Oct 10 (Reuters) - Johnson & Johnson ( JNJ ) is in

discussions to buy Protagonist Therapeutics ( PTGX ), a source

familiar with the matter told Reuters.

Shares of Protagonist surged more than 30% in afternoon

trading. The company had a market capitalization of $4.2 billion

as of Thursday's close.

The two companies are working on the development of an oral

treatment, icotrokinra, for immune diseases, including plaque

psoriasis and ulcerative colitis, with J&J holding the exclusive

rights to commercialize the product.

Protagonist declined to comment, and J&J did not immediately

respond to Reuters' requests for comment.

The Wall Street Journal reported the matter earlier in the

day.

(Reporting by Sabrina Valle in New York and Kamal Choudhury in

Bengaluru; Editing by Anil D'Silva, Tasim Zahid and Shinjini

Ganguli)