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

Back-to-school Conference. My name is Geoff Meacham. I'm the senior biopharma analyst, and my team is with me here, too. We're thrilled today to have Protagonist and CEO, Dinesh Patel. Dinesh, thanks so much for joining us.

It's a real pleasure. I appreciate the invitation.

Yes. As you move into the double digits on market cap, we're thrilled to get you for this more SMID bio type of conference. How does that feel? Getting the credit that you guys have, I think, long deserved for developing ICO, I mean, everything, right?

Yes. No. I mean, as you know, it has been a long steady journey. So it's not like things have happened overnight. So we have been able to process it. We are appreciative of what we have been able to achieve, right? I mean, statistically speaking, I'm like, yes, we got 2 drug approvals this year and a total of 30-plus approvals have happened this year. So the statistics are great. But then in the same press, I'll be like, oh, by the way, it took more than a decade with each drug. So that's the reality. But I'm glad we had a great outcome. And for both the drugs, I mean, it was backed up by amazingly strong Phase III data, right? And with MIMRYLO, the recent approval of the Hepcidin Mimetics such a clean and broad label. So we are very thrilled. Things are going exactly what we anticipated, the way we anticipated, but we are not taking anything for granted. It is biotech. We will always be on our [indiscernible].

Yes. Yes. Well, let's talk a little bit about that on the strategy. So you have 2 partnered commercial assets. The model has always been to develop things in-house and then at some point, maybe in mid-stage, make a call to a partner or not. How do you think about the next, call it, 5-plus years? Do you think there could be a Protagonist sales and marketing team on a wholly owned asset? Are you thinking about that strategy differently now that you have 2 sort of locked in are going to contribute to the P&L for the foreseeable future?

Yes. Definitely, there are some implications and differences from how we were acting and behaving, let's say, a decade ago or even 5 years ago, right? I mean with the 2 drug approvals and partnered with J&J and Takeda, we believe we are going to have a healthy revenue stream and that should be more than enough not to support our own internal R&D pipeline, but also in a mindful way, return some value to shareholders. So as you know, yesterday, after market close, we announced a $300 million share repurchase program. So it's going to be a balancing act, but R&D will always be our top priority. We don't want to be labeled as a royalty play because truly genuinely, we are, first and foremost, an R&D center. We would like to be recognized as a company with special expertise and achievements in the field of peptide therapeutics. And in terms of the strategy, I guess the simplest change is that we can afford to continue to develop assets on our own a little bit longer than what we might have done previously, let's say, with ICOTYDE, which was partnered with J&J all the way back in 2017 when it was a preclinical asset. Now we may want to hold on at least up to clinical proof of concept, right? So that way, the terms could be better, and it would be a more fair win-win deal for both a pharma partner as well as ourselves. We are big believers of pharma partnerships. We believe in the expert system. They are great at doing certain things. We are good at certain things. So let the experts do what they are good at doing. Having said that, for some of the rare disease indication, niche markets, we wouldn't mind taking those all the way through the finish line. In fact, if you think about it with Rusfertide, the hepcidin mimetic, we were already in Phase III when we did the partnership with Takeda, right? So over there, the original intent was the simple play, big indications, partner. Small indications develop on your own. But the terms were amazingly good for both parties. So we took that deal. And I'm glad we did it because now it's like giving away the first 2, not actually giving it away, but it's like in return, creating almost a financial independence.

Yes. Yes. And just along that same train of thought, when you think about the line -- the indications to go after, so you mentioned rare could be something that you keep in-house. Talk a little bit about the process at Protagonist to look at new therapeutic areas you're involved in, you have the GGG and oral version of that. Are there disease areas that you think are particularly attractive that maybe could be unmet that change its priority in your pipeline?

So Geoff, I mean, you can correct me if I'm getting carried away. But the way we are looking at things is like peptide therapeutics, peptides are the nice in between space between oral small molecules and injectable antibodies. And we have figured out how to create oral peptides. So now we can have the best of both worlds. In an oral peptide therapeutic, you have the oral component of oral small molecules and you have the amazing potency and safety of -- and specificity of the injectable antibodies. So I think this is like a totally unique stuff. And our ambitious agenda is to truly revolutionize the entire landscape of all chronic medication. Chronic, meaning patients are unfortunately going to be taking that medication for most or rest of their life. And over there, if you think about it, currently, the field is dominated by injectable antibody drugs, and they have been doing a wonderful job, especially if you look at I&I. So as a first bold step, it's like let's take on all the important I&I targets and offer oral peptide medicine. So ICOTYDE is just the beginning, if you will, right? We are already working on an oral IL-17. We love the Phase 1 data that we got, amazing exposure levels through an oral. The biology is already validated. So we are going forward in a full-fledged comprehensive Phase 2b study in Psoriasis with that asset, PN-881. But can you imagine it's like, I mean, hey, if there are injectable IL-23 blockers like Skyrizi and Tremfya, maybe ICOTYDE is an amazingly great alternative, which captures the potency specificity of the biologics, but has the convenience of once-daily oral pill. Now do the same thing in IL-17, where maybe Bimzelx is the gold standard, right? Do the same thing in IL-4, where you have Dupi currently dominating the market. So I think in a way, it's about repeat performance, applying the skills set and the knowledge and the know-how that we have acquired over the last 2 decades. We started working on peptides when we had to go out of our way to explain to people what peptides are. Now of course, people are explaining to us what peptides are because everybody knows about peptides, right? So things have changed. But I think our expertise is very unique. So that's just in the I&I space. In the obesity space, I mean, if you think about it, the market has been dominated by the 2 injectable peptides, right, Wegovy, Zepbound. And now -- but look at the response of the oral Wegovy, -- it's just amazing, and that yet once again demonstrates the preference for an oral. An oral pill doesn't make you feel like you are treating a disease, an injection would. And that psychology is also huge, right? So in the obesity space, we will acknowledge we are late entrants, but then our focus is going to be towards very strong undeniable differentiation. So the first thing we are attempting in a big way is the oral GGG. I mean, retatrutide Phase 3, the injectable from Eli Lilly has great data. They can truly claim that is the drug that offers maximal weight loss. Just imagine, if our oral idea works, then the impact it could have, right? So that's the mindset that we basically have. And whether it's in the field of metabolic diseases, whether it's in the I&I space or in the rare disease indication. In the rare disease indications, we have been successful with MIMRYLO. It's the first of its kind, right? It has got on a broad and clean label. And we are developing an oral functional mimetic as well now.

Yes. And just along those lines, I would say, for an oral in the obesity space. I mean, Lilly has even said the killer app that kind of keeps them up at night is a 20% weight loss oral, right? No pressure there.

With retatrutide, they were able to achieve 28.5% weight loss, if I can recall the numbers correctly from their clinical data. So I think if an oral triple works the way we envision it to work, 20% should not be an issue.

Yes. Well, before we go into there, let's talk a little bit about ICOTYDE versus your oral IL-17. Is there a natural tension between you guys and J&J on the development here? I mean, I think...

I mean, is there a sibling rivalry? Kind of yes and no because I mean, if you think about it, right, I mean, -- and in a way, the injectables are teaching us everything, so to speak. That's like a preview of what's to come in the oral arena as well, right? So I think the IL-23 blockers will have their uniqueness in the IBD space, right? And the IL-17 blockers are going to have their uniqueness in the more arthritic kind of conditions, whether it's HS or spondyloarthritis or psoriatic arthritis. And in psoriasis , there will be a good overlap. But if you look at the current split between IL-23, IL-17, I think both have almost an equal level of opportunity in the psoriasis space. So I think Yes, it's a healthy tension. Now of course, ICOTYDE is partnered away with J&J. They are doing a fantastic job. We couldn't have asked or hoped for a better partner. I -- but it's already approved and off to a great start. With the oral IL-17, we are now moving into Phase 2. So it's still early days, comparatively speaking, and it's fully owned by us.

Yes. We'll talk a little bit about ICOTYDE in terms of your interaction with J&J. Did they -- you obviously they're not going to inform you about where they want to go in terms of development just because of your in-house IL-17. But in terms of the technology, the peptide technology, could you take oral IL-17 into areas that maybe are not as well appreciated by investors and maybe some of the more orphan indications across the I&I landscape where ICOTYDE may not go there?

Right. Yes. So I think with the IL-17, the first order of business for us to -- let's make sure that the oral delivery is working. Now we have derisked things as much as possible, right? It's a very proven pathway. Based on the performance of antibodies, we had our own math of like, hey, we should be above the IC90, EC90 levels of the drug. And when administered orally, we overachieved that particular bar or hurdle. And that is why we are going with a full-fledged Phase 2b comprehensive study. Having said that, the PK differences are there between orals and injectables, right? -- with the injectable, right, from day 1, you have a maximal concentration in the bloodstream and then it decays over a period of weeks. Whereas with an oral, it's like every day, there is a resetting, that kind of thing. And one could keep on debating and hypothesizing, but at the end of the day, let's roll the dice in an indication where we can very clearly measure whether the concept is working or not. The concept has worked preclinically. We got beautiful data in the skin or inflammation model. But now let's see what happens in psoriasis, right? So that's the first indication we are chasing. And as soon as we get an understanding of how well it is working, right? And with psoriasis, the response rates are fortunately very high. So even looking at the blinded data, you can probably come to some very good conclusions. And if we feel good about what we are seeing, then that is where we will be sort of like off to the races, meaning chasing different indications, things like that. And that is where the KOL community will also be very helpful in guiding us.

Dinesh, a following up on that. I mean, you mentioned you going with for psoriasis first for IL-17 and then maybe HS down the line. Maybe talk about your thinking behind it, why psoriasis first and then HS because there is a lot of unmet need in HS first. So why not go after the indication which has the highest unmet need and psoriasis, it seems like you have oral IL-23 is a little bit crowded there. So yes, just your thoughts on that.

The response rates are very high. So there is no confusion or ambiguity around the data, right? So we opted for simplicity and easy interpretation of the data in the first instance because as I said, this is a very novel concept, an oral IL-17. So that was the reason we chose psoriasis. The other important reason is like if you look at all the IL-17 blockers, historically, a psoriasis study will be done first, it gives guidance towards what is the dosing regimen that should be used for a Phase 3 psoriasis study, but also for HS. And generally, you are going to need higher doses in HS in comparison to psoriasis. So I think it's also more about like what doses to go with in HS and other indications. You will get that guidance as well from the psoriasis study. So I think there are multiple purposes there. But you're absolutely right. There is more unmet need in HS, and that is where the true and big win would be. But psoriasis also, it's like -- it's dominated both by IL-17 and IL-23 blockers.

And maybe talk about the efficacy profile or kind of a safety profile you need to see with IL-17 versus like injectables like to kind of show that your drug could be like competitive versus the oral or the injectable kind of IL-17 drugs?

Yes, it's interesting like -- and we have been through this journey through ICOTYDE, right? And I think at the end of the day, at a practical level, let's say, even if you may be a little bit off the efficacy of the most potent antibody, at a practical level, it becomes a nonissue because if I were to phrase one of the KOLs, they are like, okay, I'm going to tell a patient, hey, here is an oral option. It works through the same mechanism as the antibody. So it's very safe and all that. It might take you a few weeks longer to get to your remission or skin clearance. What do you think the patient is going to choose, right? So it's one of those things. So we are not hung up on like we have to exactly match the efficacy of the antibody. It's a good thing to have, but it's not a must-have. We could be a little bit off, but just the advantages of the oral overall. And like I said, at a practical level, what it means is like, okay, it may take a few weeks longer, but that is totally overshadowed by the convenience of an oral pill.

Definitely. And then you presented recently like oral data for IL-17, like some IC90 and other levels. Maybe talk about your experience like in terms of ICOTYDE, like the preclinical data you saw and how it kind of translated into clinical kind of data. Is there any read-through from this like oral IL-17 data to what you could see in clinic? I know like there's a lot of variations in what you can see in clinic, but anything that you can kind of like see translatability from that mechanism to this one?

Yes. So there are some rough approximations and assumptions around like what is the exposure level that is needed to combat a particular target. So with IL-23 blockers, our conclusion was like -- and this takes into consideration all the complexities of each particular pathway and what has been truly observed with the antibodies, right? So over there, I think as long as you are above IC50, IC75, the chances of things working out were pretty good. And that is exactly what has happened with HEICO. Now with the IL-17, I would argue the bar is a little bit higher. And that is why we went for IC90 rather than IC50 or 75, right? Now the great news for us is like it doesn't even matter. If you look at the graph that we have shared, it's like we may be technically above IC99 or something like that. So it becomes a nonissue in that regard.

Just with respect to -- I could tie in maybe your J&J relationship. Are you happy with maybe the investments commercially to maximize the value of it? Maybe give us some perspective on your dialogue with them on -- maybe on more on the commercial side.

Yes, we couldn't have asked for a better partner or a better scenario in terms of their efforts towards the commercial launch. I mean watching the DCR commercial for the first time at the semifinals at FIFA. It's a unique ad. It's unbelievable, right? But even the general sentiment and the level of enthusiasm shared by the executive team of J&J whether it is during their earnings call or at conferences, it's amazing, right, for them to be saying this could be the best ever commercial launch exceeding all their expectations in recent history, things like that in their earnings call, which is roughly like 4 months after the approval, kind of sharing numbers like 18,000-plus prescriptions, 11,000-plus patients, 6,000-plus prescribers, and we went back and took the liberty of studying those kind of numbers for other big launches. And these are amazingly high numbers. So I would say, yes. And in a way that once again, kind of convinces us that pharma partnerships should be an integral component of Protagonist strategy at all times going forward because the things they do, the scale at which they can do, a biotech, at least in my opinion, just cannot achieve that.

And then I promise this wasn't a setup, but when you think about IL-17 and the development, how do you think about if you were to partner down the road, like the economics there, knowing that you could go after maybe different segments across I&I that maybe ICOTYDE doesn't touch or maybe you could have a differentiated profile on top of ICOTYDE or relative to ICOTYDE?