Protagonist Therapeutics, Inc. (PTGX) Earnings Call Transcript & Summary

Good day, and welcome to the Protagonist Therapeutics Year-end 2019 Update Call. Please note that today's conference is being recorded. At this time, I would like to introduce Don Kalkofen, Protagonist's Chief Financial Officer. Please go ahead.

Thank you, operator. Good afternoon, everyone. Please note that a replay of today's call will be available at the Investors section of our website at protagonist-inc.com. Before we begin, I'd like to remind you that today's discussion will include statements about the company's future expectations, plans and prospects that constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our quarterly and annual reports on Forms 10-Q and 10-K, which are on file with the SEC. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. With that, I will now turn the call over to Dinesh Patel, President and CEO, to provide an update on the company's progress to date.

Thanks, Don. Good afternoon, everyone, and thank you all for joining us today. On today's call, I would like to briefly review our achievements over the past year, share our current status and provide a clear preview of our goals for the year 2020. Following this overview, Don Kalkofen, our CFO, will review our financial results, and then we will open up the call to questions. Also present for the call today are Samuel Saks, our Chief Medical Officer; David Liu, of our Chief Scientific Officer and Head of R&D; and Suneel Gupta, our Chief Development Officer, and they will also be available to address any questions. We started last year with 3 assets in different stages of clinical development, a valuable partnership with Janssen and cash runway to fund our operations through the end of year 2020. During the year 2019, we progressed and positioned these 3 assets for up to 6 different disease indications, made significant progress in and expanded the Janssen collaboration, expanded and strengthened the Protagonist team and extended the cash runway by an additional year through the end of 2021. As a quick reminder, all 3 assets in development have been discovered through the use of our technology platform. So to summarize the current status, we have 3 clinical assets, 6 clinical proof-of-concept, or POC studies, each in a different indication. And cash runway through the end of 2021 that enables us to reach conclusive, data-driven go/no-go decisions from these studies at various different time points throughout 2020 and 2021. Now I would like to provide details on the status of these 3 assets: PTG 300, PTG 200 and PN-943, and various clinical studies with these assets and what to expect over the course of 2020. As you may recall, our 3 assets fall in 2 broad categories of diseases. PTG-300 for various blood disorders, many of which are rare diseases; and PTG-200 and PN-943 for inflammatory bowel diseases or IBD. So let's start with PTG-300, a peptide mimetic of the natural hormone hepcidin that serves as a master regulator of iron homeostasis and distribution. This is our most advanced asset, and the year 2020 will be dominated by the outcome of various clinical POC studies that are currently in progress with 300. We are pursuing PTG-300 in 4 different indications, beta-thalassemia, or beta-thal; polycythemia vera, or PV; hereditary hemochromatosis, or HH; and an investigator-sponsored study in myelodysplastic syndrome, or MDS. These are all open-label, proof-of-concept studies, and a major objective for 2020 is to pick up our first clinical indication for PTG-300 that we can progress towards a pivotal study in 2021. Our prioritization and specific choice of the first indication will be based on 3 important factors: strength of the clinical data, regulatory path forward and commercial opportunity assessment. We are very encouraged by the progress we have made so far with PTG-300. In late 2019, we gained very useful insights into the pharmacodynamic effects of 300 with preliminary results from the ongoing TRANSCEND study in beta-thalassemia, a rare disease caused by ineffective erythropoiesis and characterized by chronic anemia and iron overload in the body. We reported dose-related blood exposure and pharmacodynamic responses, namely reductions in serum iron and transferrin saturation, or TSAT levels, from the transfusion-dependent population arm of the study. These preliminary results provided the very first evidence of effects of PTG-300 in patients who have highly elevated levels of iron in the body. And it encouraged and guided us towards continuing the study with a 40-milligram twice-weekly dosing regimen. PTG-300 was also found to be well tolerated, and systemic adverse events were mostly mild to moderate in severity. These events were not dose-related and did not prevent dose escalation in the study. The beta-thal study is progressing as planned in the transfusion-dependent population, and we expect to reach definitive conclusions this year from the study. Another strong outcome from the preliminary pharmacodynamic results of the TRANSCEND beta-thal study was that it provided strong rationale for potential utility of 300 in other blood disorders directly dependent on disruption of normal iron balance in the body. Specifically, we are referring to polycythemia vera, a rare disease of myeloproliferative neoplastic disorders characterized by overproduction of red blood cells and hereditary hemochromatosis, a disease caused by the absence or deficiency of the hormone, hepcidin, in the human body. Therefore, we are enthusiastically continuing with our plans of conducting clinical POC studies for 300, not only in beta-thal, but also in PV and HH with the objective of making data-driven decisions in 2020. All 3 open-label studies are ongoing, and we plan to share our findings when we reach conclusions from each study during different times of 2020. As mentioned previously, our core intent here is to pick the first indication this year for PTG-300 that can be progressed towards a pivotal study in 2021. Now let's switch gears and talk about our IBD assets, starting with the Janssen collaboration asset, PTG-200, also known as JNJ-67864238. As a reminder, PTG-200 is an orally delivered, gut-restricted peptide that targets the IL-23 pathway, a biological pathway validated by approved injectable antibody drugs on the market today. Specifically, Janssen's injectable antibody drug Stelara targets the IL-12/23 pathway and is approved for IBD. Last year, in May, we announced the progression of PTG-200 into a Phase II clinical proof-of-concept study in Crohn's disease, the trigger of a $25 million milestone payment from Janssen to Protagonist and the expansion of the collaboration agreement to include new second-generation oral IL-23 receptor antagonist. The PTG-200 Phase II Crohn's studies is ongoing, and we expect the results from this study in the first half of 2021. Our research collaborations with efforts with Janssen are progressing extremely well. And in January of this year, we announced the nomination of a second-generation development candidate, further demonstrating the continued utility of our platform. And it also resulted in a $5 million milestone payment from Janssen. We look forward to working with Janssen to explore the full potential, clinical utility of oral IL-23 receptor antagonist. Now finally, let's talk about our second IBD asset, PN-943, a gut-restricted orally delivered peptide that targets alpha-4-beta-7 integrin. This biological target has been validated by the injectable antibody drug, ENTYVIO, from Takeda. Last year, we completed Phase I studies with PN-943 in healthy volunteers and demonstrated superior target engagement in comparison to its first generation produces peptide PTG-100. The results of this study was shared as an oral presentation at the 2019 Digestive Disease Week, or DDW conference. We remain on track to initiate a Phase II study with 943 in patients with ulcerative colitis in the second quarter of this year and anticipate top line efficacy results from this study in the second half of 2021. The first patient dosing in this study would provide us the optionality of a $20 million draw based on the terms of our current debt facilities. We are highly enthusiastic about the future prospects of PN-943. This candidate is wholly owned by Protagonist, and it is an oral antagonist of alpha-4-beta-7 integrin, which is turning out to be one of the safest, most specific, and validated IBD targets. Being an oral agent, PN-943 has the potential to play a central role in the new IBD treatment paradigm, shifting towards oral agents and combination therapy in the future. So in summary, we are very pleased to have made great progress in 2019 and set the stage for further development of 3 different clinical assets in 6 different clinical POC studies in 6 different diseases and making data-driven informed decisions over this year and next. 2019 was also a year where we took the opportunity to expand and strengthen the Protagonist team, and we will continue to do so going forward. Our priorities for 2020 include the following: One, evaluating the hepcidin mimetic PTG-300 in multiple indications and selecting the first indication this year for conducting a pivotal study in 2021; two, working with our partner, Janssen, to continue Phase II development of PTG-200 in Crohn's disease as well as discovering and developing second-generation oral IL-23 receptor antagonist until the collaboration and qualifying for milestones based on progress and performance; and finally, number three, advancing PN-943 in a Phase II study in ulcerative colitis. We are fortunate to have adequate financial resources through the end of 2021, which should enable us to reach definitive conclusions from all of our ongoing clinical proof-of-concept studies. Finally, we are proactive about and mindful of the potential impact that the recent coronavirus outbreak could have on our local operations and global activities. As of now, our guidance on specific objectives and the corresponding time lines remains unchanged. With that, I will now turn the call over to Don to review our fourth quarter and year-end financial results. Don?

Thank you, Dinesh. The press release we issued today provides details for our fourth quarter and full year 2019 results. Rather than repeat all the details included in the release here, my comments will center on a few of the highlights. Protagonist reported a net loss of $77.2 million for the full year of 2019 compared to a net loss of $38.9 million for 2008, as -- and reported a net loss of $17.5 million for the fourth quarter of 2019 in comparison to a net loss of $13.9 million for the fourth quarter of 2018. Our license and collaboration revenue booked for the full year of 2019 was $0.2 million as compared to $30.9 million for the full year of 2018. The company did recognize $9.6 million of license and collaboration revenue for the full year of 2019, which was then offset by the onetime cumulative adjustment related to the application of revenue recognition principles, following the May amendment -- May 2019 amendment of the Janssen Biotech agreement that had reduced the revenue recognition by $9.4 million for the year, and thus, resulted in a net reported revenue of $0.2 million for the full year of 2019. License and collaboration revenue was $2.7 million for the fourth quarter of 2019 compared to $2.4 million for the same period in 2018. Research and development expenses were $65 million for the full year of 2019 compared to $59.5 million for the full year of 2018, and R&D expenses were $15.9 million for the fourth quarter of 2018 (sic) [ 2019 ] as compared to $14.2 million for the fourth quarter of 2018. For general and administrative expenses for the full year of 2019 were $15.7 million compared to $13.7 million for the full year of 2018, and our G&A expenses were $4.1 million for the fourth quarter of 2019 as compared to $3.5 million for the fourth quarter of 2018. Protagonist ended 2019 with $133 million in cash, cash equivalents and marketable securities and $10 million outstanding under our debt facility. The company forecasts that cash, cash equivalents and marketable securities along with access to our debt facility will be sufficient to fund planned operating and capital expenditures through year-end 2021. We will now open the call for questions. Operator?

[Operator Instructions] And our first question comes from the line of Christopher Marai from Nomura.

So we're looking forward to several data readouts it seems. I was wondering, though, if you could comment on the most recent one with respect to PTG-300. I noticed in your prepared remarks, you talked about, I suppose, transfusion-dependent patients with beta-thal and your work in them. How is -- or are you continuing to explore the opportunity for 300 in patients without transfusion dependence? And I have a follow-up.

Yes, sure. Chris, thanks for the question. As of today, we are pursuing both the transfusion-dependent and the nontransfusion-dependent populations in the study. And as you well know, the NTD population enrollment is predictably slow. That has been the same observation with other drugs that have traveled on this path before.

Okay, great. And then just a follow-up on 300 maybe. As you think about these multiple potential paths to registration, PV, HH, TD, beta-thal, could you imagine bringing the drug forward in multiple indications in registration trials in 2021? I mean, do you have the capacity internally and otherwise to help execute on that, supposing or presuming success in each of those? And then secondarily, I understand that you've defined dose in beta-thal for 300, but could you maybe talk about how that dose might or might not relate to the doses of 300 in PV or HH? And then finally, do you believe that you've sort of at least identified the upper and lower balance of the dose for 300, such that you can make some educated guesses about PV and HH dose that would be effective going forward?

No, I think those are all 3 excellent questions. And let me go through them one at a time. So in terms of the question of one indication or multiple indications to pursue, our focus right now is to pick the first indication for a pivotal study. And to clarify, that's the first indication, not necessarily the only indication. So that down the road, depending on multiple factors, will be more than keen to pursue multiple indications. So that will really then define the total expanded scope of the drug once it reaches the market. The second point is the "effective dose" that gave us the desirable pharmacodynamic effects on beta-thal. How does that serve to guide the doses of the dosing regimens in other indications? As you may recall, we also declared, like, what are the baseline serum iron or TCEP levels in different patient populations. And what that dictates is that the iron overburden demand is different in different indications. So logic would dictate that the effective doses would be different for different indications. Now it turns out that the transfusion-dependent beta-thal population is the most demanding one with TCEP levels at baseline anywhere from 80% to 100%. So we anticipate, in theory and logically, that the effective doses could be the same or lower in other indications. And so in terms of the upper boundaries and lower boundaries, my guess would be, we have gone up to as high as 80 mg weekly or 40 mg twice-weekly dosing in the transfusion-dependent beta-thal populations. Our safety coverage will allow us to go higher if necessary. So that's your upper boundary and the lower boundary could be anybody's guess.

And our next question is from the line of Joseph Schwartz from SVB Leerink.

I'm Joori Park, dialing in for Joseph Schwartz. I guess my first question is also on PTG-300. I was just wondering if you could provide some color on how and when you plan to announce the TRANSCEND data. I know that you previously guided to TRANSCEND data in 1Q, so I was just wondering when we would be able to see that.

Right. So last year, when we said the preliminary results, mainly the pharmacodynamic readouts from the TRANSCEND study, at that time, we clarified that the ultimate data, including the clinical responders, meaning the effects on clinical efficacy, that is something we would share sometime in 2020. And the reason for choosing such a broad time line is that we would want to share data for each trial, for each indication as and when we reach a point of some firm conclusions.

Okay. Great. My next question has to do with PN-943. From your preclinical and healthy volunteer studies, how much of an improvement over PTG-100, could we expect with PTG-943 (sic) [ PN-943 ] in your upcoming Phase II trial? And is there any color or detail you can add here regarding the trial design?

Yes. No, those are, again, both excellent questions. So PN-943 was consistently superior to 100 by all preclinical measures. And in the Phase I study in healthy volunteers, which enabled us to do a side-by-side comparison with 100 in a human setting, what we found is, like, roughly speaking, one could claim that 943 is threefold more effective than PTG-100. And what we mean by that is that the effect on the pharmacodynamic readouts of blood receptor occupancy that we saw with a particular dose of PTG-100, let's say, at a 900 mg dose, we were able to achieve and exit that level of effect at 3x lower dose with PN-943, specifically the 300-milligram dose. And in terms of the next study, the Phase II study with PN-943, we look forward to providing more guidance on that in the second quarter of this year. But as you can imagine, we have already achieved a major object to over here that is proving the concept of an oral GI-restricted alpha-4-beta-7 integrin blocker with other previous peptide PTG-100. So with the clinical proof-of-concept in hand, we are feeling very confident, and that's why we will be conducting a fairly well-rounded Phase II study. It will have the typical elements of a high dose, a low dose, a placebo arm, enough number of patients so that we can get statistical significance in a meaningful way, the typical induction period followed by long-term extension and so on and so forth. But as I mentioned before, we'll share more details in the coming months.

Okay. And then just one more question, if I could just squeeze it in. Given the competition for enrolling UC trials, we were just wondering what steps you're taking to ensure you remain on track for the expected 2 half '21 readout.

Yes. I mean, clearly, there is a competition for the UC patient population, but we believe that our drug offers some very fine advantages. Number one, this is a proven target. Number two, the GI-restricted approach is a Pro 1:1 through our previous molecule PTG-100. Number three, this is an oral approach. So when you combine all these elements -- and of course, we are also going to add -- offer long-term extensions. So when you add all this up, we believe that we are feeling fairly confident about the proper kind of enrollment so that we hope to start the study in the second quarter of the year, and we anticipate clinical readouts in the second half of 2021.

Our next question comes from the line of George Farmer from BMO Capital Markets.

Dinesh, we've talked in the past about further exploration of around the 80 mg dose for PTG-300. I noticed that in your prepared remarks that you seem to be kind of stopping at 40 mg twice weekly, which equals 80 per week, but should we expect anything above that? Or do you think you found your dose.

It's a fairly good question, a slightly tricky one, I would say. What I would maintain for that is that, for now, is that we are continuing steady enrollment with our 40 mg twice-weekly dosing. And at the proper time, we intend to share the data that we get from the current study.

Okay. And then...

Now having said that, though, based on the safety parameters, that is nothing that is stopping us from going to higher doses. And Sam, go ahead.

I just wanted to mention, as Dinesh mentioned earlier, the only place where we'd be thinking about that currently is in beta-thalassemia because, as he mentioned earlier, we believe that the dose required looks like it's dependent on the iron status, and there's nothing we're treating that has a higher iron overload than transfusion-dependent beta-thal.

Okay. And then what do you need to see from this -- from the beta-thal study to make it as a candidate indication moving forward? Do you -- is TSAT or iron levels sufficient? Or do you need to see some impact on transfusion dependence do you think?

Yes, we would definitely want to see impact on transfusion burden because, at the end of the day, that is what matters at the level of patient and practicing physician, right? So now the definition that we have for clinical responders in this study is at least 20% reduction in transfusion burden over an 8-week time period. Having said that, in the same breath, what I would also add is like just an 8-week time period doesn't create a drug in itself. So we would want to see continued and prolonged observation of the effect on transition burden to make it a strong candidate.

Okay. And then a question on 943. Can you mark a little bit on what lessons you've learned from the PTG-100 study that you're applying to for a successful outcome -- potential successful outcome in the 943 study?

Yes, certainly. I mean there have been several lessons in a way, and as you recall, the place where we kind of were taken by surprise was the unprecedently high placebo effect in the initial futility readout. Since then, the -- even for PTG-100, we did the [ re rates ], and we went to another CRO, namely Robarts. And finally, we got the data that we found to be very convincing. So all those experiences and observations have been taken into consideration as we move forward with PN-943. And the other thing I would add also is that we are in intimate dialogues with the KOLs. The IBD KOL community is such a great community. Everybody is very supportive and very guiding. And now we have a different clinical team also in place. So we believe we have taken very extensive measures to ensure an uninterrupted journey forward with 943.

And our next question will come from the line of Douglas Tsao from H.C. Wainwright.

Just maybe following up on that one question on PN-943, Dinesh. You're given the fact that you had such strong evidence from the prior Phase II study for PTG-100 in terms of sort of proof-of-concept or proof of mechanism. Are you trying to answer different questions with this Phase II study for PN-943 in terms of sort of what you're trying to establish as you move into Phase -- potentially into Phase III?

Yes. No, certainly, that's a very good question. And as I mentioned, we will want to make the upcoming Phase II study as informative as possible. And the idea over here would be that let's gather enough information so that it potentially gives us a very real opportunity to prepare for a pivotal study after this particular Phase II study. And pretty soon, in the coming months, definitely in the second quarter, we will be sharing more details about our clinical trial design.

Great. And then in terms of the dosing and potency, I mean, do you see the advantage here being able to achieve sort of strong efficacy at a lower dose? Or do you really want to try to affect as great efficacy as possible?

Yes, no, fantastic question. So we would want to do both, and that is why, on purpose, we are choosing a low dose and a high dose. So a good efficacy at low dose and very good efficacy hopefully at higher dose. That will be the intent.

And our next question comes from the line of Adam Walsh from Stifel.

My first one is just on sequencing of clinical data readouts for the 300 product this year. We've been over this. These are open-label trials, so there's the opportunity to kind of present data. Can you just outline for us for each of the trials, what are the minimal kind of clinical thresholds in your mind that are there for the potential for you to announce some kind of a data read from each of the trials?

So as we said earlier, the threshold is when we've made a decision that it's worth going forward into a registration-type program. So that's we're looking for that level of certainty to make an announcement. We will look for updates throughout the year on all of our programs with 300 at various medical meetings that are appropriate, but our central goal is to define data that would indicate that we have an indication to pursue and make that data available to back up that assertion.

That's helpful. And…

And Adam, what I would also add is that, at one level, clearly, we started first with the beta-thal study, then PV and then HH. But for all practical purposes, one way to look at this is like all these studies are only a quarter apart from each other. And what I mean by that is like for the beta-thal study, for example, even though we started early last year, it's only higher doses that were effective doses, which happened in the second half of the year. And then in Q3 of last year, we announced the initiation of the PV study. And early this year, we announced the initiation of the HH study. And then as Sam pointed out early on, we believe that, theoretically, logically, our dose burden is probably going to be the highest in the beta-thal transfusion-dependent population based on the serum iron levels being the maximum over there. So when you combine all these factors, it really becomes a delicate risk amongst all these different studies. And that is why we continue to emphasize that we will make the data available as and when it reaches a certain level of certainty. But behind all this, the core objective is to -- and we cannot emphasize this enough, is to just pick the first indication, not the only, but the first indication for a pivotal study going into 2021.

And we've also said repetitively, Adam, and I know you know this to be true that just because we say it's going to be in 2020, one should not assume it's going to be December. To your point, these are open-label studies. We can read certainty at any time. So that's why we've kind of left it open-ended.

That's really helpful. And then on the dosing question that came up earlier. In the Phase II transfusion-dependent beta-thal patients, when you use the 40 mg twice weekly, you did see kind of a more sustained and significant reduction in TSAT. And I'm just curious, I mean, I understand why you might be able to go with a lower dose in the other indications, but what about the twice-weekly, have you thought about maybe a 20 twice-weekly or a 40 twice-weekly for the other indications? In other words, can you vary the dosing regimen in those other indications to maybe get a more sustained response by using a twice weekly? Have you thought about that?

Yes. So obviously, as in just about all development programs, our goal will be to give the lowest dose with the least frequency as possible. It's necessary to achieve the efficacy that we want to achieve. So that being said, we'll have data speak for itself, but our goal will be to try and make the regimen as convenient as possible.

But for our practical purposes, the study is designed in such a way that it allows for the flexibility of more frequent dosing or less frequent dosing.

Okay, that's helpful. And then one final one quickly on 943. Can you comment on -- if you know anything about it, Morphic is developing a kind of a competitive oral alpha-4-beta-7 integrin competitor? And I'm just curious, they only had really some early data, and oftentimes, competition is the best form of flattery. But can you comment on your thoughts on the competition with the data we have at this point?

No, I think one of our job is to be fully aware of what else is going on, and we understand Morphic's presence, and -- but we make it a point not to make any formal comments on other drugs that are in development.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Dinesh Patel for any closing remarks.

Thank you. We are highly encouraged by our progress to date and look forward to multiple data-driven decisions in 2020. We would like to thank Protagonist shareholders who support our efforts, the patients who participate in our studies and the investigators who support these studies. Finally, we are very proud of and thankful to our highly dedicated team of Protagonist employees who always work very passionately and diligently to make all this possible. Thank you all for joining us today. Operator?

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.