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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, 2020

 

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 001-32639

TG THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

36-3898269

(State or other jurisdiction of incorporation or organization)

(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

(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Class

Trading Symbol(s) 

Exchange Name

Common Stock, par value $0.001

TGTX

Nasdaq Capital Market

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 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, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

 

 

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No

There were 131,490,195 shares of the registrant’s common stock, $0.001 par value, outstanding as of November 4, 2020.

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TG THERAPEUTICS, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2020

TABLE OF CONTENTS

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

 

3

SUMMARY RISK FACTORS

4

 

 

 

PART I

FINANCIAL INFORMATION

 

6

 

Item 1

Financial Statements:

 

6

 

Condensed Consolidated Balance Sheets

 

6

 

Condensed Consolidated Statements of Operations (unaudited)

 

7

 

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity (unaudited)

 

8

 

Condensed Consolidated Statements of Cash Flows (unaudited)

 

9

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

10

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

27

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

 

36

 

Item 4

Controls and Procedures

 

37

 

PART II

OTHER INFORMATION

 

37

 

Item 1

Legal Proceedings

 

37

 

Item 1A

Risk Factors

 

37

 

Item 6

Exhibits

 

89

2

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SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this report, including matters discussed under the captions “Business” and “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, (the “Securities Act”), and the Securities Exchange Act of 1934, as amended, (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. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” or the negative of these words or other comparable terminology, although not all forward-looking statements contain these identifying words. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety 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. 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;
products being accepted 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;
availability of 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 and its volatility;
expectations for future capital requirements; and
potential impact of the coronavirus (“COVID-19”) pandemic and government measures to control it.

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. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or enter into.

You should read this report and the documents that we have filed as exhibits to this report completely and with the understanding that our actual future results, performance or achievements may be materially different from what we expect. Any forward-looking statements contained in this report reflect our current views with respect to future events or

3

Table of Contents

to our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. 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 obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This report also contains estimates, projections and other information concerning our industry, our business and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

SUMMARY RISK FACTORS

Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks include the following:

We are a biopharmaceutical company with a limited operating history and have not generated any revenue from drug sales. We have incurred significant operating losses since our inception and anticipate that we will incur continued losses for the foreseeable future.
If we are unable to obtain regulatory approval for our most advanced drug candidates or other drug candidates and ultimately cannot commercialize our most advanced drug candidates or other drug candidates, or experience significant delays in doing so, our business will be materially harmed.
We will need to raise substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate some of our drug development programs or commercialization efforts.
Our level of indebtedness and debt service obligations could adversely affect our financial condition, and may make it more difficult for us to fund our operations.
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.  Moreover, interim, “top-line,” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our drug candidates.
We may seek accelerated approval for some of our product candidates but may not be able to obtain it as the sufficiency of our clinical trial results for accelerated approval are subject to the FDA’s discretion.
Our drug candidates may cause undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.
Any product candidates we may advance through clinical development are subject to extensive regulation, which can be costly and time consuming, cause unanticipated delays or prevent the receipt of the required approvals.
A fast track or breakthrough therapy designation by the FDA may not actually lead to a faster development or regulatory review or approval process.
We have received orphan drug designation for some of our drug candidates for specified indications, and we may seek orphan drug designation for additional indications and some other of our drug candidates. However, we may be unsuccessful in obtaining or may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.
The incidence and prevalence for the target patient populations of our drug candidates have not been established with precision. If the market opportunities for our drug candidates are smaller than we estimate or if any approval

4

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that we obtain is based on a narrower definition of the patient population, our revenue and ability to achieve profitability will be adversely affected, possibly materially.
We face substantial competition for treatments for our target indications, which may result in others commercializing drugs before or more successfully than we do resulting in the reduction or elimination of our commercial opportunity.
Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any drug candidates that we may develop.
We are subject to new legislation, regulatory proposals and managed care initiatives that may increase our costs of compliance and adversely affect our ability to market our products, obtain collaborators and raise capital.
Major public health issues, and specifically the pandemic caused by COVID-19, could have an adverse impact on our financial condition and results of operations and other aspects of our business.
If any product candidate for which we receive regulatory approval 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.
We rely on third parties to generate clinical, preclinical and other data necessary to support the regulatory applications needed to conduct clinical trials and file for marketing approval. We rely on third parties to help conduct our planned clinical trials. If these third parties do not perform their services as required, we may not be able to obtain regulatory approval for or commercialize our product candidates when expected or at all.
We contract with third parties for the manufacture of our drug candidates for pre-clinical development and clinical trials, and we expect to continue to do so for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our drug candidates or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.
Our success depends upon our ability to obtain and protect our intellectual property and proprietary technologies and if the scope of our patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully commercialize our technology and drugs may be impaired.
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.
Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
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.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position may be harmed.
We will need to develop and expand our business, and we may encounter difficulties in managing this development and expansion, which could disrupt our operations.
Our stock price is, and we expect it to remain, volatile, which could limit investors ability to sell stock at a profit.

The foregoing is only a summary of some of our risks. These and other risks are discussed more fully in the section entitled “Risk Factors” in Part II, Item IA and elsewhere in this Quarterly Report on Form 10-Q (our “Risk Factors”).

5

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TG Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

September 30, 

December 31, 

    

2020

    

2019

    

(Unaudited)

(Note 1)

 

Assets

Current assets:

 

  

 

  

Cash and cash equivalents

$

254,154

$

112,637

Short-term investment securities

 

 

27,798

Prepaid research and development

 

5,540

 

8,105

Other current assets

 

641

 

611

Total current assets

 

260,335

 

149,151

Restricted cash

 

1,257

 

1,251

Leasehold interest, net

 

2,104

 

2,129

Equipment, net

 

378

 

282

Right-of-use-assets

8,983

9,402

Goodwill

 

799

 

799

Total assets

$

273,856

$

163,014

 

  

 

  

Liabilities and stockholders’ equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable and accrued expenses

$

34,659

$

30,041

Other current liabilities

21,735

48,994

Loan payable – current portion

14,590

Lease liability – current portion

1,614

1,616

Accrued compensation

 

5,072

 

3,798

Total current liabilities

 

77,670

 

84,449

Deferred revenue, net of current portion

 

648

 

762

Long-term debt

15,074

28,970

Lease liability – non-current

9,806

10,218

Total liabilities

 

103,198

 

124,399

Commitments and contingencies

 

  

 

  

Stockholders’ equity:

 

  

 

  

Common stock, $0.001 par value per share (150,000,000 shares authorized, 128,959,861 and 109,425,243 shares issued, 128,918,552 and 109,383,934 shares outstanding at September 30, 2020 and December 31, 2019, respectively)

 

129

 

109

Additional paid-in capital

 

1,063,142

 

739,956

Treasury stock, at cost, 41,309 shares at September 30, 2020 and December 31, 2019

 

(234)

 

(234)

Accumulated deficit

 

(892,379)

 

(701,216)

Total stockholders’ equity

 

170,658

 

38,615

Total liabilities and stockholders’ equity

$

273,856

$

163,014

The accompanying notes are an integral part of the condensed consolidated financial statements.

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TG Therapeutics, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

Three months ended

Nine months ended

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

 

  

 

  

 

  

 

  

License revenue

$

38

$

38

$

114

$

114

 

  

 

  

 

  

 

  

Costs and expenses:

 

  

 

  

 

  

 

  

Research and development:

 

  

 

  

 

  

 

  

Noncash stock expense associated with in-licensing agreements

 

 

 

 

100

Noncash compensation

 

4,618

 

1,482

 

8,150

 

4,323

Other research and development

 

45,846

 

56,503

 

114,785

 

118,814

Total research and development

 

50,464

 

57,985

 

122,935

 

123,237

 

 

  

 

  

 

  

General and administrative:

 

 

  

 

  

 

  

Noncash compensation

 

23,712

 

593

 

38,618

 

1,391

Other general and administrative

 

11,584

 

2,321

 

25,373

 

6,580

Total general and administrative

 

35,296

 

2,914

 

63,991

 

7,971

 

 

  

 

  

 

  

Total costs and expenses

 

85,760

 

60,899

 

186,926

 

131,208

 

  

 

  

 

  

 

  

Operating loss

 

(85,722)

 

(60,861)

 

(186,812)

 

(131,094)

 

  

 

  

 

  

 

  

Other expense (income):

 

  

 

  

 

  

 

  

Interest expense

 

1,610

 

1,537

 

5,038

 

3,388

Other income

 

(169)

 

(468)

 

(687)

 

(1,183)

Total other expense, net

 

1,441

 

1,069

 

4,351

 

2,205

 

  

 

  

 

  

 

  

Net loss

$

(87,163)

$

(61,930)

$

(191,163)

$

(133,299)

 

  

 

  

 

  

 

  

Basic and diluted net loss per common share

$

(0.73)

$

(0.69)

$

(1.70)

$

(1.55)

 

  

 

  

 

  

 

  

Weighted average shares used in computing basic and diluted net loss per common share

 

119,176,336

 

89,667,979

 

112,380,784

 

85,911,878

The accompanying notes are an integral part of the condensed consolidated financial statements.

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TG Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

(in thousands, except share and per share amounts)

(Unaudited)

    

    

    

Additional

    

    

    

Common Stock

paid-in

Treasury Stock  

Accumulated

Shares

Amount

 capital

Shares

Amount 

Deficit

Total

Balance at January 1, 2019

 

83,911,855

$

84

$

552,531

41,309

$

(234)

$

(528,345)

$

24,036

Issuance of restricted stock

 

23,000

 

*

 

*

 

 

 

Warrants issued with debt financing

993

993

Forfeiture of restricted stock

 

(67,628)

 

*

 

*

 

 

 

Issuance of common stock in At-the-Market offerings (net of offering costs of $0.2 million)

 

4,715,000

 

5

 

27,494

 

 

 

27,499

Compensation in respect of restricted stock granted to employees, directors and consultants

 

 

 

1,882

 

 

 

1,882

Net loss

 

 

 

  

 

 

(35,156)

 

(35,156)

Balance at March 31, 2019

 

88,582,227

89

582,900

41,309

(234)

(563,501)

19,254

Issuance of restricted stock

 

1,245,080

 

1

 

(1)

 

 

 

Forfeiture of restricted stock

 

(38,418)

 

*

 

*

 

 

 

Issuance of common stock in public offering

11

11

Issuance of common stock in At-the-Market offerings (net of offering costs of $0.5 million)

 

3,616,359

 

3

 

28,392

 

 

 

28,395

Compensation in respect of restricted stock granted to employees, directors and consultants

 

 

 

1,757

 

 

 

1,757

Shares issued in connection with in-licensing agreements

 

 

 

 

 

 

Net loss

 

 

 

 

 

(36,212)

 

(36,212)

Balance at June 30, 2019

 

93,405,248

93

613,059

41,309

(234)

(599,713)

13,205

Issuance of restricted stock

 

318,440

 

*

 

*

 

 

 

Forfeiture of restricted stock

 

(5,334)

 

 

 

 

 

Issuance of common stock in At-the-Market offerings (net of offering costs of $0.4 million)

 

2,943,460

 

4

 

20,755

 

 

 

20,759

Compensation in respect of restricted stock granted to employees, directors and consultants

 

 

 

2,075

 

 

 

2,075

Shares issued in connection with in-licensing agreements

8,383

100

100

Net loss

 

 

 

 

 

(61,930)

 

(61,930)

Balance at September 30, 2019

 

96,670,197

$

97

$

635,989

41,309

$

(234)

$

(661,643)

$

(25,791)

    

    

    

Additional

    

    

    

Common Stock

paid-in

Treasury Stock  

Accumulated

Shares

Amount

 capital

Shares

Amount 

Deficit

Total

Balance at January 1, 2020

 

109,425,243

$

109

$

739,956

 

41,309

$

(234)

$

(701,216)

$

38,615

Issuance of common stock in connection with exercise of options

19,750

*

80

80

Issuance of restricted stock

 

774,300

 

1

 

(1)

 

 

 

 

Forfeiture of restricted stock

 

(10,000)

 

*

 

*

 

 

 

 

Compensation in respect of restricted stock granted to employees, directors and consultants 

 

 

 

11,068

 

 

 

 

11,068

Net loss 

 

 

 

 

 

 

(51,116)

 

(51,116)

Balance at March 31, 2020

 

110,209,293

110

751,103

 

41,309

(234)

(752,332)

(1,353)

Issuance of common stock in connection with exercise of options

3,750

16

16

Issuance of restricted stock

 

2,208,529

 

2

 

(2)

 

 

 

 

Forfeiture of restricted stock

 

(41,666)

 

*

 

 

 

 

 

Issuance of common stock in public offering (net of offering costs of $10.9 million)

 

9,775,000

 

10

 

165,032

 

 

 

 

165,042

Issuance of common stock in At-the-Market offerings (net of offering costs of $1.4 million)

 

4,535,608

 

5

 

76,031

 

 

 

 

76,036

Compensation in respect of restricted stock granted to employees, directors and consultants

 

 

 

7,370

 

 

 

 

7,370

Net loss

 

 

 

 

 

 

(52,884)

 

(52,884)

Balance at June 30, 2020

 

126,690,514

127

999,550

 

41,309

(234)

(805,216)

194,227

Issuance of common stock in connection with exercise of options

9,347

38

38

Issuance of restricted stock

 

915,000

 

1

 

(1)

 

 

 

 

Forfeiture of restricted stock

 

(65,000)

 

*

 

 

 

 

 

Issuance of common stock in offerings (net of offering costs of $10.9 million)

 

 

 

(1)

 

 

 

 

(1)

Issuance of common stock in At the Market offering (net of offering costs of $2.0 million)

 

1,410,000

 

1

 

35,226

 

 

 

 

35,227

Compensation in respect of restricted stock and options granted to employees, directors and consultants

 

 

 

28,330

 

 

 

 

28,330

Net loss

 

 

 

 

 

 

(87,163)

 

(87,163)

Balance at September 30, 2020

 

128,959,861

$

129

$

1,063,142

 

41,309

$

(234)

$

(892,379)

$

170,658

*Amount less than one thousand dollars

The accompanying notes are an integral part of the condensed consolidated financial statements.

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TG Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

Nine months ended

September 30, 

    

2020

    

2019

    

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

 

  

 

 

  

 

  

 

Net loss

$

(191,163)

$

(133,299)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

  

Noncash stock compensation expense

 

46,768

 

5,714

Noncash licensing expense

100

Depreciation and amortization

 

105

 

72

Amortization of premium on investment securities

 

(75)

 

(209)

Amortization of debt issuance costs

694

539

Amortization of leasehold interest

163

137

Noncash change in lease liability and right-of-use asset

1,364

1,921

Change in fair value of notes payable

 

286

 

28

Changes in assets and liabilities:

 

 

  

Decrease in other current assets

2,398

2,226

Decrease in accrued interest receivable

 

105

 

Increase (decrease) in accounts payable and accrued expenses

 

5,893

 

(3,837)

Decrease in lease liabilities

(1,360)

(1,129)

Increase in interest payable

238

787

(Decrease) increase in other liabilities

 

(27,783)

 

24,651

Decrease in deferred revenue

 

(114)

 

(114)

Net cash used in operating activities

 

(162,481)

 

(102,413)

 

  

 

  

CASH FLOWS FROM INVESTING ACTIVITIES

 

  

 

  

Proceeds from maturity of short-term securities

 

35,250

 

22,500

Investment in short-term securities

(23,125)

Investment in held-to-maturity securities

 

(7,482)

 

Purchases of equipment

 

(202)

 

(97)

Net cash provided by (used in) investing activities

 

27,566

 

(722)

 

  

 

  

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

  

Proceeds from sale of common stock, net

276,303

76,664

Proceeds from exercise of options

135

Proceeds from debt financings

29,675

Financing costs paid

 

 

(480)

Net cash provided by financing activities

 

276,438

 

105,859

 

  

 

  

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

141,523

 

2,724

 

  

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD

 

113,888

 

43,199

 

  

 

  

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

$

255,411

$

45,923

 

  

 

  

 

  

 

  

Reconciliation to amounts on condensed consolidated balance sheets:

 

  

 

  

Cash and cash equivalents

$

254,154

$

44,675

Restricted cash

 

1,257

 

1,248

Total cash, cash equivalents and restricted cash 

$

255,411

$

45,923

 

  

 

  

Cash paid for:

 

  

 

  

Interest

$

3,447

$

1,837

NONCASH TRANSACTIONS

 

  

 

  

Deferred financing costs

$

$

988

Warrants issued with debt financing

$

$

993

Shares issued in connection with in-licensing

$

$

100

The accompanying notes are an integral part of the condensed consolidated financial statements.

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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 dedicated to developing and delivering medicines for patients with B-cell mediated diseases, including chronic lymphocytic leukemia (CLL), non-Hodgkin lymphoma (NHL) and multiple sclerosis (MS). We have developed a robust B-cell directed research and development (R&D) platform for identification of key B-cell pathways of interest and rapid clinical testing. Currently, we have five B-cell targeted drug candidates in clinical development, with the two lead therapies, ublituximab (TG-1101) and umbralisib (TGR-1202), in pivotal trials for CLL and NHL, with ublituximab also in pivotal trials for MS. Ublituximab is a novel anti-CD20 monoclonal antibody (mAb) that has been glycoengineered for enhanced potency. Umbralisib is an oral, once daily, dual inhibitor of PI3K-delta and CK1-epsilon. When used together in combination therapy, ublituximab and umbralisib are referred to as “U2”. Additionally, in early clinical development we have an anti-PD-L1 monoclonal antibody cosibelimab (TG-1501), an oral Bruton’s Tyrosine Kinase (BTK) inhibitor referred to as TG-1701, and an anti-CD47/CD19 bispecific antibody referred to as TG-1801.

We also actively evaluate complementary products, technologies and companies for in-licensing, partnership, acquisition and/or investment opportunities. To date, we have not received approval for the sale of any of our drug candidates in any market and, therefore, have not generated any product sales from our drug candidates.

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, 2019. The accompanying condensed December 31, 2019 balance sheet has been derived from these statements. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

In December 2018, the Company created an Australian corporation, TG Therapeutics AUS Pty Ltd. (“TG AUS”), as a wholly-owned subsidiary. This corporation’s functional currency, the Australian dollar, is also its reporting currency, and its financial statements are translated to U.S. dollars, the Company’s reporting currency, prior to consolidation. The activities of TG AUS result in immaterial currency translation adjustments and, thus, are included in Other Income/Expense on the Company’s condensed consolidated statement of operations. The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries, and all intercompany accounts and transactions have been eliminated in consolidation.

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 become profitable. As of September 30, 2020, we have an accumulated deficit of approximately $892.4 million.

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Our major sources of cash have been proceeds from the private placement and public offering of equity securities, as well as debt financings. 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 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, 2020, we had $254.2 million in cash and cash equivalents. The Company believes its cash and cash equivalents on hand as of September 30, 2020, along with the additional capital raised in the fourth quarter of 2020 (see Note 5), will provide sufficient liquidity for more than a twelve-month period from the date of filing this Quarterly Report on Form 10-Q. 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 operations, 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.

Recently Issued Accounting Standards

In July 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2018-11, “Leases - Targeted Improvements” (“ASU 2018-11”) as an update to ASU 2016-02, Leases (“ASU 2016-02” or “Topic 842”) issued on February 25, 2016. ASU 2016-02 is effective for public business entities for fiscal years beginning January 1, 2019. ASU 2016-02 required companies to adopt the new leases standard at the beginning of the earliest period presented in the financial statements, which is January 1, 2017, using a modified retrospective transition method where lessees must recognize lease assets and liabilities for all leases even though those leases may have expired before the effective date of January 1, 2017. Lessees must also provide the new and enhanced disclosures for each period presented, including the comparative periods.

ASU 2018-11 provides an entity with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new lease standard will continue to be in accordance with Accounting Standard Codification (“ASC”) 840, Leases (“ASC 840”). An entity that elects this additional (and optional) transition method must provide the required ASC 840 disclosures for all periods that continue to be in accordance with ASC 840. The amendments do not change the existing disclosure requirements in ASC 840.

ASU 2018-11 was effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with earlier adoption permitted. The Company adopted ASU 2018-11 on January 1, 2019 using a modified retrospective method and has not restated comparative periods. We elected the package of practical expedients permitted under the transition guidance, which allows us to carryforward our historical lease classification and our assessment on whether a contract is or contains a lease. The adoption of this guidance resulted in the addition of material balances of right of use assets and lease liabilities to our consolidated balance sheets at January 1, 2019, primarily relating to our lease of office space (see Note 8). The impact to our consolidated statements of operations was not material as a result of this standard.

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In June 2018, the FASB issued ASU No. 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”). ASU 2018-07 expands the scope of FASB Topic 718, “Compensation – Stock Compensation” (“Topic 718”) to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should only remeasure equity-classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Upon transition, the entity is required to measure these nonemployee awards at fair value as of the adoption date. The entity must not remeasure assets that are completed. Disclosures required at transition include the nature of and reason for the change in accounting principle and, if applicable, quantitative information about the cumulative effect of the change on retained earnings or other components of equity.

ASU 2018-07 was effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption was permitted, but no earlier than an entity’s adoption date of ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company adopted ASU 2018-07 on January 1, 2019. The adoption of ASU 2018-07 did not have a material effect on our consolidated financial statements as of January 1, 2019. The adoption of ASU 2018-07 had no impact on nonemployee performance awards as they are measured based on the outcome that is probable.

Other pronouncements issued by the FASB or other authoritative accounting standards with future effective dates are either not applicable or not significant to our condensed 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. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and stock-based compensation. Actual results could differ from those estimates. Such differences could be material to the financial statements.

Cash and Cash Equivalents

We treat liquid investments with original maturities of less than three months when purchased as cash and cash equivalents.

Restricted Cash

We record cash pledged or held in trust as restricted cash. As of both September 30, 2020 and December 31, 2019, we have approximately $1.3 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 December 31, 2019 consisted of short-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 are included in interest and other income (expense), net. Unrealized gains, if determined to be temporary, are included in accumulated other comprehensive income in equity. Dividend and interest income are recognized when earned.

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Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and short-term investments. The Company maintains its cash and cash equivalents and short-term investments with high-credit quality financial institutions. At times, such amounts may exceed federally-insured limits.

Revenue Recognition

The Company recognizes revenue under ASC 606. The core principle of this revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the Company satisfies a performance obligation

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:

The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and
The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

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Research and Development Costs

Generally, research and development costs are expensed as incurred. Nonrefundable 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 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 condensed consolidated balance sheets includes, among other things, certain costs to third party service providers related to development and manufacturing services as well as clinical development. These agreements often require payments in advance of services performed or goods received. Accordingly, as of September 30, 2020 and December 31, 2019, we recorded approximately $5.5 million and $8.1 million, respectively, in prepaid research and development related to such advance agreements.

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.

We, and our subsidiaries, file income tax returns in the U.S. Federal jurisdiction and in various states, as well as in Australia. We have tax net operating loss carryforwards that are subject to examination for a number of years beyond the year in which they were generated for tax purposes. Since a portion of these net operating loss carryforwards may be utilized in the future, many of these net operating loss carryforwards will remain subject to examination. We recognize interest and penalties related to uncertain income tax positions in income tax expense.

Coronavirus Aid, Relief and Economic Security Act (“CARES Act”)

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020.  The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.  At this time, the Company does not believe that the CARES Act will have a material impact on the Company’s income tax provision for 2020.  The Company will continue to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.

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Stock-Based Compensation

We recognize all stock-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 stock-based payment awards that is ultimately expected to vest during the period. Forfeitures are recognized as they occur.

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 cumulative amounts of potentially dilutive securities excluded from the calculation were 11,103,701 securities and 8,060,758 securities for the three and nine month periods ended September 30, 2020 and 2019, 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, 

    

2020

    

2019

 

 Unvested restricted stock

 

8,409,696

 

5,357,204

 

 Options

 

2,529,133

 

2,539,540

 

Warrants

 

147,058

 

147,058

 

 Shares issuable upon note conversion

 

17,814

 

16,956

 

 Total

 

11,103,701

 

8,060,758

 

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.

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NOTE 2 CASH AND CASH EQUIVALENTS

The following tables summarize our cash and cash equivalents at September 30, 2020 and December 31, 2019:

 

September 30, 

    

December 31, 

 (in thousands)

2020

2019

 

  

 

  

Checking and bank deposits

$

223,613

$

110,135

Money market funds

 

30,541

 

2,502

    Total

$

254,154

$

112,637

NOTE 3 INVESTMENT SECURITIES

Our investments as of December 31, 2019 are classified as held-to-maturity. We had no investment securities as of September 30, 2020. Held-to-maturity investments are recorded at amortized cost.

The following table summarize our investment securities at December 31, 2019:

December 31, 2019

    

Amortized

    

Gross

    

Gross

    

cost, as

unrealized

unrealized

Estimated fair

adjusted

holding gains

holding losses

value

Short-term investments:

 

  

 

  

 

  

 

  

Obligations of domestic governmental agencies (maturing between January 2020 and September 2020) (held-to-maturity)

$

27,798

$

28

$

$

27,826

Total short-term investment securities

$

27,798

$

28

$

$

27,826

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.

As of September 30, 2020 and December 31, 2019, the fair values of cash and cash equivalents, restricted cash, and notes and interest payable, approximate their carrying values.

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 $20.0 million at September 30, 2020 and $19.3 million at December 31, 2019. No payments have been made on the 5% Notes since the merger and through September 30, 2020.

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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, 2020 and December 31, 2019. 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, 2020 and December 31, 2019:

    

Financial liabilities at fair value as of September 30, 2020

(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

  

  

  

  

5% Notes

$

$

$

477

$

477

Total

$

$

$

477

$

477

    

Financial liabilities at fair value as of December 31, 2019

    

Level 1

    

Level 2

    

Level 3

    

Total

 

  

 

  

 

  

 

  

5% Notes

$

$

$

190

$

190

Total

$

$

$

190

$

190

The Level 3 amounts above represent the fair value of the 5% Notes and related accrued interest.