TGTX - TG Therapeutics: Ramifications Of Briumvi Approval

Summary

• TG Therapeutics, Inc. is set to launch Briumvi with an experienced in-house team.
• There are several factors conducive to launch success. Nevertheless, uncertainty remains.
• If TG Therapeutics can secure a sales/marketing partnership, the company will likely make a successful comeback.

People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences - Peter Lynch

Author's Note : This is an abbreviated version of an article originally published in advance inside Integrated BioSci Investing for our members.

In biotech investing, an FDA approval is a major fundamental improvement for a small biotech company. After all, it is a validation of the sound science and medicine of the drug. Moreover, it represents the fruits of competent management. Notwithstanding, approval is only half of the battle won, i.e., the easier half. The more difficult challenge is commercialization, which will determine the ultimate fate of the company.

That being said, TG Therapeutics, Inc. ( TGTX ) recently erased all market doubts about the ability of its lead medicine (ublituximab) to clear the FDA hurdle . Approved and to be marketed under the brand Briumvi, the drug offers a differentiated solution to patients afflicted by the dreaded condition (multiple sclerosis). In this research, I'll elucidate the ramifications of this approval. More importantly, I'll share with you my expectation of this stock.

Figure 1: TG chart.

About The Company

As usual, I'll present a brief corporate overview for new investors. If you are familiar with the firm, I suggest that you skip to the subsequent section. I noted in the prior article ,

Operating out of New York, TG Therapeutics is focused on the innovation and commercialization of stellar medicines to serve the unmet needs in blood cancers and autoimmune diseases. As shown below, the pipeline has two intriguing medicines ublituximab (i.e., Ubli) and umbralisib (Umbra). Due to safety and efficacy concerns, TG pulled Umbra off the market for its approved indications: marginal zone lymphoma (MZL) and follicular lymphoma (i.e., FL). The company also canceled their application of the U2 (Ubli plus Umbra) combo for chronic lymphocytic leukemia (CLL) and small lymphocytic lymphoma (SLL). As such, you now have [only Ubli for multiple sclerosis (i.e., MS)]. There are also other early-stage molecules such as TG1501 (cosibelimab), TG1601 (i.e., a BET inhibitor), TG-1701 (BTK inhibitor), and TG1801 (CD47/CD19 bispecific antibody).

Figure 2: Therapeutic pipeline.

Briumvi Approval Catalyst

Contrary to market expectations, TG announced that the FDA approved Ubli on December 28th. Under the brand (Briumvi), Ubli is indicated for the treatment of patients afflicted by relapsing forms of MS (i.e., RMS). Thrilled by Briumvi's prospect, the Zimmermann Professor of Neurology & Neurological Sciences, and Pediatrics at Stanford University (Dr. Lawrence Steinman) enthused,

Over the past several years we have seen a dramatic shift in the MS treatment landscape towards the use of B-cell therapy, which has shown to be highly effective in reducing relapses in patients. The outcome of the ULTIMATE I & II trials evaluating ublituximab, a novel targeted anti-CD20 agent designed for efficient B-cell depletion that supported this approval, represents an important milestone in the history of MS research as the first Phase 3 study of an anti-CD20 monoclonal antibody in patients with relapsing MS to produce an annualized relapse rate of less than 0.10, which translates to less than 1 relapse in 10 years. This approval is great news for patients living with MS and provides an appealing treatment alternative that can be administered in a one-hour infusion twice-a-year following the starting dose, which I believe is an added benefit to patients.

Figure 3: Briumvi approval.

As you know, the Briumvi approval decision was based on the high-quality Phase 3 (ULTIMATE I & II) trials. In the said trial, Briumvi posted a superior reduction in the annualized relapse rates (i.e., ARR) compared to teriflunomide, as shown below. In terms of absolute reduction in ARR, patients taking Briumvi experience a less than 10% relapsing rate.

Figure 4: ULTIMATE I & II results.

Anti-CD20 For MS

An analysis of Briumvi warrants a discussion of anti-CD20 therapy for MS. Notably, anti-CD20 plays a huge part in the treatment of MS. That is to say, over 50% of patients who starts on new MS therapy use anti-CD20. In the USA, there are currently over 100K patients afflicted by MS who are being treated with anti-CD20 drugs.

As you can see, anti-CD20 is efficacious for treating MS. The main hindrance is its adverse outcomes. Knocking down CD20 B-cells (i.e., the Commanding Officer) of the body's natural defense (i.e., immune) system can have devastating consequences. As such, there have been deaths and cancers occurring in patients taking anti-CD20. Regardless of the adverse outcomes, physicians still prescribe the drug so long as the efficacy overwhelmingly trumped the adverse outcomes. For Briumvi, the chances of giving a patient a normal life (as it prevents over 90% relapses) is worth the <1% chance of death.

Figure 5: Anti-CD20 for MS.

Product Differentiation

Given either a similar or slightly better Briumvi safety profile, the edge of this drug is its strong efficacy. In other words, Briumvi is the first and only anti-CD20 that demonstrated less than 10% ARR in two Phase 3 trials. That aside, Briumvi offers a much more convenient dosing schedule. Precisely speaking, the drug can be given twice a year with only a 1-hour infusion (after the initial starting dose). Commenting on the development, the President and CEO (Michael Weiss) remarked,

Today’s FDA approval marks an exciting day for everyone touched by MS and everyone that has worked on the development of Briumvi. We believe in the importance of treatment alternatives for patients and believe the profile of Briumvi offers unique attributes to patients and physicians alike. We have built a strong commercial team with deep knowledge of the MS landscape and look forward to launching in Q1 2023 ...

Figure 6: Briumvi's edge.

Commercialization Strategy

As you know, commercialization is the next hurdle for TG Therapeutics, Inc. to clear. For a small operator doing an in-house launch, it's extremely difficult to quickly ramp up sales. It's much better and more strategic to form a partnership with a large sales/marketing partner. When there is no partnership, that could mean two things. First, the management doesn't have meaningful relationships in the pharmaceutical world. Second, maybe the drug is not as competitive as you believe.

Despite facing substantial launch challenges, TG believes that it can launch Briumvi to become the leading anti-CD20 drug for MS. To achieve its objective, the company has several proposed solutions. Having launched other blockbusters, its pharmaceutical sales reps are highly experienced. The company's reps commercialized rival molecules. As such, they have an established relationship with physicians to foster prescriptions for Briumvi.

Here, you can bet that experience contributes greatly to launch success. The remaining question is whether the sales team is robust enough to penetrate most of the market. If TG Therapeutics, Inc. has a relatively similar number of reps to large competitors, then the chances of success for Briumvi would be excellent.

Figure 7: TG's in-house sales team.

Aside from sales experience, TG is pricing Briumvi at only $59K annually. Viewing the graph below, you can appreciate that Briumvi is the most affordable M.S. drug. Nevertheless, I believe that pricing is not a prudent competitive strategy for drug sales. Unless there are huge differences between generics and branded drugs, pricing differences would make only a small contribution.

Figure 8: Briumvi's pricing.

Financial Assessment

Just as you would get an annual physical for your well-being, it's important to check the financial health of your stock. For instance, your health is affected by "blood flow" as your stock's viability is dependent on the "cash flow." With that in mind, I'll analyze the 3Q2022 earnings report for the period that ended on September 30.

Given that I already went into the financials in great detail in the prior article, I'll briefly go over the pertinent metrics here. TG logged in $94K compared to $2.0M for the same period a year prior. The research and development (i.e., R&D) registered at $20.8M compared to $51.9M for the same period a year prior. Additionally, there were $35.0M ($0.26 per share) net losses compared to $85.6M ($0.65 per share) net declines for the same comparison.

Of the balance sheet , TG posted $197.7M in cash, equivalents, and investments. Against the $35.0M quarterly OpEx, there should be adequate capital to fund operations into 1Q2024. As such, TG is likely to raise additional capital sometime next year, likely in 2H or whenever the stock rallies.

Potential Risks

Since investment research is an imperfect science, there are always risks associated with an investment regardless of its underlying strength. At this point in its growth cycle, the most important concern for TG is whether the company can quickly ramp up Briumvi's sales. Though reps have significant experience and the drug is priced at a huge discount, the risks of launch failure are significant unless there is a partner. Moreover, there is a tangible risk that Briumvi might cause more deaths over the years which can prompt a product recall. That aside, there is a concern that TG would do a huge public offering, which can dilute the share value.

Conclusion

As you know, investing in a much higher probability situation will give you more profits in the long term. Those situations include Axsome Therapeutics ( AXSM ), Madrigal Pharmaceuticals ( MDGL ), and Intra-cellular Therapies ( ITCI ). But if you have an appetite for higher risks, TG Therapeutics, Inc. would be the right stock for you.

To be realistic, turnaround plays usually give you several folds of upside at the expense of tremendous risk. TG Therapeutics is no exception. Looking at the big picture, there are certain "characteristics" of Briumvi (and TG's launch strategy) that I believe improve its chances of success. Whether those strategies work out remains to be seen. Now, if TG Therapeutics, Inc. can secure a large sales/marketing partner, this investment would become a slam dunk.

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