In the game of investing, there are protagonists and antagonists. and right now, Wall Street is antagonizing Protagonist Therapeutics (NASDAQ:PTGX) stock as definitely out of favor.
Protagonist is a biopharmaceutical company that uses peptides as targeted therapies for blood disorders and gastrointestinal (GI) diseases. Thus, the company is working diligently to address unmet needs in various rare and chronic diseases.
Suffice it to say, life hasn’t been easy for investors of Protagonist Therapeutics. It’s been a veritable roller-coaster ride with PTGX stock: up and down days of 5%, 10% or more are par for the course here.
A bad-news bombshell just dropped recently, so that’s undoubtedly top of mind among Protagonist’s shareholders. We’ll definitely delve into that issue. And perhaps, glimpse an opportunity among the wreckage.
The Lowdown on Protagonist Therapeutics
To really know a clinical-stage biotech firm, you have to examine its pipeline of product candidates.
So, let’s get granular and see what Protagonist has to offer.
The company’s most prominent product is rusfertide (PTG-300). This is currently being evaluated for various disorders associated with iron overload and/or excessive red blood cell production.
Rusfertide is currently in a Phase 2 study for polycythemia vera, a rare chronic blood disorder which affects about 160,000 patients in the U.S.
Also, Rusfertide is being evaluated in a Phase 2 study for hereditary hemochromatosis, a blood disorder affecting over 1 million people in the U.S.
Next up is PN-943, an orally delivered product in development for the potential treatment of inflammatory bowel disease. This candidate is in a 150-patient Phase 2 study for moderate-to-severe ulcerative colitis.
Plus, Protagonist is working on three additional treatment candidates with applications in various disease areas including, but not limited to, inflammatory bowel disease.
These are known as PTG-200, PN-235 and PN-232, and they’re in various clinical phases. Pertaining to these, Protagonist Therapeutics has a co-development and commercialization agreement with Janssen Biotech.
Progress Is Halted
All of this sounds promising, no doubt.
And indeed, Wall Street took a shine to Protagonist Therapeutics for a while, lifting its shares from $6 in March 2020 to $50 in August of this year.
Yet, a bombshell dropped in September that would set the investors back 60% in a single day.
When PTGX stock plunged to $17 on Sept. 17, clearly there must have been a news catalyst in progress.
Thankfully, InvestorPlace contributor Chris MacDonald had the gruesome details. So, what happened?
As McDonald reported, the U.S. Food and Drug Administration placed a clinical hold (i.e., a halt) on Protagonists’s rusfertide/PTG-300 clinical program.
Furthermore, the reason for the clinical hold was Protagonist’s notification to the FDA of benign and malignant subcutaneous skin tumors observed in mice in a study involving rusfertide.
Is It Toast?
In response to this event, one writer asserted, “Investors should probably assume the entire rusfertide program is toast.”
After reading some other commentaries and browsing through financial message boards, I concluded that the sentiment is decidedly negative on PTGX stock.
Heck, even MacDonald acknowledged that “the company’s expected stock price is tied to rusfertide” and accordingly, “the shuttering of clinical trial efforts for this drug may be a fatal (or near-fatal) blow.”
Does this mean that it’s time to take a short position against Protagonist Therapeutics?
Personally, I wouldn’t recommend it. For one thing, shorting a biotech stock is basically playing with fire since these stocks can move quickly in either direction.
Besides, this story isn’t necessarily finished yet.
Protagonist assured that it’s “working with the FDA and will be prepared to make all appropriate updates to clinical study documents and determine the next steps in consultation with the FDA.”
Remember, not all halts turn into permanent shutdowns of clinical trials.
Looking ahead, Protagonist Therapeutics President and CEO Dinesh Patel expressed that his company will work closely with the FDA “in understanding and evaluating potential clinical risks and determining next steps for the development of rusfertide.”
The Bottom Line on PTGX Stock
There’s no denying that the FDA halt presents a major challenge for Protagonist Therapeutics.
We can’t simply dismiss the bearish thesis here. After all, Protagonist’s business relies heavily on the success of rusfertide.
On the other hand, amid the pessimistic sentiment, there may be a buying opportunity.
Not every clinical halt is a death sentence for biotech companies. Moreover, rusfertide might not end up as “toast.”
The worst-case scenario appears to have been priced into PTGX stock. Thus, any good news could send the share price soaring.
For a small position size, then, Protagonist Therapeutics might be worth a shot.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.