Now we can start. As I'm walking up, I'll just say I'm Tara Bancroft. I'm one of the senior biotech analysts here at TD Cowen, and I wanna thank you for coming to TD Cowen's 46th Annual Healthcare Conference. Our next session, we have a fireside chat with Protagonist, and it's my pleasure to introduce Dinesh Patel, the CEO of Protagonist. Thank you so much, Dinesh, for being here with us. It's a pleasure to have you. I wanna remind everyone out there, if you have burning questions, please do let me know. We'll make sure you get heard. I guess, Dinesh, maybe we could start first with some high-level thoughts on where Protagonist is today, maybe even hopes for the mid and long term, at a high level.
Tara, first and foremost, thanks for this opportunity. It's a great conference, and it's a pleasure to be part of the conference. As you know, it has been a long journey. We have been doing this since 2008 with a focus on peptide therapeutics, and it's fair to say that, you know, we have seen the whole transition and continuation from being a platform company to creating some discovery programs and the assets moving from preclinical to clinical and finally to commercialization through our partners, J&J and Takeda, with the two mature assets.
We got an opportunity to cover the full spectrum and in the process of doing that, we have, kind of thanks to the wonderful partnerships, created some sort of financial independence, if you will, meaning we can sponsor our future efforts with our own money without diluting our shareholders. We the kind of uniqueness that we have been able to create both with rusfertide and icotrokinra has encouraged us to kind of simply go after repeat performance. It's like, hey, do the same thing, meaning focus on unmet need, but with a heavy emphasis on strong differentiation from anything and everything that is out there. Follow those two rules and apply our expertise, so scale the R&D and make things bigger and better over the course of short term, medium term, long term.
Okay, great. Well, I guess we can dive right in. Maybe we'll start with psoiasis, icotakinra . I know you have this partner with J&J. You have a launch coming up later this year. Maybe you could, you know, start by discussing how that launch is going to play out in your view. I know it's going to be led by J&J. In that, maybe discuss some of the clinical data that you think are going to be most compelling on in terms of the promotion of the product once it's actually on the market.
Iko is a very unique story, right? It's an oral IL-23 blocker and fortunately, IL-23 blockers has an amazingly strong history behind them. That is Stelara, that is Skyrizi, that is Tremfya, and all these assets have succeeded in four indications, psoriasis, psoriatic arthritis, UC, and Crohn's. With Iko, what you have is an oral IL-23. Being, by virtue of being an oral, it's a first-in-class story. It's also an only-in-class story. I think, in the psoriasis space then, as an oral agent that is working through a very proven and a very safe mechanism, right? One of the highlights of IL-23 blockers is safety. In our clinical studies, the results of Iko are described as having placebo-like safety.
I think that's gonna go a long way. Its emphasis is going to continue as the drug moves along. J&J should have the first-mover advantage with an oral IL-23 blocker. There is also scarcity value because this is the only one. We don't see anything of significance in the rear view mirror. They can, practically speaking, dominate the space for a number of years to, in the near and long-term future.
Okay. Maybe we could talk about what domination looks like. you know, we've done a lot of surveys with dermatologists and get various levels of the percentage of patients that it could potentially be used in, but it would be great to get your thoughts on that of, you know, based on the efficacy that you've seen, what kind of checks have you and J&J done to see what portion of the market it's gonna get and, you know, is it gonna, you know, be in an oral segment, switches, replacing injectables in naive patients? How do you envision it?
Or all of the above. You know, I mean, this is a drug where as I said, amazing placebo-like safety. If you look at the efficacy data in psoriasis, it's like, hey, in 16 weeks you are getting almost complete to complete skin clearance in majority of the patients, 70%+ patients, that is gonna go a long way. If you look at our Phase II UC data, 30% clinical remission, I mean, that is something to write home about. Now, getting back to psoriasis, though, J&J did marketing research a couple of years ago that suggests two big opportunities. Taking market share from the current market dominated by injectables and creating new market. What I mean by this is the following.
What their survey suggested was that 75%-90% of the patients who are currently on injectables, they will be willing to switch to an oral if a good option was available. We believe Iko provides that good oral option, right? The desire to switch from injectable to oral is out there, no doubt about it. I mean, look at the oral Wegovy launch. It's the same API as the injectable, but people are flocking in that direction, right? The other is like, what that research suggested was that more than half of the patients, I and I patients that are currently eligible for targeted therapy, they are not opting for anything because they don't like the current choices.
They don't want injections. The choices in orals are JAK inhibitors, S1P modulators, TYK2 inhibitors, that kind of thing. They don't like any of those. If you combine these two components, the market opportunity could be huge, right? Tremfya is moving towards stalbendial plus, Skyrizi is moving towards $20 billion plus. These are injectables. Over here, like I said, it will be grabbing market share, unfortunately, even from, you know, the Skyrizis and Stelarans and Tremfyas of the world and creating a new market share. We'll see what the future holds. Logically, it appears that this should be a huge market f or Iko .
Huge market. Can you give us a ballpark?
J&J has given a ballpark, right? I mean, their largest bucket for things in clinical development are $5 billion+. If you look at the consensus estimate of about 10 to 10+ research analysts that are covering Protagonist, it's around $10 billion-$12 billion. Skyrizis of the world are moving towards $20 billion+. You know, I would leave it up to one's imagination as to what the market would be.
Okay, great. Before we move on to IBD, let's touch on psoriatic arthritis. Can you. You have these Phase III studies. Maybe can you talk about two things? One, what will it be competing most with that sets a benchmark? The second part, what would you have to beat then?
Right. Right. I think, you know, the kind of performance that one saw in psoriasis, if that could be achieved in psoriatic arthritis, then that would be a clean victory in our opinion. Of course, J&J is the ultimate spokesperson over here. Now fortunately, though, this is true 100% for all the three IL-23 blockers, the rate of success or translation from psoriasis to psoriatic arthritis is 100%. There are logical reasons to be optimistic about the outcome over here.
Okay. Can you maybe talk about the size of the market for psoriatic arthritis and what you think Iko could achieve?
It's a bit timid in comparison to, let's say, the IBD or psoriasis markets. You know, if you look at the whole pie, maybe psoriatic arthritis could be around 10%-15% of that whole pie.
Okay, great. Maybe we can move to IBD now. You know, really exciting Phase II data that you guys have seen in UC. I know within that you had a good blend of the biologic experienced and naive patients. What is it that gives you confidence in both of these subsets that it's competitive?
Yeah. I mean, the UC study, as you mentioned, you know, really very good results. 30% clinical remission in UC, that is something to write home about. In hindsight, it's all very reasonable. Keep in mind that with our oral IL-23 blocker, we are targeting the receptor. The reason we chose the receptor is because it is overexpressed in the GI tissue compartment of IBD patients. That was a decision we made all the way back in 2013 when the antibodies, as you know, are targeting the ligand. It seems that that decision might be paying off over here. We got a glimpse of this in preclinical studies as well.
Like the minimal dose required for efficacy in a colitis model was about an order of magnitude lower compared to the minimal efficacy dose required for the skin inflammation model. Maybe with IBD, the best is yet to come. The phase II UC data may just be the glimpse of that in our opinion. If you look at the phase II UC data, just take it at face value. You can compare it to the injectable IL-23 blockers. You can compare it to other injectables. You can compare it to orals. Whatever mechanism you want to go after, the data, you know, it stands very tall and strong. In terms of the biologics, naive versus, you know, experienced patients, as you know, from the phase II data, it was a good mix.
You know, the standard thing, that most prudent companies will do in phase II studies. If you look at, going into phase III, the inclusion, exclusion criteria has essentially remained the same. No changes over there. I think it's gonna cover both, populations, in a balanced way.
Okay, great. In mentioning the best is yet to come, the Phase III, can you discuss, I mean, just dive a little bit deeper into that in terms of the population differences and expectations there.
Yeah. Again, this is a, you know, a scientist talking. It's, like, based on whatever we saw pre-clinically and in Phase II, and the fact that we are targeting the receptor tells us that this could score amazingly well in IBD in general. J&J is certainly moving forward with confidence. They not only moved forward in a Phase III UC study, without testing the drug in a single Crohn's disease patient. They went directly into a Phase III study, right? That speaks volumes. In terms of biologics in IU versus experienced, I mean, it's a well-known fact any drug is gonna work a little bit better in an IU population versus experienced.
There shouldn't be any surprises in terms of the trends or the relative performance of an oral IL-23 versus what might have been seen with the injectables.
Okay, great. We have an IBD panel coming up this afternoon. I encourage you all to come. One of the things that we're gonna be asking the physicians is where exactly do they plan on using it, you know, initially when it is ultimately launched and over time. I was just about to say the answer. You'll have to wait and see. What do you think? You know, basically, like, as front line, second line after biologics, you know.
Yeah.
Third line.
Well, even I should be tempted to attend the afternoon panel, except for that I think the bankers have kept us busy all afternoon with back-to-back meetings, so that will be a little bit of a struggle. I think this could be definitely used all along the spectrum, in our opinion, certainly as an oral agent, as a first-line therapy, acting along a known and proven mechanism is a very attractive value proposition. If you look at the psoriasis data and, you know, the adolescent data has been outstanding, right? Yeah, a first-line therapy and all the way through. Of course, in IBD, as you know, the.
It makes so much sense, combination therapy seems to be the ultimate choice in terms of improving the outcomes in the induction phase of the study, or the induction portion of treatment. Once the disease is under control, then the obligation of the drug is to make sure that it doesn't flare up again, that kind of thing. That is where an oral monotherapy agent like icotrokinra could be a wonderful, convenient, safe choice.
Okay, great. Maybe we can move to rusfertide now. You know, I've always said from the beginning that this one is what I'm most excited about from a Protagonist perspective. Maybe you could just give us a setup, similar question on positioning of rusfertide in the PV market and what types and how many patients it could potentially be used in.
Yeah. I mean, we are super excited about rusfertide. Maybe the street has not caught up with us yet. You know, yesterday we announced we got the priority review. Now it I mean, the third quarter of this year could potentially be a wonderful quarter for Protagonist with hopefully two drugs getting approval, right? Time will tell. With rusfertide, I mean, really, this is the only erythrocytosis-specific agent for polycythemia vera treatment. This is a disease dominated by uncontrolled erythrocytosis or excessive erythrocytosis, right? That occurrence, I mean, is there throughout the treatment paradigm. It is not restricted to whether it's the early stage or the late stage or the in-between kind of stage of the disease.
PV, you know, the prevalence is there for a good 20 years on an average. What we found is that this uncontrolled hematocrit problem, it persists throughout. Answering the question on where is the utility of rusfertide, it is throughout the treatment paradigm, wherever there is uncontrolled hematocrit.
Okay, great. Takeda, your partner in this, they've said repeatedly that they believe this to be a $1 billion-$2 billion peak opportunity. kind of two parts to this. One, do you believe that that is conservative? Because I definitely do.
And I'm.
Would.
Would I dare to disagree with you in this setting?
Okay, we know the answer to that now. Really, what needs to go right to achieve the high end of that expectation or higher?
Yeah. I mean, clearly it's a new mechanism. It's a first-in-class thing. We are so glad to have Takeda as our partner. I mean, they are the experts in the heme space, and it was a conscious choice that both parties made to enter into a partnership, right? Yeah, increasing the awareness around the existence of the disease, the unattended problem of excessive, you know, hematocrit levels with the current treatment paradigms, that sort of thing. All of those things, one will have to pay attention to that. At the end of the day, I mean, PV is one of those rare diseases where by definition it's a rare disease, less than 200,000 patients.
In the U.S. alone, the prevalence number is around 150,000-160,000 patients. In Europe, equal number of patients. In the U.S., about 80,000-100,000 patients are actually on treatment. Same sort of situation in Europe. Takeda is a global company, with some significant presence in Asia, as you can imagine. This could be truly a global drug. Of course, it's pharma's job to be conservative in their estimates.
Okay. In, in these estimates and how conservative it is, in what way does that play into your rationale for which way you're leaning on the opt decision towards opt-in or opt-out? 'Cause I know you've communicated several times that you're leaning towards opt-out. Yeah, the rationale behind that, how the peak opportunity plays into that, and whatever you decide, 'cause now the clock is starting.
Yes. Yes.
T owards that decision.
Yeah.
How that could play out in terms of the economics that you receive.
For us, it became an easy decision largely based on the economics of the deal and irrespective of the market size.
We have shared these details now, we can speak a bit more freely. Up to the first one and a half billion in net sales per year, our aggregate royalty cut under opt-out will be 21%. Anything beyond that is 29%. By opting out, one of the concerns could have been like, what if this becomes a huge drug, like a $5 billion drug or something like that, right? Beyond that. Did we leave something at the table? Ultimately, our conclusion was like 29% of net revenue income translates to definitely something higher than 29% of net profits. Overall, we felt we'll be leaving very little at the table by opting out. In a way, we are enabling both companies to do what they are best at doing.
Takeda knows the heme space. Look at the amazing commercialization they did with Entyvio. right? The integrin blocker in the IBD space. We had made note of that very early on as well when we were partnering with them. It's like believing in the expert system. We will continue to innovate and, you know, dazzle everybody with new assets and let Takeda do the heavy lifting on the commercial side.
Okay, great. Looking forward to that. Maybe you can also touch on the potential for future competition. There's several assets that are in the clinic now, you know, Tempress, more hepcidin, and your own oral hepcidin. I mean, how do you think about the longer term dynamics playing out as others enter the market including yourself?
Yeah. Almost everything is, you know, pretty distant in the rear view mirror. Rusfertide is ahead of everything and anything in comparison to the other things that are out there. By having, you know, other companies or other mechanisms or, again, centrally speaking, focusing on the hepcidin mechanism, that's a great validation for rusfertide in itself, right? Our own oral hepcidin, it's almost like having a second kid when the first one went to college. It's okay that there is enough of a difference between the two, and there should be opportunity for both of them. They are very non-overlapping in my opinion, as far as the times component is concerned.
Okay. Before I get into specific questions on the rest of the pipeline, just because we've now talked about the oral hepcidin. I'm curious, you know, how the partnered programs and your early stage pipeline fit into strategic priorities and potential opportunities, and how you're thinking about having these conversations about potential partnerships or something else.
Yeah. You know, it's. Let me answer the question at several levels. I am a big believer of partnerships. Now, having said that, if you look at our history, our first partnership was in 2017, when we had a preclinical asset and a program around IL-23. The second partnership was in 2024 with Takeda on rusfertide when we were already in a phase III study. All along, we had that mindset that, hey, for smaller indications, we can do it alone. With Takeda, we were able to strike a deal with amazing economics and with a strong partner, we fell for it.
In general, now that cash is not an issue, we can fund almost everything that we would want to fund. Definitely for smaller indications, we can do it alone. For bigger indications, I think a pharma partner is a must. The money part is the least important component, although we'll bargain like hell, it's their expertise, right? Their ability to scale, their experience and expertise that comes when you partner with them.
Now, we can structure the deals in such a way that we retain larger economics, where we may decide to share the co-development cost with them, that sort of thing. A pharma partnership, it's great validation. It makes the drug bigger than it will ever be in your own hands as a biotech company. It's the. It's a win-win to partner, under the right circumstances, with the right partner, with the right economics.
Okay, great. Did you have a question?
Yeah. It's such an awesome story you created at the company. Congratulations.
Thank you.
Your division of focusing on innovation in the company and allowing stronger partners to market seems also really well thought out. How are you going to maintain your independence in the current environment? Because your success is has drawn a lot of attention.
Independence in what sense, if I may ask?
An independently, publicly traded, excellent biotech company.
Oh, you know, rumors, speculations, it is what it is. I mean, ultimately, your independence is created by your conviction and shareholders, right? At any given time, there is a evaluation component that comes into play. Right now, I mean, sure, we are a $5.5 billion company. Haven't looked at the stock price today. I know everything is in red. We still believe we are far away from the valuation that we deserve. I mean, let's use Iko as an example. We talked $10 billion-$20 billion is the average analyst estimate. If you just take that at face value, that in itself will give us $1 billion in revenue each per year, right?
Then just back of the envelope math would be, like, if you use even a 5x multiple to that as the value of Iko, that's like $5 billion, and is the lowest multiple we have ever heard. That in itself describes the whole value of Protagonist as of today. We understand Iko is overshadowing everything right now, but we have rusfertide, we have amazing cash flow. The fact that we don't have to raise new money and dilute our shareholders. If at all anything, we are thinking of, you know, returning some value back to shareholders through share buybacks, right? Those kind of things. The amazing R&D pipeline. It's like we are not just coming out of the blue and doing something we haven't done before. We have already developed an oral IL-23.
Oral IL-17 is almost like a repeat performance. Obesity is the space dominated by injectable peptides, we are putting our expertise to use over there by creating oral peptides, that sort of thing. Going into new targets, new disease areas, but with the very familiar research and innovation component.
Great question. Thank you.
Awesome. Okay. We are very limited on time. I wanna ask something a little deeper about the very end of what you just said there, you know, expanding into different targets and programs and indications. What about beyond peptides? In what way are you planning to make that expansion, if at all, and what does that look like?
It's a fantastic question. And our oral hepcidin is a great example of that. I think as you go deeper into a disease area, you go beyond what is your research capability, right? You go into what is important from a life cycle management. With the rusfertide as a weekly injectable in this heme space, we've said an oral hepcidin functional mimetic would be a great thing. Over there, we work both with peptides and small molecules. We did head-to-head comparisons. At the end of the day, the oral gave us better data, so I mean, small molecule gave us a better data, so it's a small molecule rather than a peptide. We recently hired a chemist. Now, we hired him because I have known him for a long time.
He worked with me in the 1990s at Affymax in the Bay Area, but he was the head of discovery at Dicerna. We know a thing or two about oligos as well. It's going to be one of those things. It's like, sure, we have expertise in peptides, but we are not going to let our expertise create our own limitation. And the mantra for us is address unmet need and focus on differentiation, whether it comes from peptides, most of the time it will, in our case, but it could also come from small molecules or oligos.
Okay. I mean, I guess with that, we're out of time, but this was a really great discussion. I really thank you, Dinesh, and I thank everyone for listening.
Thank you so much. Thanks to the audience as well.