Protagonist Therapeutics, Inc. Common Stock (PTGX) Q1 2019 Earnings Call Transcript

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Protagonist Therapeutics, Inc. Common Stock (PTGX -1.70%)
Q1 2019 Earnings Call
Jun 10, 2019, 12:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Protagonist Therapeutics corporate update call. Please note that today's conference is being recorded.  At this time, I would like to introduce Don Kalkofen, Protagonist Therapeutics senior advisor of finance. Please go ahead.

Don Kalkofen -- Senior Adviser of Finance

Thank you, operator. Good morning, everyone, and welcome to our call today. Please note that a replay of today's call will be available at the Investors section of our website at  protagonist-inc.com. Before we begin, I'd 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 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 factors sections of our quarterly report on Form 10-Q, which we filed 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.

Dinesh Patel -- President and Chief Executive Officer

Thanks, Don. Good morning, everyone. We are super excited to be here today and be able to share some wonderful and positive news about Protagonist.  This morning, we announced the expansion of our long-standing collaboration with Janssen Biotech on our PTG-200 program.

Details of the terms of the new agreement can be found in the news release and SEC filings. We also announced financial results for the first quarter, which reaffirms guidance on our various clinical development programs.  On the call today, we would like to review highlights of the new agreement we have put in place with our current partner, Janssen, which now includes updated terms and research support for additional second-generation oral IL-23 receptor antagonist. After this review, we'll be happy to address any questions about the amended agreement.

Joining me today are David Liu, our chief scientific officer and head of R&D Carter King, our vice president of business development; and Don Kalkofen, senior advisor of finance. And they will also be available to address questions during the Q&A session.  To begin, I would like to express our sincere thanks to our partner, Janssen, for the continuation of a productive working relationship over the last 18 months in supporting the PTG-200 program. The importance of needle-free oral therapies for the treatment of inflammatory bowel diseases is widely recognized.

Oral therapeutic options like PTG-200 that work locally in the GI through well-ligated mechanism could be a potentially safe, convenient and welcome option for many IBD patients. By combining our respective areas of expertise, we expect to bring new and better therapeutic options to patients as efficiently as possible.  The new agreement not only ensures that PTG-200 will move forward in a Phase 2 study in Crohn's Disease, as expected under the original collaboration, but it also reflects an expansion of our existing partnership with Janssen into new research efforts, utilizing our technology platform, aided -- aimed at discovering and developing second-generation oral gut-restricted IL-23 receptor antagonist. This in a way also highlights the strong conviction and long-term commitment to this oral gut-restricted targeted therapy approach for IBD and enables us to have not one but multiple opportunities, not just PTG-200 but also second-generation IL-23 receptor antagonists to eventually be able to succeed in the ultimate objective of bringing new oral and innovative medicines to patients with IBD.

Janssen already has a strong presence in IBD with blockbuster drugs such as Stelara , and we look forward to working with Janssen in expanding and extending their IBD franchise and playing the significant role in the gradual paradigm shift in IBD treatment from injectable medicine to needle-free oral therapies.  There are several differences in the new agreement from the original 2017 collaboration agreement with Janssen, and we would like to briefly review these differences and clarify their effects on the Protagonist development pipeline. First, the original agreement has specified that Protagonist will receive a $25 million milestone payment on filing of the U.S. IND by Janssen to support a Phase 2 study in Crohn's disease.

Under the terms of the amended and expanded agreement, this 25 million milestone payment has now been triggered by signing of this amended agreement. Just to clarify, we are still maintaining our original guidance and expect an IND filing by Janssen for Phase 2 development of PTG-200 in Crohn's patients in the second quarter of this year. Basically, there is no change in our commitment and belief for 200. We are pleased to have received this 25 million payment and the commitment that it represents to the future of our productive collaboration.

Second, the new agreement expands the scope of the original collaboration with Janssen established in 2017 and centered around PTG-200 by supporting new efforts toward second-generation IL-23 receptor antagonists. This expansion conveys a strong conviction by both parties in the GI-restricted approach for IBD and in Protagonist peptide technology platform. The addition of second-generation compounds to the collaboration provides not one but multiple shots on goal, including but not limited to PTG-200. Increasing the number of ways we can succeed in the clinic helps us with the ultimate objective of bringing the best medicine possible for IBD by intervention of the IL-23 pathway.

 Third and final, the terms of the new agreement reflects the previous terms and have been updated to include additional potential payment related to research, clinical development, regulatory and sales-based milestones. Also, as part of the new research collaboration, Janssen will pay certain cost and milestones related to advancing preclinical candidates through Phase 1 studies, including funding of a certain number of full-time equivalent employees at Protagonist for a set period of time. So to summarize, these new terms reflect a long-term deep commitment from both parties toward this collaboration. The terms also reflect the success of our past work together and the importance of the shared expertise of both companies working jointly in the discovery and development of IL-23 antagonist.

Additional details regarding the collaboration are available in the Form 8-K filed today with the SEC. Before I conclude, I would like to highlight three other topics. First, besides PTG-200, our two other clinical assets, PN-943 and PTG-300, remain on track with projected clinical development time lines. We are comfortable in maintaining our guidance on all major objectives we have provided for 2019.

Specifically, preliminary results from the Phase 2 Transcend study of PTG-300 for the treatment of beta-thalassemia are expected in the second half of 2019 and with the announcement of a second clinical indication for PTG-300. Also, initial results from the Phase 1 study of PN-943 are expected in the second quarter of 2019. Second, Protagonist is successfully expanding and strengthening its senior management and clinical development teams as it prepares itself for a transition from early stage to mid- to late stage clinical development and explore the maximum potential of its multiple and diverse assets for multiple indications. These management changes, including the appointment of Samuel Saks as our new chief medical officer and Suneel Gupta as our new chief development officer, have been captured in our earnings release this morning.

 So finally, we would like to emphasize that our financial position will remain strong and we are well financed to support all of our programs through the end of 2020. Additional details on our financial position and development program guidance can be found in the first-quarter 2019 news release issued this morning. With that, we will now open the call for questions. Operator?

Questions & Answers:

Operator

[Operator instructions] Our first question comes from George Farmer of BMO Capital Markets. Your line is open.

George Farmer -- BMO Capital Markets -- Analyst

Hi, good morning. Thanks for taking my question. Congratulations on your progress with Janssen. Just I'd like to get a little bit more details on the terms of this agreement.

So we should not expect an additional 25 million on IND filing. Is that correct?

Dinesh Patel -- President and Chief Executive Officer

That is correct, George. So the -- it's like the previous 25 million milestone, which was contingent upon Phase 2 U.S. IND filing of PTG-200, that has been removed and instead substituted with an earlier fetch, if you will, meaning we signed the amended agreement and the 25 million milestone payment is triggered immediately.

George Farmer -- BMO Capital Markets -- Analyst

OK. And these other potential IL-23 receptor antagonists, can you tell us anything more about them? What's stage are they at right now? Are there any leads identified that can move into the clinic?

Dinesh Patel -- President and Chief Executive Officer

I think the overarching message over here is that both parties have a higher level of conviction in this approach of IL-23 receptor antagonist as oral therapies for IBD, and we are just dialing up our efforts and commitments in this category. As you well know, the history of medicine dictates that this journey doesn't begin or end with only one drug in the development pipeline, and we just don't want to limit ourselves to taking one shot on the goal. So that is all there is to it than let's say -- basically, a continuum with higher conviction and commitment.

George Farmer -- BMO Capital Markets -- Analyst

Great. Thanks very much, Dinesh. And congratulations.

Dinesh Patel -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Joseph Schwartz of SVB Leerink. Your line is open.

Joseph Schwartz -- SVB Leerink -- Analyst

Great. Thanks very much, and congrats on the progress in the expansion of the relationship. I was wondering if you could give us a sense of what Janssen needs to see from PTG-200 in the clinic in order to pursue it versus shift to a backup compound.

Dinesh Patel -- President and Chief Executive Officer

Yeah. I guess only time will tell as to what one needs to see in 200 versus the backup or other developments in the IBD space. Right now, the approach and attitude is let's take 200 forward as quickly as we can and let's also kind of equip ourselves with various -- several other alternatives over the coming period of time.

Joseph Schwartz -- SVB Leerink -- Analyst

OK. And to what extent was this decision driven by observations of how PN-943 compares to PTG-100?

Dinesh Patel -- President and Chief Executive Officer

Yeah. It's a very interesting question. And the simple answer is these decisions are independent of observations with PTG-100 or PN-943, our oral alpha 4 beta 7 integrin blockers. Because -- as I have mentioned before, the mechanisms are different entirely and, therefore, in a way, independent of each other, except for there is a common theme, which is that both are GI-restricted approaches.

But as you well know, we don't need to convince Janssen about a GI-restricted approach for IBD. They have super level of conviction over there as is self-evident by their commitment and collaborations with other companies in the IBD space taking a similar GI-restricted approach.

Joseph Schwartz -- SVB Leerink -- Analyst

OK. Great. That makes sense. And thanks for taking my questions.

Dinesh Patel -- President and Chief Executive Officer

Absolutely  

Operator

Our next question comes from Christopher Marai of Nomura. Your line is open.

Christopher Marai -- Nomura Instinet -- Analyst

Good morning, and congratulations on the progress. I was just wondering if you could remind us about the initial collaboration. Did Janssen have any rights to any next-gen analogs that you were thinking to develop? And then, secondarily, it looks like you're now developing this product in Crohn's. So could you further elaborate perhaps on whether or not you would look to bring in a second-gen compound to Crohn's and a separate one into UC? And then maybe the potential for –

Dinesh Patel -- President and Chief Executive Officer

Sure. Yes, these are important questions. So the initial collaboration was largely centered around PTG-200, but it also included all the IP centered around PTG-200. And second, in terms of Crohn's versus UC, Janssen has the rights for all kinds of potential applications that can come from this oral IL-23 receptor antagonist.

Having said that, the -- when we talk about second-generation compounds over here, this is going to be a fresh, new effort where both research employees from both groups will be joining hands and committing themselves toward finding the best possible medicine or a number of medicines for -- by intervention of this particular pathway.

Christopher Marai -- Nomura Instinet -- Analyst

OK. Great. Then with respect to the right to co-detail 200 or any -- and any second-generation compound in the U.S. in Crohn's, could you maybe elaborate on that? That looks like it's a new component to –

Dinesh Patel -- President and Chief Executive Officer

Yeah. So further details are set in our 8-K. But the short answer is that the co-detailing rights have been preserved and extended for second-generation compounds as well.

Christopher Marai -- Nomura Instinet -- Analyst

And then is there an opt-in payment to facilitate a co-detail? And then what would be the economics on a co-detail? Is that also -- is there different on –

Dinesh Patel -- President and Chief Executive Officer

The co-detailing terms are the same as before. Nothing has changed in terms of the co-detailing.

Christopher Marai -- Nomura Instinet -- Analyst

OK. Thank you very much. Congratulations.

Dinesh Patel -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Tim Chiang of BTIG. Your line is open.

Tim Chiang -- BTIG -- Analyst

Congrats, Dinesh, on PTG-300, this new deal with Janssen. Just with the new deal, is Janssen still going to be paying for or funding the bulk of the Phase 2 costs once the IND is filed? Just wanted to make sure that was still the case.

Dinesh Patel -- President and Chief Executive Officer

Yeah. So Tim, as you recall, it was basically an 80-20 cost split for Phase 2, Janssen paying 80%, Protagonist paying 20%. And Phase 3 is 100% on Janssen. So that has been preserved and extended to second-generation compounds as well.

Tim Chiang -- BTIG -- Analyst

Also -- so just on the timing, once the IND is filed sometime in the second quarter, how quickly do you expect the Phase 2a study to be initiated? Will it most likely be in the second half of the year?

Dinesh Patel -- President and Chief Executive Officer

Yeah. I mean, over here, I'll make the normal assumption, which is that unless you hear something back from the FDA, the trial should start 30 days after the U.S. IND filing. Both parties are extremely interested in taking 200 forward as quickly as they can.

Tim Chiang -- BTIG -- Analyst

OK. Great. And then just a follow-up on PTG-300, your hepcidin mimetic. Could you just remind me -- obviously, you're going to show some interim results.

It looks like you had dosed about, what, 84 patients in the Phase 2 study. Could you just talk a little bit about just the background on what you expect to show or at least the endpoints you're looking for in this study?

Dinesh Patel -- President and Chief Executive Officer

Yeah. I think with PTG-300, we will have other opportunities to share some more details about it. But in broad strokes, I mean, that's another golden nugget where one drug in itself gives you multiple shots on goal. We are starting with beta-thal.

We have already promised The Street that we will kick off a second indication. And down the road, in theory, there are opportunities for more than two indications to pursue. And as you must have noted, we are expanding and strengthening our senior management team by pulling in Sam Saks as our chief medical officer and Suneel Gupta as our chief development officer. So that should give you a clue that we are really getting ready for the big things that we need to execute upon in clinical development down the road.

Tim Chiang -- BTIG -- Analyst

OK, great. Thanks.

Operator

Our next question comes from Adam Walsh with Stifel. Your line is open.

Adam Walsh -- Stifel Financial Corp. -- Analyst

Good morning, guys. Just on -- again, on the 300, for that 84 patient study, will that data be supportive or sufficient to move into pivotal studies? Or can you just kind of walk us through what you're thinking -- I know it's early days, but walk us through what you're thinking for the development path forward for that in 300.

Dinesh Patel -- President and Chief Executive Officer

No, that's fair, Adam, and it's nice to reconnect. Finally, we have the Janssen deal that we have promised to you. I just wanted to mention that because I know you have been waiting for it.  But let's get back to 300.

So look, I mean, we have orphan drug status on this drug both from the U.S. and European authorities. We also have fast-track designation in the U.S. for this drug.

And so yes, it is fair to assume that once we achieve our objective from the current study, which is to basically get a signal of efficacy and get a clinical proof of concept with this 84-patient study, once we get that conviction, then it will not be unreasonable to use our privilege of fast-track designation for this drug and have a productive dialogue with the FDA about the next step, which under one scenario could be that, yes, we are moving into a pivotal trial and once again, the strengthening of the clinical development team is a reflection of that mindset that we have at this stage.

Adam Walsh -- Stifel Financial Corp. -- Analyst

Great. Thanks again, guys, and congratulations.

Operator

There are no further questions. I'd like to turn the call back over to Dinesh Patel for any closing remarks.

Dinesh Patel -- President and Chief Executive Officer

So to conclude, with this expanded commitment between Protagonist and Janssen, we see multiple opportunities for success in the ultimate objective of bringing new medicines to patients with IBD. We look forward to working with Janssen in expanding and extending their IBD franchise and playing a significant role in the gradual paradigm shift in IBD treatment from injectable to needle-free oral therapies.  Thank you all for joining us today for this update.

Operator

[Operator signoff]

Duration: 24 minutes

Call participants:

Don Kalkofen -- Senior Adviser of Finance

Dinesh Patel -- President and Chief Executive Officer

George Farmer -- BMO Capital Markets -- Analyst

Joseph Schwartz -- SVB Leerink -- Analyst

Christopher Marai -- Nomura Instinet -- Analyst

Tim Chiang -- BTIG -- Analyst

Adam Walsh -- Stifel Financial Corp. -- Analyst

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