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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, 2019.
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)
(State or other jurisdiction of incorporation or organization)
Delaware
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:
Title of Class
Common Stock, par value $0.001
Trading Symbol(s)
TGTX
Exchange Name
Nasdaq Capital Market
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 ☒
Securities registered pursuant to Section 12(g) of the Act: None
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, if any, every Interactive Data File required to be submitted 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Non-accelerated filer ☐
Accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by 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 $687,572,082 as of June 30, 2019, based on the closing sale price of such stock as reported on the NASDAQ Capital Market.
There were 109,401,184 shares of the registrant’s common stock, $0.001 par value, outstanding as of February 21, 2020.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the 2020 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K.
Table of Contents
TG THERAPEUTICS, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2019
TABLE OF CONTENTS
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
PART I
ITEM 1
ITEM 1A
ITEM 2
ITEM 3
ITEM 4
PART II
ITEM 5
ITEM 6
ITEM 7
ITEM 7A
ITEM 8
ITEM 9
ITEM 9A
ITEM 9B
PART III
ITEM 10
ITEM 11
ITEM 12
ITEM 13
ITEM 14
PART IV
Business
Risk Factors
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosure About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
ITEM 15
Exhibits and Financial Statement Schedules
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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.
Table of Contents
This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. All statements,
other than statements of historical facts, contained in this Annual Report on Form 10-K are forward-looking statements. In some cases, you can
identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,”
“intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” or the negative of these words or other
comparable terminology, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this Annual Report on Form 10-K include, but are not limited to, statements about:
● the initiation, timing, progress and results of our pre-clinical studies and clinic trials, including, without limitation, our on-going
UNITY-CLL Phase 3 clinical trial, ULTIMATE I and II Phase 3 clinical trial and UNITY-NHL Phase 2b clinical trial;
● our ability to advance drug candidates into, and successfully complete, clinical trials;
● the timing or likelihood of regulatory filings and approvals;
● the commercialization of our drug candidates, if approved;
● the pricing and reimbursement of our drug candidates, if approved;
● the implementation of our business model, strategic plans for our business, drug candidates and technology;
● the scope of protection we are able to establish and maintain for intellectual property rights covering our drug candidates and
technologies;
● estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
● our ability to maintain and establish collaborations and enter into strategic arrangements, if desired;
● our financial performance and cash burn management; and
● developments relating to our competitors and our industry.
Any forward-looking statements in this Annual Report on Form 10-K reflect our current views with respect to future events or to our
future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results,
performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these
forward-looking statements. We have included important factors in the cautionary statements included in this Annual Report on Form 10-K,
particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that
we make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Our forward-looking statements
do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or enter into.
You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual Report on Form 10-
K completely and with the understanding that our actual future results, performance or achievements may be materially different from what we
expect. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new
information becomes available in the future.
Table of Contents
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report, including matters discussed under the captions “Business” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” may constitute forward-looking statements for purposes of the Securities Act of 1933, as
amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, and involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results,
performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by
words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,”
“project,” “seek,” “should,” “target,” “will,” “would” or the negative of these words or other comparable terminology, although not all forward-looking
statements contain these identifying words. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by
these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-
looking statements contained in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to,
statements about our:
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expectations for increases or decreases in expenses;
expectations for the clinical and pre-clinical development, manufacturing, regulatory approval, and commercialization of our
pharmaceutical product candidates or any other products we may acquire or in-license;
use of clinical research centers and other contractors;
expectations as to the timing of commencing or completing pre-clinical and clinical trials and the expected outcomes of those trials;
expectations for incurring capital expenditures to expand our research and development and manufacturing capabilities;
expectations for generating revenue or becoming profitable on a sustained basis;
expectations or ability to enter into marketing and other partnership agreements;
expectations or ability to enter into product acquisition and in-licensing transactions;
expectations or ability to build our own commercial infrastructure to manufacture, market and sell our drug candidates;
products being accepted by doctors, patients or payors;
ability to compete against other companies and research institutions;
ability to secure adequate protection for our intellectual property;
ability to attract and retain key personnel;
availability of reimbursement for our products;
estimates of the sufficiency of our existing cash and cash equivalents and investments to finance our operating requirements, including
expectations regarding the value and liquidity of our investments;
stock price and its volatility; and
expectations for future capital requirements.
Our actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including,
without limitation, those discussed under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and elsewhere in this report, as well as other factors which may be identified from time to time in our other filings with the Securities and
Exchange Commission, or the SEC, or in the documents where such forward-looking statements appear. Given these uncertainties, you should not
place undue reliance on these forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, joint ventures or investments we may make or enter into.
You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual Report on Form 10-K
completely and with the understanding that our actual future results, performance or achievements may be materially different from what we expect.
Any forward-looking statements in this Annual Report on Form 10-K reflect our current views with respect to future events or to our future financial
performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or
achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking
statements. The forward-looking statements contained in this report reflect our views and assumptions only as of the date this report is signed. Except
as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes
available in the future.
This Annual Report on Form 10-K also contains estimates, projections and other information concerning our industry, our business and the
markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical
conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties
and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly
stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research
firms and other third parties, industry, medical and general publications, government data and similar sources.
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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 dedicated to developing and delivering medicines for patients with B-cell mediated diseases,
including Chronic Lymphocytic Leukemia (CLL), non-Hodgkin Lymphoma (NHL) and Multiple Sclerosis (MS). We have developed a robust
B-cell directed research and development (R&D) platform for identification of key B-cell pathways of interest and rapid clinical testing.
Currently, we have five B-cell targeted drug candidates in clinical development, with the lead two therapies, ublituximab (TG-1101) and
umbralisib (TGR-1202), in pivotal trials for CLL, NHL and MS. Ublituximab is a novel anti-CD20 monoclonal antibody (mAb) that has been
glycoengineered for enhanced potency over first generation antibodies. Umbralisib is an oral, once daily, dual inhibitor of PI3K-delta and CK1-
epsilon, which may lead to a differentiated safety profile. When used together in combination therapy, ublituximab and umbralisib are referred
to as "U2". Additionally, in early clinical development we have an anti-PD-L1 monoclonal antibody referred to as cosibelimab (TG-1501), an
oral Bruton’s Tyrosine Kinase (“BTK”) inhibitor referred to as TG-1701, and an anti-CD47/CD19 bispecific antibody referred to as TG-1801.
We also actively evaluate complementary products, technologies and companies for in-licensing, partnership, acquisition and/or
investment opportunities. To date, we have not received approval for the sale of any of our drug candidates in any market and, therefore, have
not generated any product sales from our drug candidates.
Current Phase 3 or Registration Directed Clinical Trial Highlights:
We have initiated and enrolled several Phase 3 and registration-directed Phase 2b clinical trials (i.e., clinical trials that may support a
marketing application for approval). 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 Phase 2b registration-directed clinical trial designed to evaluate the
efficacy and safety of umbralisib monotherapy and U2 combinations in patients with previously treated NHL. The marginal zone
lymphoma (MZL) and the follicular lymphoma (FL)/small lymphocytic lymphoma (SLL) single agent umbralisib cohorts of this
trial are fully enrolled. The primary objective of these cohorts is to assess the efficacy of single agent umbralisib as measured by
Overall Response Rate (ORR). In February 2019, we announced that the MZL cohort met the primary endpoint of ORR as
determined by Independent Review Committee (IRC) for all treated patients (n=69). The results met our target guidance of 40-
50% ORR. Interim safety and efficacy data from the MZL cohort were presented in an oral presentation at three medical
meetings, the American Association for Cancer Research (AACR) annual meeting in April 2019, the American Society of
Clinical Oncology (ASCO) annual meeting in June 2019 and the International Conference on Malignant Lymphoma (ICML) also
in June 2019. In October 2019, we announced that the FL patients within the FL/SLL cohort met the primary endpoint of ORR as
determined by Independent Review Committee (IRC) for all treated patients (n=118). The results also met our target guidance of
40-50% ORR. Most recently, in January of 2020, we received guidance from the FDA allowing submission of a single New Drug
Application (NDA) for MZL and FL indications and initiated a rolling submission of an NDA to the FDA for umbralisib in
MZL/FL. We anticipate completion of the rolling submission in the first half of 2020.
● UNITY-CLL Phase 3 Trial Evaluating Umbralisib plus Ublituximab (U2): UNITY-CLL is a global Phase 3 randomized
controlled clinical trial comparing the U2 combination to an active control arm of obinutuzumab plus chlorambucil in patients
with both treatment naive and relapsed or refractory CLL. Two additional arms evaluating single agent ublituximab and single
agent umbralisib were also enrolled for purposes of evaluating contribution in the U2 combination regimen. The primary endpoint
for this study is progression free survival (PFS) which we intend to use to support a submission for approval of the U2
combination in CLL. The study completed enrollment in October 2017 with over 600 patients enrolled across the four treatment
arms, with approximately 420 patients in the U2 and the active control arm combined. This trial is conducted under Special
Protocol Assessment (SPA) with the FDA.
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● 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 relapsing forms of Multiple Sclerosis (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
submission for approval of ublituximab in RMS. These trials are conducted under a SPA with the FDA. Full enrollment for the
ULTIMATE studies was completed in second half of 2018, with approximately 1,100 subjects enrolled in both studies combined.
● ULTRA-V Phase 2b Trial Evaluating U2 plus Venetoclax in CLL: ULTRA-V is a Phase 2b open-label, multicenter,
registration-directed clinical trial designed to investigate the efficacy and safety of ublituximab and umbralisib (U2) combined
with venetoclax in subjects with Chronic Lymphocytic Leukemia. The primary endpoint for this study is ORR and Complete
Response (CR) rate. This trial is currently enrolling.
CORPORATE INFORMATION
We were incorporated in Delaware in 1993. Our executive offices are located at 2 Gansevoort Street, 9th Floor, New York, New York
10014. Our telephone number is 1-212-554-4484, and our e-mail address is info@tgtxinc.com.
We maintain a website with the address www.tgtherapeutics.com and maintain various social media accounts, including but not limited
to Twitter and LinkedIn. We make available free of charge through our corporate website our annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K, as well as 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 or our social
media accounts as a part of, nor incorporating either by reference into, this report. 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.
In addition, we intend to use our corporate website, SEC filings, press releases, public conference calls and webcasts as well as social
media to communicate with our subscribers and the public. It is possible that the information we post on social media could be deemed to be
material information. Therefore, in light of the SEC’s guidance, we encourage investors, the media and others interested in us to review the
information we post on the U.S. social media channels listed on our website.
STRATEGY
Our Strategy
● Completing our current Phase 3 and registration-directed trials for umbralisib and ublituximab, including, UNITY-CLL, UNITY-
NHL, and the ULTIMATE Phase 3 Program in MS;
● Gaining regulatory approval for umbralisib in NHL, umbralisib plus ublituximab (“U2”) in CLL, and ublituximab in MS;
● Preparing for commercial launch and building commercial capability to ensure, when approved, broad access to patients for the
approved indications for umbralisib and ublituximab;
● Developing U2 in NHL;
● Advancing cosibelimab (TG-1501), TG-1701, and TG-1801 through clinical development and defining potential regulatory paths
for these drug candidates both as single agents and in combination with umbralisib, ublituximab, and/or U2;
● Building upon the MS program to expand ublituximab into additional MS indications and other autoimmune diseases;
● Continuing to expand our pipeline with mechanisms of importance to B-cell mediated diseases;
● Evaluating potential strategic collaborations to maximize the value of our programs and B-cell directed platform; and
● Maintaining our “patient first” culture as we grow our business.
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Our Approach and Platform
Our approach to drug development is centered on developing solutions for patients rather than developing single therapies for a
disease. Our process begins by identifying validated targets against B-cell diseases, and then searching for and, ideally, acquiring what we
believe to be “best-in-class” compounds with complementary mechanisms against these targets, with the goal of developing multi-drug
proprietary targeted combinations, which can potentially offer better outcomes for patients.
Our preference is to identify targets for which there is human clinical proof of concept that the mechanism is active in B-cell diseases
and then to identify drug candidates that effectively modulate the desired molecular target. We identify these drug candidates at academic
centers of excellence or in development at biotech companies or pharmaceutical companies globally. Our current drug candidates were acquired
through license agreements, collaborations, or joint ventures with biopharmaceutical companies located in the US, France, Switzerland, India,
and China. This approach enables us to minimize target risk while looking for the best available drug candidates around the world. By focusing
on B-cell diseases and targets with a known activity profile, we believe that we can quickly identify the patients most likely to respond,
resulting in a more efficient development path with the potential for a greater likelihood of success. Importantly, since all our drug candidates
are focused in one disease area, we can rapidly explore combination therapies, which we believe is essential to improving outcomes for patients
and holds the key to identifying cures for patients with B-cell diseases.
Our approach is enabled by our clinical development platform which includes:
● An internal team with a deep understanding of B-cell diseases and the treatment of patients; and
● An external network of more than 350 community and academic clinical trial sites globally.
B-CELL DISEASES OVERVIEW
B-cell mediated diseases comprise a constellation of disorders that result from cancerous B-cells or aberrant B-cells. In the case of
cancerous B-cells, the most common forms of B-cell cancers or B-cell malignancies are non-Hodgkin Lymphoma (NHL) and Chronic
Lymphocytic Leukemia (CLL). In the case of aberrant B-cells, many autoimmune diseases are believed to result from aberrant B-cell activity,
including, Multiple Sclerosis (MS), Rheumatoid Arthritis (RA), and Lupus.
The Company’s current clinical programs are focused on CLL, MZL, FL and MS.
Chronic Lymphocytic Leukemia Overview
CLL is the most common type of adult leukemia, and in 2019, it is estimated there will be more than 20,000 new cases of CLL
diagnosed in the United States1. Although signs of CLL may disappear for a period of time after initial treatment, the disease is considered
incurable and many people will require additional treatment due to the return of malignant cells.
Marginal Zone Lymphoma Overview
MZL comprises a group of indolent (slow growing) B-cell non-Hodgkin lymphomas (NHLs) that begin forming in the marginal zone
of lymphoid tissue. With an annual incidence of approximately 7,500 newly diagnosed patients in the United States2, MZL is the third most
common B-cell NHL, accounting for approximately eight percent of all NHL cases. MZL consists of three different subtypes: extranodal MZL
of the mucosal-associated lymphoid tissue (MALT), nodal marginal zone lymphoma (NMZL), and splenic marginal zone lymphoma (SMZL)3.
1 Cancer Stat Facts: Leukemia – Chronic Lymphocytic Leukemia https://seer.cancer.gov/statfacts/html/clyl.html
2 2016 Lymphoid Malignancy Statistics by World Health Organization Subtypes VOLUME 66 _ NUMBER 6 _ NOVEMBER/DECEMBER
2016 https://onlinelibrary.wiley.com/doi/pdf/10.3322/caac.21357
3 Lymphoma Research Foundation: Marginal Zone Lymphoma https://lymphoma.org/aboutlymphoma/nhl/mzl/
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Follicular Lymphoma Overview
FL is typically a slow-growing or indolent form of NHL which accounts for 20 to 30 percent of all NHL cases4, with a prevalence of
approximately 245,0005 and an incidence of approximately 31,0006 in the US, Japan, and 5 major EU markets. Advanced stage FL is usually
not considered to be curable, but more of a chronic disease, with patients living for many years.
Multiple Sclerosis Overview
Relapsing multiple sclerosis (RMS) is a chronic demyelinating disease of the central nervous system (CNS) and includes people with
relapsing-remitting multiple sclerosis (RRMS) and people with secondary progressive multiple sclerosis (SPMS) who continue to experience
relapses. RRMS is the most common form of multiple sclerosis (MS) and is characterized by episodes of new or worsening signs or symptoms
(relapses) followed by periods of recovery. It is estimated that nearly 1,000,000 people are living with MS in the United States7 and
approximately 85 percent are initially diagnosed with RRMS8. The majority of people who are diagnosed with RRMS will eventually transition
to SPMS, in which they experience steadily worsening disability over time.
OUR PRODUCTS UNDER DEVELOPMENT
We have leveraged our B-cell platform to develop a robust drug pipeline of both targeted orally available, potent and selective small
molecule kinase inhibitors and intravenously delivered “off-the-shelf” immunotherapies that leverage the patient’s own immune system to fight
cancer. We currently own worldwide development and commercial rights, subject to certain limited geographical restrictions, to all of our pre-
clinical and clinical programs. The following table summarizes our most advanced drug candidates as of February 2020.
Clinical Drug Candidate
(molecular target)
Ublituximab (anti-CD20/mAb)
Umbralisib (Dual PI3K delta and CK1 epsilon
inhibitor)
Cosibelimab (anti-PDL1)
TG-1701 (BTK inhibitor)
TG-1801 (anti-CD47/CD19)
Initial Target Disease
Chronic Lymphocytic Leukemia
Multiple Sclerosis
Chronic Lymphocytic Leukemia
Marginal Zone Lymphoma
Follicular Lymphoma
B-cell Cancers
B-cell Cancers
B-cell Cancers
Stage of Development
(pivotal study)
Phase 3 trial (UNITY-CLL)
Phase 3 trials (ULTIMATE I and II)
Phase 3 trial (UNITY-CLL)
Phase 2b trial (UNITY-NHL)
Phase 2b trial (UNITY-NHL)
Phase 1 trial
Phase 1 trial
Phase 1 trial
4 Lymphoma Research Foundation: Follicular Lymphoma https://lymphoma.org/aboutlymphoma/nhl/fl/
5 Decision Resources via Pharmacyclics Investor Presentation, December 2014
6 Global Data 2016 NHL Model
7 National MS Society https://www.nationalmssociety.org/About-the-Society/MS-Prevalence
8 Multiple Sclerosis International Federation, 2013 via Datamonitor p. 236
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Ublituximab Overview
Ublituximab (also referred to as TG-1101) is a glycoengineered anti-CD20 monoclonal antibody that targets a unique epitope on the
CD20 antigen found on the surface of B-lymphocytes. We hold exclusive worldwide rights to develop and commercialize ublituximab for all
indications, except for the territories of France and Belgium for which an option to commercialize has been retained by LFB Biotechnologies,
South Korea and Southeast Asia which we licensed to Ildong Pharmaceutical Ltd 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). Ublituximab 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 rituximab the leading anti-CD20 monoclonal antibody, which had worldwide sales in
2018 of approximately $7 billion.
ADCC is a mechanism that is dependent on interactions between the Fc region of the antibody and the FcγR receptors on immune
system effector cells, most notably the Fc−gammaRIIIA (CD16) receptor found on NK cells. These interactions trigger effector cells to release
cytotoxic molecules and proteases resulting in B-cell death. Ublituximab is a next generation, type I chimeric IgG1 monoclonal antibody with a
glycoengineered Fc region designed specifically to induce higher ADCC activity in comparison to rituximab. In pre-clinical (non-human)
experiments, ublituximab has demonstrated an ability to enhance ADCC by >50x over rituximab, resulting in enhanced potency.
Umbralisib Overview
Umbralisib (also referred to as TGR-1202) is an oral, once daily dual inhibitor of PI3K-delta and CK1-epsilon, with nanomolar
potency to the delta isoform and high selectivity over the alpha, beta, and gamma isoforms. Umbralisib also uniquely inhibits CK1-epsilon,
which may lead to a differentiated safety profile. The phosphoinositide-3-kinases (“PI3Ks”) are a family of enzymes involved in various
cellular functions, including cell proliferation and survival, cell differentiation, intracellular trafficking, and immunity. There are four isoforms
of PI3K (alpha, beta, delta, and gamma), of which the delta isoform is strongly expressed in cells of hematopoietic origin, and often implicated
in B-cell related lymphomas.
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 umbralisib with the proteasome inhibitor carfilzomib and the
unique effects of the combination to silence c-Myc in various preclinical lymphoma and myeloma models. Importantly, the manuscript for the
first time reported on umbralisib’s unique complimentary mechanism of inhibiting the protein kinase casein kinase-1 epsilon (CK1e), which
may lead to a differentiated safety profile by supporting T regulatory cells, a part of the immune system necessary to protect against
autoimmune mediated toxicities.
Early Clinical Development of Ublituximab and Umbralisib
Single Agent Ublituximab (TG-1101) in Relapsed/Refractory NHL & CLL
Two single-agent, dose-escalation, Phase I studies were undertaken with ublituximab to establish an optimal dose in patients with NHL
and CLL. The first was a two part first-in-human Phase I clinical trial completed in France in which ublituximab was evaluated in relapsed or
refractory CLL. In 2012 a second single-agent Phase I study was undertaken in the US entitled "An Open Label Phase I/II Trial of the Efficacy
and Safety of TG-1101 in Patients with B-cell Non-Hodgkin Lymphoma who have Relapsed or are Refractory After CD20 Directed Antibody
Therapy." In July 2014, this trial completed enrollment of 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 rituximab or a rituximab 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. Data from this study were published
in the British Journal of Haematology in February 2017. In both Phase 1 studies, single agent ublituximab was deemed well tolerated by
treating investigators and displayed promising clinical activity in relapsed and refractory patients.
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Single Agent Ublituximab (TG-1101) in Relapsing Forms of Multiple Sclerosis
In May 2016, we commenced our first study of ublituximab in patients with relapsing forms of multiple sclerosis (RMS), 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," was led
by Edward Fox, MD, PhD, Director of the Multiple Sclerosis Clinic of Central Texas and Clinical Associate Professor at the University of
Texas Dell Medical School in Austin, TX. The primary objective of the study was to determine the optimal dosing regimen for ublituximab
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 were also evaluated.
In October 2018, final data from this Phase 2 study were presented at the 34th Congress of the European Committee for Treatment and
Research in Multiple Sclerosis (ECTRIMS) meeting in Berlin, Germany. The presentation included final data on all 48 patients enrolled in the
study through 48 weeks of treatment. Ublituximab was well tolerated across all patients including those receiving rapid infusions, as low as a
one hour for the 450mg dose currently being studied in the Phase 3 ULTIMATE program and no study drug related discontinuations occurred.
Median B cell depletion was >99% at the primary analysis point of Week 4 (n=48) and maintained at Week 24 and Week 48. Ublituximab also
completely eliminated all (100%) T1 Gd-enhancing lesions at Week 24 and maintained complete elimination at Week 48 (n=46) and an
Annualized Relapse Rate (ARR) of 0.07 was observed with 93% of subjects relapse free at Week 48.
In October of 2019, at the 35th Congress of the European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS)
meeting in Stockholm, Sweden, we re-presented the final 48-week data from the Phase 2 trial, and also presented long-term follow-up data for
45 patients from the Phase 2 trial that enrolled into the Open Label Extension (OLE) trial. With a median duration of follow-up of 124.7 weeks,
ublituximab continued to be well tolerated, no subjects discontinued due to an adverse event (AE) related to ublituximab, and AEs deemed at
least possibly related to ublituximab were infrequent with all patients dosed at 450mg administered in a one-hour infusion. Additionally,
infusion related reactions (IRRs) were rare during the OLE, occurring in only 5 patients (11%) all Grade 1 or 2.
Single Agent Umbralisib (TGR-1202) in Patients with Relapsed/Refractory Hematologic Malignancies
In January 2013, we initiated a Phase I, open label, multi-center, first-in-human clinical trial of umbralisib in patients with hematologic
malignancies. The study entitled "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 was open to patients with relapsed or
refractory NHL, CLL, and other select hematologic malignancies. As of February 2016, this study closed to enrollment.
In February 2018, data from this first-in-human Phase 1 clinical trial of umbralisib was published in The Lancet Oncology. The
manuscript was titled, “Umbralisib, a novel PI3K and casein kinase-1 epsilon inhibitor, in relapsed or refractory chronic lymphocytic leukemia
and lymphoma: an open-label, phase 1, dose-escalation, first-in-human study.” The paper includes safety and efficacy information from 90
patients with relapsed or refractory hematologic malignancies, including patients with CLL and various forms of lymphoma treated with single
agent umbralisib. In this study, the data showed that umbralisib was well tolerated with a favorable safety profile.
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Additional Early Studies with Ublituximab (TG-1101) and/or Umbralisib (TGR-1202)
In addition to the above Phase 1 trials for ublituximab and umbralisib, the following Phase 1 and Phase 2 studies, as well as an
integrated analysis were conducted:
● Phase 1/2 Study of Umbralisib, Ublituximab and Venetoclax in patients with relapsed or refractory CLL – In December
2019, we presented triple therapy data from patients with relapsed/refractory CLL treated with the triple therapy combination of
ublituximab, umbralisib and venetoclax during an oral session at the 61st American Society of Hematology (ASH) annual
meeting and exposition. At the time of presentation, twenty-seven patients were evaluable for safety and 23 were evaluable for
efficacy. The triple therapy regimen was administered with 3 cycles of U2 induction/debulking to reduce the risk of tumor lysis
syndrome (TLS), followed by the combination of umbralisib and venetoclax starting in cycle 4. Patients who were bone marrow
MRD negative after cycle 12 stopped all therapy. Overall response rate (ORR) of 87% (20/23) after U2 induction period at cycle
3, prior to introduction of venetoclax, in relapsed/refractory CLL patients, including patients refractory to ibrutinib. U2 induction
appeared to reduce venetoclax TLS risk, with no patients remaining as TLS high-risk following 3 cycles of U2. 13 patients were
treated for >7 cycles and 9 patients for > 12 cycles, with the following response rates observed: 100% ORR (13/13) after cycle 7
for the triple combination; 100% ORR (9/9) including 44% Complete Response (CR) after cycle 12 for the combination; 100%
(9/9) of patients had undetectable minimal residual disease (MRD) (<0.01%) in peripheral blood after 12 cycles of therapy; and
78% (7/9) of patients who completed 12 cycles of therapy had undetectable MRD in bone marrow and have stopped therapy. At
the time of the presentation, no patients (n=27) had progressed with a median follow-up of 6.4 months. Overall the triplet
regimen was generally well tolerated with no events of TLS observed.
● Phase 1 Study of TG-1701, a Once-Daily BTK inhibitor, as a Single Agent and in Triple Combination with Umbralisib and
Ublituximab in patients with relapsed or refractory NHL and CLL – In December 2019, we presented data from patients
with relapsed/refractory NHL and CLL treated with the triple therapy combination of TG-1701, umbralisib and ublituximab
during a poster session at the 61st American Society of Hematology (ASH) annual meeting and exposition. The proprietary triplet
of U2 plus TG-1701 induced 86% ORR (6 of 7) in patients with relapsed/refractory NHL and CLL at the lowest dose of TG-1701
tested. Of the 7 patients treated with the triple, 4 patients had follicular lymphoma (FL), of which 2 achieved a complete response
(CR), 1 patient achieved partial response (PR) and 1 patient had stable disease SD). The remaining three patients treated with the
combination included the following: 1 patient with marginal zone lymphoma (MZL) achieved a PR, 1 patient with Waldenström's
macroglobulinemia (WM) achieved a PR; and 1 patient with diffuse large B-cell lymphoma (DLBCL) achieved a PR. As of the
time of the presentation, all patients treated with the triple combination of TG-1701 plus U2 remained on study.
● Ublituximab in Combination with Umbralisib with/without ibrutinib or bendamustine 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
ublituximab and umbralisib, (U2), for patients with relapsed and/or refractory CLL and NHL. The MD Anderson Cancer Center
was the lead center for this clinical trial. Additional cohorts were added to this study to explore the triple therapy combination of
U2 plus ibrutinib and the triple therapy combination of U2 plus bendamustine. Both U2 and the triplet combinations demonstrated
acceptable levels of tolerability with promising activity. Enrollment in all cohorts is now closed and patients continued to be
followed for safety and efficacy. Data highlights from each cohort include the following:
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o Ublituximab plus Umbralisib (U2):
◾ In December 2015 we presented the results from the U2 portion of this trial at the 57th American Society of Hematology
(ASH) annual meeting, Abstract Number 1538. The presentation included data from patients with relapsed and
refractory NHL and CLL treated with U2. The combination was well tolerated in the 71 patients evaluable for safety at
all dose levels up through 1200mg. This was a heavily pretreated population with high-risk features, including 58%
refractory to last treatment with multiple previous lines of rituximab-based therapy. Notably, the only Grade 3/4 adverse
event occurring in > 5% of patients was neutropenia and of the 71 patients available for safety, only 6 patients (8%)
discontinued due to an umbralisib related event. Additionally, 26 patients had been on U2 for 6+ months, with no events
of colitis reported as of the date of publication. Efficacy data was presented on patients treated at the higher doses of
umbralisib (1200mg of the original formulation and 600mg or greater of the micronized formulation). 80% (8 of 10)
ORR was observed in patients with CLL/SLL, including 1 complete response (CR) and 7 partial responses (PRs).
Notably, 75% of CLL patients had high-risk cytogenetics (17p and/or 11q del). 71% (12 of 17) ORR was observed in
heavily pretreated patients with indolent NHL (FL & MZL), including 4 CRs (24%) and 8 PRs, with 4 of the remaining
5 patients achieving stable disease.
◾ In September of 2019, results from the Phase I/IB combination trial of U2 were published in Blood, the Journal of the
American Society of Hematology. The paper includes safety and efficacy information from 22 patients with CLL or
small lymphocytic lymphoma (SLL) and 53 patients with NHL treated with the combination of ublituximab and
umbralisib, referred to as “U2”. Safety data was available from all 75 patients and demonstrated that the U2 combination
was well tolerated with the majority of adverse events (AEs) being grade 1 or 2 in severity and no maximum tolerated
dose achieved in either CLL or NHL. Importantly, U2 exhibited low rates of immune-mediated toxicities, typically
associated with other PI3K-delta inhibitors including colitis, pneumonia/pneumonitis, or hepatic toxicity, and
discontinuations due to AEs were limited (13%).
◾ Efficacy data was available from 69 patients and showed the combination to be highly active with a 72.5% clinical
benefit rate (defined as patients obtaining a Complete Response, Partial Response, or Stable Disease) across all subtypes
of B-cell cancers enrolled in the study. Of note, a median PFS of 27.57 months was observed in patients with
relapsed/refractory CLL (n=15) treated at therapeutic dose levels of umbralisib and a 65% overall response rate (ORR)
was observed in patients relapsed/refractory indolent NHL (n=20), including a 100% ORR amongst MZL patients (n=5).
◾ These data are described further in the manuscript entitled, “Ublituximab and Umbralisib in Relapsed/ Refractory B-cell
Non-Hodgkin Lymphoma and Chronic Lymphocytic Leukemia,” which was published online in the First Edition section
of Blood, the Journal of the American Society of Hematology.
o U2 plus Bendamustine: In December 2018, updated data for the U2 plus bendamustine cohort was presented at the 60th ASH
Annual Meeting. Overall, the U2 plus bendamustine combination was well tolerated and highly active in patients with
advanced indolent and aggressive NHL, including those not eligible for HD/SCT or CD19 CART therapy. Efficacy highlights
from this poster included an 85% (11 of 13) ORR including a 54% CR rate in patients with relapsed or refractory FL.
o U2 plus Ibrutinib: In January 2019, we announced the publication of results from the U2 plus ibrutinib cohort in The Lancet
Haematology. Safety data was available from 46 patients and the triple combination of ublituximab, umbralisib, and ibrutinib
was well tolerated with a manageable adverse event profile and no maximum tolerated dose achieved for the combination.
Efficacy data was available from 44 patients and showed the U2 plus ibrutinib combination to be highly active. The ORR
amongst all evaluable patients was 84%, with 100% (22 of 22) of patients with CLL/SLL achieving a response, including
36% achieving a CR. Among patients with NHL, 68% (15 of 22) achieved a response, including a 71% ORR in FL (n=7), a
100% ORR in MZL (n=3), and a 100% ORR in MCL (n=6).
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● Umbralisib as a single agent in CLL patients who are intolerant to prior BTK inhibitor or PI3K delta inhibitor therapy—
In September 2019, at the XVIII iwCLL meeting in Edinburgh, Scotland, data was presented from 51 patients with CLL who
were intolerant to prior BTK or PI3K delta inhibitor therapy who were then treated with single agent umbralisib. Umbralisib
demonstrated a favorable safety profile with only 12% of patients discontinuing due to an umbralisib related adverse event, of
which only one patient discontinued due to a recurrent adverse event (AE) also experienced with prior kinase inhibitor therapy.
As of the data presentation, over half of the patients enrolled had been on umbralisib for a duration longer than their prior kinase
inhibitor. The estimated median progression free survival (PFS) was 23.5 months (95% confidence interval: 13.1 – Not
Estimable). Enrollment is now closed with patients continuing to be followed.
● Umbralisib Long-term Follow-up Integrated Analysis in Patients with Relapsed/Refractory Hematologic Malignancies—
In December 2017, at the 59th ASH Annual Meeting, the Company presented integrated long-term follow-up data from 347
patients exposed to umbralisib across 5 studies, which continued to demonstrate high response rates in CLL, and FL coupled with
a favorable safety profile. In June 2018, an update on the data was presented at the 23rd Congress of the European Hematology
Association (EHA). The presentation included data pooled from 4 completed or ongoing Phase 1 or 2 studies containing
umbralisib, focusing on 177 patients who have been on daily umbralisib for a minimum of 6 months. Patients were heavily
pretreated, with 45% of patients having seen 3 or more prior lines of therapy. Umbralisib continued to exhibit a tolerable safety
profile with serious adverse events occurring in >1% of patients after 6 months on therapy limited to pneumonia (3%), diarrhea
(2%), and cellulitis (2%) with only 2% of patients discontinuing umbralisib as a result of diarrhea/colitis after being on umbralisib
for more than 6 months.
● Phase 2 trial of Umbralisib plus Ibrutinib in patients with relapsed or refractory CLL and MCL— In December 2018, we
announced the publication of results from the multicenter Phase 1/1b trial of umbralisib in combination with ibrutinib, the oral
Bruton's tyrosine kinase (BTK) inhibitor, in Lancet Haematology. This investigator-initiated trial was conducted at Dana-Farber
Cancer Institute and four additional centers across the USA in collaboration with the Leukemia and Lymphoma Society, Blood
Cancer Research Partnership with funding by TG Therapeutics. The publication includes safety and efficacy information from a
total of 42 relapsed or refractory patients, 21 with CLL and 21 with MCL. In this study, the combination of umbralisib and
ibrutinib was well tolerated and consistent with the additive toxicity profile of the two drugs individually. No dose-limiting
toxicities were observed, and the maximum-tolerated dose of umbralisib when combined with ibrutinib was not reached. The
recommended phase 2 dose of umbralisib when given in combination with ibrutinib was 800 mg once daily. Importantly, serious
immune-mediated toxicities were not observed with this combination, as had previously been reported with combinations of
different agents targeting this pathway, with only one case of transient Grade 3 transaminitis and no Grade 3/4 colitis or
pneumonitis. The combination of umbralisib and ibrutinib was also clinically active, with 90% of relapsed/refractory CLL
patients achieving an overall response (n=19), of which 62% (n=13) achieved a partial response or partial response with
lymphocytosis, and 29% (n=6) achieved a complete response. Of the 21 patients treated with MCL, 67% (n=14) achieved an
overall response, of which 48% (n=10) achieved a partial response and 19% (n=4) achieved a complete response.
● Phase 2 trial of Ublituximab plus Ibrutinib in patients with relapsed or refractory CLL and Mantle Cell Lymphoma
(MCL)— In December 2013, we initiated a multi-center Phase 2 clinical trial to evaluate the safety and efficacy of the
combination of ublituximab and ibrutinib for patients with CLL and MCL. Jeff P. Sharman, MD, Medical Director, Hematology
Research, US Oncology Network, was the Study Chair. This trial has completed enrollment. Final data from the MCL cohort of
this study was presented at the 57th ASH meeting held in December 2015, with data from the CLL cohort published in the British
Journal of Haematology in December 2016. 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. The data from the CLL cohort of this study supported the Phase 3 GENUINE study
evaluating ublituximab plus ibrutinib in CLL patients with high-risk cytogenetics.
● Additional early combination studies utilizing umbralisib with approved agents— Umbralisib has been evaluated in
combination with the anti-CD30 antibody drug conjugate, brentuximab vedotin, in patients with relapsed or refractory Hodgkin
lymphoma 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 umbralisib and or the U2 combination with other
approved agents for the treatment of B-cell malignancies.
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Current Phase 3 or Registration Directed Clinical Trials for Ublituximab and Umbralisib:
We have initiated and enrolled several Phase 3 and registration-directed Phase 2b clinical trials (i.e., clinical trials that may support a
marketing application for approval). The following are the 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 umbralisib monotherapy and U2 combinations in patients with previously treated NHL. The marginal zone
lymphoma (MZL) and the follicular lymphoma (FL)/small lymphocytic lymphoma (SLL) single agent umbralisib cohorts of this trial are fully
enrolled. These indolent lymphoma cohorts of the trial are being led by Nathan H. Fowler, MD, Associate Professor, Department of
Lymphoma/Myeloma at the University of Texas MD Anderson Cancer Center. The primary objective of these cohorts is to assess the efficacy
of single agent umbralisib as measured by Overall Response Rate (ORR).
● UNITY-NHL MZL Single Agent Umbralisib Cohort: The MZL cohort enrolled adult patients who had at least one prior line of
therapy that included an anti-CD20 monoclonal antibody. This cohort was designed to evaluate the safety and efficacy of single
agent umbralisib and the primary endpoint is ORR as determined by Independent Review Committee (IRC) assessment. The
primary analysis of ORR will be conducted once all treated patients have had at least 9 cycles (Cycle = 28 days) of follow-up.
Secondary endpoints include safety, duration of response, and progression-free survival (PFS).
In February 2019, we announced that the MZL cohort met the primary endpoint of ORR as determined by IRC for all treated
patients (n=69). The results met our target guidance of 40-50% ORR. Interim safety and efficacy data from the MZL cohort were
presented in an oral presentation at the American Association for Cancer Research (AACR) annual meeting on April 1, 2019. The
data presented included safety and tolerability data on all 69 treated patients (safety population) and efficacy data on 42 patients
who were enrolled at least 9 cycles (28 day cycles) prior to the data cut-off date (interim efficacy population). The safety
population had a median duration of exposure of 6.9 months and no unexpected toxicities were observed. Analysis of the interim
efficacy population showed an ORR by IRC of 52%, including 19% CR rate, an 88% clinical benefit rate by IRC (defined as
patients obtaining Complete Response + Partial Response + Stable Disease) and a median duration of exposure of 10.1 months.
These results were also presented in oral presentations during the 2019 American Society of Clinical Oncology (ASCO) annual
meeting and the 2019 International Conference on Malignant Lymphoma (ICML) both held in June of 2019.
Previously, in January 2019, the U.S. Food and Drug Administration (FDA) granted Breakthrough Therapy Designation (BTD) to
umbralisib for the treatment of adult patients with MZL who have received at least one prior anti-CD20 regimen. The BTD was
based on interim data from the MZL cohort of the UNITY-NHL trial. In April 2019, the FDA granted orphan drug designation to
umbralisib for the treatment of patients with any of the three types of marginal zone lymphoma (MZL): nodal, extranodal, and
splenic MZL.
Most recently, in January of 2020, we initiated a rolling submission of an NDA to the FDA for umbralisib as a treatment for
previously treated MZL or FL. We anticipate completion of this rolling submission in the first half of 2020.
● UNITY-NHL FL/SLL Single Agent Umbralisib Cohort: The FL/SLL cohort enrolled adult patients who had two or more prior
lines of therapy that included an anti-CD20 monoclonal antibody and an alkylating agent. In October 2019, we announced that the
FL patients within this cohort met the primary endpoint of ORR as determined by Independent Review Committee (IRC) for all
treated follicular lymphoma patients (n=118). The results met our target guidance of 40-50% ORR. Importantly, umbralisib
monotherapy appeared to be well tolerated with a safety profile consistent with previous reports. Most recently, in January of
2020, we received guidance from the FDA allowing submission of a single NDA for MZL and FL indications. As noted earlier,
we initiated a rolling submission of an NDA to the FDA for umbralisib in MZL/FL and anticipate completion of the rolling
submission in the first half of 2020. We plan to present the data at a future medical conference as well as discuss the data with the
FDA.
● UNITY-NHL Additional Cohorts: There are additional exploratory cohorts of the UNITY-NHL trial focused on Diffuse Large
B-Cell Lymphoma (DLBCL) and Mantle Cell Lymphoma (MCL). In total, there are currently four cohorts in the UNITY-NHL
trial including, MZL, FL/SLL, DLBCL, and MCL. Each cohort is enrolled and evaluated separately from the others.
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UNITY-CLL Phase 3 Trial Evaluating Umbralisib plus Ublituximab (U2): UNITY-CLL is a global Phase 3 randomized controlled
clinical trial that includes two key objectives: first, to demonstrate contribution of each agent in the ublituximab plus umbralisib regimen (the
combination sometimes referred to as "U2"), and second, to demonstrate superiority in PFS over the standard of care to support the submission
for full approval of the combination. The study randomized patients into four treatment arms: ublituximab plus umbralisib, ublituximab alone,
umbralisib alone, and an active control arm of obinutuzumab plus chlorambucil. The primary endpoint for this study is progression free survival
(PFS) which we intend to use to support a submission for approval of the U2 combination in CLL. The UNITY-CLL trial is being led by John
Gribben, MD, professor of Medical Oncology, Barts Cancer Institute, United Kingdom. The study completed enrollment in October 2017 with
over 600 patients across the four treatment arms, with approximately 420 patients in the U2 arm and the active control arm combined.
In September 2015, we reached an agreement with the FDA regarding a Special Protocol Assessment (SPA) on the design, endpoints,
and statistical analysis approach of the UNITY-CLL Phase 3 trial. 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 ublituximab and umbralisib in
combination.
In May 2017, a pre-specified interim analysis was conducted to assess contribution of each single agent in the ublituximab plus
umbralisib combination regimen, which allowed for the early termination of both single agent arms. A second interim analysis was planned to
evaluate ORR to support accelerated approval when all patients in the U2 arm and the active control arm had at least 6 months of follow-up. In
September 2018, we announced that the independent Data Safety Monitoring Board (“DSMB”) reviewed ongoing data from the trial and
advised us that the second interim analysis of ORR could not be conducted at that time as the data were not sufficiently mature to conduct the
analysis. Given the uncertainty surrounding the timing and outcome of the ORR analysis, as well as the significant regulatory hurdles
associated with accelerated approval in CLL, we are no longer planning to seek accelerated approval for U2 in CLL based on ORR. The
Company remains blinded to all efficacy data and the trial continues to be conducted under SPA agreement with the FDA. We await the results
for the primary endpoint for the study, PFS, to seek full approval for U2 in patients with CLL, if the study is positive. Importantly, an
application based on PFS is expected to support full approval versus accelerated approval, which is a conditional approval. Additionally, in
September 2018, the DSMB reviewed safety data from over 600 patients, including over 300 patients treated with umbralisib either alone or in
combination with ublituximab, of which approximately 60% were treatment naïve. After review of the data, the DSMB identified no safety
concerns and recommended the trial continue without modification.
In March 2019, the UNITY-CLL Data and Safety Monitoring Board (DSMB) conducted a pre-planned futility analysis of PFS. The
DSMB determined that the trial was not futile and recommended the UNITY-CLL trial continue as planned. The pre-specified futility analysis
of the UNITY-CLL trial did not allow for early stopping due to positive efficacy but only for lack of efficacy. The DSMB also again reviewed
safety information from all 600+ CLL patients on the UNITY-CLL trial, including over 300 treatment naive and previously treated patients on
umbralisib alone or in combination with ublituximab. Based on its review, no safety concerns were identified and the DSMB recommended the
UNITY-CLL trial continue without modification.
GENUINE Phase 3 Trial Evaluating Ublituximab plus Ibrutinib: GENUINE is a randomized controlled clinical trial evaluating
patients with previously treated CLL with specific high-risk cytogenetic abnormalities. Patients in this trial were randomized to receive either
ublituximab plus ibrutinib or ibrutinib alone. Due to enrollment challenges associated with this study, 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 an SPA with the FDA,
and was designed to enroll approximately 330 patients, with a two-part analysis of both ORR and PFS. The trial as amended in October 2016,
and PFS was removed as a co-primary endpoint leaving ORR as the sole primary endpoint. The target number of patients was also reduced to
120 patients. The SPA was terminated at the time the changes were implemented.
In March 2017, we reported positive top-line data from the GENUINE study. The study met its primary endpoint demonstrating a
statistically significant improvement in ORR, as determined by an Independent Review Committee (IRC) using the iwCLL (Hallek 2008)
criteria, compared to ibrutinib alone in both the Intent to Treat (ITT) population (p=0.001) and Treated population (p < 0.001).
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In June 2017, the results were presented by Dr. Jeff P. Sharman, Medical Director, Hematology Research, US Oncology in an oral
session during the 53rd American Society of Clinical Oncology ("ASCO") Annual Meeting in Chicago, IL. We had hoped to use the ORR
results from the GENUINE trial to file for accelerated approval for the combination of ublituximab plus ibrutinib. In October of 2017, we
announced the results of a meeting with the FDA related to the potential accelerated approval application. The FDA had expressed concern that
an intervening approval for the treatment of relapsed or refractory CLL could, as available therapy, have the effect of blocking our accelerated
approval application. In June 2018, venetoclax received full approval for the treatment of relapsed or refractory CLL, the same indication for
which we planned to file for accelerated approval. While we do believe under the FDA guidance related to accelerated approval that there are
benefits of ublituximab plus ibrutinib over presently available therapies that could support approval, we have decided at this time to not pursue
the filing of the results from the GENUINE trial to support accelerated approval.
In October 2019, we announced that final long-term results from the Phase 3 GENUINE study demonstrated that ublituximab in
combination with ibrutinib improved progression-free survival (PFS), as determined by Independent Review Committee (IRC). Additionally,
the combination of ublituximab and ibrutinib was well tolerated with no new safety signals identified at a median follow-up of >4 years. We
plan to present these final data at a future medical conference, as well as share the results with the U.S. Food and Drug Administration (FDA).
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 relapsing forms of Multiple Sclerosis (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 submission for approval of ublituximab in RMS. Each trial was
designed to enroll approximately 440 subjects, randomized in a 1:1 ratio. This trial is being led by Lawrence Steinman, MD, George A.
Zimmermann Professor and Professor of Pediatrics, Neurology and Neurological Sciences at Stanford University.
In August 2017, we reached an agreement with the FDA regarding an SPA on the design of two Phase 3 clinical trials for ublituximab,
referred to as the ULTIMATE I and ULTIMATE II trials, for the treatment of relapsing forms of Multiple Sclerosis (RMS). The SPA provides
agreement that the two Phase 3 trial designs adequately address objectives that, if met, would support the regulatory submission for approval of
ublituximab in RMS.
In August 2018, we announced that target enrollment into the ULTIMATE I and II trials had been achieved, and that enrollment would
continue into September 2018 to allow identified patients to participate in the study. At completion of full enrollment in October of 2018,
approximately 1,100 subjects were enrolled in both studies combined.
In October 2019, at the 35th Congress of ECTRIMS, we presented the ULTIMATE I & II Phase 3 program trial design and
demographic data. The presentation concluded that patient baseline characteristics were consistent with a typical RMS population, and topline
results from the ULTIMATE I & II trials are expected in the second half of 2020.
ULTRA-V Phase 2b Trial Evaluating U2 plus Venetoclax in CLL: ULTRA-V is a Phase 2b open-label, multicenter, registration-
directed clinical trial designed to investigate the efficacy and safety of ublituximab and umbralisib (U2) combined with venetoclax in subjects
with Chronic Lymphocytic Leukemia. The primary endpoint for this study is ORR and CR rate. This trial is currently enrolling.
Early Pipeline Overview and Clinical Development
Cosibelimab (anti-PD-L1 monoclonal antibody) Overview
Cosibelimab (also referred to as TG-1501) is a fully human monoclonal antibody of IgG1 subtype that binds to Programmed Death-
Ligand 1 (PD-L1) and blocks its interactions with PD-1 and B7.1 receptors. Cancer cells elude anti-tumor immunity through multiple
mechanisms, including upregulated expression of ligands for inhibitory immune checkpoint receptors. Signals from PD-L1 on tumor cells and
in the tumor microenvironment help those tumors avoid immune attack and elimination by preventing activation of tumor specific effector T-
cells. Anti-PD-L1 antibodies are designed to block that signal, permitting effector T-cells to attack the cancer. Clinical studies have shown that
blockade of the PD-1/PD-L1 pathway by monoclonal antibodies can enhance the immune response and result in anti-tumor activity.
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Preclinically, it has been shown that the effects of anti-PD-L1 intervention can be enhanced by utilizing other mechanisms targeting
the tumor microenvironment. Combining immunotherapies like anti-PD-L1, which counters the tumor's immune-evading defense system with
other anti-cancer agents such as ublituximab or umbralisib, may better engage the body's own immune system to help fight cancer.
A comprehensive array of in vitro biochemical and cellular assays was established to characterize the binding and the functional
activities of cosibelimab. The in vitro data demonstrated that the affinity, PD-L1 binding capability, relative ability to inhibit PD-1/PDL-1
interactions, and functional activity of cosibelimab in cellular assays are comparable to those of atezolizumab, durvalumab and avelumab - the
currently approved products sharing the same mechanism of action.
Cosibelimab is currently being evaluated in an ongoing study (Study CK-301-101: NCT03212404), enrolling patients with select solid
tumors, being conducted by our licensor. In the dose escalation portion of this trial, doses ranging from 200mg to 800mg were tested with no
dose-limiting toxicities observed and no maximum tolerated dose (MTD) was achieved; therefore, a fixed dose of 800 mg was the selected
starting dose of cosibelimab for patients with hematologic malignancies.
In December 2018, the FDA approved an IND for cosibelimab and a Phase 1 study in subjects with select subtypes of lymphoma
commenced in 2019, as did a study of cosibelimab in combination with ublituximab and/or umbralisib. Based on our rapidly evolving
understanding of the pathobiology of lymphoma subtypes, we envision further combinations with other immunotherapies in the future.
TG-1701 (BTK inhibitor) Overview
TG-1701 is a novel, orally available and covalently-bound Bruton’s tyrosine kinase (BTK) inhibitor that exhibits superior selectivity to
BTK compared to ibrutinib in in vitro kinase screening.
B-cell receptor (BCR) signaling is crucial for normal B-cell development and supports the survival and growth of malignant B-cells in
patients with B-cell leukemias or lymphomas. Targeting BTK, an essential element of BCR signaling pathway which regulates the survival,
activation, proliferation, and differentiation of B lymphocytes, has shown remarkable efficacy with an acceptable safety profile in B-cell
malignancies.
In June 2018, pre-clinical data for TG-1701 demonstrating favorable pharmacologic properties was presented at the 23rd Congress of
the European Hematology Association (EHA) in Stockholm, Sweden. In vitro pharmacology studies have revealed that TG-1701 inhibited BTK
with greater than 10-fold selectivity as measured by IC50 on the kinase activities of EGFR, ITK, TXK, JAK3, HER2 and HER4. In vivo
pharmacology studies showed that TG-1701 significantly inhibited the growth of xenograft lymphoid tumors including OCI-LY-10 and DOHH-
2 in nude mice.
We are currently evaluating TG-1701 in a Phase 1, multi-center, dose-escalation clinical trial in patients with B-cell malignancies. This
trial is designed to evaluate the safety and tolerability of TG-1701 alone and in combination with ublituximab and umbralisib (U2) in adults
with B-cell malignancies and determine the recommended Phase 2 dose. Key secondary objectives include evaluation of pharmacokinetics
(PK), pharmacodynamics, and preliminary anticancer activity. Preliminary data from this Phase 1 study was presented at ASH 2019.
TG-1801 (anti-CD47/anti-CD19 bispecific monoclonal antibody) Overview
TG-1801 is a first-in-class, bispecific CD47 and CD19 antibody. It is the first therapy to target both CD19, a B-cell specific market
widely expressed across B-cell malignancies, and CD47, the "don’t eat me" signal used by both healthy and tumor cells to evade macrophage
mediated phagocytosis. CD47 is expressed ubiquitously on normal cells, including red blood cells and platelets. CD19 is a specific B-cell
marker, expressed early during pre-B cell ontogeny and until terminal differentiation into early plasma cells. The majority of B-cell lineage
malignancies (more than 90%) express CD19, including NHL, CLL and acute lymphoblastic leukemia (ALL). Tumor B-cells that have lost the
expression of CD20 after anti-CD20 mAb therapy, have been found to maintain the expression of CD19, making CD19 an attractive target in
the treatment of B cell malignancies. By co-targeting both CD47 and CD19, TG-1801 has the potential to overcome the limitations of existing
CD47 targeted therapies by avoiding the side effects caused by indiscriminate blockade of CD47 on healthy cells. In addition to potentially
enhancing tolerability, the co-targeting of CD19 by TG-1801 may provide a secondary mechanism of direct anti-tumor activity through the
engagement of effector cells and induction of antibody dependent cellular cytotoxicity (ADCC).
TG-1801 binds to human CD19 with significantly higher affinity than towards CD47. This difference between its affinity to CD19 and
CD47 allows TG-1801 to bind and selectively block CD47 on CD19+ B-cells but not on CD19- red blood cells or platelets in human peripheral
blood.
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In in vitro assays, TG-1801 induces antibody-dependent cellular phagocytosis (ADCP) and antibody-dependent cellular cytotoxicity
(ADCC) of malignant tumor B-cell lines and primary tumor B-cells from patients with B-cell acute lymphoblastic leukemia (B-ALL), B-cell
chronic lymphocytic leukemia (B-CLL) and numerous subtypes of NHL.
In in vivo mouse tumor models, treatment with TG-1801 inhibited tumor growth in Raji cell subcutaneous xenograft model, NALM-6
cell disseminated tumor model, and patient-derived xenograft models, including primary tumor cells from patients with diffuse large B-cell
lymphoma (DLBCL) and B-ALL. In addition, the combination of rituximab and TG-1801 demonstrated enhanced activity over TG-1801
monotherapy.
In summary, TG-1801 demonstrates anti-tumor activity in both in vitro assays (ADCP and ADCC) and in vivo animal tumor models.
In the first quarter of 2019, we commenced a Phase 1 first-in-human, dose-escalation study of TG-1801. This study is evaluating
escalating doses of TG-1801 in patients with B-Cell lymphoma. The primary objective of the study is to determine the recommended Phase 2
dose and to characterize the safety profile of TG-1801. Key secondary objectives are to evaluate the pharmacokinetics of TG-1801 and its
preliminary anticancer activity. Enrollment is ongoing in this Phase 1 study.
Preclinical Programs
In addition to our clinical programs, we currently have licensed preclinical programs for BET (TG-1601), IRAK4, and GITR.
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.”
Product Candidate
Ublituximab & Umbralisib
Ublituximab
Umbralisib + Ublituximab
Target Indication
CLL patients
In Relapsing forms of Multiple
Sclerosis (RMS)
Relapsed/refractory NHL patients
Development
Status
Phase III
Estimated
Completion
of Phase
2020
Estimated Cost
Phase
Approximately $2 million
to Complete
Phase III
Phase IIb
2020
2021*
Approximately $15 million
Approximately $3 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.
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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, trade secrets, proprietary information 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 seek to protect our proprietary technology and processes, in
part, by entering into confidentiality agreements with our collaborators, scientific advisors, employees and consultants, and invention
assignment agreements with our employees and consultants. There can be no assurance, however, that we can prevent unauthorized disclosure
or use of our trade secrets, know-how and proprietary information despite the existence of confidentiality agreements.
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 lags 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. 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.
We, or those companies from which we have licensed our drug candidates, file patent applications directed to our drug candidates in an
effort to establish intellectual property positions regarding these new chemical entities as well as uses of these new chemical entities in the
treatment of diseases. We also file patent applications directed to novel combinations of our drugs together and with drugs developed by others.
The intellectual property portfolios for our most advanced drug candidates as of February 2020 are summarized below. Each of these portfolios
contains pending patent applications covering our drug candidates and uses and combinations of the drug candidates, prosecution has just begun
or is in progress. Prosecution is a lengthy process, during which the scope of the claims initially submitted for examination by the USPTO is
often significantly narrowed by the time they issue, if they issue at all. We expect this to be the case with respect to our pending patent
applications referred to below.
Additionally, 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.
Ublituximab
Pursuant to our license for 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 ublituximab as well as method of use patents which cover use of ublituximab in combination with
various agents and for various therapeutic indications.
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The composition of matter patent for ublituximab has been issued in the U.S. and Europe, which affords patent protection until 2029 in
the U.S. and 2025 in Europe, exclusive of patent term extensions. We also have a method of use patent on the combination of umbralisib and
ublituximab which has been issued in the U.S., Europe, and Japan, and is pending in other territories globally. Additionally, we have numerous
granted patents and pending patent applications outside the U.S. which include claims directed to the composition of matter and methods of
treatment with ublituximab in various settings.
Umbralisib
Pursuant to our license for umbralisib with Rhizen, we have the exclusive commercial rights to a series of patent applications in the
U.S. and multiple countries around the world. The patent applications include composition of matter patents relating to the structure,
mechanism of action, and formulation for umbralisib as well as method of use patents which cover use of umbralisib in combination with
various agents and for various therapeutic indications. The composition of matter patent for umbralisib has been issued in the U.S. and Europe,
which affords patent protection until 2033, exclusive of patent term extensions. We also have a method of use patent on the combination of
umbralisib and ublituximab which has been issued in the U.S., EU, and Japan, and is pending in other territories globally. All other patent
applications currently filed for umbralisib 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.
Cosibelimab (anti-PDL1 monoclonal antibody)
Pursuant to our Global Collaboration with Checkpoint Therapeutics, we have the exclusive commercial rights in the treatment of
hematological cancers and autoimmune diseases to a series of 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.
TG-1701 (BTK inhibitor)
Pursuant to our license agreement with Jiangsu Hengrui, we have the exclusive commercial rights in the treatment of hematologic
cancers to a patent family which covers the composition of matter and proposed methods of use for various therapeutic indications in the U.S.
and certain other countries. All patent applications currently filed for the BTK program are currently pending. Any patents maturing from these
pending applications will expire no sooner than October 2034.
TG-1801 (anti-CD47/anti-CD19 bispecific antibody)
Pursuant to our joint venture and license option agreement with Novimmune, we maintain an exclusive option, exercisable at specific
times during development, to license the commercial rights to a series of global patent applications, and the non-exclusive right to certain
technology patent applications. Any patents maturing from these pending applications will expire no sooner than December 2032.
Limitations on Patent Rights and Trade Secrets
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.” In addition, the limited patent protection 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.
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.
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Orphan Drug Designation
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, ublituximab received Orphan Drug Designation from the FDA for the treatment of MZL (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 also obtained Orphan Drug Designation for umbralisib as monotherapy for the treatment of CLL in August 2016, and for the
treatment of nodal, extranodal, and splenic MZL in April 2019. In addition, in January 2017, we announced that the FDA granted Orphan Drug
Designation covering the combination of ublituximab and umbralisib for the treatment of patients with CLL and DLBCL. We believe that
ublituximab and umbralisib, as well as our other pipeline products may be eligible for additional Orphan Drug Designations; however, we
cannot assure you that ublituximab, umbralisib, or any other drug candidates we may acquire or in-license, will obtain such Orphan Drug
Designations or that we will be the first to receive FDA approval for any drug candidates that do obtain Orphan Drug Designation so as to be
eligible for market exclusivity protection.
U.S. Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of the FDA approval of our drug candidates, some of our U.S. patents may be
eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as
the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for
patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the
remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half
the time between the effective date of an IND and the submission date of an NDA or BLA plus the time between the submission date of an
NDA or BLA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the
application for the extension must be submitted prior to the expiration of the patent. The USPTO, in consultation with the FDA, reviews and
approves the application for any patent term extension or restoration. In the future, we intend to apply for restoration of patent term for one of
our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical
trials and other factors involved in the filing of the relevant NDA or the BLA.
Also under the Hatch-Waxman Amendments, drugs that are new chemical entities (NCEs) are eligible for a five-year period of non-
patent marketing exclusivity in the United States. During the exclusivity period, the FDA may not accept for review an abbreviated new drug
application, or ANDA, or a 505(b)(2) NDA submitted by another company for another drug based on the same active moiety, regardless of
whether the drug is intended for the same indication as the original innovator drug or for another indication, where the applicant does not own
or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a
certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder. The Hatch-
Waxman Amendments also provide three years of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical
investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to
the approval of the application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only
the modification for which the drug received approval on the basis of the new clinical investigations. During this period, FDA will not approve
an application filed by a third party for the protected conditions of use that relies on any of the data from the new clinical investigations that
was submitted by the innovator company. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA that
does not rely on the innovator company’s data.
The Biologics Price Competition and Innovation Act of 2009 (BPCIA) created a 12-year period of data exclusivity for innovator
biologics. FDA therefore cannot approve a biosimilar application relying on data for a specific reference product until 12 years after the
reference product is first licensed. BLA supplements are not eligible for any additional exclusivity. The objectives of the BPCIA are
conceptually similar to those of the Hatch-Waxman Act described above. The implementation of an abbreviated approval pathway for
biological products is under the direction of the FDA. Since the enactment of the BPCIA, the FDA has issued several draft guidance’s for
industry related to the BPCIA, addressing scientific, quality and procedural issues relevant to an abbreviated application for a biosimilar
product. As of December 2019, FDA had approved 26 biosimilar applications.
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Orphan drug exclusivity, as described below, may offer a seven-year period of marketing exclusivity, except in certain circumstances.
Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to
existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term,
may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.
Upon FDA approval, we believe umbralisib would qualify for five years of data exclusivity as a NCE and ublituximab would qualify
for twelve years of data exclusivity as an innovator biologic.
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.
Ublituximab
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 and commercialization of ublituximab. Under the license agreement,
we have acquired the exclusive worldwide rights (exclusive of France/Belgium) for the development and commercialization of ublituximab. To
date, we have made no payments to LFB Group under the license agreement, excluding an upfront equity payment. LFB Group is eligible to
receive payments of up to an aggregate of approximately $31.0 million upon our successful achievement of certain clinical development,
regulatory and sales milestones, in addition to royalty payments on net sales of ublituximab at a royalty rate that escalates from mid-single
digits to high-single digits. The license will terminate on a country by country basis upon the expiration of the last licensed patent right or 15
years after the first commercial sale of a product in such country, unless the agreement is earlier terminated (i) by LFB if the Company
challenges any of the licensed patent rights, (ii) by either party due to a breach of the agreement, or (iii) by either party in the event of the
insolvency of the other party.
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 ublituximab in South Korea and Southeast Asia. Under the terms of the sublicense agreement, Ildong has been granted a
royalty bearing, exclusive right, including the right to grant sublicenses, to develop and commercialize ublituximab in South Korea, Taiwan,
Singapore, Indonesia, Malaysia, Thailand, Philippines, Vietnam, and Myanmar. 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 ublituximab 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.
Umbralisib
In September 2014, we exercised our option to license the global rights to umbralisib, thereby entering into an exclusive licensing
agreement (the “Umbralisib License”) with Rhizen Pharmaceuticals, S A (“Rhizen”) for the development and commercialization of umbralisib.
Prior to this, we had been jointly developing umbralisib in a 50:50 joint venture with Rhizen.
Under the terms of the Umbralisib 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 umbralisib, 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 umbralisib is co-formulated with another drug to create a new product (a "New Product"),
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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 umbralisib and any New
Product. Rhizen will also be eligible to participate in sublicensing revenue, if any, based on a percentage that decreases as a function of the
number of patients treated in clinical trials following the exercise of the license option. Rhizen will retain global manufacturing rights to
umbralisib, provided that they are price competitive with alternative manufacturers. The license will terminate on a country by country basis
upon the expiration of the last licensed 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.
Cosibelimab
In March 2015, we entered into a Global Collaboration (the “Collaboration”) with Checkpoint Therapeutics, Inc. (“Checkpoint”) for
the development and commercialization of Checkpoint’s anti-PD-L1 and anti-GITR antibody research programs in the field of hematological
malignancies with an option to acquire rights in autoimmune diseases. These antibodies were generated at Dana-Farber Cancer Institute (Dana-
Farber). In June 2019, we amended our Collaboration Agreement with Checkpoint to cover additional licenses necessary to continue the
development of the anti-PD-L1 and anti-GITR research programs. Under the terms of the initial Collaboration, we made an up-front payment
of $500,000, and upon entering into the amended agreement, made an additional payment of $1,000,000. Under the terms of the amended
agreement, we will make development and sales-based milestone payments up to an aggregate of approximately $110 million, and will pay a
tiered low double-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.
TG-1701 (BTK inhibitor)
In January 2018, we entered into a global exclusive license agreement with Jiangsu Hengrui Medicine Co., (“Hengrui”), to acquire
worldwide intellectual property rights, excluding Asia but including Japan, and for the research, development, manufacturing, and
commercialization of products containing or comprising of any of Hengrui’s Bruton’s Tyrosine Kinase inhibitors containing the compounds of
either TG-1701 (SHR-1459 or EBI-1459) or TG-1702 (SHR-1266 or EBI-1266) for hematologic malignancies. Pursuant to the agreement, we
paid Hengrui an upfront fee of $1.0 million in our common stock in April 2018. In addition, in July 2019, we paid Jiangsu the first milestone
under the agreement of $0.1 million in our common stock. Hengrui is eligible to receive milestone payments totaling approximately $350
million upon and subject to the achievement of certain milestones. Various provisions allow for payments in conjunction with the agreement to
be made in cash or our common stock, while others limit the form of payment. Royalty payments in the low double digits are due on net sales
of licensed products and revenue from sublicenses. Additionally, before we can license, sell, develop, or commercialize ublituximab within
China, we must notify Hengrui, giving Hengrui the right of first offer. The agreement allows combinations of TG-1701 or TG-1702 with
umbralisib, ublituximab, or U2. Additional combinations may be undertaken under the agreement subject to additional pre-specified payments
to Hengrui.
The term of the agreement expires after the expiration of the last royalty term to expire with respect to any of the patent rights under
the agreement. We or Hengrui may terminate the agreement upon notice to the other upon breach without remedy or upon insolvency. In
addition, either party may terminate the agreement upon a material breach, after providing the other party with adequate notice and allowing 45
days to cure.
TG-1801 (anti-CD47/anti-CD19 bispecific antibody)
In June 2018, we entered into a Joint Venture and License Option Agreement with Novimmune SA (“Novimmune”) to collaborate on
the development and commercialization of Novimmune’s novel first-in-class anti-CD47/anti-CD19 bispecific antibody known as TG-1801
(previously NI-1701). The companies will jointly develop the product on a worldwide basis, focusing on indications in the area of hematologic
B-cell malignancies. We serve as the primary responsible party for the development, manufacturing and commercialization of the product.
Pursuant to the agreement, in June 2018 we paid Novimmune an upfront payment of $3.0 million in our common stock. Further milestone
payments will be paid based on early clinical development, and the Company will be responsible for the costs of clinical development of the
product through the end of the Phase 2 clinical trials, after which the Company and Novimmune will be jointly responsible for all development
and commercialization costs. The Company and Novimmune will each maintain an exclusive option, exercisable at specific times during
development, for the Company to license the rights to TG-1801, in which case Novimmune is eligible to receive additional milestone payments
totaling approximately $185 million as well as tiered royalties on net sales in the high single to low double digits upon and subject to the
achievement of certain milestones.
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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.
TG-1601 (BET inhibitor)
In May 2016, as part of a broader agreement with Jubilant Biosys (“Jubilant”), 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. Some of these potential
competing drugs are further advanced in development than our drug candidates and may be commercialized earlier. The resulting changes in
standard of care can impact the likelihood of regulatory accelerated approval opportunities for our drug candidates.
For the cancer indications for which we are developing our products there are a number of established therapies with which we will
compete:
● For the treatment of Chronic Lymphocytic Leukemia, if U2 is approved, we expect U2 to compete with approved drugs such as
ibrutinib (AbbVie and Janssen), venetoclax (AbbVie and Roche), obinutuzumab (Roche), idelalisib (Gilead) and duvelisib
(Verastem), and established treatments such as rituximab (Roche), and several generically available chemotherapies. Additionally,
there are two second generation BTK inhibitors similar to ibrutinib in late-stage clinical testing for CLL that could enter the
market in the next 12-36 months. Each of these agents can be used as monotherapy or in combination with one or more of the
other agents.
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● For the treatment of Marginal Zone Lymphoma, if approved, we expect umbralisib to compete with ibrutinib (AbbVie and
Janssen), lenalidomide (Bristol-Myers) and established treatments such as rituximab and several generically available
chemotherapies.
● For the treatment of Follicular Lymphoma, if approved, we expect umbralisib to compete with approved drugs such as
obinutuzumab (Roche), idelalisib (Gilead), copanlisib (Bayer), and duvelisib (Verastem), lenalidomide (Bristol-Myers) and
established treatments such as rituximab (Roche), and several generically available chemotherapies. Each of these agents can be
used as monotherapy or in combination with one or more of the other agents. There are also several PI3K delta inhibitors in
earlier stages of development.
● In addition, a number of pharmaceutical companies are developing antibodies and bispecific antibodies targeting CD20, CD19,
CD47 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 U2 and umbralisib.
For Multiple Sclerosis for which we are developing ublituximab there are a number of established therapies with which we will
compete:
● If ublituximab is approved, we expect ublituximab will primarily compete against other CD20 targeted agents, while the group of
CD20 targeted agents will also compete broadly against a number of already approved MS therapies. Currently, there is one anti-
CD20 monoclonal antibody approved, ocrelizumab (Roche), and another having recently completed Phase 3 development,
ofatumumab (Novartis), which is expected to enter the market in the next 12 months.
Cosibelimab, TG-1701 and TG-1801 if approved will also face competition from drugs on the market and under development that are
in the same therapeutic class as each of those drugs.
Additional information can be found under Item “1A - Risk Factors – Other Risks Related to Our Business” within this report.
SUPPLY AND MANUFACTURING
We have limited experience in manufacturing products for clinical or commercial purposes. We currently do not have any
manufacturing capabilities of our own. We have established contract manufacturing relationships for the supply of ublituximab. For the supply
of umbralisib, Rhizen has established contract manufacturing relationships as part of our licensing agreement. 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, as we move closer to commercialization for
ublituximab and umbralisib we will need to scale-up production to ensure adequate commercial supply, complete validation batches and
complete pre-approval inspection batches. We are currently in the process of scaling up ublituximab and completing validation and pre-
approval inspection batches for both ublituximab and umbralisib. This is an expensive process which will require significant investment on our
part over the next 24 months and there can be no assurance given that such scale-up and process validation 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.
Process improvements are common during clinical development to accommodate raw material and component variability, enhance
productivity and/or accommodate different or larger equipment utilized during the scale-up process required for commercial manufacture.
These types of incremental process changes have been made during clinical development for both TG’s small and large molecule programs. For
example, our UNITY-CLL Phase 3 clinical trial contains ublituximab produced from both a pre-commercial process and the current commercial
process. While there are some analytical differences between the two materials, we do not expect those differences to have an effect on the
clinical performance of ublituximab. The primary difference is that the commercial process has resulted in further enhancement to the ADCC
effect, potentially enhancing potency. We will analyze the Phase 3 data to ensure that the materials are substantially similar in performance. If
there are material differences in safety or efficacy, we may need to adjust our statistical analysis of the Phase 3 study, which could impact the
approvability of the U2 combination in CLL.
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At the time of commercial sale, to the extent possible and commercially practicable, we would seek to engage back-up suppliers for
raw materials, manufacturing and testing services 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. Contract
manufacturers 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.
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. 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.
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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.
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.
For clinical trials that are intended to form the basis of a new drug or biologics license application for approval, sponsors of drugs may
apply for an SPA from the FDA, by which the FDA provides official evaluation and written guidance on the design and size of proposed
protocols. While obtaining an SPA provides some assurance the design of a trial should be sufficient for approval, the 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.
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, referred to as the UNITY-CLL trial, for the proprietary combination of ublituximab and umbralisib, 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 ublituximab and umbralisib in combination. Additionally, in August 2017, we reached an
agreement with the FDA regarding an SPA on the design of two Phase 3 clinical trials for ublituximab, referred to as the ULTIMATE I and
ULTIMATE II Phase 3 clinical trials, for the treatment of relapsing forms of Multiple Sclerosis (RMS). The SPA provides agreement that the
two Phase 3 trial designs adequately address objectives that, if met, would support the regulatory submission for approval of ublituximab.
Despite obtaining an SPA the trials may not be positive and even if positive may not support FDA approval.
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; and
● that nonclinical or clinical data demonstrate the potential to address an unmet medical need.
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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 an NDA to the FDA for review before the complete application is submitted.
In addition, sponsors may also apply to the FDA for Breakthrough Therapy Designation (“BTD”). The procedures and requirements
for BTD are similar to those required for fast track such that the Breakthrough Therapy Designation is intended to expedite the development
and review of a potential new drug for serious or life-threatening diseases however with BTD, there is a further requirement that the sponsor
present “preliminary clinical evidence” which “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.
In January 2019, we announced that the FDA granted Breakthrough Therapy Designation for umbralisib for the treatment of
adult patients with marginal zone lymphoma (MZL) who have received at least one prior anti-CD20 regimen based on interim results from a
subset of patients from the MZL cohort of the UNITY-NHL clinical trial.
Sponsors of drugs designated as fast track and as breakthrough therapy 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. To obtain accelerated approval you have to be the first company to have a treatment that successfully addresses a
certain unmet medical need or you need to clearly be better than all other treatments for that medical need, subject to certain qualifications.
Many companies have filed for accelerated approval and have subsequently failed to obtain such approval for a variety of reasons, including not
being first or not being best. To the extent a product does obtain an accelerated approval, such approval will be subject to the requirement that
the applicant study the drug further in a post-marketing confirmation clinical trial 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. Accelerated approval is sometimes referred to as conditional approval because if the results of these confirmation clinical
trials are not successful, the FDA has the right to remove the drug from the market and has done so in the past. Post-marketing confirmation
studies are usually underway at the time an applicant files the NDA. When required to be conducted, such post-marketing confirmation studies
must also be adequate and well-controlled. The applicant must carry out any such post-marketing confirmation studies with due diligence.
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 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. Many drug
approvals have been delayed due to issues at contract manufacturing facilities. If we were to experience any such delay that would negatively
impact our business and timeline to commercialization of any of our drug candidates affected by such manufacturing issue.
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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 continued 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
requirements 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. Importantly, the level of evidence of efficacy and safety necessary to apply for marketing authorization for a
drug candidate differs from country to country. In particular, clinical trial endpoints, and the level of clinical evidence that may support an
accelerated approval filing with the US FDA, such as the ORR data we intend to use as the basis for a filing for umbralisib in MZL, may be
insufficient to file for marketing application outside of the US. 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.
Coverage and Reimbursement
Sales of our drugs will depend, in part, on the extent to which our drugs will be covered by third-party payors, such as government
health programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly reducing
reimbursements for medical drugs and services. In addition, the containment of healthcare costs has become a priority of federal and state
governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have
shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement, importation,
and requirements for substitution of generic drugs. Adoption of price controls and cost-containment measures, and adoption of more restrictive
policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third-party
reimbursement for our drug candidates, if approved, or a decision by a third-party payor to not cover our drug candidates could reduce
physician usage of such drugs and have a material adverse effect on our sales, results of operations and financial condition.
In the United States, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act
of 2010, or collectively the Affordable Care Act, enacted in March 2010, has had a significant impact on the health care industry. The
Affordable Care Act expanded coverage for the uninsured while at the same time containing overall healthcare costs. With regard to
pharmaceutical products, the Affordable Care Act, among other things, created a new average manufacturer price definition under the Medicaid
Drug Rebate Program for drugs that are inhaled, infused, instilled, implanted or injected and not generally dispensed through the retail channel,
increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to
individuals enrolled in Medicaid managed care organizations, established annual fees and taxes on manufacturers of certain branded
prescription drugs, and a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale
discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period (subsequent legislation
increased this to 70% effective as of January 1, 2019), as a condition for the manufacturer’s outpatient drugs to be covered under Medicare
Part D.
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Since the enactment of the Affordable Care Act, certain provisions of the Affordable Care Act have been subject to judicial challenges
as well as efforts to repeal or replace them or to alter their interpretation or implementation. For example, the Tax Cuts and Jobs Act enacted on
December 22, 2017 (the Tax Act), eliminated the shared responsibility payment for individuals who fail to maintain minimum essential
coverage under section 5000A of the Internal Revenue Code of 1986, commonly referred to as the individual mandate, effective January 1,
2019. In December 2018, a United States District Court Judge for the Northern District of Texas ruled (i) that the “individual mandate” was
unconstitutional as a result of the associated tax penalty being repealed by Congress as part of the Tax Act; and (ii) the individual mandate is
not severable from the rest of the Affordable Care Act, and as a result the entire Affordable Care Act is invalid. On December 18, 2019, the
U.S. Court of Appeals for the Fifth Circuit affirmed the district court’s decision that the individual mandate is unconstitutional, but remanded
the case to the district court to reconsider the severability question. It is unclear how the ultimate decision in this case, or other efforts to repeal,
replace, or invalidate the Affordable Care Act or its implementing regulations, or portions thereof, will affect the Affordable Care Act or our
business. Further, on January 20, 2017, U.S. President Donald Trump signed an Executive Order directing federal agencies with authorities and
responsibilities under the Affordable Care Act to waive, defer, grant exemptions from, or delay the implementation of any provision of the
Affordable Care Act that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare
providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On October 13, 2017, President Trump signed an Executive
Order that terminated the cost-sharing subsidies under the Affordable Care Act. Several state Attorneys General filed suit to stop the
administration from terminating these subsidies, but on October 25, 2017, a federal judge in California denied their request for a restraining
order. In addition, CMS has issued regulations giving states greater flexibility, starting in 2020, in the identification of the essential health
benefits benchmarks for non-grandfathered individual and small group market health insurance coverage, including plans sold through the
health insurance exchanges established under the Affordable Care Act. There may be further action to repeal, replace or modify the Affordable
Care Act. While any legislative and regulatory changes will likely take time to develop and may or may not have an impact on the regulatory
regime to which we are subject, we cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of
potential legislation on us.
There has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices. Specifically,
there have been several recent U.S. Congressional inquiries and proposed federal and state legislation designed to, among other things, bring
more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and
manufacturer patient programs, and reform government program reimbursement methodologies for drugs. The Trump administration is
currently assessing additional proposals that are designed to affect drug pricing, such as tying U.S. drug prices to prices outside the United
States. Congress and the Trump administration have each indicated that they will continue to seek new legislative and/or administrative
measures to control drug costs. We expect that additional U.S. federal healthcare reform measures could be adopted in the future, any of which
could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in additional pricing
pressures and reduced demand for any of our products that receive marketing approval.
In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The
requirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its member
states to restrict the range of medicinal drugs for which their national health insurance systems provide reimbursement and to control the prices
of medicinal drugs for human use. A member state may approve a specific price for the medicinal drug or it may instead adopt a system of
direct or indirect controls on the profitability of the company placing the medicinal drug on the market. There can be no assurance that any
country that has price controls or reimbursement limitations for pharmaceutical drugs will allow favorable reimbursement and pricing
arrangements for any of our drugs. Historically, drugs launched in the European Union do not follow price structures of the United States and
generally tend to be significantly lower.
Other Healthcare Laws
We may also be subject to healthcare regulation and enforcement by the federal government and the states and foreign governments
where we may market our product candidates, if approved. These laws include, without limitation, state and federal anti-kickback, fraud and
abuse, false claims, privacy and security and physician sunshine laws and regulations.
The federal Anti-Kickback Statute prohibits, among other things, any person from knowingly and willfully offering, soliciting,
receiving or paying remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or
ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid
programs. The government has enforced the Anti-Kickback Statute to reach large settlements with healthcare companies based on sham
consulting and other financial arrangements with physicians. A person or entity does not need to have actual knowledge of the statute or
specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim including items or
services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False
Claims Act. The majority of states also have anti-kickback laws, which establish similar prohibitions and in some cases may apply to items or
services reimbursed by any third-party payor, including commercial insurers.
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In addition, the civil False Claims Act prohibits, among other things, knowingly presenting or causing the presentation of a false,
fictitious or fraudulent claim for payment to the U.S. government. Actions under the False Claims Act may be brought by the Attorney General
or as a qui tam action by a private individual in the name of the government. Violations of the False Claims Act can result in very significant
monetary penalties and treble damages. The federal government is using the False Claims Act, and the accompanying threat of significant
liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the U.S., for example, in connection
with the promotion of products for unapproved uses and other sales and marketing practices. The government has obtained multi-million and
multi-billion dollar settlements under the False Claims Act in addition to individual criminal convictions under applicable criminal statutes.
Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to
investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, also created new federal criminal statutes that
prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program,
including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a
criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any
materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate
it in order to have committed a violation.
There has also been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare
providers. The Affordable Care Act, among other things, imposes new reporting requirements on drug manufacturers for payments made by
them to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family
members. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year (or up to an
aggregate of $1 million per year for “knowing failures”), for all payments, transfers of value or ownership or investment interests that are not
timely, accurately and completely reported in an annual submission. Drug manufacturers are required to submit annual reports to the Centers for
Medicare & Medicaid Services, which publicly posts the data on its website. Certain states also mandate implementation of compliance
programs, impose restrictions on drug manufacturer marketing practices and/or require the tracking and reporting of gifts, compensation and
other remuneration to physicians.
We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our
business. HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and their respective implementing
regulations, including the final omnibus rule published on January 25, 2013, imposes specified requirements relating to the privacy, security and
transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards
directly applicable to “business associates,” defined as independent contractors or agents of covered entities that create, receive, maintain or
transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the
civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state
attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek
attorney’s fees and costs associated with pursuing federal civil actions. In addition, we may be subject to state law equivalents of each of the
above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor,
including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which
differ from each other in significant ways, thus complicating compliance efforts.
EMPLOYEES
As of February 14, 2020, we had 134 full and part-time employees. None of our employees are represented by a collective bargaining
agreement, and we have never experienced a work stoppage.
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ITEM 1A. RISK FACTORS.
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. If any of the following risks occur, 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. The risks described below are not the only ones that our business faces. Additional risks not currently known to us or that we
currently deem to be immaterial may adversely impact our business in the future.
Risks Related to Our Financial Position and Need for Additional Capital
We are a biopharmaceutical company with a limited operating history and have not generated any revenue from drug sales. We have
incurred significant operating losses since our inception and anticipate that we will incur continued losses for the foreseeable future.
We are a biopharmaceutical company with a limited operating history on which investors can base an investment decision.
Biopharmaceutical drug development is a highly speculative undertaking and involves a substantial degree of risk. We commenced operations
in January 2012. Our operations to date have been limited primarily to organizing and staffing our company, business planning, raising capital,
developing our technology, identifying potential drug candidates and undertaking pre-clinical studies and commencing clinical trials. We have
never generated any revenue from drug sales. We have not obtained regulatory approvals for any of our drug candidates.
We have not yet demonstrated our ability to successfully complete large-scale, pivotal clinical trials, obtain regulatory approvals,
manufacture a commercial scale drug, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for
successful commercialization. Typically, it takes many years to develop one new drug from the time it is discovered to when it is available for
treating patients. Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer
operating history. We will need to transition from a company with a research and development focus to a company capable of supporting
commercial activities. We may not be successful in such a transition.
Since inception, we have focused substantially all of our efforts and financial resources on clinical trials and manufacturing of our drug
candidates. To date, we have financed our operations primarily through public offerings of our common stock and a debt financing. Through
February 18, 2020, we have received an aggregate of approximately $640 million from such transactions. Approximately $610 million of that
amount constitutes the aggregate gross proceeds from the sale of common stock in one or more offerings and through the use of our at the
market sales program, or ATM. The remaining $30.0 million is from our term loan facility with Hercules that we secured in February 2019.
Since inception, we have incurred significant operating losses. As of December 31, 2019, we had an accumulated deficit of $701.2
million. Substantially all of our operating losses have resulted from costs incurred in connection with our research and development programs
and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating
losses for the foreseeable future. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect
on our stockholders’ deficit and working capital. We expect to continue to incur significant research and development expenses in connection
with continuing our existing clinical trials and beginning additional clinical trials. In addition, if we obtain regulatory approval for our drug
candidates, we will incur significant sales, marketing and outsourced-manufacturing expenses. We also have incurred and will continue to incur
additional costs associated with operating as a public company. As a result, we expect to continue to incur significant and increasing operating
losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing pharmaceuticals, we are unable to
predict the extent of any future losses or when we will become profitable, if at all. Even if we do become profitable, we may not be able to
sustain or increase our profitability on a quarterly or annual basis. Our ability to become profitable depends upon our ability to generate
revenue.
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To date, we have not generated any significant revenue from our drug candidates and it is uncertain when and if we will generate any
revenue from the sale of our drugs in the future. Our ability to become profitable depends upon our ability to generate significant and sustained
revenues. To obtain significant and sustained revenues, we must succeed, either alone or with others, in developing, obtaining regulatory
approval for and manufacturing and marketing our product candidates. Accordingly, we do not expect to generate significant and sustained
revenue unless and until we obtain marketing approval of, and begin to sell umbralisib, ublituximab and/or one of our other product candidates.
Our ability to generate revenue depends on a number of factors, including, but not limited to, our ability to:
● Successfully complete clinical trials that meet their clinical endpoints;
● Initiate and successfully complete all safety, pharmacokinetic, biodistribution, and non-clinical studies required to obtain U.S. and
Foreign marketing approval for our drug candidates;
● Obtain approval from the U.S. Food and Drug Administration (FDA) and Foreign equivalents to market and sell our drug
candidates;
● Establish commercial manufacturing capabilities alone and/or with third parties that are satisfactory to the regulatory authorities,
cost effective, and that are capable of providing commercial supply of our drug candidates;
● Establish a commercial infrastructure to commercialize our drug candidates, if approved, by developing a sales force and/or
entering into collaborations with third parties; and
● Achieve market acceptance of our drug candidates in the medical community and with third-party payors.
If we are unable to generate significant and sustained revenues, we will not become profitable and we will be unable to continue our
operations without continued funding.
We will need to raise substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay, reduce or
eliminate some of our drug development programs or commercialization efforts.
The development of pharmaceuticals is capital-intensive. We are currently advancing our most advanced drug candidates, umbralisib,
ublituximab, cosibelimab, TG-1701 and TG-1801 through clinical development. While we may experience short-term decreases in clinical trial
expenses as our larger Phase 3 clinical trials complete and before our Phase 1 and 2 programs can advance into Phase 2 and 3, we do expect
over time our overall expenses will increase in connection with our ongoing activities, particularly as we continue the research and development
of, initiate or continue clinical trials of, seek marketing approval for, and develop an infrastructure to commercialize our drug candidates. In
addition, depending on the status of regulatory approval or, if we obtain marketing approval for any of our drug candidates, we expect to incur
significant commercialization expenses related to drug sales, marketing, manufacturing and distribution. Moreover, in anticipation of filing for
regulatory approvals for umbralisib and ublituximab we will need to expend substantial resources on manufacturing and new drug application
(NDA)/ biologics license application (BLA) preparation over the next 12 to 24 months, which could exceed any cost savings associated with
lower clinical trial expenses during the same period.
While this timing is our current estimate, 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.
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As a result, significant additional funding will be 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, marketing and medical educational
efforts that are required for a successful launch of umbralisib and/or ublituximab or any of our product candidates and otherwise 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. Accordingly, 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.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our
technologies or drug candidates and occupy valuable management time and resources.
Until such time, if ever, as we can generate substantial drug revenues, we expect to finance our cash needs through a combination of
public and private equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any
committed external source of funds, other than funds already borrowed under the loan and security agreement that we entered into with
Hercules in February 2019 (See Note 7 to our consolidated financial statements for more information). To the extent that we raise additional
capital through the sale of common stock or securities convertible or exchangeable into common stock, the ownership interest of our
stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that materially adversely affect the
rights of our common stockholders. We may also seek funds through collaborations, strategic alliances or licensing arrangements with third
parties at a time that is not desirable to us and we may be required to relinquish valuable rights to some intellectual property, future revenue
streams, research programs or drug candidates or to grant licenses on terms that may not be favorable to us, any of which may have a material
adverse effect on our business, operating results and prospects. Debt financing, if available, may involve agreements that include covenants
limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
See our risk factors below under the heading Risks Related to Our Indebtedness.
Additionally, fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to
develop and commercialize our drug candidates. Dislocations in the financial markets have generally made equity and debt financing more
difficult to obtain and may have a material adverse effect on our ability to meet our fundraising needs. We cannot guarantee that future
financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the issuance of additional securities, whether
equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline.
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.
Due to limited resources we may fail to capitalize on programs or product candidates that may present a greater commercial opportunity or
for which there is a greater likelihood of success.
Because we have limited resources, we may forego or delay pursuit of opportunities with certain programs or product candidates or for
indications that later prove to have greater commercial potential. Our estimates regarding the potential market for a product candidate could be
inaccurate, and our spending on current and future research and development programs may not yield any commercially viable products. If we
do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rights to that product
candidate through strategic collaboration, licensing or other arrangements in cases in which it would have been more advantageous for us to
retain sole development and commercialization rights to such product candidate. Alternatively, we may allocate internal resources to a product
candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.
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If any of these events occur, we may be forced to abandon or delay our development efforts with respect to a particular product
candidate or fail to develop a potentially successful product candidate, which could have a material adverse effect on our business, financial
condition, results of operations and prospects.
Risks Related to our Indebtedness
Our level of indebtedness and debt service obligations could adversely affect our financial condition, and may make it more difficult for us
to fund our operations.
In February 2019, we entered into a Loan and Security Agreement (the Loan Agreement), with Hercules Capital, Inc., a Maryland
corporation (Hercules) (See Note 7 to our consolidated financial statements for more information). Under the Loan Agreement, Hercules will
provide access to term loans with an aggregate principal amount of up to $60.0 million (the Term Loan). Concurrently with the closing of the
Loan Agreement, we borrowed an initial tranche of $30.0 million. In addition, we have incurred short-term liabilities of approximately $47.2
million with a contract manufacturing organization (CMO) for the scale-up, tech-transfer, and long-term supply of one of our drug candidates.
This is an expensive and lengthy process and we expect to incur additional obligations associated with these ongoing manufacturing activities
over the course of the next 24 months, and potentially longer. To date, this CMO has provided payment terms which we believe are reasonable;
however, no assurance can be given that such terms will continue to be available to us in the future. No assurances can be made that the
obligations associated with the Loan Agreement and the CMO will not have a material adverse impact on our financial condition.
All obligations under the Loan Agreement are secured by substantially all of our existing property and assets, excluding intellectual
property. This indebtedness may create additional financing risk for us, particularly if our business or prevailing financial market conditions are
not conducive to paying off or refinancing its outstanding debt obligations at maturity. This indebtedness could also have important negative
consequences, including:
● we will need to repay the indebtedness by making payments of interest and principal, which will reduce the amount of money
available to finance our operations, our research and development efforts and other general corporate activities; and
● our failure to comply with the restrictive covenants in the Loan Agreement could result in an event of default that, if not cured or
waived, would accelerate our obligation to repay this indebtedness, and Hercules could seek to enforce its security interest in the
assets securing such indebtedness.
To the extent additional debt is added to our current debt levels, the risks described above could increase.
We may not have cash available in an amount sufficient to enable us to make interest or principal payments on our indebtedness when due.
Failure to satisfy our current and future debt obligations under the Loan Agreement, or the breach of any of its covenants, subject to
specified cure periods with respect to certain breaches, could result in an event of default and, as a result, Hercules could accelerate all of the
amounts due. In the event of an acceleration of amounts due under the Loan Agreement as a result of an event of default, we may not have
enough available cash or be able to raise additional funds through equity or debt financings to repay such indebtedness at the time of such
acceleration. In that case, we may be required to delay, limit, reduce or terminate our product candidate development or commercialization
efforts or grant to others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Hercules could also exercise its rights as collateral agent to take possession and dispose of the collateral securing the Term Loan for its benefit,
which collateral includes substantially all of our property other than intellectual property. Our business, financial condition and results of
operations could be materially adversely affected as a result of any of these events.
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The Loan Agreement imposes operating and other restrictions on the Company. Such restrictions will affect, and in many respects
limit or prohibit, our ability and the ability of any future subsidiary to, among other things:
● dispose of certain assets;
● change its lines of business;
● engage in mergers, acquisitions or consolidations;
● incur additional indebtedness;
● create liens on assets;
● pay dividends and make contributions or repurchase our capital stock; and
● engage in certain transactions with affiliates.
The breach of any of these restrictive covenants could have a material adverse effect on our business and prospects.
Risks Related to Drug Development and Regulatory Approval
If we are unable to obtain regulatory approval for our most advanced drug candidates or other drug candidates and ultimately cannot
commercialize our most advanced drug candidates or other drug candidates, or experience significant delays in doing so, our business will
be materially harmed.
We 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 a variety of reasons. We have substantially invested all of our efforts and
financial resources in the identification and pre-clinical and clinical development of our drug candidates, including ublituximab, umbralisib,
cosibelimab, TG-1701 and TG-1801. Our ability to generate drug revenues will depend completely on the successful completion of our current
and future Phase 3 and registration-directed clinical trials and commercialization of our drug candidates, which may never occur. We currently
generate no revenues from sales of any drugs, and we may never be able to develop or commercialize a marketable drug. Each of our drug
candidates will require additional non-clinical or clinical development, management of clinical, non-clinical and manufacturing activities,
regulatory approval in multiple jurisdictions, obtaining or manufacturing supply, building of a commercial organization, substantial investment
and significant marketing efforts before we generate any revenues from drug sales. The success of our most advanced drug candidates and other
drug candidates will depend on several factors, including the following:
● Successful completion of our UNITY-NHL trial, UNITY-CLL trial and our ULTIMATE I and II trials;
● Receipt of regulatory approvals from applicable regulatory authorities for our drug candidates;
● Establishing commercially viable arrangements with third-party manufacturers for clinical supply and commercial manufacturing;
● Obtaining and maintaining patent and trade secret protection or regulatory exclusivity for our drug candidates;
● Establishing sales and marketing capabilities, whether alone or through a collaboration, to support commercialization of our drug
candidates;
● Acceptance of the drug candidates, if and when approved, by patients, the medical community and third-party payors;
● Effectively differentiating and competing with other therapies;
● Establishing competitive prices for any drug candidates that receive regulatory approval that reflect the value that the drug
candidates offer in the indications for which they are approved; Obtaining and maintaining healthcare coverage and adequate
reimbursement;
● Enforcing and defending intellectual property rights and claims; and
● Maintaining an acceptable safety profile of the drug candidates following approval.
If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to
successfully commercialize our drug candidates, which would materially harm our business.
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 and we may not be able to continue our operations. Even if we are able to develop or receive
regulatory approval for or successfully commercialize any of our product candidates, we may not be able to gain market acceptance for our
product candidates if healthcare providers and patients do not view the overall safety, tolerability and efficacy profile of our drug candidates
favorably.
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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 risks. The outcome of pre-clinical development testing and early clinical trials may not be
predictive of the outcome of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, pre-
clinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their drug
candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain marketing approval of their drug
candidates. Once a drug candidate has displayed sufficient pre-clinical data to warrant clinical investigation, 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
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 experience significant setbacks in advanced
clinical trials, even after earlier clinical trials have shown promising results. There is an extremely high rate of failure of pharmaceutical
candidates proceeding through clinical trials.
For instance, early clinical results seen with ublituximab (TG-1101) and/or umbralisib (TGR-1202) in a small number of patients may
not be reproduced in expanded or larger clinical trials such as in our UNITY-CLL, UNITY-NHL or the ULTIMATE I and II trials. Individually
reported outcomes of patients treated in clinical trials may not be representative of the entire population of treated patients in such studies.
Larger scale Phase 3 studies, which are often conducted internationally, are inherently subject to increased operational risks compared to earlier
stage studies, including the risk that the results could vary on a region to region, or country to country basis which could materially adversely
affect the outcome of the study or the opinion of the validity of the study results by applicable regulatory agencies. In addition, early clinical
trial results from interim analysis or from the review of a Data Safety Monitoring Board (DSMB) or similar safety committee may not be
reflective of the safety or efficacy results of the entire study, when completed. Clinical trial results can change over time as additional patients
are added to a study or as additional follow-up is conducted, which may result in a material negative impact on the preliminary results. For
instance, we recently announced that the Marginal Zone Lymphoma (MZL) and the Follicular Lymphoma (FL) cohorts of the UNITY-NHL
study met the primary endpoint of overall response rate (ORR), falling within our target range which was between 40%-50%, and while we
believe that the ORR results have the potential to increase over time within this range, or beyond, as patients continue to be followed, no
assurance can be given that this will be the case, and the results may ultimately fall at the lower end of the range. Further, time to event based
endpoints such as duration of response (DOR) and progression free survival (PFS) have the potential to change, sometimes drastically, with
longer follow-up. No assurance can be provided that the ORR, DOR and PFS data from the MZL and FL cohorts of the UNITY-NHL study will
be supportive of an FDA approval or will support broad market uptake based on the profile of competitor drugs which may be available. While
the MZL and FL cohorts of the UNITY-NHL study met their primary endpoint, each cohort of this study is operated and analyzed
independently, and no assurance can be given that other cohorts from the UNITY-NHL study, including the MCL cohort, the DLBCL cohort, or
the Small Lymphocytic Lymphoma (SLL) patients enrolled within the FL/SLL cohort will meet their primary endpoint, have a positive
outcome, or will be supportive of an FDA filing.
Many of our Phase 3 and registration-directed clinical trials such as UNITY-CLL, UNITY-NHL and ULTIMATE I and II utilize
international clinical research sites, including sites in eastern European countries. We work with what we believe are reputable contract research
organizations (CROs) and clinical research sites in conducting our studies internationally. Nevertheless, the risk of fraud, misconduct,
incompetence, unexpected patient variability and other issues affecting the quality and the outcome of our Phase 3 and registration-directed
studies could arise from U.S. or international sites. If that were to occur, the study could be negatively impacted, potentially even preventing it
from being useful for regulatory approval. If such event were to occur, it would have a substantial negative impact on our business.
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Many of the results reported in our early clinical trials rely on local investigator-assessed safety and efficacy outcomes which may
differ from results assessed in a blinded, independent, centrally reviewed manner, often required of adequate and well-controlled registration-
directed clinical trials which may be undertaken at a later date. All of our current Phase 3 and registration-directed studies such as UNITY-CLL,
UNITY-NHL and the ULTIMATE I and II trials utilize blinded, independent, central review to assess the primary endpoint of such studies. If
the results from interim analyses are not consistent with final results or results from our registration-directed trials are different from the results
found in the earlier studies of ublituximab and umbralisib, 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. For example, in January
2019, we presented to the FDA, interim results from the MZL cohort of our UNITY-NHL trial that supported the granting of Breakthrough
Therapy Designation (BTD). These interim results were also presented at the 2019 American Association of Cancer Research (AACR) annual
meeting, 2019 American Society of Clinical Oncology (ASCO) annual meeting, and the 2019 International Conference on Malignant
Lymphoma (ICML). In October 2019, we announced that the FL cohort of the UNITY-NHL trial met our target range for overall response rate
based on interim preliminary data. No assurance can be given that the final results from the MZL cohort or FL cohort will reflect the activity
seen in these interim results, or that the final results will be sufficient to file for accelerated approval for umbralisib for the treatment of MZL
and FL, and if filed that umbralisib will receive accelerated approval. Similarly, while early Phase 1 data for umbralisib and ublituximab alone
and together looked promising there is no assurance that the UNITY-CLL trial will be positive. Moreover, while we believe one of the key
differentiators for umbralisib is its tolerability and side effect profile compared to other drugs in the same class, no assurance can be given that a
differentiated safety and tolerability profile will be realized in our Phase 3 or registration-directed trials such as UNITY-CLL or UNITY-NHL.
Specifically, we have not yet assessed the final safety data from the MZL or FL cohorts of the UNITY-NHL study as patients continue on
therapy, therefore there can be no assurance given that the final safety data, once fully analyzed, will be consistent with prior safety data
presented on umbralisib, will be differentiated from other similar agents in the same class, or that it will be favorable enough to support
regulatory approval. In addition, no assurance can be given that new toxicities, or an increase in the severity or frequency of previously seen
toxicities, will not be observed, which could have a material negative impact on the approvability or marketability of umbralisib or any of our
product candidates. Finally, while the Phase 2 data for ublituximab in MS looked promising, no assurance can be given that the safety,
tolerability and efficacy profile will carry into Phase 3 and that the ULTIMATE I and II clinical trials will be positive.
In addition to umbralisib and ublituximab, we have a number of compounds in early clinical development, such as cosibelimab, TG-
1701 and TG-1801. Many drug candidates fail in the early stages of clinical development for safety and tolerability issues or for insufficient
clinical activity, despite promising pre-clinical results. Accordingly, no assurance can be made that a safe and efficacious dose can be found for
these compounds or that they will ever enter into advanced clinical trials alone or in combination with umbralisib and/or ublituximab.
Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or
experience delays in completing, or ultimately be unable to complete, the development and commercialization of our drug candidates.
Our drug candidates umbralisib and ublituximab are in several Phase 3 and registration-directed clinical trials such as UNITY-CLL,
UNITY-NHL and ULTIMATE I and II. Despite promising early results, as with all clinical trials, the risk of failure for our drug candidates is
high. It is impossible to predict when or if any of our drug candidates will prove effective and safe in humans or will receive regulatory
approval or will have a differentiated safety and tolerability profile. Before obtaining marketing approval from regulatory authorities for the
sale of any drug candidate, we must complete pre-clinical studies and then conduct extensive clinical trials to demonstrate the safety and
efficacy of our drug candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and
is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. Accordingly, our current Phase 3 and
registration-directed trials, such as UNITY-CLL, UNITY-NHL and ULTIMATE I and II and future clinical trials may not be successful.
Successful completion of our clinical trials is a prerequisite to submitting an NDA, or a BLA to the U.S. FDA and a Marketing
Authorization Application (MAA), in the European Union for each drug candidate and, consequently, the ultimate approval and commercial
marketing of our drug candidates. We do not know whether any of our on-going or future clinical trials for our drug candidates will be
completed on schedule, if at all.
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Whether or not and how quickly we complete clinical trials depends in part upon the rate at which we are able to engage clinical
research/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. We may experience numerous unforeseen events during, or as a result of, any current or future clinical trials that
we may conduct that could delay or prevent our ability to receive marketing approval or commercialize our drug candidates, including:
● the FDA or other regulatory authorities may require us to submit additional data or impose other requirements before permitting
us to initiate a clinical trial;
● health authorities or institutional review boards (IRBs), or ethics committees may not authorize us or our investigators to
commence a clinical trial or conduct a clinical trial at a prospective trial site or country;
● we may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and prospective
CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial
sites;
● clinical trials of our drug candidates may produce negative or inconclusive results, and we may decide, or health authorities may
require us, to conduct additional pre-clinical studies or clinical trials or we may decide to abandon drug development programs;
● the number of patients required for clinical trials of our drug candidates may be larger than we anticipate, and enrollment in these
clinical trials may be slower than we anticipate or participants may drop out of these clinical trials or fail to return for post-
treatment follow-up at a higher rate than we anticipate;
● our third-party contractors, including our clinical trial sites, may fail to comply with regulatory requirements or meet their
contractual obligations to us in a timely manner, or at all, or may deviate from the clinical trial protocol or drop out of the trial,
which may require that we add new clinical trial sites or investigators;
● we may elect to, or health authorities or IRBs or ethics committees may require that we or our investigators suspend or terminate
clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are
being exposed to unacceptable health risks;
● the cost of clinical trials of our drug candidates may be greater than we anticipate;
● the supply or quality of our drug candidates or other materials necessary to conduct clinical trials of our drug candidates may be
insufficient or inadequate, including, without limitation, as a result of disruptions to our supply chains caused by the Coronavirus
(COVID-19) and related work stoppages across China, South Korea, and potentially other parts of the world; and
● our drug candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, health
authorities, IRBs or ethics committees to suspend or terminate the trials, or reports may arise from pre-clinical or clinical testing
of other cancer therapies that raise safety or efficacy concerns about our drug candidates.
We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are
being conducted, by the DSMB for such trial or by the FDA or other regulatory authorities. Such health authorities may impose a suspension or
termination 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 trial site by the FDA or other regulatory authorities resulting in the imposition of a
clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental
regulations or administrative actions or lack of adequate funding to continue the clinical trial. The DSMBs for the UNITY-CLL and UNITY-
NHL studies meet regularly to review ongoing safety from these studies, in an unblinded manner if applicable, and may recommend
modification to the study design or closure of the study entirely based on their interpretation of the benefit/risk of the study. While we develop
charters that guide the nature of the DSMBs meetings, their analysis and interpretation of study data occurs independently from us and is
wholly within their control. Even if the DSMB finds no safety concerns and recommends no modifications to our ongoing studies, this does not
mean the safety profile of these studies may support a marketing approval or commercial acceptance if marketing approval is granted. Many of
the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of
regulatory approval of our drug candidates. Further, the FDA may disagree with our clinical trial design and our interpretation of data from
clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design for our clinical trials. This
could happen even for a protocol that has received a Special Protocol Assessment (SPA). In September 2015, we announced a Phase 3 clinical
trial for the combination of ublituximab plus umbralisib for patients with chronic lymphocytic leukemia (CLL), which is being conducted
pursuant to an SPA with the FDA and in August 2017 we announced an SPA for our registration program for ublituximab in RMS. Many
companies which have been granted SPAs have ultimately failed to obtain final approval to market
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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, while changes or amendments to protocols are common during conduct of a
clinical trial, protocol changes or amendments to a study 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. The FDAs willingness to agree to changes or amendments to a protocol or statistical analysis plan
under SPA agreement is wholly within their discretion. Such re-reviews also provide an opportunity for the FDA to scrutinize any aspect of the
study design and conduct, even if previously agreed to under the existing SPA. Failure to reach agreement with the FDA for routine protocol
changes or modifications for any study we conduct under SPA could have a material negative impact to our ability to execute these studies.
Even if the primary endpoint in a Phase 3 clinical trial is achieved, a SPA does not guarantee approval. While UNITY-CLL is being operated in
a blinded manner, it is an open label study; meaning that trial participants, investigators, site staff, some employees of our contract research
organizations, and our field level employees (e.g., clinical research associates and monitors), among others, have knowledge of treatment arm
assignments on a patient-level, which has the potential to introduce bias into study conduct. Further, while the ULTIMATE 1 and 2 clinical
trials are double-blind, double-dummy studies, unblinding of treatment arm assignment may occur from time to time, for example, on the
occurrence of unexpected safety events which may necessitate understanding of study treatment. While we believe we have put in place
adequate firewalls to prevent inappropriate unblinding of study data consistent with standard industry practice for these types of studies, no
assurance can be given that issues related to study conduct will not be raised. 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 study
design or 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.
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. If we are required to repeat or conduct additional clinical trials or other testing of our drug candidates
beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our drug candidates or other testing, if
the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:
● be delayed in obtaining marketing approval for our drug candidates;
● not obtain marketing approval at all;
● obtain approval for indications or patient populations that are not as broad as intended or desired;
● be subject to post-marketing testing requirements; or
● have the drug removed from the market after obtaining marketing approval.
Our drug development costs will also increase if we experience delays in testing or regulatory approvals. We may also incur additional
costs if enrollment is increased. All of our current Phase 3 and registration-directed clinical trials, such as UNITY-CLL, UNITY-NHL and
ULTIMATE I and II enrolled a larger number of patients than our initial projections, adding significant costs to those studies over and above
what had been projected. We do not know whether any of our clinical trials will begin as planned, will need to be restructured or will be
completed on schedule, or at all. 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. UNITY-
CLL is an event-driven study, which means the study can only end when a certain pre-specified number of events have occurred. In the case of
UNITY-CLL, an event is defined as disease progression or death. Given that these events cannot be predicted with certainty, predicting
accurately when this study will reach a sufficient number of events is impossible. We have stated we believe the number of events to conduct an
efficacy analysis can be reached by the end of the first quarter of 2020 or at some point in 2020 but there can be no assurance that this will
occur and timelines for this analysis and for the completion of this study should not be relied upon given this inherent uncertainty. Delays
beyond the first quarter of 2020 could have a material and adverse impact on the Company. Significant clinical trial delays also could shorten
any periods during which we may have the exclusive right to commercialize our drug candidates or allow our competitors to bring products to
market before we do and impair our ability to successfully commercialize our drug candidates. Any delays in our pre-clinical or future clinical
development programs may harm our business, financial condition and prospects significantly.
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, or the FDAs willingness to accept such data,
may be jeopardized.
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The sufficiency of our clinical trial results for accelerated approval are subject to the FDA’s discretion.
We have and will continue to explore strategies for ublituximab and/or umbralisib that involve use of the FDA’s accelerated approval
pathway. Obtaining accelerated approval for an agent requires demonstration of meaningful benefit over all available therapies for a serious
condition. While we believe we have an understanding of what is considered available therapy today, ultimately the determination of what
constitutes available therapy is wholly up to the FDA and is subject to change. No assurance can be given that other agents will not receive full
approval prior to our potential receipt of accelerated approval. If that were to occur, no assurance can be given that we would be successful in
proving meaningful benefit over those later approved drugs. If we were unable to prove meaningful benefit over any such agents, we would be
effectively blocked from receiving accelerated approval. We announced that we are planning to file the results from the MZL and FL cohorts
from our UNITY-NHL trial for accelerated approval. No assurance can be given that umbralisib will obtain accelerated approval for either MZL
or FL for a variety of reasons, including, without limitation, if we are unable to demonstrate meaningful benefit over a currently approved
agent/regimen or any new treatment, if any, that receives full approval prior to our potential receipt of accelerated approval. Previously, we
were hopeful to utilize the results from our GENUINE study for accelerated approval but the intervening full approval of a new therapy for the
treatment of relapsed/refractory CLL has made that potential application more challenging. In October 2019, we announced that final results
from the GENUINE study demonstrated improved progression-free survival for the combination arm compared to ibrutinib alone. Despite this
positive outcome, no assurance can be given that a filing based on the GENUINE results will ever be made, or if made would result in a
favorable review by regulatory authorities.
Finally, if any of our drugs were ever to receive accelerated approval, we would be required to conduct a post-market confirmatory
study, which we may not complete, or if completed, may prove unsuccessful. In such instance, the FDA can remove the product from the
market.
Our drug candidates may cause undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile
of an approved label, or result in significant negative consequences following marketing approval, if any.
Unacceptable or undesirable adverse events caused by any of our product candidates that we take into clinical trials could cause either
us, a DSMB, or regulatory authorities to interrupt, delay, modify or halt clinical trials and could result in a more restrictive label or the delay or
denial of regulatory approval by the FDA or other regulatory authorities. This, in turn, could prevent us from commercializing the affected
product candidate and generating revenues from its sale.
As is the case with all drugs, it is likely that there will be side effects associated with the use of our drug candidates. Results of our
trials could reveal a higher than expected and unacceptable severity and prevalence of side effects. In such an event, our trials could be
suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny
approval of our drug candidates for any or all targeted indications. The drug-related side effects could also affect patient recruitment or the
ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business,
financial condition and prospects significantly.
Many compounds that initially showed promise in early stage testing have later been found to cause side effects that prevented further
development of the compound. Further, early clinical trials by their nature utilize a small sample of the potential patient population. With a
limited number of patients and limited duration of exposure, rare and severe side effects of our drug candidates may only be uncovered with a
significantly larger number of patients exposed to the drug candidate in Phase 3 or registration-directed trials and on the market.
We are currently running our Phase 3 and registration-directed trials, such as UNITY-CLL, UNITY-NHL and ULTIMATE I and II and
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 the adverse events, if any, will be observed in patients who receive any of our product
candidates. To date, clinical trials using ublituximab and umbralisib 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 health authorities and in the case
of ublituximab and umbralisib, even if deemed acceptable for oncology and/or autoimmune indications, it may not be acceptable for diseases
outside the oncology and autoimmune settings, 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 such as found in our on-going Phase 3 and registration-
directed trials. Particularly, with respect to umbralisib, although over 1,500 patients have been dosed in umbralisib studies to date, the full
adverse effect profile of umbralisib is not known. As additional patients are exposed for longer durations to umbralisib, it is unknown whether
greater frequency and/or severity of adverse events are likely to occur. Common toxicities of other drugs in the same class as umbralisib include
high levels of liver toxicity, infections and colitis, the latter of which notably has presented with later onset, with
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incidence increasing with duration of exposure. No assurance can be given that an acceptable safety and tolerability profile for umbralisib will
continue to be demonstrated in the future with longer durations of exposure, at the fixed 800mg dose being evaluated in our registration-
directed trials and in multiple drug combinations. If any of our product candidates cause unacceptable adverse events in clinical trials, we may
not be able to obtain marketing approval and generate revenues from its sale, or even if approved for sale may lack differentiation from
competitive products, which could have a material adverse impact on our business and operations.
Additionally, in drug-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
ublituximab and umbralisib are being evaluated in combination with each other, 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. We also intend to explore multiple combination studies involving cosibelimab, TG-1701, and TG-1801.
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 drug candidates receive marketing approval and we or others later identify undesirable or unacceptable side effects
caused by such drug candidates (or any other similar drugs) after such approval, a number of potentially significant negative consequences
could result, including:
● regulatory authorities may withdraw or limit their approval of such drug candidates;
● regulatory authorities may require a more significant clinical benefit for approval to offset the risk;
● regulatory authorities may require the addition of labeling statements, including warnings, contra-indications, or precautions, that
could diminish the usage of the product or otherwise limit the commercial success of the affected product;
● we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;
● we may be required to change the way such drug candidates are distributed or administered, or to conduct additional clinical
trials;
● regulatory authorities may require a Risk Evaluation and Mitigation Strategy (REMS), plan to mitigate risks, which could include
medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient
registries and other risk minimization tools;
● we may be subject to regulatory investigations and government enforcement actions;
● we may decide to remove such drug candidates from the marketplace;
● we may not be able to enter into collaboration agreements on acceptable terms and execute on our business model;
● we could be sued and held liable for injury caused to individuals exposed to or taking our drug candidates; 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 significantly impact our ability to successfully commercialize our drug candidates and generate revenues.
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Any product candidates we may advance through clinical development are subject to extensive regulation, which can be costly and time
consuming, cause unanticipated delays or prevent the receipt of the required approvals.
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. In the United States, we are not permitted to market a product candidate 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. 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 box warning, could significantly impact our ability to successfully
market our product candidates. Finally, the FDA may require adoption of a REMS requiring prescriber training, post-market registries, or
otherwise restricting the marketing and dissemination of these products. Despite the time and expense invested in the 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 EMA, as well as the other regulatory agencies in these
countries.
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 an indication;
● the FDA may not accept clinical data from trials 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 not approve the manufacturing processes or facilities of third-party
manufacturers with which we or our collaborators currently contract for clinical supplies and plan to contract for 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, raising questions about the safety of 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.
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A breakthrough therapy designation by the FDA for our drug candidates, including umbralisib for the treatment of adult patients with
relapsed or refractory Marginal Zone Lymphoma who have received at least one prior treatment including an anti-CD20 monoclonal
antibody, may not lead to a faster development or regulatory review or approval process, and it does not ensure that our drug candidates will
receive marketing approval.
In January 2019, the FDA granted breakthrough therapy designation (also referred to as BTD) to umbralisib for the treatment of adult
patients with relapsed or refractory MZL who have received at least one prior treatment including an anti-CD20 monoclonal antibody. We may
also seek breakthrough therapy designation for some of our other drug candidates. A breakthrough therapy is defined as a drug that is intended,
alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and 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. Our breakthrough therapy designation was based on
interim data from the MZL cohort of the UNITY-NHL clinical trial. No assurance can be given that the full results from the MZL cohort of the
UNITY-NHL clinical trial will support accelerated approval.
For drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of
the trial can help to identify the most efficient path for clinical development while minimizing the number of patients who may be placed in
potentially less effective control regimens. Drugs designated as breakthrough therapies by the FDA are also eligible for accelerated approval.
Designation as a breakthrough therapy is wholly within the discretion of the FDA. Accordingly, even if we believe one of our drug candidates
meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to grant such designation to the
drug candidate. In any event, the receipt of a breakthrough therapy designation for a drug candidate may not result in a faster development
process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate
approval by the FDA. In addition, even if one or more of our drug candidates qualify as breakthrough therapies, the FDA may later decide that
the drugs no longer meet the conditions for qualification and rescind the designation.
A fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval process.
We may seek fast track designation for some of our other drug candidates. If a drug is intended for the treatment of a serious or life-
threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for
fast track designation. The FDA has broad discretion whether or not to grant this designation, so even if we believe a particular drug candidate
is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we receive fast track designation for our
other drug candidates, we may not experience a faster development process, review or approval compared to conventional FDA procedures.
The FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development
program.
While we have received orphan drug designation for umbralisib and ublituximab for specified indications, we may seek additional orphan
drug designation for those and some of our other drug candidates. However, we may be unsuccessful in obtaining or may be unable to
maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.
Ublituximab received orphan drug designation from the FDA for the treatment of MZL (nodal and extranodal) in September 2013, for
the treatment of CLL in August of 2010, and orphan-drug designation by the EMA for the treatment of CLL in November of 2009. We also
obtained orphan drug designation for umbralisib as monotherapy for the treatment of CLL in August 2016 and all three types of MZL (nodal,
extranodal and splenic) in April 2019, and in January 2017, we announced that the FDA granted orphan drug designation covering the
combination of ublituximab and umbralisib for the treatment of patients with CLL and DLBCL. As part of our business strategy, we may seek
orphan drug designation for our other drug candidates, and we may be unsuccessful. Regulatory authorities in some jurisdictions, including the
United States and the European Union, may designate drugs for relatively small patient populations as orphan drugs. Under the U.S. Orphan
Drug Act, the FDA may designate a drug as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally
defined as a patient population of fewer than 200,000 individuals annually in the United States, or a patient population greater than 200,000 in
the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States.
In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial
costs, tax advantages and user-fee waivers.
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Even if we obtain orphan drug exclusivity for a drug, that exclusivity may not effectively protect the designated drug from competition
because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve
another product that meets the definition of a “same drug” under 21 C.F.R. 316.3 for the same condition if the FDA concludes that the later
product is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. In addition, a
designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it
received orphan drug designation. Moreover, orphan drug exclusive marketing rights in the United States may be lost if the FDA later
determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to
meet the needs of patients with the rare disease or condition. Orphan drug designation neither shortens the development time or regulatory
review time of a drug nor gives the drug any advantage in the regulatory review or approval process. While we intend to seek additional orphan
drug designation for our other drug candidates, we may never receive such designations. Even if we receive orphan drug designation for any of
our drug candidates, there is no guarantee that we will enjoy the benefits of those designations.
An approval of one of our product candidates in the United States would not assure approval of that candidate in foreign jurisdictions.
The approval procedures for pharmaceuticals vary among countries, and obtaining approval in one jurisdiction does not guarantee
approval in another jurisdiction. For example, even if the FDA grants approval of a product candidate, comparable regulatory authorities in
foreign jurisdictions may not approve the same product candidate or may require additional evidence for approval. In many countries outside
the United States, the product must be approved for reimbursement before it can be marketed. As a general matter, however, the foreign
regulatory approval process involves risks similar or identical to the risks associated with FDA approval discussed above. Therefore, we cannot
guarantee that we, or future collaborators, will obtain approvals of our product candidates in any foreign jurisdiction on a timely basis, if at all.
Failure to receive approval in certain foreign markets could significantly impact the full market potential of our product candidates.
Furthermore, if we obtain regulatory approval for a product candidate in a foreign jurisdiction, we will be subject to the burden of complying
with complex regulatory, legal, and other requirements that could be costly and could subject us to additional risks and uncertainties.
As all of our product candidates are still under development, manufacturing site additions, scale-up 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 relatively 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 and/or analytical profile of the product candidates, which may affect the safety and efficacy of the products. For instance, the
manufacturing process for ublituximab has undergone several process improvements during the clinical trial process which have resulted in
analytical differences between the materials. Such process improvements continued during the conduct of Phase 3 and materials from more than
one manufacturing process were utilized in the Phase 3 UNITY-CLL trial. While analytical differences exist between those materials, we do not
believe the differences will alter the safety or efficacy profile of ublituximab. However, it is possible that additional and/or different adverse
events may appear among patients exposed to drug product manufactured under one process compared to the other, or that adverse events may
arise with greater frequency, intensity and duration among patients exposed to drug product manufactured under one process compared to the
other. Additionally, the efficacy of ublituximab also can be negatively impacted by such process changes. Given the uncertainty of the impact
on product specifications, quality and performance, process improvements made during Phase 3 development carry a higher level of risk than
those made prior to Phase 3 development. If there are significant differences in product attributes between the two materials, we may need to
adjust our statistical analysis plans of the Phase 3 study to confirm that there is no difference in safety or efficacy between product made by
each process in order to allow us to utilize data from all enrolled patients, as well as be able to integrate clinical safety and/or efficacy results
across studies to support any potential marketing application. There can be no assurance given that such analyses will be successful in
demonstrating no clinical differences between these drug products, which could substantially impact the approvability of the U2 combination
based on the results of the UNITY-CLL study. In such circumstances, that would have a material adverse effect on the Company.
Further, no assurance can be given that the material manufactured from any future optimized processes, if any, for ublituximab or any
of our product candidates will perform comparably to the product candidates as manufactured to date which could result in an unexpected
safety or efficacy outcome as compared to the data published or presented to date. Similarly, following each round of process improvements, if
any, for any of our drug candidates, future clinical trial results conducted with the new material will be subject to uncertainty related to the
effects, if any, of those additional process improvements that were made.
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In addition, we have engaged a secondary manufacturer for ublituximab to meet our current clinical and future commercial needs and
anticipate engaging additional manufacturing sources for umbralisib to meet expanded clinical trial and commercial needs. 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. No assurance can be
given that any additional manufacturers will be successful or that material manufactured by the additional manufacturers will perform
comparably to ublituximab or umbralisib as manufactured to date and used in currently available pre-clinical data and or in clinical trials
presented publicly or reported in this or any previous filing, or that the relevant regulatory agencies will agree with our interpretation of
comparability.
In addition, as we move closer to commercialization for ublituximab and umbralisib we will need to scale-up production to ensure
adequate commercial supply. We are currently in the process of scaling up ublituximab. This is an expensive process and 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. If scale-up were not to succeed our ability to supply our anticipated market at a reasonable cost of goods
would be negatively impacted. In such event, that would have a material adverse effect on the Company. Scale up could also require additional
process improvement that might be required to accommodate new and larger equipment utilized in the scaled-up process. If that were to occur
and we could not demonstrate to the FDA that the materials were analytically substantially similar, we might be required to run additional
clinical testing to demonstrate that they are substantially similar. That would entail a significant delay and significant increase in total cost, all
of which would have a material adverse effect on the Company.
Risks Related to Commercialization
The incidence and prevalence for target patient populations of our drug candidates have not been established with precision. If the market
opportunities for our drug candidates are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the
patient population, our revenue and ability to achieve profitability will be adversely affected, possibly materially.
The precise incidence and/or prevalence of CLL, relapsed/refractory MZL, relapsed/refractory FL and multiple sclerosis (MS)are
unknown. Our projections of both the number of people who are affected by disease within our target indications, as well as the subset of these
people who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates. Our beliefs are
typically based on one on one and group interactions with target physicians and our estimates have been derived from a variety of sources,
including the scientific literature, healthcare utilization databases and market research, and may prove to be incorrect. Further, new studies may
change the estimated incidence or prevalence of these diseases.
The total addressable market opportunity for umbralisib and ublituximab for the treatment of patients with CLL, MZL, FL and MS
will ultimately depend upon, among other things, the final label indication, approval for sale for these indications, acceptance by the medical
community, patient access, drug pricing and reimbursement. The number of patients in major markets, including the number of addressable
patients in those markets, may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our drugs, new
patients may become increasingly difficult to identify or gain access to, or patients and physicians may choose to utilize competitive products,
all of which would adversely affect our results of operations and our business.
We face substantial competition for treatments for our target indications, which may result in others commercializing drugs before or more
successfully than we do resulting in the reduction or elimination of our commercial opportunity.
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.
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Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize drugs that are more
effective, have fewer or less severe side effects, are more convenient or are less expensive than any drugs that we or our collaborators may
develop. Our competitors also may obtain FDA or other regulatory approval for their drugs more rapidly than we may obtain approval for ours,
which could result in our competitors establishing a strong market position before we or our collaborators are able to enter the market. The key
competitive factors affecting the success of all of our drug candidates, if approved, are likely to be their efficacy, safety, convenience, price, the
effectiveness of any related companion diagnostic tests, the level of generic competition and the availability of reimbursement from government
and other third-party payors.
For the cancer indications for which we are developing our products there are a number of established therapies with which we will
compete:
● For the treatment of CLL, if U2 is approved, we expect U2 to compete with recently approved drugs such as ibrutinib (AbbVie
and Janssen), venetoclax (AbbVie and Roche), obinutuzumab (Roche), idelalisib (Gilead) and duvelisib (Verastem), and
established treatments such as rituximab (Roche), and several generically available chemotherapies. Additionally, there are two
second generation BTK inhibitors similar to ibrutinib in late-stage clinical testing for CLL that could enter the market in the next
12-36 months. Each of these agents can be used as monotherapy or in combination with one or more of the other agents.
● For the treatment of Marginal Zone Lymphoma, if approved, we expect umbralisib to compete with ibrutinib (AbbVie and
Janssen) and established treatments such as rituximab and several generically available chemotherapies. Additionally, in May
2019, the FDA approved the combination of rituximab and lenalidomide (Bristol-Myers) for the treatment of previously treated
MZL.
● For the treatment of Follicular Lymphoma, if approved, we expect umbralisib to compete with recently approved drugs such as
obinutuzumab (Roche), idelalisib (Gilead), copanlisib (Bayer), and duvelisib (Verastem), and established treatments such as
rituximab (Roche), and several generically available chemotherapies. Each of these agents can be used as monotherapy or in
combination with one or more of the other agents. In addition, in May 2019, the FDA approved the combination of rituximab and
lenalidomide (Bristol-Myers) for the treatment of previously treated FL. There are also several PI3K delta inhibitors in earlier
stages of development.
● In addition, a number of pharmaceutical companies are developing antibodies and bispecific antibodies targeting CD20, CD19,
CD47 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 U2 and umbralisib.
For Multiple Sclerosis for which we are developing ublituximab there are a number of established therapies with which we will
compete:
● If ublituximab is approved, we expect ublituximab will primarily compete against other CD20 targeted agents, while the group of
CD20 targeted agents will also compete broadly against a number of already approved MS therapies. Currently, there is one anti-
CD20 monoclonal antibody approved, ocrelizumab (Roche), and another in Phase 3 development, ofatumumab (Novartis), which
is expected to enter the market in the next 12-24 months.
Cosibelimab, TG-1701 and TG-1801 if approved will also face competition from drugs on the market and under development in the
same therapeutic class as each of those drugs.
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. 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.
We will also face competition from these third parties in recruiting and retaining qualified personnel, establishing clinical trial sites,
patient registration for clinical trials, and in identifying and in-licensing new product candidates.
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Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any drug candidates
that we may develop.
We face an inherent risk of product liability exposure related to the testing of our drug candidates in human clinical trials and use of
our drug candidates through compassionate use programs in the event we establish such programs, and we will face an even greater risk if we
commercially sell any drug candidates that we may develop. If we cannot successfully defend ourselves against claims that our drug candidates
caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
● decreased demand for any drug candidates that we may develop;
● injury to our reputation and significant negative media attention;
● withdrawal of clinical trial participants;
● significant costs to defend the related litigation;
● substantial monetary awards to trial participants or patients;
● loss of revenue; and
● the inability to commercialize any drug candidates that we may develop.
Although we maintain product liability insurance coverage, it may not be adequate to cover all liabilities that we may incur. We
anticipate that we will need to increase our insurance coverage if we successfully commercialize any drug candidate. Insurance coverage is
increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability
that may arise.
If any product candidate for which we receive regulatory approval does not achieve broad market acceptance among physicians, patients,
healthcare payors, and the medical community, the revenues that we generate from its sales will be limited.
Even if our product candidates receive regulatory approval, they may not gain market acceptance among physicians, patients,
healthcare payors, and the medical community. Commercial success also will depend, in large part, on the coverage and reimbursement of our
product candidates by third-party payors, including private insurance providers and government payors. The degree of market acceptance of
any approved product would depend on a number of factors, including:
● the efficacy, safety and tolerability as demonstrated in clinical trials;
● the timing of market introduction of such product candidate as well as competitive products;
● 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, tolerable and effective treatment;
● the potential and perceived advantages of the product candidate over alternative treatments;
● the safety and tolerability of the product candidate in a broader patient group;
● the cost of treatment in relation to alternative treatments;
● the availability of adequate reimbursement and pricing by third parties and government authorities;
● changes in regulatory requirements by government authorities for the product candidate;
● relative convenience and ease of administration;
● the prevalence and severity of side effects and adverse events;
● the effectiveness of our sales and marketing efforts; and
● unfavorable publicity relating to the product.
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, which would have a
material adverse effect on our business.
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Even if we are able to commercialize any drug candidates, such drugs may become subject to unfavorable pricing regulations or third-party
coverage and reimbursement policies, which would harm our business.
The regulations that govern regulatory approvals, pricing and reimbursement for new drugs vary widely from country to country.
Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after
marketing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental
control even after initial approval is granted. As a result, we might obtain marketing approval for a drug candidate in a particular country, but
then be subject to price regulations that delay our commercial launch of the drug candidate, possibly for lengthy time periods, and negatively
impact the revenues we are able to generate from the sale of the drug candidate in that country. Adverse pricing limitations may hinder our
ability to recoup our investment in one or more drug candidates, even if our drug candidates obtain marketing approval. In addition, if we are
successful in receiving FDA approval for ublituximab for the treatment of CLL and MS, we will need to identify and execute a pricing strategy
that takes into account the value of the product in each indication independently to realize the product’s full potential in both indications. If we
are unable to identify and execute such a strategy, the pricing of ublituximab across indications may not be optimal, which may have a material
adverse impact on the sales in one or both of the indications and on our overall business.
Our ability to commercialize any drug candidates successfully also will depend in part on the extent to which coverage and
reimbursement for these drug candidates and related treatments will be available from government authorities, private health insurers and other
organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide
which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost
containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of
reimbursement for particular drugs. Increasingly, third-party payors are requiring that drug companies provide them with predetermined
discounts from list prices and are challenging the prices charged for drugs. We cannot be sure that coverage will be available for any drug
candidate that we commercialize and, if coverage is available, the level of reimbursement. Reimbursement may impact the demand for, or the
price of, any drug candidate for which we obtain marketing approval. If reimbursement is not available or is available only to limited levels, we
may not be able to successfully commercialize any drug candidate for which we obtain marketing approval.
There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the
purposes for which the drug is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for
reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development,
manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and
may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be
based on reimbursement levels already set for lower-cost drugs and may be incorporated into existing payments for other services. Net prices
for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future
relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States.
Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability
to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved drugs that we
develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize drugs and our overall
financial condition.
We are subject to new legislation, regulatory proposals and managed care initiatives that may increase our costs of compliance and
adversely affect our ability to market our products, obtain collaborators and raise capital.
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.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010,
collectively, the ACA, was enacted in 2010 and made significant changes to the United States healthcare system. The ACA and any revisions or
replacements of that Act, any substitute legislation, and other changes in the law or regulatory framework could have a material adverse effect
on our business.
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Among the provisions of the ACA, those of importance to our potential product candidates are:
● an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents,
apportioned among these entities according to their market share in certain government healthcare programs;
● an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and
13.0% of the average manufacturer price for branded and generic drugs, respectively;
● expansion of healthcare fraud and abuse laws, including the federal False Claims Act and the federal Anti-Kickback Statute, new
government investigative powers and enhanced penalties for non-compliance;
● a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts
off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a
manufacturer’s outpatient drugs to be covered under Medicare Part D (subsequent legislation increased this amount to 70%
effective as of January 1, 2019);
● extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid
managed care organizations;
● expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to
additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 138%
of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;
● expansion of the list of covered entities eligible to enroll in the 340B Drug Pricing Program to include certain free standing cancer
hospitals, critical access hospitals, rural referral centers, and sole community hospitals, but exempting orphan drugs from the
ceiling price requirements for these covered entities;
● the new requirements under the federal Open Payments program and its implementing regulations;
● a new requirement to annually report drug samples that manufacturers and distributors provide to physicians;
● 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; and
● a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical
effectiveness research, along with funding for such research.
Certain provisions of the ACA have been subject to judicial challenges as well as efforts to release or replace them or to alter the
interpretation or implementation. For example, at the end of 2017, Congress passed the Tax Cuts and Jobs Act (Tax Act), which repealed the
penalty for individuals who fail to maintain minimum essential health coverage as required by the ACA, commonly referred to as the individual
mandate, effective January 1, 2019. In December 2018, a United States District Court Judge for the Northern District of Texas ruled (i) that the
individual mandate was unconstitutional as a result of the associated tax penalty being repealed as part of the Tax Act; and (ii) that the
individual mandate is not severable from the rest of the ACA and, as a result, the ACA in its entirety is invalid. In December 2019, the Fifth
Circuit Court of Appeals upheld the district court’s decision that the individual mandate is unconstitutional, but remanded the case back to the
district court to reconsider the severability question. It is unclear how the ultimate decision in this case, or other efforts to repeal, replace, or
invalidate the ACA or its implementing regulations, or portions thereof, will affect the ACA or our business. Other attempts have been made in
Congress to modify or repeal all or certain provisions of the ACA, and we anticipate that there may be further efforts to repeal, replace or
invalidate the ACA, which could affect our business and operations.
The Bipartisan Budget Act of 2018, the BBA, which set government spending levels for Fiscal Years 2018 and 2019, revised certain
provisions of the ACA. Specifically, beginning in 2019, the BBA increased manufacturer point-of-sale discounts off negotiated prices of
applicable brand drugs in the Medicare Part D coverage gap from 50% to 70%, ultimately increasing the liability for brand drug manufacturers.
Further, this mandatory manufacturer discount applied to biosimilars beginning in 2019.
There has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices. Specifically,
there have been several recent U.S. Congressional inquiries and proposed federal and state legislation designed to, among other things, bring
more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and
manufacturer patient programs, and reform government program reimbursement methodologies for drugs. The Trump administration is
currently assessing additional proposals that are designed to affect drug pricing, such as tying U.S. drug prices to prices outside the United
States. Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures
to control drug costs. Most recently, President Trump signed into law the U.S.-Mexico-Canada (USMCA) trade agreement. As enacted, there
are no commitments with respect to biologic product intellectual property rights or data protection, which may create an unfavorable
environment across the three countries.
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The 116th Congress has explored legislation intended to address the cost of prescription drugs. Notably, the major committees of
jurisdiction in the Senate (Finance Committee, Health, Education, Labor and Pensions Committee, and Judiciary Committee) have marked up
legislation intended to address various elements of the prescription drug supply chain. Proposals include a significant overhaul of the Medicare
Part D benefit design, addressing patent loopholes, and efforts to cap increases in drug prices. The House Energy and Commerce Committee
approved drug-related legislation intended to increase transparency of drug prices and also curb anti-competitive behavior in the pharmaceutical
supply chain. In addition, the House Ways and Means Committee approved legislation intended to improve drug price transparency, including
for drug manufacturers to justify certain price increases. On December 12, 2019, the House of Representatives passed broad legislation that
would, among other provisions, require the Department of Health and Human Services (HHS) to negotiate drug prices and impose price caps.
Failure by a manufacturer to reach an agreement with HHS on the negotiated price could result in significant penalties for prescription drug
manufacturers. While we cannot predict what proposals may ultimately become law, the proposals under consideration could significantly
change the landscape in which the pharmaceutical market operates.
The Trump Administration has also taken several regulatory steps to redirect ACA implementation. HHS finalized Medicare fee-for-
service hospital payment reductions for Part B drugs acquired through the 340B Drug Pricing Program, which remains subject to ongoing legal
challenge. HHS also has signaled its intent to continue to pursue reimbursement policy changes for Medicare Part B drugs as a whole that likely
would reduce hospital and physician reimbursement for these drugs.
HHS has made numerous other proposals aimed at lowering drug prices for Medicare beneficiaries and increasing price transparency.
These proposals include giving Medicare Advantage and Part D plans flexibility in the availability of drugs in protected classes, more
transparency in the cost of drugs, including the beneficiary’s financial liability, and less costly alternatives and permitting the use of step
therapy as a means of prior authorization. HHS has also proposed requiring that pharmaceutical manufacturers disclose the prices of certain
drugs in direct-to-consumer television advertisements. The proposal related to protected classes has been withdrawn and the disclosure
requirements have been rejected by the courts. In addition, a proposed rule that would have passed drug rebates to consumers at the point of
sale also has been withdrawn. However, it appears the Trump Administration will continue to explore its authority to make regulatory changes
to the pharmaceutical industry. For example, the Trump Administration released an Advance Notice of Proposed Rulemaking related to an
international price index model. It is unclear what eventually will be proposed, but the President has alluded to the concept of most favored
nation pricing with regard to U.S. drug purchasing. In addition, HHS, in conjunction with the FDA, released two pharmaceutical importation
models in December 2019: (a) a Notice of Proposed Rulemaking to permit importation of pharmaceuticals from Canada, and (2) draft FDA
guidance permitting manufacturers to import their own pharmaceuticals that were originally intended for marketing in other countries.
HHS also has taken steps to increase the availability of cheaper health insurance options, typically with fewer benefits. The Trump
Administration has also signaled its intention to address drug prices and to increase competition, including by increasing the availability of
biosimilars and generic drugs. As these are regulatory actions, a new administration could undo or modify these efforts.
We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous
coverage criteria and in additional downward pressure on the price that we receive for any approved drug. Any reduction in reimbursement
from Medicare or other government healthcare programs may result in a similar reduction in payments from private payors. The
implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain
profitability or commercialize our drugs.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional
activities for drugs. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or
interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In
addition, increased scrutiny by Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as
subject us to more stringent product labeling and post-marketing testing and other requirements.
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There 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:
● our ability to generate revenues and achieve or maintain profitability;
● 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;
● 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 cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or
executive action, either in the United States or abroad.
We cannot predict the likelihood, nature or extent of how government regulation that may arise from future legislation or
administrative or executive action taken by the U.S. presidential administration may impact our business and industry. In particular, the U.S.
President has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on,
or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through
rulemaking, issuance of guidance, and review and approval of marketing applications. Notably, on January 23, 2017, President Trump ordered a
civilian hiring freeze for all executive departments and agencies, including the FDA, which prohibits the FDA from filling employee vacancies
or creating new positions. Under the terms of the order, the freeze was to remain in effect until implementation of a plan to be recommended by
the Director for the Office of Management and Budget (OMB) in consultation with the Director of the Office of Personnel Management, to
reduce the size of the federal workforce through attrition. An under-staffed FDA could result in delays in FDA’s responsiveness or in its ability
to review submissions or applications, issue regulations or guidance or implement or enforce regulatory requirements in a timely fashion or at
all. This hiring freeze was lifted later in 2017. Moreover, on January 30, 2017, President Trump issued an Executive Order, applicable to all
executive agencies, including the FDA, which requires that for each notice of proposed rulemaking or final regulation to be issued in fiscal year
2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law. These requirements are referred to as
the two-for-one provisions. This Executive Order includes a budget neutrality provision that requires the total incremental cost of all new
regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances. For fiscal years
2018 and beyond, the Executive Order requires agencies to identify regulations to offset any incremental cost of a new regulation and
approximate the total costs or savings associated with each new regulation or repealed regulation. In interim guidance issued by the Office of
Information and Regulatory Affairs within OMB on February 2, 2017, the administration indicates that the two-for-one provisions may apply
not only to agency regulations, but also to significant agency guidance documents. It is difficult to predict how these requirements will be
implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose
constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively
impacted.
In addition, on October 12, 2017, the President released an Executive Order intended to promote health care choices and competition
and on June 24, 2019, the President released an Executive Order intended to improve price transparency and quality transparency. These may
push HHS, FDA, and other relevant agencies to engage in rulemaking that may impact the pharmaceutical industry.
If, in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market
our drug candidates, we may not be successful in commercializing our drug candidates if and when they are approved, and we may not be
able to generate any revenue.
We do not currently have a sales or marketing infrastructure and have limited experience in the sale, marketing or distribution of drugs.
To achieve commercial success for any approved drug candidate for which we retain sales and marketing responsibilities, we must build our
sales, marketing, managerial, and other non-technical capabilities or make arrangements with third parties to perform these services. In the
future, we may choose to build a focused sales and marketing infrastructure to sell, or participate in sales activities with our collaborators for,
some of our drug candidates if and when they are approved.
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In advance of FDA approval of our first product, we will need to make significant investments to build a commercial organization and
infrastructure. We will need to hire a sales force and commercial support personnel, in order to build processes and systems to support a
commercial launch prior to knowing whether our product will receive FDA approval. It is possible that the FDA approval is unexpectedly
delayed or our product is not approved at all. In either case we will incur delays that may impede or significantly delay our ability to generate
revenue and at the same time will incur significant expenses. If this were to occur, it would have a material adverse effect on the Company.
There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third
parties to perform these services. For example, recruiting and training a sales force are expensive and time-consuming and could delay any drug
launch. If the commercial launch of a drug candidate for which we recruit a sales force and establish marketing capabilities is delayed or does
not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our
investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our drug candidates on our own include:
● our inability to recruit and retain adequate numbers of effective sales and marketing personnel;
● the inability of sales personnel to obtain access to physicians or to effectively promote any future drugs;
● the lack of complementary drugs to be offered by sales personnel, which may put us at a competitive disadvantage relative to
companies with more extensive product lines; and
● unforeseen costs and expenses associated with creating a sales and marketing organization.
If we enter into arrangements with third parties to perform sales, marketing and distribution services, our drug revenues or the
profitability of these drug revenues to us are likely to be lower than if we were to market and sell any drug candidates that we develop
ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our drug candidates or may
be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote
the necessary resources and attention to sell and market our drug candidates effectively. If we do not establish sales and marketing capabilities
successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our drug candidates. Further,
our business, results of operations, financial condition and prospects will be materially adversely affected.
Our relationships with customers and third-party payors will be subject to applicable fraud and abuse laws, false claims laws, transparency
and disclosure laws, health information and security laws, and other healthcare laws and regulations, which could expose us to criminal
sanctions, civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm and diminished profits
and future earnings.
Although we do not currently have any drugs on the market, once we begin commercializing our drug candidates, we will be subject to
additional extensive healthcare statutory and regulatory requirements and oversight by the federal government and the states and foreign
governments in which we conduct our business. Healthcare providers, physicians and third-party payors play a primary role in the
recommendation and prescription of any drug candidates for which we obtain marketing approval. Our future arrangements with third-party
payors and customers will expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the
business or financial arrangements and relationships through which we market, sell and distribute our drug candidates for which we obtain
marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:
● the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering,
receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an
individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal
and state healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the
statute or specific intent to violate it in order to have committed a violation;
● the federal False Claims Act imposes civil penalties, including through civil whistleblower or qui tam actions, against individuals
or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for
payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the
federal government. In addition, the government may assert that a claim including items and services resulting from a violation of
the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;
● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for
executing a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering
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up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits,
items or services; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the
statute or specific intent to violate it in order to have committed a violation;
● the federal physician payment transparency requirements, sometimes referred to as the Sunshine Act under the Affordable Care
Act require manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or
the Children’s Health Insurance Program to report to the Department of Health and Human Services information related to
physician payments and other transfers of value and the ownership and investment interests of such physicians and their
immediate family members;
● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing
regulations, which also imposes obligations on certain covered entity healthcare providers, health plans, and healthcare
clearinghouses as well as their business associates that perform certain services involving the use or disclosure of individually
identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security and
transmission of individually identifiable health information;
● federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that
potentially harm consumers; and
● analogous state laws and regulations, such as state anti-kickback and false claims laws that may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including
private insurers; and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug
manufacturers to report information related to pricing of products or payments to physicians and other health care providers or
marketing expenditures, and governing the privacy and security of health information in certain circumstances, many of which
differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Ensuring that our future business arrangements with third parties comply with applicable healthcare laws and regulations will involve
substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future
statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations, including
anticipated activities to be conducted by our sales team, were to be found to be in violation of any of these laws or any other governmental
regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from
government-funded healthcare programs, such as Medicare and Medicaid, qui tam actions brought by individual whistleblowers in the name of
the government, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we
expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions,
including exclusions from government-funded healthcare programs.
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, marketing, and distributor
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 laws. 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. In all interactions with foreign regulatory authorities, we are exposed to liability risks under the Foreign Corrupt
Practices Act or similar anti-bribery laws.
Any product for which we obtain marketing approval could be subject to restrictions or withdrawal from the market and we may be subject
to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with products.
Any regulatory approvals that we receive for our drug candidates may be subject to limitations on the indicated uses for which the
drug may be marketed or to conditions of approval that may require potentially costly post-marketing clinical trials or surveillance to monitor
safety and efficacy of the drug candidate. In addition, any product for which we obtain marketing approval, along with the manufacturing
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processes and facilities, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to
continual requirements of, and review by, the FDA and comparable regulatory authorities. These requirements include submissions of safety
and other post-marketing information and reports, registration requirements, current Good Manufacturing Practice (cGMP) requirements
relating to quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding
promotional interactions with healthcare professionals. Failure to comply with these regulatory requirements or later discovery of previously
unknown problems with products, manufacturers, or manufacturing processes, may result in actions such as:
● restrictions on product manufacturing, distribution or use;
● restrictions on the labeling or marketing of a product;
● requirements to conduct post-marketing studies or clinical trials;
● warning letters;
● withdrawal of the products from the market;
● refusal to approve pending applications or supplements to approved applications that we or our subsidiaries submit;
● recalls;
● fines;
● suspension or withdrawal of marketing or regulatory approvals;
● refusal to permit the import or export of products;
● product seizure or detentions;
● injunctions or the imposition of civil or criminal penalties; and
● adverse publicity.
If we, or our respective suppliers, third-party contractors, clinical investigators or collaborators are slow to adapt, or are unable to
adapt, to changes in existing regulatory requirements or adoption of new regulatory requirements or policies, we, our subsidiaries, or our
respective collaborators may be subject to the actions listed above, including losing marketing approval for products, resulting in decreased
revenue from milestones, product sales or royalties.
We will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may
adversely impact our business.
A pharmaceutical product candidate cannot be marketed in the United States or other countries until we have completed a rigorous and
extensive regulatory review process, including approval of a brand name. Any brand names we intend to use for ublituximab, umbralisib or any
future product candidates will require approval from the FDA regardless of whether we have secured a formal trademark registration from the
United States Patent and Trademark Office (USPTO). The FDA typically conducts a review of proposed product brand names, including an
evaluation of potential for confusion with other product names. The FDA may also object to a product brand name if it believes the name
inappropriately implies medical claims. If the FDA objects to any of our proposed product brand names, we may be required to adopt an
alternative brand name for ublituximab, umbralisib or any future product candidates. If we adopt an alternative brand name, we would lose the
benefit of our existing trademark applications for such product candidate and may be required to expend significant additional resources in an
effort to identify a suitable product brand name that would qualify under applicable trademark laws, not infringe the existing rights of third
parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all,
which would limit our ability to commercialize ublituximab, umbralisib, or any future product candidates. We do not currently have an agreed
upon brand name for umbralisib, and no assurance can be given that we will obtain one in a timely fashion. Any delay in obtaining a brand
name for umbralisib or any other of our drug candidates could delay approval and/or commercialization and have a negative impact on our
launch and future prospects for umbralisib or any other such drug candidates.
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Risks Related to Our Dependence on Third Parties
We rely on third parties to generate clinical, preclinical and other data necessary to support the regulatory applications needed to conduct
clinical trials and file for marketing approval. We rely on third parties to help conduct our planned clinical trials. If these third parties do
not perform their services as required, we may not be able to obtain regulatory approval for or commercialize our product candidates when
expected or at all.
In order to submit an Investigational New Drug application (IND), BLA, or NDA to the FDA and maintain these applications, 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 portions 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. While we
maintain an active IND for ublituximab and umbralisib enabling the conduct of studies in the FDA’s Division of Hematology and Oncology,
and an active IND for ublituximab under the FDA’s Division of Neurology, there can be no assurance that the FDA will allow us to continue the
development of our product candidates in those divisions where we maintain an active IND.
Additionally, we use CROs to assist in the conduct of our current clinical trials and expect to use such services for future clinical trials
and we rely upon medical institutions, clinical investigators and contract laboratories to conduct our trials in accordance with our clinical
protocols and appropriate regulations. Our current and future CROs, investigators and other third parties play a significant role in the conduct of
our 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. In addition to the third parties identified above, we are also heavily reliant on the conduct of our patients
enrolled to our studies by our third-party investigators. We rely on our clinical trial sites and investigators to properly identify and screen
eligible candidates for our clinical trials, and for them to ensure participants adhere to our clinical protocol requirements. The majority of our
clinical trial conduct occurs in the out-patient setting, where patients are expected to continue to adhere to our study protocol specified
requirements. The ability of our enrolled patients to properly identify, document, and report adverse events; take protocol specified study drugs
at the correct quantity, time, and setting, as applicable; avoid contraindicated medications; and comply with other protocol specified procedures
such as returning to the trial site for scheduled laboratory and disease assessments, is wholly out of our control. Deviations from protocol
procedures, such as those identified previously, could materially affect the quality of our clinical trial data, and therefore ultimately affect our
ability to develop and commercialize our drug candidates. If any of our clinical trial sites terminates 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. If any of our clinical trial sites are required by the FDA or IRB to close down due to data management or patient
management or any other issues, we may lose patients. In our MS Phase 2 trial, during routine monitoring and site audits, significant Good
Clinical Practice (GCP) violations and other noncompliance issues were identified at one of our US-based large academic sites. The
investigator left the institution and shortly thereafter the site terminated their participation in our study before all data could be source document
verified. While we do not believe this will have any effect on the overall results of the MS Phase 2 trial, sensitivity analyses excluding data
from this site will be performed and no assurance can be given that the results were not affected.
Whether conducted through a CRO or through our internal staff, we are solely responsible for ensuring that each of our clinical trials is
conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and our reliance on CROs will
not relieve us of our regulatory responsibilities. For any violations of laws and regulations during the conduct of our clinical trials, we could be
subject to warning letters or other enforcement actions that may include civil penalties up to and including criminal prosecution. We and our
CROs are required to comply with regulations, including GCP guidelines for conducting, monitoring, recording and reporting the results of
clinical trials to ensure that the data and results are scientifically credible and accurate, and that the trial patients are adequately informed of the
potential risks of participating in clinical trials and their rights are protected. These regulations are enforced by the FDA, the Competent
Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for any drug candidates in
clinical development. The FDA enforces GCP regulations through periodic inspections of clinical trial sponsors, clinical investigators, CROs,
institutional review boards, and non-clinical laboratories. If we, our CROs, our investigators or other third parties fail to comply with applicable
GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may
require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the
FDA will determine that our current or future clinical trials comply with GCPs. In addition, our clinical trials must be conducted with drug
candidates produced under cGMP regulations. Our failure or the failure of our CROs or CMOs to comply with these regulations may require us
to repeat clinical trials, which would delay the regulatory approval process and could
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also subject us to enforcement action. We also are required to register most ongoing clinical trials and post the results of completed clinical
trials on government-sponsored databases, e.g. ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse
publicity and civil and criminal sanctions.
Although we intend to design the clinical trials for our drug candidates, CROs play an important role in the conduct of our clinical
trials, especially outside of the United States. As a result, many important aspects of our development programs, including their conduct and
timing, will be outside of our direct control. Our reliance on third parties to conduct current or future clinical trials will also result in less direct
control over the management of data developed through clinical trials than would be the case if we were relying entirely upon our own staff.
Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities.
Outside parties may:
● have staffing difficulties;
● fail to comply with contractual obligations;
● experience regulatory compliance issues;
● undergo changes in priorities or become financially distressed; or
● form relationships with other entities, some of which may be our competitors.
These factors may materially adversely affect the willingness or ability of third parties to conduct our clinical trials and may subject us
to unexpected cost increases that are beyond our control. If the CROs do not perform clinical trials in a satisfactory manner, breach their
obligations to us or fail to comply with regulatory requirements, the development, regulatory approval and commercialization of our drug
candidates may be delayed, we may not be able to obtain regulatory approval and commercialize our drug candidates, or our development
program may be materially and irreversibly harmed. If we are unable to rely on clinical data collected by our CROs, we could be required to
repeat, extend the duration of, or increase the size of any clinical trials we conduct and this could significantly delay commercialization and
require significantly greater expenditures.
If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative
CROs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if
the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory
requirements or for other reasons, any clinical trials such CROs are associated with may be extended, delayed or terminated, and we may not be
able to obtain regulatory approval for or successfully commercialize our drug candidates. As a result, we believe that our financial results and
the commercial prospects for our drug candidates in the subject indication would be harmed, our costs could increase and our ability to generate
revenue could be delayed.
We contract with third parties for the manufacture of our drug candidates for pre-clinical development and clinical trials, and we expect to
continue to do so for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our
drug candidates or drugs or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or
commercialization efforts.
We do not currently own or operate, nor do we have any plans to establish in the future, any manufacturing facilities or personnel. We
rely, and expect to continue to rely, on third parties for the manufacture of our drug candidates for pre-clinical development and clinical testing,
as well as for the commercial manufacture of our drugs if any of our drug candidates receive marketing approval. In some circumstances, our
licensor has entered into arrangements with contract manufacturers to supply product for our clinical and commercial demand. Our reliance on
third parties increases the risk that we will not have sufficient quantities of our drug candidates or drugs or such quantities at an acceptable cost
or quality, which could delay, prevent or impair our development or commercialization efforts.
The facilities used by contract manufacturers to manufacture our drug candidates must be approved by the FDA or a comparable
foreign regulatory authority pursuant to inspections that may be conducted after we submit our marketing applications to the FDA or a
comparable foreign regulatory authority. We do not control the manufacturing process of, and will be completely dependent on, our contract
manufacturers for compliance with cGMPs in connection with the manufacture of our drug candidates. If our contract manufacturers cannot
successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not
be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our
contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign
regulatory authority does not approve these facilities for the manufacture of our drug candidates or if it withdraws any such approval in the
future, we may need to find alternative manufacturing facilities, which would significantly impact, including causing substantial delay,
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in our ability to develop, obtain regulatory approval for or market our drug candidates. Further, our failure, or the failure of our third-party
manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions,
civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of drug candidates or drugs, operating
restrictions and criminal prosecutions, any of which could significantly and adversely affect our business and supplies of our drug candidates.
For certain of our drug candidates, we do not have long-term supply agreements with contract manufacturers. For these drug
candidates, we purchase our required drug supply, including the drug product and drug substance on a purchase order basis. We may be unable
to establish or maintain agreements with third-party manufacturers for these drug candidates or do so on acceptable terms. No assurance can be
given that long-term, scalable manufacturers can be identified or that they can make clinical and commercial supplies of our product candidates
that meet the product specifications of previously manufactured batches, or are 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.
Even if we are able to establish and maintain agreements with third-party manufacturers, reliance on third-party manufacturers entails
additional risks, including:
● reliance on the third party for regulatory compliance and quality assurance;
● the possible breach of the manufacturing or supply agreement by the third party;
● the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
● the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.
Moreover, our current long-term supply agreements contain certain minimum purchases in what are commonly referred to as “take or
pay” provisions, and we would expect all future supply agreements to contain such provisions. To the extent our demand does not meet the
minimum supply required amounts, we would be forced to pay more than desired. This could create a situation where we are spending more
than required and could impact our on-going operations and entail curtailing other important research and development or commercialization
efforts, all of which could have a material adverse effect on the Company.
Our drug candidates and any drugs that we may develop may compete with other drug candidates and approved drugs for access to
manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of
manufacturing for us.
Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. If
our current contract manufacturers cannot perform as agreed, we may be required to replace such manufacturers causing additional costs and
delays in identifying and qualifying any such replacement.
Our current and anticipated future dependence upon others for the manufacture of our drug candidates or drugs could result in
significant delays or gaps in availability of such drug candidates or drugs and may adversely affect our future profit margins and our ability to
commercialize any drugs that receive marketing approval on a timely and competitive basis.
We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the
part of our distributors could delay clinical development or marketing approval of any future product candidates or commercialization of our
products, producing additional losses and depriving us of potential product revenue.
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 packaging and labeling 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 yet entered into long-term
agreements with our fill/finish suppliers for all of our drug candidates, and 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.
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The third parties upon whom we rely for the supply of the active pharmaceutical ingredient (API), drug product, regulatory starting
materials and intermediates for drug substance and other materials used in our drug candidates are our sole source of supply, and the loss
of any of these suppliers could significantly harm our business.
The API, drug product and drug substance used in many of our drug candidates are currently supplied to us from single-source
suppliers. Our ability to successfully develop our drug candidates, supply our drug candidates for clinical trials and to ultimately supply our
commercial drugs in quantities sufficient to meet the market demand, depends in part on our ability to obtain the API, drug product and drug
substance for these drugs in accordance with regulatory requirements and in sufficient quantities for clinical testing and commercialization. If
any of our suppliers ceases its operations for any reason or is unable or unwilling to supply API, drug product, drug substance and other
materials in sufficient quantities or on the timelines necessary to meet our needs, it could significantly and adversely affect our business, the
supply of our drug candidates and our financial condition.
In most cases, our manufacturing partners are single source suppliers. It is expected that many of our manufacturing partners will be
sole source suppliers from single site locations for the foreseeable future. Various raw materials, components, and testing services required for
our products may also be single sourced. 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. This includes potential disruptions to our supply chains that may be caused
by COVID-19 and related work stoppages across regions impacted by this public health crisis. Ublituximab is manufactured in South Korea,
and TG-1701 is manufactured in China.We have sufficient inventory of clinical supplies of ublituximab to support our current clinical program
needs. In addition, we source certain raw materials for umbralisib from China; however, we have sufficient quantities of these raw materials to
meet our current clinical program needs and our anticipated initial commercial demand in the event we receive FDA approval. Although
COVID-19 has not had a material adverse effect on our business to date, no assurance can be given that it will not in the future if the situation
persists or worsens. We continue to monitor the situation very closely with our suppliers in impacted regions. 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 of 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.
For all of our drug candidates, we plan to identify and qualify additional manufacturers and other suppliers to provide such API, drug
product and drug substance prior to or following submission of an NDA or BLA to the FDA and/or an MAA to the EMA. We are not certain,
however, that our single-source suppliers will be able to meet our demand for their products, either because of the nature of our agreements
with those suppliers, our limited experience with those suppliers, our relative importance as a customer to those suppliers, or public health
emergencies (i.e., COVID-19) or natural disasters that may cause those suppliers to stop work for a period of time.. It may be difficult for us to
assess their ability to timely meet our demand in the future based on past performance.
Establishing additional or replacement suppliers for the API, drug product and drug substance used in our drug candidates, if required,
may not be accomplished quickly or at all and may involve significant expense. If we are able to find a replacement supplier, such replacement
supplier would need to be qualified and require additional regulatory approval, which could result in further delay. While we seek to maintain
adequate inventory of the API, drug product and drug substance used in our drug candidates, any interruption or delay in the supply of
components or materials, or our inability to obtain such API, drug product and drug substance from alternate sources at acceptable prices in a
timely manner could impede, delay, limit or prevent our development efforts, which could harm our business, results of operations, financial
condition and prospects.
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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.
Because we license our product candidates from third parties and we expect to continue to in-license additional product candidates, if
there is any dispute between us and our licensor regarding our rights under a license agreement, our ability to develop and commercialize our
product candidates may be adversely affected. Disputes may arise with the third parties from whom we license our product candidates for a
variety of reasons, including:
● the scope of rights granted under the license agreement and other interpretation-related issues;
● the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the license
agreement;
● the sublicensing of patent and other rights under our collaborative development relationships and obligations associated with
sublicensing;
● our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
● the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us
and our partners; and
● the priority of invention of patented technology.
In addition, the agreements under which we currently license product candidates from third parties are complex, and certain provisions
in such agreements may be susceptible to multiple interpretations, or may conflict in such a way that puts us in breach of one or more
agreements, which would make us susceptible to lengthy and expensive disputes with one or more of our licensing partners. The resolution of
any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual
property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could
have a material adverse effect on our business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual
property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms,
we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on
our business, financial conditions, results of operations, and prospects.
If conflicts arise between us and our future collaborators or strategic partners, these parties may act in a manner adverse to us and could
limit our ability to implement our strategies.
If conflicts arise between our future corporate or academic collaborators or strategic partners and us, the other party may act in a
manner adverse to us and could limit our ability to implement our strategies. Future collaborators or strategic partners, may develop, either
alone or with others, products in related fields that are competitive with the products or potential products that are the subject of these
collaborations. Competing products, either developed by the collaborators or strategic partners or to which the collaborators or strategic
partners have rights, may result in the withdrawal of partner support for any future product candidates. Our current or future collaborators or
strategic partners may preclude us from entering into collaborations with their competitors, fail to obtain timely regulatory approvals, terminate
their agreements with us prematurely, or fail to devote sufficient resources to the development and commercialization of products. Any of these
developments could harm any future product development efforts.
We may seek to establish additional collaborations, and, if we are not able to establish them on commercially reasonable terms, we may have
to alter our development and commercialization plans.
Our drug development programs and the potential commercialization of our drug candidates will require substantial additional cash to
fund expenses. For some of our drug candidates, we may decide to collaborate with additional pharmaceutical and biotechnology companies for
the development and potential commercialization of those drug candidates.
We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will
depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed
collaboration, and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of our clinical
trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject drug
candidate, the costs and complexities of manufacturing and delivering such drug candidate to patients, the potential of competing drugs, the
existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to
the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative drug candidates or
technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the
one with us for our drug candidate. The terms of any additional collaborations or other arrangements that we may establish may not be
favorable to us.
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We may be restricted under our collaboration agreements from entering into future agreements on certain terms with potential
collaborators. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of
recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.
We may not be able to negotiate additional collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we
may have to curtail the development of the drug candidate for which we are seeking to collaborate, reduce or delay its development program or
one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities,
or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our
expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be
available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our drug candidates or
bring them to market and generate drug revenue.
Any future collaborations that we enter into may not be successful. The success of our collaboration arrangements will depend heavily
on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that
they will apply to these collaborations. Disagreements between parties to a collaboration arrangement regarding clinical development and
commercialization matters can lead to delays in the development process or commercializing the applicable drug candidate and, in some cases,
termination of the collaboration arrangement. These disagreements can be difficult to resolve if neither of the parties has final decision-making
authority. Collaborations with pharmaceutical or biotechnology companies and other third parties often are terminated or allowed to expire by
the other party. Any termination or expiration of any future collaboration agreement could adversely affect us financially or harm our business
reputation.
Risks Relating to Our Intellectual Property
Our success depends upon our ability to obtain and protect our intellectual property and proprietary technologies and if the scope of our
patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and drugs similar or
identical to ours, and our ability to successfully commercialize our technology and drugs may be impaired.
Our commercial success in part depends on obtaining and maintaining patent protection and trade secret protection in the United States
and other countries with respect to our product candidates or any future product candidate that we may license or acquire, their formulations
and uses and the methods we use to manufacture them, as well as successfully defending these patents against third-party challenges. We seek
to protect our proprietary and intellectual property position by filing patent applications in the United States and abroad related to our novel
technologies and product candidates, and by maintenance of our trade secrets through proper procedures. Because we in-license our drug
candidates, we also rely on our licensors to protect the patent and other intellectual property rights necessary for commercialization of our drug
candidates.
We will only be able to protect our technologies from unauthorized use by third parties to the extent that valid and enforceable patents
or trade secrets cover them in the market they are being used or developed. The degree of patent protection we require to successfully
commercialize our drug candidates may be unavailable or severely limited in some cases and may not adequately protect our rights or permit us
to gain or keep any competitive advantage. We cannot provide any assurances that any of our patents have, or that any of our pending patent
applications that mature into issued patents will include, claims with a scope sufficient to protect any of our drug candidates. In addition, the
laws of foreign countries may not protect our rights to the same extent as the laws of the United States.
Furthermore, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally twenty years after it is
filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Given the amount of time
required for the development, testing and regulatory review of new drug candidates, patents protecting such candidates might expire before or
shortly after such candidates are commercialized. As a result, our owned patent portfolio may not provide us with adequate and continuing
patent protection sufficient to exclude others from commercializing drugs similar or identical to our drug candidates, including generic versions
of such drugs.
Currently, the composition of matter patent for ublituximab and umbralisib are granted in both the United States and EU, among other
countries. A method of use patent covering the combination of ublituximab and umbralisib has also been granted in the US, EU, Japan, and
several other territories. Additionally, several method of use patents for ublituximab and umbralisib in various indications and settings have also
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. There can be no guarantee that any patents for which an application has already been filed, nor any patents filed
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in the future, for our cosibelimab, TG-1701 and TG-1801 or for our pre-clinical product candidates will be granted in any or all jurisdictions in
which they 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, or what the scope of an issued patent may ultimately be.
These risks and uncertainties include the following:
● the patent applications that we or our licensors 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 United States 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 file new patent applications or make, use, and sell our potential products either in the United States or in
international markets;
● there may be significant pressure on the United States 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, the patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all
necessary or desirable patent applications at a reasonable cost or in a timely manner. Further, with respect to some of the pending patent
applications covering our drug candidates, prosecution has yet to commence. Patent prosecution is a lengthy process, during which the scope of
the claims initially submitted for examination by the U.S. Patent and Trademark Office, or USPTO, have been significantly narrowed by the
time they issue, if at all. It is also possible that we will fail to identify any patentable aspects of our research and development output and
methodology, and, even if we do, an opportunity to obtain patent protection may have passed. Given the uncertain and time-consuming process
of filing patent applications and prosecuting them, it is possible that our product(s) or process(es) originally covered by the scope of the patent
application may have changed or been modified, leaving our product(s) or process(es) without patent protection. Moreover, in some
circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents,
covering technology that we license from third parties. Therefore, these patents and applications may not be prosecuted and enforced in a
manner consistent with the best interests of our business. If our licensors or we fail to appropriately prosecute and maintain patent protection or
trade secret protection for one or more product candidates or any future product candidate we may license or acquire, 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 impair our
ability to compete in the market and adversely affect our ability to generate revenues and achieve profitability, which would have a material
adverse effect on our financial condition and results of operations. Furthermore, should we enter into other collaborations, including out-
licensing or partnerships, we may be required to consult with or cede control to collaborators regarding the prosecution, maintenance and
enforcement of licensed patents. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the
best interests of our business.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual
questions, and has in recent years been the subject of much litigation. In addition, no consistent policy regarding the breadth of claims allowed
in pharmaceutical or biotechnology patents has emerged to date in the United States. The patent situation outside the United States is even more
uncertain. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States, and we may fail to seek
or obtain patent protection in all major markets. For example, European patent law restricts the patentability of methods of treatment of the
human body more than United States law does. Our pending and future patent applications may not result in patents being issued which protect
our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and
products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value
of our patents or narrow the scope of our patent protection. For example, the federal courts of the United States have
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taken an increasingly dim view of the patent eligibility of certain subject matter, such as naturally occurring nucleic acid sequences, amino acid
sequences and certain methods of utilizing same, which include their detection in a biological sample and diagnostic conclusions arising from
their detection. Such subject matter, which had long been a staple of the biotechnology and biopharmaceutical industry to protect their
discoveries, is now considered, with few exceptions, ineligible in the first instance for protection under the patent laws of the United States.
Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in those licensed from a third-party.
In addition, U.S. patent laws may change, which could prevent or limit us, our subsidiaries, or our licensors from filing patent
applications or patent claims to protect products and/or technologies or limit the exclusivity periods that are available to patent holders, as well
as affect the validity, enforceability, or scope of issued patents. For example, on September 16, 2011, the Leahy-Smith America Invents Act was
signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law. These include changes to transition
from a first-to-invent system to a first-to-file system and to the way issued patents are challenged. The formation of the Patent Trial and Appeal
Board now provides a quicker and less expensive process for challenging issued patents.
We may be subject to a third-party pre-issuance submission of prior art to the USPTO, or become involved in opposition, derivation,
reexamination, inter parties review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others.
The costs of these proceedings could be substantial and it is possible that our efforts to establish priority of invention would be unsuccessful,
resulting in a material adverse effect on our United States patent position. An adverse determination in any such submission, patent office trial,
proceeding or litigation could reduce the scope of, render unenforceable, or invalidate, our patent rights, allow third parties to commercialize
our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize
products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by patents and patent
applications for our drug candidates is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize
current or future product candidates.
The issuance of a patent does not foreclose challenges to its inventorship, scope, validity or enforceability. Therefore, our owned and
licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of
exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop
others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our
technology and products. Given the amount of time required for the development, testing and regulatory review of new product candidates,
patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result, our
owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or
identical to ours.
Even if our patent applications issue as patents, and they are unchallenged, our issued patents and our pending patents, if issued, may
not provide us with any meaningful protection or prevent competitors from designing around our patent claims to circumvent our owned or
licensed patents by developing similar or alternative technologies or drugs in a non-infringing manner. For example, a third party may develop a
competitive drug that provides benefits similar to one or more of our drug candidates but that has a different composition that falls outside the
scope of our patent protection. If the patent protection provided by the patents and patent applications we hold or pursue with respect to our
drug candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our drug candidates could be
negatively affected, which would harm our business.
In addition, we may in the future be subject to claims by our former employees or consultants asserting an ownership right in our
patents or patent applications, as a result of the work they performed on our behalf. Although we have entered into agreements with many of
our employees, consultants and advisors and any other third parties who have access to our proprietary know-how, information or technology to
assign or grant similar rights to their inventions to us, we cannot be certain that we have executed such agreements with all parties who may
have contributed to our intellectual property, nor can we be certain that our agreements with such parties will be upheld in the face of a potential
challenge, or that they will not be breached, for which we may not have an adequate remedy. An adverse determination in any such submission
or proceeding may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in
whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and drugs, without
payment to us, or could limit the duration of the patent protection covering our technology and drug candidates. Such challenges may also result
in our inability to manufacture or commercialize our drug candidates without infringing third-party patent rights. In addition, if the breadth or
strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to
license, develop or commercialize current or future drug candidates.
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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.
Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with
these requirements.
The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee
payment and other similar provisions during the patent application process. In addition, periodic maintenance fees on issued patents often must
be paid to the USPTO and foreign patent agencies over the lifetime of the patent. While an unintentional lapse can in many cases be cured by
payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in
abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to,
failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal
documents. If we fail to maintain the patents and patent applications covering our drugs or procedures, we may not be able to stop a competitor
from marketing drugs that are the same as or similar to our drug candidates, which would have a material adverse effect on our business.
If we do not obtain patent term extensions under the Hatch-Waxman Amendments and similar foreign legislation extending the terms of
our licensed patents and any future patents we may own, our business may be materially harmed.
Depending on the timing, duration, and specifics of any FDA regulatory approval for our drug candidates, one or more of our licensed
U.S. patents or future U.S. patents that we may license or own may be eligible for limited patent term restoration under the Hatch-Waxman
Amendments. The Hatch-Waxman Amendments permit a patent term extension of up to five years as compensation for patent term lost during
the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond 14 years from the date of
product approval by the FDA, and only one patent covering the approved product may be extended.
The application for a patent term extension is subject to approval by the USPTO, in conjunction with the FDA. We may not be granted
an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or
otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of the patent protection afforded could
be less than we request. If we are unable to obtain patent term extension or any term of such extension is less than we request, the period
during which we will have the right to exclusively market our product will be shortened and our competitors may obtain earlier approval of
competing products, and our ability to generate revenues could be materially adversely affected.
We may not be able to enforce our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on drug candidates throughout the world would be prohibitively expensive. Competitors may
use our licensed and owned technologies in jurisdictions where we have not licensed or obtained patent protection to develop their own
products and, further, may export otherwise infringing products to territories where we may obtain or license patent protection, but where patent
enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not have
any issued or licensed patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent
them from so competing.
Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in
foreign intellectual property laws. Additionally, laws of some countries outside of the United States and Europe do not afford intellectual
property protection to the same extent as the laws of the United States and Europe. Many companies have encountered significant problems in
protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, including India, China
and other developing countries, do not favor the enforcement of patents and other intellectual property rights. This could make it difficult for us
to stop the infringement of our patents or the misappropriation of our other intellectual property rights. For example, many foreign countries
have compulsory licensing laws under which a patent owner must grant licenses to third parties. Consequently, we may not be able to prevent
third parties from practicing our inventions in certain countries outside the United States and Europe.
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Proceedings to enforce our future patent rights, if any, in foreign jurisdictions could result in substantial cost and divert our resources
and attention from other aspects of our business. Moreover, such proceedings could put our patents at risk of being invalidated or interpreted
narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any
lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be meaningful. Furthermore, while we intend to protect
our intellectual property rights in major markets for our products, we cannot ensure that we will be able to initiate or maintain similar efforts in
all jurisdictions in which we may wish to market our products. Accordingly, our efforts to protect our intellectual property rights in such
countries may be 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 depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our
drug candidates and use our proprietary technologies without infringing the proprietary rights and intellectual property of third parties. The
biotechnology and pharmaceutical industries are characterized by extensive and frequent litigation regarding patents and other intellectual
property rights. We may in the future become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property
rights with respect to our drug candidates and technology, including interference proceedings before the USPTO.
Our competitors or other third parties may assert infringement claims against us, alleging that our drugs are covered by their patents.
Given the vast number of patents in our field of technology, we cannot be certain that we do not infringe existing patents or that we will not
infringe patents that may be granted in the future. 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. 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. Publications of discoveries in the
scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not
published until 18 months after a first filing, or in some cases not at all. Therefore, we cannot know with certainty whether we or our licensors
were the first to make the inventions claimed in patents or pending patent applications that we own or licensed, or that we or our licensors were
the first to file for patent protection of such inventions.
We are aware of certain patents that may pose issues for our commercialization of our drug candidates. For example, Roche, Biogen
Idec, and Genentech hold patents for the use of anti-CD20 antibodies utilized in the treatment of CLL in the United States which expired in
November of 2019. 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 valid and enforced at the time we are intending to launch
ublituximab, 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 decide to initiate proceedings to challenge the validity of these patents in the future, we may be unsuccessful, as courts or patent
offices in the United States and abroad could uphold the validity of any such patents. If we were to challenge the validity of any issued United
States patent in court, we would need to overcome a statutory presumption of validity that attaches to every United States patent. This means
that in order to prevail, we would have to present clear and convincing evidence as to the invalidity of the patent’s claims. If we are unable to do
so, we may be forced to delay the launch of ublituximab or launch at the risk of litigation for patent infringement, which may have a material
adverse effect on our business and results of operations.
If a third-party claims that we or any collaborators of ours infringe their intellectual property rights, we may have to 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. If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from
such third party to continue developing and marketing our drug candidates and technology. However, we may not be able to obtain any required
license on commercially reasonable terms or at all. Even if we were able to obtain such a license, it could be granted on non-exclusive terms,
thereby providing our competitors and other third parties access to the same technologies licensed to us. Without such a license, we could be
forced, including by court order, to cease developing and commercializing the infringing technology or drug candidates. In addition, we could
be found liable for monetary damages, including treble damages and attorneys fees if we are found to have willfully infringed such third-party
patent rights. A finding of infringement could prevent us from commercializing our drug candidates or force us to cease some of our business
operations, which could materially harm our business.
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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 need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on
commercially reasonable terms.
A third party may hold intellectual property, including patent rights that are important or necessary to the development and
commercialization of our products. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize
our products, in which case we would be required to obtain a license from these third parties, whom may or may not be interested in granting
such a license, on commercially reasonable terms, or our business could be harmed, possibly materially. For example, we engage extensively
with third parties, including academic institutions, to conduct non-clinical and clinical research on our product candidates. While we seek to
ensure all material transfer and service agreements governing this research provide us with favorable terms covering newly generated
intellectual property, a general principle under which much of this research with academic institutions is conducted provides third-party
ownership of newly generated intellectual property, with an exclusive option available for us to obtain a license to such intellectual property.
Through the conduct of this research, it is possible that valuable intellectual property could be developed by a third party, which we will then
need to license in order to better develop or commercialize our products. No assurance can be given that we will be able to successfully
negotiate such a license on commercially reasonable terms, or at all. Further, should we fail to successfully negotiate a license to such
intellectual property, most institutions are then free to license such intellectual property to any other third party, including potentially direct
competitors of ours. Should we fail to adequately secure a license to any newly generated intellectual property, our ability to successfully
develop or commercialize our products may be hindered, possibly materially.
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. Any claims
we assert against accused infringers could provoke these parties to assert counterclaims against us alleging invalidity of our or certain of our
subsidiaries patents or that we infringe their patents; or provoke those parties to petition the USPTO to institute inter parties review against the
asserted patents, which may lead to a finding that all or some of the claims of the patent are invalid. 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 pending patents at risk of being invalidated, held unenforceable, or interpreted narrowly.
In patent litigation in the United States, defendant counterclaims challenging the validity, enforceability or scope of asserted patents
are commonplace. In addition, third parties may initiate legal proceedings against us to assert such challenges to our intellectual property rights.
The outcome of any such proceeding is generally unpredictable. Grounds for a validity challenge could be an alleged failure to meet any of
several statutory requirements, including lack of novelty, obviousness or non-enablement. Patents may be unenforceable if someone connected
with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. It is possible
that prior art of which we and the patent examiner were unaware during prosecution exists, which could render our patents invalid. Moreover, it
is also possible that prior art may exist that we are aware of but do not believe is relevant to our current or future patents, but that could
nevertheless be determined to render our patents invalid.
Competing drugs may also be sold in other countries in which our patent coverage might not exist or be as strong. If we lose a foreign
patent lawsuit, alleging our infringement of a competitor’s patents, we could be prevented from marketing our drugs in one or more foreign
countries. Any of these outcomes would have a materially adverse effect on our business.
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In addition, 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. Furthermore, adverse results on
United States patents may affect related patents in our global portfolio. The adverse result could also put related pending patent applications at
risk of not issuing. Additionally, 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.
Interference proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions
with respect to our patents or pending 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. The costs of these proceedings could be
substantial. As a result, the issuance, scope, validity, enforceability and commercial value of our or any of our respective licensors patent rights
are highly uncertain. 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.
We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors
may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and
more mature and developed intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from
infringing upon or misappropriating or from successfully challenging our intellectual property rights. Uncertainties resulting from the initiation
and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position may be harmed.
In addition to the protection afforded by patents, we rely upon unpatented trade secret protection, unpatented know-how and
continuing technological innovation to develop and maintain our competitive position. With respect to the building of our proprietary
compound library, we consider trade secrets and know-how to be our primary intellectual property. We seek to protect our proprietary
technology and processes, in part, by entering into confidentiality agreements with our collaborators, scientific advisors, employees and
consultants, and invention assignment agreements with our consultants and employees. We may not be able to prevent the unauthorized
disclosure or use of our technical know-how or other trade secrets by the parties to these agreements, however, despite the existence generally
of confidentiality agreements and other contractual restrictions. Monitoring unauthorized uses and disclosures is difficult, and we do not know
whether the steps we have taken to protect our proprietary technologies will be effective. If any of the collaborators, scientific advisors,
employees and consultants who are parties to these agreements breaches or violates the terms of any of these agreements, we may not have
adequate remedies for any such breach or violation, and we could lose our trade secrets as a result. Enforcing a claim that a third party illegally
obtained and is using our trade secrets, like patent litigation, is expensive and time-consuming, and the outcome is unpredictable. In addition,
courts outside the United States are sometimes less willing to protect trade secrets.
Our trade secrets could otherwise become known or be independently discovered by our competitors. Competitors could purchase our
drug candidates and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe
our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our
intellectual property rights. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have
no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If our trade
secrets are not adequately protected so as to protect our market against competitors’ drugs, our competitive position could be adversely
affected, as could our business.
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We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our
competitors or are in breach of non-competition or non-solicitation agreements with our competitors.
We could in the future be subject to claims that we or our employees have inadvertently or otherwise used or disclosed alleged trade
secrets or other proprietary information of former employers or competitors. Although we try to ensure that our employees and consultants do
not use the intellectual property, proprietary information, know-how or trade secrets of others in their work for us, we may in the future be
subject to claims that we caused an employee to breach the terms of his or her non-competition or non-solicitation agreement, or that we or
these individuals have, inadvertently or otherwise, used or disclosed the alleged trade secrets or other proprietary information of a former
employer or competitor. 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 could be a distraction to management. If our defenses to these claims fail, in addition to
requiring us to pay monetary damages, a court could prohibit us from using technologies or features that are essential to our drug candidates, if
such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of the former
employers. An inability to incorporate such technologies or features would have a material adverse effect on our business, and may prevent us
from successfully commercializing our drug candidates. In addition, we may lose valuable intellectual property rights or personnel as a result of
such claims. Moreover, any such litigation or the threat thereof may adversely affect our ability to hire employees or contract with independent
sales representatives. A loss of key personnel or their work product could hamper or prevent our ability to commercialize our drug candidates,
which would have an adverse effect on our business, results of operations and financial condition.
Risks Related to Employee Matters, Managing Growth and Other Risks Related to Our Business
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 are highly dependent on the research and development, clinical, business development, financial and legal expertise of our senior
management team as well as the other principal members of our management, scientific and clinical team. Although we have entered into an
employment agreement with our chief executive officer and employment letters with our senior managers, each of our executive officers may
terminate their employment with us at any time. We do not maintain key person insurance for any of our executives or other employees. In
addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and
development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have
commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to
attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.
We expect to continue hiring qualified development personnel. Recruiting and retaining qualified scientific, clinical, manufacturing
and sales and marketing personnel will be critical to our success. The loss of the services of our chief executive officer or other key employees
could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully
implement our business strategy. Furthermore, replacing key employees may be difficult and may take an extended period of time because of
the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory
approval of and commercialize drugs. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or
motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for
similar personnel. Failure to succeed in clinical trials may make it more challenging to recruit and retain qualified medical and scientific
personnel. 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.
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We will need to develop and expand our business, and we may encounter difficulties in managing this development and expansion, which
could disrupt our operations.
As of February 14, 2020, we had 134 full-time employees, and we expect to continue to increase our number of employees and expand
the scope of our operations. Our management and medical, commercial, and scientific personnel, systems and facilities currently in place will
not be adequate to support our anticipated future growth. To manage our anticipated future growth, we must continue to implement and improve
our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Also,
our management may need to divert a disproportionate amount of its attention away from its day-to-day activities and devote a substantial
amount of time to managing these development activities. Due to our limited resources, we may not be able to effectively manage the
expansion of our operations or recruit and train additional qualified personnel. This may result in weaknesses in our infrastructure, give rise to
operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. To accommodate
growth, additional physical expansion of our operations in the future may lead to significant costs, including capital expenditures, and may
divert financial resources from other projects, such as the development of our drug candidates. If our management is unable to effectively
manage our expected development and expansion, our expenses may increase more than expected, our ability to generate or increase our
revenue could be reduced and we may not be able to implement our business strategy. Our future financial performance and our ability to
commercialize our drug candidates, if approved, and compete effectively will depend, in part, on our ability to effectively manage the future
development and expansion of our business.
Additionally, to help manage the expanding needs, 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 our 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.
Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets.
For example, the global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged
economic downturn, such as the global financial crisis, could result in a variety of risks to our business, including, weakened demand for our
drug candidates and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also
strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services.
On January 31, 2019 (Brexit Day), the United Kingdom formally left the European Union. Although Brexit has already and may
continue to adversely affect European and/or worldwide economic or market, political or regulatory conditions and may contribute to instability
in the global financial markets, political institutions and regulatory agencies, the resulting immediate changes in foreign currency exchange
rates have had a limited overall impact due to natural hedging. The long-term impact of Brexit, including on our business and our industry, will
depend on the terms that are negotiated in relation to the United Kingdom’s future relationship with the European Union during the transition
period which began on Brexit Day and is currently set to end on December 31, 2020. We are closely monitoring the Brexit developments in
order to determine, quantify and proactively address changes as they become clear. Despite the Brexit developments, we do not expect
macroeconomic conditions to have a significant impact on our liquidity needs, financial condition or results of operations.
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Our internal computer systems, or those of our third-party CROs, CMOs, or other contractors or consultants, may fail or suffer security
breaches, which could result in a material disruption of our drug candidates’ development programs.
Despite the implementation of security measures, our internal computer systems and those of our third-party CROs, CMOs, and other
contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. While we have not experienced any such system failure, accident, or security breach to date, if such
an event were to occur and cause interruptions in our operations, it could result in a material disruption of our programs. For example, the loss
of clinical trial data for our drug candidates could result in delays in our regulatory approval efforts and significantly increase our costs to
recover or reproduce the data. Furthermore, in preparing for potential commercialization of our first drug candidate, we anticipate that our
computer systems will increase in magnitude and complexity. Building the systems and infrastructure required for commercialization with
appropriate security measures may be time consuming and costly. In addition, there can be no assurance that our efforts will prevent
breakdowns or breaches in our systems. To the extent that any disruption or security breach results in a loss of or damage to our data or
applications or other data or applications relating to our technology or drug candidates, or inappropriate disclosure of confidential or proprietary
information, we could incur financial, legal, business or reputational harm.
Our employees, principal investigators, CROs, CMOs and consultants may engage in misconduct or other improper activities, including
non-compliance with regulatory standards and requirements and insider trading, which could have a material adverse effect on our
business.
We are exposed to the risk that our employees, principal investigators, CROs, CMOs, and consultants may engage in fraudulent
conduct or other illegal activity. Misconduct by these parties could include intentional failures to comply with FDA regulations, provide
accurate information to the FDA, comply with manufacturing standards we have established, comply with federal and state healthcare fraud and
abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales,
marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud,
misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing,
discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to
these laws also involve the improper use of information obtained in the course of clinical trials or creating fraudulent data in our pre-clinical
studies or clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a code of ethics
applicable to all of our employees, but it is not always possible to identify and deter misconduct by employees and other third parties, and the
precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in
protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
In addition, we are subject to the risk that a person could allege such fraud or other misconduct, even if none occurred. If any such actions are
instituted against us, regardless of the outcome, our reputation and our business may suffer. If we are not successful in defending ourselves or
asserting our rights, those actions could lead to imposition of civil, criminal and administrative penalties, damages, monetary fines, possible
exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished
profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business.
We may acquire businesses or drugs, or form strategic alliances, in the future, and we may not realize the benefits of such acquisitions.
We may acquire additional businesses or drugs, form strategic alliances or create joint ventures with third parties that we believe will
complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize
the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We
may encounter numerous difficulties in developing, manufacturing and marketing any new drugs resulting from a strategic alliance or
acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any
such acquisition, we will achieve the expected synergies to justify the transaction.
We may be subject to adverse legislative or regulatory tax changes that could negatively impact our financial condition.
The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative
process and by the IRS and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could
adversely affect our stockholders or us. In recent years, many such changes have been made and changes are likely to continue to occur in the
future. We cannot predict whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted,
promulgated or decided, which could result in an increase in our, or our stockholders, tax liability or require changes in the manner in which we
operate in order to minimize increases in our tax liability.
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On December 22, 2017, legislation commonly referred to as the Tax Cuts and Jobs Act (Tax Act) was signed into law and is generally
effective after December 31, 2017. The Tax Cuts and Jobs Act makes significant changes to the United States federal income tax rules for
taxation of individuals and business entities. Most of the changes applicable to individuals are temporary and apply only to taxable years
beginning after December 31, 2017 and before January 1, 2026. For corporations, the Tax Act reduces the top corporate income tax rate to 21%
and repeals the corporate alternative minimum tax, limits the deduction for net interest expense, limits the deduction for net operating losses
and eliminates net operating loss carrybacks, modifies or repeals many business deductions and credits, shifts the United States toward a more
territorial tax system, and imposes new taxes to combat erosion of the U.S. federal income tax base. The Tax Act makes numerous other large
and small changes to the federal income tax rules that may affect potential investors and may directly or indirectly affect us. We continue to
examine the impact this tax reform legislation may have on our business. However, the effect of the Tax Act on us, whether adverse or
favorable, is uncertain, and may not become evident for some period of time. This document does not discuss such legislation or the manner in
which it might affect us or purchasers of our common stock. Prospective investors are urged to consult with their legal and tax advisors with
respect to the Tax Act and any other regulatory or administrative developments and proposals, and their potential effects on them based on their
unique circumstances.
Risks Related to Our Common Stock and Being a Publicly-Traded Company
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 has been and is likely to continue 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 by us.
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.
Our executive officers, directors, principal stockholders and their affiliates maintain the ability to exercise significant influence over our
company and all matters submitted to stockholders for approval.
Our executive officers, directors and stockholders who own more than 5% of our outstanding common stock, together with their
affiliates and related persons, beneficially own shares of common stock representing a significant percentage of our capital stock. As a result, if
these stockholders were to choose to act together, they would be able to influence our management and affairs and the outcome of matters
submitted to our stockholders for approval, including the election of directors and any sale, merger, consolidation, or sale of all or substantially
all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may
desire. In addition, this concentration of ownership might adversely affect the market price of our common stock by:
● delaying, deferring or preventing a change of control of us;
● impeding a merger, consolidation, takeover or other business combination involving us; or
● discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
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Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be
the sole source of gain for our stockholders.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to
finance the growth and development of our business. In addition, under the Loan Agreement, we are currently restricted from paying cash
dividends, and we expect these restrictions to continue in the future. In addition, the terms of any future debt agreements may continue to
preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for our
stockholders for the foreseeable future.
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.
An active trading market for our common stock may not be sustained, and investors may not be able to resell their shares at or above the
price they paid.
Although we have listed our common stock on The Nasdaq Capital Market, an active trading market for our shares may not be
sustained. In the absence of an active trading market for our common stock, investors may not be able to sell their common stock at or above
the price at which they acquired their shares or at the time that they would like to sell. An inactive trading market may also impair our ability to
raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our
shares as consideration.
If equity research analysts do not publish research or reports about our business or if they publish negative evaluations of or downgrade
our common stock, the price of our common stock could decline.
The trading market for our common stock relies in part on the research and reports that equity research analysts publish about us or our
business. We do not control these analysts. We may never obtain research coverage by industry or financial analysts. If no or few analysts
commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the
analysts covering our business downgrade their evaluations of our common stock, the price of our common stock could decline. If one or more
of these analysts cease to cover our common stock, we could lose visibility in the market for our common stock, which in turn could cause our
common stock price to decline.
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We incur significant increased costs as a result of operating as a public company, and our management is required to devote substantial
time to compliance initiatives.
As a public company, we incur significant legal, accounting and other expenses under the Sarbanes-Oxley Act of 2002, as well as rules
subsequently implemented by the Securities and Exchange Commission (SEC), and the rules of any stock exchange on which we are listed.
These rules impose various requirements on public companies, including requiring establishment and maintenance of effective disclosure and
financial controls and appropriate corporate governance practices. Our team has devoted and will continue to devote a substantial amount of
time to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some
activities more time-consuming and costly. For example, these rules and regulations make it more difficult and more expensive for us to obtain
director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs
to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board of
Directors, our Board committees or as executive officers.
The Sarbanes-Oxley Act of 2002 requires, among other things, that we maintain effective internal control over financial reporting and
disclosure controls and procedures. As a result, we are required to periodically perform an evaluation of our internal control over financial
reporting to allow management to report on the effectiveness of those controls, as required by Section 404 of the Sarbanes-Oxley Act.
Additionally, our independent auditors are required to perform a similar evaluation and report on the effectiveness of our internal control over
financial reporting. These efforts to comply with Section 404 will require the commitment of significant financial and managerial resources.
While we anticipate maintaining the integrity of our internal control over financial reporting and all other aspects of Section 404, we cannot be
certain that a material weakness will not be identified when we test the effectiveness of our control systems in the future. If a material weakness
is identified, we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional
financial and management resources, costly litigation or a loss of public confidence in our internal control, which could have an adverse effect
on the market price of our stock.
Volatility in the price of our common stock may subject us to securities litigation, which could cause us to incur substantial costs and divert
management’s attention, financial resources and other company assets.
In the past, securities class action litigation has often been brought against a company following periods of volatility in the market
price of its securities. This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price
volatility in recent years. Past lawsuits and any future lawsuits to which we may become a party are subject to inherent uncertainties and will
likely be expensive and time-consuming to investigate, defend and resolve, and will divert our management’s attention and financial and other
resources. The outcome of litigation is necessarily uncertain, and we could be forced to expend significant resources in the defense of these and
other suits, and we may not prevail. Any litigation to which we are a party may result in an onerous or unfavorable judgment that may not be
reversed upon appeal or in payments of substantial monetary damages or fines, or we may decide to settle this or other lawsuits on similarly
unfavorable terms, which could adversely affect our business, financial condition, results of operations or stock price.
Future sales of our common stock, including by us or our directors and executive officers or shares issued upon the exercise of currently
outstanding options, could cause our stock price to decline.
A substantial portion of our outstanding common stock can be traded without restriction at any time. In addition, a portion of our
outstanding common stock is currently restricted as a result of federal securities laws, but can be sold at any time subject to applicable volume
limitations. As such, sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or
the perception in the market that the holders of a large number of shares intend to sell shares, by us or others, could reduce the market price of
our common stock or impair our ability to raise adequate capital through the sale of additional equity securities. In addition, we have a
significant number of shares that are subject to outstanding options. The exercise of these options and the subsequent sale of the underlying
common stock could cause a further decline in our stock price. These sales also might make it difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate. We cannot predict the number, timing or size of future issuances or the effect, if any,
that any future issuances may have on the market price for our common stock.
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Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an ownership change (generally
defined as a greater than 50% change (by value) in the ownership of its equity over a three year period), the corporations ability to use its pre-
change net operating loss carryforwards and certain other pre-change tax attributes to offset its post-change income may be limited. We may
have experienced such ownership changes in the past, and we may experience ownership changes in the future as a result of shifts in our stock
ownership, some of which are outside our control. As of December 31, 2019, we had federal net operating loss carryforwards of approximately
$709.9 million, and our ability to utilize those net operating loss carryforwards could be limited by an ownership change as described above,
which could result in increased tax liability to us. In addition, pursuant to the TCJA, we may not use net operating loss carry-forwards to reduce
our taxable income in any year by more than 80%, and we may not carry back any net operating losses to prior years. These new rules apply
regardless of the occurrence of an ownership change.
ITEM 2. PROPERTIES.
We maintain corporate and executive space in New York, New York, and Edison, New Jersey. We are also currently leasing small
office spaces in Raleigh, North Carolina and Kingsport, Tennessee to accommodate our clinical operations groups and commercial team. We
believe that our existing facilities are adequate to meet our current requirements. We do not own any real property.
ITEM 3. LEGAL PROCEEDINGS.
We, and our subsidiaries, are not a party to, and our property is not the subject of, any material pending legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
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”.
Holders
The number of record holders of our common stock as of February 21, 2020 was 230.
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.
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Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information as of December 31, 2019, regarding the securities authorized for issuance under our equity
compensation plan, the TG Therapeutics, Inc. Amended and Restated 2012 Incentive Plan.
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 1)
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
2,605,730
—
2,605,730
$
$
6.74
—
6.74
779,346
—
779,346
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,
2014 through December 31, 2019, 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, 2014, 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.
* $100 invested on December 31, 2014 in stock or index, including reinvestment of dividends. Fiscal Years ending December 31.
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ITEM 6. SELECTED FINANCIAL DATA.
The following Statement of Operations data for the years ended December 31, 2019, 2018, 2017, 2016 and 2015, and Balance Sheet
Data as of December 31, 2019, 2018, 2017, 2016 and 2015, as set forth below are derived from our audited consolidated financial statements.
Audited financial statements prior to 2017 are not contained herein. 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.”
(in thousands)
License revenue
Costs and expenses:
Research and development:
Noncash stock expense associated with in-licensing agreements
Noncash compensation
Other research and development
Total research and development
General and administrative:
Noncash compensation
Other general and administrative
Total general and administrative
Total costs and expenses
Operating loss
Other (income) expense:
Interest expense
Other income
Total other (income) expense, net
2019
Years ended December 31,
2017
2018
2016
2015
$
152
$
152
$
152
$
152
$
152
100
5,811
148,269
154,180
4,000
5,598
149,793
159,391
—
—
5,647
96,886
102,533
2,742
66,490
69,232
5,523
9,504
15,027
7,288
7,873
15,161
10,298
6,033
16,331
4,767
5,122
9,889
—
4,261
43,446
47,707
11,436
4,189
15,625
169,207
174,552
118,864
79,121
63,332
(169,055)
(174,400)
(118,712)
(78,969)
(63,180)
5,287
(1,471)
3,816
877
(1,795)
(918)
845
(1,081)
(236)
886
(1,602)
(716)
973
(1,204)
(231)
Net loss
$ (172,871)
$ (173,482)
$ (118,476)
$ (78,253)
$ (62,949)
Basic and diluted net loss per common share
$
(1.96)
$
(2.30)
$
(1.91)
$
(1.60)
$
(1.38)
Balance Sheet Information:
(in thousands)
Cash, cash equivalents, investment securities and interest receivable
Total assets
Accumulated deficit
Total equity
2019
$ 140,435
163,014
(701,216)
38,615
$
2018
68,901
83,616
(528,345)
24,036
$
December 31,
2017
84,825
97,381
(354,863)
66,993
$
2016
44,969
54,782
(236,387)
35,868
2015
$ 102,417
113,473
(158,134)
101,573
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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 “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 dedicated to developing and delivering medicines for patients with B-cell mediated diseases,
including Chronic Lymphocytic Leukemia (CLL), non-Hodgkin Lymphoma (NHL) and Multiple Sclerosis (MS). We have developed a robust
B-cell directed research and development (R&D) platform for identification of key B-cell pathways of interest and rapid clinical testing.
Currently, we have five B-cell targeted drug candidates in clinical development, with the lead two therapies, ublituximab (TG-1101) and
umbralisib (TGR-1202), in pivotal trials for CLL, NHL and MS. Ublituximab is a novel anti-CD20 monoclonal antibody (mAb) that has been
glycoengineered for enhanced potency over first generation antibodies. Umbralisib is an oral, once daily, dual inhibitor of PI3K-delta and CK1-
epsilon, which may lead to a differentiated safety profile. When used together in combination therapy, ublituximab and umbralisib are referred
to as "U2". Additionally, in early clinical development we have an anti-PD-L1 monoclonal antibody referred to as cosibelimab (TG-1501), an
oral Bruton’s Tyrosine Kinase (“BTK”) inhibitor referred to as TG-1701, and an anti-CD47/CD19 bispecific antibody referred to as TG-1801.
We also actively evaluate complementary products, technologies and companies for in-licensing, partnership, acquisition and/or
investment opportunities. To date, we have not received approval for the sale of any of our drug candidates in any market and, therefore, have
not generated any product sales from our drug candidates.
Our license revenues currently consist of license fees arising from our agreement with Ildong. In accordance with Financial
Accounting Standards Board (“FASB”) ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), which the Company adopted on
January 1, 2018, we recognize upfront license fee revenues ratably over the estimated period in which we will have certain performance
obligations, 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, 2019, 2018 and 2017 were approximately $148.4
million, $153.8 million and $96.9 million, 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.
(in thousands)
Ublituximab
Umbralisib
Early Clinical Pipeline & Pre-Clinical
Total
$
2019
93,302
46,074
8,993
$ 148,369
2018
$ 105,429
42,852
5,512
$ 153,793
2017
62,441
31,964
2,481
96,886
$
$
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.
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Our results of operations include non-cash compensation expenses as a result of the grants of restricted stock and stock options.
Compensation expense for awards of restricted stock and stock options 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.
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.
In addition, some of the restricted stock and stock options issued to employees, consultants and other third parties vest upon
achievement of certain milestones, and accordingly, the total expense is uncertain. Compensation expense for such awards is recognized when
the achievement of such milestones becomes 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, or at all. In
addition, we expect losses to continue as we fund in-licensing and development of new drug candidates. As we further our development efforts,
we may enter into additional third-party collaborative agreements and incur additional expenses, such as licensing fees and milestone payments.
In addition, we will need to further establish a commercial infrastructure required to manufacture, market and sell our drug candidates
following approval, if any, by the FDA or a foreign health authority, which would result in incurring significant additional expenses. As a result,
our annual results may fluctuate and a year-by-year comparison of our operating results may not be a meaningful indication of our future
performance.
RESULTS OF OPERATIONS
Years Ended December 31, 2019, 2018 and 2017
(in thousands)
License revenue
Costs and expenses:
Research and development:
Non-cash stock expense associated with in-licensing agreements
Noncash compensation
Other research and development
Total research and development
General and administrative:
Noncash compensation
Other general and administrative
Total general and administrative
Total costs and expenses
Operating loss
Other (income) expense, net
Net loss
75
Years Ended December 31,
2018
2017
2019
$
152
$
152
$
152
100
5,811
148,269
154,180
5,523
9,504
15,027
4,000
5,598
149,793
159,391
7,288
7,873
15,161
—
5,647
96,886
102,533
10,298
6,033
16,331
169,207
174,552
118,864
(169,055)
(174,400)
(118,712)
3,816
(918)
(236)
$ (172,871)
$ (173,482)
$ (118,476)
Table of Contents
Years Ended December 31, 2019 and 2018
License Revenue. License revenue was approximately $152,000 for each of the years ended December 31, 2019 and 2018. 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 we will have certain ongoing responsibilities under the sublicense agreement.
Noncash Stock Expense Associated with In-Licensing Agreement (Research and Development). Noncash stock expense associated with
in-licensing agreement (research and development) amounted to $0.1 million for the year ended December 31, 2019, as compared to $4.0
million during the comparable period in 2018. The expense during the year ended December 31, 2018 was recorded in conjunction with the
333,868 total shares of common stock issued to Novimmune and Jiangsu Hengrui as upfront payments for the licenses to the CD47/CD19 and
BTK programs.
Noncash Compensation Expense (Research and Development). Noncash compensation expense (research and development) related to
equity incentive grants remained consistent between the two periods totaling $5.8 million for the year ended December 31, 2019, as compared
to $5.6 million during the comparable period in 2018.
Other Research and Development Expenses. Other research and development expenses decreased by $1.5 million from $149.8 million
for the year ended December 31, 2018 to $148.3 million for the year ended December 31, 2019. The decrease in R&D expense is primarily
attributable to the winding down of our late-stage clinical development programs during the year ended December 31, 2019. We expect our
other research and development costs to continue to decrease modestly during 2020.
Noncash Compensation Expense (General and Administrative). Noncash compensation expense (general and administrative) related to
equity incentive grants decreased by $1.8 million from $7.3 million for the year ended December 31, 2018 to $5.5 million during the year ended
December 31, 2019. The decrease in noncash compensation expense was primarily related to more vesting of restricted stock granted to
executive personnel during the year ended December 31, 2018.
Other General and Administrative Expenses. Other general and administrative expenses increased by $1.6 million from $7.9 million
for the year ended December 31, 2018 to $9.5 million for the year ended December 31, 2019. The increase was due primarily to increased
personnel and other general and administrative costs. We expect our other general and administrative expenses to increase during 2020 as
commercial costs will increase in preparation for potential launch.
Interest Expense. Interest expense increased by $4.4 million to $5.3 million for the year ended December 31, 2019, as compared to
expense of $0.9 million for year ended December 31, 2018. The increase is mainly due to the interest expense related to the Hercules financing
agreement. We expect our interest expense to decrease modestly during 2020.
Other Income. Other income decreased by $0.3 million to $1.5 million for the year ended December 31, 2019, as compared to $1.8
million for the year ended December 31, 2018. The decrease in other income is mainly due to a greater change in the fair value of notes payable
during the year ended December 31, 2018. We expect our other income to remain at a comparable level during 2020.
Years Ended December 31, 2018 and 2017
License Revenue. License revenue was approximately $152,000 for each of the years ended December 31, 2018 and 2017. 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 Agreement (Research and Development). Noncash stock expense associated with
in-licensing agreement (research and development) amounted to $4.0 million for the year ended December 31, 2018, as compared to zero
during the comparable period in 2017. The expense during the year ended December 31, 2018 was recorded in conjunction with the 333,868
total shares of common stock issued to Novimmune and Jiangsu Hengrui as upfront payments for the licenses to the CD47/CD19 and BTK
programs, respectively.
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Noncash Compensation Expense (Research and Development). Noncash compensation expense (research and development) related to
equity incentive grants remained consistent between the two periods totaling $5.6 million for the years ended December 31, 2018 and 2017.
Other Research and Development Expenses. Other research and development expenses increased by $52.9 million from $96.9 million
for the year ended December 31, 2017 to $149.8 million for the year ended December 31, 2018. The increase in R&D expense is primarily
attributable to ongoing late-stage clinical development programs and related manufacturing costs for ublituximab and umbralisib during
the year ended December 31, 2018.
Noncash Compensation Expense (General and Administrative). Noncash compensation expense (general and administrative) related to
equity incentive grants decreased by $3.0 million from $10.3 million for the year ended December 31, 2017 to $7.3 million during the year
ended December 31, 2018. The decrease in noncash compensation expense was primarily related to a decrease in the measurement date fair
value of certain consultant restricted stock during the year ended December 31, 2018 and greater compensation expense during the year ended
December 31, 2017 related to restricted stock granted to executive personnel.
Other General and Administrative Expenses. Other general and administrative expenses increased by $1.9 million from $6.0 million
for the year ended December 31, 2017 to $7.9 million for the year ended December 31, 2018. The increase was due primarily to increased
personnel and other general and administrative costs.
Other Expense (Income), Net. Other income increased by $0.7 million from $0.2 million for the year ended December 31, 2017 to $0.9
million for the year ended December 31, 2018. The increase is mainly due to an increase in interest income during 2018.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of cash have been from the sale of equity securities, and the issuance of debt. We have not yet commercialized
any of our drug candidates and cannot be sure if we will ever be able to do so. Even if we commercialize one or more of our drug candidates,
we may not become profitable. Our ability to achieve profitability depends on a number of factors, including our ability to obtain regulatory
approval for our drug candidates, successfully complete any post-approval regulatory obligations and successfully commercialize our drug
candidates alone or in partnership. We may continue to incur substantial operating losses even if we begin to generate revenues from our drug
candidates.
As of December 31, 2019, we had $140.4 million in cash and cash equivalents, and investment securities. We anticipate that our cash
and cash equivalents, and investment securities as of December 31, 2019 will provide sufficient liquidity for more than a twelve-month period
from the date of filing this Annual Report on Form 10-K. 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.
Cash used in operating activities for the year ended December 31, 2019 was $132.8 million as compared to $128.9 million for the year
ended December 31, 2018. The increase in cash used in operating activities was due primarily to increased expenditures associated with our
clinical development programs for ublituximab and umbralisib.
For the year ended December 31, 2019, net cash used in investing activities was $0.7 million as compared to cash provided by
investing activities of $1.2 million for the year ended December 31, 2018. The decrease in net cash provided by investing activities was
primarily due to greater proceeds from the sale of short-term securities during the year ended December 31, 2018.
For the year ended December 31, 2019, net cash provided by financing activities of $204.2 million related to the net proceeds from
debt financings and net proceeds from the issuance of common stock as part of our ATM program, a public offering in March 2019, and a
registered direct offering in December 2019.
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ATM Program
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 (the "2015 ATM") with MLV & Co. LLC (“MLV”) such that we were able to 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 paid 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, 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, resulting in net proceeds of approximately
$31.0 million after deducting commissions and other transaction costs.
In May 2017, we filed a shelf registration statement on Form S-3 (the "2017 S-3"), which was declared effective in June 2017. Under
the 2017 S-3, we may sell up to a total of $300 million of securities. In connection with the 2017 S-3, we entered into an At-the-Market
Issuance Sales Agreement (the "2017 ATM") with Jefferies LLC, Cantor Fitzgerald & Co., FBR Capital Markets & Co., SunTrust Robinson
Humphrey, Inc., Raymond James & Associates, Inc., Ladenburg Thalmann & Co. Inc. and H.C. Wainwright & Co., LLC (each an "Agent" and
collectively, the "2017 Agents"), relating to the sale of shares of our common stock. Under the 2017 ATM we paid the 2017 Agents a
commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock.
During the year ended December 31, 2018, we sold a total of 9,025,222 shares of common stock under the 2017 ATM for aggregate
total gross proceeds of approximately $115.8 million at an average selling price of $12.83 per share, resulting in net proceeds of approximately
$113.7 million after deducting commissions and other transactions costs.
During the year ended December 31, 2019, we sold a total of 13,620,165 shares of common stock under the 2017 ATM for aggregate
total gross proceeds of approximately $99.3 million at an average selling price of $7.29 per share, resulting in net proceeds of approximately
$97.5 million after deducting commissions and other transactions costs.
On September 5, 2019, we filed an automatic "shelf registration" statement on Form S-3 (the "2019 WKSI") as a "well-known
seasoned issuer" as defined in Rule 405 under the Securities Act of 1933, as amended. Under this shelf process, we may sell any combination of
the securities described in the related prospectus in one or more offerings.
Equity Financings
In March 2017, we completed an underwritten public offering of 5,128,206 shares of our common stock (plus a 30-day underwriter
overallotment option to purchase up to an additional 769,230 shares of common stock, which was exercised) at a price of $9.75 per share. Net
proceeds from this offering, including the overallotment option, were approximately $54 million, net of underwriting discounts and offering
expenses of approximately $3.6 million.
On March 1, 2019, we completed a public offering of 4,100,000 shares of our common stock (plus a 30-day underwriter overallotment
option to purchase up to an additional 615,000 shares of common stock, which was exercised) at a price of $5.87. Proceeds from this offering,
including the overallotment, after underwriting discounts and offering expenses were approximately $27.5 million.
On December 22, 2019, we completed a securities purchase agreement with an institutional investor in which we agreed to sell
5,434,783 shares of our common stock at a price of $9.20. Net proceeds from this offering were approximately $50.0 million.
Debt Financings
On February 28, 2019 (the “Closing Date”), we entered into a term loan facility of up to $60.0 million (“Term Loan”) with Hercules
Capital, Inc. (“Hercules”), the proceeds of which will be used research and development programs and for general corporate purposes. The
Term Loan is governed by a loan and security agreement, dated February 28, 2019 (the “Loan Agreement”), which provides for up to four
separate advances. The first advance of $30.0 million was drawn on the Closing Date. Two additional advances of $10.0 million may be drawn
at our option but subject to certain clinical trial milestones, and the fourth advance of $10.0 million, available in minimum increments of $5.0
million, is available through December 15, 2020 subject to the approval of Hercules’ investment committee.
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The Term Loan will mature on March 1, 2022 (the “Loan Maturity Date”). Each advance accrues interest at a per annum rate of
interest equal to the greater of either (i) the “prime rate” as reported in The Wall Street Journal plus 4.75%, and (ii) 10.25%. The Term Loan
provides for interest-only payments until October 1, 2020. The interest-only period may be extended to April 1, 2021 if on or before September
30, 2020, we achieve either the third milestone or we have raised at least $150.0 million in unrestricted net cash proceeds from one or more
equity financings, subordinated indebtedness and/or upfront proceeds from business development transactions permitted under the Loan
Agreement, in each case after February 7, 2019, and prior to September 30, 2020 (“Milestone IV”). Thereafter, amortization payments will be
payable monthly in eighteen installments (or, if the period requiring interest-only payments has been extended to April 1, 2021, in twelve
installments) of principal and interest (subject to recalculation upon a change in prime rates). As a result of the Company having raised in
excess of $150 million before the required timeline in the Loan Agreement, the interest-only period has been extended to April 1, 2021. At our
option upon seven business days’ prior written notice to Hercules, we may prepay all or any portion greater than or equal to $5.0 million of the
outstanding advances by paying the entire principal balance (or portion thereof), all accrued and unpaid interest, subject to a prepayment charge
of 3.0%, if such advance is prepaid in any of the first twelve months following the Closing Date; 1.5%, if such advance is prepaid after twelve
months following the Closing Date but on or prior to twenty-four months following the Closing Date; and 0% thereafter. In addition, a final
payment equal to 3.5% of the aggregate principal amount of the loan extended by Hercules is due on the maturity date. Amounts outstanding
during an event of default shall be payable on demand and accrue interest at an additional rate of 4.0% per annum of the past due amount
outstanding.
The Term Loan is secured by a lien on substantially all of our assets, other than intellectual property and contains customary covenants
and representations, including a liquidity covenant, financial reporting covenant and limitations on dividends, indebtedness, collateral,
investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries.
The events of default under the Loan Agreement include, without limitation, and subject to customary grace periods, (1) our failure to
make any payments of principal or interest under the Loan Agreement, promissory notes or other loan documents, (2) our breach or default in
the performance of any covenant under the Loan Agreement, (3) the occurrence of a material adverse effect, (4) a false or misleading
representation or warranty in any material respect, (5) our insolvency or bankruptcy, (6) certain attachments or judgments on the Borrower’s
assets, or (7) the occurrence of any material default under certain agreements or obligations involving indebtedness in excess of $750,000. If an
event of default occurs, Hercules is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement.
The Loan Agreement also contains warrant coverage of 2% of the total amount funded. A warrant (the “Hercules Warrant”) was issued
to Hercules to purchase 147,058 shares of common stock with an exercise price of $4.08. The Hercules Warrant is exercisable for seven years
from the date of issuance. Hercules may exercise the Hercules Warrant either by (a) cash or check or (b) through a net issuance conversion. The
shares will be registered and freely tradeable within six months of issuance. We accounted for the Hercules Warrant as an equity instrument
since it was indexed to our common shares and met the criteria for classification in shareholders’ equity. The relative fair value of the Hercules
Warrant on the date of issuance was approximately $1.0 million and was recorded as debt issuance costs and as an offset to the Term Loan. This
amount will be amortized to interest expense using the straight-line method, which approximates the effective interest method, over the life of
the Term Loan.
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.
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OBLIGATIONS AND COMMITMENTS
As of December 31, 2019, we have known contractual obligations, commitments and contingencies of $97.6 million related to our
long-term liabilities and operating lease obligations.
Payment due by period (in thousands)
Contractual obligations
Operating leases
Long-term debt
Contract manufacturer
Total
Contract Manufacturer
Total
Less than 1 year
1‑3 years
3‑5 years
More than 5 years
$
$
20,440
30,000
47,168
97,608
$
$
2,331
—
47,168
49,499
$
$
3,785
30,000
$
—
$
3,709
—
—
33,785
$
3,709
$
10,615
—
—
10,615
In 2018, we entered into an agreement with a contract manufacturer for the clinical and potential commercial supply of one of our
product candidates. As part of this agreement, the contract manufacturer has agreed to defer payment of certain costs and expenses under the
agreement in exchange for the payment of an administrative fee. We have incurred expenses related to this agreement of approximately $47.2
million as of December 31, 2019, which include both service fees, raw material costs and administrative fees. No payments have been made to
the contract manufacturer as of December 31, 2019. Accordingly, as of December 31, 2019, $47.2 million is included in current liabilities in the
Company’s consolidated balance sheet, of which $19.6 million is due in the first quarter of 2020. As of December 31, 2018, $18.4 million is
included in long-term liabilities in the Company’s consolidated balance sheet. We will incur an administrative fee of six percent (6%) per year
starting from the date of invoice issuance. For the year ended December 31, 2019, we have accrued $1.2 million in administrative fees in
connection with these costs, which has been included in interest expense in the Company’s consolidated statements of operations.
Leases
In October 2014, we entered into an agreement (the “Office Agreement”) with Fortress Biotech, Inc. (“FBIO”) to occupy
approximately 45% of the 24,000 square feet of New York City office space leased by FBIO. The Office Agreement requires us to pay our
respective share of the average annual rent and other costs of the 15-year lease. We approximate an average annual rental obligation of $1.4
million under the Office Agreement. We began to occupy this new space in April 2016, with rental payments beginning in the third quarter of
2016. At January 1, 2019, we recognized a lease liability and corresponding Right of Use (“ROU”) asset based on the present value of the
remaining lease payments for all of our leased office spaces, the majority of which is comprised of our New York City office space. The present
values of our lease liability and corresponding ROU asset are $11.8 million and $9.4 million, respectively, as of December 31, 2019. Our leases
have remaining lease terms of 4 months to 12 years. One lease has a renewal option to extend the lease for an additional term of 2 years.
Under the Office Agreement, we agreed to pay FBIO 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, net on the Company’s consolidated balance
sheets and will be amortized over the 15-year term of the Office Agreement. The initial commitment period of the 45% rate was for a period of
three (3) years. We and FBIO currently determine actual office space utilization annually and if our utilization differs from the amount we have
been billed, we will either receive credits or be assessed incremental utilization charges. As of December 31, 2019, the allocation rate is 61%
and will be evaluated again in August 2020 for the following rent year. 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. Additional collateral of $0.6 million was pledged in April 2018 to increase the letter of credit for the office space.
In October 2019, we finalized a five-year lease for office space in New Jersey (the “NJ Lease”). We approximate an average annual
rental obligation of $0.3 million under the NJ Lease. We took possession of this space in October 2019, with rental payments beginning in
November 2019.
Total rental expense was approximately $2.7 million, $1.4 million and $1.4 million for the years ended December 31, 2019, 2018 and
2017, respectively.
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Future minimum lease commitments as of December 31, 2019 total, in the aggregate, approximately $19.9 million through December
31, 2031. The preceding table shows future minimum lease commitments, which include our office leases in New York, New Jersey, North
Carolina and Tennessee by period as of December 31, 2019.
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of our financial condition and results of operations are 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:
Revenue Recognition. Effective January 1, 2018, the Company began recognizing revenue under Accounting Standards Codification
(“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method. The impact of
adopting the new revenue standard was not material to our consolidated financial statements and there was no adjustment to beginning retained
earnings on January 1, 2018. The core principle of this new revenue standard is that a company should recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange
for those goods or services. The following five steps are applied to achieve that core principle:
● Step 1: Identify the contract with the customer
● Step 2: Identify the performance obligations in the contract
● Step 3: Determine the transaction price
● Step 4: Allocate the transaction price to the performance obligations in the contract
● Step 5: Recognize revenue when the company satisfies a performance obligation
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services
in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct”
good or service (or bundle of goods or services) if both of the following criteria are met:
● The customer can benefit from the good or service either on its own or together with other resources that are readily available to
the customer (i.e., the good or service is capable of being distinct).
● The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract
(i.e., the promise to transfer the good or service is distinct within the context of the contract).
If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or
services is identified that is distinct.
The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised
goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration
promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration is included in the
transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur
when the uncertainty associated with the variable consideration is subsequently resolved.
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The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price
allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as
appropriate.
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, director and consultant 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, 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.
Accruals for Clinical Research Organization and Clinical Site Costs. We make estimates of costs incurred in relation to external
clinical research organizations, or CROs, and clinical site costs. We analyze the progress of clinical trials, including levels of patient enrollment,
invoices received and contracted costs when evaluating the adequacy of the amount expensed and the related prepaid asset and accrued liability.
Significant judgments and estimates must be made and used in determining the accrued balance and expense in any accounting period. We
review and accrue CRO expenses and clinical trial study expenses based on work performed and rely upon estimates of those costs applicable
to the stage of completion of a study. Accrued CRO costs are subject to revisions as such trials progress to completion. Revisions are charged to
expense in the period in which the facts that give rise to the revision become known. With respect to clinical site costs, the financial terms of
these agreements are subject to negotiation and vary from contract to contract. Payments under these contracts may be uneven, and depend on
factors such as the achievement of certain events, the successful recruitment of patients, the completion of portions of the clinical trial or similar
conditions. The objective of our policy is to match the recording of expenses in our financial statements to the actual services received and
efforts expended. As such, expense accruals related to clinical site costs are recognized based on our estimate of the degree of completion of the
event or events specified in the specific clinical study or trial contract.
Accounting 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.
RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-11, “Leases - Targeted Improvements” (“ASU 2018-
11”) as an update to ASU 2016-02, Leases (“ASU 2016-02” or “Topic 842”) issued on February 25, 2016. ASU 2016-02 is effective for public
business entities for fiscal years beginning January 1, 2019. ASU 2016-02 required companies to adopt the new leases standard at the beginning
of the earliest period presented in the financial statements, which is January 1, 2017, using a modified retrospective transition method where
lessees must recognize lease assets and liabilities for all leases even though those leases may have expired before the effective date of
January 1, 2017. Lessees must also provide the new and enhanced disclosures for each period presented, including the comparative periods.
ASU 2018-11 provides an entity with an additional (and optional) transition method to adopt the new leases standard. Under this new
transition method, an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the
opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the
financial statements in which it adopts the new lease standard will continue to be in accordance with ASC 840, Leases (“ASC 840”). An entity
that elects this additional (and optional) transition method must provide the required ASC 840 disclosures for all periods that continue to be in
accordance with ASC 840. The amendments do not change the existing disclosure requirements in ASC 840.
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ASU 2018-11 is effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within
those fiscal years, with earlier adoption permitted. The Company adopted ASU 2018-11 on January 1, 2019 using a modified retrospective
method and will not restate comparative periods. We elected the package of practical expedients permitted under the transition guidance, which
allows us to carryforward our historical lease classification and our assessment on whether a contract is or contains a lease. The adoption of this
guidance resulted in the addition of material balances of right of use assets and lease liabilities to our consolidated balance sheets at January 1,
2019, primarily relating to our lease of office space (see Note 8). The impact to our consolidated statements of operations was not material as a
result of this standard.
In June 2018, the FASB issued ASU No. 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-
07”). ASU 2018-07 expands the scope of FASB Topic 718, Compensation – Stock Compensation (“Topic 718”) to include share-based payment
transactions for acquiring goods and services from nonemployees. An entity should only remeasure equity-classified awards for which a
measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of
adoption. Upon transition, the entity is required to measure these nonemployee awards at fair value as of the adoption date. The entity must not
remeasure assets that are completed. Disclosures required at transition include the nature of and reason for the change in accounting principle
and, if applicable, quantitative information about the cumulative effect of the change on retained earnings or other components of equity.
ASU 2018-07 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods
within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company adopted ASU 2018-
07 on January 1, 2019. The adoption of ASU 2018-07 did not have a material effect on our consolidated financial statements as of January 1,
2019. The adoption of ASU 2018-07 had no impact on nonemployee performance awards as they are measured based on the outcome that is
probable.
Other pronouncements issued by the FASB or other authoritative accounting standards 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, 2019, 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, 2019, was
less than 12 months. Due to the relatively 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.
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ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures. As of December 31, 2019, 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, 2019, our disclosure controls and procedures were effective.
Management’s Annual 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, 2019. 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, 2019, 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, 2019 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, 2019.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting during
the quarter ended December 31, 2019 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.
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
TG Therapeutics, Inc.
Opinion on Internal Control over Financial Reporting
We have audited TG Therapeutics, Inc. (the Company’s) internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United Stated)
(PCAOB), the consolidated balance sheets and the related consolidated statements of operations, stockholders’ equity and cash flows of the
Company as of December 31, 2019 and 2018 and for each of the three years in the period ended December 31, 2019 and our report dated March
2, 2020, expressed an unqualified opinion.
Basis for Opinion
The Company’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 Annual Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our
audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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
of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
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 generally accepted accounting
principles. 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 generally
accepted accounting principles, 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.
/s/ CohnReznick LLP
We have served as the Company’s auditor since 2003.
New York, New York
March 2, 2020
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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 2020 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 2020 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 2020 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 2020 Annual Meeting of
Stockholders.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2020 Annual Meeting of
Stockholders.
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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
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
2. Consolidated Financial Statement Schedules
Page
F-1
F-3
F-4
F-5
F-6
F-7
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
3.2
3.3
4.1
4.4
4.5
10.1
10.2
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).
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).
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).
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).
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).
Description of Securities of TG Therapeutics, Inc. #
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). †
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). †
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10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
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). †
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). †
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). †
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). †
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). †
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). †
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). *
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).
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.
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). *
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).*
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). *
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). *
Sublicense Agreement between TG Therapeutics, Inc. and Checkpoint Therapeutics, Inc., dated May 27, 2016, (incorporated by
reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2016). *
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10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
21.1
23.1
31.1
31.2
32.1
32.2
101
Amendment to Employment Agreement, effective January 1, 2017, between TG Therapeutics, Inc. and Michael S. Weiss
(incorporated by reference to Exhibit 10.18 to the Registrant’s Form 10-K/A for the year ended December 31, 2016). †
Advisory Agreement, effective January 1, 2017, between TG Therapeutics, Inc. and Caribe BioAdvisors, LLC (incorporated by
reference to Exhibit 10.19 to the Registrant’s Form 10-K/A for the year ended December 31, 2016).
License Agreement between TG Therapeutics, Inc. and Jiangsu Hengrui Medicine Co., dated January 8, 2018 (incorporated by
reference to Exhibit 10.20 to the Registrant’s Form 10-K for the year ended December 31, 2017). *
Joint Venture and License Option Agreement by and between TG Therapeutics, Inc. and Novimmune S.A., dated June 18, 2018
(incorporated by reference to Exhibit 10.20 to the Registrant’s Form 10-Q for the quarter ended June 30, 2018). *
Master Services Agreement between Samsung Biologics Co., Ltd. and TG Therapeutics, Inc., effective February 21, 2018
(incorporated by reference to the Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 2019). *
Loan and Security Agreement, dated February 28, 2019, by and among TG Therapeutics, Inc., TG Biologics, Inc. and Hercules
Capital, Inc. (incorporated by reference to the Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on March 5,
2019).
Warrant Agreement, dated February 28, 2019, by and between TG Therapeutics, Inc. and Hercules Capital, Inc. (incorporated by
reference to the Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on March 5, 2019).
Warrant Agreement, dated February 28, 2019, by and between TG Therapeutics, Inc. and Hercules Technology III, L.P.
(incorporated by reference to the Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on March 5, 2019).
Amended and Restated Collaboration Agreement by and between TG Therapeutics, Inc. and Checkpoint Therapeutics, Inc., dated
June 19, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2019). *
Subsidiaries of TG Therapeutics, Inc.
Consent of Independent Registered Public Accounting Firm
Certification of Principal Executive Officer
Certification of Principal Financial Officer
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The following financial information from TG Therapeutics, Inc.’s Annual Report on Form 10-K for the year ended December 31,
2019, formatted in iXBRL (Inline 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.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
Filed Herewith.
Indicates management contract or compensatory plan or arrangement.
#
†
* Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K.
89
Table of Contents
TG Therapeutics, Inc.
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
90
Page
F-1
F-3
F-4
F-5
F-6
F-7
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
TG Therapeutics, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of TG Therapeutics, Inc. (the “Company”) as of December 31, 2019
and 2018, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period
ended December 31, 2019, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and
2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with
accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the Company’s internal control over financial reporting as of December 31, 2019, 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 2,
2020, expressed an unqualified opinion.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or
fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We
believe that our audits provide a reasonable basis for our opinion.
Change in Accounting Principle
As discussed in Notes 1 and 8 to the consolidated financial statements, the Company has changed its method of accounting for leases
as of January 1, 2019 due to the adoption of Accounting Standard Codification Topic 842, Leases.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to
the consolidated financial statements and (ii) involved especially challenging, subjective, or complex judgments. The communication of a
critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
Liquidity and Capital Resources
As discussed in Note 1 to the consolidated financial statements, the Company has incurred losses since inception, and expects to
continue to incur losses for the foreseeable future. At December 31, 2019, the Company believes its cash and cash equivalents and short-term
investment securities will be sufficient to fund the Company’s planned operations for at least a year beyond the date of the issuance of the
consolidated financial statements.
F-1
Table of Contents
We identified Liquidity and Capital Resources as a critical audit matter due to the subjective judgments required of management to
conclude the Company would have sufficient liquidity to sustain itself for at least a year beyond the date of the issuance of the consolidated
financial statements. This in turn led to a high degree of auditor subjectivity and judgment to evaluate the audit evidence supporting the
liquidity conclusions. Additionally, the relevance of management’s liquidity conclusions to the users of the consolidated financial statements
also impacted our assessment of these circumstances as a critical audit matter.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with our overall opinion on the
consolidated financial statements. The procedures we performed to address this critical audit matter included:
● Testing the reasonableness of the total liquid assets at December 31, 2019.
● Evaluating the amount and timing of forecasted clinical trial expenses and related payments, including negotiated vendor payment
terms (see Note 6 to the consolidated financial statements).
● Evaluating the fluctuations in forecasted clinical trial expenses and payments thereof as compared to historic amounts and the
underlying management assumptions.
● Evaluating the reasonableness of the amounts and timing of payments of forecasted general and administrative expenses and other
income, net.
● Reconsidering certain prior management forecasted amounts to evaluate whether those forecasted amounts approximated the
ultimate actual results. This was performed in consideration of management’s ability to put forth reasonable estimates.
● Evaluating the adequacy of the Company’s disclosure of these circumstances in the consolidated financial statements.
/s/ CohnReznick LLP
We have served as the Company’s auditor since 2003.
New York, New York
March 2, 2020
F-2
TG Therapeutics, Inc. and Subsidiaries
Consolidated Balance Sheets as of December 31
(in thousands, except share and per share amounts)
Table of Contents
Assets
Current assets:
Cash and cash equivalents
Short-term investment securities
Prepaid research and development
Other current assets
Total current assets
Restricted cash
Leasehold interest, net
Equipment, net
Right of use asset
Goodwill
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses
Other current liabilities
Lease liability – current portion
Accrued compensation
Total current liabilities
Deferred rent
Deferred revenue, net of current portion
Long-term debt
Lease liability – non current
Long-term liabilities
Total liabilities
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, 2019 and 2018)
Common stock, $0.001 par value per share (150,000,000 shares authorized, 109,425,243 and
83,911,855 shares issued, 109,383,934 and 83,870,546 shares outstanding at December 31, 2019 and
2018, respectively)
Additional paid-in capital
Treasury stock, at cost, 41,309 shares at December 31, 2019 and 2018
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
2019
2018
$
$
$
$
$
$
112,637
27,798
8,105
611
149,151
1,251
2,129
282
9,402
799
163,014
30,041
48,994
1,616
3,798
84,449
—
762
28,970
10,218
—
124,399
41,958
26,943
9,691
439
79,031
1,241
2,294
251
—
799
83,616
36,377
219
—
2,258
38,854
1,462
914
—
—
18,350
59,580
—
—
109
739,956
(234)
(701,216)
38,615
163,014
$
84
552,531
(234)
(528,345)
24,036
83,616
$
The accompanying notes are an integral part of the consolidated financial statements.
F-3
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Operations for the Years Ended December 31
(in thousands, except share and per share amounts)
License revenue
Costs and expenses:
Research and development:
Non-cash stock expense associated with in-licensing agreements
Noncash compensation
Other research and development
Total research and development
General and administrative:
Noncash compensation
Other general and administrative
Total general and administrative
Total costs and expenses
Operating loss
Other (income) expense:
Interest expense
Other income
Total other (income) expense, net
Net loss
Basic and diluted net loss per common share
2019
2018
2017
$
152
$
152
$
152
100
5,811
148,269
154,180
5,523
9,504
15,027
4,000
5,598
149,793
159,391
7,288
7,873
15,161
—
5,647
96,886
102,533
10,298
6,033
16,331
169,207
174,552
118,864
(169,055)
(174,400)
(118,712)
5,287
(1,471)
3,816
877
(1,795)
(918)
845
(1,081)
(236)
(172,871) $
(173,482) $
(118,476)
(1.96) $
(2.30) $
(1.91)
$
$
Weighted average shares used in computing basic and diluted net loss per common share
88,368,844
75,466,813
62,069,570
The accompanying notes are an integral part of the consolidated financial statements.
F-4
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2019, 2018 and 2017
(in thousands, except share amounts)
Balance at January 1, 2017
Issuance of common stock in connection with exercise of
warrants
Issuance of restricted stock
Forfeiture of restricted stock
Issuance of common stock in public offering (net of
offering costs of $3.6 million)
Issuance of common stock in At-the-Market offering (net
of offering costs of $1.1 million)
Compensation in respect of restricted stock granted to
employees, directors and consultants
Net loss
Balance at December 31, 2017
Issuance of restricted stock
Forfeiture of restricted stock
Issuance of common stock in At-the-Market offerings (net
of offering costs of $2.0 million)
Compensation in respect of restricted stock granted to
employees, directors and consultants
Shares issued in connection with in-licensing agreements
Net loss
Balance at December 31, 2018
Issuance of restricted stock
Warrants issued with debt financing
Forfeiture of restricted stock
Issuance of common stock in offerings (net of offering
costs of $0.2 million)
Issuance of common stock in At-the-Market offerings (net
of offering costs of $2.0 million)
Compensation in respect of restricted stock granted to
employees, directors and consultants
Shares issued in connection with in-licensing agreements
Net loss
Balance at December 31, 2019
* Amount less than one thousand dollars.
Additional
Paid-in
Amount Capital
Common Stock
Shares
56,820,422 $
Treasury Stock
Shares Amount
Accumulated
Deficit
Total
57
$
272,432
41,309 $
(234) $
(236,387) $
35,868
887,585
1,836,511
(53,875)
5,897,436
7,793,671
73,181,750
1,562,211
(191,196)
9,025,222
333,868
83,911,855
1,851,520
(116,463)
10,149,783
13,620,165
8,383
*
2
6
8
73
2
*
9
*
84
1
*
10
14
*
2,142
(2)
*
53,634
77,865
15,945
422,017
(2)
*
113,630
12,886
4,000
552,531
(1)
993
*
77,465
97,533
11,335
100
41,309
(234)
(118,476)
(354,863)
41,309
(234)
(173,482)
(528,345)
109,425,243
$
109
$
739,956
41,309
$
(234)
$
(172,871)
(701,216)
$
2,142
—
—
53,640
77,873
15,945
(118,476)
66,993
—
—
113,639
12,886
4,000
(173,482)
24,036
—
993
—
77,475
97,547
11,335
100
(172,871)
38,615
The accompanying notes are an integral part of the consolidated financial statements.
F-5
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows for the Years Ended December 31
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net loss
Adjustments to reconcile consolidated net loss to net cash used in operating activities:
Non-cash stock compensation expense
Shares issued in connection with in-licensing agreement
Depreciation and amortization
Amortization of premium on investment securities
Amortization of debt issuance costs
Amortization of leasehold interest
Non-cash change in lease liability and right-of-use asset
Change in fair value of notes payable and accrued interest
Changes in assets and liabilities:
Decrease (increase) in other current assets
(Increase) decrease in accrued interest receivable
Decrease in other assets
(Decrease) increase in accounts payable and accrued expenses
Decrease in lease liabilities
Increase in interest payable
Increase in other liabilities
Increase in deferred rent
Decrease in deferred revenue
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of short-term securities
Investment in held-to-maturity securities
Purchases of equipment
Net cash (used in) provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock, net
Proceeds from debt financings
Proceeds from the exercise of warrants
Financing costs paid
Net cash provided by financing activities
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR
Reconciliation to amounts on consolidated balance sheets:
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
NONCASH TRANSACTIONS
Deferred financing costs
Warrants issued with debt financing
Shares issued in connection with in-licensing
Reclassification of deferred financing costs to additional paid-in capital
2019
2018
2017
$
(172,871)
$
(173,482)
$
(118,476)
11,335
100
100
(257)
772
182
2,519
124
1,395
(11)
—
(4,795)
(1,548)
1,491
28,810
—
(152)
(132,806)
29,250
(29,837)
(131)
(718)
12,886
4,000
88
(119)
—
135
—
(61)
(1,638)
14
—
10,957
—
—
18,350
97
(152)
(128,925)
32,500
(31,230)
(90)
1,180
175,021
29,987
—
(795)
204,213
113,639
—
—
—
113,639
70,689
43,199
113,888
112,637
1,251
113,888
$
$
$
(14,106)
57,305
43,199
41,958
1,241
43,199
$
$
$
15,945
—
82
61
—
125
—
59
(2,665)
(25)
162
11,020
—
—
—
104
(152)
(93,760)
19,800
(28,006)
(2)
(8,208)
131,516
—
2,143
—
133,659
31,691
25,614
57,305
56,718
587
57,305
$
988
$
993
100
$
— $
— $
— $
$
— $
4,000
—
—
—
(3)
$
$
$
$
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
F-6
Table of Contents
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 dedicated to developing and delivering medicines for patients with B-cell mediated diseases,
including Chronic Lymphocytic Leukemia (CLL), non-Hodgkin Lymphoma (NHL) and Multiple Sclerosis (MS). We have developed a robust
B-cell directed research and development (R&D) platform for identification of key B-cell pathways of interest and rapid clinical testing.
Currently, we have five B-cell targeted drug candidates in clinical development, with the lead two therapies, ublituximab (TG-1101) and
umbralisib (TGR-1202), in pivotal trials for CLL, NHL and MS. Ublituximab is a novel anti-CD20 monoclonal antibody (mAb) that has been
glycoengineered for enhanced potency over first generation antibodies. Umbralisib is an oral, once daily, dual inhibitor of PI3K-delta and CK1-
epsilon, which may lead to a differentiated safety profile. When used together in combination therapy, ublituximab and umbralisib are referred
to as "U2". Additionally, in early clinical development we have an anti-PD-L1 monoclonal antibody referred to as cosibelimab (TG-1501), an
oral Bruton’s Tyrosine Kinase (“BTK”) inhibitor referred to as TG-1701, and an anti-CD47/CD19 bispecific antibody referred to as TG-1801.
We also actively evaluate complementary products, technologies and companies for in-licensing, partnership, acquisition and/or
investment opportunities. To date, we have not received approval for the sale of any of our drug candidates in any market and, therefore, have
not generated any product sales from our drug candidates.
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, 2019, we have an accumulated deficit of $701.2 million.
Our major sources of cash have been proceeds from the private placement and public offering of equity securities, and in 2019 from
our loan and security agreement executed with Hercules Capital, Inc. (“Hercules”) (See Note 7 for more information). 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, 2019, we had $140.4 million in cash and cash equivalents, and investment securities. We anticipate that our cash
and cash equivalents, and investment securities as of December 31, 2019 will provide sufficient liquidity for more than a twelve-month period
from the date of filing this Annual Report on Form 10-K. 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.”
F-7
Table of Contents
RECENTLY ISSUED ACCOUNTING STANDARDS
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In July 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2018-11,
“Leases - Targeted Improvements” (“ASU 2018-11”) as an update to ASU 2016-02, Leases (“ASU 2016-02” or “Topic 842”) issued on
February 25, 2016. ASU 2016-02 is effective for public business entities for fiscal years beginning January 1, 2019. ASU 2016-02 required
companies to adopt the new leases standard at the beginning of the earliest period presented in the financial statements, which is January 1,
2017, using a modified retrospective transition method where lessees must recognize lease assets and liabilities for all leases even though those
leases may have expired before the effective date of January 1, 2017. Lessees must also provide the new and enhanced disclosures for each
period presented, including the comparative periods.
ASU 2018-11 provides an entity with an additional (and optional) transition method to adopt the new leases standard. Under this new
transition method, an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the
opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the
financial statements in which it adopts the new lease standard will continue to be in accordance with ASC 840, Leases (“ASC 840”). An entity
that elects this additional (and optional) transition method must provide the required ASC 840 disclosures for all periods that continue to be in
accordance with ASC 840. The amendments do not change the existing disclosure requirements in ASC 840.
ASU 2018-11 is effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within
those fiscal years, with earlier adoption permitted. The Company adopted ASU 2018-11 on January 1, 2019 using a modified retrospective
method and will not restate comparative periods. We elected the package of practical expedients permitted under the transition guidance, which
allows us to carryforward our historical lease classification and our assessment on whether a contract is or contains a lease. The adoption of this
guidance resulted in the addition of material balances of right of use assets and lease liabilities to our consolidated balance sheets at January 1,
2019, primarily relating to our lease of office space (see Note 8). The impact to our consolidated statements of operations was not material as a
result of this standard.
In June 2018, the FASB issued ASU No. 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-
07”). ASU 2018-07 expands the scope of FASB Topic 718, Compensation – Stock Compensation (“Topic 718”) to include share-based payment
transactions for acquiring goods and services from nonemployees. An entity should only remeasure equity-classified awards for which a
measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of
adoption. Upon transition, the entity is required to measure these nonemployee awards at fair value as of the adoption date. The entity must not
remeasure assets that are completed. Disclosures required at transition include the nature of and reason for the change in accounting principle
and, if applicable, quantitative information about the cumulative effect of the change on retained earnings or other components of equity.
ASU 2018-07 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods
within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company adopted ASU 2018-
07 on January 1, 2019. The adoption of ASU 2018-07 did not have a material effect on our consolidated financial statements as of January 1,
2019. The adoption of ASU 2018-07 had no impact on nonemployee performance awards as they are measured based on the outcome that is
probable.
Other pronouncements issued by the FASB or other authoritative accounting standards with future effective dates are either not
applicable or not significant to our condensed consolidated financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with 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. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and stock-based
compensation. Actual results could differ from those estimates. Such differences could be material to the financial statements.
F-8
Table of Contents
CASH AND CASH EQUIVALENTS
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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, 2019 and 2018, we have approximately $1.3 million of
restricted cash pledged to secure a line of credit as a security deposit for an Office Agreement (see Note 8).
INVESTMENT SECURITIES
Investment securities at both December 31, 2019 and 2018 consist of short-term government securities. We classify these securities as
held-to-maturity. Held-to-maturity securities are those securities in which we have the ability and intent to hold the security until maturity.
Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Premiums and
discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective interest
method.
A decline in the market value of any investment security below cost, that is deemed to be other than temporary, results in a reduction
in the carrying amount to fair value. The impairment is charged to operations and a new cost basis for the security is established. Other-than-
temporary impairment charges are included in interest and other income (expense), net. 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 and short-term investments with high-credit
quality financial institutions. At times, such amounts may exceed federally-insured limits.
REVENUE RECOGNITION
Effective January 1, 2018, the Company began recognizing revenue under ASC Topic 606, Revenue from Contracts with Customers
(“ASC 606”), using the modified retrospective transition method. The impact of adopting the new revenue standard was not material to our
consolidated financial statements and there was no adjustment to beginning retained earnings on January 1, 2018. The core principle of this new
revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are
applied to achieve that core principle:
● Step 1: Identify the contract with the customer
● Step 2: Identify the performance obligations in the contract
● Step 3: Determine the transaction price
● Step 4: Allocate the transaction price to the performance obligations in the contract
● Step 5: Recognize revenue when the company satisfies a performance obligation
F-9
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services
in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct”
good or service (or bundle of goods or services) if both of the following criteria are met:
● The customer can benefit from the good or service either on its own or together with other resources that are readily available to
the customer (i.e., the good or service is capable of being distinct).
● The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract
(i.e., the promise to transfer the good or service is distinct within the context of the contract).
If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or
services is identified that is distinct.
The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised
goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration
promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration is included in the
transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur
when the uncertainty associated with the variable consideration is subsequently resolved.
The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price
allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as
appropriate.
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, costs related to agreements with
CRO’s, certain costs to third party service providers related to development and manufacturing services as well as clinical development. These
agreements often require payments in advance of services performed or goods received. Accordingly, as of December 31, 2019 and
December 31, 2018, we recorded approximately $8.1 million and $9.7 million, respectively, in prepaid research and development related to
such advance agreements.
F-10
Table of Contents
INCOME TAXES
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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. Refer to Note 9 for
further information on impact of tax reform.
STOCK-BASED COMPENSATION
We recognize all stock-based payments to employees and non-employee directors (as compensation for service) as noncash
compensation expense in the consolidated financial statements based on the fair values of such payments. Stock-based compensation expense
recognized each period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest during the period.
Forfeitures are recognized as they occur.
In addition, because some of the options, restricted stock and warrants issued to employees, consultants and other third parties vest
upon achievement of certain milestones, the total expense is uncertain. Compensation expense for such awards that vest upon the achievement
of milestones is recognized when the achievement of such milestones becomes probable.
BASIC AND DILUTED NET LOSS PER COMMON SHARE
Basic net loss per share of our common stock is calculated by dividing net loss applicable to the common stock by the weighted-
average number of our common stock outstanding for the period. Diluted net loss per share of common stock is the same as basic net loss per
share of common stock since potentially dilutive securities from stock options, stock warrants and convertible preferred stock would have an
antidilutive effect either because we incurred a net loss during the period presented or because such potentially dilutive securities were out of
the money and the Company realized net income during the period presented. The amounts of potentially dilutive securities excluded from the
calculation were 8,361,739, 6,528,932 and 4,835,706 at December 31, 2019, 2018 and 2017, respectively. During the years ended December 31,
2019, 2018 and 2017, the Company incurred a net loss, therefore, all of the securities are antidilutive and excluded from the computation of
diluted loss per share.
Unvested restricted stock
Options
Shares issuable upon note conversion
Warrants
Total
2019
5,591,786
2,605,730
17,165
147,058
8,361,739
December 31,
2018
4,595,689
1,916,900
16,343
—
6,528,932
2017
4,820,143
—
15,563
—
4,835,706
F-11
Table of Contents
LONG-LIVED ASSETS AND GOODWILL
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Long-lived assets are reviewed for potential impairment when circumstances indicate that the carrying value of long-lived tangible and
intangible assets with finite lives may not be recoverable. Management’s policy in determining whether an impairment indicator exists, a
triggering event, comprises measurable operating performance criteria as well as qualitative measures. If an analysis is necessitated by the
occurrence of a triggering event, we make certain assumptions in determining the impairment amount. If the carrying amount of an asset
exceeds its estimated future cash flows, an impairment charge is recognized.
Goodwill is reviewed for impairment annually, or earlier when events arise that could indicate that an impairment exists. We test for
goodwill impairment using a two-step process. The first step compares the fair value of the reporting unit with the unit’s carrying value,
including goodwill. When the carrying value of the reporting unit is greater than fair value, the unit’s goodwill may be impaired, and the second
step must be completed to measure the amount of the goodwill impairment charge, if any. In the second step, the implied fair value of the
reporting unit’s goodwill is compared with the carrying amount of the unit’s goodwill. If the carrying amount is greater than the implied fair
value, the carrying value of the goodwill must be written down to its implied fair value. We will continue to perform impairment tests annually,
at December 31, and whenever events or changes in circumstances suggest that the carrying value of an asset may not be recoverable. There
was no impairment to goodwill as of December 31, 2019.
NOTE 2 – CASH AND CASH EQUIVALENTS
The following tables summarize our cash and cash equivalents at December 31, 2019 and 2018:
(in thousands)
Checking and bank deposits
Money market funds
Total
NOTE 3 – INVESTMENT SECURITIES
December 31,
2019
December 31,
2018
$
110,135 $
2,502
112,637
$
$
39,268
2,690
41,958
Our investments as of December 31, 2019 and 2018 are classified as held-to-maturity. Held-to-maturity investments are recorded at
amortized cost.
The following tables summarize our investment securities at December 31, 2019 and 2018:
(in thousands)
Short-term investments:
Obligations of domestic governmental agencies (maturing between January 2020
and September 2020) (held-to-maturity)
Total short-term investment securities
Short-term investments:
Obligations of domestic governmental agencies (maturing between January 2019
and November 2019) (held-to-maturity)
Total short-term investment securities
F-12
Amortized
cost, as
adjusted
December 31, 2019
Gross
unrealized
Gross
unrealized
holding gains holding losses
Estimated
fair value
$
$
27,798
27,798
$
$
28
28
$
$
— $
— $
27,826
27,826
December 31, 2018
Amortized
cost, as
adjusted
Gross
unrealized
holding gains
Gross
unrealized
holding losses
Estimated
fair value
$
$
26,943
26,943
$
$
2
2
$
$
10
10
$
$
26,935
26,935
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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.
As of December 31, 2019 and 2018, 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 $19.3 million at December 31, 2019
and $18.4 million at December 31, 2018. No payments have been made on the 5% Notes through December 31, 2019.
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, 2019 and 2018. 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, 2019 and 2018:
(in thousands)
5% Notes
Total
5% Notes
Total
$
$
$
$
Financial liabilities at fair value as of December 31, 2019
Total
Level 2
Level 3
Level 1
— $
— $
— $
— $
190
190
$
$
190
190
Financial liabilities at fair value as of December 31, 2018
Total
Level 3
Level 2
Level 1
— $
— $
— $
— $
67
67
$
$
67
67
The Level 3 amounts above represent the fair value of the 5% Notes and related accrued interest.
F-13
Table of Contents
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, 2018 and 2019:
(in thousands)
Balance at January 1, 2018
Interest accrued on face value of 5% Notes
Conversion of 5% Notes
Change in fair value of Level 3 liabilities
Balance at December 31, 2018
Interest accrued on face value of 5% Notes
Conversion of 5% Notes
Change in fair value of Level 3 liabilities
Balance at December 31, 2019
$
$
128
878
—
(939)
67
924
—
(801)
190
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.
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.
F-14
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In December 2014, we filed a shelf registration statement on Form S-3 (the "2015 S-3"), which was declared effective in January 2015.
Under the 2015 S-3, the Company may sell up to a total of $250 million of its securities. In connection with the 2015 S-3, we amended our
2013 At-the-Market Issuance Sales Agreement with MLV & Co, LLC (“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, 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, resulting in net proceeds of approximately
$31.0 million after deducting commissions and other transaction costs.
In March 2017, we completed an underwritten public offering of 5,128,206 shares of our common stock (plus a 30-day underwriter
overallotment option to purchase up to an additional 769,230 shares of common stock, which was exercised) at a price of $9.75 per share. Net
proceeds from this offering, including the overallotment option, were approximately $54 million, net of underwriting discounts and offering
expenses of approximately $3.6 million.
In May 2017, we filed a shelf registration statement on Form S-3 (the "2017 S-3"), which was declared effective in June 2017,
replacing the 2015 S-3. Under the 2017 S-3, we may sell up to a total of $300 million of securities. In connection with the 2017 S-3, we entered
into an At-the-Market Issuance Sales Agreement (the "2017 ATM") with Jefferies LLC, Cantor Fitzgerald & Co., FBR Capital Markets & Co.,
SunTrust Robinson Humphrey, Inc., Raymond James & Associates, Inc., Ladenburg Thalmann & Co. Inc. and H.C. Wainwright & Co., LLC
(each an "Agent" and collectively, the "Agents"), relating to the sale of shares of our common stock. Under the 2017 ATM we pay the 2017
Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock.
During the year ended December 31, 2018, we sold a total of 9,025,222 shares of common stock under the 2017 ATM for aggregate
total gross proceeds of approximately $115.8 million at an average selling price of $12.83 per share, resulting in net proceeds of approximately
$113.7 million after deducting commissions and other transactions costs.
During the year ended December 31, 2019, we sold a total of 13,620,165 shares of common stock under the 2017 ATM for aggregate
total gross proceeds of approximately $99.3 million at an average selling price of $7.29 per share, resulting in net proceeds of approximately
$97.5 million after deducting commissions and other transactions costs.
On March 1, 2019, we completed a public offering of 4,100,000 shares of our common stock (plus a 30-day underwriter overallotment
option to purchase up to an additional 615,000 shares of common stock, which was exercised) at a price of $5.87. Net proceeds from this
offering, including the overallotment, were approximately $27.5 million after underwriting discounts and offering expenses of approximately
$0.2 million.
On September 5, 2019, we filed an automatic "shelf registration" statement on Form S-3 (the "2019 WKSI") as a "well-known
seasoned issuer" as defined in Rule 405 under the Securities Act of 1933, as amended. The 2019 WKSI was declared effective in September
2019. Under this shelf process, we may sell any combination of the securities described in the related prospectus in one or more offerings.
On December 22, 2019, we completed a securities purchase agreement with an institutional investor in which we agreed to sell
5,434,783 shares of our common stock at a price of $9.20. Net proceeds from this offering were approximately $50.0 million.
The 2017 S-3 and the 2019 WKSI are currently our only active shelf registration statements. After deducting shares already sold, there
is approximately $9.5 million of common stock that remains available for sale under the 2017 S-3, and unlimited capacity under the 2019
WKSI, at December 31, 2019. We may offer the securities under the 2017 S-3 and 2019 WKSI from time to time in response to market
conditions or other circumstances if we believe such a plan of financing is in the best interests of our stockholders. We believe that the 2019
WKSI provides us with the flexibility to raise additional capital to finance our operations as needed.
F-15
Table of Contents
Treasury Stock
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
As of December 31, 2019 and 2018, 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 2018. Pursuant to this amendment, 6,000,000 shares were added to the 2012 Incentive Plan. As of December 31, 2019 and 2018,
2,605,730 and 1,916,900 options, respectively, were outstanding and up to an additional 779,346 shares may be issued under the 2012 Incentive
Plan.
Effective as of January 1, 2017, we entered into an amendment (the “Amendment”) to the employment agreement entered into as of
December 15, 2011 (together with the Amendment, the “Employment Agreement”) with Michael S. Weiss, our Executive Chairman and Chief
Executive Officer and President. Under the Amendment, Mr. Weiss will remain as Chief Executive Officer and President, removing the interim
status. Simultaneously, we entered into a Strategic Advisory Agreement (the “Advisory Agreement”) with Caribe BioAdvisors, LLC (the
“Advisor”) owned by Mr. Weiss to provide the services of Mr. Weiss as Chairman of the Board and as Executive Chairman. As part of the
Amendment, Mr. Weiss also agreed to forfeit 3,381,866 restricted shares previously granted under the Employment Agreement that were
predominantly subject to time-based vesting over the next three years. Simultaneously, (i) Mr. Weiss was issued 418,371 restricted shares under
the Employment Agreement that vest in 2018 and 2019 and (ii) the Advisor was issued 2,960,000 restricted shares under the Advisory
Agreement that vested on market capitalization thresholds ranging from $375 million to $750 million. In accordance with GAAP, there was no
incremental stock compensation expense recognition as a result of the modification.
Stock Options
The estimated fair value of the options granted in the year ended December 31, 2019 was determined utilizing the Black-Scholes
option-pricing model at the date of grant. The following table summarizes stock option activity for the years ended December 31, 2019 and
2018:
Number of
shares
Weighted-
average
exercise price
Weighted-
average
Contractual
Term
(in years)
Aggregate
intrinsic value
Outstanding at December 31, 2017
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2018
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2019
—
1,916,900
$
—
—
—
1,916,900
815,000
—
(126,170)
—
2,605,730
$
$
—
6.50
—
—
—
6.50
7.18
—
6.10
—
6.73
— $
—
9.75
$
—
8.92
$ 11,706,110
Vested and expected to vest at December 31, 2019
2,605,730
$
6.73
8.92
$ 11,706,110
F-16
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Total expense associated with the stock options was approximately $3.5 million, zero and zero during the years ended December 31,
2019, 2018 and 2017, respectively. As of December 31, 2019, there was approximately $2.6 million of total unrecognized compensation cost
related to unvested time-based stock options, which is expected to be recognized over a weighted-average period of 1.5 years. As of
December 31, 2019, the stock options outstanding include options granted to both employees and non-employees which are both time-based
and milestone-based. Stock-based compensation for milestone-based options will be recorded if and when a milestone occurs. We recognized
stock compensation expense of $0.3 million during the year ended December 31, 2019 for these stock options.
The fair value of the Company’s option awards were estimated using the assumptions below:
Volatility
Expected term (in years)
Risk-free rate
Expected dividend yield
Restricted Stock
Year ended
December 31,
2019
December 31,
2018
172.99-291.61
5.0-6.25
1.82-2.49 %
--
192.76-296.71
5.0-6.25
2.49-2.56 %
--
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, 2019, 2018 and 2017:
Outstanding at January 1, 2017
Granted
Vested
Forfeited
Outstanding at December 31, 2017
Granted
Vested
Forfeited
Outstanding at December 31, 2018
Granted
Vested
Forfeited
Outstanding at December 31, 2019
Number of Shares
Weighted Average
Grant Date Fair
Value
8,642,055 $
1,836,511
(4,103,048)
(53,875)
6,321,643
1,562,211
(1,596,966)
(191,196)
6,095,692
1,851,520
(738,960)
(116,463)
7,091,789
$
7.20
6.40
5.24
8.47
7.17
13.07
9.38
8.13
8.07
12.95
9.08
7.96
7.78
Total compensation expense associated with restricted stock grants was $7.8 million, $12.9 million and $15.9 million during the years
ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, there was approximately $15.3 million of total unrecognized
compensation expense related to unvested time-based restricted stock, which is expected to be recognized over a weighted-average period of
1 year. This amount does not include, as of December 31, 2019, 1,103,011 shares of restricted stock outstanding which are milestone-based and
vest upon certain corporate milestones; and 2,021,250 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.
F-17
Table of Contents
Warrants
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following table summarizes warrant activity for the years ended December 31, 2019, 2018 and 2017:
Outstanding at January 1, 2017
Issued
Exercised
Expired
Outstanding at December 31, 2017
Issued
Exercised
Expired
Outstanding at December 31, 2018
Issued
Exercised
Expired
Outstanding at December 31, 2019
Warrants
913,379
$
—
(887,585)
(25,794)
—
—
—
—
—
147,058
—
—
$
147,058
Weighted-
average exercise
price
2.41
Aggregate
intrinsic value
$ 1,961,403
—
2.41
—
—
—
—
—
—
4.08
—
—
—
—
4.08
$ 1,032,347
There was no expense related to warrants during the years ended December 31, 2019, 2018 and 2017.
NOTE 6 – OTHER LIABILITIES
The following is a summary of notes payable included in other current liabilities on the Company's consolidated balance sheet:
(in thousands)
Convertible 5% Notes Payable
Totals
Convertible 5% Notes Payable
December 31, 2019
Non-
current
portion,
net
Current
portion,
net
Total
December 31, 2018
Non-
current
portion,
net
Current
portion,
net
$
$
190
190
$
$
— $
— $
190
190
$
$
67
67
$
$
— $
— $
Total
67
67
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 $19.3 million at December 31, 2019
and $18.4 million at December 31, 2018. No payments have been made on the 5% Notes through December 31, 2019.
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).
F-18
Table of Contents
Current Liabilities
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In 2018, we entered into an agreement with a contract manufacturer for the clinical and potential commercial supply of one of our
product candidates. As part of this agreement, the contract manufacturer has agreed to defer payment of certain costs and expenses under the
agreement in exchange for the payment of an administrative fee. To date we have incurred expenses related to this agreement of approximately
$47.2 million as of December 31, 2019, which include service fees, raw material costs and administrative fees. No payments have been made to
the contract manufacturer as of December 31, 2019. Accordingly, as of December 31, 2019, $47.2 million is included in current liabilities in the
Company’s consolidated balance sheet, of which $19.6 million is due in the first quarter of 2020. As of December 31, 2018, $18.4 million is
included in long-term liabilities in the Company’s condensed consolidated balance sheet. We will incur an administrative fee of six percent
(6%) per year starting from the date of invoice issuance. For the year ended December 31, 2019, we have accrued $1.2 million in administrative
fees in connection with these costs, which has been included in interest expense in the Company’s consolidated statements of operations.
NOTE 7 - LONG-TERM DEBT
On February 28, 2019 (the “Closing Date”), we entered into a term loan facility of up to $60.0 million (“Term Loan”) with Hercules,
the proceeds of which were used for research and development programs and for general corporate purposes. The Term Loan is governed by a
loan and security agreement, dated February 28, 2019 (the “Loan Agreement”), which provides for up to four separate advances. The first
advance of $30.0 million was drawn on the Closing Date. Two additional advances of $10.0 million may be drawn at our option but subject to
certain clinical trial milestones, and the fourth advance of $10.0 million, available in minimum increments of $5.0 million, is available through
December 15, 2020 subject to the approval of Hercules’ investment committee.
The Term Loan will mature on March 1, 2022 (the “Loan Maturity Date”). Each advance accrues interest at a per annum rate of
interest equal to the greater of either (i) the “prime rate” as reported in The Wall Street Journal plus 4.75%, and (ii) 10.25%. The Term Loan
provides for interest-only payments until October 1, 2020. The interest-only period may be extended to April 1, 2021 if, on or before September
30, 2020, we achieve either the third milestone or we have raised at least $150.0 million in unrestricted net cash proceeds from one or more
equity financings, subordinated indebtedness and/or upfront proceeds from business development transactions permitted under the Loan
Agreement, in each case after February 7, 2019, and prior to September 30, 2020 (“Milestone IV”). Thereafter, amortization payments will be
payable monthly in eighteen installments (or, if the period requiring interest-only payments has been extended to April 1, 2021, in twelve
installments) of principal and interest (subject to recalculation upon a change in prime rates). As a result of the Company having raised in
excess of $150 million before the required timeline in the Loan Agreement, the interest-only period has been extended to April 1, 2021. At our
option upon seven business days’ prior written notice to Hercules, we may prepay all or any portion greater than or equal to $5.0 million of the
outstanding advances by paying the entire principal balance (or portion thereof), all accrued and unpaid interest, subject to a prepayment charge
of 3.0%, if such advance is prepaid in any of the first twelve months following the Closing Date; 1.5%, if such advance is prepaid after twelve
months following the Closing Date but on or prior to twenty-four months following the Closing Date; and 0% thereafter. In addition, a final
payment equal to 3.5% of the aggregate principal amount of the loan extended by Hercules is due on the maturity date. Amounts outstanding
during an event of default shall be payable on demand and accrue interest at an additional rate of 4.0% per annum of the past due amount
outstanding.
The Term Loan is secured by a lien on substantially all of our assets, other than intellectual property and contains customary covenants
and representations, including a liquidity covenant, financial reporting covenant and limitations on dividends, indebtedness, collateral,
investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries. As of and through
December 31, 2019, the Company has been in compliance with all covenants.
The events of default under the Loan Agreement include, without limitation, and subject to customary grace periods, (1) our failure to
make any payments of principal or interest under the Loan Agreement, promissory notes or other loan documents, (2) our breach or default in
the performance of any covenant under the Loan Agreement, (3) the occurrence of a material adverse effect, (4) a false or misleading
representation or warranty in any material respect, (5) our insolvency or bankruptcy, (6) certain attachments or judgments on the Borrower’s
assets, or (7) the occurrence of any material default under certain agreements or obligations involving indebtedness in excess of $750,000. If an
event of default occurs, Hercules is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement.
F-19
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The Loan Agreement also contains warrant coverage of 2% of the total amount funded. A warrant (the “Hercules Warrant”) was issued
to Hercules to purchase 147,058 shares of common stock with an exercise price of $4.08. The Hercules Warrant is exercisable for seven years
from the date of issuance. Hercules may exercise the Hercules Warrant either by (a) cash or check or (b) through a net issuance conversion. The
shares will be registered and freely tradeable within six months of issuance. We accounted for the Hercules Warrant as an equity instrument
since it was indexed to our common shares and met the criteria for classification in shareholders equity. The relative fair value of the Hercules
Warrant on the date of issuance was approximately $1.0 million and was treated as debt issuance costs and as an offset to the Term Loan. This
amount will be amortized to interest expense using the straight-line method, which approximates the effective interest method, over the life of
the Term Loan.
The Company estimated the fair value of the Hercules Warrant using the Black-Scholes model based on the following key
assumptions:
Exercise Price
Common share price on date of issuance
Volatility
Risk-free interest rate
Expected dividend yield
Contractual term (in years)
$
$
4.08
6.80
195.9 %
2.63 %
-- %
7.00 years
The Company incurred financing expenses of $2.8 million (including the fair value of the Hercules Warrant) related to the Hercules
Loan Agreement which are recorded as debt issuance costs and as an offset to long-term debt on the Company’s consolidated balance sheet.
The debt issuance costs are being amortized over the term of the debt using the straight-line method, which approximates the effective interest
method, and are included in interest expense in the Company’s consolidated statements of operations. Amortization of debt issuance costs was
$0.8 million for the year ended December 31, 2019. At December 31, 2019, the remaining unamortized balance of debt issuance costs was $2.0
million.
Long-term debt as of December 31, 2019, is as follows (in thousands):
Long-term debt
End of term fee
Less: unamortized debt issuance costs
Less: Current portion
Long-term debt non-current
NOTE 8 - LEASES
December 31,
2019
30,000
975
30,975
(2,005)
28,970
—
28,970
$
$
In October 2014, we entered into an agreement (the “Office Agreement”) with Fortress Biotech, Inc. (“FBIO”) to occupy
approximately 45% of the 24,000 square feet of New York City office space leased by FBIO. The Office Agreement requires us to pay our
respective share of the average annual rent and other costs of the 15-year lease. We approximate an average annual rental obligation of $1.4
million under the Office Agreement. We began to occupy this new space in April 2016, with rental payments beginning in the third quarter of
2016. At January 1, 2019, we recognized a lease liability and corresponding Right of Use (“ROU”) asset of $9.5 million and $8.1 million,
respectively, based on the present value of the remaining lease payments for all of our leased office spaces, the majority of which is comprised
of our New York City office space. The present values of our lease liability and corresponding ROU asset are $11.8 million and $9.4 million,
respectively, as of December 31, 2019. Our leases have remaining lease terms of 4 months to 12 years. One lease has a renewal option to extend
the lease for an additional term of 2 years.
F-20
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The initial commitment period of the 45% rate was for a period of three (3) years. We and FBIO currently determine actual office
space utilization annually and if our utilization differs from the amount we have been billed, we will either receive credits or be assessed
incremental utilization charges. As of December 31, 2019, the allocation rate is 61% and will be evaluated again in August 2020 for the
following rent year. 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. Additional collateral of
$0.6 million was pledged in April 2018 to increase the letter of credit for the office space.
In October 2019, we finalized a five-year lease for office space in New Jersey (the “NJ Lease”). We approximate an average annual
rental obligation of $0.3 million under the NJ Lease. We took possession of this space in October 2019, with rental payments beginning in
November 2019.
The following components of lease expense are included in the Company’s consolidated statements of operations for the year ended
December 31, 2019 and 2018:
(in thousands)
Operating lease cost
Net lease cost
December 31,
2019
December 31,
2018
$
$
2,651
2,651
$
$
1,440
1,440
As of December 31, 2019, the weighted-average remaining operating lease term was 8.4 years and the weighted-average discount rate
for operating leases was 10.25%. Cash paid for amounts included in the measurement of operating lease liabilities during the year ended
December 31, 2019 was $1.5 million.
The balance sheet classification of lease liabilities was as follows:
(in thousands)
Liabilities
Lease liability current portion
Lease liability non-current
Total lease liability
As of December 31, 2019, the maturities of lease liabilities were as follows:
(in thousands)
2020
2021
2022
2023
2024
After 2024
Total lease payments
Less: Interest
Present value of lease liabilities(*)
December 31,
2019
1,616
10,218
11,834
Operating
leases
1,804
1,874
1,911
1,913
1,796
10,615
19,913
(8,079)
11,834
$
$
$
$
(*) As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at
commencement date and considering the term of the lease to determine the present value of lease payments. We used the incremental borrowing
rate of 10.25% on February 28, 2019, for operating leases that commenced prior to that date.
F-21
Table of Contents
NOTE 9 – INCOME TAXES
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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 $186,711,000 and
$142,947,000 as of December 31, 2019 and 2018, respectively.
On December 22, 2017, H.R.1, commonly known as the Tax Cuts and Jobs Act (the “Act”) was signed into law. Among other things,
the Act reduced our corporate federal tax rate from 34% to 21% effective January 1, 2018. As a result, we were required to re-measure, through
income tax expense, our deferred tax assets and liabilities using the enacted rate at which we expect them to be recovered or settled. The re-
measurement of our net deferred tax asset would have resulted in additional income tax expense of $51,767,584 as of December 31, 2017;
however, with full valuation allowance in place, the expense was reversed through a corresponding adjustment to the valuation allowance,
resulting in no impact on income tax expense.
As of December 31, 2019, we have U.S. net operating loss carryforwards (“NOLs”) of approximately $709,949,000, research and
development credit carryforwards (“R&D credits”) of approximately $22,483,000 and business interest expense carryforward of $3,189,000.
For income tax purposes, these NOLs and R&D credits will expire in various amounts through 2037. NOLs generated after 2017 and the
business interest expense carryforwards do not expire. 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.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at
December 31, 2019 and 2018 are presented below.
(in thousands)
Deferred tax assets:
Net operating loss carryforwards
Research and development credit
Noncash compensation
Disallowed interest
Other
Deferred tax asset, excluding valuation allowance
Less valuation allowance
Net deferred tax assets
F-22
2019
2018
$
158,177
22,483
4,680
710
661
186,711
122,678
15,217
4,394
—
658
142,947
(186,711)
— $
(142,947)
—
$
$
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
There was no current or deferred income tax expense for the year ended December 31, 2019. Income tax expense differed from
amounts computed by applying the US Federal income tax rate of 21% for the years ended December 31, 2019 and 2018, and 34% for the year
ended December 31, 2017 to pretax loss as follows:
(in thousands)
Loss before income taxes, as reported in the consolidated statements of operations
Computed “expected” tax benefit
Increase (decrease) in income taxes resulting from:
Expected benefit from state and local taxes
Research and development credits
Other
Stock options
Enactment of federal tax reform
Change in the balance of the valuation allowance for deferred tax assets
For the year ended December 31,
2018
2017
2019
$
$
(172,871)
(36,303)
$
$
(173,482)
$
(118,476)
(36,431)
(40,282)
(2,128)
(7,266)
641
1,292
(2,243)
(4,726)
639
(473)
—
43,764
—
43,234
$
— $
— $
(1,106)
(3,697)
1,563
8,213
51,768
(16,459)
—
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 2016. 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 2019. 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 10 – LICENSE AGREEMENTS
TG-1101 (Ublituximab)
In November 2012, we entered into an exclusive (within the territory) sublicense agreement with Ildong Pharmaceutical Co. Ltd.
(“Ildong”) relating to the development and commercialization of ublituximab in South Korea and Southeast Asia. Under the terms of the
sublicense agreement, Ildong has been granted a royalty bearing, exclusive right, including the right to grant sublicenses, to develop and
commercialize ublituximab in South Korea, Taiwan, Singapore, Indonesia, Malaysia, Thailand, Philippines, Vietnam, and Myanmar.
An upfront payment of $2.0 million, which was received in December 2012, net of $0.3 million of income tax withholdings, is being
recognized as license revenue on a straight-line basis over the life of the agreement, which is through the expiration of the last licensed patent
right or 15 years after the first commercial sale of a product in such country, unless the agreement is earlier terminated, and represents the
estimated period over which we will have certain ongoing responsibilities under the sublicense agreement. We recorded license revenue of
approximately $152,000 for each of the years ended December 31, 2019 and 2018, and, at December 31, 2019 and 2018, have deferred revenue
of approximately $0.9 million and $1.1 million, respectively, associated with this $2 million payment (approximately $152,000 of which has
been classified in current liabilities at December 31, 2019 and 2018).
We may receive up to an additional $5.0 million in payments upon the achievement of pre-specified milestones. In addition, upon
commercialization, Ildong will make royalty payments to us on net sales of ublituximab in the sublicense territory.
F-23
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TGR-1202 (Umbralisib)
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
On September 22, 2014, we exercised our option to license the global rights to umbralisib, thereby entering into an exclusive licensing
agreement (the “TGR-1202 License”) with Rhizen Pharmaceuticals, SA (“Rhizen”) for the development and commercialization of umbralisib.
Prior to this, we had been jointly developing umbralisib in a 50:50 joint venture with Rhizen.
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 umbralisib, 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 umbralisib is co-formulated with another drug to create a new product (a "New Product"), Rhizen will be
eligible to receive similar regulatory approval and sales-based milestone payments for such New Product. Additionally, Rhizen will be entitled
to tiered royalties on our future net sales of umbralisib 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 umbralisib, provided that
they are price competitive with alternative manufacturers.
TG-1501: PDL1 (Cosibelimab)
In March 2015, we entered into a Global Collaboration Agreement (“Collaboration Agreement”) with Checkpoint for the development
and commercialization of anti-PD-L1 and anti-GITR antibody research programs in the field of hematological malignancies. The Collaboration
Agreement was amended in June 2019 and upon execution of the amendment we incurred an upfront fee of $1.0 million. We incurred expenses
of approximately $4.1 million and $0.6 million for the years ended December 31, 2019 and 2018, the majority of which relates to
manufacturing expenses of PD-L1. The relevant expenses are recorded in other research and development in the accompanying consolidated
statement of operations.
TG-1601: BET
In May 2016, as part of a broader agreement with Jubilant Biosys (“Jubilant”), we entered into a sub-license agreement (“JBET
Agreement”) with Checkpoint Therapeutics, Inc. (“Checkpoint”) (see Note 11), for the development and commercialization of Jubilant’s novel
BET inhibitor program in the field of hematological malignancies.
Under the terms of the agreement, we paid Checkpoint an up-front licensing fee of $1.0 million and will make additional payments
contingent on certain preclinical, clinical, and regulatory milestones, including commercial milestones totaling up to approximately $177
million and a single-digit royalty on net sales. TG will also provide funding to support certain targeted research efforts at Jubilant.
TG-1701: BTK
In January 2018, we entered into a global exclusive license agreement with Jiangsu Hengrui Medicine Co. (“Hengrui”), to acquire
worldwide intellectual property rights, excluding Asia but including Japan, and for the research, development, manufacturing, and
commercialization of products containing or comprising of any of Hengrui’s Bruton’s Tyrosine Kinase inhibitors containing the compounds of
either TG-1701 (SHR1459 or EBI1459) or TG1702 (SHR1266 or EBI1266). Pursuant to the agreement, in April 2018, we paid Jiangsu an
upfront fee of $1.0 million in our common stock recorded to noncash stock expense associated with in-licensing agreements in our condensed
consolidated statement of operations. In addition, in July 2019, we paid Jiangsu the first milestone of $0.1 million in our common stock
recorded to noncash stock expense associated with in-licensing agreements in our consolidated statement of operations. Jiangsu is eligible to
receive milestone payments totaling approximately $350 million upon and subject to the achievement of certain milestones. Various provisions
allow for payments in conjunction with the agreement to be made in cash or our common stock, while others limit the form of payment.
Royalty payments in the low double digits are due on net sales of licensed products and revenue from sublicenses.
F-24
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TG-1801: anti-CD47/anti-CD19
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In June 2018, we entered into a Joint Venture and License Option Agreement with Novimmune SA (“Novimmune”) to collaborate on
the development and commercialization of Novimmune’s novel first-in-class anti-CD47/anti-CD19 bispecific antibody known as TG-1801
(previously NI-1701). The companies will jointly develop the product on a worldwide basis, focusing on indications in the area of hematologic
B-cell malignancies. We serve as the primary responsible party for the development, manufacturing and commercialization of the product.
Pursuant to the agreement, in June 2018 we paid Novimmune an upfront payment of $3.0 million in our common stock recorded to noncash
stock expense associated with in-licensing agreements in our consolidated statement of operations. Further milestone payments will be paid
based on early clinical development, and the Company will be responsible for the costs of clinical development of the product through the end
of the Phase 2 clinical trials, after which the Company and Novimmune will be jointly responsible for all development and commercialization
costs. The Company and Novimmune will each maintain an exclusive option, exercisable at specific times during development, for the
Company to license the rights to TG-1801, in which case Novimmune is eligible to receive additional milestone payments totaling
approximately $185 million as well as tiered royalties on net sales in the high single to low double digits upon and subject to the achievement
of certain milestones.
NOTE 11 – RELATED PARTY TRANSACTIONS
Other Parties
In October 2014, we entered into the Office Agreement with FBIO, to occupy approximately 45% of the 24,000 square feet of New
York City office space leased by FBIO. The Office Agreement requires us to pay our respective share of the average annual rent and other costs
of the 15-year lease. We approximate an average annual rental obligation of $1.1 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. At January 1, 2019, we recognized a lease liability of
$9.3 million, with a corresponding Right of Use (ROU) asset of $7.7 million based on the present value of the remaining lease payments for all
of our leased office spaces, the majority of which is comprised of our New York City office space. Mr. Weiss, our Executive Chairman and
CEO, is also Executive Vice Chairman of FBIO.
Under the Office Agreement, we agreed to pay FBIO 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, net on the Company's condensed consolidated
balance sheets and will be amortized over the 15-year term of the Office Agreement. The initial commitment period of the 45% rate was for a
period of three (3) years. We and FBIO currently determine actual office space utilization annually and if our utilization differs from the amount
we have been billed, we will either receive credits or be assessed incremental utilization charges. As of December 31, 2019, the allocation rate
is 61% and will be evaluated again in August 2020 for the following rent year. 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. Additional collateral of $0.6 million was pledged in April 2018 to increase the letter of credit for
the office space.
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 $0.9
million, $1.6 million and $1.2 million for shared services for the years ended December 31, 2019, 2018 and 2017, primarily related to shared
personnel.
In May 2016, as part of a broader agreement with Jubilant, we entered into a sublicense 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 in July 2016 and incurred expenses of $0.2 million in March 2017 for the first
milestone achievement as part of the JBET Agreement which is recorded in other research and development in the accompanying consolidated
statement of operations.
In March 2015, we entered into a Global Collaboration Agreement (“Collaboration Agreement”) with Checkpoint for the development
and commercialization of anti-PD-L1 and anti-GITR antibody research programs in the field of hematological malignancies.
F-25
Table of Contents
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The Collaboration Agreement was amended in June 2019 and upon execution of the amendment we incurred an upfront fee of $1.0 million. We
incurred expenses of approximately $4.1 million and $0.6 million for the years ended December 31, 2019 and 2018 , the majority of which
relates to manufacturing expenses of PD-L1. The relevant expenses are recorded in other research and development in the accompanying
consolidated statement of operations.
NOTE 12 – COMMITMENTS AND CONTINGENCIES
As of December 31, 2019, we have known contractual obligations; commitments and contingencies of $97.6 million related to our
long term liabilities and operating lease obligations.
Payment due by period (in thousands)
Contractual obligations
Operating leases
Long-term debt
Contract manufacturer
Total
Contract Manufacturer
Total
Less than 1
year
1-3 years
3-5 years
More than
5 years
$
$
20,440
30,000
47,168
97,608
$
$
2,331
—
47,168
49,499
$
$
3,785
30,000
$
—
$
33,785
$
3,709
—
—
$
3,709
10,615
—
—
10,615
See Note 6 for a detailed description of our current liabilities. Future minimum contractual commitments as of December 31, 2019
total approximately $47.2 million and are due in 2020.
Leases
See Note 8 for a detailed description of our lease arrangements in New York and New Jersey. Total rental expense was approximately
$2.7 million, $1.4 million and $1.4 million for the years ended December 31, 2019, 2018, and 2017, respectively.
Future minimum lease commitments as of December 31, 2019, in the aggregate total approximately $20.4 million through
December 31, 2031. The preceding table shows future minimum lease commitments, which include our office leases in New York, New Jersey,
North Carolina and Tennessee by year as of December 31, 2019.
F-26
Table of Contents
NOTE 13 – QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
TG Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands)
License revenue
Total costs and expenses
Net loss
March 31,
2019
June 30,
2019
September 30,
2019
December 31,
2019
3 Months Ended
$
38
$
38
$
38
$
38
34,727
35,582
60,899
37,998
$ (35,156) $ (36,213) $
(61,930) $
(39,571)
Basic and diluted net loss per common share
$
(0.43) $
(0.42) $
(0.69) $
(0.44)
(in thousands)
License revenue
Total costs and expenses
Net loss
March 31,
2018
June 30,
2018
September 30, December 31,
2018
2018
3 Months Ended
$
38
$
38
$
38
$
38
41,615
44,383
34,366
54,188
$ (41,529) $ (44,142) $
(33,951) $
(53,860)
Basic and diluted net loss per common share
$
(0.59) $
(0.59) $
(0.43) $
(0.68)
F-27
Table of Contents
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.
SIGNATURES
Date: March 2, 2020
TG THERAPEUTICS, INC.
By: /s/ Michael S. Weiss
Michael S. Weiss
Executive Chairman,
Chief Executive Officer and President
98
Table of Contents
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 2, 2020, and in the capacities indicated:
Signatures
/s/ Michael S. Weiss
Michael S. Weiss
/s/ Sean A. Power
Sean A. Power
/s/ Laurence N. Charney
Laurence N. Charney
/s/ Yann Echelard
Yann Echelard
/s/ Kenneth Hoberman
Kenneth Hoberman
/s/ Daniel Hume
Daniel Hume
/s/ William J. Kennedy
William J. Kennedy
Executive Chairman, Chief Executive Officer and President
(principal executive officer)
Title
Chief Financial Officer (principal financial and accounting officer)
Director
Director
Director
Director
Director
99
Exhibit 4.5
When used herein, the terms “we,” “our,” and “us” refer to TG Therapeutics, Inc.
DESCRIPTION OF SECURITIES
DESCRIPTION OF CAPITAL STOCK
The following summary of the terms of our common stock may not be complete and is subject to, and qualified in its entirety by
reference to, the terms and provisions of our amended and restated certificate of incorporation and our restated bylaws. You should refer to,
and read this summary together with, our amended and restated certificate of incorporation and restated bylaws to review all of the terms of
our common stock that may be important to you.
Common Stock
Under our certificate of incorporation, we are authorized to issue a total of 150,000,000 shares of common stock, par value $0.001
per share. All outstanding shares of our common stock are fully paid and nonassessable. Our common stock is listed on the Nasdaq Capital
Market under the symbol “TGTX.”
Dividends
Subject to the dividend rights of the holders of any outstanding series of preferred stock, holders of our common stock are entitled to
receive ratably such dividends and other distributions of cash or any other right or property as may be declared by our board of directors
out of our assets or funds legally available for such dividends or distributions.
Voting Rights
The holders of our common stock are entitled to one vote for each share of common stock owned by that stockholder on every
matter properly submitted to the stockholders for their vote. Stockholders are not entitled to vote cumulatively for the election of directors.
Liquidation and Dissolution
In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, holders of common stock would be
entitled to share ratably in our assets that are legally available for distribution to stockholders after payment of liabilities. If we have any
preferred stock outstanding at such time, holders of the preferred stock may be entitled to distributions and/or liquidation preferences. In
either such case, we must pay the applicable distribution to the holders of our preferred stock (if any) before we may pay distributions to
the holders of common stock.
Other
Holders of our common stock have no conversion, redemption, preemptive, subscription or similar rights.
Transfer Agent
American Stock Transfer and Trust Company serves as the transfer agent and registrar for all of our common stock.
Preferred Stock
Under the terms of our restated certificate of incorporation, our board of directors is authorized to issue up to 10,000,000 shares of
preferred stock, par value $0.001 per share. Our board of directors may issues shares of preferred stock in one or more series without
stockholder approval, and has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. We may amend
from time to time our restated certificate of incorporation to increase the number of authorized shares of preferred stock. Any such
amendment would require the
approval of the holders of a majority of the voting power of the shares entitled to vote thereon. As of the current date, we have 10,000,000
shares of preferred shares authorized, but no shares of preferred stock outstanding.
It is not possible to state the actual effect of the issuance of any shares of preferred stock upon the rights of the holders of common
stock until the board of directors determines the specific rights of the holders of preferred stock. However, effects of the issuance of
preferred stock include restricting dividends on common stock, diluting the voting power of common stock, impairing the liquidation rights
of common stock, and making it more difficult for a third party to acquire us, which could have the effect of discouraging a third party
from acquiring, or deterring a third party from paying a premium to acquire, a majority of our outstanding voting stock.
The particular terms of any series of preferred stock being offered by us will be described in the applicable prospectus supplement
relating to that series of preferred stock. Those terms may include:
(cid:0) the title and liquidation preference per share of the preferred stock and the number of shares offered;
(cid:0) the purchase price of the preferred stock;
(cid:0) the dividend rate (or method of calculation);
(cid:0) the dates on which dividends will be paid and the date from which dividends will begin to accumulate;
(cid:0) any redemption or sinking fund provisions of the preferred stock;
(cid:0) any listing of the preferred stock on any securities exchange or market;
(cid:0) any conversion provisions of the preferred stock;
(cid:0) the voting rights, if any, of the preferred stock; and
(cid:0) any additional dividend, liquidation, redemption, sinking fund and other rights, preferences, privileges, limitations and
restrictions of the preferred stock.
The preferred stock will, when issued, be fully paid and non-assessable.
DESCRIPTION OF WARRANTS
We may issue warrants to purchase shares of our common stock and/or preferred stock in one or more series together with other
securities or separately, as described in each applicable prospectus supplement.
The prospectus supplement relating to any warrants we offer will include specific terms relating to the offering. These terms will
include some or all of the following:
(cid:0) the title of the warrants;
(cid:0) the aggregate number of warrants offered;
(cid:0) the designation, number and terms of the shares of common stock purchasable upon exercise of the warrants and procedures by
which those numbers may be adjusted;
(cid:0) the exercise price of the warrants;
(cid:0) the dates or periods during which the warrants are exercisable;
(cid:0) the designation and terms of any securities with which the warrants are issued;
2
(cid:0) if the warrants are issued as a unit with another security, the date on and after which the warrants and the other security will be
separately transferable;
(cid:0) if the exercise price is not payable in U.S. dollars, the foreign currency, currency unit or composite currency in which the exercise
price is denominated;
(cid:0) any minimum or maximum amount of warrants that may be exercised at any one time;
(cid:0) any terms relating to the modification of the warrants;
(cid:0) any terms, procedures and limitations relating to the transferability, exchange or exercise of the warrants; and
(cid:0) any other specific terms of the warrants.
DESCRIPTION OF DEBT SECURITIES
We may offer debt securities which may be senior, subordinated or junior subordinated and may be convertible. Unless otherwise
specified in the applicable prospectus supplement, our debt securities will be issued in one or more series under an indenture to be entered
into between us and a trustee. We will issue the debt securities offered by any prospectus supplement under an indenture to be entered into
between us and the trustee identified in the applicable prospectus supplement. The terms of the debt securities will include those stated in
the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as in effect on the date of the indenture.
The indenture will be subject to and governed by the terms of the Trust Indenture Act of 1939.
The following description briefly sets forth certain general terms and provisions of the debt securities that we may offer. The
particular terms of the debt securities offered by any prospectus supplement and the extent, if any, to which these general provisions may
apply to the debt securities, will be described in the related prospectus supplement. Accordingly, for a description of the terms of a
particular issue of debt securities, reference must be made to both the related prospectus supplement and to the following description.
The aggregate principal amount of debt securities that may be issued under the indenture is unlimited. The debt securities may be
issued in one or more series as may be authorized from time to time pursuant to a supplemental indenture entered into between us and the
trustee or an order delivered by us to the trustee. For each series of debt securities we offer, a prospectus supplement will describe the
following terms and conditions of the series of debt securities that we are offering, to the extent applicable:
(cid:0) title and aggregate principal amount;
(cid:0) whether the debt securities will be senior, subordinated or junior subordinated;
(cid:0) applicable subordination provisions, if any;
(cid:0) provisions regarding whether the debt securities will be convertible or exchangeable into other securities or property of the
Company or any other person;
(cid:0) percentage or percentages of principal amount at which the debt securities will be issued;
(cid:0) maturity date(s);
(cid:0) interest rate(s) or the method for determining the interest rate(s);
3
(cid:0) whether interest on the debt securities will be payable in cash or additional debt securities of the same series;
(cid:0) dates on which interest will accrue or the method for determining dates on which interest will accrue and dates on which interest
will be payable;
(cid:0) whether the amount of payment of principal of, premium, if any, or interest on the debt securities may be determined with
reference to an index, formula or other method;
(cid:0) redemption, repurchase or early repayment provisions, including our obligation or right to redeem, purchase or repay debt
securities under a sinking fund, amortization or analogous provision;
(cid:0) if other than the debt securities’ principal amount, the portion of the principal amount of the debt securities that will be payable
upon declaration of acceleration of the maturity;
(cid:0) authorized denominations;
(cid:0) form;
(cid:0) amount of discount or premium, if any, with which the debt securities will be issued, including whether the debt securities will be
issued as “original issue discount” securities;
(cid:0) the place or places where the principal of, premium, if any, and interest on the debt securities will be payable;
(cid:0) where the debt securities may be presented for registration of transfer, exchange or conversion;
(cid:0) the place or places where notices and demands to or upon the Company in respect of the debt securities may be made;
(cid:0) whether the debt securities will be issued in whole or in part in the form of one or more global securities;
(cid:0) if the debt securities will be issued in whole or in part in the form of a book-entry security, the depository or its nominee with
respect to the debt securities and the circumstances under which the book-entry security may be registered for transfer or exchange
or authenticated and delivered in the name of a person other than the depository or its nominee;
(cid:0) whether a temporary security is to be issued with respect to such series and whether any interest payable prior to the issuance of
definitive securities of the series will be credited to the account of the persons entitled thereto;
(cid:0) the terms upon which beneficial interests in a temporary global security may be exchanged in whole or in part for beneficial
interests in a definitive global security or for individual definitive securities;
(cid:0) the guarantors, if any, of the debt securities, and the extent of the guarantees and any additions or changes to permit or facilitate
guarantees of such debt securities;
(cid:0) any covenants applicable to the particular debt securities being issued;
(cid:0) any defaults and events of default applicable to the debt securities, including the remedies available in connection therewith;
(cid:0) currency, currencies or currency units in which the purchase price for, the principal of and any premium and any interest on, such
debt securities will be payable;
4
(cid:0) time period within which, the manner in which and the terms and conditions upon which the Company or the purchaser of the
debt securities can select the payment currency;
(cid:0) securities exchange(s) on which the debt securities will be listed, if any;
(cid:0) whether any underwriter(s) will act as market maker(s) for the debt securities;
(cid:0) extent to which a secondary market for the debt securities is expected to develop;
(cid:0) provisions relating to defeasance;
(cid:0) provisions relating to satisfaction and discharge of the indenture;
(cid:0) any restrictions or conditions on the transferability of the debt securities;
(cid:0) provisions relating to the modification of the indenture both with and without the consent of holders of debt securities issued
under the indenture;
(cid:0) any addition or change in the provisions related to compensation and reimbursement of the trustee;
(cid:0) provisions, if any, granting special rights to holders upon the occurrence of specified events;
(cid:0) whether the debt securities will be secured or unsecured, and, if secured, the terms upon which the debt securities will be secured
and any other additions or changes relating to such security; and
(cid:0) any other terms of the debt securities that are not inconsistent with the provisions of the Trust Indenture Act (but may modify,
amend, supplement or delete any of the terms of the indenture with respect to such series of debt securities).
General
One or more series of debt securities may be sold as “original issue discount” securities. These debt securities would be sold at a
substantial discount below their stated principal amount, bearing no interest or interest at a rate which at the time of issuance is below
market rates. One or more series of debt securities may be variable rate debt securities that may be exchanged for fixed rate debt securities.
United States federal income tax consequences and special considerations, if any, applicable to any such series will be described in
the applicable prospectus supplement.
Debt securities may be issued where the amount of principal and/or interest payable is determined by reference to one or more
currency exchange rates, commodity prices, equity indices or other factors. Holders of such debt securities may receive a principal amount
or a payment of interest that is greater than or less than the amount of principal or interest otherwise payable on such dates, depending upon
the value of the applicable currencies, commodities, equity indices or other factors. Information as to the methods for determining the
amount of principal or interest, if any, payable on any date, the currencies, commodities, equity indices or other factors to which the
amount payable on such date is linked and certain additional United States federal income tax considerations will be set forth in the
applicable prospectus supplement.
The term “debt securities” includes debt securities denominated in U.S. dollars or, if specified in the applicable prospectus
supplement, in any other freely transferable currency or units based on or relating to foreign currencies.
We expect most debt securities to be issued in fully registered form without coupons and in denominations of $2,000 and any
integral multiples thereof. Subject to the limitations provided in the indenture and in the prospectus supplement, debt securities that are
issued in registered form may be transferred or exchanged at the principal
5
corporate trust office of the trustee, without the payment of any service charge, other than any tax or other governmental charge payable in
connection therewith.
Global Securities
The debt securities of a series may be issued in whole or in part in the form of one or more global securities that will be deposited
with, or on behalf of, a depositary identified in the prospectus supplement. Global securities will be issued in registered form and in either
temporary or definitive form. Unless and until it is exchanged in whole or in part for the individual debt securities, a global security may
not be transferred except as a whole by the depositary for such global security to a nominee of such depositary or by a nominee of such
depositary to such depositary or another nominee of such depositary or by such depositary or any such nominee to a successor of such
depositary or a nominee of such successor. The specific terms of the depositary arrangement with respect to any debt securities of a series
and the rights of and limitations upon owners of beneficial interests in a global security will be described in the applicable prospectus
supplement.
Governing Law
The indenture and the debt securities shall be construed in accordance with and governed by the laws of the State of New York.
DESCRIPTION OF UNITS
We may issue, in one more series, units comprised of shares of our common stock or preferred stock, warrants to purchase common
stock or preferred stock, debt securities or any combination of those securities. Each unit will be issued so that the holder of the unit is also
the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each included
security. The unit agreement under which a unit is issued may provide that the securities included in the unit may not be held or transferred
separately, at any time or at any time before a specified date.
We may evidence units by unit certificates that we issue under a separate agreement. We may issue the units under a unit agreement
between us and one or more unit agents. If we elect to enter into a unit agreement with a unit agent, the unit agent will act solely as our
agent in connection with the units and will not assume any obligation or relationship of agency or trust for or with any registered holders of
units or beneficial owners of units. We will indicate the name and address and other information regarding the unit agent in the applicable
prospectus supplement relating to a particular series of units if we elect to use a unit agent.
We will describe in the applicable prospectus supplement the terms of the series of units being offered, including:
(cid:0) the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances
those securities may be held or transferred separately;
(cid:0) any provisions of the governing unit agreement that differ from those described herein; and
(cid:0) any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units.
The other provisions regarding our common stock, preferred stock, warrants and debt securities as described in this section will
apply to each unit to the extent such unit consists of shares of our common stock, preferred stock, warrants and/or debt securities.
6
Subsidiaries of TG Therapeutics, Inc.
Exhibit 21.1
Ariston Pharmaceuticals, Inc.
TG Biologics, Inc.
TG Therapeutics AUS Pty Ltd
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in registration statement Nos. 333‑181439, 333‑210227 and 333‑225868 on
Form S‑8 and registration statement Nos. 333‑233636 333‑218293 and 333‑226097 on Form S‑3 of TG Therapeutics, Inc. of
our report dated March 2, 2020 on our audits of the consolidated financial statements of TG Therapeutics, Inc. and
Subsidiaries as of December 31, 2019 and 2018, and for each of the three years in the period ended December 31, 2019, and
our report on our audit of internal control over financial reporting of TG Therapeutics, Inc. and Subsidiaries as of
December 31, 2019, dated March 2, 2020, included in this Annual Report on Form 10‑K of TG Therapeutics, Inc. and
Subsidiaries for the year ended December 31, 2019.
Exhibit 23.1
/s/ CohnReznick LLP
New York, New York
March 2, 2020
Exhibit 31.1
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael S. Weiss, certify that:
1.
I have reviewed this annual report on Form 10-K of TG Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 2, 2020
/s/ Michael S. Weiss
Michael S. Weiss
Executive Chairman, Chief Executive Officer and President
Principal Executive Officer
Exhibit 31.2
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Sean A. Power, certify that:
1.
I have reviewed this annual report on Form 10-K of TG Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 2, 2020
/s/ Sean A. Power
Sean A. Power
Chief Financial Officer
Principal Financial and Accounting Officer
Exhibit 32.1
STATEMENT OF CHIEF EXECUTIVE OFFICER OF
TG THERAPEUTICS, INC.
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of TG Therapeutics, Inc. (the “Company”) on Form 10-K for the year ended December
31, 2019 as filed with the Securities and Exchange Commission (the “Report”), I, Michael S. Weiss, Executive Chairman,
Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of
the Sarbanes-Oxley Act of 2002, that, based on my knowledge:
1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: March 2, 2020
/s/ Michael S. Weiss
Michael S. Weiss
Executive Chairman, Chief Executive Officer and President
Principal Executive Officer
Exhibit 32.2
STATEMENT OF CHIEF FINANCIAL OFFICER OF
TG THERAPEUTICS, INC.
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of TG Therapeutics, Inc. (the “Company”) on Form 10-K for the year ended December
31, 2019 as filed with the Securities and Exchange Commission (the “Report”), I, Sean A. Power, Chief Financial Officer of
the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that,
based on my knowledge
1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: March 2, 2020
/s/ Sean A. Power
Sean A. Power
Chief Financial Officer
Principal Financial and Accounting Officer