Protagonist’s IPO option delivers a $90M payoff for early-stage peptide work

A year ago, when I was talking about Protagonist Therapeutics’ future with Dinesh Patel, the CEO focused in on “optionality.” There could be deals, there could be a buyout, or there could be an IPO.

Not surprisingly, given its investor syndicate at the time, door number three proved to be the next step for this Milpitas, CA-based biotech. And it worked pretty well.

Protagonist $PTGX managed to sell 7.5 million shares at $12 each, earning $90 million to help fund the next round of work on new peptide drugs. That price fell comfortably in the middle of its range, underscoring what appears to be a modest improvement in the biotech IPO market at the beginning of H2.

Protagonist had set out to achieve a hard task, proving that it can develop oral peptide drugs for irritable bowel disease. Peptides have to survive a harsh environment to manage IBD, and the biotech is still only at the threshold of the Phase II stage. It sold the S-1 on a Phase I study involving healthy volunteers, which produced some PD insights intended to help craft the mid-stage program, slated to begin later in the year.

The fact that investors were willing to step in at this early point may underscore an added appetite for risk, which has been noticeably lacking in H1.

J&J Innovation and Lilly Ventures joined the syndicate for a $40 million round last summer, offering some helpful Big Pharma endorsements in the process. Canaan Partners stepped in on the lead, joining Pharmstandard and Starfish Ventures and some crossovers like Adage Capital, RA Capital and Foresite Capital. RA in particular has a strategy built around investing about a year away from a critical inflection point, and they seem to be on schedule with Protagonist.

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