TG THERAPEUTICS, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis contain forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our results could differ materially from the results anticipated by our forward-looking statements as a result of many known or unknown factors, including, but not limited to, those factors discussed in Risk Factors. Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic. See also the Special Cautionary Notice Regarding Forward-Looking Statements set forth at the beginning of this report. You should read the following discussion and analysis in conjunction with the unaudited, condensed, consolidated financial statements and the related footnotes thereto appearing elsewhere in this report, and in conjunction with management’s discussion and analysis and the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020. OVERVIEW TG Therapeutics is a fully integrated, commercial stage biopharmaceutical company focused on the acquisition, development and commercialization of novel treatments for B-cell malignancies and autoimmune diseases. In addition to an active research pipeline including five investigational medicines across these therapeutic areas, UKONIQ received accelerated approval from the FDA for the treatment of adult patients with relapsed or refractory MZL who have received at least one prior anti-CD20-based regimen and relapsed or refractory FL who have received at least three prior lines of systemic therapies. Currently, we have two programs in Phase 3 development for the treatment of patients with RMS and patients with CLL and several investigational medicines in Phase 1 clinical development. We also actively evaluate complementary products, technologies and companies for in-licensing, partnership, acquisition and/or investment opportunities. ​ FDA Accelerated Approval of UKONIQ and Commercial Launch ​ On February 5, 2021, we announced that the FDA granted accelerated approval of UKONIQ for the treatment of adult patients with relapsed or refractory MZL who have received at least one prior anti-CD20 based regimen and for the treatment of adult patients with relapsed or refractory FL who have received at least three prior lines of systemic therapy. UKONIQ is the first and only, oral, once-daily, inhibitor of phosphoinositide 3 kinase (PI3K) delta and casein kinase 1 (CK1) epsilon. Accelerated approval was granted for these indications based on overall response rate (ORR) data from the Phase 2b UNITY-NHL Trial (NCT02793583). Continued approval for these indications is contingent upon verification and description of clinical benefit in a confirmatory trial. This application was granted Priority Review for the MZL indication. In addition, UKONIQ was granted Breakthrough Therapy Designation (BTD) for the treatment of MZL and orphan drug designation (ODD) for the treatment of MZL and FL. ​ Following the FDA approval, we launched UKONIQ, making it available to patients through a distribution network that includes a specialty pharmacy and specialty distributors. In the U.S., the annual incidence of newly diagnosed MZL is approximately 8,200 and FL is approximately 13,200. Our commercialization efforts have focused on approximately 3,000 physicians at academic centers and large community practices who treat approximately 80% of MZL 23 Table of Contents and FL patients. We developed a commercialization plan that accounted for the COVID-19 pandemic, with a focus on enabling virtual interactions to provide healthcare provider education. As anticipated, our interactions with healthcare providers during the first quarter were primarily virtual due to the pandemic, with limited opportunities for our commercial and medical field teams to have live engagements. Payor coverage of UKONIQ and inclusion in the NCCN guidelines have been consistent with the FDA-approved indications. We are committed to helping patients access their prescription for UKONIQ through the TG Patient Support Program, which we launched following the approval of UKONIQ. ​ Our Products Under Development We have leveraged our B-cell platform to develop a robust drug pipeline of targeted orally available, potent and selective small molecule kinase inhibitors and intravenously delivered immunotherapies that leverage the patients’ own immune system to fight cancer. The following table summarizes our most advanced drug candidates: Clinical Drug Candidate: (molecular target) Initial Target Disease Stage of Development (trial name) Ublituximab (anti-CD20 mAb) Chronic Lymphocytic Leukemia (CLL) Phase 3 trial (UNITY-CLL) Phase 3 trial (ULTRA-V) Relapsing Multiple Sclerosis (RMS) Phase 3 trials (ULTIMATE I and II) UKONIQ (PI3K-delta inhibitor) CLL Phase 3 trial (UNITY-CLL) Phase 3 trial (ULTRA-V) Marginal Zone Lymphoma (MZL) Phase 2b trial (UNITY-NHL) Follicular Lymphoma (FL) Phase 2b trial (UNITY-NHL) Cosibelimab/TG-1501 (anti-PDL1 mAb) B-cell cancers Phase 1 trial TG-1701 (BTK inhibitor) B-cell cancers Phase 1 trial TG-1801 (anti-CD47/CD19 bispecific mAb) B-cell cancers Phase 1 trial ​ Phase 3 and Registration-Directed Clinical Trial Highlights The following are highlights from our current Phase 3 trials and registration-directed Phase 2b clinical trials: UNITY-NHL Phase 2b Trial: UNITY-NHL is a broad, multicenter, open-label, Phase 2b registration-directed clinical trial designed to evaluate the efficacy and safety of UKONIQ monotherapy and UKONIQ plus ublituximab (U2) combinations in patients with previously treated NHL. There are several exploratory cohorts of the UNITY-NHL trial which are enrolled to and evaluated independently from the others, including cohorts for MZL, FL/SLL, DLBCL, and MCL. ● UNITY-NHL MZL/FL Single Agent UKONIQ: The MZL cohort enrolled adult patients who had at least one prior line of therapy that included an anti-CD20 monoclonal antibody. The FL cohort enrolled adult patients who had two or more prior lines of therapy that included an anti-CD20 monoclonal antibody and an alkylating agent. Both cohorts met the primary endpoint of ORR as determined by Independent Review Committee (IRC) assessment. Results from these cohorts were presented in December 2020 at the American Society of Hematology Annual meeting. On February 5, 2021, we announced that the FDA granted accelerated approval of UKONIQ, for the treatment of adult patients with relapsed or refractory MZL who have received at least one prior anti-CD20 based regimen and adult patients with relapsed or refractory FL who have received at least three prior lines of systemic therapy. ​ 24 Table of Contents UNITY-CLL Phase 3 Trial Evaluating UKONIQ plus Ublituximab (U2): UNITY-CLL is a global, multi-center, Phase 3, randomized, controlled clinical trial comparing the U2 combination to an active control arm of obinutuzumab plus chlorambucil in patients with both treatment-naïve and relapsed or refractory CLL. Two additional arms evaluating single-agent ublituximab and single-agent UKONIQ were also enrolled for purposes of evaluating the contribution of each in the U2 combination regimen. The primary endpoint for this study is progression-free survival (PFS). The study completed enrollment in October 2017 with over 600 patients across the four treatment arms, with approximately 420 patients in the U2 and the active control arms combined. This trial is conducted under a Special Protocol Assessment (SPA) with the FDA. The UNITY-CLL trial is being led by John Gribben, MD, professor of Medical Oncology, Barts Cancer Institute, United Kingdom. ​ ● On December 7, 2020, we presented safety and efficacy results from the UNITY- CLL trial at the ASH annual meeting demonstrating that U2 significantly improved PFS over obinutuzumab plus chlorambucil (HR=0.54, p<0.0001) as well as ORR (p<0.001) in patients with CLL, with consistent PFS improvement across treatment naïve CLL (HR=0.48) and relapsed or refractory CLL (HR=0.60). Grade 3/4 adverse events (AEs) of clinical interest (U2 vs Obin+Chl) included elevated ALT (8.3% vs 1.0%), elevated AST (5.3% vs 2.0%), non-infectious colitis (1.9% vs 0%), infectious colitis (0.5% vs 0.5%), pneumonitis (0.5% vs 0%), rash (2.4% vs 0.5%), and opportunistic infections (5.8% vs. 1.5%). These data supported a rolling Biologics License Application (BLA) submission to the US FDA requesting approval of ublituximab, in combination with UKONIQ, as a treatment for patients with CLL. The rolling BLA submission was completed in March 2021. ​ ​ ​ ULTIMATE I & II Trials Evaluating Single-Agent Ublituximab in RMS: ULTIMATE I and ULTIMATE II are two independent Phase 3 trials. Each trial is a global, randomized, multi-center, double-blinded, double-dummy, active-controlled study comparing ublituximab to teriflunomide in subjects with RMS. The primary endpoint for each study is annualized relapse rate (ARR) following 96 weeks of treatment, which we intend to use to support a BLA submission for approval of ublituximab in the treatment of RMS. These trials were both conducted under a SPA with the FDA. Full enrollment was completed in October 2018, with approximately 1,100 subjects enrolled in both studies combined. ● In April 2021, data from the ULTIMATE I & II trials were presented at the American Academy of Neurology Annual meeting. Both studies met their primary endpoint with ublituximab treatment demonstrating a statistically significant reduction in ARR over a 96-week period (p<0.005 in each trial). Key secondary MRI endpoints were also met. ​ ULTRA-V Phase 2 and Phase 3 Trials Evaluating U2 Plus Venetoclax in CLL: The ULTRA-V Phase 2 and Phase 3 trials are designed to investigate the efficacy and safety of U2 in combination with venetoclax in subjects with treatment-naïve CLL and relapsed or refractory CLL. ● The ULTRA-V Phase 2 trial is an open-label, multi-center, clinical trial and the primary endpoints for this study are ORR and Complete Response (CR) rate. This trial completed enrollment in April 2021 with approximately 165 patients. ● The ULTRA-V Phase 3 trial is an open-label, multi-center, randomized, controlled clinical trial comparing the time-limited triple combination U2) plus venetoclax to an active control arm of continuous U2. The Phase 3 trial includes two independent randomized cohorts of CLL subjects: a treatment-naïve cohort and a previously treated cohort, with each cohort being enrolled and evaluated independently of each other. The primary endpoint for the trial is PFS. This trial is being led by Richard R. Furman, MD, Director of CLL Research Center at Weill Cornell Medicine. 25 Table of Contents RESULTS OF OPERATIONS Three months ended March 31, 2021 and 2020 Product Revenues (Net). Net product revenues represent U.S. sales from our sole commercial product, UKONIQ, which was approved by the FDA on February 5, 2021. During the three months ended March 31, 2021, net product revenues were $0.8 million. Sales allowances and accruals consisted of government rebates, patient financial assistance, distribution fees, discounts, and chargebacks. We did not have product revenues in 2020. Cost of Product Revenue. Cost of product revenue for the three months ended March 31, 2021 was $0.1 million. Cost of product revenue primarily relates to freight and royalties owed to our licensing partner for UKONIQ sales. Based on our policy to expense costs associated with the manufacture of our products prior to regulatory approval, the manufacturing costs of UKONIQ units recognized as revenue during the three months ended March 31, 2021 were expensed prior to the February 5, 2021 FDA approval, and therefore are not included in costs of product revenue during the current period. We expect the cost of product revenue to increase in relation to product revenues as we deplete these inventories and we expect to use the remaining pre-commercialization inventory for product sales through the second quarter of 2022. License Revenue. 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. License revenue was approximately $38,000 for each of the three months ended March 31, 2021 and 2020 related to the amortization of an upfront payment of $2.0 million received in 2012 associated with our license agreement with Ildong. The upfront payment from Ildong will be recognized as license revenue on a straight-line basis through December 2025, which represents the estimated period over which the Company will have certain ongoing responsibilities under the sublicense agreement. Noncash Compensation Expense (Research and Development). Noncash compensation expense (research and development) related to equity incentive grants totaled $7.5 million for the three months ended March 31, 2021, as compared to $2.0 million during the comparable period in 2020. The increase in noncash compensation expense was primarily due to an increase in research and development personnel and a higher stock price during the period ended March 31, 2021. Other Research and Development Expenses. Our other 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 including clinical trial related expenses. We expense our research and development costs as they are incurred. ​ Other research and development expenses increased by $21.6 million to $55.6 million for the three months ended March 31, 2021, as compared to $34.0 million for the three months ended March 31, 2020. The increase in R&D expense is primarily attributable to the achievement of various milestones as well as manufacturing costs for ublituximab during the three months ended March 31, 2021. Noncash Compensation Expense (Selling, General and Administrative). Noncash compensation expense (selling, general and administrative) related to equity incentive grants was $9.1 million for each of the three months ended March 31, 2021 and 2020. Other Selling, General and Administrative Expenses . Our selling, general and administrative expenses consist primarily of salaries and related expenses for executive, finance; commercial, medical, and other administrative personnel, recruitment expenses, expenses for commercialization activities (including the build out of our medical affairs and commercial organizations and infrastructure), professional fees and other corporate expenses, including investor relations, legal activities and facilities-related expenses. ​ 26 Table of Contents Other selling, general and administrative expenses was $17.7 million for the three months ended March 31, 2021, as compared to $5.2 million for the three months ended March 31, 2020. The increase was due primarily to increased personnel and other selling, general and administrative costs, associated with the commercial launch of UKONIQ. We expect our other selling, general and administrative expenses to increase during 2021 coinciding with the launch. Interest Expense . Interest expense increased by $0.7 million to $1.9 million for the three months ended March 31, 2021, as compared to $1.2 million for the three months ended March 31, 2020. The increase is mainly due to interest expense related to administrative fees in connection with contract manufacturing costs during the period ended March 31, 2021. Other Income . Other income was $0.5 million for the three months ended March 31, 2021, as compared to $0.3 million for the three months ended March 31, 2020. We expect our other income to remain at a comparable level for the remainder of 2021. LIQUIDITY AND CAPITAL RESOURCES Our major sources of cash have been proceeds from the private placement and public offering of equity securities. During the first quarter of 2021, umbralisib, now referred to as UKONIQ, was granted accelerated approval in the United States for the treatment of adult patients with relapsed or refractory MZL who have received at least one prior anti-CD20 based regimen and adult patients with relapsed or refractory FL who have received at least three prior lines of systemic therapy. Commercial sales of UKONIQ commenced in the first quarter of 2021. We have generated limited revenues to date from product sales. Even with the commercialization of UKONIQ and the potential future commercialization of our other drug candidates, we may not become profitable. Our ability to achieve profitability depends on many factors, including our ability to generate revenue, our ability to obtain regulatory approvals for our drug candidates, our ability to successfully complete any post-approval regulatory obligations and our ability to successfully commercialize our drug candidates. We may continue to incur substantial operating losses even as we begin to generate revenues from product sales. As of March 31, 2021, we had $523.8 million in cash and cash equivalents, and investment securities. We anticipate that our cash and cash equivalents, and investment securities as of March 31, 2021 will provide sufficient liquidity for more than a twelve-month period from the date of filing this Quarterly Report on Form 10-Q. The actual amount of cash that we will need to operate is subject to many factors, including, but not limited to, our UKONIQ commercialization efforts, preparations for the commercialization of our other drug candidates, and the timing, design and conduct of clinical trials for our drug candidates. We are dependent upon significant future financing to provide the cash necessary to execute our ongoing and future operations, including the commercialization of any additional drug candidates. Discussion of Cash Flows Cash used in operating activities for the three months ended March 31, 2021 was $81.4 million as compared to $62.1 million for the three months ended March 31, 2020. The increase in cash used in operating activities was due primarily to increased expenditures associated with our scale-up for manufacturing as well as ongoing clinical development programs and paydown of accounts payable and accrued expenses. Net cash used in investing activities for the three months ended March 31, 2021, was $0.5 million as compared to cash provided by investing activities of $1.5 million for the three months ended March 31, 2020. The increase in net cash used in investing activities was primarily due to greater investment in short-term securities during the three months ended March 31, 2021. Net cash used in financing activities for the three months ended March 31, 2021, was $0.1 million which related to offering costs paid offset by proceeds from the exercise of options. 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 27 Table of Contents continuing risks, contingent liabilities, or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support. CRITICAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. ​ For a description of our significant accounting policies, refer to &quot;Part II, Item 8. Financial Statements and Supplementary Data, Note 1 – Organization and Summary of Significant Accounting Policies&quot; in our 2020 Annual Report on Form 10-K, and refer to Note 1 in this Quarterly Report on Form 10-Q for significant accounting policies due to commercialization for revenue recognition, gross-to-net sales adjustments, accounts receivable, inventory, and cost of product revenue. Of these policies, the following are considered critical to an understanding of our Unaudited Condensed Consolidated Financial Statements as they require the application of the most difficult, subjective and complex judgments: stock-based compensation expenses, and fair value measurement of financial liabilities. Refer to &quot;Note 5 – Stockholders’ Equity&quot; and &quot;Note 4 - Fair Value Measurements,&quot; respectively, for more information. RECENTLY ISSUED ACCOUNTING STANDARDS Refer to &quot;Note 1 - Organization and Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of recently issued accounting pronouncements, and their expected impact on our financial position and results of operations.