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

Good morning. Thanks for joining us for another session at the 43rd JPMorgan Healthcare Conference. I'm Brian Cheng. I'm a senior biotech analyst here at the firm. I'm joined by my associate, Sean Kim, who is in the audience today. On stage, we have Protagonist Therapeutics. I'll now pass the mic to their CEO, Dinesh Patel, for a short presentation, followed by a live audience Q&A. Dinesh, the stage is yours.

Good morning, everybody. Thank you, Brian. It's a real privilege for us, the Protagonist team, they are right here in the front row, it's a pleasure for us to be at this conference, fifth year in a row now, I think. Just a cautionary remark that we will be making forward-looking statements during the presentation and throughout the conference. So this is an overview of our peptide technology platform, our programs and our assets. We work exclusively on peptide therapeutics. We choose to work on those targets that are biologically validated and commercially successful. However, our angle is that, through the peptide approach, we would create a strong differentiation and superiority versus existing therapies. And the outcome of this is the 5 different programs that are outlined over here. In discovery, we have an anti-obesity program, an oral hepcidin program, and we expect development candidate nominations from both of these programs this year. We have an oral IL-17 antagonist, PN-881, something with the potential of being a best-in-class oral IL-17 blocker. We expect this to move into Phase I studies by the end of the year. And then finally, we have 2 late-stage assets that are eyeing NDA filing by the end of this year. Icotrokinra is the first and only oral IL-23 receptor antagonist blocker. We have success in Phase III psoriasis studies, it's partnered with Johnson & Johnson. Rusfertide is our once-weekly hepcidin mimetic. It's in Phase III study for polycythemia vera. This is the first RBC-specific option that could be out there for patients, and this is partnered with Takeda Pharmaceuticals. So now let's start with an overview of rusfertide. Here, the intent is to address the unmet need in polycythemia vera. PV, as you know, is a rare disease. Its characteristics is excessive red blood cell production. And the treatment goal is to maintain hematocrit levels below 45% as per the NCCN guidelines. Serious disease associated with increased mortality, morbidity stemming from thrombotic and cardiovascular risks. And although the disease is rare, the prevalence number in U.S. alone is about 155,000 patients, and an equal number in Europe as well. And the median survival span for the patients is about 14 years. So while hematocrit control is the essence in the treatment of this disease, the real-world data suggests that majority of these patients, 78%, do not control hematocrit. And of course, no surprise that thrombotic events are very significant in this disease. The patients also have burdensome symptoms, and that, of course, affects their quality of life. So all this is really pointing towards like the current standard of care is not getting the job done. And we recognized early on that, while this is an RBC-centric disease, there are no RBC-specific options available. And that is where we basically hypothesized that if we could come up with a mimetic of hepcidin with better drug-like properties, then hepcidin, by virtue of being the master regulator of iron storage distribution in the body, including the supply of iron into the bone marrow where RBC synthesis occurs, then that could be a new way of treating polycythemia vera. And the good news is our hypothesis has borne out to be true as illustrated by success in 2 different clinical studies. Here is a schematic of our Phase II REVIVE study. Very informative, and successful study. And the positive results were captured in the New England Journal of Medicine article last year. The main thing I want to point out over here is that this study is now complete, and 80% of the patients have progressed into the THRIVE long-term extension study, so they can get 2 additional years of treatment. So this shows that, clearly, patients are engaged and interested in continuing with rusfertide therapy. On this slide, I'm showing the data of hematocrit control with rusfertide over an extended time period. And what you will notice, on the lower right, is the treatment exposure period. Clearly, the drug has amazing durability. More than half the patients have now been treated for over 2.5 years, and we have several patients that are nearing the 4-year mark. What you will also note is like if you focus on the brief randomized withdrawal portion of the study then in the placebo arm where rusfertide treatment is withdrawn, we see a loss of control of hematocrit almost immediately. The good news, though, is like when you -- the control is restored back when you engage retreatment with rusfertide again. So it is this 24/7 type of hematocrit control that our drug exercises, which has then, practically speaking, led to essential elimination of phlebotomy in these patients. They were getting more than 5 phlebotomies per year before being on treatment with the drug, and now the rate is less than 1 phlebotomy per year. And this robust efficacy is observed across all patient categories: patients on phlebotomy alone as well as patients who are on cytoreductive therapy. And while not shown in any detail over here, we do see meaningful symptom improvements in patients who have moderate-to-severe symptoms at baseline, and our drug normalized serum ferritin levels over the course of time as well. In terms of safety, this is the safety summary. This was presented at ASH last month. There are no surprises. The rate of malignancies are similar in nature a number to what you would otherwise see in this PV population. In terms of the thrombotic events, we have about 10% patients with thrombotic events. Incidentally, they are all in high-risk PV patients, and we don't observe any of these events so far in low-risk patients. And this 10% number is in a way significantly lower than what you historically observed in the PV patient population. And of course, the long-term assessment continues with the extension studies. Now this is the Phase III design. The inclusion criteria is very similar to what we have had in the Phase II REVIVE study. One main difference is like, unlike REVIVE, here we are engaging -- spreading the patients between placebo and treatment arm 1:1 right from day 1. The U.S. primary endpoint is based on the clinical response that one would achieve during the week 20 to 32 time period. And the definition of clinical response is, once again, very similar to what we had in the Phase II study. So obviously, we are very optimistic. Now we do have a number of key secondary endpoints around phlebotomies, hematocrit control and some of the symptom scores. The first key secondary endpoint of number of phlebotomies over this 32 week of double-blinded portion of the study, it's also the primary endpoint agreed upon with the European agency. So what I would like to report today is the study up to the 32-week primary endpoint portion has been completed. And so now if you look at the upcoming key milestones, then we are very anxious to share the Phase III VERIFY top line results with you all sometime in the month of March. And if positive, then this is going to lead towards the biggest moment in the history of the company, meaning we'll be moving towards our first NDA filing by the end of the year. We would also like to point out that yesterday we announced a PV Day. We are hosting a PV Day in New York City on February 6. Everybody is welcome to attend. And last but not least, we completed the REV 2-year carcinogenicity study in the last quarter. The draft audited pathology report from the CRO suggests no rusfertide related findings. We have shared this with our partner; we are sharing this with you. And of course, the final study report will be submitted in this quarter. And more data from our studies will be shared in more details at upcoming conferences. Now of course, Takeda and Protagonist have started working towards pre-commercial preparation ahead of the commercial launch. And if you just revisit the treatment paradigm that exists in PV therapy, you will note that patients are often on polytherapy, and they oscillate through different treatments. Now what we also pointed out earlier on is like uncontrolled hematocrit is observed in majority of patients. What I can specifically point out is this lack of control is not just restricted to patients with phlebotomy, but it's a phenomena that is observed all across. Now let's bring rusfertide into the picture, right? With its RBC-specific mechanism and with rapid, robust, consistent and sustained hematocrit control, it has the opportunity to then be a treatment for patients all across the spectrum. And based on these observations and this kind of findings, we and our partner, Takeda, we are estimating $1 billion to $2 billion in peak revenue potential for rusfertide down the road. Talking about Takeda and the partnership, we inked the partnership with Takeda in January of last year, so about a year ago. It came with a nice $300 million dowry. And we have shared these numbers before so I won't dwell into the details. But I just want to remind that this is a co-co partnership 50-50 U.S. split. That's the current scenario. There is a provision where protagonist has the option to opt out if it chooses to do so. Now the good news is we don't have to worry about that now. Our math tells us that decision is about 15 to 18 months away from here. So we will make an informative decision after the Phase III study results and after doing additional market research and demand studies. So that concludes the where we are with rusfertide. Now let's turn to icotrokinra. This is a drug with a -- drug candidate with a first and only in class kind of attribute as an oral IL-23 receptor antagonist. We believe this also has the potential to be the best-in-class oral psoriasis agent. This is all an outcome of the partnership that we initiated with J&J all the way back in 2017 when this was just a preclinical program in our shop. Last year we announced the successful Phase III studies. As you know, this is -- the IL-23 is the category of blockbuster drugs. Now these are all injectable antibodies, but they generate big numbers for J&J. The combined STELARA-TREMFYA sales for 2023 were over $14 billion. So I think it's a good, humble conservative estimate when potential peak sales for ico are being estimated at $5 billion plus. But that's a good number to begin with. Very productive partnership, very rewarding, more than $300 million earned already. More than double the amount is possible down the road. And 6% to 10% royalty rates when 10% number kicks in at sales over $4 billion is something to write home about, right? I want to point out that last quarter, based on the success of the Phase III study, we earned a $165 million milestone. And our CFO will remind me that this is actually money in the bank as of last week. What is interesting over here is that the $165 million number is comprised of not just the $115 million that we qualified for on the success of Phase III outcome. But J&J also chose to pay us $35 million in accelerated payment, which was otherwise due on NDA filing. They also chose to pay us an additional $15 million that was otherwise due upon initiation of a second indication in a Phase III study. So clearly, there is a lot of conviction and confidence from our partner, and we agree with them in terms of the future potential of the asset. Now this is our -- well, J&J's icotrokinra clinical lead development program, the FRONTIER Phase II studies. The success of the studies in psoriasis, the positive results, were captured in the New England Journal of Medicine article last year. And it is this positive results that's formed the basis of this expansive Phase III psoriasis program. And ICONIC-LEAD and TOTAL results are positive. And it is these results that form the foundation for moving towards an NDA filing towards the end of the year by our partner. And there are, of course, superiority studies against the other oral targeted therapy, the TYK2 inhibitors, Sotyktu. And then at last but not least, we are all waiting for the Phase II UC results. If those are positive, then, of course, that leads to further expansion of the commercial opportunity of our drug. This is a brief schematic of the ICO Phase III study, the co-primary endpoints at Week 16 are the PASI-90 and the IGA-01 scores. What is peculiar here is that the patient population is comprised of not just the adults, but also the adolescent population. And here is a cross-trial comparison that we have done with the 2 approved oral therapies in psoriasis, Otezla and Sotyktu. And ICO is the blue bar on the left. So just visually, you can see that our drug has significant superiority over the existing oral therapies, whether you measure it by PASI-90 or IGA-01 and whether at Week 16 or over extended period of Week 24. Now the good news is we don't have to rely too much on cross-trial comparisons. The head-to-head study results with Sotyktu should be available by the second quarter of this year. And ICO has a great blockbuster potential. If you look at the patient population in general, more than half the patients who are eligible for targeted therapy do not choose any. And then in terms of those who choose the therapy, and the major choices are largely injectables, 75% of them would want to switch to an oral if such an option was available. So I think there are multiple kind of opportunities in terms of market expansion with the first and only and best-in-class agents like icotrokinra. All right. So that's kind of the present, let's move to the future, meaning our discovery pipeline, starting with 881. And so this is an oral IL-17 peptide antagonist with a best-in-class potential. IL-17, as you know, is a clinically very validated target. They're a blockbuster category of injectable antibody drugs. There is no approved oral targeted therapy. But IL-17 is really expected to capture almost 1/3 of the psoriasis market. And then there is going to be further growth anticipated by the utility in other conditions besides psoriasis. 881, we believe, it has a best-in-class potential through its amazing potency against the IL-17A, and also the diverse spectrum of potency displays against all the 3 relevant isoforms. The drug is in IND-enabling studies. We have met the aggressive move of skipping the 28-day tox study and moving directly into 3-month tox studies. And the idea here is like, down the road, this should enable us to save at least 1 year in clinical development timelines. So we look forward to initiating Phase I studies by year-end. The results of these studies will dictate the design of Phase II. And then if that looks promising, we will have full preparedness for rapid expansion into other IL-17 mediated indications. I just want to take a minute to highlight the extraordinary potency of 881. And what we are doing over here is like we are comparing with both oral small molecules as well as the approved injectable antibody drugs. So in terms of the main isoform AA, you will see that we have picomolar levels of potency. We are sort of 1,000-fold more potent than the oral small molecule analog that we could get our hands on. We are 100x more potent than COSENTYX. And in fact, the only true comparator for us is the most potent antibody BIMZELX. This is the only one that also has meaningful spectrum of activity against the other isoforms, which, from comparative studies, it has been concluded, contributes towards superior efficacy. So 881 has a similar activity profile. There is no such thing that comes close to us in the oral camp, and thereby, our hope and conviction that this could be a best-in-class oral IL-17 mediated therapy. And here is a tabulation of all the different preclinical rigor that we went through before nominating the candidate. And so this is our benchmark. We hold ourselves to such high standards. The drug is not only potent. It's very stable, in GI, it has metabolic stability. We have conducted in vivoPK studies in almost all the species one could think of, and are concluding that our drug has the potential of being once daily administered drug in a clinical setting. We have studied distribution in relevant tissues like the skin, and we have obtained preclinical POC, both pharmacodynamic based POC as well as disease skin inflammation model-based POC. We have also embarked on new discovery programs, and the common thesis all along for us has been like let's work in areas where we can use our expertise with oral peptides and find utility in areas where that would address an unmet need. Obesity is probably the largest pharmaceutical opportunity we are witnessing in our lifetime. The 2 major approved agents are injectables, more specifically. I would point out, these are injectable peptides: semaglutide and tirzepatide. So this is right up our alley, so to speak, use our oral peptide expertise and come up with oral agents. We already have lead peptides that will lower glucose levels and lower weight in diet-induced obesity models. So we are on track in terms of development candidate nomination this year. Oral hepcidin, you could view this as rusfertide life cycle management. As you know, rusfertide is a once-weekly subcu injectable. And this approach will then address the general patient preference for oral medications, and we have advanced leads and expect candidate nomination here as well. So now let's talk about the cash runway. We started last year with the objective that we want to have cash runway up to the end of 2026. But thanks to the wonderful partnership that we did with Takeda as well as the accelerated payments that we received from J&J to the tune of like $165 million in total, now we have cash runway at least through the end of 2028. I do want to clarify that we do not include the future potential milestones that we could be earning over this time period, to the tune of $200 billion to $600 billion plus. And of course, we also do not include in this forecast the royalty earnouts that we could be having from our 2 late-stage assets, beginning in 2027 and beyond. So then let's conclude by summarizing the major upcoming catalysts this year. So with rusfertide, we look forward to hosting the PV Day on February 6 in New York City. It might be the coldest day, but we will see. We look forward to sharing top line results from the Phase III VERIFY study, big moment for protagonist. And if this is positive, then we and our partner, Takeda, we look forward to moving towards NDA filing by year-end. In icotrokinra, on the heels of positive Phase III studies ICONIC-LEAD, ICONIC-TOTAL, J&J is marching towards NDA filing. We shared some preliminary results last year, but you can expect more disclosure at medical conferences. And the Phase II UC study, we hope to share the results this quarter. And if positive, that can lead to further expansion into other indications. Psoriatic arthritic study should be initiated soon. The comparative head-to-head superiority study against Sotyktu, those results will be available in Q2. Real opportunity for label expansion if those studies are positive. In discovery, we started -- we have started the year with development candidate, and we hope to end the year with a total of 3 development candidates. So finally, then let me take a moment to thank my excellent Protagonist team and the Protagonist employees. Just like rusfertide exercised 24/7 hematocrit control, I would say that our employees, they exercise 24/7 dedication to their work. So we feel like we have a team with a mission. And of course, we want to thank our partners, Takeda and J&J, and the investigators and the patients and advisers, without whom our assets wouldn't be where they are today. And finally, thank you all for your attention.

All right. Let's begin the Q&A. Dinesh, do you want to join me here?

Of course.

For those of you who are in the audience, if you have any questions, you can raise your hand. We have a runner on the floor. And for those joining us virtually, you can also submit questions on the conference portal. Lots of kits that we can talk about in the portfolio now compared to, I would say, 2 years ago. I think let's just touch on ICO. I think that the key inbound that we've been getting at our desks in the recent weeks. Again, I guess how do you think about just what to expect around the ulcerative colitis trial that's upcoming, especially around, just based on what we saw in psoriasis, the profile seems to be more in a ballpark of kind of like a STELARA like profile, so do you think that is a good base case to assume that will also translate in UC? And I don't know if there's anything that you can kind of help us to better understand what the profile could look like in UC.

Yes. I think I can answer that question and my team will chime in if there is additional information to be shared. So first of all, I mean, if you look at the historical record of IL-23 blockers, that is almost 100% translation in terms of, if you have success in psoriasis, you're going to have success in IBD. So that works in our favor. And if preclinical studies are any guidance, then I would say, as you know, our preclinical data in colitis has been excellent. So that bodes well for us as well. But I think at some level, our attitude right now is like, look, we are so close to the data, the data will be the data. And I think there are 2 specific things. Phase II studies are small studies. And just by sheer luck, you can get a little bit lucky or a little bit unlucky, right? So I think what is going to matter more is to look at the totality of the data, and what is going to matter even more is what J&J thinks about the data, right? So if they decide to take the drug forward based on the results, both in UC and Crohn's, I would say the data is outstanding. And if they don't do any of that, then the data is kind of miserable. So that's how we are looking at it. But I think the general remark that you made, it's like STELARA-like activity, I would say, yes, that's maybe a fair assumption, right? I mean that's what has been observed so far with injectables.

And out of the first half, there are a couple of catalysts that are related to psoriasis. I think you pointed out there are medical conferences where we can potentially see more data from the ICONIC-LEAD and TOTAL, and also there's a head-to-head comparison against Sotyktu. Which one do you think is more important for investors who are trying to better understand the profile and specifically psoriasis?

I would say it's not a very clear answer, but it's a fair answer. I would say both of those things. And the good thing is, like it's not like there is an abundance of conferences, but there are several conferences, right? And then there are late-breakers and all that kind of thing. So you can expect -- I mean, it is such a wonderful drug, I'm sure our partner would like to talk about it whenever it's possible.

Let's switch gears to rusfertide in PV. Outside of the primary endpoint, I mean just based on historically what you have shown in Phase II, it seems that it's a pretty easy bar for you to cross for the primary endpoint. But that just how do we think about what else are important measures to hit for you to build a case for -- especially for PV where there really isn't a whole lot other than hydroxyurea for patients that are kind of right in the middle between phlebotomy and also Jakafi on a more extreme end. So how do you think about just building more complete profile to showcase the full profile of rusfertide?

Yes. And the good news here is like now there are 2 companies working towards a common goal, right, both Protagonist and Takeda. But maybe, Sam, can I bother you with like what do we expect in the Phase III PV study, what else besides the efficacy?

Well, certainly, the be-all and end-all of the study is hematocrit control. As Dinesh said earlier, 24/7 hematocrit control is in all the guidelines. And as you saw in the endpoint slide, the primary endpoint as well as some of the first few secondaries all relate to hematocrit control, which is related to phlebotomy, high correlation there because phlebotomy is dictated by having a hematocrit above 45%. So that is the key part of the study. But additionally, we're looking at symptoms. And this is our first time to look in a blinded fashion at symptom control. So remember, we looked at symptoms in the Phase II. And in that experience, we saw improvement in the moderate-to-severe population, some of the cardinal symptoms of PV, and we have the PROMIS Fatigue as well as a standard MPN symptom tool that's been used by others to look at symptoms in a blinded fashion versus placebo, is the first time we get to do that.

Arturo, would you like to add anything?

No, I think Sam covered it, but I want to emphasize that the duration of comparison between placebo and rusfertide is quite a bit longer. In the Phase II study, all patients started on rusfertide, and then they were randomized to continue rusfertide versus placebo for a 12-week period. And whereas in VERIFY, from the beginning, patients get randomized to placebo versus rusfertide and are followed for 32 weeks. So we have 32 weeks that we can see the comparison between placebo and rusfertide and where we have a very robust patient-reported outcome program that we've discussed with the FDA. So we're very excited about the unblinding the 32-week data. Just as a reminder, we will file on 52-week data. So we are following the patients for another 20 weeks to measure the durability of response. And that's something we agreed to with the FDA.

For the opt-out option, it seems that you still have quite a bit of time to kind of think through your economics and also the market opportunity. I think you said 15 to 18 months away from today. What other factors are you also considering? And what should our base case be when it comes to opting in versus opting out -- I mean the opt-out seems very attractive upfront, right? So what's going to be the ultimate factor in deciding which way to go?