Protagonist Therapeutics’ (PTGX) Bulls Are Running For The Hills, But Upside Remains

Though Tim Chiang meaningfully scales back his target expectations, he still sees 60% potential upside for PTGX shares thanks to its tech platform.

Protagonist Therapeutics Inc (NASDAQ:PTGX) has a disappointed bull left in its camp after the aftermath of a discontinued Phase 2b PROPEL trial in moderate to severe ulcerative colitis (UC) sent the Street in a bearish selling frenzy yesterday. Shares plummeted 57% amid the failure of the drug maker’s investigational oral GI-restricted alpha-4-beta-7 integrin antagonist peptide PTG-100.

BTIG analyst Tim Chiang acknowledges this sharp “setback” for Protagonist, and subsequently strikes the drug from his model.

However, Chiang stands by the company’s prospects with its technology platform, including PTG-200, an IL-23R antagonist designed to treat moderate-to-severe Crohn’s disease- a drug currently in a Phase 1 trial.

In reaction, the analyst reiterates a Buy rating on PTGX but cuts the price target from $36 to $14. All the same, even Chiang’s lowered expectations stand tall, implying a 60% upside from where the shares last closed. (To watch Chiang’s track record, click here)

For context, PTGX’s choice to end its trial was spurred by a negative interim analysis outcome for PTG-100 by independent Data Monitoring Committee (DMC), where the committee judged the trial as futile.

“Unfortunately for PTGX, there were an abnormally high number of patient responses which occurred in the placebo arm of this study, which may have led to the unfavorable result from the interim analysis. This morning’s news is certainly a negative surprise as we had viewed PTG-100 as the Co.’s lead pipeline product candidate with peak sales potential of in excess of $1B. While we await additional details to be released from PROPEL (expected in ~30 days), we have removed PTG-100 from our estimates until we see further details from the study,” Chiang contends.

Notably, the company inked a collaborative deal with Johnson & Johnson subsidiary Janssen worth as much as $940 million, where $50 million was paid upfront. The analyst likewise pinpoints injectable hepcidin mimetic peptide PTG-300 as another candidate with potential for the company. Keep in mind, the asset just completed Phase 1 safety trials and is poised to kickstart a Phase 2 trial in beta-thalassemia come the fourth quarter of this year.

Calculating roughly $140 million of cash on PTGX’s balance sheet, the analyst concludes believing the cash is enough to fuel the drug maker through this year and the next.

TipRanks showcases a largely optimistic Wall Street consensus circling PTGX shares, meaning quite a few bulls were left reeling yesterday as shares crashed. Out of 4 analysts polled in the last 12 months, 3 rate a Buy on the stock and 1 maintains a Hold. With a return potential of 171%, the stock’s consensus target price stands at $23.75.

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