TG Therapeutics, Inc. (TGTX) Q1 2018 Earnings Report, Transcript and Summary

Greetings, and welcome to TG Therapeutics' Q1 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jenna Bosco, Senior Vice President of Corporate Communications. Thank you. You may begin.

Thank you. Good morning and welcome to our conference call regarding TG Therapeutics' first quarter 2018 financial results and business update. I am Jenna Bosco, TG's SVP of Corporate Communications, and I welcome you to our conference call today. Following our Safe Harbor statements, Sean Power, TG's Chief Financial Officer, will provide an overview of our financial results, and then turn the call over to Michael Weiss, the Company's Executive Chairman and Chief Executive Officer, who will provide an update on the ongoing development of our novel, glycoengineered anti-CD20 monoclonal antibody, ublituximab; our novel, once-daily PI3K delta inhibitor, umbralisib, as well as a review of our pre-clinical and overall company standings. Before we begin, I would like to remind everyone that various remarks that we make about our future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. TG cautions that these forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from those indicated. Factors that may affect TG Therapeutics' operation include various risk factors and uncertainties that can be found in our SEC filings. This conference call is being recorded for audio rebroadcast on TG's website, www.tgtherapeutics.com, where it will be available for the next 30 days. All participants on this call will be on a listen-only mode. Now, I would like to turn the call over to Sean Power, our Chief Financial Officer, to briefly discuss the financial results for the first quarter of 2018, as well as the company's overall financial condition.

Thank you, Jenna, and thanks, everyone, for joining us. As you may be aware, our financial results were released this morning and can be viewed on the Investors & Media section of our website at tgtherapeutics.com. I'll begin with our cash position. At March 31, we had cash, cash equivalents, investment securities and interest receivables of $109.2 million. Our pro forma cash position as of March 31, 2018, is approximately $123.3 million when including $14.1 million of net proceeds from the utilization of our ATM sales facility during the second quarter of 2018. Our net loss for the first quarter of 2018, excluding non-cash items, was approximately $33.2 million, including $9.6 million of manufacturing and CMC expenses for Phase 3 clinical trials and in preparation for potential commercialization. The GAAP net loss for the first quarter of 2018, inclusive of non-cash items, was $41.5 million or $0.59 per share, compared to a net loss of $27.7 million or $0.52 per share during the comparable quarter in 2017. In the first quarter of 2018, we utilized cash from approximately $28 million to fund our ongoing operating activities in large part driven by stronger than anticipated enrolment into our Phase 3 MS program. Our clinical expenses are expected to slow a bit toward the end of this year and into the first half of next year, while we could have increased BLA/NDA filing expenses and pre-commercial [ph] expenses filling the gap. Accordingly, we expect our cash burn should remain relatively stable over the remainder of 2018. To ensure that we remain well-positioned to deliver on our goals, during the first and second quarter we added approximately $66 million for the balance sheet through the use of our ATM. Our average price during this campaign is $13.53, and total shares issued were approximately $5 million. Inclusive of the capital raise during the first and second quarters, we believe our cash current cash position will be sufficient to fund our operations well into 2019. With that, I will now turn the call over to Mike Weiss, our Executive Chairman and CEO.

Thank you, Sean and Jenna, and thanks everyone for joining us this morning. 2018 is off to a great start with the extension of our preclinical pipeline to include our own BTK inhibitor, plus various updates for our clinical programs. 2018 is setting up to be a highly impactful year as we look forward to the announcement of topline response rate data from the UNITY-CLL Phase 3 trial, completion of enrolment into the current cohorts of the UNITY-NHL study, final MS Phase 2 data, significant enrollment in our MS Phase 3 program, as well as filing decisions and potential filings of the company’s first BLA/NDA later in the year. Before reviewing our current development program, as well as the key milestones for 2018, I would like to kick this call of my recapping some of the recent accomplishments that we have already achieved in 2018. In January, we entered into a license agreement with the Chinese Pharma Company, Hengrui for the rights to develop their BTK inhibitor program. In February, we announced the publication of The Lancet Oncology, our results from the first Phase 1, first-in-human study of umbralisib, formerly referred to as TGR-1202, our novel once-daily PI3K delta inhibitor. Next, we presented the first preclinical data on TG-1601, our novel BET inhibitor, at the 2018 American Association for Cancer Research annual meeting. And most recently, we presented updated clinical and MRI data from the Phase 2 MS trial of ublituximab, formerly referred to as TG-1101 at the American Academy of Neurology Annual Meeting. We’ve had a busy start to the year, but this is just the beginning, and we look forward to the momentum continuing to build throughout the year. With that, let me give a high-level overview of our ongoing Phase 3 and pivotal programs and we will try to keep it brief today as our last quarterly conference call was not that long ago. Let’s begin with the UNITY-CLL Phase 3 program, which is a randomized study of ublituximab in combination with umbralisib or U2 as we refer to the combination compared to an active control of ublituximab plus chlorambucil in patients with both treatment-naïve and relapsed or refractory chronic lymphocytic leukemia. As a reminder, this trial is being conducted under special protocol assessment with the FDA and is a large global trial, including over 600 patients. Enrolment into this trial exceeded our expectations and the trial enrolled nearly 9 months ahead of schedule. Approximately 60% of the patients enrolled the frontline and approximately 40% over last or refractory. We are still targeting topline overall response freight data from this trial in the second quarter of this year. However, as mentioned on our last quarterly conference call, we may have to wait for slightly longer follow up on the patients and if we choose to do this, we would expect the announcement of topline results to still occur before the end of the summer. To remind everyone, we are targeting a 15% absolute improvement in overall response rate, which if successful, we plan to seek to file for accelerated approval in the fourth quarter of 2018. It is also worth reminding everyone that the primary endpoint for this study is progression-free survival to support full approval of the U2 combination and ideally supported very broad label for the treatment of CLL. With that, I’ll give a quick update on the GENUINE trial. As a reminder, GENUINE is a randomized Phase 3 trial of ublituximab plus ibrutinib, compared to ibrutinib monotherapy in patients with high-risk relapsed or refractory, Chronic Lymphocytic Leukemia. We are currently working closely with CLL experts to finalize our risk-benefit assessment, which we believe supports the position at ublituximab, ibrutinib provides meaningful benefit over all available therapy, including venetoclax based therapy. In parallel, we are moving forward with preparation of our BLA through potential filing in the third quarter of this year, knowing this preparation will also be critical in supporting the potential BLA/NDA filing, which should be based on the results of the UNITY-CLL overall response rate data. Next, I’ll give you a short update on our UNITY-NHL trial. As you may be aware, this is a multifaceted program evaluating single-agent umbralisib and building towards evaluating the U2 double combination of potentially triple combinations using U2 as a backbone across various subtypes of non-Hodgkin lymphoma or NHL. The UNITY-NHL trial currently has three distinct cohorts, evaluating the different subtypes of NHL. So, let’s first start with the Follicular Lymphoma cohort. In this cohort, we are currently enrolling relapsed or refractory follicular patients into a same arm of umbralisib monotherapy. Our goal is to enroll approximately 100 patients and plan to achieve this by made 2018. As a reminder, the panel listed was recently approved with the data from a similarly designed and sized study. Next. The marginal zone cohort. Similar to the follicular, we are also currently enrolling relapsed or refractory patients into a single arm of umbralisib monotherapy. Our goal here is to enroll about 60 patients and we plan to achieve this in the fourth quarter of 2018. Again, as a reminder, here we are following the ibrutinib, the recent ibrutinib approval, which is based on a similarly designed and sized study. Lastly, within the UNITY-NHL trial, we are evaluating a cohort of patients with relapsed or refractory diffused large B-cell lymphoma. This is a more aggressive form of lymphoma and we are now enrolling into a single arm of U2 plus bendamustine. We are targeting complete enrollment into the U2 plus benda cohort also by mid-year. Now, let’s review of Multiple Sclerosis program. Starting with the updated Phase 2 data of ublituximab and MS, which was most recently presented at the American academy of neurology annual meeting. The updated data now include safety data from all 48 patients through 24 weeks enrolled the Phase 2 and has previously presented ublituximab remained well-tolerated across all patients, including those receiving a rapid infusion as low as one hour for the 400 mg dose – 450 mg dose, which is the dose we chose for our Phase 3 program. With all patients now through 24 weeks of treatment, the data also continues to affirm the efficacy of ublituximab with sustained B-cell depletion, 100% reduction in T1 Gd-enhancing lesions, and most importantly, an annualized relapse rate that remains below the ARR observed with ocrelizumab, the only approved anti-CD20 monoclonal antibody in MS. We are extremely pleased and look forward to presenting the final Phase 2 data which will include 48-week data on all patients enrolled at a major meeting later this year. This data supports our ongoing Phase 3 program in Multiple Sclerosis known as the ULTIMATE trials. As a reminder, we are running two identical Phase 3 trials under special protocol assessment with the FDA evaluating ublituximab in relapsing forms of MS. The trials are currently enrolling in both the United States and Europe, and we are targeting complete enrolment of approximately 850 patients across the two trials by the first quarter of 2019. With ocrelizumab, the only approved CD20 for MS tracking to generate approximately 1 billion in sales in its first year, we believe this represents a major opportunity for us where we can compete on price and convenience. With that, I’d like to turn the call over to the conference operator to begin the Q&A session. Following which, I will return and provide some concluding remarks, as well as review our remaining milestones for 2018.

Thank you. [Operator Instructions] Our first question is coming from Yatin Suneja of SunTrust Robinson Humphrey. Please go ahead.

Good morning guys. Thanks for taking my question and congrats on all the progress. Mike, could you just comment on the feedback you are getting from experts on when to unblind it? When would you make that decision, are you able to look at the blinded data, I am not sure the blinded data will tell you much, but just trying to understand the basis of your decision and when that might come?

Yes. I would say in terms of expert guidance on the timing of that is not as important. I think we have an enough data from our prior clinical trials to know note that it is likely that moving from 6 and 9 to 12 months to follow – [indiscernible] partnership a little over 11 months. It has been now to a few more responses. It is not a major – it will not be a large number, I mean the vast majority. Substantially all responses will be seen by 6 and 9 months. Like I said, nine months is already built into the 2Q estimate. So, I don't think there is any expert advice and I think more of the advices come from our shareholders who reach out since we had this conversation last quarter [indiscernible] reached out and said just wait for the extra 30, 45 days and pick up those extra few responders. So, I think we are certainly leaning in that direction, where we haven’t made a decision yet, I think the final decision would be sometime probably in the next several weeks or so, and we're getting close to making that decision, but we haven't made it yet, we're still keeping our options open, again because it is not a – probably won’t be material either way, but for sure though it will be a few, a handful of responses that will occur between 9 and 12 cycles.

Okay, got it. And then this phenomenon of deeper responses over time that is probably less likely to occur on the chemo immunotherapy control arm, correct?

Yes. So that’s the other side of the coin. It is a very good point. So, the control arm, since the patients are treated for months 6 months and stopped, the optimal response would be basically at the time that the patients are stopped dosing, so that 6-month response, so carrying it forward and following those patients for 6 to 9 and 12 months is not likely, you are not likely to see a late onset responder in the treatment group. The other thing that would be important too is we will have additional follow-up on those patients. So, again, particularly for the patients in the control arm, but all patients for sure, but mostly in the control arm. If you recall with the GENUINE study, we did open up a little bit earlier and we noted that there were still some confirmation responses that needed to be verified. In this case, we would have for the most part I would say 100% of the control arm responses confirmed or not conformed and you know it is possible that some of those responses will not be able to be confront. So, I think the longer – putting aside whether we open it in 9 cycles or 12 cycles, the longer we go it is to our advantage because we do know that we see late-onset responders with these types of drugs, not just our drug combination, but BCR antagonists alone and with CD20 we feel later on responses. And with chemo-based conventions, the responses are typically shorter lived, which is why progression free survival of those types of regimens are typically shorter than those BCR antagonists. So, again I think [indiscernible] the longer it goes probably incrementally better, but again it is around the margins once you start pushing up too far.

Got it. Maybe just one more question on the UNITY enrolment criteria. So, I think our understanding is that the trial is open to all lines and you are not screening for any particular mutation, so maybe could you just help us understand where you able to enroll high-risk patients? If that is the case, what percent that might be and your assumption for how the control-arm might perform in those high-risk patients? Thanks.

Yes, so the trial was an all comer, really what I would describe, I think most people would describe it is a real-world experience trial. So, it was primarily in the community and it was, you know take pretty much anyone who shows up at the door, and in that setting we would expect that we will have sort of a normal distribution of high-risk patients and ordinary risk-patients, and I think what we learned from our GENUINE trial was that, probably somewhere between 30% and 35% of the patients ought to be in some high-risk category. We have done a screening protocol pretty sure that’s where it came about, 30%, 35% of the patients screened in relapsed/refractory setting at high-risk features. In the frontline setting, I don't have the published data, but I think it is probably between 5% and 20% would qualify for a high risk that would include [indiscernible] and 11-Qs. So, yeah, the expectations – the expectation for the performance of chemo-based treatments in high-risk patients is a lower than in ordinary risk patients, it is certainly not zero, but it has been a come down quite a bit. So, we’ve referred to the HELIOS trial, where patients were randomized to ibrutinib-BR versus BR alone and that particular case the 17 [ph] piece, where specifically excluded and the overall response rate is like 68% there. So, I think in this setting chemo plus CD20, we would expect a lower response rate for those patients.

Got it. Just following up, I promise, last question. So, the split that you said about high-risk category both in relapsed/refractory and frontline, is it similar across community and academic center? And also, for UNITY-CLL, could you tell us what sort of split was in terms of oral environment economy or what percent you might be community and academics? Thanks.

Yes, just in terms of overall enrolment, I think in the U.S. there is a clear advantage to the community-based centers. I don't have the exact, unfortunately exact percentages of patients that came in and what the distribution was based on community versus academics, but certainly we had a very large community participation in the trial, and again I don't know if it had any reflection on frontline versus relapsed/refractory.

Great. That’s all I have. Thank you so much, and again congrats on all the progress.

Thanks, Yatin. Appreciate it.

Thank you. Our next question is coming from Matt Kaplan of Ladenburg Thalmann. Please go ahead.

Hi good morning guys.

Good morning.

Congrats on the progress. Just to focus a little bit more on UNITY-CLL. Help us understand in terms of the timing for PFS endpoint, obviously that is your primary endpoint for the study, when should we expect that to read out?

Yes. That’s a good question Matt. If I had a crystal ball I’d be able to give you a really good answer, unfortunately I don't. So, our best guess today we’ve been saying is what we think pretty normal distribution curve over 2019, put a little tail [ph] to latter part of 2018 and for the tail [ph] into 2020, and I would say that’s our best guestimate today of the possibilities of when that PFS will read out, but I think as we move towards the end part of this year we will certainly have a much better sense of where we are. We will have a good sense of how the events are coming in, and what the rate of the events coming in, so hopefully sometime around the end of the year, perhaps in association with our ASH, analyst meeting that we have we could possibly provide some guidance a little bit more clarity on when we think of that PFS will readout.

Very good. Okay. And then shifting to the pipeline a little bit, after all discussion on UNITY-CLL, can you give us a sense in terms of the timeline for moving your BTK inhibitor into the clinic?

Yes. My fingers are crossed, so hopefully we will get into in the clinic in next few months here and. The teams have been working extremely hard. We know the clinical trial has started in China, so certainly first-in-human has occurred, so that is the good news. Our own first-in-human will start, like I said, hopefully in the next few months. We are again pretty close. There is no real issues other than just putting all the logistics together you know on every time to take over a program, particularly this time over translating the Chinese IND to U.S, and foreign, potential filings, it just takes a little bit of time and honestly, we have resources that have been primarily dedicated to UNITY and BLA preparations for GENUINE, but it has come on, I think we should have had it done first-in-human in the next two, three months.

Great. Thanks for taking the questions.

Yes, you're welcome.

Thank you. Our next question is coming from Reni Benjamin of Raymond James. Please go ahead.

Hi, good morning guys. Thanks for the taking the questions.

Hi, Reni.

HI. Can you remind me Mike, is UNITY under an SPA, and if it is, does changing, I imagine that there is a clear-cut stats plan that is usually filed with the FDA and I imagine that it is all based on number of events even with responses and does pushing that in anyway impact the SPA?

Right. So, we do have an SPA that is correct. So, PFS is event driven, so numbers of patients actually don’t matter in a PFS analysis, so as long as you get to the events you are satisfied with the SPA. With respect to the overall risk response, this gets us to an analysis plan since it says, I think six months or greater follow-up on the patients and we could open up. So, again, we think we have some flexibility. We are certainly being cautious and careful in what we have checked now to make sure that everything we do is okay with the FDA. So, but I don’t – certainly from the PFS and the event driven stuff there is no effect and so the overall response, not being event driven it is patient driven, we certainly would be more cautious and when we open that up and how we do it, and we are doing that.

Got it. And then just from our DSMB perspective, can you remind us, is the DSMB meeting every three months or so or is it every six months, and even after you have, I guess taken your first look for the responses, is there any sort of a statistical penalty that needs to be paid?

No statistical penalty, we again, the ORR was allocated alpha from the very beginning. So, it is part of the statistical analysis plan. So, we did allocate some alpha to that analysis and what we’ve said is that with that allocated alpha we saw the 90% power to show again powerful at 15% difference in overall response.

Got it. And then just the DSMB meetings.

DSMB meetings, I have to check with the [indiscernible] team, but I think it is every 6 months to 9 months or so. My guess is that at this point the plan is probably to do the next DSMB as part of the overall response analysis and when that occurs we will do the next DSMB I assume and we will check that.

Got it. And I guess just one final one from me, with the BTK inhibitor, can you talk a little bit about how you think, well, so how you feel this BTK inhibitor is different than all the others that have been developed and kind of where it might fit ideally in the landscape? Or does it kind of just become another option that’s out there that could compete primarily in price?

So, I mean, I think the latter is certainly true to certain extent. So, we could be out there just competing in price, but for us it’s more about building combinations. So, we’ve seen some really strong data of U2 plus umbralisib across multiple disease areas. So, I think it’s not about developing the next BTK and competing as a head-to-head again, I think, if the preclinical profile comes to fruition in the clinic it should be a very attractive option for the patients, but that’s, there will be three or four BTK’s approved at that time. The real excitement is how do we package it into a combination with U2 or other potential combinations out there or that we may acquire going forward. So, we are obviously – we still believe that owning every mechanism is important and so to the extent we have the [indiscernible] resources, we certainly have the desire to continue to build-out the pipeline. So, we do think that there is, you know opportunities whether it’s U2 plus BTK or BTK plus, perhaps PDL1 or even a quad combination of U2 BTK PDL1, we have got lots of room to be created within active BTK in the portfolio and certainly as part of that creativity, how do we price it in a way that makes sense for [indiscernible]. That continues to be our focus as making sure we continue our ways through these combinations come up with better pricing options, but again I don't think the plan is to just sort of sorted out there, it is a single agent BTK and see what happens, I think that integrates the strategy that we’ve always had, I was just building these combinations.

Perfect. Thanks for taking the questions and good luck.

Thanks, Reni.

Thank you. Our next question is coming from Madhu Kumar of B. Riley FBR. Please go ahead.

Okay. So, thanks for taking the question. Thinking about the ORR readout, are there any aspects of the UNITY-CLL besides picking up additional responders that are kind of key considerations for the timing of the ORR readout?

I don't think so. I mean that’s really, I think – overall having more follow-up is a good thing. We’ve had multiple meetings with the FDA, and multiple setting not just around UNITY-CLL, but around all of our programs and they are pushing for additional follow-ups, which for them gives better information on duration of response and gives better information on long-term tolerability. So, certainly those are factors and we're weighing in we believe that it is a better decent information then it is all done to have longer follow-up across the board. So, it’s not just about providing potentially some pretty modest incremental advancing and overall response, which again is a good thing and why not it’s 30, 45 days take advantage of that, but it is also the concept of more follow-up is just better overall that provides like I said duration of response information and long-term tolerability of their information.

So, following from that, when you speak to experts of the CLL space is duration of response a key consideration for them in terms of drug choice?

Yes. I think anytime you are looking at overall response rate you want to see one of two things right. You want to see, if your comparing it to something, you don't want to see comparable duration response or greater duration response. And it’s kind of a little bit of a balancing act, which is if you have a modest or relatively modest improvement in overall response you're going to want to see a longer improvement duration or response. If you have a more, a larger magnitude of increase in overall response then a comparable duration response is just fine. I would say, if you filed the large [indiscernible] if you can take twice as many people and give them the same duration response you are going to improve PFS. Likewise, if you only improve overall response by a modest amount, but you double the duration of response you're also going to improve PFS and I think in between is sort of the balance of how people look at the data, but I don't think there is any particular expert opinion other than that concept applies reversely to how you might see a benefit in progression free survival.

All right. Great. Thanks for taking my questions.

No problem.

[Operator Instructions] Our next question is coming from Matthew Andrews of Jefferies. Please go ahead.

Hi, good morning Mike. Just a follow-up on your questions related to the statistical spend for ORR with UNITY-CLL, I know you can't go into specifics, but can you just walk us through the thought process and how you allocated that alpha to response versus PFS bearing in mind the ultimate primary endpoint is PFS and that’s what you need to get full approval in the U.S. Can you just talk through the thought process because UNITY-CLL is such a unique study?

Yes. So, look we have been pretty candid up as we have allocated most of the alpha to progression free survival that’s going to be the most important endpoint for the FDA, that’s going to be the most important endpoints for prescribers and [indiscernible] that’s the most important endpoint for patients, they want to – you know that they may not live longer. So, clearly, we wanted to make sure that we allocated the appropriate amount of alpha to that end point because it is obviously the most important, but again in the context of this setting we have a firm with respect to the overall response because we have so many patients involved. To get to a 90% power in binary outcome study we have a lot of patients to do that. So, again I think the net effect there is we’ve allocated the bulk of the alpha to the PFS endpoint. We have lost enough alpha given the number of patients that we have just go maintain that 90% power for that 50% overall response.

Okay. Thank you. And where are discussions with CHMP assuming a statistically significant clinically meaningful improvement response and UNITY-CLL do you think there is the option that you could file based on response rate in Europe? Thanks.

Sure. Thanks Matt. Yes, so we certainly think there is the possibility to file in Europe. I think once we get the data we will certainly start working on that. We haven't spent a lot of time working on that today, we spend most of our time with its time in this trial with the FDA and working closer with the FDA on it. So, we think that, let’s get the data in hand and we will think about the global filings on top of the U.S. filing.

Got it. Thank you.

Thanks Matt.

Thank you. At this time, I’d like to turn the floor back over to Mr. Weiss for any additional or closing comments.

Great, thank you and thanks everyone for joining today. I just would like to wrap up today's call by reviewing again, once again our key goals and objectives for the remainder of 2018. Obviously, based on the Q&A everyone is aware that the big one for us would be coming up on the presentation of our top line overall response rate data from the UNITY-CLL Phase 3 trial. Again, this is U2, ublituximab versus umbralisib and frontline and the last refractory chronic lymphocytic leukaemia. We also, as we mentioned in the prepared remarks are finding and preparing to file the company's first BLA/NDA before the end of this year. So, again we are pushing forward with that. We look forward to completing enrolment in the current-arms in the UNITY-NHL trial again focusing on the follicular margins zone and [indiscernible], so cohorts that we are currently enrolling and finally we present, we plan to present updated clinical data from our ongoing oncology studies, and the final results from Phase 2 trial ublituximab and MS later this year, which again I think is something that I’m looking forward to see, if not all, results would be able to compare those results to the final Phase 2 results for okra. So that would be exciting and interesting as well. So again, just on behalf of all of us at TG, we would like to thank all of the investigators who have worked closely with us, particularly the patients who have joined our trials and thank our shareholders who have been very supportive of us. So, again thanks everyone for joining us and have a great day.

Ladies and gentlemen. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.