A new class of anticoagulant drugs called factor Xa inhibitors have wrestled away significant market share from Warfarin, a decades-old drug widely used to prevent clots in heart disease patients and hip and knee surgery patients. However, until last year's approval of Portola Pharmaceuticals' (PTLA) Andexxa, there wasn't an FDA-approved medication on the market to reverse their effect -- a dangerous proposition for patients at risk of falling or emergency surgery.

The potential upside associated with selling the only approved antidote to factor Xa inhibitors made Portola Pharmaceuticals enticing, but its performance so far has been hit-or-miss. This week, pessimistic investors sent shares reeling after management unveiled its first-quarter financial results. Here's what you ought to know about the results and management's future plans.

1. Stocking supply shelves

Investors can't be blamed for doubting management's ability to market Andexxa. After all, Portola Pharmaceuticals' first commercial-stage drug, Bevyxxa, was a dud. The company grossly overestimated the need for Bevyxxa, a factor Xa medication for the post-acute hospital setting, and as a result, Bevyxxa's sales have failed to materialize. In Q1, they totaled just $77,000.

A person looking through a magnifying glass at a wooden box with a red checkmark.


Fortunately, management's having better luck with Andexxa. In Q1, 300 hospitals were stocking it, up from 200 hospitals in Q4, and as a result, Andexxa's product sales improved to $20.3 million from $14 million in the fourth quarter. Importantly, management expects a similar cadence of new hospitals stocking Andexxa in the coming quarters, suggesting tailwinds throughout 2019.

Furthermore, the percentage of hospitals reordering Andexxa, a signal of hospitals' willingness to use it in patients, is improving. In Q1, 55% of hospitals reordered it, up from 50% in the fourth quarter and 40% in Q3 2018.

Overall, Portola Pharmaceuticals reported only $22.2 million in revenue in Q1, but supplying new hospitals and restocking existing hospitals could boost revenue considerably in the coming quarters.

2. Tapping new markets

The company's improving traction in the U.S. could suggest success in Europe, where Andexxa recently won approval to be marketed under the brand name Ondexxa.

Initially, management is focusing its European launch activity in key markets, like Germany, where it thinks it can win reimbursement quickly and where there's a large number of factor Xa patients. Its goal is to start reporting Ondexxa product sales later this year. Admittedly, there's no guarantee the cadence of adoption overseas will match the U.S., but there's reason for optimism, especially since Portola Pharmaceuticals says the addressable market in the first five countries in which it plans to launch will double the number of patients it can address with Andexxa/Ondexxa.

Over time, launches throughout Europe and plans to expand Andexxa's label to allow its use in more indications could increase its addressable patient population to 600,000 or more.

3. Spending is a problem

High hopes for Bevyxxa and a faster path to approval for Andexxa caused Portola Pharmaceuticals to invest too heavily in head count, and unfortunately Portola's expenses continue to threaten the company's future.

In Q1, spending on research and development (R&D) fell considerably, to $35.6 million from $60.1 million in Q1 2018, but that pace means R&D spending still exceeded first-quarter revenue by about 60%. Selling, general, and administrative expenses jumped to $53 million from $31.5 million last year, further complicating matters. As a result, total operating expenses were $95.8 million, up from $91.9 million one year ago, and the company's GAAP-accounting net loss was $78.2 million, or $1.17 per share.

Increasing spending to support U.S. expansion plans and the upcoming launch in Europe is necessary, but that doesn't change the fact that Portola Pharmaceuticals' cash burn is high or that management's cash and financing sources are only expected to be sufficient through late next year. Unless Andexxa's revenue ramps up substantially or the company licenses Ondexxa rights in Europe, a cash crunch could be coming in 2020.

A businessman climbing a mountain of failure signs toward a finish line.


Can this company win?

The short answer is yes. But it will need a few things to go its way to convince investors. So far, it doesn't appear companies are lining up to license Ondexxa's European rights, but that doesn't mean it won't happen. For instance, Bristol-Myers Squibb and Pfizer -- two leading factor Xa inhibitor companies, have already licensed rights to Andexxa in Japan, where it's not yet approved. 

Bevyxxa's future is undeniably uncertain. It could easily wind up in the dustbin. But Andexxa sales growth may be all the company needs to shrink cash burn and fuel the development of cerdulatinib, a lymphoma drug in its pipeline that could begin registration-ready studies before the end of 2019.

The good news is that an impending cash crunch is still at least one year away, which gives the company a few more quarters to demonstrate that Andexxa's blockbuster potential is real. However, Portola Pharmaceuticals' future is uncertain enough to make it unsuitable for most investors.