for
which payment may be made under federal and state healthcare
programs such as Medicare and Medicaid. A person or entity does not
need to have actual knowledge of the statute or specific intent to
violate it in order to have committed a violation;
●
the federal False
Claims Act imposes civil penalties, including through civil
whistleblower or qui tam actions, against individuals or entities
for, among other things, knowingly presenting, or causing to be
presented, to the federal government, claims for payment that are
false or fraudulent or making a false statement to avoid, decrease
or conceal an obligation to pay money to the federal government. In
addition, the government may assert that a claim including items
and services resulting from a violation of the federal
Anti-Kickback Statute constitutes a false or fraudulent claim for
purposes of the False Claims Act;
●
the federal Health
Insurance Portability and Accountability Act of 1996, or HIPAA,
imposes criminal and civil liability for executing a scheme to
defraud any healthcare benefit program, or knowingly and willfully
falsifying, concealing or covering up a material fact or making any
materially false statement in connection with the delivery of or
payment for healthcare benefits, items or services; similar to the
federal Anti-Kickback Statute, a person or entity does not need to
have actual knowledge of the statute or specific intent to violate
it in order to have committed a violation;
●
the federal
physician payment transparency requirements, sometimes referred to
as the “Sunshine Act” under the Affordable Care Act
require manufacturers of drugs, devices, biologics and medical
supplies that are reimbursable under Medicare, Medicaid, or the
Children’s Health Insurance Program to report to the
Department of Health and Human Services information related to
physician payments and other transfers of value and the ownership
and investment interests of such physicians and their immediate
family members;
●
HIPAA, as amended
by the Health Information Technology for Economic and Clinical
Health Act of 2009 and its implementing regulations, which also
imposes obligations on certain covered entity healthcare providers,
health plans, and healthcare clearinghouses as well as their
business associates that perform certain services involving the use
or disclosure of individually identifiable health information,
including mandatory contractual terms, with respect to safeguarding
the privacy, security and transmission of individually identifiable
health information;
●
federal consumer
protection and unfair competition laws, which broadly regulate
marketplace activities and activities that potentially harm
consumers; and
●
analogous state
laws and regulations, such as state anti-kickback and false claims
laws that may apply to sales or marketing arrangements and claims
involving healthcare items or services reimbursed by
non-governmental third-party payors, including private insurers;
and some state laws require pharmaceutical companies to comply with
the pharmaceutical industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the federal
government in addition to requiring drug manufacturers to report
information related to payments to physicians and other health care
providers or marketing expenditures, and state laws governing the
privacy and security of health information in certain
circumstances, many of which differ from each other in significant
ways and often are not preempted by HIPAA, thus complicating
compliance efforts.
Ensuring
that our future business arrangements with third parties comply
with applicable healthcare laws and regulations could involve
substantial costs. It is possible that governmental authorities
will conclude that our business practices do not comply with
current or future statutes, regulations or case law involving
applicable fraud and abuse or other healthcare laws and
regulations. If our operations, including anticipated activities to
be conducted by our sales team, were to be found to be in violation
of any of these laws or any other governmental regulations that may
apply to us, we may be subject to significant civil, criminal and
administrative penalties, damages, fines, exclusion from
government-funded healthcare programs, such as Medicare and
Medicaid, and the curtailment or restructuring of our operations.
If any of the physicians or other providers or entities with whom
we expect to do business is found to be not in compliance with
applicable laws, they may be subject to criminal, civil or
administrative sanctions, including exclusions from
government-funded healthcare programs.
If we fail to adequately understand and comply with the local laws
and customs as we expand into new international markets, these
operations may incur losses or otherwise adversely affect our
business and results of operations.
We expect to
operate a portion of our business in certain countries through
subsidiaries or through supply and marketing arrangements. In those
countries where we have limited experience in operating
subsidiaries and in reviewing equity investees, we will be subject
to additional risks related to complying with a wide variety of
national and local laws, including restrictions on the import and
export of certain intermediates, drugs, technologies and multiple
and possibly overlapping tax laws. In addition, we may face
competition in certain countries from companies that may have more
experience with operations in such countries or with international
operations generally. We may also face difficulties integrating new
facilities in different countries into our existing operations, as
well as integrating employees hired in different countries into our
existing corporate culture. If we do not effectively manage our
operations in these subsidiaries and review equity investees
effectively, or if we fail to manage our alliances, we may lose
money in these countries and it may adversely affect our business
and results of our operations. In all interactions with foreign
regulatory authorities, we are exposed to liability risks under the
Foreign Corrupt Practices Act or similar anti-bribery
laws.
S-25
Any
product for which we obtain marketing approval could be subject to
restrictions or withdrawal from the market and we may be subject to
penalties if we fail to comply with regulatory requirements or if
we experience unanticipated problems with
products.
Any product for
which we obtain marketing approval, along with the manufacturing
processes and facilities, post-approval clinical data, labeling,
advertising and promotional activities for such product, will be
subject to continual requirements of, and review by, the FDA and
comparable regulatory authorities. These requirements include
submissions of safety and other post-marketing information and
reports, registration requirements, current Good Manufacturing
Practice (“CGMP”) requirements relating to quality
control, quality assurance and corresponding maintenance of records
and documents, requirements regarding the distribution of samples
to physicians and recordkeeping, and requirements regarding company
presentations and interactions with healthcare professionals. Even
if we obtain regulatory approval of a product, the approval may be
subject to limitations on the indicated uses for which the product
may be marketed, be subject to conditions of approval, or contain
requirements for costly post-marketing testing and surveillance to
monitor the safety and/or efficacy of the product. We also may be
subject to state laws and registration requirements covering the
distribution of drug products. Later discovery of previously
unknown problems with products, manufacturers or manufacturing
processes, or failure to comply with regulatory requirements, may
result in actions such as:
●
restrictions on
product manufacturing, distribution or use;
●
restrictions on the
labeling or marketing of a product;
●
requirements to
conduct post-marketing studies or clinical
trials;
●
warning
letters;
●
withdrawal of the
products from the market;
●
refusal
to approve pending applications or supplements to approved
applications that we or our subsidiaries submit;
●
recalls;
●
fines;
●
suspension or
withdrawal of marketing or regulatory approvals;
●
refusal
to permit the import or export of products;
●
product
seizure or detentions;
●
injunctions or the
imposition of civil or criminal penalties; and
●
adverse
publicity.
If we, or our
respective suppliers, third-party contractors, clinical
investigators or collaborators are slow to adapt, or are unable to
adapt, to changes in existing regulatory requirements or adoption
of new regulatory requirements or policies, we, our subsidiaries,
or our respective collaborators may be subject to the actions
listed above, including losing marketing approval for products,
resulting in decreased revenue from milestones, product sales or
royalties.
We will need to obtain FDA approval of any proposed product brand
names, and any failure or delay associated with such approval may
adversely impact our business.
A pharmaceutical product candidate cannot be
marketed in the United States or other countries until we have
completed a rigorous and extensive regulatory review processes,
including approval of a brand name. Any brand names we intend to
use for ublituximab, umbralisib or any future product candidates will require
approval from the FDA regardless of whether we have secured a
formal trademark registration from the United States Patent and Trademark Office
(“USPTO”). The FDA typically conducts a review of
proposed product brand names, including an evaluation of potential
for confusion with other product names. The FDA may also object to
a product brand name if it believes the name inappropriately
implies medical claims. If the FDA objects to any of our proposed
product brand names, we may be required to adopt an alternative brand name for
ublituximab, umbralisib or any future
product candidates. If we adopt an alternative brand name, we would
lose the benefit of our existing trademark applications for such
product candidate and may be required to expend significant
additional resources in an effort to identify a suitable product
brand name that would qualify under applicable trademark laws, not
infringe the existing rights of third parties and be acceptable to
the FDA. We may be unable to build a successful brand identity for
a new trademark in a timely manner or at all, which would limit our
ability to commercialize ublituximab, umbralisib,
or any future product candidates. We
do not currently have an agreed upon brand name for umbralisib, and
no assurance can be given that we will obtain one in a timely
fashion. Any delay in obtaining a brand name for umbralisib or any
other of our drug candidates could delay approval and/or
commercialization and have a negative impact on our launch and
future prospects for umbralisib or any other such drug
candidates.
S-26
Risks Related to Our Dependence on Third Parties
We rely on third parties to generate clinical, preclinical and
quality data necessary to support the regulatory applications
needed to conduct clinical trials and file for marketing approval.
We rely on third parties to help conduct our planned clinical
trials. If these third parties do not perform their services as
required, we may not be able to obtain regulatory approval for or
commercialize our product candidates when expected or at
all.
In order to submit
and maintain an Investigational New Drug application
(“IND”), BLA, or NDA to the FDA, it is necessary to
submit all information on the clinical, non-clinical, chemistry,
manufacturing, controls and quality aspects of the product
candidate. We rely on our third party contractors and our licensing
partners to provide portions of this data. If we are unable to
obtain this data, or the data is not sufficient to meet the
regulatory requirements, we may experience significant delays in
our development programs. While we maintain an active IND for
ublituximab and umbralisib enabling the conduct of studies in the
FDA’s Division of Hematology and Oncology, and an active IND
for ublituximab under the FDA’s Division of Neurology, there
can be no assurance that the FDA will allow us to continue the
development of our product candidates in those divisions where we
maintain an active IND.
Additionally, we
use CRO’s to assist in the conduct of our current clinical
trials and expect to use such services for future clinical trials
and we rely upon medical institutions, clinical investigators and
contract laboratories to conduct our trials in accordance with our
clinical protocols and appropriate regulations. Our current and
future CROs, investigators and other third parties play a
significant role in the conduct of our trials and the subsequent
collection and analysis of data from the clinical trials. There is
no guarantee that any CROs, investigators and other third parties
will devote adequate time and resources to our clinical trials or
perform as contractually required. If any third parties upon whom
we rely for administration and conduct of our clinical trials fail
to meet expected deadlines, fail to adhere to its clinical
protocols or otherwise perform in a substandard manner, our
clinical trials may be extended, delayed or terminated, and we may
not be able to commercialize our product candidates. In addition to
the third parties identified above, we are also heavily reliant on
the conduct of our patients enrolled to our studies by our
third-party investigators. We rely on our clinical trial sites and
investigators to properly identify and screen qualified candidates
for our clinical trials, and for them to ensure participants adhere
to our clinical protocol requirements. The majority of our clinical
trial conduct occurs in the out-patient setting, where patients are
expected to continue to adhere to our study protocol specified
requirements. The ability of our enrolled patients to properly
identify, document, and report adverse events; take protocol
specified study drugs at the correct quantity, time, and setting,
as applicable; avoid contraindicated medications; and comply with
other protocol specified procedures such as returning to the trial
site for scheduled laboratory and disease assessments, is wholly
out of our control. Deviations from protocol procedures, such as
those identified previously, could materially affect the quality of
our clinical trial data, and therefore ultimately affect our
ability to develop and commercialize our drug candidates. If any of
our clinical trial sites terminates for any reason, we may
experience the loss of follow-up information on patients enrolled
in our ongoing clinical trials unless we are able to transfer the
care of those patients to another qualified clinical trial site. If
any of our clinical trial sites are required by the FDA or IRB to
close down due to data management or patient management or any
other issues we may lose patients. In our MS Phase 2 trial,
during routine monitoring and site audits, significant Good
Clinical Practice (GCP) violations and other noncompliance issues
were identified at one of our US-based large academic sites. The
investigator left the institution; shortly thereafter the site
terminated their participation in our study, before all data could
be source document verified. While we do not believe this will have
any effect on the overall results of the MS Phase 2 trial,
sensitivity analyses excluding data from this site will be
performed and no assurance can be given that the results were not
affected.
Whether conducted through a CRO or through our
internal staff, we are solely responsible for ensuring that each of
our clinical trials are conducted in accordance with the applicable
protocol, legal and regulatory requirements and scientific
standards, and our reliance on CROs will not relieve us of our
regulatory responsibilities. For any violations of laws and
regulations during the conduct of our clinical trials, we could be
subject to warning letters or enforcement action that may include
civil penalties up to and including criminal prosecution. We and
our CROs are required to comply with regulations, including
GCP Guidelines for conducting,
monitoring, recording and reporting the results of clinical trials
to ensure that the data and results are scientifically credible and
accurate, and that the trial patients are adequately informed of
the potential risks of participating in clinical trials and their
rights are protected. These regulations are enforced by the FDA,
the Competent Authorities of the Member States of the European
Economic Area and comparable foreign regulatory authorities for any
drugs in clinical development. The FDA enforces GCP regulations
through periodic inspections of clinical trial sponsors, principal
investigators and trial sites. If we or our CROs fail to comply
with applicable GCPs, the clinical data generated in our clinical
trials may be deemed unreliable and the FDA or comparable foreign
regulatory authorities may require us to perform additional
clinical trials before approving our marketing applications. We
cannot assure you that, upon inspection, the FDA will determine
that our current or future clinical trials comply with GCPs. In
addition, our clinical trials must be conducted with drug
candidates produced under cGMPs regulations. Our failure or the
failure of our CROs to comply with these regulations may require us
to repeat clinical trials, which would delay the regulatory
approval process and could also subject us to enforcement action.
We also are required to register most ongoing clinical trials and
post the results of completed clinical trials on
government-sponsored databases, e.g. ClinicalTrials.gov, within
certain timeframes. Failure to do so can result in fines, adverse
publicity and civil and criminal sanctions.
S-27
Although
we intend to design the clinical trials for our drug candidates,
CROs play an important role in the conduct of our clinical trials,
especially outside of the United States. As a result, many
important aspects of our development programs, including their
conduct and timing, will be outside of our direct control. Our
reliance on third parties to conduct current or future clinical
trials will also result in less direct control over the management
of data developed through clinical trials than would be the case if
we were relying entirely upon our own staff. Communicating with
outside parties can also be challenging, potentially leading to
mistakes as well as difficulties in coordinating activities.
Outside parties may:
●
have staffing
difficulties;
●
fail to comply with
contractual obligations;
●
experience
regulatory compliance issues;
●
undergo changes in
priorities or become financially distressed; or
●
form relationships
with other entities, some of which may be our
competitors.
These
factors may materially adversely affect the willingness or ability
of third parties to conduct our clinical trials and may subject us
to unexpected cost increases that are beyond our control. If the
CROs do not perform clinical trials in a satisfactory manner,
breach their obligations to us or fail to comply with regulatory
requirements, the development, regulatory approval and
commercialization of our drug candidates may be delayed, we may not
be able to obtain regulatory approval and commercialize our drug
candidates, or our development program may be materially and
irreversibly harmed. If we are unable to rely on clinical data
collected by our CROs, we could be required to repeat, extend the
duration of, or increase the size of any clinical trials we conduct
and this could significantly delay commercialization and require
significantly greater expenditures.
If
any of our relationships with these third-party CROs terminate, we
may not be able to enter into arrangements with alternative CROs.
If CROs do not successfully carry out their contractual duties or
obligations or meet expected deadlines, if they need to be replaced
or if the quality or accuracy of the clinical data they obtain is
compromised due to the failure to adhere to our clinical protocols,
regulatory requirements or for other reasons, any clinical trials
such CROs are associated with may be extended, delayed or
terminated, and we may not be able to obtain regulatory approval
for or successfully commercialize our drug candidates. As a result,
we believe that our financial results and the commercial prospects
for our drug candidates in the subject indication would be harmed,
our costs could increase and our ability to generate revenue could
be delayed.
We contract with third parties for the manufacture of our drug
candidates for pre-clinical development and clinical trials, and we
expect to continue to do so for commercialization. This reliance on
third parties increases the risk that we will not have sufficient
quantities of our drug candidates or drugs or such quantities at an
acceptable cost, which could delay, prevent or impair our
development or commercialization efforts.
We
do not currently own or operate, nor do we have any plans to
establish in the future, any manufacturing facilities or personnel.
We rely, and expect to continue to rely, on third parties for the
manufacture of our drug candidates for pre-clinical development and
clinical testing, as well as for the commercial manufacture of our
drugs if any of our drug candidates receive marketing approval.
This reliance on third parties increases the risk that we will not
have sufficient quantities of our drug candidates or drugs or such
quantities at an acceptable cost or quality, which could delay,
prevent or impair our development or commercialization
efforts.
The
facilities used by our contract manufacturers to manufacture our
drug candidates must be approved by the FDA pursuant to inspections
that will be conducted after we submit our marketing applications
to the FDA. We do not control the manufacturing process of, and
will be completely dependent on, our contract manufacturers for
compliance with cGMPs in connection with the manufacture of our
drug candidates. If our contract manufacturers cannot successfully
manufacture material that conforms to our specifications and the
strict regulatory requirements of the FDA or others, they will not
be able to secure and/or maintain regulatory approval for their
manufacturing facilities. In addition, we have no control over the
ability of our contract manufacturers to maintain adequate quality
control, quality assurance and qualified personnel. If the FDA or a
comparable foreign regulatory authority does not approve these
facilities for the manufacture of our drug candidates or if it
withdraws any such approval in the future, we may need to find
alternative manufacturing facilities, which would significantly
impact our ability to develop, obtain regulatory approval for or
market our drug candidates, if approved. Further, our failure, or
the failure of our third-party manufacturers, to comply with
applicable regulations could result in sanctions being imposed on
us, including clinical holds, fines, injunctions, civil penalties,
delays, suspension or withdrawal of approvals, license revocation,
seizures or recalls of drug candidates or drugs, if approved,
operating restrictions and criminal prosecutions, any of which
could significantly and adversely affect our business and supplies
of our drug candidates.
S-28
We do not have any long-term supply agreements
with all our contract manufacturers, and in those instances where
we do not, we purchase our required drug supply, including the drug
product and drug substance on a purchase order basis. In addition,
we may be unable to establish or maintain any agreements with
third-party manufacturers or to do so on acceptable terms.
No assurance can be given that a long-term, scalable manufacturer
can be identified or that they can make clinical and commercial
supplies of our product candidates that meets the product
specifications of previously manufactured batches, or is of a
sufficient quality, or at an appropriate scale and cost to make it
commercially feasible. If they are unable to do so, it could have a
material adverse impact on our business.
Even
if we are able to establish and maintain agreements with
third-party manufacturers, reliance on third-party manufacturers
entails additional risks, including:
●
reliance on the
third party for regulatory compliance and quality
assurance;
●
the possible breach
of the manufacturing agreement by the third party;
●
the possible
misappropriation of our proprietary information, including our
trade secrets and know-how; and
●
the possible
termination or nonrenewal of the agreement by the third party at a
time that is costly or inconvenient for us.
Moreover,
our current long-term supply agreements and, we would expect all
future long-term supply agreements would, contain certain minimum
purchases in what are commonly referred to as “take or
pay” provisions.
To the extent our demand does not meet the minimum supply required
amounts, we would be forced to pay more than desired. This could
create a situation where we are spending more than required and
could impact our on-going operations and entail curtailing other
important research and development or commercialization efforts.
All of which could have a material adverse effect on the
Company.
Our
drug candidates and any drugs that we may develop may compete with
other drug candidates and approved drugs for access to
manufacturing facilities. There are a limited number of
manufacturers that operate under cGMP regulations and that might be
capable of manufacturing for us.
Any
performance failure on the part of our existing or future
manufacturers could delay clinical development or marketing
approval. If our current contract manufacturers cannot perform as
agreed, we may be required to replace such manufacturers causing
additional costs and delays in identifying and qualifying any such
replacement.
Our
current and anticipated future dependence upon others for the
manufacture of our drug candidates or drugs could result in
significant delays or gaps in availability of such drug candidates
or drugs and may adversely affect our future profit margins and our
ability to commercialize any drugs that receive marketing approval
on a timely and competitive basis.
We
also expect to rely on other third parties to store and distribute
drug supplies for our clinical trials. Any performance failure on
the part of our distributors could delay clinical development or
marketing approval of any future product candidates or
commercialization of our products, producing additional losses and
depriving us of potential product revenue.
In addition, we do
not have the capability to package finished products for
distribution to hospitals and other customers. Prior to commercial
launch, we intend to enter into agreements with one or more
alternate fill/finish pharmaceutical product suppliers so that we
can ensure proper supply chain management once we are authorized to
make commercial sales of our product candidates. If we receive
marketing approval from the FDA, we intend to sell pharmaceutical
product finished and packaged by such suppliers. We have not
entered into long-term agreements with our fill/finish suppliers,
and we may be unable to enter into such an agreement or do so on
commercially reasonable terms, which could have a material adverse
impact upon our business.
The third parties upon whom we rely for the supply of the active
pharmaceutical ingredient (“API”), drug product, drug
substance and other materials used in our drug candidates are our
sole source of supply, and the loss of any of these suppliers could
significantly harm our business.
The
API, drug product and drug substance used in our drug candidates
are currently supplied to us from single-source suppliers. Our
ability to successfully develop our drug candidates, supply our
drug candidates for clinical trials and to ultimately supply our
commercial drugs in quantities sufficient to meet the market
demand, depends in part on our ability to obtain the API, drug
product and drug substance for these drugs in accordance with
regulatory requirements and in sufficient quantities for clinical
testing and commercialization. If any of our suppliers ceases its
operations for any reason or is unable or unwilling to supply API,
drug product, drug substance and other materials in sufficient
quantities or on the timelines necessary to meet our needs, it
could significantly and adversely affect our business, the supply
of our drug candidates and our financial condition.
S-29
In most cases, our
manufacturing partners are single source suppliers. It is expected
that our manufacturing partners will be sole source suppliers from
single site locations for the foreseeable future. Various raw
materials, components, and testing services required for our
products may also be single sourced. Given this, any disruption of
supply from these partners could have a material, long-term impact
on our ability to supply products for clinical trials or commercial
sale. If our suppliers do not deliver sufficient quantities of our
product candidates on a timely basis, or at all, and in accordance
with applicable specifications, there could be a significant
interruption of our supply, which would adversely affect clinical
development and commercialization of our products. In addition, if
our current or future supply of any or our product candidates
should fail to meet specifications during its stability program
there could be a significant interruption of our supply of drug,
which would adversely affect the clinical development and
commercialization of the product.
For
all of our drug candidates, we plan to identify and qualify
additional manufacturers and other suppliers to provide such API,
drug product and drug substance prior to or following submission of
an NDA to the FDA and/or an MAA to the EMA. We are not certain,
however, that our single-source suppliers will be able to meet our
demand for their products, either because of the nature of our
agreements with those suppliers, our limited experience with those
suppliers or our relative importance as a customer to those
suppliers. It may be difficult for us to assess their ability to
timely meet our demand in the future based on past performance.
While our suppliers have generally met our demand for their
products on a timely basis in the past, they may subordinate our
needs in the future to their other customers.
Establishing
additional or replacement suppliers for the API, drug product and
drug substance used in our drug candidates, if required, may not be
accomplished quickly or at all. If we are able to find a
replacement supplier, such replacement supplier would need to be
qualified and may require additional regulatory approval, which
could result in further delay. While we seek to maintain adequate
inventory of the API, drug product and drug substance used in our
drug candidates, any interruption or delay in the supply of
components or materials, or our inability to obtain such API, drug
product and drug substance from alternate sources at acceptable
prices in a timely manner could impede, delay, limit or prevent our
development efforts, which could harm our business, results of
operations, financial condition and prospects.
Because we have in-licensed our product candidates from third
parties, any dispute with or non-performance by our licensors will
adversely affect our ability to develop and commercialize the
applicable product candidates.
Because we license our intellectual property from
third parties and we expect to continue to in-license additional
intellectual property rights, if there is any dispute between us
and our licensor regarding our rights under a license
agreement, our ability to develop and
commercialize our product candidates may be adversely affected.
Disputes may arise with the third parties from whom we license our
intellectual property rights from for a variety of reasons,
including:
●
the
scope of rights granted under the license agreement and other
interpretation-related issues;
●
the
extent to which our technology and processes infringe on
intellectual property of the licensor that is not subject to the
license agreement;
●
the
sublicensing of patent and other rights under our collaborative
development relationships and obligations associated with
sublicensing;
●
our
diligence obligations under the license agreement and what
activities satisfy those diligence obligations;
●
the
ownership of inventions and know-how resulting from the joint
creation or use of intellectual property by our licensors and us
and our partners; and
●
the
priority of invention of patented technology.
In addition, the agreements under which we
currently license intellectual property or technology from third
parties are complex, and
certain provisions in such agreements may be susceptible to
multiple interpretations, or may conflict in such a way that puts
us in breach of one or more agreements, which would make us
susceptible to lengthy and expensive disputes with one or more of
our licensing partners. The resolution of any contract
interpretation disagreement that may arise could narrow what we
believe to be the scope of our rights to the relevant intellectual
property or technology, or increase what we believe to be our
financial or other obligations under the relevant agreement, either
of which could have a material adverse effect on our business,
financial condition, results of operations, and prospects.
Moreover, if disputes over intellectual property that we have
licensed prevent or impair our ability to maintain our current
licensing arrangements on commercially acceptable terms, we may be
unable to successfully develop and commercialize the affected
product candidates, which could have a material adverse effect on
our business, financial conditions, results of operations, and
prospects.
S-30
If conflicts arise between us and our future collaborators or
strategic partners, these parties may act in a manner adverse to us
and could limit our ability to implement our
strategies.
If
conflicts arise between our future corporate or academic
collaborators or strategic partners and us, the other party may act
in a manner adverse to us and could limit our ability to implement
our strategies. Future collaborators or strategic partners, may
develop, either alone or with others, products in related fields
that are competitive with the products or potential products that
are the subject of these collaborations. Competing products, either
developed by the collaborators or strategic partners or to which
the collaborators or strategic partners have rights, may result in
the withdrawal of partner support for any future product
candidates. Our current or future collaborators or strategic
partners may preclude us from entering into collaborations with
their competitors, fail to obtain timely regulatory approvals,
terminate their agreements with us prematurely, or fail to devote
sufficient resources to the development and commercialization of
products. Any of these developments could harm any future product
development efforts.
We may seek to establish additional collaborations, and, if we are
not able to establish them on commercially reasonable terms, we may
have to alter our development and commercialization
plans.
Our
drug development programs and the potential commercialization of
our drug candidates will require substantial additional cash to
fund expenses. For some of our drug candidates, we may decide to
collaborate with additional pharmaceutical and biotechnology
companies for the development and potential commercialization of
those drug candidates.
We
face significant competition in seeking appropriate collaborators.
Whether we reach a definitive agreement for a collaboration will
depend, among other things, upon our assessment of the
collaborator’s resources and expertise, the terms and
conditions of the proposed collaboration, and the proposed
collaborator’s evaluation of a number of factors. Those
factors may include the design or results of our clinical trials,
the likelihood of approval by the FDA or similar regulatory
authorities outside the United States, the potential market for the
subject drug candidate, the costs and complexities of manufacturing
and delivering such drug candidate to patients, the potential of
competing drugs, the existence of uncertainty with respect to our
ownership of technology, which can exist if there is a challenge to
such ownership without regard to the merits of the challenge and
industry and market conditions generally. The collaborator may also
consider alternative drug candidates or technologies for similar
indications that may be available to collaborate on and whether
such a collaboration could be more attractive than the one with us
for our drug candidate. The terms of any additional collaborations
or other arrangements that we may establish may not be favorable to
us.
We
may be restricted under our collaboration agreements from entering
into future agreements on certain terms with potential
collaborators. Collaborations are complex and time-consuming to
negotiate and document. In addition, there have been a significant
number of recent business combinations among large pharmaceutical
companies that have resulted in a reduced number of potential
future collaborators.
We
may not be able to negotiate additional collaborations on a timely
basis, on acceptable terms, or at all. If we are unable to do so,
we may have to curtail the development of the drug candidate for
which we are seeking to collaborate, reduce or delay its
development program or one or more of our other development
programs, delay its potential commercialization or reduce the scope
of any sales or marketing activities, or increase our expenditures
and undertake development or commercialization activities at our
own expense. If we elect to increase our expenditures to fund
development or commercialization activities on our own, we may need
to obtain additional capital, which may not be available to us on
acceptable terms or at all. If we do not have sufficient funds, we
may not be able to further develop our drug candidates or bring
them to market and generate drug revenue.
Any
future collaborations that we enter into may not be successful. The
success of our collaboration arrangements will depend heavily on
the efforts and activities of our collaborators. Collaborators
generally have significant discretion in determining the efforts
and resources that they will apply to these collaborations.
Disagreements between parties to a collaboration arrangement
regarding clinical development and commercialization matters can
lead to delays in the development process or commercializing the
applicable drug candidate and, in some cases, termination of the
collaboration arrangement. These disagreements can be difficult to
resolve if neither of the parties has final decision-making
authority. Collaborations with pharmaceutical or biotechnology
companies and other third parties often are terminated or allowed
to expire by the other party. Any termination or expiration of any
future collaboration agreement could adversely affect us
financially or harm our business reputation.
Risks Relating to Our Intellectual Property
Our success depends upon our ability to obtain and protect our
intellectual property and proprietary technologies and if the scope of our patent protection obtained is
not sufficiently broad, our competitors could develop and
commercialize technology and drugs similar or identical to ours,
and our ability to successfully commercialize our technology and
drugs may be impaired.
Our commercial
success in part depends on obtaining and maintaining patent
protection and trade secret protection in the United States and
other countries with respect to our product candidates or any
future product candidate that we may license or acquire, their
formulations and uses and the methods we use to manufacture them,
as well as successfully defending these patents against third-party
challenges. We seek to protect our proprietary and intellectual
property position by filing patent applications in the United
States and abroad related to our novel technologies and product
candidates, and by maintenance of our trade secrets through proper
procedures.
S-31
We will only be
able to protect our technologies from unauthorized use by third
parties to the extent that valid and enforceable patents or trade
secrets cover them in the market they are being used or developed.
The degree of patent protection we
require to successfully commercialize our drug candidates may be
unavailable or severely limited in some cases and may not
adequately protect our rights or permit us to gain or keep any
competitive advantage. We cannot provide any assurances that any of
our patents have, or that any of our pending patent applications
that mature into issued patents will include, claims with a scope
sufficient to protect any of our drug candidates. In addition, the
laws of foreign countries may not protect our rights to the same
extent as the laws of the United States.
Furthermore,
patents have a limited lifespan. In the United States, the natural
expiration of a patent is generally twenty years after it is filed.
Various extensions may be available; however, the life of a patent,
and the protection it affords, is limited. Given the amount of time
required for the development, testing and regulatory review of new
drug candidates, patents protecting such candidates might expire
before or shortly after such candidates are commercialized. As a
result, our owned patent portfolio may not provide us with adequate
and continuing patent protection sufficient to exclude others from
commercializing drugs similar or identical to our drug candidates,
including generic versions of such drugs.
Currently, the
composition of matter patent for ublituximab and umbralisib are
granted in both the United States and EU, among other countries. A
method of use patent covering the combination of ublituximab and
umbralisib has also been granted in the US, EU, Japan, and several
other territories. Additionally, several method of use patents for
ublituximab and umbralisib in various indications and settings have
also been applied for but have not yet been issued, or have been
issued in certain territories but not under all jurisdictions in
which such applications have been filed. No patents to date have
been issued for TG-1501, TG-1701 and TG-1801 or for our
pre-clinical product candidates. There can be no guarantee that any
of these patents for which an application has already been filed,
nor any patents filed in the future for our product candidates will
be granted in any or all jurisdictions in which there were filed,
or that all claims initially included in such patent applications
will be allowed in the final patent that is issued. The patent
application process is subject to numerous risks and uncertainties,
and there can be no assurance that we or our partners will be
successful in protecting our product candidates by obtaining and
defending patents, or what the scope of an issued patent may
ultimately be.
These risks and
uncertainties include the following:
●
the
patent applications that we or our partners file may not result in
any patents being issued;
●
patents
that may be issued or in-licensed may be challenged, invalidated,
modified, revoked or circumvented, or otherwise may not provide any
competitive advantage;
●
as of
March 16, 2013, the United States converted from a “first to
invent” to a “first to file” system. If we do not
win the filing race, we will not be entitled to inventive
priority;
●
our
competitors, many of which have substantially greater resources
than we do, and many of which have made significant investments in
competing technologies, may seek, or may already have obtained,
patents that will limit, interfere with, or eliminate its ability
to file new patent applications or make, use, and sell our
potential products either in the United States or in international
markets;
●
there
may be significant pressure on the United States government and
other international governmental bodies to limit the scope of
patent protection both inside and outside the United States for
disease treatments that prove successful as a matter of public
policy regarding worldwide health concerns; and
●
countries other
than the United States may have less restrictive patent laws than
those upheld by United States courts, allowing foreign competitors
the ability to exploit these laws to create, develop, and market
competing products.
If patents are not
issued that protect our product candidates, it could have a
material adverse effect on our financial condition and results of
operations.
In addition, the
patent prosecution process is expensive and time-consuming, and we
may not be able to file and prosecute all necessary or desirable
patent applications at a reasonable cost or in a timely manner.
Further, with respect to some of the
pending patent applications covering our drug candidates,
prosecution has yet to commence. Patent prosecution is a lengthy
process, during which the scope of the claims initially submitted
for examination by the U.S. Patent and Trademark Office, or USPTO,
have been significantly narrowed by the time they issue, if at
all. It is also possible that we will fail to identify any
patentable aspects of our research and development output and
methodology, and, even if we do, an opportunity to obtain patent
protection may have passed. Given the uncertain and time-consuming
process of filing patent applications and prosecuting them, it is
possible that our product(s) or process(es) originally covered by
the scope of the patent application may have changed or been
modified, leaving our product(s) or process(es) without patent
protection. Moreover, in some
circumstances, we do not have the right to control the preparation,
filing and prosecution of patent applications, or to maintain the
patents, covering technology that we license from third parties.
Therefore, these patents and applications may not be prosecuted and
enforced in a manner consistent with the best interests of our
business. If our licensors or we fail to appropriately
prosecute and maintain patent protection or trade secret protection
for one or more product candidates or any future product candidate
we may license or acquire, our ability to develop and commercialize
these product candidates may be adversely affected and we may not
be able to prevent competitors from making, using and selling
competing products. This failure to properly protect the
intellectual property rights relating to these product candidates
could impair our ability to compete in the market and adversely
affect our ability to generate revenues and achieve profitability,
which would have a material adverse effect on our financial
condition and results of operations. Furthermore, should we enter
into other collaborations, including out-licensing or partnerships,
we may be required to consult with or cede control to collaborators
regarding the prosecution, maintenance and enforcement of licensed
patents. Therefore, these patents and applications may not be
prosecuted and enforced in a manner consistent with the best
interests of our business.
S-32
The patent position
of biotechnology and pharmaceutical companies generally is highly
uncertain, involves complex legal and factual questions, and has in
recent years been the subject of much litigation. In addition, no
consistent policy regarding the breadth of claims allowed in
pharmaceutical or biotechnology patents has emerged to date in the
United States. The patent situation outside the United States is
even more uncertain. The laws of foreign countries may not protect
our rights to the same extent as the laws of the United States, and
we may fail to seek or obtain patent protection in all major
markets. For example, European patent law restricts the
patentability of methods of treatment of the human body more than
United States law does. Our pending and future patent applications
may not result in patents being issued which protect our technology
or products, in whole or in part, or which effectively prevent
others from commercializing competitive technologies and products.
Changes in either the patent laws or interpretation of the patent
laws in the United States and other countries may diminish the
value of our patents or narrow the scope of our patent protection.
For example, the federal courts of the United States have taken an
increasingly dim view of the patent eligibility of certain subject
matter, such as naturally occurring nucleic acid sequences, amino
acid sequences and certain methods of utilizing same, which include
their detection in a biological sample and diagnostic conclusions
arising from their detection. Such subject matter, which had long
been a staple of the biotechnology and biopharmaceutical industry
to protect their discoveries, is now considered, with few
exceptions, ineligible in the first instance for protection under
the patent laws of the United States. Accordingly, we cannot
predict the breadth of claims that may be allowed or enforced in
our patents or in those licensed from a third-party.
In addition, U.S. patent laws may change, which
could prevent or limit us or our subsidiaries from filing patent
applications or patent claims to protect products and/or
technologies or limit the exclusivity periods that are available to
patent holders, as well as affect the validity, enforceability, or
scope of issued patents. For example, on September 16, 2011,
the Leahy-Smith America Invents Act was signed into law. The
Leahy-Smith Act includes a number of significant changes to United
States patent law. These include changes to transition from a
“first-to-invent” system to a
“first-to-file” system and to the way issued patents
are challenged. The formation of the Patent Trial and Appeal Board
now provides a quicker and less expensive process for challenging
issued patents.
We may be subject
to a third-party pre-issuance submission of prior art to the USPTO,
or become involved in opposition, derivation, reexamination, inter
parties review, post-grant review or interference proceedings
challenging our patent rights or the patent rights of others. The
costs of these proceedings could be substantial and it is possible
that our efforts to establish priority of invention would be
unsuccessful, resulting in a material adverse effect on our United
States patent position. An adverse determination in any such
submission, patent office trial, proceeding or litigation could
reduce the scope of, render unenforceable, or invalidate, our
patent rights, allow third parties to commercialize our technology
or products and compete directly with us, without payment to us, or
result in our inability to manufacture or commercialize products
without infringing third-party patent rights. In addition, if the
breadth or strength of protection provided by our patents and
patent applications is threatened, it could dissuade companies from
collaborating with us to license, develop or commercialize current
or future product candidates.
The issuance of a
patent does not foreclose challenges to its inventorship, scope,
validity or enforceability. Therefore, our owned and licensed
patents may be challenged in the courts or patent offices in the
United States and abroad. Such challenges may result in loss of
exclusivity or in patent claims being narrowed, invalidated or held
unenforceable, in whole or in part, which could limit our ability
to stop others from using or commercializing similar or identical
technology and products, or limit the duration of the patent
protection of our technology and products. Given the amount of time
required for the development, testing and regulatory review of new
product candidates, patents protecting such product candidates
might expire before or shortly after such product candidates are
commercialized. As a result, our owned and licensed patent
portfolio may not provide us with sufficient rights to exclude
others from commercializing products similar or identical to
ours.
Even if our patent
applications issue as patents, and they are unchallenged, our issued patents and our
pending patents, if issued, may not provide us with any meaningful
protection or prevent competitors from designing around our patent
claims to circumvent our owned or licensed patents by developing
similar or alternative technologies or drugs in a non-infringing
manner. For example, a third party may develop a competitive drug
that provides benefits similar to one or more of our drug
candidates but that has a different composition that falls outside
the scope of our patent protection. If the patent protection
provided by the patents and patent applications we hold or pursue
with respect to our drug candidates is not sufficiently broad to
impede such competition, our ability to successfully commercialize
our drug candidates could be negatively affected, which would harm
our business.
In
addition, we may in the future be subject to claims by our former
employees or consultants asserting an ownership right in our
patents or patent applications, as a result of the work they
performed on our behalf. Although we generally require all of our
employees, consultants and advisors and any other third parties who
have access to our proprietary know-how, information or technology
to assign or grant similar rights to their inventions to us, we
cannot be certain that we have executed such agreements with all
parties who may have contributed to our intellectual property, nor
can we be certain that our agreements with such parties will be
upheld in the face of a potential challenge, or that they will not
be breached, for which we may not have an adequate remedy. An
adverse determination in any such submission or proceeding may
result in loss of exclusivity or freedom to operate or in patent
claims being narrowed, invalidated or held unenforceable, in whole
or in part, which could limit our ability to stop others from using
or commercializing similar or identical technology and drugs,
without payment to us, or could limit the duration of the patent
protection covering our technology and drug candidates. Such
challenges may also result in our inability to manufacture or
commercialize our drug candidates without infringing third-party
patent rights. In addition, if the breadth or strength of
protection provided by our patents and patent applications is
threatened, it could dissuade companies from collaborating with us
to license, develop or commercialize current or future drug
candidates.
Patent protection
and other intellectual property protection are crucial to the
success of our business and prospects, and there is a substantial
risk that such protections will prove inadequate.
S-33
Obtaining and maintaining patent protection depends on compliance
with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our
patent protection could be reduced or eliminated for non-compliance
with these requirements.
The
USPTO and various foreign governmental patent agencies require
compliance with a number of procedural, documentary, fee payment
and other similar provisions during the patent application process.
In addition, periodic maintenance fees on issued patents often must
be paid to the USPTO and foreign patent agencies over the lifetime
of the patent. While an unintentional lapse can in many cases be
cured by payment of a late fee or by other means in accordance with
the applicable rules, there are situations in which noncompliance
can result in abandonment or lapse of the patent or patent
application, resulting in partial or complete loss of patent rights
in the relevant jurisdiction.
Non-compliance
events that could result in abandonment or lapse of a patent or
patent application include, but are not limited to, failure to
respond to official actions within prescribed time limits,
non-payment of fees and failure to properly legalize and submit
formal documents. If we fail to maintain the patents and patent
applications covering our drugs or procedures, we may not be able
to stop a competitor from marketing drugs that are the same as or
similar to our drug candidates, which would have a material adverse
effect on our business.
If we or our partners are
sued for infringing intellectual property rights of third parties,
it will be costly and time consuming, and an unfavorable outcome in
that litigation would have a material adverse effect on our
business.
Our
commercial success depends upon our ability and the ability of our
collaborators to develop, manufacture, market and sell our drug
candidates and use our proprietary technologies without infringing
the proprietary rights and intellectual property of third parties.
The biotechnology and pharmaceutical industries are characterized
by extensive and frequent litigation regarding patents and other
intellectual property rights. We may in the future become party to,
or threatened with, adversarial proceedings or litigation regarding
intellectual property rights with respect to our drug candidates
and technology, including interference proceedings before the
USPTO.
Our competitors or other third parties may assert
infringement claims against us, alleging that our drugs are covered
by their patents. Given the vast number of patents in our field of
technology, we cannot be certain that we do not infringe existing
patents or that we will not infringe patents that may be granted in
the future. Numerous United States and foreign issued
patents and pending patent applications, which are owned by third
parties, exist in the fields in which we are developing products,
some of which may be directed at claims that overlap with the
subject matter of our intellectual property. In addition, because
patent applications can take many years to issue, there may be
currently pending applications, unknown to us, which may later
result in issued patents that our product candidates or proprietary
technologies may infringe. Similarly, there may be issued patents
relevant to our product candidates of which we are not aware.
Publications of discoveries in the scientific literature often lag
behind the actual discoveries, and patent applications in the
United States and other jurisdictions are typically not published
until 18 months after a first filing, or in some cases not at all.
Therefore, we cannot know with certainty whether we or our
licensors were the first to make the inventions claimed in patents
or pending patent applications that we own or licensed, or that we
or our licensors were the first to file for patent protection of
such inventions.
We are aware of
certain patents that may pose issues for our commercialization of
our drug candidates. For example, Roche, Biogen Idec, and Genentech
hold patents for the use of anti-CD20 antibodies utilized in the
treatment of CLL in the United States which are expected to expire
in November of 2019. While these patents have been challenged, to
the best of our knowledge, those matters were settled in a way that
permitted additional anti-CD20 antibodies to be marketed for CLL.
If those patents are still valid and enforced at the time we are
intending to launch ublituximab, then we will need to either
prevail in a litigation to challenge those patents or negotiate a
settlement agreement with the patent holders. If we decide to initiate proceedings to challenge the
validity of these patents in the future, we may be unsuccessful, as
courts or patent offices in the United States and abroad could
uphold the validity of any such patents. If we were to challenge
the validity of any issued United States patent in court, we would
need to overcome a statutory presumption of validity that attaches
to every United States patent. This means that in order to prevail,
we would have to present clear and convincing evidence as to the
invalidity of the patent’s claims. If we are unable to
do so, we may be forced to delay the launch of ublituximab or
launch at the risk of litigation for patent infringement, which may
have a material adverse effect on our business and results of
operations.
If a third party
claims that we or any collaborators of ours infringe their
intellectual property rights, we may have to defend litigation or
administrative proceedings which may be costly whether we win or
lose, and which could result in a substantial diversion of our
financial and management resources. If
we are found to infringe a third party’s intellectual
property rights, we could be required to obtain a license from such
third party to continue developing and marketing our drug
candidates and technology. However, we may not be able to obtain
any required license on commercially reasonable terms or at all.
Even if we were able to obtain such a license, it could be granted
on non-exclusive terms, thereby providing our competitors and other
third parties access to the same technologies licensed to us.
Without such a license, we could be forced, including by court
order, to cease developing and commercializing the infringing
technology or drug candidates. In addition, we could be found
liable for monetary damages, including treble damages and
attorneys’ fees if we are found to have willfully infringed
such third-party patent rights. A finding of infringement could
prevent us from commercializing our drug candidates or force us to
cease some of our business operations, which could materially harm
our business.
S-34
No assurance can be
given that patents issued to third parties do not exist, have not
been filed, or could not be filed or issued, which contain claims
covering its products, technology or methods that may encompass all
or a portion of our products and methods. Given the number of
patents issued and patent applications filed in our technical areas
or fields, we believe there is a risk that third parties may allege
they have patent rights encompassing our products or
methods.
Other product
candidates that we may in-license or acquire could be subject to
similar risks and uncertainties.
We may need to license certain intellectual property from third
parties, and such licenses may not be available or may not be
available on commercially reasonable terms.
A third party may
hold intellectual property, including patent rights that are
important or necessary to the development and commercialization of
our products. It may be necessary for us to use the patented or
proprietary technology of third parties to commercialize our
products, in which case we would be required to obtain a license
from these third parties, whom may or may not be interested in
granting such a license, on commercially reasonable terms, or our
business could be harmed, possibly materially. For example, we
engage extensively with third parties, including academic
institutions, to conduct non-clinical and clinical research on our
product candidates. While we seek to ensure all material transfer
and service agreements governing this research provide us with
favorable terms covering newly generated intellectual property, a
general principle under which much of this research with academic
institutions is conducted provides third party ownership of newly
generated intellectual property, with an exclusive option available
for us to obtain a license to such intellectual property. Through
the conduct of this research, it is possible that valuable
intellectual property could be developed by a third party, which we
will then need to license in order to better develop or
commercialize our products. No assurance can be given that we will
be able to successfully negotiate such a license on commercially
reasonable terms, or at all. Further, should we fail to
successfully negotiate a license to such intellectual property,
most institutions are then free to license such intellectual
property to any other third party, including potentially direct
competitors of ours. Should we fail to adequately secure a license
to any newly generated intellectual property, our ability to
successfully develop or commercialize our products may be hindered,
possibly materially.
We may be involved in lawsuits to protect or enforce our patents or
the patents of our licensors, which could be expensive, time
consuming and unsuccessful.
Competitors may
infringe our patents or the patents of our licensors. To counter
infringement or unauthorized use, we may be required to file
infringement claims, which typically are very expensive,
time-consuming and disruptive of day-to-day business operations.
Any claims we assert against accused infringers could provoke these
parties to assert counterclaims against us alleging invalidity of
our or certain of our subsidiaries’ patents or that we
infringe their patents; or provoke those parties to petition the
USPTO to institute inter parties review against the asserted
patents, which may lead to a finding that all or some of the claims
of the patent are invalid. In addition, in an infringement
proceeding, a court may decide that a patent of ours or our
licensors is not valid or is unenforceable, or may refuse to stop
the other party from using the technology at issue on the grounds
that our patents do not cover the technology in question. An
adverse result in any litigation or defense proceedings could put
one or more of our pending patents at risk of being invalidated,
held unenforceable, or interpreted narrowly.
In
patent litigation in the United States, defendant counterclaims
challenging the validity, enforceability or scope of asserted
patents are commonplace. In addition, third parties may initiate
legal proceedings against us to assert such challenges to our
intellectual property rights. The outcome of any such proceeding is
generally unpredictable. Grounds for a validity challenge could be
an alleged failure to meet any of several statutory requirements,
including lack of novelty, obviousness or non-enablement. Patents
may be unenforceable if someone connected with prosecution of the
patent withheld relevant information from the USPTO or made a
misleading statement during prosecution. It is possible that prior
art of which we and the patent examiner were unaware during
prosecution exists, which could render our patents invalid.
Moreover, it is also possible that prior art may exist that we are
aware of but do not believe is relevant to our current or future
patents, but that could nevertheless be determined to render our
patents invalid.
Competing
drugs may also be sold in other countries in which our patent
coverage might not exist or be as strong. If we lose a foreign
patent lawsuit, alleging our infringement of a competitor’s
patents, we could be prevented from marketing our drugs in one or
more foreign countries. Any of these outcomes would have a
materially adverse effect on our business.
In addition,
because of the substantial amount of discovery required in
connection with intellectual property litigation, there is a risk
that some of our confidential information could be compromised by
disclosure during this type of litigation. Furthermore, adverse results on
United States patents may affect related patents in our global
portfolio. The adverse result could also put related pending patent
applications at risk of not issuing. Additionally, there could be
public announcements of the results of hearings, motions or other
interim proceedings or developments. If securities analysts or
investors perceive these results to be negative, it could have a
substantial adverse effect on the price of our common
stock.
Interference
proceedings provoked by third parties or brought by the USPTO may
be necessary to determine the priority of inventions with respect
to our patents or pending patent applications or those of our
collaborators or licensors. An unfavorable outcome could require us
to cease using the related technology or to attempt to license
rights to it from the prevailing party. The costs of these
proceedings could be substantial. As a result, the issuance, scope,
validity, enforceability and commercial value of our or any of our
respective licensors’ patent rights are highly uncertain. Our
business could be harmed if the prevailing party does not offer us
a license on commercially reasonable terms. Litigation or
interference proceedings may fail and, even if successful, may
result in substantial costs and distract our management and other
employees. We may not be able to prevent, alone or with our
licensors, misappropriation of our trade secrets or confidential
information, particularly in countries where the laws may not
protect those rights as fully as in the United States.
S-35
We
may not have sufficient financial or other resources to adequately
conduct such litigation or proceedings. Some of our competitors may
be able to sustain the costs of such litigation or proceedings more
effectively than we can because of their greater financial
resources and more mature and developed intellectual property
portfolios. Accordingly, despite our efforts, we may not be able to
prevent third parties from infringing upon or misappropriating or
from successfully challenging our intellectual property rights.
Uncertainties resulting from the initiation and continuation of
patent litigation or other proceedings could have a material
adverse effect on our ability to compete in the
marketplace.
If we are unable to protect the confidentiality of our trade
secrets, our business and competitive position may be
harmed.
In
addition to the protection afforded by patents, we rely upon
unpatented trade secret protection, unpatented know-how and
continuing technological innovation to develop and maintain our
competitive position. With respect to the building of our
proprietary compound library, we consider trade secrets and
know-how to be our primary intellectual property. We seek to
protect our proprietary technology and processes, in part, by
entering into confidentiality agreements with our collaborators,
scientific advisors, employees and consultants, and invention
assignment agreements with our consultants and employees. We may
not be able to prevent the unauthorized disclosure or use of our
technical know-how or other trade secrets by the parties to these
agreements, however, despite the existence generally of
confidentiality agreements and other contractual restrictions.
Monitoring unauthorized uses and disclosures is difficult, and we
do not know whether the steps we have taken to protect our
proprietary technologies will be effective. If any of the
collaborators, scientific advisors, employees and consultants who
are parties to these agreements breaches or violates the terms of
any of these agreements, we may not have adequate remedies for any
such breach or violation, and we could lose our trade secrets as a
result. Enforcing a claim that a third party illegally obtained and
is using our trade secrets, like patent litigation, is expensive
and time-consuming, and the outcome is unpredictable. In addition,
courts outside the United States are sometimes less willing to
protect trade secrets.
Our
trade secrets could otherwise become known or be independently
discovered by our competitors. Competitors could purchase our drug
candidates and attempt to replicate some or all of the competitive
advantages we derive from our development efforts, willfully
infringe our intellectual property rights, design around our
protected technology or develop their own competitive technologies
that fall outside of our intellectual property rights. If any of
our trade secrets were to be lawfully obtained or independently
developed by a competitor, we would have no right to prevent them,
or those to whom they communicate it, from using that technology or
information to compete with us. If our trade secrets are not
adequately protected so as to protect our market against
competitors’ drugs, our competitive position could be
adversely affected, as could our business.
We may be subject to damages resulting from claims that we or our
employees have wrongfully used or disclosed alleged trade secrets
of our competitors or are in breach of non-competition or
non-solicitation agreements with our competitors.
We
could in the future be subject to claims that we or our employees
have inadvertently or otherwise used or disclosed alleged trade
secrets or other proprietary information of former employers or
competitors. Although we try to ensure that our employees and
consultants do not use the intellectual property, proprietary
information, know-how or trade secrets of others in their work for
us, we may in the future be subject to claims that we caused an
employee to breach the terms of his or her non-competition or
non-solicitation agreement, or that we or these individuals have,
inadvertently or otherwise, used or disclosed the alleged trade
secrets or other proprietary information of a former employer or
competitor. Litigation may be necessary to defend against these
claims. Even if we are successful in defending against these
claims, litigation could result in substantial costs and could be a
distraction to management. If our defenses to these claims fail, in
addition to requiring us to pay monetary damages, a court could
prohibit us from using technologies or features that are essential
to our drug candidates, if such technologies or features are found
to incorporate or be derived from the trade secrets or other
proprietary information of the former employers. An inability to
incorporate such technologies or features would have a material
adverse effect on our business, and may prevent us from
successfully commercializing our drug candidates. In addition, we
may lose valuable intellectual property rights or personnel as a
result of such claims. Moreover, any such litigation or the threat
thereof may adversely affect our ability to hire employees or
contract with independent sales representatives. A loss of key
personnel or their work product could hamper or prevent our ability
to commercialize our drug candidates, which would have an adverse
effect on our business, results of operations and financial
condition.
Risks Related to Employee Matters, Managing Growth and Other Risks
Related to Our Business
If we fail to attract and keep key management and clinical
development personnel, we may be unable to successfully develop or
commercialize our product candidates.
We
are highly dependent on the research and development, clinical,
business development, financial and legal expertise of our senior
management team as well as the other principal members of our
management, scientific and clinical team. Although we have entered
into employment agreement with our chief executive officer and
employment letters with our senior managers, each of our executive
officers may terminate their employment with us at any time. We do
not maintain “key person” insurance for any of our
executives or other employees. In addition, we rely on consultants
and advisors, including scientific and clinical advisors, to assist
us in formulating our research and development and
commercialization strategy. Our consultants and advisors may be
employed by employers other than us and may have commitments under
consulting or advisory contracts with other entities that may limit
their availability to us. If we are unable to continue to attract
and retain high quality personnel, our ability to pursue our growth
strategy will be limited.
S-36
We
expect to continue hiring qualified development personnel.
Recruiting and retaining qualified scientific, clinical,
manufacturing and sales and marketing personnel will be critical to
our success. The loss of the services of our chief executive
officer or other key employees could impede the achievement of our
research, development and commercialization objectives and
seriously harm our ability to successfully implement our business
strategy. Furthermore, replacing key employees may be difficult and
may take an extended period of time because of the limited number
of individuals in our industry with the breadth of skills and
experience required to successfully develop, gain regulatory
approval of and commercialize drugs. Competition to hire from this
limited pool is intense, and we may be unable to hire, train,
retain or motivate these key personnel on acceptable terms given
the competition among numerous pharmaceutical and biotechnology
companies for similar personnel. Failure to succeed in clinical
trials may make it more challenging to recruit and retain qualified
medical and scientific personnel. If we are not able to
attract and retain the necessary personnel to accomplish our
business objectives, we may experience constraints that will impede
significantly the achievement of our development objectives, our
ability to raise additional capital, and our ability to implement
our business strategy.
We will need to develop and expand our Company, and we may
encounter difficulties in managing this development and expansion,
which could disrupt our operations.
As of February 15, 2019, we had 105 full-time
employees, and we expect to continue to increase our number of
employees and expand the scope of our operations. Our
management and medical and scientific personnel, systems and
facilities currently in place may not be adequate to support our
future growth. To manage our
anticipated future growth, we must continue to implement and
improve our managerial, operational and financial systems, expand
our facilities and continue to recruit and train additional
qualified personnel. Also, our management may need to divert a
disproportionate amount of its attention away from its day-to-day
activities and devote a substantial amount of time to managing
these development activities. Due to our limited resources, we may
not be able to effectively manage the expansion of our operations
or recruit and train additional qualified personnel. This may
result in weaknesses in our infrastructure, give rise to
operational mistakes, loss of business opportunities, loss of
employees and reduced productivity among remaining employees. To
accommodate growth, additional physical expansion of our operations
in the future may lead to significant costs, including capital
expenditures, and may divert financial resources from other
projects, such as the development of our drug candidates. If our
management is unable to effectively manage our expected development
and expansion, our expenses may increase more than expected, our
ability to generate or increase our revenue could be reduced and we
may not be able to implement our business strategy. Our future
financial performance and our ability to commercialize our drug
candidates, if approved, and compete effectively will depend, in
part, on our ability to effectively manage the future development
and expansion of our company.
Additionally, to
help manage the expanding needs, we may utilize the services of
outside vendors or consultants to perform tasks including clinical
trial management, statistics and analysis, regulatory affairs,
formulation development, chemistry, manufacturing, controls, and
other pharmaceutical development functions. Our growth strategy may
also entail expanding our group of contractors or consultants to
implement these tasks going forward. Because we rely on a
substantial number of consultants, effectively outsourcing many key
functions of our business, we will need to be able to effectively
manage these consultants to ensure that they successfully carry out
their contractual obligations and meet expected deadlines. However,
if we are unable to effectively manage our outsourced activities or
if the quality or accuracy of the services provided by consultants
is compromised for any reason, our clinical trials may be extended,
delayed or terminated, and we may not be able to obtain regulatory
approval for our product candidates or otherwise advance its
business. There can be no assurance that we will be able to manage
our existing consultants or find other competent outside
contractors and consultants on economically reasonable terms, or at
all. If we are not able to effectively expand our organization by
hiring new employees and expanding our groups of consultants and
contractors, we may be unable to successfully implement the tasks
necessary to further develop and commercialize our product
candidates and, accordingly, may not achieve our research,
development and commercialization goals.
Unfavorable global economic conditions could adversely affect our
business, financial condition or results of
operations.
Our
results of operations could be adversely affected by general
conditions in the global economy and in the global financial
markets. For example, the global financial crisis caused extreme
volatility and disruptions in the capital and credit markets. A
severe or prolonged economic downturn, such as the global financial
crisis, could result in a variety of risks to our business,
including, weakened demand for our drug candidates and our ability
to raise additional capital when needed on acceptable terms, if at
all. A weak or declining economy could also strain our suppliers,
possibly resulting in supply disruption, or cause our customers to
delay making payments for our services.
S-37
Following its June 23, 2016 vote to leave the
European Union, on March 29, 2017, the United Kingdom invoked
Article 50 of the Lisbon Treaty and formally began the process of
exiting the European Union. Although Brexit has already and may
continue to adversely affect European and/or worldwide economic or
market, political or regulatory conditions and may contribute to
instability in the global financial markets, political institutions
and regulatory agencies, the
resulting immediate changes in foreign currency exchange rates have
had a limited overall impact due to natural hedging. The long-term
impact of Brexit, including on our business and our industry, will
depend on the terms that are negotiated in relation to the United
Kingdom’s future relationship with the European
Union, and we are closely
monitoring the Brexit developments in order to determine, quantify
and proactively address changes as they become clear. Despite the
Brexit developments, we do not expect macroeconomic conditions to
have a significant impact on our liquidity needs, financial
condition or results of operations.
We or the third parties upon whom we depend may be adversely
affected by earthquakes or other natural disasters and our business
continuity and disaster recovery plans may not adequately protect
us from a serious disaster.
Earthquakes
or other natural disasters could severely disrupt our operations,
and have a material adverse effect on our business, results of
operations, financial condition and prospects. If a natural
disaster, power outage or other event occurred that prevented us
from using all or a significant portion of our headquarters, that
damaged critical infrastructure, such as the manufacturing
facilities of our third-party contract manufacturers, or that
otherwise disrupted operations, it may be difficult or, in certain
cases, impossible for us to continue our business for a substantial
period of time. The disaster recovery and business continuity plans
we have in place may prove inadequate in the event of a serious
disaster or similar event. We may incur substantial expenses as a
result of the limited nature of our disaster recovery and business
continuity plans, which, could have a material adverse effect on
our business.
Our internal computer systems, or those of our third-party CROs or
other contractors or consultants, may fail or suffer security
breaches, which could result in a material disruption of our drug
candidates’ development programs.
Despite
the implementation of security measures, our internal computer
systems and those of our third-party CROs and other contractors and
consultants are vulnerable to damage from computer viruses,
unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. While we have not
experienced any such system failure, accident, or security breach
to date, if such an event were to occur and cause interruptions in
our operations, it could result in a material disruption of our
programs. For example, the loss of clinical trial data for our drug
candidates could result in delays in our regulatory approval
efforts and significantly increase our costs to recover or
reproduce the data. To the extent that any disruption or security
breach results in a loss of or damage to our data or applications
or other data or applications relating to our technology or drug
candidates, or inappropriate disclosure of confidential or
proprietary information, we could incur liabilities and the further
development of our drug candidates could be delayed.
Our employees, principal investigators, CROs and consultants may
engage in misconduct or other improper activities, including
non-compliance with regulatory standards and requirements and
insider trading, which could have a material adverse effect on our
business.
We are exposed to the risk that our employees,
principal investigators, CROs and consultants may engage in
fraudulent conduct or other illegal activity. Misconduct by these
parties could include intentional failures to comply with FDA
regulations, provide accurate information to the FDA, comply with
manufacturing standards we have established, comply with federal
and state healthcare fraud and abuse laws and regulations, report
financial information or data accurately or disclose unauthorized
activities to us. In
particular, sales, marketing and business arrangements in the
healthcare industry are subject to extensive laws and regulations
intended to prevent fraud, misconduct, kickbacks, self-dealing and
other abusive practices. These laws and regulations may restrict or
prohibit a wide range of pricing, discounting, marketing and
promotion, sales commission, customer incentive programs and other
business arrangements. Activities subject to these laws also
involve the improper use of information obtained in the course of
clinical trials or creating fraudulent data in our pre-clinical
studies or clinical trials, which could result in regulatory
sanctions and cause serious harm to our reputation. We have adopted
a code of ethics applicable to all of our employees, but it is not
always possible to identify and deter misconduct by employees and
other third parties, and the precautions we take to detect and
prevent this activity may not be effective in controlling unknown
or unmanaged risks or losses or in protecting us from governmental
investigations or other actions or lawsuits stemming from a failure
to comply with these laws or regulations. In addition, we are
subject to the risk that a person could allege such fraud or other
misconduct, even if none occurred. If any such actions are
instituted against us, and we are not successful in defending
ourselves or asserting our rights, those actions could have a
significant impact on our business, including the imposition of
civil, criminal and administrative penalties, damages, monetary
fines, possible exclusion from participation in Medicare, Medicaid
and other federal healthcare programs, contractual damages,
reputational harm, diminished profits and future earnings, and
curtailment of our operations, any of which could adversely affect
our ability to operate our business and our results of
operations.
We may acquire businesses or drugs, or form strategic alliances, in
the future, and we may not realize the benefits of such
acquisitions.
We
may acquire additional businesses or drugs, form strategic
alliances or create joint ventures with third parties that we
believe will complement or augment our existing business. If we
acquire businesses with promising markets or technologies, we may
not be able to realize the benefit of acquiring such businesses if
we are unable to successfully integrate them with our existing
operations and company culture. We may encounter numerous
difficulties in developing, manufacturing and marketing any new
drugs resulting from a strategic alliance or acquisition that delay
or prevent us from realizing their expected benefits or enhancing
our business. We cannot assure you that, following any such
acquisition, we will achieve the expected synergies to justify the
transaction.
S-38
We may be subject to adverse legislative or regulatory tax changes
that could negatively impact our financial condition.
The
rules dealing with U.S. federal, state and local income taxation
are constantly under review by persons involved in the legislative
process and by the IRS and the U.S. Treasury Department. Changes to
tax laws (which changes may have retroactive application) could
adversely affect our stockholders or us. In recent years, many such
changes have been made and changes are likely to continue to occur
in the future. We cannot predict whether, when, in what form, or
with what effective dates, tax laws, regulations and rulings may be
enacted, promulgated or decided, which could result in an increase
in our, or our stockholders’, tax liability or require
changes in the manner in which we operate in order to minimize
increases in our tax liability.
On
December 22, 2017, the Tax Cuts and Jobs Act, or TCJA, was enacted.
The TCJA significantly reforms the Internal Revenue Code of 1986,
as amended. The TCJA, among other things, includes changes to U.S.
federal tax rates, imposes significant additional limitations on
the deductibility of interest and net operating loss carryforwards
and allows for the expensing of capital expenditures. Our net
deferred tax assets and liabilities were revalued as of December
31, 2017 at the newly enacted U.S. corporate rate, and the impact
was recognized in our tax expense in the year of enactment but was
offset by a corresponding reduction to the valuation allowance. We
continue to examine the impact this tax reform legislation may have
on our business. The impact of this tax reform is uncertain and
could be adverse.
Our tax position could be affected by recent changes in United
States federal income tax laws.
On
December 22, 2017, legislation commonly referred to as the
“Tax Cuts and Jobs Act” was signed into law and is
generally effective after December 31, 2017. The Tax Cuts and Jobs
Act makes significant changes to the United States federal income
tax rules for taxation of individuals and business entities. Most
of the changes applicable to individuals are temporary and apply
only to taxable years beginning after December 31, 2017 and before
January 1, 2026. For corporations, the Tax Cuts and Jobs Act
reduces the top corporate income tax rate to 21% and repeals the
corporate alternative minimum tax, limits the deduction for net
interest expense, limits the deduction for net operating losses and
eliminates net operating loss carrybacks, modifies or repeals many
business deductions and credits, shifts the United States toward a
more territorial tax system, and imposes new taxes to combat
erosion of the United States federal income tax base. The Tax Cuts
and Jobs Act makes numerous other large and small changes to the
federal income tax rules that may affect potential investors and
may directly or indirectly affect us. We continue to examine the
impact this tax reform legislation may have on our business.
However, the effect of the Tax Cuts and Jobs Act on us, whether
adverse or favorable, is uncertain, and may not become evident for
some period of time. This document does not discuss such
legislation or the manner in which it might affect us or purchasers
of our common stock. Prospective investors are urged to consult
with their legal and tax advisors with respect to the Tax Cuts and
Jobs Act and any other regulatory or administrative developments
and proposals, and their potential effects on them based on their
unique circumstances.
Risks Related to Our Common Stock and Being a Publicly-Traded
Company
Our executive officers, directors, principal stockholders and their
affiliates maintain the ability to exercise significant influence
over our company and all matters submitted to stockholders for
approval.
Our
executive officers, directors and stockholders who own more than 5%
of our outstanding common stock, together with their affiliates and
related persons, beneficially own shares of common stock
representing a significant percentage of our capital stock. As a
result, if these stockholders were to choose to act together, they
would be able to influence our management and affairs and the
outcome of matters submitted to our stockholders for approval,
including the election of directors and any sale, merger,
consolidation, or sale of all or substantially all of our assets.
This concentration of voting power could delay or prevent an
acquisition of our company on terms that other stockholders may
desire. In addition, this concentration of ownership might
adversely affect the market price of our common stock
by:
●
delaying, deferring
or preventing a change of control of us;
●
impeding a merger,
consolidation, takeover or other business combination involving us;
or
●
discouraging a
potential acquirer from making a tender offer or otherwise
attempting to obtain control of us.
Because we do not anticipate paying any cash dividends on our
capital stock in the foreseeable future, capital appreciation, if
any, will be the sole source of gain for our
stockholders.
We
have never declared or paid cash dividends on our capital stock. We
currently intend to retain all of our future earnings, if any, to
finance the growth and development of our business. In addition,
under the Loan Agreement, we are currently restricted from paying
cash dividends, and we expect these restrictions to continue in the
future. In addition, the terms of any future debt agreements may
preclude us from paying dividends. As a result, capital
appreciation, if any, of our common stock will be the sole source
of gain for our stockholders for the foreseeable
future.
S-39
Certain anti-takeover provisions in our charter documents and
Delaware law could make a third-party acquisition of us difficult.
This could limit the price investors might be willing to pay in the
future for our common stock.
Provisions in our
amended and restated certificate of incorporation and restated
bylaws could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from
attempting to acquire, or control us. These factors could limit the
price that certain investors might be willing to pay in the future
for shares of our common stock. Our amended and restated
certificate of incorporation allows us to issue preferred stock
without the approval of our stockholders. The issuance of preferred
stock could decrease the amount of earnings and assets available
for distribution to the holders of our common stock or could
adversely affect the rights and powers, including voting rights, of
such holders. In certain circumstances, such issuance could have
the effect of decreasing the market price of our common stock. Our
restated bylaws eliminate the right of stockholders to call a
special meeting of stockholders, which could make it more difficult
for stockholders to effect certain corporate actions. Any of these
provisions could also have the effect of delaying or preventing a
change in control.
On July 18, 2014,
the Board of Directors declared a distribution of one right for
each outstanding share of common stock. The rights may have certain
anti-takeover effects. The rights will cause substantial dilution
to a person or group that attempts to acquire us on terms not
approved by the Board of Directors unless the offer is conditioned
on a substantial number of rights being acquired. However, the
rights should not interfere with any merger, statutory share
exchange or other business combination approved by the Board of
Directors since the rights may be terminated by us upon resolution
of the Board of Directors. Thus, the rights are intended to
encourage persons who may seek to acquire control of the Company to
initiate such an acquisition through negotiations with the Board of
Directors. However, the effect of the rights may be to discourage a
third party from making a partial tender offer or otherwise
attempting to obtain a substantial equity position in the equity
securities of, or seeking to obtain control of, the Company. To the
extent any potential acquirers are deterred by the rights, the
rights may have the effect of preserving incumbent management in
office.
An active trading market for our common stock may not be sustained,
and investors may not be able to resell their shares at or above
the price they paid.
Although
we have listed our common stock on The Nasdaq Global Select Market,
an active trading market for our shares may not be sustained. In
the absence of an active trading market for our common stock,
investors may not be able to sell their common stock at or above
the price at which they acquired their shares or at the time that
they would like to sell. An inactive trading market may also impair
our ability to raise capital to continue to fund operations by
selling shares and may impair our ability to acquire other
companies or technologies by using our shares as
consideration.
If equity research analysts do not publish research or reports
about our business or if they publish negative evaluations of or
downgrade our common stock, the price of our common stock could
decline.
The
trading market for our common stock relies in part on the research
and reports that equity research analysts publish about us or our
business. We do not control these analysts. We may never obtain
research coverage by industry or financial analysts. If no or few
analysts commence coverage of us, the trading price of our stock
would likely decrease. Even if we do obtain analyst coverage, if
one or more of the analysts covering our business downgrade their
evaluations of our common stock, the price of our common stock
could decline. If one or more of these analysts cease to cover our
common stock, we could lose visibility in the market for our common
stock, which in turn could cause our common stock price to
decline.
We
incur significant increased costs as a result of operating as a
public company, and our management is required to devote
substantial time to compliance initiatives.
As a public company, we incur significant legal,
accounting and other expenses under the Sarbanes-Oxley Act of 2002,
as well as rules subsequently implemented by the
Securities and Exchange Commission
(“SEC”), and the rules of any stock exchange on which
we may become listed. These rules impose various requirements on
public companies, including requiring establishment and maintenance
of effective disclosure and financial controls and appropriate
corporate governance practices. Our team has devoted and will
continue to devote a substantial amount of time to these compliance
initiatives. Moreover, these rules and regulations increase our
legal and financial compliance costs and make some activities more
time-consuming and costly. For example, these rules and regulations
make it more difficult and more expensive for us to obtain director
and officer liability insurance, and we may be required to accept
reduced policy limits and coverage or incur substantially higher
costs to obtain the same or similar coverage. As a result, it may
be more difficult for us to attract and retain qualified persons to
serve on our Board of Directors, our Board committees or as
executive officers.
S-40
The Sarbanes-Oxley Act of 2002 requires, among
other things, that we maintain effective internal control over
financial reporting and disclosure controls and procedures. As a
result, we are required to periodically perform an evaluation of
our internal control over financial reporting to allow management
to report on the effectiveness of those controls, as required by
Section 404 of the Sarbanes-Oxley Act. Additionally, our
independent auditors are required to perform a similar evaluation
and report on the effectiveness of our internal control over
financial reporting. These efforts to comply with Section 404 will
require the commitment of significant financial and managerial
resources. While we anticipate maintaining the integrity of our
internal control over financial reporting and all other aspects of
Section 404, we cannot be certain that a material weakness will not
be identified when we test the effectiveness of our control systems
in the future. If a material weakness is identified, we could be
subject to sanctions or investigations by the SEC or other
regulatory authorities, which would require additional financial
and management resources, costly litigation or a loss of public
confidence in our internal control, which could have an adverse
effect on the market price of our stock.
Volatility
in the
price of our common stock may subject us to securities litigation,
which could cause us to incur substantial costs and divert
management's attention, financial resources and other company
assets.
In the past, securities class action litigation
has often been brought against a company following periods of
volatility in the market price of its securities. This risk is
especially relevant for us because pharmaceutical companies have
experienced significant stock price volatility in recent
years. In addition, we and certain of our executive
officers have been named as defendants in a securities class action
and derivative lawsuits captioned Randall Reinmann v. TG
Therapeutics Inc., and Michael S. Weiss, Case No. 1:18-cv-09104-KPF
and Thessalus Capital v. Weiss, et al.,
1:18-cv-11918-KPF. These
lawsuits and any future lawsuits to which we may become a party are
subject to inherent uncertainties and will likely be expensive and
time-consuming to investigate, defend and resolve, and will divert
our management's attention and financial and other resources. The
outcome of litigation is necessarily uncertain, and we could be
forced to expend significant resources in the defense of these and
other suits, and we may not prevail. Any litigation to which we are
a party may result in an onerous or unfavorable judgment that may
not be reversed upon appeal or in payments of substantial monetary
damages or fines, or we may decide to settle this or other lawsuits
on similarly unfavorable terms, which could adversely affect our
business, financial condition, results of operations or stock
price.
Future sales of our common stock, including by us or our directors
and executive officers or shares issued upon the exercise of
currently outstanding options, could cause our stock price to
decline.
A substantial portion of our
outstanding common stock can be traded without restriction at any
time. In addition, a portion of our outstanding common stock is
currently restricted as a result of federal securities laws, but
can be sold at any time subject to applicable volume limitations.
As such, sales of a substantial number of shares of our common
stock in the public market could occur at any time. These sales, or
the perception in the market that the holders of a large number of
shares intend to sell shares, by us or others, could reduce the
market price of our common stock or impair our ability to raise
adequate capital through the sale of additional equity securities.
In addition, we have a significant number of shares that are
subject to outstanding options. The exercise of these options and
the subsequent sale of the underlying common stock could cause a
further decline in our stock price. These sales also might make it
difficult for us to sell equity securities in the future at a time
and at a price that we deem appropriate. We cannot predict the
number, timing or size of future issuances or the effect, if any,
that any future issuances may have on the market price for our
common stock.
Our ability to utilize our net operating loss carryforwards and
certain other tax attributes may be limited.
Under
Section 382 of the Internal Revenue Code of 1986, as amended,
if a corporation undergoes an “ownership change”
(generally defined as a greater than 50% change (by value) in the
ownership of its equity over a three year period), the
corporation’s ability to use its pre-change net operating
loss carryforwards and certain other pre-change tax attributes to
offset its post-change income may be limited. We may have
experienced such ownership changes in the past, and we may
experience ownership changes in the future as a result of shifts in
our stock ownership, some of which are outside our control. As of
December 31, 2017, we had federal net operating loss
carryforwards of approximately $375.5 million, and our ability to
utilize those net operating loss carryforwards could be limited by
an “ownership change” as described above, which could
result in increased tax liability to us. In addition, pursuant to
the TCJA, we may not use net operating loss carry-forwards to
reduce our taxable income in any year by more than 80%, and we may
not carry back any net operating losses to prior years. These new
rules apply regardless of the occurrence of an ownership
change.
S-41
DILUTION
Purchasers of the
shares offered by this prospectus supplement and the accompanying
prospectus will suffer immediate and substantial dilution in the
net tangible book value per share of the common stock they
purchase. Net tangible book value per share represents the amount
of total tangible assets less total liabilities, divided by the
number of shares of our common stock outstanding as of December 31,
2018. Our net tangible book value as of December 31, 2018 was
approximately $23.2 million, or $0.28 per share of our common
stock.
Dilution in net
tangible book value per share represents the difference between the
amount per share paid by purchasers in this offering and the net
tangible book value per share of our common stock immediately after
this offering. After giving effect to the sale of shares of common
stock in this offering at the assumed public offering price of
$6.15 per share, and after deducting the underwriting discount and
the estimated offering expenses payable by us, our as adjusted net
tangible book value as of December 31, 2018 would have been
approximately $0.55 per share of common stock. This represents an
immediate increase in net tangible book value of $0.27 per share of
common stock to our existing stockholders and an immediate dilution
in net tangible book value of $5.60 per share of common stock to
purchasers in this offering. The following table illustrates this
per share dilution:
|
Assumed public
offering price per share
|
$6.15
|
|
Net tangible book
value per share as of December 31,
2018
|
$0.28
|
|
Increase per share
attributable to this offering
|
$0.27
|
|
As adjusted net
tangible book value per share as of December 31, 2018 after this
offering
|
$0.55
|
|
Dilution per share
to new investors participating in this offering
|
$5.60
|
The above table is
based on 83,870,546 shares of common stock outstanding as of
December 31, 2018, assumes no exercise of the underwriters’
option to purchase additional shares of common stock and excludes,
as of December 31, 2018:
●
1,916,900 shares of
common stock issuable upon the exercise of outstanding stock
options with a weighted average exercise price of $6.50 per
share;
●
16,343 shares of
common stock issuable upon the conversion of outstanding notes
payable with a weighted average conversion price of $1,125 per
share;
●
an aggregate of
3,279,841 shares of common stock reserved for future issuance under
our stock option and incentive plans; and
●
147,058 shares of
common stock issuable upon the exercise of outstanding warrants
with a weighted average exercise price of $4.08 per share.
If
the underwriter exercises in full its option to purchase additional
shares of our common stock, the as adjusted net tangible book value
after this offering would be $0.59 per share, representing an
increase in net tangible book value of $0.31 per share to existing
stockholders and immediate dilution in net tangible book value of
$5.56 per share to purchasers in this offering. The following table
illustrates this per share dilution:
|
Assumed public
offering price per share
|
$6.15
|
|
Net tangible book
value per share as of December 31, 2018
|
$ 0.28
|
|
Increase per share
attributable to this offering
|
$0.31
|
|
As adjusted net
tangible book value per share as of December 31, 2018 after this
offering
|
$0.59
|
|
Dilution per share
to new investors participating in this offering
|
$5.56
|
To the extent that
any options or warrants are exercised, new options are issued under
our equity incentive plans or we otherwise issue additional shares
of common stock in the future at a price less than the assumed
public offering price, there will be further dilution to new
investors.
S-42
USE
OF PROCEEDS
The gross proceeds
to us from the sale of shares of our common stock will be
approximately $24.1 million, or approximately $27.7 million, if the
underwriter exercises in full its option to purchase 615,000
additional shares of common stock, in each case before deducting
estimated offering expenses payable by us.
We expect to use
the net proceeds from this offering:
● to fund the ongoing
development of TG-1101 and TGR-1202;
● to potentially
in-license, acquire, develop and commercialize additional drug
candidates; and
● for general
corporate purposes.
The timing and
amounts of our actual expenditures will depend on several factors,
including the progress of our research and development programs,
the results of other pre-clinical and clinical studies and the
timing and costs of regulatory approvals. Pending the uses
described above, we will invest the net proceeds in short-term and
long-term, investment grade, interest-bearing
securities.
DIVIDEND
POLICY
We have never
declared or paid any cash dividends on our common stock and do not
anticipate paying any cash dividends in the foreseeable future. Any
future determination to pay dividends will be at the discretion of
our board of directors.
S-43
UNDERWRITING
Subject to the
terms and conditions set forth in the underwriting agreement, dated
March 1, 2019 between us and Cantor Fitzgerald & Co., 499 Park
Avenue, New York, New York 10022, as the sole book-running manager
of this offering, we have agreed to sell to Cantor Fitzgerald &
Co., and Cantor Fitzgerald & Co. has agreed to purchase from
us, shares of common stock.
The underwriting
agreement provides that the obligations of Cantor Fitzgerald &
Co. are subject to certain conditions precedent such as the receipt
by Cantor Fitzgerald & Co. of officers’ certificates and
legal opinions and approval of certain legal matters by their
counsel. The underwriting agreement provides that Cantor Fitzgerald
& Co. will purchase all of the shares of common stock if any of
them are purchased. We have agreed to indemnify Cantor Fitzgerald
& Co. and certain of its controlling persons against certain
liabilities, including liabilities under the Securities Act, and to
contribute to payments that Cantor Fitzgerald & Co. may be
required to make in respect of those liabilities.
Cantor Fitzgerald
& Co.is offering the shares of common stock subject to its
acceptance of the shares of common stock from us and subject to
prior sale. Cantor Fitzgerald & Co. reserves the right to
withdraw, cancel or modify offers to the public and to reject
orders in whole or in part.
Option
to Purchase Additional Shares
We have granted to
Cantor Fitzgerald & Co. an option, exercisable 30 days from the
date of this prospectus supplement, to purchase, from time to time,
in whole or in part, up to an aggregate of shares from us at
the price set forth on the cover page of this prospectus
supplement.
Commissions
and Expenses
Cantor Fitzgerald
& Co. is purchasing the shares of common stock from us at $5.87
per share (representing approximately $24.1 million of proceeds to
us, before offering expenses). Cantor Fitzgerald & Co. may
offer the shares of common stock from time to time to purchasers
directly or through agents, or through brokers in brokerage
transactions on The NASDAQ Capital Market, or to dealers in
negotiated transactions or in a combination of such methods of
sale, or otherwise, at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated
prices. The difference between the price at which Cantor Fitzgerald
& Co. purchases shares from us and the price at which Cantor
Fitzgerald & Co. resells such shares may be deemed underwriting
compensation. If Cantor Fitzgerald & Co. effects such
transactions by selling shares of common stock to or through
dealers, such dealers may receive compensation in the form of
discounts, concessions or commissions from Cantor Fitzgerald &
Co. and/or purchasers of shares of common stock for whom they may
act as agents or to whom they may sell as principal.
We estimate
expenses payable by us in connection with this offering will be
approximately $150,000. We have also agreed to reimburse the
underwriter for certain of its expenses, which reimbursed fee is
deemed underwriting compensation for this offering by
FINRA.
Listing
Our common stock is
listed on The NASDAQ Capital Market under the trading symbol
“TGTX.”
No
Sales of Similar Securities
We, our officers
and our directors have agreed, subject to certain specified
exceptions, not to directly or indirectly, for a period of 90 days
after the date of the underwriting agreement:
●
sell, offer,
contract or grant any option to sell (including any short sale),
pledge, transfer, establish an open “put equivalent
position” within the meaning of Rule 16a-l(h) under the
Securities Exchange Act of 1934, as amended, or otherwise dispose
of, any shares of common stock, options or warrants to acquire
shares of common stock, or securities exchangeable or exercisable
for or convertible into shares of common stock currently or
hereafter owned either of record or beneficially,
●
enter into any
swap, hedge or other agreement or transaction that transfers, in
whole or in part, the economic consequence of ownership of common
stock, or securities exchangeable or exercisable for or convertible
into shares of common stock, or
●
publicly announce
an intention to do any of the foregoing for a period of 90 days
after the date of this prospectus supplement without the prior
written consent of Cantor Fitzgerald & Co.
In addition, we and
each such person agrees that, without the prior written consent of
Cantor Fitzgerald & Co., we or such other person will not,
during the restricted period, make any demand for, or exercise any
right with respect to, the registration of any shares of common
stock or any security convertible into or exercisable or
exchangeable for common stock.
S-44
The exceptions to
our lock-up include: (A) the issuance or sale of any shares of our
common stock to effectuate this offering, and (B) the issuance of
any shares, the grant of any options to purchase shares or the
issuance of any shares upon the exercise of options, pursuant to
any stock option, stock bonus or other stock plan or arrangement
described herein, but only if the holders agree in writing not to
sell, offer, dispose of or otherwise transfer any such shares or
options during the 90-day period without the prior written consent
of Cantor Fitzgerald & Co. With respect to the ATM Agreement,
the lock-up shall be for a period of 45 days after the date of the
underwriting agreement.
Cantor Fitzgerald
& Co. may, in its sole discretion and at any time or from time
to time before the termination of the 90-day period release all or
any portion of the securities subject to lock-up
agreements.
Market
Making, Stabilization and Other Transactions
Cantor Fitzgerald
& Co. may make a market in the common stock as permitted by
applicable laws and regulations. However, Cantor Fitzgerald &
Co. is not obligated to do so, and Cantor Fitzgerald & Co. may
discontinue any market-making activities at any time without notice
in its sole discretion. Accordingly, no assurance can be given as
to the liquidity of the trading market for the common stock, that
you will be able to sell any of the common stock held by you at a
particular time or that the prices that you receive when you sell
will be favorable.
The underwriter has
advised us that it, pursuant to Regulation M under the Securities
Exchange Act of 1934, as amended, may engage in short sale
transactions, stabilizing transactions, syndicate covering
transactions or the imposition of penalty bids in connection with
this offering. These activities may have the effect of stabilizing
or maintaining the market price of the common stock at a level
above that which might otherwise prevail in the open market.
Establishing short sales positions may involve either
“covered” short sales or “naked” short
sales.
“Covered”
short sales are sales made in an amount not greater than the
underwriter’s option to purchase additional shares of our
common stock in this offering. The underwriter may close out any
covered short position by either exercising its option to purchase
additional shares of our common stock or purchasing shares of our
common stock in the open market. In determining the source of
shares to close out the covered short position, the underwriter
will consider, among other things, the price of shares available
for purchase in the open market as compared to the price at which
it may purchase shares through the option to purchase additional
shares.
“Naked”
short sales are sales in excess of the option to purchase
additional shares of our common stock. The underwriter must close
out any naked short position by purchasing shares in the open
market. A naked short position is more likely to be created if the
underwriter is concerned that there may be downward pressure on the
price of the shares of our common stock in the open market after
pricing that could adversely affect investors who purchase in this
offering.
A stabilizing bid
is a bid for the purchase of shares of common stock on behalf of
the underwriter for the purpose of fixing or maintaining the price
of the common stock. A syndicate covering transaction is the bid
for or the purchase of shares of common stock on behalf of the
underwriter to reduce a short position incurred by the underwriter
in connection with the offering. Similar to other purchase transactions, the
underwriter’s purchases to cover the syndicate short sales
may have the effect of raising or maintaining the market price of
our common stock or preventing or retarding a decline in the market
price of our common stock. As a result, the price of our common
stock may be higher than the price that might otherwise exist in
the open market. A penalty bid is an arrangement permitting the
underwriter to reclaim the selling concession otherwise
accruing to a syndicate member in connection with the offering if
the common stock originally sold by such syndicate member are
purchased in a syndicate covering transaction and therefore have
not been effectively placed by such syndicate member.
Neither we, nor the
underwriter make any representation or prediction as to the
direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. The
underwriter is not obligated to engage in these activities and, if
commenced, may end any of these activities at any
time.
Passive
Market Making
The underwriter may
also engage in passive market making transactions in our common
stock on the NASDAQ in accordance with Rule 103 of
Regulation M during a period before the commencement of offers
or sales of shares of our common stock in this offering and
extending through the completion of distribution. A passive market
maker must display its bid at a price not in excess of the highest
independent bid of that security. However, if all independent bids
are lowered below the passive market maker’s bid, that bid
must then be lowered when specified purchase limits are exceeded.
Passive market making may cause the price of our common stock to be
higher than the price that otherwise would exist in the open market
in the absence of those transactions. The underwriter is not
required to engage in passive market making and, if commenced, may
end passive market making activities at any time.
S-45
Electronic
Distribution
A prospectus in
electronic format may be made available by e-mail or on the web
sites or through online services maintained by one or more of the
underwriters, selling group members (if any) or their affiliates.
The underwriter may agree with us to allocate a specific number of
shares of common stock for sale to online brokerage account
holders. Any such allocation for online distributions will be made
by the underwriter on the same basis as other allocations. Other
than the prospectus in electronic format, the information on the
underwriter’s web site and any information contained in any
other web site maintained by the underwriter is not part of this
prospectus supplement, has not been approved and/or endorsed by us
or the underwriter and should not be relied upon by
investors.
Other
Activities and Relationships
Cantor Fitzgerald
& Co. and certain of its
affiliates are full service financial institutions engaged in a
wide range of activities for their own accounts and the accounts of
customers, which may include, among other things, corporate
finance, mergers and acquisitions, merchant banking, equity and
fixed income sales, trading and research, derivatives, foreign
exchange, futures, asset management, custody, clearance and
securities lending. Cantor Fitzgerald & Co. and certain of its affiliates have, from time to
time, performed, and may in the future perform, various investment
banking and financial advisory services for us and our affiliates,
for which it received or will receive customary fees and
expenses.
In addition, in the
ordinary course of its business, Cantor Fitzgerald & Co. and
its affiliates may, directly or indirectly, hold long or short
positions, trade and otherwise conduct such activities in or with
respect to debt or equity securities and/or bank debt of, and/or
derivative products. Such investment and securities activities may
involve our securities and instruments. Cantor Fitzgerald & Co.
and its affiliates may also make investment recommendations or
publish or express independent research views in respect of such
securities or instruments and may at any time hold, or recommend to
clients that they acquire, long or short positions in such
securities and instruments.
Cantor Fitzgerald
& Co. is a sales agent under the ATM Agreement.
Stamp
Taxes
If you purchase
shares of common stock offered in this prospectus supplement, you
may be required to pay stamp taxes and other charges under the laws
and practices of the country of purchase, in addition to the
offering price listed on the cover page of this prospectus
supplement.
S-46
NOTICE
TO INVESTORS
Canada
This prospectus
supplement constitutes an “exempt offering document” as
defined in and for the purposes of applicable Canadian securities
laws. No prospectus has been filed with any securities commission
or similar regulatory authority in Canada in connection with the
offer and sale of the common stock. No securities commission or
similar regulatory authority in Canada has reviewed or in any way
passed upon this prospectus supplement or on the merits of the
common stock and any representation to the contrary is an
offence.
Canadian investors
are advised that this prospectus supplement has been prepared in
reliance on section 3A.3 of National Instrument 33-105 Underwriting Conflicts (“NI
33-105”). Pursuant to section 3A.3 of NI 33-105, this
prospectus supplement is exempt from the requirement that the
Company and the underwriter(s) provide investors with certain
conflicts of interest disclosure pertaining to “connected
issuer” and/or “related issuer” relationships
that may exist between the Company and the underwriter(s) as would
otherwise be required pursuant to subsection 2.1(1) of NI
33-105.
Resale
Restrictions
The offer and sale
of the common stock in Canada is being made on a private placement
basis only and is exempt from the requirement that the Company
prepares and files a prospectus under applicable Canadian
securities laws. Any resale of the common stock acquired by a
Canadian investor in this offering must be made in accordance with
applicable Canadian securities laws, which may vary depending on
the relevant jurisdiction, and which may require resales to be made
in accordance with Canadian prospectus requirements, pursuant to a
statutory exemption from the prospectus requirements, in a
transaction exempt from the prospectus requirements or otherwise
under a discretionary exemption from the prospectus requirements
granted by the applicable local Canadian securities regulatory
authority. These resale restrictions may under certain
circumstances apply to resales of the common stock outside of
Canada.
Representations
of Purchasers
Each Canadian
investor who purchases the common stock will be deemed to have
represented to the Company and the underwriter(s) that the investor
(i) is purchasing the common stock as principal, or is deemed to be
purchasing as principal in accordance with applicable Canadian
securities laws, for investment only and not with a view to resale
or redistribution; (ii) is an “accredited investor” as
such term is defined in section 1.1 of National Instrument 45-106
Prospectus Exemptions
(“NI 45-106”) or, in Ontario, as such term is defined
in section 73.3(1) of the Securities Act (Ontario); and (iii) is
a “permitted client” as such term is defined in section
1.1 of National Instrument 31-103 Registration Requirements, Exemptions and
Ongoing Registrant Obligations.
Taxation
and Eligibility for Investment
Any discussion of
taxation and related matters contained in this prospectus
supplement does not purport to be a comprehensive description of
all of the tax considerations that may be relevant to a Canadian
investor when deciding to purchase the common stock and, in
particular, does not address any Canadian tax considerations. No
representation or warranty is hereby made as to the tax
consequences to a resident, or deemed resident, of Canada of an
investment in the common stock or with respect to the eligibility
of the common stock for investment by such investor under relevant
Canadian federal and provincial legislation and
regulations.
Rights
of Action for Damages or Rescission
Securities legislation in certain of the Canadian
jurisdictions provides certain purchasers of securities pursuant to
an offering memorandum (such as this prospectus supplement),
including where the distribution involves an “eligible
foreign security” as such term is defined in Ontario
Securities Commission Rule 45-501 Ontario Prospectus and
Registration Exemptions and in
Multilateral Instrument 45-107 Listing Representation and
Statutory Rights of Action Disclosure Exemptions,
as applicable, with a remedy for
damages or rescission, or both, in addition to any other rights
they may have at law, where the offering memorandum, or other
offering document that constitutes an offering memorandum, and any
amendment thereto, contains a “misrepresentation” as
defined under applicable Canadian securities laws. These remedies,
or notice with respect to these remedies, must be exercised or
delivered, as the case may be, by the purchaser within the time
limits prescribed under, and are subject to limitations and
defences under, applicable Canadian securities legislation. In
addition, these remedies are in addition to and without derogation
from any other right or remedy available at law to the
investor.
Language
of Documents
Upon receipt of
this document, each Canadian investor hereby confirms that it has
expressly requested that all documents evidencing or relating in
any way to the sale of the securities described herein (including
for greater certainty any purchase confirmation or any notice) be
drawn up in the English language only. Par la réception de ce document, chaque
investisseur Canadien confirme par les présentes qu’il a
expressément exigé que tous les documents faisant foi ou
se rapportant de quelque manière que ce soit à la vente
des valeurs mobilières décrites aux présentes
(incluant, pour plus de certitude, toute confirmation d'achat ou
tout avis) soient rédigés en anglais
seulement.
S-47
Australia
This prospectus is not a disclosure document for
the purposes of Australia’s Corporations Act 2001 (Cth) of
Australia, or Corporations Act, has not been lodged with the
Australian Securities & Investments Commission and is only
directed to the categories of exempt persons set out below.
Accordingly, if you receive this prospectus in
Australia:
You confirm and
warrant that you are either:
●
a
“sophisticated investor” under section 708(8)(a) or (b)
of the Corporations Act;
●
a
“sophisticated investor” under section 708(8)(c) or (d)
of the Corporations Act and that you have provided an
accountant’s certificate to the company which complies with
the requirements of section 708(8)(c)(i) or (ii) of the
Corporations Act and related regulations before the offer has been
made; or
●
a
“professional investor” within the meaning of section
708(11)(a) or (b) of the Corporations Act.
To the extent that
you are unable to confirm or warrant that you are an exempt
sophisticated investor or professional investor under the
Corporations Act any offer made to you under this prospectus is
void and incapable of acceptance.
You warrant and
agree that you will not offer any of the shares issued to you
pursuant to this prospectus for resale in Australia within 12
months of those securities being issued unless any such resale
offer is exempt from the requirement to issue a disclosure document
under section 708 of the Corporations Act.
European
Economic Area
In relation to each
Member State of the European Economic Area , no offer of any
securities which are the subject of the offering contemplated by
this prospectus has been or will be made to the public in that
Member State other than any offer where a prospectus has been or
will be published in relation to such securities that has been
approved by the competent authority in that Member State or, where
appropriate, approved in another Member State and notified to the
relevant competent authority in that Member State in accordance
with the Prospectus Directive, except that an offer of such
securities may be made to the public in that Member
State:
●
to any legal entity
which is a “qualified investor” as defined in the
Prospectus Directive;
●
to fewer than 150,
natural or legal persons (other than qualified investors as defined
in the Prospectus Directive), as permitted under the Prospectus
Directive, subject to obtaining the prior consent of the
representatives of the underwriters for any such offer;
or
●
in any other
circumstances falling within Article 3(2) of the Prospectus
Directive,
provided that no
such offer of securities shall require the Company or any of the
underwriters to publish a prospectus pursuant to Article 3 of the
Prospectus Directive or supplement a prospectus pursuant to Article
16 of the Prospectus Directive.
For the purposes of
this provision, the expression an “offer to the public”
in relation to any securities in any Member State means the
communication in any form and by any means of sufficient
information on the terms of the offer and the securities to be
offered so as to enable an investor to decide to purchase or
subscribe the securities, as the same may be varied in that Member
State by any measure implementing the Prospectus Directive in that
Member State and the expression “Prospectus Directive”
means Directive 2003/71/EC (and amendments thereto, including the
2010 PD Amending Directive), and includes any relevant implementing
measure in the Member State and the expression “2010 PD
Amending Directive” means Directive 2010/73/EU.
S-48
Hong
Kong
No securities have
been offered or sold, and no securities may be offered or sold, in
Hong Kong, by means of any document, other than to persons whose
ordinary business is to buy or sell shares or debentures, whether
as principal or agent; or to “professional investors”
as defined in the Securities and Futures Ordinance (Cap. 571) of
Hong Kong and any rules made under that Ordinance; or in other
circumstances which do not result in the document being a
“prospectus” as defined in the Companies Ordinance
(Cap. 32) of Hong Kong or which do not constitute an offer to the
public within the meaning of the Companies Ordinance (Cap.32) of
Hong Kong. No document, invitation or advertisement relating to the
securities has been issued or may be issued or may be in the
possession of any person for the purpose of issue (in each case
whether in Hong Kong or elsewhere), which is directed at, or the
contents of which are likely to be accessed or read by, the public
of Hong Kong (except if permitted under the securities laws of Hong
Kong) other than with respect to securities which are or are
intended to be disposed of only to persons outside Hong Kong or
only to “professional investors” as defined in the
Securities and Futures Ordinance (Cap. 571) of Hong Kong and any
rules made under that Ordinance.
This prospectus has
not been registered with the Registrar of Companies in Hong Kong.
Accordingly, this prospectus may not be issued, circulated or
distributed in Hong Kong, and the securities may not be offered for
subscription to members of the public in Hong Kong. Each person
acquiring the securities will be required, and is deemed by the
acquisition of the securities, to confirm that he is aware of the
restriction on offers of the securities described in this
prospectus and the relevant offering documents and that he is not
acquiring, and has not been offered any securities in circumstances
that contravene any such restrictions.
Japan
The offering has
not been and will not be registered under the Financial Instruments
and Exchange Law of Japan (Law No. 25 of 1948 of Japan, as
amended), or FIEL, and the Initial Purchaser will not offer or sell
any securities, directly or indirectly, in Japan or to, or for the
benefit of, any resident of Japan (which term as used herein means,
unless otherwise provided herein, any person resident in Japan,
including any corporation or other entity organized under the laws
of Japan), or to others for re-offering or resale, directly or
indirectly, in Japan or to a resident of Japan, except pursuant to
an exemption from the registration requirements of, and otherwise
in compliance with, the FIEL and any other applicable laws,
regulations and ministerial guidelines of Japan.
Singapore
This prospectus has
not been and will not be lodged or registered with the Monetary
Authority of Singapore. Accordingly, this prospectus and any other
document or material in connection with the offer or sale, or the
invitation for subscription or purchase of the securities may not
be issued, circulated or distributed, nor may the securities be
offered or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly, to the
public or any member of the public in Singapore other than (i) to
an institutional investor under Section 274 of the Securities and
Futures Act, Chapter 289 of Singapore, or the SFA, (ii) to a
relevant person as defined under Section 275(2), or any person
pursuant to Section 275(1A) of the SFA, and in accordance with the
conditions, specified in Section 275 of the SFA, or (iii) otherwise
pursuant to, and in accordance with the conditions of any other
applicable provision of the SFA.
Where the
securities are subscribed or purchased under Section 275 of the SFA
by a relevant person which is:
●
a corporation
(which is not an accredited investor as defined under Section 4A of
the SFA) the sole business of which is to hold investments and the
entire share capital of which is owned by one or more individuals,
each of whom is an accredited investor; or
●
a trust (where the
trustee is not an accredited investor) whose sole purpose is to
hold investments and each beneficiary is an accredited
investor,
shares, debentures
and units of shares and debentures of that corporation or the
beneficiaries’ rights and interest in that trust shall not be
transferable for six months after that corporation or that trust
has acquired the Offer Shares under Section 275 of the SFA
except:
●
to an institutional
investor under Section 274 of the SFA or to a relevant person
defined in Section 275(2) of the SFA, or to any person pursuant to
an offer that is made on terms that such shares, debentures and
units of shares and debentures of that corporation or such rights
and interest in that trust are acquired at a consideration of not
less than $200,000 (or its equivalent in a foreign currency) for
each transaction, whether such amount is to be paid for in cash or
by exchange of securities or other assets, and further for
corporations, in accordance with the conditions, specified in
Section 275 of the SFA;
●
where no
consideration is given for the transfer; or
●
where the transfer
is by operation of law.
S-49
Switzerland
The securities may
not be publicly offered in Switzerland and will not be listed on
the SIX Swiss Exchange, or SIX, or on any other stock exchange or
regulated trading facility in Switzerland. This prospectus has been
prepared without regard to the disclosure standards for issuance
prospectuses under art. 652a or art. 1156 of the Swiss Code of
Obligations or the disclosure standards for listing prospectuses
under art. 27 ff. of the SIX Listing Rules or the listing rules of
any other stock exchange or regulated trading facility in
Switzerland. Neither this prospectus nor any other offering or
marketing material relating to the securities or the offering may
be publicly distributed or otherwise made publicly available in
Switzerland.
Neither this
prospectus nor any other offering or marketing material relating to
the offering, the Company or the securities have been or will be
filed with or approved by any Swiss regulatory authority. In
particular, this prospectus will not be filed with, and the offer
of securities will not be supervised by, the Swiss Financial Market
Supervisory Authority FINMA, or FINMA, and the offer of securities
has not been and will not be authorized under the Swiss Federal Act
on Collective Investment Schemes, or CISA. The investor protection
afforded to acquirers of interests in collective investment schemes
under the CISA does not extend to acquirers of
securities.
Israel
This document does
not constitute a prospectus under the Israeli Securities Law,
5728-1968, or the Securities Law, and has not been filed with or
approved by the Israel Securities Authority. In the State of
Israel, this document is being distributed only to, and is directed
only at, and any offer of the shares is directed only at, investors
listed in the first addendum, or the Addendum, to the Israeli
Securities Law, consisting primarily of joint investment in trust
funds, provident funds, insurance companies, banks, portfolio
managers, investment advisors, members of the Tel Aviv Stock
Exchange, underwriters, venture capital funds, entities with equity
in excess of NIS 50 million and “qualified
individuals”, each as defined in the Addendum (as it may be
amended from time to time), collectively referred to as qualified
investors (in each case purchasing for their own account or, where
permitted under the Addendum, for the accounts of their clients who
are investors listed in the Addendum). Qualified investors will be
required to submit written confirmation that they fall within the
scope of the Addendum, are aware of the meaning of same and agree
to it.
United
Kingdom
This prospectus is
only being distributed to, and is only directed at, persons in the
United Kingdom that are qualified investors
(as defined in the Prospectus Directive) that are also (i)
investment professionals falling within Article 19(5) of the
Financial Services and Markets Act 2000 (Financial Promotion) Order
2005, as amended, referred to herein as the “Order”,
and/or (ii) high net worth entities falling within Article 49(2)(a)
to (d) of the Order and other persons to whom it may lawfully be
communicated or caused to be communicated. Each such person is
referred to herein as a “Relevant Person”.
This prospectus and
its contents are confidential and should not be distributed,
published or reproduced (in whole or in part) or disclosed by
recipients to any other persons in the United Kingdom. Any person
in the United Kingdom that is not a Relevant Person should not act
or rely on this document or any of its contents.
Any invitation or
inducement to engage in investment activity (within the meaning of
Section 21 of the Financial Services and Markets Act 2000 (the
“FSMA”) may only be communicated or caused to be
communicated in connection with the issue or sale of the securities
in circumstances in which Section 21(1) of the FSMA does not apply.
All applicable provisions of the FSMA must be complied with in
respect of anything done by any person in relation to the
securities in, from or otherwise involving the United
Kingdom.
S-50
LEGAL
MATTERS
Alston & Bird
LLP has passed upon certain legal matters regarding the shares
offered by this prospectus supplement. Duane Morris LLP is counsel
to the underwriter in connection with this offering.
EXPERTS
The consolidated
financial statements of TG Therapeutics, Inc. and subsidiaries as
of and for the year ended December 31, 2018, December 31, 2017 and
December 31, 2016 have been incorporated by reference herein in
reliance upon the report of CohnReznick LLP, independent registered
public accounting firm, and upon the authority of said firm as
experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We file annual,
quarterly and current reports, proxy statements, and other
information with the SEC. You may read and copy any documents we
have filed with the SEC at its Public Reference Room located at 100
F Street, N.E., Washington, D.C. 20549. You may obtain information
on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. We also file these documents with the SEC
electronically. You can access the electronic versions of these
filings on the SEC’s Internet website found at
http://www.sec.gov. You can also obtain copies of materials we file
with the SEC, free of charge, from our Internet website found at
www.tgtherapeutics.com. Information contained on our website does
not constitute part of this prospectus supplement or the
accompanying prospectus. Our stock is quoted on the Nasdaq Capital
Market under the symbol “TGTX.”
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us
to “incorporate by reference” the information we file
with them which means that we can disclose important information to
you by referring you to those documents instead of having to repeat
the information in this prospectus supplement and accompanying
prospectus. The information incorporated by reference is considered
to be part of this prospectus supplement and accompanying
prospectus, and later information that we file with the SEC will
automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act between the date of this prospectus supplement and the
termination of the offering (other than, unless otherwise
specifically indicated, current reports furnished under
Item 2.02 or Item 7.01 of Form 8-K and exhibits filed on
such form that are related to such items):
●
Our Annual Report
on Form 10-K for the year ended December 31, 2018;
●
Our Proxy Statement
on Schedule 14A filed with the SEC on April 30, 2018;
and
●
Our Current Reports
on Form 8-K filed with the SEC on January 22, 2019 and February 28,
2019.
We will provide to
each person, including any beneficial owner, to whom a copy of this
prospectus supplement and the related prospectus is delivered, a
copy of any or all of the information that we have incorporated by
reference into this prospectus supplement and the related
prospectus, but not delivered with this prospectus supplement and
the related prospectus (see Item 12(c)(1)(i) of Form S-3). We will
provide this information upon written or oral request at no cost to
the requester. You may request this information by contacting our
corporate headquarters at the following address: 2 Gansevoort St.,
9th Floor,
New York, New York 10014, Attn: Chief Financial Officer, or by
calling (212) 554-4484.
S-51
PROSPECTUS
$300,000,000
Common Stock
Preferred Stock
Warrants
Debt Securities
Units
Preferred Stock
Warrants
Debt Securities
Units
The following are types of securities that we may offer, issue and
sell from time to time, together or separately:
●
shares of our common
stock;
●
shares of our preferred
stock;
●
warrants;
●
debt securities;
and
●
units consisting of any
combination of our common stock, preferred stock, warrants or debt
securities.
We may offer our
securities in one or more offerings in amounts, at prices, and on
terms determined at the time of the offering. We may sell our
securities through agents we select or through underwriters and
dealers we select. If we use agents, underwriters or dealers, we
will name them and describe their compensation in a prospectus or
prospectus supplement.
This prospectus
provides a general description of the securities we may offer. Each
time we sell securities, we will provide specific terms of the
securities offered in a supplement to this prospectus. The
prospectus or prospectus supplement may also add, update or change
information contained in this prospectus. You should read this
prospectus and the applicable prospectus supplement carefully
before you invest in any securities. This prospectus may not be
used to consummate a sale of securities unless accompanied by the
applicable prospectus supplement.
Our common stock is traded on the Nasdaq Capital Market under the
symbol “TGTX.” On May 22, 2017, the per share closing
price of our common stock as reported on the Nasdaq Capital Market
was $11.45 per share.
Investing in our securities involves certain risks. See “Risk
Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2016, as well as our Quarterly Report on Form 10-Q for
the period ended March 31, 2017, which has been filed with the SEC
and is incorporated by reference into this prospectus. You should
read the entire prospectus carefully before you make your
investment decision.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is June 13, 2017.
Prospectus
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Page
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TG THERAPEUTICS, INC.
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1
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THE OFFERING
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1
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WHERE YOU CAN FIND MORE INFORMATION
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1
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IMPORTANT INFORMATION ABOUT THIS
PROSPECTUS
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1
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INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE
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2
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DESCRIPTION OF COMMON STOCK
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2
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DESCRIPTION OF WARRANTS
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4
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DESCRIPTION OF DEBT SECURITIES
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4
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DESCRIPTION OF UNITS
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7
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PLAN OF DISTRIBUTION
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8
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LEGAL MATTERS
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8
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EXPERTS
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8
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(i)
We are a
biopharmaceutical company focused on the acquisition, development
and commercialization of novel treatments for B-cell malignancies
and autoimmune diseases. Currently, we are developing two therapies
targeting hematologic malignancies. TG-1101 (ublituximab) is a
novel, glycoengineered monoclonal antibody that targets a specific
and unique epitope on the CD20 antigen found on mature
B-lymphocytes. We are also developing TGR-1202, an orally available
PI3K delta inhibitor. The delta isoform of PI3K is strongly
expressed in cells of hematopoietic origin and is believed to be
important in the proliferation and survival of B-lymphocytes. Both
TG-1101 and TGR-1202 are in clinical development for patients with
hematologic malignancies, with TG-1101 also in clinical development
for autoimmune disorders. We also have pre-clinical programs to
develop IRAK4 (interleukin-1 receptor-associated kinase 4)
inhibitors, BET (Bromodomain and Extra Terminal) inhibitors, and
anti-PD-L1 and anti-GITR antibodies.
We also actively
evaluate complementary products, technologies and companies for
in-licensing, partnership, acquisition and/or investment
opportunities. To date, we have not received approval for the sale
of any of our drug candidates in any market and, therefore, have
not generated any product sales from our drug
candidates.
Our principal
executive offices are located at 2 Gansevoort Street, 9th Floor,
New York, New York 10014, and our telephone number is
212-554-4484. We
maintain a website on the Internet at www.tgtherapeutics.com and
our e-mail address is info@tgtxinc.com. Our Internet website, and
the information contained on it, are not to be considered part of
this prospectus.
THE OFFERING
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Use of
Proceeds
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We intend to use
the net proceeds of any offering as set forth in the applicable
prospectus supplement.
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Nasdaq
Symbol
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TGTX
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WHERE
YOU CAN FIND MORE INFORMATION
We file reports
with the SEC on an annual basis using Form 10-K, quarterly reports
on Form 10-Q and current reports on Form 8-K. You may read and copy
any such reports and amendments thereto at the SEC’s Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549 on official business days
during the hours of 10:00 a.m. to 3:00 p.m. Please call the SEC at
1-800-SEC-0330 for information on the Public Reference Room.
Additionally, the SEC maintains a website that contains annual,
quarterly, and current reports, proxy statements, and other
information that issuers (including us) file electronically with
the SEC. The SEC’s
website address is http://www.sec.gov. You can also obtain copies of
materials we file with the SEC from our Internet website found at
www.tgtherapeutics.com. Our stock is quoted on the
Nasdaq Capital Market under the symbol “TGTX.”
IMPORTANT INFORMATION ABOUT THIS PROSPECTUS
This prospectus is
part of a “shelf” registration statement that we
filed with the SEC. By using a shelf registration
statement, we may sell our securities, as described in this
prospectus, from time to time in one or more offerings. We may use
the shelf registration statement to offer and sell securities
described in this prospectus. Each time we sell securities,
we will provide a prospectus or prospectus supplement to this
prospectus that contains specific information about the terms of
such offering. The
prospectus or prospectus supplement may also add, update or change
information contained in this prospectus. Before purchasing any
securities, you should carefully read both this prospectus and any
supplement, together with the additional information incorporated
into this prospectus or described under the heading “Where You Can Find More
Information.”
You should rely
only on the information contained or incorporated by reference in
this prospectus and any prospectus or prospectus supplement. We
have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent
information, you should not rely on it. We will not make an offer
to sell securities in any jurisdiction where the offer or sale is
not permitted. You should assume that the information appearing in
this prospectus, as well as information we previously filed with
the SEC and have incorporated by reference, is accurate as of the
date on the front cover of this prospectus only, or when such
document was filed with the SEC. Our business, financial condition,
results of operations and prospects may have changed since the
relevant date.
We will not use
this prospectus to offer and sell securities unless it is
accompanied by a prospectus or prospectus supplement that more
fully describes the terms of the offering.
1
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us
to “incorporate by
reference” into this
prospectus the information we file with the SEC. This means that we can disclose
important information to you by referring you to those documents
without restating that information in this document. The information incorporated by
reference into this prospectus is considered to be part of this
prospectus, and information we file with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, or the Exchange Act, after the date of this
prospectus and prior to the termination of this offering, will
automatically update and supersede the information contained in
this prospectus and documents listed below. We incorporate by reference
into this prospectus the documents listed below, except to the
extent information in those documents differs from information
contained in this prospectus, and any future filings made by us
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act, including exhibits:
(a) Our Annual
Report on Form 10-K for the year ended December 31, 2016 and Form
10-K/A filed on March 21, 2017;
(b) Our Quarterly
Report on Form 10-Q for the quarter ended March 31,
2017;
(c) Our Current
Report on Form 8-K filed with the SEC on May 1, 2017;
(d) Our Definitive
Proxy Statement on Schedule 14A, filed with the SEC on April 28,
2017; and
The description of
our common stock contained in our registration statement on Form
8-A filed with the SEC on May 28, 2013 (File No.
001-32639).
We will provide to
each person, including any beneficial owner, to whom a copy of this
prospectus is delivered, a copy of any or all of the information
that we have incorporated by reference into this
prospectus. We will
provide this information upon written or oral request at no cost to
the requester. You
may request this information by contacting our corporate
headquarters at the following address: 2 Gansevoort Street, 9th
Floor, New York, New York 10014, Attn: Chief Financial Officer, or
by calling (212) 554-4484.
DESCRIPTION OF COMMON STOCK
The following
summary of the terms of our common stock may not be complete and is
subject to, and qualified in its entirety by reference to, the
terms and provisions of our amended and restated certificate of
incorporation and our restated bylaws. You should refer to, and read
this summary together with, our amended and restated certificate of
incorporation and restated bylaws to review all of the terms of our
common stock that may be important to you.
Common Stock
Under our
certificate of incorporation, we are authorized to issue a total of
150,000,000 shares of common stock, par value $0.001 per
share. As of March
31, 2017, we had 66,816,455 shares issued and 66,775,146 shares
outstanding of our common stock. There are approximately 301
holders of record. All outstanding shares of our
common stock are fully paid and nonassessable. Our common stock is
listed on the Nasdaq Capital Market under the symbol “TGTX.”
Dividends
Subject to the
dividend rights of the holders of any outstanding series of
preferred stock, holders of our common stock are entitled to
receive ratably such dividends and other distributions of cash or
any other right or property as may be declared by our board of
directors out of our assets or funds legally available for such
dividends or distributions.
Voting Rights
The holders of our
common stock are entitled to one vote for each share of common
stock owned by that stockholder on every matter properly submitted
to the stockholders for their vote. Stockholders are not entitled
to vote cumulatively for the election of directors.
Liquidation and Dissolution
In the event of any
voluntary or involuntary liquidation, dissolution or winding up of
our affairs, holders of common stock would be entitled to share
ratably in our assets that are legally available for distribution
to stockholders after payment of liabilities. If we have any
preferred stock outstanding at such time, holders of the preferred
stock may be entitled to distributions and/or liquidation
preferences. In either such case, we must pay the applicable
distribution to the holders of our preferred stock (if any) before
we may pay distributions to the holders of common
stock.
2
Other
Holders of our
common stock have no conversion, redemption, preemptive,
subscription or similar rights.
Transfer
Agent
American Stock
Transfer and Trust Company serves as the transfer agent and
registrar for all of our common stock.
Preferred Stock
Under the terms of
our restated certificate of incorporation, our board of directors
is authorized to issue up to 10,000,000 shares of preferred stock,
par value $0.001 per share. Our board of directors may issues
shares of preferred stock in one or more series without stockholder
approval, and has the discretion to determine the rights,
preferences, privileges and restrictions, including voting rights,
dividend rights, conversion rights, redemption privileges and
liquidation preferences, of each series of preferred stock. We may
amend from time to time our restated certificate of incorporation
to increase the number of authorized shares of preferred stock. Any
such amendment would require the approval of the holders of a
majority of the voting power of the shares entitled to vote
thereon. As of the date of this prospectus, we have 10,000,000
shares of preferred shares authorized, but no shares of preferred
stock outstanding.
It is not possible
to state the actual effect of the issuance of any shares of
preferred stock upon the rights of the holders of common stock
until the board of directors determines the specific rights of the
holders of preferred stock. However, effects of the issuance of
preferred stock include restricting dividends on common stock,
diluting the voting power of common stock, impairing the
liquidation rights of common stock, and making it more difficult
for a third party to acquire us, which could have the effect of
discouraging a third party from acquiring, or deterring a third
party from paying a premium to acquire, a majority of our
outstanding voting stock.
The particular
terms of any series of preferred stock being offered by us will be
described in the prospectus supplement relating to that series of
preferred stock. Those terms may include:
●
the title and
liquidation preference per share of the preferred stock and the
number of shares offered;
●
the purchase price
of the preferred stock;
●
the dividend rate
(or method of calculation);
●
the dates on which
dividends will be paid and the date from which dividends will begin
to accumulate;
●
any redemption or
sinking fund provisions of the preferred stock;
●
any listing of the
preferred stock on any securities exchange or market;
●
any conversion
provisions of the preferred stock;
●
the voting rights,
if any, of the preferred stock; and
●
any additional
dividend, liquidation, redemption, sinking fund and other rights,
preferences, privileges, limitations and restrictions of the
preferred stock.
The preferred stock
will, when issued, be fully paid and non-assessable.
3
DESCRIPTION OF WARRANTS
We may issue
warrants to purchase shares of our common stock and/or preferred
stock in one or more series together with other securities or
separately, as described in each applicable prospectus
supplement.
The prospectus
supplement relating to any warrants we offer will include specific
terms relating to the offering. These terms will include some or
all of the following:
●
the title of the
warrants;
●
the aggregate
number of warrants offered;
●
the designation,
number and terms of the shares of common stock purchasable upon
exercise of the warrants and procedures by which those numbers may
be adjusted;
●
the exercise price
of the warrants;
●
the dates or
periods during which the warrants are exercisable;
●
the designation and
terms of any securities with which the warrants are
issued;
●
if the warrants are
issued as a unit with another security, the date on and after which
the warrants and the other security will be separately
transferable;
●
if the exercise
price is not payable in U.S. dollars, the foreign currency,
currency unit or composite currency in which the exercise price is
denominated;
●
any minimum or
maximum amount of warrants that may be exercised at any one
time;
●
any terms relating
to the modification of the warrants;
●
any terms,
procedures and limitations relating to the transferability,
exchange or exercise of the warrants; and
●
any other specific
terms of the warrants.
DESCRIPTION
OF DEBT SECURITIES
We may offer debt
securities which may be senior, subordinated or junior subordinated
and may be convertible. Unless otherwise specified in the
applicable prospectus supplement, our debt securities will be
issued in one or more series under an indenture to be entered into
between us and a trustee. We will issue the debt securities offered
by this prospectus and any accompanying prospectus supplement under
an indenture to be entered into between us and the trustee
identified in the applicable prospectus supplement. The terms of
the debt securities will include those stated in the indenture and
those made part of the indenture by reference to the Trust
Indenture Act of 1939, as in effect on the date of the indenture.
We have filed a copy of the form of indenture as an exhibit to the
registration statement in which this prospectus is included. The
indenture will be subject to and governed by the terms of the Trust
Indenture Act of 1939.
The following
description briefly sets forth certain general terms and provisions
of the debt securities that we may offer. The particular terms of
the debt securities offered by any prospectus supplement and the
extent, if any, to which these general provisions may apply to the
debt securities, will be described in the related prospectus
supplement. Accordingly, for a description of the terms of a
particular issue of debt securities, reference must be made to both
the related prospectus supplement and to the following
description.
4
Debt Securities
The aggregate
principal amount of debt securities that may be issued under the
indenture is unlimited. The debt securities may be issued in one or
more series as may be authorized from time to time pursuant to a
supplemental indenture entered into between us and the trustee or
an order delivered by us to the trustee. For each series of debt
securities we offer, a prospectus supplement accompanying this
prospectus will describe the following terms and conditions of the
series of debt securities that we are offering, to the extent
applicable:
●
title
and aggregate principal amount;
●
whether
the debt securities will be senior, subordinated or junior
subordinated;
●
applicable
subordination provisions, if any;
●
provisions
regarding whether the debt securities will be convertible or
exchangeable into other securities or property of the Company or
any other person;
●
percentage
or percentages of principal amount at which the debt securities
will be issued;
●
maturity
date(s);
●
interest
rate(s) or the method for determining the interest
rate(s);
●
whether
interest on the debt securities will be payable in cash or
additional debt securities of the same series;
●
dates
on which interest will accrue or the method for determining dates
on which interest will accrue and dates on which interest will be
payable;
●
whether
the amount of payment of principal of, premium, if any, or interest
on the debt securities may be determined with reference to an
index, formula or other method;
●
redemption,
repurchase or early repayment provisions, including our obligation
or right to redeem, purchase or repay debt securities under a
sinking fund, amortization or analogous provision;
●
if
other than the debt securities’ principal amount, the portion
of the principal amount of the debt securities that will be payable
upon declaration of acceleration of the maturity;
●
authorized
denominations;
●
form;
●
amount
of discount or premium, if any, with which the debt securities will
be issued, including whether the debt securities will be issued as
“original issue discount” securities;
5
●
the
place or places where the principal of, premium, if any, and
interest on the debt securities will be payable;
●
where
the debt securities may be presented for registration of transfer,
exchange or conversion;
●
the
place or places where notices and demands to or upon the Company in
respect of the debt securities may be made;
●
whether
the debt securities will be issued in whole or in part in the form
of one or more global securities;
●
if
the debt securities will be issued in whole or in part in the form
of a book-entry security, the depository or its nominee with
respect to the debt securities and the circumstances under which
the book-entry security may be registered for transfer or exchange
or authenticated and delivered in the name of a person other than
the depository or its nominee;
●
whether
a temporary security is to be issued with respect to such series
and whether any interest payable prior to the issuance of
definitive securities of the series will be credited to the account
of the persons entitled thereto;
●
the
terms upon which beneficial interests in a temporary global
security may be exchanged in whole or in part for beneficial
interests in a definitive global security or for individual
definitive securities;
●
the
guarantors, if any, of the debt securities, and the extent of the
guarantees and any additions or changes to permit or facilitate
guarantees of such debt securities;
●
any
covenants applicable to the particular debt securities being
issued;
●
any
defaults and events of default applicable to the debt securities,
including the remedies available in connection
therewith;
●
currency,
currencies or currency units in which the purchase price for, the
principal of and any premium and any interest on, such debt
securities will be payable;
●
time
period within which, the manner in which and the terms and
conditions upon which the Company or the purchaser of the debt
securities can select the payment currency;
●
securities
exchange(s) on which the debt securities will be listed, if
any;
●
whether
any underwriter(s) will act as market maker(s) for the debt
securities;
●
extent
to which a secondary market for the debt securities is expected to
develop;
●
provisions
relating to defeasance;
●
provisions
relating to satisfaction and discharge of the
indenture;
●
any
restrictions or conditions on the transferability of the debt
securities;
●
provisions
relating to the modification of the indenture both with and without
the consent of holders of debt securities issued under the
indenture;
●
any
addition or change in the provisions related to compensation and
reimbursement of the trustee;
●
provisions,
if any, granting special rights to holders upon the occurrence of
specified events;
●
whether
the debt securities will be secured or unsecured, and, if secured,
the terms upon which the debt securities will be secured and any
other additions or changes relating to such security;
and
●
any
other terms of the debt securities that are not inconsistent with
the provisions of the Trust Indenture Act (but may modify, amend,
supplement or delete any of the terms of the indenture with respect
to such series of debt securities).
6
General
One or more series
of debt securities may be sold as “original issue discount” securities. These debt securities
would be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which
at the time of issuance is below market rates. One or more series
of debt securities may be variable rate debt securities that may be
exchanged for fixed rate debt securities.
United States
federal income tax consequences and special considerations, if any,
applicable to any such series will be described in the applicable
prospectus supplement.
Debt securities may
be issued where the amount of principal and/or interest payable is
determined by reference to one or more currency exchange rates,
commodity prices, equity indices or other factors. Holders of such
debt securities may receive a principal amount or a payment of
interest that is greater than or less than the amount of principal
or interest otherwise payable on such dates, depending upon the
value of the applicable currencies, commodities, equity indices or
other factors. Information as to the methods for determining the
amount of principal or interest, if any, payable on any date, the
currencies, commodities, equity indices or other factors to which
the amount payable on such date is linked and certain additional
United States federal income tax considerations will be set forth
in the applicable prospectus supplement.
The term
“debt
securities” includes debt
securities denominated in U.S. dollars or, if specified in the
applicable prospectus supplement, in any other freely transferable
currency or units based on or relating to foreign
currencies.
We expect most debt
securities to be issued in fully registered form without coupons
and in denominations of $2,000 and any integral multiples thereof.
Subject to the limitations provided in the indenture and in the
prospectus supplement, debt securities that are issued in
registered form may be transferred or exchanged at the principal
corporate trust office of the trustee, without the payment of any
service charge, other than any tax or other governmental charge
payable in connection therewith.
Global Securities
The debt securities
of a series may be issued in whole or in part in the form of one or
more global securities that will be deposited with, or on behalf
of, a depositary identified in the prospectus supplement. Global
securities will be issued in registered form and in either
temporary or definitive form. Unless and until it is exchanged in
whole or in part for the individual debt securities, a global
security may not be transferred except as a whole by the depositary
for such global security to a nominee of such depositary or by a
nominee of such depositary to such depositary or another nominee of
such depositary or by such depositary or any such nominee to a
successor of such depositary or a nominee of such successor. The
specific terms of the depositary arrangement with respect to any
debt securities of a series and the rights of and limitations upon
owners of beneficial interests in a global security will be
described in the applicable prospectus supplement.
Governing Law
The indenture and
the debt securities shall be construed in accordance with and
governed by the laws of the State of New York.
DESCRIPTION OF UNITS
We may issue, in
one more series, units comprised of shares of our common stock or
preferred stock, warrants to purchase common stock or preferred
stock, debt securities or any combination of those securities. Each
unit will be issued so that the holder of the unit is also the
holder of each security included in the unit. Thus, the holder of a
unit will have the rights and obligations of a holder of each
included security. The unit agreement under which a unit is issued
may provide that the securities included in the unit may not be
held or transferred separately, at any time or at any time before a
specified date.
We may evidence
units by unit certificates that we issue under a separate
agreement. We may issue the units under a unit agreement between us
and one or more unit agents. If we elect to enter into a unit
agreement with a unit agent, the unit agent will act solely as our
agent in connection with the units and will not assume any
obligation or relationship of agency or trust for or with any
registered holders of units or beneficial owners of units. We will
indicate the name and address and other information regarding the
unit agent in the applicable prospectus supplement relating to a
particular series of units if we elect to use a unit
agent.
We will describe in
the applicable prospectus supplement the terms of the series of
units being offered, including:
●
the designation and
terms of the units and of the securities comprising the units,
including whether and under what circumstances those securities may
be held or transferred separately;
●
any provisions of
the governing unit agreement that differ from those described
herein; and
●
any provisions for
the issuance, payment, settlement, transfer or exchange of the
units or of the securities comprising the units.
7
The other
provisions regarding our common stock, preferred stock, warrants
and debt securities as described in this section will apply to each
unit to the extent such unit consists of shares of our common
stock, preferred stock, warrants and/or debt
securities.
PLAN OF DISTRIBUTION
We may sell the
securities covered in this prospectus in any of three ways (or in
any combination):
●
through
underwriters or dealers;
●
directly to a
limited number of purchasers or to a single purchaser;
or
●
through
agents.
Each time that we
use this prospectus to sell securities, we will also provide a
prospectus or prospectus supplement that contains the specific
terms of the offering. The prospectus or prospectus
supplement will set forth the terms of the offering of the
securities, including:
●
the
name or names of any underwriters, dealers or agents and the
amounts of any securities underwritten or purchased by each of
them; and
●
the
public offering price of the common stock and the proceeds to us
and any discounts, commissions or concessions allowed or reallowed
or paid to dealers.
Any public offering
price and any discounts or concessions allowed or reallowed or paid
to dealers may be changed from time to time.
If underwriters are
used in the sale of any securities, the securities will be acquired
by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The securities may be either
offered to the public through underwriting syndicates represented
by managing underwriters, or directly by underwriters. Generally, the
underwriters’ obligations
to purchase the securities will be subject to certain conditions
precedent. The
underwriters will be obligated to purchase all of the securities if
they purchase any of securities.
We may sell the
securities through agents from time to time. The prospectus or prospectus
supplement will name any agent involved in the offer or sale of the
securities and any commissions we pay to them. Generally, any agent will be
acting on a best efforts basis for the period of its
appointment.
We may authorize
underwriters, dealers or agents to solicit offers by certain
purchasers to purchase the securities from us at the public
offering price set forth in the prospectus or prospectus supplement
pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future. The contracts will be subject
only to those conditions set forth in the prospectus or prospectus
supplement, and the prospectus or prospectus supplement will set
forth any commissions we pay for solicitation of these
contracts.
Agents and
underwriters may be entitled to indemnification by us against
certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribution with respect
to payments which the agents or underwriters may be required to
make in respect thereof. Agents and underwriters may be
customers of, engage in transactions with, or perform services for
us in the ordinary course of business.
We may enter into
derivative transactions with third parties, or sell securities not
covered by this prospectus to third parties in privately negotiated
transactions. If the
applicable prospectus or prospectus supplement indicates, in
connection with those derivatives, the third parties may sell
securities covered by this prospectus and the applicable prospectus
or prospectus supplement, including in short sale
transactions. If so,
the third party may use securities pledged by us or borrowed from
us or others to settle those sales or to close out any related open
borrowings of securities, and may use securities received from us
in settlement of those derivatives to close out any related open
borrowings of securities. The third party in such sale
transactions will be an underwriter and will be identified in the
applicable prospectus or prospectus supplement (or a post-effective
amendment).
In compliance with
the guidelines of the Financial Services Regulatory Authority,
Inc., or FINRA, the maximum compensation to be received by a FINRA
member or independent broker-dealer may not exceed 8% of the
offering proceeds. It is anticipated that the
maximum compensation to be received in any particular offering of
securities will be less than this amount.
LEGAL MATTERS
The legality and
validity of the securities offered from time to time under this
prospectus will be passed upon by Alston & Bird LLP, New York,
New York.
EXPERTS
The consolidated
financial statements of TG Therapeutics, Inc. and subsidiaries as
of December 31, 2016 and 2015, and for each of the three years in
the period ended December 31, 2016, have been incorporated by
reference herein and in the registration statement in reliance upon
the report of CohnReznick LLP, independent registered public
accounting firm, and upon the authority of said firm as experts in
accounting and auditing.
8
4,100,000 Shares
TG Therapeutics, Inc.
Common Stock
PROSPECTUS SUPPLEMENT
Sole Book-Running Manager
Cantor
March 1, 2019