rating: buy · data drives value. in our opinion, tg’s pipeline currently boasts two strong...

Initiating CoverageHealthcare

October 27, 2014

TG Therapeutics, Inc. (TGTX)Rating: Buy

Reni Benjamin, Ph.D.212-356-0542

[email protected]

Two Blockbuster Therapies in One Company; Initiating with Buy Rating

Stock Data 10/24/2014Price $10.89Exchange NASDAQPrice Target $17.0052-Week High $12.4552-Week Low $2.97Enterprise Value (MM) $370Market Cap (MM) $415Public Market Float (MM) 16.0Shares Outstanding (MM) 38.13 Month Avg Volume 421,509Short Interest (MM) 3.10Balance Sheet MetricsCash (MM) $43.0Total Debt (MM) $0.2

Cash (MM): pro forma

EPS DilutedFull Year - Dec 2013A 2014E 2015E1Q -- (0.25)A --2Q -- (0.36)A --3Q -- (0.36) --4Q -- (0.34) --FY (0.81) (1.33) (1.39)Revenue ($M) DilutedFull Year - Dec 2013A 2014E 2015E1Q -- 0.04A --2Q -- 0.04A --3Q -- 0.04 --4Q -- 0.04 --FY 0.15 0.15 0.16

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Investment opinion. We are initiating coverage of TG Therapeuticswith a Buy rating and a target price of $17, based on a discountedrevenues and earnings per share valuation methodology. TGTherapeutics’ core franchise is comprised of a glycoengineered anti-CD20 monoclonal antibody and a novel PI3Kδ inhibitor targeting B-cell lymphomas. The company has multiple Phase 1 and 2 clinicalstudies ongoing with the potential to report updated data over thenext 12 months. In addition, with a SPA in place, the company ispoised to begin a registration study in combination with ibrutinib in4Q14. With two de-risked lead assets ready to target multi-billion dollartherapeutic areas, news flow to generate shareholder value, and acash position of $43 MM (pro forma), expected to fund operations until2H15, we believe TG Therapeutics represents an undervalued playerwith significant upside for the long-term investor.

TG-1101/TGR-1202: A blockbuster in tandem or separately. Phase1 and 2 clinical studies of lead therapeutic candidates TG-1101 andTGR-1202 have demonstrated excellent safety and a comparableor better efficacy relative to other marketed products. Preliminarydata evaluating TG-1101 with ibrutinib demonstrated a superior 100%overall response rate in relapsed CLL as compared to 43% foribrutinib alone and equivalent to ibrutinib in combination with Rituxan.Similarly, TGR-1202 has shown significantly lower liver toxicities whencompared to Gilead’s (GILD; not rated) Zydelig which suggests tous that potential combination therapies may be better tolerated withTGR-1202. Despite a growing competitive landscape, we believemultiple opportunities exist for assets displaying efficacy and betterside effect profiles to gain market share versus existing therapies.

Licensing and takeout potential. We believe the recent AbbVie(ABBV; not rated) mega-deal with Infinity (INFI; not rated) for theworld-wide rights to IPI-145 ($275 MM upfront and $530 MM inmilestones) underscores the upside potential at TG Therapeutics.While we believe that Pharmacyclics (PCYC; not rated) representsthe ideal suitor given the myriad of studies currently underwaycombining ibrutinib with CD20-targeting monoclonal antibodies andPI3Kδ inhibitors, we cannot rule out the possibility of separatepartnership/licensing opportunities for each asset.

Data drives value. In our opinion, TG’s pipeline currently boaststwo strong therapeutic candidates with excellent safety profiles. Ifsuccessfully initiated, the Phase 3 study evaluating TG-1101 andibrutinib could report results as early as 2016, representing afundamental inflection point for investors. In the meantime, ongoingPhase 1 and 2 studies in CLL and NHL have the potential to reportupdated results at the American Society of Hematology Meeting in4Q14, representing near-term drivers for investors.

Valuation. We value TG Therapeutics using a discounted earningsper share and revenue multiple analysis. Applying an 8x multiple to ourrisk (50%) adjusted 2023 revenues of approximately $1.01 billion anda 28x multiple to our 2023 earnings per share of approximately $4.63,we obtain a 12-month price target of $17.25, which we round to $17.

For definitions and the distribution of analyst ratings, and other disclosures, please refer to pages 40 - 41 of this report

DA

Restricted

Investment Summary

TG Therapeutics, based in New York City, is a clinical-stage biotechnology company focused on

acquiring, developing and commercializing innovative therapies for the treatment of cancer and

other large areas of unmet need. Currently, the company is developing two therapies targeting

hematological malignancies. TG-1101 (ublituximab) is a novel, glycoengineered monoclonal

antibody that targets a specific epitope of the CD20 antigen found on B-lymphocyte cell surfaces.

CD20 is an established target of monoclonal antibodies including rituximab, obinutuzumab, and

ofatumumab, all of which are currently approved for the treatment of B-cell lymphomas and

leukemias. Additionally, the company is also developing TGR-1202, an orally available PI3Kδ

inhibitor. PI3Kδ is another validated target whose expression is linked to the proliferation and

survival of B-lymphocytes, and was integral in the approval of Gilead’s (GILD; not rated) idelalisib.

The company also has a preclinical IRAK4 inhibitor program which was in-licensed from Ligand

Pharmaceuticals (LGND; not rated). IRAK4 is a signaling kinase that is dysregulated in tumors

that carry certain oncogenic mutations of MYD88, commonly found in patients with

Waldenström's Macroglobulinemia. Finally, Big Pharma’s interest in the treatment of B-cell

lymphomas has taken center stage given the upcoming patent expiration of rituximab. Notably,

AbbVie’s recent licensing deal for IPI-145 is potentially worth $805 MM and highlights the growing

interest in the space. Importantly, this deal only includes a PI3K inhibitor while TG Therapeutics

maintains the world-wide rights to both TG-1101 and TGR-1202.

Valuation

We value TG Therapeutics using a discounted earnings per share and revenue multiple analysis.

Applying an 8x multiple to our risk (50%) adjusted 2023 revenues of approximately $1.01 billion

and discounting additionally by 30% over 8.0 periods, we obtain a $16.79 target price. Applying a

28x multiple to our probability adjusted 2023 earnings per share of approximately $4.63 and

discounting additionally by 30% over 8.0 periods, we obtain a price target of $15.88. Averaging

the results from these two methods and adding the projected cash per share in 12 months, we

obtain a 12-month price target of $17.25, which we round to $17.

Newsworthy Events and Milestones for 2014-2015

TG-1101 in R/R CLL

Potential to commence the Phase 3 R/R CLL trial in combination with ibrutinib (4Q14)

TG-1101 / TGR-1202 in R/R NHL and CLL

Additional Phase 1/2 data from R/R NHL (4Q14)

Potential to initiate a Phase 2 combination study in R/R NHL (2Q15)

Potential to have combination data of TG-1101/TGR-1202/ibrutinib in R/R CLL (2H15)

TGR-1202 in R/R CLL, NHL and untreated CLL

Additional Phase 1 results from TGR-1202 as a single agent in relapse CLL/NHL (4Q14)

Potential to optimize micronized dosing schedules of TGR-1202 in monotherapy (1H15)

Potential to complete Phase 1 trial with Gazyva and Chlorambucil in previously untreated

CLL patients (2H15)

TG Therapeutics, Inc. October 27, 2014

H.C. WAINWRIGHT & CO. EQUITY RESEARCH 2

Risk Analysis

In addition to development, manufacturing, marketing, and financial risks associated with

emerging biotechnology companies, specific additional risk factors to be considered are as

follows:

Clinical/Regulatory Risk

TG Therapeutics current product candidates, TG-1101 and TGR-1202, target different receptors

and could have synergistic potential and both therapeutic candidates are in early stages of clinical

development. TG-1101 is currently in Phase 2 evaluation in combination with ibrutinib for MCL

and CLL, and Phase 1 evaluation in combination with TGR-1202 in hematological malignancies.

TGR-1202 is also being evaluated in a Phase 1 trial as a single agent therapy for hematological

malignancies. The current ongoing clinical trials may not generate statistically significant or

clinically meaningful results.

Commercial Risk

TG-1101 is chemically distinct from conventional antibodies by virtue of its engineered glycans.

Glycoengineered biologics may be more expensive to manufacture and supply to the end user

than conventional monoclonal antibodies, resulting in elevated cost of goods sold relative to

competing monoclonal antibodies that target CD20. Additionally rituximab is coming off patent

and at least one biosimilar will be expected onto the market by 2017. As such, TG’s products may

not obtain the market penetration and sales forecasted by our estimates or those of the company

given the competitive marketplace and pricing dynamics in place.

Financing Risk

TG Therapeutics has a cash position of approximately $43 MM (pro forma). With consideration of

ongoing Phase 1 and 2 trial costs as well as the possibility to initiate a Phase 3 trial in R/R CLL by

4Q14, we project burn rate of approximately $9 MM per quarter suggesting that the cash position

should be sufficient to fund operations until 2H15. In the event that an ex-US partner cannot be

found, the company may need to seek dilutive financing options via the capital markets in order to

complete development of the clinical pipeline.

Intellectual Property and Licensing Risk

TG currently has exclusive commercial rights and five US issued patents for TGR-1202 which

expire in 2021 and 2024. The TG-1101 platform is protected by a wide body of intellectual

property, including patent and patent applications which protect structure, mechanism of action

and method of use of TG-1101 as single or in combination therapy. In the US, the company has

seven issued patents protecting TG-1101 which expire 2021 and 2024.

Market Risk

Small-cap biotechnology stocks are inherently volatile and often illiquid. They are not appropriate

for investors with a low-risk profile.



Investment Highlights

Attacking Cancer by Inhibiting Established Protein Targets

The first successful monoclonal antibody (rituximab) contained a human IgG constant

region and murine variable CD20 binding region. The chimeric nature of the construct

allowed for a prolonged half-life mediating sustained downstream effects. Despite a

successful and historic launch trajectory (peak WW sales >$7 billion), patients on

rituximab treatment require extensive infusion times, are subject to hypersensitivity

reactions, and are likely to relapse over time.

Subsequent anti-CD20 monoclonal antibodies have attempted to address rituximab’s

shortcomings with varying success. Fully-humanized antibodies have been designed to

minimize the observed immunogenicity believed to be caused by rituximab’s chimeric

nature. Further modifications to the variable and constant regions have been attempted

to augment activity and antigen binding affinity to CD20 (obinutuzumab, ofatumumab). To

date, GlaxoSmithKline’s (GSK; not rated) Arzerra (ofatumumab) was granted full

approval for untreated CLL patients for whom fludarabine-based therapy is not

considered appropriate (2014) and accelerated approval in CLL patients who are

refractory to fludarabine and alemtuzumab (2009), while Roche’s (RHHBY; not rated)

Gazyva (obinutuzumab) was the first drug to be approved after receiving breakthrough

therapy designation.

While the landscape appears to have its fill of CD20 monoclonal antibodies, we believe

room exists, not necessarily from agents that can produce greater efficacy, but from

those that can be better tolerated. The majority of the products listed above are rarely

used as a monotherapy, but rather in combination with other agents with separate, and

sometimes overlapping, toxicity profiles. If novel CD20 antibodies with lower side effect

profiles are developed, we believe the big Pharma/big Biotech companies would pay a

substantial premium to harness the multiple revenue streams.

TG-1101 (ublituximab) Shows Strong Efficacy in Single Agent and Combination Trials

The prevalence of NHL exceeds 540,000 individuals within the US and the majority of

NHL patients receive rituximab, resulting in an overall market size of nearly $7 billion.1

Despite treatment with rituximab, approximately 50% of all patients will relapse.2 We

estimate the 2023 US and EU market size for indolent NHL to be approximately $13

billion with a second-line CLL market size reach approximately $1.2 billion.

TG-1101 is a third-generation, Type I chimeric monoclonal antibody which binds a

specific epitope of the CD20 antigen, displaying impressive results even in low CD20

expression B-cells. The constant region has also been glycoengineered to have high

antibody-dependent cellular cytotoxicity (ADCC) and moderate complement-dependent

cytotoxicity (CDC) activity, relative to rituximab (which has low ADCC but high CDC

activity) and obinutuzumab (which displays high ADCC but low CDC activity).

1 Surveillance, Epidemiology, and End Results (SEER) Program, Sagient Analysis 2014 2 Sagient Analysis, BioMedTracker 2014



Three clinical studies to date highlight a differentiated profile as both a monotherapy and

in combination with other approved therapies:

- Two monotherapy studies evaluating TG-1101 in both CLL and NHL demonstrated

strong efficacy and safety results. In the first Phase 1b, single-low dose study (450

mg) within 12 relapse/refractory CLL patients (most with high-risk cytogenetics)

showed a 63.6% (n=7) partial response rate at 4 months with a second follow-up at

6-months showing a partial response rate of 45.5% (n=5) among the 11 evaluable

patients. Responses were highly durable with all five patients maintaining durable

partial responses at one year. Safety data was encouraging with all except one

patient receiving the eight planned infusions.

- A second 35-patient Phase 1/2 dose-ranging (450 mg to 1200 mg) and dose

confirmation study evaluating TG-1101 in patients with prior exposure to Rituximab.

Those with relapsed and refractory CLL (n=6) demonstrated a 67% overall response

rate (ORR) and an 80% to near 100% decrease in absolute lymphocyte count (ALC)

while on treatment. In our opinion, the 43% ORR (CLL and NHL) and 45.5% ORR

(CLL) observed in both studies (includes only CRs and PRs), with the majority of

responders demonstrating a durable response for more than 1 year while on

maintenance ublituximab, demonstrates strong single agent activity comparable to

other glycoengineered monoclonal antibodies in development and on the market

(Figure 1). In addition to the efficacy profile, patients treated at the highest doses

tested demonstrated no dose limiting toxicities (DLTs) and primarily grade 1/2

adverse events including infusion-related reactions. Taken together, we believe the

data set the stage for the potential to combine TG-1101 with other therapeutics in an

effort to boost efficacy without a concomitant increase in toxicity.

Figure 1: Best Change from Baseline in Nodal Size

Source: TG Therapeutics company reports

- TG Therapeutics also has an ongoing 28 patient Phase 2 trial evaluating TG-1101 in

combination with Johnson & Johnson’s (JNJ; not rated) ibrutinib in both

relapsed/refractory CLL and MCL. The primary endpoint is an evaluation of safety for

the combination treatment with an ORR at up to 6 months as the secondary endpoint.



Of the 10 evaluable patients at the latest update (Figure 2), the combination

generated a 100% ORR and a mean 79% decrease in ibrutinib-related

lymphocytosis. In particular, an 86% ORR (six PR out of seven patients) in CLL

patients was subsequently converted to 100% ORR (seven PRs) compared to

ibrutinib’s Phase 3 RESONATE trial which demonstrated an ORR of 42.6% (all PRs).

From a side effect perspective, all rash, elevated creatinine, and grade 3/4 diarrhea

events were deemed related to ibrutinib and the infusion related reactions related to

TG-1101. We view these results as further evidence of the synergistic potential of

both drugs to significantly increase response rates without an additive effect on

toxicity.

These promising results led to a Phase 3 SPA for TG-1101 in combination with

ibrutinib for the treatment of CLL patients. The Phase 3 randomized trial is designed

to enroll 330 patients across two treatment cohorts: ibrutinib alone and ibrutinib in

combination with TG-1101. As per the SPA, the primary endpoint will be ORR and

will form the basis for a submission of a BLA for accelerated approval. All patients will

then be followed for PFS assessment to support full approval. Given that the

company could initiate the trial in 4Q14 and ORR can be assessed rather quickly (in

2016/early 2017), we believe TG1101 could achieve market approval by 2H17.

Figure 2: Change from Baseline in Nodal Size at First Assessment

Source: EHA poster presentation

Comparing monotherapy efficacy data between TG-1101 and Gazyva across

relapse/refractory indolent NHL subtypes shows similar overall response rates across

both treatment regimens. However, the 18 indolent NHL patients treated with TG-1101

showed an impressive 22% complete response rate (n=4) compared to a 5% complete

response rate (n=2) among patients treated with Gazyva (Table 1). Investors should also

note the impressive safety data for TG-1101. Among the 27 NHL patients treated with

TG-1101 only 1 patient experienced grade 3 anemia; in comparison, among the 40 iNHL

patients treated with Gazyva, 5 serious adverse events (grade 3/4) were noted, four of

which were serious hematological related AEs. In our opinion, this combination of

efficacy and safety in a difficult to treat population signifies significant opportunity for TG-

1101 within R/R NHL populations.



Table 1: Comparison of Monotherapy Response Rates between Gazyva and TG-1101

Gazyva TG-1101

Number of Patients (R/R

iNHL) 40 18

End of treatment

response (R/R iNHL) 38% 44%

Complete Response

(R/R iNHL) 5% 22%

Safety (NHL) SAE: 12.5% SAE: 3.7%

Source: EHA 2010, ASH 2010, TG Therapeutics

TGR1202 Shows Excellent Efficacy with Possible Best-in-class Safety

TG Therapeutics is also developing a PI3Kδ inhibitor for B-cell lymphomas. Similar to

Gilead’s idelalisib, TGR-1202 in vitro studies have shown a 50-fold preferential binding

for delta over gamma subunits. Importantly, TGR-1202 has a distinct structural backbone

that could potentially minimize hepatotoxicity relative to idelalisib and Infinity’s IPI-145.3

TG has initiated multiple multi-center Phase 1 clinical trials evaluating the safety and

efficacy of TGR-1202. A study currently ongoing involves the combination of both TG-

1101 and TGR-1202. Of 21 patients enrolled in the study and evaluable for safety,

approximately 15 were evaluable for efficacy, including those with CLL/SLL, Richter’s,

follicular lymphoma (FL), and diffuse large B-cell lymphoma (DLBCL). While responses

were seen across both CLL/SLL and DLBCL patients, in our opinion, the robust 80%

(4/5) response rate seen in CLL/SLL patients, including two high-risk 17p/11q deletion

patients, is particularly impressive (Figure 3). Although one patient did not qualify as a PR

in terms of nodal size at first assessment, preliminary data showed that of five of five

evaluable CLL/SLL patients achieved a greater than 50% reduction in ALC by 14 days,

with one patient achieving complete normalization of ALC. In the DLBCL group, patients

had a median of three prior lines and 3/5 patients had the GCB subtype. First efficacy

measures showed a 40% overall response (n=2) including 1 PR within a GCB subtype

patient refractory to prior treatment. Notably, no liver toxicity was observed in the 21

patients treated to date.

3 EHA 2014 Poster, Burris III et al ” Activity of TGR1202, a Novel Once-Daily PI3K inhibitor, in Patients with Relapsed and

Refractory Hematologic Malignancies”.



Figure 3: Nodal Size Changes in Patients Receiving TG-1101 + TGR-1202

Source: TG Therapeutics, Inc.

In light of the strong efficacy and safety data from the TG-1101 + TGR-1202

combination therapy, TG Therapeutics has amended the TGR-1202 development

program to include an extension arm for TG-1101 + TGR-1202 + ibrutinib in CLL

patients. The trial is designed to be the first triple therapy chemo free regimen for

relapse CLL patients. In our opinion, this combination will need to show efficacy

greater than ibrutinib monotherapy (ORR=42.6%) with either a faster time to

response or a high response rate to TG-1101/ibrutinib (ORR=86% in 7 evaluable

patients) and TG-1101/TGR-1202 (ORR=80% in 5 evaluable patients).

Additionally, TG has recently initiated another Phase 1 clinical trial evaluating the

safety and efficacy of TGR-1202 in combination with obinutuzumab and chlorambucil

in patients with untreated CLL. The study is set to enroll 30 patients with completion

set for June 2015. In comparison, idelalisib’s CLL registration trial with rituximab had

an overall response rate of 81%; notably, 35% of patients also experienced liver

toxicity during the pivotal trial.4

IRAK4 Inhibitors show Broad Applicability in Oncology and Autoimmune Diseases

TG is also examining the application of IRAK4 inhibitors to various targets in cancer and

autoimmune diseases. An IRAK4 inhibitor, LG0224912, licensed from Ligand

Pharmaceuticals (LGND; not rated), has shown favorable in vitro characteristics including

potent binding of the ATP binding pocket and >100 fold selectivity for IRAK4-dependent

and independent pathways.

4 NEJM, Furman et al (2014): 370( 11): 997-1007.



Big Pharma’s Interest in Biotech Oncology Programs Remains High

As a reminder to investors, Big Pharma’s interest in biotech oncology programs remains

high. Since 2009, several licensing deals in oncology are worth noting, summarized in the

table below. One example, highly pertinent to TG Therapeutics, is AbbVie’s (agreement

to license the PI3K-δ/γ inhibitor duvelisib from Infinity for $275 MM upfront in a deal

potentially worth a total of $805 MM. Notably, merger and acquisition activity the biotech

industry has reached a four-year high, with over $25 billion in M&A deals recorded in

2014 thus far.

Recent Biotech Oncology Partnerships with Big Pharma

Source: Biocentury.com

Take-home points

In our opinion, both TG-1101 and TGR-1202 demonstrate solid evidence of efficacy and

durability, both as a monotherapy, and in particular, in combination with marketed

products. However, we maintain that efficacy alone cannot get both products across the

finish line. As highlighted above, a key differentiator for these two products is the side-

effect profile. Given the lower SAE’s demonstrated, we are confident that trials

evaluating combinations maybe be able to push already established dosing limits and

potentially increase efficacy rates.

We believe either one or both lead therapeutic candidates are acquisition targets within

the next 24 months. We believe that the Pharma powerhouses that are leaders in

hematology/oncology will strive to acquire and have in-house their own checkpoint

inhibitor program which could then be used to combine monoclonal antibodies or other

target therapies. Given that TG Therapeutics represents one of the few stand-alone

companies with world-wide rights to two of the most sought after targets in biotech, we

believe the company could squarely move into the acquisition cross-hairs of marquee

companies such as Pharmacyclics and Celgene (CELG; not rated) as the data from

ongoing clinical trials mature.



TG Therapeutics’ Portfolio

Drug Phase Potential Indications Rights

TG-1101 +

ibrutinib Phase 3 ready Chronic Lymphocytic Leukemia

TG/ LFB Group (only

royalty/milestone rights with

an option to take back

France and Belgium)/Ildong

(South Korea and select

south Asian countries

(excluding Japan)

TGR-1202 +

TG1101 +

ibrutinib Phase 1

Chronic Lymphocytic Leukemia

TG/Rhizen (only rights to

India)

TGR-1202 +

TG-1101 Non-Hodgkin’s Lymphoma

TGR-1202 Phase 1 /2 Chronic Lymphocytic Leukemia /

Non-Hodgkin’s Lymphoma

TG/Rhizen (only rights to

India)

IRAK-4 inhibitor Preclinical Cancer and Inflammatory

Disorders TG

Source: Company Reports; H.C. Wainwright Research

Investment Pros and Cons

The major investment pros and cons, as we see them, are summarized in the following table:

POSITIVES NEGATIVES

Early phase best-in-class therapy for

DLBCL GCB-subtype patients

No prior sales experience or other

marketed products

Early phase best-in-class safety profile

for TGR-1202

Clinical and regulatory risk with advanced

stage pipeline products

Strong efficacy data for TG-1101 in

combination trials with ibrutinib; a Phase

3 SPA with ORR as a primary registration

endpoint could allow TG-1101 to enter

the market by 2H17

Small cap/low share volume; subject to

market swings

Strong management team with deal

making experience

Competitive market risk with numerous

monoclonal antibodies and kinase

inhibitors reaching commercialization first

Source: H.C. Wainwright Research and TG Therapeutics



Scientific Overview and Background

The Anti-CD20 Mechanism of Action

The human immune system uses antibodies to destroy foreign material through four primary

mechanisms of action summarized in figure 4: 1) direct binding of target proteins leading to

apoptosis; 2) complement dependent cytotoxicity (CDC); 3) antibody-dependent cell mediated

cytotoxicity (ADCC); and 4) a combination of complement and antibody mediated mechanism

appropriately named complement enhanced ADCC.5 The CD20 antigen is a glycosylated and

phosphorylated protein expressed on the surface of both mature and immature B-cells.6 As a

drug target, the protein is highly expressed on B-cell lymphomas, hairy cell leukemias and B-cell

chronic lymphocytic leukemias; additionally, it is rarely down-regulated or shed after antibody

binding.7 Rituximab, a first generation Type 1 (Type 1 monoclonal antibodies rely primarily on the

CDC cascade) Anti-CD20 monoclonal antibody, showed excellent efficacy in pivotal Phase 3

clinical trials through targeting the CD20 antigen and activating the CDC cascade.

Figure 4: Various Mechanisms for Cytotoxicity

Source: Am J Cancer Res. 2012;2(6):676-90.

Anti-CD20 Antibody Design

Monoclonal antibodies contain both a variable and a constant region. The variable region binds

the antigen of interest such as a specific epitope of CD20, while the constant region mediates the

downstream actions (CDC or ADCC). Factors influencing monoclonal antibody efficacy include

target accessibility, surface electrostatics, antigen affinity, and antigen-binding kinetics which are

thought to influence downstream signals. These features can be modulated with changes to both

the variable and constant regions.

5 J Clin Oncol, Bannerji et al (2003): 21: 1466-71 6 Hardy, Richard (2008). “Chapter 7: B Lymphocyte Development and Biology”. In Paul, William. Fundamental Immunology (Book)

(6th ed). 7 J. Clin Oncol. Grillo-Lopez et al (2000); 18 (17): 3135-43



The first generation of successful monoclonal anti-CD20 antibodies (rituximab) included a human

IgG constant region and murine variable CD20 binding region. Rituximab’s chimeric nature allows

for a longer half-life than previous murine antibodies; this was largely due to the humanized

constant region8 that also contained the downstream effector sequences leading to increased

cytotoxicity. Despite its efficacy, rituximab does require extensive infusion times, and patients are

subject to relapse.

Second and Third Generation Monoclonal Antibodies

Subsequent monoclonal antibodies have attempted to address rituximab’s shortcomings with

varying success. Fully-humanized antibodies, such as obinutuzumab and veltuzumab, have been

constructed to minimize the observed immunogenicity believed to arise from rituximab’s chimeric

nature. Additionally, modifications to the variable and constant regions, employed in

obinutuzumab and ofatumumab, have been introduced to modulate antigen binding affinity and

the cytotoxic response mechanism. TG-1101 is a third generation, Type I chimeric monoclonal

antibody which binds a specific epitope of the CD20 antigen, displaying activity even in low CD20

expression B-cells. In addition, the constant region has also been glycoengineered to tune the

cytotoxic response (Figure 5).

Figure 5: Mechanism of Cytotoxic Action of Select antil-CD20 Monoclonal Antibodies

Source: H.C. Wainwright Research

The constant regions of IgG monoclonal antibodies are post-translationally modified with two

asparagine-linked glycans, complex and structurally diverse polymeric chains of sugar residues

including N-acetylglucosamine, mannose, galactose, sialic acid, and fucose. The glycans

attached to TG-1101 lack fucose residues, and removing core fucose from the glycans has been

shown to enhance ADCC activity. The composition of normal antibody glycans is summarized in

Figure 6a, whereas the reduced-fucose glycans used in TG-1101 are illustrated in Figure 6c.

8 J. Clin Oncol. Grillo-Lopez et al (2000); 18 (17): 3135-43



Notably, glycan engineering has been successfully employed in other approved monoclonal

antibody therapies, such as the anti-CCR4 antibody mogamulizumab.9

Figure 6: Influence of Glycoengineering on Monoclonal Antibodies

Source: MAbs 2012 Jul-Aug;4(4):419-25

Rituximab Resistance

We believe the key to therapeutic success with monoclonal antibodies lies in understanding

mechanisms for rituximab resistance. These can be broadly defined by two categories: (1) CD20

affinity; and (2) expression and mechanism of cytotoxicity.

Analysis of CD20 expression has demonstrated that acquired resistance is accompanied by

down-regulation of CD20 expression in all in vitro cell lines.10

Additional mechanisms of

resistance may exist, including secondary antigenic modulation in response to prolonged

antibody exposure.11

Similar resistance patterns can be seen in both ofatumumab and rituximab;

this could be due to the fact both antibodies bind a discontinuous but related version of the CD20

epitope.12

The cytotoxicity mechanism of action is another important factor in rituximab resistance. Recent

studies have shown that a decrease in CD20 expression is associated with an increase in

CD55/CD59 expression, both of which are important complement system regulators.13

Thus, it

may be important to develop antibodies which bypass complement regulation and use an

alternate cytotoxic method to target cancer cells. For example, glycoengineered obinutuzumab

demonstrated a five- to 50-fold enhanced induction of ADCC.14

9 MAbs 2012 Jul-Aug;4(4):419-25 10 Peer J. Small et al. (2013), Analysis of innate and acquired resistance to anti-CD20 antibodies in malignant and nonmalignant B

cells.” 11 Journal of Immunology, Beum et al(2006); 176: 2600-2609. 12 Journal of Immunology. Teeling et al(2006); 177(1): 362-371 13 Blood. Golay et al (2001); 98: 3383-3389 14 Expert Opin Biol Ther. Owen et al (2012); 12(3): 343-351.



Discovery and Preclinical Investigation of TG-1101

Given that the overexpression of CD20 is implicated in B-cell lymphoma development, TG

Therapeutics has developed a bio-engineered anti-CD20 monoclonal antibody targeting a specific

epitope of the CD20 antigen. Preclinical experiments show a clear in vitro and in vivo (Figures 7

and 8) mechanism of action and subsequent tumor shrinkage. When TG-1101 was administered

to B-cell CLL, there was a 10x enhanced ADCC versus rituximab (Figure 7). Importantly,

compared to both ofatumumab and rituximab, TG-1101 exhibited a potent ADCC against CD20-

low expressing cells providing support that TG-1101 may be advantageous to currently approved

CD20 monoclonal antibodies for cells expressing lower levels of CD20.

Figure 7: ADCC Activity Compared to Rituximab

Source: TG Therapeutics

Furthermore, TG-1101 has also demonstrated sustained anti-tumor activity in mouse models with

primary cerebral lymphomas (Figure 8).

Figure 8: Tumor Shrinkage Secondary to TG-1101 Administration




Clinical Trials of TG-1101

Table 2: Ongoing and Completed Clinical Development Program for TG-1101

Name Phase # of

Patients

Current Status Initiation Date Expected Upcoming

Catalyst

Phase 3 ready:

Relapse CLL

3

330

SPA reached;

not yet initiated

End of year

2014

-

Phase 1/2: B cell

lymphomas

1/2

33

Complete

March 2010

Complete

Phase 2: CLL

(w/ ibrutinib)

2

30

Enrollment

complete

December 2013

4Q14 (ASH 2014)

Phase 1:

CLL/NHL (w/

TGR-1202,

TGR1202 and

ibrutinib)

1

100

Protocol

amendment

from previous

Phase 1 trial

December 2013,

Protocol

amendment in

August 2014 to

include triple

therapy cohort

4Q14 (additional data

for TG-1101/TGR-

1202 in R/R NHL for

ASH 2014)


Monotherapy

TG-1101 Phase 1/2 Study CD20-0703 (France)

In 2010, prior to TG licensing the compound, LFB presented a multi-center clinical trial evaluating

TG-1101 in 21 patients with relapsed CLL. Study CD20-0703 was designed to be a two part

dose-escalation trial with data presented at the 52nd

and 53rd

ASH meetings. The study recruited

patients who had relapsed CLL and were following at least one prior course of fludarabine.

Notably, patients who had received prior treatment with an anti-CD20 antibody within six months

were excluded. Among the 21 patients recruited for Part 1 of the trial, 20 were relapse and one

patient was refractory to treatment. Twelve patients had prior exposure to rituximab and 100% of

patients displaying lymph node enlargement. The study regimen for part one involved five dosing

cohorts with doses escalated based on safety in a 3+3 design. The total dosages provided over

four weeks ranged from 75 mg in cohort A to 1650 mg in cohort E (Figure 9). Premedication

consisted of allopurinol, dexchlorpheniramine and paracetamol, combined with

methylprednisolone 1 mg/kg before the first two infusions. Patients were assessed at week 16

with a follow up assessment at week 24 for those patients who displayed a partial response at

week 16.

Figure 9: Part One Dosing Cohorts




Part two of the study evaluated the safety and efficacy profile of TG-1101 when administered in

an eight-dose regimen (150 mg initial dose, followed by seven doses of 450 mg). The 12 patients

enrolled were similar to part one with median age of 69.5, and a median of three prior therapy

lines. Results showed that 11/12 patients were able to attain near lymphocyte depletion lasting

up to 10 months after the last infusion. Furthermore TG-1101 was able to produce a PR in 45% of

evaluable patients. Predictably, Infusion Related Reactions (IRRs) were the most common

adverse event with 10 events of grade 3/4 neutropenia. All IRRs were mild in nature and no

patients required active management. Notably, no cases of serum anti-TG-1101 antibodies were

detected at any time point.

TG-1101 Phase 1/2 Study: 101

In August 2012, TG Therapeutics initiated a TG-1101 Phase 1/2 clinical trial, known as Study TG-

1101-101, in NHL/CLL patients who are refractory to rituximab containing regimens. Patients

were required to have ECOG scores of <2 and no active Hepatitis B or C infection. Study 101 has

enrolled 35 subjects (20 indolent NHL, 8 CLL, 7 aggressive NHL) in a single-center, non-

randomized, multi-dose trial for the treatment of relapse NHL. Primary outcome measures were to

assess maximum tolerated dose and dose limiting toxicities. Efficacy was a secondary endpoint.

Currently enrollment within the study is complete.

Subjects received infusions of TG-1101 once weekly for four infusions followed by maintenance

therapy. The dose cohorts were 450 mg (CLL, NHL), 600 mg (CLL, NHL), 900 mg (CLL, NHL)

and 1200 mg (NHL) respectively. The induction for NHL required TG-1101 to be administered

weekly for four weeks while the induction for CLL required TG-1101 to be administered on days

1, 8, 15 for cycles one and two. All 35 patients were evaluable for safety and 30/35 patients were

evaluated for efficacy; the median number of prior therapies was three (range from one to nine)

with 71% receiving two prior rituximab regimens.

In May 2014, TG Therapeutics announced updated interim results from their ongoing Phase 1/2

trial. The overall response rate was 43% (30% PR, 13% CR) among the 30 patient available for

efficacy analysis. Response rates were 67% (4/6) for both CLL and MZL (Figure 10). Responses

were durable, with a median duration of progression free survival (PFS) among patients who

achieved SD or better not yet reached and a median PFS for all patients on study of 34 weeks

(n=30). TG-1101 was well tolerated at all dose levels tested in the 35 patients evaluable for

safety, with day one IRRs being the most frequently reported adverse event. The IRR were

managed with infusion interruptions only and all recovered without issue.

Figure 10: Phase 1 Response Rates from TG-1101 Treatment




Combination Therapies

TG 1101 Phase 1/1b Study: 103

In 4Q13, TG initiated a multi-center Phase 1/1b clinical trial evaluating the combination of TG-

1101 and TGR-1202 for patients with relapsed CLL and NHL. Study 103 was designed to be a

two part Phase 1 trial with a dose escalation for TGR-1202 (part one) and a dose confirmation

portion (part two). The 3+3 design featured dose cohorts for TGR-1202 with doses ranging from

400 mg (micronized) to 1200 mg in combination with a TG-1101 at a dose range of 600 mg to

900 mg for CLL patients and 900 mg for NHL patients. The primary endpoint was to evaluate

safety and maximum tolerated dose. The ORR at up to one year was measured as a secondary

endpoint. Patients enrolled were heavily pre-treated with 66% receiving at least 2 lines of

rituximab therapy. Currently the company has enrolled 30 patients across both CLL and NHL with

additional results to be presented at ASH 2014.

Interim results were announced in July 2014 with 21 patients evaluated for safety and 15

evaluated for efficacy. The ORR seen was 40% across all CLL and NHL subtypes (Figure 11).

Notably CLL patients had an 80% ORR with 5/5 evaluable CLL patients achieving a >50%

reduction in ALC. Of importance, the harder to treat DLBCL-GCB subtype also responded with a

67% ORR.

Figure 11: Overall Response Rate at Interim Assessment


Predictably, IRRs were the most common adverse event with grade 3/4 neutropenia appearing in

38% of all patients. Notably, no drug-related increase in ALT/AST was observed and no patients

required their TG-1101 or TGR-1202 dose reduced. TG announced a protocol amendment in

August 2014 to add an additional cohort that combines TGR-1202, TG-1101 and ibrutinib in CLL

patients. The two-center study is designed to be adjunct to the current Phase 1 study and will

likely use the fixed doses of TG-1101 and ibrutinib (900mg and 560 mg respectively). TGR-1202

will likely be provided through a dose escalation with previous studied dose levels: 50, 100, 200,

400, 800, 1200 and 1800 QD. Given the favorable safety profile of TG-1101 + ibrutinib and TG-

1101 + TGR-1202, TG has hypothesized that a triple therapy may be well tolerated and offer

greater activity than all current doublet regimens.



TG-1101 Phase 2 Study: 104

In 2Q13, TG initiated a multi-center Phase 2 clinical trial evaluating the combination of TG-1101

and ibrutinib for patients with relapsed CLL and MCL. Study 104 was designed to be a two part

Phase 2 trial with a safety run in portion (part one) and an efficacy portion (part two). The dosing

levels used for TG-1101 were 600 mg, 900 mg for CLL and MCL patients. Ibrutinib was dosed at

420 mg, 560 mg for CLL and MCL patients. The primary endpoint was to evaluate safety for the

combination treatment with ORR (up to six months) as the secondary endpoint. Enrollees

included 21 CLL and seven MCL patients. Notably, 43% of enrolled patients had received greater

than three prior therapy lines. Currently the trial is ongoing with an updated data for 30 patients to

be presented at ASH 2014.

First efficacy results were seen at EHA 2014, the data at that time included 28 patients with R/R

CLL or MCL, 10 patients were evaluated for efficacy, 17 were too early to assess and one patient

had discontinued prior to first assessment for ibrutinib related diarrhea. The ORR was initially

90% for the 10 evaluable patients but later became 100% (Figure 12). The addition of TG-1101

also appeared to control ibrutinib-related lymphocytosis with a median 79% decrease in absolute

lymphocyte count (ALC) from baseline by Cycle Four (Figure 13). This trial confirms that an anti-

CD20/BTK regimen reduces both nodal volume and BTK-induced lymphocytosis.

Figure 12: Overall Response at First Efficacy Assessment






Overall, both TG-1101 and ibrutinib were well-tolerated. Understandably, infusion reactions were

the most prevalent adverse event with neutropenia appearing in 7% of patients. Notably, serious

AEs, leading to discontinuations or dose reductions, were only seen after ibrutinib exposure.

Despite its small size, Study 104 does show that combining TG-1101 with ibrutinib could provide

faster symptom resolution and a greater response rate. In comparison to earlier Phase 2 trials

with ibrutinib and rituximab, TG-1101 combinations showed a quicker onset of action with a 40%

reduction in lymphocytosis by the end of cycle 1 (rituximab required three months to show the

same reduction).

In 3Q14, TG Therapeutics announced it had reached an agreement with the FDA regarding a

SPA on the design of a Phase 3 trial of TG-1101 in combination with ibrutinib. TG indicates full

details of the study’s design will be disclosed upon initiation of the trial, expected before the end

of 2014. In the meantime, initial information about the randomized trial is that it will enroll

approximately 330 patients, with ORR serving as the primary endpoint. PFS will be used to

substantiate full approval. The company indicates ORR data from the first two thirds of enrollees

may be used to support a BLA for accelerated approval.

The PI3K-inhibitor Mechanism of Action

Incidence and Prevalence

Worldwide, the prevalence of NHL is 16.5 per 100,000 and is increasing at 1.7% annually. NHL

classification is often done through separating cases into aggressive vs. indolent subtypes

followed by cell type. Currently, the most common subtype is DLBCL (Diffuse Large B-cell

Lymphoma) which accounts for 36.9-43.1% of cases, followed by CLL (24.5-33.4%) and FL

(16.8-22.0%). The rarest subtype is MCL which accounts for 4.6 to 6.2% of the population.15

Lymphomas and leukemias originate when a lymphocyte undergoes malignant transformation;

this process can occur at any point during the B- or T-cell differentiation process. The distinction

between lymphoma and leukemias is defined at the differentiation stage; leukemias typically

occur early within the bone marrow while lymphomas proliferate at later stages within the lymph

nodes. The most common type of lymphoma is B-lymphomas and these are further classified by

maturation stage. Currently the cause of lymphoma is not known but many risk factors have been

implicated in its development; for example EBV infection, long-term immunosuppression and

cytogenetic abnormalities have all been extensively studied.

15 Decision Resources, Report on NHL 2013



Molecular Origins of NHL

NHL pathways are diverse with considerable heterogeneity between patients. Nevertheless like

all malignancies, the various pathways fall within the context of disrupted tumor suppression and

enhanced proto-oncogenic activation.16

One molecular mechanism implicated in FL, DLBCL and

MALT lymphoma is immunoglobulin gene hyper-mutation. Somatic mutations are introduced

within the immunoglobulin surface molecule which alters subsequent downstream effects. This

includes maintenance of tumor clone with anti-apoptotic results. Several common gene

translocations are also implicated in many B-cell lymphoma subtypes. These mutations activate a

group of proto-oncogenes (e.g. BCL2) which cause inappropriate activation of tyrosine kinases

(e.g. BTK) enhancing further cell survival. The characterization of these pathways has been a

critical advancement in developing new treatment paradigms.

When deciding treatment, patients can be divided into indolent and aggressive cohorts.

Aggressive lymphomas tend to develop faster but is more responsive to chemotherapy while

indolent lymphomas are largely incurable. Due to the large heterogeneity of NHL patients,

additional classifications by molecular and genetic variables have been attempted. For example,

DLBCL can be further classified into three subtypes based on gene expression, this includes:

germinal center B-cell like (GCB-DLBCL), activated B-cell like (ABC-DLBCL) and others.17

These

discoveries have had implications on therapy and have sought to further define individualized

treatment pathways for NHL with examples seen in figure 14.

Figure 14: Relapse/Refractory: Current and Future Therapeutic Strategies


Role of CD20 in the NHL Disease Process

Although CD20 is not directly implicated in the pathogenesis of lymphoma, it is a surface antigen

that is ubiquitously expressed in both normal and malignant B cells (Figure 15). One advantage of

targeting CD20 is that it has no known natural ligand. Although drugs targeting CD20 may destroy

normal and malignant B-cells, it has often been an acceptable trade-off in lymphoma treatment.

16 Blood. Rossi et al (2005); 119(21): 2854-2862. 17 New England Journal of Medicine. Rosenwald et al(2002); 346: 1937-1947.



Figure 15: CD20 Expression in Normal and Malignant B-cell

Source: J Clin Pathol. Ginald et al(1998)

Role of PI3K in the NHL Disease Process

The signaling network dependent on phosphoinositide 3-kinase (PI3K), AKT, and mTOR impacts many of the dysregulated activities in cancer cells, including cell cycle, survival, metabolism, motility and genomic instability.

18 The lipid second messenger produced by PI3K enzymes seen

in figure 16, phosphatidylinositol-3,4,5-trisphosphate (PIP3), is constitutively elevated in most cancer cells and recruits cytoplasmic proteins (AKT, IRS) to membrane-localized ‘onco’ signalosomes.

19

Figure 16: Overview of the PI3K Pathway

Source: Nat Rev Drug Discov. 2014 Feb;13(2):140-56.

There are multiple isoforms of the PI3K enzyme, the most important in cancer are the 4 class I

enzymes termed PI3Kα, PI3Kβ, PI3Kγ and PI3Kδ (target of idelalisib) (Figure 17). Although

these catalytic isoforms share considerable sequence homology and produce the same lipid

product (PIP3), they differ in their activation mechanism, tissue expression and downstream

therapeutic effects.20

Among the four isoforms PI3Kα is the most commonly mutated within

human cancers and frequently associated with angiogenesis. PI3Kδ controls adaptive immunity

and has been implicated in lymphocyte activation. PI3Kδ also plays a particular importance in

downstream control as Bruton’s tyrosine kinase (target of ibrutinib) acts subsequent to PI3Kδ

activation.21

18 Cancer Cell. Hanahan et al (2011); 19: 693-695. 19 Annu. Rev. Biochem. Vanhaesebroeck, B. et al (2001); 70: 535-602. 20 Nature Reviews. Fruman et al(2014); 13: 140-156. 21 Nature Reviews. Fruman et al(2014); 13: 140-156.



Figure 17: PI3K Isoforms and Functions

Source: Nat Rev Drug Discov. 2014 Feb;13(2):140-56.

Whereas CD20 plays a role in the identification of malignant transformation, PI3K is crucial for the

oncogenic process. Secondly, PI3K’s presence further changes possible CD20 expression

through initial dysregulation and subsequent resistance. Research into molecular mechanisms of

resistance have shown that direct downstream of CD20 binding will eventually result in up-

regulation of anti-apoptotic signaling pathways such as the PI3K/AKT cascade; this is particularly

true for CDC-related necrosis.22

Figure 18 illustrates the various ways cancer cells exhibit

complement resistance. Furthermore, research has shown that fine tuning these various

mechanistic approaches should be used as the treatment paradigm for patients who consistently

relapse.

Figure 18: Rituximab-Induced Mechanism of Resistance

Source: Leuk Lymphoma. 2009 Jun;50(6):873-85.

22 Leukemia & Lymphoma. Stolz et al ( 2009); 50(6): 873-885



Discovery and Preclinical Investigation of TGR-1202

Given that implication of PI3K in various lymphoma pathways and the success of idelalisib, TG

Therapeutics is developing a PI3K inhibitor for B-cell lymphomas. Unlike idelalisib and IPI-145,

TGR-1202 is designed to minimize hepatotoxicity by eliminating the nitrogen based structural

back bone.23

As these compounds are metabolized by the liver, a nitrogenous backbone can

produce reactive nitrogen species leading to significant liver toxicity.24

In terms of efficacy,

preclinical experiments show a clear in vivo signal (Figure 19 and 20) indicating that TGR-1202

has similar apoptotic potential as idelalisib in CLL and DLBCL cell lines.

Figure 19: Cytotoxicity of TGR-1202 and Idelalisib in DLBCL Cell Lines

Source: ASH Poster, Friedman et al, 2012

Figure 20: TGR-1202 and Idelalisib activity in CLL Lines

Source: ASH Poster, Friedman et al, 2012

23 Deng at al; Presentation 2013 ”Novel PI3K Inhibitor TGR-1202 Demonstrates Cytotoxicity in B- and T-cell Lymphoma Models and

is Synergistic with a Novel Anti-Cd20 monoclonal antibody, Ublituximab, in Models of Lymphoma”. 24 Physiol. Rev. Pacher et al (2007); 87 (1): 315-324.



Successful Clinical Trials of TGR-1202

Table 3: Ongoing Clinical Development Program for TGR-1202

Name

Phase

# of

Patients

Current

Status

Initiation

Date

Next

Expected

Catalyst

Phase 1/ 2: CLL and NHL 1/2 50 Interim Data January 2013 4Q14 (ASH

2014)

Phase 1: NHL (w/ TG-

1101; an additional triple

arm of

TG1101/TGR1202/ibrutinib

in CLL was added in

3Q14)

1 - Interim Data November

2013

4Q14 (ASH

2014; no

data on triple

combo

expected)


Monotherapy

TGR-1202 Phase 1 Study: 101

In 1Q13, TG initiated a multi-center Phase 1 clinical trial evaluating the safety and efficacy of

TGR-1202 in patients with relapsed CLL and NHL, and 50 patients have been recruited. The

primary endpoint was to evaluate safety and maximum tolerated dose after 28 days. The overall

response rate (past 1 year) was measured as a secondary endpoint. The dosing schedule

followed a 3+3 dose escalation design with seven dose levels: 50, 100, 200, 400, 800, 1200 and

1800 mg QD; 2 expansion cohorts (5a, 6a) were added to evaluate the effect of food on the PK of

1202 at 800 mg and 1200 mg. TGR-1202 was dosed in continuous 28-day cycles to maximum of

15 cycles; dose limiting toxicities was assessed in Cycle 1 prior to escalation. Enrolled patients

were heavily pretreated with 85% have received previous rituximab treatment. Additionally, all

relevant subtypes (CLL, FL, MCL, DLBCL) were included for enrollment. Under company

guidance, we expect updated trial data to be presented at ASH 2014.

In May 2014, TG announced updated early results. Among the patients recruited, 40 were

evaluated for safety and 35 evaluated for efficacy. Histologically, there were 13 CLL, 10 FL, 6 HL,

5 DLBCL, 2 MCL, 2 MZL, 1 HCL and 1 LPL enrollees. A nodal response was seen in 89% of CLL

patients receiving greater than 800 mg with four patients exhibiting PR. There was dose-

dependent relationship where lymph node reduction was correlated to extended dose levels and

duration (Figure 21).





Diarrhea was the most common adverse event with neutropenia appearing in 8% of all patients.

Particularly notable was the lack of liver toxicity, even at doses greater than 800 mg. In

comparison, idelalisib-induced liver toxicity was seen in 13-24% of all treated populations.

To understand the effect of food on TGR-1202 exposure, a PK analysis into the expansion

cohorts was performed, showing an increased Cmax ratio between fed to fast states of 1.7 to 2.9

at 800 mg and 1200 mg, respectively. Notably, GI side effects were also lower in the fed states

with 1 incident of diarrhea among the 14 evaluated patients. Furthermore, since no patient

discontinued from drug related adverse events, the MTD was not reached and TGR-1202 dose

escalation is still ongoing. This data suggests that fed state dosing could increase drug exposure

while maintaining better GI tolerability.

In addition to efficacy data, the company provided results on exploratory studies in health

volunteers seeking to characterize PK and MTD of its micronizing TGR-1202 within the fed-state.

Twenty-four healthy subjects underwent a crossover study with TGR-1202 given in a fasting state

or within 30 min of a high fat meal. The dose groups tested were 200 mg, 400 mg, 800 mg and

until MTD. Results from the study would help determine the appropriate dose for the fed state

micronized TGR-1202. Interim PK results showed that both the fed state and micronized

formulation had significantly higher drug exposure to standard protocol (Cmax ratio 2.73 and

2.24, respectively).

Unmet Needs in Non-Hodgkin’s Lymphoma

Despite the wide variety of branded and generic treatments available, NHL is a heterogeneous

disease with variable a disease course. Figure 22 shows survey data from top ranking

hematologists throughout the US and Europe.



Figure 22: Unmet Needs Within NHL

Source: Decision Resources, 2013

TG-1101 and TGR-1202 are specifically designed to address two primary unmet needs: therapies

for the elderly and therapies for refractory lymphoma. Overcoming drug resistance is a key unmet

need with the potential for significant revenue potential. Similarly, toxicity improvements for high

risk lymphoma patients are needed to maintain adherence into later treatment lines. Clinically

valued endpoints are also variable among the NHL subtypes.

Hematologists tend to prefer PFS for indolent lymphomas while overall survival is still considered

the gold standard for aggressive tumors. However, since early trials are typically unable to report

progression rates, tumor response rates is consistently used, and has been correlated with the

length of PFS and occasionally with OS.25

Given the number of current and upcoming treatments

for NHL, TG Therapeutics’ primary obstacle will be differentiation, in our opinion. Table 4

summarizes the key efficacy and safety parameters identified by hematologists to be key

considerations when deciding on treatment. Early ORR has shown that TG-1101 & TGR-1202 in

combination could be the best in-class treatment for relapse patients.

25 JCO, Cheson BD et al (2012); 30(23): 2820-2822



Table 4: Comparison of Early Phase Data for Investigational Lymphoma Treatments

TGR-1202

(with TG-1101)

Idelalisib-

based

regimens

(with

rituximab)

Abt199-

based

regimens

(with

rituximab)

Duvelisib TG-1101 (with

ibrutinib)

Ibrutinib (with

rituximab/ofatumumab)

Abt199-based regimens

(with rituximab)

Gazyva (with rituximab)

R/R NHL

Efficacy Combo-ORR 40%

(preliminary data)

Combo-DLBCL

ORR 40%

Combo-NHL

ORR 77%

(CR 19%)

1 year PFS

78-90%

Mono-ORR

48%

MCL 68%

FL 28%

DLBCL 28%

WM 75%

MZL 67%

Mono-ORR 75%

(20% CR Rate)

Combo-MCL ORR

100% (CR33%)

Mono-FL ORR 33%

(CR 17%)

Mono-MZL ORR

100% (CR 67%)

Mono-DLBCL GCB ORR

5.3%

Mono-DLBCL ABC ORR

40% (CR 8%)

Mono-MCL 68% (CR

22%)

Mono-ORR 48%

Mono-MCL 68%

Mono-FL 28%

Mono-DLBCL 28%

Mono- WM 75%

Mono-MZL 67%

Mono-ORR NHL 25%

Mono-ORR FL ORR 58%

(CR25%)

Mono-ORR DLBCL 28%

Mono-ORR MCL 27%

Safety

Low degree of

neutropenia

No LFT increase

Neutropenia

43-52%

LFT increase

13-24%

Grade 3 LFT

increase 38%

Neutropenia 31%

Neutropenia 7% Neutropenia 29% Neutropenia 29%

R/R CLL

Efficacy Mono-ORR 89%

Combo-ORR 80%

Combo-ORR

78-87%

74-88% 1

year PFS

Combo-

ORR 84%

(36% CR)

Mono-ORR

77% (23%

CR)

Mono-ORR 48%

75% 1 year PFS

Combo-ORR 100% Combo-ORR

(ofatumumab) 100%

Combo-ORR (rituximab)

93%

Combo-ORR 84% (36%

CR)

Mono-ORR 77% (23% CR)

Mono-ORR 62%

Safety Neutropenia 5%

No LFT increase

Neutropenia

32-76%

Infections 11-

18%

LFT 5-18%

Neutropenia

7%

Neutropenia 40%

Infection ~ 20%

Neutropenia 7% Neutropenia 29% Neutropenia 7% Neutropenia 58%




Discovery and Preclinical Programs

TGR-1202

PI3Kδ signaling has been shown to be important for extracellular signaling in multiple myeloma

with several MM lines expressing high levels of the sigma subunit.26

In December 2013, TG

Therapeutics presented preclinical data combining TGR-1202 with carfilzomib for select multiple

myeloma cell lines. TGR-1202 alone did not show significant cell death, however in combination

with carfilzomib showed enhanced apoptosis in all tested cell lines (Figure 23). Investigation into

the mechanism of action showed that TGR-1202 with carfilzomib produced significant phospho-

mTOR suggesting pathway blockade.

Figure 23: Synergistic Potential between TGR-1202 and Carfilzomib

Source: TG Therapeutics, ASH Poster 2013

IRAK4

TG Therapeutics has also licensed Ligand Pharmaceuticals IRAK4 inhibitor research program for

cancer and autoimmune diseases. IRAK4 is a signaling kinase implicated in most patients with

Waldenström’s Macroglobulinemia (ABT199 shows the greatest response rate currently), a rare

malignancy with minimal effective treatment. Outside of cancer applications, IRAK4 has also

shown activity in treatment of autoimmune related disorders. Currently there are no IRAK4

inhibitors in clinical development possibly presenting a first-in-class opportunity.

The IRAK4 is a key signaling component of the TLR family (IL-1R, IL1B, Toll-like receptors) that

are important for innate immunity and inflammation.27

Figure 24 demonstrates the IRAK4

signaling cascade.

26 ASH 2013 Poster; Torre et al (2013). ”Combined Carfilzomib and Selective PI3K Inhibition (TGR-1202) Results in Enhanced

Myeloma Cell Apoptosis” 27 Trends Immunol . Suzuki et al (2002); 23: 503-506



Figure 24: IRAK4 Mechanism of Action

Source: Suzuki et al, 2002

Preclinical data for lead compound LG0224912 have shown that collagen-induced arthritis

severity is reduced by IL1B receptor blockade.28

The target has further been validated with the

approval of Kineret and Arcalyst for autoimmune disorders.

The IRAK4 inhibitor developed by Ligand has shown favorable in vitro characteristics including

potent binding of ATP binding pocket, >100 fold selectivity for IRAK4-dependent and independent

pathways and good suppression activity of IL1B signaling in mice models.29

Figure 25

demonstrates activity in an animal model of collagen induced arthritis.

Figure 25: Mouse Model of IRAK4 inhibition

Source: Ligand Presentation

28 Arthritis Rheum, Ma et al (1998); 41(10) 29 Ligand Investor Presentation, 2012



Competitive Landscape

TG-1101 and Monoclonal Antibodies

Many companies have obtained FDA approvals for treatment for NHL. While most companies

have focused on deriving variations of an anti-CD20 antibody (ofatumumab), the recent approvals

for idelalisib and ibrutinib with rituximab heralds a new era of “inside-outside” combination

treatments.

Roche’s (RHHBY; not rated) GA-101 is similar to TG Therapeutics TG-1101 in that both

treatments are targeting the same patient demographics with a similar mechanism of action. As

opposed to using a chimeric Type I antibody, Roche’s approach involves synthesizing a

glycoengineered Type II monoclonal antibody aimed at inducing higher levels of ADCC. In 2013,

Roche presented the final results of its successful Phase 3 clinical trial testing GA-101 as first line

treatment for CLL. The treatment demonstrated an ORR of 75.5% in patients with CLL with

22.2% achieving CR. The median PFS was double that of chlorambucil (23 months versus 10.9

months). GA-101, like all monoclonal antibodies, causes IRRs with close to 69% of all patients

requiring active management. Neutropenia is also a frequent AE appearing in 77% of patients. A

final stage comparing GA-101 with rituximab was presented at ASH 2013 that showed GA-101

achieving an ORR of 78% compared to rituximab’s 65%. Subsequent Phase 3 trials in relapse

CLL patients are ongoing.

Similar to GA-101, Immunomedics’ (IMMU; not rated) veltuzumab is humanized monoclonal anti-

CD20 monoclonal antibody targeting NHL. Clinical advantages of veltuzumab compared to

rituximab include greater efficacy (within animal models) and shorter infusion times. Specifically,

veltuzumab has shown greater CDC activity than rituximab but comparable ADCC activity.30

Currently, veltuzumab is in Phase 2 development in combination with Y-90 epratuzumab in

patients with aggressive relapsed lymphomas. Previous animal studies evaluating the

combination showed median survival improved from 42 days to 63 days in those receiving the

combination versus individual components.

Ofatumumab is an approved fully human IgG Type I anti-CD20 mAb that binds to specific epitope

of the CD20 antigen. Preclinical studies have shown that ofatumumab has higher CDC activity

than rituximab, even in B cells that express low CD20 levels. Currently ofatumumab is approved

for third line CLL patients’ refractory to fludarabine and alemtuzumab. Although ofatumumab has

a more favorable safety profile, treated patients only had a median PFS of 5.5 months.

Consequently, ofatumumab has not received significant uptake within relapsed CLL patients.

Alemtuzumab is currently approved for CLL patients who are refractory to fludarabine, carry TP53

mutations and patients with non-bulky disease.31

alemtuzumab is the first CD52 monoclonal

antibody launched and had a median overall survival of 16 months with a PFS of 9.5 months.

Notably, alemtuzumab had little effect on bulky disease with only 5% achieving nodular PR. Due

to its significant tolerability issues, Sanofi/Genzyme (SNY; not rated) withdrew alemtuzumab from

the US and EU markets in August 2012.

30 American Society of Clinical Oncology. Goldenberg et al (2008). Abstract 3043. 31 Blood. Keating et al (2002); 99 (10): 3554-3561



In our opinion, one of the most impactful events may be the entrance of a rituximab biosimilar.

Given rituximab’s wide-label across all treatments lines and indications, a rituximab biosimilar

could see significant usage particularly in treatment-naïve patients. In the EU, Sandoz is in late

stage development of a biosimilar (GP-2013), currently in a Phase 3 trial against rituximab in

previously untreated FL patients. Similarly, Boehringer Ingelheim is testing its BI-69550 in a

Phase 3 trial for Rheumatoid Arthritis. Assuming a similar PK/PD profile to rituximab, an approval

in RA could lead to an approval in all labeled indications.32

TGR-1202 and PI3K/AKT inhibitors

Idelalisib is an asset acquired in 2011 by Gilead (GILD; not rated) when they acquired Calistoga

Pharmaceuticals for $375 MM. At the time, idelalisib (CAL-101) was the first-in-class specific

inhibitor of PI3Kδ and under Phase 2 development for relapsed NHL and CLL. Early studies of

idelalisib in combination with bendamustine showed an ORR of 86.7%, while Phase 3

combination studies with rituximab showed an impressive overall survival hazard ratio of 0.28 in

comparison to rituximab alone.33

Interviewed experts believe that idelalisib and ibrutinib will be

the main stay treatments moving forward.34

IPI-145 is PI3K-δ/γ inhibitor under co-development by Infinity Pharmaceuticals (INFI; not rated)

and AbbVie (ABBV; not rated). Under the terms of the agreement, Infinity and AbbVie will co-

develop and commercialize IPI-145 in the US, while AbbVie will commercialize IPI-145 worldwide,

paying Infinity a tiered, double-digit sales royalty. It is believed that IPI-145 would have greater

disease control due to overlapping downstream effects between PI3K-δ/γ. Early phase data has

shown an 89% nodal response rate with an impressive 50% partial response in patients with 17p,

p53 mutations.35

IPI-145 is currently in Phase 3 development for CLL and NHL.

ABT-199 is an oral, second-generation BH3-mimetic BCl-2 inhibitor being developed by Roche

and AbbVie. Although not a direct mechanism of action competitor to TGR-1202, it has expedited

release timelines, patient demographics and could pose the greatest threat to idelalisib and

ibrutinib. The first Phase 1 trial in select lymphoma patients showed a 95% reduction in

lymphocytosis within 24 hours. ABT-199 has also been tested in combination with rituximab in

relapsed/refractory CLL patients; early efficacy data have been impressive with ORR of 78%. The

most common adverse events were neutropenia (43%), nausea (38%) and diarrhea (30%).36

Though many hematologists are excited by the possibility of a BCl2/PI3K combination regimen,

tolerability could emerge to be a significant concern as both products can induce significant

neutropenia.

Additionally, several companies are pursuing novel treatment approaches for lymphoma including

treatments which target the mTOR pathway, CD37, and HDAC. The competitive landscape is

summarized in figure 26.

32 FDA Guidance for Industry Biosimilars (2012): Questions and Answers Regarding Implementation of the Biologics Price

Competition and Innovation Act of 2009. 33 N Engl J Med, Furman et al (2014); 370 (997-1007) 34 Decision Resources 2013: Non-Hodgkins Lymphoma 35 ASH 2013. Flinn et al. 36 Targeted Oncology (2014): BCL-2 Inhibitor Combo May Offer Remissions in CLL.



Figure 26: Development Stages of Investigational Lymphoma Therapies


Route of Administration: Undervalued Criteria in a Highly Competitive Lymphoma Market

In our opinion, the success of a lymphoma drug depends on three criteria:

1. Effective in rituximab/PI3K/BTK-refractive populations: With increased cost pressures,

entrance of a biosimilar and the promising efficacy of new treatments, we believe emerging

biologic treatments will be competing for relapse patients who have had a minimum of two or

three prior therapy lines.

2. Tolerable safety profile: Despite the approval new treatments, there is still a key unmet need

for drugs that possess low hematological and chemical side effects. Typically, NHL patients

are elderly, relapse frequently, and therefore are unable to tolerate drug-related toxicities.

Emerging therapies that significantly reduce hematological toxicity could have considerable

commercial advantage.

3. Route of administration: Route of administration has garnered increased attention in

lymphoma drug development as the many emerging therapies have addressed the other two

considerations. The most accepted means of systemic delivery of rituximab is through

intravenous infusion which runs the risk of triggering an immune reaction. Notably, Roche is

developing a subcutaneous delivery method for rituximab; this in combination with an oral

kinase inhibitor could be a driving factor in influencing sales.

0

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PHASE 2

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Partnerships

Currently, TG has ongoing partnerships for all products within their product portfolio:

TG entered into an exclusive license agreement with LFB Biotechnologies relating to the

development of TG-1101. Under the license agreement, TG acquired the exclusive

worldwide rights (excluding France and Belgium) for the development and

commercialization of TG-1101. To date, they have made no payments to LFB Group.

However LFB Group is eligible to receive payments of up to an aggregate of

approximately $31.0 MM upon successful achievement of certain clinical development,

regulatory and sales milestones, in addition to royalty payments on net sales of TG-1101

at a royalty rate that escalates from mid-single digits to high-single digits. The license will

terminate on a country by country basis upon the expiration of the last licensed patent

right or 15 years after the first commercial sale.

TG entered into an exclusive (within the territory) sublicense agreement with Ildong

(KRX:000230; not rated) relating to the development and commercialization of TG-1101

in South Korea and Southeast Asia. Under the terms of the sublicense agreement,

Ildong has been granted a royalty bearing, exclusive right, including the right to grant

sublicenses, to develop and commercialize TG-1101 in South Korea, Taiwan, Singapore,

Indonesia, Malaysia, Thailand, Philippines, Vietnam, and Myanmar. To date, TG has

received $2 MM in the form of an upfront payment from Ildong, and are eligible to receive

sales based milestone payments up to an aggregate of $5 MM and royalty payments on

net sales of TG-1101 at a royalty rate that escalates from mid-teens to high-teens upon

approval in South Korea and/or Southeast Asia.

On September 22, 2014, TG exercised its option to license the global rights to TGR-

1202. Under the terms of the agreement, in exchange for the global license, Rhizen will

receive a one-time, upfront cash payment of $4.0 MM and approximately 370,000 shares

of TG Therapeutics' common stock. By exercising the option, TG Therapeutics receives

exclusive worldwide rights (excluding India) for the development and commercialization

of TGR-1202 for all indications. Rhizen will be eligible to receive regulatory filing,

approval and sales based milestones in the aggregate of approximately $240 million, and

tiered royalties based on net sales.

In 2014, TG entered into an exclusive global agreement with Ligand Pharmaceuticals

(LGND; not rated) to develop and commercialize Ligand’s IRAK4 research program.

Under the terms of the agreement, Ligand will receive an up-front licensing fee of

125,000 unregistered shares of TG Therapeutics' common stock. In addition, TG will

make development and sales-based milestone payments and will pay a tiered, mid-to-

high single digit royalty on net sales.



Financials

Revenues

Based on prevalence data from SEER and GLOBOCAN, we estimate there are currently about 20,000 R/R CLL

patients in the US and about 10,000 CLL patients in the EU that may constitute a potential patient pool for TG-

1101/ibrutinib combination therapy. We estimate that a larger pool of patients with indolent NHL may be addressable

with TGR-1202 in combination with an anti-CD20 antibody—approximately 110,000 in the US and 55,000 in the EU.

Monoclonal antibody treatments such as rituximab are currently priced at approximately $2,500 per month, with annual

treatment costs exceeding $30,000. Newer therapies are priced even higher with ibrutinib reaching nearly $8,000 per

month. We believe the competitive/regulatory environment for NHL and oncology may not warrant significant premium

pricing over currently available therapies, and we assume annual price points at $45,000 (US) and $25,000 (EU) for

TG-1101 (in combination with ibrutinib) and $85,000 (US) and $50,000 (EU) for TGR-1202/anti-CD20 antibody

combination therapy.

We estimate the 2023 US and EU combined market size for TGR-1202 in indolent NHL is approximately $13 billion.

For TG-1101/ibrutinib in CLL, we estimate the 2023 US and EU combined market size is approximately $1.2 billion.

Assuming a 20-30% peak market penetration amongst relapse patients, we estimate TG-1101 (in combination with

ibrutinib) has the potential to generate combined peak US and EU annual sales of $250 MM in CLL patients. Assuming

similar market penetration amongst relapse indolent NHL patients, we estimate TGR-1202 (in combination with an

anti-CD20 antibody) has the potential to generate peak annual sales $3.8 billion in combined US and EU markets. We

believe a US commercial launch for TG-1101/ibrutinib could occur in 2017 with an EU launch following in 2018. We

anticipate TGR-1202 could launch in the US in late 2020, with an EU commercial launch potentially following in late

2021. Altogether, we project risk (50%) adjusted revenues of $8.6 MM in 2017, $37.5 MM in 2018, $49.1 MM in 2019,

$122 MM in 2020, $437.6 MM in 2021, $717.8 MM in 2022, and $1.01 billion in 2023.

By way of comparison, rituximab was approved for CLL in 1997. Within one year of marketing for CLL, sales had

increased to greater than $200 MM. With in 4 years, sales had surpassed $750 MM. We view our probability adjusted

sales ramp to be much shallower than rituximab, given the price pressures associated with a rituximab biosimilar and

the possibility of combination branded therapies.


TG1101 w/Ibrutinib Markets 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

(≥2nd line) US CLL/SLL patients ('000) 18.99 19.15 19.31 19.47 19.63 19.79 19.95 20.11 20.27 20.47

US Cost of treatment ($'s) 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000

US Market Size ($ '000) 854,400 861,611 868,819 876,017 883,202 890,374 897,571 904,769 911,967 920,965

% US Market penetration 1% 5% 9% 12% 18% 22% 22%

(≥2nd line) EU CLL/SLL patients ('000) 9.27 9.28 9.29 9.29 9.30 9.31 9.31 9.31 9.31 9.31

EU Cost of treatment ($'s) 25000 25000 25000 25000 25000 25000 25000 25000 25000 25000

EU Market Size ($ '000) 231,644 231,962 232,160 232,359 232,558 232,756 232,756 232,756 232,756 232,756

% EU Market penetration 2% 8% 9% 13% 19% 21%

Risk & Royalty Adjusted Sales-US 8,550 35,150 40,090 58,140 84,170 95,000 95,000

Risk & Royalty Adjusted Sales-EU 2,138 8,788 10,023 14,535 21,043 23,750

TG1101 Total Sales in CLL/SLL ($'000) 8,550 37,288 48,878 68,163 98,705 116,043 118,750

TGR1202 + anti-CD20 Markets 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

(≥2nd line) US iNHL patients ('000) 111.21 112.15 113.08 114.02 114.96 115.89 116.83 117.76 118.70 119.87

US Cost of treatment ($'s) 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000

Market Size ($ '000) 9,452,643 9,532,429 9,612,175 9,691,807 9,771,299 9,850,641 9,930,273 10,009,906 10,089,538 10,189,094

% Market penetration 1% 7% 11% 16%

(≥2nd line) EU iNHL patients ('000) 54.27 54.35 54.39 54.44 54.48 54.53 54.53 54.53 54.53 54.53

EU Cost of treatment ($'s) 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000

EU Market Size ($ '000) 2,713,546 2,717,268 2,719,594 2,721,920 2,724,246 2,726,571 2,726,571 2,726,571 2,726,571 2,726,571

% EU Market penetration 1% 7% 11%

Risk & Royalty Adjusted Sales-US 54,000 324,000 513,000 753,300

Risk & Royalty Adjusted Sales-EU 14,760 88,560 140,220

TGR-1202 + TG1101 Total Sales in iNHL ($'000) 54,000 338,760 601,560 893,520



Operating Expenses

Based on the R&D expenses reported for 2013 and 2014, we are introducing the R&D estimates of $25.8 MM for

2014, increasing to $202 MM for 2023. The R&D assumptions from 2014-2023 take into account continued

expenditure for TG-1101 Phase 2 and 3 trials in CLL, and clinical development of TGR-1202 in monotherapy and

combination trials for NHL.

We are introducing the SG&A estimates of $18.8 MM for 2014, increasing to $233 MM in 2023. These estimates

reflect the ramp in the growth of a salesforce in connection with possible approval of TG-1101 and TGR-1202 in

multiple indications in 2017 and 2020, respectively.

Net Income and EPS

Net loss for the year ended December 31, 2013 was $20.5 MM, or ($0.81) per share. Going forward, we are

introducing net income (loss) estimates of ($44.4) MM or ($1.33) per share in 2014, increasing to $275 MM or $4.63

per share for in 2023, and potentially achieving profitability in 2021.

Cash

TG Therapeutics has a cash position of approximately $43 MM (pro forma). Based on our projections and with

consideration of ongoing Phase 1 and 2 trial costs, as well as the possibility to initiate a Phase 3 in combination with

ibrutinib in R/R CLL patients by 4Q14, we expect a burn rate of approximately $9 MM per quarter, and we believe the

current cash position is sufficient to fund operations until 2H15. We have modeled three capital raises in to our

estimates. We expect the company to raise approximately $40 MM in 4Q14, $75 MM in 2H16 and an additional $50

MM in 2H18 in order to sustain operations until the company potentially achieves profitability in 2021.

Valuation

We value TG Therapeutics using a discounted earnings per share and revenue multiple analysis. Applying a 8x

multiple to our probability adjusted 2023 revenues of approximately $1.01 billion and discounting additionally by 30%

over 8.0 periods, we obtain a $16.79 target price. Applying a 28x multiple to our probability adjusted 2023 earnings

per share of approximately $4.63 and discounting additionally by 30% over 8.0 periods, we obtain a price target of

$15.88. Averaging the results from these two methods and adding the projected cash per share in 12 months, we

obtain a 12-month price target of $17.25, which we round to $17.

In our opinion, the stage of development can impact the appropriate discount rate used in the discount model, because

it can be used as a proxy for risk. The following table shows the range of discount rates that would normally be used

according to the stage of development (Figure 27). Given that TG’s pipeline has at least one program about to enter a

Phase 3 trial, we elect to use a 30% discount rate in our valuation.

Figure 27: Discount Rates Associated With Clinical Development Stages

Source: Nat Biotechnol. 2004 Aug;22(8):1049-51.




Discount Rate

10% 15% 20% 25% 30% 35% 40% 45%

24 $51.81 $36.30 $25.83 $18.63 $13.61 $10.07 $7.53 $5.68 Estimated 2023 EPS 4.63$

26 $56.13 $39.33 $27.98 $20.18 $14.75 $10.91 $8.15 $6.16 Year 2023

28 $60.44 $42.36 $30.13 $21.74 $15.88 $11.74 $8.78 $6.63 Periods (years) 8.0

30 $64.76 $45.38 $32.29 $23.29 $17.02 $12.58 $9.41 $7.10 Price target $15.88

35 $75.55 $52.94 $37.67 $27.17 $19.85 $14.68 $10.97 $8.29

10% 15% 20% 25% 30% 35% 40% 45%

4.0 $31.96 $22.39 $15.93 $11.49 $8.40 $6.21 $4.64 $3.51 Estimated 2023 Revenues (000s) 1,012,471$

6.0 $47.93 $33.59 $23.90 $17.24 $12.60 $9.31 $6.96 $5.26 Year 2023

8.0 $63.91 $44.78 $31.86 $22.98 $16.79 $12.42 $9.28 $7.01 Periods (years) 8.0

10.0 $79.89 $55.98 $39.83 $28.73 $20.99 $15.52 $11.60 $8.76 Shares outstanding (000s): 59,123

12.0 $95.87 $67.18 $47.79 $34.48 $25.19 $18.63 $13.92 $10.52 Price target $16.79

14.0 $111.84 $78.37 $55.76 $40.22 $29.39 $21.73 $16.25 $12.27

16.0 $127.82 $89.57 $63.72 $45.97 $33.59 $24.84 $18.57 $14.02 Average Price Target Combining Both Methods $16.34

18.0 $143.80 $100.77 $71.69 $51.72 $37.79 $27.94 $20.89 $15.77

20.0 $159.78 $111.96 $79.65 $57.46 $41.99 $31.04 $23.21 $17.53 Average Price Target Including Cash Per Share $17.25

Discounted Earnings Analysis

P/E

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Management Team

Michael S. Weiss, Executive Chairman, Interim President and Chief Executive Officer

Michael S. Weiss has served as the company’s Executive Chairman, and interim President and CEO since December

2011. Mr. Weiss is currently a director of the company. Mr. Weiss is a co-founder of, and has been a managing partner

and principal of Opus Point Partners since 2008. Mr. Weiss earned his J.D. from Columbia Law School and his B.S. in

Finance from The University of Albany. He began his professional career as a lawyer with Cravath, Swaine & Moore.

In 1999, Mr. Weiss founded Access Oncology which was later acquired by Keryx Biopharmaceuticals (KERX; Buy) in

2004. Following the merger, Mr. Weiss remained as CEO of Keryx and grew the company grew the company to close

to a $1 billion market capitalization company at its peak. While at Keryx, he raised over $150 MM in equity capital

through public and private offerings, executed a $100 MM+ strategic alliance, negotiated multiple Special Protocol

Assessments (SPA) agreements with the FDA and managed multiple large clinical trials.

Sean A. Power, Chief Financial Officer

Sean A. Power, CPA has served as the company's Chief Financial Officer since December 2011 and currently serves

as the CFO of Opus Point Partners. Mr. Power joined the company from Keryx Biopharmaceuticals, Inc., where he

served as Corporate Controller from 2006 to 2011. During his tenure there, Mr. Power was involved in all capital

raising and licensing transactions. He was also responsible for leading Keryx's compliance with Securities and

Exchange Commission rules and regulations. Prior to joining Keryx, he was with KPMG, LLP, independent certified

public accountants, where he served as a senior associate. Mr. Power received a BBA in accounting from Siena

College and is a member of the American Institute of Certified Public Accountants.

Robert Niecestro, PhD., Executive Vice President, Clinical and Regulatory

Robert Niecestro, PhD. has served as the company's Executive Vice President, Clinical and Regulatory since

December 2011. Dr. Niecestro is an experienced professional in the pharmaceutical industry with approximately 26

years of experience in regulatory affairs, and project management. Dr. Niecestro was the Vice President of Clinical and

Regulatory Affairs for Keryx Biopharmaceuticals, Inc., where among other things he successfully negotiated six SPA

agreements with the FDA. He has previously held numerous senior management positions including serving as Vice

President of Clinical Development for Andrx Laboratories, Senior Director, Clinical Development and Therapeutic Head

for Gastrointestinal, Oncology and Stroke at Eisai Inc. and as Director, Clinical Operations and NDA Planning for

Organon Inc. While at Andrx, Dr. Niecestro was part of the team that developed the following approved drugs:

extended-release metformin, extended-release lovastatin and valproic acid. At Eisai Dr. Niecestro played a pivotal role

in the development and commercialization of Aciphex (rabeprazole sodium), the post-NDA program for Aricept

(donepezil sodium), and started both the oncology and neurology franchises in the United States; and while at

Organon, he was part of the team that developed and commercialized the following drugs: Zemuron (rocuronium

bromide), Orgaran (danaparoid sodium), Humegon (FSH/LH), Follistim (recombinant FSH beta), and one birth control

pill (Mircette). Dr. Niecestro has been involved in the filing of over 45 Investigational New Drug (IND) applications, has

over 60 peer-reviewed publications and holds three patents. Dr. Niecestro completed his graduate and post-graduate

work at the University of Illinois at Chicago.



TG Therapeutics (TGTX) – Historical Income Statement and Financial Projections

Source: Company Reports and H.C. Wainwright Research

Figures in $ thousands except per share data

FY13 A 1Q14A 2Q14A 3Q14E 4Q14E FY14E 1Q15E 2Q15E 3Q15E 4Q15E FY15E FY16E FY17E FY18E FY19E FY20E FY21E FY22E FY23E

Sales revenues:

TG1101 Sales - US 8,550 35,150 40,090 58,140 84,170 95,000 95,000

TG1101 Sales - EU 2,138 8,788 10,023 14,535 21,043 23,750

TGR1202 + anti-CD20 combo Sales - US 54,000 324,000 513,000 753,300

TGR1202 + anti-CD20 combo Sales - EU 14,760 88,560 140,220

Total Product sales 8,550 37,288 48,878 122,163 437,465 717,603 1,012,270

Other revenues:

License and service revenue 152 38 38 38 39 153 39 40 40 40 158 163 168 173 178 184 189 195 201

Total revenues 152 38 38 38 39 153 39 40 40 40 158 163 8,718 37,460 49,056 122,346 437,654 717,797 1,012,471

Expenses:

Cost of goods 2,565 11,186 14,663 36,649 109,366 179,401 253,068

Research & development 16,460 4,410 6,848 6,916 7,608 25,783 7,684 7,761 7,839 7,917 31,201 32,468 36,797 39,253 42,489 47,039 71,619 129,693 202,494

Sales, general & administrative 6,658 3,233 5,145 5,196 5,248 18,823 5,301 5,354 5,407 5,462 21,524 22,398 27,642 29,908 31,122 38,483 67,473 143,559 232,868

Total expenses 23,118 7,643 11,993 12,113 12,857 44,605 12,985 13,115 13,246 13,379 52,725 54,866 64,439 80,347 88,274 122,171 248,458 452,653 688,430

Net (loss) income from operations (22,966) (7,605) (11,955) (12,075) (12,818) (44,452) (12,946) (13,075) (13,207) (13,339) (52,567) (54,703) (55,721) (42,887) (39,218) 175 189,196 265,144 324,041

Other (income) expense

Loss before income Taxes (20,478) (7,548) (11,986) (12,075) (12,818) (44,426) (12,946) (13,075) (13,207) (13,339) (52,567) (54,703) (55,721) (42,887) (39,218) 175 189,196 265,144 324,041

Income tax expense 48,606

Comprehensive net (loss) income attributable to common stockholders (20,478) (7,548) (11,986) (12,075) (12,818) (44,426) (12,946) (13,075) (13,207) (13,339) (52,567) (54,703) (55,721) (42,887) (39,218) 175 189,196 265,144 275,435

Earnings per share:

Basic (0.81) (0.25) (0.36) (0.36) (0.34) (1.33) (0.34) (0.35) (0.35) (0.35) (1.39) (1.37) (1.32) (0.99) (0.88) 0.00 4.19 5.83 6.00

Diluted (0.81) (0.25) (0.36) (0.36) (0.34) (1.33) (0.34) (0.35) (0.35) (0.35) (1.39) (1.37) (1.32) (0.99) (0.88) 0.00 3.22 4.48 4.63

Average shares outstanding

Basic 25,414 30,091 32,985 33,085 37,630 33,448 37,730 37,830 37,930 38,030 37,880 39,984 42,089 43,203 44,317 44,717 45,117 45,517 45,917

Diluted 25,414 30,091 32,985 33,085 37,630 33,448 37,730 37,830 37,930 38,030 37,880 39,984 42,089 43,203 44,317 58,323 58,723 59,123 59,523

H.C. Wainwright & Company Ren Benjamin, Ph.D.

212-356-0542



TG Therapeutics (TGTX) – Balance Sheet

Source: Company Reports and H.C. Wainwright Research

Figures in $ thousands except per share data 3Q13 4Q13 1Q14 2Q14

ASSETS

Cash and cash equivalents 50,183 40,485 49,596 37,078

Short-term investment securities 3,902 7,960

Interest Recievable 27 11 74

Prepaids and other current assets 312 1,742 2,419 3,977

Other current asset 118 48 360 198

Total current assets 50,613 42,302 56,288 49,287

In process research and development 2,798

Long-term investment securities 4,919 1,002 6,110

Goodwill 799 799 799 799

Equipment and furnishings, net 4 6 8 7

Other assets 85 85 76 98

Total Assets 54,299 48,111 58,173 56,301

LIABILITIES

Notes payable 678 678 159

Accounts payable and accrued expenses 4,325 4,765 1,639 1,899

Accrued compensation 350 533 197 396

Current portion of deferred revenue 152 152 152 152

Interest Payable 173 190

Total Current Liabilities 5,678 6,318 1,988 2,606

Deferred revenue, net of current portion 1,714 1,676 1,638 1,600

Notes payable, less current portion, at fair value 2,269 65 116

Total Liabilities 9,661 8,059 3,742 4,206

Commitments and Contingencies

STOCKHOLDERS' EQUITY

Preferred stock, $0.001 par value per share (10,000,000 shares authorized, 0 issues and

outstanding as of June 30,2014)

Common stock, $0.001 par value per share (150,000,000 and 500,000,000 shares

authorized, 38,161,964 and 34,336,235 shares issued, 38,120,655 and 34,294,926 shares

outstanding at June 30, 2014 and December 13, 2013, respectively)

33 34 38 38

Contingently issuable stock

Additional paid-in capital 78,429 79,659 101,580 111,299

Treasury Stock, at cost, 41,309 shares at March 31, 2014 and December 21, 2013 (85) (234) (234) (234)

Accumulated deficit (33,740) (39,404) (46,951) (58,927)

Total equity 44,638 40,054 54,431 52,096

Total Liabilities and equity 54,299 48,113 58,173 56,302

H.C. Wainwright & Company Ren Benjamin, Ph.D.

212-356-0542



Important Disclaimers

H.C. WAINWRIGHT & CO, LLC RATING SYSTEM: H.C. Wainwright employs a three tier rating system for evaluating boththe potential return and risk associated with owning common equity shares of rated firms. The expected return of any givenequity is measured on a RELATIVE basis of other companies in the same sector. The price objective is calculated to estimatethe potential movements in price that a given equity could reach provided certain targets are met over a defined time horizon.Price objectives are subject to external factors including industry events and market volatility.

RETURN ASSESSMENT

Market Outperform (Buy): The common stock of the company is expected to outperform a passive index comprised of all thecommon stock of companies within the same sector.Market Perform (Neutral): The common stock of the company is expected to mimic the performance of a passive indexcomprised of all the common stock of companies within the same sector.Market Underperform (Sell): The common stock of the company is expected to underperform a passive index comprised ofall the common stock of companies within the same sector.

Investment Banking Services include, but are not limited to, acting as a manager/co-manager in the underwriting or placementof securities, acting as financial advisor, and/or providing corporate finance or capital markets-related services to a companyor one of its affiliates or subsidiaries within the past 12 months.



Distribution of Ratings TableIB Service/Past 12 Months

Ratings Count Percent Count PercentBuy 88 92.63% 38 43.18%Neutral 6 6.32% 0 0.00%Sell 0 0.00% 0 0.00%Under Review 1 1.05% 0 0.00%Total 95 100% 38 40.00%

H.C. Wainwright & Co, LLC (the “Firm”) is a member of FINRA and SIPC and a registered U.S. Broker-Dealer.

I, Reni Benjamin, Ph.D. , certify that 1) all of the views expressed in this report accurately reflect my personal views aboutany and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectlyrelated to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members ofmy household is an officer, director or advisory board member of these companies.

None of the research analysts or the research analyst’s household has a financial interest in the securities of TG Therapeutics,Inc. and Keryx Biopharmaceuticals, Inc. (including, without limitation, any option, right, warrant, future, long or short position).As of September 30, 2014 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securitiesof TG Therapeutics, Inc. and Keryx Biopharmaceuticals, Inc. .Neither the research analyst nor the Firm has any material conflict of interest in TG Therapeutics, Inc. and KeryxBiopharmaceuticals, Inc. of which the research analyst knows or has reason to know at the time of publication of this researchreport.

The research analyst principally responsible for preparation of the report does not receive compensation that is based upon anyspecific investment banking services or transaction but is compensated based on factors including total revenue and profitabilityof the Firm, a substantial portion of which is derived from investment banking services.

The Firm or its affiliates did receive compensation from Keryx Biopharmaceuticals, Inc. for investment banking services withintwelve months before, and may seek compensation from the companies mentioned in this report for investment bankingservices within three months following publication of the research report.

The Firm or its affiliates did not receive compensation from TG Therapeutics, Inc. for investment banking services within twelvemonths before, but may seek compensation from the companies mentioned in this report for investment banking services withinthree months following publication of the research report.

The Firm does not make a market in TG Therapeutics, Inc. and Keryx Biopharmaceuticals, Inc. as of the date of this researchreport.

The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as beingaccurate and does not purport to be a complete statement or summary of the available data on the company, industry or securitydiscussed in the report. All opinions and estimates included in this report constitute the analyst’s judgment as of the date ofthis report and are subject to change without notice.

The securities of the company discussed in this report may be unsuitable for investors depending on their specific investmentobjectives and financial position. Past performance is no guarantee of future results. This report is offered for informationalpurposes only, and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdictionwhere such would be prohibited. No part of this report may be reproduced in any form without the expressed permission ofH.C. Wainwright & Co, LLC. Additional information available upon request.



rating: buy · data drives value. in our opinion, tg’s pipeline currently boasts two strong...

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