Protara Therapeutics (Nasdaq: TARA) is expected to report interim data from its ongoing Phase 2/2b study, titled STARBORN, with TARA-002 in lymphatic malformations (LMs) in the coming weeks. Protara’s valuation is highly correlated with its non-muscle invasive bladder cancer (NMIBC) program, but we believe there’s unrecognized value in its pipeline, which includes two rare disease programs: LMs and IV choline. We have highlighted Protara’s LMs program in a few previous notes, but, like most investors, we have focused most of our attention on NMIBC. In fairness, the company has been pretty low-key on its LM program and hasn’t shared any data since a press release in September of last year. Still, we believe this is a program with an above-average probability of success and warrants the attention of investors.
Quick Refresher
LMs, as the name suggests, are malformations (cysts) caused by poor lymphatic drainage. They are typically congenital and diagnosed at birth or during infancy. LMs are broadly categorized as either macrocystic (characterized by one or more large cysts >2cm in diameter), microcystic (characterized by smaller and more diffuse cysts), or mixed.
There are currently no approved therapeutics for treating LMs; however, surgical and off-label options are commonly used. For macrocystic lesions, intracystic injections of the antibiotic doxycycline are often used as first-line therapy. Surgery may be considered for LMs unresponsive to doxycycline, but that carries scarring and nerve damage risk. Surgery also has a high recurrence rate. Systemic sirolimus (immunosuppressant) is sometimes used as a last resort. Macrocystic LMs spontaneously regress in 10-20% of cases, so patients/caregivers may opt for “watchful waiting” before considering their treatment options.
Microcystic LMs are generally not suitable for intracystic injections or surgery and are therefore commonly treated with systemic sirolimus. Compounding sirolimus for topical application is also used. In 2022, FDA approved the first topical formulation of sirolimus (branded Hyftor). Although approved for facial angiofibromas, Hyftor is used off-label for microcystic LMs.
Japan and Iowa
TARA-002, cell-based immunopotentiator therapy, is a biosimilar to Japanese pharma giant Chugai Pharmaceutical’s OK-432. In Japan and Taiwan, OK-432 is already approved for LMs and has successfully treated thousands of patients. Although never approved by FDA, OK-432 does have an IND. A randomized controlled trial (RCT) led by the University of Iowa, investigating OK-432 for the treatment of LMs, was initiated in 1998, completed in 2005, and published in 2009.
***Protara’s Sept. 2025 Corporate Presentation
Not surprisingly, given Japan’s clinical experience, the U.S. RCT demonstrated strong efficacy of OK-432 in macrocystic and mixed LMs, but showed no benefit in microcystic LMs. Protara’s ongoing STARBORN study is only enrolling pediatric patients with macrocystic and mixed LMs.
***Protara’s Sept. 2025 Corporate Presentation
Impending Data
Stepping through the age de-escalation safety cohorts has been slow, but the company has stated that it has completed enrollment in that part of the study and is now enrolling the expansion cohorts. We are unsure how many patients will be included in the impending interim release, but based on recent sell-side notes, it is expected to be between 10 and 15 patients.
Study participants can receive up to four intracystic injections of TARA-002 spaced approximately six to eight weeks apart. Similar to an oncology study, the efficacy endpoint is response rate. Response rates are determined by radiographic measurement of lesion size change and are graded as complete (90%-100%), substantial (60%-89%), intermediate (20%-59%), or none (<20%). The percentage of patients with complete or substantial responses, referred to as clinical success, is the study’s primary endpoint.
Jesse Shefferman, Protara’s CEO, hinted during his September HC Wainwright presentation that the STARBORN data are trending favorably, “ …the protocol for these patients is one dose every eight weeks apart, up to four doses. What I can tell you is that we have yet to see a patient that has required the full four doses. That should give you a sense of where we might be in terms of response rates when we talk about these patients in the interim analysis.”
Relevant Peer?
We have previously highlighted Palvella Therapeutics (Nasdaq: PVLA) as a relevant LMs peer for Protara. Palvella’s lead asset, QTORIN, is a high-strength topical sirolimus formulation. QTORIN is currently being evaluated in a registrational single-arm Phase 3 study in 51 patients with microcystic LMs. Recall that Protara focuses on the other two LM categories: macrocystic and mixed. Top-line data from the Phase 3 study are expected in 1Q2026. Palvella, which went public last December at an approximate $200 million valuation, today trades at a healthy $850 million valuation.
Protara shareholders are undoubtedly scratching their heads at the approximately $500 difference in market cap between the companies. In fact, as of the end of Q3, Protara also had twice as much cash as Palvella ($134 million vs. $63 million), making the EV gap even greater. However, some notable differences between the two companies’ LMs programs may partially explain the current valuation gap.
Notable Differences
One noticeable difference between the two companies is that Palvella is further along in its development and regulatory engagement with QTORIN than Protara is with TARA-002. Palvella has already completed and shared data from a successful 12-patient Phase 2 study for QTORIN in microcystic LMs. They have completed enrollment in their Phase 3 study, with data expected early next year to support an anticipated 505(b)2 NDA submission later in the year. Whereas, Protara is currently enrolling in a Phase 2/2b study and has shared data from only three patients thus far. The impending interim data, expected in the coming weeks, will be investors’ first real glimpse at TARA-002’s efficacy in LMs.
Both companies are running single-arm studies, but Palvella, having completed an end-of-Phase 2 meeting with FDA in 2023, has greater regulatory certainty (if such a thing exists with today’s FDA) that positive data will be sufficient to support an NDA filing. Protara, on the other hand, has suggested that positive data from STARBORN, together with the legacy OK-432 data, warrant an accelerated approval discussion with FDA. In his Wainwright presentation, CEO Shefferman stated, “…in addition to the study that we’re undertaking and where we will be releasing data before the end of the year, we’ll be able to utilize that data set and our experience in Japan to put together a registration package that we hope will be enough to drive towards accelerated approval.”
Protara’s BLA discussion will take place within CBER, the same center at FDA that, over the past several months, has made controversial decisions regarding accelerated approval for drugs from Sarepta Therapeutics (Nasdaq: SRPT), Replimune (Nasdaq: REPL), and most recently, uniQure (Nasdaq: QURE). Needless to say, Protara faces more regulatory intrigue than Palvella.
Chronic vs Curative
Another key difference between Palvella and Protara’s LMs programs is their chronic vs curative approaches. QTORIN is a daily topical treatment for microcystic LMs. It is believed to help reduce lesion size and improve symptoms, but it is not curative. As a chronic treatment, the market opportunity is based on prevalence, which Palvella estimates to be over 30,000 in the U.S. In contrast, TARA-002 is a curative approach, making its addressable market opportunity more incidence-based. The annual incidence of macrocystic and mixed LMs in the U.S. is around 1,000. If approved, in the first few years of its launch, TARA-002 will be able to capture a portion of the macrocystic and mixed-prevalence market, including patients who have opted for “watchful waiting” and have chosen to forgo surgery or other off-label treatments. Nevertheless, eventually, TARA-002’s addressable LMs market will be incidence-driven. Protara will unquestionably price TARA-002 at a premium; nonetheless, the addressable market for a curative approach in mixed and macrocystic LMs will be smaller than Palvella’s chronic treatment approach for microcystic LMs.
Flagship
The last difference we will highlight, and arguably the most important, is that LMs is not Protara’s lead program, while it is for Palvella. Palvella investors have bought into LMs, whereas Protara investors are predominantly focused on the company’s lead program, BCG-unresponsive NMIBC. Protara is currently enrolling in a registrational study, ADVANCED-2, for BCG-unresponsive NMIBC patients and plans to release interim data from the study in early 2026. Based on the current enrollment pace, it appears that study completion is likely to occur in 2027. Therefore, Protara should have completed STARBORN, met with FDA, and maybe even filed a BLA before NMIBC is completed.
NMIBC has been Protara’s flagship program. It is unquestionably a larger, higher-profile market than LMs. However, if FDA is amenable, it is entirely possible LMs leapfrogs NMIBC as Protara’s most advanced program. It is also worth highlighting that there are several follow-on malformation/cyst indications, where OK-432 has demonstrated benefit, that the company has openly discussed pursuing. According to the company, these follow-on indications could represent another 12.5 million patients. Again, that’s a prevalence figure, and TARA-002’s addressable markets will be more incidence-based; however, it suffices to say that LMs may be the first indication of a much larger cyst franchise for Protara. In this scenario, Protara could end up resembling Palvella, which now has a pipeline of follow-on indications for QTORIN beyond LMs.
The Big Unknown(s)
The clinical and commercial history of OK-432 should reassure investors that TARA-002 will be effective in LMs. CEO Shefferman has insinuated as much with his recent comments at Wainwright. But will investors, who have been focused on Protara as an NMIBC company, reward the company for positive LMs data? Are the impending LMs data enough to motivate investors to step up, or is regulatory guidance the bigger catalyst? With data impending, we will get our answers shortly. Regardless, there’s an argument to be made that LMs could be a foundational piece for a cyst franchise that could justify a Palvella-like valuation.