TG THERAPEUTICS: MacDoζe Winter-Blows 3/4
Bored of Christmas peace? Follow us into Biotech madness.
Do rich kids' rumors weigh more than middle-class Joe's?
Binary vs. non-binary; emotions are at play!
The FDA could bring speedy composure to Biotech, after all.
1. Why Do I Care Right Now?
If you want to burn yourself, play Biotech. TG Therapeutics (TGTX) made it on my watchlist Summer 2021 when some random New York trust fund kid, throwing mommy’s family office funds around, whispered take-over rumors into my ears at some unexpected event. The story was thrilling, told as a fact. Risk-return a killing, and I was cracked.
Worst trade 2021.
Fast forward to 2022, and we like what we see. No speculation on family office rumors. Let’s leave trade selection to probabilities and option pricing. We also feel the fundamental tunes on TG’s most promising multiple sclerosis medicine, UbliTuxiMab. The odds of the speedy FDA review process resulting in marketing approval on Dec 28, 2022, are higher than fifty percent, one might believe.
You can call this a binary event. We call it an elevated-probability event with a potential non-binary outcome, e.g., decision delay. Regardless, we loved the CEO’s bird’s twittering on their QThree Business Update when he talked about UbliTuxiMab & More. How to read a script emotionally 101.
Spring of this year, TG voluntarily market-withdrew UmbraLisib, an earlier FDA-approved drug that caused issues. Instead of trying to fix it, they paused the entire UmbraLisib pipeline to reduce cash burn and focus on the chosen one, UbliTuxiMab. Usually, we wouldn’t recommend putting all eggs into one basket (or coming up with bizarre jawbreakers), but it shows confidence and might be temporary.
2. Useful Background Information
TG Therapeutics is a biotech company focusing on acquiring, developing, and commercializing innovative treatments for B-cell diseases. B-cells belong to a family of white blood cells that produce antibodies to fight infections. Cancer is one type of B-cell disease; another type is autoimmune disorders, including multiple sclerosis and rheumatoid arthritis.
The company has completed a Phase III program for UbliTuxiMab to treat patients with relapsing forms of multiple sclerosis.
2.1 The Drug Development Process
For non-Biotech geeks, it helps to get a high-level understanding of the US drug development process. That way, it is easier to allocate probabilities to potential outcomes. We try to be short and sweet.
STEP 1: Discovery and Development
Research for a new drug begins in the laboratory.
STEP 2: Preclinical Research
Drugs undergo laboratory (in vitro) and animal testing (in vivo) to answer basic questions about safety.
Followed by an IND application to the FDA. (Investigational New Drug)
STEP 3: Clinical Research
Drugs are tested on people to make sure they are safe and effective.
Phase I: 20-80 participants; safety; several months.
Phase II: 100+ participants; effectiveness; several months to two years.
Phase III: 1000+ participants; effectiveness & side effects; one to four years.
STEP 4: FDA Drug Review
NDA (New Drug Application).
FDA review-teams thoroughly examine all the submitted data related to the drug and decide on approval or rejection.
Step 5: FDA Post-Market Safety Monitoring
FDA monitors drug safety once products are available for public use.
TG was granted a speedy approval process and a targeted decision deadline on Dec 28, 2022.
We can sense a larger than fifty percent success around this event. During the last business update call, the company and the FDA were already working on Drug Labeling. The final step would be Facility Inspection, and we know the facilities are top-in-class, having produced a similar drug for the public before.
Cash flows look healthy for at least another nine months, and TG just reissued their USD 400 million Common Stock At-The-Market-Offering. The company never made use of its previous At-The-Market-Offering facilities. However, it is a clever arrangement in a hyper volatile Biotech market.
3. Trade Execution
Even though an FDA marketing approval end of December would be great news, we do not forecast a price explosion. There are already two other somehow effective products for MS on the market (Teriflunomide and OcreliZumab), so the next step will be handling commercialization, including competition.
Hence, we are selling a slightly bullish risk-defined straddle at 10, with wings at 5 and 15, maturity Jan 20, 2023.
Break-evens are at 6.5 and 13.5.
3.1 Trade Entry - Dec 12, 2022
Total: 3.65 Credit.
4. Final Comments
Expect updates on BrainDoζers within 4-6 weeks. We use the exact heading, ending with (+/- xy%), and label the cover cartoon with a red Doζed stamp. That way, the performance will be easy to follow.
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My name is Juri von Randow. You can find me on the top banner to the right. MacroDoζing, as if there was no tomorrow. (Email version only.)
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