Portola Pharmaceuticals' (NASDAQ:PTLA) won FDA approval of their first commercial drug, Bevyxxa in June, and that sent shares skyrocketing. Yet the market opportunity for Bevyxxa could total in the billions of dollars annually, and the potential approval of a second drug later this year suggests to me that shares could be heading even higher.

Crossing the FDA finish line

Bevyxxa is a factor Xa anticoagulant that can be used to prevent venous thromboembolism in acutely ill medical patients who are being discharged from hospitals following a serious medical event, such as heart failure, stroke, and infection.

An approval stamp.


There are an estimated 24 million acutely ill medical patients who get hospitalized in the G7 countries every year, and because many of these patients don't move around a lot following their release from the hospital, they're at high risk for developing blood clots. Although doctors prescribe Lovenox for between six and 14 days to reduce the risk of clots, there are still over 1 million clotting events in this patient population annually, and of those, 150,000 people pass away. 

A blockbuster in the making

Bevyxxa isn't the first drug that prevents blood clots by targeting factor Xa. The FDA has already approved a slate of other factor Xa inhibitors, including the multibillion-dollar blockbusters Xarelto and Eliquis. 

The ability to lower the risk of clots while reducing dietary restrictions and patient monitoring has quickly allowed factor Xa inhibitors to win away market share from warfarin, a decades-old anticoagulant. Since doctors are already very familiar with factor Xa drugs, it's likely that Portola Pharmaceuticals sales team won't face a lot of heavy lifting when it comes to educating physicians about this class of drugs.

If that's true, then Bevyxxa could quickly displace Lovenox in much the same way that Xarelto and Eliquis are displacing warfarin. At its peak before losing patent protection, Lovenox sales were approaching $3 billion. 

It's not uncommon for commercial-stage biotech stocks to trade at three to five times revenue, or more. Celgene and Regeneron, for instance, trade at eight and 10 times sales, respectively. Yet despite the multibillion-dollar market opportunity for Bevyxxa, Portola Pharmaceuticals' market cap is south of $4 billion.

What makes Portola Pharmaceuticals even more intriguing is the potential for the FDA to approve AndexXa later this year, or in 2018. AndexXa, if approved, will become the first factor Xa reversal agent to get the FDA nod, and given the rising use of factor Xa drugs, including Xarelto and Eliquis, AndexXa could be worth hundreds of millions of dollars in additional revenue to the company.

Portola Pharmaceuticals got rejected the last time around with AndexXa because of manufacturing questions and questions regarding data supporting AndexXa's use in less commonly prescribed factor Xa drugs, but management believes it's making good progress on addressing those questions, and it hopes to refile for approval this month. 

Should you buy?

According to Portola Pharmaceuticals, 1% to 3% of patients taking oral factor Xa inhibitors experience a major bleeding event, and another 1% of patients require emergency surgery, so AndexXa's addressable market is about 90,000 people in the U.S. alone.

Couple AndexXa up with Bevyxxa, and you can build an argument for between $1 billion and $2 billion in annual sales within a couple years. Assuming a sales multiple of 3 to 5, that gets us a back-of-the-envelope market cap target of $3 billion to as high as $10 billion. Of course, that's guesswork. Bevyxxa could be a flop, and AndexXa could get rejected again. In either of those scenarios, shares will tumble.

Nevertheless, I think the odds favor success, not failure, and that's why I think owning Portola Pharmaceuticals still makes sense, despite its recent soaring share price.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.