Why Protagonist Therapeutics Shares Are Climbing

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Protagonist Therapeutics Inc. (NASDAQ: PTGX) saw its shares make a solid gain early on Tuesday after the company announced a key worldwide licensing and collaboration agreement with Janssen Biotech, a subsidiary of Johnson & Johnson (NYSE: JNJ). The agreement actually builds on a Johnson & Johnson Innovation — JJDC Inc. Series B venture financing from 2013 in support of the discovery and development of Protagonist’s pipeline of oral peptide therapeutics.

Specifically, these companies will be co-developing and commercializing PTG-200, a first-in-class, oral peptide IL-23 receptor antagonist for all indications including inflammatory bowel disease (IBD). PTG-200 is expected to enter Phase 1 clinical testing in normal healthy volunteers in the second half of 2017.

Under the terms of the agreement, Protagonist will receive an upfront payment of $50 million from Janssen, and also will be eligible to receive up to an additional $940 million in development, regulatory and sales milestones. Keep in mind that prior to this move, Protagonist had a market cap of about $140 million.

The development milestones represent significant payments that Protagonist would receive upon completion of each component of the Phase 2a/2b clinical trial in Crohn’s disease, if Janssen elects to retain its license following each of those events. Janssen will receive exclusive, worldwide rights to develop and commercialize PTG-200, and Protagonist will receive double-digit tiered royalties on net product sales.

Dinesh V. Patel, Ph.D., Protagonist’s president and CEO, commented:

We are very pleased to partner with Janssen, a world-leader in the development of innovative therapies for patients suffering with chronic inflammatory and immunomodulatory diseases. As an oral IL-23 receptor antagonist, PTG-200 nicely complements Janssen’s current IBD portfolio. The funding provided by this transaction enables us to advance our platform and clinical pipeline of innovative peptide drugs, including our lead oral peptide alpha-4-beta-7 integrin antagonist, PTG-100, which is currently in a Phase 2b clinical trial as a potential treatment for ulcerative colitis.

Shares of Protagonist closed Friday at $8.22, with a 52-week range of $8.00 to $26.36. The stock traded up about 43% at $11.75 in early trading indications Tuesday.

Shares of Johnson & Johnson were last seen at $127.00, with a consensus analyst price target of $130.28 and a 52-week range of $109.32 to $129.00.