PTGX - Protagonist Therapeutics: On A Ship That Could Be About To Sail

2023-12-08 01:03:33 ET

Summary

• Protagonist Therapeutics is developing two parallel programs in different disease areas and has recovered in market valuation.
• The company will present important data on hematocrit control and iron deficiency in patients with polycythemia vera at the ASH meeting.
• PTGX is also developing JNJ-2113, an IL-23 receptor blocker, for autoimmune diseases, and has commenced clinical studies for plaque psoriasis and ulcerative colitis.

Topline Summary and Update

Protagonist Therapeutics ( PTGX ) is a biotech company attempting to develop two different parallel programs in very different disease areas. While they've experienced dramatic setbacks in the past, they have largely recovered in overall market valuation as different fears have been laid to rest. Now, they're entering a period of developing critical mass that could end up being the foundation for establishing them as a key player on the commercial biotech stage. Despite the gains they've made over 2023, I continue to maintain a buy rating, as they have much more potential than their $1b market cap would suggest.

Pipeline Overview

Rusfertide

The relatively big news for PTGX is coming up at this year's ASH meeting, where 2-year data on hematocrit control will be presented in an oral presentation . This is an important look at the enduring quality of responses seen if patients continue taking rusfertide, with or without other treatments like hydroxyurea or interferon.

Per the abstract, rusfertide treatment led to continual downward trends in excessive blood counts, most notably red blood cells. Meanwhile, ferritin levels, a signal of healthy iron metabolism, have continued an upward trend through 2 years. There is also a striking interlude from the clinical hold where patients had several cycles of not receiving rusfertide, where they experienced dramatic reversals for the worse in their disease. It really gives a sense of the impact of rusfertide treatment on markers of the disease, and how important it is to continue therapy.

They will also present a poster on the impact of rusfertide on iron deficiency in patients with polycythemia vera. Here they focus more on normalized iron levels, suggesting deeper clinical benefit than just hematocrit control would indicate.

Of course, these data are encouraging, but the lynchpin piece of PTGX's rusfertide story is the ongoing, phase 3 VERIFY study , which has been enrolling patients all year. PTGX has guided that they expect enrollment to be completed in early 2024, with results likely coming later next year or in early 2025.

JNJ-2113

This IL-23 receptor blocker is PTGX's foray into the autoimmune disease space. As you probably know, this molecule is being co-developed with Janssen, a big pharma. After some setbacks that led to the significant undermining of their valuation, PTGX announced promising data for patients with moderate-to-severe plaque psoriasis back in July, easing fears that the Janssen collaboration was in jeopardy.

PTGX has commenced or will commence shortly 3 later-stage clinical studies investigating JNJ-2113. ICONIC-LEAD and ICONIC-TOTAL are placebo-controlled trials enrolling patients with plaque psoriasis. ANTHEM-UC is a phase 2b, randomized trial investigating JNJ-2113 in patients with moderately to severely active ulcerative colitis.

Financial Overview

Per the Q3 2023 quarterly report , PTGX held $325 million in total current assets, including $230.5 million in cash and equivalents and $90.2 million in marketable securities. Their total operating expenses came to $38.3 million, and after interest income, PTGX realized a net loss of $34.1 million.

This cash burn gives them approximately 9-10 quarters of operational runway, which should fund their ongoing development into 2026. They also guided anticipated cash milestones as part of their agreement with Janssen, with the recent announcement of a $50 million milestone being achieved for enrolling the third patient on the ICONIC TOTAL phase 3 study in patients with psoriasis.

Strengths and Risks

In the near term, and in my opinion, PTGX lives and dies through the development of rusfertide and the fundamental improvements patients are seeing in treatment. Shareholders and would-be shareholders are thus in an uneasy holding pattern as the VERIFY trial continues to accrue. Researchers in myeloproliferative neoplasms seem very excited about the potential for rusfertide, some even remarking to me that it seems like a game changer for patients with polycythemia vera.

But there is, of course, a lot of downside risk here, too. Rusfertide could still fail, or the controversy over potential cancer risk could rear its head again, as it's been wont to do several times over the course of the REVIVE study. This clinical hold has been something of a blessing in disguise, forcing researchers to see the effects of discontinuing rusfertide, as well as starting treatment back up again. It was a valuable learning experience. But all of this says that the whole platform has several potential points of failure.

The early success is also drawing competition, with numerous hepcidin mimetic strategies being tested in polycythemia vera. They're a long way off, but if PTGX is unable to capitalize on positive phase 3 results with a quick submission and approval, then it gives others a chance to catch up and capture what used to look like a wide-open field for PTGX. It's theirs to have, but things do go awry in the submission process all the time.

And then there's the rheumatology program. JNJ-2113 is looking more and more like a real player in the plaque psoriasis space, after some previous failures in other drug programs targeting autoimmune disease. We still have a wait, but JNJ-2113 is something I would consider a moderate-risk, potentially high-reward proposition at this time.

Bottom-Line Summary

I've liked PTGX for a long time, and I continue to maintain that PTGX has a lot of upside potential, even if a lot of its success has already been baked into the share price. Looking just in the PV space, you can find other companies like Pharmaessentia valued in the realm of $3 billion with one approval. I don't see this as direct competition, but it gives an idea of how much valuation a single molecule in a rare disease space can give.

This is not an apples to apples comparison, but it does underlie my hypothesis that a $1 billion valuation for PTGX is a far cry from where they might be if they manage to succeed in rusfertide, let alone in their other areas of investigation. For that reason, PTGX remains an easy buy recommendation for me.

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