Farmas USA

Jefferies  $TGTX Initiate at Buy PT $23.00
Ublituximab/TGR-1202: GENUINE-ly Differentiated Hem/MS Assets

TGTX is under-valued based on LT promise of ublituximab, TGR-1202, and
TG-1303 (ubli + 1202) in B-cell cancers and multiple sclerosis. While debate
exists for ubli in high-risk CLL, we believe FDA precedent exists for accelerated
approval based on ORR. If promising Ph. II 1303 data are confirmed in Ph. III,
we see 1303 as a $2.4B CLL drug at peak. We expect Ph. II/III DLBCL and RRMS
data to highlight under-appreciated shots on goal. Initiate at Buy and $23 PT.
Jefferies was sole bookrunner on TGTX's 3/9/17 secondary stock offering.
Positive GENUINE data...FDA Controversy Exists? Top-line ORR for Ph. III study of ubli
+ Imbruvica in high-risk R/R CLL are robust (+33% vs. Imbruvica; p<0.001), while ASCO
Meeting will provide new data (DOR, PFS). A key debate is if FDA approves under accelerated
approval (AA) as GENUINE was initially under an SPA but TGTX amended it without FDA
input. We note FDA has approved 16 hem/onc drugs (2013-2017) based on single-arm
studies with ORR/DOR as primary endpoint (GENUINE was randomized). Further the 21st
Century Cures Act gives FDA legal authority to ease/amend data requirements to speed
approvals by considering 'totality of evidence' (e.g., real-world data). These factors and FDA
Dr. Pazdur's history of collaboration with industry suggest a higher potential for AA (85%
probability).
TG-1303: UNITY-CLL study interim analysis upcoming in mid-2017. In Ph. II
1303 demonstrated impressive ORR of 89%, median PFS not reached, and a differentiated
tolerability/safety profile (vs. other PI3K-regimens). Mid-year, an initial efficacy analysis for
Ph. III UNITY-CLL in 1L and R/R CLL comparing 1303 vs. 1202 vs. ubli will occur. Positive
results should incrementally de-risk UNITY, setting stage for an ORR analysis in Q3 2018
(which could support U.S./EU approvals).
Key events through H1 2018. April 28: Ph. II ubli data in RRMS at AAN Meeting. June: at
ASCO, EHA, and Lugano Meetings: GENUINE data. Q3: interim efficacy analyses for UNITYCLL
and Ph. II/III UNITY-DLBCL (comparing 1303 vs. 1202). Mid: start Ph. III ubli global RRMS
program. H2: Request pre-BLA meeting with FDA and meet to discuss AA for ubli based on
GENUINE data. H1 2018: file ubli BLA.
Probability-weighted PT breakdown: ~$6 in high-risk CLL, $11 in 1L/2L+ CLL, $3 in
DLBCL, and $3 in RRMS. We see ubli and 1303 as a $3B CLL franchise in 2031. We model
$2.2B/$215M in adjusted 2031 revenues/royalties.
Valuation/Risks
Our $23 PT is DCF-based. Risks: FDA, clinical (UNITY-CLL, -DLBCL), and commercial.