Blueprint
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
____________________________
FORM
10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
|
SECURITIES
EXCHANGE ACT OF 1934
|
For
the quarterly period ended September 30, 2016
|
OR
|
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
|
SECURITIES
EXCHANGE ACT OF 1934
|
For
the transition period from to
|
Commission
File Number 000-30929
___________________
TG
THERAPEUTICS, INC.
(Exact
name of registrant as specified in its charter)
Delaware
(State
or other jurisdiction of incorporation or
organization)
|
36-3898269
(I.R.S.
Employer Identification No.)
|
|
2
Gansevoort Street, 9th
Floor
New
York, New York 10014
(Address including
zip code of principal executive offices)
(212)
554-4484
(Registrant's
telephone number, including area code)
Indicate by check
mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
Yes
☒ No ☐
Indicate by check
mark whether the registrant has submitted electronically and posted
on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit and post such files).
☒
Yes ☐ No
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of “large accelerated filer,”
“accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ☐
|
Accelerated filer
☒
|
Non-accelerated
filer ☐ (Do not check if smaller reporting
company)
|
Smaller
reporting company ☐
|
Indicate by
checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes
☐ No ☒
There
were 54,731,109 shares of the registrant’s common stock,
$0.001 par value, outstanding as of November 1, 2016.
TG
THERAPEUTICS, INC.
FORM
10-Q
FOR
THE QUARTER ENDED SEPTEMBER 30, 2016
TABLE
OF CONTENTS
SPECIAL CAUTIONARY
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
|
3
|
|
|
|
PART
I
|
FINANCIAL
INFORMATION
|
4
|
|
|
|
Item
1
|
Financial
Statements:
|
4
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of September 30, 2016 (unaudited)
and December 31, 2015
|
4
|
|
|
|
|
Condensed
Consolidated Statements of Operations for the three and nine months
ended September 30, 2016 and 2015 (unaudited)
|
5
|
|
|
|
|
Condensed
Consolidated Statement of Stockholders’ Equity for the nine
months ended September 30, 2016 (unaudited)
|
6
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2016 and 2015 (unaudited)
|
7
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
(unaudited)
|
8
|
|
|
|
Item
2
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
18
|
|
|
|
Item
3
|
Quantitative and
Qualitative Disclosures About Market Risk
|
27
|
|
|
|
Item
4
|
Controls and
Procedures
|
28
|
|
|
|
PART
II
|
OTHER
INFORMATION
|
28
|
|
|
|
Item
1
|
Legal
Proceedings
|
28
|
|
|
|
Item
1A
|
Risk
Factors
|
28
|
|
|
|
Item
6
|
Exhibits
|
46
|
|
|
|
2
SPECIAL
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain
matters discussed in this report, including matters discussed under
the caption “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” may
constitute forward-looking statements for purposes of the
Securities Act of 1933, as amended, or the Securities Act, and the
Securities Exchange Act of 1934, as amended, or the Exchange Act,
and involve known and unknown risks, uncertainties and other
factors that may cause our actual results, performance or
achievements to be materially different from the future results,
performance or achievements expressed or implied by such
forward-looking statements. The words "anticipate," "believe,"
"estimate," "may," "expect," “plan,”
“intend” and similar expressions are generally intended
to identify forward-looking statements. Our actual results may
differ materially from the results anticipated in these
forward-looking statements due to a variety of factors, including,
without limitation, those discussed under the captions “Risk
Factors,” “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and
elsewhere in this report, as well as other factors which may be
identified from time to time in our other filings with the
Securities and Exchange Commission, or the SEC, or in the documents
where such forward-looking statements appear. All written or oral
forward-looking statements attributable to us are expressly
qualified in their entirety by these cautionary statements. Such
forward-looking statements include, but are not limited to,
statements about our:
●
expectations for
increases or decreases in expenses;
●
expectations for
the clinical and pre-clinical development, manufacturing,
regulatory approval, and commercialization of our pharmaceutical
product candidates or any other products we may acquire or
in-license;
●
use of clinical
research centers and other contractors;
●
expectations as to
the timing of commencing or completing pre-clinical and clinical
trials and the expected outcomes of those trials;
●
expectations for
incurring capital expenditures to expand our research and
development and manufacturing capabilities;
●
expectations for
generating revenue or becoming profitable on a sustained
basis;
●
expectations or
ability to enter into marketing and other partnership
agreements;
●
expectations or
ability to enter into product acquisition and in-licensing
transactions;
●
expectations or
ability to build our own commercial infrastructure to manufacture,
market and sell our drug candidates;
●
expectations for
the acceptance of our products by doctors, patients or
payors;
●
ability to compete
against other companies and research institutions;
●
ability to secure
adequate protection for our intellectual property;
●
ability to attract
and retain key personnel;
●
ability to obtain
reimbursement for our products;
●
estimates of the
sufficiency of our existing cash and cash equivalents and
investments to finance our operating requirements, including
expectations regarding the value and liquidity of our
investments;
●
stock price
volatility; and
●
expectations for
future capital requirements.
The
forward-looking statements contained in this report reflect our
views and assumptions only as of the date this report is signed.
Except as required by law, we assume no responsibility for updating
any forward-looking statements.
We
qualify all of our forward-looking statements by these cautionary
statements. In addition, with respect to all of our forward-looking
statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
3
PART
I. FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
TG
Therapeutics, Inc.
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
Assets
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$29,156,521
|
$55,061,329
|
Short-term investment securities
|
31,445,616
|
22,166,512
|
Interest receivable
|
108,458
|
186,021
|
Prepaid research and development
|
10,121,215
|
9,151,142
|
Other current assets
|
500,564
|
308,327
|
Total current
assets
|
71,332,374
|
86,873,331
|
Restricted
cash
|
582,184
|
579,143
|
Long-term
investment securities
|
--
|
25,003,032
|
Leasehold
interest
|
2,517,771
|
--
|
Equipment,
net
|
327,674
|
47,122
|
Goodwill
|
799,391
|
799,391
|
Other
assets
|
127,700
|
171,182
|
|
$75,687,094
|
$113,473,201
|
|
|
|
Liabilities
and stockholders’ equity
|
|
|
Current
liabilities:
|
|
|
Accounts payable
and accrued expenses
|
$15,550,129
|
$9,346,068
|
Accrued
compensation
|
1,061,626
|
818,472
|
Current portion of
deferred revenue
|
152,381
|
152,381
|
Notes
payable
|
117,126
|
211,549
|
Total current
liabilities
|
16,881,262
|
10,528,470
|
Deferred
rent
|
793,968
|
--
|
Deferred revenue,
net of current portion
|
1,257,143
|
1,371,429
|
Total
liabilities
|
18,932,373
|
11,899,899
|
Commitments and
contingencies
|
|
|
Stockholders’
equity:
|
|
|
Preferred stock,
$0.001 par value per share (10,000,000 shares authorized, none
issued and outstanding as of September 30, 2016 and December 31,
2015)
|
--
|
--
|
Common stock,
$0.001 par value per share (150,000,000 shares authorized,
54,765,890 and 54,095,110 shares issued, 54,724,581 and 54,053,801
shares outstanding at September 30, 2016 and December 31, 2015,
respectively)
|
54,766
|
54,095
|
Contingently
issuable shares
|
6
|
6
|
Additional paid-in
capital
|
269,646,963
|
259,887,464
|
Treasury stock, at
cost, 41,309 shares at September 30, 2016 and December 31,
2015
|
(234,337)
|
(234,337)
|
Accumulated
deficit
|
(212,712,677)
|
(158,133,926)
|
Total
stockholders’ equity
|
56,754,721
|
101,573,302
|
Total liabilities and
stockholders’ equity
|
$75,687,094
|
$113,473,201
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
4
TG
Therapeutics, Inc.
Condensed
Consolidated Statements of Operations
(Unaudited)
|
Three months ended September 30,
|
Nine months ended September 30,
|
|
|
|
|
|
|
|
|
|
|
License
revenue
|
$38,096
|
$38,096
|
$114,286
|
$114,286
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
Research and
development:
|
|
|
|
|
Noncash compensation
|
919,648
|
35,756
|
1,873,730
|
2,733,110
|
Other research and development
|
20,878,108
|
11,538,246
|
45,075,097
|
29,719,891
|
Total research and
development
|
21,797,756
|
11,574,002
|
46,948,827
|
32,453,001
|
|
|
|
|
|
General and
administrative:
|
|
|
|
|
Noncash compensation
|
1,914,390
|
1,204,278
|
4,307,670
|
10,106,938
|
Other general and administrative
|
1,251,421
|
1,085,400
|
3,798,859
|
3,094,362
|
Total general and
administrative
|
3,165,811
|
2,289,678
|
8,106,529
|
13,201,300
|
|
|
|
|
|
Total costs and
expenses
|
24,963,567
|
13,863,680
|
55,055,356
|
45,654,301
|
|
|
|
|
|
Operating
loss
|
(24,925,471)
|
(13,825,584)
|
(54,941,070)
|
(45,540,015)
|
|
|
|
|
|
Other (income)
expense:
|
|
|
|
|
Interest income
|
(87,965)
|
(55,977)
|
(265,456)
|
(109,660)
|
Other
income
|
(33,042)
|
--
|
(33,042)
|
--
|
Interest expense
|
211,538
|
246,527
|
674,699
|
730,710
|
Change in fair value of notes payable
|
(184,975)
|
(360,218)
|
(738,520)
|
(824,231)
|
Total other
income
|
(94,444)
|
(169,668)
|
(362,319)
|
(203,181)
|
|
|
|
|
|
Net
loss
|
$(24,831,027)
|
$(13,655,916)
|
$(54,578,751)
|
$(45,336,834)
|
|
|
|
|
|
Basic and diluted
net loss per common share
|
$(0.50)
|
$(0.28)
|
$(1.11)
|
$(1.01)
|
|
|
|
|
|
Weighted average
shares used in computing basic and diluted net loss per common
share
|
49,203,277
|
47,946,309
|
48,961,582
|
44,810,352
|
|
|
|
|
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
5
TG
Therapeutics, Inc.
Condensed
Consolidated Statement of Stockholders’ Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Contingently
issuable shares
|
Additional
paid-in capital
|
|
|
|
|
Balance at January 1,
2016
|
54,095,110
|
$54,095
|
$6
|
$259,887,464
|
41,309
|
$(234,337)
|
$(158,133,926)
|
$101,573,302
|
Issuance of common stock in
connection with exercise of warrants
|
44,541
|
45
|
|
100,851
|
|
|
|
100,896
|
Issuance of common stock in
connection with conversion of notes payable
|
3,201
|
3
|
|
30,598
|
|
|
|
30,601
|
Issuance of restricted
stock
|
261,000
|
261
|
|
(261)
|
|
|
|
--
|
Forfeiture of restricted
stock
|
(34,773)
|
(35)
|
|
35
|
|
|
|
--
|
Issuance of common stock in
At-the-Market offering (net of offering costs of
$122,497)
|
396,811
|
397
|
|
3,446,876
|
|
|
|
3,447,273
|
Compensation in respect of
restricted stock granted to employees, directors and
consultants
|
|
|
|
6,181,400
|
|
|
|
6,181,400
|
Net loss
|
|
|
|
|
|
|
(54,578,751)
|
(54,578,751)
|
Balance at September 30,
2016
|
54,765,890
|
$54,766
|
$6
|
$269,646,963
|
41,309
|
$(234,337)
|
$(212,712,677)
|
$56,754,721
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
6
TG
Therapeutics, Inc.
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
Nine months ended September 30,
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
Net
loss
|
$(54,578,751)
|
$(45,336,834)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
Gain on sale of
long-term securities
|
(33,042)
|
--
|
Noncash stock
compensation expense
|
6,181,400
|
12,840,048
|
Depreciation
|
42,464
|
10,326
|
Amortization of
premium on investment securities
|
367,673
|
377,770
|
Change in fair
value of notes payable and accrued interest
|
(63,822)
|
(93,522)
|
Changes in assets
and liabilities:
|
|
|
Increase in
restricted cash
|
(3,041)
|
(3,114)
|
Increase in prepaid
research and development and other current assets
|
(1,162,310)
|
(4,055,116)
|
Increase in
leasehold interest
|
(2,517,771)
|
--
|
Decrease (increase)
in accrued interest receivable
|
77,563
|
(73,011)
|
Increase in other
assets
|
(3,523)
|
--
|
Increase in
accounts payable and accrued expenses
|
6,447,215
|
4,658,128
|
Increase in
deferred rent
|
793,968
|
--
|
Decrease in
deferred revenue
|
(114,286)
|
(114,286)
|
Net cash used in
operating activities
|
(44,566,263)
|
(31,789,611)
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
Purchases of
equipment
|
(323,015)
|
(59,194)
|
Investment in
held-to-maturity securities
|
(15,199,922)
|
(40,955,137)
|
Proceeds from
maturity of short-term securities
|
18,000,000
|
13,850,000
|
Proceeds from the
sale of long-term securities
|
12,589,219
|
--
|
Net cash provided
by (used in) investing activities
|
15,066,282
|
(27,164,331)
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
Proceeds from the
exercise of warrants
|
100,896
|
1,009,985
|
Proceeds from sale
of common stock, net
|
3,504,261
|
67,760,517
|
Financing
costs
|
(9,984)
|
(68,404)
|
Net cash provided
by financing activities
|
3,595,173
|
68,702,098
|
|
|
|
NET (DECREASE)
INCREASE IN CASH AND CASH EQUIVALENTS
|
(25,904,808)
|
9,748,156
|
|
|
|
CASH AND CASH
EQUIVALENTS AT BEGINNING OF PERIOD
|
55,061,329
|
55,713,784
|
|
|
|
CASH AND CASH
EQUIVALENTS AT END OF PERIOD
|
$29,156,521
|
$65,461,940
|
|
|
|
NONCASH
TRANSACTIONS
|
|
|
Reclassification of
deferred financing costs to additional paid-in
capital
|
$(56,988)
|
$(63,788)
|
Conversion of
convertible notes payable to common stock
|
$30,601
|
$--
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
7
TG
Therapeutics, Inc.
Notes
to Condensed Consolidated Financial Statements
(unaudited)
Unless the context requires
otherwise, references in this report to “TG,” the
“Company,” “we,” “us” and
“our” refer to TG Therapeutics, Inc. and our
subsidiaries.
NOTE
1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Description of Business
We are
a biopharmaceutical company focused on the acquisition, development
and commercialization of novel treatments for B-cell malignancies
and autoimmune diseases. Currently, the Company is 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. The Company also has 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.
The
accompanying unaudited condensed consolidated financial statements
were prepared in accordance with U.S. generally accepted accounting
principles, or GAAP, for interim financial information and with the
instructions to Quarterly Report on Form 10-Q and Article 10 of
Regulation S-X of the Exchange Act. Accordingly, they may not
include all of the information and footnotes required by GAAP for
complete financial statements. All adjustments that are, in the
opinion of management, of a normal recurring nature and are
necessary for a fair presentation of the condensed consolidated
financial statements have been included. Nevertheless, these
condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements
contained in our Annual Report on Form 10-K for the year ended
December 31, 2015. The accompanying condensed December 31, 2015
balance sheet has been derived from these statements. The results
of operations for the three and nine months ended September 30,
2016 are not necessarily indicative of the results that may be
expected for the entire fiscal year or any other interim
period.
Liquidity and Capital Resources
We have
incurred operating losses since our inception, expect to continue
to incur operating losses for the foreseeable future, and may never
attain profitable operations. As of September 30, 2016, we have an
accumulated deficit of approximately $212.7 million.
Our
major sources of cash have been proceeds from the private placement
and public offering of equity securities. We have not yet
commercialized any of our drug candidates and cannot be sure if we
will ever be able to do so. Even if we commercialize one or more of
our drug candidates, we may not become profitable. Our ability to
achieve profitability depends on many factors, including our
ability to obtain regulatory approval for our drug candidates;
successfully completing any post-approval regulatory obligations;
and successfully commercializing our drug candidates alone or with
one or more partners. We may continue to incur substantial
operating losses even if we begin to generate revenues from our
drug candidates.
As of
September 30, 2016, we had approximately $60.7 million in cash,
cash equivalents, investment securities, and interest receivable,
which we believe will be sufficient to fund the company’s
planned operations into the first half of 2018. The actual
amount of cash that we will need to operate is subject to many
factors, including, but not limited to, the timing, design and
conduct of clinical trials for our drug candidates. We are
dependent upon significant future financing to provide the cash
necessary to execute our current strategic plan, including the
commercialization of any of our drug candidates.
Our
common stock is listed on the Nasdaq
Capital Market and trades under the symbol
“TGTX.”
8
Recently Issued Accounting Standards
In August 2016, the Financial Accounting Standards Board ("FASB")
issued Accounting Standards Update (“ASU”) No. 2016-15,
“Classification of Certain Cash Receipts and Cash
Payments” (“ASU 2016-15”). ASU 2016-15 amends the
guidance in Accounting Standards Codification (“ASC” or
“Codification”) 230 on the classification of certain
cash receipts and payments in the statement of cash flows. The
primary purpose of ASU 2016-15 is to reduce the diversity in
practice that has resulted from the lack of consistent principles
on this topic. The amendments in ASU 2016-15 add or clarify
guidance on eight cash flow issues:
●
Debt prepayment or
debt extinguishment costs.
●
Settlement
of zero-coupon debt instruments or other debt instruments with
coupon interest rates that are insignificant in relation to the
effective interest rate of the borrowing.
●
Contingent
consideration payments made after a business
combination.
●
Proceeds
from the settlement of insurance claims.
●
Proceeds
from the settlement of corporate-owned life insurance policies,
including bank-owned life insurance policies.
●
Distributions
received from equity method investees.
●
Beneficial
interests in securitization transactions.
●
Separately
identifiable cash flows and application of the predominance
principle.
ASU 2016-15 is effective for annual and interim
periods beginning after December 15, 2017, and early adoption is
permitted for all entities. Entities must apply the guidance
retrospectively to all periods presented but may apply it
prospectively from the earliest date practicable if retrospective
application would be impracticable. The provisions of this
standard are not expected to significantly impact the
Company.
In May 2016, the FASB issued ASU No. 2016-11,
“Rescission of SEC Guidance Because of Accounting Standards
Update 2014-09 and 2014-16 Pursuant to Staff Announcements at the
March 3, 2016 EITF Meeting” (“ASU 2016-11”). ASU
2016-11 rescinds certain SEC guidance from the FASB Codification
in response to announcements made by
the SEC staff at the Emerging Issues Task Force’s March 3,
2016 meeting. Specifically, ASU 2016-11 supersedes SEC observer
comments on the following topics:
●
Upon
the adoption of ASU 2014-09:
o
Revenue and expense
recognition for freight services in process (ASC
605-20-S99-2)
o
Accounting for
shipping and handling fees and costs (ASC
605-45-S99-1)
o
Accounting for
consideration given by a vendor to a customer (ASC
605-50-S99-1)
o
Accounting for
gas-balancing arrangements (ASC 932-10-S99-5).
●
Upon the adoption
of ASU 2014-16:
o
Determining the
nature of a host contract related to a hybrid financial instrument
issued in the form of a share under ASC 815 (ASC
815-10-S99-3).
ASU
2016-11 is effective upon the adoption of ASU 2014-09 and ASU
2014-16. The adoption of ASU 2016-11
is not expected to have a material impact on the Company’s
condensed consolidated financial statements.
In
March 2016, the FASB issued ASU No. 2016-09, “Simplifying the
Accounting for Share-Based Payments” (“ASU
2016-09”). ASU 2016-09 simplifies several aspects of the
accounting for employee share-based payment transactions for both
public and nonpublic entities, including the accounting for income
taxes, forfeitures, and statutory tax withholding requirements, as
well as classification in the statement of cash flows. ASU 2016-09
is effective for annual reporting periods beginning after December
15, 2016, including interim periods within those annual reporting
periods. The provisions of this standard are not expected to
significantly impact the Company.
Other
pronouncements issued by the FASB or other authoritative accounting
standards group with future effective dates are either not
applicable or not significant to our consolidated financial
statements.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and judgments that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the applicable reporting period. Actual results could differ from
those estimates. Such differences could be material to the
consolidated financial statements.
9
Cash and Cash Equivalents
We
treat liquid investments with original maturities of three months
or less when purchased as cash and cash equivalents.
Restricted Cash
We
record cash pledged or held in trust as restricted cash. As of
September 30, 2016 and December 31, 2015, we have approximately
$0.6 million of restricted cash pledged to secure a line of credit as a security
deposit for an Office Agreement
(see Note 8).
Investment Securities
Investment
securities at September 30, 2016 and December 31, 2015 consist of
short-term and long-term government securities. We classify these
securities as held-to-maturity. Held-to-maturity securities are
those securities in which we have the ability and intent to hold
the security until maturity. Held-to-maturity securities are
recorded at amortized cost, adjusted for the amortization or
accretion of premiums or discounts. Premiums and discounts are
amortized or accreted over the life of the related held-to-maturity
security as an adjustment to yield using the effective interest
method.
A
decline in the market value of any investment security below cost,
that is deemed to be other than temporary, results in a reduction
in the carrying amount to fair value. The impairment is charged to
operations and a new cost basis for the security is established.
Other-than-temporary impairment charges would be included in
interest and other (income) expense, net. Dividend and interest
income are recognized when earned.
Credit Risk
Financial
instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash and cash equivalents,
short-term investments and long-term investments. The Company
maintains its cash and cash equivalents, short-term investments and
long-term investments with high-credit quality financial
institutions. At times, such amounts may exceed federally-insured
limits.
Revenue Recognition
We
recognize license revenue in accordance with the revenue
recognition guidance of the FASB Codification. We analyze each
element of our licensing agreement to determine the appropriate
revenue recognition. The terms of the license agreement may include
payments to us of non-refundable up-front license fees, milestone
payments if specified objectives are achieved, and/or royalties on
product sales. We recognize revenue from upfront payments over the
period of significant involvement under the related agreements
unless the fee is in exchange for products delivered or services
rendered that represent the culmination of a separate earnings
process and no further performance obligation exists under the
contract. We recognize milestone payments as revenue upon the
achievement of specified milestones only if (1) the milestone
payment is non-refundable, (2) substantive effort is involved in
achieving the milestone, (3) the amount of the milestone is
reasonable in relation to the effort expended or the risk
associated with achievement of the milestone, and (4) the milestone
is at risk for both parties. If any of these conditions are not
met, we defer the milestone payment and recognize it as revenue
over the estimated period of performance under the
contract.
Research and Development Costs
Generally,
research and development costs are expensed as incurred.
Non-refundable advance payments for goods or services that will be
used or rendered for future research and development activities are
deferred and amortized over the period that the goods are delivered
or the related services are performed, subject to an assessment of
recoverability. We make estimates of costs incurred in relation to
external clinical research organizations, or CROs, and clinical
site costs. We analyze the progress of clinical trials, including
levels of patient enrollment, invoices received and contracted
costs when evaluating the adequacy of the amount expensed and the
related prepaid asset and accrued liability. Significant judgments
and estimates must be made and used in determining the accrued
liability balance and expense in any accounting period. We review
and accrue CRO expenses and clinical trial study expenses based on
work performed and rely upon estimates of those costs applicable to
the stage of completion of a study. Accrued CRO costs are subject
to revisions as such trials progress to completion. Revisions are
charged to expense in the period in which the facts that give rise
to the revision become known. With respect to clinical site costs,
the financial terms of these agreements are subject to negotiation
and vary from contract to contract. Payments under these contracts
may be uneven, and depend on factors such as the achievement of
certain events, the successful recruitment of patients, the
completion of portions of the clinical trial or similar conditions.
The objective of our policy is to match the recording of expenses
in our financial statements to the actual services received and
efforts expended. As such, expense accruals related to clinical
site costs are recognized based on our estimate of the degree of
completion of the event or events specified in the specific
clinical study or trial contract.
Prepaid research and development in our
consolidated balance sheets includes, among other things, certain
costs related to development and manufacturing services. These
development and manufacturing agreements often require payments in
advance of services performed or goods received. Accordingly, as of
September 30, 2016 and December 31, 2015, we recorded approximately
$10.1 million and $9.2 million of prepaid development and
manufacturing services, respectively, in prepaid research and
development related to such advance agreements.
10
Income Taxes
Income
taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, operating losses and
tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
operations in the period that includes the enactment date. If the
likelihood of realizing the deferred tax assets or liability is
less than “more likely than not,” a valuation allowance
is then created.
Stock-Based
Compensation
We
recognize all share-based payments to employees and non-employee
directors (as compensation for service) as noncash compensation
expense in the condensed consolidated financial statements based on
the fair values of such payments. Stock-based compensation expense
recognized each period is based on the value of the portion of
share-based payment awards that is ultimately expected to vest
during the period. Forfeitures are estimated at the time of grant
and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.
For
share-based payments to consultants and other third-parties
(including related parties), noncash compensation expense is
determined at the “measurement date.” The expense is
recognized over the vesting period of the award. Until the
measurement date is reached, the total amount of compensation
expense remains uncertain. We record compensation expense based on
the fair value of the award at the reporting date. The awards to
consultants and other third-parties (including related parties) are
then revalued, or the total compensation is recalculated based on
the then current fair value, at each subsequent reporting
date.
In
addition, because some of the options, restricted stock and
warrants issued to employees, consultants and other third-parties
vest upon achievement of certain milestones, the total expense is
uncertain. Compensation expense for such awards that vest upon the
achievement of milestones is recognized when the achievement of
such milestones becomes probable.
Basic and Diluted Net Loss Per Common Share
Basic
net loss per share of our common stock is calculated by dividing
net loss applicable to the common stock by the weighted average
number of our common stock outstanding for the period. Diluted net
loss per share of common stock is the same as basic net loss per
share of common stock since potentially dilutive securities from
stock options, stock warrants and convertible preferred stock would
have an antidilutive effect either because we incurred a net loss
during the period presented or because such potentially dilutive
securities were out of the money and the Company realized net
income during the period presented. The amounts of potentially
dilutive securities excluded from the calculation were 6,664,591
and 5,634,005 for the three and nine months ended September 30,
2016 and 2015, respectively. The
following outstanding shares of potentially dilutive securities
were excluded from the computation of net loss per share
attributable to common stockholders for the periods presented
because including them would have been
antidilutive:
|
Three and Nine Months Ended September 30,
|
|
|
|
Unvested restricted
stock
|
5,507,250
|
4,404,805
|
Warrants
|
1,142,208
|
1,211,177
|
Shares issuable
upon note conversion
|
15,133
|
18,023
|
|
|
|
Total
|
6,664,591
|
5,634,005
|
Long-Lived Assets and Goodwill
Long-lived assets
are reviewed for potential impairment when circumstances indicate
that the carrying value of long-lived tangible and intangible
assets with finite lives may not be recoverable. Management’s
policy in determining whether an impairment indicator exists, a
triggering event, comprises measurable operating performance
criteria as well as qualitative measures. If an analysis is
necessitated by the occurrence of a triggering event, we make
certain assumptions in determining the impairment amount. If the
carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized.
Goodwill is
reviewed for impairment annually, or earlier when events arise that
could indicate that an impairment exists. We test for goodwill
impairment using a two-step process. The first step compares the
fair value of the reporting unit with the unit's carrying value,
including goodwill. When the carrying value of the reporting unit
is greater than fair value, the unit’s goodwill may be
impaired, and the second step must be completed to measure the
amount of the goodwill impairment charge, if any. In the second
step, the implied fair value of the reporting unit’s goodwill
is compared with the carrying amount of the unit’s goodwill.
If the carrying amount is greater than the implied fair value, the
carrying value of the goodwill must be written down to its implied
fair value. We will continue to perform impairment tests annually,
at December 31, and whenever events or changes in circumstances
suggest that the carrying value of an asset may not be
recoverable.
11
NOTE
2 – CASH AND CASH EQUIVALENTS
The
following tables summarize our cash and cash equivalents at
September 30, 2016 and December 31, 2015:
|
|
|
|
|
|
Money market
funds
|
$24,316,496
|
$8,265,583
|
Checking and bank
deposits
|
4,840,025
|
46,795,746
|
Total
|
$29,156,521
|
$55,061,329
|
NOTE
3 – INVESTMENT SECURITIES
Our
investments as of September 30, 2016 and December 31, 2015 are
classified as held-to-maturity. Held-to-maturity investments are
recorded at amortized cost. During the three months ended September
30, 2016, we liquidated our long-term investment securities with a
net carrying amount of approximately $12.6 million, realizing a
gain of approximately $33,000 on the sale. The decision to sell our
long-term securities was made due to market rate conditions on
long-term securities coupled with the recognized gain we were able
to yield on the sale of the securities.
The
following tables summarize our investment securities at September
30, 2016 and December 31, 2015:
|
|
|
Amortized cost, as adjusted
|
Gross unrealized holding gains
|
Gross unrealized holding losses
|
|
Short-term
investments:
|
|
|
|
|
Obligations of
domestic governmental agencies (maturing between October 2016 and
September 2017) (held-to-maturity)
|
$31,445,616
|
$19,363
|
$--
|
$31,464,979
|
|
|
|
|
|
Total short-term
investment securities
|
$31,445,616
|
$19,363
|
$--
|
$31,464,979
|
|
|
|
Amortized cost, as adjusted
|
Gross unrealized holding gains
|
Gross unrealized holding losses
|
|
Short-term
investments:
|
|
|
|
|
Obligations of
domestic governmental agencies (maturing between January 2016 and
December 2016) (held-to-maturity)
|
$22,166,512
|
$--
|
$22,822
|
$22,143,690
|
|
|
|
|
|
Long-term
investments:
|
|
|
|
|
Obligations of
domestic governmental agencies (maturing between January 2017 and
December 2017) (held-to-maturity)
|
25,003,032
|
--
|
85,846
|
24,917,186
|
Total short-term
and long-term investment securities
|
$47,169,544
|
$--
|
$108,668
|
$47,060,876
|
NOTE
4 – FAIR VALUE MEASUREMENTS
We
measure certain financial assets and liabilities at fair value on a
recurring basis in the condensed consolidated financial statements.
The fair value hierarchy ranks the quality and reliability of
inputs, or assumptions, used in the determination of fair value and
requires financial assets and liabilities carried at fair value to
be classified and disclosed in one of the following three
categories:
●
Level 1 –
quoted prices in active markets for identical assets and
liabilities;
●
Level 2 –
inputs other than Level 1 quoted prices that are directly or
indirectly observable; and
●
Level 3 –
unobservable inputs that are not corroborated by market
data.
12
As of
September 30, 2016 and December 31, 2015, the fair values of cash
and cash equivalents, restricted cash, and notes and interest
payable, approximate their carrying value.
At the time of our merger (we were then known as Manhattan
Pharmaceuticals, Inc.) with Ariston Pharmaceuticals, Inc.
(“Ariston”) in March 2010, Ariston issued $15.5 million
of five-year 5% notes payable (the “5% Notes”) in
satisfaction of several note payable issuances. The 5% Notes and
accrued and unpaid interest thereon are convertible at the option
of the holder into common stock at the conversion price of $1,125
per share. Ariston agreed to make quarterly payments on the 5%
Notes equal to 50% of the net product cash flow received from the
exploitation or commercialization of Ariston’s product
candidates, AST-726 and AST-915. We have no obligations under the
5% Notes aside from (a) 50% of the net product cash flows from
Ariston’s product candidates, if any, payable to noteholders;
and (b) the conversion feature, discussed above.
The cumulative
liability to the Ariston subsidiary including accrued and unpaid
interest of the 5% Notes was approximately $17.0 million at
September 30, 2016 and $19.9 million at December 31, 2015.
No payments have been made on the 5% Notes as of September 30,
2016.
In
December 2011, we elected the fair value option for valuing the 5%
Notes. The fair value option was elected in order to reflect in our
financial statements the assumptions that market participants use
in evaluating these financial instruments.
As of
December 31, 2013, as a result of expiring intellectual property
rights and other factors, it was determined that net product cash
flows from AST-726 were unlikely. As we have no other obligations
under the 5% Notes aside from the net product cash flows and the
conversion feature, the conversion feature was used to estimate the
5% Notes’ fair value as of September 30, 2016 and December
31, 2015. The assumptions, assessments and projections of future
revenues are subject to uncertainties, difficult to predict, and
require significant judgment. The use of different assumptions,
applying different judgment to inherently subjective matters and
changes in future market conditions could result in significantly
different estimates of fair value and the differences could be
material to our condensed consolidated financial
statements.
The
following tables provide the fair value measurements of applicable
financial liabilities as of September 30, 2016 and December 31,
2015:
|
Financial liabilities at fair value as of September 30,
2016
|
|
|
|
|
|
|
|
|
|
|
5%
Notes
|
$--
|
$--
|
$117,126
|
$117,126
|
Total
|
$--
|
$--
|
$117,126
|
$117,126
|
|
Financial liabilities at fair value as of December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
5%
Notes
|
$--
|
$--
|
$211,549
|
$211,549
|
Total
|
$--
|
$--
|
$211,549
|
$211,549
|
The
Level 3 amounts above represent the fair value of the 5% Notes and
related accrued interest.
13
The
following table summarizes the changes in Level 3 instruments
during the nine months ended September 30, 2016:
Fair value at
December 31, 2015
|
$211,549
|
Interest accrued on
face value of 5% Notes
|
674,699
|
Conversion of 5%
notes
|
(30,601)
|
Change in fair
value of Level 3 liabilities
|
(738,521)
|
Fair value at
September 30, 2016
|
$117,126
|
|
|
The
change in the fair value of the Level 3 liabilities is reported in
other (income) expense in the accompanying condensed consolidated
statements of operations.
NOTE
5 - STOCKHOLDERS' EQUITY
Preferred Stock
Our
amended and restated certificate of incorporation authorizes the
issuance of up to 10,000,000 shares of preferred stock, $0.001 par
value, with rights senior to those of our common stock,
issuable in
one or more series. Upon issuance, we can determine the rights,
preferences, privileges and restrictions thereof. These rights,
preferences and privileges could include dividend rights,
conversion rights, voting rights, terms of redemption, liquidation
preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, any or
all of which may be greater than the rights of common
stock.
Common Stock
Our
amended and restated certificate of incorporation authorizes the
issuance of up to 150,000,000 shares of $0.001 par value common
stock.
In December 2014, we filed a shelf registration statement on Form
S-3 (the “2015 S-3”), which was declared effective in
January 2015. Under the 2015 S-3, the Company may sell up to a
total of $250 million of its securities. In connection with the
2015 S-3, we amended our 2013 At-the-Market Issuance Sales
Agreement with MLV & Co. LLC (the “2015 ATM”) such
that we may issue and sell additional shares of our common stock,
having an aggregate offering price of up to $175.0 million, from
time to time through MLV & Co. LLC (“MLV”) and FBR
Capital Markets & Co. (“FBR”, each of MLV and FBR
individually an “Agent” and collectively the
“Agents”), acting as the sales agents. Under the 2015
ATM we pay the Agents a commission rate of up to 3.0% of the gross
proceeds from the sale of any shares of common stock sold through
the Agents.
In April and May of 2016, we sold a total of 396,811 shares of
common stock under the 2015 ATM for aggregate total gross proceeds
of approximately $3.6 million at an average selling price of $9.00
per share, resulting in net proceeds of approximately $3.5 million
after deducting commissions and other transaction
costs.
The 2015 S-3 is currently our only active shelf registration
statement. After deducting shares already sold, including under the
2015 ATM, there is approximately $178 million of common stock that
remains available for sale under the 2015 S-3. We may offer the
securities under the 2015 S-3 from time to time in response to
market conditions or other circumstances if we believe such a plan
of financing is in the best interests of our stockholders. We
believe that the 2015 S-3 provides us with the flexibility to raise
additional capital to finance our operations as
needed.
14
Equity Incentive Plans
The TG
Therapeutics, Inc. Amended and Restated 2012 Incentive Plan
(“2012 Incentive Plan”) was approved by stockholders in
June 2015. As of September 30, 2016, no options were outstanding
and up to an additional 3,938,403 shares may be issued under the
2012 Incentive Plan.
Restricted Stock
Certain employees, directors and consultants have
been awarded restricted stock. The restricted stock vesting
consists of milestone and time-based vesting. The following
table summarizes restricted share activity for the nine months
ended September 30, 2016:
|
|
Weighted Average Grant Date Fair Value
|
Outstanding at
December 31, 2015
|
7,359,915
|
$7.83
|
Granted
|
261,000
|
7.13
|
Vested
|
(578,892)
|
7.13
|
Forfeited
|
(34,773)
|
11.83
|
Outstanding at
September 30, 2016
|
7,007,250
|
$7.82
|
Total
expense associated with restricted stock grants was approximately
$2.8 million and $1.2 million during the three months ended
September 30, 2016 and 2015, respectively, and $6.2 million and
$12.8 million during the nine months ended September 30, 2016 and
2015, respectively. As of September 30, 2016, there was
approximately $15.8 million of total unrecognized compensation cost
related to unvested time-based restricted stock, which is expected
to be recognized over a weighted average period of 1.64 years. This
amount does not include, as of September 30, 2016, 411,172 shares
of restricted stock outstanding which are milestone-based and vest
upon certain corporate milestones; and 2,306,958 shares of
restricted stock outstanding issued to non-employees, the expense
for which is determined each reporting period at the measurement
date. The expense is recognized over the vesting period of the
award. Until the measurement date is reached for milestone awards,
the total amount of compensation expense remains uncertain. We
record compensation expense based on the fair value of the award at
the reporting date.
Warrants
The
following table summarizes warrant activity for the nine months
ended September 30, 2016:
|
|
Weighted average exercise price
|
Aggregate Intrinsic Value
|
Outstanding at
December 31, 2015
|
1,186,749
|
$2.37
|
$11,341,452
|
Issued
|
--
|
--
|
|
Exercised
|
(44,541)
|
2.26
|
|
Expired
|
--
|
--
|
|
Outstanding at
September 30, 2016
|
1,142,208
|
$2.38
|
$6,125,109
|
Stock-Based Compensation
We did
not grant any stock options during the nine months ended September
30, 2016 and 2015.
The
following table summarizes stock-based compensation expense
information about restricted stock and stock options for the three
and nine months ended September 30, 2016 and 2015:
|
Three
months ended September 30,
|
Nine
months ended September 30,
|
|
|
|
|
|
Stock-based
compensation expense associated with restricted stock
|
$2,834,038
|
$1,240,034
|
$6,181,400
|
$12,840,048
|
|
$2,834,038
|
$1,240,034
|
$6,181,400
|
$12,840,048
|
15
NOTE
6 – NOTES PAYABLE
The
following is a summary of notes payable:
|
|
|
|
|
|
|
|
|
|
Convertible 5%
Notes Payable
|
$117,126
|
$-
|
$117,126
|
$211,549
|
$-
|
$211,549
|
Total
|
$117,126
|
$-
|
$117,126
|
$211,549
|
$-
|
$211,549
|
Convertible 5% Notes Payable
The 5%
Notes and accrued and unpaid interest thereon are convertible at
the option of the holder into common stock at the conversion price
of $1,125 per share. We have no obligation
under the 5% Notes aside from (a) 50% of the net product cash flows
from Ariston’s product candidates, if any, payable to
noteholders; and (b) the conversion feature, discussed
above. Interest accrues monthly, is added to principal on an
annual basis, every March 8, and is payable at maturity, which was
March 8, 2015 (see Note 4 for further details).
The cumulative
liability including accrued and unpaid interest of these notes was
approximately $17.0 million at September 30, 2016 and $19.9 million
at December 31, 2015. No payments have been made on the 5%
Notes as of September 30, 2016.
In
December 2011, we elected the fair value option for valuing the 5%
Notes. The fair value option was elected in order to reflect in our
financial statements the assumptions that market participants use
in evaluating these financial instruments (see Note 4 for further
details).
NOTE
7 – LICENSE AGREEMENTS
BET
In May
2016, as part of a broader agreement with Jubilant Biosys
(“Jubilant”), an India-based biotechnology company, we
entered into a sub-license agreement (“JBET Agreement”)
with Checkpoint Therapeutics, Inc. (“Checkpoint”), (see
Note 8), for the development and commercialization of
Jubilant’s novel BET inhibitor program in the field of
hematological malignancies.
Under
the terms of the agreement, we paid Checkpoint an up-front
licensing fee of $1.0 million and will make additional payments
contingent on certain preclinical, clinical, and regulatory
milestones, including commercial milestones totaling up to
approximately $177 million and a single-digit royalty on net sales.
TG will also provide funding to support certain targeted research
efforts at Jubilant.
16
TG-1101
In
November 2012, we entered into an exclusive (within the territory)
sublicense agreement with Ildong relating to the development and
commercialization of TG-1101 in South Korea and Southeast Asia.
Under the terms of the sublicense agreement, Ildong has been
granted a royalty bearing, exclusive right, including the right to
grant sublicenses, to develop and commercialize TG-1101 in South
Korea, Taiwan, Singapore, Indonesia, Malaysia, Thailand,
Philippines, Vietnam, and Myanmar.
An
upfront payment of $2.0 million which was received in December 2012
(net of
$0.3 million of income tax withholdings), is recognized as
license revenue on a straight-line basis over the life of the
agreement, which is through the expiration of the last licensed
patent right or 15 years after the first commercial sale of a
product in such country, unless the agreement is earlier
terminated, and represents the estimated period over which we will
have certain ongoing responsibilities under the sublicense
agreement. We recorded license revenue of approximately $38,000 for
each of the three months ended September 30, 2016 and 2015, and
approximately $0.1 million for each of the nine months ended
September 30, 2016 and 2015 and, at September 30, 2016 and December
31, 2015, have deferred revenue of approximately $1.4 million and
$1.5 million, respectively, associated with this $2.0 million
payment (approximately $0.2 million of which has been classified in
current liabilities at September 30, 2016 and December 31,
2015).
We may
receive up to an additional $5.0 million in payments upon the
achievement of pre-specified milestones. In addition, upon
commercialization, Ildong will make royalty payments to us on net
sales of TG-1101 in the sublicense territory.
NOTE
8 – RELATED PARTY TRANSACTIONS
LFB Biotechnologies
On January 30, 2012, we entered into an exclusive
license agreement with LFB Biotechnologies, GTC Biotherapeutics and
LFB/GTC LLC, all wholly-owned subsidiaries of LFB Group, relating
to the development of ublituximab (the “LFB License
Agreement”). In connection with the LFB License
Agreement, LFB Group was issued 5,000,000 shares of common stock,
and a warrant to purchase 2,500,000 shares of common stock at a
purchase price of $0.001 per share. In addition, on November 9,
2012, we nominated Dr. Yann Echelard to our Board of Directors as
LFB Group’s nominee. LFB Group maintains the right to
nominate a board member until such time as LFB Group owns less than
10% of the outstanding common stock.
Under
the terms of the LFB License Agreement, we utilize LFB Group for
certain development and manufacturing services. We incurred
expenses of $1.9 million and $2.5 million during the three months
ended September 30, 2016 and 2015, respectively, and $4.3 million
and $4.9 million during the nine months ended September 30, 2016
and 2015, respectively, which have been included in other research
and development expenses in the accompanying condensed consolidated
statements of operations. As of September 30, 2016 and December 31,
2015, we had approximately $0.3 million and $2.1 million,
respectively, recorded in accounts payable related to the LFB
License Agreement. In conjunction with the development and
manufacturing services discussed above, certain agreements between
us and LFB Group require payments in advance of services performed
or goods delivered. Accordingly, as of September 30, 2016 and
December 31, 2015, we recorded approximately $3.1 million and $3.0
million, respectively, in prepaid research and development for such
advance payments.
Other Parties
In
March 2014, we entered into a shared services agreement (the
“Opus Shared Services Agreement”) with Opus Point
Partners Management, LLC (“Opus”) in which the parties
agreed to share the costs of a rented facility and certain other
services. Our Executive Chairman and Interim Chief Executive
Officer is a Managing Member of Opus. During the three and nine
months ended September 30, 2016, we incurred expenses of
approximately $0 and $0.1 million, respectively, principally for
rent, related to this agreement. The Opus Shared Services Agreement
is no longer in effect as we began occupying new space in April
2016.
In October 2014, we
entered into an agreement (the “Office Agreement”) with
Fortress Biotech, Inc. (“Fortress”), to occupy
approximately 45% of the 24,000 square feet of New York City office
space leased by Fortress, which is now our corporate headquarters.
The Office Agreement requires us to pay our respective share of the
average annual rent and other costs of the 15-year lease. We
approximate an average annual rental obligation of $1.1 million
under the Office Agreement. We began to occupy this new space in
April 2016, with rental payments beginning in the third quarter of
2016. During the nine months ended September 30, 2016, we recorded
rent expense of approximately $1.0 million and at September
30, 2016, have deferred rent of approximately $0.8
million.
Mr. Weiss, our Executive Chairman and Interim CEO, is also
Executive Vice Chairman of Fortress.
17
During
the nine months ended September 30, 2016, we agreed to pay Fortress $2.7 million
for our portion of the build out costs, which have been
allocated to us at the 45% rate mentioned above. The allocated
build-out costs have been recorded in Leasehold Interest and will
be amortized over the 15-year term of the Office Agreement. After
an initial commitment period of the 45% rate for a period of three
(3) years, we and Fortress will determine actual office space
utilization annually and if our utilization differs from the amount
we have been billed, we will either receive credits or be assessed
incremental utilization charges. As of September 30, 2016, we had
approximately $0.4 million recorded in accounts payable
related mostly to the upfront leasehold interest. Also in connection with this lease, in
October 2014 we pledged $0.6 million to secure a line of credit as
a security deposit for the Office Agreement, which has been
recorded as restricted cash in the accompanying condensed
consolidated balance sheets.
In July 2015, we
entered into a Shared Services Agreement (the “Shared
Services Agreement”) with Fortress to share the cost of
certain services such as facilities use, personnel costs and other
overhead and administrative costs. This Shared Services Agreement
requires us to pay our respective share of services utilized. In
connection with the Shared Services Agreement, we incurred
expenses of approximately $0.5
million for shared services for the nine months ended September 30,
2016, primarily related to shared personnel.
In May
2016, as part of a broader agreement with Jubilant, an India-based
biotechnology company, we entered into the JBET Agreement with
Checkpoint, a subsidiary of Fortress, for the development and
commercialization of Jubilant’s novel BET inhibitor program
in the field of hematological malignancies. We paid Checkpoint an
up-front licensing fee of $1.0 million as part of the JBET
Agreement. As of September 30, 2016, we had approximately $0.3
million recorded in accounts payable, related to the JBET
Agreement. Mr. Weiss is also the Executive Chairman of
Checkpoint.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis contains forward-looking
statements about our plans and expectations of what may happen in
the future. Forward-looking statements are based on a number of
assumptions and estimates that are inherently subject to
significant risks and uncertainties, and our results could differ
materially from the results anticipated by our forward-looking
statements as a result of many known or unknown factors, including,
but not limited to, those factors discussed in “Risk
Factors.” See also the “Special Cautionary Notice
Regarding Forward-Looking Statements” set forth at the
beginning of this report.
You
should read the following discussion and analysis in conjunction
with the unaudited condensed consolidated financial statements, and
the related footnotes thereto, appearing elsewhere in this report,
and in conjunction with management’s discussion and analysis
and the audited consolidated financial statements included in our
Annual Report on Form 10-K for the year ended December 31,
2015.
OVERVIEW
We are
a biopharmaceutical company focused on the acquisition, development
and commercialization of novel treatments for B-cell malignancies
and autoimmune diseases. Currently, the Company is 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. The Company also has pre-clinical
programs to develop IRAK4 (interleukin-1 receptor-associated kinase
4) inhibitors, BET 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.
18
TG-1101 (ublituximab)
Overview
TG-1101
(ublituximab) is a chimeric, glycoengineered monoclonal antibody
that targets a unique epitope on the CD20 antigen found on the
surface of B-lymphocytes developed to aid in the depletion of
circulating B-cells. We hold exclusive worldwide rights to develop
and commercialize TG-1101 for all indications, except for the
territories of France and Belgium which have been retained by LFB
Biotechnologies, and South Korea and Southeast Asia which were
licensed by us to Ildong in November 2012.
Generally,
anti-CD20 antibodies are believed to exert their B-cell depleting
effects through three primary mechanisms: antibody dependent
cell-mediated cytotoxicity (“ADCC”), complement
dependent cytotoxicity (“CDC”), and direct or
programmed cell death (“DCD” or “PCD”).
TG-1101 has been specifically glycoengineered to enhance ADCC
activity, which should enhance its ability to deplete B-cells and
may improve its anti-cancer effects when compared to
Rituxan®, the leading
anti-CD20 monoclonal antibody, which had worldwide sales in 2015 of
more than $7 billion.
Clinical Trials Overview and Recent Developments
Two
single-agent, dose-escalation, Phase I studies were undertaken with
TG-1101 to establish an optimal dose in patients with
Non-Hodgkin’s Lymphoma (“NHL”) and Chronic
Lymphocytic Leukemia (“CLL”). A two part first-in-human
Phase I clinical trial was first completed in France in which
TG-1101 was evaluated in relapsed or refractory CLL patients at
doses as high as 450mg per infusion. Subsequently, a single-agent
Phase I study was undertaken in the US enrolling patients with both
NHL and CLL, dosing patients up to 1200mg per infusion. In both
studies, single agent therapy with TG-1101 was deemed well
tolerated by treating investigators and displayed promising
clinical activity in relapsed and refractory patients.
In
oncology settings, anti-CD20 therapy is generally used in
combination with other anti-cancer agents where it demonstrates
maximum activity as opposed to single agent usage. As a result,
subsequent clinical development for TG-1101 has focused on
combination therapy. Currently, our priority combination trials for
TG-1101 are:
●
The GENUINE Trial
– a randomized controlled Phase 3 trial evaluating TG-1101 in
combination with ibrutinib, for previously treated CLL patients
with high risk cytogenetics;
●
The UNITY-CLL Trial
– a randomized controlled Phase 3 trial evaluating TG-1101 in
combination with TGR-1202, the Company’s development stage
PI3K delta inhibitor, for patients with front line and previously
treated CLL;
●
The UNITY-DLBCL
Trial – registration-directed UNITY-DLBCL Phase 2b clinical
study evaluating TG-1101, in combination with TGR-1202, as well as
TGR-1202 alone, in patients with previously treated Diffuse Large
B-Cell Lymphoma (DLBCL); and
●
TG-1101 + TGR-1202
+ Pembrolizumab for patients with CLL.
In
addition, we have announced our intent of evaluating TG-1101 for
the treatment of certain autoimmune diseases. Currently, TG-1101 is
being evaluated in a Phase 2 study for the treatment of Multiple
Sclerosis (MS) and in an investigator initiated Phase 1 study for
the treatment of acute neuromyelitis optica (NMO) relapses, with
additional autoimmune related indications planned to be studied.
Preliminary data from this Phase 1 study in NMO was presented at
the 32nd Congress of the European Committee for Treatment and
Research in Multiple Sclerosis (ECTRIMS), in London, UK in
September 2016. Data from the poster presentation demonstrated that
TG-1101 was well tolerated with minimal adverse events (AEs)
observed and rapid and robust B-cell depletion observed following a
single 450 mg infusion of TG-1101. In August 2016, it was also
announced that TG-1101 received orphan drug designation for the
Treatment of Neuromyelitis Optica and Neuromyelitis Optica Spectrum
Disorder.
Further
details on our priority ongoing combination trials for TG-1101 are
as follows:
TG-1101 + Ibrutinib Phase 3 Study Program – The GENUINE
Trial
The
GENUINE trial is a randomized controlled clinical trial in patients
with previously treated CLL with specific high-risk cytogenetic
abnormalities, with patients randomized to receive either TG-1101
plus ibrutinib or ibrutinib alone. In October 2016, we announced
revisions to the design of the GENUINE study to accelerate its
completion. Initially the study was being conducted pursuant to a
Special Protocol Assessment (SPA) with the U.S. Food and Drug
Administration (FDA), and was designed to enroll approximately 330
patients, with a two-part analysis of both overall response rate
(ORR) and progression-free survival (PFS). The trial was amended in
October 2016 to now enroll approximately 120 patients, with the PFS
analysis component removed. The sole primary endpoint of the study
is now ORR, and the SPA is no longer in effect. We expect to
complete enrollment in the revised trial by year end 2016, and will
have topline data available in the first half of 2017. If the
results of the study are positive, we plan to request a pre-BLA
meeting to discuss the data and a filing strategy with the FDA. We
have communicated with the FDA regarding our intention to file a
Biologics Licensing Application (BLA) for accelerated approval if
the results of the amended study are positive and the FDA has
agreed that a pre-BLA meeting can be requested based on ORR data
from the GENUINE study.
19
TG-1101 in Combination with TGR-1202 Phase 3 Study Program –
The UNITY-CLL Trial
In
September 2015, we reached an agreement with the FDA regarding an
SPA on the design, endpoints and statistical analysis approach of a
Phase 3 clinical trial for the proprietary combination of TG-1101
plus TGR-1202, for the treatment of CLL. The SPA provides agreement
that the Phase 3 trial design adequately addresses objectives that,
if met, would support the regulatory submission for drug approval
of both TG-1101 and TGR-1202 in combination.
The
Phase 3 trial, called the UNITY-CLL trial, is a randomized
controlled clinical trial that includes two key objectives: first,
to demonstrate contribution of each agent in the TG-1101 + TGR-1202
regimen (the combination sometimes referred to as "1303"), and
second, to demonstrate superiority in Progression Free Survival
(PFS) over the standard of care to support the submission for full
approval of the combination. The study will randomize patients into
four treatment arms: TG-1101 + TGR-1202, TG-1101 alone, TGR-1202
alone, and an active control arm of obinutuzumab
(GAZYVA®)
+ chlorambucil. An early interim analysis will assess contribution
of each single agent in the TG-1101 + TGR-1202 combination regimen,
which, if successful, will allow early termination of both single
agent arms. A second interim analysis will be conducted following
full enrollment into the study, which, if positive, we plan to
utilize for accelerated approval. Assuming early termination of the
TG-1101 and TGR-1202 single agent arms, the study will enroll
approximately 450 patients.
TG-1101 in Combination with TGR-1202 Phase 2b Registration-Directed
Program – The UNITY-DLBCL Trial
In June
2016, we commenced a registration-directed UNITY-DLBCL Phase 2b
clinical study evaluating TG-1101 in combination with TGR-1202, as
well as TGR-1202 alone, in patients with previously treated
DLBCL.
The study, entitled
"A Phase 2b Randomized Study to Assess the Efficacy and Safety of
the Combination of Ublituximab + TGR-1202 and TGR-1202 alone in
Patients with Previously Treated Diffuse Large B-Cell Lymphoma," is
being led by Owen A. O'Connor, MD, PhD, Professor of Medicine and
Experimental Therapeutics, and Director of the Center for Lymphoid
Malignancies at Columbia University Medical Center. The primary
objective of the study is to assess the efficacy of TGR-1202 alone
and in combination with TG-1101 in patients with previously treated
DLBCL as measured by Overall Response Rate (ORR). The study will
also provide important information as to the contribution of each
agent, TGR-1202 and TG-1101, to the combination regimen of both
agents. In addition to monitoring for safety and efficacy this
study will analyze the impact of cell of origin (GCB vs. non-GCB),
mutational status and select biomarkers of
efficacy.
TGR-1202
Overview
The
phosphoinositide-3-kinases (“PI3Ks”) are a family of
enzymes involved in various cellular functions, including cell
proliferation and survival, cell differentiation, intracellular
trafficking, and immunity. There are four isoforms of PI3K (alpha,
beta, delta, and gamma), of which the delta isoform is strongly
expressed in cells of hematopoietic origin, and often implicated in
B-cell related lymphomas.
TGR-1202 is an
orally available PI3K delta inhibitor with nanomolar potency to the
delta isoform and high selectivity over the alpha, beta, and gamma
isoforms. TGR-1202 has demonstrated activity in several
pre-clinical models and primary cells from patients with
hematologic malignancies.
We hold
exclusive worldwide rights to develop and commercialize TGR-1202
for all indications worldwide, except for India which has been
retained by Rhizen Pharmaceuticals S A.
Updates for TGR-1202
In
August 2016, we announced that TGR-1202 had received orphan drug
designation for the treatment of CLL.
In
October 2016, a manuscript titled, "Silencing c-Myc Translation as
a Therapeutic Strategy through Targeting PI3K Delta and CK1 Epsilon
in Hematological Malignancies," was published online in the First
Edition section of Blood, the Journal of the American Society of
Hematology. The publication presents preclinical data describing
the synergy of TGR-1202 with the proteasome inhibitor carfilzomib
and the unique effects of the combination to silence c-Myc in
various preclinical lymphoma and myeloma models. In addition, the
manuscript for the first time reports on TGR-1202's unique
complimentary mechanism of inhibiting the protein kinase casein
kinase-1 (CK1) epsilon, which may contribute to the silencing of
c-Myc and explain TGR-1202's clinical activity in aggressive
lymphoma, including Diffuse Large B-cell Lymphoma
(DLBCL).
20
Clinical Trials Overview and Recent Developments
Initial clinical
development of TGR-1202 was focused on establishing preliminary
safety and efficacy in a wide variety of hematologic malignancies.
Upon identification of safe and active doses of TGR-1202, a
combination clinical trial program was opened, exploring TGR-1202
in combination with a variety of agents. In addition to the
previously described studies in combination with TG-1101, our
current combination clinical trials that are ongoing or have been
completed for TGR-1202 are:
●
TGR-1202 in
combination with the anti-CD20 antibody, obinutuzumab
(GAZYVA®) and
chlorambucil in patients with CLL;
●
TGR-1202 in
combination with the anti-CD30 antibody drug conjugate, brentuximab
vedotin (ADCETRIS®), in patients
with relapsed or refractory Hodgkin’s lymphoma;
●
TGR-1202 in
combination with the BTK inhibitor, ibrutinib, in patients with
previously treated CLL and MCL; and
●
TGR-1202 in
combination with the JAK inhibitor, ruxolitinib (JAKAFI®), in patients
with previously treated Myelofibrosis or Polycythemia
Vera
In addition, given
the favorable safety profile demonstrated to date, a trial of
TGR-1202 monotherapy in patients with CLL who were previously
intolerant to prior BTK or PI3K inhibitor therapy is also
underway.
Single
Agent TGR-1202 in Patients with Relapsed/Refractory Hematologic
Malignancies
In
January 2013, the Company initiated a Phase I, open label,
multi-center, first-in-human clinical trial of TGR-1202 in patients
with hematologic malignancies. The study entitled TGR-1202-101, "A
Phase I Dose Escalation Study Evaluating the Safety and Efficacy of
TGR-1202 in Patients with Relapsed or Refractory Hematologic
Malignancies," is being run in collaboration with the Sarah
Cannon Research Institute in Nashville, TN with Howard
“Skip” Burris, MD, Executive Director, Drug Development
as the acting Study Chair. Enrollment is open to patients with
relapsed or refractory NHL, CLL, and other select hematologic
malignancies. As of February 2016, this study has closed to
enrollment.
Data
from this ongoing Phase I study was most recently presented at the
57th Annual American Society of
Hematology (ASH) meeting held in December 2015,
with updated data presented as part of an integrated analysis as
described below.
TGR-1202 Long-term Follow-up Integrated Analysis in Patients with
Relapsed/Refractory Hematologic Malignancies
In June
2016, at the 52nd Annual Meeting of
the American Society of Clinical Oncology (ASCO) and at the
21st
Congress of the European Hematology Association (EHA), the Company
presented integrated data with long term follow-up from 165
patients exposed to TGR-1202 monotherapy or the combination of
TGR-1202 plus TG-1101, which continued to demonstrate high response
rates in CLL, NHL, and DLBCL coupled with a favorable safety
profile.
TGR-1202 in Combination with obinutuzumab and chlorambucil in
patients with CLL
In
March 2014, the Company initiated a Phase I/Ib, open label,
multi-center, clinical trial of TGR-1202 in combination with
obinutuzumab and chlorambucil in patients with CLL, both treatment
naïve and relapsed. The study entitled TGR-GA-106, "A
Multi-center Phase I/Ib Study Evaluating the Efficacy and Safety of
TGR-1202, a Novel PI3K Delta Inhibitor, in Combination with
Obinutuzumab and Chlorambucil in Patients with Chronic Lymphocytic
Leukemia (CLL)," is being led by Dr. Daruka Mahadevan of the West
Clinic in Memphis, TN. As of February 2016, this study has
completed enrollment.
Data
from the study was presented at the 57th Annual American Society of Hematology (ASH)
meeting held in December 2015.
TGR-1202 Combination Trials
TGR-1202 is being
evaluated in combination with the anti-CD30 antibody drug
conjugate, brentuximab vedotin, in patients with relapsed or
refractory Hodgkin’s lymphoma; in combination with the BTK
inhibitor, ibrutinib, in patients with CLL and MCL; and in
combination with the JAK inhibitor, ruxolitinib, in patients with
Myelofibrosis or Polycythemia Vera. It is anticipated that
preliminary results from these studies will be presented at future
medical conferences.
TGR-1202 in Solid Tumors
In
addition to the exploration of TGR-1202 in various hematologic
malignancies, a study was opened in October 2015 to evaluate
TGR-1202 as a single agent as well as in combination with various
chemotherapies for the treatment of select solid tumors. The study,
entitled TGR-1202-102, “A Phase I Study Evaluating the Safety
and Efficacy of TGR-1202 Alone and in Combination with either
nab-paclitaxel + Gemcitabine or with FOLFOX in Patients with Select
Relapsed or Refractory Solid Tumors” is being run in
collaboration with the Sarah Cannon Research Institute in
Nashville, TN with Johanna Bendell, MD, Director of GI Oncology
Research as the acting study chair.
21
IRAK4
We hold global rights to develop and commercialize
the IRAK4 program, which was licensed from Ligand Pharmaceuticals.
Our IRAK4 program is currently in pre-clinical
development.
PD-L1 and GITR
In
March 2015, we entered into a global collaboration agreement for
the development and commercialization of anti-PD-L1 and anti-GITR
antibody research programs in the field of hematological
malignancies. Our anti-PD-L1 and anti-GITR programs are currently
in pre-clinical development.
BET
In
May 2016, as part of a broader agreement with Jubilant Biosys
(“Jubilant”), an India-based biotechnology company, we
entered into a sub-license agreement (“JBET Agreement”)
with Checkpoint Therapeutics, Inc. (“Checkpoint”), a
subsidiary of Fortress, for the development and commercialization
of Jubilant’s novel BET inhibitor program in the field of
hematological malignancies. The BET inhibitor program is the
subject of a family of patents covering compounds that inhibit
BRD4, a member of the BET (Bromodomain and Extra Terminal) domain
for cancer treatment. Our BET inhibitor program is currently
in pre-clinical development.
GENERAL CORPORATE
Our
license revenues currently consist of license fees arising from our
agreement with Ildong. We recognize upfront license fee revenues
ratably over the estimated period in which we will have certain
significant ongoing responsibilities under the sublicense
agreement, with unamortized amounts recorded as deferred
revenue.
We have
not earned any revenues from the commercial sale of any of our drug
candidates.
Our
research and development expenses consist primarily of expenses
related to in-licensing of new product candidates, fees paid to
consultants and outside service providers for clinical and
laboratory development, facilities-related and other expenses
relating to the design, development, manufacture, testing and
enhancement of our drug candidates and technologies. We expense our
research and development costs as they are incurred.
Our
general and administrative expenses consist primarily of salaries
and related expenses for executive, finance and other
administrative personnel, recruitment expenses, professional fees
and other corporate expenses, including investor relations, legal
activities and facilities-related expenses.
Our
results of operations include non-cash compensation expenses as a
result of the grants of restricted stock. Compensation expense for
awards of options and restricted stock granted to employees and
directors represents the fair value of the award recorded over the
respective vesting periods of the individual awards. The expense is
included in the respective categories of expense in the condensed
consolidated statements of operations. We expect to continue to
incur significant non-cash compensation expenses.
22
For
awards of options and restricted stock to consultants and other
third-parties, compensation expense is determined at the
“measurement date.” The expense is recognized over the
vesting period of the award. Until the measurement date is reached,
the total amount of compensation expense remains uncertain. We
record compensation expense based on the fair value of the award at
the reporting date. The awards to consultants and other
third-parties are then revalued, or the total compensation is
recalculated based on the then current fair value, at each
subsequent reporting date. This results in a change to the amount
previously recorded in respect of the equity award grant, and
additional expense or a reversal of expense may be recorded in
subsequent periods based on changes in the assumptions used to
calculate fair value, such as changes in market price, until the
measurement date is reached and the compensation expense is
finalized.
In
addition, certain restricted stock issued to employees vest upon
the achievement of certain milestones; therefore, the total expense
is uncertain until the milestone is probable.
Our
clinical trials will be lengthy and expensive. Even if these trials
show that our drug candidates are effective in treating certain
indications, there is no guarantee that we will be able to record
commercial sales of any of our drug candidates in the near future.
In addition, we expect losses to continue as we continue to fund
in-licensing and development of new drug candidates. As we continue
our development efforts, we may enter into additional third-party
collaborative agreements and may incur additional expenses, such as
licensing fees and milestone payments. In addition, we may need to
establish the commercial infrastructure required to manufacture,
market and sell our drug candidates following approval, if any, by
the FDA, which would result in us incurring additional expenses. As
a result, our quarterly results may fluctuate and a
quarter-by-quarter comparison of our operating results may not be a
meaningful indication of our future performance.
RESULTS
OF OPERATIONS
Three
months ended September 30, 2016 and 2015
License Revenue. License revenue was
$38,096 for each of the three months ended September 30, 2016 and
2015. License revenue is related to the amortization of an upfront
payment of $2.0 million received in 2012 associated with our
license agreement with Ildong. The upfront payment from Ildong will
be recognized as license revenue on a straight-line basis through
December 2025, which represents the estimated period over which the
Company will have certain ongoing responsibilities under the
sublicense agreement.
Noncash Compensation Expense (Research and
Development). Noncash compensation expense (research and
development) related to equity incentive grants totaled $919,648
for the three months ended September 30, 2016, as compared to
$35,756 during the comparable period in 2015. The increase in
noncash compensation expense was primarily related to restricted
stock grants to personnel in 2016 and a decrease in the measurement
date fair value of certain consultant restricted stock during the
period ended September 30, 2015.
Other Research and Development
Expenses. Other research and development expenses increased
by $9,339,862 to $20,878,108 for the three months ended September
30, 2016, as compared to $11,538,246 for the three months ended
September 30, 2015. The increase was mainly due to the ongoing
clinical development programs and related manufacturing costs for
TG-1101 and TGR-1202 during the three months ended September 30,
2016. We expect our other research and development costs to
increase for the remainder of 2016 as the enrollment of additional
patients in our Phase 3 clinical trials increases and we prepare
for launch.
Noncash Compensation Expense (General and
Administrative). Noncash
compensation expense (general and administrative) related to equity
incentive grants increased by $710,112 to $1,914,390 for the
three months ended September 30, 2016,
as compared to $1,204,278 for the three months ended
September 30, 2015. The
increase in noncash compensation expense was primarily related to
restricted stock granted to executive personnel and a decrease in
the measurement date fair value of certain consultant restricted
stock during the three months ended September 30,
2015.
Other General and Administrative
Expenses. Other general and
administrative expenses increased by $166,021 to $1,251,421
for the three months ended September 30, 2016, as compared to $1,085,400 for the three
months ended September 30, 2015. The
increase was due primarily to the straight-line rent expense of our
new office space, as well as increased personnel and other general
and administrative costs. We expect our other general and
administrative expenses to remain at a comparable level for the
remainder of 2016.
Other (Income) Expense. Other income
decreased by $75,224 to $94,444 for the three months ended
September 30, 2016, as compared
to $169,668 for the three months ended September 30, 2015.
The decrease is mainly due to a decrease in the change in fair
value of notes payable for the three months ended September 30,
2016.
23
Nine
months ended September 30, 2016 and 2015
License Revenue. License revenue was
$114,286 for each of the nine months ended September 30, 2016 and
2015. License revenue for the nine months ended September 30, 2016
and 2015 was related to the amortization of an upfront payment of
$2.0 million received in 2012 associated with our license agreement
with Ildong.
Noncash Compensation Expense (Research and
Development). Noncash compensation expense (research and
development) related to equity incentive grants totaled $1,873,730
for the nine months ended September 30, 2016, as compared to
$2,733,110 during the comparable period in 2015. The decrease in
noncash compensation expense was primarily related to
milestone-based vesting of restricted stock grants to non-executive
personnel in the nine months ended September 30, 2015, and a
decrease in the measurement date fair value of certain consultant
restricted stock during the period ended September 30,
2016.
Other Research and Development
Expenses. Other research and development expenses increased
by $15,355,206 to $45,075,097 for the nine months ended September
30, 2016, as compared to $29,719,891 for the nine months ended
September 30, 2015. The increase in other research and development
expenses was due primarily to a $1.0 million licensing fee for the
Jubilant sub-license agreement, as well as the ongoing clinical
development programs and related manufacturing costs for TG-1101
and TGR-1202 during the nine months ended September 30, 2016. We
expect our other research and development costs to increase for the
remainder of 2016 as enrollment of additional patients in our Phase
3 clinical trials increases and we prepare for launch.
Noncash Compensation Expense (General and
Administrative). Noncash
compensation expense (general and administrative) related to equity
incentive grants decreased by $5,799,268 to $4,307,670 for the nine months ended
September 30, 2016, as compared to
$10,106,938 for the nine months ended September 30,
2015. The decrease in noncash
compensation expense was primarily related to greater measurement
date fair values of certain consultant restricted stock during the
nine months ended September 30, 2015.
Other General and Administrative
Expenses. Other general and
administrative expenses increased by $704,497 to $3,798,859
for the nine months ended September 30, 2016, as compared to
$3,094,362 for the nine months ended September 30, 2015. The increase was due primarily to the
straight-line rent expense of our new office space, as well as
increased personnel and other general and administrative costs. We
expect our other general and administrative expenses to remain at a
comparable level for the remainder of 2016.
Other (Income) Expense. Other income
increased by $159,138 to $362,319 for the nine months ended
September 30, 2016, as compared
to $203,181 for the nine months ended September 30, 2015.
The increase is mainly due to an increase in interest income for
the nine months ended September 30, 2016.
LIQUIDITY
AND CAPITAL RESOURCES
Our
primary sources of cash have been from the sale of equity
securities, warrant exercises, and the upfront payment from our
Sublicense Agreement with Ildong. We have not yet commercialized
any of our drug candidates and cannot be sure if we will ever be
able to do so. Even if we commercialize one or more of our drug
candidates, we may not become profitable. Our ability to achieve
profitability depends on a number of factors, including our ability
to obtain regulatory approval for our drug candidates, successfully
complete any post-approval regulatory obligations and successfully
commercialize our drug candidates alone or in partnership. We may
continue to incur substantial operating losses even if we begin to
generate revenues from our drug candidates.
As of
September 30, 2016, we had approximately $60.7 million in cash and
cash equivalents, investment securities, and interest
receivable.
As of September 30,
2016 we anticipate that our cash and cash equivalents and
investments will be sufficient to fund the company’s
planned operations into the first half of 2018. The
actual amount of cash that we will need to operate is subject to
many factors, including, but not limited to, the timing, design and
conduct of clinical trials for our drug candidates. We are
dependent upon significant financing to provide the cash necessary
to execute our current operations, including the commercialization
of any of our drug candidates.
Cash
used in operating activities for the nine months ended September
30, 2016 was $44,566,263 as compared to $31,789,611 for the nine
months ended September 30, 2015. The increase in cash used in
operating activities was due primarily to increased expenditures
associated with our clinical development programs for TG-1101 and
TGR-1202.
For the
nine months ended September 30, 2016, net cash provided by
investing activities was $15,066,282 as compared to net cash used
in investing activities of $27,164,331 for the nine months ended
September 30, 2015. The increase in net cash provided by investing
activities was primarily due to the maturity and sale of treasury
securities during the nine months ended September 30,
2016.
For the
nine months ended September 30, 2016 and 2015, net cash provided by
financing activities of $3,595,173 and $68,702,098 related to our
ATM program, as well as proceeds from the exercise of
warrants.
24
OFF-BALANCE
SHEET ARRANGEMENTS
We have
not entered into any transactions with unconsolidated entities
whereby we have financial guarantees, subordinated retained
interests, derivative instruments or other contingent arrangements
that expose us to material continuing risks, contingent
liabilities, or any other obligations under a variable interest in
an unconsolidated entity that provides us with financing,
liquidity, market risk or credit risk support.
CRITICAL
ACCOUNTING POLICIES
The
discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements,
which have been prepared in accordance with U.S. generally accepted
accounting principles. The preparation of these consolidated
financial statements requires us to make estimates and judgments
that affect the reported amount of assets and liabilities and
related disclosure of contingent assets and liabilities at the date
of our financial statements and the reported amounts of revenues
and expenses during the applicable period. Actual results may
differ from these estimates under different assumptions or
conditions.
We
define critical accounting policies as those that are reflective of
significant judgments and uncertainties and which may potentially
result in materially different results under different assumptions
and conditions. In applying these critical accounting policies, our
management uses its judgment to determine the appropriate
assumptions to be used in making certain estimates. These estimates
are subject to an inherent degree of uncertainty. Our critical
accounting policies include the following:
Revenue Recognition. We recognize
license revenue in accordance with the revenue recognition guidance
of the FASB Codification. We analyze each element of our licensing
agreement to determine the appropriate revenue recognition. The
terms of the license agreement may include payments to us of
non-refundable up-front license fees, milestone payments if
specified objectives are achieved, and/or royalties on product
sales. We recognize revenue from upfront payments over the period
of significant involvement under the related agreements unless the
fee is in exchange for products delivered or services rendered that
represent the culmination of a separate earnings process and no
further performance obligation exists under the contract. We
recognize milestone payments as revenue upon the achievement of
specified milestones only if (1) the milestone payment is
non-refundable, (2) substantive effort is involved in achieving the
milestone, (3) the amount of the milestone is reasonable in
relation to the effort expended or the risk associated with
achievement of the milestone, and (4) the milestone is at risk for
both parties. If any of these conditions are not met, we defer the
milestone payment and recognize it as revenue over the estimated
period of performance under the contract.
Stock-Based Compensation. We have
granted stock options and restricted stock to employees, directors
and consultants, as well as warrants to other third parties. For
employee and director grants, the value of each option award is
estimated on the date of grant using the Black-Scholes
option-pricing model. The Black-Scholes model takes into account
volatility in the price of our stock, the risk-free interest rate,
the estimated life of the option, the closing market price of our
stock and the exercise price. We base our estimates of our stock
price volatility on the historical volatility of our common stock
and our assessment of future volatility; however, these estimates
are neither predictive nor indicative of the future performance of
our stock. For purposes of the calculation, we assumed that no
dividends would be paid during the life of the options and
warrants. The estimates utilized in the Black-Scholes calculation
involve inherent uncertainties and the application of management
judgment. In addition, we are required to estimate the expected
forfeiture rate and only recognize expense for those equity awards
expected to vest. As a result, if other assumptions had been used,
our recorded stock-based compensation expense could have been
materially different from that reported. In addition, because some
of the options and warrants issued to employees, consultants and
other third-parties vest upon the achievement of certain
milestones, the total expense is uncertain.
Total
compensation expense for options and restricted stock issued to
consultants is determined at the “measurement date.”
The expense is recognized over the vesting period for the options
and restricted stock. Until the measurement date is reached, the
total amount of compensation expense remains uncertain. We record
stock-based compensation expense based on the fair value of the
equity awards at the reporting date. These equity awards are then
revalued, or the total compensation is recalculated based on the
then current fair value, at each subsequent reporting date. This
results in a change to the amount previously recorded in respect of
the equity award grant, and additional expense or a reversal of
expense may be recorded in subsequent periods based on changes in
the assumptions used to calculate fair value, such as changes in
market price, until the measurement date is reached and the
compensation expense is finalized.
25
Accruals for Clinical Research Organization
and Clinical Site Costs. We make estimates of costs incurred
in relation to external clinical research organizations, or CROs,
and clinical site costs. We analyze the progress of clinical
trials, including levels of patient enrollment, invoices received
and contracted costs when evaluating the adequacy of the amount
expensed and the related prepaid asset and accrued liability.
Significant judgments and estimates must be made and used in
determining the accrued balance and expense in any accounting
period. We review and accrue CRO expenses and clinical trial study
expenses based on work performed and rely upon estimates of those
costs applicable to the stage of completion of a study. Accrued CRO
costs are subject to revisions as such trials progress to
completion. Revisions are charged to expense in the period in which
the facts that give rise to the revision become known. With respect
to clinical site costs, the financial terms of these agreements are
subject to negotiation and vary from contract to contract. Payments
under these contracts may be uneven, and depend on factors such as
the achievement of certain events, the successful recruitment of
patients, the completion of portions of the clinical trial or
similar conditions. The objective of our policy is to match the
recording of expenses in our financial statements to the actual
services received and efforts expended. As such, expense accruals
related to clinical site costs are recognized based on our estimate
of the degree of completion of the event or events specified in the
specific clinical study or trial contract.
Accounting Related to Goodwill. As of
September 30, 2016 and December 31, 2015, there was $799,391 of
goodwill on our condensed consolidated balance sheets. Goodwill is
reviewed for impairment annually, or when events arise that could
indicate that an impairment exists. We test for goodwill impairment
using a two-step process. The first step compares the fair value of
the reporting unit with the unit's carrying value, including
goodwill. When the carrying value of the reporting unit is greater
than fair value, the unit’s goodwill may be impaired, and the
second step must be completed to measure the amount of the goodwill
impairment charge, if any. In the second step, the implied fair
value of the reporting unit’s goodwill is compared with the
carrying amount of the unit’s goodwill. If the carrying
amount is greater than the implied fair value, the carrying value
of the goodwill must be written down to its implied fair
value.
We are
required to perform impairment tests annually, at December 31, and
whenever events or changes in circumstances suggest that the
carrying value of an asset may not be recoverable. For all of our
acquisitions, various analyses, assumptions and estimates were made
at the time of each acquisition that were used to determine the
valuation of goodwill and intangibles. In future years, the
possibility exists that changes in forecasts and estimates from
those used at the acquisition date could result in impairment
indicators.
Accounting For Income Taxes. In
preparing our condensed consolidated financial statements, we are
required to estimate our income taxes in each of the jurisdictions
in which we operate. This process involves management estimation of
our actual current tax exposure and assessment of temporary
differences resulting from differing treatment of items for tax and
accounting purposes. These differences result in deferred tax
assets and liabilities. We must then assess the likelihood that our
deferred tax assets will be recovered from future taxable income
and, to the extent we believe that recovery is not likely, we must
establish a valuation allowance. To the extent we establish a
valuation allowance or increase this allowance in a period, we must
include an expense within the tax provision in the consolidated
statements of operations. Significant management judgment is
required in determining our provision for income taxes, our
deferred tax assets and liabilities and any valuation allowance
recorded against our net deferred tax assets. We have fully offset
our deferred tax assets with a valuation allowance. Our lack of
earnings history and the uncertainty surrounding our ability to
generate taxable income prior to the reversal or expiration of such
deferred tax assets were the primary factors considered by
management in maintaining the valuation allowance.
Fair Value of 5% Notes Payable. We
measure certain financial assets and liabilities at fair value on a
recurring basis in the financial statements. The hierarchy ranks
the quality and reliability of inputs, or assumptions, used in the
determination of fair value and requires financial assets and
liabilities carried at fair value to be classified and disclosed in
one of three categories.
We
elected the fair value option for valuing the 5% Notes. We elected
the fair value option in order to reflect in our financial
statements the assumptions that market participants use in
evaluating these financial instruments.
26
RECENTLY
ISSUED ACCOUNTING STANDARDS
In
August 2016, the
Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update (“ASU”) No. 2016-15,
“Classification of Certain Cash Receipts and Cash
Payments” (“ASU 2016-15”). ASU 2016-15 amends the
guidance in Accounting Standards Codification (“ASC” or
“Codification”) 230 on the classification of certain
cash receipts and payments in the statement of cash flows. The
primary purpose of ASU 2016-15 is to reduce the diversity in
practice that has resulted from the lack of consistent principles
on this topic. The amendments in ASU 2016-15 add or clarify
guidance on eight cash flow issues:
●
Debt prepayment or
debt extinguishment costs.
●
Settlement
of zero-coupon debt instruments or other debt instruments with
coupon interest rates that are insignificant in relation to the
effective interest rate of the borrowing.
●
Contingent
consideration payments made after a business
combination.
●
Proceeds
from the settlement of insurance claims.
●
Proceeds
from the settlement of corporate-owned life insurance policies,
including bank-owned life insurance policies.
●
Distributions
received from equity method investees.
●
Beneficial
interests in securitization transactions.
●
Separately
identifiable cash flows and application of the predominance
principle.
ASU 2016-15 is effective for
annual and interim periods beginning after December 15, 2017, and
early adoption is permitted for all entities. Entities must apply
the guidance retrospectively to all periods presented but may apply
it prospectively from the earliest date practicable if
retrospective application would be impracticable. The
provisions of this standard are not expected to significantly
impact the Company.
In May 2016, the FASB issued ASU No. 2016-11,
“Rescission of SEC Guidance Because of Accounting Standards
Update 2014-09 and 2014-16 Pursuant to Staff Announcements at the
March 3, 2016 EITF Meeting” (“ASU 2016-11”). ASU
2016-11 rescinds certain SEC guidance from the FASB Codification
in response to announcements made by
the SEC staff at the Emerging Issues Task Force’s March 3,
2016 meeting. Specifically, ASU 2016-11 supersedes SEC observer
comments on the following topics:
●
Upon
the adoption of ASU 2014-09:
o
Revenue and expense
recognition for freight services in process (ASC
605-20-S99-2)
o
Accounting for
shipping and handling fees and costs (ASC
605-45-S99-1)
o
Accounting for
consideration given by a vendor to a customer (ASC
605-50-S99-1)
o
Accounting for
gas-balancing arrangements (ASC 932-10-S99-5).
●
Upon the adoption
of ASU 2014-16:
o
Determining the
nature of a host contract related to a hybrid financial instrument
issued in the form of a share under ASC 815 (ASC
815-10-S99-3).
ASU
2016-11 is effective upon the adoption of ASU 2014-09 and ASU
2014-16. The adoption of ASU 2016-11
is not expected to have a material impact on the Company’s
condensed consolidated financial statements.
In
March 2016, the FASB issued ASU No. 2016-09, “Simplifying the
Accounting for Share-Based Payments” (“ASU
2016-09”). ASU 2016-09 simplifies several aspects of the
accounting for employee share-based payment transactions for both
public and nonpublic entities, including the accounting for income
taxes, forfeitures, and statutory tax withholding requirements, as
well as classification in the statement of cash flows. ASU 2016-09
is effective for annual reporting periods beginning after December
15, 2016, including interim periods within those annual reporting
periods. The provisions of this standard are not expected to
significantly impact the Company.
Other
pronouncements issued by the FASB or other authoritative accounting
standards group with future effective dates are either not
applicable or not significant to our consolidated financial
statements.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The
primary objective of our investment activities is to preserve
principal while maximizing our income from investments and
minimizing our market risk. We invest in government and
investment-grade corporate debt in accordance with our investment
policy. Some of the securities in which we invest have market risk.
This means that a change in prevailing interest rates, and/or
credit risk, may cause the fair value of the investment to
fluctuate. For example, if we hold a security that was issued with
a fixed interest rate at the then-prevailing rate and the
prevailing interest rate later rises, the fair value of our
investment will probably decline. As of September 30, 2016, our
portfolio of financial instruments consists of cash equivalents,
including bank deposits, and investments. Due to the short-term
nature of our investments, we believe there is no material exposure
to interest rate risk, and/or credit risk, arising from our
investments.
27
ITEM
4. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
As of
September 30, 2016, management carried out, under the supervision
and with the participation of our Chief Executive Officer and Chief
Financial Officer, an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our
disclosure controls and procedures are designed to provide
reasonable assurance that information we are required to disclose
in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in applicable rules and forms. Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of September 30, 2016, our disclosure controls
and procedures were effective.
Internal
Control Over Financial Reporting
There
were no changes in our internal control over financial reporting
during the quarter ended September 30, 2016 that have materially
affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
PART
II. OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
We, and
our subsidiaries, are not a party to, and our property is not the
subject of, any material pending legal proceedings.
ITEM
1A. RISK FACTORS
You
should carefully consider the following risks and uncertainties. If
any of the following occurs, our business, financial condition or
operating results could be materially harmed. These factors could
cause the trading price of our common stock to decline, and you
could lose all or part of your investment.
Risks Related to Our Business and Industry
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.
Our
product candidates have been in-licensed from third parties. Under
the terms of our license agreements, the licensors generally will
have the right to terminate such agreement in the event of a
material breach by us. The licensors will also have the right to
terminate the agreement in the event we fail to use diligent and
reasonable efforts to develop and commercialize the product
candidate worldwide.
If
there is any conflict, dispute, disagreement or issue of
non-performance between us and our licensing partners regarding our
rights or obligations under the license agreements, including any
such conflict, dispute or disagreement arising from our failure to
satisfy payment obligations under such agreement, our ability to
develop and commercialize the affected product candidate and our
ability to enter into collaboration or marketing agreements for the
affected product candidate may be adversely affected. Any loss of
our rights under these license agreements would delay or completely
terminate its product development efforts for the affected product
candidate.
We do not have full internal development capabilities, and are thus
reliant upon our partners and 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.
In
order to submit and maintain an IND, Biologics License Application
(“BLA”), or New Drug Application (“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 a significant
portion 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.
Additionally, an IND must be active in each division in which we
intend to conduct clinical trials. Currently we do not have an
active IND for any of the IRAK4 or BET inhibitors, nor for our
anti-PD-L1 and anti-GITR antibodies. Additionally, there can be no
assurance given that any of the molecules under development in our
IRAK4 or BET inhibitor program or in our anti-PD-L1 and anti-GITR
antibody research program will demonstrate sufficient pharmacologic
properties during pre-clinical evaluation to advance to IND
enabling studies, or that such IND enabling studies, if any are
conducted, will provide data sufficient to support the filing of an
IND, or that such IND, if filed, would be accepted by any FDA
division under which we would seek to develop any product
candidate. While we maintain an active IND for TG-1101 and TGR-1202 enabling the conduct
of studies in the FDA’s Division of Hematology and Oncology,
and an active IND for TG-1101 under the FDA’s Division of
Neurology, there can be no assurance that we will be successful in
obtaining an active IND for TG-1101 or TGR-1202 in any other division
under whose supervision we may seek to develop our product
candidates, or that the FDA will allow us to continue the
development of our product candidates in those divisions where we
maintain an active IND.
28
We are highly dependent on the success of our product candidates
and cannot give any assurance that these or any future product
candidates will be successfully commercialized.
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 any
of several reasons.
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.
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 risk. 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 diverse 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 suffer 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.
We plan
on conducting additional Phase I, II and III clinical trials for
TG-1101 and TGR-1202. Early
clinical results seen with TG-1101 and
TGR-1202 in a small number of patients may not be reproduced
in expanded or larger clinical trials. Additionally, individually
reported outcomes of patients treated in clinical trials may not be
representative of the entire population of treated patients in such
studies. If the results from expansion cohorts or later trials are
different from those found in the earlier studies of TG-1101 and TGR-1202, 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. Our IRAK4, BET,
anti-PD-L1 and anti-GITR programs are all in pre-clinical
development and no assurance can be given that they will advance
into clinical development. If the results from additional
pre-clinical studies or early clinical trials differ from those
found in earlier studies, our clinical development plans and
timelines for this program could be adversely affected which could
have a material adverse effect on our business. Many drugs fail in
the early stages of clinical development for safety and
tolerability issues, accordingly if our pre-clinical assets advance
into clinical development, no assurance can be made that a safe and
efficacious dose can be found.
If we are unable to successfully complete our clinical trial
programs, or if such clinical trials take longer to complete than
we project, our ability to execute our current business strategy
will be adversely affected.
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 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. 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. They may also incur additional costs if enrollment is
increased in order to achieve the desired number of events. If we
experience delays in identifying and contracting with sites and/or
in patient enrollment in our clinical trial programs, we may incur
additional costs and delays in our development programs, and may
not be able to complete our clinical trials in a cost-effective or
timely manner. In addition, conducting multi-national studies adds
another level of complexity and risk. We are subject to events
affecting countries outside the U.S. 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.
29
In
September 2014, we announced a Phase 3 clinical trial for TG-1101
in previously treated patients with high-risk CLL, and in September
2015 we announced a Phase 3 clinical trial for the combination of
TG-1101 + TGR-1202 for patients with CLL, each of which are being
conducted pursuant to SPAs with the FDA. Many companies which have
been granted SPAs and/or the right to utilize the FDA’s Fast
Track or accelerated approval process 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 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.
For
example, we recently announced the filing of an amended protocol
for the GENUINE Phase 3 (TG-1101 in previously treated patients
with high-risk CLL) trial to evaluate the effect of the addition of
TG-1101 to ibrutinib on overall response rate, which reduced the
enrollment target from approximately 330 to 120 randomized patients
and eliminated the progression free survival component of the
study. Given that this change to the protocol, this study is no
longer being conducted pursuant to the SPA and there can be no
assurance given that the FDA’s review of the results achieved
from the amended protocol will lead to the granting of a pre-BLA
meeting, or an accelerated approval for TG-1101.
Any product candidates we may advance into 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 to commercialize our product
candidates.
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 theUnited States and
by comparable health authorities worldwide or in foreign markets.
In the United States, we are not permitted to market our product
candidates 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. Even with “fast track” or “priority
review” status which we intend to seek for our product
candidates, such designations do not necessarily mean a faster
development process or regulatory review process or necessarily
confer any advantage with respect to approval compared to
conventional FDA procedures. 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 Risk Evaluation
andMitigation Strategy (REMS) requiring prescriber training,
post-market registries, or otherwise restricting the marketing and
dissemination of these products. Despite the time and expense
invested in 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 many of these countries,
and other regulatory agencies around the
world.
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 any indication;
●
the FDA may not
accept clinical data from trials which are 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 fail to approve the
manufacturing processes or facilities of third-party manufacturers
with which we or our collaborators contract for clinical and
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.
30
In
addition, recent events raising questions about the safety of
certain 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.
Any product candidate we advance into clinical trials may cause
unacceptable adverse events or have other properties that may delay
or prevent their regulatory approval or commercialization or limit
their commercial potential.
Unacceptable
adverse events caused by any of our product candidates that we take
into clinical trials could cause either us or regulatory
authorities to interrupt, delay, modify or halt clinical trials and
could result in the denial of regulatory approval by the FDA or
other regulatory authorities for any or all targeted indications.
This, in turn, could prevent us from commercializing the affected
product candidate and generating revenues from its
sale.
We 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
adverse events, if any, will be observed in patients who receive
any of our product candidates. To date, clinical trials using
TG-1101 and TGR-1202 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 FDA and in the case of
TG-1101 and TGR-1202, even if
deemed acceptable for oncology applications, it may not be
acceptable for diseases outside the oncology setting, 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. With respect to both TG-1101 and TGR-1202, the toxicity when
manufactured under different conditions and in different
formulations is not known, and it is possible that additional
and/or different adverse events may appear upon the human use of
those formulations and those adverse events may arise with greater
frequency, intensity and duration than in the current formulation.
Further, with respect to TGR-1202, although more than 300 patients
have been dosed amongst all ongoing TGR-1202 studies, the full
adverse effect profile of TGR-1202 is not known. It is unknown as
the additional patients are exposed for longer durations to
TGR-1202, whether greater frequency and/or severity of adverse
events are likely to occur. Common toxicities of other drugs in the
same class as TGR-1202 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. To date, the incidence of these events has been limited
for TGR-1202, however no assurance can be given that this safety
and tolerability profile will continue to be demonstrated in the
future as higher doses, longer durations of exposure, and multiple
drug combinations are explored. 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.
Additionally, in
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
TG-1101 and TGR-1202 are being evaluated in combination together,
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. 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 product candidates receives marketing approval and we, or
others, later identify unacceptable adverse events caused by the
product, a number of significant negative consequences could
result, including:
●
regulatory
authorities may withdraw their approval of the affected
product;
●
regulatory
authorities may require a more significant clinical benefit for
approval to offset the risk;
●
regulatory
authorities may require the addition of labeling statements that
could diminish the usage of the product or otherwise limit the
commercial success of the affected product;
●
we may be required
to change the way the product is administered, conduct additional
clinical trials or change the labeling of the product;
●
we may choose to
discontinue sale of the product;
●
we could be sued
and held liable for harm caused to patients;
●
we may not be able
to enter into collaboration agreements on acceptable terms and
execute on our business model; 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 delay or prevent us from generating any
revenues from the sale of the affected product.
31
We may experience delays in the commencement of our clinical trials
or in the receipt of data from preclinical and clinical trials
conducted by third parties, which could result in increased costs
and delay our ability to pursue regulatory approval.
Delays
in the commencement of clinical trials and delays in the receipt of
data from preclinical or clinical trials conducted by third parties
could significantly impact our product development costs. Before we
can initiate clinical trials in the United States for our product
candidates, we need to submit the results of preclinical testing,
usually in animals, to the FDA as part of an IND, along with other
information including information about product chemistry,
manufacturing and controls and its proposed clinical trial protocol
for our product candidates.
We plan
to rely on preclinical and clinical trial data from third parties,
if any, for the IND submissions for our product candidates. If
receipt of that data is delayed for any reason, including reasons
outside of our control, it will delay our plans for IND filings,
and clinical trial plans. This, in turn, will delay our ability to
make subsequent regulatory filings and ultimately, to commercialize
our products if regulatory approval is obtained. If those third
parties do not make this data available to us, we will likely, on
our own, have to develop all the necessary preclinical and clinical
data which will lead to additional delays and increase the costs of
our development of our product candidates.
Before
we can test any product candidate in human clinical trials the
product candidate enters the preclinical testing stage. Preclinical
tests include laboratory evaluations of product chemistry, toxicity
and formulation, as well as in-vitro and animal studies to assess
the potential safety and activity of the pharmaceutical product
candidate. The conduct of the preclinical tests must comply with
federal regulations and requirements including good laboratory
practices (“GLP”).
We must
submit the results of the preclinical tests, together with
manufacturing information, analytical data, any available clinical
data or literature and a proposed clinical protocol, to the FDA as
part of the IND. The IND automatically becomes effective 30 days
after receipt by the FDA, unless the FDA places the IND on a
clinical hold within that 30-day time period. In such a case, we
must work with the FDA to resolve any outstanding concerns before
the clinical trials can begin. The FDA may also impose clinical
holds on a product candidate at any time before or during clinical
trials due to safety concerns or non-compliance. Accordingly, we
cannot be sure that submission of an IND will result in the FDA
allowing clinical trials to begin, or that, once begun, issues will
not arise that suspend or terminate such clinical
trial.
The FDA
may require that we conduct additional preclinical testing for any
product candidate before it allows us to initiate the clinical
testing under any IND, which may lead to additional delays and
increase the costs of our preclinical development.
Even
assuming an active IND for a product candidate, we do not know
whether our planned clinical trials for any such product candidate
will begin on time, or at all. The commencement of clinical trials
can be delayed for a variety of reasons, including delays
in:
●
obtaining
regulatory clearance to commence a clinical
trial;
●
identifying,
recruiting and training suitable clinical
investigators;
●
reaching agreement
on acceptable terms with prospective contract research
organizations (“CROs”) and trial sites, the terms of
which can be subject to extensive negotiation, may be subject to
modification from time to time and may vary significantly among
different CROs and trial sites
●
obtaining
sufficient quantities of a product candidate for use in clinical
trials;
●
obtaining
institutional review board (“IRB”) or ethics committee
approval to conduct a clinical trial at a prospective
site;
●
identifying,
recruiting and enrolling patients to participate in a clinical
trial;
●
retaining patients
who have initiated a clinical trial but may withdraw due to adverse
events from the therapy, insufficient efficacy, fatigue with the
clinical trial process or personal issues; and
●
unexpected safety
findings.
Any delays in the
commencement of our clinical trials will delay our ability to
pursue regulatory approval for our product candidates. In addition,
many of the factors that cause, or lead to, a delay in the
commencement of clinical trials may also ultimately lead to the
denial of regulatory approval of a product candidate.
32
Delays in the completion of clinical testing could result in
increased costs and delay our ability to generate product
revenues.
Once a
clinical trial has begun, patient recruitment and enrollment may be
slower than we anticipate or slower than initial trends indicate.
Clinical trials may also be delayed as a result of ambiguous or
negative interim results. Further, a clinical trial may be
suspended or terminated by us, an IRB, an ethics committee or a
Data Safety and Monitoring Committee overseeing the clinical trial,
any of our clinical trial sites with respect to that site or the
FDA or other regulatory authorities 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 clinical trial site by the FDA or
other regulatory authorities resulting in the imposition of a
clinical hold;
●
unforeseen safety
issues or any determination that the clinical trial presents
unacceptable health risks; and
●
lack of adequate
funding to continue the clinical trial.
Changes
in regulatory requirements and guidance also may occur and we may
need to amend clinical trial protocols to reflect these changes.
Amendments may require us to resubmit our clinical trial protocols
to IRBs for re-examination, which may impact the costs, timing and
successful completion of a clinical trial. If we experience delays
in the completion of, or if we must terminate, any clinical trial
of any product candidate that we advance into clinical trials, our
ability to obtain regulatory approval for that product candidate
will be delayed and the commercial prospects, if any, for the
product candidate may be harmed. In addition, many of these factors
may also ultimately lead to the denial of regulatory approval of a
product candidate. Even if we ultimately commercialize any of our
product candidates, other therapies for the same indications may
have been introduced to the market during the period we have been
delayed and such therapies may have established a competitive
advantage over our product candidates.
We intend to rely on third parties to help conduct our planned
clinical trials. If these third parties do not meet their deadlines
or otherwise conduct the trials as required, we may not be able to
obtain regulatory approval for or commercialize our product
candidates when expected or at all.
We
intend to use CROs to assist in the conduct of our planned clinical
trials and will rely upon medical institutions, clinical
investigators and contract laboratories to conduct our trials in
accordance with our clinical protocols. Our future CROs,
investigators and other third parties may play a significant role
in the conduct of these 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.
If any
of our clinical trial sites terminate 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. 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 may be
jeopardized.
As all of our product candidates are still under development,
manufacturing 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 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 profile of the product candidates, which may affect the
safety and efficacy of the products. No assurance can be given that
the material manufactured from any of the optimized processes will
perform comparably to the product candidates as manufactured to
date and used in currently available pre-clinical data and or in
early clinical trials reported in this or any previous filing.
Additionally, future clinical trial results will be subject to the
same level of uncertainty if, following such trials, additional
process improvements are made. In addition, we have recently
engaged a secondary manufacturer for TG-1101 to meet our current
clinical and future commercial needs and anticipate engaging
additional manufacturing sources for TGR-1202 to meet expanded
clinical trial and commercial needs. While material produced from
this secondary manufacturer for TG-1101 has to date demonstrated
acceptable comparability, no assurance can be given that any
additional manufacturers will be successful or that material
manufactured by the additional manufacturers will perform
comparably to TG-1101 or TGR-1202 as manufactured to date and used
in currently available pre-clinical data and or in early clinical
trials reported in this or any previous filing. 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.
33
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 structures. 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.
If our competitors develop treatments for the target indications
for which any of our product candidates may be approved, and they
are approved more quickly, marketed more effectively or
demonstrated to be more effective than our product candidates, our
commercial opportunity will be reduced or eliminated.
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.
The
cancer indications for which we are developing our products have a
number of established therapies with which we will compete. Most
major pharmaceutical companies and many biotechnology companies are
aggressively pursuing new cancer development programs for the
treatment of NHL, CLL, and other B-cell proliferative malignancies,
including both therapies with traditional, as well as novel,
mechanisms of action. Additionally, numerous established therapies
exist for the autoimmune disorders for which we are developing
TG-1101, including and in particular, multiple sclerosis
(MS).
If
approved, we expect TG-1101 to compete directly with Roche
Group’s Rituxan®
(rituximab) and Gazyva®
(obinutuzumab or GA-101), and Genmab and GlaxoSmithKline’s
Arzerra® (ofatumumab)
among others, each of which is currently approved for the treatment
of various diseases including NHL and CLL. In addition, a number of
pharmaceutical companies are developing antibodies targeting CD20,
CD19, 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 TG-1101
both in oncology settings as well as in autoimmune disorders.
Recently, positive Phase 3 data was announced for the Roche
Group’s anti-CD20 antibody ocrelizumab in the treatment of
MS, which we anticipate will be filed for approval in the near
term. Genmab and GSK’s (ofatumumab) is also under clinical
development for patients with MS. 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.
34
With
respect to TGR-1202, there are several PI3K delta targeted
compounds both approved, such as Gilead’s Zydelig™
(idelalisib), and in development, including, but not limited to,
Infinity Pharmaceuticals’ duvelisib (IPI-145) which if
approved we would expect to compete directly with TGR-1202. In
addition, there are numerous other novel therapies targeting
similar pathways to TGR-1202 both approved and in development,
which could also compete with TGR-1202 in similar indications, such
as the BTK inhibitor, ibrutinib (FDA approved for MCL, CLL, and WM
and marketed by AbbVie and Janssen), the BTK inhibitor ACP-196
(under development by AstraZeneca), or the BCL-2 inhibitor ABT-199
(FDA approved for CLL and marketed by AbbVie and
Roche).
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;
●
pharmaceutical
development, clinical trial and pharmaceutical commercialization
experience;
●
experience and
expertise in exploitation of intellectual property rights;
and
As a
result of these factors, our competitors may obtain regulatory
approval of their products more rapidly than us or may obtain
patent protection or other intellectual property rights that limit
our ability to develop or commercialize our product candidates. Our
competitors may also develop products for the treatment of
lymphoma, CLL, or other B-cell and autoimmune related disorders
that are more effective, better tolerated, more useful and less
costly than ours and may also be more successful in manufacturing
and marketing their products. Our competitors may succeed in
obtaining approvals from the FDA and foreign regulatory authorities
for their product candidates sooner than we do for our
products.
We will
also face competition from these third parties in recruiting and
retaining qualified personnel, establishing clinical trial sites
and enrolling patients for clinical trials and in identifying and
in-licensing new product candidates.
We rely completely on third parties to manufacture our preclinical
and clinical pharmaceutical supplies and we intend to rely on third
parties to produce commercial supplies of any approved product
candidate, and our commercialization of any of our product
candidates could be stopped, delayed or made less profitable if
those third parties fail to obtain approval of the FDA, fail to
provide us with sufficient quantities of pharmaceutical product or
fail to do so at acceptable quality levels or prices.
The
facilities used by our contract manufacturers to manufacture our
product candidates must be approved by the FDA pursuant to
inspections that will be conducted only after we submit a BLA or
NDA to the FDA, if at all. We do not control the manufacturing
process of our product candidates and are completely dependent on
our contract manufacturing partners for compliance with the
FDA’s requirements for manufacture of finished pharmaceutical
products (good manufacturing practices, GMP). If our contract
manufacturers cannot successfully manufacture material that
conforms to our target product specifications, patent
specifications, and/or the FDA’s strict regulatory
requirements of safety, purity and potency, we will not be able to
secure and/or maintain FDA approval for our product candidates. In
addition, we have no control over the ability of our contract
manufacturers to maintain adequate quality control, quality
assurance and qualified personnel. If our contract manufacturers
cannot meet FDA standards, we may need to find alternative
manufacturing facilities, which would significantly impact our
ability to develop, obtain regulatory approval for or market our
product candidates. 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.
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 current
contract manufacturers or with any fill/finish suppliers, and
though we intend to do so prior to commercial launch of our product
candidates in order to ensure that we maintain adequate supplies of
finished product, 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.
35
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.
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.
We currently have no marketing and sales organization and no
experience in marketing pharmaceutical products. If we are unable
to establish sales and marketing capabilities or fail to enter into
agreements with third parties to market and sell any products we
may develop, we may not be able to effectively market and sell our
products and generate product revenue.
We do
not currently have the infrastructure for the sales, marketing and
distribution of our biotechnology products, and we must build this
infrastructure or make arrangements with third parties to perform
these functions in order to commercialize our products. We plan to
either develop internally or enter into collaborations or other
commercial arrangements to develop further, promote and sell all or
a portion of our product candidates.
The
establishment and development of a sales force, either by us or
jointly with a development partner, or the establishment of a
contract sales force to market any products we may develop will be
expensive and time-consuming and could delay any product launch,
and we cannot be certain that we or our development partners would
be able to successfully develop this capability. If we or our
development partners are unable to establish sales and marketing
capability or any other non-technical capabilities necessary to
commercialize any products we may develop, we will need to contract
with third parties to market and sell such products. We currently
possess limited resources and may not be successful in establishing
our own internal sales force or in establishing arrangements with
third parties on acceptable terms, if at all.
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 is also necessary for commercial success. The
degree of market acceptance of any of our approved products will
depend on a number of factors, including:
●
the efficacy and
safety as demonstrated in clinical trials;
●
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 product candidates over alternative
treatments;
●
the safety of
product candidates seen in a broader patient group, including its
use outside the approved indications;
●
the cost of
treatment in relation to alternative treatments;
●
the availability of
adequate reimbursement and pricing by third parties and government
authorities;
●
relative
convenience and ease of administration;
●
the prevalence and
severity of adverse events; and
●
the effectiveness
of our sales and marketing efforts.
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.
36
If product liability lawsuits are brought against us, we may incur
substantial liabilities and may be required to limit
commercialization of our product candidates.
We face
an inherent risk of product liability exposure related to the
testing of our product candidates in human clinical trials, and
will face an even greater risk if we sell our product candidates
commercially. Although we are not aware of any historical or
anticipated product liability claims against us, if we cannot
successfully defend ourselves against product liability claims, we
may incur substantial liabilities or be required to cease clinical
trials of our drug candidates or limit commercialization of any
approved products. An individual may bring a liability claim
against us if one of our product candidates causes, or merely
appears to have caused, an injury. If we cannot successfully defend
our self against product liability claims, we will incur
substantial liabilities. Regardless of merit or eventual outcome,
liability claims may result in:
●
decreased demand for our product candidates;
|
|
●
impairment to our business reputation;
|
|
●
withdrawal of clinical trial participants;
|
|
●
costs of related litigation;
|
|
●
distraction of management’s attention from our primary
business;
|
|
●
substantial monetary awards to patients or other
claimants;
|
|
●
the inability to commercialize our product candidates;
and
|
|
We
believe that we have obtained sufficient product liability
insurance coverage for our clinical trials. We intend to expand our
insurance coverage to include the sale of commercial products if
marketing approval is obtained for any of our product candidates.
However, we may be unable to obtain this product liability
insurance on commercially reasonable terms and with insurance
coverage that will be adequate to satisfy any liability that may
arise. On occasion, large judgments have been awarded in class
action or individual lawsuits relating to marketed pharmaceuticals.
A successful product liability claim or series of claims brought
against us could cause our stock price to decline and, if judgments
exceed our insurance coverage, could decrease our cash and
adversely affect our business.
Reimbursement may be limited or unavailable in certain market
segments for our product candidates, which could make it difficult
for us to sell our products profitably.
We
intend to seek approval to market our future products in both the
United States and in countries and territories outside the United
States. If we obtain approval in one or more foreign countries, we
will be subject to rules and regulations in those countries
relating to our product. In some foreign countries, particularly in
the European Union, the pricing of prescription pharmaceuticals and
biologics is subject to governmental control. In these countries,
pricing negotiations with governmental authorities can take
considerable time after the receipt of marketing approval for a
product candidate. In addition, market acceptance and sales of our
product candidates will depend significantly on the availability of
adequate coverage and reimbursement from third-party payors for any
of our product candidates and may be affected by existing and
future healthcare reform measures.
Government
authorities and third-party payors, such as private health insurers
and health maintenance organizations, decide which pharmaceuticals
they will pay for and establish reimbursement levels. Reimbursement
by a third-party payor may depend upon a number of factors,
including the third-party payor’s determination that use of a
product is:
●
a covered benefit under its health plan;
|
|
●
safe, effective and medically necessary;
|
|
●
appropriate for the specific patient;
|
|
●
neither experimental nor investigational.
|
|
37
Obtaining coverage
and reimbursement approval for a product from a government or other
third-party payor is a time consuming and costly process that could
require that we provide supporting scientific, clinical and
cost-effectiveness data for the use of our products to the payor.
We may not be able to provide data sufficient to gain acceptance
with respect to coverage and reimbursement. If reimbursement of our
future products is unavailable or limited in scope or amount, or if
pricing is set at unsatisfactory levels, we may be unable to
achieve or sustain profitability. Additionally, while we may seek
approval of our products in combination with each other, there can
be no guarantee that we will obtain coverage and reimbursement for
any of our products together, or that such reimbursement will
incentivize the use of our products in combination with each other
as opposed to in combination with other agents which may be priced
more favorably to the medical community.
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. Most recently, the
Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act of 2010, collectively,
the “Affordable Care Act,” was enacted. The Affordable
Care Act contains a number of provisions, including those governing
enrollment in federal healthcare programs, the increased use of
comparative effectiveness research on healthcare products,
reimbursement and fraud and abuse changes, and 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. An expansion in the
government’s role in the U.S. healthcare industry may further
lower rates of reimbursement for pharmaceutical and biotechnology
products.
There
have been, and 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:
●
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;
●
our ability
to generate revenues and achieve or maintain
profitability;
●
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 will need to increase the size of our organization and the scope
of our outside vendor relationships, and we may experience
difficulties in managing this growth.
As of
November 1, 2016, we had fifty-eight full and part time employees.
Over time, we will need to expand our managerial, operational,
financial and other resources in order to manage and fund our
operations and clinical trials, continue research and development
activities, and commercialize our product candidates. Our
management and scientific personnel, systems and facilities
currently in place may not be adequate to support our future
growth. Our need to effectively manage our operations, growth, and
various projects requires that we:
●
manage our clinical
trials effectively;
●
manage our internal
development efforts effectively while carrying out our contractual
obligations to licensors, contractors and other third
parties;
●
continue to improve
our operational, financial and management controls and reporting
systems and procedures; and
●
attract and retain
sufficient numbers of talented employees.
38
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.
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 will
need to expand and effectively manage our managerial, operational,
financial and other resources in order to successfully pursue our
clinical development and commercialization efforts for our product
candidates and future product candidates. We are highly dependent
on the development, regulatory, commercial and financial expertise
of the members of our senior management. The loss of the services
of any of our senior management could delay or prevent the further
development and potential commercialization of our product
candidates and, if we are not successful in finding suitable
replacements, could harm our business. We do not maintain
“key man” insurance policies on the lives of these
individuals. We will need to hire additional personnel as we
continue to expand our manufacturing, research and development
activities.
Our
success depends on our continued ability to attract, retain and
motivate highly qualified management and scientific personnel and
we may not be able to do so in the future due to the intense
competition for qualified personnel among biotechnology,
pharmaceutical and other businesses. Our industry has experienced a
high rate of turnover of management personnel in recent years. 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.
If we fail to comply with healthcare regulations, we could face
substantial penalties and our business, operations and financial
condition could be adversely affected.
In
addition to FDA restrictions on the marketing of pharmaceutical and
biotechnology products, several other types of state and federal
laws have been applied to restrict certain marketing practices in
the pharmaceutical and medical device industries in recent years,
as well as consulting or other service agreements with physicians
or other potential referral sources. These laws include
anti-kickback statutes and false claims statutes that prohibit,
among other things, knowingly and willfully offering, paying,
soliciting or receiving remuneration to induce, or, in return for,
purchasing, leasing, ordering or arranging for the purchase, lease
or order of any healthcare item or service reimbursable under
Medicare, Medicaid or other federally-financed healthcare programs,
and knowingly presenting, or causing to be presented, a false claim
for payment to the federal government, or knowingly making, or
causing to be made, a false statement to get a false claim paid.
The majority of states also have statutes or regulations similar to
the federal anti-kickback law and false claims laws, which apply to
items and services reimbursed under Medicaid and other state
programs, or, in several states, apply regardless of the payor.
Although there are a number of statutory exemptions and regulatory
safe harbors protecting certain common activities from prosecution,
the exemptions and safe harbors are drawn narrowly, and any
practices we adopt may not, in all cases, meet all of the criteria
for safe harbor protection from anti-kickback liability. Sanctions
under these federal and state laws may include civil monetary
penalties, exclusion of a manufacturer’s products from
reimbursement under government programs, criminal fines and
imprisonment. Any challenge to its business practices under these
laws could have a material adverse effect on our business,
financial condition, and results of operations.
39
We use biological and hazardous materials, and any claims relating
to improper handling, storage or disposal of these materials could
be time consuming or costly.
We use
hazardous materials, including chemicals and biological agents and
compounds, which could be dangerous to human health and safety or
the environment. Our operations also produce hazardous waste
products. Federal, state and local laws and regulations govern the
use, generation, manufacture, storage, handling and disposal of
these materials and wastes. Compliance with applicable
environmental laws and regulations may be expensive, and current or
future environmental laws and regulations may impair our
pharmaceutical development efforts.
In
addition, we cannot entirely eliminate the risk of accidental
injury or contamination from these materials or wastes. If one of
our employees was accidentally injured from the use, storage,
handling or disposal of these materials or wastes, the medical
costs related to his or her treatment would be covered by our
workers’ compensation insurance policy. However, we do not
carry specific biological or hazardous waste insurance coverage and
our property and casualty and general liability insurance policies
specifically exclude coverage for damages and fines arising from
biological or hazardous waste exposure or contamination.
Accordingly, in the event of contamination or injury, we could be
held liable for damages or penalized with fines in an amount
exceeding our resources, and our clinical trials or regulatory
approvals could be suspended, or operations otherwise
affected.
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.
Risks Relating to Acquisitions
Acquisitions, investments and strategic alliances that we may make
in the future may use significant resources, result in disruptions
to our business or distractions of our management, may not proceed
as planned, and could expose us to unforeseen
liabilities.
We may
seek to expand our business through the acquisition of, investments
in and strategic alliances with companies, technologies, products,
and services. Acquisitions, investments and strategic alliances
involve a number of special problems and risks, including, but not
limited to:
●
difficulty
integrating acquired technologies, products, services, operations
and personnel with the existing businesses;
●
diversion of
management’s attention in connection with both negotiating
the acquisitions and integrating the businesses;
●
strain on
managerial and operational resources as management tries to oversee
larger operations;
●
difficulty
implementing and maintaining effective internal control over
financial reporting at businesses that we acquire, particularly if
they are not located near our existing operations;
●
exposure to
unforeseen liabilities of acquired companies;
●
potential costly
and time-consuming litigation, including stockholder
lawsuits;
●
potential issuance
of securities to equity holders of the company being acquired with
rights that are superior to the rights of holders of our common
stock or which may have a dilutive effect on our
stockholders;
●
risk of loss of
invested capital;
●
the need to incur
additional debt or use cash; and
●
the requirement to
record potentially significant additional future operating costs
for the amortization of intangible assets.
As a
result of these or other problems and risks, businesses we acquire
may not produce the revenues, earnings, or business synergies that
we anticipated, and acquired products, services, or technologies
might not perform as we expected. As a result, we may incur higher
costs and realize lower revenues than we had anticipated. We may
not be able to successfully address these problems and we cannot
assure you that the acquisitions will be successfully identified
and completed or that, if acquisitions are completed, the acquired
businesses, products, services, or technologies will generate
sufficient revenue to offset the associated costs or other negative
effects on our business.
Any of
these risks can be greater if an acquisition is large relative to
our size. Failure to effectively manage our growth through
acquisitions could adversely affect our growth prospects, business,
results of operations, financial condition and cash
flows.
40
Risks Relating to Our Intellectual Property
Our success depends upon our ability to protect our intellectual
property and proprietary technologies, and the intellectual
property protection for our product candidates depends
significantly on third parties.
Our
commercial success depends on obtaining and maintaining patent
protection and trade secret protection for our product candidates
and their formulations and uses, as well as successfully defending
these patents against third-party challenges. If any of our
licensors or partners fails to appropriately prosecute and maintain
patent protection for these product candidates, 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 have a material adverse effect on our financial
condition and results of operations.
Currently, the
composition of matter patent and several method of use patents for
TG-1101 and TGR-1202 in various
indications and settings have 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.
While composition of matter patents have been granted in the US for
TG-1101 and TGR-1202, no patents to date have been issued for our
IRAK4 inhibitor and anti-PD-L1 and anti-GITR programs. 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.
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 U.S. 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 make, use,
and sell our potential products either in the United States or in
international markets;
●
there may be
significant pressure on the U.S. 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 to patents, we and our partners also rely on trade secrets
and proprietary know-how. Although we have taken steps to protect
our trade secrets and unpatented know-how, including entering into
confidentiality agreements with third parties, and confidential
information and inventions agreements with employees, consultants
and advisors, third parties may still obtain this information or we
may be unable to protect its rights. If any of these events occurs,
or we otherwise lose protection for our trade secrets or
proprietary know-how, the value of this information may be greatly
reduced.
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.
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 also depends upon our ability and the ability of
any of our future collaborators to develop, manufacture, market and
sell our product candidates without infringing the proprietary
rights of third parties. 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. For example, Roche has
the Cabilly patents in the U.S. that block the commercialization of
antibody products derived from a single cell line, like
TG-1101. Also, Roche, Biogen
Idec, and Genentech hold patents for the use of anti-CD20
antibodies utilized in the treatment of CLL in the U.S. 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
enforced at the time we are intending to launch TG-1101, 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 are unable to
do so we may be forced to delay the launch of TG-1101 or launch at the risk of litigation
for patent infringement, which may have a material adverse effect
on our business and results of operations.
41
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.
There
is a substantial amount of litigation involving patent and other
intellectual property rights in the biotechnology and
biopharmaceutical industries generally. If a third party claims
that we or any collaborators of ours infringe their intellectual
property rights, we may have to:
●
obtain licenses,
which may not be available on commercially reasonable terms, if at
all;
●
abandon an
infringing product candidate or redesign its products or processes
to avoid infringement;
●
pay substantial
damages, including treble damages and attorneys’ fees, which
we may have to pay if a court decides that the product or
proprietary technology at issue infringes on or violates the third
party’s rights;
●
pay substantial
royalties, fees and/or grant cross licenses to our technology;
and/or
●
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.
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 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. 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 patents at risk of being
invalidated, held unenforceable, or interpreted narrowly. The
adverse result could also put related patent applications at risk
of not issuing.
Interference
proceedings provoked by third parties or brought by the U.S. Patent
and Trademark Office (“PTO”) may be necessary to
determine the priority of inventions with respect to our patents or
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. 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.
Furthermore,
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. In addition, 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.
We may be subject to claims that our consultants or independent
contractors have wrongfully used or disclosed alleged trade secrets
of their other clients or former employers to it.
As is
common in the biotechnology and pharmaceutical industry, we engage
the services of consultants to assist us in the development of our
product candidates. Many of these consultants were previously
employed at, may have previously been, or are currently providing
consulting services to, other biotechnology or pharmaceutical
companies, including our competitors or potential competitors.
Although no claims against us are currently pending, we may be
subject to claims that these consultants or we have inadvertently
or otherwise used or disclosed trade secrets or other proprietary
information of their former employers or their former or current
customers. 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 be a
distraction to management and day-to-day business
operations.
42
Risks Relating to Our Finances and Capital
Requirements
We will need to raise additional capital to continue to operate our
business.
As of
September 30, 2016, we had approximately $60.7 million in cash,
cash equivalents, investment securities, and interest receivable,
which we believe will be sufficient to fund the company’s
planned operations into the first half of 2018.
As a
result, we will need additional capital to continue our operations
beyond that time. 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 and
marketing efforts and 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.
We have a history of operating losses, expect to continue to incur
losses, and are unable to predict the extent of future losses or
when we will become profitable, if ever.
We have
not yet applied for or demonstrated an ability to obtain regulatory
approval for or commercialize a product candidate. Our short
operating history makes it difficult to evaluate our business
prospects and consequently, any predictions about our future
performance may not be as accurate as they could be if we had a
history of successfully developing and commercializing
pharmaceutical or biotechnology products. 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.
We have
never been profitable and, as of September 30, 2016, we had an
accumulated deficit of $212.7 million. We have generated operating
losses in all periods since we were incorporated. We expect to make
substantial expenditures resulting in increased operating costs in
the future and our accumulated deficit will increase significantly
as we expand development and clinical trial efforts for our product
candidates. Our losses have had, and are expected to continue to
have, an adverse impact on our working capital, total assets and
stockholders’ equity. Because of the risks and uncertainties
associated with product development, we are unable to predict the
extent of any future losses or when we will become profitable, if
ever. Even if we achieve profitability, we may not be able to
sustain or increase profitability on an ongoing basis.
We have not generated any revenue from our product candidates and
may never become profitable.
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 (or utilize early access programs
to generate such revenue). To date, our product candidates have not
generated any revenues, and we do not know when, or if, we will
generate any revenue. Our ability to generate revenue depends on a
number of factors, including, but not limited to:
●
successful
completion of preclinical studies of our product
candidates;
●
successful
commencement and completion of clinical trials of our product
candidates and any future product candidates we advance into
clinical trials;
●
achievement of
regulatory approval for our product candidates and any future
product candidates we advance into clinical trials (unless we
successfully utilize early access programs which allow for revenue
generation prior to approval);
●
manufacturing
commercial quantities of our products at acceptable cost levels if
regulatory approvals are obtained;
●
successful sales,
distribution and marketing of our future products, if any;
and
●
our entry into
collaborative arrangements or co-promotion agreements to market and
sell our products.
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 substantial additional funding and may be unable to
raise capital when needed, which would force us to delay, reduce or
eliminate our development programs or commercialization
efforts.
We
expect to spend substantial amounts on development, including
significant amounts on conducting clinical trials for our product
candidates, manufacturing clinical supplies and expanding our
pharmaceutical development programs. We expect that our monthly
cash used by operations will continue to increase for the next
several years. We anticipate that we will continue to incur
operating losses for the foreseeable future.
43
We will
require substantial additional funds to support our continued
research and development activities, as well as the anticipated
costs of preclinical studies and clinical trials, regulatory
approvals, and eventual commercialization. We anticipate that we
will incur operating losses for the foreseeable future. We have
based these estimates, however, on assumptions that may prove to be
wrong, and we could expend our available financial resources much
faster than we currently expect. Further, we will need to raise
additional capital to fund our operations and continue to conduct
clinical trials to support potential regulatory approval of
marketing applications. Future capital requirements will also
depend on the extent to which we acquire or in-license additional
product candidates. We currently have no commitments or agreements
relating to any of these types of transactions.
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.
Until
we can generate a sufficient amount of product revenue and achieve
profitability, we expect to finance future cash needs through
public or private equity offerings, debt financings or corporate
collaboration and licensing arrangements, as well as through
interest income earned on cash balances. If we were to be unable to
raise additional capital, we would have to significantly delay,
scale back or discontinue one or more of our pharmaceutical
development programs. We also may be required to relinquish,
license or otherwise dispose of rights to product candidates or
products that it would otherwise seek to develop or commercialize
itself on terms that are less favorable than might otherwise be
available.
Raising additional funds by issuing securities or through licensing
or lending arrangements may cause dilution to our existing
stockholders, restrict our operations or require us to relinquish
proprietary rights.
We may
raise additional funds through public or private equity offerings,
debt financings or licensing arrangements. To the extent that we
raise additional capital by issuing equity securities, the share
ownership of existing stockholders will be diluted. Any future debt
financing we enter into may involve covenants that restrict our
operations, including limitations on our ability to incur liens or
additional debt, pay dividends, redeem our stock, make certain
investments and engage in certain merger, consolidation or asset
sale transactions, among other restrictions.
In
addition, if we raise additional funds through licensing
arrangements, it may be necessary to relinquish potentially
valuable rights to our product candidates, or grant licenses on
terms that are not favorable to us. If adequate funds are not
available, our ability to achieve profitability or to respond to
competitive pressures would be significantly limited and we may be
required to delay, significantly curtail or eliminate the
development of one or more of our product candidates.
Risks Related to Our Common Stock
We are controlled by current officers, directors and principal
stockholders.
Our
directors, executive officers, their affiliates, and our principal
stockholders beneficially own approximately 58% percent of our
outstanding voting stock, including shares underlying outstanding
options and warrants. Our directors, officers and principal
stockholders, taken as a whole, have the ability to exert
substantial influence over the election of our Board of Directors
and the outcome of issues submitted to our
stockholders.
44
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.
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.
We have not paid dividends in the past and do not expect to pay
dividends in the future, and any return on investment may be
limited to the value of your stock.
We have
never paid dividends on our common stock and do not anticipate
paying any dividends for the foreseeable future. You should not
rely on an investment in our stock if you require dividend income.
Further, you will only realize income on an investment in our stock
in the event you sell or otherwise dispose of your shares at a
price higher than the price you paid for your shares. Such a gain
would result only from an increase in the market price of our
common stock, which is uncertain and unpredictable.
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.
45
ITEM
6. EXHIBITS
The
exhibits listed on the Exhibit Index are included with this
report.
|
|
|
|
31.1
|
Certification of
Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
dated November 9, 2016.
|
|
|
|
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31.2
|
Certification of
Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
dated November 9, 2016.
|
|
|
|
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32.1
|
Certification of
Chief Executive Officer pursuant to 18 U.S.C. §1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
dated November 9, 2016.
|
|
|
|
|
32.2
|
Certification of
Chief Financial Officer pursuant to 18 U.S.C. §1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
dated November 9, 2016.
|
|
|
|
|
101
|
The
following financial information from the Company’s Quarterly
Report on Form 10-Q for the period ended September 30, 2016,
formatted in Extensible Business Reporting Language (XBRL): (i) the
Condensed Consolidated Balance Sheets, (ii) the Condensed
Consolidated Statements of Operations, (iii) the Condensed
Consolidated Statement of Stockholders’ Equity, (iv) the
Condensed Consolidated Statements of Cash Flows, and (v) Notes to
the Condensed Consolidated Financial Statements (filed
herewith).
|
46
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
|
|
|
|
TG
THERAPEUTICS, INC.
|
|
|
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Date:
November 9, 2016
|
By:
|
/s/
Sean A. Power
|
|
Sean A.
Power
Chief
Financial Officer
Principal Financial
and Accounting Officer
|
47
EXHIBIT
INDEX
The
following exhibits are included as part of this Quarterly Report on
Form 10-Q:
|
|
|
|
31.1
|
Certification of
Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
dated November 9, 2016.
|
|
|
|
|
31.2
|
Certification of
Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
dated November 9, 2016.
|
|
|
|
|
32.1
|
Certification of
Chief Executive Officer pursuant to 18 U.S.C. §1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
dated November 9, 2016.
|
|
|
|
|
32.2
|
Certification of
Chief Financial Officer pursuant to 18 U.S.C. §1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
dated November 9, 2016.
|
|
|
|
|
101
|
The
following financial information from the Company’s Quarterly
Report on Form 10-Q for the period ended September 30, 2016,
formatted in Extensible Business Reporting Language (XBRL): (i) the
Condensed Consolidated Balance Sheets, (ii) the Condensed
Consolidated Statements of Operations, (iii) the Condensed
Consolidated Statement of Stockholders’ Equity, (iv) the
Condensed Consolidated Statements of Cash Flows, and (v) Notes to
the Condensed Consolidated Financial Statements (filed
herewith).
|
48
Untitled Document
Exhibit 31.1
CERTIFICATION
OF PERIODIC REPORT PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, Michael S.
Weiss, certify that:
1.
|
I have reviewed
this quarterly report on Form 10-Q of TG Therapeutics,
Inc.;
|
2.
|
Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
|
3.
|
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
|
4.
|
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
a)
|
|
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
b)
|
|
Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
c)
|
|
Evaluated the
effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
d)
|
|
Disclosed in this
report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
|
5.
|
The
registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
a)
|
|
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information;
and
|
b)
|
|
Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant’s internal control
over financial reporting.
|
Date: November 9,
2016
|
|
/s/ Michael S.
Weiss
|
|
Michael S.
Weiss
Executive Chairman,
Interim Chief Executive Officer and President
Principal Executive
Officer
|
Untitled Document
Exhibit
31.2
CERTIFICATION
OF PERIODIC REPORT PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, Sean A. Power,
certify that:
1.
|
I have reviewed
this quarterly report on Form 10-Q of TG Therapeutics,
Inc.;
|
2.
|
Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
|
3.
|
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
|
4.
|
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
a)
|
|
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
b)
|
|
Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
c)
|
|
Evaluated the
effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
d)
|
|
Disclosed in this
report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
|
5.
|
The
registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
|
a)
|
|
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information;
and
|
b)
|
|
Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant’s internal control
over financial reporting.
|
Date: November 9,
2016
|
|
/s/ Sean A.
Power
|
|
Sean A.
Power
Chief Financial
Officer
Principal Financial
and Accounting Officer
|
Untitled Document
Exhibit 32.1
STATEMENT
OF CHIEF EXECUTIVE OFFICER OF
TG
THERAPEUTICS, INC.
PURSUANT
TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the quarterly report of TG Therapeutics, Inc. (the
“Company”) on Form 10-Q for the period ended September
30, 2016 as filed with the Securities and Exchange Commission (the
“Report”), I, Michael S. Weiss, Chief Executive Officer
of the Company, certify, pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002,
that, based on my knowledge:
1) The
Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2) The
information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
Date: November 9,
2016
|
|
/s/ Michael S.
Weiss
|
|
Michael S.
Weiss
Executive Chairman,
Interim Chief Executive Officer and President
Principal Executive
Officer
|
Untitled Document
Exhibit 32.2
STATEMENT
OF CHIEF FINANCIAL OFFICER OF
TG
THERAPEUTICS, INC.
PURSUANT
TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the quarterly report of TG Therapeutics, Inc. (the
“Company”) on Form 10-Q for the period ended September
30, 2016 as filed with the Securities and Exchange Commission (the
“Report”), I, Sean A. Power, Chief Financial Officer of
the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that,
based on my knowledge:
1) The Report
fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2) The
information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
Date: November 9,
2016
|
|
/s/ Sean A.
Power
|
|
Sean A.
Power
Chief
Financial Officer
Principal Financial
and Accounting Officer
|