Following a disappointing outcome for the second quarter, shares of biotechnology firm TG Therapeutics (NASDAQ:TGTX) suffered a catastrophic loss. Specializing in Briumvi — a therapeutic for the treatment of relapsing forms of multiple sclerosis (MS) — Q2 represented the first full quarter of the drug’s sales. While scientifically compelling, Briumvi may not have lived up to excessive hype, resulting in TGTX stock falling 50%.
According to data from Zacks Equity Research, TG printed a loss of 34 cents per share, adjusted for non-recurring items. Unfortunately, Wall Street’s consensus target called for a loss of 26 cents. Making matters worse, in the year-ago quarter, the biotech printed a loss of 30 cents per share. At the time, analysts anticipated a loss of 36 cents.
In other words, the earnings surprise trend underlining TGTX stock is moving in the wrong direction. Per Zacks, over the last four quarters, the company surpassed earnings per share estimates only two times.
Notably, TG’s official press release noted that the company rang up $16 million in net sales for Briumvi during Q2. This figure represented 100% growth on a quarter-over-quarter basis. Since the launch of the therapeutic, Briumvi generated total net revenue of approximately $24 million.
TGTX Stock Faces a Harsh Reality Check
Fundamentally, the global MS therapeutics market size features a wide canvas for TGTX stock. According to research firm Mordor Intelligence, this sector may reach a valuation of $28.66 billion at the end of this year. By 2028, the segment should be valued at $33.98 billion, representing a compound annual growth rate (CAGR) of 3.46%.
In addition, enormous anticipation for Briumvi undergirded TGTX stock. As TG Therapeutics Chairman and CEO Michael S. Weiss stated during the Q2 disclosure, several MS centers have adopted the underlying therapeutic. Specifically, Briumvi benefits from positive feedback from patients along with encouraging late-stage clinical data. Therefore, TGTX accrued substantial hype.
Sadly, though, the latest Q2 results suggest that investors were looking for much more substantive results. True, TGTX stock aligns with a scientifically compelling therapeutic. However, as Seeking Alpha contributor Edmund Ingham pointed out early last month, the company’s roughly $3.5 billion market capitalization was difficult to justify, especially against incumbent therapeutic competitors.
Indeed, heading into the Q2 disclosure, investment data aggregator Gurufocus noted that TGTX traded at a revenue multiple of over 165. Apparently, that was far too much for investors to take, even with Briumvi’s promising profile.
Why It Matters
At the moment, analysts peg TGTX stock as a consensus moderate buy with an average price target of $30.94. This figure represents upside potential of over 200%. However, the most recent two analyst assessments rate TGTX as a sell. In particular, Bank of America’s Alec Stranahan warns that shares could drop to $6, implying 40% downside risk.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
