TG Therapeutics, Inc. (TGTX) Q1 2013 Earnings Report, Transcript and Summary

Greetings and welcome to the TG Therapeutics First Quarter Financial Results & Business Update Teleconference. At this time all participants are in a listen-only mode. A brief 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 our host, Ms. Jenna Bosco, Director of Investor Relations. Thank you. Miss, you may begin.

Thank you. Good morning and welcome to our conference call regarding TG Therapeutics first quarter 2013 financial results and business update. I’m Jenna Bosco, TG’s Director of Investor Relations, and I welcome you to our conference call today. Following our Safe Harbor statements, Sean Power, TG’s Chief Financial Officer will provide a brief overview of our financial results and then turn the call over to Mike Weiss, the company’s Executive Chairman and Interim CEO. We will provide an update on the ongoing development of our novel third generation anti CD20 monoclonal antibody, TG-1101, and our novel PI3K delta inhibitor TGR-1202. Before we begin, I would like to remind everyone that various remarks that we make about our future expectations, plans and contracts constitute forward looking statements, for purposes of the safe harbor provision, 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 results to differ materially than those indicated. Factors that may affect TG Therapeutics operations include various risk factors and uncertainties that can be found on our SEC filings. This conference call is being recorded for audio rebroadcast on TG’s website www.tgtherapuetics.com, where it will be available for the next 30 days. All participants on this call will be on 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 2013, 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 yesterday evening and can be viewed on the Investors & Media section of our website at www.tgtherapeutics.com. As of March 31, 2013 the company had cash and cash equivalents of $15.2 million as compared to the $16.5 million at December 31, 2012. Included in our cash balance, as of March 31, 2013 was approximately $937,000 from the exercise of warrants with an exercise price of 225. Consolidated net loss for the first quarter ended March 31, 2013 was $3.7 million, or $0.17 per share, compared to a consolidated net loss of $17.4 million during the comparable quarter in 2012, representing a decrease in consolidated net loss of $13.7 million. Included in the consolidated net loss for the quarter ended March 31, 2012 was $16.6 million in noncash stock expense associated with an in-licensing arrangement recorded in conjunction with a license for TG-1101. This decrease in non-cash stock expense was partially offset by an increase in other research and development expenses of $1.1 million, principally related to the TG-1101 and TGR-1202 clinical development programs. Consolidated net loss for the first quarter ended March 31, 2013 also included $1.9 million of noncash compensation expense related to equity incentive grants. With regards to our cash position, we continue to operate with a very controlled burn rate relative to our peers. We expect our cash burn to average between $2 million and $3 million per quarter and believe that our current cash will be sufficient to take us into the middle of 2014. Finally, we have no material update from our year-end’s call held in March with respect to our NASDAQ listing. We continue to await a final decision from NASDAQ. I’ll now turn the call over to Mike Weiss, our Executive Chairman and Interim CEO.

Thank you, Sean. And thanks to all of you for joining us on this call today. The first quarter of 2013 proved to be an exciting start to what we believe will be a transforming year for TG Therapeutics. On behalf of our small but highly focused team I would like to now share an update on the company’s recent business and clinical activities. First let me highlight some of the important recent clinical accomplishments. In January, we launched our First-In-Human phase I dose-escalation Trial for our novel PI3K-Delta Inhibitor, TGR-1202. In February, we announced that we opened our first expansion cohort in the company’s phase I/II single agent trial of TG-1101 in patients with the relapsed or refractory Non-Hodgkin lymphoma. Also during the quarter, we submitted an important clinical and pre-clinical data updates to the three major medical meetings happening next month; the American Society of Clinical Oncology meeting, typically referred to as ASCO; the European Hematology Association meeting and the International Lymphoma Conference in Lugano. We are pleased to announce that we had abstracts accepted for all three meetings, including a poster presentation at ASCO by Owen O'Connor of the results from our phase I dose-escalation trial for TG-1101 as a single agent in patients with Rituxan relapsed or refractory non-Hodgkin’s lymphoma. We have been very pleased with the performance of TG-1101 both from a safety and efficacy perspective and look forward to sharing detailed information at the conference to the medical community. Now, I’d like to briefly update everyone on the progress of our clinical trials for our two pipeline products. Let me first remind everyone that to date we have completed one study for TG-1101 and have three ongoing studies, two for TG-1101 and one for TGR-1202. Our completed study was our First-In-man phase I trial…

Thank you. We will now be conducting a question-and-answer Session (Operator Instructions). Our first question is coming from Jonathan Aschoff of Brean Capital. Please proceed with your question.

I was wondering where you guys see TGR-1202 sitting in the treatment landscape with Pharmacyclics’ Ibrutinib, given what they have shown thus far with that BTK inhibitor in several liquid tumor types?

Look we think 1202 may have some advantages to those other compounds. Obviously we are too early in testing to know it for sure. But we think we may be able to produce a once-a-day drug which again would be more convenient than the others, that could be an interesting possibility. We also know that there are some PK challenges with Gilead’s compound and perhaps, again too early but, perhaps we will be able to overcome those and drive additional activity with our compound. Ultimately, we think that these drugs will all get used to a certain extent, when you are thinking about third, fourth, fifth line treatments my feeling is that you are going to be cycling between different CD20s, advanced CD20s like ours and GA101 Obinutuzumab, you are going to be cycling between PI3K deltas because they are all going to have probably slightly different resistance profiles based purely on the actual chemical entities themselves versus the mechanism. So our belief is that there is plenty of room for everyone to be involved, that we think we may be able to bring some additional interesting attributes to the table. But ultimately we believe that each of these drugs will get significant use. We certainly believe that the combination of the 1101 plus 1202 puts us in a unique position to drive early combination studies and again once we do and we're going to establish ourselves as standard of care in certain combination settings there is no reason that anyone would substitute out our PI3K delta for someone else’s if we’re the approved regimen. So we think there is one profile of the drug could be differentiated. We think that all the drugs will be used and we certainly think that combining with our antibody gives us quite a competitive advantage.

Having said that given what I guess you have already seen with your pre-clinical combo of 1101 and 1202. Could you elaborate at all on the design of the 1101-1202 combination study or is that too premature?

It’s probably little bit early. No doubt the initial study will simply be a dose-escalation, probably a mini dose-escalation as I think we’ll have a pretty good understanding of the two drugs. There shouldn’t be too much overlap in toxicity. So we would assume mini dose-escalation, but there will be a pretty standard phase I/II study and basically all (inaudible) with relapsed or refractory NHL or CLL. All the patients will have to have been pre-treated with the Rituxan, so at a minimum Rituxan relapse and ideally as many Rituxan refractory patients. And then from there it will really be a function of identifying the right regulatory strategy for approval of the combination. Again our feeling it would be probably in a second, third or fourth line setting versus some standard of care at that point in those settings and that would be in some sub-type or histology of lymphoma or CLL. But it is too early to precisely predict which one we will go after first. But we think that it’ll be highly active; I mean assuming that 1202 is active again making one logical leap here until we have more data. But assuming 1202 is as active as the Infinity or the Gilead compounds then we do believe that the combination with our antibody will be highly, highly active and will give us multiple opportunities to find addressable markets.

Thank you. Our next question is coming from Matt Kaplan of Ladenburg Thalmann. Please proceed with your question.

Congrats on the progress and efficient burn rate as well. Impressive.

Yes, we definitely don’t like to spend money unnecessarily.

I want to dig in a little bit to the ongoing studies that you have for 1101 and 1202. Starting with 1202 first, what can you tell us about where you are so far in that phase I dose-escalation? I know you started at 50 mg but was it once it once a day, can you give us a sense of where you are in the dose-escalation?

Sure, so basically we are about to launch our third cohort and again I think that’s why we are predicting probably the fourth cohort we will have information on it by late summer. And again it’s a hard process to do these dose-escalations but once you get through them, it’s nice and you just move very quickly. But we’re moving at a pretty good clip and again we have been predicting about 60 days between cohorts. We are running at probably 65 days I think between cohorts. So I think it’s going pretty well, all things considered and so far so good. We feel comfortable on the safety side of things. We haven’t seen anything untoward with the compound and we're excited to keep dose escalating. I think as soon as we get through - again this cohort will start imminently the next cohort within 60 days thereafter. Once we get that those two cohorts added to the two cohorts we can run the PK analysis on the whole group and again at that point make a determination one whether we think we have a once-a-day or twice-a-day drug and two, to try to predict when we think we’ll hit the IC90, if ever, right, who knows but that’s the goal. So I think we are in pretty good shape, target is like I said, by the end of the summer to have a good sense of where we are on the PK profile. And then end of the year, we will soon have a lot more patients involved in the studies for the ASH presentation. We will show, I think at that point we will be able to run the PD parameters. We’ll certainly have a pretty good size safety database at that point. And fingers crossed, hopefully we will have some preliminary signs of efficacy but again that will be dependent on the PK and our target dose for activity. So we are just blocking, tackling and pushing forward.

Will you be able to launch the dose confirmation segment of the study sometime in the summer or will you wait till later in the year to do that?

It’s completely variable. It depends on where we are seeing basically the PK profile and if we are hitting the IC90s if we're seeing IC90s and we are seeing responses whether nodal or otherwise. Yes, we will definitely start to do expansion cohorts. I think before that we’re just kind of waiting to see what happens. It could happen but we won’t know until we see it.

And then in terms of 1101 I guess you’ve launched some expansion cohorts so far. Can you give us an update on where those stand in terms of the NHL and CLL expansion cohorts in mono-therapy study?

Yeah, sure, I don’t have - I know we've added five more sites just recently. Patients are coming out; I don’t have an exact number of how many patients we have enrolled in the expansion cohorts right now.

And I guess the new thing that you announced this morning is that you completed the dose-escalation component, up to 1200. And with seeing no DLTs, do you think you’ll have to go to a higher dose in the future or is that sufficient where you are?

Yes. For the moment we are happy with our dose level. We originally started the expansion cohorts at 900 because we were comfortable with the activity we’d seen up and through 900. I think the 1200, for the moment, looks and feels quite safe and easy to use, so we will certainly do a 1200 expansion cohort. I think we won’t dose escalate until we finish those two pieces and assess the activity and then probably simultaneously consider a higher dose cohort. It’s hard to really tell if we are seeing, if there is going to be more of just response how high you go to continue to push for activity between 900 and 1200 is kind of in terms of actual milligrams used is pretty close to the dosage GA101 is using, in terms of at least on a single infusion basis. And they did a lot more work on dose response, I think they did see dose response between what they considered their low dose and high dose and I think 1000 was considered their high dose. So I think we are in a pretty high range already. As like I said, we have seen activity all the way up the dosing escalation portion of the study. So we feel pretty good about where we are. We think we have two good options with 900 and 1200, and we will see, once we do the expansion cohorts, if you feel like we want to try and see if we can drive more activity, we certainly have the option to amend the protocol and do another dose-escalation cohort.

And I guess, in the study are you continuing to see, after that first infusion, where you have some infusion related reactions and subsequent infusions [a termination] [ph] or no infusion rate reactions at that point? Is that continuing?

Thus far, we haven’t seen any grade three or four infusion-related reactions in patients with a non-Hodgkin’s lymphoma. So when we do see them in those patients, they are either grade one or grade two. And I can pretty confidently say although I don’t have the data in front of me that, rarely does it occur after the first infusion.

And then one last question on 1101 in terms of the combo study with Revlimid. Can you update us where you are on the dose-escalation there?

We are in the second dose cohort so we are at the 600 mg dosing level. And we are pushing forward - again that study admittedly was moving a little bit slowly at first because of the issues associated with Revlimid and reimbursement. We were able to get Celgene recently to agree to provide study drug for that study, which will certainly help them improve the recruitment and we’re already starting to see the effects of that. So we are looking for that to start to move pretty rapidly shortly.

Sounds good. Congrats on the impressive progress.

Thanks, Matt. Appreciate it.

And your next question is coming from Joe Pantginis of ROTH Capital Partners. Please proceed with your question.

Couple of questions I just wanted to drive home regarding the competitive landscape. My first question is somewhat rhetorical, but I just wanted to drive it home either way. With regards to 1202, maybe just a little bit of feedback you get about why the PK (inaudible) support wants to make their seniors importance.

It is cancer and people typically won’t forget to take their meds. But it's always better to have it once a day. It's always more convenient because you are going to always have a better compliance rate and ideally a better outcome. So I won’t say that this is the thing that is going to make or break. The jargon we are inviting everything on once-a-day, we don’t even know if we have a once-a-day drug. That’s something we want to oversell that. But it's certainly a nice to have feature, we want to do once-a-day. Certainly going forward in the future, if there’s other drugs that are once-a-day and you can make a combination regimen of two once-a-day drugs. And turn it into a co-formulation that can be an attractive opportunity for others to want to partner with us. So it does add that additional attractiveness to that once-a-day feature. But again, I certainly don’t want to oversell it in terms of once-a-day versus twice-a-day, since we don’t know if we are once-a-day or twice-a-day. And it is cancer patients will always stick to their meds.

Just to drive home the landscape regarding ibrutinib, Dr. Connor obviously made some comments in the past about ibrutinib is not going to be (inaudible) in the end despite their very positive data. And they are going to certainly look towards combinations in the clinic. Just wanted to get any commentary, is the feeling changing or is the feeling the same especially since the field continues to evolve with ibrutinib receiving so far three breakthrough designations already in the lymphoma space.

I personally think from the data, certainly I don’t have the insider data, but very few to date I have ever seen, the best drug that I've ever seen in the treatment of these patients. And I wish it were my drug. But short of that, the one thing I can do is I can make sure that we do combinations studies with ibrutinib and we leverage the capabilities of both of our drug and their drug. Certainly, their drug has high rates of response. But it's not 100 % response rates, it’s a single agent. We do believe that using their drug plus our anti CD20 could drive response rates close to 100%. There is already evidence of that in combination with Rituxan and Ublituximab approaching with their high rates of response, approaching 100%. So we certainly think that the ability to take our drug, combine it with a ibrutinib and given to be better for the patients is a winning strategy. So we are, we think our drug is very, we want to hang ourselves as closely as possible. We think that our drug will improve the response rates of the patients taking ibrutinib. And we think that’s going to be a massive market opportunity. And if we could tag along and people think about, then they want to give them the pill they get about a few infusions of our drug at the same time, get a better outcome. That's where we want to position ourselves. We are certainly not competitive with ibrutinib in any way, shape or form, certainly from our antibody development program. We think that we are absolutely complimentary and probably very synergistic with them.

And then I guess when you look towards the ASCO conference besides sort of the obvious players like GA101 for example in front line CLL. Are there any players in CLL or NHL space that you are watching closely at ASCO?

You know, really just the usual suspects, GA101 studies on obinutuzumab are most interesting to us from the antibody development side. And then from the small molecule side, obviously it’s the work around that (inaudible) an affinity for the delta side, it's really (inaudible) everyone is focused on them as we are. And again I just think that overall this market is about to transform from $7 billion per year annual market to a $15 billion annual year for market. And patients are going to live longer, they are going to live healthier, they are going to have regimens that do not keep where they are today. And this is going to be one of the most remarkable (thesis) in the way patients are treated and how they survive. In fact in any disease in the last 20 years, CLL is probably the only other place where this has happened recently.

And then just lastly, if you don’t mind I’ll just sort of switch gears, because you mentioned the word partnering a little earlier in one of your responses. So obviously this year it’s very, very busy year with regards to data flow. We will have a lot of data present not only from the investment community but to potential partners. How does all this data flow fit into your general business development strategy?

For us, business development strategy is kind of a secondary outcome of our primary work of developing data sets. So we are going to have data like ASCO has been updated as a long way, even before and after, we’ll probably have the same exact posture which is, we are not aggressively looking for partnerships, but we will certainly take meetings, and have discussions and see if things evolve into something that's attractive. Our goal is to build value in the company and we think the most important way to do that is to drive the data sets. So that is our primary focus. What comes out of that whether it's a partnership, or an acquisition, or not any of that, and we just end up having a nice evaluation, we can raise money, we can go forward and develop the drugs as robustly and broadly as we’d like. I see all those as potential future options.

Thank you, our next question is coming from Ren Benjamin of Burrill & Company. Please proceed with your question. Ren Benjamin - Burrill & Company : Hey good morning guys. Congratulations on the progress. Thanks for taking the question. Just very quickly, on 1202, could you give us a sense as to what dose you would predict, you might see activity just based on pre-clinical data?

My impression is quite variable, because if you look at the different species, the one thing you have to look at is you are talking about four mice, four rats, two dogs and two monkeys. You have to try and make an assessment of what you think your target dose is going to be. But if I had to guess, I’d say somewhere between 500 mg and 1000 mg per day whether given as a single dose or the (IV) dose. But total drug of 500 to 1000 I think is a reasonable target range. Could it be a little bit lower or a little bit higher for sure. Ren Benjamin - Burrill & Company : And just so, I get a sense, you started at 50 mg by the end, and you are about to launch the cohort, are we just doubling the dosage in each case?

That's correct. We are doubling the doses through the first four cohorts and I think it grows by 50% from there. Ren Benjamin - Burrill & Company : While you wouldn’t expect that such early cohorts, but are there any patients that are still being dosed and going on in multiple cycles, for the first few cohorts?

Yes, we have most of the patients are still being treated. Ren Benjamin - Burrill & Company : And then just related to the combination of 1101 and 1202 can you just go through the rationale for evaluating two experimental therapies versus combination with an approved therapy to improve for proof-of-concept. And how that could be aligned from a regulatory perspective moving forward?

Let me start with the clinical strategy perspective and then move into regulatory. In clinical strategy perspective, wherever there is a novel single agent small molecule approval, we are more likely to use our antibody with that small molecule. So if BTK gets approved for one, two, or three single agent indications, for us, we wouldn’t try to take our combination into those indications. We are more than happy to just find ourselves with the BTK and/or to the extent that there is another PI3K delta approved there is a single agent, any indication, we certainly just leverage their label that already exists. The nice part is that, and the reason why I'm having both compounds analysis and problem is that collectively in the next three years, there will probably only be three or four single agents approvals in the small molecule class for us to (leverage). But there is probably another 25 sub populations lines of therapy, you have to look at the matrix of seven or eight, and overlooking any chance here of histology or sub characterization of CLL, and third, fourth and fifth line. We have got 25 boxes to fill. And of which, very few will be filled by the current agents which means that we have the only proprietary combination that can dive into some of those areas. So from a clinical strategy point, we are certainly happy and more than happy to work with the other agents with our antibody we've had single agent approvals. And then leveraging our proprietary combinations where they don’t. I think that this is a pretty exciting regulatory and competitive advantage. So from a regulatory standpoint, we think the agency is well open to novel combinations. I think (HEV) is driving this home. I think we are going to see the first novel combinations approved in HEV. But we are not the only ones looking at novel combinations in cancer therapy, there are a few large firms that have already put out announcements. They are just starting to investigational agent. The FDA is comfortable from a guidance standpoint. They have issued guidance and now you get to novel has just approved. We feel pretty comfortable that we can manage through those designs that they put out. And we are going to continue, I think most importantly for the combinations is that we continue to develop each drug individually. So we will have a good amount of safety data on both agents both on a single agent basis which is important.

Thank you. At this time, I would like to thank everyone for their participation they may disconnect their lines at this time. And have a wonderful day.