An Interview With Portola Pharmaceuticals CEO Bill Lis

Portola Pharmaceuticals (NASDAQ: PTLA  )  is relatively new to biotech investors and was one of many biotechs to IPO last year. In an effort to better understand the company's pipeline and upcoming catalysts, analyst Max Macaluso recently spoke with the company's CEO, Bill Lis. In the discussion below, Lis discusses Portola's approach to research and development, its primary drug candidates, and the company's partnerships.

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A transcript follows the audio clip below.

Max Macaluso: Hi Fools, I'm Max Macaluso, the health-care bureau chief here at Fool.com, and joining me today is Bill Lis, CEO of Portola Pharmaceuticals, and Mardi Dier, CFO of Portola. Thank you very much for joining me.

Mardi Dier: Yes, thanks Max.

Macaluso: Portola is a relatively new name to biotech investors; your company IPOed last year. Let's get started and just talk about your approach to R&D. I'm curious if you start with a specific disease and then discover a drug for that indication, or if you actually start by discovering drugs that target certain biological pathways, and then that leads which therapeutic areas you tackle.

Bill Lis: I think it's a little bit of both, Max. The history of this compound and those of the research and development group has been focused on advancing the field in both thrombosis and hematologic disorders that drive the research engine.

We have an approach to validate a target for which we think we can improve upon properties of drugs and advance the field. We're very translational-based, so we do look to find unmet medical needs that we think we can serve best.

I think we have found that with what we call our three "wholly owned" programs. We have two in the area of thrombosis and one in the area of hematologic cancers, so we refer to ourselves as a "blood clots and blood cancers" company, from a research and development standpoint.

The other aspect of our R&D efforts is relative to development and regulatory strategy, and commercial. Each one of our programs has taken either a biomarker or a genetic approach to not only identify patients that we think will differentially have improvement in either quality of life or morbidity and mortality -- starting with betrixaban, which is, as we know it today, the only thrombosis program that uses a biomarker to identify patients most likely to benefit.

Andexanet alfa, similarly, is using biomarkers not only to identify patients who will most likely benefit, but also using a biomarker through an accelerated development program agreed to with the FDA for conditional or accelerated approval.

Then lastly, cerdulatinib; looking at the molecular basis of some of the hematologic cancers and tumor cell growth, and identifying patients based on genetic mutations.

Macaluso: Let's start with a discussion about betrixaban. This is a Factor Xa inhibitor. It's in phase 3 development and it's a blood thinner. I'm actually just curious about the competitive landscape here because you have Johnson & Johnson and Bayer, which market Xarelto, and Pfizer and Bristol-Myers Squibb, that recently launched Eliquis.

This to me seems like a very competitive market, so I'm curious what differentiates your experimental drug.

Lis: Yes, that's a very good question. It is a very competitive market, but it's a very large market. This year, the market for the novel oral anticoagulants will approach $3-4 billion globally. The expectations from analysts have anywhere between $10-15 billion as a market so, first of all, we believe there's ample opportunity for multiple compounds to succeed.

There are as many as 10 indications for the novel oral anticoagulants we're pursuing. The current anticoagulants, the novel ones that have come to market, are indicated for as many as between three and five.

Our differentiation is twofold. One is the properties of our drug, and two is the clinical development strategy. Let me take you first through the properties of the drug.

Generally, patients on anticoagulants are elderly patients. They're frail patients. They have a high degree of renal impairment or renal disease, and they're on concomitant medications because of their underlying diseases. Betrixaban has three properties that are distinct from any of the other Factor Xa inhibitors, and we believe make this compound best suited for some of these patients.

They are, it has the longest half-life -- in actuality, it really has the only "once-daily" half-life. It's a half-life of about 20 hours. That not only allows for once daily dosing, which is important, but it also allows for even blood levels over 24 hours, so the concentration of the drug does not fluctuate much over 24 hours. That's very important.

It's cleared by a very low level through the kidney. That's important because it doesn't accumulate, especially in elderly patients that have rental disease, as much as the other drugs may. And it's not metabolized in the liver through CYP3A4, so less potential for drug/drug interaction.

If you put all of those three together, we hypothesize it provides betrixaban with the opportunity to have a better bleeding profile, or safety profile, just based on the pharmacokinetics.

We've taken that into our clinical development strategy. We are pursuing an indication to prevent deadly clots in patients that are called "acute medically ill." These are patients that are in the hospital for such diseases as heart failure, stroke, severe rheumatic disease and pulmonary disease, or severe infections. Because of their underlying disease and concomitant risk factors, they're at risk for blood clots.

We estimate that about 150,000 patients in the G7 each year will be admitted to the hospital, will survive their underlying disease, but will die of a blood clot within a few weeks.

Because these are such frail patients, our strategy is to treat these patients both in the hospital and for several weeks after hospitalization. There are currently a number of standard drugs that are injectable, that are used in the hospital setting, but there's nothing available for when they are discharged from the hospital -- and about 50% of the events that occur in this patient population occur there -- and there is no drug available for that postdischarge period.

We think betrixaban, because of its properties, will be able to benefit this patient population best; that is, provide a reduction in fatal blood clots, but do it at a low risk of bleeding. Our strategy is to be the first into this particular indication. I said it's about a $10-15 billion market; in and of itself, this particular indication is as large as somewhere between $3 and $4 billion, so we believe if we get there first, with the drug properties that differentiate from all of the other Factor Xa inhibitors, that we can build substantial market in this indication.

Macaluso: When can we expect to see more data on this drug?

Lis: Right now we are enrolling in a global, pivotal, phase 3 clinical trial. We are estimated to enroll about 7,000 patients in over 30 countries, in about 450 clinical trial sites. We announced yesterday in our 2013 earnings call that the trial is a little over 30% enrolled. We expect to complete enrollment by the end of 2015, and report out data in early 2016.

Macaluso: Great.

Let's move on to the second drug you have in mid/late-stage trials. It's actually an antidote for Factor Xa inhibitors like betrixaban. This is a very complex space for a lot of investors to understand. Can you just explain the medical need for antidotes here?

Lis: Yes. The medical need is quite straightforward. As good as these novel oral anticoagulants are -- and they've shown not only superiority in efficacy, but also in some patient settings they've shown superiority or an improvement in the incidence of bleeding -- remember, anticoagulants do nothing more or less than thin the blood.

The idea is to thin the blood enough to prevent the clots, but not too much, to cause bleeding. Unfortunately, even though these drugs have been shown to be very, very safe, the number one side effect will continue to be bleeding.

It will happen at a very, very low percentage, but if you multiply that low percentage by the significant number of patients -- tens of millions of patients that will be treated with these drugs annually -- you can project in the future that in, say the G7 countries, or maybe just in the United States alone, several hundred thousand patients will be admitted to the hospital, and they'll be on a novel anticoagulant, and they'll either be bleeding because of the anticoagulant, or induced by the anticoagulant, or because they've had a traumatic injury, or they'll be at very high risk of bleeding because they need to be sent to emergency surgery.

That's really the unmet medical need. The basic mechanism of these drugs, by thinning blood, will cause some patients to bleed or be at high risk for bleeding, so there are a number of clinical settings and scenarios where an antidote -- or the ability to reverse these drugs -- is very, very important to clinicians.

We've seen this with warfarin. Warfarin was the old standard of care that's being replaced by these agents, but warfarin has an antidote. You can use vitamin K to reverse the effects of warfarin, so that's been by and large the standard of care in the setting of anticoagulation -- the ability to provide a good and an effective anticoagulant when it's needed, and the ability to have an antidote.

We've just been ahead of the field in advancing the science behind an antidote, because it's not been easy. I think the other companies have tried. We've been most successful. We're much farther advanced than any of the competition, and that is why -- because of the unmet medical need, and because of the science behind our antidote -- the FDA granted us what's called "Breakthrough Designation Therapy" late last year, and they're allowing us to develop this compound on what's called an "Accelerated Approval."

Similar to some of the oncology programs -- based on small clinical trials that just look at the pharmacokinetics and pharmacodynamics of our drug -- the FDA will grant us a conditional approval. Then we will be required to run what's called a confirmatory clinical trial thereafter.

What that allows, for a drug like this, is to be accelerated to the market. For us, the market timeline from filing IND to a potential BLA at the end of 2015, will be a little less than four years, and that's a remarkable timeline.

It's really based on the unmet medical need, and then based on the data thus far, that we've reported out on, that shows that we can very robustly reverse the anticoagulant activity of the oral Factor Xa inhibitors. We can do it immediately, and we can either do it for a short period of time, or we can sustain that reversibility with andexanet.

Macaluso: Four years is definitely a very fast timeline to look at.

I'm also fascinated by the collaboration you have here with some of your potential competitors, actually. You have a clinical collaboration for this antidote with Pfizer, Bristol-Myers Squibb, Johnson & Johnson, and Bayer. Can you comment on the terms of that agreement?

Lis: Yes, it's really a unique opportunity. Yes, in one sense we are competitors, but I think in the other sense, again, everyone's focused on what's best for the patient and -- importantly in this patient population -- the ability to preserve the benefits of these compounds, but address the limitations, and as I mentioned, bleeding is the number one limitation with each of these compounds.

These are unique collaborations. We look at it as coalition for us to accelerate not only the development but the approval and commercialization of andexanet. These are collaborations where our colleagues from BMS/Pfizer, J&J/Bayer and Daiichi provide capital and funding for the development of andexanet.

They provide us some insight and input as to the best way to study andexanet with their compounds, but we retain 100% commercialization rights and decision-making around the compound, so that makes it very, very unique, that we pursue the collaborations this way.

These are designed to stay in effect for the development period, and then we'll make a determination in the future as to whether these collaborations continue through commercialization. But the good thing is, both andexanet and -- I'm not sure if I mentioned betrixaban -- both of those compounds, we can market them ourselves.

These are relatively small, hospital-based sales forces that can market both of these compounds. We can build a sales organization that would promote both of them simultaneously in a hospital setting. For that reason, we don't need big partners to develop either one of the compounds, or to commercialize either one of the compounds -- especially if we do this together.

Thus far, these collaborations have been very beneficial to us, not only in bringing in additional capital to develop the compounds, but also to accelerate the development of andexanet.

Macaluso: Let's shift gears and look at a drug that's a little farther back in your pipeline. That's cerdulatinib. This is an experimental treatment for certain types of blood cancers, and it looks like again you're entering kind of a competitive space here, because there's already ibrutinib from Pharmacyclics and J&J, and Gilead is also developing idelalisib. How does this drug fit into this space?

Lis: You mentioned a number of really terrific compounds that have shown really remarkable results in hematologic cancers over the last year or so.

We're taking, again, a unique approach. I think the molecular basis behind cancers and tumor growth in some of these patients is now well understood. It's now referred to as precision-based medicine, where we're understanding some of the mutations and some of the genetic drivers behind these cancers.

Cerdulatinib is unique. You mentioned a few molecules that target the B-cell pathway, a very well-validated pathway to address hematologic cancers such as chronic lymphocytic leukemia and non-Hodgkin lymphoma.

Cerdulatinib not only targets the B-cell pathway, but it also targets a cytokine pathway through JAK inhibition. We're starting to understand that perhaps a molecule that, in one pill, targets both of those pathways may have differential and improved benefit in certain subtypes, where the compounds that you mentioned have not demonstrated either robust efficacy, or where they have shown -- based on mutations or acquired mutations -- relapse for patients treated with those compounds.

We've shown preclinically that we can address some of these specific patient populations -- these difficult to treat patients, or these patients that relapse -- based on understood and defined genetic mutations, that we can potentially address those patients differentially than the other compounds in the space.

Therefore, we believe we can carve out, through genetically defined patients, a space where cerdulatinib has benefit where other agents do not.

Macaluso: When can we expect more clinical data from this program?

Lis: We initiated a phase 1/2A clinical program in patients in the latter part of 2013. We expect to report out data from that clinical trial sometime mid-year of 2014 and then we'll expect, if we're successful there, to expand the patient population -- specifically those that have some of these genetically defined mutations -- the second half of this year, and report out additional data in 2015.

Macaluso: OK, that was a great rundown of the hematology segment of your pipeline.

Let's look at ... I think this is your earliest stage drug. This is a drug that you're partnered with Biogen on, and it's for allergic asthma.

Lis: Yes. We signed an agreement a few years ago with Biogen around another class of compounds out of our small molecule kinase portfolio. This one has some of the attributes of cerdulatinib. It targets specifically the B-cell pathway, and the B-cell pathway has been a validated target -- as it's been in hematologic cancers -- also in the field of immunology and inflammation.

This partnership is more around the area of inflammation. It's a distinct series of molecules from that of cerdulatinib, and it's very, very specific. Biogen has 100% worldwide rights to this compound, and they're moving it forward in phase 1 studies for allergic asthma -- another area of high unmet medical need.

I think we'll see, over the next several months and year, as to the progress they make at Biogen and whether the compound will continue to advance.

Macaluso: That's great. Once again, that was Bill Lis, CEO of Portola Pharmaceuticals, joined by Mardy Dier, CFO of Portola. Thank you very much for joining me.

Lis: Thank you, Max.

Dier: Thank you.


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