Protagonist Therapeutics Sees Steady If Bumpy Progress

It's amazing how easily we can cast ourselves in the role of hero.”― Erica Bauermeister, The Scent Keeper.

We last looked at Protagonist Therapeutics, Inc. (NASDAQ:PTGX) in the late summer of 2021 after the shares had sold off some. We concluded that article with the following summary:

I have opened a small initial position in PTGX via some covered call orders this week on back of the share's huge decline. It seems likely that more clarity comes out around the Hold in the coming months and the company has plenty of cash on hand to ride out what hopefully is a temporary setback. Given the results the company reported in late spring for PV, one would think eventually this issue gets resolved at some point. One article earlier this year on Seeking Alpha, pegged Protagonist's opportunity in this space at over $2 billion."

That turned out to be a profitable trade and a position I have maintained. Now shareholders have the opposite question as the shares have more than doubled here in 2023. Can the rally continue? An analysis follows below.

Company Overview:

Protagonist Therapeutics is based just outside of San Francisco, in Newark, CA. The company is focused on developing drug candidates off its proprietary peptide technology platform. The stock currently trades near $25.00 a share and sports an approximate market capitalization of just north of $1.4 billion.

The company has two main assets in development. The first is Rusfertide which was formerly known as PTG-300. This is a wholly own compound and a once weekly injected hepcidin mimetic. The other is PN-235, which is partnered with Janssen, a division of Johnson & Johnson (JNJ). It is an oral IL-23r antagonist targeting several indications, the most advanced of which is plaque psoriasis.

Rusfertide is targeting Polycythemia Vera or PV in several studies and is being evaluated as a potential alternative to Phlebotomy in a roughly $2 billion annual market. This is a hormone therapy designed to maintain iron homeostasis. PV is a rare, chronic blood cancer in which a person’s body makes too many red blood cells, white blood cells, and platelets.

Mid-stage trial results have been encouraging, and rusfertide has both Fast Track and Orphan Drug status for this indication. The compound is currently being evaluated in a Phase 3 randomized trial called VERIFY.

Full enrollment should happen by the fourth quarter at the latest. Results of the study should be out in first quarter of next year. The goal of this study is to compare rusfertide versus placebo to reduce phlebotomy burden in patients with PV. Success should result in a NDA filing. The current treatment options for this disease leave much to be desired.

PN-235 has a potentially lucrative partnership with Janssen, from which it has already seen over $100 million in milestone payouts (see below).

Janssen is looking at this development as a way to extend their lucrative Stelara and Tremfya franchises.

Phase 2 results came out in March, targeting plaque psoriasis. They were quite positive and should lead to a Phase 3 registrational study in plaque psoriasis. Initiation of said trial would trigger an additional $50 million milestone payout to Protagonist Pharmaceuticals.

Analyst Commentary & Balance Sheet:

Since first quarter results came out earlier this month, three analyst firms including Piper Sandler and BTIG have reiterated Buy ratings on the stock. Price targets proffered range from $28 to $41 a share.

There has been no insider activity in the stock since the end of 2021. Approximately one out of every dozen shares outstanding is currently held short. The company ended the first quarter with approximately $230 million in cash and marketable securities on it balance sheet. Management then raised approximately $100 million via a secondary offering in early April, which extended the company's "cash runway" until the end of FY2025. Protagonist Therapeutics has no long-term debt.

Verdict:

Rusfertide continues to progress in development and has significant commercial promise. Rusfertide could potentially eliminate the need for phlebotomy in low and high-risk patients. It also can be self-administered instead of the procedure taking place at a medical facility.

Rusfertide's development journey to treat PV has its bumps in the road, including a clinical hold which was quickly resolved and revocation of Breakthrough Therapy designation. However, signs now look positive in regards to potential commercialization. Full enrollment in the REVIVE study should be achieved in the second half of this year, with data out in the first quarter of 2024. An NDA filing should hopefully follow shortly thereafter. The initiation of a registrational Phase 3 trial for plaque psoriasis within the Janssen partnership is also on the horizon and will trigger a $50 million payout that will help on the funding front.

I am not adding to my small position in Protagonist Therapeutics, Inc. given the huge rally in the stock so far this year. I might do so, if the stock dropped back below $20 a share in the next overall market pullback. Until then, I will keep my "watch item" position in the shares pending further developments.

Sometimes you’re the protagonist and someone else is the hero.”― A.D. Posey.

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