Protagonist Therapeutics, Inc. ($PTGX)

Let's kick off the next session. It is my pleasure to welcome Protagonist Therapeutics. And with me today is Danish Patel, CEO of the company. We have a lot to go through. There's a lot of excitement with the product launches and the pipeline that we're going to hopefully learn more later this year. Before we get to them, I'm going to turn it to you for opening remarks.

Yes. Well, first and foremost, thanks for inviting us. That is something we truly appreciate. And hopefully, they will continue. But I think Protagonist is at an unusually interesting and positive space right now. If you think about it, we are now a commercial company through our drug cotide, partnered with J&J. We could be looking forward to potential approval of rusfertide in the third quarter. That's when the PDUFA date is in August. And the Phase III data has been outstanding. So that is partnered with Takeda. And if that gets approved, then I guess we'll be a biotech with 2 approved drugs this year. So that's nice statistics. And then the other thing we like to point out is like -- with the success of these 2 drugs, now we are going for repeat performance. That's what our R&D pipeline is about. And if you think about it, the probability of success in our case, I would like to believe, is significantly higher than whatever the norms are for our industry for multiple reasons, right? Our biology targets are very validated. So that's one level of derisking. Our success with ICO and rusfertide is stick volumes for validation of our platform and our expertise in the field of peptides, right? So that's what it is sharing as well. So it kind of adds up in a nice way, the derisking. And last but not least, I mean, if you look at the statistics of peptides versus small molecules, peptides have higher success rate in through clinical development and through approval compared to small molecules. So things are lining up for us. And then last but not least, financially also, there is a very big positive for the company. It's like we have ample cash and assumptions of cash coming in. So through the royalty arrangements and milestone arrangements both with J&J and Takeda. So we believe that we won't have a need for a regular equity raise in the foreseeable future. And if anything, we would like to reward our shareholders with some share buyback kind of approaches down the road.

Okay. Got it. So you mentioned -- yes, regarding the share buyback, I think you mentioned that back in March. What do you need to achieve for that to occur? Do you see this as like a onetime event? Or do you see this as more or less a recurring event?

Yes. So -- we are waiting for the approval of rusfertide because that will really cement our revenue projections. That's the key gating factor right now. And we are not fond of onetime share buybacks. If we do it, we'll do it the right way, have a steady share buyback program.

I see. Okay. So 5 years from now, how do you see Protagonist as a company? Will you ever consider building a full-side commercial team that can support specialty products? And also what modality and therapeutic areas will you want to expand to or not expand to? I'm thinking about like oncology, CV and things like that.

Yes. Those are great questions. And I remind myself and others that, look, with rusfertide, we were already in Phase III before we deal a wonderful partnership with Takeda. So yes, for rare diseases, niche markets, we are big believers of -- therein lies the possibility of taking it all the way through commercial. And maybe with the oral hepcidin, the second gen drug that we have, we may aspire to do something like that. And having said that -- and we have the financial strength to do all that. But we are also very pharma friendly, and we have pro partnership. And we believe that partnership with pharma, it's not just about money. Much more than money is the expertise and the breadth of expertise and scale and all that, that they bring to the table. So we will be always eyeing for partnerships for bigger indications. So for example, with the obesity one, I don't know, of doing Phase III studies on my own over there, let me put it in that way. So we take things to clinical POC on our own and then for niche indications and niche products, we can develop it all the way through. But for others, we'll be running.

Okay. More questions to come on those topics. So let's switch gears to Iclotide. J&J is saying that cloty could become one of its most successful drug in the history and potentially grow now greater than $10 billion peak sales. Given that excitement and the launch progress so far, what is your own base case regarding the peak sales? And I'm assuming that you've done your own market research because you're planning for the royalty stream coming in. What have you found in your own research?

Yes. I mean IO is a great product, right? I mean it's not only the first of its kind. It's the only one of its kind, the oral IL-23 receptor blocker that has been approved. So -- and the early indications regarding the launch are incredibly positive. Like yesterday, there was a fireside chat with J&J and the remarks are incredibly positive. I mean if you think about it, the drug was approved on St. Patrick's Day, March 17, -- during their first earnings call, which was April 14, they claimed more than 1,000 prescribers. Yesterday, they shared it's more than 4,500 prescribers. And really, they are getting the market share both from experienced and naive populations and the switch from other orals and injectables to orals, all kind of -- I mean, these are early beginnings, but the launch is incredibly powerful. And if you look at our research analyst estimates that the projections are kind of in the $10 billion, $15 billion sort of range of peak sales. But I think the data that is really coming out -- it's still early days, but it appears very promising. So I think that is very satisfying. J&J is doing an outstanding job. And this is an outstanding drug with an amazing combination of efficacy, safety and convenience. No other drug has all the 3 attributes. So that works in our favor. Right now, the approval is just for psoriasis and Phase III studies in psoriatic arthritis, UC and Crohn's are ongoing. And so it's value and market share can only increase over time.

And what is your expectation for peak sales?

What I would like to say is like my expectation or whatever number I may have in mind is not that credible. It doesn't have value. I would rather have the real numbers do the talking. And like I said, the research consensus estimates is anywhere from $10 billion to $15 billion. But if you look at Skyrizi, it's going north of $20 billion. And TREMFYA is not that far behind. But over here, the important thing is like here, there is an opportunity to take the market share from injectables and also create a new market, right? The J&J marketing research suggested that 75-plus percent of those that are on injectable in the I&I space, if a good option was available, then they would switch. And I believe IQO is a great option. And half of the I&I population that is eligible for targeted therapy are not choosing anything because they don't like the current choices, don't like injections and don't like the choices that are available in the oral, right? So I think this could be huge beyond our normal expectations. Time will tell.

Right, right. And I remember when we talked about this like back in February, I think you mentioned something that was interesting. You said that you see clutide besides as the first line for like new patient coming in and a great oral therapy. You see that it could be a switch where -- or maintenance switch, right, where patients on these injectable biologics. -- and at some point and then you can switch as a maintenance. I mean do you see that playing out? I know we were approved and it was kind of the way to go in terms of what given that it's already in the marketplace and now having conversation with J&J and what clutide is doing, do you see that becoming more of a real scenario?

I mean human psychology plays a big role. And I would like to believe that with an injectable, just at a psychological level, you're going to feel like a patient, you're being treated for a disease or something like that, right? And for chronic indications, I'm like, yes, why do we want to feel that way? And oral will give you the feelings of as if you're taking your daily multivitamin or whatever that kind of thing. And the convenience of an oral is just unbeatable. And you're right. I mean, people focus on where is the most efficacy. And I'm like, okay, once the disease is under control, right? And now it has stabilized and it's not going to flare up that kind of thing. The maintenance setting becomes the most critical. And time-wise, I mean, the induction phase is 3 months, 4 months, that kind of thing. The maintenance is the rest of your life, and that is where oral will rule.

Okay. I see. And then -- so I think in order to hit some of those numbers, I mean, a lot has to go right because you're talking about the best drug in potentially in Jing.

The success rate with IL-23 blockers like STELARA, Skyrizi, TREMFYA, it's 100% for psoriasis, psoriatic arthritis, UC and Crohn's.

Right? So there is reason for optimism for ICO.

Right, right. So in the next readout of the PSA, the psoriatic arthritis -- so that disease is becoming more of an IL-17 disease. I think you look at what's going on because they're able to address the joint as well as the skin.

What is your expectation in that -- from that the Phase III readout in terms of addressing both skin and joints?

So with ICO, I mean, J&J has done multiple Phase III studies, right? The pivotal registrational studies and then head-to-head comparison studies with SYK, the TYK2 inhibitor. So they have a wealth of data, and they have done a subpopulation psoriatic arthritis subpopulation patients within those psoriasis studies, and that has been presented before. And that data is very positive. And if you look at the translation success rate, that's 100% for IL-1 blockers from psoriasis to psoriatic arthritis. So we are feeling very optimistic about the outcome, obviously.

Okay. And then from a commercial perspective, like just kind of given that the IL-17s are becoming more of a trend, becoming more popular in the standard of care for psoriatic arthritis. How do you see the success, the commercial success in, say, how you compare that for psoriasis versus psoriatic arthritis or an oral IL-23?

I think if you look at the pie and that kind of thing, it's fair to say that derm conditions like psoriasis, psoriatic arthritis out of it psoriasis is a much bigger piece, psoriatic arthritis is a smaller component. But it kind of is split between IL-23 and IL-17 blockers for now. And then, of course, IL-23s will dominate in IBD and IL-17 will dominate in HS and spondyloarthritis that kind of thing. The nice thing with us is like we are covering both grounds like with PN-881, our oral IL-17, which is fully owned by us. So we are in that space as well.

Okay. Speaking of that, obviously, Icoty as regarded a huge success from the protagonist platform. What do you -- I know -- so Icoti was co-developed by you and J&J. What do you learn from that experience? And specifically, what -- from your platform and from what J&J's contribution was and that you can apply to the IL-17 development?

Yes. I think it's an excellent question. And the way to think about this is like to get to a drug, you have to discover it and you have to develop it, right? There is discovery and there is development. When it comes to discovery, our expertise is in discovering peptides. This is a journey we have started since 2008. So we know that very well. But we'll be the first one to admit that when it comes to discovery, each time it's a new beginning, right? So the expertise, experience and efforts that go in the discovery part of IL-17 are totally different from IL-23. But once you switch to development and as early as preclinical development, definitely in clinical development, that is where you benefit from the experience of ICO, right? So for example, the skin inflammation preclinical model, it's the same model for IL-17 evaluation, IL-17 blocker evaluation that we had for IL-23. And in clinical development, I mean, the inflection point for ICO was the comprehensive Phase II frontier study, right? So -- there are learnings from that. So we benefit from those kind of things. It's like we can apply those learnings to our own PN88 1 at the right time.

Right, right. So for Icotpe, did J&J help part of the discovery as well, did they help define a structure or look at different attributes or certain things that they have to meet? And was there anything that you can take away from that itself and apply to IL-17 like the binding affinity.

Like I said, the 2 targets are so different from each other that you just have to start from ground zero. And getting back to ICO, I mean, clearly, it has been a joint collaborative effort since 2017. and still going very strong. And we started the program in our shop all the way back in 2013. And if you look at -- yes, so it has been a joint effort. But like I said, with IL-17, it's totally a new ball game at the discovery end in development, there are learnings that you can benefit from.

I see. Okay. And let's move to rusfertide because I do have more questions on IL-17 later. So let's...

Move to like the Eid fireside.

You guys have Yes. So you have -- I mean, the PDUFA is coming out in August. You guys are already opted out of commercializing the drug. What is your expectation? I mean you guys have done a lot of work in that space and then that led to the decision to opt out. What is the expectation for you in terms of the potential peak sale based on your own market research?

Yes. I mean.. Now the drug belongs to Takeda, and they will be the main spokespeople for this, and they have provided a conservative estimate of $1 billion to $2 billion in peak sales. So I'm not going to add anything further in terms of the guidance component. I think that's the right range to stare at this particular junction. What we are laser-focused on is the PDUFA date, which is sometime in August. And let's see how things shake out. Hopefully, the drug gets approved and things will be off to a good start.

Fantastic. Okay. Have you done any health economic analysis during your opt-out like due diligence decision? And what -- anything that you learned that you can share?

Yes. I think with regard to the opt out, it was really a decision from a very different angle, so to speak, right? As you know, there was a $400 million opt-out fee. So I was like if I'm staying opted in, then I'm investing that money back into rusertide instead I could have a better use of proceeds in our new R&D pipeline with that. And especially because of the fact that if we opt out, then we get 3x higher milestones, close to $1 billion compared to $300 million plus, but more importantly, 14% to 29% royalty worldwide and the 29% kicks at anything over $1.5 billion. So with that kind of cut on net revenues, you're not leaving that much on the table in comparison to a 50-50 profit loss split. So the economics are very fair to both companies. And that was the main driver.

I see. Okay. And then how do you think it will be used initially in the commercial setting? Is it -- I mean, when you look across -- because you guys study rusfertide on top of thehyloreductive therapy, right? You didn't reduce that. It's really mainly for reducing phlebotomy. So in the beginning, maybe like how do you think this drug will be adapted? Is it going to be more of the like inadequately control patients, how many phlebotomy were they -- is there a threshold that you have to get on? Just maybe think about from that potential payer scenario.

Yes, sure. So what we found is like in PV is a very -- excessive erythrocytosis-driven disease, right? -- per NCCN guidelines, you need to keep your hematocrit below 45%. And in PV patients, you have it over 45%, that kind of thing. So that's the basic definition of the disease. And we were just shocked that there was no erythrocytosis specific agent ever. So -- and the classical treatment is phlebotomy. I think it's totally updated. It's very suboptimal based. I would like to make the case that phabara is such a poor choice that was being made only because no good option was available, right? You are, first of all, with the blood draw, you are making patients very iron deficient that leads to terrible symptoms. And even your iron and blood levels go through a roller coaster ride. So there is so much unknown in the body of a patient. And you can envision worsening of the thrombance and all kind of things. So it's like, okay, people did what they had to do when nothing else was available, but we intend to change that mindset and approach through rusfertide, erythrocytosis specific agent. And in the clinical studies, if you look at the patient population that we were able to garner. It's very simple. It's like, hey, if you are not controlling your hematocrit and you continue to need excessive phlebotomies, then there is an issue over here. You're dealing with a very ineffective therapy. And that is what rusfertide has been able to solve, right? So I think the utility is going to be very broad. It hopefully will essentially eliminate the need for a phlebotomy. And this is the first drug where actually symptom improvements code as an official secondary endpoint in the study, right? That is huge as well. And we believe that is because like phlebotomy, it's -- you're taking iron out of the body. In our case, we are not taking iron out of the body. It just keeps recirculating. We are changing the distribution of the iron in the body.

Right. I see. And then when you think about it from a commercial setting, I mean, how the step edits are being implemented? Would you expect like step edit to hydroxyurea and maybe the interferons? Is there like -- and then have you thought about like -- I know you guys are not involved with the pricing research and decision from that. But I mean, is there like a price point where you feel like that would be the sweet spot where you can perhaps like not have all these stringent step edits to it? And then maybe like -- and then what would that secondary look like?

So there are a couple of questions in there. And one answer I would have is like, hey, EHA is happening this week. We have 4 posters on rusfertide. So if one wants to learn more about rusfertide, pay close attention to those posters. I believe there is a poster on how did the drug perform in the Phase III study, both in the low-risk and the high-risk population because that gives you an idea about like the spectrum of utility or the effectiveness of the drug throughout the whole spectrum of the patients and the treatment paradigm. And in terms of what impact, if any, has on the cytoreductives or the doses and that kind of thing, I think we are sharing some of that as well. if I recall correctly. So I would say, yes, pay close attention to the EHA posters to learn more about rusfertide. And in terms of pricing and all that, that is really up to Takeda. But if you think about it, I mean, this is a rare disease indication. If you look at Jakafi or the latest entrant -- so yes, BD is a rare disease.

I see. Okay. Let's switch gears to IL-17. I know we had touched a little bit on it earlier. Pat, going back to my previous question about Icotide and what you've learned from it. Just looking at IL-17 itself, and you guys have -- obviously have a molecule that you already advanced to clinical development. What is special about this? Because it's not just the oral component because you can have an oral may not work that well. Is there anything unique about this besides being an oral peptide that you believe that you have confidence based on -- we saw that for IO or something that you can.

Look, like I said in terms of the learnings from ICO, in discovery, you start from ground zero with each new target. It is in preclinical and clinical development that you can benefit from some of the learnings. But getting back to IL-17 as a target, first, I mean, if you look at the antibodies, they have already established the rules, and it's like the extent of inhibition of the target, that requirement is different for IL-23 blockers versus IL-17 blockers. So that's one difference to keep in mind. The other thing I would add is like with IL-17, with the outstanding performance of BIMZALX, it's pretty clear that you need activity against both A and F isoforms. We believe we are the only or one of the few companies that have been able to kind of have that attribute in an oral peptide. And that is the uniqueness about 881, right? We have both A and F spectrum of activity. And guided by the antibodies, we have a good understanding of what level of target inhibition is needed. So in a way, in Phase I study, the drug exposure levels will allow us to determine if are fulfilling that criteria or not.

Right. And you mentioned BIMseELX, I was also thing there talkimab. Did you run sort of like the side-by-side comparison because other companies do that in the preclinical development where they just kind of run like competing assets out there and see how it performs against different metrics. Have you done that like with BIMseELX or others?

Yes. I mean, preclinically, there is only so much that you can do. And even if you do a lot, it carries very little value, right, at the end of the day. But we have established the preclinical POC in the skin inflammation model in an inequal manner. And typically, it's like, hey, if an antibody is available, so the cross-reactivity component plays a role, right? Sometimes you don't have antibodies that will be cross-reacting, let's say, to the rat model or something like that, in which case, then we cannot use. But if a competitor is available, we would definitely be using it.

I see. So you have done those analysis. We just haven't seen it yet. Okay. Got it. And then -- so since I think you mentioned that when you guys have the data available or when the trial completed, the Phase I trial completed, you will not share the data with the public? Is that still the case? Or are you...

And look, we are not trying to be arrogant or stubborn. It's just that we felt that previously, we were very disclosive of all of our preclinical data and some of the research pointed out to us that we were teaching too much to the competition. So then we are like, okay, we have something that is valuable. So let's be a bit secretive and tightlipped about it. That's how we are looking at it. And again, we are not being arrogant, but it's like -- unlike most biotech companies, and they were in the same shoe a few years ago, but not anymore. It's not as if on the heels of good data, we'll be urging to do an equity financing. In fact, if at all, anything, we are saying we won't have a need for any kind of equity-based financing or money raise in the foreseeable future. So that necessity or need is not there as well. But having said that, what we are guiding towards is like, look, the Phase I, we will see all the data in Q3, and that is the time when we will be ready to share our decision of the next steps with PMDA.

Right. So if the decision is positive then you said you're going to advance to Phase II. Again, we're in the dark. We're not going to see what that data looks like. What can we assume? Should we assume that the data is comparable to BIMseELI for injectable biologics? Or should we assume more like Icotype profile where it may not be as potent as injectable biologic, but it's good enough. Like how should we think about it?

Yes, yes. So there are 3 outcomes: a no-go, in which case, it's like the data we got did not fulfill our requirements or we could be doing a single high-dose proof-of-principle kind of study where it's like, hey, let's -- the data looks good, but let's confirm or we could be going for a full-blown comprehensive Phase II study like the FronNtierR study that was done with ICO, the Frontier Phase II study. in which case, you can make a qualitative assumption that we really like the data that we saw, and we are just going for it. And the science, we also learn a lot by talking to the KOLs and all that. And there is a good understanding of the level of target inhibition that is necessary. And so the drug levels will teach us a lot.

Right. Okay. So basically, pay attention to the Phase II design that will Okay. Got it. And then I think you also mentioned that this is a hot target, and I agree with that. And there's people knocking on your door asking what is this asset. Would you start that partnership exploration before the beginning -- before you kicked off the Phase II? Or like how are you thinking about it? Yes.

There is so much value in engaging with companies early on. That is what we did with rusfertide as well as with our oral IL-23 programs. And so yes, there is no scarcity of interest with IL-17 or other programs in our R&D pipeline. So that's just a healthy dialogue. But at the same time, we are also saying we have all the money that we would ever need to get to clinical POC.

So you wouldn't wave, right? You would...

We are full speed ahead.

Full speed ahead.

Is the most currency, yes.

I see. Okay. Let's spend the last couple of minutes on the obesity program. What is your overall development vision in this given sort of the complexity, the hypercompetitiveness, very fast evolving price eroding nature of the market. I think we see now price down to $149 per month for some of these direct-to-consumer cash pay programs. I mean, what -- why do you think this market is so attractive?

Well, first of all, I mean, this is an opportunity of unprecedented scale in our sector in its entire history. And this is not a one drug fits all or the first or second drug going away with all the winnings and that kind of thing. The market is still evolving. It is expanding. So there is a lot more to do, and everybody is very busy. What we focused on is like, as usual, differentiation, differentiation, differentiation. So the first strike is with an oral triple and ride, the Phase III data is outstanding. So that bodes well. We are the one with an oral GGG, right? And so we look forward to taking it forward in clinical studies. The clinical studies by themselves are going to be -- even the Phase I studies will be very informative because you enroll patients with higher BMI and you start observing weight loss. obesity is a big fill, but also it's a very cost-conscious fill. So the cost of goods and all that is something that you factor in right from the beginning. It's almost like a nonscientific target product profile you have to have if you're going to develop drugs in the obesity space, right? So we are very aware of that. But if you think about it, our deep-rooted expertise in peptides and the way now everybody is interested in peptides. A lot of expertise is building COGS and cost of synthesis. The economy of combined altogether. We are mindful of the cost and we can manage it.

Right, right. Yes. So I mean, speaking of the cost, I mean, these Phase III programs are fairly expensive. You have one.

We definitely partner...

Without diabetes and then there's a lot of outcome study you can also do. I mean, is there a point in time that you would take this asset to and then just either stop there and look for a partner? I mean, obviously, you would be exploring partnership all the way. But if you don't have a partner, you would just kind of stop and shelve it. I mean how -- like how are you thinking about this?

So far, we have not had an issue in the history of the company of not having a potential partner. So hopefully, we'll continue with that statistics. And keep in mind, it's not just about one GGG oral drug. We are creating an entire portfolio, both around incretin and non-incretin kind of approaches as well. So we believe we'll be a very attractive value proposition to multiple pharma companies at the proper stage with a whole basket, whole portfolio of very highly differentiated anti-obesity agents.

And have you already started those conversations? Have you already started some of these partnerships?

That has always been interest from multiple parties... At any given time in all of our assets.

I see. Okay. So we are unfortunately out of time. It's been a very exciting time indeed for Protagonist, and it's been a pleasure hosting you, Ganesh. I'll turn it to you for final remarks.

Super exciting for me as well. Thanks for inviting us. And look, I think we are a company that has a commercial presence. We are very validated. We have a rapidly expanding R&D pipeline that is very seriously derisked in multiple ways, and we have all the cash in the world to fund our programs and assets up to clinical POC. And pending rusfertide approval by the end of the year, I mean, if that happens, then we certainly look forward to rewarding shareholders with some kind of a share buyback program mechanism.

Fantastic. Thank you again.