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Portola Pharmaceuticals Inc. (NASDAQ:PTLA)

2Q 2013 Results - Earnings Call Transcript

August 15, 2013 08:30 AM ET

Executives

Alexandra Santos - Director of Corporate Communications and IR

Bill Lis - Chief Executive Officer

Mardi Dier - Chief Financial Officer

John Curnutte - EVP of Research and development

Analysts

Jason Kantor - Credit Suisse

John Sonnier - William Blair

David Friedman - Morgan Stanley

Operator

Good day everyone and welcome to the Portola Pharmaceuticals second quarter 2013 financial results conference call. This call is being recorded. At the end of the company’s prepared remarks, we will open the call for questions and will provide specific instructions at that point.

I would now like to turn the call over to Alexandra Santos, Director of Corporate Communications and Investor Relations at Portola Pharmaceuticals. Please go ahead.

Alexandra Santos

Thank you and welcome to Portola’s second quarter 2013 financial results conference call. Joining me on the call today for the prepared remarks are Bill Lis, Chief Executive Officer and Mardi Dier, Chief Financial Officer. John Curnutte, Executive Vice President of Research and development will join Bill and Mardi for Q&A.

Before we begin, I would like to remind you that various remarks we will make on this call contains forward-looking statements subject to risk, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied. For a more detail description of the risk that impacted forward-looking statements, please refer to the information under the heading forward-looking statements and our press release today and other information regarding risks in the Portolo quarterly report on Form 10-Q, filed with the SEC on August 14, 2013.

Please be aware that you should not place undue reliance of forward-looking statements made today. The date of this conference call is August 15, 2013 and all forward-looking statements made on this call are made based on the belief of Portola as of this date only. Future events or simply a passage of time may cause these beliefs to change.

Finally, this conference call is the property of Portola Pharmaceuticals Inc. and any taping or other duplication or re-broadcast without the express written consent of Portola Pharmaceuticals is prohibited. We issued our second quarter press release earlier today, a copy of which can be found at www.portola.com in the Investor Relations section.

With that I will turn the call over to Bill Lis, CEO, Portola.

Bill Lis

Thank you, Alexandra and good morning everyone. Thank you for joining us today on our inaugural earnings call. I’ll begin with the corporate overview of recent accomplishment for our clinical development programs, Mardi will then provide a review of second quarter financial results and then I conclude with the important upcoming milestones of the company.

In May, we completed a successful IPO in which we raised approximately $126 million in net proceeds, we plan to use these proceeds to develop our two late-stage thrombosis programs, betrixaban and andexanet alfa or PRT4445 and move our third product candidate PRT2070 into the clinic this year.

PRT2070 is a novel oral, dual Syk-JAK kinase inhibitor for the treatment of genetically-defined hematologic cancers. Our lead compound betrixaban is an oral small molecule anticoagulant that directly inhibits the activity of Factor Xa, and important and validated target in blood coagulation pathway.

We are developing this novel once daily Factor Xa inhibitor for hospitals and post-discharge prevention of venous thromboembolism or VTE in high-risk acute medically ill patients. We are currently evaluating the betrixaban in global pivotal Phase 3 study called APEX. The study is enrolling approximately 6,850 patients and more than 400 study sites throughout the world. And we remain on track to complete enrollment in mid 2015.

Currently there is no anticoagulant proof for extended-duration [VTE] prophylaxis in this population therefore if APEX succeeds betrixaban could potentially be the first Factor Xa inhibitor to the market and there is significant unmet need. Importantly, we have worldwide rights to develop and commercialize the betrixaban event.

Our second lead development candidate andexanet alfa, is a recombinant protein designed to reverse the anticoagulant activity in patients treated with Factor Xa inhibitor who suffered uncontrolled bleeding episode or require emergency surgery, andexanet alfa is the first antidote to demonstrate reversal effect of Xa inhibitor activity in the clinic.

During the second quarter we achieved significant milestones in this program, in May, we successfully completed first of the series of Phase 2 concept studies of andexanet alfa demonstrating reversal of the anticoagulant activity of Bristol-Myers Squibb and Pfizer Factor Xa inhibitor Eliquis. These findings which were presented at the 2013 Congress of the International Society on Thrombosis and Haemostasis showed for the first time in the clinic that an antidote can reverse the anticoagulant effect of the Factor Xa inhibitor.

Our Phase 2 with andexanet alfa and XARELTO was ongoing and we anticipate announcing these results later this year. Importantly, we entered into a clinical collaboration agreement with agreement with Daiichi Sankyo to study andexanet alfa with edoxaban. With this agreement we now have collaboration agreements in place with all the manufacture of Factor Xa inhibitors this includes BMS [Bristol-Myers Squibb’s], Pfizer, J&J, Bayer, and Daiichi Sankyo to evaluate andexanet alfa in reversing the anticoagulant activity of Eliquis, XARELTO, edoxaban respectively.

It is important to note that we retain full worldwide commercialization rights for this investigation of Factor Xa inhibitor antidote.

We've now completed a series of discussions with the FDA including just yesterday and end the Phase 2 meeting regarding the clinical and manufacturing path forward for andexanet alfa. We conducted these meetings yesterday with our academic leaders for the program and with our collaborators from J&J, Bayer and BMS Pfizer.

Based on these meetings we continue to plan for an expedited approval pathway for andexanet alfa that will allow us to bring this important product to the market as soon as possible.

The final agreement with the FDA is pending submission of the Phase 3 protocol which we plan to submit to the FDA later this year in anticipation of investigating these studies in the first half of 2014.

Additionally, we signed an agreement earlier this year with Lonza Group to develop commercial scale manufacturing process for andexanet alfa. We then plan to implement changes at Lonza to initiate BLA enabling studies with the manufacturing process that will allow us to launch andexanet alfa pursuant to an expedited approval.

To improve the cost of goods further, additional process changes will be needed and implemented later into the commercial process either prior to the initial BLA filing or a supplemental BLA.

I will now turn the call over to Mardi Dier, our Chief Financial Officer. Who'll review the financial results for the quarter.

Mardi Dier

Thank you, Bill. Collaboration revenue for the second quarter of 2013 was $2.6 million earned under Portola's collaborations with BMS, Pfizer, J&J, Byer, Daiichi Sankyo and Lee’s Pharmaceuticals.

Collaboration revenues in the second quarter of 2012 was $66.9 million and that was earned under the Portola's collaboration with Novartis, which was terminated effective July 1, 2012.

Total operating expenses for the second quarter of 2013 were $24.5 million compared with the operating expenses of $16.1 million for the same period in 2012. The increase in operating expenses was primarily attributable to increased investment in research and development expenses to advance clinical development of betrixaban, andexanet alfa and PRT2070.

We reported a net loss of $21.6 million, or $1.47 per share, for the second quarter of 2013 compared with net income of $49.8 million, or $1.67 per share, for the same period in 2012. Net income in the comparative period in 2012 was a result of revenue recognized upon termination of the Novartis collaboration agreement.

Cash, cash equivalents and investments at June 30, 2013, totaled $235.2 million compared with $137.4 million as of December 31, 2012. Additional manufacturing process changes for andexanet alfa, which we just discussed, will result in additional spend in 2014 and 2015. However, consistent with our projections at the time of the IPO in May, our cash on hand is expected to fund the development of our three programs including APEX 3 data, andexanet alfa into the Phase 3 study and completion of the Phase 1/2 for PRT2070.

As we continue to move all three wholly-owned programs forward, we will evaluate the value to shareholders of potential regional partnerships in addition to or in lieu of any better equity funding that we anticipate by the end of 2014, in order to fund both lead programs to the respective NDA and BLA filings.

I will now turn the call back over to Bill.

Bill Lis

Thank you, Mardi. So in summary, we were pleased with our (inaudible) to-date and believe this is an exciting time for Portola as we continue to make significant advances in each of our clinical programs. For the full portfolio of late-stage assets we are well positioned to significantly slow. During the coming months, we're focused on the following milestone. For betrixaban, we'll continue to enroll patients in the pivotal APEX study and expect to complete a futility analysis in 2014.

For andexanet alfa we expect the core data from our ongoing Phase 2 study with the Factor Xa inhibitor antidote this year XARELTO and to report data from additional Phase 2 study of andexanet alfa and other Factor Xa inhibitors including edoxaban, betrixaban, and low molecular heparin, enoxaparin. After our recent discussions with the FDA, we are moving forward to initiate our Phase 3 clinical study in andexanet alfa planned for the first half of 2014.

For PRT2070, our product candidate with potential and genetically-defined hematologic cancers, we plan to minimize the input to the FDA and initiate a Phase 1/2 clinical study in patients with chronic lymphocytic leukemia and non-Hodgkin lymphoma.

In conclusion, our timelines and key value drivers are consistent with what we can based on our IPO roadshow in May and we continue to make important progress with each of our programs.

Before I open the call to questions, I would like to welcome John Curnutte, M.D., our Executive Vice President of Research and Development who will join Mardi and me for the Q&A. With that, we will open the call for questions. Operator, please poll for questions.

Question-and-Answer Session

Operator

(Operator Instructions). We have a first question coming from the line of Jason Kantor of Credit Suisse.

Jason Kantor - Credit Suisse

So first of all, could you give us a better idea of what exactly was agreed upon with FDA in terms of what a Phase 3 might look like in your end of Phase 2 meeting, and if you could be little more specific, I guess I didn’t understand what cause your view that you are going to have to increase manufacturing expenses for the antidote program?

Bill Lis

Yes. So let me take the first question to answer your question, Jason. Let me take your first question. So, as is usual in the end of Phase 2 meeting, yesterday we discussed that we continue the ongoing discussion without our Phase 3 program and they remained consistent with what we said in the IPO. We expect to start Phase 3 program with pharmacodynamic based endpoint clinical trials of between 100 and 200 patients followed by supportive trial in patients that have either active bleeding or undergoing emergency surgery.

The final agreement for that program will come once we file and submit our final protocol later or in the upcoming months. That time we expect to come to the final agreement with the agency and expectation of starting the Phase 3 trials in first half of 2014. With respect to the manufacturing [cmp] process, I’ll turn it over to John Curnutte to comment.

John Curnutte

Good Jason. The decision how we are moving forward with the current product is that our focus is really to get this much needed product to patients as quickly as possible under this now expedited approval, a pathway to build this discussed. We want to do this in a way where we derisk the manufacturing and also move it quickly to keep our strategic advantage.

And so the product will be ready I think on time for this rapid clinical development program so that we can make it available to patients. We will then of course follow on with the additional product and those changes and what not. Again I am going to be fairly standard for biologics as we then work to improve, further improve the yield and therefore the cost of goods.

Jason Kantor - Credit Suisse

Thank you.

Operator

And next question is from the line of John Sonnier of William Blair.

John Sonnier - William Blair

Thanks a lot. And thanks for the (inaudible) Phase 3. Mardi, this may be consistent and I want to make sure that it’s consistent with your earlier timing and that is the progress of the APEX study complete enrollment in mid-‘15. I think we were assuming it would be completed with the trial in mid-’15. I am just wondering if there has been any slippage at all and whether or not that has implications for your funding status. Thanks.

Mardi Dier

Yeah, thanks, John. There hasn’t been any change with our projections with APEX, but it’s going to take enrollment in the mid-2015 time frame and no change from our funding status from what discussed previously.

Operator

And next question comes from the line of [Jeffrey Boggess] (inaudible).

Unidentified Analyst

Congratulations guys on your first quarterly close as a public company. Couple of question. First to clarify a little bit more on this FDA meeting, do you plan to apply for an SPA or for breakthrough therapy designation and could you give us a little bit more clarity on what the pivotal trial requirement is, is it just the PK/PD or do you have to do a confirmatory bleeding cessation endpoint study in order to secure the approval? And I just have a couple of other question Mardi on the finances.

Bill Lis

Jeff, this is Bill. Thanks for your question. So I think the specific designation Jeff would be defined I think will discontinue those discussions. I think the thing we do agree with the FDA that and our collaborators at J&J, Bayer, BMS, Pfizer and Daiichi is the need to get this product to the market as fast as possible.

And I think we will continue to have those discussions towards the end of the year and then we will report again if there is any specific designation that will aid in that process. But we feel very confident with what we’ve told both Jeff when we did the IPO, and that is that this will be an expedited approval process and allow us to get it to the market more quickly than a traditional development program. So I think if I remember the second part of your question, maybe you should repeat, the second part

Unidentified Analyst

What is actually going to be the filing end point for the pivotal trial? Simply (inaudible) response for the drug or is there going to have to be a bleeding cessation end point for approval.

Bill Lis

Yeah, it’s our best guess at this time, Jeff because we have to submit the final protocol. So as you may or may not know there is no final agreement that comes out at the end of Phase 2, meaning there is really disagreement on how to proceed forward in guidance on the final protocol. So again we will have to have that by the end of the year.

But again I think it is consistent with the discussions we had during the IPO and that is a PD kind of a pharmacodynaimc based approval and support a trial that will be needed whether they are called phase 3 or phase 4 post marketing study that will be needed to support the trial. If you want to call that confirmatory study of the nature, I think that’s probably fair, although we are going to need to get the exact designation and accuracy of the nomenclature over the next few months. Does that answer your questions.

Unidentified Analyst

Yeah, that’s very helpful. Mardi could I just ask you about R&D spends?

Mardi Dier

Sure.

Unidentified Analyst

So your R&D spend is stressed and I think in your Q there is some sense that it’s going to step up again. When do you think you are going to get it a [plateau] in terms of the burn required for APEX and also for the andexanet studies, thanks.

Mardi Dier

Jeff I didn't hear you, we are we going to get what, guidance

Unidentified Analyst

When you think your R&D spend is going to get a sort of quarterly plateau and

Mardi Dier

Yes, yes we certainly see from second quarter last year to this year, we've stepped up our R&D significantly and our total R&D expense for the quarter was close to $40 million, and we anticipate that we'll have, we're going into our Phase 3 with stepping APEX studies continued into 2014. We're going to start the Phase 3 for 2017 in the first half of ‘14. So we expect that spend to continue to ramp for the rest of this year and into 2014, there after we see some leveling out.

Bill Lis

And just to clarify what she said, first is for andexanet

Mardi Dier

For andexanet

Operator

Thank you. And our next question is from the line of David Friedman of Morgan Stanley. Over to you David.

David Friedman - Morgan Stanley

Hi, thanks for taking the question. In the past you guys had talked about potentially doing a sort of Phase 2 multi-dose andexanet study and I was wondering if that is still part of the plan or would you rather sort of aggregate that type of data from the Phase 3 now at this point.

Bill Lis

Yeah. No Dave we have ongoing Phase 2 studies and they do include what you would either say multiple [doses] or an infusion of andexanet alfa. Those are ongoing currently kind of the next phase of what we call the EliquisA studies. And then we plan to do the same with XARELTO, where initially it self-starts with a single bolus and then again to maintain the reversal activity, either giving multiple boluses or bolus plus infusion and that will help guide our final dosing decisions for Phase 3. Again those decisions we made between now and the end of the year in anticipation of starting the Phase 3 in the first half of 2014. So that answer your question, Dave?

David Friedman - Morgan Stanley

Yes, and do you have any sense as to when we might start seeing some of that kind of multi-dose or dose plus infusion data?

John Curnutte

Hi, Dave, John Curnutte. Yes, we're moving along very quickly with the studies and I think by the end of the year, we will be ready to release some of the top line data.

Operator

Thank you and next question is from the line of Jason Kantor of Credit Suisse. Over to you Jason.

Jason Kantor - Credit Suisse

I just wanted to ask about 2017. You talk about this being patient selection based protocol. Are you going to be genetically selecting patients in the Phase 1 portion of the study and could you speak to exactly what kind of patients you are looking to bring in to that and you call it a Phase 1, 2. Is there something special about the design or is it pretty much it's going to be standard dose escalation, dose expansion?

John Curnutte

You got that right. It's standard dose escalation initially in both CLL and B-cell non-Hodgkin's lymphoma. So that part will be as in the standard methodology to determine the maximum tolerated dose. In the course of that study, as you probably know, we are going to be exploring and probing a wide array of biomarkers and genetic markers for various genetic subtypes of the diseases. That data plus published data then will guide our selection of patients in the expansion cohorts that then follow the MTT portion. So we are planning to enrich in those expansion cohorts for these genetically determined or biomarker determine subset of the disease.

Bill Lis

Yeah. If you remember this is Bill, Jason, thanks John. We defined somewhat what those patients subtypes may look like when we did the IPO Roadshow and tried some of the mutations that we would be pursuing and then there probably will be a broader array that would be included.

Operator

Thank you. (Operator Instructions). There are no further questions, so we will now conclude the Q&A portion of the call. I would like to turn the call back over to Bill Lis for closing remarks.

Bill Lis

Thank you for joining us today and your interest in Portola. We look forward to you see in the upcoming European side of Cardiology Congress at Amsterdam in a couple of weeks.

Operator

And this concludes today’s second quarter 2013 financial results conference call for Portola Pharmaceuticals. You may now disconnect. Thank you.

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