Protagonist Therapeutics, Inc. ($PTGX)

Welcome to Protagonist Therapeutics March 18 Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, Wednesday, March 18, 2025. I will now turn the call over to Dr. Corey Davis of Lifesci Advisors. Please go ahead, sir.

Thank you, Latanya. Hello, everyone, and thanks for joining us this morning. Joining me from Protagonist are Dr. Dinesh Patel, President and CEO; Asif Ali, CFO; and Dr. Samuel Saks, Clinical Development Adviser. Earlier today, Protagonist issued a press release announcing the FDA approval of ICOTYDE for the treatment of moderate to severe plaque psoriasis in adults and pediatric patients, 12 years of age and older who weigh at least 40 kilograms who are candidates for systemic therapy or phototherapy. A copy of this press release is available on the company's website. As can be seen on this slide, we will be making forward-looking statements on this call. These may include statements relating to the safety and efficacy and the therapeutic and commercial potential of our investigational product candidates. For further information relating to risks and uncertainties related to our business, please see the periodic reports we have filed with the Securities and Exchange Commission. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, March 18, 2026. 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 now turn the call over to Dinesh Patel. Go ahead, Dinesh.

Thank you, Corey, and good morning, everyone. Today marks a major milestone for Protagonist. We are very pleased to announce that ICOTYDE has received U.S. FDA approval for the treatment of moderate to severe plaque psoriasis, and we want to congratulate Johnson & Johnson on this great success. What makes ICOTYDE or ICO very unique is that, first and foremost, it is the only oral peptide targeted therapy that works by blocking the IL-23 pathway, and it does so by targeting the IL-23 receptor. This is in sharp contrast to the approved antibodies that are obviously injectables, but unlike ICO that targets the receptor, these antibodies work by targeting the IL-23 ligand. So it is truly a first of its kind IL-23 pathway blocker. Next slide. Before getting into any details, let me take this opportunity to offer a brief historical perspective on our journey from a concept to FDA approval. ICOTYDE, previously known as PN-235 to use Protagonist initial nomenclature for this peptide during its discovery and preclinical phase, is the ultimate outcome of relentless research and development activities in the IL-23 program that began in our laboratories 13 years ago. And it represents an immensely important validation of our peptide technology platform and our ability to generate innovative medicines. I'm incredibly proud of the Protagonist team for the scientific work, persistence and execution that helped this program from discovery to approval. I also want to congratulate Johnson & Johnson or J&J on outstanding clinical execution and for maintaining a strong and productive collaboration that has been in place since 2017, and that has helped advance this concept of oral peptides for chronic diseases from discovery through development and now to FDA approval. J&J has been an outstanding partner, and we look forward to our continued partnership with them for years to come. ICOTYDE is an important new first and only of its kind and best-in-class oral first-line treatment option for patients with plaque psoriasis, delivering the IL-23 pathway blocking injectable biologics like skin clearance that is accompanied with outstanding placebo-like safety, and all of this with the convenience of a needle-free once-daily oral pill. This combination of efficacy, safety and convenience of an oral pill makes icotrokinra a compelling choice and should be a very favorable treatment option for individuals with inflammatory and immunomodulatory-driven chronic diseases like psoriasis. Turning briefly to the approval itself. The FDA approval decision was supported by a robust body of clinical evidence in a large patient population from a comprehensive Phase III program. Across 4 Phase III studies enrolling approximately 2,500 patients, ICOTYDE met all primary endpoints and demonstrated an extremely favorable safety profile. Next slide. The breadth of the psoriasis program has led to a very broad label and is based on studies in both adults and adolescents, evaluation in high-impact disease sites, as well as 2 head-to-head studies showing superiority to the active comparator Sotyktu. The results from these studies have been published and presented at medical conferences and are now largely reflected in the FDA-approved label. Besides today's approval, we are also very encouraged by the ongoing clinical studies to evaluate ICOTYDE in additional indications beyond psoriasis. We see very meaningful potential in these programs and are very optimistic about the outcome since historically speaking, all the 3 major IL-23 pathway blocking injectable antibodies, namely Stelara, Skyrizi and TREMFYA, they have had a successful outcome in all 4 indications, that is psoriasis, psoriatic arthritis, ulcerative colitis and Crohn's disease. Having said that, we do recognize that these are ongoing studies and the actual data will define the opportunity more precisely over the coming years. Taken together, across the approved psoriasis program and the ongoing studies in additional indications, ICOTYDE is supported by a development effort that exceeds 7,000 patients. We view ICOTYDE as not just a product, but rather as a pipeline in a product, a multi-indication, multibillion-dollar immunology franchise. Next slide. Now let's move to the financial aspects of the partnership with J&J. This approval has clear economic significance for Protagonist, leading to an immediate $50 million milestone achievement from this approval and now kicking off a royalty-based revenue stream going forward. Since the initiation of our collaboration with J&J in 2017, Protagonist has now earned a total of $387 million in milestone payments. We still have around $580 million in future potential milestones, and we believe that Protagonist has a very good chance of achieving all of these milestones in the coming years. To break it down further, this $50 million is comprised of $155 million in development milestones summarized in the table on the left and $425 million in sales milestones summarized in the table on the right. So the $155 million in development milestones, as you can see, are based largely on NDA filings and approvals in additional second and third indications, which should be achievable based on clinical studies currently being pursued in 3 additional indications. With the $425 million in sales milestones, the highest hurdle milestone is based on reaching $5 billion in annual sales, which should be achievable, we believe, in the coming years. So seldom do we get a chance in our lifelong careers, 40 years to be specific in my case, to say that we could potentially achieve all research, development, regulatory and sales milestones from a pharma licensing and partnership deal. Beyond milestones, we are also eligible for tiered royalties ranging from 6% to 10% on global net sales with a weighted average of 7.25% at $4 billion annual sales and 10% for sales over $4 billion. Our royalty-based earnout each year will obviously depend on the annual sales and the table at the bottom provides a simple illustration of the actual pretax royalty-based dollars that would be earned at various levels of annual sales exemplified as ranging from $5 billion to $20 billion. Taken together, these numbers and percentages speak to the win-win nature of the partnership, and it also speaks volumes for the blockbuster category potential of ICOTYDE. This is also a good opportunity for us to clarify Protagonist role going forward in this collaboration. Because J&J is solely responsible for all aspects of the commercialization of ICOTYDE as well as the ongoing clinical trials, they are the best ones positioned to describe specific launch activities and provide guidance on all commercial expectations going forward. Next slide. From Protagonist standpoint, today's approval highlights the strength of our core expertise in discovering oral peptides and the value of our collaboration model. This is a meaningful scientific achievement and in our view, an important demonstration that rationally designed oral peptides against well-validated clinical targets can deliver highly differentiated therapeutic profiles in large, well-established blockbuster category markets. The success of ICOTYDE, together with multiple assets now advancing across our R&D pipeline, validates the durability and productivity of our unique peptide technology platform that is geared towards optimizing intrinsic potency, oral stability and oral bioavailability in an oral peptide agent against validated targets previously deemed to be approachable only through injectable biologics. It is evident that our proprietary discovery engine can generate candidates with the potential to move from concept to clinic to approval, and ultimately toward commercial value creation. Next slide. Now let's turn our attention to the other assets in Protagonist pipeline. In addition to the ICO approval, as shown on the left, we are also expecting FDA approval for our first-in-class hepcidin mimetic, rusfertide for polycythemia vera sometime in the third quarter of this year. In partnership with Takeda Pharmaceuticals, the NDA was filed on December 29 of last year, and we are thrilled to have received priority review earlier this month from the FDA. If successful, rusfertide's approval would further reinforce the breadth and maturity of our platform. As most of you know, we have a provision to opt out of our co-development and co-commercialization arrangement with Takeda, and we are strongly leaning towards opting out, which will, in turn, qualify us for a $400 million opt-out payment fee and allow us to transition from the current 50-50 profit loss sharing arrangement to an out-licensing deal with enhanced milestones and royalty-based economics. Takeda has been an outstanding partner, and they have a very strong experience and presence in the hematology space, and rusfertide is a high-priority asset for them, which fits nicely in their heme portfolio. Moving from our late-stage assets, ICOTYDE and rusfertide, let's now shed some light on our new wave of emerging R&D assets, which we commonly refer to as our second act or repeat performance. In the inflammation and immunology or the I&I space, we have PN-881, our first-in-class IL-17 oral peptide antagonist with activity against both A and F isoforms, and it is currently in a comprehensive Phase I study. We expect to complete this study by midyear and we'll share our decision on the next steps with PN-881 in the third quarter. In the heme space, as a complement and follow-on to rusfertide, we are developing an oral hepcidin functional mimetic PN-8047, which is currently in IND-enabling studies. Incidentally, 8047 is a small molecule and not a peptide. At the core level, we are focused on strong differentiation at Protagonist and are agnostic to the actual chemical nature of our assets. Besides I&I and hematology, we are extending our peptide expertise to the anti-obesity space, which is currently largely dominated by the injectable peptide, semaglutide and tirzepatide. PN-477 is our oral triple GLP, GIP, GCG agonist, and it is being developed both as a weekly injectable and a once-daily oral agent. We expect Phase I clinical studies to commence in the second half of the year, and it should be feasible to achieve preliminary clinical proof of concept in the Phase I study itself by observing weight loss in healthy volunteers with a higher BMI index. Finally, we continue to add new programs such as IL-4 in the I&I space and amylin in the obesity space, wherein we believe there is an unmet need and where a strong differentiation could be achieved with our approach. Our 2 late-stage assets and our 2 pharma partnerships have placed Protagonist in a very strong financial position. Based on the cash we have on hand today and with the anticipated future cash generation from the 2 partnered assets, we believe we have the financial resources and organizational experience to fund all of our current R&D programs to clinical proof of concept, and to continue investing in a growing pipeline of new peptide-based and small molecule-based programs in the future. What makes us so unique, is that we anticipate carrying on all of our R&D activities now and in the foreseeable future without any equity offering based financing and dilution to our shareholders. In fact, with respect to capital allocation, we'll be giving serious consideration to all forms of returning capital to shareholders with tools like share buyback programs, which will lead to more concentrated positions for our shareholders. We'll constantly be striving for maximizing shareholder value through all of our operational, financial and strategic activities. I would also like to emphasize that we always have been and will continue to remain strong believers in value-creating partnerships with pharmaceutical companies. And certainly, our partnerships with J&J and Takeda serve as great examples of successful win-win collaborations. Keep in mind that our partnership with pharma is not just about bringing non-dilutive cash into the company. A true pharma partner offers the incredible advantage of experience, expertise and ability to scale. Going forward, we can envision pursuing rare disease indications on our own all the way through FDA approval. But for broader indications, we'll be strongly leaning towards fair pharma partnerships, with more financial participation through clinical development with the anticipation of preserving better economics down the road. We'll continue to pursue win-win structures that align capabilities, maximize value of our science and create meaningful returns to shareholders. Next slide. So in summary, today's approval of ICOTYDE is a defining moment for our company, our people and our platform. It marks the slow and steady transition of a research program that originated in our laboratories 13 years ago into an approved therapy for patients. And it validates the power of our platform to produce differentiated drug candidates with real therapeutic and commercial relevance. I would again like to congratulate the teams at Johnson & Johnson and Protagonist whose unwavering commitment allowed us to reach and exceed all of our goals in the IL-23 program, culminating in the approval of ICOTYDE for psoriasis that we are so pleased to announce today. Drug discovery and development requires patience, resilience and collaboration and reaching this point is deeply meaningful for all of us. I also want to recognize the patients, investigators and caregivers who participated and contributed in the comprehensive ICOTYDE clinical program. Everything we do, we do it with the ultimate goal of transforming patient lives. With the approval of ICOTYDE, the pending FDA decision for rusfertide this year, and the financial resources to support the next generation of R&D programs and assets, we are increasingly confident that this is the beginning of a multiyear product-driven growth cycle for Protagonist Therapeutics as a company. And with that, I will now ask the operator to begin our Q&A session. Operator?

[Operator Instructions] The first question comes from Roger Song with Jefferies.

Huge congrats for the approval, a little bit earlier than we thought, but congrats. And looking at the label, I think it's pretty impressive how clean the safety label language looks like. Notably, this TB test requirement comparing to IL-23 biologics since this is optional. Just curious about your thoughts. I know probably J&J is a better position to comment. But just how you think about this requirement and consideration for TB test because a lot of doctors is talking about it. And then how did you achieve that language, if you have any comments?

Roger, so yes, clearly, we are a few months early in this announcement. And hopefully, that's a good surprise for everybody. And with respect to the label, I think in a way you answered the question, I think J&J is the best party to give any detailed answers. But what I can reflect on is like, hey, even 13 years ago, when we were trying to decide which targets to work on, we, on purpose avoided working on TNF blockers, even though Humira was the dominant product at that time, and very consciously chose IL-23 pathway and the alpha 4 beta 7 integrin pathway because we believe that safety was of paramount importance that could be achieved with this intervention of these pathways. And that has obviously come to fruition today with the approval of ICOTYDE as an IL-23 pathway blocker. Sam?

I would just say, in general, again, not to comment specifically, but in general, we had heard from investors repetitively sort of, I'd say, misinformation that there was going to be various testing requirements with ICO, be it for TB or liver or other aspects. And as you point out, it's really clean with respect to the requirement to do any specific testing. So that is going to be a great thing for the launch.

Excellent. Just a quick follow-up. Now this is J&J going to driving force for the launch and then we're moving on to your own program. AADA 17, just use this as an opportunity, just give us some comments around how you think the learning from ICOTYDE can translate to AADA. And then in terms of the safety and efficacy profile, what's your expectation for -- compared to the biologics?

Yes. I think in our case, the big advantage is that by working on pathways that have already been validated by the biologics, we almost have a cheat sheet in terms of what to expect. And that has turned out to be so true with ICO. And I would say we expect kind of a similar type of behavior and expectation with the IL-17 blocker as well. Now in terms of the lessons learned or the similarity or differences, I mean, as you know, each target is different. And so in terms of the specific of what a peptide molecule looks like, what ICO looks like versus PN-881, I can assure you that is a day and night difference, totally different entities. So in each instance, you have to start from scratch. Having said that, though, some broad learnings about that, hey, potency is of paramount importance, oral stability is a must, and engineering some permeability to achieve some oral bioavailability and having a slow clearance. And some of the fundamental learnings is something that can be applied all across the board in all of our programs.

One thing to remind you, Roger, is one of the claim to fames of peptides because of their enhanced potency is high specificity. So that's one of the reasons you achieve these kinds of labels is because there's less chance of off-target effects when you have that kind of potency and specificity.

The next question comes from Doug Tsao with H.C. Wainwright.

Dinesh, congratulations. It's been really remarkable journey for the company, and we look forward to seeing you get your second approval not too long in the future, which would be a really great accomplishment. Just maybe as a follow-up along the lines of what Sam just said, do you think given the tolerability profile we've seen and the clean label on that front, does this sort of perhaps provide a road map for some of your other oral programs in terms of what those labels might look at, especially in terms of sort of off-target effects. I mean there might be some side effects that are sort of unavoidable. But does this sort of really highlight a potential clinical advantage beyond just sort of the oralization of these markets, but perhaps sort of a greater tolerability profile as well?

So, I think -- this is an excellent question, and we cannot answer it enough time, I would say. Safety is of paramount importance. And the simple realization is that, hey, with peptides, you have a larger number of binding interactions compared to small molecules. So just logically speaking, you're going to come up with something that is much, much more potent than a small molecule. And with that kind of high level of potency, what also comes along is amazingly high level of specificity, and it minimizes the chances of off-target kind of side effects. So that's a big advantage that we believe should translate all across the board in our approach of oral peptides. That's how we are looking at it.

But as Dinesh pointed out earlier, because these are validated targets, we're not looking to ICO for the toxicity profile, let's say, IL-17 A and F and 881. We're looking to the antibody that covers those targets because that -- that's already a commercial product and treating lots of patients. So we would get surprised, quite frankly, if any of our peptides have any other toxicity besides those that are already known from the validated therapeutics.

Yes. And once again, that is a sharp contrast to what you may expect from small molecules where the real surprising and ugliness may come much later in an advanced clinical study.

And just as a follow-up, Dinesh, I guess what I was sort of -- I think is striking about the label is not just the sort of safety profile versus other small molecules, but even the advantages from a labeling safety standpoint versus -- be it Stelara or even TREMFYA, where ICO looks to compare favorably. So I was just curious if you thought that might be something we should expect or think about as a potential for the IL-17 and other programs?

It's hard for us to comment on any labeling thing in terms of J&J. But as was already pointed out, this is a receptor blocker. So it is completely unique. But J&J did all the direct negotiations with FDA. So we would have no comment on like why the label looks the way it does.

And Doug, to answer your question in a general way, I mean, these are the early innings for oral peptide approaches, right? And as you know, there are 2 very fundamental differences in the pharmacokinetic aspects of the drug with an antibody, which would be an injectable, you are starting with a maximum concentration on day 1 and then it wanes out over a matter of days or weeks, something like that. With the oral peptide approach, it's a daily ritual of having some level of drug levels in circulation each day. So different kind of titration and dosing. It's almost like theoretically, with an oral peptide approach, you are providing more frequent but moderate level of the drug to the individual. And just in general, the lower the dose, the better. So let's see how it all plays out. But yes, the overall safety profile of ICOTYDE is just outstanding at all levels.

The next question comes from Evan Seigerman with BMO Capital.

Malcolm Hoffman on for Evan. Thinking about the ICONIC-ASCEND data coming up soon, how should we think about the significance of that data set for ICO? ICO has already shown strong strength against oral I&I agents. How do you think about the potential for superiority here and what that could mean for revenue uptake in the future?

Well, the data will be the data, but the intent, obviously, which J&J has articulated, so I'm not saying anything that they haven't already said is they're trying to make this the frontline treatment of choice. And that's the usefulness of that study. How it turns out, even they, I think, would say, let's see the data.

But yes, if you look at the adolescent data and the idea behind like doing a head-to-head comparison with Stelara, basically, ICO has all the makings of being a first-line therapy of choice for patients.

And they were very clever with the deucra or Sotyktu studies in terms of doing things proactively as well. So as Dinesh had said earlier, boy, we could have a better partner.

The next question comes from Jon Wolleben with Citizens.

Just two for me. One simple one. Can you remind us of the patent protection on ICOTYDE? And then also with Skyrizi doing so well, maybe can you compare and contrast your profile versus Skyrizi and what could drive adoption for an oral here?

Yes. Jon, so good points. And we are very pleased with the extent of patent protection we have over here. It's fair to mention in broad strokes that it is extending to 2040 or slightly behind that, right? Now in terms of Skyrizi or any injectables for that matter, TREMFYA could be another comparison. I think -- and J&J has communicated this incredibly well. There are 2 different opportunities over here. What their marketing research suggests is that amongst patients who are already on treatment, which is with the injectables because the IL-23 injectables are the ones that are offering the best combination of efficacy and safety. Amongst those patients, more than 75% or rather 75% to 90% will be willing to switch to an oral agent if a good option was available. I mean, ICOTYDE's label, in my opinion, clearly makes it a good option. So let's see how that goes. And again, J&J is the one that is doing the heavy lifting over here. But in broad strokes, the first category is like taking market share from the injectables. But now here is the additional thing, right? An equal number of I&I patients, a few million of those that are actually qualified and eligible for targeted therapy treatment options, they are not choosing any treatment right now because: a, they don't like injections; and b, they don't like the current oral options that are out there. So this will give ICOTYDE and J&J a great opportunity to create a new market for ICO as well. So I would say ICO could be very well positioned both to grab some market share from the existing injectables as well as expand the market and create a new market of its own by becoming an attractive option for patients who are currently on the sidelines.

We will be on the watch. Thanks, Dinesh, and congrats.

The next question comes from Srikripa Devarakonda from Truist Securities.

Congratulations. This came certainly earlier than expected. One question we've been getting from investors. This has been a great partnership between J&J and Protagonist teams. A question is the relative contribution of Protagonist to the optimization journey, and this relates more to how much of the know-how in the optimization of these oral peptides continues to be proprietary to Protagonist. In other words, I think people are -- want to be more comforted around your ability to protect the know-how. And then another question, I think there's a food effect on the label. I was just wondering if you think there could be any sort of impact on longer-term compliance.

Kripa, It was nice to meet you a week or 2 ago. And of course, our lips were sealed at that time, but it's good to come out in the open today. So in terms of the partnerships, as we keep saying, this has been a fantastic partnership, and both parties have benefited immensely. And in terms of know-how and who is good or great at what, I think both groups have utilize their strengths towards uncovering ICO and bringing it where it is today. And of course, as you know, this is a joint co-inventorship with inventors from both camps. So that is as simple as that. In terms of the know-how and the future utility and things like that, I mean, obviously, I'll speak for Protagonist. As you can see from our expanding R&D pipeline, almost everything we do, except for the exception of the oral Srikripa Devarakonda, that is all peptide-centric, right? We oscillate between injectable peptides like rusfertide or oral peptides, be it for the obesity program or the oral IL-17, and in the future IL-4 and other programs. So our expertise, we have been building and expanding on the core expertise all the way back from 2008. So there is a lot of residual know-how, and that basically is our secret sauce, which allows us to come up with this kind of highly differentiated assets in otherwise what would be a very competitive and crowded field.

One would expect that if J&J -- and if our technology was no longer proprietary to us based on this collaboration, that J&J would have a whole host of oral peptides or peptides in general in their R&D portfolio. I haven't heard anything recently.

Yes. The -- now in terms of the food effect, things like that, it is very simple. You take -- and as you know, this is a one pill, once-daily oral pill. So you take the pill first thing in the morning with an empty stomach and you can take it with water. And you just have to avoid solid food for the first 30 minutes. I don't know of that many people who require solid food in the first 30 minutes after they wake up. So I think compliance should not be an issue.

That's good to know. And congrats again, very exciting.

The next question comes from Etzer Darout with Barclays.

This is Luke on for Etzer. Congrats on this update. Given the success of icotrokinra, are you looking to replicate its PK/PD profile with your oral IL-17? Is there anything that you'd like to see optimize as we think about the healthy volunteer study? And then looking forward to the study initiating in the second half, should we expect the size and scope of the IL-17 study to be similar to the IL-23 trial?

Yes. No, very good question. So I think in terms of what we would expect with our oral IL-17 PN-881. Yes, the overall profile of the peptide is of such nature that, as you know, it is incredibly potent. It is the first of its kind as an oral agent to have activity both against the A and F isoforms. We have made sure that it is very stable. And we definitely have an eye for achieving higher level of absorptions and oral bioavailability. So the -- it is -- and those were the same things that we were able to achieve with icotrokinra, has incredible potency, amazing oral stability and adequate degree of oral exposure. So those are the similarities in the approach with oral peptides. And our focus with 881 is, of course, going to be on the drug levels that we observe in healthy volunteers, right? What are the levels about the EC50, EC90, those kind of criteria. And that in turn would dictate what kind of Phase II study in psoriasis, we would undertake as a follow-on to the Phase I study. Currently, our guidance is that, hey, we will complete the Phase I studies by the middle of the year, and then we will carefully analyze the data that we have in front of us. And then it is in the third quarter that we will share our decision about our next steps with 881.

Yes. And let me just clarify that IL-17 biology is completely different than IL-23. So our targets that Dinesh just articulated are not based on ICO. They're based on the injectable antibodies that target IL-17 A and F. So that's, again, with validated targets, that's how we define our goalpost, so to speak. With respect to pharmacodynamics and normals, it's not very relevant to IL-17. So we -- again, we know what we think are actionable pharmacokinetic levels. So that study is really aimed at finding the right formulation and dosing instructions to take into a Phase II study for the peptide.

The next question comes from Thomas Smith with Leerink Partners.

Let me add my congrats on this huge milestone. Just a couple from us, please, on your earlier pipeline. First, on the planned expansion into the obesity space. Could you talk about some of the learnings from the ICO oral peptide experience and how you could apply that to your dual and triple agonists? And can you just remind us what you're trying to optimize for with these compounds? Is it greater weight loss, better tolerability, less frequent dosing or maybe some other attribute besides just the oral dosing component? And then second, with respect to the capital return plans to shareholders, can you just expand on your latest thinking there between share buyback or dividend and when you think you'll have more visibility into the timing for that capital return?

Yes. Maybe answering the second question first. In terms of capital return, we have been conveying since the beginning of the year that we have serious intentions of some sort of capital return to shareholders in a meaningful and a programmed way. I'm a big believer of like events actually have to happen rather than assuming they happen before we act on something. So today, until yesterday, ICO would most likely get approved. Well, now it is approved. So one of the similar things on the financial side is like, hey, in our Takeda co-development, co-commercialization, 50-50 partnership, we are strongly leaning towards opting out. While it must translate into -- we are actually opting out because that is what really would trigger the $400 million influx of opt-out fee into Protagonist war chest. So I think it is really in the second half of the year or more specifically in the third quarter of the year. And hopefully, by that -- I mean, in the fourth quarter of the year. And hopefully, by that time, rusfertide is also approved. So there are milestones associated with that as well. But in the fourth quarter, we'll be able to provide more granularity on what we exactly would opt to do. But as of today, and we have the ability and right to change our mind. But as of today, what comes to mind is share buybacks in a moderated way and a consistent way. That's what comes to mind. In terms of the obesity space, I would say it's also like what are the learnings from ICO and it is -- what are the attributes we would want to have an anti-obesity agents based on the learnings from ICO. I would also say we also have to keep an eye on the competition that is out there, right? So -- in general, when we choose a disease area to work on, of course, we want to address an unmet need. And I believe in the obesity space, there is a huge unmet need. I mean there is a lot that is going on, but we are just scrapping the surface in my opinion. So the unmet need is there. But at the same time, there are many players there. So the second criteria that is equally important is that along with the unmet need, we should be able to offer something that truly has a high degree of differentiation. And that's where our first act in the space, the oral triple G serves as a great example. We believe we are the -- definitely the first ones or one of the first ones that are coming up with an oral triple G. And it's not just a mad chase toward maximizing weight loss, also that -- although that will be a key characteristic of an oral triple G. But we have also gone through great troubles to adjust the relative potencies of the GLP versus GIP versus GCG agonism based on which we believe based on the literature data that we are also trying to optimize for other attributes besides maximal weight loss, such as improving GI tolerability and tilting the ratio of weight loss more in the category of fat loss versus -- and preservation of muscle mass loss. So hopefully, that answers the question on the obesity candidate.

The next question comes from Tara Bancroft with TD Cowen.

This is Ikenna on for Tara, sharing our congrats as well. I had a question. Can you tell us about pricing, the rationale and gross to net assumptions that may impact royalty payments?

Yes, that is definitely a J&J question, I would say.

And royalty payments, we can -- can you comment on what the royalty payments are based on?

I mean, yes, the economics we know, obviously, it's 6% to 10% royalty with -- and we've given further guidance that 7.25% is the weighted average at $4 billion and then above $4 billion, it's a 10% royalty rate. But as to your other question, as Dinesh and Sam said, that's pricing and gross to net is not something that we can guide to. That's a J&J question.

I had a quick follow-up, if you don't mind. on its usage, could payers eventually require that therapy requirements with a failure on ICOTYDE before injectables or vice versa? And can you talk about...

That's a J&J question. We are -- so any commercial question, you have to ask J&J. But they're going to be very vocal. They have been talking about this as one of their biggest launches ever, if not biggest. They're very excited and vocal. So you're going to have no lack of information flowing out of J&J on this product.

What you will hear from us is on a quarterly basis, what was the revenue generation from ICOTYDE based on the royalty payment arrangement.

The next question comes from Yun Zhong with Wedbush Securities.

Congratulations on the approval. Maybe a follow-up question on the obesity program. And so you introduced the dual agonist program in addition to the triple G agonist. So I just wanted to -- I understand that you want to build a portfolio for obesity, but any additional comments that you are able to share in terms of maybe your plan positioning when it comes to, for example, resource allocation and suitable patient population? Any comments you're able to share, please?

Yes. So I really like this question. And in a way, if you think about it, this is our admitting the fact that obesity is a rapidly evolving field and nobody has a crystal ball, and ultimately, which will be the most desired target or the combination of targets and poly-agonism, I personally believe that there will be many winners and especially if you keep in mind the comorbidities that are also affiliated with this approach. So in a humble way then what we are doing is like, hey, let's create multiple assets and then -- but with a strong differentiation of having an oral drug as much as possible. Although, as you know, we are developing both oral as well as subcu form of our agents. And that is also an acknowledgment of like it's like, hey, we don't know what the preferences would be. There could be some instances for some periods of time where an injectable would be a welcome choice. Working on a dual along with the triple is also the same kind of spirit, if you will. It's like triple could be -- we are hoping it will be outstanding. If you look at the Phase III data of retatrutide, the triple agonist from Eli Lilly, the data is very, very impressive. But what if down the road, somehow the dual becomes a more optimal choice. So we don't want to leave anything for chance. And the whole idea, and we will continue in this way. And as you know, we have also acknowledged our presence with the amylin agonist and polyagonist kind of approaches. The whole idea in a way is to create an amazing portfolio of numerous anti-obesity agents over the coming year or 2. And then, of course, that would hopefully be very appealing and be a very high-value proposition to a big pharma who would be a very interested late entrant to the party.

Okay. Great. So the follow-up question on J&J partnership. Does your existing partnership with J&J on ICO provide J&J the first to negotiate right to, for example, IL-17 program and/or obesity programs, please?

It does not. There's no such agreements, no sort of contractual terms that would cover any of that -- our remaining programs.

It's a very clean arrangement. It's confined to the IL-23 program and obesity is certainly of our stretch. But just to clarify, they have no such rights even for the oral IL-17 program.

The next question comes from Richard Law with Goldman Sachs.

This is Jane on for Rich. Congrats on ICO's approval. So I have two questions. First, as you mentioned there is potential for share buyback. So does that predicate on after you can partner more pipeline assets out or the current resources are sufficient? And what condition will allow for the share buyback? And my second question is about the pipeline programs. So are you going to share Phase I data for IL-17? And then when will you explore partnership for the IL-17 and the obesity programs?

Yes. No, I think these are interesting questions, and then we can make some general comments. The share buyback is a decision based on our overall conclusion, and you are pointing it out very nicely. Is it from the revenue that we'll generate from the existing partnerships? Or is it also based on the partnerships we may do in the future because we do keep emphasizing that, yes, we are big believers of joining hands with big pharma. And I would say, yes, it's a combination of both. And what I can also clarify is like we are certainly not compromising on our ability to scale our R&D operations to broaden the discovery efforts in numerous targets, some of which we have announced and some of which are under the hood. So it's a problem of the riches. It's a nice problem to have and the abundance of financial value creation basically lends us to state that we want to return some value back to our shareholders in an efficient way, and that's where the share buybacks come in. In terms of the IL-17, I think what we have shared and clarified last year is that, hey, we did extensive sharing of preclinical data when we announced our oral IL-17 881 and when we announced our oral triple G anti-obesity agent 477. But going forward, we'll be a bit stingy in terms of sharing the actual data for 2 reasons in a way, and this is with full sincerity and humbleness. One is like now we are at a stage where we don't need to share the data and wow the Street with like, wow, look, here is wonderful data and then next week, do an equity offering. If at all anything, we are clearly saying we are not going to do an equity offering, never say never, but we are not -- we have no plans of an equity offering in the near future. And second, and again, this is with full humbleness. We just don't want to teach too much to the competition. So we'll keep it under reps.

And then could you comment on when will you explore partnership for the IL-17 and obesity programs?

Yes. As you know, partnerships are -- is an activity that is a constant activity. If you look at our J&J partnerships and the Takeda partnerships, I mean, these are dialogues that go on for years, not just with the final party, but multiple parties at any given time. So oral IL-17, I mean you can just assume it's a really hot asset, and there is great demand for it. I can tell you that much. So we do the act of playing the musical chair and continue to have a sincere dialogue with parties. As and when a partnership is inked, well, that is -- that happens when there is a meeting of minds and the checkbooks.

One of the things I would point out is one of the reasons that we're saying that we are going to have excessive cash here, even though we have such a robust pipeline, is these assets validate quickly and cheaply in Phase I and II studies. So in terms of your partnering question, we want to get clinical POC. That's where we think we get adequately -- we get the best deal constructed, and that's going to come relatively quickly for some of these assets.

The next question comes from Geoff Meacham with Citi.

This is Nishant on for Geoff. Going back to Dinesh, your comment on compliance regarding the food effect. I just wanted to get a sense whether -- what kind of rates you have seen in the clinical trials, whether there was any food effect related kind of issues with the patients that they have kind of dropped out and just getting a sense of actual data from clinical trials. And then on your strategy overall, you have mentioned in the past that for some of the rare disease like oral hepcidin asset, you could go all the way other than partnering. So just getting a sense of your priority in terms of like partnering versus taking assets all the way through, whether that could change for other assets as well.

I want to address this issue about compliance and point out, and you can look this up is J&J has presented long-term data on this compound. It's necessary in psoriasis to present up to 1-year data. And one of the remarkable things about their long-term data is although patients are feeling improvements in itch and pain and things in a matter of 48 weeks. The persistence on the study to week 52 and the maintenance of the effect they saw at week 16 is outstanding. And I would encourage everyone to look at all that data because, obviously, in -- even in a study, if you're taking a drug over a year, you're going to get the compliance that's the compliance. That is very good for them.

First and foremost, taking the drug with an empty stomach first thing in the morning and not having any solid food for 30 minutes, it's not a high -- it's not a hurdle at all in my opinion to compliance. That's number one. And the second thing that I would just reiterate what Sam said, you start seeing or feeling this effect of really from itching and pain in the first few weeks. And that's just human psychology. You feel the drug is working, you're going to continue with the treatment. And this is the most convenient form of treatment that one could ever think of. And as we started talking about in the beginning of the call, the safety, just amazingly clean safety. So when you add all that up, the compliance part in our opinion, is a nonissue.

J&J has also presented in this long-term data, patient satisfaction data. You can see this published at EADV and other places. They've shown that they have data on how people love this product.

Yes. Now in terms of the oral hepcidin, I mean, that's a good question. Now keep in mind that even with rusfertide, we were in Phase III study on our own when we announced the partnership with Takeda, and the original intent was like we will take it forward all the way through approval and commercialization. So I think it's no different for oral hepcidin. The intent is like, yes, this is a rare disease indication, and this is something within our domain. We are fully capable of developing and getting it approved on our own. But at the same time, the whole idea is like what is the best way to maximize value creation with an asset. And if joining hands with a pharma is the answer, then that is what we will do. At the end of the day, our focus, laser-like focus is on maximizing shareholder value.

The next question comes from Brian Cheng with JPMorgan.

Congratulations for the approval. Two from us. So we noticed that there is a head-to-head data against deucra included in your label. Will the label be updated ahead of the commercial launch once you have the ICONIC-ASCEND trial that's testing ICOTYDE head-to-head against Stelara later this year? And then for the PFA trial primary completion in the first half, will we be getting clinical data in the first half this year? Curious if you can give us a better sense of the time line for PFA as well.

So I think, again, Brian, these are questions -- these are great questions, but I would say they are best answered by J&J. And whether it is -- what is the outcome of the ICONIC-ASCEND study, where there is a head-to-head comparison with Stelara. And does that influence the expansion of the label? It's J&J, who will answer that question.

We're laser-focused on two things: how big are the payments? And when are we getting them?

Yes. And psoriatic arthritis, I mean, you are very observant. It's the completion of the enrollment up to the primary endpoint stage in the naive population, that's going to happen by the end of May. Now to what extent -- and when J&J chooses to share what level of data, once again, that will be up to them. Our job will be to fully cooperating with them. I think as I had mentioned in my call, I mean, if you look at the historical track record of the IL-23 blockers, Skyrizi, Stelara, TREMFYA, that is 100% hit rate, right? All 3 of these drugs have had positive outcome in all the 4 indications, so not just psoriatic arthritis, but also Crohn's and UC. And as you recall, our Phase II UC data is just outstanding. 30% clinical remission is something to write one about. So, so far, we see very good outcome and very good translation, both in the derm space as well as in the IBD space. And we remain optimistic about the outcome of the ongoing clinical studies in the 3 other indications.

And just to touch on your comments earlier about how you think about partnerships in broader indications and you're more focusing on the smaller indications. How active are you today in securing partnerships for assets targeting the broader indications like obesity? Are you actively looking today? Or do you think that you will need to have some clinical data to secure a more fruitful partnership for you?

I think, yes. Great question. These are moving targets. And as I mentioned before, it's always healthy to have a dialogue with pharma companies under a CDA and you get great feedback, and it brings in valuable insights, that sort of thing. It also provides early warnings if there is something that would be concerning, that sort of thing. But I think it's fair to assume like if I were a big pharma representative, I would be definitely interested in touch, but would certainly want to see some sort of clinical data before becoming a big believer of the asset. So now the advantage is like in the obesity space, just in a Phase I study by enrolling a few healthy volunteers with a higher BMI index, you can actually observe weight loss to some degree. And the smart people can easily make conclusions on the overall effectiveness of the drug at such an early stage as well. So I think we definitely still have some work to do, but chatting with pharma under confidentiality, under a CDA is a norm for Protagonist.

And I would say, Brian, that -- with respect to the targets that are furthest along, IL-17 and obesity, it's not like we have to go knocking. People come knocking on our door. These are very hot targets that a lot of people are interested.

Thank you. There are no further questions. I will turn the call over to Dr. Patel for closing remarks.

Thanks. Thank you again, everybody, for joining us this morning. The approval of ICOTYDE is a proud and historical moment for Protagonist, and we look forward to carrying this momentum forward as we continue advancing our R&D pipeline and preparing for the important milestones ahead. Thank you again for your continued interest in and support of Protagonist.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.