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Table of Contents

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 March 31, 2021

 

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 141,468,357 shares of the registrant’s common stock, $0.001 par value, outstanding as of May 4, 2021.

Table of Contents

TG THERAPEUTICS, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2021

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 Changes in 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

 

23

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

 

28

 

Item 4

Controls and Procedures

 

29

 

PART II

OTHER INFORMATION

 

29

 

Item 1

Legal Proceedings

 

29

 

Item 1A

Risk Factors

 

30

 

Item 6

Exhibits

 

80

2

Table of Contents

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, 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. 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 ability to establish and maintain a commercial infrastructure, and to successfully launch, market and sell UKONIQTM (umbralisib) in the U.S. and any products for which we obtain regulatory approval in the future;
success of the ongoing commercialization of UKONIQ and potential future commercialization of any future products, including the anticipated rate and degree of market acceptance and pricing and reimbursement;
the timing of and our ability to complete regulatory submissions for our product candidates and additional indications for UKONIQ, and acceptance and review of those submissions by regulatory authorities, including in the U.S. and in additional geographies;
our ability to obtain and maintain regulatory approvals for our product candidates;
the initiation, timing, progress and results of our pre-clinical studies and clinical trials, including, without limitation, UNITY-CLL Phase 3 clinical trial, ULTIMATE I and II Phase 3 clinical trials and UNITY-NHL Phase 2b clinical trial;
our ability to advance drug candidates into, and successfully complete, clinical trials;
our ability to establish and maintain contractual relationships, on commercially reasonable terms, with third parties for manufacturing, distribution and supply, and a range of other support functions for our clinical development and commercialization efforts;
the implementation of our business model, strategic plans for our business, drug candidates and technology;
the scope of protection we are able to establish and maintain for intellectual property rights covering our products and product candidates;
estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
our ability to maintain and establish collaborations and enter into strategic arrangements, if desired;
our financial performance and cash burn management; and
developments relating to our competitors and our industry.

3

Table of Contents

SUMMARY RISK FACTORS

Our business is subject to a number of risks of which you should be aware before making an investment decision. The risks described below are a summary of the principal risks associated with an investment in us and are not the only risks we face.  You should carefully consider these risks, the risk factors in Item IA, and the other reports and documents that we have filed with the Securities and Exchange Commission (“SEC”).

Risks Related to Commercialization

We have limited experience as a commercial company, and the marketing and sale of UKONIQ or any future approved products may be less successful than anticipated or unsuccessful.
The COVID-19 pandemic and related response measures to control it have impacted our sales and marketing efforts for UKONIQ and could have an adverse impact on our commercial launch of ublituximab, if approved.
If UKONIQ or any future approved product does not achieve broad market acceptance among physicians, patients, payors, and the medical community, the revenues that we generate from product sales will be limited.
If the market opportunities for UKONIQ and future approved products are smaller than we estimate or if any approval that we obtain is based on a narrower patient population, our revenue will be adversely affected.
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.
If we are unable to establish additional commercial capabilities and infrastructure, we may be unable to generate sufficient revenue to sustain our business.
Product liability lawsuits could cause us to incur substantial liabilities and limit commercialization of any of our products.

Risks Related to our Financial Position and Need for Additional Capital

We have incurred significant operating losses since our inception and anticipate that we will continue to incur losses for the foreseeable future.
We will need to raise substantial additional funding. If we are unable to raise capital when needed, we will 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.

Risks Related to Drug Development and Regulatory Approval

The approval of UKONIQ for patients with marginal zone lymphoma and follicular lymphoma is conditional, and continued approval for these indications is contingent upon verification and description of clinical benefit in a confirmatory trial.  If we are unable to maintain regulatory approval for UKONIQ or obtain or maintain regulatory approval for our drug candidates, or experience significant delays in doing so, our business will be materially harmed.
Our products and product candidates may cause undesirable side effects that could delay or prevent their regulatory approval or significantly limit their commercial profile following marketing approval, if any.
Because results of preclinical studies and early clinical trials are not necessarily predictive of future results, any product candidate we advance may not have favorable results in later clinical trials.  Moreover, interim, “top-line,” and preliminary data from our clinical trials that we announce or publish may change, or the perceived product profile may be impacted, as more patient data or additional endpoints are analyzed.
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 U.S. Food and Drug Administration (“FDA”) may not actually lead to a faster development, regulatory review or approval process.
Although we have received orphan drug designation for UKONIQ and for some of our drug candidates for specified indications and may seek additional orphan drug designations, we may be unsuccessful in obtaining or maintaining the benefits associated with orphan drug status.

4

Table of Contents

Risks Related to Governmental Regulation of the Pharmaceutical Industry

We are subject to extensive regulation, including new legislation, regulatory proposals and third-party payor initiatives, that may increase our costs of compliance and adversely affect our ability to market our products, obtain collaborators and raise capital.
If we fail to comply with various healthcare laws and regulations, we may incur losses or be subject to liability.
If we fail to comply with regulatory requirements, any product for which we obtain marketing approval could be subject to restrictions or withdrawal from the market and we may be subject to penalties.

Risks Related to our Dependence on Third Parties

If the third parties on which we rely to conduct our clinical trials and generate clinical, preclinical and other data necessary to support our regulatory applications 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.
Our reliance on third parties for commercial and clinical supply of our products and product candidates increases the risk that we will not have sufficient quantities of our products or product candidates or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.
Because we have in-licensed our products and 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.

Risks Related to Intellectual Property

Our success depends upon our ability to obtain and protect our intellectual property and if the scope of our patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be impaired.
Our patent protection could be reduced or eliminated for non-compliance with various procedural and other requirements imposed by governmental patent agencies.
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.

Risks Related to COVID-19

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.

General Risks Related to Our Business Organization and Governance, Strategy, Employees and Growth Management

We will need to develop and expand our business, and we may encounter difficulties in managing this development and expansion.
Our ability to continue our clinical development and commercialization activities will depend on our ability to attract and maintain key management and other personnel.
Certain of our executive officers, directors and other stockholders own more than 10% of our outstanding common stock and may be able to influence our management and the outcome of matters submitted to shareholders for approval.
Certain anti-takeover provisions in our charter documents and Delaware law could make a third-party acquisition more difficult, which could limit the price investors might be willing to pay for our common stock.
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)

March 31, 

December 31, 

    

2021

    

2020

    

(Unaudited)

(Note 1)

 

Assets

Current assets:

 

  

 

  

Cash and cash equivalents

$

471,514

$

553,439

Short-term investment securities

 

52,334

 

51,987

Accounts receivable, net

771

 

Prepaid research and development

 

5,590

 

5,231

Other current assets

 

4,804

 

1,083

Total current assets

 

535,013

 

611,740

Restricted cash

 

1,260

 

1,259

Leasehold interest, net

 

1,998

 

2,051

Equipment, net

 

488

 

481

Right of use assets

9,141

9,312

Goodwill

 

799

 

799

Total assets

$

548,699

$

625,642

 

  

 

  

Liabilities and stockholders’ equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable and accrued expenses

$

42,837

$

37,014

Other current liabilities

14,460

18,236

Loan payable – current portion

30,127

22,179

Lease liability – current portion

1,533

1,669

Accrued compensation

 

3,537

 

8,456

Total current liabilities

 

92,494

 

87,554

Deferred revenue, net of current portion

 

571

 

610

Loan payable – non-current

7,716

Lease liability – non-current

10,349

10,412

Total liabilities

 

103,414

 

106,292

Commitments and contingencies

 

  

 

  

Stockholders’ equity:

 

  

 

  

Preferred stock, $0.001 par value per share (10,000,000 shares authorized, none issued and outstanding as of March 31, 2021 and December 31, 2020)

 

 

Common stock, $0.001 par value per share (150,000,000 shares authorized, 141,520,696 and 140,617,606 shares issued, 141,479,387 and 140,576,297 shares outstanding at March 31, 2021 and December 31, 2020, respectively)

 

142

 

141

Additional paid-in capital

 

1,516,602

 

1,500,040

Treasury stock, at cost, 41,309 shares at March 31, 2021 and December 31, 2020

 

(234)

 

(234)

Accumulated deficit

 

(1,071,225)

 

(980,597)

Total stockholders’ equity

 

445,285

 

519,350

Total liabilities and stockholders’ equity

$

548,699

$

625,642

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

6

Table of Contents

TG Therapeutics, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

Three months ended

March 31, 

    

2021

    

2020

    

Revenue:

Product revenue, net

$

755

$

License revenue

38

38

Total revenue

$

793

$

38

 

  

 

  

Costs and expenses:

 

  

 

  

Cost of product revenue

139

Research and development:

 

  

 

  

Noncash compensation

 

7,511

 

1,979

Other research and development

 

55,583

 

34,043

Total research and development

 

63,094

 

36,022

 

 

  

Selling, general and administrative:

 

 

  

Noncash compensation

 

9,107

 

9,089

Other selling, general and administrative

 

17,655

 

5,172

Total selling, general and administrative

 

26,762

 

14,261

 

 

  

Total costs and expenses

 

89,995

 

50,283

 

  

 

  

Operating loss

 

(89,202)

 

(50,245)

 

  

 

  

Other expense (income):

 

  

 

  

Interest expense

 

1,898

 

1,201

Other income

 

(472)

 

(330)

Total other expense (income), net

 

1,426

 

871

 

  

 

  

Net loss

$

(90,628)

$

(51,116)

 

  

 

  

Basic and diluted net loss per common share

$

(0.69)

$

(0.48)

 

  

 

  

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

 

131,898,626

 

105,461,892

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

7

Table of Contents

TG Therapeutics, Inc.

Condensed Consolidated Statements of Changes in 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, 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)

    

    

    

Additional

    

    

    

Common Stock

paid-in

Treasury Stock  

Accumulated

Shares

Amount

 capital

Shares

Amount 

Deficit

Total

Balance at January 1, 2021

 

140,617,606

$

141

$

1,500,040

41,309

$

(234)

$

(980,597)

$

519,350

Issuance of common stock in connection with exercise of options

31,245

*

128

128

Issuance of restricted stock

 

893,488

 

1

 

(1)

 

 

 

 

Forfeiture of restricted stock

 

(21,643)

 

*

 

*

 

 

 

 

Offering costs paid

(183)

(183)

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

 

 

 

16,618

 

 

 

 

16,618

Net loss 

 

 

 

 

 

 

(90,628)

 

(90,628)

Balance at March 31, 2021

 

141,520,696

142

1,516,602

 

41,309

(234)

(1,071,225)

445,285

*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)

Three months ended

March 31, 

    

2021

    

2020

    

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

 

  

 

 

  

 

  

 

Net loss

$

(90,628)

$

(51,116)

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

 

  

 

  

Noncash stock compensation expense

 

16,618

 

11,068

Depreciation and amortization

 

59

 

30

Amortization of premium on investment securities

 

127

 

(44)

Amortization of debt issuance costs

231

231

Amortization of leasehold interest

53

54

Noncash change in lease liability and right of use asset

479

2,001

Change in fair value of notes payable

 

(58)

 

(20)

Changes in assets and liabilities:

 

 

  

Increase in other current assets

(4,107)

(1,017)

Increase in accounts receivable

(771)

Increase (decrease) in accounts payable and accrued expenses

 

904

 

(1,567)

Decrease in lease liabilities

(507)

(1,967)

Decrease in other liabilities

 

(3,717)

(19,730)

Decrease in deferred revenue

 

(38)

 

(38)

Net cash used in operating activities

 

(81,355)

 

(62,115)

 

  

 

  

CASH FLOWS FROM INVESTING ACTIVITIES

 

  

 

  

Proceeds from maturity of short-term securities

 

17,000

 

9,000

Investment in held-to-maturity securities

 

(17,447)

 

(7,482)

Purchases of equipment

 

(67)

 

(68)

Net cash (used in) provided by investing activities

 

(514)

 

1,450

 

  

 

  

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

  

Proceeds from exercise of options

128

81

Offering costs paid

 

(183)

 

Net cash (used in) provided by financing activities

 

(55)

 

81

 

  

 

  

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

(81,924)

 

(60,584)

 

  

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD

 

554,698

 

113,887

 

  

 

  

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

$

472,774

$

53,303

 

  

 

  

 

  

 

  

Reconciliation to amounts on consolidated balance sheets:

 

  

 

  

Cash and cash equivalents

$

471,514

$

52,051

Restricted cash

 

1,260

 

1,252

Total cash, cash equivalents and restricted cash 

$

472,774

$

53,303

 

  

 

  

Cash paid for:

 

  

 

  

Interest

$

769

$

777

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

TG Therapeutics is a fully integrated, commercial stage biopharmaceutical company focused on the acquisition, development and commercialization of novel treatments for B-cell malignancies and autoimmune diseases. In addition to an active research pipeline including five investigational medicines across these therapeutic areas, UKONIQ received accelerated approval from the FDA for the treatment of adult patients with relapsed or refractory marginal zone lymphoma (MZL) who have received at least one prior anti-CD20-based regimen and relapsed or refractory follicular lymphoma (FL) who have received at least three prior lines of systemic therapies. Currently, we have two programs in Phase 3 development for the treatment of patients with relapsing forms of multiple sclerosis (RMS) and patients with chronic lymphocytic leukemia (CLL) and several investigational medicines in Phase 1 clinical development. We also actively evaluate complementary products, technologies and companies for in-licensing, partnership, acquisition and/or investment opportunities.

Basis of Presentation

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, 2020. The accompanying condensed December 31, 2020 balance sheet has been derived from these statements. The results of operations for the three months ended March 31, 2021 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 and expect to continue to incur operating losses for the foreseeable future and may never become profitable. As of March 31, 2021, we have an accumulated deficit of $1.1 billion.

Our major sources of cash have been proceeds from private placements and public offerings of equity securities. During the first quarter of 2021, umbralisib, now referred to as UKONIQ, was granted accelerated approval in the United States for the treatment of adult patients with relapsed or refractory MZL who have received at least one prior anti-CD20 based regimen and adult patients with relapsed or refractory FL who have received at least three prior lines of systemic therapy. Commercial sales of UKONIQ commenced in the first quarter of 2021. We have generated limited revenues to date from product sales. Even with the commercialization of UKONIQ and the potential future commercialization of our other drug candidates, we may not become profitable. Our ability to achieve profitability depends on many factors,

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including our ability to generate revenue, our ability to obtain regulatory approvals for our drug candidates, our ability to successfully complete any post-approval regulatory obligations and our ability to successfully commercialize our drug candidates. We may continue to incur substantial operating losses even as we begin to generate revenues from our drug candidates.

As of March 31, 2021, we had $523.8 million in cash and cash equivalents, and investment securities. We anticipate that our cash and cash equivalents, and investment securities as of March 31, 2021 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, our UKONIQ commercialization efforts, preparations for the potential commercialization of our other drug candidates, and 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 ongoing and future operations, including the commercialization of any of our drug candidates.

Our common stock is quoted on the Nasdaq Capital Market and trades under the symbol “TGTX.”

Summary of Significant Accounting Policies

Our significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements included in our 2020 Annual Report on Form 10-K, except as it relates to revenue recognition, accounts receivable, inventory, cost of product revenue, and the adoption of new accounting standards during the three months ended March 31, 2021, as discussed below.

Revenue Recognition

Pursuant to Topic 606, we recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, Topic 606 includes provisions within a five-step model that includes i) identifying the contract with a customer, ii) identifying the performance obligations in the contract, iii) determining the transaction price, iv) allocating the transaction price to the performance obligations, and v) recognizing revenue when, or as, an entity satisfies a performance obligation.

At contract inception, we assess the goods or services promised within each contract and assess whether each promised good or service is distinct and determine those that are performance obligations. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied.

Product Revenue, Net - The Company recognizes product revenues, net of variable consideration related to certain allowances and accruals, when the customer takes control of the product, which is typically upon delivery to the customer. Product revenue is recorded at the net sales price, or transaction price. The Company records product revenue reserves, which are classified as a reduction in product revenues, to account for the components of variable consideration. Variable consideration includes the following components: chargebacks, government rebates, trade discounts and allowances, product returns, and co-payment assistance, which are described below.

These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is expected to be settled with a credit against to the Company's customer account) or a liability (if the amount is expected to be settled with a cash payment). The Company's estimates of reserves established for variable consideration are calculated based upon a consistent application of the expected value method, which is the sum of probability-weighted amounts in a range of possible consideration amounts. These estimates reflect the Company's current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. The amount of variable consideration that is included in the transaction price may be subject to constraint and is included in net product revenues only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration received may ultimately differ from the Company's estimates. If actual results vary, the Company adjusts these estimates, which could have an effect on earnings in the period of adjustment.

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Chargebacks and Administrative Fees: Chargebacks for discounts represent the Company's estimated obligations resulting from contractual commitments to sell product to qualified healthcare providers and government agencies at prices lower than the list prices charged to the customers who directly purchase the product from the Company. The customers charge the Company for the difference between what the customers pay the Company for the product and the customers’ ultimate contractually committed or government required lower selling price to the qualified healthcare providers. As part of the Company's contractual commitments to sell product to qualified healthcare providers, the Company pays fees for administrative services, such as account management and data reporting.

Government Rebates: Government rebates consist of Medicare, Tricare, and Medicaid rebates. These reserves are recorded in the same period the related revenue is recognized. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom it will owe a rebate under the Medicare Part D program.

Trade Discounts and Allowances: The Company provides its customers with discounts that are explicitly stated in the contracts and are recorded in the period the related product revenue is recognized. In addition, the Company also receives sales order management, inventory management, and data services from its customers in exchange for certain fees.

Product Returns: Consistent with industry practice, the Company generally offers customers a limited right of return for product that has been purchased from the Company. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate in the period the related product revenue is recognized. The Company currently estimates product return liabilities based on data from similar products and other qualitative considerations, such as visibility into the inventory remaining in the distribution channel.

Subject to certain limitations, the Company’s return policy allows for eligible returns of UKONIQ for credit under the following circumstances:

receipt of damaged product;
shipment errors that were a result of an error by the Company;
expired product that is returned during the period beginning three months prior to the product’s expiration and ending six months after the expiration date;
product subject to a recall; and
product that the Company, at its sole discretion, has specified can be returned for credit.

As of March 31, 2021, the Company has not received any returns.

Co-Payment Assistance Programs: Co-payment assistance is provided to qualified patients, whereby the Company may provide financial assistance to patients with prescription drug co-payments required by the patient's insurance provider. Reserves for co-payment assistance are recorded in the same period the related revenue is recognized.

Accounts Receivable

In general, accounts receivable consists of amounts due from customers, net of customer allowances for cash discounts, product returns and chargebacks. Our contracts with customers have standard payment terms. We analyze accounts that are past due for collectability, and regularly evaluate the creditworthiness of our customers so that we can properly assess and respond to changes in their credit profiles. As of March 31, 2021, we determined an allowance for expected credit losses related to outstanding accounts receivable was currently not required based upon our review of contractual payment terms and individual customer circumstances.

Cost of Product Revenue

Cost of product revenue consists primarily of materials, third-party manufacturing costs, as well as freight and royalties owed to our licensing partner for UKONIQ sales. Based on our policy to expense costs associated with the

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manufacture of our products prior to regulatory approval, the manufacturing costs of UKONIQ units recognized as revenue during the three months ended March 31, 2021 were expensed prior to receipt of FDA approval on February 5, 2021, and therefore are not included in costs of product revenue during the current period.

Inventory

Prior to regulatory approval, we expense costs relating to the production of inventory as research and development expense in the period incurred. Following regulatory approval, costs to manufacture those approved products will be capitalized. Inventories are stated at the lower of cost or estimated net realizable value with cost based on the first-in-first-out method. Inventory that can be used in either the production of clinical or commercial products is expensed as research and development costs when identified for use in clinical trials.

Prior to the approval of UKONIQ, all manufacturing and other potential costs related to the commercial launch of UKONIQ were expensed to research and development expense in the period incurred.

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 should the Company realize net income during the period presented. The cumulative amounts of potentially dilutive securities excluded from the calculation were 12,129,734 securities and 8,579,266 securities for the three month period ended March 31, 2021 and 2020, 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 Months Ended

March 31, 

    

2021

    

2020

 

 Unvested restricted stock

 

9,474,026

 

5,828,852

 

 Options

 

2,490,396

 

2,585,980

 

Warrants

147,058

147,058

 Shares issuable upon note conversion

 

18,254

 

17,376

 

 Total

 

12,129,734

 

8,579,266

 

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No 2019-12, Income Taxes

(Topic 740): Simplifying Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocations, calculating income taxes in interim periods, and adds certain guidance to remove complexity in certain areas. ASU 2019-12 is effective for all entities for annual and interim periods beginning after December 15, 2020. Early adoption of either the entire standard or only those provisions that eliminate or modify requirements is permitted. Adoption of ASU 2019-12 did not have any impact to our condensed consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on today’s Step 1). The standard has tiered effective dates, starting in 2020 for calendar-year public business entities PBEs that meet the definition of an SEC filer, excluding smaller reporting companies. Early adoption is permitted for annual and interim

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goodwill impairment testing dates after 1 January 2017. Adoption of ASU 2017-04 did not have any impact to our condensed consolidated financial statements.

Other pronouncements issued by the FASB or other authoritative accounting standards with future effective dates are either not applicable or not significant to our consolidated financial statements.

NOTE 2 REVENUE RECOGNITION

Gross-to-Net Sales Adjustments

To date, our only source of product revenue has been from the U.S. sales of UKONIQ, which we began shipping to our customers in February 2021. We record our best estimate of sales discounts and allowances to which customers are likely to be entitled. The reconciliation of gross product sales to net product sales by each significant category of gross-to-net adjustments was as follows for the three months ended March 31, 2021:

(in thousands)

Gross product revenue

$

906

Gross-to-net adjustments:

Chargebacks and administrative fees

(75)

Government rebates and co-payment assistance

(37)

Trade discounts and allowances

(35)

Sales returns and allowances

(4)

Total gross-to-net adjustments(1)

$

(151)

Net product revenue

$

755

(1) As of March 31, 2021 approximately $0.1 million of estimated gross-net-accruals have been recorded as a reduction of accounts receivable, net and within accounts payable and accrued expenses on the condensed consolidated balance sheets.

NOTE 3 INVESTMENT SECURITIES

Our investments as of March 31, 2021 and December 31, 2020 are classified as held-to-maturity. Held-to-maturity investments are recorded at amortized cost.

The following table summarize our investment securities at March 31, 2021 and December 31, 2020:

March 31, 2021

  Amortized

  Gross

  Gross

cost, as

unrealized

unrealized

  Estimated

(in thousands)

    

adjusted

    

holding gains

    

holding losses

    

fair value

Short-term investments:

 

  

 

  

 

  

 

  

Obligations of domestic governmental agencies (maturing between April 2021 and March 2022) (held-to-maturity)

$

52,334

$

10

$

1

$

52,343

Total short-term investment securities

$

52,334

$

10

$

1

$

52,343

December 31, 2020

    

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 2021 and December 2021) (held-to-maturity)

$

51,987

$

1

$

4

$

51,984

Total short-term investment securities

$

51,987

$

1

$

4

$

51,984

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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 March 31, 2021 and December 31, 2020, 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 $20.5 million at March 31, 2021 and $20.3 million at December 31, 2020. No payments have been made on the 5% Notes since the merger and through March 31, 2021.

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 March 31, 2021 and December 31, 2020. 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 March 31, 2021 and December 31, 2020:

    

Financial liabilities at fair value as of March 31, 2021

(in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

  

  

  

  

5% Notes

$

$

$

880

$

880

Total

$

$

$

880

$

880

    

Financial liabilities at fair value as of December 31, 2020

    

Level 1

    

Level 2

    

Level 3

    

Total

 

  

 

  

 

  

 

  

5% Notes

$

$

$

938

$

938

Total

$

$

$

938

$

938

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

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The Company’s financial instruments include cash, cash equivalents consisting of money market funds, accounts payable and debt. Cash, cash equivalents, accounts payable and debt are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature.

The following table summarizes the changes in Level 3 instruments during the three months ended March 31, 2021:

(in thousands)

Balance at December 31, 2020

938

Interest accrued on face value of 5% Notes

 

250

Change in fair value of Level 3 liabilities

 

(308)

Balance at March 31, 2021

$

880

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.

On September 5, 2019, we filed an automatic “shelf registration” statement on Form S-3 (the “2019 WKSI Shelf”) as a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act, which registered an unlimited and indeterminate amount of debt or equity securities for future issuance and sale. The 2019 WKSI Shelf was declared effective in September 2019. In connection with the 2019 WKSI Shelf, we entered into an At-the-Market Issuance Sales Agreement (the “2020 ATM”) with Jefferies LLC, Cantor Fitzgerald & Co. and B. Riley FBR, Inc. (each a “2020 Agent” and collectively, the “2020 Agents”), relating to the sale of shares of our common stock. Under the 2020 ATM, we pay the 2020 Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock.

The 2019 WKSI Shelf is currently our only active shelf-registration statement. We may offer any combination of the securities registered under the 2019 WKSI Shelf 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 2019 WKSI Shelf provides us with the flexibility to raise additional capital to finance our operations as needed.

Equity Incentive Plans

The TG Therapeutics, Inc. Amended and Restated 2012 Incentive Plan (the “2012 Incentive Plan”) was approved by stockholders in June 2020. As of March 31, 2021, 10,974,039 shares of restricted stock and 2,490,396 options were outstanding and up to an additional 3,187,593 shares may be issued under the 2012 Incentive Plan.

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Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2021:

    

    

    

Weighted-

    

average

Weighted-

contractual 

Number of 

 average 

term

Aggregate 

shares

exercise price

(in years)

intrinsic value

Outstanding at December 31, 2020

2,526,166

$

6.99

8.10

$

115,472,832

Granted

Exercised

(31,245)

4.10

Forfeited

(4,525)

4.10

Expired

Outstanding at March 31, 2021

 

2,490,396

$

7.03

 

7.74

$

102,529,214

Total expense associated with the stock options was approximately $0.6 million and $3.9 million during the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, there was approximately $1.2 million of total unrecognized compensation cost related to unvested time-based stock options, which is expected to be recognized over a weighted-average period of 1.3 years. As of March 31, 2021, the stock options outstanding include options granted to both employees and non-employees which are both time-based and milestone-based. Stock-based compensation for milestone-based options will be recorded if and when a milestone occurs.

There were no option awards granted during the three months ended March 31, 2021 and 2020.

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 three months ended March 31, 2021:

    

    

Weighted-average 

grant date fair 

Number of shares

value

Outstanding at December 31, 2020

 

10,785,034

13.38

Granted

 

893,488

 

51.77

Vested

 

(682,840)

 

13.81

Forfeited

 

(21,643)

 

22.98

Outstanding at March 31, 2021

 

10,974,039

$

16.46

Total expense associated with restricted stock grants was approximately $16.0 million and $7.1 million during the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, there was approximately $79.5 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 1.0 year. This amount does not include, as of March 31, 2021, 2,910,511 shares of restricted stock outstanding which are milestone-based and vest upon certain corporate milestones. 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 grant date.

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Stock-Based Compensation

The following table summarizes stock-based compensation expense information about restricted stock and stock options for the three months ended March 31, 2021 and 2020:

 

Three months ended

 

March 31, 

 

March 31, 

(in thousands)

 

2021

 

2020

Stock-based compensation expense associated with restricted stock

$

16,050

$

7,120

Stock-based compensation expense associated with option grants

 

568

 

3,948

Total

$

16,618

$

11,068

Warrants

The Company’s only outstanding warrant is the warrant issued to Hercules as part of our debt agreement to purchase 147,058 shares of common stock with an exercise price of $4.08. See Note 6 for further details. As the warrants could not require cash settlement, the warrants were classified as equity. There will not be any ongoing stock compensation expense volatility associated with these warrants.

NOTE 6 LOAN PAYABLE

On February 28, 2019 (the “Closing Date”), we entered into a term loan facility of up to $60.0 million (“Term Loan”) with Hercules Capital, Inc. (“Hercules”), the proceeds of which were used for research and development programs and for general corporate purposes. The Term Loan is governed by a loan and security agreement, dated February 28, 2019 (the “Loan Agreement”), which provides for up to four separate advances. The first advance of $30.0 million was drawn on the Closing Date.  An additional $30.0 million was available with different milestones and time points that have lapsed.

The Term Loan will mature on March 1, 2022 (the “Loan Maturity Date”). Each advance accrues interest at a per annum rate of interest equal to the greater of either (i) the “prime rate” as reported in The Wall Street Journal plus 4.75%, and (ii) 10.25%. As a result of the Company having raised in excess of $150 million before the required timeline in the Loan Agreement, the interest-only period has been extended to April 1, 2021. At our option upon seven business days’ prior written notice to Hercules, we may prepay all or any portion greater than or equal to $5.0 million of the outstanding advances by paying the entire principal balance (or portion thereof) and all accrued and unpaid interest, subject to a prepayment charges of: 3.0% if such advance is prepaid in any of the first twelve months following the Closing Date; 1.5% if such advance is prepaid after the first twelve months following the Closing Date but on or prior to twenty-four months following the Closing Date; and 0% thereafter. In addition, a final payment equal to 3.5% of the aggregate principal amount of the loan extended by Hercules is due on the maturity date. Amounts outstanding during an event of default shall be payable on demand and accrue interest at an additional rate of 4.0% per annum of the past due amount outstanding.

The Term Loan is secured by a lien on substantially all of our assets, other than intellectual property, and contains customary covenants and representations, including a liquidity covenant, financial reporting covenant and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries. As of March 31, 2021 and through the filing date of this report, the Company has been in compliance with all covenants.

The events of default under the Loan Agreement include, without limitation, and subject to customary grace periods, (1) our failure to make any payments of principal or interest under the Loan Agreement, promissory notes or other loan documents, (2) our breach or default in the performance of any covenant under the Loan Agreement, (3) the occurrence of a material adverse effect, (4) a false or misleading representation or warranty in any material respect, (5) our insolvency or bankruptcy, (6) certain attachments or judgments on our assets, or (7) the occurrence of any material default under certain agreements or obligations involving indebtedness in excess of $750,000. If an event of default occurs, Hercules is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement.

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The Loan Agreement also contains warrant coverage of 2% of the total amount funded. A warrant (the “Hercules Warrant”) was issued to Hercules to purchase 147,058 shares of common stock with an exercise price of $4.08. We accounted for the Hercules Warrant as an equity instrument since it was indexed to our common shares and met the criteria for classification in shareholders’ (deficit) equity. The relative fair value of the Hercules Warrant on the date of issuance was approximately $1.0 million and was treated as debt issuance costs and as an offset to the Term Loan. This amount will be amortized to interest expense using the straight-line method, which approximates the effective interest method, over the life of the Term Loan.

The Company estimated the fair value of the Warrant using the Black-Scholes model based on the following key assumptions:

Exercise price

    

$

4.08

 

Common share price on date of issuance

$

6.80

Volatility

 

195.9

%

Risk-free interest rate

 

2.63

%

Expected dividend yield

 

--

%

Contractual term (in years)

 

7.00 years

The Company incurred financing expenses of $2.8 million (including the fair value of the Hercules Warrant) related to the Hercules Loan Agreement which are recorded as debt issuance costs and as an offset to loan payable on the Company’s unaudited condensed consolidated balance sheet. The debt issuance costs are being amortized over the term of the debt using the straight-line method, which approximates the effective interest method, and are included in interest expense in the Company’s unaudited condensed consolidated statements of operations. Amortization of debt issuance costs was $0.2 million and $0.2 million for the three months ended March 31, 2021 and 2020. At March 31, 2021, the remaining unamortized balance of debt issuance costs was $0.8 million.

The loan payable as of March 31, 2021 and December 31, 2020 is as follows:

March 31,

    

December 31,

(in thousands)

2021

 

2020

Loan payable

$

30,000

$

30,000

End of term fee

 

975

 

975

 

30,975

 

30,975

Less: unamortized debt issuance costs

 

(848)

 

(1,080)

 

30,127

 

29,895

Less: current portion

 

(30,127)

 

(22,179)

Loan payable non-current

$

$

7,716

NOTE 7 LEASES

In October 2014, we entered into an agreement (the “Office Agreement”) with Fortress Biotech, Inc. (“FBIO”) to occupy approximately 45% of the 24,000 square feet of New York City office space leased by FBIO. 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 $1.4 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. At January 1, 2019, we recognized a lease liability and corresponding Right-of-Use (“ROU”) asset of $9.5 million and $8.1 million, respectively, based on the present value of the remaining lease payments for all of our leased office spaces, the majority of which is comprised of our New York City office space. The present values of our lease liability and corresponding ROU asset are $11.9 million and $9.1 million, respectively, as of March 31, 2021. Our leases have remaining lease terms of 2 years to 10 years. One lease has a renewal option to extend the lease for an additional term of two years.

The initial commitment period of the 45% rate was for a period of three (3) years. We and FBIO currently 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 March 31, 2021, the allocation rate is 65% and will be evaluated again in August 2021 for the following rent year. Also in connection with this lease, in October 2014, we pledged

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$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. Additional collateral of $0.6 million was pledged in April 2018 to increase the letter of credit for the office space.

In October 2019, we finalized a five-year lease for office space in New Jersey (the “NJ Lease”). We approximate an average annual rental obligation of $0.3 million under the NJ Lease. We took possession of this space in October 2019, with rental payments beginning in November 2019. We incurred rent expense of $0.1 million for the three months ended March 31, 2021.

The following components of lease expense are included in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020:

    

 

 

March 31, 

 

March 31, 

(in thousands)

 

2021

 

2020

Operating lease cost

$

532

$

507

Net lease cost

$

532

$

507

As of March 31, 2021, the weighted-average remaining operating lease term was 7.6 years and the weighted-average discount rate for operating leases was 10.25%. Cash paid for amounts included in the measurement of operating lease liabilities during the three months ended March 31, 2021 was $0.5 million.

The balance sheet classification of lease liabilities was as follows:

    

March 31, 

    

December 31,

(in thousands)

 

2021

 

2020

Liabilities

 

  

 

  

Lease liability current portion

$

1,533

$

1,669

Lease liability non-current

 

10,349

 

10,412

Total lease liability

$

11,882

$

12,081

As of March 31, 2021, the maturities of lease liabilities were as follows:

    

Operating

(in thousands)

 

leases

2022

$

2,035

2023

 

2,040

2024

 

1,924

2025

 

1,653

After 2026

 

9,884

Total lease payments

 

17,536

Less: interest

 

(7,158)

Present value of lease liabilities(*)

$

10,378

(*)

As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date and considering the term of the lease to determine the present value of lease payments. We used the incremental borrowing rate of 10.25% on February 28, 2019, for operating leases that commenced prior to that date.

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NOTE 8 LICENSE AGREEMENTS

TG-1101 (Ublituximab)

In November 2012, we entered into an exclusive (within the territory) sublicense agreement with Ildong Pharmaceutical Co. Ltd. (“Ildong”) relating to the development and commercialization of ublituximab 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 ublituximab 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 being 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 March 31, 2021 and 2020, and at March 31, 2021 and December 31, 2020, have deferred revenue of approximately $0.7 million and $0.8 million, respectively, associated with this $2 million payment (approximately $0.1 million of which has been classified in current liabilities at March 31, 2021 and December 31, 2020).

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 ublituximab in the sublicense territory.

In January 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 and commercialization of ublituximab. Under the license agreement, we have acquired the exclusive worldwide rights (exclusive of France/Belgium) for the development and commercialization of ublituximab. As of March 31, 2021 we have incurred approximately $3.0 million and accrued approximately $3.0 million related to milestones. LFB Group is eligible to receive payments of up to an aggregate of approximately $31.0 million upon our successful achievement of certain clinical development, regulatory, and sales milestones, in addition to royalty payments on net sales of ublituximab at a royalty rate that escalates from mid-single digits to high-single digits. The license will terminate on a country by country basis upon 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 (i) by LFB if the Company challenges any of the licensed patent rights, (ii) by either party due to a breach of the agreement, or (iii) by either party in the event of the insolvency of the other party.

TGR-1202 (Umbralisib)

In September 2014, we exercised our option to license the global rights to umbralisib, thereby entering into an exclusive licensing agreement (the “Umbralisib License”) with Rhizen Pharmaceuticals, SA (“Rhizen”) for the development and commercialization of umbralisib. Prior to this, we had been jointly developing umbralisib in a 50:50 joint venture with Rhizen.

During the three months ended March 31, 2021, we paid Rhizen $12.0 million as part of a primary indication approval milestone for launch of product in the US in accordance with the terms of the Umbralisib License. Rhizen will be eligible to receive additional approval and sales-based milestone payments in the aggregate of approximately $175 million payable upon approval in multiple jurisdictions for up to two oncology indications and one non-oncology indication and attaining certain sales milestones. In addition, if umbralisib is co-formulated with another drug to create a new product (a "New Product"), Rhizen will be eligible to receive similar regulatory approval and sales-based milestone payments for such New Product. Additionally, Rhizen receives tiered royalties that escalate from high single digits to low double digits on any net sales of umbralisib and any New Product. During the three months ended March 31, 2021, the Company recorded $0.1 million related to the worldwide royalty due under the Umbralisib License in cost of product revenue based on U.S. sales of UKONIQ and as of March 31, 2021, $0.1 million in royalties were payable under the Umbralisib License Agreement. Rhizen will also be eligible to participate in sublicensing revenue, if any, based on a percentage that decreases as a function of the number of patients treated in clinical trials following the exercise of the license option. Rhizen will retain global manufacturing rights to umbralisib, provided that they are price competitive with alternative manufacturers. The license will terminate on a country by country basis upon the expiration of the last licensed

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patent right or any other exclusivity right in such country, unless the agreement is earlier terminated (i) by us for any reason, or (ii) by either party due to a breach of the agreement.

TG-1501: PDL1 (Cosibelimab)

In March 2015, we entered into a Global Collaboration Agreement (“Collaboration Agreement”) with Checkpoint Therapeutics, Inc. (“Checkpoint”) for the development and commercialization of anti-PD-L1 and anti-GITR antibody research programs in the field of hematological malignancies. The Collaboration Agreement was amended in June 2019 and in March of 2020 achieved the first Milestone event for which we incurred expenses of zero and approximately $0.9 million for the three months ended March 31, 2021 and 2020, respectively.

TG-1701: BTK

In January 2018, we entered into a global exclusive license agreement with Jiangsu Hengrui Medicine Co. (“Hengrui”), to acquire worldwide intellectual property rights, excluding Asia but including Japan, and for the research, development, manufacturing, and commercialization of products containing or comprising of any of Hengrui’s Brutons Tyrosine Kinase inhibitors containing the compounds of either TG-1701 (SHR1459 or EBI1459) or TG-1702 (SHR1266 or EBI1266). Pursuant to the agreement, in April 2018, we paid Hengrui an upfront fee of $1.0 million in our common stock recorded to noncash stock expense associated with in-licensing agreements in our condensed consolidated statement of operations. In July 2019, we paid Hengrui the first milestone of $0.1 million in our common stock recorded to noncash stock expense associated with in-licensing agreements in our consolidated statement of operations. In July 2020, we paid Hengrui $2.0 million as part of a milestone in accordance with the license agreement. Hengrui is eligible to receive milestone payments totaling approximately $350 million upon and subject to the achievement of certain milestones. Various provisions allow for payments in conjunction with the agreement to be made in cash or our common stock, while others limit the form of payment. Royalty payments in the low double digits are due on net sales of licensed products and revenue from sublicenses. We incurred expenses of approximately $0.5 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively, the majority of which relates to manufacturing expenses of BTK. The relevant expenses are recorded in other research and development in the accompanying unaudited condensed consolidated statement of operations.

TG-1801: anti-CD47/anti-CD19

In June 2018, we entered into a Joint Venture and License Option Agreement with Novimmune SA (“Novimmune”) to collaborate on the development and commercialization of Novimmune’s novel first-in-class anti-CD47/anti-CD19 bispecific antibody known as TG-1801 (previously NI-1701). The companies will jointly develop the product on a worldwide basis, focusing on indications in the area of hematologic B-cell malignancies. We serve as the primary responsible party for the development, manufacturing, and commercialization of the product. Pursuant to the agreement, in June 2018 we paid Novimmune an upfront payment of $3.0 million in our common stock recorded to noncash stock expense associated with in-licensing agreements in our consolidated statement of operations. As of March 31, 2021 we accrued $2.0 million in milestone expense related to patient enrollment. Further milestone payments will be paid based on early clinical development, and the Company will be responsible for the costs of clinical development of the product through the end of the Phase 2 clinical trials, after which the Company and Novimmune will be jointly responsible for all development and commercialization costs. The Company and Novimmune will each maintain an exclusive option, exercisable at specific times during development, for the Company to license the rights to TG-1801, in which case Novimmune is eligible to receive additional milestone payments totaling approximately $185 million as well as tiered royalties on net sales in the high single to low double digits upon and subject to the achievement of certain milestones.

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NOTE 9 RELATED PARTY TRANSACTIONS

In July 2015, we entered into a Shared Services Agreement (the “Shared Services Agreement”) with FBIO 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 $0.2 million for shared services for each of the three months ended March 31, 2021 and 2020, primarily related to shared personnel.

Please refer to Note 7 - Leases for details regarding the Office Agreement with FBIO, as well as Note 8 - License Agreements for details regarding the Collaboration Agreement with Checkpoint.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis contain 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. Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic. 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, 2020.

 

OVERVIEW

 

TG Therapeutics is a fully integrated, commercial stage biopharmaceutical company focused on the acquisition, development and commercialization of novel treatments for B-cell malignancies and autoimmune diseases. In addition to an active research pipeline including five investigational medicines across these therapeutic areas, UKONIQ received accelerated approval from the FDA for the treatment of adult patients with relapsed or refractory MZL who have received at least one prior anti-CD20-based regimen and relapsed or refractory FL who have received at least three prior lines of systemic therapies. Currently, we have two programs in Phase 3 development for the treatment of patients with RMS and patients with CLL and several investigational medicines in Phase 1 clinical development. We also actively evaluate complementary products, technologies and companies for in-licensing, partnership, acquisition and/or investment opportunities.

FDA Accelerated Approval of UKONIQ and Commercial Launch

On February 5, 2021, we announced that the FDA granted accelerated approval of UKONIQ for the treatment of adult patients with relapsed or refractory MZL who have received at least one prior anti-CD20 based regimen and for the treatment of adult patients with relapsed or refractory FL who have received at least three prior lines of systemic therapy. UKONIQ is the first and only, oral, once-daily, inhibitor of phosphoinositide 3 kinase (PI3K) delta and casein kinase 1 (CK1) epsilon. Accelerated approval was granted for these indications based on overall response rate (ORR) data from the Phase 2b UNITY-NHL Trial (NCT02793583). Continued approval for these indications is contingent upon verification and description of clinical benefit in a confirmatory trial. This application was granted Priority Review for the MZL indication. In addition, UKONIQ was granted Breakthrough Therapy Designation (BTD) for the treatment of MZL and orphan drug designation (ODD) for the treatment of MZL and FL.

Following the FDA approval, we launched UKONIQ, making it available to patients through a distribution network that includes a specialty pharmacy and specialty distributors. In the U.S., the annual incidence of newly diagnosed MZL is approximately 8,200 and FL is approximately 13,200. Our commercialization efforts have focused on approximately 3,000 physicians at academic centers and large community practices who treat approximately 80% of MZL

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and FL patients. We developed a commercialization plan that accounted for the COVID-19 pandemic, with a focus on enabling virtual interactions to provide healthcare provider education. As anticipated, our interactions with healthcare providers during the first quarter were primarily virtual due to the pandemic, with limited opportunities for our commercial and medical field teams to have live engagements. Payor coverage of UKONIQ and inclusion in the NCCN guidelines have been consistent with the FDA-approved indications. We are committed to helping patients access their prescription for UKONIQ through the TG Patient Support Program, which we launched following the approval of UKONIQ.


Our Products Under Development

We have leveraged our B-cell platform to develop a robust drug pipeline of targeted orally available, potent and selective small molecule kinase inhibitors and intravenously delivered immunotherapies that leverage the patients’ own immune system to fight cancer. The following table summarizes our most advanced drug candidates:

Clinical Drug Candidate:
(molecular target)

Initial Target Disease

Stage of Development
(trial name)

Ublituximab (anti-CD20 mAb)

Chronic Lymphocytic Leukemia (CLL)

Phase 3 trial (UNITY-CLL)

Phase 3 trial (ULTRA-V)

Relapsing Multiple Sclerosis (RMS)

Phase 3 trials (ULTIMATE I and II)

UKONIQ (PI3K-delta inhibitor)

CLL

Phase 3 trial (UNITY-CLL)

Phase 3 trial (ULTRA-V)

Marginal Zone Lymphoma (MZL)

Phase 2b trial (UNITY-NHL)

Follicular Lymphoma (FL)

Phase 2b trial (UNITY-NHL)

Cosibelimab/TG-1501 (anti-PDL1 mAb)

B-cell cancers

Phase 1 trial

TG-1701 (BTK inhibitor)

B-cell cancers

Phase 1 trial

TG-1801 (anti-CD47/CD19 bispecific mAb)

B-cell cancers

Phase 1 trial

Phase 3 and Registration-Directed Clinical Trial Highlights

The following are highlights from our current Phase 3 trials and registration-directed Phase 2b clinical trials:

UNITY-NHL Phase 2b Trial: UNITY-NHL is a broad, multicenter, open-label, Phase 2b registration-directed clinical trial designed to evaluate the efficacy and safety of UKONIQ monotherapy and UKONIQ plus ublituximab (U2) combinations in patients with previously treated NHL. There are several exploratory cohorts of the UNITY-NHL trial which are enrolled to and evaluated independently from the others, including cohorts for MZL, FL/SLL, DLBCL, and MCL.

UNITY-NHL MZL/FL Single Agent UKONIQ: The MZL cohort enrolled adult patients who had at least one prior line of therapy that included an anti-CD20 monoclonal antibody. The FL cohort enrolled adult patients who had two or more prior lines of therapy that included an anti-CD20 monoclonal antibody and an alkylating agent. Both cohorts met the primary endpoint of ORR as determined by Independent Review Committee (IRC) assessment. Results from these cohorts were presented in December 2020 at the American Society of Hematology Annual meeting. On February 5, 2021, we announced that the FDA granted accelerated approval of UKONIQ, for the treatment of adult patients with relapsed or refractory MZL who have received at least one prior anti-CD20 based regimen and adult patients with relapsed or refractory FL who have received at least three prior lines of systemic therapy.

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UNITY-CLL Phase 3 Trial Evaluating UKONIQ plus Ublituximab (U2): UNITY-CLL is a global, multi-center, Phase 3, randomized, controlled clinical trial comparing the U2 combination to an active control arm of obinutuzumab plus chlorambucil in patients with both treatment-naïve and relapsed or refractory CLL. Two additional arms evaluating single-agent ublituximab and single-agent UKONIQ were also enrolled for purposes of evaluating the contribution of each in the U2 combination regimen. The primary endpoint for this study is progression-free survival (PFS). The study completed enrollment in October 2017 with over 600 patients across the four treatment arms, with approximately 420 patients in the U2 and the active control arms combined. This trial is conducted under a Special Protocol Assessment (SPA) with the FDA. The UNITY-CLL trial is being led by John Gribben, MD, professor of Medical Oncology, Barts Cancer Institute, United Kingdom.

On December 7, 2020, we presented safety and efficacy results from the UNITY- CLL trial at the ASH annual meeting demonstrating that U2 s