2017 has been a great year for investors of Portola Pharmaceuticals (PTLA) with shares up almost 70% year to date.
The reason for the run? A combination one-two punch of an FDA resubmission combined with a priority review has led to a substantial rise in the stock. So can this move continue? Or will this year be another unfortunate repeat of 2016? Let's dig in.
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First shot on goal: betrixaban
Portola Pharmaceuticals has two main product candidates, betrixaban and andexanet alfa, both of which have to do with the treatment of blood clots and related disorders.
Betrixaban is a once-daily oral medication indicated for the prevention of blood clots in medically ill patients who are at risk for blood clot-related complications. This drug works by inhibiting the function of an enzyme called factor Xa which is activated during the blood coagulation process.
Unlike the current standard of care, enoxaparin, which lasts 6 to 11 days, betrixaban has an extended duration of treatment lasting 35 days. If approved, betrixaban has the potential to be the first hospital-to-home anticoagulant on the market. Management believes the total addressable market for this product could be worth upwards of $3 billion.
Second shot on goal: AndexXa (andexanet alfa)
Portola's second main product candidate is AndexXa, or andexanet alfa, a medication designed to reverse the anticoagulative effects of factor Xa inhibitors. Why would this be desired? Allow me to explain.
In addition to betrixaban, other factor Xa inhibitors include Johnson & Johnson's Xarelto and Bristol-Myers/Pfizer's best-selling drug Eliquis. These drugs are highly useful -- indicated for the prevention of blood clots in patients with irregular heartbeats (non-valvular atrial fibrillation) and in patients following knee or hip surgery.
Unfortunately, while these next-generation anticoagulants are highly effective in preventing clots they also come with the risk of an uncontrollable bleeding event occurring. In fact, in 2015, Portola estimates that north of 80,000 patients were sent to hospitals due to bleeds occurring while using a factor Xa inhibitor. Traditional blood thinners are easily reversed with vitamin K, but there is no current way to stop the effects of these new Factor Xa inhibitors. It is for this reason that a reversal agent is so desperately needed.
What's happened so far
Back in March of 2016, Portola announced top-line results from a phase 3 study of betrixaban for the prevention of blood clots in acute medically ill patients. While betrixaban did show superiority in preventing blood clots versus enoxaparin, the results were just shy of statistical significance -- leading many to consider this trial a failure. The stock promptly sold off as a result.
As if this were not bad enough, in August of 2016 Portola then received a complete response letter (CRL) from the FDA regarding its biologics license application (BLA) for AndexXa. A CRL is a response from the FDA indicating that an application cannot be approved in present form. Digging into the CRL, the letter related primarily to questions the FDA had regarding the manufacture of AndexXa as well as requests for additional data.
The reasons for the rise
Back in December of last year, the company announced that the FDA had accepted Portola's New Drug Application (NDA) for betrixaban. Better still, in February of this year, the company reported that the FDA had not found any issues requiring an advisory committee meeting. While this is no guarantee what the future holds, this announcement gave investors greater confidence in the likelihood of a betrixaban approval. Regardless, we will have to wait until June 24th for an official decision.
The second catalyst came in February when the company announced a $150 million royalty agreement with Healthcare Royalty Partners, the proceeds of which would go to fund a resubmission of AndexXa's BLA. The company expects to resubmit its BLA for AndexXa sometime in the second quarter of this year.
Where to from here
While 2016 was disappointing for Portola shareholders, 2017 has the potential to be a transformative year for this biotech. As mentioned earlier, should betrixaban receive approval, management believes this indication could be worth upwards of $3 billion by 2020. In addition, management has also guided toward a worldwide market of around $2 billion annually for AndexXa.
There is no guarantee the FDA will approve either betrixaban or AndexXa. After all, betrixaban already missed statistical significance in its phase 3 trial. In addition, Portola is a clinical-stage biotech which has never successfully commercialized a pharmaceutical product, so there will still be hurdles to cross even after FDA approval. All this said, however, I believe Portola still presents an attractive risk-reward profile even after the recent run-up. Should either betrixaban or AndexXa receive FDA approval, this stock could be considered cheap at today's levels. For the risk-tolerant investor, I'd say Portola has more upside to come.
