Protagonist Therapeutics, Inc. (PTGX) 2018 Q4 法說會逐字稿

Good day, and welcome to the Protagonist Therapeutics Year-end 2018 Update Call. Please note that today's conference is being recorded. (Operator Instructions) At this time, I would like to introduce Rich Allan of Protagonist Therapeutics Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to the Protagonist year-end 2018 update call. Please note that a webcast and a replay of today's call will be available at the Investors section of our website at protagonist-inc.com.

Before we begin, I would like to remind you that today's discussion will include statements about the company's future expectations, plans and prospects that constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factor section of our annual report on Form 10-K, which is on file with the SEC.

While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. With that, I will now turn the call over to Dinesh Patel, President and CEO.

Thanks, Rich. Good afternoon, everyone, and thank you for joining us today. The past year was highly eventful for Protagonist, and we look forward to 2019 as a year of solid execution as we move ahead with clinical development of 3 very diverse drug candidates, all generated from our proprietary peptide technology platform.

We begin the year with adequate financial resources to support progression of these 3 candidates to important inflection points from now through the end of 2020.

On today's call, I would like to review the status of our development candidates and highlight 6 key milestones we anticipate for 2019. Joining me today is David Liu, our CSO and Head of R&D; Rich Shames, our Chief Medical Officer; and Suneel Gupta, our Executive VP of Clinical Operations and Pharmacology. They will all be available to address questions you may have during the Q&A session. Following my overview, Don Kalkofen, our Senior Adviser for Finance and Accounting, will review our financial results, and then we will open up the call to questions.

So to begin, I would like to emphasize that Protagonist is exclusively focused on peptide therapeutics. Over the past 10 plus years, we have created and optimized the peptide engineering technology platform that enables us to discover new chemical entities with highly distinctive attributes. Specifically, we are able to develop peptide therapeutics designed to address specific medical challenges that cannot be adequately addressed with classical small molecule or large antibody approaches. We are therefore, able to pursue those projects and opportunities in medicine that most other companies are unable to undertake. Thus, there is a significant barrier-to-entry for others towards accessing the kind of assets we are discovering and developing, as they do not possess the privileged know-how or the type of proprietary technology platform that we have.

Through the use of our platform, we have built a pipeline of 3 distinct therapeutic candidates that are now in different stages of development. Our most advanced asset is PTG-300, a synthetic peptide mimetic of the natural hormone, hepcidin. PTG-300 is engineered to have better drug like properties for use as a therapeutic agent. It is engineered to be more potent, more stable, less complex in structure and easier to synthesize in comparison to the natural hormone, hepcidin.

Hepcidin is a master regulator of iron homeostasis in our body. And therefore, the mimetic peptide PTG-300 has the potential to address unmet medical needs in multiple blood disorder based indications, many of which fall in the category of rare diseases. Thereby, providing an opportunity for orphan drug development for those specific indications.

Our 2 other assets, PTG-200 and PN-943, are gut-restricted, orally stable peptides that are being developed as potential oral therapy for inflammatory bowel diseases or IBD. In IBD, we are targeting those biological pathways that have already been validated by approved and marketed injectable antibody drugs. What sets us apart here from these injectable antibodies is our oral gut restricted approach to targeting these validated pathways.

Our first oral gut restricted IBD asset is PTG-200, and it targets the IL-23 receptor. The clinical validation for this approach comes from Janssen's approved injectable antibody therapeutic Stelara that targets the IL-12/23 pathway, and that is approved for Crohn's disease. You can also appreciate then that it is not a random coincidence that we have a partnership with Janssen around PTG-200 as it offers the potential to synergize and extend the Stelara franchise. PTG-200 is ready for a Phase II study in Crohn's patients, and we expect this study to be initiated by Janssen in the first half of 2019.

Our second asset in the IBD space is the oral gut restricted candidate PN-943, which targets alpha-4-beta-7 integrin, the same biological target through which Takeda's injectable antibody IBD drug, ENTYVIO, works. PN-943 is currently in Phase I studies in healthy volunteers. While the injectable antibodies like Stelara and ENTYVIO are important and available treatment options, there is a strong shift in the potential treatment paradigm towards oral targeted therapy in IBD as witnessed by multiple companies working on oral JAK inhibitors and S1P modulators. Oral therapeutic options, like PTG-200 and PN-943, that work through mechanisms already proven and validated by injectable antibodies could be a potentially safe and a welcome needle-free option for IBD patients.

So until now, I have talked about why and how our 3 clinical assets are unique, well differentiated, address unmet needs and in general, present a barrier to direct competition. Now let us talk about the specifics that is what is the current status of these 3 assets and what milestones and announcements can be expected in 2019 and beyond.

As mentioned before, we are fortunate to be in a strong position to move forward with adequate financial resources to support all of these programs through the end of 2020.

First, let's review the status of hepcidin mimetic PTG-300. With 300, we have previously demonstrated pharmacodynamic readout phase clinical proof-of-concept in Phase I studies, achieving dose related reductions in serum iron levels in healthy volunteers. It should be noted that in this Phase I study, PTG-300 was shown to have a significantly longer half-life of 21 to 42 hours in comparison to hepcidin, which is expected to have a half-life of 5 to 8 hours. Being a mimetic of the natural hormone that serves as a master regulator of iron homeostasis, 300 has potential utility in multiple blood disorders, such as beta-thalassemia, myelodysplastic syndrome, polycythemia vera and hereditary hemochromatosis. Out of this, the fourth indication we have chosen to pursue is beta-thalassemia, a rare disease characterized by deficient or defective production of red blood cells and excessive iron overload in the body. Currently, there is no approved medication for these patients, and they are often dependent on blood transfusion with many patients requiring lifelong transfusions to survive.

PTG-300 has received orphan drug designation from the European Medicines Agency and U.S. Food and Drug Administration as well as fast-track designation from the U.S. FDA. We recently initiated dosing of PTG-300 in the TRANSCEND study, a global Phase II study in beta-thalassemia patients. This is a single arm, open label study in 84 patients designed to evaluate safety, clinical proof-of-concept and dose optimization in both transfusion-dependent as well as non-transfusion-dependent beta-thalassemia patients. We're satisfied with the rate of patient enrollment to date, and we expect to report initial results from the TRANSCEND study in the second half of the year.

Beyond beta-thalassemia, we see strong potential for PTG-300 in other indications and expect to initiate a second indication in the second half of the year.

So that was the overview on our subcutaneous hepcidin mimetic 300 for blood disorders and diseases. Now let us switch gears and update you on our 2 oral gut-restricted IBD assets.

First, let's address the oral IL-23 receptor antagonist, PTG-200. As a refresher, we entered into partnership with Janssen for PTG-200 around mid-2017 when it was a preclinical asset. Since then, all preclinical studies as well as Phase I studies have been completed by Protagonist and the drug has been found to be well-tolerated with no serious adverse events or dose-limiting toxicities observed in healthy volunteers, and it is now ready for evaluation in patients. Both Protagonist and the Janssen teams are working together toward the objective of filing the U.S. IND in the first half of 2019 to begin a global Phase II study in patients with Crohn's disease. Our partnership remains strong, and we are privileged to be working with a partner like Janssen with such deep-rooted expertise and experience in the field of IBD and with a strong commitment towards oral gut-restricted approach as a future therapeutic option for IBD patients.

Now let's address our fully owned oral gut-restricted alpha-4-beta-7 integrin antagonist, PN-943, that we are currently developing on our own at this stage. 943 is currently in a Phase I study in healthy volunteers, wherein besides establishing safety and PK, we will also benefit tremendously from measuring pharmacodynamics or PD effects of blood receptor occupancy or RO. You may recall that PN-943 builds upon an earlier program with a similar oral gut-restricted alpha-4-beta-7 integrin antagonist, PTG-100, wherein we had established a good correlation between Phase I pharmacodynamic data and the Phase II histological and clinical remission rates in ulcerative colitis patients. And these findings are presented as an oral talk at the UEGW conference in October of 2018.

PN-943 is an analog that has shown superiority to 100 by all measures of in vitro and in vivo preclinical studies that we have investigated to date. We are glad to share that the preclinical research findings that describe the properties of PN-943 have been accepted for an oral presentation for Sunday, May 2019, at the Digestive Diseases Week conference in San Diego. PN-943 provides a notable example of the versatility of the Protagonist peptide engineering platform, which allows to create backup candidates with improved properties. And in this case, it has allowed us to switch conveniently from 100 to 943 without significantly expanding the overall development timelines. We are expecting initial clinical safety PK and PD results from the Phase I study of 943 in healthy volunteers in the first half of 2019. The Phase I results will inform the design of a Phase II study of 943 in patients with ulcerative colitis with an expected U.S. IND filing in late 2019.

So in summary, 2019 will be an eventful year with 6 specific milestones. With hepcidin mimetic PTG-300, the 3 specifics events are, first, dosing of the first patient -- beta-thalassemia patient, which we already accomplished in early January; two, preliminary results from the TRANSCEND study in the second half of the year; and three, initiating another indication besides beta-thalassemia in the second half of the year. Our fourth milestone of the year is with regard to the oral IL-23 receptor antagonist, PTG-200, wherein we expect Janssen to file a U.S. IND in the first half of 2019. And the last 2 out of the 6 milestones pertain to our oral alpha-4-beta-7 integrin antagonist, PN-943, wherein we look forward to, one, finishing the Phase I study and sharing the PD data in the first half of the year, which will then guide the Phase II study designed in UC patient. And then last, an IND filing by year-end for this Phase II study.

With that overview now, I will now turn the call over to Don to review our fourth quarter and year-end financial results. Don?

Thank you, Dinesh. The press release we issued today provides details of our fourth quarter and full year results. Rather than repeat all those details here, my comments will center on a few highlights.

Protagonist ended 2018 with $128.9 million in cash and cash equivalents and investments. As Dinesh mentioned earlier, we expect to have sufficient financial resources to fund our operations through the end of 2020. Protagonist reported a net loss of $13.9 million or a negative $0.57 per share and $38.9 million or a negative $1.74 per share, respectively, for the fourth quarter and full year of 2018 as compared to a net loss of $3.1 million or a negative $0.15 per share and $37 million or a negative $2.09 per share, respectively, for the same year in 2017.

License and collaboration revenue was $2.4 million and $30.9 million, respectively, for the fourth quarter and full year of 2018 as compared to $11.3 million and $20.1 million, respectively, for the same period in 2017. The decrease in license and collaboration revenue for the fourth quarter of 2018 as compared to the prior year period was primarily related to us nearing the end of the revenue recognition phase of the $50 million upfront payment received from Janssen in 2017, coupled with the additional estimated time remaining to complete our increased compound supply services under the Janssen license and collaboration agreement. Protagonist estimates these services will be completed during the first half of 2019 compared to the previous estimate at the end of 2018.

R&D expenses were $14.2 million and $59.5 million, respectively, for the fourth quarter and full year of 2018 as compared to $11.7 million and $46.2 million, respectively, for the same periods of 2017. These increases in R&D expenses were primarily due to the cost related to contract manufacturing and the preparation for and conduct of clinical trials for our product candidates.

With that, we'll now open up the call for questions. Operator?

(Operator Instructions) And our first question comes from the line of George Farmer with BMO Capital Markets.

Can you provide a little bit more detail on what we can expect to see from the PTG-300 study ongoing now, specifically with regards to any differences between the transfusion and nontransfusing dependent patients? And also, can you help us understand a little bit about why this drug should have activity in this particular indication when really, the underlying defect doesn't have to do with iron overload per se?

Sure. So George, thanks for the question. And you have 2 questions embedded in there. So in terms of the detail of the trial design and things of that nature, I will divert the question to our CMO, Rich Shames. And then David Liu, our CSO, can give a brief rationale for why we would expect activity in beta-thal with this drug.

Thank you, Dinesh, and thank you, George, for the question. So let me just briefly overview the trial design. As you may recall, it's a single arm, open label, multiple ascending dose study in approximately 84 patients with both nontransfusion or transfusion-dependent beta-thalassemia. And overall, we're intending to evaluate safety and preliminary efficacy in this trial. Now the nontransfusion-dependent subtype patients, there's a 12-week duration of treatment, and the primary readout is a change in hemoglobin at 12 weeks with a minimum response criteria of at least an increase of a gram in hemoglobin from baseline. For the transfusion-dependent subtypes, it's a 16-week treatment period, with the primary endpoint focused on a change in transfusion burden and a minimal response defined as at least a 20% decrease from baseline in the red blood cell units. Now as the trial progresses through its multiple ascending dose stages, we expect to report preliminary efficacy and safety in the second half of this year. So essentially, this would focus on the top line readouts to evaluate proof-of-concept in this trial. And as I mentioned earlier, for the nontransfusion and transfusion-dependent patients, there would be separate efficacy readouts.

Okay. And you think the data will be sufficiently mature in both cohorts by the time you're ready for data presentation?

So we intend to accumulate the data. It's an open label study, so we will be evaluating it as it comes in. And as soon as we have sufficient data to be able to evaluate proof-of-concept in either/or both of those subtypes, we would be prepared to report out that preliminary data.

Which you're still on track for the end of this year, right?

Yes. At this point, we're on track for...

Right. I'm just thinking about the math. If you just -- if you enrolled first patient at the beginning of this year, that's a lot of patients to squeeze in between now and the end of the year with a 12-week and a 16-week endpoint. I just wanted to clarify that.

Yes. So just to be clear, we are not talking about data from all the patients we expect to enroll. We are just talking about initial readout.

Okay. Okay, great. And then again, just kind of mechanistically, why should a drug like this work to increase hemoglobin levels again if the underlying pathology is -- does not involve iron homeostasis in particular?

George, this is David Liu. So the basic excitement around PTG-300 [is a] hepcidin mimetic is that we can actually, in a very unique mechanism, directly reduce iron toxicity that leads to premature oxidative damage to the late stage red blood cell precursors. So regardless of the etiology of the disease, there's an imbalance that -- so we would like to certainly reduce and reach [to beat] that iron so that the red blood cell precursors are allowed to incorporate that iron as much as possible appropriately into hemoglobin, in this case alpha-globin chains, to allow for oxygen carrying and address the anemia.

And George, what I would add is like for whatever it is worth, in a preclinical setting, we saw a very nice translation of the serum iron reduction PD effect that we saw in healthy animals to a very good effect on the disease animals, the beta-thalassemia mice model in terms of the hemoglobin levels and overall clinical efficacy. Now of course, it's a preclinical study. But over there -- but it's a very validated model. Other developers of beta-thalassemia drugs have used the same model. And so that is a good degree of conviction that we have about the translation of the effects of a mimetic in beta-thalassemia patients based on that.

And our next question comes from the line of Joseph Schwartz with SVB Leerink.

My first question is also on PTG-300 and how do you expect the improvements that you're hoping to see in serum iron to translate into tissue iron? And is the latter an end point that you think regulators will be looking for you to demonstrate an improvement on given how rapidly this program is advancing? How are you thinking about the regulatory pathway for 300?

Yes. So Joe, thanks for the question. Let me first address the translational aspect, and that is we know from our preclinical studies that there is this relationship of serum, hematological and iron parameters where they lead to an eventual outcome of hemoglobin increases, which for the nontransfusion-dependent patients would be the primary endpoint. And we know that, that increase in hemoglobin is -- can be done without sustained decreases of iron. So we have that kind of translational information which we can now extract from the Phase I iron regulation that we saw with PTG-300 to some prediction of the appropriate dose for patients and so forth.

And also, Joe -- yes, this is Rich Shames. Let me just speak to your question about the regulatory path. First, let me emphasize that once we obtain adequate safety data as well as identify the proper dose regimen in this Phase II study, we believe that we can go to the FDA and propose a pivotal study. As you recall, we do have fast-track designation, so we clearly have good access to the agency. I think as far as the end points, our primary focus is really on the underlying ineffective erythropoiesis and anemia. So the endpoints that we're primarily measuring in the Phase II study would also likely be the pivotal endpoints -- that is, increasing hemoglobin in NTD patients and a reduction in transfusion burden in [the TD] patients. We, of course, will be measuring tissue iron effects in the liver in particular, and these are probably going to take a little bit longer term to assess and would likely be more secondary assessments in terms of the regulatory status.

That's helpful. And then on PN-943, is there anything that we should look for that's new data from the preclinical data that will be at DDW? And then how will you be using the Phase I data to inform the design of your Phase II for PN-943?

Sure. So obviously, we'll let you wait until May to get the exact details of what we present. But there will be more color and more details about our overall preclinical data package that we have with PN-943. So that's point number 1. With regard to the Phase I results of 943, as I mentioned before, we have a previous drug 100, we were able to build a very nice correlation between the PD effects that we saw in healthy volunteers to the PD effects that we saw in patients to ultimately, the histological and clinical remissions that we saw in UC patients. So until now, we have done comparison of PN-943 with 100 only in a preclinical setting. But this Phase I study, PD data will be the first point of direct comparison between the 2 drugs in a human setting. And then the idea would be to use that information, along with the information we already have with 100, to then structure a very informative next study in UC patients with 943.

And our next question comes from line of Christopher Marai with Nomura.

This is Jackson Harvey on for Christopher Marai. I have a follow-up question to the previous one, and that is regards to how PN-943 Phase I data will inform the Phase II trial. I'm just curious if the -- if you expect that the primary endpoint relative to PTG-100 would be different for PN-943?

I think at this stage, we just have to wait it out and see what the Phase I results look like because that is what ultimately informs us what kind of a guided Phase II design we create with PN-943 going forward into UC patients.

And I would just add, Jackson, that we expect to do a proof-of-concept study in UC patients. Obviously, we'll announce further details later this year. And in particular, the data coming out of that Phase I study with regard to the pharmacodynamic markers will be particularly important in terms of understanding the proper dose regimen that we may use.

And then I'll volunteer to add that we want to bring everybody's attention the fact that PN-943 is an oral GI-restricted alpha-4-beta-7 integrin specific blocker, one of its kind. And the latest disclosure from Takeda where they did a side-by-side comparison of their drug, Vedolizumab, with Humira, has once again established how alpha-4-beta-7 integrin is not only a safer, but a superior and more effective mechanism, at least in this case comparison to TNF blockers. So clearly, this is a mechanism that is going to prevail, prosper and broaden, and we are privileged to be the only one that has a drug that will go in to Phase II studies by the end of the year.

Great. And my last question is on PTG-200. I guess, what's the gating factor in getting this IND submitted? Is it -- is Janssen, I guess, chiefly responsible for the trial design at this point?

Yes. No, it's a fair point. And so the way the original agreement was structured, for all practical purposes, it's a true, true collaboration with both teams working together in all aspects of clinical development. But according to the contract, Phase I was Protagonist's responsibility, which has been completed. And technically, for Phase II, it is Janssen that will be the front face and that will file the U.S. IND. But I would also add that once again, the 2 teams are working very closely together. And by the way, it is an 80-20 cost split in a Phase II study. As to like why this hasn't happened yet and all that kind of stuff, it's -- all we can say is that we are very privileged to be working with Janssen. These are the frontiers in the field of IBD. This is also a company that is not shy of terminating biotech collaborations if it doesn't make sense to them. But we are offering them an extension to their Stelara franchise. We are very happy with the data that we have with our drug and the kind of relationship that we have with Janssen. So we feel confident in maintaining our statement that we expect Janssen to file the U.S. IND in the first half of the year.

And our next question comes from the line of Tim Chiang with BTIG.

One additional question on PTG-300. I know you are [base lining] those cohorts. I think you also had planned 2 additional cohorts in younger patients. Do you think you'll be able to show top line data from those cohorts as well by year-end?

Yes, this is Rich. Thanks, Tim, for the question. So what you're referring to is the 2 cohorts of the adolescent subjects, which are aged 12 to 18 years. These are obviously not rate limiting to the main data that's going to available in the adult patients. I think these patients are certainly more challenging to recruit. And so I'm not sure that it would fall into that -- the same bucket in terms of timing. But we'll be able to announce preliminary results from the populations that we have at that point.

So it's not rate limiting at this stage [broadly.]

Exactly.

And maybe just one finance question. Is there any sort of target that you think you'll have for operating expenses in 2019? And then will it be somewhat similar to this past year or will be something higher?

Sorry, can you repeat your question?

Yes, just operating expense targets for this year, R&D spending. And obviously, you guys were around about $31 million -- no, actually, just what sort of R&D burn do you think you'll have in 2019?

Yes. Well, as you can imagine, we don't fine tune that kind of breakdown. The guidance we are providing is -- and Don, you can feel free to chime in, we ended the year with roughly $129 million, and we have cash runways through the end of 2020 under the conservative assumption that we will be going full speed ahead with all our plans and every single study that we initiated is going to blossom further.

And our next question comes from the line of Adam Walsh with Stifel.

I have just a couple. On PTG-300, for the second indication that you're thinking about, I'm just curious, is there something that you think about in terms of the mechanism of action that might make the drug more applicable to a certain indication than others? Or is this something you expect to learn from the beta-thal study and that, that will help guide you to additional indications? That's the first question. Then second one on 943. I don't mean to kind of beat a dead horse here, but the Phase II design that I understand will be informed by the Phase I. But based on the PTG-100 experience, is there -- are there things that you know a priori will change in the 943 Phase II study? And if so, since we already kind of understand the learnings from the other study, can you help us -- guide us there?

Sure. So with regard to PTG-300, clearly, there are multiple indications we can choose from. And if you reflect upon how we came to beta-thal as a choice of first indication, then it provided us with a nice conversion of mechanistic rationale as well as the unmet need and the commercial opportunity. So those are the kind of factors that we take into consideration with regard to our choices, and that is how the second indication choice will be dictated. But you asked a very good question. And that the short answer is that no, they wouldn't necessarily be waiting for seeing results from the beta-thal indication before initiating the second indication because some of these diseases, they kind of are related to different aspects of the mechanism of hepcidin, right? So for example, beta-thal and PCV are 2 very good contrasting mechanistic rationales. So all in all, I think it's a good balance of where the unmet need is, what is the probability of success and what is the commercial opportunity appeal. That's what will dictate our second choice. Having said all that, it's -- over a period of time, we will slowly and steadily want to take on a further new indication as well with PTG-200. So our journey is not going to just stop with the first or second indication. So that's PTG-300. And maybe for 943 and the lessons learned from PTG-100, Rich, I can have you elaborate a little bit?

Sure, sure. So Adam, I think it's fair to say there are certainly some learnings from the PTG-100 study and its design and experience. But I think most important is that the PTG-1 Phase II study really did validate the concept of a gut-restricted oral alpha-4-beta-7 candidate drug. The drug was clearly safe and well-tolerated, and we did demonstrate preliminary efficacy. So I think that's very important in terms of derisking the program moving forward. And as I mentioned earlier, the Phase II study will really be -- or subsequent study will really be a proof-of-concept study focused on UC patients, the precise design around that. Again, we'll provide additional details down the line with that.

I'm showing no further questions at this time. I would like to turn the call back over to Dinesh Patel, President and CEO, for closing remarks.

Thanks. So we expect 2019 to be a very productive year for us with significant milestones for each of our 3 clinical programs and potential expansion for PTG-300 clinical development into an additional indication. We would like to thank the Protagonist shareholders who have supported us over the past years. We would also like to thank the patients who participate in our studies and the very, very hard-working and dedicated Protagonist employees, who are responsible for the achievements we have made so far. And finally, I would like to thank you all for joining us today for this update.

Ladies and gentlemen, this concludes the Protagonist update call. You may all disconnect.