TG Therapeutics Inc

NASDAQ:TGTX

Earnings Call Transcript 2021-Q3

[Operator]

Greetings, and welcome to the TG Therapeutics Third Quarter 2021 Earnings Call and Business Update. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. [Operator Instructions]

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jenna Bosco, Senior Vice President, Corporate Communications. Thank you, Jenna. You may begin.

[Jenna Bosco]

Thank you. Welcome, everyone, and thanks for joining us this morning. I am Jenna Bosco and with me today to discuss the third quarter 2021 financial results and provide a business update are Michael Weiss, our Chairman and Chief Executive Officer; Adam Waldman, our Chief Commercialization Officer; and Sean Power, our Chief Financial Officer.

Following our Safe Harbor statement, Mike will provide an overview of our recent corporate developments, as well as provide an update on the current pivotal programs and key remaining goals for 2021.Adam will then provide an update on our commercialization efforts, and Sean will provide a brief overview of our financial results before turning the call over to the operator to begin the Q&A session.

Before we begin, I'd like to remind everyone that we'll be making some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements about our anticipated future operations and financial performance, including sales performance, projected regulatory milestones, clinical development plans and expectations for our marketed and pipeline products.

TG cautions that these forward-looking statements are subject to risks that may cause our actual results to differ materially from those indicated. Factors that may affect TG Therapeutics' operations include various risk factors that can be found in our SEC filings, including our most recent reports on Forms 10-K and 10-Q. In addition, any forward-looking statements made on this call represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update or revise any forward-looking statements.

This conference call is being recorded for audio rebroadcast on TG's website at www.tgtherapeutics.com, where it will be available for the next 30 days. All participants on this call will be on a listen-only mode. Now, I would like to turn the call over to Mike Weiss, our CEO.

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Thank you, Jenna, and good morning, everybody, and thanks for joining us. 2021 has been a pivotal year for TG, as we transitioned from a purely development stage company into a fully integrated commercial organization. With the launch of UKONIQ and the continued build of our commercial platform, TG has grown tremendously this year.

I am incredibly impressed with the team we've built and excited to see everyone working so closely together for our common goal of developing and commercializing novel treatments for patients with B-cell diseases.

The team's hard work and effort this year have established our commercial footprint that I believe will pay dividends in the coming years as we intend to leverage our commercial platform for multiple potential future launches including, of course, U2 and CLL and ublituximab and RMS, both of which we are targeting for 2022 and beyond that, from our robust B-cell pipeline that we will touch briefly on later.

Since this call is occurring hot off the heels of our live participation in the Consortium of Multiple Sclerosis Clinics Annual Meeting, referred to as CMSC, and ASH abstracts won't be available for another 20 minutes or so, I thought I'd kick off the call by discussing our multiple sclerosis program. Perhaps the most exciting news from this past quarter was that we completed our Biologics License Application or BLA, submission to the USFDA for ublituximab.

They're glycoengineered anti-CD20 monoclonal antibody to treat patients with relapsing forms of MS. We submitted this application in late September and we look forward to hearing back from the FDA in late November on whether they have accepted this application with filing. Assuming all goes well, we would anticipate a target PDUFA date in late September of 2022.

This past quarter, we also presented at the ECTRIMS Conference and shared additional data from the ULTIMATE I and II Phase III trials, which supported our BLA submission to the FDA. As a reminder, these trials were conducted under special protocol assessment with the FDA and importantly, as noted in the past, both studies met their primary endpoint with ublituximab treatment demonstrating a statistically significant reduction in annualized relapse rate, sometimes referred to as ARR with ublituximab treatment resulting in historically low levels of annualized relapse rate.

At the ECTRIMS Meeting, we also shared data on additional secondary, tertiary and even some post-hoc endpoints to offer the MS community additional color around the highly successful primary endpoint. We believe the additional data presented further demonstrates the potential benefit of ublituximab to treat patients with RMS with a one hour infusion every six months following the initial starting dose.

As a reminder, we also hosted a virtual event during the ECTRIMS Conference, and I’d encourage anyone who is interested in TG to go to our website to listen to a recording of this event and listen to the KOLs provide their thoughts on ublituximab and the data presented thus far.

Furthermore, at the recent CMSC Annual Meeting, I personally had the opportunity to meet with a number of key opinion leaders and I have to say, the feedback was overwhelmingly positive and provided tremendous insights to help us best position ublituximab for success in MS.

Next, let's review the UNITY-CLL Phase III program. As you may recall, we submitted and received a PDUFA goal date of March 25, 2022 for a BLA and an sNDA, requesting approval of the combination of UKONIQ, plus ublituximab, for those of you who are new, refer to as the U2 combination for treatment of patients with CLL.

These applications were supported by the data from the UNITY-CLL Phase III program, which achieved its primary endpoint and showed patients treated with U2 achieved a statistically significant improvement and progression-free survival as compared to patients who received chemo immunotherapy. This trial was conducted under a special protocol assessment with the FDA.

With many CLL patients seeking a new treatment each year, we are excited about the potential to leverage the commercial platform we’ve built this year around UKONIQ to commercialize U2 for patients with CLL, if approved.

In particular, for those patients who may not be good candidates for current standards of care, as well as those who have failed currently available options and are in need of an alternative treatment.

Now, let me turn to UKONIQ. As a reminder, in February of this year, the FDA granted accelerated approval of UKONIQ as a single agent for the treatment of adult patients with relapsed or refractory marginal zone lymphoma who have received at least one prior anti-CD20-based regimen and for adult patients with relapsed or refractory follicular lymphoma who have received at least three prior lines of systemic therapy.

This approval was based primarily on the results from the UNITY-NHL trial, which were subsequently published in the Journal of Clinical Oncology.

As for the launch, I'll keep my comments brief and let our Chief Commercialization Officer, Adam Waldman to provide the details. Despite the challenges posed by COVID, I've been very pleased with the performance of our team. I got a chance to meet most of our sales team in person recently and I have to say what an impressive group.

True professionals with vast experience, working hard to establish our commercial footprint by introducing UKONIQ and TG to the broader community of oncologists. One of the team's key goals has been to educate and build awareness with as many healthcare professionals who treat MZL and follicular as possible, keeping in mind that most of our current target prescribers are also the clinicians who treat patients with CLL.

So, all the hard work building prescriber base with experience with single-agent UKONIQ and MZL and follicular should bolster our launch efforts for U2 and CLL if approved.

Through their efforts, our teams have engaged live and virtually thousands of healthcare providers and the UKONIQ prescriber base continues to grow. And importantly, we are seeing increasing uptick in community practices which we believe will be integral for the potential success of U2.

Lastly, I wanted to spend a few minutes discussing a couple of additional pipeline programs, which we hope will drive better outcome for patients and become future drivers of growth and expansion of our hematology oncology commercial platform. Starting with U2 plus venetoclax. As a reminder, the ULTRA-V Phase III trial evaluating this triple combination is now enrolling patients with treatment-naive and relapsed or refractory CLL.

The Phase II portion of this study completed an enrollment with approximately 165 patients earlier this year. Most recently, at the IWCLL Conference, Dr. Paul Barr of the Wilmot Cancer Center in Rochester, New York, presented updated results from this Phase I U2-plus ven combination, which now includes approximately 47 patients treated with the triplet regimen.

Best overall response of a 100% among the valuable patients, including a 37% complete response rate. Importantly, at cycle 12, 91% of the 34 patients achieved undetectable minimal residual disease in the peripheral blood and 72% of 32 patients achieved undetectable minimal residual disease in the bone marrow. We see these data as highly encouraging and we look forward to providing updates from the Phase I and Phase II studies next year.

Also, at IWCLL, we presented data on TG-1701, our investigational BTK inhibitor as a monotherapy and as a triple combination with U2. We were pleased to see that with additional patients, TG-1701 continues to show encouraging clinical activity compared with what appears to be a tolerable safety profile.

Also important to note, we hosted a virtual event during the IWCLL conference and again, I encourage those of you who are interested in TG to go to our website and listen to the feedback directly given by the KOLs about this novel regimen.

These are exciting combinations and I believe not only speak to the utility of U2 as a backbone in triple combinations, but also highlight the potential benefits of our combination approach in our B-cell platform that should provide us with a steady stream of commercial opportunities.

To wrap up, I wanted to quickly review some upcoming goals and objectives for the remainder of 2021 and into 2022. First, we look forward to hearing from the FDA regarding our BLA submission for ublituximab to treat patients with relapsing forms of MS. We also will continue to work with the FDA on the U2 BLA/sNDA for patients with chronic lymphocytic leukemia, which has a PDUFA target goal date of March 25, 2022.

We plan to have an exciting ASH Conference in December, so next month and are looking forward to having a live presence there. So that's going to be very exciting. As mentioned, in just a few minutes at 9:00 A.M., so that’s 12 minutes from now, the abstracts will go live.

We think this will be a great conference for us as we're presenting data showcasing the potential value and utility of U2 as a doublet combination therapy and also as a backbone of triple combinations. Of course, we will continue to focus on the commercialization of UKONIQ in relapsed or refractory marginal zone and follicular lymphoma and expand our commercial footprint in preparation for potential future launches including U2 and CLL and ublituximab in relapsing forms of MS.

We are continuing to drive enrollment into our ULTRA-V Phase III trial evaluating the triple combination of U2 plus venetoclax in both treatment naive and relapsed/refractory CLL and we plan to continue to advance our early pipeline candidates, including the TG-1701, our BTK inhibitor that we've been talking quite a bit about, but some earlier stage compounds as well, including TG-1801, our anti-CD47, CD-19 bispecific and TG-1501, our anti-PD-L1 antibody.

With that, I am excited to turn the call over to our Chief Commercialization Officer, Adam Waldman to share some highlights from our early commercialization efforts. Adam?

[Adam Waldman, Chief Commercialization Officer]

Yes. Thank you, Mike. Good morning, everyone. I am pleased to provide an update on our core commercial activities for the third quarter as we continue to build on the UKONIQ launch and create a strong commercial platform capable of supporting multiple future launches.

I'll start with what we are seeing in the overall market; present sales numbers; and then provide some qualitative detail on the launch. Finally, I'll cover our priorities and activities to set the stage for our upcoming potential launches in CLL and MS.

Our commercialization teams continue to perform well in the third quarter. However, COVID continues to create challenges for patients and healthcare providers. As we continue to understand the impacts, we have looked at claims data, syndicated reports and spoken with providers directly and they all confirmed that patient visits and treatment initiations for patients with indolent lymphoma remain below pre-pandemic levels.

As you're aware, indolent lymphoma patients tend to be elderly and at risk, causing providers to exercise greater caution in balancing potential patient exposure to COVID with the need for changes in treatment. While we are confident in our strategy and execution, we continue to face challenging market conditions with the ongoing pandemic.

Despite these challenges, we've seen some nice bright spots. The overall demand for UKONIQ continue to grow with $2 million in net sales for the quarter, representing an increase of 32% from the last quarter. We are seeing growth in our base of prescribers, as well as a number of repeat prescribers and accounts.

Further, we are seeing growth in – that we are seeing growing use in the community with approximately 65% of our Q3 new patient starts in the community versus 35% in the academic centers. We think that this is an encouraging trend as most of the community physicians that are prescribing UKONIQ for follicular and marginal zone are the same physicians that treat CLL and could prescribe U2 for CLL if approved.

Our share of voice was robust during the quarter and based on third-party research, we have achieved a leading share of voice across follicular and marginal zone markets in both the community and academic centers. UKONIQ awareness and familiarity among targeted treatment – treaters remain high, and prescribers continue to cite strong UKONIQ performance across all key attributes.

Again, we believe high UKONIQ awareness and foundational understanding of UKONIQ's profile in our currently approved indication amongst our target prescribers will set a strong foundation for a potentially successful U2 launch in CLL.

Moreover, we continue to hear positive feedback from customers about their experience with UKONIQ, the TG teams and our patient support services and impressively, in third-party syndicated research, our field team is right at the top of the NHL category for quality of engagements and overall value.

As we have previously shared, ensuring a positive first experience with UKONIQ is a launch strategic imperative. So hearing the positive feedback is particularly gratifying.

Finally, based on market research, when prescribers understand the unique MOA, the differentiation on safety and tolerability, as well as compelling – as well as the compelling efficacy, this does translate into a strong intent to prescribe. We believe these are positive indicators and give us confidence in our overall strategy and approach to the UKONIQ launch.

As mentioned during our last call, we are seeing UKONIQ demand from patients who are facing drug affordability issues. And as a result, through our patient – TG Patient Support Program, we have provided UKONIQ free to about 35% of patients. We are proud to be able to support these patients in need by providing assistance when there are barriers to access.

To summarize, we are very pleased with the UKONIQ launch. Our goal since day one of this launch was to start laying the foundation and building our commercial capabilities for future launches. This initial launch of UKONIQ is allowing our teams to establish strong relationships with cancer centers and healthcare providers while ensuring initial positive experience with UKONIQ and TG.

We estimate there is roughly an 80% to 85% overlap of our target prescriber base between non-Hodgkin's lymphoma and CLL reinforcing the importance of establishing our footprint with this launch. We are excited to expand our commercial platform with the potential launch of our second drug, ublituximab, as part of the U2 doublet combination with UKONIQ and CLL early next year in the U.S. market, and believe our preparedness and our experience with UKONIQ launch will be invaluable to our success.

Now turning to the MS launch readiness. As Mike mentioned, now that we have submitted the BLA for ublituximab in RMS, our team has also accelerated our launch preparations. We significantly strengthened our core capabilities in Q3, making critical hires in key home office and field-based roles. The team has deep and longstanding ties to the MS community.

Our team significantly ramped up their activities in Q3, actively engaging KOLs, community neurologists, payers and advocacy groups at conferences, ad boards and one-on-one engagements. Our confidence continues to grow as the feedback in obinutuzumab profile has been very positive across the board, and our belief is there is a very compelling commercial opportunity here.

In particular, neurologists view ublituximab efficacy and tolerability profile as impressive and highly competitive with existing CD20s. Ublituximab shorter infusion and flexible premedication and post monitoring requirements demonstrated in the ULTIMATE I and II trials are also seen as significant advantages.

In summary, we continue to build and strengthen our core commercial capabilities and footprint as we ready the organization for multiple upcoming launches. We continue to make nice progress with the UKONIQ launch as utilization and experience at community and major cancer centers continues to grow and awareness of UKONIQ's profile continues to expand.

We have also made significant progress preparing the organization to optimize the potential launch of U2 in CLL early next year and the potential launch of ublituximab in MS late next year.

With that, I'll turn the call over to Sean.

[Sean Power, Chief Financial Officer]

Thank you, Adam, and thanks again to everyone for joining us this morning. Earlier this morning, we reported our detailed third quarter 2021 financial results, which can be viewed on the Investors & Media section of our corporate website.

For today's call, I'll touch on a few highlights from the quarter, beginning with our cash position. We ended the third quarter with approximately $381 million in cash, cash equivalents and investment securities, which we believe will be sufficient to take us into 2023.

As Adam just noted, we reported $2 million of UKONIQ net product revenue in the third quarter, representing a 32% increase over the second quarter of 2021. Cumulatively, in the first seven months of launch, we recognized approximately $4.3 million in net product revenue.

Our net loss for the third quarter of 2021, excluding non-cash items, was approximately $72 million, in line with our expectations, which was an increase of $10 million quarter-over-quarter from Q2 of 2021, where we saw a net loss, excluding non-cash items of approximately $62 million.

As compared to the second quarter of 2021, the increase was primarily driven by an uptick in research and development cost pertaining to our BLA filing for ublituximab in MS and an increase in CMC expenses incurred in Q3 of 2021.

Comparing this quarter to Q3 of 2020, where we saw a net loss, excluding non-cash items, of approximately $59 million, the increase is primarily related to SG&A expenses associated with the launch of UKONIQ and planning for the potential future launches of U2 in CLL and ublituximab in RMS.

Our GAAP net loss for the third quarter of 2021, inclusive of non-cash items, was $85.6 million or $0.65 per share, compared to a net loss of $87.2 million or $0.73 per share during the comparable quarter in 2020.

With that, I will now turn the call back over to the conference operator to begin the Q&A.

[Operator]

[Operator Instructions] Thank you. Our first question comes from Alethia Young with Cantor Fitzgerald. Please proceed with your question.

[Unidentified Analyst]

Hi. Good morning, and thanks for taking our questions. This is Nina, on for Alethia. We are wondering if we can expect ULTRA-V data by year end or should we expect that in 2022? And if I can have another one, we are also wondering what are the challenges for Medicare funding for patients with marginal zone lymphoma and follicular lymphoma. And how are you seeing that dynamic play out? And what can you do to minimize that impact? Thanks.

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Sure. Thanks for the questions. So, in terms of ULTRA-V, the expectation is that we will have data probably middle of next year conferences. So the ASCO, EHA, maybe, I think, Lugano, that kind of focus end of this year, or ASH, which now the abstracts are live as of 9:00 a.m. You'll see that no ULTRA-V, but we've been talking about that for a while that ULTRA-V wouldn't be until next year.

In terms of the Medicare funding for patients with marginal zone and follicular, I'll take a crack out and then if I missed anything, Adam can chime in. For the most part, these patients are on Medicare. They are - I hate to use the word elderly since I think I am approaching the average age of folks with marginal zone follicular, but it's an older patient population.

Many of them are on Medicare. Most of them do have coverage. The problem is the co-pays associated with Medicare. So the only way to - for companies to really help patients with co-pays for – that are on Medicare is to either provide support to charitable foundations that then in turn can help provide some of that support or provide the drug for free.

So, most of the patients have good coverage except they are responsible for a portion of their drug costs and even though a small portion, they cannot afford. So that's why we see the free goods that we're giving away are for those patients who essentially can't afford their co-pays. They all have - I won't say all, but the vast majority of them have insurance. It's just - they still can't afford the co-pays. Adam, did I missed anything there? Yes, sure.

[Adam Waldman, Chief Commercialization Officer]

Yes. Yes. The only thing I would add is that the reason we're experiencing issues in this particular lymphoma is that there just is not availability of co-pay foundation support. We don't expect that we'll have the same issues in CLL, where there is more access to funding. The funding is done by indication. So, we're not seeing it. There is not a lot of it in lymphoma, but we do think the issue will be largely less. It will have a less impact on CLL because there is funding available there.

[Unidentified Analyst]

Thanks. That's helpful.

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Thank you.

[Operator]

Thank you. Our next question comes from Eric Joseph with JPMorgan. Please proceed with your question.

[Eric Joseph, JPMorgan]

Good morning. Thanks for taking the questions. A couple from me, but first on UKONIQ, which is whether you saw any sequential shifts in gross to net versus second quarter? And perhaps how we should be thinking about that into year-end. And whether at this stage as we look to expansion with U2 for CLL, is there anything you might guide at this point in terms of how to think about gross-to-net in the CLL setting?

And then, perhaps as it relates to ublituximab for RMS - with sort of your launch, pre-commercial preparations underway can you just talk a little bit about sort of the concentration of the prescriber account base there? And I guess coming away from ECTRIMS, what messages are resonating strongly, I think with the treatment community and what impacts is relative price playing in your discussions with providers right now?

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Sure. So Adam, why don't you, if you could, help me out on the gross to net questions for UKONIQ and for what we anticipate in CLL and then we'll tag team on the RMS stuff?

[Adam Waldman, Chief Commercialization Officer]

Yes. Eric, thanks for the question. The gross to net is, as you know, variable based on the type of patients that come into us and the site of care. So there will be a little variability and given the rotation volume, there can be swings from quarter-to-quarter. But it's largely in line with where we thought it was going to be and at this point, there hasn't been major shifts in gross-to-net. That was the first question. What was the second question? It was around...

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Perhaps into...

[Adam Waldman, Chief Commercialization Officer]

Do you want to take the second question?

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Yes. Well, just...

[Eric Joseph, JPMorgan]

Yes, too early, yes.

[Adam Waldman, Chief Commercialization Officer]

CLL, right? So CLL, it's too early to give any insight on gross to net in CLL.

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Got it, Okay. And then in terms of ubli and RMS two-part question, concentration of prescriber base, I'll give an answer. Adam, correct me if I'm wrong. My understanding is that there's about 500 centers, Eric, that represent about 80% of the patients.

So it's a really highly concentrated in major centers here in the U.S. And in terms of things we heard coming out of ECTRIMS, I think you particularly wanted to understand how price may impact. The things that – so both from ECTRIMS, but as I mentioned in the prepared remarks, I really had a great opportunity to meet directly with KOLs when I went to the live CMSC conference.

I'd say, again, overall, very, very positive feedback. People are very excited about the one hour infusion. I think that's something that is definitely attractive, particularly for all the patients and for any of the physicians that have infusion centers or associated with infusion centers, the one hour infusion is really something that's quite attractive.

They really like the mechanism. A lot of people were digging in on the glycoengineering aspect of ublituximab. The different epitope finding sites. Definitely, people were understanding that this is a differentiated CD20, and that was generating a bit of excitement. And then, circling back to price, what we hear now consistently is that access is probably more important than price assuming we use price to buy access, price matters.

But really it's a function of when they have an option for patients, they want to know that they get the patient on the drug that they choose and they want to get them on the drug quickly. They do say that – they do sometimes have challenges with OCREVUS and getting patients on in a timely fashion. So there is definitely room for improvement there.

And our payer team is out there hustling every day to try to identify ways in which we can cut through as much of the red tape as possible. And we've said this multiple times, if price gets us there, we'll use price to do what we can to create the best access for ublituximab in RMS. Adam, any additional thoughts?

[Adam Waldman, Chief Commercialization Officer]

No. Mike, I think you got it.

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Thank you.

[Eric Joseph, JPMorgan]

And great. Thanks for taking the questions.

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Yes.

[Operator]

Thank you. Our next question is from Ed White with H.C. Wainwright. Please proceed with your question.

[Ed White, HC Wainwright]

Good morning. Question to start off for Adam. Can you comment on the percentage of live engagements with the prescribers right now? And are you seeing any changes as we work our way through the pandemic? And how is it going with the education of the providers for UKONIQ? Are there - do they understand the differentiation and maybe if you can tell us some of the challenges that you might be seeing?

[Adam Waldman, Chief Commercialization Officer]

Sure, Ed. Great question. We were certainly seeing some increases in live engagements toward the early summer months. As Delta picked up, that definitely declined as cancer centers went back to COVID restriction policies that made it more difficult to get to live engagements. We are hopeful now that the Delta variant has gone down.

We are starting to see pickup now back into the fourth quarter, which is great. We do believe live engagements are a much more effective way of communicating. We've said before that there is a bit of fatigue with the Hem/Onc community with the Zoom calls that have been going on. Although we still do it, we think live engagement is just a more effective way of educating.

What we've done – I mean, the challenges that you asked about, yes, this is a challenging environment, no question. What we've done in response is, we've increased our digital and non-personal efforts. We've had to be innovative in the way that we've done our educational programs and it is very clear to us that when we do put the profile and we do have the opportunity to get the profile in front of physicians that the feedback is largely very, very positive.

It's just a matter of being able to do it and do it on a frequent basis, right, getting in. Sometimes it takes, especially with the new product it does take multiple visits sometimes, multiple interactions for people to appreciate the full profile and to identify patients. So, that is a continuing challenge is we can get in, but then the frequency of which we get the repeat visits has been difficult.

Like I said, we've developed innovative educational programs and speaker programs, different types of modalities to do that. And we're continuing to adjust as the COVID environment is continuing. The dynamics from that are continuing to change really from month-to-month. We've also increased our investments in data to try to identify patients.

So that is another area that we feel like if we can identify patients and know where to go. We can do some interesting things around better targeting, and we can use that as an access tool to getting to prescribers that have patients and the information is very relevant to them. So.

[Ed White, HC Wainwright]

Great. Thanks. Now a question on the European strategy. You had mentioned last quarter that you might target the MS before the hematology. Can you just give us an update maybe on your European strategy and also your thoughts on perhaps partnering?

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Yes. I'll jump in there, Ed. So, we haven't made any final decisions. But we are definitely leaning significantly toward bringing MS forward first in Europe. And in terms of partnering, again, I think we haven't made any final decisions. We are certainly leaning toward a go-it-alone strategy, but we're certainly keeping our options open.

[Ed White, HC Wainwright]

Thanks, Mike. And a last question, maybe for Sean. Just on R&D, you had mentioned the increase was due to the BLA submission and increased manufacturing cost. Should we be thinking of these, obviously, the BLA submission is one-time in nature, but perhaps you can give us your thoughts on what's the underlying run rate for R&D and how we should be thinking of it directionally for the fourth quarter and perhaps if you're willing for 2022? Thanks.

[Sean Power, Chief Financial Officer]

Sure, Ed. Thanks for the questions. I think ahead of potential approval for ublituximab, we may see some lumpiness or some bumpiness in R&D as the CMSC costs will run through the P&L ahead of being able to go on the balance sheet as inventory. Directionally, for 2022, I would say, if you average the R&D for over the course of 2021, it's probably going to be pretty flat with maybe a little bit of an uptick towards the latter half of 2022.

[Ed White, HC Wainwright]

Okay. Great. Thanks for taking my questions.

[Sean Power, Chief Financial Officer]

Thanks, Ed.

[Operator]

Thank you. Our next question is from Chris Howerton with Jefferies. Please proceed with your question.

[Chris Howerton, Jefferies]

Hi. Great. Thank you so much for taking the questions. I guess, the two from me, first would be just, I guess, related to the CMC. With respect to kind of heading into the PDUFA dates, what is the preparedness of CMSC and supply particularly for ublituximab as it relates to both the CLL and MS application?

As a follow-on to that, is there additional supply that will be required to serve the MS market when and if both indications are approved? And then, the third question, if I may, for Adam would be, as you are kind of looking at the new patient adds from the community setting, what would you say is the impact of the site experience during the clinical trials that you are in? Thanks.

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Yes. So Chris, I'll jump in on the CMC stuff. Yes, we are feeling very good about our CMC readiness and supply. We've got a long-term supply agreement with the number one antibody manufacturer in the world. And so, we're feeling quite good about where we are with that.

In terms of additional supply for MS, on a volume basis, MS is, we don't use a lot of material for MS. So it's all subsumed in the overall CMC agreement we have with our supplier. And yes, we feel very comfortable again that we have plenty of supply through that relationship for both the oncology and CLL and MS launches.

Adam, did you follow the second question completely, because I personally did not? You got it.

[Adam Waldman, Chief Commercialization Officer]

I did, I did. Yes, I got it. So far, yes. So Chris, in the community and the new patient adds, yes, we're seeing, yes, the majority is with sites that have had experience in our clinical trials so that they were part of the trial, the development of the drug in the U.S. So, I do think it is – we've said it before, I think that helped, and we are seeing that the use in the community it's not exclusively in those sites. But we do see a large percentage of these coming from sites that were involved in the clinical trials previously.

[Chris Howerton, Jefferies]

Okay. Well, thanks a lot for taking the questions and I appreciate it.

[Adam Waldman, Chief Commercialization Officer]

Thanks, Chris.

[Operator]

Thank you. Our next question comes from Mayank Mamtani with B. Riley. Please proceed with your question.

[Mayank Mamtani, B. Riley Securities]

Good morning team. Thanks for taking my questions. So two quick ones for Adam on commercial, and then I have ASH abstract. Since the abstracts are out now, I guess, you can talk about it. So before that – so, Adam, on where we are with the pandemic sort of going forward question, obviously, there are bright spots, people getting vaccinated, especially the high risk elderly getting the booster.

Is there like a pent-up demand dynamic that we should be aware of for any of the upcoming quarters for from relatives? And then, on MS readiness, I was just curious, this Alzheimer's drug dynamic in neurology clinics and even as you prepare – I know it's early, but you are preparing to engage with CMS in some way. How much is that playing a role in your payer and access conversation within the team?

[Adam Waldman, Chief Commercialization Officer]

Yes, sure. Yes. No, I wouldn't – on the pandemic, this stuff is just so difficult to predict how this is going to go. I wouldn't expect there will be a pent-up demand. I think that hopefully, as COVID starts to go down, we will see increased patient flow. And – but I don't think there is going to be a big patient pent-up demand. So I think it will slowly trickle in, and I think that will be generally a positive. I think as the COVID situation increases, that's generally a positive and we are optimistic for the future.

As far as the second question goes, Mayank, on the Alzheimer's drug and that those dynamics on infusions in MS, the use is the – the use of the drug has been light as far as I can tell. I don't think at this point, we think the Alzheimer launch will affect the access of ublituximab in MS. It's something that we'll obviously watch and we understand infusion dynamics to be important.

Just as a reminder, the majority of MS patients have commercial insurance is the younger patient population. So, maybe it might be slightly different from a reimbursement dynamics than the Alzheimer's situation, although I am not as familiar with Alzheimer's. I just feel like it's a more older population and potentially a more Medicare population. So, I think there'll be a bit different dynamics there from a -just an insurance mix perspective. Hopefully, that answers your question.

[Mayank Mamtani, B. Riley Securities]

Yes. And the capacity of neurology clinics may be helpful there, too. So, on the ASH abstract question, lots out there, Mike, if you can just maybe distill down on where we should focus on. And maybe the specific question I had was around your U2 ibrutinib abstract. Can you just remind me with your BTK, you do – what do we know about the median treatment duration? And where do we stand with the current discontinuation rate there with the ongoing study?

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Yes. So just starting from there, I have to double check, but the discontinuation rate due to AEs is very, very low with TG-1701, very, very low. So, I don't have the percentage in front of me, but I know that discontinuation is very low.

In terms of overall ASH abstracts and things to focus on and the U2 plus BTK abstract that you specifically highlighted. So it's an interesting ASH for us. We've got two presentations that come out of our UNITY-NHL trial. We have some data from U2 in marginal zone lymphoma, which I think is looking quite good. And we had some additional data that we haven't looked at in a while, because we'll be presenting on U2 in diffused large B-cell, which is kind of intriguing, some interesting information there.

I think the presentation is coming together nicely. So that's the UNITY-NHL, submission guide coming there. We have some nice UNITY-CLL cuts of the data. Again, these are more tertiary and post-hoc analysis. One that I am obviously quite keen on is we've always said that there is this population of patients who may be poor candidates for BTK inhibitors based on co-morbidities or on con-meds, concomitant medications, that they need to be on.

So we went back through our Phase III database to look at what percentage of the patients have co-morbidities that could make them poor candidates for BTK and others that are on medications that are contraindication – contraindicate with BTKs, it's a much larger portion than we had anticipated when we started the effort.

So I think that data is going to be quite interesting for folks. And it really kind of just highlights that there is a need for novel therapies and U2 can really fit nicely into certain practice settings that we've been discussing for a while now.

In terms of BTK, obviously, we are quite enamored with our own 1701. We think it's a very, very good BTK inhibitor. We like it alone and we like it in combination with U2. But in addition, I would say, one of the cooler to me, cooler trial designs that we have kind of going and plan to expand is the U2 plus ibrutinib one that will be presented. I think that was the brainchild of Dr. Anthony Mato.

I just think it's one of the smarter thoughts on how to potentially change the game, and how patients are managed even on BTK inhibitors by using U2 to try to essentially create prolonged drug holidays off of BTK therapies. Again, we are dealing with better tolerated BTKs like 1701 and others that are now approved or hopefully will be approved soon.

But regardless, anytime you're on a drug, you run the risk of a side-effect. This is a study in which we see, if we can take patients who are on BTK inhibitors, they may be having a good outcome, but they are certainly not able to get off that treatment. So they are on it. Some of them may be experiencing some side-effects and using U2 to get to a deeper response, looking at undetectable minimal residual disease.

And then getting patients off all therapy and then following them to see how long they could stay on therapy without having to get back on some treatment. So again, like I said, I think it's one of the cooler designs. I think it's a really neat application of using U2 to help patients get to a better outcome. And we'll see what the data as it's presented looks like, but I am quite encouraged by that one as well.

[Mayank Mamtani, B. Riley Securities]

Thank you, Mike. I look forward to additional details as you guys think about the design. Appreciate you taking my question.

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Thank you.

[Operator]

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

[Matt Kaplan, Ladenburg Thalmann]

Thank you, good morning, Mike and team. I wanted to, I guess, first, maybe a question for Adam. Can you talk a little bit about the current status and size of the commercial organization? And how you expect it, I guess, to evolve over the next 12 months as you head into the launch in CLL for U2 in March, April, and then into, I guess, the MS market in the second half, third, fourth quarter of next year?

[Adam Waldman, Chief Commercialization Officer]

Sure, Matt. Thanks. So, we have about a 70-person field footprint right now on the oncology side and I think we've made some opportunistic expansions here for CLL that in small numbers that help reinforce the team in areas that we thought we needed some reinforcements and we are looking for ways to increase our ability to access certain accounts.

But largely, the oncology footprint is in place for what we need for CLL. We feel pretty good about it. And as we said in the prepared remarks, the experience that we are getting from UKONIQ launch is going to help us as we go into CLL. On the MS front, as Mike had answered earlier, this is a more concentrated market than perhaps people think 550 centers of excellence that are seeing 80% of the patients. It sets up for a field footprint that is a reasonable size.

I think most other competitors are in the 80 range on reps, 80 or so, 80 to 100 on the rep size and we're evaluating right now what that will look like for us. But I think you can use that as a reference for how you might think about the size of our team going forward.

[Matt Kaplan, Ladenburg Thalmann]

Okay. That's very helpful. Thank you. And then, I guess, secondly, in terms of – maybe more for Adam, too. In your research, and I guess, outreach pre-approval, how is ublituximab differentiated profile with respect to efficacy and potentially with respect to infusion-related reactions and infusion times. How has that been resonating with potential prescribers? What are their hot buttons, I guess, that you are hearing back?

[Michael Weiss, Executive Chairman & Chief Executive Officer]

You want to go ahead, Adam? I think Matt wanted you to answer that one. Although I could answer it, Matt, though I'll let Adam...

[Adam Waldman, Chief Commercialization Officer]

Why don't you start, Mike, because you were down there? You were at the ad board last week. So why don't you start? I'll fill in.

[Michael Weiss, Executive Chairman & Chief Executive Officer]

You're being super polite. You were there as well. But, yes, look, Matt, for me, personally, it was great. I mean I've been in and out of the direct interactions with the MS folks, and it was really nice for me to get back in at live about two weeks ago in Orlando. Yes, I think people are very impressed with the activity level of the compound.

Again, what I've been saying for a long time, some folks are completely convinced it's a better activity profile and others are bucketing it CD20s all work really well. So I think you'll get a mixed reaction. No one thinks it's inferior. So that's good. So I think most people would say on par or better from an efficacy standpoint.

I think overall, people are excited about the infusion times and the associated infusion-related reactions. I think when you talk to folks, OCRE definitely has its issues on the infusion side that people are pretty aware of and somewhat vocal about. So, I think they looked at the IRR data, and we are actually quite comforted by it. So I think all systems are go from what I could tell.

Again, I think key attributes, the activity profile, safety, everything has got to be in line and should do better, and I think that's where people perceive it. And then, the hour infusion is extremely attractive and – but the big one, as I mentioned earlier, is all about access, right? So to the extent we can drive great access, ideally through price, then we'll be in a great position.

We'll be in a great position regardless, but it is an access game as people want to just make sure they can pick the drug that they want at the time they want to give it and they don't want to have too many hassles, which is understandable. When you think about 500 centers treating 80% of the patients, the throughput volume is really tremendous.

[Matt Kaplan, Ladenburg Thalmann]

Great. Thanks, Mike and I guess, one last question. Mike, you mentioned in your kind of walk to ASH abstract highlights, U2 and DLBCL and some new data there being intriguing. Any thoughts on potential next steps with the development for DLBCL?

[Michael Weiss, Executive Chairman & Chief Executive Officer]

We are still just putting that all together in terms of the data. But, yes, I think it's something we're going to look into. And step one is, let's get U2 approved for CLL and then, step two is, we can look to a supplemental filing and seeing – fully evaluating, which data sets could be part of that supplemental filing. We think U2 marginal zone is certainly a potential candidate for inclusion in that kind of a filing as well. And yes, we'll take a hard look at the diffuse large B-cell and see if we can include that in a filing, too.

[Matt Kaplan, Ladenburg Thalmann]

Great. Well, thanks for taking the questions and congrats on all the partners.

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Thanks, Matt.

[Operator]

Thank you. There are no further questions at this time. I would like to turn the floor back over to Mike Weiss for any closing comments.

[Michael Weiss, Executive Chairman & Chief Executive Officer]

Well, since the hour is late. Market is already open. I'll keep this quite brief and just thank everyone for joining us this morning and continuing to support us. Have a great day. Thank you.

[Operator]

This concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation.