UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2016.
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the transition period from ________ to ________.
Commission File Number 1-32639
TG THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
|
Delaware
(State
or other jurisdiction of
incorporation
or organization)
|
36-3898269
(I.R.S.
Employer
Identification
No.)
|
|
|
|
|
2 Gansevoort St.
9th
Floor
New York, New York
(Address
of principal executive offices)
|
10014
(Zip
Code)
|
Registrant’s
telephone number, including area code: (212) 554-4484
Securities registered pursuant to Section 12(b) of the
Act:
|
Common
Stock, Par Value $0.001 Per Share
(Title
of Class)
|
The
Nasdaq Capital Market
(Name
of Each Exchange on Which Registered)
|
Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act.
Yes
☐ No ☒
Indicate by check
mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes
☐ No ☒
Indicate by check
mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
☒ No ☐
Indicate by check mark whether the registrant has
submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T 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 if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ☐
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act). (Check
one):
Large accelerated
filer
☐
Accelerated filer ☒
Non-accelerated
filer ☐
Smaller reporting company ☐
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
☐ No ☒
The
aggregate market value of voting common stock held by
non-affiliates of the registrant (assuming, for purposes of this
calculation, without conceding, that all executive officers and
directors are “affiliates”) was $221,001,116 as of June
30, 2016, based on the closing sale price of such stock as reported
on the NASDAQ Capital
Market.
There
were 56,908,544 shares of the registrant’s common stock,
$0.001 par value, outstanding as of March 1, 2017.
DOCUMENTS INCORPORATED BY REFERENCE
Portions
of the registrant’s Proxy Statement for the 2016 Annual
Meeting of Stockholders are incorporated by reference in Part III
of this Annual Report on Form 10-K.
TG THERAPEUTICS, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016
TABLE OF CONTENTS
|
|
|
Page
|
|
|
|
|
|
SPECIAL CAUTIONARY
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
|
1
|
|
|
|
|
|
|
PART
I
|
||
|
ITEM
1
|
Business
|
2
|
|
ITEM
1A
|
Risk
Factors
|
17
|
|
ITEM
2
|
Properties
|
35
|
|
ITEM
3
|
Legal
Proceedings
|
35
|
|
|
|
|
|
PART
II
|
||
|
|
||
|
ITEM
5
|
Market for
Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
|
35
|
|
ITEM
6
|
Selected Financial
Data
|
37
|
|
ITEM
7
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
38
|
|
ITEM
7A
|
Quantitative and
Qualitative Disclosure About Market Risk
|
47
|
|
ITEM
8
|
Financial
Statements and Supplementary
Data
|
47
|
|
ITEM
9
|
Changes in and
Disagreements With Accountants on Accounting and Financial
Disclosures
|
47
|
|
ITEM
9A
|
Controls and
Procedures
|
47
|
|
ITEM
9B
|
Other
Information
|
49
|
|
|
|
|
|
PART
III
|
||
|
|
||
|
ITEM
10
|
Directors,
Executive Officers and Corporate
Governance
|
49
|
|
ITEM
11
|
Executive
Compensation
|
49
|
|
ITEM
12
|
Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder
Matters
|
49
|
|
ITEM
13
|
Certain
Relationships and Related Transactions, and Director
Independence
|
49
|
|
ITEM
14
|
Principal
Accountant Fees and
Services
|
49
|
|
|
|
|
|
PART
IV
|
||
|
|
||
|
ITEM
15
|
Exhibits and
Financial Statement
Schedules
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
This
Annual Report on Form 10-K contains trademarks and trade names of
TG Therapeutics, Inc., including our name and logo. All other
trademarks, service marks, or trade names referenced in this Annual
Report on Form 10-K are the property of their respective
owners.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING
STATEMENTS
Certain
matters discussed in this report, including matters discussed under
the caption “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” may
constitute forward-looking statements for purposes of the
Securities Act of 1933, as amended, or the Securities Act, and the
Securities Exchange Act of 1934, as amended, or the Exchange Act,
and involve known and unknown risks, uncertainties and other
factors that may cause our actual results, performance or
achievements to be materially different from the future results,
performance or achievements expressed or implied by such
forward-looking statements. The words "anticipate," "believe,"
"estimate," "may," "expect" and similar expressions are generally
intended to identify forward-looking statements. Our actual results
may differ materially from the results anticipated in these
forward-looking statements due to a variety of factors, including,
without limitation, those discussed under the captions “Risk
Factors,” “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and
elsewhere in this report, as well as other factors which may be
identified from time to time in our other filings with the
Securities and Exchange Commission, or the SEC, or in the documents
where such forward-looking statements appear. All written or oral
forward-looking statements attributable to us are expressly
qualified in their entirety by these cautionary statements. Such
forward-looking statements include, but are not limited to,
statements about our:
●
expectations for
increases or decreases in expenses;
●
expectations for
the clinical and pre-clinical development, manufacturing,
regulatory approval, and commercialization of our pharmaceutical
product candidates or any other products we may acquire or
in-license;
●
use of clinical
research centers and other contractors;
●
expectations as to
the timing of commencing or completing pre-clinical and clinical
trials and the expected outcomes of those trials;
●
expectations for
incurring capital expenditures to expand our research and
development and manufacturing capabilities;
●
expectations for
generating revenue or becoming profitable on a sustained
basis;
●
expectations or
ability to enter into marketing and other partnership
agreements;
●
expectations or
ability to enter into product acquisition and in-licensing
transactions;
●
expectations or
ability to build our own commercial infrastructure to manufacture,
market and sell our drug candidates;
●
acceptance of our
products by doctors, patients or payors;
●
ability to compete
against other companies and research institutions;
●
ability to secure
adequate protection for our intellectual property;
●
ability to attract
and retain key personnel;
●
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; and
●
expectations for
future capital requirements.
The
forward-looking statements contained in this report reflect our
views and assumptions only as of the date this report is signed.
Except as required by law, we assume no responsibility for updating
any forward-looking statements.
We
qualify all of our forward-looking statements by these cautionary
statements. In addition, with respect to all of our forward-looking
statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
1
PART I
Unless the context requires otherwise, references in this report to
“TG,” “Company,” “we,”
“us” and “our” refer to TG Therapeutics,
Inc. and our subsidiaries.
ITEM 1. BUSINESS.
OVERVIEW
We are a
biopharmaceutical company focused on the acquisition, development
and commercialization of novel treatments for B-cell malignancies
and autoimmune diseases. Currently, the Company is developing two
therapies targeting hematological malignancies. TG-1101
(ublituximab) is a novel, glycoengineered monoclonal antibody that
targets a specific and unique epitope on the CD20 antigen found on
mature B-lymphocytes. We are also developing TGR-1202, an orally
available PI3K delta inhibitor. The delta isoform of PI3K is
strongly expressed in cells of hematopoietic origin and is believed
to be important in the proliferation and survival of B-lymphocytes.
Both TG-1101 and TGR-1202 are in clinical development for patients
with hematologic malignancies. We also have pre-clinical programs
seeking to develop IRAK4 (interleukin-1 receptor-associated kinase
4) inhibitors, BET (Bromodomain and Extra Terminal) inhibitors, and
anti-PD-L1 and anti-GITR antibodies.
We also
actively evaluate complementary products, technologies and
companies for in-licensing, partnership, acquisition and/or
investment opportunities. To date, we have not received approval
for the sale of any of our drug candidates in any market and,
therefore, have not generated any product sales from our drug
candidates.
CORPORATE INFORMATION
We were
incorporated in Delaware in 1993. Our executive offices are located
at 2 Gansevoort St., 9th Floor, New York,
New York 10014. Our telephone number is 212-554-4484, and our
e-mail address is info@tgtxinc.com.
We
maintain a website with the address www.tgtherapeutics.com. We make
available free of charge through our Internet website our annual
reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K, and any amendments to these reports, as soon
as reasonably practicable after we electronically file such
material with, or furnish such material to, the SEC. We are not
including the information on our website as a part of, nor
incorporating it by reference into, this report. You may read and
copy any such reports and amendments thereto at the SEC’s
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549
on official business days during the hours of 10:00 a.m. to 3:00
p.m. Please call the SEC at 1-800-SEC-0330 for information on the
Public Reference Room. Additionally, the SEC maintains a website
that contains annual, quarterly, and current reports, proxy
statements, and other information that issuers (including us) file
electronically with the SEC. The SEC’s website address is
http://www.sec.gov.
PRODUCTS UNDER DEVELOPMENT
TG-1101 (ublituximab)
Overview
TG-1101
(ublituximab) is a chimeric, glycoengineered monoclonal antibody
that targets a unique epitope on the CD20 antigen found on the
surface of B-lymphocytes developed to aid in the depletion of
circulating B-cells. We hold exclusive worldwide rights to develop
and commercialize TG-1101 for all indications, except for the
territories of France and Belgium which have been retained by LFB
Biotechnologies (“LFB”), and South Korea and Southeast
Asia which were licensed by us to Ildong Pharmaceutical Co. Ltd
(“Ildong”) in November 2012.
Generally, anti-CD20 antibodies are believed to
exert their B-cell depleting effects through three primary
mechanisms: antibody dependent cell-mediated cytotoxicity
(“ADCC”), complement dependent cytotoxicity
(“CDC”), and direct or programmed cell death
(“DCD” or “PCD”). TG-1101 has been
specifically glycoengineered to enhance ADCC activity, which should
enhance its ability to deplete B-cells and may improve its
anti-cancer effects when compared to Rituxan®, the
leading anti-CD20 monoclonal antibody, which had worldwide sales in
2015 of more than $7 billion.
Two
single-agent, dose-escalation, Phase I studies were undertaken with
TG-1101 to establish an optimal dose in patients with
Non-Hodgkin’s Lymphoma (“NHL”) and Chronic
Lymphocytic Leukemia (“CLL”). A two part first-in-human
Phase I clinical trial was first completed in France in which
TG-1101 was evaluated in
relapsed or refractory CLL patients at doses as high as 450mg per
infusion. Subsequently, a single-agent Phase I study was undertaken
in the US enrolling patients with both NHL and CLL, dosing patients
up to 1200mg per infusion. In both
studies, single agent therapy with TG-1101 was deemed well
tolerated by treating investigators and displayed promising
clinical activity in relapsed and refractory
patients.
2
In
oncology settings, anti-CD20 therapy is generally used in
combination with other anti-cancer agents where it demonstrates
maximum activity as opposed to single agent usage. As a result,
subsequent clinical development for TG-1101 has focused on
combination therapy. Currently, our priority combination trials for
TG-1101 are:
●
The GENUINE Trial
– a randomized controlled Phase 3 trial evaluating TG-1101 in
combination with ibrutinib, for previously treated CLL patients
with high risk cytogenetics;
●
The UNITY-CLL Trial
– a randomized controlled Phase 3 trial evaluating TG-1101 in
combination with TGR-1202, the Company’s development stage
PI3Kd inhibitor, for patients with front line and previously
treated CLL;
●
The UNITY-DLBCL
Trial – registration-directed UNITY-DLBCL Phase 2b clinical
study evaluating TG-1101, in combination with TGR-1202, as well as
TGR-1202 alone, in patients with previously treated Diffuse Large
B-Cell Lymphoma (DLBCL); and
●
TG-1101
+ TGR-1202 + Pembrolizumab for patients with CLL.
In
addition, we have announced our intent of evaluating TG-1101 for
the treatment of certain autoimmune diseases. Currently, TG-1101 is
being evaluated in a Phase 2 study for the treatment of Multiple
Sclerosis (MS) and in an investigator initiated Phase 1 study for
the treatment of acute neuromyelitis optica (NMO) relapses, with
additional autoimmune related indications planned to be studied.
Preliminary data from this Phase 1 study in NMO was presented at
the 32nd Congress of the European Committee for Treatment and
Research in Multiple Sclerosis (ECTRIMS), in London, UK in
September 2016. Data from the poster presentation demonstrated that
TG-1101 was well tolerated with minimal adverse events (AEs)
observed and rapid and robust B-cell depletion observed following a
single 450 mg infusion of TG-1101. In August 2016, it was also
announced that TG-1101 received orphan drug designation for the
Treatment of Neuromyelitis Optica and Neuromyelitis Optica Spectrum
Disorder.
Manufacturing of
TG-1101 is currently performed by our partner, LFB Biotechnologies,
and a secondary contract manufacturer based in the US.
Pre-Clinical Data Overview
The
mechanism of action of anti-CD20 antibodies, including rituximab
and TG-1101 has been elucidated and detailed in numerous academic
and clinical studies. Upon conjugation of the antibody to the CD20
surface antigen, rituximab has been found to deplete B-lymphocytes
through three primary mechanisms: ADCC, CDC, and DCD or
PCD.
Antibody dependent
cellular cytotoxicity, or ADCC, is a mechanism that is dependent on
interactions between the Fc region of the antibody and the
FccR receptors on
immune system effector cells, most notably the FccRIIIA (CD16) receptor found
on NK cells. These interactions trigger cells to release cytotoxic
molecules and proteases resulting in B-cell death. TG-1101 is a
third generation, type I chimeric IgG1 monoclonal antibody with a
glycoengineered Fc region designed specifically to induce higher
ADCC activity in comparison to rituximab, which has been
demonstrated in pre-clinical models.
Clinical Data Overview and Recent Developments
Single Agent TG-1101 in Relapsed/Refractory NHL &
CLL
Our
first US based trial entitled "An Open Label Phase I/II Trial of
the Efficacy and Safety of TG-1101 in Patients with B-cell
Non-Hodgkin’s Lymphoma who have Relapsed or are Refractory
After CD20 Directed Antibody Therapy," was launched in the third
quarter of 2012. In July 2014, this
trial completed enrollment at 35 patients, of which 12 patients
were included in the dose escalation component and 23 patients in
various expansion cohorts. All enrolled patients were relapsed or
refractory to Rituxan®
or a Rituxan®
containing regimen, and in most cases
multiple other lines of therapy. Dr. Owen O'Connor, Professor of
Medicine and Director, Center for Lymphoid Malignancies at New York
Presbyterian Columbia Medical Center was the Principal Investigator
for the multi-center study.
Preliminary data from this study was presented at
the 50th American
Society of Clinical Oncology (ASCO) 2014 Annual Meeting
in Chicago, IL, and was recently published in full
in the British Journal of
Haematology and is summarized
below:
TG-1101
was well tolerated at all dose levels tested in the 35 patients
evaluable for safety, with Day 1 infusion related reactions (IRR)
being the most frequently reported adverse event. The combined
overall response rate (ORR) for the Phase 1 dose escalation
component and expansion cohorts was 45% (32% PR, 13% CR) among the
31 rituximab relapsed/refractory patients evaluable for efficacy at
the time of the presentation. TG-1101 displayed marked clinical
activity as a single agent in a variety of lymphoma subtypes,
reporting a 50% (3/6) response rate in patients with CLL and 53%
(10/19) response rate in patients with indolent NHL (21% CR, 32%
PR). Responses were durable, with a median duration of response of
9.2 months and duration of progression free survival (PFS) of 7.7
months (n=31) amongst evaluable patients.
TG-1101 in Combination with TGR-1202 for Relapsed/Refractory NHL
& CLL
In
November 2013, we initiated a multi-center, Phase I study to
evaluate the safety and efficacy of the combination of TG-1101 and
TGR-1202, the Company's novel, once per day, PI3Kd inhibitor,
for patients with relapsed and/or refractory CLL and NHL. In this
study, dosing of TGR-1202 commenced at 800mg (initial formulation)
once per day (QD) with dose escalation proceeding in a 3+3 design.
Dose-escalation up to 1200mg micronized formulation has been
completed and expansion cohorts were also evaluated at various
doses. Additional cohorts were added to this study to explore the
triple therapy combination of TG-1101, TGR-1202, and ibrutinib and
the triple therapy of TG-1101, TGR-1202 and
bendamustine.
The MD
Anderson Cancer Center is the lead center for the trial with Nathan
Fowler, MD, Assistant Professor and Co-Director of Clinical
Research in the Department of Lymphoma, as the Study Chair for the
NHL patient group and Susan O’Brien, MD, formerly of MD
Anderson and now Professor and Medical Director for Cancer Clinical
Trials and Research at UC Irvine as the Study Chair for the CLL
patient group.
3
Preliminary
data from this study was presented at the 57th Annual American
Society of Hematology (ASH) meeting held in December 2015 and is
summarized below:
The combination of TG-1101 and TGR-1202 was well
tolerated in the 71 patients evaluable for safety, with only 8% of
patients discontinuing due to an adverse event. Notably, the only
Grade 3/4 adverse event occurring in > 5% of patients was neutropenia. As of
the data presentation, twenty-six
patients had been on the combination of TG-1101 plus TGR-1202 for
6+ months, with no events of colitis reported. The combination
displayed marked clinical activity in a variety of lymphoma
subtypes, reporting an 80% (8/10) response rate in patients with
CLL, a 71% (12/17) response rate in patients with indolent NHL, and
a 35% (6/17) response rate in patients with DLBCL and
Richter’s Transformation. The data from this study supports
the current Phase 3 UNITY-CLL study of TG-1101 + TGR-1202 in
CLL.
Preliminary
data from the combination of TG-1101 + TGR-1202 + ibrutinib and
TG-1101 + TGR-1202 + bendamustine were presented at the American
Society of Clinical Oncology (ASCO) 2015 meeting and the American
Society of Hematology (ASH) 2016 meeting respectively. Both
combinations demonstrated acceptable levels of tolerability with
promising activity and continue to enroll as of
today.
TG-1101 in Combination with Ibrutinib for Relapsed/Refractory MCL
& CLL
In
December 2013, we initiated a multi-center Phase 2 clinical trial
to evaluate the safety and efficacy of the combination of TG-1101
and ibrutinib for patients with CLL and MCL. This is the first
clinical trial evaluating the combination of TG-1101 and ibrutinib,
an oral Bruton’s Tyrosine Kinase (BTK)
inhibitor.
TG
Therapeutics partnered with the US Oncology Network and other
select centers throughout the United States on the study,
with Jeff Sharman, MD, Medical Director for Hematology
Research, US Oncology Network, as the Study Chair. This trial has
completed enrollment.
Final data from this study was presented on the
MCL cohort at the 57th Annual American Society of Hematology (ASH)
meeting held in December 2015, and on the CLL cohort at the 13th International
Congress on Malignant Lymphoma (ICML), held in June 2015 and
recently published in full in the
British Journal of
Haematology and
is summarized below:
In
the CLL cohort, TG-1101 in combination with ibrutinib was well
tolerated in the 45 patients evaluable for safety, with day 1
infusion related reactions (IRR) being the most frequently reported
adverse event (regardless of causality). In the MCL cohort, the
combination was well tolerated in the 15 patients evaluable for
safety, with fatigue being the most frequently reported adverse
event (regardless of causality). Overall, in both CLL and MCL,
aside from day 1 IRR, the addition of TG-1101 did not appear to
alter the safety profile seen historically with single agent
ibrutinib. Of the 60 patients treated, 41 CLL and 15 MCL patients
were evaluable for response. The combination displayed marked
clinical activity, reporting an 88% (35/41) response rate in
patients with CLL, a 95% (19/21) response rate in those CLL
patients with high-risk cytogenetics, and an 87% (13/15) response
rate in patients with MCL.
TG-1101 + Ibrutinib Phase 3 Study Program – The GENUINE
Trial
The GENUINE trial
is a randomized controlled clinical trial in patients with
previously treated CLL with specific high-risk cytogenetic
abnormalities, with patients randomized to receive either TG-1101
plus ibrutinib or ibrutinib alone. In October 2016, we announced
revisions to the design of the GENUINE study to accelerate its
completion. Initially the study was being conducted pursuant to a
Special Protocol Assessment (SPA) with the U.S. Food and Drug
Administration (FDA), and was designed to enroll approximately 330
patients, with a two-part analysis of both overall response rate
(ORR) and progression-free survival (PFS). The trial was amended in
October 2016 to enroll approximately 120 patients, with the PFS
analysis component removed. Following the revisions, the sole
primary endpoint of the study is ORR, and the SPA is no longer in
effect. We have communicated with the FDA regarding our intention
to file a Biologics Licensing Application (BLA) for accelerated
approval and the FDA has agreed that a pre-BLA meeting can be
requested based on ORR data from the GENUINE
study.
On March 6, 2017, we announced positive topline
results from our Phase 3 GENUINE clinical trial of TG-1101 plus
ibrutinib in patients with previously treated high risk CLL. For
the study, high risk was defined as having any one or more of the
following: 17p deletion, 11q deletion or p53 mutation.The
multicenter, randomized trial (NCT02301156), which assessed the
efficacy and safety of TG-1101 plus ibrutinib, met its primary
endpoint, demonstrating a statistically significant improvement in
Overall Response Rate (ORR) compared to ibrutinib alone in both the
Intent to Treat (ITT) population (p=0.001) and Treated population
(p < 0.001). The ITT population includes all 126 randomized
patients (64 in the TG-1101 + ibrutinib arm and 62 in the ibrutinib
alone arm) while the Treated population includes all ITT patients
that received at least one dose of either study drug (59 in the
TG-1101 + ibrutinib arm and 58 in the ibrutinib alone
arm).
Overall Response Rates
|
|
TG-1101 plus Ibrutinib
|
Ibrutinib
|
P-value
|
|
Treated
Population (n)
|
n=59
|
n=58
|
|
|
Overall
Response Rate
|
80%
|
47%
|
P <
0.001
|
All
responses were assessed by independent blinded central review using
the iwCLL 2008 guidelines. Per iwCLL guidelines, responders require
confirmation of response for a minimum duration of 2 months. As of
the date of the analysis, each arm had responders that were
awaiting confirmation visits which are scheduled to occur over the
next two months. During the study it was infrequent (less than 3%
in the combination arm) for initial responses to fail to be
confirmed. Median follow-up for the study was approximately 12
months.
In addition to ORR,
observed advantages were seen for the combination in a number of
secondary and other efficacy measures, including radiographic
Complete Response (CR) rate, Progression Free Survival and Time to
Response. Sufficient data on MRD negative status and bone marrow
confirmation of radiographic CRs were not available at the time of
analysis. From a safety standpoint, the combination was well
tolerated with a safety profile consistent with the Phase 2 study
of ublituximab plus ibrutinib recently published in the British
Journal of Haematology.
4
A full
analysis of the Phase 3 GENUINE data along with detailed efficacy
and safety results will be submitted for presentation at a medical
meeting in the first half of 2017 and we plan to request a meeting
with the FDA as soon as possible thereafter to discuss the filing
of the data for accelerated approval.
TG-1101 in Combination with TGR-1202 Phase 3 Study Program –
The UNITY-CLL Trial
In September 2015, we reached an agreement with
the FDA regarding an SPA on the design, endpoints and statistical
analysis approach of a Phase 3 clinical trial for the proprietary
combination of TG-1101 plus TGR-1202, for the treatment of CLL. The
SPA provides agreement that the Phase 3 trial design adequately
addresses objectives that, if met, would support the regulatory
submission for drug approval of both TG-1101 and TGR-1202 in
combination.
The Phase 3 trial, called the UNITY-CLL trial, is
a randomized controlled clinical trial that includes two key
objectives: first, to demonstrate contribution of each agent in the
TG-1101 + TGR-1202 regimen (the combination sometimes referred to
as "1303"), and second, to demonstrate superiority in Progression
Free Survival (PFS) over the standard of care to support the
submission for full approval of the combination. The study will
randomize patients into four treatment arms: TG-1101 + TGR-1202,
TG-1101 alone, TGR-1202 alone, and an active control arm of
obinutuzumab (GAZYVA®) +
chlorambucil. An early interim analysis will assess contribution of
each single agent in the TG-1101 + TGR-1202 combination regimen,
which, if successful, will allow early termination of both single
agent arms. A second interim analysis will be conducted following
full enrollment into the study, which, if positive, we plan to
utilize for accelerated approval. Assuming early termination of the
TG-1101 and TGR-1202 single agent arms, the study will enroll
approximately 450 patients.
TG-1101 in Combination with TGR-1202 Phase 2b Registration-Directed
Program – The UNITY-DLBCL Trial
In
June 2016, we commenced a registration-directed UNITY-DLBCL Phase
2b clinical study evaluating TG-1101 in combination with TGR-1202,
as well as TGR-1202 alone, in patients with previously treated
DLBCL.
The
study, entitled "A Phase 2b Randomized Study to Assess the Efficacy
and Safety of the Combination of Ublituximab + TGR-1202 and
TGR-1202 alone in Patients with Previously Treated Diffuse Large
B-Cell Lymphoma," is being led by Owen A. O'Connor, MD, PhD,
Professor of Medicine and Experimental Therapeutics, and Director
of the Center for Lymphoid Malignancies at Columbia University
Medical Center. The primary objective of the study is to assess the
efficacy of TGR-1202 alone and in combination with TG-1101 in
patients with previously treated DLBCL as measured by Overall
Response Rate (ORR). The study will also provide important
information as to the contribution of each agent, TGR-1202 and
TG-1101, to the combination regimen of both agents. In addition to
monitoring for safety and efficacy this study will analyze the
impact of cell of origin (GCB vs. non-GCB), mutational status and
select biomarkers of efficacy.
Single Agent TG-1101 in Relapsing Forms of Multiple
Sclerosis
In
May 2016, we commenced our first study of TG-1101 in patients with
relapsing remitting multiple sclerosis (RRMS), a chronic
demyelinating disease of the central nervous system
(CNS).
The
study, entitled "A Placebo-Controlled Multi-Center Phase 2 Dose
Finding Study of Ublituximab, a Third-Generation Anti-CD20
Monoclonal Antibody, in Patients with Relapsing Forms of Multiple
Sclerosis," is being led by Edward Fox, MD, PhD, Director of the
Multiple Sclerosis Clinic of Central Texas and Clinical Assistant
Professor at the University of Texas Medical Branch in Round Rock,
TX. The primary objective of the study is to determine the optimal
dosing regimen for TG-1101 with a focus on accelerating infusion
times. In addition to monitoring for safety and tolerability at
each dosing cohort, B-cell depletion and established MS efficacy
endpoints will also be evaluated.
In
January 2017, we announced the completion of enrollment into Part 1
of this study and B-cell depletion data from patients treated to
date. Part 1 of the study explored TG-1101 at an initial dose of
600 mg administered as a 150 mg infusion on day 1 and 450 mg
infusion on day 15, followed by either 450 mg or 600 mg at week 24.
The day 15 and week 24 doses were subject to accelerated infusion
times by cohort, down to a 1-hour infusion by cohort 3. The median
B-cell depletion for all patients in Part 1 was 99% and TG-1101 was
well-tolerated with no grade 3/4 adverse events reported, including
in patients receiving the one-hour infusion at the target Phase 3
dose and infusion rate. For Part 2 of the trial, the Company has
added expansion cohorts and will explore accelerated dosing of the
initial 150mg dose.
TGR-1202
Overview
The
phosphoinositide-3-kinases (“PI3Ks”) are a family of
enzymes involved in various cellular functions, including cell
proliferation and survival, cell differentiation, intracellular
trafficking, and immunity. There are four isoforms of PI3K (alpha,
beta, delta, and gamma), of which the delta (d) isoform is strongly
expressed in cells of hematopoietic origin, and often implicated in
B-cell related lymphomas.
TGR-1202 is an
orally available PI3K delta inhibitor with nanomolar potency to the
delta isoform and high selectivity over the alpha, beta, and gamma
isoforms. TGR-1202 has demonstrated activity in several
pre-clinical models and primary cells from patients with various
hematologic malignancies.
We hold
exclusive rights to develop and commercialize TGR-1202 for all
indications worldwide, except India which has been retained by
Rhizen Pharmaceuticals, SA.
The
Company’s Investigational New Drug (“IND”)
application for TGR-1202 was accepted by the FDA in December 2012
and a first in-human Phase I clinical trial was initiated in
January 2013.
5
Updates for TGR-1202
In
August 2016, we announced that TGR-1202 had received orphan drug
designation for the treatment of CLL.
In
October 2016, a manuscript titled, "Silencing c-Myc Translation as
a Therapeutic Strategy through Targeting PI3K Delta and CK1 Epsilon
in Hematological Malignancies," was published online in the First
Edition section of Blood, the Journal of the American Society of
Hematology. The publication presents preclinical data describing
the synergy of TGR-1202 with the proteasome inhibitor carfilzomib
and the unique effects of the combination to silence c-Myc in
various preclinical lymphoma and myeloma models. In addition, the
manuscript for the first time reports on TGR-1202's unique
complimentary mechanism of inhibiting the protein kinase casein
kinase-1 (CK1) epsilon, which may contribute to the silencing of
c-Myc and explain TGR-1202's clinical activity in aggressive
lymphoma, including Diffuse Large B-cell Lymphoma
(DLBCL).
Clinical Data Overview and Recent Developments
Initial clinical development of TGR-1202 was
focused on establishing preliminary safety and efficacy in a wide
variety of hematologic malignancies. Upon identification of safe
and active doses of TGR-1202, a combination clinical trial program
was opened, exploring TGR-1202 in combination with a variety of
agents. In addition to the previously described studies in
combination with TG-1101, our current combination clinical trials
that are ongoing or have been completed for TGR-1202
included:
●
TGR-1202 in
combination with the anti-CD20 antibody, obinutuzumab
(GAZYVA®) and
chlorambucil in patients with CLL;
●
TGR-1202 in
combination with the anti-CD30 antibody drug conjugate, brentuximab
vedotin (ADCETRIS®), in patients
with relapsed or refractory Hodgkin’s lymphoma;
●
TGR-1202 in
combination with the BTK inhibitor, ibrutinib, in patients with
previously treated CLL and MCL; and
●
TGR-1202 in
combination with the JAK inhibitor, ruxolitinib (JAKAFI®), in patients
with previously treated Myelofibrosis or Polycythemia
Vera.
In
addition, given the favorable safety profile demonstrated to date,
a trial of TGR-1202 monotherapy in patients with CLL who were
previously intolerant to prior BTK or PI3K inhibitor therapy is
also underway.
Single Agent TGR-1202 in Patients with Relapsed/Refractory
Hematologic Malignancies
In
January 2013, the Company initiated a Phase I, open label,
multi-center, first-in-human clinical trial of TGR-1202 in patients
with hematologic malignancies. The study entitled TGR-1202-101, "A
Phase I Dose Escalation Study Evaluating the Safety and Efficacy of
TGR-1202 in Patients with Relapsed or Refractory Hematologic
Malignancies," is being run in collaboration with the Sarah
Cannon Research Institute in Nashville, TN with Howard
“Skip” Burris, MD, Executive Director, Drug Development
as the acting Study Chair. Enrollment is open to patients with
relapsed or refractory NHL, CLL, and other select hematologic
malignancies. As of February 2016, this study has closed to
enrollment.
Data
from this ongoing Phase I study was most recently presented at the
57th Annual American Society of
Hematology (ASH) meeting held in December 2015, with updated data
presented as part of an integrated analysis as described
below.
TGR-1202 Long-term Follow-up Integrated Analysis in Patients with
Relapsed/Refractory Hematologic Malignancies
In June
2016, at the 52nd Annual Meeting of the American Society of
Clinical Oncology (ASCO) and at the 21st Congress of the European
Hematology Association (EHA), the Company presented integrated data
with long term follow-up from 165 patients exposed to TGR-1202
monotherapy or the combination of TGR-1202 plus TG-1101, which
continued to demonstrate high response rates in CLL, NHL, and DLBCL
coupled with a favorable safety profile.
6
TGR-1202
in Combination with obinutuzumab and chlorambucil in patients with
CLL
In
March 2014, the Company initiated a Phase I/Ib, open label,
multi-center, clinical trial of TGR-1202 in combination with
obinutuzumab and chlorambucil in patients with CLL, both treatment
naïve and relapsed. The study entitled TGR-GA-106, " A
Multi-center Phase I/Ib Study Evaluating the Efficacy and Safety of
TGR-1202, a Novel PI3K Delta Inhibitor, in Combination with
Obinutuzumab and Chlorambucil in Patients with Chronic Lymphocytic
Leukemia (CLL)," is being led by Dr. Daruka Mahadevan of the West
Clinic in Memphis, TN. As of February 2016, this study has
completed enrollment.
Data
from this study was presented at the 57th Annual American Society of Hematology (ASH)
meeting held in December 2015.
TGR-1202 Combination Trials
TGR-1202 is being
evaluated in combination with the anti-CD30 antibody drug
conjugate, brentuximab vedotin, in patients with relapsed or
refractory Hodgkin’s lymphoma; in combination with the BTK
inhibitor, ibrutinib, in patients with CLL and MCL; and in
combination with the JAK inhibitor, ruxolitinib, in patients with
Myelofibrosis or Polycythemia Vera. Additional
investigator sponsored trials are also underway which are combining
TGR-1202 with other approved agents for the treatment of B-cell
malignancies.
Preliminary
data from studies evaluating TGR-1202 + brentuximab vedotin and
TGR-1202 + ibrutinib were presented at the 58th Annual American
Society of Hematology (ASH) meeting held in December 2016. Both
combinations appeared well tolerated. In particular, the
combination of TGR-1202 + ibrutinib resulted in an 88% (15 of 17)
Overall Response Rate (ORR) (including Complete Response (CR),
Partial Response (PR), and Partial Response with lymphocytosis
(PR-L)) in patients with CLL, with 1 patient achieving a bone
marrow confirmed CR and 5 patients with a > 80% nodal reduction,
nearing radiographic CR.
It is anticipated
that results from these studies will be presented or updated at
future medical conferences.
TGR-1202 in Solid Tumors
In
addition to the exploration of TGR-1202 in various hematologic
malignancies, a study was opened in October 2015 to evaluate
TGR-1202 as a single agent as well as in combination with various
chemotherapies for the treatment of select solid tumors. The study,
entitled TGR-1202-102, “A Phase I Study Evaluating the Safety
and Efficacy of TGR-1202 Alone and in Combination with either
nab-paclitaxel + Gemcitabine or with FOLFOX in Patients with Select
Relapsed or Refractory Solid Tumors” is being run in
collaboration with the Sarah Cannon Research Institute in
Nashville, TN with Johanna Bendell, MD, Director of GI Oncology
Research as the acting study chair.
Market Opportunity for TG-1101 & TGR-1202
Our
lead products under development, TG-1101 and TGR-1202 are for the
treatment of B-cell hematologic malignancies. Hematologic
malignancies include cancers derived from the bone marrow and lymph
tissue. The non-Hodgkin’s lymphomas (NHL) represent a
heterogeneous subset of these malignancies. Underneath the single
rubric of lymphoma exist some of the most aggressive growing
cancers (Burkitt’s lymphoma, lymphoblastic lymphoma, diffuse
large-B-cell lymphoma), as well as some of the most indolent (small
lymphocytic lymphoma, follicular lymphoma, and marginal zone
lymphoma). In the United States, NHL represents 4-5% of all new
cancer cases, and is the eighth leading cause of cancer death.
According to the American Cancer Society, it is estimated in 2017
that there will be 72,240 new cases in the United States, and
20,140 deaths from NHL, despite improvements in treatment. Chronic
lymphocytic leukemia (CLL) affects mainly older adults and accounts
for one quarter of all diagnosed cases of leukemia, of which there
are estimated to be about 62,130 new cases and about 24,500 deaths
(all kinds of leukemia) according to American Cancer Society
estimates. Despite improvements in therapy, up to one third of
patients with aggressive NHL continue to die from their disease,
and indolent lymphomas remain incurable in the absence of
allogeneic stem cell transplant. The treatment paradigm for
hematologic malignancies is well standardized in front line
settings, with the anti-CD20 monoclonal antibody, rituximab,
administered generally in combination with chemotherapeutic agents.
While front line therapies are generally efficacious, there are
numerous downsides, including a high rate of toxicity associated
with exposure to chemotherapeutic agents. While initially
responsive, most patients with hematologic malignancies will
eventually relapse and require second, third, and sometimes more
lines of therapy. As a result, there is a pressing need for new,
innovative, targeted therapies for the treatment of this
heterogeneous group of diseases.
Anti-CD20
antibodies have been approved and studied in a variety of diseases
falling into several therapeutic areas including oncology,
autoimmune disorders, and neurologic disease. NHL and CLL are the
most common B-cell proliferative diseases for which rituximab, the
first anti-CD20 antibody approved by the FDA, is the current gold
standard treatment. While the addition of rituximab to
chemotherapeutic treatment of NHL has dramatically improved patient
outcomes, many patients will relapse or become refractory to
rituximab containing regimens.
Rituximab
resistance is becoming an increasing concern for clinicians as
relapsing patients are exposed to multiple lines of rituximab
containing regimens to treat recurrence of disease. It is estimated
that over half of patients initially responsive to their first
exposure to rituximab do not respond upon retreatment (Davis et al,
2000).
7
We
believe these factors contribute to an immediate and sustained need
for an anti-CD20 monoclonal antibody that is differentiated and
potentially therapeutically superior to the gold standard rituximab
in order to extend and enhance CD20 therapy as it stands
today.
In
addition to anti-CD20 therapy, novel targeted agents are now being
introduced which target specific signaling pathways and enzymes
known to exhibit aberrant activity and overexpression in B-cell
malignancies such as Bruton’s Tyrosine Kinase (BTK), and
Phosphoinositide-3-Kinase delta (PI3K delta). The PI3K/AKT/mTOR
pathway has been the target of numerous pharmaceutical agents, both
approved and in development, however only recently has the delta
isoform of PI3K been identified as a potential target for the
treatment of hematologic malignancies and other B-cell
lymphoproliferative disorders. Idelalisib (ZYDELIG™), a PI3K
delta specific inhibitor from Gilead Pharmaceuticals, was approved
by the FDA in 2014 for patients with CLL and indolent NHL. Other
agents targeting kinases downstream of the B-cell receptor, such as
the BTK inhibitor, ibrutinib, have displayed high rates of response
in patients with relapsed and refractory B-cell malignancies and
have been recently approved for these indications. While these
agents have demonstrated high levels of single agent activity in
B-cell disorders, their clinical activity has been shown to be
greatly enhanced when utilized in combination with anti-CD20
agents.
As
novel targeted agents gain FDA approval for the treatment of
relapsed and refractory disease, it is anticipated that the size of
this market will expand greatly as branded drugs enter use in
multiple lines of therapy. Given the nature of the disease state
for patients with hematologic malignancies, characterized by
indolent disease progression and chronic relapses, the Company
anticipates a great and growing need for novel agents that can be
used alone or in combination with approved agents, and those
currently under development to enhance the quality of life and
extend the length of survival for patients suffering from
hematologic malignancies.
IRAK4
Interleukin-1
Receptor Associated Kinase 4, referred to as IRAK4, is a key
signaling kinase that becomes inappropriately activated in tumors
that carry certain oncogenic mutations of MYD88, which can be found
in most patients with Waldenström's Macroglobulinemia, a rare
B-cell cancer, as well as in a sub-set of patients with
Non-Hodgkin's Lymphoma and Chronic Lymphocytic Leukemia.
Additionally, IRAK4 is a key component of signaling pathways which
regulate immune and inflammatory processes suggesting that
inhibition of IRAK4 may also be useful in the treatment of
autoimmune related disorders. We hold global rights to develop and
commercialize the IRAK4 program, which was licensed from Ligand
Pharmaceuticals. Our IRAK4 program is currently in pre-clinical
development. In April 2015, we presented pre-clinical data on the
IRAK4 compounds at the 2015 American Association for Cancer
Research (AACR) Annual Meeting held in Philadelphia,
PA.
PD-L1 and GITR
In
March 2015, we entered into a global collaboration agreement for
the development and commercialization of anti-PD-L1 and anti-GITR
antibody research programs in the field of hematological
malignancies. Our anti-PD-L1 and anti-GITR programs are currently
in pre-clinical development.
BET
In May 2016, as part of a broader
agreement with Jubilant Biosys (“Jubilant”), an
India-based biotechnology company, we entered into a sub-license
agreement (“JBET Agreement”) with Checkpoint
Therapeutics, Inc. (“Checkpoint”), a subsidiary of
Fortress Biotech, Inc. (“FBIO”), for the development
and commercialization of Jubilant’s novel BET inhibitor
program in the field of hematological malignancies. The BET
inhibitor program is the subject of a family of patents covering
compounds that inhibit BRD4, a member of the BET (Bromodomain and
Extra Terminal) domain for cancer treatment. Our BET inhibitor
program is currently in pre-clinical development.
Our
Executive Chairman and CEO, is also Executive Vice Chairman of
FBIO.
COSTS AND TIME TO COMPLETE PRODUCT DEVELOPMENT
The
information below provides estimates regarding the costs associated
with the completion of the current development phase and our
current estimated range of the time that will be necessary to
complete that development phase for our key pipeline products. We
also direct your attention to the risk factors which could
significantly affect our ability to meet these cost and time
estimates found in this report in Item 1A under the heading
“Risks Related to the Company’s Business and
Industry.”
8
|
Product
candidate
|
Target
indication
|
Development
status
|
Completion of
phase
|
Estimated
cost to complete phase
|
|
TG-1101
& TGR-1202
|
In combination in
CLL patients
|
Phase
III
|
2018*
|
Approximately $20
million
|
|
TG-1101 & TGR-1202
|
In combination in
relapsed/refractory DLBCL patients
|
Phase
IIb
|
2018
|
Approximately $5
million
|
*Completion
of phase for this study indicates completion of portion of study,
which, if successful, would support an accelerated
approval
Completion dates
and costs in the above table are estimates due to the uncertainties
associated with clinical trials and the related requirements of
development. In the cases where the requirements for clinical
trials and development programs have not been fully defined, or are
dependent on the success of other trials, we cannot estimate trial
completion or cost with any certainty. The actual spending on each
trial during the year is also dependent on funding. We therefore
direct your attention to Item 7 under the heading “Liquidity
and Capital Resources.”
INTELLECTUAL PROPERTY AND PATENTS
General
Our
goal is to obtain, maintain and enforce patent protection for our
products, formulations, processes, methods and other proprietary
technologies, preserve our trade secrets, and operate without
infringing on the proprietary rights of other parties, both in the
United States and in other countries. Our policy is to
actively seek to obtain, where appropriate, the broadest
intellectual property protection possible for our product
candidates, proprietary information and proprietary technology
through a combination of contractual arrangements and patents, both
in the U.S. and elsewhere in the world.
We also
depend upon the skills, knowledge and experience of our scientific
and technical personnel, as well as that of our advisors,
consultants and other contractors. This knowledge and experience we
call “know-how.” To help protect our proprietary
know-how which is not patentable, and for inventions for which
patents may be difficult to enforce, we rely on trade secret
protection and confidentiality agreements to protect our
interests. To this end, we require all employees,
consultants, advisors and other contractors to enter into
confidentiality agreements which prohibit the disclosure of
confidential information and, where applicable, require disclosure
and assignment to us of the ideas, developments, discoveries and
inventions important to our business.
Patents
and other proprietary rights are crucial to the development of our
business. We will be able to protect our proprietary technologies
from unauthorized use by third parties only to the extent that our
proprietary rights are covered by valid and enforceable patents,
supported by regulatory exclusivity or are effectively maintained
as trade secrets. We have a number of patents and patent
applications related to our compounds and other technology, but we
cannot guarantee
the scope of protection of the issued patents, or that such patents
will survive a validity or enforceability challenge, or that any of
the pending patent applications will issue as patents.
Generally, patent
applications in the U.S. are maintained in secrecy for a period of
18 months or more. Since publication of discoveries in the
scientific or patent literature often lag behind actual
discoveries, we are not certain that we were the first to make the
inventions covered by each of our pending patent applications or
that we were the first to file those patent applications. The
patent positions of biotechnology and pharmaceutical companies are
highly uncertain and involve complex legal and factual questions.
Therefore, we cannot predict the breadth of claims allowed in
biotechnology and pharmaceutical patents, or their enforceability.
To date, there has been no consistent policy regarding the breadth
of claims allowed in biotechnology patents. Third parties or
competitors may challenge or circumvent our patents or patent
applications, if issued. If our competitors prepare and file patent
applications in the U.S. that claim technology also claimed by us,
we may have to participate in interference proceedings declared by
the U.S. Patent and Trademark Office to determine priority of
invention, which could result in substantial cost, even if the
eventual outcome is favorable to us. Because of the extensive time
required for development, testing and regulatory review of a
potential product, it is possible that before we commercialize any
of our products, any related patent may expire or remain in
existence for only a short period following commercialization, thus
reducing any advantage of the patent. However, the life of a patent
covering a product that has been subject to regulatory approval may
have the ability to be extended through the patent restoration
program, although any such extension could still be
minimal.
9
If a
patent is issued to a third party containing one or more preclusive
or conflicting claims, and those claims are ultimately determined
to be valid and enforceable, we may be required to obtain a license
under such patent or to develop or obtain alternative technology.
In the event of litigation involving a third party claim, an
adverse outcome in the litigation could subject us to significant
liabilities to such third party, require us to seek a license for
the disputed rights from such third party, and/or require us to
cease use of the technology. Further, our breach of an existing
license or failure to obtain a license to technology required to
commercialize our products may seriously harm our business. We also
may need to commence litigation to enforce any patents issued to us
or to determine the scope and validity of third-party proprietary
rights. Litigation would involve substantial costs.
TG-1101
Pursuant to our
license for TG-1101 (ublituximab) with LFB Biotechnologies, GTC
Biotherapeutics, and LFB/GTC LLC, we have the exclusive commercial
rights to a series of patents and patent applications in the U.S.
and in multiple countries around the world, as well as a
non-exclusive license to additional background patent rights.
These patents and patent protections include composition of matter
patents relating to the structure and mechanism of action for
TG-1101 as well as method of use patents which cover use of TG-1101
in combination with various agents and for various therapeutic
indications.
In the
United States, we have, through our license agreement, access to 12
issued patents and 6 patent applications covering TG-1101 which
expire between 2021 and 2033, excluding any patent term extensions,
as well as granted and pending foreign counterpart patent filings
related to these patent families. These patents include
claims related to the manufacture and use of TG-1101. The composition of matter patent for TG-1101 has
been issued in the United States, which affords patent protection
until 2029, exclusive of patent term extensions.
Additionally, we have over 30 granted patents outside the US, and
over 25 patent applications pending worldwide also including claims
directed to the composition of matter and methods of treatment
with TG-1101 in various settings.
TGR-1202
Pursuant to our
license for TGR-1202 with Rhizen, we have the exclusive commercial
rights to a series of patent applications in the U.S. and abroad.
The patent applications include composition of matter patents
relating to the structure, mechanism of action, and formulation for
TGR-1202 as well as method of use patents which cover use of
TGR-1202 in combination with various agents and for various
therapeutic indications. Our composition of matter patent for
TGR-1202 has been issued in the United States, which affords patent
protection until 2033, exclusive of patent term extensions. All
other patent applications currently filed for TG-1202 are currently
pending. Because the dates for any potential regulatory approval
are currently unknown we cannot predict the expected expiration
date, and it is possible that the life of these patents following
regulatory approval could be minimal.
IRAK4
Pursuant to our
license for the IRAK4 program with Ligand, we have the exclusive
commercial rights to a patent family which covers the composition
of matter and proposed methods of use for various therapeutic
indications. All patent applications currently filed for the IRAK4
program are currently pending. Because the date for any potential
regulatory approval is currently unknown we cannot predict the
expected expiration date, and it is possible that the life of these
patents following regulatory approval could be
minimal.
PD-L1 and GITR
Pursuant to our Global Collaboration with
Checkpoint, the intellectual property includes issued patents in a
number of countries, including the United States and Europe, as
well as pending patent applications in several countries
elsewhere. The PD-L1 segment of the portfolio includes patent
applications pending in the United States, Australia, Canada,
Europe, Israel and Korea. Any patents maturing from these
pending applications will expire no sooner than October 2033.
The GITR segment of the portfolio includes an International
Application No. PCT/US2015/054010, filed in October 2015. Any
national stage applications, which are pursued off of this
international application (including one in the United States
Patent and Trademark Office), would expire no earlier than October
2035.
BET
Pursuant to our
JBET Agreement with Checkpoint, the in-licensed patent estate
includes two international (PCT) applications filed in March 2016
(WO 2016/157221) and September 2016, respectively, claiming the
benefit of two earlier-filed Indian provisional applications. Any
patents maturing from this patent estate are expected to expire no
sooner than March 2036.
The
patent rights that we own or have licensed relating to our product
candidates are limited in ways that may affect our ability to
exclude third parties from competing against us if we obtain
regulatory approval to market these product candidates. See
“Item 1A – Risk
Factors -- Risks Related to the Company’s Intellectual
Property.”
10
Proof
of direct infringement by a competitor for method of use patents
can prove difficult because the competitors making and marketing a
product typically do not engage in the patented use. Additionally,
proof that a competitor contributes to or induces infringement of a
patented method of use by another can also prove difficult because
an off-label use of a product could prohibit a finding of
contributory infringement and inducement of infringement requires
proof of intent by the competitor.
Moreover,
physicians may prescribe such a competitive identical product for
indications other than the one for which the product has been
approved, or off-label indications, that are covered by the
applicable patents. Although such off-label prescriptions may
directly infringe or contribute to or induce infringement of method
of use patents, such infringement is difficult to prevent or
prosecute.
In
addition, the limited patent protection described above may
adversely affect the value of our product candidates and may
inhibit our ability to obtain a corporate partner at terms
acceptable to us, if at all.
Other Intellectual Property Rights
We
depend upon trademarks, trade secrets, know-how and continuing
technological advances to develop and maintain our competitive
position. To maintain the confidentiality of trade secrets and
proprietary information, we require our employees, scientific
advisors, consultants and collaborators, upon commencement of a
relationship with us, to execute confidentiality agreements and, in
the case of parties other than our research and development
collaborators, to agree to assign their inventions to us. These
agreements are designed to protect our proprietary information and
to grant us ownership of technologies that are developed in
connection with their relationship with us. These agreements may
not, however, provide protection for our trade secrets in the event
of unauthorized disclosure of such information.
In
addition to patent protection, we may utilize orphan drug
regulations or other provisions of the Food, Drug and Cosmetic Act
of 1938, as amended, or FDCA, to provide market exclusivity for
certain of our drug candidates. Orphan drug regulations provide
incentives to pharmaceutical and biotechnology companies to develop
and manufacture drugs for the treatment of rare diseases, currently
defined as diseases that exist in fewer than 200,000 individuals in
the U.S., or, diseases that affect more than 200,000 individuals in
the U.S. but that the sponsor does not realistically anticipate
will generate a net profit. Under these provisions, a manufacturer
of a designated orphan-drug can seek tax benefits, and the holder
of the first FDA approval of a designated orphan product will be
granted a seven-year period of marketing exclusivity for such
FDA-approved orphan product.
Pursuant to these
regulations, TG-1101 (ublituximab) has received Orphan-Drug
designation from the FDA for the treatment of Marginal Zone
Lymphoma (Nodal and Extranodal) in September 2013, for the
treatment of CLL in August of 2010, and Orphan-Drug designation by
the European Medicines Agency (“EMA”) for the treatment
of CLL in November of 2009. We believe that TG-1101 may be eligible
for additional orphan drug designations; however, we cannot assure
you that TG-1101, or any other drug candidates we may acquire or
in-license, will obtain such orphan drug designations.
Additionally, upon FDA approval, we believe that TG-1101 would
qualify as a New Chemical Entity, or NCE, which provides for five
years of exclusivity following approval.
We
cannot assure you that any other drug candidates we may acquire or
in-license, will obtain such orphan drug designation or that we
will be the first to receive FDA approval for such drugs so as to
be eligible for market exclusivity protection.
LICENSING AGREEMENTS AND COLLABORATIONS
We have
formed strategic alliances with a number of companies for the
manufacture and commercialization of our products. Our current key
strategic alliances are discussed below.
TG-1101
LFB Biotechnologies S.A.S, GTC Biotherapeutics, LFB/GTC
LLC.
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
of TG-1101. Under the license agreement, we have acquired the
exclusive worldwide rights (exclusive of France/Belgium) for the
development and commercialization of TG-1101 (ublituximab). To
date, we have made no payments to LFB Group and 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 TG-1101 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.
11
Ildong Pharmaceutical Co. Ltd.
In
November 2012, we entered into an exclusive (within the territory)
sublicense agreement with Ildong relating to the development and
commercialization of TG-1101 in South Korea and Southeast Asia.
Under the terms of the sublicense agreement, Ildong has been
granted a royalty bearing, exclusive right, including the right to
grant sublicenses, to develop and commercialize TG-1101 in South
Korea, Taiwan, Singapore, Indonesia, Malaysia, Thailand,
Philippines, Vietnam, and Myanmar. To date, we have received $2
million in the form of an upfront payment from Ildong, and are
eligible to receive sales based milestone payments up to an
aggregate of $5 million and royalty payments on net sales of
TG-1101 at a royalty rate that escalates from mid-teens to
high-teens upon approval in South Korea and/or Southeast Asia. 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 Ildong 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
In
September 2014, we exercised our option to license the global
rights to TGR-1202, thereby entering into an exclusive licensing
agreement (the “TGR-1202 License”) with Rhizen
Pharmaceuticals, S A (“Rhizen”) for the development and
commercialization of TGR-1202. Prior to this, we had been jointly
developing TGR-1202 in a 50:50 joint venture with
Rhizen.
Under
the terms of the TGR-1202 License, Rhizen received a $4.0 million
cash payment and 371,530 shares of our common stock as an upfront
license fee. With respect to TGR-1202, Rhizen will be eligible to
receive regulatory filing, approval and sales based milestone
payments in the aggregate of approximately $175 million, a small
portion of which will be payable on the first New Drug Application
(NDA) filing and the remainder on approval in multiple
jurisdictions for up to two oncology indications and one
non-oncology indication and attaining certain sales milestones. In
addition, if TGR-1202 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 will be entitled to tiered
royalties that escalate from high single digits to low double
digits on our future net sales of TGR-1202 and any New Product. In
lieu of sales milestones and royalties on net sales, Rhizen shall
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
TGR-1202, 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 patent right or any
other exclusivity right in such country, unless the agreement is
earlier terminated (i) by us for any reason, (ii) by either party
due to a breach of the agreement.
IRAK4
In June
2014, we entered into an exclusive licensing agreement with Ligand
Pharmaceuticals Incorporated ("Ligand") for the development and
commercialization of Ligand's interleukin-1 receptor associated
kinase-4 ("IRAK4") inhibitor technology, which currently is in
preclinical development for potential use against certain cancers
and autoimmune diseases. IRAK4 is a serine/threonine protein kinase
that is a key downstream signaling component of the interleukin-1
receptor and multiple toll-like receptors.
Under
the terms of the license agreement, Ligand received 125,000 shares
of our common stock as an upfront license fee. Ligand will also be
eligible to receive maximum potential milestone payments of
approximately $207 million upon the achievement of specific
clinical, regulatory and commercial milestone events. Additionally,
Ligand will be entitled to royalties on our future net sales of
licensed products containing IRAK4 inhibitors. The basic royalty
rate for licensed products covered by Ligand's issued patents will
be 6% for annual sales of up to $1 billion and 9.5% for annual
sales in excess of that threshold. The license will terminate on a
country by country basis upon the expiration of the last licensed
patent right or 10 years after the first commercial sale of a
product in such country, unless the agreement is earlier terminated
by either party due to a breach of the agreement in the event of
the insolvency of the other party.
PD-L1 and GITR
In
March 2015, we entered into a Global Collaboration (the
“Collaboration”) with Checkpoint Therapeutics, Inc.
(“Checkpoint”), a subsidiary of FBIO for the
development and commercialization of Checkpoint’s anti-PD-L1
and anti-GITR antibody research programs in the field of
hematological malignancies.
12
Under
the terms of the Collaboration, we made an up-front payment of
$500,000, will make development and sales-based milestone payments
up to an aggregate of $164 million, and will pay a tiered single
digit royalty on net sales. The royalty term will terminate on a
country by country basis upon the later of (i) ten years after the
first commercial sale of any applicable licensed product in such
country, or (ii) the expiration of the last-to-expire patent held
by Dana Farber containing a valid claim to any licensed product in
such country.
BET
In
May 2016, as part of a broader agreement with Jubilant Biosys
(“Jubilant”), an India-based biotechnology company, we
entered into a sub-license agreement (“JBET Agreement”)
with Checkpoint for the development and commercialization of
Jubilant’s novel BET inhibitor program in the field of
hematological malignancies. The BET inhibitor program is the
subject of a family of patents covering compounds that inhibit
BRD4, a member of the BET (Bromodomain and Extra Terminal) domain
for cancer treatment. Our BET inhibitor program is currently in
pre-clinical development.
Under
the terms of the agreement, we paid Checkpoint an up-front
licensing fee of $1.0 million and will make additional
payments contingent on certain preclinical, clinical, and
regulatory milestones, including commercial milestones totaling up
to approximately $177 million and a single-digit royalty
on net sales. TG will also provide funding to support
certain targeted research efforts at Jubilant.
COMPETITION
Competition in the
pharmaceutical and biotechnology industries is intense. Our
competitors include pharmaceutical companies and biotechnology
companies, as well as universities and public and private research
institutions. In addition, companies that are active in different
but related fields represent substantial competition for us. Many
of our competitors have significantly greater capital resources,
larger research and development staffs and facilities and greater
experience in drug development, regulation, manufacturing and
marketing than we do. These organizations also compete with us to
recruit qualified personnel, attract partners for joint ventures or
other collaborations, and license technologies that are competitive
with ours. To compete successfully in this industry we must
identify novel and unique drugs or methods of treatment and then
complete the development of those drugs as treatments in advance of
our competitors.
The
drugs that we are attempting to develop will have to compete with
existing therapies. In addition, a large number of companies are
pursuing the development of pharmaceuticals that target the same
diseases and conditions that we are targeting. Other companies have
products or drug candidates in various stages of pre-clinical or
clinical development to treat diseases for which we are also
seeking to discover and develop drug candidates. Some of these
potential competing drugs are further advanced in development than
our drug candidates and may be commercialized earlier.
If
approved, we expect TG-1101 to compete directly with Roche
Group’s Rituxan® (rituximab) and
Gazyva® (obinutuzumab),
and Novartis' Arzerra® (ofatumumab)
among others, each of which is currently approved for the treatment
of various diseases including NHL and CLL. In addition, other
pharmaceutical companies are developing anti-CD20 antibodies which,
if approved, would potentially compete with TG-1101. New
developments, including the development of other pharmaceutical
technologies and methods of treating disease, occur in the
pharmaceutical and life sciences industries at a rapid
pace.
With
respect to TGR-1202, if approved, we expect to compete directly
with Gilead’s Zydelig™ (idelalisib), as well as with
other PI3K delta inhibitors which are currently in development,
which, if approved, would potentially compete with TGR-1202, such
as Verastem's duvelisib. In addition, there are numerous other
novel therapies targeting similar pathways to TGR-1202 in
development, which would also compete with TGR-1202 in similar
indications, such as the BTK inhibitor, ibrutinib (FDA approved for
Mantle Cell Lymphoma, CLL, Marginal Zone Lymphoma and
Waldenstrom’s Macroglobulinemia marketed by AbbVie and
Janssen), the BTK inhibitor acalabrutinib or ACP-196 (under
clinical development by AstraZeneca), or the BCL-2 inhibitor
venetoclax or ABT-199 (FDA approved for CLL and marketed by AbbVie
and Roche), among others.
Additional
information can be found under Item “1A - Risk Factors
– Other Risks Related to Our Business” within this
report.
13
SUPPLY AND MANUFACTURING
We have
limited experience in manufacturing products for clinical or
commercial purposes. We currently do not have any manufacturing
capabilities. We have established contract manufacturing
relationships for the supply of TG-1101 as part of our license
agreement with LFB Biotechnologies. We have also established
contract manufacturing relationships for the supply of TGR-1202 as
part of our licensing agreement with Rhizen, and contract
manufacturing relationships to support our IRAK4 development
program. As with any supply program, obtaining pre-clinical and
clinical materials of sufficient quality and quantity to meet the
requirements of our development programs cannot be guaranteed and
we cannot ensure that we will be successful in this endeavor. In
addition, we anticipate the need for the current scale of
production for each of our products to be significantly expanded as
we enter later stages of development. There can be no assurance
given that such scale-up will be successful in providing
pharmaceutical product that is of sufficient quantity, or of a
quality that is consistent with our previously established
specifications, or that meets the requirements set by regulatory
agencies under which we may seek approval of our product
candidates.
At the
time of commercial sale, to the extent possible and commercially
practicable, we would seek to engage a back-up supplier for each of
our product candidates. Until such time, we expect that we will
rely on a single contract manufacturer to produce each of our
product candidates under current Good Manufacturing Practice, or
cGMP, regulations. Our third-party manufacturers have a limited
number of facilities in which our product candidates can be
produced and will have limited experience in manufacturing our
product candidates in quantities sufficient for commercialization.
Our third-party manufacturers will have other clients and may have
other priorities that could affect their ability to perform the
work satisfactorily and/or on a timely basis. Both of these
occurrences would be beyond our control.
We
expect to similarly rely on contract manufacturing relationships
for any products that we may in-license or acquire in the future.
However, there can be no assurance that we will be able to
successfully contract with such manufacturers on terms acceptable
to us, or at all.
Contract
manufacturers are subject to ongoing periodic and unannounced
inspections by the FDA, the Drug Enforcement Administration and
corresponding state agencies to ensure strict compliance with cGMP
and other state and federal regulations. Our contractors outside of
the United States face similar challenges from the numerous local
and regional agencies and authorized bodies. We do not have control
over third-party manufacturers’ compliance with these
regulations and standards, other than through contractual
obligations. If they are deemed out of compliance with cGMPs,
product recalls could result, inventory could be destroyed,
production could be stopped and supplies could be delayed or
otherwise disrupted.
If we
need to change manufacturers after commercialization, the FDA and
corresponding foreign regulatory agencies must approve these new
manufacturers in advance, which will involve testing and additional
inspections to ensure compliance with FDA regulations and standards
and may require significant lead times and delay. Furthermore,
switching manufacturers may be difficult because the number of
potential manufacturers is limited. It may be difficult or
impossible for us to find a replacement manufacturer quickly or on
terms acceptable to us, or at all.
GOVERNMENT AND INDUSTRY REGULATION
Numerous
governmental authorities, principally the FDA and corresponding
state and foreign regulatory agencies, impose substantial
regulations upon the clinical development, manufacture and
marketing of our drug candidates, as well as our ongoing research
and development activities. None of our drug candidates have been
approved for sale in any market in which we have marketing rights.
Before marketing in the U.S., any drug that we develop must undergo
rigorous pre-clinical testing and clinical trials and an extensive
regulatory approval process implemented by the FDA under the FDCA.
The FDA regulates, among other things, the pre-clinical and
clinical testing, safety, efficacy, approval, manufacturing, record
keeping, adverse event reporting, packaging, labeling, storage,
advertising, promotion, export, sale and distribution of
biopharmaceutical products.
The
regulatory review and approval process is lengthy, expensive and
uncertain. We are required to submit extensive pre-clinical and
clinical data and supporting information to the FDA for each
indication or use to establish a drug candidate’s safety and
efficacy before we can secure FDA approval to market or sell a
product in the U.S. The approval process takes many years, requires
the expenditure of substantial resources and may involve ongoing
requirements for post-marketing studies or surveillance. Before
commencing clinical trials in humans, we must submit an IND to the
FDA containing, among other things, pre-clinical data, chemistry,
manufacturing and control information, and an investigative plan.
Our submission of an IND may not result in FDA authorization to
commence a clinical trial.
14
The FDA
may permit expedited development, evaluation, and marketing of new
therapies intended to treat persons with serious or
life-threatening conditions for which there is an unmet medical
need under its fast track drug development programs. A sponsor can
apply for fast track designation at the time of submission of an
IND, or at any time prior to receiving marketing approval of the
new drug application, or NDA. To receive Fast Track designation, an
applicant must demonstrate:
●
that the drug is
intended to treat a serious or life-threatening
condition;
●
that the drug is
intended to treat a serious aspect of the condition;
and
●
that the drug has
the potential to address unmet medical needs, and this potential is
being evaluated in the planned drug development
program.
The FDA
must respond to a request for fast track designation within 60
calendar days of receipt of the request. Over the course of drug
development, a product in a fast track development program must
continue to meet the criteria for fast track designation. Sponsors
of products in fast track drug development programs must be in
regular contact with the reviewing division of the FDA to ensure
that the evidence necessary to support marketing approval will be
developed and presented in a format conducive to an efficient
review. Sponsors of products in fast track drug development
programs ordinarily are eligible for priority review of a completed
application in six months or less and also may be permitted to
submit portions of a New Drug Application (“NDA”) to
the FDA for review before the complete application is
submitted.
Sponsors of drugs
designated as fast track also may seek approval under the
FDA’s accelerated approval regulations. Under this authority,
the FDA may grant marketing approval for a new drug product on the
basis of adequate and well-controlled clinical trials establishing
that the drug product has an effect on a surrogate endpoint that is
reasonably likely, based on epidemiologic, therapeutic,
pathophysiologic, or other evidence, to predict clinical benefit or
on the basis of an effect on a clinical endpoint other than
survival or irreversible morbidity. Approval will be subject
to the requirement that the applicant study the drug further to
verify and describe its clinical benefit where there is uncertainty
as to the relation of the surrogate endpoint to clinical benefit or
uncertainty as to the relation of the observed clinical benefit to
ultimate outcome. Post-marketing studies are usually underway
at the time an applicant files the NDA. When required to be
conducted, such post-marketing studies must also be adequate and
well-controlled. The applicant must carry out any such
post-marketing studies with due diligence. Many companies who have
been granted the right to utilize an accelerated approval approach
have failed to obtain approval. Moreover, negative or inconclusive
results from the clinical trials we hope to conduct or adverse
medical events could cause us to have to repeat or terminate the
clinical trials. Accordingly, we may not be able to complete the
clinical trials within an acceptable time frame, if at all, and,
therefore, could not submit the NDA to the FDA or foreign
regulatory authorities for marketing approval.
In
addition, sponsors may also apply to the FDA for Breakthrough
Therapy Designation. The Breakthrough Therapy Designation is
intended to expedite the development and review of a potential new
drug for serious or life-threatening diseases where
“preliminary clinical evidence indicates that the drug may
demonstrate substantial improvement over existing therapies on one
or more clinically significant endpoints, such as substantial
treatment effects observed early in clinical development.”
The designation of a drug as a Breakthrough Therapy was enacted as
part of the 2012 Food and Drug Administration Safety and Innovation
Act.
Clinical testing
must meet requirements for institutional review board oversight,
informed consent and good clinical practices, and must be conducted
pursuant to an IND, unless exempted.
For
purposes of NDA approval, clinical trials are typically conducted
in the following sequential phases:
●
Phase 1: The drug is administered to a
small group of humans, either healthy volunteers or patients, to
test for safety, dosage tolerance, absorption, metabolism,
excretion, and clinical pharmacology.
●
Phase 2: Studies are conducted on a
larger number of patients to assess the efficacy of the product, to
ascertain dose tolerance and the optimal dose range, and to gather
additional data relating to safety and potential adverse
events.
●
Phase 3: Studies establish safety and
efficacy in an expanded patient population.
●
Phase 4: The FDA may require Phase 4
post-marketing studies to find out more about the drug’s
long-term risks, benefits, and optimal use, or to test the drug in
different populations.
15
The
length of time necessary to complete clinical trials varies
significantly and may be difficult to predict. Clinical results are
frequently susceptible to varying interpretations that may delay,
limit or prevent regulatory approvals. Additional factors that can
cause delay or termination of our clinical trials, or that may
increase the costs of these trials, include:
●
slow patient
enrollment due to the nature of the clinical trial plan, the
proximity of patients to clinical sites, the eligibility criteria
for participation in the study or other factors;
●
inadequately
trained or insufficient personnel at the study site to assist in
overseeing and monitoring clinical trials or delays in approvals
from a study site’s review board;
●
longer treatment
time required to demonstrate efficacy or determine the appropriate
product dose;
●
insufficient supply
of the drug candidates;
●
adverse medical
events or side effects in treated patients; and
●
ineffectiveness of
the drug candidates.
In
addition, the FDA, equivalent foreign regulatory authority, or a
data safety monitoring committee for a trial may place a clinical
trial on hold or terminate it if it concludes that subjects are
being exposed to an unacceptable health risk, or for futility. Any
drug is likely to produce some toxicity or undesirable side effects
in animals and in humans when administered at sufficiently high
doses and/or for a sufficiently long period of time. Unacceptable
toxicity or side effects may occur at any dose level at any time in
the course of studies in animals designed to identify unacceptable
effects of a drug candidate, known as toxicological studies, or
clinical trials of drug candidates. The appearance of any
unacceptable toxicity or side effect could cause us or regulatory
authorities to interrupt, limit, delay or abort the development of
any of our drug candidates and could ultimately prevent approval by
the FDA or foreign regulatory authorities for any or all targeted
indications.
Sponsors of drugs
may apply for an SPA from the FDA. The SPA process is a procedure
by which the FDA provides official evaluation and written guidance
on the design and size of proposed protocols that are intended to
form the basis for a new drug application. However, final marketing
approval depends on the results of efficacy, the adverse event
profile and an evaluation of the benefit/risk of treatment
demonstrated in the Phase 3 trial. The SPA agreement may only be
changed through a written agreement between the sponsor and the
FDA, or if the FDA becomes aware of a substantial scientific issue
essential to product safety or efficacy.
Before
receiving FDA approval to market a product, we must demonstrate
that the product is safe and effective for its intended use by
submitting to the FDA an NDA or BLA containing the pre-clinical and
clinical data that have been accumulated, together with chemistry
and manufacturing and controls specifications and information, and
proposed labeling, among other things. The FDA may refuse to accept
an NDA/BLA for filing if certain content criteria are not met and,
even after accepting an NDA/BLA, the FDA may often require
additional information, including clinical data, before approval of
marketing a product.
It is
also becoming more common for the FDA to request a Risk Evaluation
and Mitigation Strategy, or REMS, as part of a NDA/BLA. The REMS
plan contains post-market obligations of the sponsor to train
prescribing physicians, monitor off-label drug use, and conduct
sufficient Phase 4 follow-up studies and registries to ensure the
continued safe use of the drug.
As part
of the approval process, the FDA must inspect and approve each
manufacturing facility. Among the conditions of approval is the
requirement that a manufacturer’s quality control and
manufacturing procedures conform to cGMP. Manufacturers must expend
significant time, money and effort to ensure continued compliance,
and the FDA conducts periodic inspections to certify compliance. It
may be difficult for our manufacturers or us to comply with the
applicable cGMP, as interpreted by the FDA, and other FDA
regulatory requirements. If we, or our contract manufacturers, fail
to comply, then the FDA may not allow us to market products that
have been affected by the failure.
16
If the
FDA grants approval, the approval will be limited to those disease
states, conditions and patient populations for which the product is
safe and effective, as demonstrated through clinical studies.
Further, a product may be marketed only in those dosage forms and
for those indications approved in the NDA/BLA. Certain changes to
an approved NDA/BLA, including, with certain exceptions, any
significant changes to labeling, require approval of a supplemental
application before the drug may be marketed as changed. Any
products that we manufacture or distribute pursuant to FDA
approvals are subject to continuing monitoring and regulation by
the FDA, including compliance with cGMP and the reporting of
adverse experiences with the drugs. The nature of marketing claims
that the FDA will permit us to make in the labeling and advertising
of our products will generally be limited to those specified in FDA
approved labeling, and the advertising of our products will be
subject to comprehensive monitoring and regulation by the FDA.
Drugs whose review was accelerated may carry additional
restrictions on marketing activities, including the requirement
that all promotional materials are pre-submitted to the FDA. Claims
exceeding those contained in approved labeling will constitute a
violation of the FDCA. Violations of the FDCA or regulatory
requirements at any time during the product development process,
approval process, or marketing and sale following approval may
result in agency enforcement actions, including withdrawal of
approval, recall, seizure of products, warning letters,
injunctions, fines and/or civil or criminal penalties. Any agency
enforcement action could have a material adverse effect on our
business.
Should
we wish to market our products outside the U.S., we must receive
marketing authorization from the appropriate foreign regulatory
authorities. The requirements governing the conduct of clinical
trials, marketing authorization, pricing and reimbursement vary
widely from country to country. At present, companies are typically
required to apply for foreign marketing authorizations at a
national level. However, within the European Union, registration
procedures are available to companies wishing to market a product
in more than one European Union member state. Typically, if the
regulatory authority is satisfied that a company has presented
adequate evidence of safety, quality and efficacy, then the
regulatory authority will grant a marketing authorization. This
foreign regulatory approval process, however, involves risks
similar or identical to the risks associated with FDA approval
discussed above, and therefore we cannot guarantee that we will be
able to obtain the appropriate marketing authorization for any
product in any particular country.
Failure
to comply with applicable federal, state and foreign laws and
regulations would likely have a material adverse effect on our
business. In addition, federal, state and foreign laws and
regulations regarding the manufacture and sale of new drugs are
subject to future changes. We cannot predict the likelihood,
nature, effect or extent of adverse governmental regulation that
might arise from future legislative or administrative action,
either in the U.S. or abroad.
EMPLOYEES
As of
March 1, 2017, we had sixty-four full and part-time employees. None
of our employees are represented by a collective bargaining
agreement, and we have never experienced a work stoppage. We
consider our relations with our employees to be good.
ITEM 1A. RISK FACTORS.
You should carefully consider the following risks and
uncertainties. If any of the following occurs, our business,
financial condition or operating results could be materially
harmed. An investment in our securities is speculative in nature,
involves a high degree of risk, and should not be made by an
investor who cannot bear the economic risk of its investment for an
indefinite period of time and who cannot afford the loss of its
entire investment. You should carefully consider the following risk
factors and the other information contained elsewhere in this
Annual Report before making an investment in our
securities.
Risks Related to Our Business and Industry
Because we have in-licensed our product candidates from third
parties, any dispute with or non-performance by our licensors will
adversely affect our ability to develop and commercialize the
applicable product candidates.
Our
product candidates have been in-licensed from third parties. Under
the terms of our license agreements, the licensors generally will
have the right to terminate such agreement in the event of a
material breach by us. The licensors will also have the right to
terminate the agreement in the event we fail to use diligent and
reasonable efforts to develop and commercialize the product
candidate worldwide.
17
If
there is any conflict, dispute, disagreement or issue of
non-performance between us and our licensing partners regarding our
rights or obligations under the license agreements, including any
such conflict, dispute or disagreement arising from our failure to
satisfy payment obligations under such agreement, our ability to
develop and commercialize the affected product candidate and our
ability to enter into collaboration or marketing agreements for the
affected product candidate may be adversely affected. Any loss of
our rights under these license agreements would delay or completely
terminate its product development efforts for the affected product
candidate.
We do not have full internal development capabilities, and are thus
reliant upon our partners and third parties to generate clinical,
preclinical and quality data necessary to support the regulatory
applications needed to conduct clinical trials and file for
marketing approval.
In order to submit and maintain an IND, Biologics
License Application (“BLA”), or New Drug Application
(“NDA”) to the FDA, it is necessary to submit all
information on the clinical, non-clinical, chemistry,
manufacturing, controls and quality aspects of the product
candidate. We rely on our third party contractors and our licensing
partners to provide a significant portion of this data. If we are
unable to obtain this data, or the data is not sufficient to meet
the regulatory requirements, we may experience significant delays
in our development programs. Additionally, an IND must be active in
each division in which we intend to conduct clinical trials.
Currently we do not have an active IND for any of the IRAK4 or BET
inhibitors, nor for our anti-PD-L1 and anti-GITR antibodies.
Additionally, there can be no assurance given that any of the
molecules under development in our IRAK4 or BET inhibitor program
or in our anti-PD-L1 and anti-GITR antibody research program will
demonstrate sufficient pharmacologic properties during pre-clinical
evaluation to advance to IND enabling studies, or that such IND
enabling studies, if any are conducted, will provide data
sufficient to support the filing of an IND, or that such IND, if
filed, would be accepted by any FDA division under which we would
seek to develop any product candidate. While we maintain an active
IND for TG-1101 and TGR-1202 enabling the conduct of studies in
the FDA’s Division of Hematology and Oncology, and an active
IND for TG-1101 under the FDA’s Division of Neurology, there
can be no assurance that we will be successful in obtaining an
active IND for TG-1101 or TGR-1202 in any other division under whose
supervision we may seek to develop our product candidates, or that
the FDA will allow us to continue the development of our product
candidates in those divisions where we maintain an active
IND.
We are highly dependent on the success of our product candidates
and cannot give any assurance that these or any future product
candidates will be successfully commercialized.
We are
a development-stage biopharmaceutical company, and do not currently
have any commercial products that generate revenues or any other
sources of revenue. We may never be able to successfully develop
marketable products. Our pharmaceutical development methods are
unproven and may not lead to commercially viable products for any
of several reasons.
If we
are unable to develop, or receive regulatory approval for or
successfully commercialize any of our product candidates, we will
not be able to generate product revenues.
Because the results of preclinical studies and early clinical
trials are not necessarily predictive of future results, any
product candidate we advance into clinical trials may not have
favorable results in later clinical trials, if any, or receive
regulatory approval.
Pharmaceutical
development has inherent risk. We will be required to demonstrate
through adequate and well-controlled clinical trials that our
product candidates are effective with a favorable benefit-risk
profile for use in diverse populations for their target indications
before we can seek regulatory approvals for their commercial sale.
Success in early clinical trials does not mean that later clinical
trials will be successful because product candidates in later-stage
clinical trials may fail to demonstrate sufficient safety or
efficacy despite having progressed through initial clinical
testing. Companies frequently suffer significant setbacks in
advanced clinical trials, even after earlier clinical trials have
shown promising results. In addition, there is typically an
extremely high rate of failure of pharmaceutical candidates
proceeding through clinical trials.
We plan
on conducting additional Phase I, II and III clinical trials for
TG-1101 and TGR-1202. Early clinical results seen with TG-1101 and
TGR-1202 in a small number of patients may not be reproduced in
expanded or larger clinical trials. Additionally, individually
reported outcomes of patients treated in clinical trials may not be
representative of the entire population of treated patients in such
studies. If the results from expansion cohorts or later trials are
different from those found in the earlier studies of TG-1101 and
TGR-1202, we may need to terminate or revise our clinical
development plan, which could extend the time for conducting our
development program and could have a material adverse effect on our
business. Our IRAK4, BET, anti-PD-L1 and anti-GITR programs are all
in pre-clinical development and no assurance can be given that they
will advance into clinical development. If the results from
additional pre-clinical studies or early clinical trials differ
from those found in earlier studies, our clinical development plans
and timelines for this program could be adversely affected which
could have a material adverse effect on our business. Many drugs
fail in the early stages of clinical development for safety and
tolerability issues, accordingly if our pre-clinical assets advance
into clinical development, no assurance can be made that a safe and
efficacious dose can be found.
18
If we are unable to successfully complete our clinical trial
programs, or if such clinical trials take longer to complete than
we project, our ability to execute our current business strategy
will be adversely affected.
Whether
or not and how quickly we complete clinical trials is dependent in
part upon the rate at which we are able to engage clinical trial
sites and, thereafter, the rate of enrollment of patients, and the
rate we collect, clean, lock and analyze the clinical trial
database. Patient enrollment is a function of many factors,
including the size of the patient population, the proximity of
patients to clinical sites, the eligibility criteria for the study,
the existence of competitive clinical trials, and whether existing
or new drugs are approved for the indication we are studying. We
are aware that other companies are currently conducting or planning
clinical trials that seek to enroll patients with the same diseases
that we are studying. Certain clinical trials are designed to
continue until a pre-determined number of events have occurred in
the patients enrolled. Trials such as this are subject to delays
stemming from patient withdrawal and from lower than expected event
rates. They may also incur additional costs if enrollment is
increased in order to achieve the desired number of events. If we
experience delays in identifying and contracting with sites and/or
in patient enrollment in our clinical trial programs, we may incur
additional costs and delays in our development programs, and may
not be able to complete our clinical trials in a cost-effective or
timely manner. In addition, conducting multi-national studies adds
another level of complexity and risk. We are subject to events
affecting countries outside the U.S. Negative or inconclusive
results from the clinical trials we conduct or unanticipated
adverse medical events could cause us to have to repeat or
terminate the clinical trials.
In
September 2014, we announced a Phase 3 clinical trial for TG-1101
in previously treated patients with high-risk CLL, and in September
2015 we announced a Phase 3 clinical trial for the combination of
TG-1101 + TGR-1202 for patients with CLL, each of which are being
conducted pursuant to SPAs with the FDA. Many companies which have
been granted SPAs and/or the right to utilize the FDA’s Fast
Track or accelerated approval process have ultimately failed to
obtain final approval to market their drugs. Since we are seeking
approvals under SPAs for some of our product registration
strategies, based on protocol designs negotiated with the FDA, we
may be subject to enhanced scrutiny. Further, any changes or
amendments to a protocol that is being conducted under SPA will
have to be reviewed and approved by the FDA to verify that the SPA
agreement is still valid. Even if the primary endpoint in a Phase 3
clinical trial is achieved, a SPA does not guarantee approval. The
FDA may raise issues of safety, study conduct, bias, deviation from
the protocol, statistical power, patient completion rates, changes
in scientific or medical parameters or internal inconsistencies in
the data prior to making its final decision. The FDA may also seek
the guidance of an outside advisory committee prior to making its
final decision.
The sufficiency of our GENUINE trial design and results are subject
to FDA’s discretion.
On
March 6, 2017, we announced topline data from our Phase 3
“GENUINE” clinical trial of TG-1101 in combination with
ibrutinib as a treatment for patients with previously treated high
risk Chronic Lymphocytic Leukemia, or CLL. This trial, as
originally designed, was prepared under FDA’s SPA procedures,
in which FDA agrees in advance of commencement of a Phase III
clinical trial that the trial’s design, clinical endpoints
and statistical analyses will constitute a pivotal study for
purposes of regulatory approval, assuming that the resulting data
is sufficiently favorable. In October 2016, we amended the
protocol, which had the effect of reducing the number of enrolled
patients to approximately 120 and eliminating progression-free
survival as a primary endpoint, leaving overall response rate as
the sole primary endpoint. In doing so, we invalidated the
trial’s SPA.
We
believe that the trial design and the resulting data could support
FDA approval, but that is a question wholly within FDA’s
discretion to determine. Whether or not FDA accepts the data for
filing will depend on FDA’s views on the adequacy of the
filing. Consequently, there can be no assurance that FDA will
approve TG-1101, or even whether FDA will agree to meet with us to
discuss the matter.
A
critical area of inquiry in the GENUINE clinical trial will be the
overall response rate observed. As per applicable guidelines,
responders require confirmation of response for a minimum duration
of two months. As of the date of analysis, nine patients that
demonstrated a response in the combination therapy arm of the trial
were awaiting confirmation visits, which are expected to occur over
the next two months. During the study, less than 3% of patients who
demonstrated a response in the combination therapy arm of the trial
failed to be a confirmed response at subsequent follow-up.
Nevertheless, if one or more of the nine patients awaiting
confirmation do not maintain their response at the next checkpoint,
our previously reported results could be adversely affected,
perhaps materially so, which could adversely affect the likelihood
of regulatory approval.
Any product candidates we may advance ithroughclinical development
are subject to extensive regulation, which can be costly and time
consuming, cause unanticipated delays or prevent the receipt of the
required approvals or any accelerated or "fast track" status to
commercialize our product candidates.
The
clinical development, manufacturing, labeling, storage,
record-keeping, advertising, promotion, import, export, marketing
and distribution of our product candidates or any future product
candidates are subject to extensive regulation by the FDA in the
United States and by comparable health authorities worldwide or in
foreign markets. In the United States, we are not permitted to
market our product candidates until we receive approval of a BLA or
NDA from the FDA. The process of obtaining BLA and NDA approval is
expensive, often takes many years and can vary substantially based
upon the type, complexity and novelty of the products involved.
Approval policies or regulations may change and the FDA has
substantial discretion in the pharmaceutical approval process,
including the ability to delay, limit or deny approval of a product
candidate for many reasons. Even with “fast track” or
“priority review” status which we intend to seek for
our product candidates where possible, including with regard to
TG-1101, such designations do not necessarily mean a faster
development process or regulatory review process or necessarily
confer any advantage with respect to approval compared to
conventional FDA procedures. In addition, the FDA may require
post-approval clinical trials or studies which also may be costly.
The FDA approval for a limited indication or approval with required
warning language, such as a boxed warning, could significantly
impact our ability to successfully market our product candidates.
Finally, the FDA may require adoption of a Risk Evaluation and
Mitigation Strategy (“REMS”) requiring prescriber
training, post-market registries, or otherwise restricting the
marketing and dissemination of these products. Despite the time and
expense invested in clinical development of product candidates,
regulatory approval is never guaranteed. Assuming successful
clinical development, we intend to seek product approvals in
countries outside the United States. As a result, we would be
subject to regulation by the European Medicines Agency
(“EMA”), as well as the other regulatory agencies in
many of these countries, and other regulatory agencies around the
world.
19
Approval procedures
vary among countries and can involve additional product testing and
additional administrative review periods. The time required to
obtain approval in other countries might differ from that required
to obtain FDA approval. Regulatory approval in one country does not
ensure regulatory approval in another, but a failure or delay in
obtaining regulatory approval in one country may negatively impact
the regulatory process in others. As in the United States, the
regulatory approval process in Europe and in other countries is a
lengthy and challenging process. The FDA, and any other regulatory
body around the world can delay, limit or deny approval of a
product candidate for many reasons, including:
●
the FDA or
comparable foreign regulatory authorities may disagree with the
design or implementation of our clinical trials;
●
we may be unable to
demonstrate to the satisfaction of the FDA or comparable foreign
regulatory authorities that a product candidate is safe and
effective for any indication;
●
the FDA may not
accept clinical data from trials which are conducted by individual
investigators or in countries where the standard of care is
potentially different from the United States;
●
the results of
clinical trials may not meet the level of statistical significance
required by the FDA or comparable foreign regulatory authorities
for approval;
●
we may be unable to
demonstrate that a product candidate's clinical and other benefits
outweigh its safety risks;
●
the FDA or
comparable foreign regulatory authorities may disagree with our
interpretation of data from preclinical studies or clinical
trials;
●
the data collected
from clinical trials of our product candidates may not be
sufficient to support the submission of a BLA, NDA or other
submission or to obtain regulatory approval in the United States or
elsewhere;
●
the FDA or
comparable foreign regulatory authorities may fail to approve the
manufacturing processes or facilities of third-party manufacturers
with which we or our collaborators contract for clinical and
commercial supplies; or
●
the approval
policies or regulations of the FDA or comparable foreign regulatory
authorities may significantly change in a manner rendering our
clinical data insufficient for approval.
In
addition, recent events raising questions about the safety of
certain marketed pharmaceuticals may result in increased
cautiousness by the FDA and other regulatory authorities in
reviewing new pharmaceuticals based on safety, efficacy or other
regulatory considerations and may result in significant delays in
obtaining regulatory approvals. Regulatory approvals for our
product candidates may not be obtained without lengthy delays, if
at all. Any delay in obtaining, or inability to obtain, applicable
regulatory approvals would prevent us from commercializing our
product candidates.
Any product candidate we advance into clinical trials may cause
unacceptable adverse events or have other properties that may delay
or prevent their regulatory approval or commercialization or limit
their commercial potential.
Unacceptable
adverse events caused by any of our product candidates that we take
into clinical trials could cause either us or regulatory
authorities to interrupt, delay, modify or halt clinical trials and
could result in the denial of regulatory approval by the FDA or
other regulatory authorities for any or all targeted indications.
This, in turn, could prevent us from commercializing the affected
product candidate and generating revenues from its
sale.
We have
not completed testing of any of our product candidates for the
treatment of the indications for which we intend to seek product
approval in humans, and we currently do not know the extent that
adverse events, if any, will be observed in patients who receive
any of our product candidates. To date, clinical trials using
TG-1101 and TGR-1202 have demonstrated a toxicity profile that was
deemed acceptable by the investigators performing such studies.
Such interpretation may not be shared by future investigators or by
the FDA and in the case of TG-1101 and TGR-1202, even if deemed
acceptable for oncology applications, it may not be acceptable for
diseases outside the oncology setting, and likewise for any other
product candidates we may develop. Additionally, the severity,
duration and incidence of adverse events may increase in larger
study populations. With respect to both TG-1101 and TGR-1202, the
toxicity when manufactured under different conditions and in
different formulations is not known, and it is possible that
additional and/or different adverse events may appear upon the
human use of those formulations and those adverse events may arise
with greater frequency, intensity and duration than in the current
formulation. Further, with respect to TGR-1202, although more than
300 patients have been dosed amongst all ongoing TGR-1202 studies,
the full adverse effect profile of TGR-1202 is not known. It is
unknown as the additional patients are exposed for longer durations
to TGR-1202, whether greater frequency and/or severity of adverse
events are likely to occur. Common toxicities of other drugs in the
same class as TGR-1202 include high levels of liver toxicity,
infections and colitis, the latter of which notably has presented
with later onset, with incidence increasing with duration of
exposure. To date, the incidence of these events has been limited
for TGR-1202, however no assurance can be given that this safety
and tolerability profile will continue to be demonstrated in the
future as higher doses, longer durations of exposure, and multiple
drug combinations are explored. If any of our product candidates
cause unacceptable adverse events in clinical trials, we may not be
able to obtain marketing approval and generate revenues from its
sale, or even if approved for sale may lack differentiation from
competitive products, which could have a material adverse impact on
our business and operations.
20
Additionally, in
combination clinical development, there is an inherent risk of
drug-drug interactions between combination agents which may affect
each component’s individual pharmacologic properties and the
overall efficacy and safety of the combination regimen. Both
TG-1101 and TGR-1202 are being evaluated in combination together,
as well as with a variety of other active anti-cancer agents, which
may cause unforeseen toxicity, or impact the severity, duration,
and incidence of adverse events observed compared to those seen in
the single agent studies of these agents. Further, with multi-drug
combinations, it is often difficult to interpret or properly assign
attribution of an adverse event to any one particular agent,
introducing the risk that toxicity caused by a component of a
combination regimen could have a material adverse impact on the
development of our product candidates. There can be no assurances
given that the combination regimens being studied will display
tolerability or efficacy suitable to warrant further testing or
produce data that is sufficient to obtain marketing
approval.
If any
of our product candidates receives marketing approval and we, or
others, later identify unacceptable adverse events caused by the
product, a number of significant negative consequences could
result, including:
●
regulatory
authorities may withdraw their approval of the affected
product;
●
regulatory
authorities may require a more significant clinical benefit for
approval to offset the risk;
●
regulatory
authorities may require the addition of labeling statements that
could diminish the usage of the product or otherwise limit the
commercial success of the affected product;
●
we may be required
to change the way the product is administered, conduct additional
clinical trials or change the labeling of the product;
●
we may choose to
discontinue sale of the product;
●
we could be sued
and held liable for harm caused to patients;
●
we may not be able
to enter into collaboration agreements on acceptable terms and
execute on our business model; and
●
our reputation may
suffer.
Any one
or a combination of these events could prevent us from obtaining or
maintaining regulatory approval and achieving or maintaining market
acceptance of the affected product or could substantially increase
the costs and expenses of commercializing the affected product,
which in turn could delay or prevent us from generating any
revenues from the sale of the affected product.
We may experience delays in the commencement of our clinical trials
or in the receipt of data from preclinical and clinical trials
conducted by third parties, which could result in increased costs
and delay our ability to pursue regulatory approval.
Delays
in the commencement of clinical trials and delays in the receipt of
data from preclinical or clinical trials conducted by third parties
could significantly impact our product development costs. Before we
can initiate clinical trials in the United States for our product
candidates, we need to submit the results of preclinical testing,
usually in animals, to the FDA as part of an IND, along with other
information including information about product chemistry,
manufacturing and controls and its proposed clinical trial protocol
for our product candidates.
We plan
to rely on preclinical and clinical trial data from third parties,
if any, for the IND submissions for our product candidates. If
receipt of that data is delayed for any reason, including reasons
outside of our control, it will delay our plans for IND filings,
and clinical trial plans. This, in turn, will delay our ability to
make subsequent regulatory filings and ultimately, to commercialize
our products if regulatory approval is obtained. If those third
parties do not make this data available to us, we will likely, on
our own, have to develop all the necessary preclinical and clinical
data which will lead to additional delays and increase the costs of
our development of our product candidates.
Before
we can test any product candidate in human clinical trials the
product candidate enters the preclinical testing stage. Preclinical
tests include laboratory evaluations of product chemistry, toxicity
and formulation, as well as in-vitro and animal studies to assess
the potential safety and activity of the pharmaceutical product
candidate. The conduct of the preclinical tests must comply with
federal regulations and requirements including good laboratory
practices (“GLP”).
We must
submit the results of the preclinical tests, together with
manufacturing information, analytical data, any available clinical
data or literature and a proposed clinical protocol, to the FDA as
part of the IND. The IND automatically becomes effective 30 days
after receipt by the FDA, unless the FDA places the IND on a
clinical hold within that 30-day time period. In such a case, we
must work with the FDA to resolve any outstanding concerns before
the clinical trials can begin. The FDA may also impose clinical
holds on a product candidate at any time before or during clinical
trials due to safety concerns or non-compliance. Accordingly, we
cannot be sure that submission of an IND will result in the FDA
allowing clinical trials to begin, or that, once begun, issues will
not arise that suspend or terminate such clinical
trial.
21
The FDA
may require that we conduct additional preclinical testing for any
product candidate before it allows us to initiate the clinical
testing under any IND, which may lead to additional delays and
increase the costs of our preclinical development.
Even
assuming an active IND for a product candidate, we do not know
whether our planned clinical trials for any such product candidate
will begin on time, or at all. The commencement of clinical trials
can be delayed for a variety of reasons, including delays
in:
●
obtaining
regulatory clearance to commence a clinical trial;
●
identifying,
recruiting and training suitable clinical
investigators;
●
reaching agreement
on acceptable terms with prospective contract research
organizations (“CROs”) and trial sites, the terms of
which can be subject to extensive negotiation, may be subject to
modification from time to time and may vary significantly among
different CROs and trial sites;
●
obtaining
sufficient quantities of a product candidate for use in clinical
trials;
●
obtaining
institutional review board (“IRB”) or ethics committee
approval to conduct a clinical trial at a prospective
site;
●
identifying,
recruiting and enrolling patients to participate in a clinical
trial;
●
retaining patients
who have initiated a clinical trial but may withdraw due to adverse
events from the therapy, insufficient efficacy, fatigue with the
clinical trial process or personal issues; and
●
unexpected safety
findings.
Any
delays in the commencement of our clinical trials will delay our
ability to pursue regulatory approval for our product candidates.
In addition, many of the factors that cause, or lead to, a delay in
the commencement of clinical trials may also ultimately lead to the
denial of regulatory approval of a product candidate.
Delays in the completion of clinical testing could result in
increased costs and delay our ability to generate product
revenues.
Once a
clinical trial has begun, patient recruitment and enrollment may be
slower than we anticipate. Clinical trials may also be delayed as a
result of ambiguous or negative interim results. Further, a
clinical trial may be suspended or terminated by us, an IRB, an
ethics committee or a Data Safety and Monitoring Committee
overseeing the clinical trial, any of our clinical trial sites with
respect to that site or the FDA or other regulatory authorities due
to a number of factors, including:
●
failure to conduct
the clinical trial in accordance with regulatory requirements or
our clinical protocols;
●
inspection of the
clinical trial operations or clinical trial site by the FDA or
other regulatory authorities resulting in the imposition of a
clinical hold;
●
unforeseen safety
issues or any determination that the clinical trial presents
unacceptable health risks; and
●
lack of adequate
funding to continue the clinical trial.
Changes
in regulatory requirements and guidance also may occur and we may
need to amend clinical trial protocols to reflect these changes.
Amendments may require us to resubmit our clinical trial protocols
to IRBs for re-examination, which may impact the costs, timing and
successful completion of a clinical trial. If we experience delays
in the completion of, or if we must terminate, any clinical trial
of any product candidate that we advance into clinical trials, our
ability to obtain regulatory approval for that product candidate
will be delayed and the commercial prospects, if any, for the
product candidate may be harmed. In addition, many of these factors
may also ultimately lead to the denial of regulatory approval of a
product candidate. Even if we ultimately commercialize any of our
product candidates, other therapies for the same indications may
have been introduced to the market during the period we have been
delayed and such therapies may have established a competitive
advantage over our product candidates.
We intend to rely on third parties to help conduct our planned
clinical trials. If these third parties do not meet their deadlines
or otherwise conduct the trials as required, we may not be able to
obtain regulatory approval for or commercialize our product
candidates when expected or at all.
We
intend to use CROs to assist in the conduct of our planned clinical
trials and will rely upon medical institutions, clinical
investigators and contract laboratories to conduct our trials in
accordance with our clinical protocols. Our future CROs,
investigators and other third parties may play a significant role
in the conduct of these trials and the subsequent collection and
analysis of data from the clinical trials.
There
is no guarantee that any CROs, investigators and other third
parties will devote adequate time and resources to our clinical
trials or perform as contractually required. If any third parties
upon whom we rely for administration and conduct of our clinical
trials fail to meet expected deadlines, fail to adhere to its
clinical protocols or otherwise perform in a substandard manner,
our clinical trials may be extended, delayed or terminated, and we
may not be able to commercialize our product
candidates.
22
If any
of our clinical trial sites terminate for any reason, we may
experience the loss of follow-up information on patients enrolled
in our ongoing clinical trials unless we are able to transfer the
care of those patients to another qualified clinical trial site. In
addition, principal investigators for our clinical trials may serve
as scientific advisors or consultants to us from time to time and
receive cash or equity compensation in connection with such
services. If these relationships and any related compensation
result in perceived or actual conflicts of interest, the integrity
of the data generated at the applicable clinical trial site may be
jeopardized.
As all of our product candidates are still under development,
manufacturing and process improvements implemented in the
production of those product candidates may affect their ultimate
activity or function.
Our
product candidates are in the initial stages of development and are
currently manufactured in small batches for use in pre-clinical and
clinical studies. Process improvements implemented to date have
changed, and process improvements in the future may change, the
activity profile of the product candidates, which may affect the
safety and efficacy of the products. No assurance can be given that
the material manufactured from any of the optimized processes will
perform comparably to the product candidates as manufactured to
date and used in currently available pre-clinical data and or in
early clinical trials reported in this or any previous filing.
Additionally, future clinical trial results will be subject to the
same level of uncertainty if, following such trials, additional
process improvements are made. In addition, we have recently
engaged a secondary manufacturer for TG-1101 to meet our current
clinical and future commercial needs and anticipate engaging
additional manufacturing sources for TGR-1202 to meet expanded
clinical trial and commercial needs. While material produced from
this secondary manufacturer for TG-1101 has to date demonstrated
acceptable comparability, no assurance can be given that any
additional manufacturers will be successful or that material
manufactured by the additional manufacturers will perform
comparably to TG-1101 or TGR-1202 as manufactured to date and used
in currently available pre-clinical data and or in early clinical
trials reported in this or any previous filing. If a secondary
manufacturer is not successful in replicating the product or
experiences delays, or if regulatory authorities impose unforeseen
requirements with respect to product comparability from multiple
manufacturing sources, we may experience delays in clinical
development.
If we fail to adequately understand and comply with the local laws
and customs as we expand into new international markets, these
operations may incur losses or otherwise adversely affect our
business and results of operations.
We
expect to operate a portion of our business in certain countries
through subsidiaries or through supply and marketing arrangements.
In those countries, where we have limited experience in operating
subsidiaries and in reviewing equity investees, we will be subject
to additional risks related to complying with a wide variety of
national and local laws, including restrictions on the import and
export of certain intermediates, drugs, technologies and multiple
and possibly overlapping tax structures. In addition, we may face
competition in certain countries from companies that may have more
experience with operations in such countries or with international
operations generally. We may also face difficulties integrating new
facilities in different countries into our existing operations, as
well as integrating employees hired in different countries into our
existing corporate culture. If we do not effectively manage our
operations in these subsidiaries and review equity investees
effectively, or if we fail to manage our alliances, we may lose
money in these countries and it may adversely affect our business
and results of our operations.
If our competitors develop treatments for the target indications
for which any of our product candidates may be approved, and they
are approved more quickly, marketed more effectively or
demonstrated to be more effective than our product candidates, our
commercial opportunity will be reduced or eliminated.
We
operate in a highly competitive segment of the biotechnology and
biopharmaceutical market. We face competition from numerous
sources, including commercial pharmaceutical and biotechnology
enterprises, academic institutions, government agencies, and
private and public research institutions. Many of our competitors
have significantly greater financial, product development,
manufacturing and marketing resources. Large pharmaceutical
companies have extensive experience in clinical testing and
obtaining regulatory approval for drugs. Additionally, many
universities and private and public research institutes are active
in cancer research, some in direct competition with us. We may also
compete with these organizations to recruit scientists and clinical
development personnel. Smaller or early-stage companies may also
prove to be significant competitors, particularly through
collaborative arrangements with large and established
companies.
The
cancer indications for which we are developing our products have a
number of established therapies with which we will compete. Most
major pharmaceutical companies and many biotechnology companies are
aggressively pursuing new cancer development programs for the
treatment of NHL, CLL, and other B-cell proliferative malignancies,
including both therapies with traditional, as well as novel,
mechanisms of action. Additionally, numerous established therapies
exist for the autoimmune disorders for which we are developing
TG-1101, including and in particular, multiple sclerosis
(MS).
23
If
approved, we expect TG-1101 to compete directly with Roche
Group’s Rituxan® (rituximab) and Gazyva®
(obinutuzumab or GA-101), and Novartis’ Arzerra®
(ofatumumab) among others, each of which is currently approved for
the treatment of various diseases including NHL and CLL. In
addition, a number of pharmaceutical companies are developing
antibodies targeting CD20, CD19, and other B-cell associated
targets, chimeric antigen receptor T-cell (CAR-T) immunotherapy,
and other B-cell ablative therapy which, if approved, would
potentially compete with TG-1101 both in oncology settings as well
as in autoimmune disorders. Recently, positive Phase 3 data was
announced for the Roche Group’s anti-CD20 antibody
ocrelizumab in the treatment of MS, which we anticipate will be
filed for approval in the near term. Genmab and GSK’s
(ofatumumab) is also under clinical development for patients with
MS. New developments, including the development of other
pharmaceutical technologies and methods of treating disease, occur
in the pharmaceutical and life sciences industries at a rapid
pace.
With
respect to TGR-1202, there are several PI3K delta targeted
compounds both approved, such as Gilead’s Zydelig™
(idelalisib), and in development, including, but not limited to,
Verastem's duvelisib which if approved we would expect to compete
directly with TGR-1202. In addition, there are numerous other novel
therapies targeting similar pathways to TGR-1202 both approved and
in development, which could also compete with TGR-1202 in similar
indications, such as the BTK inhibitor, ibrutinib (FDA approved for
MCL, CLL, Marginal Zone Lymphoma and WM and marketed by AbbVie and
Janssen), the BTK inhibitor ACP-196 (under development by
AstraZeneca), or the BCL-2 inhibitor ABT-199 (FDA approved for CLL
and marketed by AbbVie and Roche).
These
developments may render our product candidates obsolete or
noncompetitive. Compared to us, many of our potential competitors
have substantially greater:
●
research and
development resources, including personnel and
technology;
●
regulatory
experience;
●
pharmaceutical
development, clinical trial and pharmaceutical commercialization
experience;
●
experience and
expertise in exploitation of intellectual property rights;
and
●
capital
resources.
As a
result of these factors, our competitors may obtain regulatory
approval of their products more rapidly than us or may obtain
patent protection or other intellectual property rights that limit
our ability to develop or commercialize our product candidates. Our
competitors may also develop products for the treatment of
lymphoma, CLL, or other B-cell and autoimmune related disorders
that are more effective, better tolerated, more useful and less
costly than ours and may also be more successful in manufacturing
and marketing their products. Our competitors may succeed in
obtaining approvals from the FDA and foreign regulatory authorities
for their product candidates sooner than we do for our
products.
We will
also face competition from these third parties in recruiting and
retaining qualified personnel, establishing clinical trial sites
and enrolling patients for clinical trials and in identifying and
in-licensing new product candidates.
We rely completely on third parties to manufacture our preclinical
and clinical pharmaceutical supplies and we intend to rely on third
parties to produce commercial supplies of any approved product
candidate, and our commercialization of any of our product
candidates could be stopped, delayed or made less profitable if
those third parties fail to obtain approval of the FDA, fail to
provide us with sufficient quantities of pharmaceutical product or
fail to do so at acceptable quality levels or prices.
The
facilities used by our contract manufacturers to manufacture our
product candidates must be approved by the FDA pursuant to
inspections that will be conducted only after we submit a BLA or
NDA to the FDA, if at all. We do not control the manufacturing
process of our product candidates and are completely dependent on
our contract manufacturing partners for compliance with the
FDA’s requirements for manufacture of finished pharmaceutical
products (good manufacturing practices, GMP). If our contract
manufacturers cannot successfully manufacture material that
conforms to our target product specifications, patent
specifications, and/or the FDA’s strict regulatory
requirements of safety, purity and potency, we will not be able to
secure and/or maintain FDA approval for our product candidates. In
addition, we have no control over the ability of our contract
manufacturers to maintain adequate quality control, quality
assurance and qualified personnel. If our contract manufacturers
cannot meet FDA standards, we may need to find alternative
manufacturing facilities, which would significantly impact our
ability to develop, obtain regulatory approval for or market our
product candidates. No assurance can be given that a long-term,
scalable manufacturer can be identified or that they can make
clinical and commercial supplies of our product candidates that
meets the product specifications of previously manufactured
batches, or is of a sufficient quality, or at an appropriate scale
and cost to make it commercially feasible. If they are unable to do
so, it could have a material adverse impact on our
business.
24
In
addition, we do not have the capability to package finished
products for distribution to hospitals and other customers. Prior
to commercial launch, we intend to enter into agreements with one
or more alternate fill/finish pharmaceutical product suppliers so
that we can ensure proper supply chain management once we are
authorized to make commercial sales of our product candidates. If
we receive marketing approval from the FDA, we intend to sell
pharmaceutical product finished and packaged by such suppliers. We
have not entered into long-term agreements with our current
contract manufacturers or with any fill/finish suppliers, and
though we intend to do so prior to commercial launch of our product
candidates in order to ensure that we maintain adequate supplies of
finished product, we may be unable to enter into such an agreement
or do so on commercially reasonable terms, which could have a
material adverse impact upon our business.
In most
cases, our manufacturing partners are single source suppliers. It
is expected that our manufacturing partners will be sole source
suppliers from single site locations for the foreseeable future.
Given this, any disruption of supply from these partners could have
a material, long-term impact on our ability to supply products for
clinical trials or commercial sale. If our suppliers do not deliver
sufficient quantities of our product candidates on a timely basis,
or at all, and in accordance with applicable specifications, there
could be a significant interruption of our supply, which would
adversely affect clinical development and commercialization of our
products. In addition, if our current or future supply of any or
our product candidates should fail to meet specifications during
its stability program there could be a significant interruption of
our supply of drug, which would adversely affect the clinical
development and commercialization of the product.
We currently have no marketing and sales organization and no
experience in marketing pharmaceutical products. If we are unable
to establish sales and marketing capabilities or fail to enter into
agreements with third parties to market and sell any products we
may develop, we may not be able to effectively market and sell our
products and generate product revenue.
We do
not currently have the infrastructure for the sales, marketing and
distribution of our biotechnology products, and we must build this
infrastructure or make arrangements with third parties to perform
these functions in order to commercialize our products. We plan to
either develop internally or enter into collaborations or other
commercial arrangements to develop further, promote and sell all or
a portion of our product candidates.
The
establishment and development of a sales force, either by us or
jointly with a development partner, or the establishment of a
contract sales force to market any products we may develop will be
expensive and time-consuming and could delay any product launch,
and we cannot be certain that we or our development partners would
be able to successfully develop this capability. If we or our
development partners are unable to establish sales and marketing
capability or any other non-technical capabilities necessary to
commercialize any products we may develop, we will need to contract
with third parties to market and sell such products. We currently
possess limited resources and may not be successful in establishing
our own internal sales force or in establishing arrangements with
third parties on acceptable terms, if at all.
If any product candidate that we successfully develop does not
achieve broad market acceptance among physicians, patients,
healthcare payors, and the medical community, the revenues that we
generate from its sales will be limited.
Even if
our product candidates receive regulatory approval, they may not
gain market acceptance among physicians, patients, healthcare
payors, and the medical community. Coverage and reimbursement of
our product candidates by third-party payors, including government
payors, generally is also necessary for commercial success. The
degree of market acceptance of any of our approved products will
depend on a number of factors, including:
●
the efficacy and
safety as demonstrated in clinical trials;
●
the clinical
indications for which the product is approved;
●
acceptance by
physicians, major operators of cancer clinics and patients of the
product as a safe and effective treatment;
●
the potential and
perceived advantages of product candidates over alternative
treatments;
●
the safety of
product candidates seen in a broader patient group, including its
use outside the approved indications;
●
the cost of
treatment in relation to alternative treatments;
●
the availability of
adequate reimbursement and pricing by third parties and government
authorities;
●
relative
convenience and ease of administration;
●
the prevalence and
severity of adverse events; and
●
the effectiveness
of our sales and marketing efforts.
If any
product candidate is approved but does not achieve an adequate
level of acceptance by physicians, hospitals, healthcare payors and
patients, we may not generate sufficient revenue from these
products and we may not become or remain profitable.
25
If product liability lawsuits are brought against us, we may incur
substantial liabilities and may be required to limit
commercialization of our product candidates.
We face
an inherent risk of product liability exposure related to the
testing of our product candidates in human clinical trials, and
will face an even greater risk if we sell our product candidates
commercially. Although we are not aware of any historical or
anticipated product liability claims against us, if we cannot
successfully defend ourselves against product liability claims, we
may incur substantial liabilities or be required to cease clinical
trials of our drug candidates or limit commercialization of any
approved products. An individual may bring a liability claim
against us if one of our product candidates causes, or merely
appears to have caused, an injury. If we cannot successfully defend
our self against product liability claims, we will incur
substantial liabilities. Regardless of merit or eventual outcome,
liability claims may result in:
●
decreased demand
for our product candidates;
●
impairment to our
business reputation;
●
withdrawal of
clinical trial participants;
●
costs of related
litigation;
●
distraction of
management’s attention from our primary
business;
●
substantial
monetary awards to patients or other claimants;
●
the inability to
commercialize our product candidates; and
●
loss of
revenues.
We
believe that we have obtained sufficient product liability
insurance coverage for our clinical trials. We intend to expand our
insurance coverage to include the sale of commercial products if
marketing approval is obtained for any of our product candidates.
However, we may be unable to obtain this product liability
insurance on commercially reasonable terms and with insurance
coverage that will be adequate to satisfy any liability that may
arise. On occasion, large judgments have been awarded in class
action or individual lawsuits relating to marketed pharmaceuticals.
A successful product liability claim or series of claims brought
against us could cause our stock price to decline and, if judgments
exceed our insurance coverage, could decrease our cash and
adversely affect our business.
Reimbursement may be limited or unavailable in certain market
segments for our product candidates, which could make it difficult
for us to sell our products profitably.
We
intend to seek approval to market our future products in both the
United States and in countries and territories outside the United
States. If we obtain approval in one or more foreign countries, we
will be subject to rules and regulations in those countries
relating to our product. In some foreign countries, particularly in
the European Union, the pricing of prescription pharmaceuticals and
biologics is subject to governmental control. In these countries,
pricing negotiations with governmental authorities can take
considerable time after the receipt of marketing approval for a
product candidate. In addition, market acceptance and sales of our
product candidates will depend significantly on the availability of
adequate coverage and reimbursement from third-party payors for any
of our product candidates and may be affected by existing and
future healthcare reform measures.
Government
authorities and third-party payors, such as private health insurers
and health maintenance organizations, decide which pharmaceuticals
they will pay for and establish reimbursement levels. Reimbursement
by a third-party payor may depend upon a number of factors,
including the third-party payor’s determination that use of a
product is:
●
a covered benefit
under its health plan;
●
safe, effective and
medically necessary;
●
appropriate for the
specific patient;
●
cost-effective;
and
●
neither
experimental nor investigational.
Obtaining coverage
and reimbursement approval for a product from a government or other
third-party payor is a time consuming and costly process that could
require that we provide supporting scientific, clinical and
cost-effectiveness data for the use of our products to the payor.
We may not be able to provide data sufficient to gain acceptance
with respect to coverage and reimbursement. If reimbursement of our
future products is unavailable or limited in scope or amount, or if
pricing is set at unsatisfactory levels, we may be unable to
achieve or sustain profitability. Additionally, while we may seek
approval of our products in combination with each other, there can
be no guarantee that we will obtain coverage and reimbursement for
any of our products together, or that such reimbursement will
incentivize the use of our products in combination with each other
as opposed to in combination with other agents which may be priced
more favorably to the medical community.
26
In both
the United States and certain foreign countries, there have been a
number of legislative and regulatory changes to the healthcare
system that could impact our ability to sell our products
profitably. In particular, the Medicare Modernization Act of 2003
revised the payment methodology for many products reimbursed by
Medicare, resulting in lower rates of reimbursement for many types
of drugs, and added a prescription drug benefit to the Medicare
program that involves commercial plans negotiating drug prices for
their members. Since 2003, there have been a number of other
legislative and regulatory changes to the coverage and
reimbursement landscape for pharmaceuticals. Most recently, the
Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act of 2010, collectively,
the “Affordable Care Act,” was enacted. The Affordable
Care Act contains a number of provisions, including those governing
enrollment in federal healthcare programs, the increased use of
comparative effectiveness research on healthcare products,
reimbursement and fraud and abuse changes, and a new regulatory
pathway for the approval of biosimilar biological products, all of
which will impact existing government healthcare programs and will
result in the development of new programs. An expansion in the
government’s role in the U.S. healthcare industry may further
lower rates of reimbursement for pharmaceutical and biotechnology
products.
There
have been, and likely will continue to be, legislative and
regulatory proposals at the federal and state levels directed at
broadening the availability of healthcare and containing or
lowering the cost of healthcare products and services. We cannot
predict the initiatives that may be adopted in the future. The
continuing efforts of the government, insurance companies, managed
care organizations and other payors of healthcare services to
contain or reduce costs of healthcare may adversely
affect:
●
the demand for any
products for which we may obtain regulatory approval;
●
our ability to set
a price that we believe is fair for our products;
●
our ability to
generate revenues and achieve or maintain
profitability;
●
the level of taxes
that we are required to pay; and
●
the availability of
capital.
In
addition, governments may impose price controls, which may
adversely affect our future profitability.
We will need to increase the size of our organization and the scope
of our outside vendor relationships, and we may experience
difficulties in managing this growth.
As of
March 1, 2017, we had sixty-four full and part time employees. Over
time, we will need to expand our managerial, operational, financial
and other resources in order to manage and fund our operations and
clinical trials, continue research and development activities, and
commercialize our product candidates. Our management and scientific
personnel, systems and facilities currently in place may not be
adequate to support our future growth. Our need to effectively
manage our operations, growth, and various projects requires that
we:
●
manage our clinical
trials effectively;
●
manage our internal
development efforts effectively while carrying out our contractual
obligations to licensors, contractors and other third
parties;
●
continue to improve
our operational, financial and management controls and reporting
systems and procedures; and
●
attract and retain
sufficient numbers of talented employees.
We
may utilize the services of outside vendors or consultants to
perform tasks including clinical trial management, statistics and
analysis, regulatory affairs, formulation development, chemistry,
manufacturing, controls, and other pharmaceutical development
functions. Our growth strategy may also entail expanding our group
of contractors or consultants to implement these tasks going
forward. Because we rely on a substantial number of consultants,
effectively outsourcing many key functions of our business, we will
need to be able to effectively manage these consultants to ensure
that they successfully carry out their contractual obligations and
meet expected deadlines. However, if we are unable to effectively
manage our outsourced activities or if the quality or accuracy of
the services provided by consultants is compromised for any reason,
our clinical trials may be extended, delayed or terminated, and we
may not be able to obtain regulatory approval for our product
candidates or otherwise advance its business. There can be no
assurance that we will be able to manage our existing consultants
or find other competent outside contractors and consultants on
economically reasonable terms, or at all. If we are not able to
effectively expand our organization by hiring new employees and
expanding our groups of consultants and contractors, we may be
unable to successfully implement the tasks necessary to further
develop and commercialize our product candidates and, accordingly,
may not achieve our research, development and commercialization
goals.
27
If we fail to attract and keep key management and clinical
development personnel, we may be unable to successfully develop or
commercialize our product candidates.
We will
need to expand and effectively manage our managerial, operational,
financial and other resources in order to successfully pursue our
clinical development and commercialization efforts for our product
candidates and future product candidates. We are highly dependent
on the development, regulatory, commercial and financial expertise
of the members of our senior management. The loss of the services
of any of our senior management could delay or prevent the further
development and potential commercialization of our product
candidates and, if we are not successful in finding suitable
replacements, could harm our business. We do not maintain
“key man” insurance policies on the lives of these
individuals. We will need to hire additional personnel as we
continue to expand our manufacturing, research and development
activities.
Our
success depends on our continued ability to attract, retain and
motivate highly qualified management and scientific personnel and
we may not be able to do so in the future due to the intense
competition for qualified personnel among biotechnology,
pharmaceutical and other businesses. Our industry has experienced a
high rate of turnover of management personnel in recent years. If
we are not able to attract and retain the necessary personnel to
accomplish our business objectives, we may experience constraints
that will impede significantly the achievement of our development
objectives, our ability to raise additional capital, and our
ability to implement our business strategy.
If we fail to comply with healthcare regulations, we could face
substantial penalties and our business, operations and financial
condition could be adversely affected.
In
addition to FDA restrictions on the marketing of pharmaceutical and
biotechnology products, several other types of state and federal
laws have been applied to restrict certain marketing practices in
the pharmaceutical and medical device industries in recent years,
as well as consulting or other service agreements with physicians
or other potential referral sources. These laws include
anti-kickback statutes and false claims statutes that prohibit,
among other things, knowingly and willfully offering, paying,
soliciting or receiving remuneration to induce, or, in return for,
purchasing, leasing, ordering or arranging for the purchase, lease
or order of any healthcare item or service reimbursable under
Medicare, Medicaid or other federally-financed healthcare programs,
and knowingly presenting, or causing to be presented, a false claim
for payment to the federal government, or knowingly making, or
causing to be made, a false statement to get a false claim paid.
The majority of states also have statutes or regulations similar to
the federal anti-kickback law and false claims laws, which apply to
items and services reimbursed under Medicaid and other state
programs, or, in several states, apply regardless of the payor.
Although there are a number of statutory exemptions and regulatory
safe harbors protecting certain common activities from prosecution,
the exemptions and safe harbors are drawn narrowly, and any
practices we adopt may not, in all cases, meet all of the criteria
for safe harbor protection from anti-kickback liability. Sanctions
under these federal and state laws may include civil monetary
penalties, exclusion of a manufacturer’s products from
reimbursement under government programs, criminal fines and
imprisonment. Any challenge to its business practices under these
laws could have a material adverse effect on our business,
financial condition, and results of operations.
We use biological and hazardous materials, and any claims relating
to improper handling, storage or disposal of these materials could
be time consuming or costly.
We use
hazardous materials, including chemicals and biological agents and
compounds, which could be dangerous to human health and safety or
the environment. Our operations also produce hazardous waste
products. Federal, state and local laws and regulations govern the
use, generation, manufacture, storage, handling and disposal of
these materials and wastes. Compliance with applicable
environmental laws and regulations may be expensive, and current or
future environmental laws and regulations may impair our
pharmaceutical development efforts.
In
addition, we cannot entirely eliminate the risk of accidental
injury or contamination from these materials or wastes. If one of
our employees was accidentally injured from the use, storage,
handling or disposal of these materials or wastes, the medical
costs related to his or her treatment would be covered by our
workers’ compensation insurance policy. However, we do not
carry specific biological or hazardous waste insurance coverage and
our property and casualty and general liability insurance policies
specifically exclude coverage for damages and fines arising from
biological or hazardous waste exposure or contamination.
Accordingly, in the event of contamination or injury, we could be
held liable for damages or penalized with fines in an amount
exceeding our resources, and our clinical trials or regulatory
approvals could be suspended, or operations otherwise
affected.
28
All product candidate development timelines and projections in this
report are based on the assumption of further
financing.
The
timelines and projections in this report are predicated upon the
assumption that we will raise additional financing in the future to
continue the development of our product candidates. In the event we
do not successfully raise subsequent financing, our product
development activities will necessarily be curtailed commensurate
with the magnitude of the shortfall. If our product development
activities are slowed or stopped, we would be unable to meet the
timelines and projections outlined in this filing. Failure to
progress our product candidates as anticipated will have a negative
effect on our business, future prospects, and ability to obtain
further financing on acceptable terms (if at all), and the value of
the enterprise.
Risks Relating to Acquisitions
Acquisitions, investments and strategic alliances that we may make
in the future may use significant resources, result in disruptions
to our business or distractions of our management, may not proceed
as planned, and could expose us to unforeseen
liabilities.
We may
seek to expand our business through the acquisition of, investments
in and strategic alliances with companies, technologies, products,
and services. Acquisitions, investments and strategic alliances
involve a number of special problems and risks, including, but not
limited to:
●
difficulty
integrating acquired technologies, products, services, operations
and personnel with the existing businesses;
●
diversion of
management’s attention in connection with both negotiating
the acquisitions and integrating the businesses;
●
strain on
managerial and operational resources as management tries to oversee
larger operations;
●
difficulty
implementing and maintaining effective internal control over
financial reporting at businesses that we acquire, particularly if
they are not located near our existing operations;
●
exposure to
unforeseen liabilities of acquired companies;
●
potential costly
and time-consuming litigation, including stockholder
lawsuits;
●
potential issuance
of securities to equity holders of the company being acquired with
rights that are superior to the rights of holders of our common
stock or which may have a dilutive effect on our
stockholders;
●
risk of loss of
invested capital;
●
the need to incur
additional debt or use cash; and
●
the requirement to
record potentially significant additional future operating costs
for the amortization of intangible assets.
As a
result of these or other problems and risks, businesses we acquire
may not produce the revenues, earnings, or business synergies that
we anticipated, and acquired products, services, or technologies
might not perform as we expected. As a result, we may incur higher
costs and realize lower revenues than we had anticipated. We may
not be able to successfully address these problems and we cannot
assure you that the acquisitions will be successfully identified
and completed or that, if acquisitions are completed, the acquired
businesses, products, services, or technologies will generate
sufficient revenue to offset the associated costs or other negative
effects on our business.
Any of
these risks can be greater if an acquisition is large relative to
our size. Failure to effectively manage our growth through
acquisitions could adversely affect our growth prospects, business,
results of operations, financial condition and cash
flows.
Risks Relating to Our Intellectual Property
Our success depends upon our ability to protect our intellectual
property and proprietary technologies, and the intellectual
property protection for our product candidates depends
significantly on third parties.
Our
commercial success depends on obtaining and maintaining patent
protection and trade secret protection for our product candidates
and their formulations and uses, as well as successfully defending
these patents against third-party challenges. If any of our
licensors or partners fails to appropriately prosecute and maintain
patent protection for these product candidates, our ability to
develop and commercialize these product candidates may be adversely
affected and we may not be able to prevent competitors from making,
using and selling competing products. This failure to properly
protect the intellectual property rights relating to these product
candidates could have a material adverse effect on our financial
condition and results of operations.
29
Currently, the
composition of matter patent and several method of use patents for
TG-1101 and TGR-1202 in various indications and settings have been
applied for but have not yet been issued, or have been issued in
certain territories but not under all jurisdictions in which such
applications have been filed. While composition of matter patents
have been granted in the US for TG-1101 and TGR-1202, no patents to
date have been issued for our IRAK4 inhibitor and anti-PD-L1 and
anti-GITR programs. There can be no guarantee that any of these
patents for which an application has already been filed, nor any
patents filed in the future for our product candidates will be
granted in any or all jurisdictions in which there were filed, or
that all claims initially included in such patent applications will
be allowed in the final patent that is issued. The patent
application process is subject to numerous risks and uncertainties,
and there can be no assurance that we or our partners will be
successful in protecting our product candidates by obtaining and
defending patents.
These
risks and uncertainties include the following:
●
the patent
applications that we or our partners file may not result in any
patents being issued;
●
patents that may be
issued or in-licensed may be challenged, invalidated, modified,
revoked or circumvented, or otherwise may not provide any
competitive advantage;
●
as of March 16,
2013, the U.S. converted from a “first to invent” to a
“first to file” system. If we do not win the filing
race, we will not be entitled to inventive priority;
●
our competitors,
many of which have substantially greater resources than we do, and
many of which have made significant investments in competing
technologies, may seek, or may already have obtained, patents that
will limit, interfere with, or eliminate its ability to make, use,
and sell our potential products either in the United States or in
international markets;
●
there may be
significant pressure on the U.S. government and other international
governmental bodies to limit the scope of patent protection both
inside and outside the United States for disease treatments that
prove successful as a matter of public policy regarding worldwide
health concerns; and
●
countries other
than the United States may have less restrictive patent laws than
those upheld by United States courts, allowing foreign competitors
the ability to exploit these laws to create, develop, and market
competing products.
If
patents are not issued that protect our product candidates, it
could have a material adverse effect on our financial condition and
results of operations.
In
addition to patents, we and our partners also rely on trade secrets
and proprietary know-how. Although we have taken steps to protect
our trade secrets and unpatented know-how, including entering into
confidentiality agreements with third parties, and confidential
information and inventions agreements with employees, consultants
and advisors, third parties may still obtain this information or we
may be unable to protect its rights. If any of these events occurs,
or we otherwise lose protection for our trade secrets or
proprietary know-how, the value of this information may be greatly
reduced.
Patent
protection and other intellectual property protection are crucial
to the success of our business and prospects, and there is a
substantial risk that such protections will prove
inadequate.
If we or our partners are sued for infringing intellectual property
rights of third parties, it will be costly and time consuming, and
an unfavorable outcome in that litigation would have a material
adverse effect on our business.
Our
commercial success also depends upon our ability and the ability of
any of our future collaborators to develop, manufacture, market and
sell our product candidates without infringing the proprietary
rights of third parties. Numerous United States and foreign issued
patents and pending patent applications, which are owned by third
parties, exist in the fields in which we are developing products,
some of which may be directed at claims that overlap with the
subject matter of our intellectual property. For example, Roche has
the Cabilly patents in the U.S. that block the commercialization of
antibody products derived from a single cell line, like TG-1101.
Also, Roche, Biogen Idec, and Genentech hold patents for the use of
anti-CD20 antibodies utilized in the treatment of CLL in the U.S.
While these patents have been challenged, to the best of our
knowledge, those matters were settled in a way that permitted
additional anti-CD20 antibodies to be marketed for CLL. If those
patents are still enforced at the time we are intending to launch
TG-1101, then we will need to either prevail in a litigation to
challenge those patents or negotiate a settlement agreement with
the patent holders. If we are unable to do so we may be forced to
delay the launch of TG-1101 or launch at the risk of litigation for
patent infringement, which may have a material adverse effect on
our business and results of operations.
In
addition, because patent applications can take many years to issue,
there may be currently pending applications, unknown to us, which
may later result in issued patents that our product candidates or
proprietary technologies may infringe. Similarly, there may be
issued patents relevant to our product candidates of which we are
not aware.
30
There
is a substantial amount of litigation involving patent and other
intellectual property rights in the biotechnology and
biopharmaceutical industries generally. If a third party claims
that we or any collaborators of ours infringe their intellectual
property rights, we may have to:
●
obtain licenses,
which may not be available on commercially reasonable terms, if at
all;
●
abandon an
infringing product candidate or redesign its products or processes
to avoid infringement;
●
pay substantial
damages, including treble damages and attorneys’ fees, which
we may have to pay if a court decides that the product or
proprietary technology at issue infringes on or violates the third
party’s rights;
●
pay substantial
royalties, fees and/or grant cross licenses to our technology;
and/or
●
defend litigation
or administrative proceedings which may be costly whether we win or
lose, and which could result in a substantial diversion of our
financial and management resources.
No
assurance can be given that patents issued to third parties do not
exist, have not been filed, or could not be filed or issued, which
contain claims covering its products, technology or methods that
may encompass all or a portion of our products and methods. Given
the number of patents issued and patent applications filed in our
technical areas or fields, we believe there is a risk that third
parties may allege they have patent rights encompassing our
products or methods.
Other
product candidates that we may in-license or acquire could be
subject to similar risks and uncertainties.
We may be involved in lawsuits to protect or enforce our patents or
the patents of our licensors, which could be expensive, time
consuming and unsuccessful.
Competitors may
infringe our patents or the patents of our licensors. To counter
infringement or unauthorized use, we may be required to file
infringement claims, which typically are very expensive,
time-consuming and disruptive of day-to-day business operations. In
addition, in an infringement proceeding, a court may decide that a
patent of ours or our licensors is not valid or is unenforceable,
or may refuse to stop the other party from using the technology at
issue on the grounds that our patents do not cover the technology
in question. An adverse result in any litigation or defense
proceedings could put one or more of our patents at risk of being
invalidated, held unenforceable, or interpreted narrowly. The
adverse result could also put related patent applications at risk
of not issuing.
Interference
proceedings provoked by third parties or brought by the U.S. Patent
and Trademark Office (“PTO”) may be necessary to
determine the priority of inventions with respect to our patents or
patent applications or those of our collaborators or licensors. An
unfavorable outcome could require us to cease using the related
technology or to attempt to license rights to it from the
prevailing party. Our business could be harmed if the prevailing
party does not offer us a license on commercially reasonable terms.
Litigation or interference proceedings may fail and, even if
successful, may result in substantial costs and distract our
management and other employees. We may not be able to prevent,
alone or with our licensors, misappropriation of our trade secrets
or confidential information, particularly in countries where the
laws may not protect those rights as fully as in the United
States.
Furthermore,
because of the substantial amount of discovery required in
connection with intellectual property litigation, there is a risk
that some of our confidential information could be compromised by
disclosure during this type of litigation. In addition, there could
be public announcements of the results of hearings, motions or
other interim proceedings or developments. If securities analysts
or investors perceive these results to be negative, it could have a
substantial adverse effect on the price of our common
stock.
We may be subject to claims that our consultants or independent
contractors have wrongfully used or disclosed alleged trade secrets
of their other clients or former employers to it.
As is
common in the biotechnology and pharmaceutical industry, we engage
the services of consultants to assist us in the development of our
product candidates. Many of these consultants were previously
employed at, may have previously been, or are currently providing
consulting services to, other biotechnology or pharmaceutical
companies, including our competitors or potential competitors.
Although no claims against us are currently pending, we may be
subject to claims that these consultants or we have inadvertently
or otherwise used or disclosed trade secrets or other proprietary
information of their former employers or their former or current
customers. Litigation may be necessary to defend against these
claims. Even if we are successful in defending against these
claims, litigation could result in substantial costs and be a
distraction to management and day-to-day business
operations.
31
Risks Relating to Our Finances and Capital
Requirements
We will need to raise additional capital to continue to operate our
business.
As of December 31,
2016, we had approximately $45.0 million in cash, cash equivalents,
investment securities, and interest receivable. The Company
believes its cash, cash equivalents, investment securities, and
interest receivable on hand as of December 31, 2016 combined with
the additional capital raised in the first quarter of 2017 will be
sufficient to fund the Company’s planned operations for
approximately the next 24 months. As a result, we will need
additional capital to continue our operations beyond that time.
Required additional sources of financing to continue our operations
in the future might not be available on favorable terms, if at all.
If we do not succeed in raising additional funds on acceptable
terms, we might be unable to complete planned preclinical and
clinical trials or obtain approval of any of our product candidates
from the FDA or any foreign regulatory authorities. In addition, we
could be forced to discontinue product development, reduce or
forego sales and marketing efforts and forego attractive business
opportunities. Any additional sources of financing will likely
involve the issuance of our equity securities, which would have a
dilutive effect to stockholders.
Currently, none of
our product candidates have been approved by the FDA or any foreign
regulatory authority for sale. Therefore, for the foreseeable
future, we will have to fund all of our operations and capital
expenditures from cash on hand and amounts raised in future
offerings or financings.
We have a history of operating losses, expect to continue to incur
losses, and are unable to predict the extent of future losses or
when we will become profitable, if ever.
We have
not yet applied for or demonstrated an ability to obtain regulatory
approval for or commercialize a product candidate. Our short
operating history makes it difficult to evaluate our business
prospects and consequently, any predictions about our future
performance may not be as accurate as they could be if we had a
history of successfully developing and commercializing
pharmaceutical or biotechnology products. Our prospects must be
considered in light of the uncertainties, risks, expenses and
difficulties frequently encountered by companies in the early
stages of operations and the competitive environment in which we
operate.
We have
never been profitable and, as of December 31, 2016, we had an
accumulated deficit of $236.4 million. We have generated operating
losses in all periods since we were incorporated. We expect to make
substantial expenditures resulting in increased operating costs in
the future and our accumulated deficit will increase significantly
as we expand development and clinical trial efforts for our product
candidates. Our losses have had, and are expected to continue to
have, an adverse impact on our working capital, total assets and
stockholders’ equity. Because of the risks and uncertainties
associated with product development, we are unable to predict the
extent of any future losses or when we will become profitable, if
ever. Even if we achieve profitability, we may not be able to
sustain or increase profitability on an ongoing basis.
We have not generated any revenue from our product candidates and
may never become profitable.
Our
ability to become profitable depends upon our ability to generate
significant continuing revenues. To obtain significant continuing
revenues, we must succeed, either alone or with others, in
developing, obtaining regulatory approval for and manufacturing and
marketing our product candidates (or utilize early access programs
to generate such revenue). To date, our product candidates have not
generated any revenues, and we do not know when, or if, we will
generate any revenue. Our ability to generate revenue depends on a
number of factors, including, but not limited to:
●
successful
completion of preclinical studies of our product
candidates;
●
successful
commencement and completion of clinical trials of our product
candidates and any future product candidates we advance into
clinical trials;
●
achievement of
regulatory approval for our product candidates and any future
product candidates we advance into clinical trials (unless we
successfully utilize early access programs which allow for revenue
generation prior to approval);
●
manufacturing
commercial quantities of our products at acceptable cost levels if
regulatory approvals are obtained;
●
successful sales,
distribution and marketing of our future products, if any;
and
●
our entry into
collaborative arrangements or co-promotion agreements to market and
sell our products.
If we
are unable to generate significant continuing revenues, we will not
become profitable and we may be unable to continue our operations
without continued funding.
32
We will need substantial additional funding and may be unable to
raise capital when needed, which would force us to delay, reduce or
eliminate our development programs or commercialization
efforts.
We
expect to spend substantial amounts on development, including
significant amounts on conducting clinical trials for our product
candidates, manufacturing clinical supplies and expanding our
pharmaceutical development programs. We expect that our monthly
cash used by operations will continue to increase for the next
several years. We anticipate that we will continue to incur
operating losses for the foreseeable future.
We will
require substantial additional funds to support our continued
research and development activities, as well as the anticipated
costs of preclinical studies and clinical trials, regulatory
approvals, and eventual commercialization. We anticipate that we
will incur operating losses for the foreseeable future. We have
based these estimates, however, on assumptions that may prove to be
wrong, and we could expend our available financial resources much
faster than we currently expect. Further, we will need to raise
additional capital to fund our operations and continue to conduct
clinical trials to support potential regulatory approval of
marketing applications. Future capital requirements will also
depend on the extent to which we acquire or in-license additional
product candidates. We currently have no commitments or agreements
relating to any of these types of transactions.
The
amount and timing of our future funding requirements will depend on
many factors, including, but not limited to, the
following:
●
the progress of our
clinical trials, including expenses to support the trials and
milestone payments that may become payable under our license
agreements;
●
the costs and
timing of regulatory approvals;
●
the costs and
timing of clinical and commercial manufacturing supply arrangements
for each product candidate;
●
the costs of
establishing sales or distribution capabilities;
●
the success of the
commercialization of our products;
●
our ability to
establish and maintain strategic collaborations, including
licensing and other arrangements;
●
the costs involved
in enforcing or defending patent claims or other intellectual
property rights; and
●
the extent to which
we in-license or invest in other indications or product
candidates.
Until we can generate a sufficient amount of
product revenue and achieve profitability, we expect to finance
future cash needs through public or private equity offerings, debt
financings or corporate collaboration and licensing arrangements,
as well as through interest income earned on cash balances. If we
were to be unable to raise additional capital, we would have to
significantly delay, scale back or discontinue one or more of our
pharmaceutical development programs. We also may be required to
relinquish, license or otherwise dispose of rights to product
candidates or products that it would otherwise seek to develop or
commercialize itself on terms that are less favorable than might
otherwise be available.
Raising additional funds by issuing securities or through licensing
or lending arrangements may cause dilution to our existing
stockholders, restrict our operations or require us to relinquish
proprietary rights.
We may
raise additional funds through public or private equity offerings,
debt financings or licensing arrangements. To the extent that we
raise additional capital by issuing equity securities, the share
ownership of existing stockholders will be diluted. Any future debt
financing we enter into may involve covenants that restrict our
operations, including limitations on our ability to incur liens or
additional debt, pay dividends, redeem our stock, make certain
investments and engage in certain merger, consolidation or asset
sale transactions, among other restrictions.
In
addition, if we raise additional funds through licensing
arrangements, it may be necessary to relinquish potentially
valuable rights to our product candidates, or grant licenses on
terms that are not favorable to us. If adequate funds are not
available, our ability to achieve profitability or to respond to
competitive pressures would be significantly limited and we may be
required to delay, significantly curtail or eliminate the
development of one or more of our product candidates.
Risks Related to Our Common Stock
We are controlled by current officers, directors and principal
stockholders.
Our
directors, executive officers, their affiliates, and our principal
stockholders beneficially own approximately 48% percent of our
outstanding voting stock, including shares underlying outstanding
options and warrants. Our directors, officers and principal
stockholders, taken as a whole, have the ability to exert
substantial influence over the election of our Board of Directors
and the outcome of issues submitted to our
stockholders.
33
Our stock price is, and we expect it to remain, volatile, which
could limit investors’ ability to sell stock at a
profit.
The
trading price of our common stock is likely to be highly volatile
and subject to wide fluctuations in price in response to various
factors, many of which are beyond our control. These factors
include:
●
publicity regarding
actual or potential clinical results relating to products under
development by our competitors or us;
●
delay or failure in
initiating, completing or analyzing nonclinical or clinical trials
or the unsatisfactory design or results of these
trials;
●
achievement or
rejection of regulatory approvals by our competitors or
us;
●
announcements of
technological innovations or new commercial products by our
competitors or us;
●
developments
concerning proprietary rights, including patents;
●
developments
concerning our collaborations;
●
regulatory
developments in the United States and foreign
countries;
●
economic or other
crises and other external factors;
●
period-to-period
fluctuations in our revenues and other results of
operations;
●
changes in
financial estimates by securities analysts; and
●
sales of our common
stock.
We will
not be able to control many of these factors, and we believe that
period-to-period comparisons of our financial results will not
necessarily be indicative of our future performance.
In
addition, the stock market in general, and the market for
biotechnology companies in particular, has experienced extreme
price and volume fluctuations that may have been unrelated or
disproportionate to the operating performance of individual
companies. These broad market and industry factors may seriously
harm the market price of our common stock, regardless of our
operating performance.
We have not paid dividends in the past and do not expect to pay
dividends in the future, and any return on investment may be
limited to the value of your stock.
We have
never paid dividends on our common stock and do not anticipate
paying any dividends for the foreseeable future. You should not
rely on an investment in our stock if you require dividend income.
Further, you will only realize income on an investment in our stock
in the event you sell or otherwise dispose of your shares at a
price higher than the price you paid for your shares. Such a gain
would result only from an increase in the market price of our
common stock, which is uncertain and unpredictable.
Certain anti-takeover provisions in our charter documents and
Delaware law could make a third-party acquisition of us difficult.
This could limit the price investors might be willing to pay in the
future for our common stock.
Provisions
in our amended and restated certificate of incorporation and
restated bylaws could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from
attempting to acquire, or control us. These factors could limit the
price that certain investors might be willing to pay in the future
for shares of our common stock. Our amended and restated
certificate of incorporation allows us to issue preferred stock
without the approval of our stockholders. The issuance of preferred
stock could decrease the amount of earnings and assets available
for distribution to the holders of our common stock or could
adversely affect the rights and powers, including voting rights, of
such holders. In certain circumstances, such issuance could have
the effect of decreasing the market price of our common stock. Our
restated bylaws eliminate the right of stockholders to call a
special meeting of stockholders, which could make it more difficult
for stockholders to effect certain corporate actions. Any of these
provisions could also have the effect of delaying or preventing a
change in control.
On
July 18, 2014, the Board of Directors declared a distribution of
one right for each outstanding share of common stock. The rights
may have certain anti-takeover effects. The rights will cause
substantial dilution to a person or group that attempts to acquire
us on terms not approved by the Board of Directors unless the offer
is conditioned on a substantial number of rights being acquired.
However, the rights should not interfere with any merger, statutory
share exchange or other business combination approved by the Board
of Directors since the rights may be terminated by us upon
resolution of the Board of Directors. Thus, the rights are intended
to encourage persons who may seek to acquire control of the Company
to initiate such an acquisition through negotiations with the Board
of Directors. However, the effect of the rights may be to
discourage a third party from making a partial tender offer or
otherwise attempting to obtain a substantial equity position in the
equity securities of, or seeking to obtain control of, the Company.
To the extent any potential acquirers are deterred by the rights,
the rights may have the effect of preserving incumbent management
in office.
34
ITEM 2. PROPERTIES.
Our
corporate and executive office is located in New York, New York.
Our New York facility consists of leased office space at 2
Gansevoort Street, 9th Floor, New York,
New York 10014. We are also currently leasing small office spaces
in Cary, North Carolina and Kingsport, Tennessee to accommodate our
clinical operations groups. We believe that our existing facilities
are adequate to meet our current requirements. We do not own any
real property.
ITEM 3. LEGAL PROCEEDINGS.
On January 6, 2017,
a purported securities class action complaint was filed in New York
federal court against the Company and certain of its directors,
officers or consultants on behalf of all shareholders who purchased
or otherwise acquired TG Therapeutics common stock between
September 15, 2014 and October 12, 2016 (the “Class
Period”). The case is captioned John Lyon v. TG Therapeutics,
Michael S. Weiss, Sean A. Power and Robert Niecestro, Case No.
1:17-cv-00112-VM (S.D.N.Y.). The complaint alleges that, throughout
the Class Period and including on October 13, 2016, that the
Company had filed an “amended protocol for its GENUINE Phase
3 trial,” various statements made by the Company regarding
its GENUINE Phase 3 trial were materially false or misleading when
made in violation of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder. On January 24, 2017, a second
purported class action complaint was filed in New York federal
court against the Company and certain of its directors, officers or
consultants also on behalf of all shareholders who purchased or
otherwise acquired TG Therapeutics common stock between September
15, 2014 and October 12, 2016. The case is captioned Kenneth C.
Wyzgoski v. TG Therapeutics, Michael S. Weiss, Sean A. Power and
Robert Niecestro, Case No. 1:17-cv-00508-VM (S.D.N.Y.). The claims
and allegations in the Wyzgoski complaint are substantially
identical to those in the Lyon case. Both actions remain pending
and are in the early stages of litigation.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
Market Information
Our
common stock is listed on the Nasdaq
Capital Market and trades under the symbol “TGTX”.
Prior to May 30, 2013 our stock was listed on the Over the Counter
Bulletin Board.
The
following table sets forth the high and low closing sale prices of
our common stock for the periods indicated.
|
Fiscal Year Ended December 31,
2016 |
High
|
Low
|
|
Fourth
Quarter
|
$9.33
|
$4.65
|
|
Third
Quarter
|
$7.98
|
$5.49
|
|
Second
Quarter
|
$10.23
|
$5.97
|
|
First
Quarter
|
$11.41
|
$7.83
|
| Fiscal Year Ended December 31, 2015 |
High
|
Low
|
|
Fourth
Quarter
|
$14.42
|
$10.22
|
|
Third
Quarter
|
$18.74
|
$9.76
|
|
Second
Quarter
|
$17.17
|
$13.24
|
|
First
Quarter
|
$18.82
|
$12.77
|
Holders
The
number of record holders of our common stock as of March 1, 2017
was 276.
Dividends
We have
never declared or paid any cash dividends on our common stock and
do not anticipate paying any cash dividends in the foreseeable
future. Any future determination to pay dividends will be at the
discretion of our board of directors.
Securities Authorized for Issuance Under Equity Compensation
Plans
The
following table provides information as of December 31, 2016,
regarding the securities authorized for issuance under our equity
compensation plan, the TG Therapeutics, Inc. Amended and Restated
2012 Incentive Plan.
35
|
Equity
Compensation Plan Information
|
|||
|
|
|
|
|
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding
options
|
Weighted-average
exercise price of outstanding options
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|
|
(a)
|
(b)
|
(c)
|
|
Equity compensation
plans approved by security holders
|
--
|
$--
|
2,286,764
|
|
Equity compensation
plans not approved by security holders
|
--
|
--
|
--
|
|
Total
|
--
|
$--
|
2,286,764
|
For information about all of our equity
compensation plans see Note 5 to our Consolidated Financial Statements included in this
report.
COMMON STOCK PERFORMANCE GRAPH
The
following graph compares the cumulative total stockholder return on
our common stock for the period from December 31, 2011(1)
through December 31, 2016, with the cumulative total return over
such period on (i) the U.S. Index of The Nasdaq Stock Market and
(ii) the Biotechnology Index of The Nasdaq Stock Market. The graph
assumes an investment of $100 on December 31, 2011, in our common
stock (at the adjusted closing market price) and in each of the
indices listed above, and assumes the reinvestment of all
dividends. Measurement points are December 31 of each
year.
(1)
In connection with the Company having entered into and consummated
an exchange transaction agreement (the “Exchange
Transaction”) with Opus Point Partners, LLC
(“Opus”) and TG Biologics, Inc. (formerly known as TG
Therapeutics, Inc.) (“TG Bio”), we used the start date
of December 31, 2011 to be in agreement with this
transaction.
(2)
$100 invested on 12/31/11 in stock or index, including reinvestment
of dividends. Fiscal Years ending December 31.
36
ITEM 6. SELECTED FINANCIAL DATA
The
following Statement of Operations Data for the years ended December
31, 2016, 2015, 2014, 2013 and 2012, and Balance Sheet Data as of
December 31, 2016, 2015, 2014, 2013 and 2012, as set forth below
are derived from our audited consolidated financial statements.
This financial data should be read in conjunction with “Item
7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and “Item 8.
Financial Statements and Supplementary Data.”
|
|
Years ended
December 31,
|
||||
|
|
2016
|
2015
|
2014
|
2013
|
2012
|
|
|
|
|
|
|
|
|
License revenue
|
$152,381
|
$152,381
|
$152,381
|
$152,381
|
$19,048
|
|
|
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
|
|
Research and
development:
|
|
|
|
|
|
|
Noncash stock
expense associated with in-licensing agreements
|
--
|
--
|
5,350,094
|
--
|
16,578,000
|
|
Noncash
compensation
|
2,742,354
|
4,261,406
|
8,731,566
|
1,041,519
|
455,809
|
|
Other research and
development
|
66,489,820
|
43,445,817
|
26,004,687
|
12,621,161
|
3,994,182
|
|
Total research and
development
|
69,232,174
|
47,707,223
|
40,086,347
|
13,662,680
|
21,027,991
|
|
|
|
|
|
|
|
|
General and
administrative:
|
|
|
|
|
|
|
Noncash
compensation
|
4,767,645
|
11,435,686
|
12,373,726
|
4,161,629
|
2,966,373
|
|
Other general and
administrative
|
5,121,690
|
4,189,488
|
3,413,400
|
2,496,461
|
1,815,083
|
|
Total general and
administrative
|
9,889,335
|
15,625,174
|
15,787,126
|
6,658,090
|
4,781,456
|
|
|
|
|
|
|
|
|
Impairment of in-process research
and development
|
--
|
--
|
--
|
2,797,600
|
1,104,700
|
|
|
|
|
|
|
|
|
Total costs and
expenses
|
79,121,509
|
63,332,397
|
55,873,473
|
23,118,370
|
26,914,147
|
|
|
|
|
|
|
|
|
Operating loss
|
(78,969,128)
|
(63,180,016)
|
(55,721,092)
|
(22,965,989)
|
(26,895,099)
|
|
|
|
|
|
|
|
|
Other (income)
expense:
|
|
|
|
|
|
|
Interest income
|
(323,032)
|
(174,653)
|
(55,049)
|
(30,822)
|
(15,787)
|
|
Other (income)
expense
|
(393,202)
|
(56,717)
|
115,234
|
(2,456,957)
|
(1,026,360)
|
|
Total other (income) expense,
net
|
(716,234)
|
(231,370)
|
60,185
|
(2,487,779)
|
(1,042,147)
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
(78,252,894)
|
(62,948,646)
|
(55,781,277)
|
(20,478,210)
|
(25,852,952)
|
|
Income taxes
|
--
|
--
|
--
|
--
|
330,000
|
|
Consolidated net
loss
|
(78,252,894)
|
(62,948,646)
|
(55,781,277)
|
(20,478,210)
|
(26,182,952)
|
|
|
|
|
|
|
|
|
Net loss attributable to
non-controlling interest
|
--
|
--
|
--
|
--
|
(8,110,233)
|
|
Net loss attributable to TG
Therapeutics, Inc. and Subsidiaries
|
$(78,252,894)
|
$(62,948,646)
|
$(55,781,277)
|
$(20,478,210)
|
$(18,072,719)
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per
common share
|
$(1.60)
|
$(1.38)
|
$(1.64)
|
$(0.81)
|
$(1.38)
|
Balance
Sheet Information:
|
|
December
31,
|
||||
|
|
2016
|
2015
|
2014
|
2013
|
2012
|
|
Cash, cash equivalents, investment
securities and interest receivable
|
$44,968,992
|
$102,416,894
|
$78,861,334
|
$45,431,532
|
$16,455,995
|
|
Total assets
|
54,781,547
|
113,473,201
|
86,746,890
|
48,112,390
|
22,074,037
|
|
Accumulated
deficit
|
(236,386,820)
|
(158,133,926)
|
(95,185,280)
|
(39,404,003)
|
(18,925,793)
|
|
Total equity
|
35,867,802
|
101,573,302
|
80,101,884
|
40,054,492
|
15,550,301
|
37
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The
following discussion and analysis contains forward-looking
statements about our plans and expectations of what may happen in
the future. Forward-looking statements are based on a number of
assumptions and estimates that are inherently subject to
significant risks and uncertainties, and our results could differ
materially from the results anticipated by our forward-looking
statements as a result of many known or unknown factors, including,
but not limited to, those factors discussed in “Item 1A. Risk Factors.”
See also the “Special Cautionary Notice Regarding
Forward-Looking Statements” set forth at the beginning of
this report.
You
should read the following discussion and analysis in conjunction
with “Item 8. Financial Statements and Supplementary
Data,” and our consolidated financial statements beginning on
page F-1 of this report.
Overview
We are a biopharmaceutical company focused on the
acquisition, development and commercialization of novel treatments
for B-cell malignancies and autoimmune diseases. Currently, the
Company is developing two therapies targeting hematologic
malignancies. TG-1101 (ublituximab) is a novel, glycoengineered
monoclonal antibody that targets a specific and unique epitope on
the CD20 antigen found on mature B-lymphocytes. We are also
developing TGR-1202, an orally available PI3K delta inhibitor. The
delta isoform of PI3K is strongly expressed in cells of
hematopoietic origin and is believed to be important in the
proliferation and survival of B-lymphocytes. Both TG-1101 and
TGR-1202 are in clinical development for patients with hematologic
malignancies. We also have pre-clinical programs to develop IRAK4
(interleukin-1 receptor-associated kinase 4) inhibitors, BET
inhibitors, and anti-PD-L1 and anti-GITR
antibodies.
We also
actively evaluate complementary products, technologies and
companies for in-licensing, partnership, acquisition and/or
investment opportunities. To date, we have not received approval
for the sale of any of our drug candidates in any market and,
therefore, have not generated any product sales from our drug
candidates.
Our
license revenues currently consist of license fees arising from our
agreement with Ildong. We recognize upfront license fee revenues
ratably over the estimated period in which we will have certain
significant ongoing responsibilities under the sublicense
agreement, with unamortized amounts recorded as deferred
revenue.
We have
not earned any revenues from the commercial sale of any of our drug
candidates.
Our
research and development expenses consist primarily of expenses
related to in-licensing of new product candidates, fees paid to
consultants and outside service providers for clinical and
laboratory development, facilities-related and other expenses
relating to the design, development, manufacture, testing and
enhancement of our drug candidates and technologies. We expense our
research and development costs as they are incurred. Research and
development expenses for the years ended December 31, 2016, 2015
and 2014 were $66,489,820, $43,445,817 and $31,354,781,
respectively, excluding non-cash compensation expenses related to
research and development.
The
following table sets forth the research and development expenses
per project, exclusive of non-cash compensation expenses, for the
periods presented.
38
|
|
2016
|
2015 |
2014
|
|
TG-1101
|
$40,839,899
|
$29,816,042
|
$15,410,925
|
|
TGR-1202
|
21,394,427
|
11,671,889
|
14,249,856
|
|
IRAK4
|
200,457
|
1,068,466
|
1,694,000
|
|
PD-L1/GITR
|
987,369
|
500,300
|
--
|
|
BET
|
1,551,032
|
--
|
--
|
|
BTK
|
925,581
|
--
|
--
|
|
Other
|
591,055
|
389,120
|
--
|
|
Total
|
$66,489,820
|
$43,445,817
|
$31,354,781
|
Our
general and administrative expenses consist primarily of salaries
and related expenses for executive, finance and other
administrative personnel, recruitment expenses, professional fees
and other corporate expenses, including investor relations, legal
activities and facilities-related expenses such as rent expense and
amortization of leasehold interest.
Our
results of operations include non-cash compensation expenses as a
result of the grants of stock options and restricted stock.
Compensation expense for awards of options and restricted stock
granted to employees and directors represents the fair value of the
award recorded over the respective vesting periods of the
individual awards. The expense is included in the respective
categories of expense in the consolidated statements of operations.
We expect to continue to incur significant non-cash compensation
expenses.
For
awards of options and restricted stock to consultants and other
third-parties, compensation expense is determined at the
“measurement date.” The expense is recognized over the
vesting period of the award. Until the measurement date is reached,
the total amount of compensation expense remains uncertain. We
record compensation expense based on the fair value of the award at
the reporting date. The awards to consultants and other
third-parties are then revalued, or the total compensation is
recalculated based on the then current fair value, at each
subsequent reporting date. This results in a change to the amount
previously recorded in respect of the equity award grant, and
additional expense or a reversal of expense may be recorded in
subsequent periods based on changes in the assumptions used to
calculate fair value, such as changes in market price, until the
measurement date is reached and the compensation expense is
finalized.
In
addition, certain restricted stock issued to employees vest upon
the achievement of certain milestones; therefore, the total expense
is uncertain until the milestone is probable.
Our
clinical trials will be lengthy and expensive. Even if these trials
show that our drug candidates are effective in treating certain
indications, there is no guarantee that we will be able to record
commercial sales of any of our drug candidates in the near future.
In addition, we expect losses to continue as we continue to fund
in-licensing and development of new drug candidates. As we continue
our development efforts, we may enter into additional third-party
collaborative agreements and may incur additional expenses, such as
licensing fees and milestone payments. In addition, we may need to
establish the commercial infrastructure required to manufacture,
market and sell our drug candidates following approval, if any, by
the FDA, which would result in us incurring additional expenses. As
a result, our quarterly results may fluctuate and a
quarter-by-quarter comparison of our operating results may not be a
meaningful indication of our future performance.
39
RESULTS OF OPERATIONS
Years Ended December 31, 2016, 2015 and 2014
|
|
Years
Ended December 31,
|
||
|
|
2016
|
2015
|
2014
|
|
|
|
|
|
|
License
revenue
|
$152,381
|
$152,381
|
$152,381
|
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
Research and
development:
|
|
|
|
|
Noncash stock
expense associated with in-licensing agreements
|
--
|
--
|
5,350,094
|
|
Noncash
compensation
|
2,742,354
|
4,261,406
|
8,731,566
|
|
Other
research and development
|
66,489,820
|
43,445,817
|
26,004,687
|
|
Total research and
development
|
69,232,174
|
47,707,223
|
40,086,347
|
|
|
|
|
|
|
General and
administrative:
|
|
|
|
|
Noncash
compensation
|
4,767,645
|
11,435,686
|
12,373,726
|
|
Other general and
administrative
|
5,121,690
|
4,189,488
|
3,413,400
|
|
Total general and
administrative
|
9,889,335
|
15,625,174
|
15,787,126
|
|
|
|
|
|
|
Total costs and
expenses
|
79,121,509
|
63,332,397
|
55,873,473
|
|
|
|
|
|
|
Operating
loss
|
(78,969,128)
|
(63,180,016)
|
(55,721,092)
|
|
|
|
|
|
|
Other expense
(income), net
|
(716,234)
|
(231,370)
|
60,185
|
|
|
|
|
|
|
Net
loss
|
$(78,252,894)
|
$(62,948,646)
|
$(55,781,277)
|
|
|
|
|
|
Years Ended December 31, 2016 and 2015
License Revenue. License revenue was
$152,381 for each of the years ended December 31, 2016 and 2015.
License revenue is related to the amortization of an upfront
payment of $2.0 million associated with our license agreement with
Ildong. The upfront payment from Ildong will be recognized as
license revenue on a straight-line basis through December 2025,
which represents the estimated period over which the Company will
have certain ongoing responsibilities under the sublicense
agreement.
Noncash Compensation Expense (Research and
Development). Noncash compensation expense (research and
development) related to equity incentive grants totaled $2,742,354
for the year ended December 31, 2016, as compared to $4,261,406
during the comparable period in 2015. The decrease in noncash compensation expense was
primarily related to milestone-based vesting of restricted stock
grants to non-executive personnel during the year ended December
31, 2015, and a decrease in the measurement date fair value of
certain consultant restricted stock during the year ended December
31, 2016.
Other Research and Development
Expenses. Other research and development expenses increased
by $23,044,003 from $43,445,817 for the year ended December 31,
2015 to $66,489,820 for the year ended December 31, 2016.
The increase in other research and
development expenses was due primarily to a $1.0 million licensing
fee for the Jubilant sub-license agreement, as well as the ongoing
clinical development programs and related manufacturing costs for
TG-1101 and TGR-1202 during the year ended December 31, 2016. We
expect our other research and development costs to increase
modestly during 2017 as enrollment of additional patients in our
Phase 3 clinical trials increases and we prepare for a commercial
launch.
Noncash Compensation Expense (General and
Administrative). Noncash compensation expense (general and
administrative) related to equity incentive grants decreased by
$6,668,041 from $11,435,686 for the year ended December 31, 2015 to
$4,767,645 during the year ended December 31, 2016. The
decrease in noncash compensation expense was primarily related to
greater measurement date fair values of certain consultant
restricted stock during the year ended December 31,
2015.
40
Other General and Administrative
Expenses. Other general and administrative expenses
increased by $932,202 from $4,189,488 for the year ended December
31, 2015 to $5,121,690 for the year ended December 31, 2016.
The increase was due
primarily to the straight-line rent expense of our new office
space, as well as increased personnel and other general and
administrative costs. We
expect our other general and administrative expenses to increase
modestly during 2017.
Other Expense (Income), Net. Other
income increased by $484,864 from $231,370 for the year ended
December 31, 2015 to $716,234 for the year ended December 31, 2016.
The increase is mainly due to the receipt of a New York City
biotechnology tax credit of approximately $0.3 million and an
increase in interest income for the year ended December 31,
2016.
Years Ended December 31, 2015 and 2014
License Revenue. License revenue was
$152,381 for each of the years ended December 31, 2015 and 2014.
License revenue is related to the amortization of an upfront
payment of $2.0 million associated with our license agreement with
Ildong. The upfront payment from Ildong will be recognized as
license revenue on a straight-line basis through December 2025,
which represents the estimated period over which the Company will
have certain ongoing responsibilities under the sublicense
agreement.
Noncash Stock Expense Associated with
In-licensing Agreements. Noncash stock expense associated
with in-licensing agreements amounted to $5,350,094 for the year
ended December 31, 2014. The expense during the year ended December
31, 2014 was recorded in conjunction with the stock issued to
Rhizen of approximately $4,100,000 in connection with our license
for TGR-1202, and approximately $1,200,000 for the common stock
issued to Ligand Pharmaceuticals as an upfront payment for the
license to the IRAK4 inhibitors program.
Noncash Compensation Expense (Research and
Development). Noncash compensation expense (research and
development) related to equity incentive grants totaled $4,261,406
for the year ended December 31, 2015, as compared to $8,731,566
during the comparable period in 2014. The decrease in noncash
compensation expense was primarily related to milestone-based
vesting of restricted stock grants to personnel during the year
ended December 31, 2014 and a decrease in the measurement date fair
value of certain consultant restricted stock during the period
ended December 31, 2015.
Other Research and Development
Expenses. Other research and development expenses increased
by $17,441,130 from $26,004,687 for the year ended December 31,
2014 to $43,445,817 for the year ended December 31, 2015. The
increase in other research and development expenses was due
primarily to increases of approximately $11.7 million and $3.4
million for manufacturing and clinical trial expenses related to
TG-1101 and TGR-1202, respectively, offset by a decrease of $4.0
million related to the upfront cash milestone payment to Rhizen to
exercise the license option for TGR-1202 during the year ended
December 31, 2014.
Noncash Compensation Expense (General and
Administrative). Noncash compensation expense (general and
administrative) related to equity incentive grants decreased by
$938,040 from $12,373,726 for the year ended December 31, 2014 to
$11,435,686 during the year ended December 31, 2015. The decrease in noncash compensation
expense was primarily related to milestone-based vesting of
restricted stock grants to personnel during the year ended December
31, 2014.
Other General and Administrative
Expenses. Other general and administrative expenses
increased by $776,088 from $3,413,400 for the year ended December
31, 2014 to $4,189,488 for the year ended December 31, 2015.
The increase was due primarily to
increased personnel and other general and administrative
costs.
Other Expense (Income), Net. Other
income increased by $291,555 from $60,185 of expense for the year
ended December 31, 2014 to $231,370 of income for the year ended
December 31, 2015. The increase is mainly due to an increase in
interest income for the year ended December 31, 2015.
LIQUIDITY AND CAPITAL RESOURCES
Our
primary sources of cash have been from the sale of equity
securities, the upfront payment from our Sublicense Agreement with
Ildong, and warrant and option exercises. We have not yet
commercialized any of our drug candidates and cannot be sure if we
will ever be able to do so. Even if we commercialize one or more of
our drug candidates, we may not become profitable. Our ability to
achieve profitability depends on a number of factors, including our
ability to obtain regulatory approval for our drug candidates,
successfully complete any post-approval regulatory obligations and
successfully commercialize our drug candidates alone or in
partnership. We may continue to incur substantial operating losses
even if we begin to generate revenues from our drug
candidates.
On
March 9, 2017, we announced the pricing of an underwritten public
offering of 5,128,206 shares of our common stock (plus a 30-day
option to purchase up to an additional 769,230 shares of common
stock, which has been exercised) at a price of $9.75 per
share, with expected gross proceeds to TG
Therapeutics of $57.5 million, less underwriting
discounts and commissions. Total net proceeds from this offering,
including the overallotment, are expected to be approximately $54
million, net of underwriting discounts and estimated offering
expenses of approximately $3.5 million. The shares were sold under
a shelf registration statement on Form S-3 (File No. 333-201339)
that was previously filed and declared effective by the SEC in
January 2015. The offering closed on March 14, 2017.
As of
December 31, 2016, we had $45.0 million in cash and cash
equivalents, investment securities, and interest receivable.
Subsequent
to the year ended December 31, 2016, we sold a total of
approximately 3,000,000 shares of common stock under the 2015 ATM
for aggregate net proceeds of approximately $30.2
million.
41
We
anticipate that our cash and cash equivalents as of December 31,
2016 combined with the additional capital raised in the first
quarter of 2017 will be sufficient to fund the Company’s
planned operations for approximately the next 24 months. The actual
amount of cash that we will need to operate is subject to many
factors, including, but not limited to, the timing, design and
conduct of clinical trials for our drug candidates. We are
dependent upon significant financing to provide the cash necessary
to execute our current operations, including the commercialization
of any of our drug candidates.
Cash
used in operating activities for the year ended December 31, 2016
was $61,591,330 as compared to $44,690,272 for the year ended
December 31, 2015. The increase in cash used in operating
activities was due primarily to increased expenditures associated
with our clinical development programs for TG-1101 and
TGR-1202.
For the
year ended December 31, 2016, net cash provided by investing
activities was $26,545,312 as compared to cash used in investing
activities of $24,685,869 for the year ended December 31, 2015. The
increase in net cash provided by investing activities was primarily
due to proceeds from maturity of short-term securities and the sale
of long-term securities during the year ended December 31,
2016.
For the
year ended December 31, 2016, net cash provided by financing
activities of $5,015,969 related to our program under an
At-the-Market Issuance Sales Agreement (the “ATM
Program”), as well as proceeds from the exercise of warrants.
For the year ended December 31, 2015, net cash provided by
financing activities of $68,723,686 related to our ATM Program, as
well as proceeds from the exercise of warrants.
ATM Program
On June 21, 2013, we entered into an At-the-Market Issuance Sales
Agreement (the ?2013 ATM?) with MLV & Co. LLC (?MLV?) under
which we could issue and sell shares of our common stock, having
aggregate offering proceeds of up to $50.0 million, from time to
time through MLV, acting as the sales agent. Under the agreement we
would pay MLV a commission rate of up to 3.0% of the gross proceeds
from the sale of any shares of common stock sold through
MLV.
During the year ended December 31, 2014, we sold a total of
4,850,055 shares of common stock under this arrangement for
aggregate total gross proceeds of approximately $50.0 million at an
average selling price of $10.31 per share. Net proceeds were
approximately $48.8 million after deducting commissions and other
transaction costs. We have fully utilized the capacity under the
2013 ATM and, accordingly, no further sales can be made under the
2013 ATM.
In December 2014, we amended our 2013 ATM with MLV (the “2015
ATM”) such that we could issue and sell additional shares of
our common stock, having an aggregate offering price of up to $75.0
million, from time to time through MLV, acting as the sales agent.
Under the 2015 ATM, we would pay MLV a commission rate of up to
3.0% of the gross proceeds from the sale of any shares of common
stock sold through MLV.
During the year ended December 31, 2015, we sold a total of
4,094,498 shares of common stock under the 2015 ATM for aggregate
total gross proceeds of approximately $68.2 million at an average
selling price of $16.66 per share, resulting in net proceeds of
approximately $67.0 million after deducting commissions and other
transaction costs.
During the year ended December 31, 2016, we sold a total of 570,366
shares of common stock under the 2015 ATM for aggregate total gross
proceeds of approximately $4.5 million at an average selling price
of $7.88 per share, resulting in net proceeds of approximately $4.4
million after deducting commissions and other transaction
costs.
Equity Financings
On March 11, 2014, we announced the pricing of an underwritten sale
of 2,702,809 shares of our common stock at a price of $6.71 per
share for gross proceeds of approximately $18.1 million. Net
proceeds from this offering were approximately $16.8 million, net
of underwriting discounts and offering expenses of approximately
$1.3 million.
On
July 18, 2013, we announced the pricing of an underwritten public
offering of 5,700,000 shares of our common stock at a
price of $6.15 per share for gross proceeds of approximately
$35 million. We also granted to the underwriters a 30-day
option to acquire an additional 855,000 shares to cover
overallotments in connection with the offering, which they
exercised. Total net proceeds from this offering, including the
overallotment, were approximately $37.6 million, net of
underwriting discounts and offering expenses of approximately
$2.7 million.
42
OFF-BALANCE SHEET ARRANGEMENTS
We have
not entered into any transactions with unconsolidated entities
whereby we have financial guarantees, subordinated retained
interests, derivative instruments or other contingent arrangements
that expose us to material continuing risks, contingent
liabilities, or any other obligations under a variable interest in
an unconsolidated entity that provides us with financing,
liquidity, market risk or credit risk support.
OBLIGATIONS AND COMMITMENTS
As of
December 31, 2016, we have known contractual
obligations, commitments and contingencies of $18.0 million related
to our operating lease obligations.
|
(in
thousands)
|
Payment
due by period
|
||||
|
|
Total
|
Less
than 1 year
|
1-3
years
|
3-5
years
|
More
than 5 years
|
|
Contractual
obligations
|
|
|
|
|
|
|
Operating
leases
|
$18,020
|
$1,185
|
$2,281
|
$2,286
|
$12,268
|
|
Total
|
$18,020
|
$1,185
|
$2,281
|
$2,286
|
$12,268
|
Leases
In
October 2014, we entered into an agreement (the “Office
Agreement”) with FBIO, to occupy approximately 45% of the
24,000 square feet of New York City office space leased by FBIO,
which is now our corporate headquarters. The Office Agreement
requires us to pay our respective share of the average annual rent
and other costs of the 15-year lease. We approximate an average
annual rental obligation of $1.1 million under the Office
Agreement. We began to occupy this new space in April 2016, with
rental payments beginning in the third quarter of 2016. During the
year ended December 31, 2016, we recorded rent expense of
approximately $1.4 million and at December 31, 2016, have deferred rent of
approximately $0.8 million. Mr.
Weiss, our Executive Chairman and CEO, is also Executive Vice
Chairman of FBIO.
During
the year ended December 31, 2016, we agreed to pay FBIO $2.2 million for
our portion of the build out costs, which have been
allocated to us at the 45% rate mentioned above. The allocated
build-out costs have been recorded in leasehold interest and will
be amortized over the 15-year term of the Office Agreement. After
an initial commitment period of the 45% rate for a period of three
(3) years, we and FBIO will determine actual office space
utilization annually and if our utilization differs from the amount
we have been billed, we will either receive credits or be assessed
incremental utilization charges. Also in connection with this lease, in
October 2014 we pledged $0.6 million to secure a line of credit as
a security deposit for the Office Agreement, which has been
recorded as restricted cash in the accompanying consolidated
balance sheets.
Total rental expense was approximately $1.6 million, $0.3 million
and $0.1 million for the years ended December 31, 2016, 2015
and 2014, respectively.
Future minimum lease commitments as of December 31, 2016
total, in the aggregate, approximately $18.0 million through
December 31, 2031. The preceding table shows future minimum lease
commitments, which include our office leases in New York, North
Carolina and Tennessee, by period as of December 31,
2016.
CRITICAL ACCOUNTING POLICIES
The
discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements,
which have been prepared in accordance with U.S. generally accepted
accounting principles. The preparation of these financial
statements requires us to make estimates and judgments that affect
the reported amount of assets and liabilities and related
disclosure of contingent assets and liabilities at the date of our
financial statements and the reported amounts of revenues and
expenses during the applicable period. Actual results may differ
from these estimates under different assumptions or
conditions.
We
define critical accounting policies as those that are reflective of
significant judgments and uncertainties and which may potentially
result in materially different results under different assumptions
and conditions. In applying these critical accounting policies, our
management uses its judgment to determine the appropriate
assumptions to be used in making certain estimates. These estimates
are subject to an inherent degree of uncertainty. Our critical
accounting policies include the following:
43
Revenue Recognition. We recognize
license revenue in accordance with the revenue recognition guidance
of the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”), or
Codification. We analyze each element of our licensing agreement to
determine the appropriate revenue recognition. The terms of the
license agreement may include payments to us of non-refundable
up-front license fees, milestone payments if specified objectives
are achieved, and/or royalties on product sales. We recognize
revenue from upfront payments over the period of significant
involvement under the related agreements unless the fee is in
exchange for products delivered or services rendered that represent
the culmination of a separate earnings process and no further
performance obligation exists under the contract. We recognize
milestone payments as revenue upon the achievement of specified
milestones only if (1) the milestone payment is
non-refundable, (2) substantive effort is involved in
achieving the milestone, (3) the amount of the milestone is
reasonable in relation to the effort expended or the risk
associated with achievement of the milestone, and (4) the
milestone is at risk for both parties. If any of these conditions
are not met, we defer the milestone payment and recognize it as
revenue over the estimated period of performance under the
contract.
Stock Compensation. We have granted
stock options and restricted stock to employees, directors and
consultants, as well as warrants to other third parties. For
employee and director grants, the value of each option award is
estimated on the date of grant using the Black-Scholes
option-pricing model. The Black-Scholes model takes into account
volatility in the price of our stock, the risk-free interest rate,
the estimated life of the option, the closing market price of our
stock and the exercise price. We base our estimates of our stock
price volatility on the historical volatility of our common stock
and our assessment of future volatility; however, these estimates
are neither predictive nor indicative of the future performance of
our stock. For purposes of the calculation, we assumed that no
dividends would be paid during the life of the options and
warrants. The estimates utilized in the Black-Scholes calculation
involve inherent uncertainties and the application of management
judgment. In addition, we are required to estimate the expected
forfeiture rate and only recognize expense for those equity awards
expected to vest. As a result, if other assumptions had been used,
our recorded stock-based compensation expense could have been
materially different from that reported. In addition, because some
of the options, restricted stock and warrants issued to employees,
consultants and other third-parties vest upon the 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 milestone
becomes probable.
Total
compensation expense for options and restricted stock issued to
consultants is determined at the “measurement date.”
The expense is recognized over the vesting period for the options
and restricted stock. Until the measurement date is reached, the
total amount of compensation expense remains uncertain. We record
stock-based compensation expense based on the fair value of the
equity awards at the reporting date. These equity awards are then
revalued, or the total compensation is recalculated based on the
then current fair value, at each subsequent reporting date. This
results in a change to the amount previously recorded in respect of
the equity award grant, and additional expense or a reversal of
expense may be recorded in subsequent periods based on changes in
the assumptions used to calculate fair value, such as changes in
market price, until the measurement date is reached and the
compensation expense is finalized.
In-process Research and Development.
All acquired research and development projects are recorded at
their fair value as of the date acquisition. The fair values are
assessed as of the balance sheet date to ascertain if there has
been any impairment of the recorded value. If there is an
impairment the asset is written down to its current fair value by
the recording of an expense.
Accruals for Clinical Research Organization
and Clinical Site Costs. We make estimates of costs incurred
in relation to external clinical research organizations, or CROs,
and clinical site costs. We analyze the progress of clinical
trials, including levels of patient enrollment, invoices received
and contracted costs when evaluating the adequacy of the amount
expensed and the related prepaid asset and accrued liability.
Significant judgments and estimates must be made and used in
determining the accrued balance and expense in any accounting
period. We review and
accrue CRO expenses and clinical trial study expenses based on work
performed and rely upon estimates of those costs applicable to the
stage of completion of a study. Accrued CRO costs are subject
to revisions as such trials progress to completion. Revisions are
charged to expense in the period in which the facts that give rise
to the revision become known. With respect to clinical site
costs, the financial terms of these agreements are subject to
negotiation and vary from contract to contract. Payments under
these contracts may be uneven, and depend on factors such as the
achievement of certain events, the successful recruitment of
patients, the completion of portions of the clinical trial or
similar conditions. The objective of our policy is to match the
recording of expenses in our financial statements to the actual
services received and efforts expended. As such, expense accruals
related to clinical site costs are recognized based on our estimate
of the degree of completion of the event or events specified in the
specific clinical study or trial contract.
44
Accounting Related to Goodwill. As of
December 31, 2016 and 2015, there was $799,391 of goodwill on our
consolidated balance sheets. Goodwill is reviewed for impairment
annually, or when events arise that could indicate that an
impairment exists. We test for goodwill impairment using a two-step
process. The first step compares the fair value of the reporting
unit with the unit's carrying value, including goodwill. When the
carrying value of the reporting unit is greater than fair value,
the unit’s goodwill may be impaired, and the second step must
be completed to measure the amount of the goodwill impairment
charge, if any. In the second step, the implied fair value of the
reporting unit’s goodwill is compared with the carrying
amount of the unit’s goodwill. If the carrying amount is
greater than the implied fair value, the carrying value of the
goodwill must be written down to its implied fair
value.
We are
required to perform impairment tests annually, at December 31, and
whenever events or changes in circumstances suggest that the
carrying value of an asset may not be recoverable. For all of our
acquisitions, various analyses, assumptions and estimates were made
at the time of each acquisition that were used to determine the
valuation of goodwill and intangibles. In future years, the
possibility exists that changes in forecasts and estimates from
those used at the acquisition date could result in impairment
indicators.
Accounting For Income Taxes. In
preparing our consolidated financial statements, we are required to
estimate our income taxes in each of the jurisdictions in which we
operate. This process involves management estimation of our actual
current tax exposure and assessment of temporary differences
resulting from differing treatment of items for tax and accounting
purposes. These differences result in deferred tax assets and
liabilities. We must then assess the likelihood that our deferred
tax assets will be recovered from future taxable income and, to the
extent we believe that recovery is not likely, we must establish a
valuation allowance. To the extent we establish a valuation
allowance or increase this allowance in a period, we must include
an expense within the tax provision in the consolidated statements
of operations. Significant management judgment is required in
determining our provision for income taxes, our deferred tax assets
and liabilities and any valuation allowance recorded against our
net deferred tax assets. We have fully offset our deferred tax
assets with a valuation allowance. Our lack of earnings history and
the uncertainty surrounding our ability to generate taxable income
prior to the reversal or expiration of such deferred tax assets
were the primary factors considered by management in maintaining
the valuation allowance.
Fair Value of 5% Notes Payable. We
measure certain financial assets and liabilities at fair value on a
recurring basis in the financial statements. The hierarchy ranks
the quality and reliability of inputs, or assumptions, used in the
determination of fair value and requires financial assets and
liabilities carried at fair value to be classified and disclosed in
one of three categories.
We
elected the fair value option for valuing the 5% Notes. We elected
the fair value option in order to reflect in our financial
statements the assumptions that market participants use in
evaluating these financial instruments.
RECENTLY ISSUED ACCOUNTING STANDARDS
In
January 2017, the Financial Accounting Standards Board ("FASB")
issued Accounting Standards Update (“ASU”) No. 2017-04,
“Simplifying the Test for Goodwill Impairment”
(“ASU 2017-04”). ASU 2017-04 removes the requirement to
compare the implied fair value of goodwill with its carrying amount
as part of step 2 of the goodwill impairment test. As a result,
under ASU 2017-04, an entity should perform its annual, or interim,
goodwill impairment test by comparing the fair value of a reporting
unit with its carrying amount and should recognize an impairment
charge for the amount by which the carrying amount exceeds the
reporting unit’s fair value; however, the loss recognized
should not exceed the total amount of goodwill allocated to that
reporting unit. In addition, ASU 2017-04:
●
Clarifies
the requirements for excluding and allocating foreign currency
translation adjustments to reporting units in connection with an
entity’s testing of reporting units for goodwill
impairment.
●
Clarifies
that an entity should consider income tax effects from any tax
deductible goodwill on the carrying amount of the reporting unit
when measuring the goodwill impairment loss, if
applicable.
●
Makes
minor changes to the overview and background sections of certain
Accounting Standards Codification (“ASC” or
“Codification”) subtopics and topics as part of the
Board’s initiative to unify and improve those sections
throughout the Codification.
ASU
2017-04 is effective prospectively for annual and interim periods
beginning on or after December 15, 2019, and early adoption is
permitted on testing dates after January 1, 2017. We are currently
evaluating the impact the adoption of ASU 2017-04 will have on our
consolidated financial statements.
45
In
November 2016, the FASB issued ASU 2016-18, “Restricted Cash
– a consensus of the FASB Emerging Issues Task Force”
(“ASU 2016-18”). ASU 2016-18 amends ASC 230 to add or
clarify guidance on the classification and presentation of
restricted cash in the statement of cash flows. Key requirements of
the ASU are as follows:
●
An
entity should include in its cash and cash-equivalent balances in
the statement of cash flows those amounts that are deemed to be
restricted cash and restricted cash equivalents. The ASU does not
define the terms “restricted cash” and
“restricted cash equivalents” but states that an entity
should continue to provide appropriate disclosures about its
accounting policies pertaining to restricted cash in accordance
with other GAAP. The ASU also states that any change in accounting
policy will need to be assessed under ASC 250.
●
A
reconciliation between the statement of financial position and the
statement of cash flows must be disclosed when the statement of
financial position includes more than one line item for cash, cash
equivalents, restricted cash, and restricted cash
equivalents.
●
Changes
in restricted cash and restricted cash equivalents that result from
transfers between cash, cash equivalents, and restricted cash and
restricted cash equivalents should not be presented as cash flow
activities in the statement of cash flows.
●
An
entity with a material balance of amounts generally described as
restricted cash and restricted cash equivalents must disclose
information about the nature of the restrictions.
ASU
2016-18 is effective for annual and interim periods beginning after
December 15, 2017, and early adoption is permitted for all
entities. We are currently evaluating the impact the adoption of
ASU 2016-18 will have on our consolidated financial
statements.
In
August 2016, the FASB issued ASU No. 2016-15, “Classification
of Certain Cash Receipts and Cash Payments” (“ASU
2016-15”). ASU 2016-15 amends the guidance in ASC 230 on the
classification of certain cash receipts and payments in the
statement of cash flows. The primary purpose of ASU 2016-15 is to
reduce the diversity in practice that has resulted from the lack of
consistent principles on this topic. The amendments in ASU 2016-15
add or clarify guidance on eight cash flow issues:
●
Debt
prepayment or debt extinguishment costs.
●
Settlement
of zero-coupon debt instruments or other debt instruments with
coupon interest rates that are insignificant in relation to the
effective interest rate of the borrowing.
●
Contingent
consideration payments made after a business
combination.
●
Proceeds
from the settlement of insurance claims.
●
Proceeds
from the settlement of corporate-owned life insurance policies,
including bank-owned life insurance policies.
●
Distributions
received from equity method investees.
●
Beneficial
interests in securitization transactions.
●
Separately
identifiable cash flows and application of the predominance
principle.
ASU
2016-15 is effective for annual and interim periods beginning after
December 15, 2017, and early adoption is permitted for all
entities. Entities must apply the guidance retrospectively to all
periods presented but may apply it prospectively from the earliest
date practicable if retrospective application would be
impracticable. The provisions of this standard are not expected to
significantly impact the Company.
In
May 2016, the FASB issued ASU No. 2016-11, “Rescission of SEC
Guidance Because of Accounting Standards Update 2014-09 and 2014-16
Pursuant to Staff Announcements at the March 3, 2016 EITF
Meeting” (“ASU 2016-11”). ASU 2016-11 rescinds
certain SEC guidance from the FASB Codification in response to
announcements made by the SEC staff at the Emerging Issues Task
Force’s March 3, 2016 meeting. Specifically, ASU 2016-11
supersedes SEC observer comments on the following
topics:
●
Upon
the adoption of ASU 2014-09:
o
Revenue
and expense recognition for freight services in process (ASC
605-20-S99-2)
o
Accounting
for shipping and handling fees and costs (ASC
605-45-S99-1)
o
Accounting
for consideration given by a vendor to a customer (ASC
605-50-S99-1)
o
Accounting
for gas-balancing arrangements (ASC 932-10-S99-5)
●
Upon
the adoption of ASU 2014-16:
o
Determining
the nature of a host contract related to a hybrid financial
instrument issued in the form of a share under ASC 815 (ASC
815-10-S99-3).
ASU
2016-11 is effective upon the adoption of ASU 2014-09 and ASU
2014-16. The adoption of ASU 2016-11 is not expected to have a
material impact on the Company’s consolidated financial
statements.
In
March 2016, the FASB issued ASU No. 2016-09, “Simplifying the
Accounting for Share-Based Payments” (“ASU
2016-09”). ASU 2016-09 simplifies several aspects of the
accounting for employee share-based payment transactions for both
public and nonpublic entities, including the accounting for income
taxes, forfeitures, and statutory tax withholding requirements, as
well as classification in the statement of cash flows. ASU 2016-09
is effective for annual reporting periods beginning after December
15, 2016, including interim periods within those annual reporting
periods. The provisions of this standard are not expected to
significantly impact the Company.
In
February 2016, the FASB issued ASU No. 2016-02, “Leases
(Topic 842),” which requires lessees to recognize assets and
liabilities for the rights and obligations created by most leases
on their balance sheet. The guidance is effective for fiscal years
beginning after December 15, 2018, including interim periods within
those fiscal years. Early application is permitted. ASU 2016-02
requires modified retrospective adoption for all leases existing
at, or entered into after, the date of initial application, with an
option to use certain transition relief. The Company is currently
evaluating the impact the standard may have on its consolidated
financial statements and related disclosures.
46
In
August 2014, the FASB issued ASU No. 2014-15, “Presentation
of Financial Statements - Going Concern (Subtopic 205-40)”,
which will require management to assess an entity’s ability
to continue as a going concern at each annual and interim period.
Related footnote disclosures will be required if conditions give
rise to substantial doubt about an entity’s ability to
continue as a going concern within one year of the report issuance
date. If conditions do not give rise to substantial doubt, no
disclosures will be required specific to going concern
uncertainties. The guidance defines substantial doubt using a
likelihood threshold of “probable” similar to the
current use of that term in U.S. GAAP for loss contingencies and
provides example indicators. The guidance is effective for
reporting periods ending after December 15, 2016, and early
adoption is permitted. Therefore, the Company has adopted this new
standard on December 15, 2016. The adoption of this standard did
not have a material impact on our consolidated financial statements
as of December 31, 2016.
Other
pronouncements issued by the FASB or other authoritative accounting
standards group with future effective dates are either not
applicable or not significant to our consolidated financial
statements.
|
ITEM 7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
|
|
The
primary objective of our investment activities is to preserve
principal while maximizing our income from investments and
minimizing our market risk. We currently invest in government and
investment-grade corporate debt in accordance with our investment
policy, which we may change from time to time. The securities in
which we invest have market risk. This means that a change in
prevailing interest rates, and/or credit risk, may cause the fair
value of the investment to fluctuate. For example, if we hold a
security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises,
the fair value of our investment will probably decline. As of
December 31, 2016, our portfolio of financial instruments
consists of cash equivalents and short-term interest bearing
securities, including government debt and money market funds. The
average duration of all of our held-to-maturity investments held as
of December 31, 2016, was less than 12 months. Due to the
relative short-term nature of these financial instruments, we
believe there is no material exposure to interest rate risk, and/or
credit risk, arising from our portfolio of financial
instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our
consolidated financial statements and the notes thereto, included
in Part IV, Item 15(a), part 1, are incorporated by reference into
this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND
FINANCIAL DISCLOSURES.
Not
applicable.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and
Procedures. As of December 31, 2016, management carried out
an evaluation, under the supervision and with the participation of
our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)). Our disclosure controls and
procedures are designed to provide reasonable assurance that
information we are required to disclose in the reports that we file
or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in applicable rules
and forms. Based upon that evaluation, our Chief Executive and
Chief Financial Officers concluded that, as of December 31, 2016,
our disclosure controls and procedures were effective.
Management's Report on Internal Control over
Financial Reporting. Our management is responsible for
establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f)
under the Exchange Act). Our management assessed the effectiveness
of our internal control over financial reporting as of December 31,
2016. In making this assessment, our management used the criteria
established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway
Commission, or COSO Framework. Our management has concluded that,
as of December 31, 2016, our internal control over financial
reporting was effective based on these criteria.
The
effectiveness of our internal control over financial reporting as
of December 31, 2016 was audited by CohnReznick LLP, our
independent registered public accounting firm, as stated in their
report appearing below, which expressed an unqualified opinion on
the effectiveness of our internal control over financial reporting
as of December 31, 2016.
Changes in Internal Control Over Financial
Reporting. There were no changes in our internal control
over financial reporting during the quarter ended December 31, 2016
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
Limitations on the Effectiveness of
Controls. Our management, including our Chief Executive
Officer and Chief Financial Officer, does not expect that our
disclosure controls and procedures or our internal control over
financial reporting will prevent all errors and all fraud. A
control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any,
within our Company have been detected.
47
Report of Independent Registered Public Accounting
Firm
To The
Board of Directors and Stockholders
TG
Therapeutics, Inc.
We have
audited TG Therapeutics, Inc. and Subsidiaries’ internal
control over financial reporting as of December 31, 2016, based on
criteria established in Internal Control-Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). TG Therapeutics, Inc.’s
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included
in the accompanying Management’s Report on Internal Control
over Financial Reporting. Our responsibility is to express an
opinion on TG Therapeutics, Inc.’s internal control over
financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A
company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting
principles generally accepted in the United States of America. A
company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements
in accordance with accounting principles generally accepted in the
United States of America, and that receipts and expenditures
of the company are being made only in accordance with
authorizations of management and directors of the company; and (3)
provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because
of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our
opinion, TG Therapeutics, Inc. and Subsidiaries has maintained, in
all material respects, effective internal control over financial
reporting as of December 31, 2016 based on the criteria established
in Internal Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
We have
also audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the
consolidated financial statements of TG Therapeutics, Inc. and
Subsidiaries as of December 31, 2016 and 2015, and for each of the
three years in the period ended December 31, 2016 and our report
dated March 15, 2017, expressed an unqualified
opinion.
/s/
CohnReznick LLP
New
York, New York
March
15, 2017
48
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE.
The
information required by this Item is incorporated herein by
reference from our Proxy Statement for our 2017 Annual Meeting of
Stockholders.
ITEM 11. EXECUTIVE COMPENSATION.
The
information required by this Item is incorporated herein by
reference from our Proxy Statement for our 2017 Annual Meeting of
Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The
information required by this Item is incorporated herein by
reference from our Proxy Statement for our 2017 Annual Meeting of
Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.
The
information required by this Item is incorporated herein by
reference from our Proxy Statement for our 2017 Annual Meeting of
Stockholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The
information required by this Item is incorporated herein by
reference from our Proxy Statement for our 2017 Annual Meeting of
Stockholders.
49
PART IV
ITEM 15. EXHIBITS and FINANCIAL STATEMENT SCHEDULES.
1.
Consolidated
Financial Statements
The
following consolidated financial statements of TG Therapeutics,
Inc. are filed as part of this report.
|
Contents
|
Page
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
|
|
|
Consolidated
Balance Sheets as of December 31, 2016 and 2015
|
F-2
|
|
|
|
|
Consolidated
Statements of Operations for the years ended December 31, 2016,
2015 and 2014
|
F-3
|
|
|
|
|
Consolidated
Statements of Stockholders’ Equity for the years ended
December 31, 2016, 2015 and 2014
|
F-4
|
|
|
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2016,
2015 and 2014
|
F-5
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
F-6
|
|
|
|
2.
Consolidated
Financial Statement Schedules
All
schedules are omitted as the information required is inapplicable
or the information is presented in the consolidated financial
statements or the related notes.
3.
Exhibits
|
Exhibit
|
|
|
Number
|
Exhibit Description
|
|
|
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of TG Therapeutics, Inc.
dated April 26, 2012 (incorporated by reference to Exhibit 3.2 to
the Registrant’s Form 10-Q for the quarter ended June 30,
2012).
|
|
|
|
|
3.2
|
Certificate of
Amendment to Amended and Restated Certificate of Incorporation of
TG Therapeutics, Inc. dated June 9, 2014 (incorporated by reference
to Exhibit 3.2 to the Registrant’s Form 10-Q for the quarter
ended June 30, 2014).
|
|
|
|
|
3.3
|
Amended
and Restated Bylaws of TG Therapeutics, Inc. dated July 18, 2014
(incorporated by reference to Exhibit 3.1 to the Registrant’s
Current Report on Form 8-K filed on July 21, 2014).
|
|
|
|
|
4.1
|
Specimen common
stock certificate (incorporated by reference to Exhibit 4.1 to the
Registrant’s Form 10-K for the year ended December 31,
2011).
|
|
|
|
|
4.2
|
Form of
warrant to purchase common stock of TG Therapeutics, Inc.
(incorporated by reference to Exhibit 4.1 to the Registrant’s
Current Report on Form 8-K filed on November 13,
2012).
|
|
|
|
|
4.3
|
Form of
Warrant issued to stockholders (incorporated by reference to
Exhibit 10.34 to the Registrant’s Form 10-K for the fiscal
year ended December 31, 2011).
|
|
|
|
|
4.4
|
Stockholder
Protection Rights Agreement, dated July 18, 2014 between TG
Therapeutics, Inc. and American Stock Transfer & Trust Company,
LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 to
the Registrant?s Current Report on Form 8-K filed on July 21,
2014).
|
|
|
|
|
10.1
|
Amended
and Restated Convertible Promissory Note, dated March 1, 2011
(incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed on March 7,
2011).
|
|
|
|
50
|
10.2
|
Employment
Agreement, effective December 29, 2011, between the Registrant and
Michael Weiss (incorporated by reference to Exhibit 10.30 to the
Registrant’s Form 10-K for the fiscal year ended December 31,
2011). †
|
|
|
|
|
10.3
|
Restricted Stock
Subscription Agreement, effective December 29, 2011, between the
Registrant and Michael Weiss (incorporated by reference to Exhibit
10.31 to the Registrant’s Form 10-K for the fiscal year ended
December 31, 2011). †
|
|
|
|
|
10.4
|
Amendment to
Restricted Stock Agreement, dated July 12, 2013, by and between TG
Therapeutics, Inc. and Michael S. Weiss (incorporated by reference
to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed on July 16, 2013). †
|
|
|
|
|
10.5
|
Amendment to
Restricted Stock Agreements, dated December 31, 2014, by and
between TG Therapeutics, Inc. and Michael S. Weiss (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report
on Form 8-K filed on January 7, 2015). †
|
|
|
|
|
10.6
|
Employment
Agreement, effective December 29, 2011, between the Registrant and
Sean Power (incorporated by reference to Exhibit 10.32 to the
Registrant’s Form 10-K for the fiscal year ended December 31,
2011). †
|
|
|
|
|
10.7
|
Restricted Stock
Subscription Agreement, effective December 29, 2011 between the
Registrant and Sean Power (incorporated by reference to Exhibit
10.33 to the Registrant’s Form 10-K for the fiscal year ended
December 31, 2011). †
|
|
|
|
|
10.8
|
Amendment to
Restricted Stock Agreement, dated July 12, 2013, by and between TG
Therapeutics, Inc. and Sean A. Power (incorporated by reference to
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K
filed on July 16, 2013). †
|
|
|
|
|
10.9
|
Amendment to
Restricted Stock Agreements, dated December 31, 2014, by and
between TG Therapeutics, Inc. and Sean A. Power (incorporated by
reference to Exhibit 10.2 to the Registrant’s Current Report
on Form 8-K filed on January 7, 2015). †
|
|
|
|
|
10.10
|
License
Agreement, dated January 30, 2012, by and among the Registrant, GTC
Biotherapeutics, Inc., LFB Biotechnologies S.A.S. and LFB/GTC LLC
(incorporated by reference to Exhibit 10.35 to the
Registrant’s Form 10-K for the fiscal year ended December 31,
2011). *
|
|
|
|
|
10.11
|
TG
Therapeutics, Inc. Amended and Restated 2012 Incentive Plan, dated
May 14, 2012 (incorporated by reference to Exhibit 10.1 to the
Registrant’s Form 10-Q/A for the quarter ended March 31,
2012).
|
|
|
|
|
10.12
|
First
Amendment to TG Therapeutics, Inc. Amended and Restated 2012
Incentive Plan, filed with the Registrant’s Definitive Proxy
Statement for the Annual Meeting of Stockholders on June 4, 2015,
filed on April 24, 2015, and
incorporated herein by reference.
|
|
|
|
|
10.13
|
Sublicense
Agreement between TG Therapeutics, Inc. and Ildong Pharmaceutical
Co. Ltd., dated November 13, 2012 (incorporated by reference to
Exhibit 10.37 to the Registrant’s Form 10-K for the fiscal
year ended December 31, 2012). *
|
|
|
|
|
10.14
|
License
Agreement between TG Therapeutics, Inc. and Ligand Pharmaceuticals
Incorporated, dated June 23, 2014 (incorporated by reference to
Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter
ended June 30, 2014).*
|
|
|
|
|
10.15
|
Licensing Agreement
between TG Therapeutics, Inc. and Rhizen Pharmaceuticals SA, dated
September 22, 2014 (incorporated by reference to Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K filed on January
20, 2015). *
|
|
|
|
|
10.16
|
Collaboration
Agreement between TG Therapeutics, Inc. and Checkpoint
Therapeutics, Inc., dated March 3, 2015 (incorporated by reference
to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter
ended March 31, 2015). *
|
|
|
|
|
21.1
|
Subsidiaries of TG
Therapeutics, Inc.
|
|
|
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm
|
|
|
|
|
31.1
|
Certification of
Principal Executive Officer
|
|
|
|
|
31.2
|
Certification of
Principal Financial Officer
|
|
|
|
|
32.1
|
Certification of
Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
32.2
|
Certification of
Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
101
|
The
following financial information from TG Therapeutics, Inc.’s
Annual Report on Form 10-K for the year ended
December 31, 2016, formatted in XBRL (eXtensible Business
Reporting Language): (i) Consolidated Balance Sheets,
(ii) Consolidated Statements of Operations, (iii) Consolidated
Statements of Stockholders’ Equity, (iv) Consolidated
Statements of Cash Flows, (v) the Notes to Consolidated
Financial Statements.
|
†
Indicates
management contract or compensatory plan or
arrangement.
*
Confidential
treatment has been requested with respect to omitted portions of
this exhibit.
51
TG Therapeutics, Inc.
Consolidated Financial Statements
|
|
Page
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
|
|
|
Consolidated
Balance Sheets as of December 31, 2016 and 2015
|
F-2
|
|
|
|
|
Consolidated
Statements of Operations for the years ended December 31, 2016,
2015 and 2014
|
F-3
|
|
|
|
|
Consolidated
Statements of Stockholders’ Equity for the years ended
December 31, 2016, 2015 and 2014
|
F-4
|
|
|
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2016,
2015 and 2014
|
F-5
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
F-6
|
|
|
|
52
Report of Independent Registered Public Accounting
Firm
To The
Board of Directors and Stockholders
TG
Therapeutics, Inc.
We have
audited the accompanying consolidated balance sheets of TG
Therapeutics, Inc. and Subsidiaries (the “Company”) as
of December 31, 2016 and 2015, and the related consolidated
statements of operations, stockholders’ equity and cash flows
for each of the three years in the period ended December 31, 2016.
TG Therapeutics, Inc.’s management is responsible for these
consolidated financial statements. Our responsibility is to express
an opinion on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
TG Therapeutics, Inc. and Subsidiaries as of December 31, 2016 and
2015, and their results of operations and cash flows for each of
the three years in the period ended December 31, 2016, in
conformity with accounting principles generally accepted in the
United States of America.
We have
also audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), TG
Therapeutics, Inc. and Subsidiaries’ internal control over
financial reporting as of December 31, 2016 based on criteria
established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) and our report dated March 15, 2017
expressed an unqualified opinion.
/s/
CohnReznick LLP
New
York, New York
March
15, 2017
F-1
TG Therapeutics, Inc. and Subsidiaries
Consolidated Balance Sheets as of December 31, 2016 and
2015
|
|
2016
|
2015
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
|
$25,031,280
|
$55,061,329
|
|
Short-term
investment securities
|
19,853,860
|
22,166,512
|
|
Interest
receivable
|
83,852
|
186,021
|
|
Prepaid research
and development
|
5,678,755
|
9,151,142
|
|
Other current
assets
|
216,397
|
308,327
|
|
Total current
assets
|
50,864,144
|
86,873,331
|
|
Restricted
cash
|
583,208
|
579,143
|
|
Long-term
investment securities
|
--
|
25,003,032
|
|
Leasehold interest,
net
|
2,042,281
|
--
|
|
Equipment,
net
|
328,148
|
47,122
|
|
Goodwill
|
799,391
|
799,391
|
|
Other
assets
|
164,375
|
171,182
|
|
Total
assets
|
$54,781,547
|
$113,473,201
|
|
|
|
|
|
Liabilities
and stockholders’ equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable
and accrued expenses
|
$15,267,668
|
$9,346,068
|
|
Accrued
compensation
|
1,389,516
|
818,472
|
|
|
152,381
|
152,381
|
|
|
68,875
|
211,549
|
|
Total current
liabilities
|
16,878,440
|
10,528,470
|
|
Deferred
rent
|
816,257
|
--
|
|
Deferred revenue,
net of current portion
|
1,219,048
|
1,371,429
|
|
Total
liabilities
|
18,913,745
|
11,899,899
|
|
Commitments and
contingencies
|
|
|
|
Stockholders’
equity:
|
|
|
|
Preferred stock,
$0.001 par value per share (10,000,000 shares authorized, none
issued and outstanding as of December 31, 2016 and
2015)
|
--
|
--
|
|
Common stock,
$0.001 par value per share (150,000,000 shares authorized,
56,820,423 and 54,095,110 shares issued, 56,779,114 and 54,053,801
shares outstanding at December 31, 2016 and 2015,
respectively)
|
56,820
|
54,095
|
|
Contingently
issuable shares
|
--
|
6
|
|
Additional paid-in
capital
|
272,432,139
|
259,887,464
|
|
Treasury stock, at
cost, 41,309 shares at December 31, 2016 and 2015
|
(234,337)
|
(234,337)
|
|
Accumulated
deficit
|
(236,386,820)
|
(158,133,926)
|
|
Total
stockholders’ equity
|
35,867,802
|
101,573,302
|
|
Total liabilities
and stockholders’ equity
|
$54,781,547
|
$113,473,201
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-2
TG Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Operations for the Years Ended December
31, 2016, 2015 and 2014
|
|
2016
|
2015
|
2014
|
|
|
|
|
|
|
License
revenue
|
$152,381
|
$152,381
|
$152,381
|
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
Research and
development:
|
|
|
|
|
Noncash stock
expense associated with in-licensing agreements
|
--
|
--
|
5,350,094
|
|
Noncash
compensation
|
2,742,354
|
4,261,406
|
8,731,566
|
|
Other
research and development
|
66,489,820
|
43,445,817
|
26,004,687
|
|
Total research and
development
|
69,232,174
|
47,707,223
|
40,086,347
|
|
|
|
|
|
|
General and
administrative:
|
|
|
|
|
Noncash
compensation
|
4,767,645
|
11,435,686
|
12,373,726
|
|
Other general and
administrative
|
5,121,690
|
4,189,488
|
3,413,400
|
|
Total general and
administrative
|
9,889,335
|
15,625,174
|
15,787,126
|
|
|
|
|
|
|
Total costs and
expenses
|
79,121,509
|
63,332,397
|
55,873,473
|
|
|
|
|
|
|
Operating
loss
|
(78,969,128)
|
(63,180,016)
|
(55,721,092)
|
|
|
|
|
|
|
Other (income)
expense:
|
|
|
|
|
Interest
income
|
(323,032)
|
(174,653)
|
(55,049)
|
|
Other (income)
expense
|
(393,202)
|
(56,717)
|
115,234
|
|
Total other
(income) expense, net
|
(716,234)
|
(231,370)
|
60,185
|
|
|
|
|
|
|
Net
loss
|
$(78,252,894)
|
$(62,948,646)
|
$(55,781,277)
|
|
|
|
|
|
|
Basic and diluted
net loss per common share
|
$(1.60)
|
$(1.38)
|
$(1.64)
|
|
|
|
|
|
|
Weighted average
shares used in computing basic and diluted net loss per common
share
|
49,041,354
|
45,646,414
|
34,068,926
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-3
TG Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity for the Years
Ended December 31, 2016, 2015 and 2014
|
|
Common Stock
|
Contingently
issuable
|
Additional
Paid-in
|
Treasury
Stock
|
Accumulated
|
|
||
|
|
Shares
|
Amount
|
Shares
|
Capital
|
Shares
|
Amount
|
Deficit
|
Total
|
|
Balance at January
1, 2014
|
34,336,235
|
$34,336
|
6
|
$79,658,490
|
41,309
|
$(234,337)
|
$39,404,003
|
$40,054,492
|
|
Issuance of common
stock in connection with exercise of warrants
|
1,560,826
|
1,561
|
|
3,555,063
|
|
|
|
3,556,624
|
|
Issuance of common
stock in connection with exercise of options
|
46,000
|
46
|
|
202,354
|
|
|
|
202,400
|
|
Issuance of
restricted stock
|
982,793
|
983
|
|
(983)
|
|
|
|
--
|
|
Forfeiture of
restricted stock
|
(1,000)
|
(1)
|
|
1
|
|
|
|
--
|
|
Issuance of common
stock in public offering (net of offering costs of
$1,344,440)
|
2,702,809
|
2,703
|
|
16,788,705
|
|
|
|
16,791,408
|
|
Issuance of common
stock in At the Market offering (net of offering costs of
$1,101,572)
|
4,850,055
|
4,850
|
|
48,818,002
|
|
|
|
48,822,852
|
|
Compensation in
respect of restricted stock and stock options granted to employees,
directors and consultants
|
|
|
|
21,105,292
|
|
|
|
21,105,292
|
|
Common stock
issued in connection with in-licensing agreements
|
496,530
|
496
|
|
5,349,597
|
|
|
|
5,350,093
|
|
Net
loss
|
|
|
|
|
|
|
(55,781,277)
|
(55,781,277)
|
|
Balance at
December 31, 2014
|
44,974,248
|
44,974
|
6
|
175,476,521
|
41,309
|
(234,337)
|
(95,185,280)
|
80,101,884
|
|
Issuance of common stock in
connection with exercise of warrants
|
2,946,703
|
2,946
|
|
1,064,393
|
|
|
|
1,067,339
|
|
Issuance of common
stock in connection with cashless exercise of warrants
|
2,915
|
3
|
|
(3)
|
|
|
|
--
|
|
Issuance of common
stock in connection with conversion of notes payable
|
522
|
1
|
|
6,924
|
|
|
|
6,925
|
|
Issuance of
restricted stock
|
1,992,535
|
1,993
|
|
(1,993)
|
|
|
|
--
|
|
Forfeiture of
restricted stock
|
(31,166)
|
(31)
|
|
31
|
|
|
|
--
|
|
Issuance of common
stock to related party for cash (See Note 9)
|
114,855
|
115
|
|
749,890
|
|
|
|
750,005
|
|
Issuance of common
stock in At-the-Market offering (net of offering costs of
$1,310,591)
|
4,094,498
|
4,094
|
|
66,894,609
|
|
|
|
66,898,703
|
|
Compensation in
respect of restricted stock granted to employees, directors and
consultants
|
|
|
|
15,697,092
|
|
|
|
15,697,092
|
|
Net
loss
|
|
|
|
|
|
|
(62,948,646)
|
(62,948,646)
|
|
Balance at
December 31, 2015
|
54,095,110
|
54,095
|
6
|
259,887,464
|
41,309
|
(234,337)
|
(158,133,926)
|
101,573,302
|
|
Issuance of common stock in
connection with exercise of warrants
|
273,370
|
273
|
|
617,969
|
|
|
|
618,242
|
|
Issuance of common
stock in connection with conversion of notes payable
|
3,710
|
4
|
|
33,013
|
|
|
|
33,017
|
|
Issuance of
restricted stock
|
1,924,639
|
1,925
|
|
(1,925)
|
|
|
|
--
|
|
Forfeiture of
restricted stock
|
(46,773)
|
(47)
|
|
47
|
|
|
|
--
|
|
Issuance of common
stock in At-the-Market offering (net of offering costs of
$108,185)
|
570,366
|
570
|
|
4,385,566
|
|
|
|
4,386,136
|
|
Compensation in
respect of restricted stock granted to employees, directors and
consultants
|
|
|
|
7,509,999
|
|
|
|
7,509,999
|
|
Adjustment to
contingently issuable shares
|
|
|
(6)
|
6
|
|
|
|
--
|
|
Net
loss
|
|
|
|
|
|
|
(78,252,894)
|
(78,252,894)
|
|
Balance at
December 31, 2016
|
56,820,422
|
$56,820
|
$--
|
$272,432,139
|
41,309
|
$(234,337)
|
$(236,386,820)
|
$35,867,802
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-4
TG Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows for the Years Ended December
31, 2016, 2015 and 2014
|
|
2016
|
2015
|
2014
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Consolidated net
loss
|
$(78,252,894)
|
$(62,948,646)
|
$(55,781,277)
|
|
Adjustments to
reconcile consolidated net loss to net cash used in operating
activities:
|
|
|
|
|
Gain on settlement
of notes payable
|
--
|
--
|
(95,427)
|
|
Gain on sale of
long-term securities
|
(33,042)
|
--
|
--
|
|
Noncash stock
compensation expense
|
7,509,999
|
15,697,092
|
21,105,292
|
|
Noncash stock
expense associated with in-licensing agreements
|
--
|
--
|
5,350,094
|
|
Depreciation
|
62,960
|
15,452
|
3,931
|
|
Amortization of
premium on investment securities
|
459,429
|
536,142
|
193,581
|
|
Change in fair
value of notes payable and accrued interest
|
(109,657)
|
(56,717)
|
210,661
|
|
Changes in assets
and liabilities:
|
|
|
|
|
Increase in
restricted cash
|
(4,065)
|
(4,131)
|
(575,012)
|
|
Decrease (increase)
in other current assets
|
3,564,316
|
(3,105,771)
|
(4,563,067)
|
|
Increase in
leasehold interest
|
(2,042,281)
|
--
|
--
|
|
Decrease (increase)
in accrued interest receivable
|
102,169
|
(100,505)
|
(58,347)
|
|
Increase in other
assets
|
(4,784)
|
(41,722)
|
--
|
|
Increase (decrease)
in accounts payable and accrued expenses
|
6,492,644
|
5,470,915
|
(603,377)
|
|
Decrease in
interest payable
|
--
|
--
|
(94,590)
|
|
Increase in
deferred rent
|
816,257
|
--
|
--
|
|
Decrease in
deferred revenue
|
(152,381)
|
(152,381)
|
(152,381)
|
|
Net cash used in
operating activities
|
(61,591,330)
|
(44,690,272)
|
(35,059,919)
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Purchases of
equipment
|
(343,985)
|
(42,217)
|
(18,570)
|
|
Investment in
held-to-maturity securities
|
(15,199,922)
|
(48,993,652)
|
(18,336,719)
|
|
Proceeds from
maturity of short-term securities
|
29,500,000
|
24,350,000
|
--
|
|
Proceeds from the
sale of long-term securities
|
12,589,219
|
--
|
--
|
|
Net cash provided
by (used in) investing activities
|
26,545,312
|
(24,685,869)
|
(18,355,289)
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds from the
exercise of warrants
|
618,242
|
1,067,339
|
3,556,624
|
|
Proceeds from the
exercise of options
|
--
|
--
|
202,400
|
|
Payment of notes
payable
|
--
|
--
|
(677,778)
|
|
Proceeds from sale
of common stock, net
|
4,411,233
|
67,760,517
|
65,614,260
|
|
Deferred financing
costs paid
|
(13,506)
|
(104,170)
|
(51,980)
|
|
Net cash provided
by financing activities
|
5,015,969
|
68,723,686
|
68,643,526
|
|
|
|
|
|
|
NET (DECREASE)
INCREASE IN CASH AND CASH EQUIVALENTS
|
(30,030,049)
|
(652,455)
|
15,228,318
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of year
|
55,061,329
|
55,713,784
|
40,485,466
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS AT END OF YEAR
|
$25,031,280
|
$55,061,329
|
$55,713,784
|
|
NONCASH
TRANSACTIONS
|
|
|
|
|
Reclassification
of deferred financing costs to additional paid-in
capital
|
$(25,097)
|
$(111,810)
|
--
|
|
Conversion of
convertible notes payable to common stock
|
$33,017
|
$6,924
|
--
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-5
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Unless the context requires otherwise, references in this report to
“TG,” “Company,” “we,”
“us” and “our” refer to TG Therapeutics,
Inc. and our subsidiaries.
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
DESCRIPTION OF BUSINESS
We are a biopharmaceutical company focused on the
acquisition, development and commercialization of novel treatments
for B-cell malignancies and autoimmune diseases. Currently, the
Company is developing two therapies targeting hematologic
malignancies. TG-1101 (ublituximab) is a novel, glycoengineered
monoclonal antibody that targets a specific and unique epitope on
the CD20 antigen found on mature B-lymphocytes. We are also
developing TGR-1202, an orally available PI3K delta inhibitor. The
delta isoform of PI3K is strongly expressed in cells of
hematopoietic origin and is believed to be important in the
proliferation and survival of B-lymphocytes. Both TG-1101 and
TGR-1202 are in clinical development for patients with hematologic
malignancies. The Company also has pre-clinical programs to develop
IRAK4 (interleukin-1 receptor-associated kinase 4) inhibitors, BET
(Bromodomain and Extra Terminal) inhibitors, and anti-PD-L1 and
anti-GITR antibodies.
We also
actively evaluate complementary products, technologies and
companies for in-licensing, partnership, acquisition and/or
investment opportunities. To date, we have not received approval
for the sale of any of our drug candidates in any market and,
therefore, have not generated any product sales from our drug
candidates.
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 December 31, 2016, we have an
accumulated deficit of $236.4 million.
Our
major sources of cash have been proceeds from the private placement
and public offering of equity securities. We have not yet
commercialized any of our drug candidates and cannot be sure if we
will ever be able to do so. Even if we commercialize one or more of
our drug candidates, we may not become profitable. Our ability to
achieve profitability depends on many factors, including our
ability to obtain regulatory approval for our drug candidates;
successfully 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
December 31, 2016, we had $45.0 million in cash and cash
equivalents, investment securities, and interest receivable. The
Company believes its cash, cash equivalents, investment securities,
and interest receivable on hand as of December 31, 2016 combined
with the additional capital raised in the first quarter of 2017
(see Note 13) will be sufficient to fund the Company’s
planned operations for approximately the next 24 months. 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 quoted on the Nasdaq
Capital Market and trades under the symbol
“TGTX.”
RECENTLY ISSUED ACCOUNTING STANDARDS
In
January 2017, the Financial Accounting Standards Board ("FASB")
issued Accounting Standards Update (“ASU”) No. 2017-04,
“Simplifying the Test for Goodwill Impairment”
(“ASU 2017-04”). ASU 2017-04 removes the requirement to
compare the implied fair value of goodwill with its carrying amount
as part of step 2 of the goodwill impairment test. As a result,
under ASU 2017-04, an entity should perform its annual, or interim,
goodwill impairment test by comparing the fair value of a reporting
unit with its carrying amount and should recognize an impairment
charge for the amount by which the carrying amount exceeds the
reporting unit’s fair value; however, the loss recognized
should not exceed the total amount of goodwill allocated to that
reporting unit. In addition, ASU 2017-04:
●
Clarifies
the requirements for excluding and allocating foreign currency
translation adjustments to reporting units in connection with an
entity’s testing of reporting units for goodwill
impairment.
●
Clarifies
that an entity should consider income tax effects from any tax
deductible goodwill on the carrying amount of the reporting unit
when measuring the goodwill impairment loss, if
applicable.
●
Makes
minor changes to the overview and background sections of certain
Accounting Standards Codification (“ASC” or
“Codification”) subtopics and topics as part of the
Board’s initiative to unify and improve those sections
throughout the Codification.
ASU
2017-04 is effective prospectively for annual and interim periods
beginning on or after December 15, 2019, and early adoption is
permitted on testing dates after January 1, 2017. We are currently
evaluating the impact the adoption of ASU 2017-04 will have on our
consolidated financial statements.
F-6
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In
November 2016, the FASB issued ASU 2016-18, “Restricted Cash
– a consensus of the FASB Emerging Issues Task Force”
(“ASU 2016-18”). ASU 2016-18 amends ASC 230 to add or
clarify guidance on the classification and presentation of
restricted cash in the statement of cash flows. Key requirements of
the ASU are as follows:
●
An
entity should include in its cash and cash-equivalent balances in
the statement of cash flows those amounts that are deemed to be
restricted cash and restricted cash equivalents. The ASU does not
define the terms “restricted cash” and
“restricted cash equivalents” but states that an entity
should continue to provide appropriate disclosures about its
accounting policies pertaining to restricted cash in accordance
with other GAAP. The ASU also states that any change in accounting
policy will need to be assessed under ASC 250.
●
A
reconciliation between the statement of financial position and the
statement of cash flows must be disclosed when the statement of
financial position includes more than one line item for cash, cash
equivalents, restricted cash, and restricted cash
equivalents.
●
Changes
in restricted cash and restricted cash equivalents that result from
transfers between cash, cash equivalents, and restricted cash and
restricted cash equivalents should not be presented as cash flow
activities in the statement of cash flows.
●
An
entity with a material balance of amounts generally described as
restricted cash and restricted cash equivalents must disclose
information about the nature of the restrictions.
ASU
2016-18 is effective for annual and interim periods beginning after
December 15, 2017, and early adoption is permitted for all
entities. We are currently evaluating the impact the adoption of
ASU 2016-18 will have on our consolidated financial
statements.
In
August 2016, the FASB issued ASU No. 2016-15, “Classification
of Certain Cash Receipts and Cash Payments” (“ASU
2016-15”). ASU 2016-15 amends the guidance in ASC 230 on the
classification of certain cash receipts and payments in the
statement of cash flows. The primary purpose of ASU 2016-15 is to
reduce the diversity in practice that has resulted from the lack of
consistent principles on this topic. The amendments in ASU 2016-15
add or clarify guidance on eight cash flow issues:
●
Debt
prepayment or debt extinguishment costs.
●
Settlement
of zero-coupon debt instruments or other debt instruments with
coupon interest rates that are insignificant in relation to the
effective interest rate of the borrowing.
●
Contingent
consideration payments made after a business
combination.
●
Proceeds
from the settlement of insurance claims.
●
Proceeds
from the settlement of corporate-owned life insurance policies,
including bank-owned life insurance policies.
●
Distributions
received from equity method investees.
●
Beneficial
interests in securitization transactions.
●
Separately
identifiable cash flows and application of the predominance
principle.
ASU
2016-15 is effective for annual and interim periods beginning after
December 15, 2017, and early adoption is permitted for all
entities. Entities must apply the guidance retrospectively to all
periods presented but may apply it prospectively from the earliest
date practicable if retrospective application would be
impracticable. The provisions of this standard are not expected to
significantly impact the Company.
F-7
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In
May 2016, the FASB issued ASU No. 2016-11, “Rescission of SEC
Guidance Because of Accounting Standards Update 2014-09 and 2014-16
Pursuant to Staff Announcements at the March 3, 2016 EITF
Meeting” (“ASU 2016-11”). ASU 2016-11 rescinds
certain SEC guidance from the FASB Codification in response to
announcements made by the SEC staff at the Emerging Issues Task
Force’s March 3, 2016 meeting. Specifically, ASU 2016-11
supersedes SEC observer comments on the following
topics:
●
Upon
the adoption of ASU 2014-09:
o
Revenue
and expense recognition for freight services in process (ASC
605-20-S99-2)
o
Accounting
for shipping and handling fees and costs (ASC
605-45-S99-1)
o
Accounting
for consideration given by a vendor to a customer (ASC
605-50-S99-1)
o
Accounting
for gas-balancing arrangements (ASC 932-10-S99-5)
●
Upon
the adoption of ASU 2014-16:
o
Determining
the nature of a host contract related to a hybrid financial
instrument issued in the form of a share under ASC 815 (ASC
815-10-S99-3).
ASU
2016-11 is effective upon the adoption of ASU 2014-09 and ASU
2014-16. The adoption of ASU 2016-11 is not expected to have a
material impact on the Company’s consolidated financial
statements.
In
March 2016, the FASB issued ASU No. 2016-09, “Simplifying the
Accounting for Share-Based Payments” (“ASU
2016-09”). ASU 2016-09 simplifies several aspects of the
accounting for employee share-based payment transactions for both
public and nonpublic entities, including the accounting for income
taxes, forfeitures, and statutory tax withholding requirements, as
well as classification in the statement of cash flows. ASU 2016-09
is effective for annual reporting periods beginning after December
15, 2016, including interim periods within those annual reporting
periods. The provisions of this standard are not expected to
significantly impact the Company.
In
February 2016, the FASB issued ASU No. 2016-02, “Leases
(Topic 842),” which requires lessees to recognize assets and
liabilities for the rights and obligations created by most leases
on their balance sheet. The guidance is effective for fiscal years
beginning after December 15, 2018, including interim periods within
those fiscal years. Early application is permitted. ASU 2016-02
requires modified retrospective adoption for all leases existing
at, or entered into after, the date of initial application, with an
option to use certain transition relief. The Company is currently
evaluating the impact the standard may have on its consolidated
financial statements and related disclosures.
In
August 2014, the FASB issued ASU No. 2014-15, “Presentation
of Financial Statements - Going Concern (Subtopic 205-40)”,
which will require management to assess an entity’s ability
to continue as a going concern at each annual and interim period.
Related footnote disclosures will be required if conditions give
rise to substantial doubt about an entity’s ability to
continue as a going concern within one year of the report issuance
date. If conditions do not give rise to substantial doubt, no
disclosures will be required specific to going concern
uncertainties. The guidance defines substantial doubt using a
likelihood threshold of “probable” similar to the
current use of that term in U.S. GAAP for loss contingencies and
provides example indicators. The guidance is effective for
reporting periods ending after December 15, 2016, and early
adoption is permitted. Therefore, the Company has adopted this new
standard on December 15, 2016. The adoption of this standard did
not have a material impact on our consolidated financial statements
as of December 31, 2016.
Other
pronouncements issued by the FASB or other authoritative accounting
standards group with future effective dates are either not
applicable or not significant to our consolidated financial
statements.
F-8
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
USE OF ESTIMATES
The
preparation of financial statements in conformity with U.S.
generally accepted accounting principles (“GAAP”)
requires management to make estimates and judgments that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the applicable reporting period. Actual results could differ from
those estimates. Such differences could be material to the
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
December 31, 2016, we have approximately $0.6 million of restricted
cash pledged to secure a line of
credit as a security deposit for an Office Agreement (see Note
9).
INVESTMENT SECURITIES
Investment
securities at December 31, 2016 consist of short-term government
securities and at December 31, 2015 consist of short-term and
long-term government securities. We classify these securities as
held-to-maturity. Held-to-maturity securities are those securities
in which we have the ability and intent to hold the security until
maturity. Held-to-maturity securities are recorded at amortized
cost, adjusted for the amortization or accretion of premiums or
discounts. Premiums and discounts are amortized or accreted over
the life of the related held-to-maturity security as an adjustment
to yield using the effective interest method.
A
decline in the market value of any investment security below cost,
that is deemed to be other than temporary, results in a reduction
in the carrying amount to fair value. The impairment is charged to
operations and a new cost basis for the security is established.
Other-than-temporary impairment charges 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.
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 with high-credit quality financial institutions. At
times, such amounts may exceed federally-insured
limits.
REVENUE RECOGNITION
We
recognize license revenue in accordance with the revenue
recognition guidance of the FASB Accounting Standards Codification,
or Codification. We analyze each element of our licensing agreement
to determine the appropriate revenue recognition. The terms of the
license agreement may include payments to us of non-refundable
up-front license fees, milestone payments if specified objectives
are achieved, and/or royalties on product sales. We recognize
revenue from upfront payments over the period of significant
involvement under the related agreements unless the fee is in
exchange for products delivered or services rendered that represent
the culmination of a separate earnings process and no further
performance obligation exists under the contract. We recognize
milestone payments as revenue upon the achievement of specified
milestones only if (1) the milestone payment is
non-refundable, (2) substantive effort is involved in
achieving the milestone, (3) the amount of the milestone is
reasonable in relation to the effort expended or the risk
associated with achievement of the milestone, and (4) the
milestone is at risk for both parties. If any of these conditions
are not met, we defer the milestone payment and recognize it as
revenue over the estimated period of performance under the
contract.
F-9
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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 consolidated balance sheets
includes, among other things, certain fees related to development
and manufacturing services. These development and manufacturing
agreements often require payments in advance of services performed
or goods received. Accordingly, as of December 31, 2016 and 2015,
we recorded approximately $5.7 million and $9.2 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. 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.
STOCK-BASED COMPENSATION
We
recognize all share-based payments to employees and non-employee
directors (as compensation for service) as noncash compensation
expense in the consolidated financial statements based on the fair
values of such payments. Stock-based compensation expense
recognized each period is based on the value of the portion of
share-based payment awards that is ultimately expected to vest
during the period. Forfeitures are estimated at the time of grant
and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.
F-10
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For
share-based payments to consultants and other third-parties
(including related parties), noncash compensation expense is
determined at the “measurement date.” The expense is
recognized over the vesting period of the award. Until the
measurement date is reached, the total amount of compensation
expense remains uncertain. We record compensation expense based on
the fair value of the award at the reporting date. The awards to
consultants and other third-parties (including related parties) are
then revalued, or the total compensation is recalculated based on
the then current fair value, at each subsequent reporting
date.
In
addition, because some of the options, restricted stock and
warrants issued to employees, consultants and other third-parties
vest upon achievement of certain milestones, the total expense is
uncertain. Compensation expense for such awards that vest upon the
achievement of milestones is recognized when the achievement of
such milestone becomes probable.
BASIC AND DILUTED NET LOSS PER COMMON SHARE
Basic
net loss per common share is calculated by dividing net loss
applicable to common shares by the weighted-average number of
common shares outstanding for the period. Diluted net loss per
common share is the same as basic net loss per common share, since
potentially dilutive securities from stock options, stock warrants
and convertible notes would have an antidilutive effect either
because the Company incurred a net loss during the period presented
or because such potentially dilutive securities were out of the
money and the Company realized net income during the period
presented. The amounts of potentially dilutive securities excluded
from the calculation were 8,033,779, 7,064,396 and 8,890,796 at
December 31, 2016, 2015 and 2014, respectively. During the years
ended December 31, 2016, 2015 and 2014 the Company incurred a net
loss, therefore, all of the securities are antidilutive and
excluded from the computation of diluted loss per
share.
|
|
December 31,
|
||
|
|
2016
|
2015
|
2014
|
|
Unvested
restricted stock
|
7,142,055
|
5,859,914
|
4,725,001
|
|
Warrants
|
876,912
|
1,186,749
|
4,148,228
|
|
Shares
issuable upon note conversion
|
14,812
|
17,733
|
17,373
|
|
Options
|
--
|
--
|
194
|
|
Total
|
8,033,779
|
7,064,396
|
8,890,796
|
LONG-LIVED ASSETS AND GOODWILL
Long-lived
assets are reviewed for an impairment loss 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, a triggering event, exists 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 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.
F-11
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 2 – CASH AND CASH EQUIVALENTS
The
following tables summarize our cash and cash equivalents at
December 31, 2016 and 2015:
|
|
December
31, 2016
|
December
31, 2015
|
|
|
|
|
|
Money market
funds
|
$20,978,947
|
$8,265,583
|
|
Checking and bank
deposits
|
4,052,333
|
46,795,746
|
|
Total
|
$25,031,280
|
$55,061,329
|
NOTE 3 – INVESTMENT SECURITIES
Our investments as of December 31, 2016 and 2015
are classified as held-to-maturity. Held-to-maturity investments
are recorded at amortized cost. During the year ended December 31,
2016, we liquidated our long-term investment securities with a net
carrying amount of approximately $12.6 million, realizing a gain of
approximately $33,000 on the sale. The decision to sell our
long-term securities was made due to market rate conditions on
long-term securities coupled with the recognized gain we were able
to yield on the sale of the securities.
The
following tables summarize our investment securities at December
31, 2016 and 2015:
|
|
December
31, 2016
|
|||
|
|
Amortized
cost, as adjusted
|
Gross
unrealized holding gains
|
Gross
unrealized holding losses
|
Estimated
fair value
|
|
Short-term
investments:
|
|
|
|
|
|
Obligations of
domestic governmental agencies (maturing between February 2017 and
September 2017) (held-to-maturity)
|
$19,853,860
|
$3,270
|
$2,492
|
$19,854,638
|
|
Total
short-term investment securities
|
$19,853,860
|
$3,270
|
$2,492
|
$19,854,638
|
|
|
December
31, 2015
|
|||
|
|
Amortized
cost, as adjusted
|
Gross
unrealized holding gains
|
Gross
unrealized holding losses
|
Estimated
fair value
|
|
Short-term
investments:
|
|
|
|
|
|
Obligations of
domestic governmental agencies (maturing between January 2016 and
December 2016) (held-to-maturity)
|
$22,166,512
|
$--
|
$22,822
|
$22,143,690
|
|
|
|
|
|
|
|
Long-term
investments:
|
|
|
|
|
|
Obligations of
domestic governmental agencies (maturing between January 2017 and
December 2017) (held-to-maturity)
|
25,003,032
|
--
|
85,846
|
24,917,186
|
|
Total
short-term and long-term investment securities
|
$47,169,544
|
$--
|
$108,668
|
$47,060,876
|
|
|
|
|
|
|
|
|
||||
NOTE 4 –
FAIR VALUE MEASUREMENTS
We
measure certain financial assets and liabilities at fair value on a
recurring basis in the 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.
F-12
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
As of
December 31, 2016 and 2015, the fair values of cash and cash
equivalents, restricted cash, and notes and interest payable
approximate their carrying value.
At the time of our merger (we were then known as Manhattan
Pharmaceuticals, Inc. (“Manhattan”)) 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 including accrued and unpaid interest of the 5% Notes was
approximately $16.7 million at December 31, 2016 and $19.9 million
at December 31, 2015. No payments have been made on the 5%
Notes as of December 31, 2016.
In
December 2011, we elected the fair value option for valuing the 5%
Notes. The fair value option was elected in order to reflect in our
financial statements the assumptions that market participants use
in evaluating these financial instruments.
As of
December 31, 2013, as a result of expiring intellectual property
rights and other factors, it was determined that net product cash
flows from AST-726 were unlikely. As we have no other obligations
under the 5% Notes aside from the net product cash flows and the
conversion feature, the conversion feature was used to estimate the
5% Notes’ fair value as of December 31, 2016 and 2015. The
assumptions, assessments and projections of future revenues are
subject to uncertainties, difficult to predict, and require
significant judgment. The use of different assumptions, applying
different judgment to inherently subjective matters and changes in
future market conditions could result in significantly different
estimates of fair value and the differences could be material to
our consolidated financial statements.
The
following tables provide the fair value measurements of applicable
financial liabilities as of December 31, 2016 and
2015:
|
|
Financial
liabilities at fair value as of December 31, 2016
|
|||
|
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
|
|
|
|
|
|
5%
Notes
|
$--
|
$--
|
$68,875
|
$68,875
|
|
Totals
|
$--
|
$--
|
$68,875
|
$68,875
|
|
|
Financial
liabilities at fair value as of December 31, 2015
|
|||
|
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
|
|
|
|
|
|
5%
Notes
|
$--
|
$--
|
$211,549
|
$211,549
|
|
Totals
|
$--
|
$--
|
$211,549
|
$211,549
|
The
Level 3 amounts above represent the fair value of the 5% Notes and
related accrued interest.
F-13
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The
following table summarizes the changes in Level 3 instruments for
the years ended December 31, 2015 and 2016:
|
Balance at January
1, 2015
|
$275,190
|
|
Interest
accrued on face value of 5% Notes
|
972,736
|
|
Conversion
of 5% Notes
|
(6,924)
|
|
Change
in fair value of Level 3 liabilities
|
(1,029,453)
|
|
Balance at December
31, 2015
|
211,549
|
|
Interest
accrued on face value of 5% Notes
|
886,084
|
|
Conversion
of 5% Notes
|
(33,017)
|
|
Change
in fair value of Level 3 liabilities
|
(995,741)
|
|
Balance at December
31, 2016
|
$68,875
|
The
change in the fair value of the Level 3 liabilities is reported in
other (income) expense in the accompanying 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, the Company 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.
Stockholder Rights Plan
On
July 18, 2014, we adopted a stockholder rights plan. The
stockholder rights plan is embodied in the Stockholder Protection
Rights Agreement dated as of July 18, 2014 (the "Rights
Agreement"), between us and American Stock Transfer & Trust
Company, LLC, as rights agent (the "Rights Agent").
Accordingly,
the Board of Directors declared a distribution of one right (a
“Right”) for each outstanding share of common stock, to
stockholders of record at the close of business on July 28, 2014,
for each share of common stock issued (including shares distributed
from treasury) by us thereafter and prior to the Separation Time
(as defined in the Rights Agreement), and for certain shares of
common stock issued after the Separation Time. Following the
Separation Time, each Right entitles the registered holder to
purchase from us one one-thousandth (1/1,000) of a share of Series
A Junior Participating Preferred Stock, par value $0.001 per share
(the "Preferred Stock"), at a purchase price of $100.00 (the
"Exercise Price"), subject to adjustment. The description and terms
of the Rights are set forth in the Rights Agreement. Each one
one-thousandth of a share of Preferred Stock has substantially the
same rights as one share of common stock. Subject to the terms and
conditions of the Rights Agreement, Rights become exercisable ten
days after the public announcement that a “Person” has
become an “Acquiring Person” (as each such term is
defined in the Rights Agreement). Any Rights held by an Acquiring
Person are void and may not be exercised.
If
a Person becomes an Acquiring Person, all holders of Rights, except
the Acquiring Person, may purchase at the Right’s
then-current exercise price, common stock having a market value
equal to twice the exercise price. Moreover, at any time after a
Person becomes an Acquiring Person (unless such Person acquires 50
percent or more of our common stock then outstanding, as more fully
described in the Rights Agreement), the Board of Directors may
exchange all (but not less than all) of the then outstanding Rights
(other than rights owned by such Person, which would have become
void) for shares of common stock at an exchange ratio of one share
of common stock per Right, appropriately adjusted in order to
protect the interests of holders of Rights.
F-14
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The
Rights Agreement was approved by our Board of Directors on July 18,
2014. The Rights will expire at the close of business on its ten
year anniversary, unless earlier exchanged or terminated by
us.
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 June 21, 2013, we entered into an At-the-Market Issuance Sales
Agreement (the "2013 ATM") with MLV & Co. LLC ("MLV") under
which we could issue and sell shares of our common stock, having an
aggregate offering price of up to $50.0 million, from time to time
through MLV, acting as the sales agent. Under the agreement we
would pay MLV a commission rate of up to 3.0% of the gross proceeds
from the sale of any shares of common stock sold through
MLV.
During the year ended December 31, 2014, we sold a total of
4,850,055 shares of common stock under the 2013 ATM for aggregate
total gross proceeds of approximately $50.0 million at an average
selling price of $10.31 per share. Net proceeds were approximately
$48.9 million after deducting commissions and other transactions
costs.
In
December 2014, we filed a shelf registration statement on Form S-3
(the "2015 S-3"), which was declared effective in January 2015.
Under the 2015 S-3, the Company may sell up to a total of $250
million of its securities. In connection with the 2015 S-3, we
amended our 2013 At-the-Market Issuance Sales Agreement with MLV
(the "2015 ATM") such that we may issue and sell additional shares
of our common stock, having an aggregate offering price of up to
$175.0 million, from time to time through MLV and FBR Capital
Markets & Co. ("FBR", each of MLV and FBR individually an
"Agent" and collectively the "Agents"), acting as the sales agents.
Under the 2015 ATM we pay the Agents a commission rate of up to
3.0% of the gross proceeds from the sale of any shares of common
stock sold through the Agents.
During the year ended December 31, 2016, we sold a total of 570,366
shares of common stock under the 2015 ATM for aggregate total gross
proceeds of approximately $4.5 million at an average selling price
of $7.88 per share, resulting in net proceeds of approximately $4.4
million after deducting commissions and other transaction costs.
During the year ended December 31, 2015, we sold a total of
4,094,498 shares of common stock under the 2015 ATM for aggregate
total gross proceeds of approximately $68.2 million at an average
selling price of $16.66 per share, resulting in net proceeds of
approximately $67.0 million after deducting commissions and other
transaction costs.
The
2015 S-3 is currently our only active shelf registration statement.
After deducting shares already sold, including under the 2015 ATM,
there is approximately $177.3 million of common stock that remains
available for sale under the 2015 S-3. We may offer the securities
under the 2015 S-3 from time to time in response to market
conditions or other circumstances if we believe such a plan of
financing is in the best interests of our stockholders. We believe
that the 2015 S-3 provides us with the flexibility to raise
additional capital to finance our operations as
needed.
Treasury Stock
As
of December 31, 2016 and 2015, 41,309 shares of common stock are
being held in Treasury, at a cost of approximately $234,000,
representing the fair market value on the date the shares were
surrendered to the Company to satisfy employee tax
obligations.
Equity Incentive Plans
The TG Therapeutics, Inc. Amended
and Restated 2012 Incentive Plan (“2012 Incentive
Plan”) was approved by stockholders in June 2015. As of
December 31, 2016 and 2015, no options were outstanding and up to
an additional 2,286,764 shares may be issued under the 2012
Incentive Plan.
F-15
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Stock Options
The
following table summarizes stock option activity for the years
ended December 31, 2016, 2015 and 2014:
|
|
Number
of
shares
|
Weighted-
average
exercise
price
|
Weighted-
average
contractual
term
|
Aggregate
intrinsic value
|
|
|
|
|
(in
years)
|
|
|
Outstanding at
January 1, 2014
|
46,591
|
$46.37
|
8.50
|
$--
|
|
Granted
|
--
|
--
|
|
|
|
Exercised
|
(46,000)
|
4.40
|
|
|
|
Forfeited
|
--
|
--
|
|
|
|
Expired
|
(397)
|
4,457.57
|
|
|
|
Outstanding at
December 31, 2014
|
194
|
971.70
|
3.50
|
$--
|
|
Granted
|
--
|
--
|
|
|
|
Exercised
|
--
|
--
|
|
|
|
Forfeited
|
(152)
|
463.32
|
|
|
|
Expired
|
(42)
|
2,811.53
|
|
|
|
Outstanding at
December 31, 2015
|
--
|
--
|
--
|
$--
|
|
Granted
|
--
|
--
|
|
|
|
Exercised
|
--
|
--
|
|
|
|
Forfeited
|
--
|
--
|
|
|
|
Expired
|
--
|
--
|
|
|
|
Outstanding at
December 31, 2016
|
--
|
$--
|
--
|
$--
|
|
|
|
|
|
|
|
Exercisable at
December 31, 2016
|
--
|
$--
|
--
|
$--
|
|
|
|
|
|
|
As of
December 31, 2016, there are no unvested option awards and no
unrecognized compensation cost related to option
awards.
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 years ended December 31, 2016, 2015 and
2014:
|
|
Number
of Shares
|
Weighted
Average Grant Date Fair Value
|
|
Outstanding at
January 1, 2014
|
7,034,957
|
$4.60
|
|
Granted
|
982,793
|
13.55
|
|
Vested
|
(1,616,749)
|
6.53
|
|
Forfeited
|
(1,000)
|
6.60
|
|
Outstanding at
December 31, 2014
|
6,400,001
|
5.86
|
|
Granted
|
1,992,535
|
12.89
|
|
Vested
|
(1,001,455)
|
5.04
|
|
Forfeited
|
(31,166)
|
16.76
|
|
Outstanding at
December 31, 2015
|
7,359,915
|
7.83
|
|
Granted
|
1,924,639
|
4.99
|
|
Vested
|
(595,726)
|
7.38
|
|
Forfeited
|
(46,773)
|
10.34
|
|
Outstanding at
December 31, 2016
|
8,642,055
|
$7.20
|
|
|
|
|
F-16
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Total
expense associated with restricted stock grants was $7,509,999,
$15,697,092 and $20,726,512 during the years ended December 31,
2016, 2015 and 2014, respectively. As of December 31, 2016, there
was approximately $18.8 million of total unrecognized compensation
cost related to unvested time-based restricted stock, which is
expected to be recognized over a weighted-average period of 1.6
years. This amount does not include, as of December 31, 2016,
696,172 shares of restricted stock outstanding which are
milestone-based and vest upon certain corporate milestones; and
2,477,958 shares of restricted stock outstanding issued to
non-employees. Milestone-based
non-cash compensation expense will be measured and recorded if and
when a milestone becomes probable. The expense for
non-employee shares is determined at the “measurement
date.” The expense is recognized over the vesting period of
the award. Until the measurement date is reached, the total amount
of compensation expense remains uncertain. We record compensation
expense based on the fair value of the award at the reporting
date.
Warrants
The
following table summarizes warrant activity for the years ended
December 31, 2016, 2015 and 2014:
|
|
Warrants
|
Weighted-
average
exercise
price
|
Aggregate
intrinsic value
|
|
Outstanding at
January 1, 2014
|
5,718,947
|
$1.34
|
$14,809,030
|
|
Issued
|
--
|
--
|
|
|
Exercised
|
(1,560,826)
|
2.28
|
|
|
Expired
|
(9,893)
|
20.74
|
|
|
Outstanding at
December 31, 2014
|
4,148,228
|
0.94
|
$61,792,184
|
|
Issued
|
--
|
--
|
|
|
Exercised
|
(2,950,115)
|
0.36
|
|
|
Expired
|
(11,364)
|
2.25
|
|
|
Outstanding at
December 31, 2015
|
1,186,749
|
2.37
|
$11,341,452
|
|
Issued
|
--
|
--
|
|
|
Exercised
|
(273,370)
|
2.26
|
|
|
Expired
|
(36,467)
|
2.25
|
|
|
Outstanding at
December 31, 2016
|
876,912
|
$2.41
|
$1,961,403
|
|
|
|
|
|
Stock-Based Compensation
The
fair value of stock options granted is estimated at the date of
grant using the Black-Scholes pricing model. The expected term of
options granted is derived from historical data and the expected
vesting period. Expected volatility is based on the historical
volatility of our common stock. The risk-free interest rate is
based on the U.S. Treasury yield for a period consistent with the
expected term of the option in effect at the time of the grant. We
have assumed no expected dividend yield, as dividends have never
been paid to stock or option holders and will not be paid for the
foreseeable future. The Company did not grant any stock options
during the years ended December 31, 2016, 2015 and
2014.
The
following table summarizes stock-based compensation expense
information about stock options and restricted stock for the years
ended December 31, 2016, 2015 and 2014:
|
|
2016
|
2015
|
2014
|
|
Stock-based
compensation expense associated with restricted stock
|
$7,509,999
|
$15,697,092
|
$20,726,512
|
|
Stock-based
compensation expense associated with stock options
|
--
|
--
|
378,780
|
|
|
$7,509,999
|
$15,697,092
|
$21,105,292
|
F-17
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 6 – NOTES PAYABLE
The
following is a summary of notes payable:
|
|
December
31, 2016
|
December
31, 2015
|
||||
|
|
Current
portion, net
|
Non-current
portion, net
|
Total
|
Current
portion, net
|
Non-current
portion, net
|
Total
|
|
Convertible 5%
Notes Payable
|
$68,875
|
$-
|
$68,875
|
$211,549
|
$-
|
$211,549
|
|
Totals
|
$68,875
|
$-
|
$68,875
|
$211,549
|
$-
|
$211,549
|
Convertible 5% Notes Payable
The 5% Notes and accrued and unpaid interest
thereon are convertible at the option of the holder into common
stock at the conversion price of $1,125 per share.
We
have no obligation under the 5% Notes aside from (a) 50% of the net
product cash flows from Ariston’s product candidates, if any,
payable to noteholders; and (b) the conversion feature, discussed
above. Interest accrues
monthly, is added to principal on an annual basis, every March 8,
and is payable at maturity, which was March 8, 2015 (see Note 4 for
further details).
The cumulative
liability including accrued and unpaid interest of these notes was
approximately $16.7 million at December 31, 2016 and $19.9 million
at December 31, 2015. No payments have been made on the 5%
Notes as of December 31,
2016.
In
December 2011, we elected the fair value option for valuing the 5%
Notes. The fair value option was elected in order to reflect in our
financial statements the assumptions that market participants use
in evaluating these financial instruments (see Note 4 for further
details).
NOTE 7 – INCOME TAXES
We
account for income taxes under the asset and liability method.
Deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax basis of assets
and liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. A valuation allowance is established when necessary to
reduce deferred tax assets to the amount expected to be realized.
In determining the need for a valuation allowance, management
reviews both positive and negative evidence, including current and
historical results of operations, future income projections and the
overall prospects of our business. Based upon management's
assessment of all available evidence, we believe that it is
more-likely-than-not that the deferred tax assets will not be
realizable, and therefore, a valuation allowance has been
established. The valuation allowance for deferred tax assets was
approximately $116,172,000 and $86,359,000 as of December 31, 2016
and 2015, respectively.
As of
December 31, 2016, we have U.S. net operating loss carryforwards
('NOLs") of approximately $271,828,000 and research and development
credit carryforwards (?R&D credits?) of approximately
$7,327,000. For income tax purposes, these NOLs and R&D credits
will expire in various amounts through 2036. The Tax Reform Act of
1986 contains provisions which limit the ability to utilize net
operating loss carryforwards and R&D credit carryforwards in
the case of certain events including significant changes in
ownership interests. The Exchange Transaction with TG Bio may have
resulted in a "change in ownership" as defined by IRC Section 382
of the Internal Revenue Code of 1986, as amended. Additionally,
stock issuance activities may have resulted in a "change in
ownership" as defined by IRC Section 382 of the Internal Revenue
Code of 1986, as amended. Accordingly, a substantial portion of the
Company's NOLs above may be subject to annual limitations in
reducing any future year's taxable income, and a substantial
portion of the R&D Credit carryforwards may be subject to
annual limitations in reducing any future year's tax.
F-18
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The tax
effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 2016 and 2015 are presented below.
|
|
2016
|
2015
|
|
Deferred tax assets
(liabilities):
|
|
|
|
Net operating loss
carryforwards
|
$95,329,928
|
$68,700,379
|
|
Research and
development credit
|
7,326,715
|
4,962,298
|
|
Noncash
compensation
|
12,915,672
|
12,087,968
|
|
Other
|
599,514
|
608,205
|
|
Deferred tax asset,
excluding valuation allowance
|
116,171,829
|
86,358,850
|
|
|
|
|
|
Less valuation
allowance
|
(116,171,829)
|
(86,358,850)
|
|
Net deferred tax
assets
|
$--
|
$--
|
There
was no current or deferred income tax expense for the year ended
December 31, 2016. Income tax expense differed from amounts
computed by applying the US Federal income tax rate of 34% to
pretax loss as follows:
|
|
For
the year ended December 31,
|
||
|
|
2016
|
2015
|
2014
|
|
|
|
|
|
|
Loss before income
taxes, as reported in the consolidated statements of
operations
|
$(78,252,894)
|
$(62,948,646)
|
$(55,781,277)
|
|
|
|
|
|
|
Computed
“expected” tax benefit
|
$(26,605,984)
|
$(21,402,540)
|
$(18,965,634)
|
|
|
|
|
|
|
Increase (decrease)
in income taxes resulting from:
|
|
|
|
|
Expected
benefit from state and local taxes
|
(835,072)
|
(672,306)
|
(2,533,156)
|
|
Research
and development credits
|
(2,364,417)
|
(1,603,364)
|
(1,092,767)
|
|
Other
|
(7,506)
|
566,310
|
35,459
|
|
Permanent
difference related to contingent note payable
|
--
|
--
|
(244,814)
|
|
Impact
of change in state tax rates on deferred taxes
|
--
|
5,836,819
|
--
|
|
Change
in the balance of the valuation allowance for deferred tax
assets
|
29,812,979
|
17,275,081
|
22,800,912
|
|
|
$--
|
$--
|
$--
|
We file
income tax returns in the U.S Federal and various state and local
jurisdictions. With certain exceptions, the Company is no longer
subject to U.S. Federal and state income tax examinations by tax
authorities for years prior to 2013. However, NOLs and tax credits
generated from those prior years could still be adjusted upon
audit.
The
Company would recognize interest and penalties, if any, to
uncertain tax position in income tax expense in the statement of
operations. There was no accrual for interest and penalties related
to uncertain tax positions for 2016. We do not believe that
there will be a material change in our unrecognized tax positions
over the next twelve months. All of the unrecognized tax
benefits, if recognized, would be offset by the valuation
allowance.
NOTE 8 – LICENSE AGREEMENTS
BET
In May
2016, as part of a broader agreement with Jubilant Biosys
(“Jubilant”), an India-based biotechnology company, we
entered into a sub-license agreement (“JBET Agreement”)
with Checkpoint Therapeutics, Inc. (“Checkpoint”) (see
Note 9), for the development and commercialization of
Jubilant’s novel BET inhibitor program in the field of
hematological malignancies.
F-19
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Under
the terms of the agreement, we paid Checkpoint an up-front
licensing fee of $1.0 million and will make additional payments
contingent on certain preclinical, clinical, and regulatory
milestones, including commercial milestones totaling up to
approximately $177 million and a single-digit royalty on net sales.
TG will also provide funding to support certain targeted research
efforts at Jubilant.
Anti-PD-L1 and anti-GITR
On
March 3, 2015, we entered into a Global Collaboration Agreement
(the “Collaboration”) with Checkpoint, a subsidiary of
Fortress Biotech, Inc. (“FBIO”), a related party, for
the development and commercialization of Checkpoint’s
anti-PD-L1 and anti-GITR antibody research programs in the field of
hematological malignancies. Checkpoint retains the rights to
develop and commercialize these antibodies in solid
tumors.
Under
the terms of the Collaboration, we made an up-front payment of $0.5
million, will make development and sales-based milestone payments
up to an aggregate of $164 million, and will pay a tiered single
digit royalty on net sales. The royalty term will terminate on a
country by country basis upon the later of (i) ten years after the
first commercial sale of any applicable licensed product in such
country, or (ii) the expiration of the last-to-expire patent held
by the Dana Farber Cancer Institute containing a valid claim to any
licensed product in such country.
Michael
Weiss, our Executive Chairman, CEO and President is also the
Executive Vice Chairman of FBIO and the Executive Chairman of
Checkpoint (see Note 9).
TGR-1202
On
September 22, 2014, we exercised our option to license the global
rights to TGR-1202, thereby entering into an exclusive licensing
agreement (the “TGR-1202 License”) with Rhizen
Pharmaceuticals, SA (“Rhizen”) for the development and
commercialization of TGR-1202. Prior to this, we had been jointly
developing TGR-1202 in a 50:50 joint venture with
Rhizen.
Under
the terms of the TGR-1202 License, Rhizen received a $4.0 million
cash payment and 371,530 shares of our common stock as an upfront
license fee. With respect to TGR-1202, Rhizen will be eligible to
receive regulatory filing, approval and sales-based milestone
payments in the aggregate of approximately $175 million, a small
portion of which will be payable on the first New Drug Application
(NDA) filing and the remainder on approval in multiple
jurisdictions for up to two oncology indications and one
non-oncology indication and attaining certain sales milestones. In
addition, if TGR-1202 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 will be entitled to tiered
royalties on our future net sales of TGR-1202 and any New Product.
In lieu of sales milestones and royalties on net sales, Rhizen
shall 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 TGR-1202, provided that they are price
competitive with alternative manufacturers.
In
connection with the TGR-1202 License, we recognized $4.1 million of
noncash research and development expense during the year ended
December 31, 2014 related to the issuance of the above mentioned
common stock. In addition, we recognized $4.0 million of other
research and development expense during the year ended December 31,
2014 related to the cash milestone payment.
IRAK4
On
June 23, 2014, we entered into an exclusive licensing agreement
with Ligand Pharmaceuticals Incorporated ("Ligand") for the
development and commercialization of Ligand's interleukin-1
receptor associated kinase-4 ("IRAK4") inhibitor technology, which
currently is in preclinical development for potential use against
certain cancers and autoimmune diseases. IRAK4 is a
serine/threonine protein kinase that is a key downstream signaling
component of the interleukin-1 receptor and multiple toll-like
receptors.
F-20
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Under the terms of the license agreement, Ligand
received 125,000 shares of our common stock as an upfront license
fee. Ligand will also be eligible to receive maximum potential
milestone payments of approximately $207 million upon the
achievement of specific clinical, regulatory and commercial
milestone events. Additionally, Ligand will be entitled to
royalties on our future net sales of licensed products containing
IRAK4 inhibitors. The basic royalty rate for licensed products
covered by Ligand's issued patents will be 6% for annual sales of
up to $1 billion and 9.5% for annual sales in excess of that
threshold.
In
connection with the license agreement, we recognized $1,211,250 of
noncash research and development expense during the year ended
December 31, 2014 in connection with the issuance of the above
mentioned common stock.
Additionally,
Opus Point Partners, LLC, who identified the opportunity and
advised us on the transaction, will also be entitled to receive a
1% royalty for annual sales of up to $1 billion. Michael S. Weiss,
our Executive Chairman and Chief Executive Officer, is a Managing
Member of Opus Point Partners, LLC.
TG-1101
In
November 2012, we entered into an exclusive (within the territory)
sublicense agreement with Ildong relating to the development and
commercialization of TG-1101 in South Korea and Southeast Asia.
Under the terms of the sublicense agreement, Ildong has been
granted a royalty bearing, exclusive right, including the right to
grant sublicenses, to develop and commercialize TG-1101 in South
Korea, Taiwan, Singapore, Indonesia, Malaysia, Thailand,
Philippines, Vietnam, and Myanmar.
An
upfront payment of $2.0 million, which was received in December
2012, net
of $0.3 million of income tax withholdings, is 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 $152,000
for each of the years ended December 31,
2016, 2015 and 2014, and, at December 31,
2016, 2015 and 2014, have deferred revenue of approximately
$1,371,000, $1,524,000 and $1,676,000, respectively, associated
with this $2,000,000 payment (approximately $152,000 of which has
been classified in current liabilities at December 31,
2016).
We may
receive up to an additional $5.0 million in payments upon the
achievement of pre-specified milestones. In addition, upon
commercialization, Ildong will make royalty payments to us on net
sales of TG-1101 in the sublicense territory.
NOTE 9 – RELATED PARTY TRANSACTIONS
LFB Biotechnologies
On
January 30, 2012, we entered into an exclusive license agreement
with LFB Biotechnologies, GTC Biotherapeutics and LFB/GTC LLC, all
wholly-owned subsidiaries of LFB Group, relating to the development
of ublituximab (the “LFB License Agreement”). In
connection with the LFB License Agreement, LFB Group was issued
5,000,000 shares of common stock, and a warrant to purchase
2,500,000 shares of common stock at a purchase price of $0.001 per
share. In addition, on November 9, 2012, we nominated Dr. Yann
Echelard to our Board of Directors as LFB Group’s nominee.
LFB Group maintains the right to nominate a board member until such
time as LFB Group owns less than 10% of the outstanding common
stock.
In
connection with the LFB License Agreement, LFB Group maintained the
right to purchase at least $750,000 in additional shares of common
stock at a purchase price per share as defined in a November 2012
securities exchange agreement. Accordingly, in February 2015, LFB
Group purchased 114,855 shares of our common stock at a price of
$6.53 per share for net proceeds of $750,000. In May 2015, LFB
Group exercised its warrant to purchase 2,500,000 shares of common
stock at a purchase price of $0.001 per share.
F-21
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Under
the terms of the LFB License Agreement, we utilize LFB Group for
certain development and manufacturing services. We incurred
approximately $8,100,000, $9,300,000 and $5,200,000 in expenses for
such services during the years ended
December 31, 2016, 2015 and 2014, respectively, which have
been included in other research and development expenses in the
accompanying consolidated statements of operations. As of
December 31, 2016, and 2015, we had approximately $0.4
million and $2.1 million, respectively, recorded in accounts
payable related to the LFB License Agreement. In conjunction with
the development and manufacturing services discussed above, certain
agreements between us and LFB Group require payments in advance of
services performed or goods delivered. Accordingly, as of December
31, 2016 and 2015, we recorded $1.3 million and $3.0 million,
respectively, in prepaid research and development for such advance
payments.
Other Parties
In
March 2014, we entered into a shared services agreement (the
“Opus Shared Services Agreement”) with Opus Point
Partners Management, LLC (“Opus”) in which the parties
agreed to share a rented facility and costs for certain other
services. Michael S. Weiss, our Executive Chairman and CEO,
is a Managing Member of Opus. During the years ended December 31,
2016 and 2015, we incurred expenses of approximately $0.3 million
and $0.1 million, respectively, principally for rent, related to
this Opus Shared Services Agreement. As of December
31, 2016 and
2015, we had $0 and approximately $0.1 million, respectively,
recorded in accounts payable related to this Opus Shared
Services Agreement. The
Opus Shared Services Agreement is no longer in effect as we began
occupying new space in April 2016.
In October 2014, we
entered into an agreement (the “Office Agreement”) with
FBIO to occupy approximately 45% of the 24,000 square feet of New
York City office space leased by FBIO, which is now our corporate
headquarters. The Office Agreement requires us to pay our
respective share of the average annual rent and other costs of the
15-year lease. We approximate an average annual rental obligation
of $1.1 million under the Office Agreement. We began to occupy this
new space in April 2016, with rental payments beginning in the
third quarter of 2016. During the year ended December 31, 2016, we
recorded rent expense of approximately $1.4 million and at
December 31, 2016, have deferred rent of approximately $0.8
million.
Mr. Weiss, our Executive Chairman and CEO, is also Executive Vice
Chairman of FBIO.
During
the year ended December 31, 2016, we agreed to pay FBIO $2.2 million for
our portion of the build-out costs, which have been
allocated to us at the 45% rate mentioned above. The allocated
build-out costs have been recorded in Leasehold Interest on the
Company’s consolidated balance sheet and will be amortized
over the 15-year term of the Office Agreement. After an initial
commitment period of the 45% rate for a period of three (3) years,
we and FBIO will determine actual office space utilization annually
and if our utilization differs from the amount we have been billed,
we will either receive credits or be assessed incremental
utilization charges. Also
in connection with this lease, in October 2014 we pledged $0.6
million to secure a line of credit as a security deposit for the
Office Agreement, which has been recorded as restricted cash in the
accompanying consolidated balance sheets.
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 $0.8
million and $0.1 million for shared services for the years ended
December 31, 2016 and 2015, primarily related to shared
personnel. As of
December 31, 2016, we had approximately $0.4 million
recorded in accounts payable related mostly to the Shared Services
Agreement, and no amounts were due at December 31,
2015.
In May
2016, as part of a broader agreement with Jubilant, an India-based
biotechnology company, we entered into the JBET Agreement with
Checkpoint, a subsidiary of FBIO, for the development and
commercialization of Jubilant’s novel BET inhibitor program
in the field of hematological malignancies. We paid Checkpoint an
up-front licensing fee of $1.0 million as part of the JBET
Agreement which was recorded in other research and development in
the accompanying consolidated statement of operations. As of
December 31, 2016, we had approximately $0.8 million recorded in
accounts payable, related mostly to the JBET Agreement. Mr. Weiss
is also the Executive Chairman of Checkpoint.
F-22
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the
year ended December 31, 2016, we incurred expenses of approximately
$4,000 to AOI Communications, L.P. for manuscript services related
to TG-1101. Mr. Weiss is the owner of AOI Communications,
L.P.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
As of
December 31, 2016, we have known contractual
obligations, commitments and contingencies of approximately $18.0
million related to our operating lease
obligations.
|
(in
thousands)
|
Payment
due by period
|
||||
|
|
Total
|
Less
than 1 year
|
1-3
years
|
3-5
years
|
More
than 5 years
|
|
Contractual
obligations
|
|
|
|
|
|
|
Operating
leases
|
$18,020
|
$1,185
|
$2,281
|
$2,286
|
$12,268
|
|
Total
|
$18,020
|
$1,185
|
$2,281
|
$2,286
|
$12,268
|
Leases
See Note 9 for a detailed description of our lease arrangements.
Total rental expense was approximately $1.6 million, $0.3 million
and $0.1 million for the years ended December 31, 2016, 2015
and 2014, respectively.
Future minimum lease commitments as of December 31, 2016, in
the aggregate total approximately $18.0 million through December
31, 2031. The preceding table shows future minimum lease
commitments, which include our office leases in New York, North
Carolina and Tennessee, by period as of December 31,
2016.
F-23
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 11 – QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
|
|
3
Months Ended
|
|||
|
|
March
31, 2016
|
June
30, 2016
|
September
30, 2016
|
December
31, 2016
|
|
|
|
|
|
|
|
License
revenue
|
$38,095
|
$38,095
|
$38,096
|
$38,095
|
|
|
|
|
|
|
|
Total costs and
expenses
|
14,030,251
|
16,061,538
|
24,963,567
|
24,066,153
|
|
|
|
|
|
|
|
Net
loss
|
$(13,848,662)
|
$(15,899,062)
|
$(24,831,027)
|
$(23,674,143)
|
|
|
|
|
|
|
|
Basic and diluted
net loss per common share
|
$(0.28)
|
$(0.33)
|
$(0.50)
|
$(0.48)
|
|
|
|
|
|
|
|
|
3 Months
Ended
|
|||
|
|
March
31, 2015
|
June
30, 2015
|
September
30, 2015
|
December
31, 2015
|
|
|
|
|
|
|
|
License
revenue
|
$38,095
|
$38,095
|
$38,096
|
$38,095
|
|
|
|
|
|
|
|
Total costs and
expenses
|
14,640,946
|
17,149,675
|
13,863,680
|
17,678,096
|
|
|
|
|
|
|
|
Net
loss
|
$(14,577,735)
|
$(17,103,183)
|
$(13,655,916)
|
$(17,611,812)
|
|
|
|
|
|
|
|
Basic and diluted
net loss per common share
|
$(0.35)
|
$(0.38)
|
$(0.28)
|
$(0.37)
|
|
|
|
|
|
|
NOTE 12 – LITIGATION
On
January 6, 2017, a purported securities class action complaint was
filed in New York federal court against the Company and certain of
its directors, officers or consultants on behalf of all
shareholders who purchased or otherwise acquired TG Therapeutics
common stock between September 15, 2014 and October 12, 2016 (the
“Class Period”). The case is captioned John Lyon v. TG
Therapeutics, Michael S. Weiss, Sean A. Power and Robert Niecestro,
Case No. 1:17-cv-00112-VM (S.D.N.Y.). The complaint alleges that,
throughout the Class Period and including on October 13, 2016, that
the Company had filed an “amended protocol for its GENUINE
Phase 3 trial,” various statements made by the Company
regarding its GENUINE Phase 3 trial were materially false or
misleading when made in violation of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated thereunder. On January 24, 2017, a
second purported class action complaint was filed in New York
federal court against the Company and certain of its directors,
officers or consultants also on behalf of all shareholders who
purchased or otherwise acquired TG Therapeutics common stock
between September 15, 2014 and October 12, 2016. The case is
captioned Kenneth C. Wyzgoski v. TG Therapeutics, Michael S. Weiss,
Sean A. Power and Robert Niecestro, Case No. 1:17-cv-00508-VM
(S.D.N.Y.). The claims and allegations in the Wyzgoski complaint
are substantially identical to those in the Lyon case. Both actions
remain pending and are in the early stages of
litigation.
NOTE 13 - SUBSEQUENT EVENTS
During the first quarter of 2017, we sold a total of 3,104,253
shares of common stock under the 2015 ATM for aggregate total gross
proceeds of approximately $31.6 million at an average selling price
of $10.18 per share. Net proceeds were approximately $31 million
after deducting commissions and other transactions
costs.
On
March 9, 2017, we announced the pricing of an underwritten public
offering of 5,128,206 shares of our common stock (plus a 30-day
underwriter option to purchase up to an additional 769,230 shares
of common stock, which has been exercised) at a price
of $9.75 per share, with expected gross proceeds
to TG Therapeutics of $57.5 million, less
underwriting discounts and commissions. Total net proceeds from
this offering, including the overallotment, are $54 million, net of
underwriting discounts and estimated offering expenses of
approximately $3.5 million. The shares were sold under a shelf
registration statement on Form S-3 (File No. 333-201339) that was
previously filed and declared effective by the SEC in January 2015.
The offering closed on March 14, 2017.
F-24
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
Date: March 15, 2017
|
TG
THERAPEUTICS, INC.
|
|
|
|
By:
/s/ Michael S.
Weiss
|
|
|
Michael S. Weiss
Executive Chairman, Chief
Executive Officer and President
|
POWER
OF ATTORNEY
KNOW
ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Michael S. Weiss and Sean A.
Power, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and his name,
place and stead, in any and all capacities, to sign any or all
amendments to this annual report on Form 10-K, and to file the
same, with all exhibits thereto and other documents in connection
therewith, with the SEC, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or any of his substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the
requirements of the Securities Exchange Act of 1934, as amended,
this Form 10-K has been signed by the following persons on behalf
of the Registrant on March 15, 2017, and in the capacities
indicated:
|
Signatures
|
Title
|
|
/s/
Michael S. Weiss
Michael
S. Weiss
|
Executive
Chairman, Chief Executive Officer and President
(principal
executive officer)
|
|
/s/
Sean A. Power
Sean
A. Power
|
Chief
Financial Officer
(principal
financial and accounting officer)
|
|
/s/
Laurence N. Charney
Laurence
N. Charney
|
Director
|
|
/s/
Yann Echelard
Yann
Echelard
|
Director
|
|
/s/
Kenneth Hoberman
Kenneth
Hoberman
|
Director
|
|
/s/
Daniel Hume
Daniel
Hume
|
Director
|
|
/s/
William J. Kennedy
William
J. Kennedy
|
Director
|
|
/s/
Mark Schoenebaum, M.D.
Mark
Schoenebaum, M.D.
|
Director
|
EXHIBIT INDEX
|
Exhibit
|
|
|
Number
|
Exhibit Description
|
|
|
|
|
21.1
|
Subsidiaries of TG Therapeutics, Inc.
|
|
|
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm
|
|
|
|
|
31.1
|
Certification of
Principal Executive Officer
|
|
|
|
|
31.2
|
Certification of
Principal Financial Officer
|
|
|
|
|
32.1
|
Certification of
Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
32.2
|
Certification of
Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|