TG Therapeutics: Briumvi Growth Story Appears Intact (NASDAQ:TGTX)

When I last wrote about TG Therapeutics, Inc. (NASDAQ:TGTX) in November, I rated the company a buy based on the sales numbers from the company’s multiple sclerosis drug, Briumvi. I also noted the potential for the stock to fill a gap in the chart back to $20. The name did indeed fill that gap, but in January, preliminary Q4 ’23 data and business development saw TGTX pull back.

Following Q4 earnings this week, TGTX has rallied. This article looks at why the market’s concerns may have been allayed and if the rally can continue.

TG Therapeutics in-licenses a CAR-T

On January 9, TG Therapeutics announced it would acquire a license to develop and commercialize Precision BioSciences’ (DTIL) azer-cel, a allogeneic CD19 CAR-T cell therapy, for autoimmune and other non-oncology indications. The deal sees TGTX make an upfront payment of $7.5M in cash and by the purchase of DTIL’s stock (at a 100% premium to the 30-day VWAP). DTIL is also set to receive a further $2.5M from TGTX within 12 months, also via purchase of stock at a premium to the 30-day VWAP. Further, upon achievement of near-term clinical milestones, DTIL would receive another $7.5M, in cash and via the purchase of DTIL stock at a premium to the 30-day VWAP. Beyond that, the deal includes a further potential $288M worth of milestones for DTIL from TGTX, and royalties on net sales.

On the one hand, while TGTX is spending upfront on the deal, the acquisition of DTIL stock might not turn out to be worthless, even if TGTX buys in at a 100% premium. If TGTX sees impressive results from the therapy, obviously DTIL could rally and thus TGTX’s holding could take on substantial value.

I must admit, I view the use of CAR-T cells to treat autoimmune conditions as even more experimental than their use in oncology, where some CAR-T’s are already approved. Certainly, developing these therapies won’t be cheap, but, for anyone worried about TGTX wasting money on their development, they aren’t even in the clinic yet. TGTX looks set to file an Investigational New Drug application in mid-2024, and initial dosing of patients would likely proceed cautiously.

TGTX Financial Overview

On January 10, TGTX reported preliminary Q4 ’23 U.S. net product revenue of $40M for Briumvi, and a preliminary 2023 year-end cash position of $215M. Further, TGTX guided for U.S. net product revenue of $41M-$46M in Q1 ’24, and $220M-$260M for full year 2024.

On February 28, TGTX reported Q4 ’23 and full year earnings confirming Briumvi U.S. net product revenue of $39.9M in Q4’23, and $88.8M for 2023. Total revenue was $44M, thanks in part to an additional $3.2M in revenue from products sold to Neuraxpharm, as they get underway with their ex-U.S. launch of Briumvi. Cash, cash equivalents and investment securities were $217.5M at year-end 2023, which TGTX expected, along with revenues from Briumvi, would fund the company through to cash flow positivity.

Net loss was $14.4M in Q4’23, although net income was $12.7M for full year 2023. Of course, this is aided by the $140M upfront payment from the Neuraxpharm deal. R&D expenses were $17.4M in Q4’23 and SG&A was $31.2M in the same quarter. Net cash used in operating activities was $31.4M in 2023, and as of December 31, 2023, TGTX listed $100.1M worth of loan payable in long-term liabilities from its loan with Hercules.

Taking out the loan, payable from TGTX’s cash, yields cash of $117.4M. At the rate of burn seen in 2023, this would last the company three years. Of course TGTX is instead guiding for cash to last it to cash flow positivity, which I see as achievable if the company hits guidance on Briumvi revenues.

As of February 23, 2023, there were 154,420,772 shares of TGTX’s common stock outstanding, giving it a market cap of $2.66B.

There were also a further 13M shares worth of potentially dilutive securities as of December 31, 2023.

So why did TGTX stock rally?

Between the preliminary Q4 ’23 earnings on January 10, and the Q4 ’23 earnings on February 28, TGTX more or less has confirmed the Briumvi sales numbers and guidance. I don’t think having $217.5M in cash rather than $215M as the preliminary guidance suggested would be the reason for TGTX to rally, either, but it has added hundreds of millions to its market cap.

Perhaps it is the bullish statement on cash lasting until cash flow positivity. An obvious source of enthusiasm is the following comment on the conference call.

So far this year is off to a really strong start, where we have seen record enrollments into our Hub in January. And we believe we are tracking towards the upper end of our first quarter guidance range of $41 million to $46 million, and potentially higher if demand trends persist over the next month.

Adam Waldman, Chief Commercialization Officer, Q4 ’23 earnings call..

Comments like that might have helped convince the market that the company can achieve its U.S. net sales revenue guidance of $220M-$260M.

Beyond that, a recent update on February 27, 2024, was that there were additional patents issued for Briumvi. One is a composition of matter patent covering Briumvi, and those tend to provide very solid protection in terms of market exclusivity. That patent lasts into 2042, so TGTX could have market exclusivity for many years to come.

Conclusions, rating and risks

While Briumvi’s preliminary Q4 ’23 sales numbers, and the DTIL agreement announcement in January, led to a TGTX selloff, the Q4 ’23 earnings have sparked a rally. I attribute this as being likely due to comments regarding Q1 ’24 being off to a strong start. Even $46M in U.S. net product revenues from Briumvi would represent 15% quarter-over-quarter growth, and if revenues continued to grow at that rate, we would see U.S. net product revenues of $52.9M in Q2, $60.8M in Q3, and $70M in Q4, totaling $229.7M and beating the lower end of TGTX’s guidance. As such, I don’t think TGTX’s $220M-$260M guidance is too farfetched and may even be conservative based on historical rates of growth thus far (see table below).

Click to enlarge

I think TGTX will continue to rally from current prices, and even the recent high of $21.30 represents a 23% rally from Thursday’s close of $17.22. As such, I rate TGTX a buy.

Risks

There are several risks to any long in TGTX, a few of which I’ll discuss here. Firstly, If Q1’24 earnings come with revenue numbers that are barely above the Q4’24 numbers, then the stock is going to fall. Especially if it doesn’t look like TGTX’s revenue guidance for 2024 is achievable

Beyond weak sales numbers, another risk is that TGTX could engage in other business development activities which might not be well received. The Neuraxpharm deal wasn’t well received, there has been some concern on the CAR-T deal too. If TGTX wants to spend its cash building the pipeline further and investors don’t like the terms, then the stock could sell off.

Lastly, if Briumvi faces potential future competition from other successful multiple sclerosis drugs in the clinic then the stock could sell off. While the threat from BTK inhibitors subsided somewhat since my last article, new drugs come along all the time.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.