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Today I would like to discuss a biotech stock, TG Therapeutic TGTX, which I feel offers strong upside potential in the midterm. TGTX currently has 2 products in its pipeline: TG-1101 and TGR-1202.

1) TGR-1202 (PI3Kδ inhibitor): Phosphatidylinositide 3-kinases (PI 3-kinases or PI3Ks) are a family of enzymes involved in important cellular functions including proliferation, growth, and cell survival. There are 3 classes of PI3K isoforms; however, only the class I isoforms phosphorylate inositol lipids form second messenger phosphoinositides and have been associated with tumorigenesis (cancer). PI3K class 1 has 4 isoforms alpha, beta, delta and gamma. The PI3K-delta and PI3K-gamma isoforms are preferentially expressed in leukocytes (white blood cells) and are involved in a variety of inflammatory and autoimmune diseases and hematological cancers. PI3K is one of the hottest area/target in recent years and several pharmaceutical companies are developing their PI3K inhibitors. There are more than a dozen of PI3K inhibitors currently in clinical trials: PX-866, IPI-145, BAY80-6946, BEZ235, SF1126, INK1117, GDC-0941, BKM120, XL147, XL765, IC87114, PI-103 and many others. However, it looks like only PI3K delta and/or gamma inhibitors have had a good clinical outcome in lymphoid-based disease and this therefore drew a lot of interest.

PI3K is one of the hottest pathways in biotech, and compounds that inhibit it have been the object of some major deals. Let me go through companies that have PI3K delta and/or gamma inhibitors and how they are valued. A first-in-class specific inhibitor of the PI3K delta isoform, CAL-101 (later named GS-1101), was first developed by Calistoga. CAL-101 had a good clinical outcome in Chronic Lymphocytic Leukemia (CLL) and Non-Hodgkin's Lymphoma (NHL) in clinical phase 1. Quickly after that, Calistoga was bought by Gilead (NASDAQ:GILD) for $375M. Infinity Pharmaceuticals (NASDAQ:INFI) has IPI-145 (PI3K gamma and delta inhibitor) which has mainly accounted for its 2 billion market cap, though it has not finished the Phase 2 clinical trial. Several Wall Street hedge funds are betting on Infinity Pharmaceuticals. Gilead (GS-9820), GlaxoSmithKline (bought Cellzome) and Exelixis (XL-499) also have their own PI3K delta inhibitors which are in the very early stages of development.

TGR-1202 is a highly specific, orally available, PI3K delta inhibitor, targeting only the delta isoform with nanomolar potency. It shows TGR-1202 is equally efficacious to GS-1101 with regards to in vitro induction of apoptosis and toxicity. Giving the fact above, I believe TGTX will have a strong potential growth or be acquired if TGR-1202 shows similar to GS-1101 in its clinical Phase I which will be read out in Q3 2013.

2) TG-1101: Ublituximab is a third-generation monoclonal antibody that targets CD20, which is expressed on the surface of all B-cells beginning at the pro-B phase. Ublituximab is characterized by a specific glycosylation pattern at the Fc site. This specific pattern of glycosylation increases the affinity of antibodies for human FcγRIIIa (CD16), resulting in an increased antibody dependent cell-mediated cytotoxicity (ADCC) by human Fc expressing cells. Ublituximab has been developed for the treatment of B-cell proliferative disorders, including NHL and CLL and others autoimmune diseases. TG-1101 is similar to Rituxan in that it targets the same CD20 antigen. However according the company's presentation, Ublituximab could be more efficient than Rituximab in inducing nature killer cell degranulation and ADCC (see the company abstracts). TG-1101 has received Orphan Drug Designation in the U.S. and EU for the treatment of CLL. Several companies have CD20mAb currently in the market or being developed such as Rituximab (Biogen Idec, Genentech, Roche) Ibritumomab (Immunomedics), Ibritumomab tiuxetan (Spectrum Pharmaceuticals) and others. Giving the fact that CD20mAb market is crowded, the future of TG-1101 depends on how superior it is compared to other CD20mAb in clinical setting.

Valuation

Below is a summary of the financial statements for TGTX.OB based on recently reported Q4 2012 results:

  • As of year-end 2012, TGTX.OB reported $16.4 million in cash and cash equivalent. According the company, the cash and cash equivalents are sufficient to fund their operation for approximately 18 months from December 31, 2012.
  • TGTX.OB reported a net loss of ($26.2M) in 2012 primarily due to research & development (R&D). The company has 2.5M debt.
  • TGTX.OB currently has no product in the market yet.
  • TG Therapeutics' market cap is about $150M today.

As I mentioned, since the company does not have products in the market and all the pipelines are in early stages, the stock valuation is just a prediction. The company has several events coming. TGTX.OB will present two abstracts in upcoming ASCO 2013. A phase I study of TG-1101 in lymphomas will be read out in late Q2 2013 and phase I/IIb result in mid 2014. A Phase I study of TG-1202 in blood-based cancers will be read out in late 2013. In my opinion, with a market cap of ~150M the stock still looks relative cheap. If TG-1202 gives comparable results to GS-1101 and TG-1101 gives positive results, I think the stock has a lot of room to grow or the company will be acquired. I considered this a high reward/medium risk stock.

Disclaimer: This article is intended for informational and should not be construed as professional investment advice. The article is written based on my opinions and knowledge only. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.

Source: TG Therapeutic: A Small-Cap Biotech With Great Potential Growth