SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION13 OR 15(d)OF THE |
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended |
OR |
☐ TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d)OF THE |
SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Commission File Number 000-30929
TG THERAPEUTICS,INC.
(Exact name of registrant as specified in its charter)
Delaware | 36-3898269 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
3020 Carrington Mill Blvd, Suite 475
Morrisville, North Carolina 27560
(Address including zip code of principal executive offices)
(212) 554-4484
(Registrant'sRegistrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class | Trading Symbol(s) | Exchange Name |
Common Stock, par value $0.001 | TGTX | Nasdaq Capital Market |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitionthe 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 | Accelerated filer |
Non-accelerated filer ☐ | Smaller reporting company ☐ |
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
There were 70,652,267154,542,945 shares of the registrant’s common stock, $0.001 par value, outstanding as of November 1, 2017.
TG THERAPEUTICS,INC.
FORM10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2017
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS | |||
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Condensed Consolidated Balance Sheets | |||
Notes to Condensed Consolidated Financial Statements (unaudited) | |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||
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Certain matters discussed in this report, including matters discussed under the captioncaptions “Risk Factors” 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(the Securities Act,Act), and the Securities Exchange Act of 1934, as amended or the(the Exchange Act,Act), and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. The words "anticipate," "believe," "estimate," "may," "expect," “plan,” “intend” and similar expressions are generally intended toIn some cases, you can identify forward-looking statements. Our actual results may differ materially fromstatements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” or the results anticipated innegative of these words or other comparable terminology, although not all 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. contain these identifying words.
All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements. Such forward-looking statements include, but are not limited to, statements about our
● | our ability to obtain and maintain regulatory approvals for our product candidates, including TG-1701, TG-1801, and azercabtagene zapreleucel (azer-cel), as well as any other product candidates, and our ability to maintain regulatory approval of BRIUMVI® (ublituximab) for the treatment of relapsing forms of multiple sclerosis (RMS) in the United States (U.S.), the European Union (EU) and the United Kingdom (UK); |
● | our ability to adapt and expand our commercial infrastructure to successfully launch, market and sell BRIUMVI and our other product candidates; |
● | our ability to maintain a reliable supply of our products that meets market demand; |
● | the success of the ongoing commercialization of BRIUMVI or any future products or combinations of products, including the anticipated rate and degree of market acceptance and pricing and reimbursement; |
● | the initiation, timing, progress and results of our pre-clinical studies and clinical trials; |
● | our ability to advance drug candidates into, and successfully complete, clinical trials; | |
● | our ability to develop, formulate, manufacture and commercialize our product candidates; |
● | our ability to establish and maintain contractual relationships and partnerships, on commercially reasonable terms, with third parties for manufacturing, distribution, marketing and supply and a range of other support functions for our clinical development and commercialization efforts; |
● | the implementation of our business model and strategic plans for our business and drug candidates; |
● | the scope of protection we are able to establish and maintain for intellectual property rights covering our product and product candidates; |
● | estimates of our expenses, future revenues, capital requirements and our needs for additional financing; |
● | our ability to maintain and establish collaborations and enter into strategic arrangements, if desired; |
● | our ability to meet any of our financial projections or guidance, including without limitation short and long-term revenue projections or guidance and changes to the assumptions underlying those projections or guidance; |
● | our ability to obtain sufficient capital to fund our planned operations; |
● | our financial performance and cash burn management; | |
● | our ability to maintain or obtain adequate product liability and other insurance coverage; |
● | developments relating to our competitors and our industry; | |
● | the effects on our company of future regulatory developments or legislative actions, including changes in healthcare, environmental and other laws and regulations to which we are subject; | |
● | prevailing economic, market and business conditions; | |
● | our ability to retain, attract and hire key personnel; and | |
● | fluctuations in the trading price of our common stock. |
Our business is subject to a number of risks of which you should be aware before making an investment decision. The risks described below are a summary of the principal risks associated with an investment in us and are not the only risks we face. You should carefully consider these risks, the risk factors in Item 1A, and the other reports and documents that we have filed with the Securities and Exchange Commission (SEC).
Risks Related to Commercialization
● | If we are unable to maintain current approval of BRIUMVI, our business will be materially harmed. |
● | We cannot predict when or if we will obtain regulatory approval to commercialize our product candidates, including TG-1701 and TG-1801 in B-cell disorders or azer-cel in non-oncology indications. |
● | We have limited experience operating as a commercial company, and, as a result, the marketing and sale of BRIUMVI for the treatment of RMS may be less successful than anticipated. |
● | If BRIUMVI or any of our future product candidates (if approved) do not achieve broad market acceptance among physicians, patients, payors or the medical community, the revenues that we generate from product sales will be limited. |
● | If the market opportunities for BRIUMVI and any future products for which we may receive approval, including TG-1701 or TG-1801 in B-cell disorders or azer-cel in non-oncology indications, are smaller than we estimate or if any approval we obtain is based on a narrower patient population or the labeling includes warnings or limitations that are not acceptable to patients or healthcare providers, our revenue will be adversely affected. |
● | We face substantial competition for treatments for our target indications, including from companies with greater resources than we have, which may result in others commercializing drugs before or more successfully than we do, which could result in the reduction or elimination of our commercial opportunity. |
● | If we are unable to generate sufficient revenue, we may need to raise substantial additional capital to sustain our business. |
● | Product liability lawsuits could cause us to incur substantial liabilities and limit product commercialization. |
Risks Related to Drug Development and Regulatory Approval
● | If we are unable to obtain or maintain regulatory approval for our product or product candidates and ultimately cannot commercialize one or more of them, or if we experience significant delays in doing so, our business will be materially harmed. |
● | Our product and product candidates may cause undesirable side effects that could delay or prevent their regulatory approval or significantly limit their commercial profile following marketing approval, if any, or result in withdrawal from the market if approved. |
● | Because results of preclinical studies and early clinical trials are not necessarily predictive of future results, any product candidate we advance may not have favorable results in later clinical trials. Moreover, interim, “top-line” and preliminary data from our clinical trials that we announce or publish may change, or the perceived product profile may be impacted, as more patient data or additional endpoints are analyzed. |
● | Any products or 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. |
Risks Related to Governmental Regulation of the Pharmaceutical Industry
● | We are subject to extensive regulation, including new legislative and regulatory proposals, including efforts to control, set or cap pricing for approved drugs, which may increase our costs and adversely affect our ability to market our products, obtain collaborators and raise capital. |
● | If we fail to comply with various healthcare laws and regulations, we may incur losses or be subject to liability. |
● | If we fail to comply with regulatory requirements, any product candidate may fail to receive regulatory approval and any product for which we obtain marketing approval could be subject to restrictions or withdrawal from the market and we may be subject to penalties. |
Risks Related to our Dependence on Third Parties
● | Our reliance on third parties for commercial and clinical supply of raw materials and our product and product candidates increases the risk that we will not have sufficient quantities of our product or product candidates or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts. |
● | If the third parties on which we rely to conduct our clinical trials and generate clinical, preclinical, and other data necessary to support our regulatory applications do not perform their services as required, we may not be able to obtain regulatory approval for or commercialize our product or product candidates when expected or at all. |
● | Because we have in-licensed our product and product candidates from third parties, any dispute with, or non-performance by our licensors will adversely affect our ability to develop and commercialize the applicable product. |
Risks Related to Intellectual Property
● | Our success depends upon our ability to obtain and protect our intellectual property, and if the scope of our patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be impaired. |
● | Our patent protection could be reduced or eliminated for non-compliance with various procedural and other requirements imposed by governmental patent agencies. |
● | We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms. |
● | If we or our partners are sued for infringing intellectual property rights of third parties, it will be costly and time consuming to defend against such lawsuits, and an unfavorable outcome in any such lawsuit would have a material adverse effect on our business. |
● | If we are unable to protect the confidentiality of our trade secrets, our business may be significantly harmed. |
Risks Related to our Financial Position and Need for Additional Capital
● | We have incurred significant operating losses since our inception, and we may incur losses in the future. |
● | While we do not expect to need to raise additional capital, we may need to do so. If we are unable to raise capital, if needed, we may be required to delay, limit, reduce or eliminate some of our drug development programs or commercialization efforts. |
● | Our level of indebtedness and debt service obligations could adversely affect our financial condition and may make it more difficult for us to fund our operations. |
General Risk Factors
● | Public health issues including an epidemic or global pandemic, including the pandemic caused by COVID-19, could have an adverse impact on our financial condition and results of operations and other aspects of our business. |
● | Patients and healthcare providers have raised concerns that immunosuppressive products, like anti-CD20 antibodies and other B-cell targeted agents, may increase the risk of acquiring COVID-19 or lead to more severe complications upon infection. These concerns may impact the commercial potential for BRIUMVI and other immunosuppressive products that we have in development. |
● | We will need to develop and expand our business, and we may encounter difficulties in managing this development and expansion. |
● | Our ability to continue our clinical development and commercialization activities will depend on our ability to attract and maintain key management and other personnel. |
● | Certain of our executive officers, directors and other stockholders own more than 5% of our outstanding common stock and may be able to influence our management and the outcome of matters submitted to shareholders for approval. |
● | Certain anti-takeover provisions in our charter documents and Delaware law could make a third-party acquisition more difficult, which could limit the price investors might be willing to pay for our common stock. |
● | Our stock price is, and we expect it to remain, volatile, which could limit investors’ ability to sell stock at a profit and could subject us to securities and shareholder derivative litigation. |
● | Significant disruptions of information technology systems, breaches of data security or unauthorized disclosures of sensitive data could harm our business and subject us to liability or reputational damage. |
The foregoing is only a summary of some of our risks. These and other risks are discussed more fully in the section entitled “Risk Factors” in Part II, Item 1A and elsewhere in this Quarterly Report on Form 10-Q (our Risk Factors).
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
| March 31, | December 31, | ||||||
| 2024 | 2023 | ||||||
| (Unaudited) | (Note 1) | ||||||
Assets | | |||||||
Current assets: | | | ||||||
Cash and cash equivalents | $ | 75,477 | $ | 92,933 | ||||
Short-term investment securities | 134,308 | 124,575 | ||||||
Accounts receivable, net | 64,982 | 51,093 | ||||||
Inventories | 77,719 | 39,823 | ||||||
Prepaid research and development and other current assets | 8,095 | 9,519 | ||||||
Total current assets | 360,581 | 317,943 | ||||||
Restricted cash | 1,289 | 1,285 | ||||||
Long-term investment securities | 1,320 | — | ||||||
Right of use assets | 7,906 | 8,050 | ||||||
Leasehold interest, net | 1,362 | 1,415 | ||||||
Equipment, net | 66 | 95 | ||||||
Goodwill | 799 | 799 | ||||||
Total assets | $ | 373,323 | $ | 329,587 | ||||
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Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 87,266 | $ | 38,471 | ||||
Other current liabilities | 4,064 | 1,479 | ||||||
Lease liability – current portion | 1,383 | 1,446 | ||||||
Deferred revenue - current portion | 3,373 | 152 | ||||||
Accrued compensation | 3,598 | 12,172 | ||||||
Total current liabilities | 99,684 | 53,720 | ||||||
Deferred revenue, non-current portion | 3,244 | 6,016 | ||||||
Loan payable – non-current | 101,326 | 100,118 | ||||||
Lease liability – non-current | 8,960 | 9,231 | ||||||
Total liabilities | 213,214 | 169,085 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $0.001 par value per share (175,000,000 shares authorized, 154,607,052 and 151,465,598 shares issued, 154,565,743 and 151,424,289 shares outstanding at March 31, 2024 and December 31, 2023, respectively) | 155 | 151 | ||||||
Additional paid-in capital | 1,685,256 | 1,674,946 | ||||||
Treasury stock, at cost, 41,309 shares at March 31, 2024 and December 31, 2023 | (234 | ) | (234 | ) | ||||
Accumulated deficit | (1,525,068 | ) | (1,514,361 | ) | ||||
Total stockholders’ equity | 160,109 | 160,502 | ||||||
Total liabilities and stockholders’ equity | $ | 373,323 | $ | 329,587 | ||||
September 30, 2017 | December 31, 2016 | |
(Unaudited) | (Note 1) | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $91,842,167 | $25,031,280 |
| Short-term investment securities | -- | 19,853,860 |
| Interest receivable | -- | 83,852 |
| Prepaid research and development | 5,022,846 | 5,678,755 |
| Other current assets | 796,283 | 216,397 |
| Total current assets | 97,661,296 | 50,864,144 |
| Restricted cash | 586,259 | 583,208 |
| Leasehold interest, net | 2,466,202 | 2,042,281 |
| Equipment, net | 268,366 | 328,148 |
| Goodwill | 799,391 | 799,391 |
| Other assets | -- | 164,375 |
| Total assets | $101,781,514 | $54,781,547 |
| Liabilities and stockholders’ equity | ||
| Current liabilities: | ||
| Accounts payable and accrued expenses | $18,179,772 | $15,267,668 |
| Accrued compensation | 1,275,305 | 1,389,516 |
| Current portion of deferred revenue | 152,381 | 152,381 |
| Notes payable | 182,156 | 68,875 |
| Total current liabilities | 19,789,614 | 16,878,440 |
| Deferred rent | 1,341,372 | 816,257 |
| Deferred revenue, net of current portion | 1,104,762 | 1,219,048 |
| Total liabilities | 22,235,748 | 18,913,745 |
| Commitments and contingencies | ||
| Stockholders’ equity: | ||
| Preferred stock, $0.001 par value per share (10,000,000 shares authorized, none issued and outstanding as of September 30, 2017 and December 31, 2016) | -- | -- |
| Common stock, $0.001 par value per share (150,000,000 shares authorized, 70,693,576 and 56,820,422 shares issued; 70,652,267 and 56,779,113 shares outstanding at September 30, 2017 and December 31, 2016, respectively) | 70,694 | 56,820 |
| Additional paid-in capital | 403,712,474 | 272,432,139 |
| Treasury stock, at cost, 41,309 shares at September 30, 2017 and December 31, 2016 | (234,337) | (234,337) |
| Accumulated deficit | (324,003,065) | (236,386,820) |
| Total stockholders’ equity | 79,545,766 | 35,867,802 |
| Total liabilities and stockholders’ equity | $101,781,514 | $54,781,547 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(Unaudited)
| Three months ended | |||||||
| March 31, | |||||||
| 2024 | 2023 | ||||||
Revenue: | ||||||||
Product revenue, net | $ | 50,488 | $ | 7,765 | ||||
License, milestone, royalty and other revenue | 12,986 | 38 | ||||||
Total revenue | $ | 63,474 | $ | 7,803 | ||||
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Costs and expenses: | ||||||||
Cost of revenue | 5,441 | 857 | ||||||
Research and development: | | |||||||
Noncash compensation | 2,452 | 1,584 | ||||||
Other research and development | 30,270 | 14,286 | ||||||
Total research and development | 32,722 | 15,870 | ||||||
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Selling, general and administrative: | | |||||||
Noncash compensation | 6,887 | 5,240 | ||||||
Other selling, general and administrative | 27,694 | 22,828 | ||||||
Total selling, general and administrative | 34,581 | 28,068 | ||||||
| | |||||||
Total costs and expenses | 72,744 | 44,795 | ||||||
| ||||||||
Operating loss | (9,270 | ) | (36,992 | ) | ||||
| ||||||||
Other expense (income): | ||||||||
Interest expense | 2,288 | 2,844 | ||||||
Other income | (880 | ) | (604 | ) | ||||
Total other expense (income), net | 1,408 | 2,240 | ||||||
| | |||||||
Net loss before taxes | $ | (10,678 | ) | $ | (39,232 | ) | ||
Income taxes | $ | 29 | — | |||||
Net loss | $ | (10,707 | ) | $ | (39,232 | ) | ||
| ||||||||
Basic and diluted net loss per common share | $ | (0.07 | ) | $ | (0.28 | ) | ||
Weighted-average shares used in computing basic and diluted net loss per common share | 146,209,213 | 140,312,269 | ||||||
Three months ended September 30, | Nine months ended September 30, | |||
2017 | 2016 | 2017 | 2016 | |
| License revenue | $38,096 | $38,096 | $114,286 | $114,286 |
| Costs and expenses: | ||||
| Research and development: | ||||
| Noncash compensation | 1,814,288 | 919,648 | 5,386,709 | 1,873,730 |
| Other research and development | 25,334,762 | 20,878,108 | 71,150,033 | 45,075,097 |
| Total research and development | 27,149,050 | 21,797,756 | 76,536,742 | 46,948,827 |
| General and administrative: | ||||
| Noncash compensation | 3,075,835 | 1,914,390 | 6,988,597 | 4,307,670 |
| Other general and administrative | 1,398,438 | 1,251,421 | 4,265,967 | 3,798,859 |
| Total general and administrative | 4,474,273 | 3,165,811 | 11,254,564 | 8,106,529 |
| Total costs and expenses | 31,623,323 | 24,963,567 | 87,791,306 | 55,055,356 |
| Operating loss | (31,585,227) | (24,925,471) | (87,677,020) | (54,941,070) |
| Other (income) expense: | ||||
| Interest income | (79,163) | (87,965) | (174,056) | (265,456) |
| Other | 29,588 | (6,479) | 113,281 | (96,863) |
| Total other (income) expense, net | (49,575) | (94,444) | (60,775) | (362,319) |
| Net loss | $(31,535,652) | $(24,831,027) | $(87,616,245) | $(54,578,751) |
| Basic and diluted net loss per common share | $(0.48) | $(0.50) | $(1.45) | $(1.11) |
| Weighted average shares used in computing basic and diluted net loss per common share | 65,079,128 | 49,203,277 | 60,552,084 | 48,961,582 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
Condensed Consolidated StatementStatements of Changes in Stockholders’ Equity
(in thousands, except share and per share amounts)
(Unaudited)
Additional | ||||||||||||||||||||||||||||
Common Stock | paid-in | Treasury Stock | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | capital | Shares | Amount | Deficit | Total | |||||||||||||||||||||
Balance at January 1, 2023 | 146,426,697 | $ | 146 | $ | 1,585,708 | 41,309 | $ | (234 | ) | $ | (1,527,033 | ) | $ | 58,587 | ||||||||||||||
Issuance of common stock in connection with exercise of options | 66,701 | * | 363 | — | — | — | 363 | |||||||||||||||||||||
Issuance of restricted stock | 3,017,736 | 3 | (3 | ) | — | — | — | — | ||||||||||||||||||||
Warrants issued with debt financing | — | — | 595 | — | — | — | 595 | |||||||||||||||||||||
Forfeiture of restricted stock | (73,787 | ) | * | — | — | — | — | — | ||||||||||||||||||||
Compensation in respect of restricted stock granted to employees, directors and consultants | — | — | 7,120 | — | — | — | 7,120 | |||||||||||||||||||||
Net loss | — | — | — | — | — | (39,232 | ) | (39,232 | ) | |||||||||||||||||||
Balance at March 31, 2023 | 149,437,347 | 149 | 1,593,783 | 41,309 | (234 | ) | (1,566,265 | ) | 27,433 | |||||||||||||||||||
Additional | ||||||||||||||||||||||||||||
Common Stock | paid-in | Treasury Stock | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | capital | Shares | Amount | Deficit | Total | |||||||||||||||||||||
Balance at January 1, 2024 | 151,465,598 | $ | 151 | $ | 1,674,946 | 41,309 | $ | (234 | ) | $ | (1,514,361 | ) | $ | 160,502 | ||||||||||||||
Issuance of common stock in connection with exercise of options | 2,500 | 0 | 10 | 10 | ||||||||||||||||||||||||
Issuance of restricted stock | 3,304,468 | 4 | (4 | ) | — | |||||||||||||||||||||||
Forfeiture of restricted stock | (165,514 | ) | 0 | — | — | |||||||||||||||||||||||
Compensation in respect of restricted stock granted to employees, directors and consultants | 10,304 | 10,304 | ||||||||||||||||||||||||||
Net loss | (10,707 | ) | (10,707 | ) | ||||||||||||||||||||||||
Balance at March 31, 2024 | 154,607,052 | 155 | 1,685,256 | 41,309 | (234 | ) | (1,525,068 | ) | 160,109 | |||||||||||||||||||
| | Common Stock | Treasury Stock | |||||
Shares | Amount | Additional paid-in capital | Shares | Amount | Accumulated Deficit | Total | |
| Balance at January 1, 2017 | 56,820,422 | $56,820 | $272,432,139 | 41,309 | $(234,337) | $(236,386,820) | $35,867,802 |
| Issuance of common stock in connection with exercise of warrants | 887,585 | 888 | 2,142,197 | -- | -- | -- | 2,143,085 |
| Issuance of restricted stock | 1,112,131 | 1,112 | (1,112) | -- | -- | -- | -- |
| Forfeiture of restricted stock | (26,625) | (27) | 27 | -- | -- | -- | -- |
| Issuance of common stock in public offering (net of offering costs of $3.6 million) | 5,897,436 | 5,898 | 53,634,115 | -- | -- | -- | 53,640,013 |
| Issuance of common stock in At-the-Market offerings (net of offering costs of $1.1 million) | 6,002,627 | 6,003 | 63,129,802 | -- | -- | -- | 63,135,805 |
| Compensation in respect of restricted stock granted to employees, directors and consultants | -- | -- | 12,375,306 | -- | -- | -- | 12,375,306 |
| Net loss | -- | -- | -- | -- | -- | (87,616,245) | (87,616,245) |
| Balance at September 30, 2017 | 70,693,576 | $70,694 | $403,712,474 | 41,309 | $(234,337) | $(324,003,065) | $79,545,766 |
*Amount less than one thousand dollars
The accompanying notes are an integral part of the condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Three months ended | |||||||
| March 31, | |||||||
| 2024 | 2023 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | | | ||||||
| | | ||||||
Net loss | $ | (10,707 | ) | $ | (39,232 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Noncash stock compensation expense | 9,339 | 6,823 | ||||||
Depreciation and amortization | 29 | 68 | ||||||
Amortization of premium (discount) on investment securities | (1,670 | ) | (301 | ) | ||||
Amortization of debt issuance costs | 639 | 461 | ||||||
Amortization of leasehold interest | 53 | 53 | ||||||
Noncash change in lease liability and right of use asset | 407 | 491 | ||||||
Change in fair value of equity investments | (195 | ) | — | |||||
Change in fair value of notes payable | (35 | ) | 59 | |||||
Changes in assets and liabilities: | ||||||||
Increase in inventory | (36,931 | ) | (26,924 | ) | ||||
Decrease (increase) in other current assets | 1,490 | (2,623 | ) | |||||
Increase in accounts receivable | (13,889 | ) | (8,623 | ) | ||||
Increase in accounts payable and accrued expenses | 40,222 | 9,858 | ||||||
Decrease in lease liabilities | (596 | ) | (593 | ) | ||||
Increase in other current liabilities | 3,035 | 619 | ||||||
Increase (decrease) in deferred revenue | 602 | (38 | ) | |||||
Net cash used in operating activities | (8,207 | ) | (59,902 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Proceeds from maturity of short-term securities | 73,401 | 16,000 | ||||||
Investment in held-to-maturity securities | (81,531 | ) | (22,168 | ) | ||||
Investment in long-term securities | (1,125 | ) | — | |||||
Net cash used in investing activities | (9,255 | ) | (6,168 | ) | ||||
| ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from exercise of options | 10 | 363 | ||||||
Proceeds from debt financings | 25,000 | |||||||
Financing costs paid | (125 | ) | ||||||
Net cash provided by financing activities | 10 | 25,238 | ||||||
| ||||||||
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (17,452 | ) | (40,832 | ) | ||||
| | |||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD | 94,218 | 103,577 | ||||||
| ||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | 76,766 | $ | 62,745 | ||||
| ||||||||
| ||||||||
Reconciliation to amounts on condensed consolidated balance sheets: | ||||||||
Cash and cash equivalents | $ | 75,477 | $ | 61,469 | ||||
Restricted cash | 1,289 | 1,276 | ||||||
Total cash, cash equivalents and restricted cash | $ | 76,766 | $ | 62,745 | ||||
| ||||||||
Cash paid for: | ||||||||
Interest | $ | 2,448 | $ | 1,749 | ||||
Nine months ended September 30, | ||
2017 | 2016 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||
| Net loss | $(87,616,245) | $(54,578,751) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Gain on sale of long-term securities | -- | (33,042) |
| Noncash stock compensation expense | 12,375,306 | 6,181,400 |
| Depreciation | 62,009 | 42,464 |
| Amortization of premium on investment securities | 53,860 | 367,673 |
| Change in fair value of notes payable | 113,281 | (63,822) |
| Changes in assets and liabilities: | ||
| Increase in restricted cash | (3,051) | (3,041) |
| Decrease (increase) in other current assets | 147,826 | (1,162,310) |
| Decrease (increase) in leasehold interest | 88,179 | (2,517,771) |
| Decrease in accrued interest receivable | 83,852 | 77,563 |
| Decrease (increase) in other assets | 161,730 | (3,523) |
| Increase in accounts payable and accrued expenses | 2,666,164 | 6,447,215 |
| Increase in deferred rent | 72,942 | 793,968 |
| Decrease in deferred revenue | (114,286) | (114,286) |
| Net cash used in operating activities | (71,908,433) | (44,566,263) |
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||
| Purchases of property, plant and equipment | (2,227) | (323,015) |
| Investment in held-to-maturity securities | -- | (15,199,922) |
| Proceeds from the sale of long-term securities | -- | 18,000,000 |
| Proceeds from maturity of short-term securities | 19,800,000 | 12,589,219 |
| Net cash provided by investing activities | 19,797,773 | 15,066,282 |
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||
| Proceeds from the exercise of warrants | 2,143,085 | 100,896 |
| Proceeds from sale of common stock, net | 116,778,462 | 3,504,261 |
| Financing costs | -- | (9,984) |
| Net cash provided by financing activities | 118,921,547 | 3,595,173 |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 66,810,887 | (25,904,808) |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 25,031,280 | 55,061,329 |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $91,842,167 | $29,156,521 |
| NONCASH TRANSACTIONS | ||
Reclassification of deferred financing costs to additional paid-in capital | $(2,645) | $(56,988) |
| Conversion of convertible notes payable to common stock | $-- | $30,601 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TG Therapeutics,Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
Unless the context requires otherwise, references in this report to “TG,“TG,” the “Company,“Company,” “we,“we,” “us”“us” and “our”“our” refer to TG Therapeutics,Inc. (formerly known as Manhattan Pharmaceuticals, Inc., or Manhattan) and our subsidiaries.
Description of Business
TG Therapeutics is a fully-integrated, commercial stage, biopharmaceutical company focused on the acquisition, development and commercialization of novel treatments for B-cell malignanciesdiseases. In addition to a research pipeline including several investigational medicines, TG has received approval from the United States Food and autoimmune diseases. Currently, we are developing two therapies targeting hematologic malignancies. TG-1101 (ublituximab) is a novel, glycoengineered monoclonal antibody that targets a specificDrug Administration (FDA) for BRIUMVI (ublituximab-xiiy) for the treatment of adult patients with relapsing forms of multiple sclerosis (RMS), to include clinically isolated syndrome, relapsing-remitting disease, and unique epitope onactive secondary progressive disease, in adults. TG also received approval for BRIUMVI by the CD20 antigen found on mature B-lymphocytes. We are also developing TGR-1202 (umbralisib), an orally available PI3K delta inhibitor. The delta isoform of PI3K is strongly expressed in cells of hematopoietic origin and is believed to be importantEuropean Commission (EC) in the proliferationEuropean Union (EU), and survivalthe Medicines and Healthcare Products Regulatory Agency (MHRA) in the United Kingdom (UK), for the treatment of B-lymphocytes. Both TG-1101 and TGR-1202, or the combination of which is referred to as "U2," are in Phase 3 clinical development foradult patients with hematologic malignancies, with TG-1101 also in Phase 3RMS who have active disease defined by clinical development for Multiple Sclerosis. Additionally, the Company has recently brought its anti-PD-L1 monoclonal antibody into Phase 1 development and aimsor imaging features. TG continues to bring additional pipeline assets into the clinic in the future.
.
Basis of any of our drug candidates in any market and, therefore, have not generated any product sales from our drug candidates.
The accompanying unaudited condensed consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles or GAAP,(GAAP), for interim financial information and with the instructions to Quarterly Report on Form 10-Q10-Q and Article 10 of Regulation S-XS-X of the Exchange Act. Accordingly, they may not include all of the information and footnotes required by GAAP for complete financial statements. All adjustments that are, in the opinion of management, of a normal recurring nature and are necessary for a fair presentation of the condensed consolidated financial statements have been included. Nevertheless, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in our Annual Report on Form 10-K10-K for the year ended December 31, 2016.2023. The accompanying condensed December 31, 20162023 balance sheet has been derived from these statements. The results of operations for the three and nine months ended September 30, 2017March 31, 2024 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.
In December 2018, the Company created an Australian corporation, TG Therapeutics AUS Pty Ltd. (TG AUS), as a wholly-owned subsidiary. This corporation’s functional currency, the Australian dollar, is also its reporting currency, and its financial statements are translated to U.S. dollars, the Company’s reporting currency, prior to consolidation. The activities of TG AUS result in immaterial currency translation adjustments and, thus, are included in Other Income/Expense on the Company’s condensed consolidated statement of operations. The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries, and all intercompany accounts and transactions have been eliminated in consolidation.
Liquidity and Capital Resources
Historically, we have incurred operating losses since our inception andinception; however, the Company experienced a net profit during the twelve months ended December 31, 2023 due to a $140.0 million non-refundable upfront payment recognized as license revenue in the third quarter of 2023 as part of our ex-U.S. commercialization agreement (the Commercialization Agreement) with Neuraxpharm Pharmaceuticals, S.L. (Neuraxpharm) (see Note 2 for more information). We expect to continue to incur operating losses forin the foreseeable futurenear term and may never become profitable. As of September 30, 2017,March 31, 2024, we have an accumulated deficit of approximately $324.0 million.
Our major sources of cash have been proceeds from the private placementplacements and public offeringofferings of equity securities. Wesecurities, from our loan and security agreements executed with Hercules Capital, Inc. (Hercules) (see Note 7 for more information), and the upfront payment from the Commercialization Agreement (see Note 2 for more information). Substantially all our operating losses have not yet commercialized anyresulted from costs incurred in connection with our research and development programs and from selling, general and administrative costs associated with our operations, including our commercialization activities. During the three months ended March 31, 2024, we generated $50.5 million in product revenue from drug sales of BRIUMVI. BRIUMVI first became commercially available in the United States in January of 2023. Even with the commercialization of BRIUMVI and the possible future commercialization 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 ourother drug candidates, we may not become profitable. Our ability to achieve profitability depends on our ability to generate revenue and many other factors, including our ability to successfully commercialize our drug candidates alone or in partnership; successfully complete any post-approval regulatory obligations; and our ability to maintain or obtain regulatory approval for our drug candidates; successfully completing any post-approval regulatory obligations; and successfully commercializing our drug candidates alone or in partnership.candidates. We may continue to incur substantial operating losses even ifnow that we begin to generateare generating revenues from our drug candidates.BRIUMVI.
As of September 30, 2017,March 31, 2024, we had approximately $91.8$209.8 million in cash and cash equivalents.equivalents, and investment securities. The Company believes its existing cash, and cash equivalents, on hand asand investment securities, combined with projected revenues associated with the sale of September 30, 2017BRIUMVI in the U.S. and ex-U.S., will be sufficient to fund its anticipated operating cash requirements for at least twelve months following the Company’s planned operations through 2018. date of this filing.
The actual amount of cash that we will need to operate is subject to many factors, including, but not limited to, our commercialization efforts for BRIUMVI, preparations for the potential commercialization of our other drug candidates, and the timing, design and conduct of clinical trials for our drug candidates as well as the costs associated with licensing or otherwise acquiring new product candidates. We aremay be dependent upon significant future financing to provide the cash necessary to execute our current strategic plan,ongoing and future operations, including the commercialization of any of our drug candidates (see Note 5 for further details).
Our common stock is listedquoted on the Nasdaq Capital Market and trades under the symbol “TGTX.”
Summary of Significant Accounting Standards
Our significant accounting policies are described in Note 1 of Notes to Consolidated Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2017-09, “ScopeStatements included in our 2023 Annual Report on Form 10-K, except as updated herein or as it relates to revenue recognition, accounts receivable, inventory, cost of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity should account for the effects of a modification unless all the following are met:
Revenue Recognition
Pursuant to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, ASU 2017-04:
At contract inception, we assess the goods or over time based onservices promised within each contract and assess whether each promised good or service is distinct and determine those that are performance obligations. We then recognize as revenue the natureamount of the entity’s promisetransaction price that is allocated to the respective performance obligation when the performance obligation is satisfied.
Product Revenue, Net - The Company recognizes product revenues, net of variable consideration related to certain allowances and accruals, when the customer takes control of the product, which is typically upon delivery to the customer. To determine whetherProduct revenue is recorded at the entity’s promisenet sales price, or transaction price. The Company records product revenue reserves, which are classified as a reduction in product revenues, to account for the components of variable consideration. Variable consideration includes the following components, which are described below: chargebacks, government rebates, trade discounts and allowances, product returns, and co-payment assistance.
These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is expected to be settled with a credit against the Company’s customer account) or a liability (if the amount is expected to be settled with a cash payment). The Company’s estimates of reserves established for variable consideration are calculated based upon a consistent application of the expected value method, which is the sum of probability-weighted amounts in a range of possible consideration amounts. These estimates reflect the Company’s current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. The amount of variable consideration that is included in the transaction price may be subject to constraint and is included in net product revenues only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration received may ultimately differ from the Company’s estimates. If actual results vary, the Company adjusts these estimates, which could have an effect on earnings in the period of adjustment.
Chargebacks: Chargebacks for discounts represent the Company’s estimated obligations resulting from contractual commitments to sell product to qualified healthcare providers and government agencies at prices lower than the list prices charged to the customers who directly purchase the product from the Company. The customers charge the Company for the difference between what the customers pay the Company for the product and the customers’ ultimate contractually committed or government required lower selling price to the qualified healthcare providers.
Government Rebates: Government rebates consist of Medicare, Tricare, and Medicaid rebates. These reserves are recorded in the same period the related revenue is recognized. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom it will owe a rebate under the Medicare Part D program.
Commercial Payer Rebates: The Company contracts with various private payer organizations, primarily insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of our product and contracted formulary status. The Company estimates these rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.
Trade Discounts and Allowances: The Company provides its customers with discounts that are explicitly stated in the applicable contracts and are recorded in the period the related product revenue is recognized. In addition, the Company also receives sales order management, inventory management, and data services from its customers in exchange for certain fees.
Product Returns: Consistent with industry practice, the Company generally offers customers a limited right of return for product that has been purchased from the Company. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate in the period the related product revenue is recognized. The Company currently estimates product return liabilities based on data from similar products and other qualitative considerations, such as visibility into the inventory remaining in the distribution channel.
Subject to certain limitations, the Company’s return policy allows for eligible returns of BRIUMVI for credit under the following circumstances:
● receipt of damaged product;
● shipment errors that were a result of an error by the Company;
● expired product that is returned during the period beginning three months prior to the product’s expiration and ending six months after the expiration date;
● product subject to a recall; and
● product that the Company, at its sole discretion, has specified can be returned for credit.
As of March 31, 2024, the Company has not received any returns related to sales of BRIUMVI.
Co-Payment Assistance Programs: Co-payment assistance is provided to qualified patients with commercial insurance, whereby the Company may provide a rightfinancial assistance to access itspatients with prescription drug co-payments required by the patient's insurance provider. Reserves for co-payment assistance are recorded in the same period the related revenue is recognized.
License Agreements
The Company generates revenue from license or similar agreements with pharmaceutical companies for the development and commercialization of certain products. Such agreements may include the transfer of intellectual property orrights in the form of licenses. Payments made by the customer may include non-refundable upfront fees, payments based upon the achievement of defined milestones, and royalties on sales of products.
Licenses of intellectual property: If a rightlicense to use itsthe Company’s intellectual property is determined to be distinct from the entity should considerother performance obligations identified in the naturearrangement, the Company recognizes the transaction price allocated to the license as revenue upon transfer of control of the intellectual propertylicense. All other promised goods or services in the agreement are evaluated to determine if they are distinct. If they are not distinct, they are combined with other promised goods or services to create a bundle of promised goods or services that is distinct.
Milestone payments: Contingent milestones at contract inception are estimated at the amount which is not probable of a material reversal and included in the transaction price using the most likely amount method. Milestone payments that are not within the Company's control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received and therefore the variable consideration is constrained. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the customer will have rights.
Sales-based royalties: For arrangements that include sales-based royalties and a license of intellectual property that is deemed to be other than temporary, results inthe predominant item to which the royalties relate, revenue is recognized at the later of when the related sales occur or when the performance obligation to which some or all of the royalties have been allocated has been satisfied (or partially satisfied).
Optional Purchases: The Company’s arrangements may provide the licensee the right to make optional purchases of the licensed product. These optional purchases are accounted for as separate contracts when the licensee determines that it will make such a reduction inpurchase, unless the carrying amountoption conveys a material right.
Other Revenue
Revenue is also generated from service-based fees recognized for providing regulatory support & development services to fair value. The impairmentcustomers. Service fee revenue is chargedrecognized overtime as the services are transferred to operations andthe customer.
Deferred Product Revenue
When consideration is received, or such consideration is unconditionally due, from a new cost basis for the security is established. Other-than-temporary impairment charges would be included in interest and other (income) expense, net. Dividend and interest income are recognized when earned.
Accounts Receivable
In general, accounts receivable consists of amounts due from customers, net of customer allowances for cash discounts, product returns and chargebacks. Our contracts with customers have standard payment terms. We analyze accounts that are past due for collectability, and regularly evaluate the creditworthiness of our customers so that we can properly assess and respond to changes in their credit risk consistprofiles. As of March 31, 2024, we determined an allowance for expected credit losses related to outstanding accounts receivable was currently not required based upon our review of contractual payment terms and individual customer circumstances.
Cost of Revenue
Cost of revenue consists primarily of cashthird-party manufacturing costs, distribution, overhead and cash equivalentsroyalties owed to our licensing partner for BRIUMVI sales. Cost of revenue may also include costs related to excess or obsolete inventory adjustment charges, abnormal costs, unabsorbed manufacturing and short-term investments. The Company maintains its cashoverhead costs, and cash equivalents and short-term investments with high-credit quality financial institutions. At times, such amounts may exceed federally-insured limits.
Inventory
Inventories are expensed as incurred. Non-refundable advance payments for goodsstated at the lower of cost or services that will be used or rendered for future research and development activities are deferred and amortized overestimated net realizable value with cost based on the period that the goods are delivered or the related services are performed, subject tofirst-in-first-out method (FIFO). The Company performs an assessment of recoverability. We make estimatesthe recoverability of costs incurred in relationcapitalized inventory during each reporting period, and it writes down any excess and obsolete inventories 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 liability 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 expensetheir estimated net realizable value in the period in which the facts that give riseimpairment is first identified. Such impairment charges, if they occur, are recorded within cost of revenue.
Prior to regulatory approval, we expense costs relating to the revision become known. With respect to clinical site costs, the financial termsproduction of these agreements are subject to negotiation and vary from contract to contract. Payments under these contracts may be uneven, and depend on factors suchinventory 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.
Prior to the approval of BRIUMVI, all manufacturing and other things,potential costs related to agreements with CROs, certain coststhe commercial launch of BRIUMVI were expensed to third party service providers related to development and manufacturing services as well as clinical development. These agreements often require payments in advance of services performed or goods received. Accordingly, as of September 30, 2017 and December 31, 2016, we recorded approximately $5.0 million and $5.7 million, respectively, in prepaid research and development relatedexpense in the period incurred.
Equity Securities
Our equity securities consist of common stock of Precision BioSciences, Inc. (Precision). Equity securities are recognized at their fair value in accordance with ASC 321, Investments – Equity Securities. Forward contracts to such advance agreements.
Net LossIncome (Loss) Per Common Share
Basic net lossincome (loss) per share of our common stock is calculated by dividing net lossincome (loss) applicable to the common stock by the weighted-average number of shares of our common stock outstanding for the period. Diluted net lossincome (loss) per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, stock options, and restricted stock, which would result in the issuance of incremental shares of common stock. The impact of these items is anti-dilutive during periods of net loss. Therefore, basic and diluted net income (loss) per share were the same as basic net loss per sharefor all periods presented in the unaudited condensed consolidated statement of common stock sinceoperations.
The following table summarizes our potentially dilutive securities from stock options, stock warrants at March 31, 2024 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 out2023:
| As of | |||||||
| March 31, | |||||||
| 2024 | 2023 | ||||||
Unvested restricted stock | 9,898,448 | 9,000,857 | ||||||
Options | 4,694,529 | 4,876,484 | ||||||
Warrants | 312,272 | 312,272 | ||||||
Shares issuable upon note conversion | 21,167 | 20,136 | ||||||
Total | 14,926,416 | 14,209,749 | ||||||
NOTE2 REVENUE
As discussed in Note 1, revenues are recognized under guidance within ASC 606.The following outstanding shares of common stock equivalents were excluded from the computation of net loss per share attributable to common stockholderstable presents our disaggregated revenue for the periods presented because including them would(in thousands):
(in thousands) | Three months ended March 31, | |||||||
| 2024 | 2023 | ||||||
Total product revenue, net | $ | 50,488 | $ | 7,765 | ||||
License Revenue | 38 | 38 | ||||||
Milestone Revenue | 12,500 | - | ||||||
Royalty Revenue | 33 | - | ||||||
Other Revenue | 415 | - | ||||||
Total Revenue | $ | 63,474 | $ | 7,803 | ||||
Product revenue, net
For the three months ended March 31, 2024 and March 31, 2023, our only source of product revenue has been from U.S. sales of BRIUMVI which we began shipping to our customers in January 2023.
As of March 31, 2024, approximately $15.0 million of gross-to-net accruals have been antidilutive:
Three and Nine Months Ended September 30, | ||
2017 | 2016 | |
| Unvested restricted shares | 4,141,680 | 5,507,250 |
| Shares issuable upon note conversion | 15,372 | 1,142,208 |
| Warrants | -- | 15,133 |
| Total | 4,157,052 | 6,664,591 |
License Agreements
Neuraxpharm Commercialization Agreement
On July 28, 2023, the Company entered into an ex-U.S. commercialization agreement (the Commercialization Agreement) with Neuraxpharm. The Company granted Neuraxpharm the exclusive right to commercialize BRIUMVI in territories outside the United States, Canada, and Mexico, which are retained by the Company, and excluding certain Asian countries of which the Company previously partnered (the Territory). In addition, the Company will perform certain development and regulatory activities for Neuraxpharm to support its obligations under the Commercialization Agreement to secure and maintain the regulatory approvals required to sell BRIUMVI in the Territory. As part of the overall arrangement, the Company has agreed to supply BRIUMVI to Neuraxpharm throughout the term of the Commercialization Agreement.
In consideration for entering the Commercialization Agreement, the Company received a non-refundable upfront payment of $140.0 million. The Company will also receive tiered double-digit royalties up to 30% on net product sales in the Territory and is eligible to receive sales-based or other milestone payments totaling up to $492.5 million.
The Company evaluated the Commercialization Agreement under ASC 606 and concluded that Neuraxpharm represents a customer in the transaction. In accordance with this guidance, the Company identified the following commitments under the arrangement: (i) the exclusive right to develop, sell, offer to sell and import the Product in the Territory (the License); (ii) certain development and regulatory activities (Development and Regulatory Activities).
The License to the Company’s intellectual property represents a distinct performance obligation, therefore, the $140.0 million non-refundable upfront payment related to this performance obligation was recognized as License Revenue in the third quarter of 2023.
The Development and Regulatory Activities performance obligation is satisfied over time because Neuraxpharm simultaneously receives and consumes the benefits provided by the Company’s performance of the services. Therefore, revenue is recognized as the activities are completed by the Company. For the three months ended March 31,2024, the Company recognized Other Revenue of $0.4 million related to the Development and Regulatory Activities.
The arrangement also provides Neuraxpharm with the right to make optional purchases of BRIUMVI (the Supply of Licensed Product). These optional purchases are accounted for as a separate contract when the right to purchase BRIUMVI is exercised. The consideration for optional purchases of BRIUMVI by Neuraxpharm approximates the price that a customer in the Territory would be willing to pay for these goods.
The following tables summarize our cashremaining forms of consideration are variable because they are dependent on the achievement of sales-based or other milestones. The Company evaluated the constraint on variable consideration and cash equivalentsconcluded that the milestone payments are highly dependent on factors outside of the Company’s control. Therefore, at September 30, 2017 and Decembercontract inception, the milestones are not included in the transaction price as it is not probable that a significant reversal of revenue would not occur. Sales-based milestones will be recognized as revenue in the period when the related sales threshold is met. All other milestones will be recognized as revenue immediately in the period the achievement of the underlying milestone is probable. During the three months ended March 31, 2016:2024 the Company received a $12.5 million milestone payment for the first key market commercial launch of BRIUMVI in the EU. Any consideration related to sales-based royalties will be recognized when the related sales occur. Royalty revenue of less than $0.1 million was recognized during the three months ended March 31, 2024.
September 30, 2017 | December 31, 2016 | |
| Money market funds | $29,055,021 | $20,978,947 |
| Checking and bank deposits | 62,787,146 | 4,052,333 |
| Total | $91,842,167 | $25,031,280 |
NOTE3 – INVESTMENT SECURITIES
Our short-term investments as of March 31, 2024 and December 31, 20162023 are classified as held-to-maturity. Held-to-maturity investments are recorded at amortized cost.
The following tables summarize our short-term investment securities at March 31, 2024 and December 31, 2023:
| March 31, 2024 | |||||||||||||||
| Amortized | Gross | Gross | | ||||||||||||
| cost, as | unrealized | unrealized | Estimated | ||||||||||||
(in thousands) | adjusted | holding gains | holding losses | fair value | ||||||||||||
Short-term investments: | | | | | ||||||||||||
Obligations of domestic governmental agencies (maturing between April 2024 and September 2024) (held-to-maturity) | $ | 134,308 | $ | — | $ | 28 | $ | 134,280 | ||||||||
Total short-term investments | $ | 134,308 | $ | — | $ | 28 | $ | 134,280 | ||||||||
| December 31, 2023 | |||||||||||||||
| Amortized | Gross | Gross | | ||||||||||||
| cost, as | unrealized | unrealized | Estimated | ||||||||||||
| adjusted | holding gains | holding losses | fair value | ||||||||||||
Short-term investments: | | | | | ||||||||||||
Obligations of domestic governmental agencies (maturing between January 2024 and June 2024) (held-to-maturity) | $ | 124,575 | $ | 30 | $ | 53 | $ | 124,552 | ||||||||
Total short-term investments | $ | 124,575 | $ | 30 | $ | 53 | $ | 124,552 | ||||||||
Our long-term investments as of March 31, 2024 include shares of common stock of Precision. The fair market value of these equity securities as of March 31, 2024 was $1.3 million. For the three months ended March 31, 2024, we recorded an unrealized gain of $0.2 million based on the change in fair value of Precision’s common stock during the period. See Note 5 for further details.
NOTE4 INVENTORY
The following table summarizespresents our investment securitiesinventory as of March 31, 2024 (in thousands):
| March 31, 2024 | |||
Raw Materials | $ | 1,712 | ||
Work in Process | 74,104 | |||
Finished Goods | 1,903 | |||
Total Inventory | $ | 77,719 | ||
Inventory is stated at the lower of cost or net realizable value and consists of raw materials, work-in-process and finished goods. Cost is determined using a standard cost method, which approximates actual cost, and assumes a FIFO flow of goods. Inventory that is used for clinical development purposes is expensed to research and development expense when consumed.
At March 31, 2024, all our inventory was solely related to BRIUMVI, which was approved by the FDA on December 28, 2022, at which time we began to capitalize costs to manufacture BRIUMVI. Prior to the FDA approval of BRIUMVI, all costs related to the manufacturing of BRIUMVI and related material were charged to research and development expense in the period incurred. Inventory that is used for clinical development purposes is expensed to research and development expense when consumed.
The work in process materials consist primarily of bulk drug substance, which has a multi-year shelf life. When the bulk drug substance is manufactured into BRIUMVI finished goods, those finished goods have a shelf life of three years from the date of manufacture. Our expectation is to sell finished goods at least twelve months prior to expiration. Due to our long manufacturing lead time, it was necessary to buildup inventory in support of BRIUMVI forecasted sales, to ensure appropriate safety stock levels, and meet our commitment to supply BRIUMVI to Neuraxpharm related to the Commercialization Agreement. As a result of being in the early stages of the BRIUMVI product launch, the Company is continuing to evaluate the length of its operating cycle.
On a quarterly basis, the Company analyzes our inventory levels for excess quantities and obsolescence (expiration), taking into account factors such as historical and anticipated future sales compared to quantities on hand and the remaining shelf-life. At March 31, 2016:2024, we determined that a reserve related to BRIUMVI inventory for excess quantities and obsolescence is not required. In addition, since FDA approval of BRIUMVI, the Company has not recorded any inventory write downs.
Amortized cost, as adjusted | Gross unrealized holding gains | Gross unrealized holding losses | Estimated fair value | |
| Short-term investments: | ||||
| Obligations of domestic governmental agencies (maturing between February 2017 and September 2017) (held-to-maturity) | $19,853,860 | $3,270 | $2,492 | $19,854,638 |
| Total short-term investment securities | $19,853,860 | $3,270 | $2,492 | $19,854,638 |
NOTE 4 –5 FAIR VALUE MEASUREMENTS
We measure certain financial assets and liabilities at fair value on a recurring basis in the condensed consolidated financial statements. The fair value hierarchy ranks the quality and reliability of inputs, or assumptions, used in the determination of fair value and requires financial assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:
● | Level 1 quoted prices in active markets for identical assets and liabilities; |
● | Level 2 inputs other than Level 1 quoted prices that are directly or indirectly observable; and |
● | Level 3 unobservable inputs that are not corroborated by market data. |
Equity Investments and Forward Contract Liabilities
On January 7, 2024, (the Precision Effective Date) the Company and its wholly-owned subsidiary, TG Cell Therapy, Inc., (TG Cell) entered into a License Agreement (the Precision License Agreement) with Precision, pursuant to which Precision granted the Company certain exclusive and non-exclusive license rights to develop, manufacture, and commercialize Precision’s allogeneic CAR T therapy azercabtagene zapreleucel (azer-cel) for identical assetsthe treatment of autoimmune and liabilities;
Pursuant to the Precision License Agreement, the Company made an upfront payment to Precision of September 30, 2017 and December 31, 2016, the fair values$7.5 million, consisting of (i) $5.25 million in cash and cash equivalents, restricted cash, accounts payable,(ii) $2.25 million (the Upfront Precision Stock Payment), as an equity investment, for the purchase of 2,920,816 shares of Precision’s common stock at a price of $0.77 per share. The Company paid a premium for the shares which was recorded in research and notesdevelopment expense as part of the cost of the Precision License Agreement. Precision subsequently had a 30-to-1 reverse stock split in February 2024. The shares purchased with the Upfront Precision Stock Payment are classified as an equity investment and interest payable, current portion approximate their carrying value.are recognized at fair market value as of March 31, 2024.
Within 12 months following the Precision Effective Date, the Company will make a one-time payment to Precision equal to $2.5 million (the Deferred Precision Stock Payment). Upon receipt of such payment, Precision shall issue to the Company the number of shares of Precision common stock (the Precision Shares) (rounded down to the nearest whole share) obtained by dividing the Deferred Precision Stock Payment by 200% of the weighted average share price of the Precision common stock (the Precision Share Price) for the thirty (30) trading days preceding the date on which Precision receives the payment. The Deferred Precision Stock Payment was recorded to research and development License Fees as part of the cost of the Precision License Agreement in the three months ended March 31, 2024, and is classified as a forward contract liability recognized at fair market value in Other Current Liabilities as of March 31, 2024, in accordance with ASC 321.
Upon the achievement of a clinical and regulatory milestone event (Milestone Event 1), the Company will make a one-time payment to Precision equal to $2.3 million (the Milestone 1 Precision Stock Payment). Upon receipt of such payment, Precision shall issue to the Company the Precision Shares (rounded down to the nearest whole share) obtained by dividing the Milestone 1 Precision Stock Payment by 200% of the weighted average share price of the Precision common stock (the Precision Share Price) for the thirty (30) trading days preceding the achievement of Milestone Event 1. The Milestone 1 Precision Stock Payment was recorded to research and development License Fees as part of the cost of the Precision License Agreement in the three months ended March 31, 2024, and is classified as a forward contract liability recognized at fair market value in Other Current Liabilities as of March 31, 2024, in accordance with ASC 321.
5% Notes
At the time of our merger (we were then known as Manhattan Pharmaceuticals, Inc. (“Manhattan”)(Manhattan)) with Ariston Pharmaceuticals, Inc. (“Ariston”)(Ariston) in March 2010, Ariston issued $15.5 million of five-yearfive-year 5% notes payable (the “5% Notes”)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 Company’s financial instruments include cash, flowscash equivalents consisting of money market funds, accounts receivable, accounts payable and loan payable. As of March 31, 2024 and December 31, 2023, the conversion feature,fair values of cash and cash equivalents, restricted cash, accounts receivable, and loan and interest payable approximate their carrying value. The carrying value of loan payable on the conversion feature was usedCompany’s balance sheet is estimated to estimate the 5% Notes’approximate its fair value as of September 30, 2017the interest rate approximates the market rate for loans with similar terms and December 31, 2016. The assumptions, assessments and projections of future revenues are subject to uncertainties, difficult to predict, and require significant judgment. The use of different assumptions, applying different judgment to inherently subjective matters and changes in future market conditions could result in significantly different estimates of fair value and the differences could be material to our condensed consolidated financial statements.
The following tables provide the fair value measurements of applicable financial assets and liabilities as of September 30, 2017 March 31, 2024 and December 31, 2016:
Financial liabilities at fair value as of September 30, 2017 | ||||
Level 1 | Level 2 | Level 3 | Total | |
| 5% Notes | $-- | $-- | $182,156 | $182,156 |
| Total | $-- | $-- | $182,156 | $182,156 |
Financial liabilities at fair value as of December 31, 2016 | ||||
Level 1 | Level 2 | Level 3 | Total | |
| 5% Notes | $-- | $-- | $68,875 | $68,875 |
| Total | $-- | $-- | $68,875 | $68,875 |
Financial assets and liabilities at fair value as of March 31, 2024 | ||||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Investments | $ | 1,320 | $ | — | $ | — | $ | 1,320 | ||||||||
Total Assets | $ | 1,320 | $ | — | $ | — | $ | 1,320 | ||||||||
Forward Contract Liabilities | $ | — | $ | 2,471 | $ | — | $ | 2,471 | ||||||||
5% Notes | $ | — | $ | — | $ | 322 | $ | 322 | ||||||||
Total Liabilities | $ | — | $ | 2,471 | $ | 322 | $ | 2,793 | ||||||||
Financial assets and liabilities at fair value as of December 31, 2023 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
5% Notes | $ | — | $ | — | $ | 357 | $ | 357 | ||||||||
Total Liabilities | $ | — | $ | — | $ | 357 | $ | 357 | ||||||||
Our equity investments classified as Level 1 were valued using their respective closing stock price on the Nasdaq Stock Market. We did not experience any transfers of financial instruments between the fair value hierarchy levels during the three months ended March 31, 2024. Our forward contract liabilities classified as Level 2 were valued using Precision's closing stock price on the Nasdaq Stock Market. Our Level 3 instrument amounts above represent the fair value of the 5% Notes and related accrued interest.
The change in the fair value of the Level 1 assets and Level 2 and Level 3 liabilities is reported in other (income) expense in the accompanying condensed consolidated statements of operations.
NOTE 5 - STOCKHOLDERS'6 STOCKHOLDERS’ EQUITY
Preferred Stock
Our amended and restated certificate of incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock, $0.001 par value, with rights senior to those of our common stock, issuable in one or more series. Upon issuance, we can determine the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock.
Common Stock
Our amended and restated certificate of incorporation authorizes the issuance of up to 150,000,000175,000,000 shares of $0.001 par value common stock.
On September 2, 2022, we filed a shelf registrationan automatic “shelf registration” statement on Form S-3S-3 (the "2015 S-3"),2022 WKSI Shelf) as a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act, which registered an unlimited and indeterminate amount of debt or equity securities for future issuance and sale. The 2022 WKSI Shelf 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. September 2022. In connection with the 2015 S-3,2022 WKSI Shelf, we amended our 2013entered into an At-the-Market Issuance Sales Agreement (the 2022 ATM) with MLVCantor Fitzgerald & Co. LLC (the "2015 ATM") such that we may issue and sell additionalB. Riley Securities, Inc. (each a 2022 Agent and collectively, the 2022 Agents), relating to the sale of shares of our common stock, having an aggregate offering price of up to $175.0 million, from time to time through MLV & Co. LLC ("MLV") and FBR Capital Markets & Co. ("FBR", each of MLV and FBR individually an "Agent" and collectively the "Agents"), acting as the sales agents.stock. Under the 20152022 ATM, we will pay the2022 Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock sold throughstock.
We had no activity on the Agents.
The 2017 S-32022 WKSI Shelf is currently our only active shelf registrationshelf-registration statement. After deducting shares already sold there is approximately $267.3 millionWe may offer any combination of common stock that remains available for salethe securities registered under the 2017 S-3. We may offer the securities under the 2017 S-32022 WKSI Shelf from time to time in response to market conditions or other circumstances if we believe such a plan of financing is in the best interests of our stockholders. We believe thatmay need to file additional shelf-registration statements in the 2017 S-3 providesfuture to provide us with the flexibility to raise additional capital to finance our operations as needed.
Equity Incentive Plans
The TG Therapeutics, Inc. Amended and Restated 20122022 Incentive Plan (“2012(the 2022 Incentive Plan”)Plan) was approved by stockholders in June 2015.2022 with 17,000,000 shares available to be issued, of which not more than 10,000,000 shares may be issued pursuant to “full-value awards.” Full-value awards include any award other than an option or stock appreciation right and which is settled by the issuance of stock. As of September 30, 2017, noMarch 31, 2024, 7,181,941 shares of restricted stock and 2,272,500 options were outstanding and up to an additional 1,201,2585,582,801 shares maywere available to be issued under the 20122022 Incentive Plan.
The TG Therapeutics, Inc. Amended and Restated 2012 Incentive Plan (the “Amendment”)2012 Incentive Plan) was approved by stockholders in June 2020. As of March 31, 2024, 4,216,538 shares of restricted stock and 2,422,029 options were outstanding, and no additional shares were available 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 grantedbe issued under the Employment Agreement that were predominantly subject to time-based vesting over2012 Incentive Plan as the next three years. Simultaneously, (i) Mr. Weiss was issued 418,371 restricted shares under2022 Incentive Plan is currently 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 stockCompany's only active incentive plan.
Stock-based compensation expense recognition as a resultincluded in the condensed consolidated statements of operations was $9.3 million and $6.8 million for the modification.
Stock Options and Restricted Stock
The following table summarizes restricted sharethe activity for stock options and restricted stock for the ninethree months ended September 30, 2017:
Number of Shares | Weighted Average Grant Date Fair Value | |
| Outstanding at December 31, 2016 | 8,642,055 | $7.20 |
| Granted | 1,112,131 | 6.10 |
| Vested | (4,085,881) | 5.23 |
| Forfeited | (26,625) | 6.72 |
| Outstanding at September 30, 2017 | 5,641,680 | $7.06 |
| Stock Options | Restricted Stock | ||||||
Equity awards outstanding, beginning of year | 4,697,029 | 9,639,068 | ||||||
Changes during the year: | ||||||||
Granted | — | 3,304,468 | ||||||
Exercised or vested | (2,500 | ) | (1,379,543 | ) | ||||
Expired or Forfeited | — | (165,514 | ) | |||||
Equity awards outstanding, end of period | 4,694,529 | 11,398,479 | ||||||
As of September 30, 2017, there was approximately $14.9 million ofMarch 31, 2024, total unrecognized compensation cost related to unvested time-based restricted stock,awards not yet recognized and the weighted-average periods over which isthe awards are expected to be recognized over a weighted-average periodwere as follows:
(in thousands) | Stock Options | Restricted Stock | ||||||
Unrecognized compensation cost | $3,309 | $55,066 | ||||||
Expected weighted-average period in years of compensation cost to be recognized | 2.3 | 3.2 | ||||||
Warrants
The Company’s only outstanding warrants are the warrants issued to Hercules as part of 0.9 years. The unrecognized compensation amount does not include, as of September 30, 2017, 180,000the Loan Agreement, the Amended Loan Agreement and the First Amendment (please refer to Note 7 – Loan Payable) to purchase 147,058, 115,042 and 50,172 shares of restrictedour common stock with exercise prices of $4.08, $17.95 and $14.70, respectively. See Note 7 for further details. There will not be any ongoing stock compensation expense volatility associated with these warrants.
NOTE7 LOAN PAYABLE
On February 28,2019 (the Closing Date), we entered into a term loan facility with Hercules Capital, Inc. (Hercules or Lender), which provided us with the capacity to borrow up to an aggregate principal amount of $60.0 million (Term Loan). The Term Loan is governed by a loan and security agreement, dated February 28,2019 (the Loan Agreement), which provides for up to four separate advances. The first advance of $30.0 million was drawn on the Closing Date. An additional $30.0 million under the Term Loan was previously available upon the completion of different milestones and time points that have now lapsed.
On December 30, 2021 (the Amended Loan Agreement Closing Date), the Company entered into an Amended and Restated Loan and Security Agreement (the Amended Loan Agreement) with Hercules Capital, Inc. The Amended Loan Agreement amended the terms of the Loan Agreement to, among other things, (i) increase the aggregate principal amount of the loan, available at the Company’s option, from $60.0 million to $200.0 million (the Amended Term Loan), (ii) issue a first advance of $70.0 million drawn at the Amended Loan Agreement Closing Date, a portion of which was used to refinance the current outstanding loan balance of approximately $7.8 million and pay for expenses incurred by the Lender in executing the agreements, (iii) change the draw amounts and dates available in subsequent tranches, (iv) extend the maturity date of the facility from the original March 1, 2022 to January 1, 2026, (v) reset and extend the interest only period from April 1, 2021 to February 1, 2025 and extendable to August 1, 2025 subject to the achievement of certain performance milestones, and (vi) modify the cash interest rate to be the greater of either (a) the “prime rate” as reported in The Wall Street Journal plus 2.15%, and (b) 5.40%. In addition to the cash interest rate, the principal balance accrues paid-in-kind interest at a rate of 3.45%, which amount will be capitalized and added to the outstanding principal balance of the Amended Term Loan and payable at the maturity date of the Amended Loan Agreement.
On March 31, 2023 (the First Amendment Effective Date), the Company entered into a First Amendment to the Amended and Restated Loan and Security Agreement (the First Amendment) with Hercules. The First Amendment amended the terms of the Amended Loan Agreement to, among other things, (i) issue an advance of $25.0 million drawn at the First Amendment Effective Date (the Tranche 3A Advance), (ii) formal expiration of Tranche 2, (iii) change the draw amounts and dates available under subsequent tranches, including splitting the remaining balance of Tranche 3 into two additional advances in an aggregate principal amount of up to $20.0 million, in increments of $10.0 million (the Tranche 3B Advance and the Tranche 3C Advance), decreasing the amount available under Tranche 4 from $65.0 million to $60.0 million, and adding a Tranche 5 of $25.0 million, subject to the achievement of revenue related performance milestones, (iv) extend the interest only period from February 1, 2025 to August 1, 2025, and (v) modify the cash interest rate to be the greater of either (a) the “prime rate” as reported in The Wall Street Journal plus 1.20%, and (b) 8.95%. In addition to the cash interest rate, the principal balance will accrue paid-in-kind interest at a rate of 2.25%, which amount will be capitalized and added to the outstanding principal balance of the Amended Term Loan and payable at the maturity date of the Amended Loan Agreement. The First Amendment contains financial covenants that require the Company to maintain certain levels of unrestricted cash and additional financial covenants related to market capitalization. As of March 31, 2024, we are milestone-based and vest upon certain corporate milestones; and 2,289,917in compliance with all financial covenants.
The First Amendment also contains warrant coverage of 2.95% of each advance amount funded. A warrant was issued by the Company to Hercules to purchase 50,172 shares of restrictedcommon stock outstanding issuedwith an exercise price of $14.70 for the amount funded pertaining to non-employees, the expenseTranche 3A Advance (the First Amendment Warrant). The First Amendment Warrant shall be exercisable for whichseven years from the date of issuance. Hercules may exercise the First Amendment Warrant either by (a) cash or check or (b) through a net issuance conversion.
In addition, the Company is determined each reporting period at the measurement date. The expense for non-employee awards is recognized over the vesting periodrequired to pay a final payment fee equal to 5.95% of the award. Until the measurement date is reached, the totalaggregate principal amount of compensation expense remains uncertain. We record compensation expense basedthe Term Loan Advances (as defined in the Loan Agreement) plus 4.95% of the aggregate principal amount of all other advances.
The Company may, at its option, prepay the Amended Term Loan in full or in part, subject to a prepayment penalty equal to (i) 1.5% of the principal amount prepaid if the prepayment occurs prior to the first anniversary of the First Amendment Effective Date, and (ii) 1.0% of the principal amount prepaid if the prepayment occurs on or after the first anniversary of the First Amendment Effective Date.
The Company evaluated whether the First Amendment represented a debt modification or extinguishment of the Term Loan in accordance with ASC 470-50, Debt – Modifications and Extinguishments. As a result of the modification of terms and no repayment or retirement of the Term Loan, the Term Loan was accounted for by the Company under the modification accounting model. The Company capitalized the facility charge from the First Amendment advance to debt issuance costs and expensed third party fees in the Company’s statement of operations for the three months ended March 31, 2023.
The Company estimated the fair value of the award atFirst Amendment Warrant using the reporting date.
Warrants | Weighted-average exercise price | Aggregate Intrinsic Value | |
| Outstanding at December 31, 2016 | 913,381 | $2.41 | $1,961,403 |
| Issued | -- | -- | |
| Exercised | (887,585) | 2.41 | |
| Expired | (25,796) | -- | |
| Outstanding at September 30, 2017 | -- | $-- | $-- |
Three months ended September 30, | Nine months ended September 30, | |||
2017 | 2016 | 2017 | 2016 | |
| Stock-based compensation expense associated with restricted stock | $4,890,123 | $2,834,038 | $12,375,306 | $6,181,400 |
| Total | $4,890,123 | $2,834,038 | $12,375,306 | $6,181,400 |
September 30, 2017 | December 31, 2016 | |||||
Current portion, net | Non-current portion, net | Total | Current portion, net | Non-current portion, net | Total | |
| Convertible 5% Notes Payable | $182,156 | $- | $182,156 | $68,875 | $- | $68,875 |
| Total | $182,156 | $- | $182,156 | $68,875 | $- | $68,875 |
Amended Term Loan | ||||
Exercise price | $ | 14.70 | ||
Common share price on date of issuance | $ | 15.04 | ||
Volatility | 0.88 | % | ||
Risk-free interest rate | 3.6 | % | ||
Expected dividend yield | — | % | ||
Contractual term (in years) | 7.00 | |||
The Company incurred financing expenses of $2.0 million (including the fair value optionof the First Amendment Warrant) related to the First Amendment which are recorded as debt issuance costs and as an offset to loan payable 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 will be included in interest expense in the Company’s consolidated statements of operations. Amortization of debt issuance costs was $0.6 million and $0.5 million for valuing the 5% Notes. three months ended March 31, 2024, and 2023, respectively. At March 31, 2024, the remaining unamortized balance of debt issuance costs was $4.5 million.
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).
| March 31, | December 31, | ||||||
(in thousands) | 2024 | 2023 | ||||||
Loan payable | $ | 95,000 | $ | 95,000 | ||||
Add: Accreted Liability of final payment fee | 10,799 | 10,230 | ||||||
| 105,799 | 105,230 | ||||||
Less: unamortized debt issuance costs | (4,473 | ) | (5,112 | ) | ||||
| 101,326 | 100,118 | ||||||
Less: principal payments | — | — | ||||||
Total loan payable | 101,326 | 100,118 | ||||||
Less: current portion | — | — | ||||||
Loan payable non-current | $ | 101,326 | $ | 100,118 | ||||
NOTE 7 – LICENSE AGREEMENTS
In May 2016, as part of a broader agreement with Jubilant Biosys (“Jubilant”), an India-based biotechnology company, 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 $1.8 million under the Office Agreement. We began to occupy this space in April 2016, with rental payments beginning in the third quarter of 2016. Also, in connection with this Office Agreement, we have pledged $1.3 million to secure a sub-licenseline of credit as a security deposit for the Office Agreement, which has been recorded as restricted cash in the accompanying condensed consolidated balance sheets.
In October 2019, we finalized a five-year lease for office space in New Jersey (the NJ Lease). We approximate an average annual rental obligation of $0.3 million under the NJ Lease. We took possession of this space in October 2019, with rental payments beginning in November 2019. We incurred rental expense of $0.1 million for the three months ended March 31, 2024.
In October 2021, we finalized a five-year lease for office space in North Carolina (the NC Lease). We approximate an average annual rental obligation of $0.2 million under the NC Lease. We took possession of this space in February 2022, with rental payments beginning in April 2022. We incurred rental expense of $0.1 million for the three months ended March 31, 2024.
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 $10.3 million and $7.9 million, respectively, as of March 31, 2024. Our leases have remaining lease terms of 9 months to 7 years. One lease has a renewal option to extend the lease for an additional term of two years. The following components of lease expense are included in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023:
| Three months ended | |||||||
| March 31, | March 31, | ||||||
(in thousands) | 2024 | 2023 | ||||||
Operating lease cost | $ | 600 | $ | 544 | ||||
Net lease cost | $ | 600 | $ | 544 | ||||
As of March 31, 2024, the weighted-average remaining operating lease term was 5.8 years and the weighted-average discount rate for operating leases was 10.01%. Cash paid for amounts included in the measurement of operating lease liabilities during the three months ended March 31, 2024 was $0.6 million. The balance sheet classification of lease liabilities was as follows:
| March 31, | December 31, | ||||||
(in thousands) | 2024 | 2023 | ||||||
Liabilities | | | ||||||
Lease liability current portion | $ | 1,383 | $ | 1,446 | ||||
Lease liability non-current | 8,960 | 9,231 | ||||||
Total lease liability | $ | 10,343 | $ | 10,677 | ||||
As of March 31, 2024, the maturities of lease liabilities were as follows:
| Operating | |||
(in thousands) | leases | |||
Remainder of 2024 | $ | 1,792 | ||
2025 | 2,100 | |||
2026 | 2,080 | |||
2027 | 1,913 | |||
2028 | 1,827 | |||
After 2029 | 4,715 | |||
Total lease payments | 14,427 | |||
Less: interest | (4,084 | ) | ||
Present value of lease liabilities(*) | $ | 10,343 | ||
(*) | 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 through December 31, 2021. We used an incremental borrowing rate of 5.65% for the NC lease. |
NOTE 9 LICENSE AGREEMENTS
BRIUMVI (Ublituximab)
In January 2012, we entered into an exclusive license agreement (“JBET Agreement”) with Checkpoint Therapeutics, Inc. (“Checkpoint”) (see Note 8)LFB Biotechnologies, GTC Biotherapeutics and LFB/GTC LLC, all wholly-owned subsidiaries of LFB Group, relating to the development of ublituximab (the LFB License Agreement). Under the terms of the LFB License Agreement, we have acquired the exclusive worldwide rights (exclusive of France/Belgium) for the development and commercialization of Jubilant’s novel BET inhibitor programublituximab. As of March 31, 2024, we have incurred approximately $31.0 million in expense related to the achievement of certain milestones of the LFB License Agreement.
LFB Group is eligible to receive 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 field of hematological malignancies.
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 TG-1101ublituximab in South Korea and Southeast Asia. Under the terms of the sublicense agreement, Ildong has been granted a royalty bearing, exclusive right, including the right to grant sublicenses, to develop and commercialize TG-1101ublituximab 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,
We may receive up to an additional $5.0 million in payments upon the achievement of pre-specified milestones. In addition, upon commercialization, Ildong will make royalty payments to us on net sales of TG-1101ublituximab in the sublicense territory.
In July 2023, the Company entered into anthe Commercialization Agreement with Neuraxpharm. The Company granted Neuraxpharm the exclusive license agreement with LFB Biotechnologies, GTC Biotherapeutics and LFB/GTC LLC, all wholly-owned subsidiaries of LFB Group, relating to the development of ublituximab (the “LFB License Agreement”). In connection with the LFB License Agreement, we nominated Dr. Yann Echelard to our Board of Directors as LFB Group’s nominee. LFB Group maintains the right to nominate a board member until such time as LFB Group owns less than 10% ofcommercialize BRIUMVI in territories outside the outstanding common stock.
Azer-cel
On January 7, 2024, the Company and Fortressits wholly-owned subsidiary, TG Cell Therapy, Inc., entered into the Precision License Agreement with Precision, pursuant to which Precision granted the Company certain exclusive and non-exclusive license rights to develop, manufacture, and commercialize Precision’s allogeneic CAR T therapy azercabtagene zapreleucel (azer-cel) for the treatment of autoimmune and other non-oncology diseases and conditions.
Pursuant to the Precision License Agreement, the Company made an upfront payment to Precision of $7.5 million, consisting of (i) $5.25 million in cash and (ii) $2.25 million, as an equity investment, for the purchase of 2,920,816 shares of Precision’s common stock at a price of $0.77 per share. Within 12 months of the Precision License Agreement, the Company will determine actual office space utilization annually and if our utilization differs frommake a deferred payment of $2.5 million to Precision, consisting of an equity investment in Precision’s common stock at a 100% premium to the amount we have been billed, we30-day volume-weighted average price (the 30-day VWAP) prior to purchase. Upon achievement of certain near-term clinical or time-based milestones, the Company will either receive credits or be assessed incremental utilization charges. As of September 30, 2017, we had approximately $131,000 recorded in accounts payable relatedmake a $7.5 million payment to FortressPrecision, a portion of which approximately $30,000 relatedwill also be an equity investment in Precision’s common stock at a 100% premium to rentthe 30-day VWAP prior to purchase. Precision will be eligible to receive up to $293 million in additional milestone payments based on the achievement of certain clinical, regulatory, and build-out costs.
NOTE10 RELATED PARTY TRANSACTIONS
In July 2015, we entered into a Shared Services Agreement (the “SharedShared Services Agreement”)Agreement) with FortressFBIO to share the cost of certain services such as facilities use, personnel costs and other overhead and administrative costs. ThisThe Shared Services Agreement requires us to pay our respective share of services utilized. In connection with the Shared Services Agreement, we
Please refer to Note 8 – Leases for details regarding the JBETOffice Agreement with Checkpoint, a subsidiaryFBIO.
ITEM2. MANAGEMENT’SMANAGEMENT’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 “RiskRisk Factors.” See also the “SpecialSpecial Cautionary Notice Regarding Forward-Looking Statements”Statements set forth at the beginning of this report.
You should read the following discussion and analysis in conjunction with the unaudited condensed consolidated financial statements and the related footnotes thereto appearing elsewhere in this report, and in conjunction with management’s discussion and analysis and the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.
OVERVIEW
TG Therapeutics is a fully-integrated, commercial stage, biopharmaceutical company focused on the acquisition, development and commercialization of novel treatments for B-cell malignanciesdiseases. In addition to a research pipeline including several investigational medicines, TG has received approval from the FDA for BRIUMVI (ublituximab-xiiy) for the treatment of adult patients with RMS, to include clinically isolated syndrome, relapsing-remitting disease, and autoimmune diseases. Currently, we are developing two therapies targeting hematologic malignancies. TG-1101 (ublituximab) is a novel, glycoengineered monoclonal antibody that targets a specific and unique epitope onactive secondary progressive disease, in adults. TG also received approval for BRIUMVI by the CD20 antigen found on mature B-lymphocytes. We are also developing TGR-1202 (umbralisib), an orally available PI3K delta inhibitor. The delta isoform of PI3K is strongly expressed in cells of hematopoietic origin and is believed to be importantEuropean Commission (EC) in the proliferationEuropean Union (EU), and survivalthe Medicines and Healthcare Products Regulatory Agency (MHRA) in the United Kingdom (UK), for the treatment of B-lymphocytes. Both TG-1101 and TGR-1202, or the combination of which is referred to as "U2," are in Phase 3 clinical development foradult patients with hematologic malignancies, with TG-1101 also in Phase 3RMS who have active disease defined by clinical development for Multiple Sclerosis. Additionally, the Company has recently brought its anti-PD-L1 monoclonal antibody into Phase 1 development and aimsor imaging features. TG continues to bring additional pipeline assets into the clinic in the future.
Recent Business Update Highlights
Pipeline Expansion
On January 9, 2024, we have not received approvalentered into an agreement with Precision BioSciences, Inc. (Precision) to acquire a worldwide license to Precision’s azercabtagene zapreleucel (azer-cel), an allogeneic CD19 CAR T cell therapy program for autoimmune diseases and all other non-oncology indications. Azer-cel is an allogeneic (off the shelf) CAR T program, and the Company has near term plans to evaluate the program in multiple autoimmune indications.
BRIUMVI Ex-US Launch
On February 26, 2024, we announced the commercial launch of BRIUMVI in the EU by Neuraxpharm, with BRIUMVI made available for commercial sale in Germany, with additional EU markets expected to follow.
BRIUMVI Patents
On February 27, 2024, we announced the issuance of anythree additional patents by the United States Patent and Trademark Office (USPTO) for BRIUMVI, which extended patent protection through 2042.
OUR PRODUCTS
We currently license worldwide development and commercial rights, subject to certain limited geographical restrictions, for all of our products under development. The following table summarizes the current clinical trial status for our lead drug candidates in any marketas of April 2024.
Clinical Drug Candidate: | Initial Target Disease | Stage of Development |
Ublituximab (anti-CD20 mAb) | Relapsing Forms of Multiple Sclerosis (RMS) | APPROVED |
TG-1701 (BTK inhibitor) | B-cell disorders | Phase 1 trial |
TG-1801 (anti-CD47/CD19 bispecific mAb) | B-cell disorders | Phase 1 trial |
BRIUMVI (ublituximab-xiiy) Overview
BRIUMVI is the first and therefore, have not generated any product sales from our drug candidates.
The BRIUMVI approvals were primarily based on the design of two global Phase 3 clinical trials for TG-1101, referred to as the ULTIMATE I and ULTIMATE II Phase 3 clinical trials.
| TG-1101 plus Ibrutinib | Ibrutinib | P-value | |
| Treated Population (n) | n=59 | n=58 | |
| Overall Response Rate (ORR) | 78% | 45% | P<0.001 |
| Complete Response (CR) | 7% | 0% | NS |
| MRD-Negative | 19% (n=53) * | 2% (n=53) * | P<0.01 |
● | In December 2020, we announced positive topline results from the ULTIMATE I & II trials. Both studies met their primary endpoint of significantly reducing ARR over a 96-week period (p<0.005 in each study) with BRIUMVI demonstrating an ARR of <0.10 in each of the studies. Relative reductions of approximately 60% and 50% in ARR over teriflunomide were observed in ULTIMATE I & II, respectively. Key secondary MRI endpoints were also met. |
● | On August 22, 2022, the full results from the ULTIMATE I & II trials were published in the New England Journal of Medicine. |
● | Additional exploratory data sets from the ULTIMATE I & II Phase 3 trials continue to be presented at major medical meetings. BRIUMVI is also being studied in the ENHANCE Phase 3b trial evaluating RMS patients who switch from a IV anti-CD20 therapy to BRIUMVI and data from the ENHANCE trial was most recently presented at the 2024 Americas Committee for Treatment and Research in Multiple Sclerosis Annual Meeting held in February 2024. | |
● | On February 27, 2024, we announced the issuance of three additional patents by the United States Patent and Trademark Office (USPTO) for BRIUMVI, which extended patent protection through 2042. |
U.S. Commercialization of BRIUMVI
On December 28, 2022, we announced the FDA approval of BRIUMVI for the combinationtreatment of TG-1101RMS, to include clinically isolated syndrome, relapsing-remitting disease, and TGR-1202
● | Our commercialization efforts focused on engaging targeted neurology accounts with multi-channel promotional programming, sales engagements, infusion training and education. We also worked closely with payers to begin to secure insurance coverage for BRIUMVI. The first patient received a BRIUMVI infusion on February 1, 2023. |
Ex-U.S. Commercialization of BRIUMVI
On June 1, 2023, we announced that the FDA hasEC granted orphan drug designation covering the combinationapproval of TG-1101 and TGR-1202BRIUMVI for the treatment of adult patients with CLLRMS who have active disease defined by clinical or imaging features. With this approval, the centralized marketing authorization is valid in all EU member states, Iceland, Norway and DLBCL.
On August 1, 2023, we announced an agreement with Neuraxpharm, 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.
On November 1, 2023, we announced that we also received approval if any, by the MHRA for BRIUMVI to treat adult patients with RMS with active disease defined by clinical or imaging features in the UK.
On February 26, 2024, we announced the commercial launch of BRIUMVI in the EU by Neuraxpharm, with BRIUMVI made available for commercial sale in Germany, with additional EU markets expected to follow.
For more information, please refer to our Annual Report on Form 10-K for the quarter and year ended December 31, 2023.
RESULTS OF OPERATIONS
The following table summarizes the results of operations for the three months ended March 31, 2024 and 2023:
Three months ended | ||||||||
March 31, | ||||||||
(in thousands) | 2024 | 2023 | ||||||
Product revenue, net | $ | 50,488 | $ | 7,765 | ||||
License, milestone, royalty and other revenue | 12,986 | 38 | ||||||
Total Revenue | $ | 63,474 | $ | 7,803 | ||||
Costs and expenses: | ||||||||
Cost of revenue | 5,441 | 857 | ||||||
Research and development: | ||||||||
Noncash compensation | 2,452 | 1,584 | ||||||
Other research and development | 30,270 | 14,286 | ||||||
Total research and development | 32,722 | 15,870 | ||||||
General and administrative: | ||||||||
Noncash compensation | 6,887 | 5,240 | ||||||
Other selling, general and administrative | 27,694 | 22,828 | ||||||
Total general and administrative | 34,581 | 28,068 | ||||||
Total costs and expenses | 72,744 | 44,795 | ||||||
Interest expense | 2,288 | 2,844 | ||||||
Other income | (880 | ) | (604 | ) | ||||
Total other expense, net | 1,408 | 2,240 | ||||||
Net loss before taxes | (10,678 | ) | (39,232 | ) | ||||
Income taxes | 29 | — | ||||||
Net loss | $ | (10,707 | ) | $ | (39,232 | ) | ||
Product Revenue, net. Product revenue, net was approximately $50.5 million for the three months ended March 31, 2024, compared to $7.8 million for the three months ended March 31, 2023. Product revenue, net for the both the three months ended March 31, 2024 and March 31, 2023, consisted of net product sales of BRIUMVI in the United States. In January 2023, we began commercial sales of BRIUMVI within the U.S. following FDA orapproval. The increase in product revenue, net is driven by an increase in product shipments for BRIUMVI as a foreign health authority, which would result of greater market penetration.
License Revenue. License revenue was $12.5 million and less than $0.1 million for the three months ended March 31, 2024 and March 31, 2023, respectively. License revenue for the three months ended March 31, 2024 is predominantly comprised of a milestone payment under the Neuraxpharm Commercialization Agreement for the first key market commercial launch of BRIUMVI in incurring additional expenses.the EU. License revenue for the three months ended March 31, 2023 is comprised of recognition of a portion of the upfront payment from the Ublituximab sublicense agreement with Ildong.
Other Revenue. Other revenue was approximately $0.5 million and zero for the three months ended March 31, 2024 and March 31, 2023, respectively. Other revenue for the three months ended March 31, 2024 is comprised of consideration received for development and regulatory activities performed on behalf of Neuraxpharm in accordance with the Commercialization Agreement.
Cost of Revenue. Cost of revenue for the three months ended March 31, 2024 was $5.4 million compared to approximately $0.9 million for the three months ended March 31, 2023. Cost of revenue for both the three months ended March 31, 2024 and March 31, 2023 consists primarily of third-party manufacturing, distribution, overhead costs and royalties owed to our licensing partner for BRIUMVI sales. A portion of the costs of producing BRIUMVI sold to date was expensed as research and development prior to the FDA approval of BRIUMVI and therefore it is not reflected in the cost of revenue. As a result, our quarterly results may fluctuate and a quarter-by-quarter comparisoninitial product gross margin is higher as our pre-launch inventory costs are not included in cost of revenue. We expect the cost of revenue for BRIUMVI to increase in relation to product revenues as we deplete these inventories. We expect to use the remaining pre-commercialization inventory for product sales through the first quarter of 2025, after which our operating results may not be a meaningful indicationproduct gross margin is anticipated to decrease modestly. A portion of our future performance.
Noncash Compensation Expense (Research and Development). Noncash compensation expense (research and development) related to equity incentive grants totaled $1.8$2.5 million for the three months ended September 30, 2017,March 31, 2024, as compared to $0.9$1.6 million during the comparable period in 2016. The increase in noncash compensation expense was primarily related to milestone-based vesting of restricted stock grants to personnel and an increase in the measurement date fair value of certain consultant restricted stock during the current 2017 period.
Other Research and Development Expense. Other research and development expense increased for the three months ended March 31, 2024, by approximately $16.0 million to $30.3 million as compared to the comparable period ended March 31, 2023. The increase in research and development expense during the three months ended September 30, 2017March 31, 2024 was primarily attributable to the Precision License Agreement, as well as manufacturing related expenses during the period.
Noncash Compensation Expense (Selling, General and Administrative).Noncash compensation expense (selling, general and administrative) related to restricted stock granted to executive personnel.
Other ResearchSelling, General and Development Expenses
Interest Expense.Interest expense decreased by $0.5 million to $4.3$2.3 million for the ninethree months ended September 30, 2017,March 31, 2024, as compared to $3.8$2.8 million for the ninethree months ended September 30, 2016. The increase was due primarily to rent related expenses of our new office space. We expect our other general and administrative expenses to remain at a comparable level for the remainder of 2017.
Other (Income) Expense
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have incurred operating losses since our inception; however, the Company experienced a net profit during the twelve months ended December 31, 2023 due to a $140.0 million non-refundable upfront payment recognized as license revenue in the third quarter of 2023 as part of our Commercialization Agreement with Neuraxpharm (see Note 2 for more information). We expect to continue to incur operating losses in the near term and may never become profitable. As of March 31, 2024, we have an accumulated deficit of $1.5 billion.
Our primarymajor sources of cash have been proceeds from the saleprivate placements and public offerings of equity securities, warrantour loan and option exercises,security agreements executed with Hercules (see Note 7 for more information), and the upfront payment from the Commercialization Agreement (see Note 2 for more information). Substantially all our Sublicense Agreementoperating losses have resulted from costs incurred in connection with Ildong. We have not commercialized anyour research and development programs and from selling, general and administrative costs associated with our operations, including our commercialization activities. During the three months ended March 31, 2024, we generated $50.5 million in product revenue from sales of BRIUMVI. BRIUMVI first became commercially available in the United States in January of 2023. Even with the commercialization of BRIUMVI and the possible future commercialization 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 ourother drug candidates, we may not become profitable. Our ability to achieve profitability depends on a number ofour ability to generate revenue and many other 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.partnership; successfully complete any post-approval regulatory obligations and our ability to maintain or obtain regulatory approval for our drug candidates. We may continue to incur substantial operating losses even ifnow that we begin to generateare generating revenues from our drug candidates.BRIUMVI.
As of September 30, 2017,March 31, 2024, we had approximately $91.8$209.8 million in cash and cash equivalents.equivalents, and investment securities. The Company believes its existing cash, and cash equivalents, on hand asand investment securities, combined with projected revenues associated with the sale of September 30, 2017BRIUMVI in the U.S. and ex-U.S., will be sufficient to fund its anticipated operating cash requirements for at least twelve months following the Company’s planned operations through 2018. date of this filing.
The actual amount of cash that we will need to operate is subject to many factors, including, but not limited to, our commercialization efforts for BRIUMVI, preparations for the potential commercialization of our other drug candidates, and the timing, design and conduct of clinical trials for our drug candidates as well as the costs associated with licensing or otherwise acquiring new product candidates. We aremay be dependent upon significant future financing to provide the cash necessary to execute our currentongoing and future operations, including the commercialization of any of our drug candidates.
Discussion of Cash Flows
The following table summarizes our cash flows for the three months ended March 31, 2024 and 2023:
| Three months ended | |||||||
March 31, | ||||||||
(in thousands) | 2024 | 2023 | ||||||
Net cash used in operating activities | $ | (8,207 | ) | $ | (59,902 | ) | ||
Net cash used in investing activities | $ | (9,255 | ) | $ | (6,168 | ) | ||
Net cash provided by (used in) financing activities | $ | 10 | $ | 25,238 | ||||
Cash used in operating activities for the ninethree months ended September 30, 2017March 31, 2024 was $71.9$8.2 million as compared to $44.6cash used in operating activities of $59.9 million for the ninethree months ended September 30, 2016.March 31, 2023. The increasedecrease in net cash used in operating activities was due to a lower net loss during the three months ended March 31, 2024, offset by an increase in inventory of $50.5 million during the same period. This inventory balance increase was due to the buildup of inventory in support of BRIUMVI forecasted sales, to ensure appropriate safety stock levels, and meet our commitment to supply BRIUMVI to Neuraxpharm in relation to the Commercialization Agreement.
Net cash used in investing activities for the three months ended March 31, 2024, was $9.3 million as compared to $6.2 million for the three months ended March 31, 2023. The increase in net cash used in investing activities was primarily due to increased expenditures associated with our clinical development programs for TG-1101investment in short-term and TGR-1202.
Net cash provided by financing activities for the three months ended March 31, 2024, was approximately zero as compared to net cash provided by investingfinancing activities was $19.8 million as compared to $15.1of $25.2 million for the ninethree months ended September 30, 2016.March 31, 2023. The increase in net cash provided by investingfinancing activities was primarily due to greater proceeds from maturity of investments during the ninethree months ended September 30, 2017.
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.
CRITICAL ACCOUNTING POLICIES
A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparationoperation and requires management’s most difficult, subjective or complex judgments, often as a result of these consolidated financial statements requires usthe need to make estimates and judgmentsabout the effect of matters that affect the reported amount of assets and liabilities and related disclosure of contingent assets and liabilities at the dateare inherently uncertain. For a description 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.
Our exposure to interest ratemarket risk and/or credit risk, arising fromhas not changed materially since our investments.
Evaluation of Disclosure Controls and Procedures
As of September 30, 2017,March 31, 2024, management carried out, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, an evaluation 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) under 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 Officer and Chief Financial Officer concluded that, as of September 30, 2017,March 31, 2024, our disclosure controls and procedures were effective.
Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2017March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We, and our subsidiaries, are not a party to, and our property is not the subject of, any material pending legal proceedings.
You should carefully consider the following risksrisk factors and uncertainties.the other information contained elsewhere in this Quarterly Report before making an investment in our securities. If any of the following occurs,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 Commercialization
If we obtain U.S. Food and Drug Administration (FDA) or European Medicines Agency (EMA) approval for a product candidate and do not achieve broad market acceptance among physicians, patients, healthcare payors, and the medical community, the revenues that we generate from product sales will be limited.
We currently have one marketed product, BRIUMVI, which received approval from the FDA on December 28, 2022, for the treatment of relapsing forms of multiple sclerosis (RMS), to include clinically isolated syndrome, relapsing-remitting disease, and active secondary progressive disease, in adults. Additionally, BRIUMVI received approval from the European Commission (EC) on June 1, 2023, and later in 2023, from the Medicines and Healthcare products Regulatory Agency (MHRA) for the treatment of adult patients with RMS who have active disease defined by clinical or imaging features in the EU and UK, respectively.
We have limited experience as a commercial company, and our ability to successfully overcome the risks associated with commercializing drugs in the biopharmaceutical industry, including the risk that our products do not achieve an adequate level of acceptance, remains uncertain. BRIUMVI, as well as other drugs that we may bring to the market in the future, may not gain market acceptance by physicians, patients, third-party payors and others in the healthcare community. As a result, we may not generate significant revenues or meet our revenue projections or guidance and may not become profitable. The degree of market acceptance of BRIUMVI, as well as any future product candidates for which we may receive marketing approval, will depend on a number of factors, including:
● | the timing of our receipt of marketing approvals, the terms of such approvals, and the countries in which such approvals are obtained; | |
● | the efficacy, safety and tolerability as demonstrated in clinical trials and as compared to alternative treatments; | |
● | the timing of market introduction of BRIUMVI and any of our product candidates, as well as competitive products; | |
● | the indications for which our products are approved, and other aspects of the approved labeling for such products; | |
● | acceptance by physicians, advanced practitioners, major operators of neurology clinics, and patients of our products as safe, tolerable and effective treatments; | |
● | the potential and perceived advantages or disadvantages of our products compared to alternative treatments; | |
● | our ability to offer our products for sale at competitive prices; | |
● | the availability of adequate reimbursement by third-party payors and government authorities; | |
● | the extent of patient cost-sharing obligations, including copays and deductibles; | |
● | changes in regulatory requirements by government authorities for our products; | |
● | relative convenience and ease of administration; | |
● | the prevalence and severity of side effects and adverse events; | |
● | the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; | |
● | the effectiveness of our sales and marketing efforts, as well as those of any current or future partners; | |
● | protecting our rights in our intellectual property portfolio; | |
● | our ability to maintain a reliable supply of our products that meets market demand; and | |
● | favorable or unfavorable publicity relating to our products or relating to the Company. |
In addition, global health concerns such as the COVID-19 pandemic could impact commercialization of BRIUMVI. Patients and healthcare providers have raised concerns that immunosuppressive products like anti-CD20 antibodies and other B-cell targeted agents may increase the risk of acquiring viruses such as COVID-19 or lead to more severe complications or outcomes upon infection, including death. These or other similar concerns may impact the commercial potential for BRIUMVI and other immunosuppressive products that we have in development.
If BRIUMVI, or any future product candidates for which we receive regulatory approval, do 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.
We may be subject to limitations on the indicated uses or requirements to fulfill certain post-marketing requirements to the satisfaction of regulatory authorities or may be unable to maintain marketing approval for BRIUMVI or future products that we may bring to market.
Regulatory approvals for our product or any of our product candidates may be subject to conditions and limitations on the approved indicated uses for which the product may be marketed or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the approved product candidate. For example, with respect to the FDA’s approval of BRIUMVI for RMS, the approval is subject to certain post-marketing requirements and commitments, including long-term safety studies, as well as studies to evaluate the effects of BRIUMVI in pregnant women and pediatric populations, among others. Similar post-approval studies are required by other regulatory authorities outside of the U.S., including but not limited to, the EMA in the EU and the MHRA in the UK. These studies are highly specialized in their design and conduct and are associated with considerable expenses, and based on the outcome, could result in further labeling restrictions that could impair or restrict the way in which we are able to market BRIUMVI, or negatively impact its overall clinical profile.
In addition, with respect to BRIUMVI and any product candidate that the FDA or a comparable foreign regulatory authority approves, the manufacturing processes, testing, labeling, packaging, distribution, import, export, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with current Good Manufacturing Practices (cGMPs), with Good Clinical Practices (GCPs), for any clinical trials that we conduct post-approval, and with Good Laboratory Practices (GLPs), for any nonclinical studies. Later discovery of previously unknown problems with a product or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things, restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, mandatory safety labeling changes or product recalls, suspension or revocation of product approvals, product seizure or detention, refusal to permit the import or export of products, and injunctions or the imposition of civil or criminal penalties, all of which would adversely affect our business, prospects and ability to achieve or sustain profitability.
BRIUMVI, and any of our product candidates for which we in the future obtain approval, may, after approval, be found to cause undesirable side effects that could result in significant negative consequences following commercialization.
As BRIUMVI or any future approved products are used more widely or for a longer duration after being brought to market, data may emerge from clinical studies, including confirmatory or other post-marketing studies, or from adverse event reporting, that may affect the commercial potential of our products. For example, as additional patients are exposed for longer durations to a product in the commercial and clinical settings, it is unknown whether greater frequency and/or severity of adverse events are likely to occur or whether an acceptable safety and tolerability profile will continue to be demonstrated. If we or others identify unexpected side effects caused by BRIUMVI or other products or product candidates within the RMS space following introduction into the market, a number of potentially significant negative consequences could result, including:
● | regulatory authorities may withdraw approval or limit the approved indications for use of such products; | |
● | regulatory authorities may require the addition of new or different labeling statements, including warnings or boxed warnings, precautions, or contraindications that could diminish the usage of the product or otherwise limit the commercial success of the affected product; | |
● | we may be required to change the way such drug candidates are distributed or administered, or to conduct additional clinical trials; | |
● | regulatory authorities may require a Risk Evaluation and Mitigation Strategy (REMS), a plan to mitigate risks, which could include a Medication Guide, 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 products; and | |
● | our reputation may suffer. |
Any one or a combination of these events could prevent us from 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.
The incidence and prevalence for target patient populations of BRIUMVI and our product candidates, including TG-1701 and TG-1801 in B-cell disorders and azer-cel in non-oncology indications, have not been established with precision. If the market opportunities for BRIUMVI and our product 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.
The precise incidence and/or prevalence of RMS are unknown. Our projections for BRIUMVI in RMS are based on estimates and our current knowledge and understanding of the disease. These estimates are typically based on one-on-one and group interactions with target physicians and other sources available at the time we make the estimates, including the scientific literature, healthcare utilization databases and market research. Although we believe our estimates are reasonable, many factors may limit their accuracy. For example, the sources we use to make the estimates may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these diseases and the number of patients may turn out to be lower than expected.
The total addressable market opportunity for BRIUMVI and our product candidates, if approved, ultimately depends upon, among other things, the approved prescribing information, acceptance by the medical community, patient access, and 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, patients and physicians may choose to utilize competitive products or reimbursement may be unfavorable, all of which would adversely affect our results of operations and our business.
We face substantial competition, 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 commercialization resources. Large pharmaceutical companies have extensive experience commercializing products and may have significant existing relationships with customers and more resources available to them to promote their products. Many are active in the same diseases that we are, including within the neurological and immunological fields, some in direct competition with us. We may also compete with these organizations to recruit commercial and other key personnel. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
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 priced or contracted differently 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. In a competitive environment, a company’s communications may also be subject to heightened scrutiny from regulators and competitors under laws, regulations, and guidance about promotional communications (advertising and promotional labeling) and non-promotional communications (e.g., certain educational and scientific exchange), and with regard to potential competitor actions under federal law (the Lanham Act) and congruous state law, which protect businesses against the unfair competition of misleading advertising or labeling.
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 level of generic or biosimilar competition and the availability of reimbursement from government and other third-party payors.
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 or 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 products and product candidates.
BRIUMVI, as well as any products that we are able to commercialize in the future, may become subject to unfavorable pricing regulations or third-party payor 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. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. 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 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 product 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 products, even if more of our product candidates obtain marketing approval. 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 be insufficient to cover our costs and may not be made permanent. On April 27, 2023, we received a product-specific J-Code for BRIUMVI (J2329), which became effective July 1, 2023 and is expected to help reduce reluctance by physicians to prescribe BRIUMVI based on reimbursement concerns. However, some third-party payors may nevertheless still require documented proof that patients meet certain eligibility criteria in order to be reimbursed for BRIUMVI.
Our ability to commercialize any product successfully also will depend in part on the extent to which coverage and reimbursement for our products 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 and co-payment 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 restricting coverage and limiting 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, examining the cost effectiveness of drugs in addition to their safety and efficacy. Third-party commercial payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Payors may restrict coverage of some products by using formularies under which only selected drugs are covered, variable co-payments that make drugs that are not preferred by the payor more expensive for patients, and utilization management controls, such as requirements for prior authorization or failure first on another type of treatment. Payors may target higher-priced drugs for imposition of these obstacles to coverage, and consequently our products may be subject to payor-driven restrictions. Additionally, in countries where patients have access to insurance, as in the U.S., insurance co-payment amounts or other benefit limits may represent a barrier to obtaining or continuing use of our products that receive regulatory approval. If we are unable to obtain or maintain coverage, or coverage is reduced in one or more countries, our product sales may be lower than anticipated and our financial condition could be harmed.
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. In the United States, for example, we must offer discounted pricing or rebates on purchases of pharmaceutical products under various federal and state healthcare programs, such as the Medicaid Drug Rebate Program, the 340B drug pricing program and the Medicare Part D Program. We must also report specific prices to government agencies under healthcare programs, such as the Medicaid Drug Rebate Program and Medicare Part B. The calculations necessary to determine the prices reported are complex and the failure to report prices accurately may expose us to penalties.
If we are unable to expand our commercialization operations, we may not be successful in commercializing BRIUMVI or any product candidate, if and when such product candidates are approved, and we may not be able to generate revenue.
Commercialization of pharmaceutical products is an extremely complex and highly capital and resource-intensive process. Even for established companies with existing infrastructure and significantly greater resources than we have, challenges have occurred.
We have made and continue to make significant investments in our commercial organization and infrastructure. We built processes and systems to support the commercialization of BRIUMVI following its commercial launch on January 26, 2023. There are risks involved with establishing our own commercialization capabilities. For example, if we are unable to recruit and retain adequate numbers of effective personnel to support the ongoing commercialization of BRIUMVI, we may not be successful in marketing and selling the product.
Additional factors that may inhibit our efforts to commercialize BRIUMVI and our other product candidates on our own, or through partnership, and generate product revenues include:
● | the costs and time associated with the initial and ongoing training of commercialization personnel on the applicable disease states, products, competitors, and legal and regulatory compliance matters; | |
● | the inability of commercialization personnel to obtain access to physicians or to effectively promote or provide education about BRIUMVI and any future approved products; | |
● | the lack of complementary drugs to be offered by the Company, which may put us at a competitive disadvantage relative to companies with more extensive product lines; | |
● | decisions by third-party payors to deny reimbursement of or delay coverage decisions regarding BRIUMVI or following approval of any product candidates; | |
● | our inability to maintain a healthcare compliance program including effective mechanisms for compliance monitoring; | |
● | our inability to establish and maintain commercial partnerships outside the U.S.; | |
● | our inability, or the inability of a third party with whom we have partnered, to maintain the necessary regulatory approvals required to operate in markets outside of the U.S.; | |
● | the timing of product availability for commercial sale following approval and continued product supply; and | |
● | unforeseen costs and expenses associated with creating a commercialization organization. |
In addition, we have entered into a commercialization agreement, and may enter into additional agreements in the future, that facilitate commercialization of BRIUMVI and/or future products that receive approval in markets outside the U.S. through partnerships. On February 26, 2024, our partner commercially launched BRIUMVI in Germany, the first European market in which BRIUMVI has launched. However, there are also risks with entering into these types of arrangements with third parties to perform sales, marketing and distribution services. For example, we may not be able to enter into such arrangements on terms that are favorable to us. 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 products or product candidates that we develop ourselves. In addition, 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 product or product 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.
We believe there is potential market opportunity for BRIUMVI outside of the U.S., including in the EU. We have entered into a commercialization agreement for the sale of BRIUMVI in certain territories outside the U.S., Canada and Mexico, the commercialization rights for which had been previously retained by TG, thus excluding certain Asian countries subject to previously existing partnerships, and we also may enter into certain collaboration and/or commercialization agreements with third parties in the future to facilitate market expansion. To the extent we do expand into other markets outside of the U.S. in which we are responsible for building and maintaining a commercial infrastructure, we expect to incur significant expenses in establishing an infrastructure to commercialize our drug products. Depending on the expenses incurred, it could have a negative impact on our cash resources.
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 trading pricetesting of our product candidates in human clinical trials, and an even greater risk in connection with the commercialization of BRIUMVI and any other products for which we may receive marketing authorization in the future. If we cannot successfully defend ourselves against claims that BRIUMVI or any of our product candidates caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
● | decreased demand for any products that we may commercialize; | |
● | injury to our reputation and significant negative media attention; | |
● | withdrawal of clinical trial participants; | |
● | significant costs to defend the related litigation, including the risk that any individuals who may face such related litigation may in turn seek to recover from us; | |
● | substantial monetary awards to trial participants or patients; | |
● | loss of revenue; and | |
● | the inability to commercialize any products or product 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. 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.
Any contracts that we enter into with government entities may involve future funding and compliance risks.
Any contracts that we enter into with government entities may involve future funding and compliance risks. Such contracts with government entities are generally subject to risks such as lack of funding and compliance with unique requirements. For example, government contract purchase obligations are typically subject to the availability of funding, which may be eliminated or reduced. In addition, the future volume of products or services purchased by a government customer is often uncertain. Any of our government contracts might not be renewed or might be terminated for convenience with little prior notice. Contracts with government entities typically are subject to procurement laws that include socio-economic, employment practices, environmental protection, recordkeeping and accounting, and other requirements. These contractual and legal requirements could complicate our business and increase our compliance burden. The occurrence of any of these risks could harm our reputation and might have a materially adverse impact on our business operations and our financial position or results of operations.
Risks Related to Our Financial Position and Need for Additional Capital
We have incurred significant operating losses since our inception, and we may incur losses in the future.
Biopharmaceutical drug development is a highly speculative undertaking and involves a substantial degree of risk. We commenced operations in January 2012. To date, our operations have been limited primarily to organizing and staffing our company, business planning, raising capital, developing our technology, identifying potential drug candidates, undertaking pre-clinical studies and clinical trials, commercializing UKONIQ (withdrawn from sale) and launching and commercializing BRIUMVI. We are transitioning from a company with a research and development focus and commercialization capabilities in oncology to a company capable of supporting commercial activities in neurology and immunology in the U.S. and outside the U.S. This transition involves a wide variety of risks, and we may not be successful in such transition.
Since inception, we have focused our efforts and financial resources on clinical trials, manufacturing of our product and product candidates and preparing to support a commercial product. To date, we have financed our operations primarily through public offerings of our common stock to decline, and you could lose all or part of your investment.
To become and remain profitable, we must succeed in developing (or in-licensing) and commercializing our products or product candidates that generate significant revenue. It is uncertain when and if we will generate any significant revenue from the sale of our product or any product candidates, if approved, in the future. Furthermore, no assurance can be given that we will meet revenue projections or guidance with respect to BRIUMVI or our product candidates, if approved. To obtain significant and sustained revenues and meet our revenue projections or guidance, we must succeed, either alone or with others, in (i) obtaining and maintaining regulatory approval for our product and product candidates; and (ii) manufacturing and marketing our product and product candidates. Our ability to generate sustained 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 product and product candidates; | |
● | obtain approval from the FDA and foreign equivalents to market and sell our product and product candidates, and maintain FDA, MHRA and EMA approvals of BRIUMVI for RMS; | |
● | establish and maintain commercial manufacturing capabilities with third parties that are satisfactory to the regulatory authorities, cost effective, and that are capable of providing commercial supply of our product and product candidates; | |
● | expand on our commercialization infrastructure to commercialize BRIUMVI, and/or entering into collaborations with third parties; and | |
● | achieve market acceptance of BRIUMVI and any other products for which we may receive regulatory approval in the medical community and with third-party payors. |
If we are unable to generate significant and sustained revenues, we will not become or remain profitable and we will be unable to continue our operations without continued funding.
While we do not expect to need to raise additional capital, we may need to do so. If we are unable to raise capital, if needed, we may be required to delay, limit, reduce or eliminate some of our drug development programs or commercialization efforts.
The development of pharmaceuticals is capital-intensive. We are also continuing to generate additional clinical data for BRIUMVI to support and potentially expand commercial adoption, including assessing long-term tolerability in an Open-Label Extension of the Phase 3 ULTIMATE I and II trials and Phase 4 clinical studies necessary to satisfy post-approval commitments for regulatory authorities or those undertaken voluntarily by the Company to evaluate the use of BRIUMVI in alternate settings or with alternate methods of administration. Moreover, now that we have launched BRIUMVI, we will need to expend substantial resources on maintaining approvals and continuing commercialization, manufacturing and distribution over the foreseeable future. Additionally, we expect to commence a trial evaluating azer-cel in autoimmune disease in 2024. We are also currently advancing our early-stage drug candidates, TG-1701 and TG-1801 in ongoing Phase 1 studies to identify tolerable and efficacious doses.
The amount and timing of our future funding requirements will depend on many factors, including, but not limited to, the following:
● | the success of the commercialization of BRIUMVI and any other products for which we receive regulatory approval; | |
● | the costs and timing of clinical and commercial manufacturing supply arrangements for each product and product candidate; | |
● | the costs of expanding our sales, distribution, and other commercialization capabilities; | |
● | the costs and timing of regulatory approvals; | |
● | the progress of our clinical trials, including expenses to support the trials and milestone payments that may become payable under our license agreements; | |
● | 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. |
As a result, significant additional funding may 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 could be forced to discontinue product development, reduce or forego commercialization efforts that are required for successful commercialization of BRIUMVI or any of our product candidates and otherwise forego attractive business opportunities. Any additional sources of financing may involve the issuance of our equity securities, which would have a dilutive effect to stockholders. Currently, other than BRIUMVI, our products are investigational and have not been approved by the FDA or any foreign regulatory authority for sale. For the foreseeable future, we will have to fund all our operations and capital expenditures from sales of BRIUMVI, 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 commercial 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 revenues, we expect to finance our cash needs through a combination of public and private equity offerings, debt financings, collaborations, strategic alliances, licensing agreements or other 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, amended and restated in December 2021 and amended on March 31, 2023 (see Note 7 to our condensed 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 products and product candidates or to grant licenses on terms that may not be favorable to us, any dispute withof 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 non-performance byrestricting our licensorsability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. We cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all, which could limit our ability to expand our business operations and could harm our overall business prospects.
Additionally, fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize the applicable productour drug candidates.
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 abilityspending 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, sale 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. We may focus our efforts and resources on potential product candidates or other potential programs that ultimately prove to be unsuccessful. 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 collaboration or marketing agreements for the affected product candidate may be adversely affected. Any loss of our rights under these license agreements would delay or completely terminate its product development efforts for the affected product candidate.
There can be no assurance that we will ever be successful in obtaining an active INDable to identify additional therapeutic opportunities forthese drugs in any other division under whose supervision we may seek to develop our product candidates or thatto develop suitable potential product candidates through internal research programs, which could materially adversely affect our future growth and prospects. If any of the FDA will allowaforementioned 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.
Our level of indebtedness and debt service obligations could adversely affect our financial condition and may make it more difficult for us to continuefund our operations.
In February 2019, we entered into a Loan and Security Agreement, with Hercules Capital, Inc., a Maryland corporation (Hercules), and on December 30, 2021 (the Amendment Closing Date), the Company entered into an Amended and Restated Loan and Security Agreement (the Amended Loan Agreement) with Hercules. Under the Amended Loan Agreement, Hercules increased the aggregate principal amount of the loan, available at the Company’s option, from $60.0 million to $200.0 million. On March 31, 2023 (the First Amendment Effective Date), the Company entered into a First Amendment to the Amended Loan Agreement (the First Amendment) with Hercules. An advance of $25.0 million was drawn at the First Amendment Effective Date (see Note 7 to our condensed consolidated financial statements for more information). We have the option to request additional loan advances in an aggregate principal amount of up to $60.0 million under the First Amendment.
All obligations under the Amended Loan Agreement, as amended, are secured by substantially all 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 Amended Loan Agreement, as amended, 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 Amended Loan Agreement, as amended, 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 the amounts due. In the event of an acceleration of amounts due under the Amended Loan Agreement, as amended, 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 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.
The Amended Loan Agreement, as amended, 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.
Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail.
On March 10, 2023, the Federal Deposit Insurance Corporation (FDIC) announced that Silicon Valley Bank had been closed by the California Department of Financial Protection and Innovation, and on March 12, 2023, Signature Bank was closed by the New York State Department of Financial Services, and the FDIC was named receiver. Although we did not maintain any bank accounts with Silicon Valley Bank or Signature Bank, we regularly maintain cash balances at third-party financial institutions in excess of the FDIC insurance limit. Any failure of a depository institution to return any of our product candidates in those divisions where we maintain an active IND.
Risks Related to successfully develop marketable products. Our pharmaceutical development methods are unprovenDrug Development and may not lead to commercially viable products for any of several reasons.
If we are unable to develop, or receiveobtain and maintain regulatory approval for orour product and product candidates and ultimately cannot successfully commercialize anyour product or product candidates, or experience significant delays in doing so, our business will be materially harmed.
Our ability to generate revenues from product sales will depend largely on the successful commercialization of BRIUMVI. Each of our product candidates we will not be able to generate product revenues. Even if we are able to developrequire additional non-clinical or receiveclinical development, regulatory approval, for or successfully commercialize anyand sufficient clinical and commercial supply. The success of our development programs and achievement of regulatory approval of our product candidates will depend on several factors, including, among others, the following:
● | successful completion of our clinical programs with positive results that support a finding of effectiveness and an acceptable safety profile of our product candidates in the intended populations within the timeframes we have projected; | |
● | Investigational New Drugs (INDs) and clinical trial applications (CTAs), being cleared/approved such that our product candidates can commence clinical trials; | |
● | successful initiation and completion of preclinical studies and successful initiation of, enrollment in, and completion of clinical trials; | |
● | sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials; | |
● | receipt of regulatory approvals from applicable regulatory authorities for our product candidates; | |
● | establishing commercially viable arrangements with third-party manufacturers for clinical supply and commercial manufacturing; and | |
● | obtaining and maintaining patent and trade secret protection or regulatory exclusivity for our product candidates. |
If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays in our clinical programs and regulatory submission timelines and may not be able to gain market acceptanceobtain regulatory approval for our product candidates and future products and may never become profitable.
Because the results of preclinical studies and early clinical trials are not necessarily predictive of future results, any product candidate we advance into clinical trials may not have favorable results in later clinical trials if any, or receive regulatory approval.
Pharmaceutical development has inherent risk. Werisks. The outcome of preclinical 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, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval. Once a product candidate has displayed sufficient preclinical 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 diverse populations for their target indications before we can seek regulatory approvals for their commercial sale. SuccessMany 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 other product candidates. Moreover, 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 sufferexperience significant setbacks in advanced clinical trials, even after earlier clinical trials have shown promising results. In addition, thereThere is typically an extremely high rate of failure of pharmaceutical candidates proceeding through clinical trials.
Individually reported outcomes of patients treated in clinical trials may not be representative of the entire population of treated patients in such studies. Further,In addition, larger scale Phase III3 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 study’s outcome of the study or the opinion of the validity of the study results by applicable regulatory agencies. Early
From time to time, we may publicly disclose top-line or preliminary data from our clinical trialtrials, which is based on a preliminary analysis of available data, and the results from interim analysisand related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of such data, and we may not have received or had the opportunity to fully and carefully evaluate all data from the review ofparticular study or trial, including all endpoints and safety data. As a Data Safety Monitoring Board (DSMB)result, top-line or similar safety committeepreliminary results that we report may not be reflective of thediffer from future results of the entiresame studies, or different conclusions or considerations may qualify such results once additional data have been received and fully evaluated. Top-line or preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the topline, interim, or preliminary data we previously published. When providing top-line results, we may disclose the primary endpoint of a study when completed. Additionally, manybefore all secondary endpoints have been fully analyzed. A positive primary endpoint does not translate to all, or any, secondary endpoints being met. As a result, top-line and preliminary data should be viewed with caution until the final data are available, including data from the full safety analysis and the final analysis of all endpoints.
Further, from time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. For example, time-to-event based endpoints such as duration of response (DOR) and progression-free survival (PFS), and continuously observed data such as annualized relapse rate (ARR) have the potential to change with longer follow-up. In addition, as patients continue on therapy, there can be no assurance given that the final safety data from studies, once fully analyzed, will be consistent with prior safety data presented, will be differentiated from other similar agents in the same class, will support continued development, or will be favorable enough to support regulatory approvals for the indications studied. Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. The information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and regulators or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure. If the interim, top-line or preliminary data that we report differ from final results, or if others, including regulatory authorities, disagree with the conclusions we have reached, our ability to obtain approval for, or successfully commercialize, our product or product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.
Many of the results reported in our early clinical trials rely on local investigator assessed safety andinvestigator-assessed efficacy outcomes which may differ frombe subject to greater variability or subjectivity than results assessed in a blinded, independent, centrally reviewed manner, often required of later phase, adequate and well controlled registration directedwell-controlled registration-directed clinical trials which may be undertaken at a later date.trials. If the results from expansion cohorts or laterour registration-directed trials are different from thosethe results found in the earlier studies, of TG-1101 and TGR-1202, we may need to terminate or revise our clinical development plan, which could extend the time for conducting our development program and could have a material adverse effect on our business. Our IRAK4, BET,
Clinical drug development involves a lengthy and anti-GITR programs are allexpensive process, with an uncertain outcome. We may incur additional costs or experience delays in pre-clinicalcompleting, or ultimately be unable to complete, the development and no assurance can be given that they will advance into clinical development. Ifcommercialization of our product candidates.
Before obtaining marketing approval from regulatory authorities for the results from additionalsale of any product candidate, we must complete pre-clinical studies or earlyand then conduct extensive clinical trials differ from those foundto demonstrate the safety and efficacy of our product candidates in earlier studies,humans. Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome. It is impossible to predict when or if our clinical development plansproduct candidates will prove effective and timelines for this program could be adversely affected which couldsafe in humans, will receive regulatory approval or will have a material adverse effect on our business. Many drugs fail in the early stages of clinical development fordifferentiated safety and tolerability issues, accordinglyprofile. A failure of one or more clinical trials can occur at any stage of testing. Accordingly, our ongoing trials and future clinical trials may not be successful. Even if our pre-clinical assets advance into clinical development, no assurancetrials produce positive results, there can be madeno guarantee that a safethe positive outcomes will be replicated in future studies either within the same indication as previously evaluated or in alternate indications and efficacious dose can be found.
Successful completion of our clinical trial programs,trials is a prerequisite to submitting a New Drug Application (NDA) or if sucha Biologics License Application (BLA) to the FDA and a Marketing Authorization Application (MAA) to the EMA for each product candidate and, consequently, the ultimate approval and commercial marketing of our product candidates. We do not know whether any of our ongoing or future clinical trials take longer to complete than we project,for our ability to execute our current business strategyproduct candidates will be adversely affected.completed on schedule, if at all.
Whether or not and how quickly we complete clinical trials is dependentdepends 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 at which 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 unforeseen events, such as the COVID-19 pandemic, that could delay or prevent our ability to complete current clinical trials, initiate new trials, receive marketing approval or commercialize our product 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; | |
● | the FDA or other regulatory authorities or institutional review boards (IRBs) or ethics committees (ECs) may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site or in a country; we may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and prospective clinical research organizations (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 regulatory 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 regulatory authorities or IRBs or ECs 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 product candidates may be greater than we anticipate; | |
● | the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate, including, without limitation, as a result of disruptions to our supply chains caused by global health crises, such as the COVID-19 pandemic, international conflicts such as the Russian invasion of Ukraine or the Israel-Hamas war, economic instability, or natural disasters; | |
● | regulatory authorities may revise the requirements applicable to our product candidates, or such requirements may not be as we anticipate; and | |
● | our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulatory authorities, IRBs or ECs to suspend or terminate the trials, or reports may arise from pre-clinical or clinical testing of other therapies in the same or a similar class that raise safety or efficacy concerns about our product candidates. |
We also 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 Data and Safety Monitoring Board (DSMB) for such trial or by the FDA or other regulatory authorities. Such regulatory 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. In addition to the FDA, the DSMB for our clinical trials may recommend modification to the study design or closure of the study entirely based on the DSMB’s interpretation of the benefit-risk of the study. While we develop charters that guide the nature of the DSMB 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 the ongoing study, this does not mean the safety profile reported in the study 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 product candidates.
Negative or inconclusive results from the clinical trials we conduct, unanticipated adverse medical events, or changes in regulatory policy could cause us to have to delay, 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 product candidates; | |
● | not obtain marketing approval at all; | |
● | obtain marketing approval in some countries and not others; | |
● | obtain approval for indications or patient populations that are not as broad as intended or desired; | |
● | be subject to post-marketing requirements or post-marketing commitments; | |
● | be subject to increased pricing pressure; or | |
● | have the drug removed from the market after obtaining marketing approval. |
In addition, changes in regulatory policy could cause us to have to repeat or conduct additional clinical trials or change our clinical development strategy. For example, in December 2022, with the passage of Food and Drug Omnibus Reform Act, Congress required sponsors to develop and submit a diversity action plan for each Phase 3 clinical trial or any other “pivotal study” of a new drug or biological product. These plans are meant to encourage the enrollment of more diverse patient populations in late-stage clinical trials of FDA-regulated products. If we are not able to adhere to these new requirements, our ability to conduct clinical trials may be delayed or halted. Our drug development costs will also increase if we experience delays in testing or regulatory approvals. 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 expectedlower-than-expected event rates. TheySignificant clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates. Any delays in our pre-clinical or future clinical development programs may harm our business, financial condition and prospects significantly. We may also incur additional costs if enrollment is increased in order to achieve the desired number of events. If we experience delays in identifying and contracting with sites and/or in patient enrollment in our clinical trial programs, we may incur additional costs and delays in our development programs, and may not be able to completeincreased.
In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive 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 FDA’s acceptance of such data, may be jeopardized.
Biologics carry unique risks and uncertainties, which could have a cost-effective or timely manner.negative impact on our business.
The successful development, manufacturing and sale of biologics is a long, expensive and uncertain process. There are unique risks and uncertainties with biologics. For example, access to and supply of necessary biological materials, such as cell lines, may be limited, and governmental regulations restrict access to and regulate the transport and use of such materials. In addition, conducting multi-national studies adds another levelthe development, manufacturing and sale of complexity and risk. We arebiologics is subject to events affecting countries outsideregulations that are often more complex and extensive than the U.S. Negative or inconclusive results from the clinical trials we conduct or unanticipated adverse medical events could cause usregulations applicable to have to repeat or terminate the clinical trials.
Our product or prevent the receipt of the required approvals or “fast track” or “priority review” status to commercialize our product candidates.
Unexpected or limit their commercial potential.
As is the case with all drugs, it is likely that there will be side effects associated with the use of our productdrug 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 discontinue an ongoing trial 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 treatmentability of enrolled patients to complete the trial or result in potential product liability claims. In addition, data may emerge, from confirmatory or other post-marketing studies, or from pharmacovigilance reporting, as products are used more widely, or for a longer duration, after approval that may affect the commercial potential of our products. 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 indications for which we intend to seek product approval in humans,compound. Further, early clinical trials by their nature utilize a small sample of the potential patient population. With a limited number of patients and we currently do not know the extent that adverse events, if any, will be observed in patients who receive anylimited duration of exposure, rare and serious side effects of our product candidates. To date, clinical trials using TG-1101 and TGR-1202 have demonstrateddrug candidates may only be uncovered when a toxicity profile that was deemed acceptable by the investigators performing such studies. Such interpretation may not be shared by future investigators or by the FDA and in the casesignificantly larger number ofTG-1101 and TGR-1202, even if deemed acceptable for oncology applications, it may not be acceptable for diseases outside the oncology setting, and likewise for any other product candidates we may develop. Additionally, the severity, duration and incidence of adverse events may increase in larger study populations. With respect to both TG-1101 and TGR-1202, the toxicity when manufactured under different conditions and in different formulations is not known, and it is possible that additional and/or different adverse events may appear upon the human use of those formulations and those adverse events may arise with greater frequency, intensity and duration than in the current formulation. Should the Company not be able to adequately demonstrate analytical comparability between drug product manufactured under different conditions, the introduction of such new drug product into ongoing trials also has the potential to confound the interpretation of the results or complicate the statistical analysis of such trial. Further, with respect to TGR-1202, although several hundred patients have been dosed amongst all ongoing TGR-1202 studies, the full adverse effect profile of TGR-1202 is not known. It is also unknown as additional patients are exposed for longer durations to TGR-1202, whether greater frequency and/the drug candidate in Phase 3 or severity of adverse events are likely to occur. Common toxicities of other drugs inregistration-directed trials or when the same class as TGR-1202 include high levels of liver toxicity, infections and colitis,drug candidate is on the latter of which notably has presented with later onset, with incidence increasing with duration of exposure. To date, the incidence of these events has been limited for TGR-1202, however no assurance can be given that this safety and tolerability profile will continue to be demonstrated in the future as higher doses, longer durations of exposure, and multiple drug combinations are explored.market. 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.
Any products or product candidates we may advance through clinical development there is an inherent risk of drug-drug interactions between combination agentsare subject to extensive regulation, which may affect each component’s individual pharmacologic propertiescan be costly and time consuming, cause unanticipated delays or prevent the overall efficacy and safetyreceipt of the combination regimen. Both TG-1101required approvals.
The clinical development, manufacturing, labeling, packaging, storage, record-keeping, advertising, promotion, import, export, marketing and TGR-1202 are being evaluated in combination together, as well as with a variety of other active anti-cancer agents, which may cause unforeseen toxicity, or impact the severity, duration,distribution, and incidence of adverse events observed compared to those seen in the single agent studies of these agents. Further, with multi-drug combinations, it is often difficult to interpret or properly assign attribution of anpharmacovigilance and 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 developmentreporting 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.
The FDA and controls and its proposed clinical trial protocol for our product candidates.
Furthermore, some of our clinical trials may be extended, delayedconducted as open-label studies, meaning that trial participants, investigators, site staff, some employees of our CROs, 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, even when our 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 terminated,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 in evaluating (among other things) clinical data and safety and effectiveness considerations prior to making its final decision. These issues could cause a delay in the FDA’s review, lead the FDA to deny approval, or lead the Company to withdraw a regulatory application.
Other reasons that the FDA or regulatory authorities around the world may delay, limit or deny approval of a product candidate, include:
● | we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is tolerable 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 or the patient population, is potentially different from that of 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 and/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 marketing authorization submission to obtain regulatory approval in the United States or elsewhere; | |
● | the FDA or comparable foreign regulatory authorities may identify issues related to 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; during the course of review, the FDA or foreign regulatory authorities may raise issues and request or require additional preclinical, clinical, chemistry, manufacturing, and control (CMC), or other data and information, and the development and provision of these data and information may be time consuming. We may not be able to generate the data within the time period necessary to obtain approval within the established regulatory review timelines, such as by a Prescription Drug User Fee Act (PDUFA) goal date or at all to satisfy the FDA or foreign regulatory authorities; | |
● | the approval processes of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval; or | |
● | interruptions or delays in the operations of the FDA and foreign regulatory authorities as a result of global health, inadequate government funding, or economic crises, such as the COVID-19 pandemic, international conflict, or national disasters may negatively impact review, inspection, and approval timelines. |
Even if we succeed in obtaining regulatory approval for a product candidate, the FDA may require post-marketing studies, including additional clinical trials such as those necessary to assess drug interactions or activity of a product in specific populations, which may be costly. The outcomes of post-marketing studies may impact product labeling and therefore, there can be no guarantee that the product attributes contained in the initial prescribing information will be maintained as future studies produce data. This includes, without limitation, additional results from studies evaluating drug-drug interactions and patients with certain comorbidities that may restrict the use of an approved product in select populations or introduce dose modifications or contraindicated concomitant medications that have the potential to impact the utility of a product or its perceived product profile among prescribers. Post-marketing studies may also lead to the introduction of new warnings in the product prescribing information. The FDA may require adoption of a REMS program requiring prescriber training or a post-marketing registry or may restrict the marketing and dissemination of our products. Finally, failure to complete a post-marketing commitment by the applicable post-marketing milestone date may lead to withdrawal of the product or indication. Any requirements to conduct post-approval studies or fulfill special post-approval requirements could impact our ability to commercialize our product or product candidates and increase our costs.
A Breakthrough Therapy or Fast Track designation by the FDA may not actually lead to a faster development or regulatory review or approval process.
We may seek Breakthrough Therapy or Fast Track designation for some of our 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 an unmet medical need for this condition, the Sponsor may apply for Fast Track designation or Breakthrough Therapy designation, the latter of which has more significant requirements. The FDA has broad discretion whether or not to grant these designations, so even if we believe a particular drug candidate is eligible for such a designation, we cannot be sure that the FDA would decide to grant it. Even if we receive Breakthrough Therapy or Fast Track designation for a drug candidate, we may not experience a faster development process, review or approval compared to conventional FDA procedures. A drug that receives Fast Track designation is eligible for more frequent interactions with the FDA, priority review if relevant criteria are met, and rolling submission of the BLA or NDA. Even if rolling review is allowed, there is no guarantee that the FDA will have commenced or completed review of the BLA or NDA modules submitted earlier in the rolling review process. Neither Breakthrough Therapy nor Fast Track designation guarantees Priority Review of an NDA or BLA application.
We may seek orphan drug designation for some of our drug candidates. However, we may be unsuccessful in obtaining or may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.
Regulatory authorities in some jurisdictions, including the United States, the European Union, and the United Kingdom, 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. Orphan drug designations are required to be maintained through annual reporting and are subject to re-evaluation. Based on the evolving data and development plans for our product candidates and changing incidence and prevalence rates for our intended indications, there can be no guarantee that we will be able to successfully maintain orphan drug designations that we have for certain of our drug candidates or that we will be successful in obtaining orphan designation for other drug candidates in the future.
Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes FDA or EMA from approving another marketing application for the same drug or biologic for that time period. 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 exercises its authority to revoke orphan drug designation, which it may do on a variety of grounds, including that the request contained an untrue statement of material fact or omitted material information, or that the drug in fact was not eligible for orphan drug designation. 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 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 or obtain orphan drug exclusivity. In addition, the U.S. Orphan Drug Act may be subject to amendments that could reduce the period of marketing exclusivity or change the qualifications for orphan drug designation, which could adversely impact our products or product candidates that have or may be eligible for orphan drug designation.
We are conducting clinical trials and anticipate conducting additional clinical trials for our product and product candidates at sites outside the United States, and the FDA may not accept data from trials conducted in such locations or clinical trial activities in such locations may be impacted by political conditions, including international conflict.
Many of our clinical trials utilize international clinical research sites. We work with what we believe are reputable CROs and clinical research sites in conducting our studies internationally. Nevertheless, there can be heightened challenges to monitoring and oversight of global clinical trials and sponsors are subject to the risk that fraud, misconduct, incompetence, unexpected patient variability and other issues affecting the reliability, quality, and outcome of studies. The geographic variability of the COVID-19 pandemic also introduces increased risk in the conduct of clinical research in certain countries and territories where vaccination rates and available standard of care anti-viral therapy varies significantly. Such problems, if they were to occur, could negatively impact trial results, and depending on the circumstances and scope of concerns could potentially even prevent a trial from being useful or acceptable for regulatory approval. If such events were to occur with respect to any of our trials (and in particular with respect to registration-directed studies), they would have a substantial negative impact on our business.
In addition, our clinical studies with sites outside the United States may be adversely impacted by international conflict. For example, in February 2022, Russia initiated a full-scale military invasion of Ukraine. In one or both countries, as well as neighboring countries that may be impacted by this conflict (e.g. Poland, Slovakia, Belarus, Georgia), we have clinical trial sites terminate for any reason, we may experience the loss of follow-up information on patients enrolled in our ongoingRMS and/or oncology programs. While no clinical trials unless we are ableactively enrolling patients in these territories, there are a number of trial subjects in long-term treatment and follow-up. The political and physical conditions in Russia and Ukraine have disrupted our ability to transfer the care of those patientssupply investigational drug product to another qualified clinical trial site. In addition, principal investigators forimpacted sites; impacted patients’ ability to partake in our clinical trials may serve as scientific advisors or consultantsand our ability to usgather data on those patients, including long-term follow-up data; and resulted in suspension of clinical trial activities at impacted sites. Furthermore, the United States and its European allies have imposed significant sanctions against Russia and Belarus, including regional embargoes, full blocking sanctions, and other restrictions targeting major Russian financial institutions. Specifically, such sanctions have included, among other things, a prohibition on doing business with certain Russian companies, officials, and oligarchs; a commitment by certain countries and the European Union to remove selected Russian banks from timethe Society for Worldwide Interbank Financial Telecommunications (SWIFT) electronic banking network that connects banks globally; and restrictive measures 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,prevent the integrityRussian Central Bank from undermining the impact of the data generated atsanctions. Our ability to conduct clinical trials in Russia, Belarus, Ukraine and elsewhere in the region may also become restricted under applicable clinical trial site may be jeopardized.
Approval of one of our product candidates arein the United States would not assure approval of that candidate in foreign jurisdictions.
We intend to seek additional product approvals in certain countries outside of the United States. 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 the same indications for use for the product candidate, or may require additional evidence for approval. The time required to obtain approval in other countries might differ from that required to obtain FDA 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 a lengthy and challenging process with risks similar or identical to the risks associated with the FDA approval discussed above. Therefore, we cannot guarantee that we, or future collaborators, will obtain approvals of our product and 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 and product candidates and may negatively impact the regulatory process in other countries. Furthermore, if we obtain regulatory approval for a product or 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.
We have product candidates still under development and are also engaging manufacturing partners in commercial manufacturing activities, and as such clinical and commercial manufacturing site additions and process improvements implemented in the production of thoseour product and product candidates may affect their ultimate activitytimely delivery or function.quality.
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 a contract manufacturing relationship for the commercial supply of BRIUMVI with Samsung Biologics. As with any supply program, obtaining materials of sufficient quality and quantity to meet the requirements of the market demand for BRIUMVI and our development programs cannot be guaranteed and we cannot ensure that we will be successful in these endeavors.
To the extent possible and commercially practicable, we plan to develop back-up strategies for raw materials, manufacturing and testing services for our commercial products. Given the long lead times and cost of establishing additional commercial manufacturing sites we expect that we will rely on single contract manufacturers to produce our commercial products under current Good Manufacturing Practice, or cGMP, regulations for many years. Our commercial manufacturing partners 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 our development programs and 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, if applicable, and corresponding state agencies to ensure strict compliance with cGMP requirements and other state and federal regulations. Where manufactured products are globally registered, similar regulatory inspection burdens are applicable from each and every marketed territory. If our manufacturing partners are inspected and 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 either before or after commercialization, the FDA and corresponding foreign regulatory agencies may need to approve these new manufacturers in advance, which will involve testing, regulatory submissions, and additional inspections to ensure compliance with FDA and other 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.
Some of our product and 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 or product candidates, which may affect the safety and efficacy of the products. NoIt 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.
Further, no assurance can be given that the material manufactured from any of thefuture optimized processes, if any, for BRIUMVI or any of our product candidates will perform comparably to the product or product candidates as manufactured to date and usedwhich could result in currently available pre-clinicalan unexpected safety or efficacy outcome as compared to the data andpublished or in early clinical trials reported in this orpresented to date. Similarly, following each round of process improvements, if any, previous filing. Additionally,for any of our drug candidates, future clinical trial results conducted with the new material will be subject to uncertainty related to the same leveleffects, if any, of uncertainty if, following such trials,those additional process improvements that were made.
Risks Related to Governmental Regulation of Pharmaceutical Industry and Legal Compliance Matters
We are made. subject to new legislation, regulatory proposals and third-party payor initiatives that may increase our costs of compliance and adversely affect our ability to market our products, obtain collaborators and raise capital.
In addition, weboth the United States and certain foreign countries, there have engagedbeen a secondary manufacturer for TG-1101number of legislative and regulatory changes or proposed changes to meetthe healthcare system, many of which have focused on prescription drug pricing and lowering overall healthcare costs, that could impact our current clinicalability to sell our products profitably and support future commercial needsinnovation. We expect prescription drug pricing and anticipate engaging additional manufacturing sources for TGR-1202other healthcare costs to meet expanded clinical trialcontinue to be subject to intense political and commercial needs. While material produced from this secondary manufacturer for TG-1101 hassocial pressures on a global basis.
In the United States, the President, federal and state legislatures, health agencies and third-party payors continue to date demonstrated acceptable comparability, no assurance can be given that any additional manufacturers will be successful or that material manufacturedfocus on containing the cost of healthcare and addressing public concern over access and affordability of prescription drugs. The Patient Protection and Affordable Care Act, as amended by the additionalHealth Care and Education Reconciliation Act of 2010 (collectively, the ACA) was enacted in 2010 and made significant changes to the U.S. healthcare system. ACA changes included expanding healthcare coverage through Medicaid expansion and implementation of the individual health insurance mandate; changing coverage and reimbursement of drug products under government healthcare programs; imposing an annual fee on manufacturers will perform comparably to TG-1101 or TGR-1202 as manufactured to dateof branded drugs; and used in currently available pre-clinical dataexpanding government enforcement authority. Although the ACA has been the subject of a number of legislative and or in early clinical trials reported in this or any previous filing, orlitigation challenges since it passed, it is expected that the relevantBiden Administration will seek to strengthen and expand the ACA. We cannot predict what effect, if any, further changes to the ACA would have on our business.
Beyond the ACA, there has been increasing legislative, regulatory agencies will agree with our interpretation of comparability. If a secondary manufacturer is not successful in replicating the product or experiences delays, or if regulatory authorities impose unforeseen requirementsand enforcement interest with respect to prescription drug pricing practices. Proposals that may garner bipartisan legislative support or become legislation through reconciliation include adding a cap on out-of-pocket spending under Medicare Part D, authorizing Medicare to negotiate certain drugs covered by Medicare Parts D and B directly with manufacturers, and imposing limits on increases in drug prices. In addition, President Biden may take executive action to introduce new drug pricing models and other drug pricing initiatives. The Biden Administration also may propose substantial changes to the U.S. healthcare system, including expanding government-funded health insurance options. We are uncertain of the impact or outcome of potential Executive Orders, rescission of rules and policy statements, or new legislation, especially any relative impact on the healthcare regulatory and policy landscape, or the impact they may have on our business. We expect drug pricing will continue to be a focus of the Biden Administration. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product comparabilityaccess and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from multiple manufacturing sources,other countries and bulk purchasing.
There have been several recent U.S. Congressional inquiries and proposed and enacted legislation designed to bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, limit price increases, evaluate the relationship between pricing and manufacturer patient programs, and reform government health care program reimbursement methodologies for prescription drugs. For example, the Bipartisan Budget Act of 2018 (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% effective as of January 1, 2019, ultimately increasing the liability for brand drug manufacturers. We expect that health care reform measures that may be adopted in the future, may result in more rigorous coverage criteria, increased manufactured financial liability and additional downward pressure on the price that we may receive for any of our product candidates, if approved. Any reduction in reimbursement from Medicare or other government health care programs may result in a similar reduction in payments from private payors.
There continue to be efforts to lower drug prices through increased competition, with policy proposals seeking to facilitate generic and biosimilar approval and marketing authorization. For example, in 2018, the FDA announced the Biosimilar Action Plan and sought input on how the agency can best facilitate greater availability of biosimilar products, including input on whether changes to an approved biologic (e.g., a new indication) would be protected by the remainder of the statutory 12-year exclusivity period (commonly referred to as umbrella exclusivity). In the event there is a modification to the biologic exclusivity period or other steps taken to facilitate biosimilar or generic approvals, we could experience delaysbiosimilar/generic competition of any products for which we receive FDA approval at an earlier time than currently anticipated.
Most recently, on August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the Act), which, among other provisions, included several measures intended to lower the cost of prescription drugs and related healthcare reforms. Specifically, the Act authorizes and directs the Department of Health and Human Services (DHHS) to set drug price caps for certain high-cost Medicare Part B and Part D qualified drugs, with the initial list of drugs selected on August 29, 2023, and the first year of maximum price applicability to begin in 2026. On October 3, 2023, the Centers for Medicare & Medicaid Services announced that all manufacturers of the initially selected drugs opted to participate. The Act further authorizes the DHHS to penalize pharmaceutical manufacturers that increase the price of certain Medicare Part B and Part D drugs faster than the rate of inflation. Finally, the Act creates significant changes to the Medicare Part D benefit design by capping Part D beneficiaries’ annual out-of-pocket spending at $2,000 beginning in 2025. We cannot be sure whether additional or related legislation or rulemaking will be issued or enacted, or what impact, if any, such changes will have on the profitability of any of our drug candidates, if approved for commercial use, in the future.
At the state level, individual states are experiencing significant economic pressure within their respective Medicaid programs and responding to public concern over the cost of healthcare. States, including California, Florida, Nevada and Maine, among others, have responded to these pressures with a range of legislative enactments and policy proposals designed to control prescription drug prices by, for example, allowing importation of pharmaceutical products from jurisdictions outside the U.S., imposing price controls on state drug purchases, consolidating state drug purchasing to a single purchaser, and imposing transparency measures around prescription drug prices and marketing costs. These measures, which vary by state, could reduce the ultimate demand for our products, if approved, or put pressure on our product pricing.
In addition, other legislative changes have been adopted that could have an adverse effect upon, and could prevent, our products’ or product candidates’ commercial success. More broadly, the Budget Control Act of 2011, as amended, or the Budget Control Act, includes provisions intended to reduce the federal deficit, including reductions in Medicare payments to providers through 2030 (except May 1, 2020 to December 31, 2020). Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs, or any significant taxes or fees imposed as part of any broader deficit reduction effort or legislative replacement to the Budget Control Act, or otherwise, could have an adverse impact on our anticipated product revenues.
Furthermore, legislative and regulatory proposals have been made to expand post-approval requirements, make changes the Orphan Drug Act and related guidance, reform the 340B Drug Pricing Program, and restrict sales and promotional activities for drugs. With respect to the 340B Drug Pricing Program, recent legislative proposals, as well as judicial challenges to DHHS’s policies, present both opportunities and challenges for drug manufacturers participating in the program. Further, 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.
In many international markets, including the European Union, the government regulates prescription drug prices, patient access, and/or reimbursement levels to control the biopharmaceutical budget of their government-sponsored healthcare system. The European Union and some individual countries have announced or implemented measures and may in the future implement new or additional measures, to reduce biopharmaceutical costs to contain the overall level of healthcare expenditures. These measures vary by country and may include, among other things, non-coverage decisions, patient access restrictions, international price referencing, mandatory discounts or rebates, and cross-border sales of prescription drugs. These measures may adversely affect our ability to generate revenues or commercialize our product or product candidates in certain international markets.
There likely will continue to be pressure on prescription drug prices globally and legislative and regulatory proposals, including at the federal and state levels in the U.S., directed at broadening the availability of health care and containing or lowering the cost of health care products and services. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, health insurance companies, managed care organizations and other payors of health care services to contain or reduce costs of health care may adversely affect, among other things:
● | 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.
Our relationships with customers and third-party payors are 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.
With the FDA, EMA and MHRA approval of BRIUMVI, we are 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 and third-party payors play a primary role in the recommendation and prescription of any drug candidates for which we obtain marketing approval. Our past, current and future relationships, arrangements and interactions with these professionals and entities, as well as with patients and patient advocacy organizations 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 product and product 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 or the Federal Food, Drug, and Cosmetic Act (FDCA) constitutes a false or fraudulent claim for purposes of the False Claims Act; | |
● | the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering 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 Physician Payments Sunshine Act under section 6002 of the Affordable Care Act requires manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid or the Children’s Health Insurance Program to monitor and report certain information related to payments and other transfers of value to and the ownership and investment interests of physicians and certain other healthcare providers as well as teaching hospitals to the federal government for redisclosure to the public; | |
● | 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; | |
● | a wide range of federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers including those related to privacy; | |
● | the FDCA and its implementing regulations, which among other things, strictly regulate drug product marketing and prohibit manufacturers from promotion and marketing of products prior to approval or for uses inconsistent with the FDA-required labeling; | |
● | federal laws, including the Medicaid Drug Rebate Program, that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare programs; | |
● | the Drug Supply Chain Security Act (DSCSA), which imposes obligations on entities in the commercial product supply chain, including manufacturers, to identify and track prescription drugs as they are distributed in the U.S.; and | |
● | state law equivalents of some of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers, state transparency laws, state laws limiting interactions between pharmaceutical manufacturers and members of the healthcare industry, and state laws 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 federal laws, thus complicating compliance efforts. |
As we continue commercialization of BRIUMVI, we are taking steps to provide patient support services to help patients access the product. Our patient support programs are administered in conjunction with a patient support program vendor and other third parties. There has been heightened governmental scrutiny over the scope of patient support programs and the manner in which drug manufacturers and their vendors operate such programs. We cannot ensure that our compliance controls, policies, and procedures will be sufficient to protect against acts of our employees, business partners or vendors that may violate the laws, regulations, or evolving government guidance on patient support programs. A government investigation, regardless of its outcome, could impact our business practices, harm our reputation, divert attention of management, increase our expenses and reduce availability of assistance to patients. If we or our vendors are deemed to fail to comply with relevant laws, regulations or government guidance in the operation of these programs, we could be subject to damages, fines, penalties or other criminal, civil or administrative sanctions or enforcement actions.
Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations involves 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. The compliance and enforcement landscape, and related risk, is informed by government enforcement precedent and settlement history, Advisory Opinions, and Special Fraud Alerts. Our approach to compliance may evolve over time in light of these types of developments. Additionally, the potential safe harbors available under the federal Anti-Kickback Statute are subject to change through legislative and regulatory action, and we may decide to adjust our business practices or be subject to heightened scrutiny as a result. If our operations, including 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 we violate applicable data privacy and security laws, we may be subject to penalties, including civil and criminal penalties, damages, fines, reputation harm and the curtailment or restructuring of our operations.
We may be subject to privacy and security laws in the various jurisdictions in which we operate, obtain or store personal information. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues with the potential to affect our business.
Within the United States, various federal and state laws regulate the privacy and security of personal information and so may affect our business operations. For example, at the federal level, our operations may be affected by the data privacy and security provisions of HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations. HIPAA affects the ability of healthcare providers and other entities with which we may interact, including clinical development.trial sites, to disclose patient health information to us. Under Section 5(a) of the Federal Trade Commission Act (FTCA), the Federal Trade Commission (FTC) expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Medical data is considered sensitive data that merits stronger safeguards. States may also impose requirements. For example, the California Consumer Privacy Act (CCPA), went into effect in January 2020 creating data privacy obligations for covered companies and providing privacy rights to California residents, including the right to opt out of certain disclosures of their information. Colorado, Connecticut, Utah, Virginia and Iowa have also enacted data privacy statutes, and both California and Colorado are also undergoing or have undergone rulemaking procedures to finalize regulatory regimes to supplement their privacy statutes.
Numerous other jurisdictions regulate the privacy and security of personally identifiable data. For example, the processing of personal data in the European Economic Area (EEA), is subject to the General Data Protection Regulation (GDPR), which took effect in May 2018. The GDPR increases obligations with respect to clinical trials conducted in the EEA, such as in relation to the provision of fair processing notices, exercising data subject rights and reporting certain data breaches to regulators and affected individuals, as well as how we document our relationships with third parties that process GDPR-covered personal data on our behalf. The GDPR also increases the scrutiny applied to transfers of personal data from the EEA (including from clinical trial sites in the EEA) to countries that are considered by the EC to lack an adequate level of data protection, such as the United States. In July 2020, the Court of Justice of the European Union invalidated the EU-U.S. Privacy Shield framework, one of the mechanisms used to legitimize the transfer of personal data from the EEA to the U.S., which decision may lead to increased scrutiny on data transfers from the EEA to the U.S. generally and increase our costs of compliance with data privacy legislation.
If our operations are found to be in violation of any data privacy and security laws, rules or regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations, which could adversely affect our ability to operate our business and our financial results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, rules or regulations, we cannot be certain that our program will address all areas of potential exposure and the risks in this area cannot be entirely eliminated, particularly because the requirements and government interpretations of the requirements in this space are constantly evolving. Any action against us for violation of these laws, rules or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business, as well as damage our business or reputation. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security, fraud and reporting laws may prove costly.
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 marketingdistributor arrangements. In those countries where we have limited experience in operating subsidiaries and in reviewing equity investees, we will be subject to additional risks related to complying with a wide variety of national and local laws, including restrictions on the import and export of certain intermediates, drugs, technologies and multiple and possibly overlapping tax structures.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 the Company isand other government agencies, we are exposed to liability risks under the Foreign Corrupt Practices Act (FCPA) or similar anti-bribery laws.
Any product for which we obtain marketing approval, including BRIUMVI, 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 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, EMA and comparable regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration requirements, 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 or other advisory actions; | |
● | request for withdrawal of the products from the market; | |
● | refusal to approve pending applications or supplements to approved applications that we or our subsidiaries submit; | |
● | recalls; | |
● | suspension or termination of ongoing clinical trials; | |
● | fines, restitutions, or disgorgement of profits or revenues; | |
● | 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. |
Any internal or government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. In addition, the FDA’s or EMA’s regulations, policies or guidance may change and new or additional statutes or government regulations may be enacted that could prevent or delay regulatory approval of our product candidates or further restrict or regulate post-approval activities. We also cannot predict the likelihood, nature, or extent of adverse government regulation that may arise from pending or future legislation or administrative action, either in the United States or abroad.
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 approved, and they are approved more quickly, marketed more effectivelysubject to the actions listed above, including losing marketing approval for products, resulting in decreased revenue from milestones, product sales or demonstrated to be more effective than our product candidates, our commercial opportunity will be reducedroyalties.
If we or eliminated.
Our third-party manufacturers, suppliers, 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.
Risks Related to TGR-1202, there are several PI3K delta targeted compounds both approved, such as Gilead’s Zydelig™ (idelalisib) and Bayer’s Aliqopa® (copanlisib), and in development, including, but not limited to, Verastem’s duvelisib which if approved we would expect to compete directly with TGR-1202. In addition, there are numerous other novel therapies targeting similar pathways to TGR-1202 both approved and in development, which could also compete with TGR-1202 in similar indications, such as the BTK inhibitor, ibrutinib (FDA approved for MCL, CLL, Marginal Zone Lymphoma and WM and marketed by AbbVie and Janssen), the BTK inhibitor acalabrutinib (FDA approved for MCL and marketed by AstraZeneca), or the BCL-2 inhibitor venetoclax (FDA approved for CLL and marketed by AbbVie and Roche).
We rely on third parties to produce commercial supplies of any approved product candidate,generate clinical, preclinical and other data necessary to support the regulatory applications needed to conduct clinical trials and submit for marketing approval. We rely on third parties to help conduct our commercialization of any ofplanned 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 could be stopped, delayed or made less profitable if those third parties fail to obtain approval of the FDA, fail to provide us with sufficient quantities of pharmaceutical product or fail to do so at acceptable quality levels or prices.
In order to inspections that will be conducted only after we submit aan 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. Clinical trial applications and marketing authorization applications for foreign regulatory bodies have substantially similar requirements. 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 and commercialization efforts.
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 or 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 outpatient 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 is required by the FDA or IRB to close down due to data management or patient management or any other issues, we may lose clinical trial subjects.
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 or 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 Contract Manufacturing Organizations (CMOs) to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could 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.
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 product or product candidates. As a result, we believe that our financial results and the commercial prospects for our product or product 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 BRIUMVI for commercial supply, as well as all of our clinical product supply, and we expect to continue to do so. This reliance on third parties increases the risk that we will not have sufficient quantities of our products or product candidates or such quantities at all. 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. We rely, and expect to continue to rely, on third parties for the manufacture, testing, packaging and labeling of any products that we commercialize and our product candidates for pre-clinical development and clinical testing. For example, we currently rely on Samsung Biologics for clinical and commercial supply of BRIUMVI. In addition, we utilize multiple vendors who provide testing services. Our reliance on third parties increases the risk that we will not have sufficient quantities of our products or product candidates or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.
The facilities used by contract manufacturers to manufacture, test, package, and label our product and product candidates typically undergo periodic inspections by the FDA or a comparable foreign regulatory authority to verify compliance with applicable cGMP regulations. Additional inspections may be conducted after we submit our marketing applications to or receive marketing approval from the FDA or a comparable foreign regulatory authority. Although the FDA and other regulators impose requirements regarding our selection, qualification, oversight, and monitoring of our contract manufacturers and hold us responsible for the ultimate compliance of our products, we do not directly control the manufacturing process of our product candidatesthird-party contract manufacturers and are completely dependent on our contract manufacturing partners for compliancesubject to risks associated with their ability to comply with cGMPs in connection with the FDA’s requirements for manufacture of finished pharmaceuticalour products (good manufacturing practices, GMP).and product candidates. If our contract manufacturers cannot successfully manufacture material that conforms to our target product specifications patent specifications, and/orand the FDA’s strict regulatory requirements of safety, puritythe FDA or others and potency,the compliance concerns cannot be resolved, remediated, or otherwise addressed to the FDA’s or others’ satisfaction in a timely manner during the review of any marketing applications that we will not be ablesubmit, it may negatively impact our ability to secure and/or maintain FDAobtain regulatory approval for our product candidates. In addition, we have no control overdrug candidates or obtain approval within projected timelines. We cannot guarantee the ability of our contractthird-party manufacturers to maintain compliance with cGMP regulations, including having adequate quality control, quality assurance and qualified personnel. 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 products or product candidates, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business and supplies of our products or product candidates.
Our 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, supply or quality 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 agreement for BRIUMVI contains certain minimum purchases in what are commonly referred to as a “take or pay” provision, and it is possible that future supply agreements could 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. In negotiating our supply agreement for BRIUMVI, there is no guarantee that we have foreseen all eventualities or that our third-party manufacturer will be able to accommodate unforeseen changes in business direction in a timely fashion or at all. Scheduling of manufacturing at our third-party manufacturer is governed by contractual terms that require us to make investments in inventory of materials, with limited shelf-life, in advance of regulatory approval and based on preliminary commercial forecasting, and such inventory may not be used if timelines and supply needs shift.
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 third-party manufacturer with which we contract will have other clients, and our relative importance as a customer may adversely impact contractual terms or the performance of services in a satisfactory manner or on a timely basis.
Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval or interrupt commercial distribution. If our current contract manufacturers cannot meet FDA standards,perform as agreed, we may needbe required to find alternativereplace such manufacturers causing additional costs and delays in identifying and qualifying any such replacement. If a new contract 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 facilities, which would significantly impactsources, we may experience delays in clinical development or an interruption in our ability to develop, obtain regulatory approval for or market our product candidates.commercial supply. No assurance can be given that a long-term, scalableany new manufacturer canwill be identifiedsuccessful or that they can makematerial manufactured by a new manufacturer will perform comparably to product manufactured by the previous manufacturer or that the relevant regulatory agencies will agree with our interpretation of comparability. Any significant delays or gaps in supply of commercial or clinical products may adversely affect our clinical development program, our ability to commercialize any drugs that receive marketing approval on a timely and competitive basis, and our future profit margins.
We also rely on other third parties to store and distribute drug supplies for our clinical trials and for commercial supplies of our product candidates that meets the product specifications of previously manufactured batches, or is of a sufficient quality, or at an appropriate scaledemand for BRIUMVI and costexpect to make it commercially feasible. If they are unablecontinue to do so itfor any other potential commercial products. Any performance failure on the part of our distributors could have a material adverse impactdelay 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.
The third parties upon whom we rely for the supply of starting materials, intermediates, active pharmaceutical ingredient (API)/drug substance, drug product, and other materials used in our drug candidates are our sole source of supply, and the loss or disruption of any of these suppliers could significantly harm our business.
The starting materials, intermediates, API/drug substance, and drug product 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 business.
We currently have no marketingcontinually evaluate our supply chains to identify potential risks and sales organizationneeds for additional manufacturers and no experience in marketing pharmaceutical products.other suppliers for the production of our products and product candidates. Establishing additional or replacement suppliers for the API/drug substance, drug product, and certain raw materials, if required, may not be accomplished quickly, or at all, and may involve significant expense. If we are unable to establish sales and marketing capabilities or fail to enter into agreements with third parties to market and sell any products we may develop, we may not be able to effectively marketfind a replacement supplier, we would need to evaluate and sellqualify such replacement supplier and its ability to meet quality and compliance standards. Any change in suppliers or the manufacturing process could require additional regulatory approval and result in operational delays. While we seek to maintain adequate inventory of materials necessary for the production of our products and generate product revenue.
Because we may develop will be expensivehave in-licensed BRIUMVI and time-consuming and could delay any product launch, and we cannot be certain that we or our development partners would be able to successfully develop this capability. If we or our development partners are unable to establish sales and marketing capability or any other non-technical capabilities necessary to commercialize any products we may develop, we will need to contract with third parties to market and sell such products. We currently possess limited resources and may not be successful in establishing our own internal sales force or in establishing arrangements with third parties on acceptable terms, if at all.
Because we license BRIUMVI and reimbursement of our product candidates by third-party payors, including government payors, generally is also necessary for commercial success. The degree of market acceptance of any of our approved products will depend on a number of factors, including:
● | the 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 may not become or remain profitable.
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 are dependent upon our relationships with collaboration and commercialization partners to further develop, fund, manufacture and commercialize our drug products and our product candidates. If such relationships are unsuccessful, or if a collaboration or commercialization partner terminates its collaboration or commercialization agreement with us, it could negatively impact our ability to conduct our business and generate net product revenue. Failure by a collaboration or commercialization partner to perform its duties under its collaboration or commercialization agreement with us (e.g. financial reporting or internal control compliance) may negatively affect us.
On July 28, 2023, we entered into a commercialization agreement (the Commercialization Agreement) with Neuraxpharm Pharmaceuticals, S.L. (Neuraxpharm), pursuant to which Neuraxpharm has the right to commercialize BRIUMVI in certain markets outside of the ACAU.S. On February 26, 2024, Neuraxpharm announced the commercial launch of importanceBRIUMVI in Germany and expects to launch BRIUMVI in additional international markets as well. In addition to the Commercialization Agreement, we may enter into collaboration arrangements with other collaboration and commercialization partners.
We are subject to a number of risks associated with our potentialdependence on our relationships with our collaboration and commercialization partners, including:
● | decisions by our collaboration and commercialization partners to terminate their collaboration or commercialization agreements with us for reasons specified in the collaboration or commercialization agreements, including our breach; | |
● | the need for us to identify and secure on commercially reasonable terms the services of third parties to perform key activities, including development and commercialization activities, currently performed by our collaboration or commercialization partners in the event that a collaboration or commercialization partner terminates its agreement with us; | |
● | adverse decisions by a collaboration or commercialization partner regarding the amount and timing of resource expenditures for the commercialization, distribution, and sale of our drug products; | |
● | failure by a collaboration or commercialization partner to perform its duties under its agreement with us (e.g., its failure to comply with regulatory requirements which may disrupt its performance of its obligations under the agreement with us); | |
● | failure by a collaboration or commercialization partner to timely deliver accurate and complete financial information to us or to maintain adequate and effective internal control over its financial reporting may negatively affect our ability to meet our financial reporting obligations as required by the SEC; | |
● | failure by a collaboration or commercialization partner to timely deliver accurate and complete medical or clinical information to us or to maintain adequate and effective internal control over its pharmacovigilance activities and reporting may negatively affect our ability to meet our reporting obligations as required by the FDA and other regulatory bodies; | |
● | collaboration or commercialization partners’ and their affiliates’ development and commercialization of products that compete directly or indirectly with our products or product candidates; | |
● | decisions by a collaboration or commercialization partner to prioritize others of its current or future products more highly than our drug products or our product candidates when it performs its duties; | |
● | possible disagreements with a collaboration or commercialization partner as to the timing, nature and extent of our development plans or distribution and sales and marketing plans; and | |
● | the fact that financial returns to us, if any, under our collaboration agreement with Neuraxpharm depends in large part on the achievement of milestones and generation of product sales, and if Neuraxpharm fails to perform or satisfy its obligations under the collaboration agreements, the development and commercialization of our drug products could be delayed, hindered or may not occur, and our business and prospects could be materially and adversely affected. |
While the Commercialization Agreement contains provisions that allow for dispute resolution, arbitration, and/or termination of the agreement by the Company in the event of a breach by Neuraxpharm, there can be no assurance that the Company and Neuraxpharm will agree on a cure for such a breach, and in the event of termination, there can be no assurance that the Company would be appropriately compensated and/or recover any losses sustained. Due to these factors and other possible disagreements with our collaboration and commercialization partners, we may be delayed or prevented from further developing, manufacturing or commercializing our drug products or our product candidates are:
If any entity that manufacturescollaboration or imports specified branded prescription drugscommercialization partner were to terminate our relationship with it unilaterally, we would need to undertake development, commercialization or distribution or sale activities for our drug products and biologic agents, apportioned amongproduct candidates solely at our own expense, and/or seek one or more other partners for some or all of these entities according to their market share in certain government healthcare programs;
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 federal Anti-Kickback Statute, new government investigative powerspotential 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 enhanced penaltiesbiotechnology companies for non-compliance;
We face significant competition in seeking appropriate collaborators. Whether we reach 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 conditiondefinitive agreement for a manufacturer’s outpatient drugs to be covered under Medicare Part D;
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 new programs; and
Risks Relating to Our Intellectual Property
Our success depends upon our ability to setobtain and protect our intellectual property and proprietary technologies. 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 any product we commercialize, including BRIUMVI, our product candidates, 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 products and product candidates, we also rely on our licensors to protect the patent and other intellectual property rights necessary for commercialization.
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 products and product 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 pricescope sufficient to protect any of our products. In addition, the laws of foreign countries may not protect our patent rights to the same extent as the patent 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 patent portfolio may not provide us with adequate and continuing patent protection sufficient to exclude others from commercializing drugs similar or identical to our product or product candidates, including generic versions of such drugs.
Currently, we have several granted patents in the United States and EU, among other countries, and several pending patent applications that have not yet been issued or have been issued in certain jurisdictions but not all jurisdictions in which such applications have been filed. There can be no guarantee that any pending patent applications, nor any patent applications filed in the future will be granted in any or all jurisdictions in which they were filed, or that all patent claims initially submitted for examination in such patent applications will be allowed in the patent that is eventually granted, if at all. The patent prosecution process is subject to numerous risks and uncertainties, and there can be no assurance of the scope of patent claims that will ultimately be allowed, if at all, and no assurance that we believeor our partners will be successful in protecting our product and product candidates by obtaining and defending patents.
These risks and uncertainties include the following:
● | the patent applications that we or our licensors file may not issue as patent; | |
● | 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 whom have substantially greater resources than we do, and many of whom have made significant investments in competing technologies, may seek, or may already have obtained, patents that will limit, interfere with, or eliminate our ability to file new patent applications covering our products, or make, use, and/or sell our 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, which could limit our ability to fully monetize our intellectual property rights; and | |
● | countries other than the United States may have less restrictive patent laws than those of the United States, allowing foreign competitors to exploit such less restrictive patent laws to make, use, and/or sell competing products in their respective jurisdictions. |
If we are not able to obtain patents that protect our product and product candidates, it could have a material adverse effect on our financial condition and results of operations.
In addition, the patent prosecution process is fairexpensive 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 United States Patent and Trademark Office (USPTO) can be 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 products;
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 patent laws of foreign countries may not protect our patent 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 patent 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 U.S. 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 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 the transition from a first-to-invent system to a first-to-file system and changes 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.
The patents or patent applications owned or filed by us, or by our licensors or other collaborators, may be affected by third-party pre-issuance submissions of prior art to the USPTO, or by opposition, derivation, reexamination, inter parties review, post-grant review or interference proceedings. 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 U.S. 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 products or 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 U.S. 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 enough 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 pending patent applications, 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 products or product 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 products or product candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our products or product 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 for the purpose of assigning or granting 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 products and product 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.
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 products or product candidates, which would have a material adverse effect on our business.
If we do not obtain patent term extensions under the Hatch-Waxman Act 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 Act. The Hatch-Waxman Act 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 what 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. 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.
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 profitability;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.
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 to our 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 asserted patents 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 levelUnited States, defendant counterclaims challenging the validity, enforceability or scope of taxesasserted 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 the 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 as in the United States. 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 material adverse effect on our business.
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 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 or product candidates or proprietary technologies may infringe. Similarly, there may be issued patents relevant to our product or 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 product and product candidates. 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 our product candidates 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 pay;obtain a license from such third party to continue developing and
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 their products, technology or methods that may impose price controls,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 products or 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, in which case 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 and 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.
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 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 breach or violate 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.
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 future profitability.
Risks Related to Our Business Organization and Governance, Strategy, Employees and Growth Management
If we fail to attract and keep key management, commercial, and clinical development personnel, we may be unable to successfully develop or commercialize our product and product candidates.
We are highly dependent on the research and development, commercialization, manufacturing, quality, financial and legal expertise of our senior management team as well as the other principal members of our management. 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.
Recruiting and retaining qualified scientific, clinical, manufacturing and medical affairs, and commercial personnel, particularly in MS, 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 products. 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. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our development and commercialization objectives, our ability to raise additional capital, and our ability to implement our business strategy.
We will need to increase the size ofdevelop and expand our organization and the scope of our outside vendor relationships,business, and we may experienceencounter difficulties in managing this growth.
We may attempt to expand our business by acquiring additional businesses or drugs, forming strategic alliances or creating joint ventures with third parties. We may encounter numerous difficulties in developing, manufacturing, and marketing any new products resulting from any such arrangement or transaction that may delay or prevent us from realizing their expected benefits. If we are unable to successfully integrate such acquired businesses with our existing operations and company culture, we may never realize the benefits of such acquisitions or strategic alliances. We cannot assure you that, following any such transaction, we will achieve the expected synergies to justify the transaction.
As of May 3, 2024, we had 284 full-time employees. To manage our anticipated future growth and focus in neurology and immunology, we must continue to implement and improve our managerial, operational and financial systems, and other resources in ordercontinue to managerecruit and fundtrain additional qualified personnel. Also, our operations and clinical trials, continue research and developmentmanagement may need to divert a disproportionate amount of its attention away from its day-to-day activities and commercializedevote a substantial amount of time to managing these activities. Due to our product candidates. Our management and scientific personnel, systems and facilities currently in placelimited resources, we may not be adequateable to supporteffectively manage the expansion and shift of our future growth. Our needoperations 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. If our management is unable to effectively manage our operations, growth,transition to a strategy primarily focused on neurology and various projects requires that we:
Additionally, to help manage our internal development efforts effectively while carrying out our contractual obligations to licensors, contractors and other third parties;
Certain anti-takeover provisions in our chartergoverning 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.
Certain provisions in our amended and restated certificate of incorporation and restated bylaws could have the effect of makingmay make it more difficult for a third party to acquire us or of discouragingdiscourage a third party from attempting to acquire or control us. These factors couldus and may limit the price that certain investors might be willing to pay in the future for shares of our common stock. OurFor example, our amended and restated certificate of incorporation allows us to issue preferred stock without the approval of our stockholders. Thestockholders, the issuance of preferred stockwhich 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.our common stockholders. In certain circumstances, such issuance could have the effect of decreasing the market price of our common stock. OurIn addition, 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.
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 corporation’s 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, 2023, we had federal net operating loss carryforwards of approximately $1.4 billion, 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 Tax Act, 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. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed by President Trump. Certain provisions of the CARES Act alter the rules regarding net-operating losses for such losses arising in 2018, 2019 and 2020. Such losses may be carried back for five years. We cannot assure you, however, of our ability to utilize these favorable offset rules within the applicable time period. These rules apply regardless of the occurrence of an ownership change.
Certain of 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.
Certain of our executive officers, directors and stockholders own more than 5% of our outstanding common stock and, together with their affiliates and related persons, beneficially own a significant percentage of our capital stock. 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. |
Our internal information technology 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 and our commercialization of any products for which we receive regulatory approval.
Despite the implementation of security measures, our internal information technology systems and those of our third-party CROs, CMOs, and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks or cyber-intrusions over the Internet, natural disasters, terrorism, war and telecommunication and electrical failures. Although we have been the targets of cyber-attacks and cyber-intrusions, the impact on our operations and financial condition has not been material. We expect such cybersecurity threats to continue and become more sophisticated, even more so due to the conflict between Russia and Ukraine. A significant cyber-attack or cyber-intrusion could cause our systems to fail, leakage of confidential information, or business interruption, which could result in a material disruption of our operations, financial loss, or reputational harm. 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. We have invested in protections and monitoring practices of our data and information technology systems to reduce these risks and expect to continue do so as our information technology systems increase in magnitude and complexity. However, there can be no assurance that our efforts and investments will prevent breakdowns or breaches in our systems that could adversely affect our business.
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. Key national economies, including the United States, have been affected from time to time by economic downturns or recessions, supply chain constraints, rising inflation, restricted credit, poor liquidity, reduced corporate profitability, debt, equity and foreign exchange market volatility, bankruptcies, rising interest rates, unemployment rates and overall uncertainty with respect to the economy. Increasing interest rates in the United States to respond to inflationary pressures and market volatility, as well as the government closures of Silicon Valley Bank and Signature Bank and liquidity concerns at other financial institutions, could negatively impact our results of operations and financial condition. In addition, increased interest rates or a general economic downturn or recession could reduce our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy, supply disruptions or international trade disputes could also strain our third-party suppliers, possibly resulting in supply disruption.
Likewise, the capital and credit markets may be adversely affected by the conflicts between Russia and Ukraine and Israel and Hamas, the possibility of wider European, Middle Eastern or global conflicts, and the global sanctions imposed in response thereto. Other international events such as trade disputes, separatist movements, leadership changes and political and military conflicts could also adversely affect global financial activity and markets and could negatively affect the U.S. economy. These conditions could result in decreased economic activity, heightened risk of cyberattacks and inflation, as well as impact our ability to raise capital. Additionally, the Federal Reserve Board (FRB) and other major central banks have been consistently removing or reducing monetary accommodation, increasing the risk of recession and also potentially negatively impacting asset values and credit spreads that were boosted by extraordinary monetary stimulus. A severe or prolonged economic downturn 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 marketed product and services. We cannot anticipate all of the ways in which the foregoing, and the current economic climate and financial market conditions, could adversely impact our business.
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 and have implemented a compliance program, 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 products 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.
On December 22, 2017, legislation commonly referred to as the Tax Act was signed into law and is generally effective after December 31, 2017. The Tax 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.
As another example, in August 2022, the Inflation Reduction Act of 2022 was enacted, and, among other things, included a new 15% alternative minimum tax on the adjusted financial statement income of certain large corporations for tax years beginning after December 31, 2022. To the extent that such changes have a negative impact on us, including as a result of related uncertainty, these changes could adversely impact our business, results of operations and financial position.
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, among others:
● | reception and success of BRIUMVI in the U.S. market; | |
● | reception and success of BRIUMVI in the German market and the anticipated launch of BRIUMVI in additional European markets; | |
● | publicity regarding actual or potential clinical results relating to our product or 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 us or our competitors; | |
● | any delay in our regulatory review for products and product candidates we may develop, and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation a change to the projected approval date, scheduling of an advisory committee meeting or issuance of a “refusal to file” letter; | |
● | 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 such as the disruptions in the global economy caused by the COVID-19 pandemic, the conflict between Russia and Ukraine, and the Israel-Hamas war; | |
● | period-to-period fluctuations in our revenues and other results of operations; | |
● | failure to meet our revenue projections or guidance; | |
● | 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. As a result of this volatility, investors may not be able to sell their common stock at or above the price paid for the shares.
We are subject to risks related to corporate social responsibility and reputational matters.
Our reputation and the reputation of our brands, including the perception held by our customers, end-users, business partners, investors, other key stakeholders and the communities in which we do business are influenced by various factors. There is an increased focus from our stakeholders on Environmental, Social, and Governance (ESG) practices and disclosure - and if we fail, or are perceived to have failed, in any number of ESG matters, such as environmental stewardship, inclusion and diversity, workplace conduct and support for local communities, or if we fail, or are perceived to have failed, to effectively respond to changes in legal or regulatory requirements concerning climate change or other sustainability concerns, our reputation or the reputation of our brands may suffer. Such damage to our reputation and the reputation of our brands may negatively impact our business, financial condition and results of operations. In addition, negative or inaccurate postings or comments on social media or networking websites about the Company or our brands could generate adverse publicity that could damage our reputation or the reputation of our brands. If we are unable to effectively manage real or perceived issues, including concerns about product quality, safety, corporate social responsibility or other matters, sentiments toward the Company or our products could be negatively impacted, and our financial results could suffer.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will likely 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. However, any future determination relating to the use of our future earnings, if any, will be made at the discretion of the Board of Directors and will depend on a number of factors, including capital requirements, financial conditions, future prospects, contractual restrictions and covenants and other factors that the Board of Directors may deem relevant. In addition, under the Amended Loan Agreement, as amended, with Hercules, we are currently restricted from paying cash dividends, and we expect these restrictions to continue in the future. Furthermore, 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 likely the sole source of gain for our stockholders for the foreseeable future.
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. 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.
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 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.
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 over financial reporting, 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 and shareholder derivative 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 and shareholder derivative 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 in which 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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS OF SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
Securities Trading Plans of Directors and Executive Officers
During the three months ended March 31, 2024, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
The exhibits listed on the Exhibit Index are included with this report.
31.1* | ||
31.2* | ||
32.1** | ||
32.2** | ||
101* | ||
The following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended | ||
104* | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
* Filed herewith.
** Furnished herewith.
SIGNATURES
Pursuant to the requirements 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.
TG THERAPEUTICS, INC. | |||
Date: | By: | /s/ Sean A. Power | |
Sean A. Power | |||
Chief Financial Officer | |||
Principal Financial and Accounting Officer | |||