TG Therapeutics: Indications Of Slowing Market Growth For Briumvi (NASDAQ:TGTX)

At a Glance

My last article for TG Therapeutics (NASDAQ:TGTX) focused on Briumvi’s rocky journey in the multiple sclerosis [MS] arena, leading to a cautious “Hold” stance.

Post-launch, Briumvi carved a relevant niche in this domain. Its financials in the initial three quarters post-debut showed escalating Briumvi earnings. Yet, a recent Q/Q revenue growth deceleration could hint at either market saturation or intensifying rivalry. TG Therapeutics boasts a solid balance sheet, fortified by substantial cash reserves. Still, it’s contending with elevated SG&A expenses, a commonality in nascent biotech ventures. Upcoming Q4 and Q1 ’24 projections, alongside the stock’s latest trends, highlight investor wariness and challenges in maintaining momentum amidst fierce competition. This context lays the groundwork for a renewed, in-depth analysis of TG Therapeutics’ market stance and fiscal stability, suggesting a watchful approach towards the stock.

Scaling the MS Market: TG Therapeutics’ Briumvi Takes the Stage

In early January 2023, TG Therapeutics introduced Briumvi into a competitive MS landscape. Here’s a breakdown of the company’s financial data for Briumvi’s first three quarters on the market:

Q1, ending March 31:

• Product revenue: $7.765 million.
• SG&A costs: $28.068 million.

Q2, ending June 30:

• Product revenue: $16.036 million.
• SG&A costs: $30.715 million.

Q3, ending September 30:

• Product revenue: $25.068 million.
• SG&A costs: $32.769 million.

A trend is evident from Q1 to Q3. Product revenues steadily climbed, suggesting market traction for Briumvi. Concurrently, SG&A expenditures also rose, but at a surprisingly slower pace. This pattern indicated burgeoning operational efficiencies or scaling advantages. Yet, the firm’s spending on SG&A remains moderately higher than its revenue from product sales. Such financial dynamics are typical for biotech entities in the initial stages of product commercialization.

Fast forward to earlier this month, when the company reported preliminary Q4 and forecast Q1 ’24 revenue. Q4’s $40 million product revenue, followed by a projected $41–$46 million in Q1 ’24, reveals a notable deceleration in revenue growth Q/Q.

Several factors may have contributed:

• Market Saturation: TG Therapeutics’ initial traction could plateau. Early adopters are tapped, making further market penetration arduous.
• Seasonal Variations: The pharmaceutical industry’s revenue often fluctuates. Seasonality, insurance resets, and prescribing trends are culprits.
• Competitive Dynamics: New rival products or insurance formulary shifts could dampen sales growth.
• Pricing Pressures: Negotiations with payers and regulatory shifts might constrain revenue despite rising volume.
• Regulatory and Reimbursement Hurdles: Changes in regulations and reimbursement rates can influence sales. Insurance coverage delays or denials for new patients also play a role.
• Market Expectation Alignment: Conservative estimates by companies often aim to match market forecasts, avoiding overpromises.

The company anticipates full-year Briumvi revenue of $220–$260 million. After removing Q1 numbers, the remaining three quarters are expected to generate an average of ~$66 million.

TG Therapeutics’ stock has dropped approximately 25% since this update. While some investors believe the drop is due to a “sell the news” event, I believe the market’s reaction is more nuanced. Q4 revenue of $40 million, followed by Q1 revenue of $41–$46 million, appears to be a plateau and offers only a slim revenue beat (compared to the $40.31 million estimate). While it is too early to conclude, I believe this perception is a cause of the stock pullback.

Financial Health

TG Therapeutics’ financial landscape reveals a robust balance sheet. As of September 30, liquid assets, a mix of cash and equivalents ($150.9 million) plus short-term investments ($78.3 million), amassed around $229.2 million. On the flip side, total liabilities amount to $166.3 million, with $98.9 million tallied as “loan payable—non-current.” A telling metric, the current ratio, hovers at 5.53. This figure, a quotient of current assets and liabilities, signifies potent liquidity.

TG Therapeutics has had a significant cash outflow in its operations, amounting to $18.2 million over the past nine months. Notably, this figure excludes the non-recurring $140.0 million upfront payment from Neuraxpharm. When adjusted for this one-time event, the company’s monthly cash burn rate stands at $17.6 million. As a result, their cash runway, calculated by dividing liquid assets by the monthly burn rate, is approximately 13 months.

However, the company could draw upon an existing loan if necessary.

Market Sentiment

Seeking Alpha’s data places TG Therapeutics in the mid-tier biotech echelon with a $2.13 billion market cap. Its growth trajectory is optimistic. Analysts predict a revenue surge of +8,186.07% in 2023, climbing steadily to 2025. From $230.77 million in 2023, expectations rise to $392.37 million by 2025.

Yet, TGTX’s stock momentum oscillates. It lags in 6- and 9-month spans compared to SPY, but rebounds with a +27.50% year-on-year gain, outpacing SPY’s +24.13%.

The stock’s short interest is high at 24.20%. Over 31.83 million shares are short, hinting at bearish investor moods and a possible short squeeze scenario.

Institutional ownership sits at 59.62%. Recent shifts include 148 holders upping their stakes by 29,566,074 shares, while 102 holders reduced their shares by 26,154,602. Vanguard, Blackrock, and State Street affirm their trust as major holders. Paradigm Biocapital Advisors joins them as a noteworthy new entrant.

Insider trading patterns over the last year reveal more buys than sells by 2,173,040 shares, signaling internal optimism. This confidence echoes in the last three months’ activities too.

Is TG Therapeutics’ Stock a Buy, Sell, or Hold?

In conclusion, Briumvi’s numbers continue to support my peak annual estimates of “no more than $500 million.” In such an event, TG Therapeutics’ stock becomes pricey, in my eyes, whenever it trades over $2 billion. Right now, the company’s enterprise value is nearly $2 billion, so while I believe the current valuation is optimistic, it does not merit a rating downgrade. So, TG Therapeutics remains a “Hold,” but with a bit more caution.

In the short term, the stock appears to be finding important support near the 50-day moving average, which should be encouraging for bulls.

Subsequently, I think the stock price will probably “random walk” in the teens until the next major catalyst (e.g., earnings).

I would like to emphasize the many positives that exist here, such as the fact that Briumvi has not needed much SG&A acceleration, the company appears to be getting close to profitability, and the midpoint estimate of $240 million in just its second year on the market is not something to scoff at. Nevertheless, investors should also be mindful of the risks and proceed with the knowledge that negative scenarios could materialize.

As always, investors should keep a diverse portfolio and constantly watch TG Therapeutics’ performance as more information becomes available. For the time being, TG Therapeutics is a company you should hold in your portfolio, but you should also keep a closer check on it.