Is TG Therapeutics a Buy?

George Budwell, The Motley Fool

TG Therapeutics (NASDAQ: TGTX), a clinical-stage hematology and autoimmune disease specialist, has been crushing the broader stock market this year. The biotech's shares surged higher in response to the news that the company's relapsed and refractory marginal zone lymphoma (MZL) candidate, umbralisib, may be up for an accelerated approval from the Food and Drug Administration, perhaps as soon as next year.

In a mid-stage trial for MZL that read out earlier this year, the experimental drug easily met its primary endpoint of overall response rate. And the FDA recently granted umbralisib a Breakthrough Therapy Designation for this indication. In short, the stars appear to be lining up for TG and its promising B-cell lymphoma drug. 

Up close image of human blood showing a malignant cell in the center.

Image Source: Getty Images.

Does this red-hot biotech stock have more room to run, or should  investors take their profits now? To answer that question, let's consider the company's clinical pipeline and its commercial prospects. 

What's on the horizon? 

Predicting the near-term fates of clinical-stage biotechs is never easy. These companies, after all, are prone to wild swings in their share prices due to a lack of strong institutional support, and the chaotic nature of the clinical trial process in general. Having said that, TG does have the ingredients in place to continue its recent growth trend for a long-time.

The lowdown is that umbralisib seems to sport a favorable efficacy and safety profile compared to other drugs in its class, as well as to its chief competitor in later-line MZL -- AbbVie's (NYSE: ABBV) Imbruvica.

If this narrative holds through the drug's anticipated accelerated path toward approval (the FDA hasn't agreed to this regulatory arrangement yet), it should be in line to rack up a few hundred million in annual sales in the relapsed/refractory MZL setting. That's quite a haul for a company with a current market cap of $686 million. 

But there's even more to like about this biotech. TG is also aiming to tack follicular lymphoma and small lymphocytic lymphoma onto umbralisib's label in the near-future. While those two indications are attracting a significant amount of attention from potential competitors, the commercial opportunity should still be significant enough to move TG's share price higher in the event that umbralisib hits the mark as a treatment for these other lymphomas. 

Lastly, TG is awaiting the maturing progression-free survival data for the combination of umbralisib and ublituximab in patients with chronic lymphocytic leukemia. This pivotal trial could open up yet another high-value indication for TG's hematology franchise. Although the company hasn't pinned down a target date for this next clinical update, TG expects it to occur sometime between the end of 2019 and the first half 2020. 

Time to buy?

The good news is that TG appears poised to get at least one drug on the market in the near future, based on the clinical data released thus far. That should help it slow down its blistering cash burn rate, reduce its need to raise capital on a regular basis.

The bad news is that TG is attempting to break into a stacked field. AbbVie, Gilead, Bristol-Myers Squibb/Celgene, Verastem, and others sport drugs that would compete directly against TG's lead product candidates in hematology. Given that, its experimental drugs will need to post stellar efficacy and safety results; otherwise, they may flounder in the marketplace.

After all, the biotech heavyweight AbbVie has placed a heavy emphasis on this particular space over the past few years with its development of both Imbruvica and Venclexta, and that could make it next to impossible for smaller companies like TG to carve out a profitable niche.  

Bottom line: Investors may want to take a wait-and-see approach with this upstart biotech, despite its recent share-price rise. Additional clinical updates might warrant an entry soon, but a less-than-stellar readout for any of these ongoing heme trials could spur a hefty pullback. In other words, TG's stock definitely makes the grade as a top watch list candidate, but only ultra-aggressive investors should consider buying it ahead of these all-important clinical milestones. 

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George Budwell owns shares of AbbVie and Celgene. The Motley Fool owns shares of and recommends Celgene and Gilead Sciences. The Motley Fool recommends TG Therapeutics. The Motley Fool has a disclosure policy.