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Protagonist Stock Jumps 58% After Re-Review of Test Results

Chris Lau

The mouth-watering 58% rise in shares of Protagonist Therapeutics (NASDAQ:PTGX) on Monday should interest biotech investors. The rally is a welcome change after months of PTGX stock going nowhere.

At a market cap of $236.2 million, experienced biotech investors will expect higher than normal volatility. After all, there is only a 20 million share float. On Monday, Protagonist announced that it secured $22 million in equity financing through the sale of 2.75 million shares. The company will use the financing to advance its development of drug candidate PTG-100. That same day, a program update on the PROPEL Study and PTG-100 program update sent the stock up 58 percent on the day.

PTG-100 works by blocking lymphocytes homing to the gut. When administered intravenously, the drug reduces gut inflammation. PTG-200 targets cells in the gut by antagonizing the IL-23 receptor. PTG-300 is an injectable peptide hepcidin mimetic. The drug is well-tolerated and demonstrates dose-related effects on iron distribution in a first in-human study involving 62 subjects.

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The company reported that its randomized, double-blind, placebo-controlled, 12-week study of ulcerative colitis patients experienced an unusually high placebo effect. The company ruled out any operational misconduct or trial design issues. It did identify an issue with the central endoscopy reading. The technical errors in endoscopy scoring resulted in a high placebo remitter of 23.5 percent, or four out of 17 subjects, compared to a historic norm of 6 percent. All four initial placebo remitters were by a single reader.

When a CRO (chief research officer) re-read the remitters, the company confirmed there were errors by the original reader in both the placebo and treatment arms. So, this announcement will negate the March 26 news of a Phase 2b trial discontinuation, which caused the stock to fall from $20 down to $8. Chances are good that because PTG-100 shows signals of clinical efficacy, it merits further development. In fact, the clinical efficacy is comparable to other IBD (Inflammatory Bowel Disease) drugs on the market.

Re-Reading Clinical Results

In the re-analysis involving 83 subjects, placebo rates decreased to historical norms. In layman’s terms, those treated with PTG-100 had a higher percentage of patients in clinical remission compared to the placebo. The results are comparable to other therapies: Tofacitinib manufactured by Pfizer Inc. (NYSE:PFE); Ozanimod, which is made by Celgene (NASDAQ:CELG); Etrolizumab, made by La Roche (OTCMKTS:RHHBY); Entyvio from Takeda Pharmaceuticals; and SHF-647.

Bottom Line on PTGX Stock

Four analysts covering PTGX stock have price targets ranging from $8.50 to $14, according to Tipranks. Barclays most recently downgraded the stock on June 6 after writing that the company will achieve its key catalysts in the second half of 2019.

The markets welcomed Protagonist’s recent good news by buying up the stock. It is not impossible for PTGX stock to trade back to last year’s levels in the range of $14-$23.97. As the company requests an FDA meeting to discuss the Phase 2/3 study, markets will price in the positive developments by bidding the stock higher.

Disclosure: The author does not own shares in any of the companies mentioned.

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