Protagonist Therapeutics, Inc. (NASDAQ:PTGX) Q4 2018 Earnings Conference Call March 12, 2019 4:30 PM ET Company Participants Rich Allan - IR Dinesh Patel - President and CEO Don Kalkofen - Senior Advisor, Finance and Accounting Richard Shames - CMO David Liu - CSO and Head, Research & Development Conference Call Participants George Farmer - BMO Capital Markets Joseph Schwartz - SVB Leerink Jackson Harvey - Nomura Instinet Timothy Chiang - BTIG Adam Walsh - Stifel Operator Good day and welcome to the Protago ...

Drug Development and Clinical Trials - PTG-200 is a potential first-in-class oral IL-23R antagonist for IBD, with a worldwide collaboration agreement with Janssen for co-development[21]. - The Phase 1 clinical study of PTG-200 was completed in 2018, and Janssen is expected to file an IND for PTG-200 in Crohn's disease in the first half of 2019[21]. - PN-943, a more potent oral α4β7 antagonist, is currently in a Phase 1 clinical trial, with top-line results anticipated in the first half of 2019[22][23]. - A global Phase 2 study of PTG-300 in beta-thalassemia patients was initiated in the first quarter of 2019, focusing on safety, tolerability, and preliminary efficacy[29]. - The Phase 1 study of PTG-300 demonstrated dose-dependent reductions in serum iron, persisting beyond 72 hours at higher doses[27]. - The company plans to initiate an additional Phase 2 study for PTG-300 in a second indication in the second half of 2019[30]. - The development of PN-943 is informed by extensive preclinical studies and pharmacodynamic biomarker assays, leveraging insights from previous studies with PTG-100[35]. - PTG-100 was discontinued in a Phase 2 trial due to an unusually high placebo effect, but subsequent analyses indicated potential clinical efficacy[34]. - PTG-300's Phase 2 study aims to evaluate safety, tolerability, and preliminary efficacy in patients with both non-transfusion dependent and transfusion dependent beta-thalassemia[52]. - The company expects Janssen to file an IND for PTG-200 to support a Phase 2 clinical study in Crohn's disease in the first half of 2019[72]. - Phase 1 clinical trial of PN-943 includes dose escalation from 100 mg to 1,400 mg to assess safety, tolerability, and pharmacodynamics[92]. - The company plans to conduct at least two large-scale, well-controlled clinical trials for each product candidate to demonstrate safety and efficacy[179]. Market Potential and Competition - The ulcerative colitis (UC) market was estimated at approximately $5.4 billion in 2017, projected to reach $6.9 billion by 2025, while the Crohn's disease (CD) market is expected to grow from $9.0 billion to $13.8 billion in the same period[55]. - Greater than 84% of UC product sales are derived from injectable biologic products, highlighting a significant market trend towards biologics[55]. - The company’s PTG-200 is positioned as the only oral IL-23 receptor antagonist, competing against injectable agents expected to be approved by 2028[109]. - The company faces competition in chronic iron overload disorders from products like luspatercept and LJPC-401, both in advanced clinical stages[108]. - The company faces competition from existing therapies and investigational drugs for inflammatory bowel disease (IBD), which may complicate patient recruitment for clinical trials[184]. Financial Overview and Funding - The company has incurred significant operating losses, with a net loss of $38.9 million for the year ended December 31, 2018, and an accumulated deficit of $140.5 million[193]. - The company does not anticipate generating revenue from product sales for the foreseeable future and has no product candidates in registration or pivotal clinical trials[194]. - The company will require substantial additional funding to complete clinical development and commercialize its product candidates, with funding requirements subject to change based on various factors[200]. - If the Janssen License and Collaboration Agreement is terminated, the company may not receive any development fees or milestone payments, significantly impacting its financial condition[197]. - The company has never generated any revenue from product sales and may never be profitable, which could adversely affect the market price of its common stock[194]. - The company had cash, cash equivalents, and available-for-sale securities of $128.9 million as of December 31, 2018, which is expected to fund operations for at least the next 12 months[198]. Regulatory Environment - The FDA regulatory process requires substantial time and financial resources, with potential sanctions for non-compliance during product development and approval[120]. - The FDA aims to review and act on a standard NDA for a new molecular entity within ten months from the filing date, although the typical review period is twelve months[124]. - The FDA may require a risk evaluation and mitigation strategy (REMS) plan to ensure that the benefits of the drug outweigh its risks, which could include various safety measures[126]. - The FDA conducts a preliminary review of all NDAs within the first 60 days after submission to determine completeness before substantive review[127]. - Orphan designation can provide financial incentives such as grant funding, tax advantages, and user-fee waivers for drugs intended to treat rare diseases affecting fewer than 200,000 individuals in the U.S.[133]. - Post-approval, the FDA may impose requirements such as Phase 4 clinical trials to further assess the product's safety and effectiveness[135]. - The FDA strictly regulates marketing and promotion of drugs, allowing promotion only for approved indications[138]. Intellectual Property and Collaboration - The company holds eleven issued patents and numerous patent applications related to its clinical-stage product candidates, with expiration dates ranging from October 2033 to February 2039[111]. - The company is focused on expanding its portfolio of patents and applications to protect its product candidates and related technologies[112]. - The proprietary peptide technology platform has led to several pre-clinical and clinical-stage candidates, optimizing potency, selectivity, and oral stability[93]. - The company relies on contract manufacturing organizations (CMOs) for all product candidates, with plans to establish longer-term contracts as products advance to Phase 3 trials[118]. - The company relies on third-party collaborations, such as the Janssen agreement, which may not be successful and could adversely affect its business prospects[209]. - The company may need to relinquish rights to its product candidates or technologies if it seeks additional funding through collaborations or licensing arrangements[201]. - The company is subject to risks related to disagreements with Janssen, which could delay or preclude the development and commercialization of its product candidates[207]. Operational Challenges - The company is subject to a variety of health care regulations, including HIPAA and anti-kickback statutes, which could impact operations and compliance efforts[150]. - The company is classified as an "emerging growth company," allowing it to benefit from reduced reporting requirements until certain financial thresholds are met[165]. - The company has not yet demonstrated an ability to generate product revenue or overcome risks associated with biopharmaceutical development[169]. - The company must obtain requisite approvals from regulatory authorities in foreign countries before commencing clinical studies or marketing products[155]. - Clinical development is lengthy and expensive, with the potential for failure at any stage, which could adversely affect the company's business and stock price[179]. - The company has experienced a significant setback with the premature discontinuation of the global Phase 2 clinical trial of PTG-100, which negatively impacted its stock price[178]. Safety and Efficacy Concerns - Undesirable side effects from product candidates could delay or prevent regulatory approval, limit commercial opportunities, or result in product liability claims[188]. - The company expects that clinical trials for PTG-200 and PN-943 will need to demonstrate a competitive risk/benefit profile compared to existing injectable antibody drugs to obtain regulatory approval[189]. - All toxicology studies for PN-943 have shown no safety issues, with good tolerability at all dose levels tested[89]. - The company is responsible for ensuring compliance with Good Clinical Practices (GCPs) in clinical trials, and failure to do so may result in unreliable clinical data[217]. - Significant portions of clinical studies for peptide-based product candidates are expected to be conducted outside the U.S., complicating monitoring and compliance efforts[217].