Revisiting TG Therapeutics

Dec. 17, 2019 11:27 PM ETTG Therapeutics, Inc. (TGTX)32 Comments13 Likes

Summary

  • TG Therapeutics’ stock is up significantly since it announced that TGR-1202 achieved its primary endpoint in a potentially registrational Phase 2b trial for follicular lymphoma on October 25, 2019.
  • The company is set to file an NDA for TGR-1202 in the treatment of marginal zone lymphoma by YE19 and has multiple catalysts covering four indications over the next year.
  • Even with the recent run-up, TG seems to have plenty additional upside as one of its two later-stage candidates has been de-risked.
  • With two pivotal data readouts and potentially three NDA filings coming in the next twelve months, it is time to revisit TG Therapeutics.
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Confusion is a sign of intelligence; only fools are crystal clear.”― Haresh Sippy

We have not revisited TG Therapeutics (NASDAQ:TGTX) since last year although we did update our investment thesis on this name last month exclusively at The Biotech Forum as it is a holding in the model portfolio. A full investment analysis is as follows in the paragraphs below.

Company Overview

TG Therapeutics is a New York City based clinical stage biopharmaceutical company focused on the treatment of B-cell mediated diseases, such as Chronic Lymphocytic Leukemia (CLL), non-Hodgkin’s Lymphoma (NHL) and Multiple Sclerosis (MS). Its stock has recently jumped substantially recently to over $10 a share on more positive TGR-1202 data and commands a market cap north of $900 million.

Pipeline:

B-cells are antibody secreting white blood cells that are an important part of the immune system. B-cell mediated diseases comprise both cancerous B-cells (such as NHL and CLL) and aberrant B-cells (MS and Rheumatoid Arthritis). TG’s B-cell pipeline includes five candidates, of which two – ‘next-generation’ PI3k-delta inhibitor umbralisib (TGR-1202) and ‘next-generation’ anti-CD20 monoclonal antibody (MAB) ublituximab (TG-1101) – are being investigated in later-stage trials, both as monotherapies and together, for four indications.

For certain indications, TG is attempting to pursue accelerated approval through an endpoint of overall response rate (ORR), which is a much quicker and trickier path to approval than the more standard progression free survival (PFS) and overall survival endpoints. Although this approach is wrought with potential shortcomings such as primary resistance quickly setting in after initial response, it gets medications to patients in unmet indications more quickly.

Source: Company Presentation

TGR-1202 for MZL. TG’s most advanced candidate/indication (TGR-1202 for MZL) is employing the ORR endpoint as a means to accelerated approval. TGR-1202 is an oral, once daily inhibitor of both PI3K-delta and CK1-epsilon. Its ability to block CK1-epsilon may allow it to overcome tolerability and toxicity issues that have menaced otherwise very pharmacokinetically active ‘first-generation’ PI3K-delta inhibitors. It is being evaluated in a multi-cohort Phase 2b trial (UNITY-NHL) as a monotherapy in the treatment of MZL and Follicular Lymphoma (FL), and in combination for the treatment of CLL.

For the MZL cohort, in which patients who had received one prior line of therapy that included an anti-CD20 mAb (n=69), TGR-1202 demonstrated an ORR of 52%, including a 19% complete response (CR) rate in the evaluable population (n=42), which compares favorably to AbbVie’s (ABBV) BTK-inhibitor ibrutinib (46% ORR; 2% CR). Based on these results, TG anticipates filing a rolling NDA by YE19 with final data from the MZL cohort of UNITY-NHL. TGR-1202 has already received Breakthrough Therapy Designation for patients with MZL who have received at least one prior anti-CD20 regimen, such as Roche’s (OTCQX:RHHBY) Rituxan, from the FDA in January 2019.

Source: Company Presentation

If approved, management plans to make the MZL indication the center of its franchise. MZL is currently treated with non-specific chemo-immunotherapy; twice daily and clinically less effective ibrutinib; and a recently-approved combination therapy of Celgene’s (CELG) Revlimid and Rituxan that is associated with severe neutropenia and rash. And with no approved PI3K Delta inhibitors, TG has a pathway towards best treatment option for the ~3,000 patients afflicted with relapsed MZL each year in the U.S.

TGR-1202 for FL. The FL cohort of UNITY-NHL is assessing TGR-1202 as a monotherapy in the treatment of 118 patients who have had two prior lines of therapy that include an anti-CD20 monoclonal antibody (MAB) and an alkylating (chemo) agent. On October 28, 2019, the company announced that TGR-1202 achieved its prespecified primary endpoint of 40-50% ORR. This news sent shares ~25% higher to ~$7.00 as there are no approved third-line treatments for FL. With 15,000 new cases annually in the U.S., FL accounts for ~20% of all NHL patients. With data that will likely support an accelerated approval, the company plans to huddle with the FDA soon to discuss next steps. This news will not affect the NDA submission for TGR-1202 in the treatment of MZL but, contingent upon the outcome of the FDA meeting, may allow TG to tuck the FL indication into the MZL filing.

U2 for CLL. Accelerated approval is not in play for its combination therapy of TGR-1202 and TG-1101 (a.k.a. U2) in the treatment of CLL. TG has made two failed attempts at utilizing ORR data to receive accelerated approval for this indication. It was investigating TG-1101 plus ibrutinib versus ibrutinib monotherapy in the treatment of relapsed/refractory CLL. After altering the (GENUINE) trial design in 2016 to reduce the number of patients to 120 (from 360) and dropping the co-primary endpoint of PFS, TG-1101 demonstrated promising ORR results, but was denied accelerated approval owing to the intervening approval of AbbVie’s (ABBV) BCL-2 protein inhibitor venetoclax for the same indication.

Concurrently, TG was conducting a Phase 3 trial (UNITY-CLL) studying U2 in the treatment of patients with front-line or relapsed/refractory CLL. The 600-patient study enrolled in October 2017 and initially had four arms: TG-1101; TGR-1202; U2; and an active standard of care control arm of Roche’s obinutuzumab plus chlorambucil. An early interim analysis allowed for the early termination of both single agent arms. The company had anticipated that an accelerated approval based on ORR data was in the cards until it announced in September 2018 that the Data Safety Monitoring Board (DSMB) determined that the data were not mature enough to conduct a second interim ORR analysis. TG was forced to back off its accelerated ORR endpoint in favor of a PFS primary endpoint with a readout now likely at YE19 or shortly thereafter. News of this pathway delay drove shares of TGTX 44% lower one day in September 2018.

The good news for TG’s U2 is manifold. First the waiting is almost over with a top-line readout of PFS in UNITY-CLL expected in the next two to three months. Second, the DSMB has reviewed UNITY-CLL data on several occasions and has not forced TG to alter or stop the trial over safety/tolerability concerns. This is significant as most current treatment options are riddled with safety and tolerability issues. In fact, PI3K-delta inhibitor idelalisib is contra-indicated as a first-line therapy, whereas ~60% of the U2 cohort is treatment naïve. Third, on October 24, 2019, TG announced that the TG-1101/ibrutinib combo had improved PFS over ibrutinib monotherapy in the GENUINE trial. Ibrutinib has treated ~135,000 patients globally since its approval in June 2018. Also, the TGR-1202 monotherapy arm of UNITY-CLL demonstrated PFS of 23.5 months, somewhat de-risking the upcoming U2 results.

It should be noted that venetoclax in combination with Roche’s anti-CD20 mAb obinutuzumab was approved by the FDA for the first-line treatment of CLL (and small lymphocytic lymphoma) in May 2019, making it the first non-chemo based CLL therapy approved for treatment naïve patients. However, there should be plenty of room for U2 (if approved) with 20,000 new American cases expected in 2019 and a global market expected to touch $7.6 billion by 2023.

TGR-1202 has been granted has been granted Orphan status for all three lymphoma indications by the FDA.

TG-1101 (ublituximab) for Relapsing forms of MS. TG’s final late-stage indication is TG-1101 monotherapy in the treatment of relapsing forms of MS (RMS). Approximately 1 million in the U.S. and 2.3 million globally suffer with this chronic demyelinating disease of the central nervous system with ~85% having RMS. MS is big business for drug makers, estimated at $23 billion in 2019. Roche’s Ocrevus, the only approved anti-CD20 therapy for MS, is expected to generate revenue of $4 billion in only its second year on the market. Novartis’ (NVS) CD20 asset Arzerra, already approved for CLL, is also expected to be approved for this indication. The market is highly competitive and somewhat price sensitive but there is plenty of upside for TG-1101 (if approved).

As mentioned previously, TG-1101 is an anti-CD20 mAb, but it has been glycoengineered to be more or equally effective and safe, more convenient, and cheaper than its predecessors, including Ocrevus. The compound is being investigated in two independent Phase 3 trials (ULTIMATE I and II) in the treatment of RMS. Both trials are being conducted under Special Protocol Assessment with the FDA. In total, the trials will comprise ~1,100 patients with RMS and will test TG-1101 against immunomodulator teriflunomide with a primary endpoint of annualized relapse rate (AAR) following 96 weeks of treatment. Data are expected from these trials in mid-to-2H20.

Both of these assets are wholly-owned, although TG is on the hook for $31 million in clinical, regulatory, and sales milestones and mid-to-high single digit royalties for TG-1101 as well as $175 million in milestone payments and high single-digit to low double-digit royalties for TGR-1202.

TG also has three other B-cell therapy candidates – an anti-PD-L1 mAb (TG-1501); an oral BTK inhibitor (TG-1701); and an anti-CD47/CD19 bispecific antibody (TG-1801) – that have recently initiated or are about to initiate Phase 1 studies.

Balance Sheet & Analyst Commentary

In addition to raising capital of $57.5 million in early March, TG has employed its ATM facility to put another $40 million in the bank (as of August 6, 2019 YTD). In sum, the company has ~$97 million in cash and $30 million in debt, giving it a cash runway through 3Q20. TG potentially has access to another $30 million of debt, contingent upon achievement of clinical milestones and the lender’s discretion.

The current median analyst price target on TGTX is north of $15.00 a share. H.C. Wainwright reissued its Buy rating and $20 price target last week.

Verdict

TG has not disappointed since we last looked at it with additional positive data in each lymphoma indication. The following twelve months should provide the following: 1. An NDA filing for TGR-1202 for MZL around or shortly after YE19; 2. Top-line data on U2 in the treatment of CLL before YE19; 3. An FDA meeting on TGR-1202 for FL that should allow for accelerated approval with a best-case-scenario filing as part of the NDA for MZL; 4. A potential NDA filing of U2 for CLL around mid-2020; 5. A readout of a pivotal RMS trial around or slightly after mid-2020. Even with the recent bump in shares on the back-to-back releases of positive PFS data for TG-1101 in GENUINE and likely accelerated approval-worthy ORR data from the FL cohort of UNITY-CLL, the market seems to be discounting the commercial potential of TGR-1202 because it’s a PI3K and not giving much credit to TG-1101’s RMS indication. Both assets have blockbuster potential with TGR-1202 likely to be generating sales in 2021.

Even with the huge recent jump in the stock, there appears to be the potential for significantly larger upside on a longer term basis. That said, I could also see the potential for some profit taking on a shorter term basis given the stock's big rally. If I was looking to add to my stake currently, I would be a buyer on any profit taking and/or use a buy-write option strategy to increase holdings.

The thinking child seeks equals; the conformist seeks protectors.”― Ayn Rand

Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum.

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Disclosure: I am/we are long TGTX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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