Don van Vliet · @donvanvliet3
13th Dec 2016 from TwitLonger
On $TGTX share price versus value
Somebody tweeted me that the market was telling us something or other. I am not well attuned to what the market tells me because it is always shouting and I don't speak algorithm anyway. Here is what I know regarding the fundamentals, which eventually should be very relevant.
TG Therapeutics has 2 best-in-class therapies: an anti CD20 monoclonal antibody that may serve as a backbone therapy in CLL and non-Hodgkins Lymphoma; and TGR-1202, a pi3-kinase inhibitor that has demonstrated a differentiated safety profile which may allow it to unlock the potential of this long-heralded class of drugs.
Full control of these two drugs is what makes TG Therapeutics unique in the space - and an eventual buyout candidate. The most effective treatment paradigms being investigated in hematological oncology all involve combinations of drugs. The limiting factors for these combinations are safety and cost (which is further complicated when the component drugs are partially or wholly owned by different companies). Full control of two best in class drugs allows for eventual pricing advantages that, together with better safety and efficacy, can drive significant market penetration.
In the heme-onc space, anti CD-20 therapy is a basic component of most combination treatments. Roche wholly owns both Rituxan and Gazyva. Rituxan is the 1st generation anti CD-20; it shows decent efficacy and is well tolerated. Gazyva is a next generation anti CD-20 that is more effective in CLL and in Folicular Lymphoma but also is less well-tolerated (11% Grade 3-4 Infusion Reactions).
http://www.accessdata.fda.gov/drugsatfda_docs/label/2016/125486s013lbl.pdf
Roche fully controls the anti-CD 20 space. It also has an interest in venetoclax, a first in class BCL-2 inhibitor that is also owned by AbbVie. Venetoclax is a highly promising drug which is generally well tolerated but which also may cause Tumor Lysis Syndrome if not properly administered following strict protocols and monitoring. These strict protocols (and thrice-daily lab testing surrounding dose escalations) will almost certainly limit the uptake of venetoclax in the community setting, where the vast majority of patients are treated.
AbbVie also owns a 50% interest in Ibrutinib, following its acquisition of Pharmacyclics for $21 billion in 2015. (The other 50% interest in the drug was purchased several years earlier by Janssen.) Ibrutinib is a great, first in class Bruton's Tyrosine Kinase Inhibitor (BTK) which has saved the lives of countless patients with CLL. It is approved in both r/r CLL and as a first line treatment. It does exhibit what appears to be a class effect with respect to atrial fibrillation and bleeding. This is the major contributing reason to what has been estimated to be a 40% discontinuation rate among patients prescribed Ibrutinib. Again - great drug but some patients don't tolerate it well. (Related point: data have been presented that some patients who skip doses in order to manage side effects such as arthralgia have lower PFS and overall survival.)
Gilead owns Idelalisib, a first in class pi-3k which is approved for the treatment of r/r CLL and relapsed SLL and folicular NHL. It is associated with a high level of severe adverse events which has limited its uptake, despite a correspondingly high level of efficacy for patients who can stay on drug. (None of these drugs work if patients can't take them.)
Both Gilead and Infinity (another company that was developing a nearly identical pi3-k) dropped combination trials earlier this year due to severe adverse events and patient deaths that were observed in trials that apparently involved front-line, treatment naive patients. These treatment related reactions were even more severe than what had been noted on the idelalisib black box warning. The current theory is that these front line patients have more intact immune systems and that this resulted in greater auto-immune mediated reactions.
The dropped trials confirmed the negative perspective many key opinion leaders had about the "class effect" of pi3-ks. In addition to halting the use of these two pi3-ks in the front line setting, it also severely limited their use as combination therapy.
Many shareholders in TGTX have sold first and asked questions later - especially in the context of a difficult environment for small cap biotechnology stocks that has obtained since the Summer of 2015.
Nevertheless, the data that have been presented regarding TGR-1202 are consistently differentiated with respect to discontinuation rates (< 8%); treatment related adverse events have been dramatically lower than with idelalisib.
http://www.tgtherapeutics.com/ASCO%20Integrated%20Analysis%20Poster%20FINAL.pdf
At the ASH conference this past week, we saw data from combination studies of TGR-1202 with Ibrutinib and ruxolitinib in CLL and myelofibrosis, respectively. Both studies showed that the respective combination was relatively well tolerated, in line with what one would expect given data from monotherapy trials of the component drugs. The preliminary safety data from these trials appear to confirm that TGR-1202 is a differentiated pi3-k that may be used in combination with other drug classes to potentially achieve deeper, more durable responses across a range of indications where the pi3-k pathway is implicated. I am unaware of any other pi-3k's that have successfully been combined with either drug. TGR-1202 is also under investigation in two trials using a triple combination (with ublituximab and Ibrutinib and with ublituximab and pembroluzimab, respectively).
Also presented at ASH were preclinical data that explains how TGR-1202 is differentiated and potentially why it is differentiated. Investigators from the Moffitt Cancer Center reported murine data that demonstrated that TGR-1202 is associated with a well-maintained presence of regulatory T-Cells. These are the cells that regulate the auto-immune reaction.
http://www.tgtherapeutics.com/ASH%202016%20Maharaj%20Final.pdf
The data reported were consistent with data reported at AACR, which showed consistent results but in an in-vitro model using CLL cells:
http://www.tgtherapeutics.com/2016%20AACR%20Moffitt-Pinilla%20lab%20TGTX%20Poster%20FINAL.PDF
The reasons for this are still being elucidated but one key factor has been discovered by investigators at Columbia University Medical Center. They discovered that TGR-1202 significantly inhibits CK1-epsilon. CK1-epsilon has not been studied extensively, but its inhibition is associated with a reduced inflammatory response and suppression of the auto-immune function.
The lab at Columbia is also exploring multiple avenues of research, including the highly promising effects of TGR-1202 on c-Myc in combination with carfilzomib - which could have groundbreaking effects in the treatment of a particulary pernicious form of DLBCL. In this context, however, it is the activity of TGR-1202 on CK1-epsilon which is most relevant.
The relevant slide is # 26 but I would recommend taking the time to listed to the entire presentation if possible:
http://files.shareholder.com/downloads/MHA/1502553846x0x920046/37F236DB-F307-424A-8A18-A6D7A5E5B909/ASH_Monday_Investor_Deck_FinalFinal.pdf
TGR-1202 is a highly active drug in CLL which should find a place in either 1st or 2nd line therapy with high risk disease. There do not appear to be any other drug classes (including BCL-2's such as venetoclax) that most doctors and patients are likely to prioritize if the patient is not eligible for a chemotherapy based regimen such as FCR - which should continue to be 1st choice for fit, younger patients with CLL. As a point of comparison, Astra Zeneca acquired a 55% interest in Acerta at a valuation of $7 billion. That was largely due to the potential shown by acalabrutinib, which may offer safety advantages over ibrutinib. Acalabrutinib is a promising drug. However, will it prove better suited to those 40% patients who discontinue Ibrutinib therapy than a drug such as TGR-1202 which does not appear to have cardio-vascular toxicity? I doubt that very much.
TGR-1202 has also has shown great potential in the treatment of r/r DLBCL, for which there are no approved drugs cf., results of combination treatment of TGR-1202 and bendamustine with Kite's CAR-T, which Kite plans to submit to the FDA next year:
http://www.tgtherapeutics.com/ASH%202016%20Lunning%20Final.pdf
http://ir.kitepharma.com/releasedetail.cfm?releaseid=990947
There will likely be more publications regarding how TGR-1202 is differentiated over the coming year. More importantly, results of the company's Phase III trial comparing Ibrutinib monotherapy with Ibrutinib plus ublituximab in patients with high risk r/r CLL will report out sometime in late Q2.
Ublituximab has been shown to be well tolerated, without the Grade 3/4 infusion related reactions of Gazyva and with analogous efficacy. I expect that the results from the GENUINE trial will show a statistically significant improvement is ORR (measured according to Hallek criteria) and also will show CR's - I hope somewhere around 15% as was seen in the phase I/II. As a reminder, Ibrutinib monotherapy is not associated with CR's. I further expect that the FDA will be willing to accept the ORR endpoint as a basis for submission - because of the CR's, prior precedents, and the fact that the discontinuation rate of patients on Ibrutinib means that a deeper response rate while on therapy may mitigate the poor prognosis faced by patients who discontinue treatment. Greater safety than the current best in class drug is another point in TG's favour.
The current enterprise value of TG Therapeutics is approximately $225 MM. For me the question is not whether the market is inefficient (it is) but how, when, and to what extent the inefficiencies will be remedied.
Stemline Therapeutics traded below cash in the Spring and has since appreciated by over 200%. It may go much higher if it receives positive regulatory guidance from the FDA with respect to a BLA submission for SL-401 (the peak market opportunity in the BPDCN indication alone is conservatively in excess of $150 MM - $200 MM per year; there are 21 MM shares outstanding, fully diluted). Again - I don't know what the market is telling me most of the time. But this is one time that I am as certain as possible that the market is flat-out wrong.