Entering text into the input field will update the search result below

Protagonist: A Deeper Look

Early Retiree profile picture
Early Retiree


  • Protagonist surprised investors by putting the blame for the recent PTG-100 trial discontinuation on an erroneous analysis by its CRO.
  • The stock rallied 50% above $11 and might go even higher, as it traded north of $20 before the discontinuation.
  • A few fundamental considerations on Protagonist's pipeline assets, dilution and dilution risks.
  • This idea was first discussed with members of my private investing community, Stability & Opportunity. To get an exclusive ‘first look’ at my best ideas, subscribe today >>

It was all futile

After a long period of optimism for its pipeline of GI-restricted ulcerative colitis and Crohn's disease treatments had propelled its shares to their ATH of ~$23, on 3/26/18, Protagonist (NASDAQ:PTGX) shocked investors with the discontinuation of its UC drug PTG-100 in phase 2b after a futility analysis.

This drug is basically an "oral Entyvio". Entyvio is marketed by Takeda (OTCPK:TKPYY) and enjoying a nicely growing market share and should rake in ~$2B of revenues in 2018. PTG-100 is Protagonist's most advanced asset and its discontinuation was an enormous setback.

Protagonist was left with its Janssen-partnered PTG-200, another GI-restricted UC and CD treatment (basically a gut-restricted, oral Stelara). But this drug is still in phase 1.

Moreover, the failure increased the likelihood that the company's peptide platform would not yield the expected result of an intestinally restricted UC/CD drug. In addition, from being substantially ahead of Theravance Biopharma (TBPH) that has a very similar cooperation with Janssen (part of Johnson & Johnson (JNJ)), Protagonist was suddenly trailing its competitor.

This is important as the space is extremely crowded:

(Source - Data is from 2014. Color coding is apparently wrong. Some compounds have been subsequently discontinued, others have been initiated.)

Both Protagonist and Theravance are targeting a very early positioning in the treatment pyramid. Basically, they try to jump the queue. Even if other companies launched their new compounds earlier, they would be used only after the PTGX and TBPH compounds, thanks to almost zero systemic exposure and their excellent safety profile.

Protagonist lost ~$250M of market value following the PTG-100 discontinuation. Given an average ~30% success rate of phase 2 trials, in theory, this loss of $250M should represent 30% of the potential total value (assuming market efficiency), so a successful PTG-100 would have been valued at ~800M.

Money can be easy to make

Sometimes at least. Over the past six months, Stability & Opportunity subscribers have received exclusive alerts to a total of six short-term trade opportunities, all of which have yielded the expected returns.

Alongside unparalleled, deep research into selected holdings, Stability & Opportunity provides frequent alerts to short- and long-term investment opportunities with multiple layers of safety arising from carefully identified market inefficiencies.

This article was written by

Early Retiree profile picture
Having always been a learning machine, I speak five languages, have worked as a sales agent, project manager, translator, computer consultant, software engineer, built a house with my own hands, published books and essays on literature, philosophy and art, have written for magazines of various kinds in different countries. After retiring early in 2004, little by little, I have become a fund manager for some friends and myself, following the principles of value investing laid out by Benjamin Graham, Phil Fisher, Charlie Munger and Warren Buffett. In 2015 I won the Seeking Alpha Contrarian Contest and was among the winners of several other competitions. I have also been a regular contributor to Seeking Alpha Pro right from the start.I strive to gather above-average knowledge about my stock picks. As this takes many hours, despite managing my portfolio full-time, you should not expect me to throw out new ideas each and every week. One can't be an expert on everything, but can try to acquire deep knowledge about a careful selection of businesses. Only knowledge can provide the required conviction to profit from temporary market inefficiencies (i.e. buy into a sell-off). My Investment Strategy Statement can be found here.Legal Disclaimer: My contributions to Seeking Alpha, or elsewhere on the web, are to be construed as personal opinion only and do NOT constitute investment advice. An investor should always conduct personal due diligence before initiating a position. Provided articles and comments should NEVER be construed as official business recommendations. In efforts to keep full transparency, related positions will be disclosed at the end of each article to the maximum extent practicable. I am not registered as an investment adviser, nor do I have any plans to pursue this path. No statements should be construed as anything but opinion, and the liability of all investment decisions reside with the individual. Although I do my utmost to procure high quality information, investors should always do their own due diligence and fact check all research prior to making any investment decisions. Any direct engagements with readers should always be viewed as hypothetical examples or simple exchanges of opinion as nothing is ever classified as “advice” in any sense of the word.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in PTGX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.