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

Greetings. Welcome to the Protagonist Therapeutics Conference Call. [Operator Instructions] I will now turn the conference over to your host, Corey Davis of LifeSci Advisors. You may begin.

Thanks, Shamali. Hello, everyone. Thanks for joining us on our call today. Joining me from Protagonist are Dr. Dinesh Patel, President and Chief Executive Officer; Dr. Arturo Molina, Chief Medical Officer; Dr. Sam Saks, Clinical Development Adviser; and Asif Ali, Chief Financial Officer. After our formal remarks, we'll conduct a question-and-answer session and instructions will follow at that time. Earlier today, Protagonist and Takeda Pharmaceuticals issued a joint press release announcing that we have entered into a worldwide collaboration with Takeda, relating to development and commercialization of rusfertide. A copy of this press release is available on the company's website, and an 8-K has been filed with the SEC that contains full details of the agreement. Please note that on today's call, we'll be making forward-looking statements, including statements relating to the safety and efficacy and the therapeutic and commercial potential of our investigational product candidates as well as the benefits of our collaboration with Takeda. For further information relating to the risks and uncertainties related to our business, please see the periodic reports we filed with the Securities and Exchange Commission. This conference call contains time-sensitive information that's accurate only as of the date of this live broadcast, January 31, 2024. Protagonist undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as may be required by applicable securities law. With that, I'll turn it over to Dr. Dinesh Patel. Go ahead, Dinesh.

Thank you, Corey. Good afternoon, and welcome, everyone. We are very excited to announce today that Protagonist has entered into a collaboration with Takeda Pharmaceuticals in relation to our hepcidin mimetic rusfertide. As you know, rusfertide is our first-in-class erythrocytosis specific agent currently in a Phase III pivotal trial for the rare disease polycythemia vera or PV, a disease that is characterized by excessive red blood cell synthesis. Takeda is a premier pharmaceutical company with a global footprint in research and development and commercialization capabilities that we are extremely proud to be partnering with. They have a proven track record of bringing innovative treatment options for both rare and more common diseases. In fact, Takeda will also be reporting its Q3 earnings at 5:30 a.m. Eastern Time tomorrow morning, and we encourage everyone to listen into their earnings call as well for their take on this exciting collaboration announcement. Today, I would like to take the opportunity to not only elaborate on the structure of this collaboration, but also explain its strategic importance as we now take Protagonist into its next phase of maturation as a specialized biotech company with core focus and competency in discovering and developing innovative peptide therapeutics. In brief, Protagonist and Takeda have today entered into a worldwide co-development and co-commercialization collaboration for rusfertide with a 50-50 profit share structure in U.S.A. and with Takeda having exclusive ex-U.S. rights. Protagonist will receive a significant upfront payment and there are additional financial milestones as rusfertide progresses towards clinical study completion, regulatory approval and commercial launch. In addition, Protagonist is also eligible to receive tiered royalties on ex-U.S. net sales. First, let me start by saying that this deal allows both parties to do what we each do best. Under the terms of the agreement, Protagonist retains full control for the ongoing Phase III pivotal study of rusfertide in PV all the way through NDA filing. So the Protagonist team will continue to operate the same way as it has been operating so far. That is being laser focused for the next 2 years on the execution of rusfertide polycythemia vera program. Obviously, we will now have the added benefit of being able to seek counsel from our partner, Takeda, on various clinical and regulatory matters as and when necessary. In addition, the deal also enables Takeda to immediately begin precommercial launch activities for this program. Second, Protagonist has always believed in doing the right thing at the right time. And joining hand with Takeda at this junction is the right thing to do for 2 reasons. One, we believe that this partnership significantly mitigates the commercial execution risk that is typically inherent in any biotech company undertaking the commercial launch of its first product on its own; and two, a strong commercial partner can be expected to maximize the full potential of the drug both by increasing the total market share globally and also by shortening the time frame to achieve peak sales. We believe we have selected the best possible partner in Takeda for multiple reasons. Takeda is a premier biopharmaceutical company with global R&D, manufacturing and commercialization capabilities. Takeda also has a proven track record in the rare diseases in the hematology space and this partnership fits very well strategically with Takeda's long-term vision of expanding its portfolio of paradigm shift changing therapies in the rare disease, hematology space. The third point I would like to make is that the 50-50 co-commercialization structure provides Protagonist with a great opportunity to maximally participate in the economics from rusfertide and also to incrementally build our own commercial infrastructure in a measured and cost-effective manner as Protagonist matures as an organization over the coming years. At the same time, the agreement also contains an opt-out provision that allows us to convert this deal post NDA filing to a worldwide license in return for increased milestone and royalty payments if we choose to do so. This right of an opt-out option provides us with maximum financial flexibility to make that decision if circumstances warrant such a choice at a later date. Further details of this deal structure and the opt-out provision are contained within the 8-K that was filed today. Another positive aspect and strategic rationale of the deal is the significant upfront payment as well as future milestones that should serve to further strengthen our already strong financial position. This, in turn, provides us with a great opportunity to increase our efforts in our core areas of excellence that is discover and develop innovative peptide-based medicines. To date, we have validated our technology platform and our expertise with multiple peptidic assets that are currently in different stages of preclinical and clinical development. With a balance sheet that is now stronger than ever before, we can now afford to initiate multiple new oral peptide-based discovery programs in succession and also afford to keep full ownership of this program for a longer time period, including up to clinical proof of concept and beyond. Now let me briefly highlight some of the specific financial terms of this transformational deal with Takeda, which is a co-development and co-commercialization collaboration with a 50-50 profit split in the U.S. with Takeda having exclusive ex-U.S. rights. Under the terms of the agreement, Protagonist will receive $300 million upfront, and we will be eligible to receive up to an additional $330 million in worldwide development, regulatory and commercial milestones and 10% to 17% royalties on ex-U.S. sales. There will be a joint steering committee and joint development and commercialization of committees to facilitate important decision-making during the collaboration. Protagonist will maintain operational control and financial responsibility for the Phase III VERIFY trial and all other currently ongoing studies from now through the filing of an NDA for polycythemia vera. Effective immediately, Takeda will begin precommercial activities and will be responsible for all of the associated costs up until the time of the NDA filing, which is currently expected in 2025. Assuming FDA approval in 2026, we strongly believe that now is actually an optimal time to begin precommercial activities and it was, in fact, a major reason for materializing this deal now versus at a later date. It allows Protagonist to remain focused on completing the clinical development of rusfertide and also gives us ample time to work with our partner, Takeda, to begin all of the activities necessary to maximize the commercial launch of rusfertide in the 2026-'27 time frame. We should also point out that post NDA submission, Protagonist has the choice to opt out of the 50-50 profit share and co-promotion arrangement. Under the opt-out scenario, we would receive $400 million in cash, split between $200 million after NDA filing and another $200 million for FDA approval. We would also be eligible now for enhanced milestone payments and tiered royalties on all worldwide sales in the 14% to 29% range under the opt-out scenario. So in summary, we believe we have selected the best possible partner for rusfertide in Takeda, a premier global biopharmaceutical company with a proven track record of bringing innovative medicines to the marketplace and with a strong presence and leadership in the rare hematology space. With that, I would now like to turn it over to Arturo Molina, our Chief Medical Officer, to provide a brief update on the rusfertide clinical program.

Thank you, Dinesh. Rusfertide, a mimetic of the natural hormone hepcidin is the company's lead drug candidate currently in a global Phase III development program. Last year, we unblinded the randomized portion of the Phase II REVIVE study and reported the highly statistically significant efficacy results as a late-breaking abstract at the European Hematology Association Conference. The full results will be published in the not-too-distant future in a reputable medical journal. We have presented detailed results previously, including long-term follow-up of the efficacy and safety data on REVIVE at the American Society of Hematology Annual Conference this past December. The global Phase III VERIFY study of rusfertide in PV has a goal of enrolling 250 patients with PV across more than 100 sites worldwide, and we are on track to complete enrollment by the end of the first quarter. The primary endpoint is the proportion of patients achieving response, defined by absence of phlebotomy eligibility during weeks 20 to 32. Key secondary endpoints include evaluations of symptom improvement from patient-reported outcomes using validated PRO scales. Given the highly statistically significant results demonstrated in the Phase II study, we remain optimistic about the probability of success of the ongoing Phase III VERIFY study in as much as the 2 studies have similar target populations, inclusion, exclusion criteria and primary and secondary efficacy endpoints. We truly believe that rusfertide can provide tremendous clinical benefit to the patients with PV who have limited therapeutic options currently as the REVIVE study nears completion with many patients now on rusfertide treatment for more than 3 years, we have learned that the majority of patients wish to continue treatment beyond the REVIVE study's duration. In response to requests from our patients and investigators, we have launched the THRIVE study to provide 2 additional years of rusfertide therapy for patients who have completed participation in the REVIVE study. In summary, rusfertide continues to progress well and we're extremely excited about the Takeda partnership as we move closer to NDA submission and ultimately the potential approval and launch of rusfertide in polycythemia vera. I'd now like to hand it over to Dinesh.

Thanks, Arturo, for that brief overview and update on rusfertide for PV. 2024 has already been and will continue to be a very busy year for Protagonist and we expect to provide meaningful updates throughout the year on all 3 current programs of the company, namely hepcidin mimetic rusfertide for polycythemia vera, which is now partnered with Takeda, JNJ-2113, our oral IL-23 receptor antagonist peptide for psoriasis and other immunomodulatory diseases that is partnered with J&J, and our recently announced and fully owned oral peptide-based IL-17 antagonist program. With rusfertide, we expect enrollment completion in the VERIFY Phase III study for PV by end of this quarter. With oral peptide JNJ-2113, we expect our other partner, J&J, to complete the 16-week primary endpoint readout portion of the 2 Phase III psoriasis studies, ICONIC LEAD and ICONIC TOTAL by the end of the year. We also expect that J&J will begin enrollment in its 2 additional Phase III superiority trials involving head-to-head comparison of 2113 versus the TYK2 inhibitors, TYK2 in psoriasis sometime this year. In Discovery, by year's end, we expect to nominate a development candidate in our overall IL-17 Discovery program. And we also expect to announce another oral peptide-based Discovery program in 2024. With a stronger financial position that we have now secured with the Takeda collaboration, you can expect Protagonist to continue to embark on new oral peptide Discovery programs against validated biological pathways where an oral peptide will offer unparalleled differentiation to address significant unmet needs. Today's partnership with Takeda is a big inflection point for Protagonist as it prepares itself for further progression of rusfertide from late-stage clinical development to regulatory filings and commercial launch with the ultimate objective of getting this first-in-class erythrocytosis specific agent in the hands of PV patients who need it the most. We are thrilled to see a large global pharmaceutical company like Takeda, with proven leadership in rare disease and hematology franchise, sharing the same passion and commitment towards the common goal of bringing such paradigm-changing therapy like rusfertide to address unmet needs in PV. Finally, we would like to thank our extremely talented and dedicated pool of employees, advisers and consultants of our pharmaceutical partners and all the patients, investigators, nurses and caregivers that are involved in our clinical trials for their continued support. And with that, I will now ask the operator to begin our Q&A session.

At this time, we will be conducting a question and answer session. [Operator Instructions] Our first question comes from the line of Roger Song with Jefferies.

Great. Congrats for the deal. A few questions from us. First, Dinesh, if you can remind us what will be the year-end update from your Phase III -- ongoing Phase III VERIFY in terms of the primary end point, what should we expect from that trial? Also as part of the NDA package, your 2-year carcinogenesis, what's the study? How is the status there? And when should we expect some update from that trial?

What are the next set of events and announcements one could expect from the ongoing Phase III study. So I will have Arturo, our CMO, take that question.

All right, Roger. Thanks for your question. As we've discussed before, the 2-year carcinogenicity study is being done under a special protocol assessment with the FDA and the analysis plan is scheduled to read out at the beginning of 2025. So no news is good news. And similarly, with the VERIFY study, we anticipate enrollment completion at the end of March and we would need for patients to be on study for a minimum of 32 weeks before there's an evaluation of efficacy. But the data monitoring committee is primarily monitoring any safety events that could occur. So it's a safety-driven assessment. So again, no news would be good news for both the efficacy results and the carcinogenicity study results.

And I think -- I mean, obviously, after 32 weeks, these patients move in a blinded fashion into the 20-week durability of response component of the study. So a conservative way to look at it is like if we are completing the enrollment by end of March, then a year from that junction is when the 52-week study will be completed.

Got it. Maybe another question from us is the -- this 50-50 profit sharing in the U.S., how should we think about the commercial spend, both from your side and the Takeda side and given this is a rare hematological disease?

Yes. Roger, thank you for that question. As we disclosed earlier, Takeda is now responsible for the precommercialization expenditure up to the NDA filing. So I think that's one thing to sort of factor in. And I'm sorry, what was your other question on what the profit split expenses are going to be. Would you mind ...

I think the question was around like what are the anticipated commercial expenses that could be incurred. I guess it's a 50-50. So it would be a blend between what a big pharma would want to spend. And of course, how a biotech company would want to participate in that. So it will be a nice balancing act, but we have full trust and confidence in Takeda. And so yes, at the end of the day, it's a 50:50 expense and profit split.

Our next question comes from the line of Brian Cheng with JPMorgan.

This is Sean on for Brian. Firstly, congrats on the deal today. For Dinesh, as you're tracking towards the completion of your enrollment in VERIFY, could you give us more color on the timing of the deal and whether it was a competitive process? And also, can you elaborate your thoughts on taking a co-co in the U.S. but not ex-U.S.? And we have another follow-up.

Yes, it's really a good question. Protagonist has always been very fortunate to be in a situation almost at all times when there are multiple parties that are interested in our programs. And this has been no exception. But then at the end of the day, we wanted to share this with a party that is as passionate and as committed to the rare heme space as we are. So we believe that we have found the perfect home for rusfertide, if you will, and we have found an ideal partner in Takeda. In terms of -- and the beauty over here is, as you know, at one end, we have the 50-50 provisions, and so that is what we are starting out with. That is what we'll be focused on. It allows Protagonist to commence on some pre-commercial preparedness in its own way, learn a thing here or there from the bigger partner. That's always a good thing. And then at the same time, I mean, if our world at Protagonist takes on a different view 18, 24 months from now, we, in our back pocket always have the opt-out provision as well. So there are multiple optionalities in addition to the amazing passion and commitment for this kind of very unique assets in the rare heme space, which is what we found in Takeda. In terms of the ex-U.S. rights, as you can imagine, a biotech company like ours is always going to -- almost always going to opt out of the ex U.S. rights. So in a way, this is a perfect arrangement. In the U.S., we got the ideal 50-50 scenario and for the ex-U.S., we are more than happy to let go of all the rights. And as you know, in PV, I mean, if you look at the overall market, the majority of the market share resides in the U.S., that's the bigger piece of the pie.

We also have 1 more follow-up question. So with this deal in place, does this capital infusion accelerate your progress with the new oral IL-17 program and change the trajectory of your R&D portfolio and peptide platform outside of heme? How much flexibility does this add?

Yes. So I mean, taking oral IL-17 as an example because that is a bird in hand. Yes, definitely now this gives us the flexibility of going at least up to a clinical POC, right? If you recall, in 2017, when we inked the deal with Janssen on our oral IL-23 program, it was a preclinical stage still. But now things have changed for us and in a positive way. So going forward, you can assume that Protagonist will have the capability of hanging on to its programs and assets for longer duration and the best value inflection is typically achieved after clinical POC. And besides IL-17, clearly, the technology expertise is there. We have more than doubled our discovery efforts. And the idea is to really go for repeat performance, right? So hopefully, every 9 to 12 months, if not sooner, we will be announcing more new programs that are anchored around oral peptides as a strong differentiator against fully validated biological pathways. And whether it is in I&I or heme at this stage, we are "technology-centric" as far as Discovery is concerned, so we can afford to be agnostic to specific disease area indications and would go wherever we believe the overall approach, oral peptide approach offers a strong differentiation.

Our next question comes from the line of Tim Chiang with Capital One.

Congrats Dinesh, on a solid deal with Takeda on rusfertide. I had 2 questions, really 1, why did you decide to announce a partnership with Takeda now, right? I mean do you think this was the best time to do the deal? And also, obviously, with a $300 million upfront milestone payment, I guess that's probably a pretty good incentive. But I wanted to get your thoughts on the timing of doing this. And obviously, you've sort of talked -- I mean the question before was sort of asking about freeing up additional capital and resources to develop a next-generation oral IL-17 receptor antagonist. Do you have other potential programs in the works with your peptide technology as well?

Yes. Maybe I'll answer the second question first. I would say, roughly speaking, we have about half a dozen different discovery programs brewing in our discovery shop and we are super excited about each one of those, almost all of them are oral peptide centric and working against very popular and validated targets where an oral peptide will fetch an amazing differentiation. So now we can execute on all those things without any kind of hesitation and with a truckload of confidence. In terms of the timing, we sincerely believe that this is the optimal timing. And the main reason for that, and even if you think about like, why did Takeda choose this as the timing? I mean they could have afforded to wait as well, right? But the whole idea is like both parties are very, very convinced that this is a huge opportunity in the rare heme space. So the sooner one commences on pre-commercial activities in a very serious way, the better. And this is where we found the ideal intersection of the mutual interest and thought it was important to strike the deal. And if you look at the $300 million upfront and the other terms of the deal, I would like to believe that some of the anticipated success in the Phase III study, and those things are probably already baked in the assumptions of the deal structure.

And maybe just 1 follow-up, Dinesh. Just looking at the 8-K, it looks like if you opt out you're eligible to receive up to $975 million in additional milestone payments. Is that right?

I mean you are not off, those are big numbers. And yes, that is accurate, right? And then also significant royalties. But the beauty here is we don't have to make those decisions now, right? At that junction, we will truly understand how big of a drug rusfertide is and then based on that, Protagonist can make a very educated choice of choosing path A or path B. Path A being continue with the co-co and Path B being opt out.