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

Good morning, everyone. Thanks for joining us for another session at the 41st JPMorgan Healthcare Conference. I'm Brian Cheng. I'm a senior analyst at the firm. Presenting next is Protagonist Therapeutics. I'll turn the floor to Dinesh Patel. After his presentation, we'll go into Q&A mode. [Operator Instructions] Dinesh, the floor is yours.

Thanks, Brian. Good morning, everybody, for being here this early morning. Appreciate it. So just a quick disclaimer that we are a publicly traded company, and we will be making forward-looking statements today. So Protagonist works exclusively on peptide therapeutics, and we are a late-stage clinical development company. We have 2 very diverse assets. And the genesis of these assets is our core technology platform, which enables de novo discovery of new peptide therapeutics against almost any target of interest, including protein-protein interaction targets, which typically are not amenable by small molecules. So the 2 assets are rusfertide and PN-235. Rusfertide is a synthetic mimetic of the natural hormone hepcidin. Hepcidin is an iron homeostasis regulator. Its function is to manage the storage, distribution and absorption of iron in the body. So as you can imagine then, a mimetic of this natural hormone could have relevance in the intervention of numerous blood disorders, specifically those that could be influenced by iron overload or erythrocytosis. In particular, we are focusing on polycythemia vera. This is a blood disorder of excessive red blood cell production. We have multiple studies going on over here, including a pivotal Phase III study. The drug has an Orphan and Fast Track status. PV is a rare disease, and in itself, we believe it represents a multibillion-dollar opportunity in the rare heme space. And the asset is fully owned by Protagonist. PN-235 is an oral peptide, an oral IL-23 receptor antagonist, and this is something we have partnered with Janssen. And as you can see, Janssen is doing full justice to this asset. There are multiple Phase II studies going on in psoriasis. The big vision here is really the extension of the $10 billion plus STELARA and TREMFYA franchise and the transition from injectable to oral targeted therapy. Now it is also very comforting to highlight that in these challenging times in our sector, Protagonist is fortunate to have a credible cash runway through the end of 2024, which then enables us to achieve multiple milestones, including completing the Phase III PV study, getting it to top line data before we run out of cash. So let's talk about rusfertide and polycythemia vera. PV is a myeloproliferative neoplasm. It's characterized by excessive production of red blood cells. An elevated hematocrit is a characteristic of the disease. Hematocrit is nothing. But the ratio of the volume of red blood cells to the total blood volume and a number above 45% is a characteristic of the disease, and it is affiliated with numerous risk factors. So -- including thrombotic and cardiovascular risks. PV is a rare disease, but not that rare in the sense that there are about 100,000 patients in the U.S. alone and almost an equal number in Europe as well. And it is a chronic indication. So the median survival time spans over several decades. Now this is a slide that basically highlights that there is a very significant unmet need in PV. So number one, hematocrit needs to be maintained below 45% per guidelines. Number two, there is a very, very clear and direct association of higher hematocrit with higher rates of mortality and morbidity arising from cardiovascular and thrombotic events. Not only that, as I said, people live for decades with the disease and the day-to-day quality of life gets highly impacted. Symptoms are very burdensome, including symptoms such as fatigue and concentration problems. Number three, which is really an eye-opener, is that our real world data shows that majority of the patients do not control their hematocrit and have tests registering above 45%. So when you combine all these facts, what it states is that the current standard of care is not getting the job done and that is an unmet need. Finally, the therapy involves phlebotomy and cytoreductive agents for the large part, but there is no pharmaceutical option that is very RBC or erythrocytosis specific. So in that context, rusfertide could be the solution over here by being a synthetic mimetic of hepcidin, the iron homeostasis regulator in the body. These are 2 examples that demonstrate clear affiliation of increased hematocrit with increased morbidity and mortality events. On the left is a CYTO-PV study where you will see that the mortality rates are 4x higher in the group that had higher hematocrit in comparison to the group that had hematocrit below 45%. And on the right, what you see is that for patients who are also on hydroxyurea treatment, if they have fewer phlebotomies, they are kind of in a safe zone. But if you are having 3 or more phlebotomies a year, then that is where your thrombotic risk is 4x higher. Okay. So how does rusfertide work? In PV, in a sense, as you can see on the left-hand side, there is excessive delivery of iron into the bone marrow, leading to excessive red blood cell production. That's fundamentally what the disease is. Now hepcidin is an inhibitor of ferroportin, the iron channel through which iron is transported from the storage systems, the macrophages, into different parts of the body where it is needed. So rusfertide blocks ferroportin, thereby modulates or decreases the supply of iron to the marrow and normalizes the production of red blood cells. I would also point out that hepcidin, the natural hormone in its own right, was never a drug in its own right in our eyes. It was always a starting point for drug discovery. It simply doesn't have the characteristics of a good drug. And through our platform, we discovered a superior mimetic, which is superior in the context of all the pharmacological and drug-like properties that one could think of. So our drug is now in 3 clinical studies, and I will quickly highlight some of these studies. Phase II REVIVE study has been a source of constant information and updates for the performance of rusfertide in PV. The eligibility criteria in this 70-plus patient study is patients with excessive phlebotomy requirements in spite of their current standard of care. They could be on phlebotomy alone or they could be on other cytoreductive agents. The study has different parts. The first phase is the dose finding and efficacy evaluation phase. The second is a 12-week randomized withdrawal where the patients are distributed in a blinded manner in a one-to-one fashion in placebo versus treatment. And finally, that is the open-label extension. Originally, it was for 1 year. But then keeping the interest of the drug in mind, both from the patients and the investigators, we extended the open-label extension now for 3 years. For the 70-plus patient study, we now have 5 patients who have completed more than 2 years of treatment, and we have more than 50 who have completed over 1 year of treatment. So clearly, there is a lot of good stickiness of this drug with the patients and the practicing physicians. The demographics are self-explanatory. But very quickly, we have a good proportion of both low- and high-risk disease patients. And as you can see in the therapy part, there is almost an equal distribution of patients on phlebotomy versus patients who require phlebotomy in spite of being on various concurrent therapy. Now this is a data-rich slide. This is a [ money ] slide. It's a very busy slide, but just follow the colors and I think you will appreciate the simplicity and the impressive data. For now, we will just focus on the sketch on the left, the phlebotomy-only group. The gray area with the red triangles is basically the pre-dose phase. This is when patients were not on the study, and each red triangle is a phlebotomy. So the bottom line is these are patients requiring frequent phlebotomies. And now once they enter into the study, that's the green area, and you can see the triangles are almost eliminated. So essentially, the punchline over here is like this is a drug that essentially eliminates phlebotomy and exercises amazing hematocrit control in a consistent and persistent manner. Then you see the kind of the shaded gray area with some red triangles. Now this is the time when there was a clinical hold. And while the hold was lifted in a record time of 3 weeks only, it took a few months for the patients to get back into the study. So for a few months, the patients were without any drug. And as you can see, now the phlebotomy requirement has come back when the dosing was suspended, which then, in a way, talks to the strong influence of the drug in controlling phlebotomy. And then the other component we have is the randomized withdrawal. This is a 12-week period, placebo versus treatment. We are nearing the completion of this phase, and in the first quarter of this year, we expect to share the highlights from this study. We will save the details of our presentation at a major medical conference. So this is basically the data set. And now when you look at the other phlebotomy versus cytoreductives at a high level, the data trends are essentially identical. So clearly, the drug is doing an amazing job in terms of controlling hematocrit and eliminating phlebotomy. So this is a summary slide. I won't go through any of the details. Last December at ASH, we provided a safety update. There were no new safety findings. So the drug appears to be well tolerated, and now our exclusive focus is on the 250-patient pivotal Phase III VERIFY study. The most important thing to remember about this study is like the study design, the enrollment criteria, the primary end points, all of those things essentially mirror what we had in the Phase II REVIVE study and where, as I just showed you, we have achieved amazing success. So patients with excessive phlebotomies are into the study. They are distributed one-to-one between placebo versus treatment. There is a week 20 to 32 primary efficacy evaluation phase. After that, all the patients go into a 20-week durability phase. And at that junction, we believe we'll be ready for an NDA filing while the study still continues with additional 2 years of safety follow-up. We have forecasted that the enrollment for this study will be completed in the second half of the year. So as we are in the thick and thin of a Phase III study, it's only right for us to now start paying attention to the commercial positioning. And the punchline over here is that we believe that rusfertide is almost like a precision medicine, if you will, that works exclusively through controlling erythrocytosis or the RBC production by controlling the hematocrit and thereby eliminating the need for phlebotomies. We would like to see this as foundational medicine that should be applied to a majority of the patients for a majority of the life span of the disease. When you're in a very low-burden state requiring only 1 or 2 phlebotomies, that gets the job done, you're fine. And then you're at the very late stage moving towards myelofibrosis, you do need control of all cell counts, and that is where you need a pan inhibitor. But for most patients, for most of the time, an RBC-specific drug will do a great job and it will do a safer job. All right. Now let's switch gears and talk about our oral IL-23 asset. So this is a partnership we have had with Janssen for more than 5-plus years now, and it has been a very satisfying journey for the Protagonist team to move the asset from early discovery preclinical now into multiple clinical studies with PN-235. And the big vision, as I mentioned over here, is really extending the STELARA and TREMFYA franchise and transitioning from injectable to oral targeted therapy. As you know, this is the most important franchise for our partner, $11.26 billion in total global sales in 2021 alone, and application in multiple different indications, including psoriasis and inflammatory bowel diseases. So PN-235 is a very unique molecule. And we can claim a first-in-class status for the drug at, at least 3 different levels. One is over here, we are targeting the receptor in the IL-23 pathway, unlike the antibodies that are targeting the ligand. The other is, obviously, this is an oral, a huge plus compared to the injectable antibodies. And the third is like this is a small peptide unlike the big biologics, and that is why it could be oral. So now when you look at the psoriasis space, obviously, JAK inhibitors and TYK2 inhibitors are going to have their presence. But the -- it is the IL-23 pathway blockers and IL-12/23 pathway blockers that have unprecedented efficacy and safety in psoriasis. So when we come up with an oral drug working along this pathway, that could really be a game changer for both companies. So PN-235 could be a potential not just the first-in-class, but a best-in-class oral approach in the IL-12/23 pathway. Now this is a protein-protein interaction target. So the barrier to entry is high unlike JAK or TYK2 inhibitors where it's a small molecule approach. And relatively speaking, it's simpler in nature. As I mentioned before, there are multiple studies being conducted by Janssen. The 2 most noteworthy ones are the FRONTIER 1 and SUMMIT. FRONTIER 1 is a 240-patient Phase IIb placebo-controlled study in patients with moderate to severe plaque psoriasis. And we are glad to report that the enrollment has been completed. And it's not just the enrollment. Even the study has been completed as of the middle of December of last year. So as you can imagine, data analysis is in progress. The other study is SUMMIT. It is with the same drug and in the same population but with a different delayed-release tablet formulation. So clearly, Protagonist and Janssen are getting 2 shots on goal over here. Now this has been a very lucrative partnership for us. We have already benefited from $112.5 million in different kind of payments. But there is a lot more to come, I guess, $855 million to be precise, and these are not just biobucks, right? As we can see, close to $200 million is something that could be achieved over the next 2 to 3 years. Now of course, this is all depending on that PN-235 is a success. And the royalty rates, last but not least, of 6% to 10% for a $10 billion-plus franchise, the numbers add up. So if 235 goes forward, this partnership, in its own right, would become such a nice nondilutive financing arrangement for Protagonist and a very steady stream of reliable income over the coming years. And currently, even without that arrangement, we are comfortable with the cash position, $267 million as reported at the end of third quarter of last year, cash runway through end of 2024, enough to allow us to finish the pivotal Phase III study of rusfertide in polycythemia vera. So what are the things we could look forward to in 2023? Clearly, for us, it is all about rusfertide and 235. With rusfertide, we will get the randomization data from the Phase II REVIVE study sometime in this quarter. We look forward to sharing some of the highlights, and then we'll save the details for presentation at a major medical conference around the middle of the year. And then towards the end of the year, we also expect completing the enrollment of the Phase III VERIFY study. And with PN-235, thanks to Janssen, we are getting 2 very clean, robust shots on goal, and we believe the fate of 235 will become pretty clear in the first half of this year. So this really completes my narration about Protagonist and its amazing group of employees, through whose efforts we have moved on from being a technology platform player to a company with multiple assets in late-stage clinical development: one being developed by us entirely; another being developed by an amazing well-qualified partner, Janssen Pharmaceuticals. Thank you.

Thanks, Dinesh. So we're going to start the Q&A session. [Operator Instructions]

Actually, Arturo and Sam, why don't you sit here? I'll stand.

We're going to have more members from the management team joining us. So maybe it will be good to have introduced -- the introduction of your team members who are on the stage today. [Operator Instructions] So we have Dinesh. Go ahead.

Sure. I'm the CEO of Protagonist, a medicinal chemist by training, have been in the industry for 33-plus years. Who is counting, right? And just enjoy the journey of bringing innovative new medicine in the hands of patients who need it the most.

Yes. Arturo Molina. I'm a practicing physician, medical oncologist by training, and my -- I've spent time as faculty at City of Hope on the hematology team. And in industry, I've been at IDEC; Biogen Idec; CMO at Cougar Biotechnology, acquired by Janssen; Sutro Biopharma; and really happy to be at Protagonist for the last couple of months.

I'm Sam Saks. I'm an oncologist by training. I've been with -- advising Protagonist since 2018. In the '80s, I was part of Genentech's first oncology group. In the '90s, I was with Ernie Mario with ALZA and helped sell it to J&J. Stayed on and run it for a short time for J&J. In the 2000s, I was the Founding CEO of Jazz Pharmaceuticals and took that public. In the last decade, I was part of the Auspex team that sold to Teva for $3 billion. And again, I've been here since 2018.

Great. It's great to have you, guys. So maybe just to start us off, we'll focus on rusfertide in PV. Heading into our next readout for the REVIVE study, we're getting randomization data from the Phase II. What should we focus on in terms of what we should expect at the top line readout from investors' standpoint? And can you just recap on the expectation of the number of patients and the respond measures that you could potentially read out at the -- later this quarter?

Yes, no, so I would like to mention that this is the first instance where it's truly a blinded, randomized, one-to-one placebo versus treatment kind of study. All the data we have generated so far has been in the open label -- kind of open study format, right? So it will be very revealing to see and understand how the drug performs in that kind of setting. But maybe Arturo and then Sam, you should elaborate on like what will be our expectations here.

So I can start. Dinesh showed you the data where you saw a lot of red, that's bad, a lot of phlebotomies that are required; then a lot of green once a patient start on rusfertide; and then when there was a clinical hold, the red comes back, and that's in the gray-red area. Now the purple rectangles is the data that we'll be analyzing this quarter. And in some ways, you got a sneak peek of what the data could look like. We haven't seen it yet. That will be analyzed soon. But we know that for patients who are deriving benefit from rusfertide, if the drug gets stopped, the requirement for phlebotomy comes back right away. And this data shows you prior to dosing the phlebotomy rates and then post rusfertide. And these p-values are very significant in terms of the rusfertide effect in controlling the hematocrit and thereby obviating the need for phlebotomy. So I think it will be very rich data because this will be a prospective randomized withdrawal as opposed to the suspension of treatment related to a clinical hold. And there will also be some data from the patient-reported outcomes. But the sample size for the PRO will be better for -- in the Phase III study, where we have 250 patients where we'll be assessing the PRO. So it will be more robust in the Phase III. But we're already getting hints from PRO data that patients are experiencing clinical benefit, improvement in concentration and the total symptom score.

So you're getting a pretty good sense of how this drug will perform in the Phase III. Are there specific factors that are different fundamentally between the Phase II REVIVE study versus the Phase III VERIFY study?

The Phase III study recapitulates all the key elements of the Phase II. They're very similar. The main difference in the protocol design is that in the Phase II study, all patients start out with rusfertide, and then they get randomized to a withdrawal of rusfertide. In the Phase III, patients up at the get-go are randomized to placebo versus rusfertide. It's a double-blind, placebo-controlled study. So no one knows who's getting what.

One thing I would add is one of the difference is the size of the study. So if we would just focus on efficacy, we could have gotten away with a 50-patient study. But Phase II was a 70-patient study. This is a 250-patient study. And the idea here is to really have a broader set of data and get more clarity and assuredness in terms of the other outcomes, such as the symptom scores and things of that nature.

Have you talked about just the powering assumptions around it? What is the bar that you would like to hit in the Phase III?

Yes, Sam, you want to...

So I'd just say that, again, the powering assumptions are based on the PROs because with the PROs, we can only show a benefit in those people who have a particular symptom and have it in a moderate or severe elevated level so that we can see a decline. So in order to have the power for the individual symptoms, we had -- again, the primary end point from the 2 studies is nearly identical. But in Phase II, it was powered solely for that. In Phase III, it was powered for the patient-reported outcomes. I also want to point out that the demographics that we see in both studies mirror the marketplace. So if you think about the marketplace, about half on phlebotomy alone, about 1/3 on Hydrea, a small percentage on Jakafi. That's exactly what we see in our patient population that we're accruing is basically what you would expect from the broader marketplace.