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How This $1.6 Billion Company May Change a $10 Billion Market

By Todd Campbell and Kristine Harjes – Mar 2, 2016 at 11:38AM

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Demand for a new class of blood thinners is soaring, but sales of them could climb even higher if Portola Pharmaceuticals' antidote wins FDA approval this year.

The decades-long dominance of warfarin as a therapy to prevent blood clots is already coming to an end, thanks to rising use of Johnson & Johnson (JNJ -0.70%) Xarelto and Bristol-Myers Squibb (BMY -0.14%) and Pfizer's (PFE -0.16%) Eliquis. However, warfarin's decline could accelerate even more quickly if a drug made by Portola Pharmaceuticals (PTLA) wins FDA approval in August this year. How big of an impact could a green light for Portola Pharmaceuticals' andexanet alfa make on the anticoagulant market? Find out in the following video segment.  

A transcript follows the video.

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This podcast was recorded on Feb. 24, 2016. 

Kristine Harjes: We received a really interesting question this past week from Christopher Andrews, who says that he's been a Fool since 1998. He's listened to The Motley Fool in 15 to 20 different countries or territories, he says, on multiple deployments, and many more to come. Christopher, thank you for the question, for writing in, and thank you for your service.

Christopher asked us about a company called Portola Pharmaceuticals, which, if you have listened closely to us, we have talked about Portola a little bit before. I think back in December, we talked about it on a different show, MarketFoolery. Todd, before I was even hosting the show, you did a show with Michael Douglass, our last host, about Opko Health and Portola. This is a company that's very much on our mind. I'm personally quite bullish on it.

Christopher is basically asking, he opened up a little position in it, and started researching and got more and more excited about what this company has to offer. Todd, what I'd love to have you address on the show is whether anything has changed since the last times that we've talked about this company, and where the company looks to be going from here.

Todd Campbell: Yes. Things have indeed changed, and the fact is that Portola's lead product candidate, which is Andexanet alfa, the application for approval has been accepted by the FDA, and an FDA decision on that drug is expected in August. The reason investors want to pay attention to this drug is that, if approved, it will be the first reversible agent or antidote for a brand new type of anticoagulant that's being used increasingly more every quarter known as Factor Xa inhibitors. These Factor Xa inhibitors are breaking down, I guess, the market share dominance that Warfarin's had in the indications for the last 50 years. As a result, these drugs -- Johnson & Johnson makes one of them, Pfizer and Bristol-Myers teamed up another one, Xarelto and Eliquis are their names. They're racking up sales in the billions of dollars per year.

Problem is, without an antidote in existence, if someone who's taking one of these drugs falls and has a bleeding event or requires emergency surgery, then it's a little tricky for the hospital to figure out how to stop them from bleeding so that they can be cared for.

Harjes: That sounds like a lot of if's there, like, "If they have an emergency surgery." How big, actually, is this market? Are there numbers out there?

Campbell: Yeah. Portola estimates -- of course, this is from the company -- they estimate that between 1% and 4% of all patients treated with Factor Xa's suffer some sort of event or hospitalization that may benefit from the use of their drug. They peg that number at about 100,000 people per year. We have no idea whether the FDA will approve this drug. I think that they will, but we don't know that, and we don't know how Portola would price it. Even if you throw a price tag on there of $10,000, you're talking about a billion dollar-a-year drug.

Maybe what you say is, "OK, this is probably going to bring in at least hundreds of millions of dollars a year in sales for this company." That's guesswork, but it's as close, probably, as we can get at this point.

Harjes: The huge question left on my mind, then. This is a $1.6 billion market cap company. They potentially have a blockbuster drug that's already through phase 3 trials, it's awaiting approval, it looks, by all means, like it's going to get approved. It has all of these Big Pharma companies interested in it. Why has it not been bought yet? Is this a buyout candidate?

Campbell: I think ... listen. You can't invest based on M&A. You and I have talked about this over and over and over again. It's a fool's errand to try and seek out companies that you can buy ahead of somebody else acquiring them.

Harjes: Honestly, I don't think I would want them to get bought out.

Campbell: Yeah, and I don't think they'd want to get bought out, either. It wouldn't shock me. You look at Johnson & Johnson and Pfizer and Bristol-Myers. They supplied money to fund the research into this antidote. I have a hard time believing that someone along the way didn't say, "Hey, how about we team up?" Last month, Bristol-Myers and Pfizer did license rights to the drug in Japan, in a deal that's worth about $90 million plus royalties, so that gives you some idea of the level of interest from the big pharmaceutical companies in this company.

Yeah, I think that there's a good opportunity here for investors. Obviously, there's the risk that this drug doesn't get passed and approved, but I think that, for people who are willing to take on that chance, yeah. This is a company that I think business makes sense to own.

Harjes: Yeah. They actually aren't just a one-drug company, too. We won't dive into that, because we only have so much time on the episode, but definitely check out this company if you are looking for a smaller-sized healthcare company. I think both of us are pretty bullish on it. Of course, you have your normal caveats.

I am required to tell you that as always, people may have interest in the stocks that we talk about. The Motley Fool could have formal recommendations for or against them, so, as always, don't buy or sell based solely on what you're hearing, but check out fool.com. We have a good bit of coverage. I know, Todd, you've written plenty of articles on Portola. It's intriguing. It's an interesting story. It's kind of a fun one to explain, too. It's like, "Oh, well, they're making a drug that undoes the work of other drugs!"

Campbell: Yeah. Yes, I absolutely would encourage all the listeners, viewers, to go out. You can go right to the Fool website and search under the ticker in the top right hand corner, and those articles pop right up.

Harjes: Yep. PTLA is the ticker, if you're curious.

Kristine Harjes owns shares of Johnson & Johnson and Portola Pharmaceuticals. Todd Campbell owns shares of Portola Pharmaceuticals. The Motley Fool recommends Johnson & Johnson. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Portola Pharmaceuticals Stock Quote
Portola Pharmaceuticals
PTLA
Pfizer Stock Quote
Pfizer
PFE
$49.49 (-0.16%) $0.08
Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$176.09 (-0.70%) $-1.24
Bristol Myers Squibb Stock Quote
Bristol Myers Squibb
BMY
$79.03 (-0.14%) $0.11

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