Portola Pharmaceuticals Inc's CEO Discusses Q3 2013 Results - Earnings Call Transcript

| About: Portola Pharmaceuticals (PTLA)

Portola Pharmaceuticals Inc (NASDAQ:PTLA)

Q3 2013 Earnings Conference Call

November 05, 2013 / 4:30 p.m. E.T.


Alexandra Santos – Director, Corporate Communications and IR

Bill Lis – CEO

John Curnutte – EVP, R&D

Mardi Dier – CFO


Phil Nadeau – Cowen and Company

David Friedman – Morgan Stanley


Good day, everyone, and welcome to the Portola Pharmaceuticals third quarter of 2013 financial results conference call. This call is being recorded. (Operator Instructions)

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 third quarter 2013 financial results conference call. Joining me on the call today for the prepared remarks are Bill Lis, Chief Executive Officer; Dr. John Curnutte, Executive Vice President of Research & Development; and Mardi Dier, Chief Financial Officer.

We issued our third quarter press release earlier today, a copy of which can be found at www.portola.com in the Investor Relations section.

Before we begin I would like to remind you that various remarks we make on this call contain forward-looking statements subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied. The date of this conference call is November 5, 2013, and all forward-looking statements made on this call are based on beliefs of Portola as of this date only. Future events or simply the passage of time may cause these beliefs to change.

For a more detailed description of the risks that impact these forward-looking statements, please refer to our most recent Quarterly Report on Form 10-Q filed with the SEC. Please be aware that you should not place undue reliance on the forward-looking statements made today.

Finally, this conference call is the property of Portola Pharmaceuticals, Inc., and any taping, other duplication or rebroadcast without the express written consent of Portola Pharmaceuticals is prohibited.

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

Bill Lis

Thank you, Alex, and good afternoon, everyone. Thank you for joining us today on our third quarter earnings call.

Since our initial public offering in May we've accomplished a number of milestones that advance our goal of building a company with multiple novel drugs that we can develop and commercialize. Our three 100%-owned clinical stage assets target areas of significant unmet medical need. We remain confident in our plan to advance our programs independently, because we have proven integrated capabilities and because all of our programs target large markets that only require hospital and specialty sales teams. Let me walk you through the highlights of our recent achievements.

Most recently we completed our first follow-on equity offering, successfully raising approximately $100 million in net proceeds to position us to independently fund our late-stage pipeline beyond betrixaban and regulatory milestones in 2014 and 2015. Consistent with our message from the IPO in May, we plan to use proceeds from the follow-on offering to advance andexanet alfa to a BLA filing and expand the scope of PRT2070 in our Phase 2 proof-of-concept study to include additional cancer types.

Betrixaban, our Phase 3 oral anticoagulant, blocks the clotting Factor Xa to prevent thrombosis. We're advancing betrixaban with the goal of being the first oral anticoagulant approved for the prevention of blood clots in acute medically ill patients.

This is a multibillion-dollar market and has an estimated 22 million acute medically ill patients that are at risk for pulmonary embolism, and an estimated 150,000 of these acute medically ill patients die of PE annually in the G7 countries. This is the unmet medical need. Currently there is no approved agent to treat these patients during the period when they are most at risk for experiencing an event.

During the third quarter the independent data monitoring committee for our Phase 3 APEX study held a second safety review and recommended that the study proceed, keeping us on track to report data as planned in 2015.

Andexanet alfa, our second late-stage development candidate, has the potential to be a first-in-class recombinant protein that is designed to reverse the anticoagulant activity of Factor Xa inhibitors in patients with major bleeding or those needing emergency surgery. This quarter we reported additional positive Phase 2 data demonstrating that we can extend the duration of andexanet's activity. This provides us with the potential to treat a broader range of patients, and John will review this in more detail.

Additionally, at the European Society of Cardiology Congress we presented data demonstrating that andexanet reduces blood loss in anticoagulated animals experiencing an active bleeding event by reversing Factor Xa inhibitor activity. Our Phase 3 and Phase 4 registration studies, scheduled to begin in 2014, are designed to confirm these findings.

In August we completed an end-of-Phase 2 meeting with the FDA regarding clinical and manufacturing paths forward for andexanet, and, based on our discussions that were positive with the agency we are pursuing an accelerated approval pathway.

Early in the quarter we entered into a clinical collaboration agreement with Daiichi Sankyo to study andexanet with their Factor Xa inhibitor, edoxaban. We now have collaboration agreements in place with all of the manufacturers of Factor Xa inhibitors, including BMS/Pfizer, J&J/Bayer and now Daiichi Sankyo. We believe this underscores andexanet's importance clinically and commercially.

In October we advanced our third proprietary program, PRT2070, into the clinic. This is an oral dual Syk-JAK inhibitor that's being evaluated in a Phase 1/2 proof-of-concept study for the treatment of patients with hematologic cancers, including genetically defined subtypes, which have been difficult to treat thus far.

Finally, on a corporate front, we continue to put in place the necessary capabilities to support the growth we envision for the Company. Specifically, we appointed Mark Gossett as Senior Vice President of Commercial. He is responsible for building, leading and developing all aspects of commercial operations.

Mark comes to us with more than 25 years of experience in successfully commercializing life-saving medicines, including in the hospital setting. This also includes marketing of the multibillion anticoagulant Lovenox.

Now I'll ask John to discuss the specifics for each of our proprietary programs. John?

John Curnutte

Thank you, Bill.

We are excited to have three compounds discovered by Portola in the clinic that are targeting areas of such high unmet need.

With our ongoing Phase 3 APEX study of betrixaban, we believe we have designed a trial that has a high probability of success. First, we are evaluating betrixaban against placebo for 25 days following the initial 10 days of treatment with enoxaparin, the current standard of care.

Second, we've enriched the trial to enroll patients with the highest risk of thromboembolism, specifically those patients with an elevated D-dimer blood marker and those who are over the age of 75. Now, based on recent large randomized trials, we know with a higher level of confidence that these patients suffer the highest incidence of blood clots after hospital discharge in the standard duration of the injectable coagulation. Importantly, these studies show that Factor Xa inhibitors can effectively reduce clots.

The remaining question, then, is whether we can prevent these clots without significantly increasing the risk of bleeding. We believe betrixaban's unique properties, namely low renal clearance, lack of CYP3A4 metabolism and a long half-life, will allow it to be administered once daily and maintain blood levels within a more consistent range across patient populations. Together with the exclusion of patients with the highest risk of bleeding, these properties have the potential to minimize the frequency and severity of bleeding in the APEX study.

Therefore, we believe betrixaban, administered for 35 days compared with an average 10-day course of enoxaparin followed by placebo, has the potential to demonstrate a reduction in the rate of blood clots without increasing the risk of bleeding in our APEX study.

Our second product candidate, andexanet alfa, has demonstrated reversal of Factor Xa inhibitor activity in the clinic. Currently millions of patients are treated with Factor Xa inhibitors for short-term use or chronic conditions, and it is expected that the adoption of these anticoagulants will continue to grow.

Based on Phase 3 trial results of Factor Xa inhibitors, we expect between 1% and 4% of patients treated with these agents will experience uncontrolled bleeding, and an additional 1% will require emergency surgery annually. Based on these data, we estimate that by the year 2020 there will be approximately 500,000 hospital visits each year in the G7 countries by patients who would benefit from an antidote. Importantly, there is currently no antidote or reversal agent approved for use against these Factor Xa inhibitors.

We have previously shown greater than 90% reversal of the anticoagulant activity of Eliquis within two minutes after the administration of an IV bolus of andexanet alfa in a Phase 2 study. Now we have demonstrated that this profound reversal of Factor Xa activity can be sustained with the continuous infusion of andexanet.

In these new Phase 2 results, the activity of Eliquis was reversed by 92% at two minutes and remained reversed by 91% following a two-hour infusion. The p-value at each of these time points compared with placebo was less than 0.0001.

Additionally, after completion of the 48-day safety follow-up, no serious adverse events were observed. These data suggest that physicians may be able to address a broader range of bleeding conditions with greater control. Whether a patient requires rapid and short-acting reversal of bleeding due to a traumatic injury or requires longer reversal to undergo emergency surgery, the safety and efficacy data of andexanet appears to be consistent.

Importantly, safety data for the over 65 healthy volunteers dosed thus far with andexanet alfa across Phase 1 and Phase 2 studies demonstrated the agent was well tolerated, and, of note, with no thrombotic events or antibodies against andexanet alfa itself or against endogenous Factor Xa or Factor X.

Based on the compelling data we've seen thus far and our discussions with the FDA, we plan to initiate BLA-enabling Phase 3 and Phase 4 studies in 2014 as part of our pursuit of accelerated approval to address the unmet medical need for a universal antidote. Concurrently, we are working with Lonza to manufacture andexanet at commercial scale.

We now turn to our third product candidate. PRT2070, our oncology agent, is unique because its dual mechanism of action targets two cancer-signaling pathways in a single pill, blocking survival signals from both the B-cell receptor pathway via Syk and the cytokine receptor signaling pathway via JAK.

In vitro studies of PRT2070 have shown that the agent, through its inhibition of Syk and JAK, was active in certain B-cell lymphoma cell lines, including cell lines with growth-promoting mutations in the cytokine pathway. Marketed and development-stage therapies have demonstrated limited activity in patients with these specific types of mutations. We believe, and our in vitro data suggests, that patients with these mutations, or those patients whose cancers have relapsed on another kinase inhibitor, may benefit from a dual kinase inhibitor such as PRT2070.

In October we started a Phase 1/2 study of PRT2070 targeting patients with non-Hodgkin's lymphoma or chronic lymphocytic leukemia. The Phase 1 portion of the study will determine the maximum tolerated dose, and we expect initial proof-of-activity data in mid-2014. Thereafter, the Phase 2 study will evaluate PRT2070 in a broader group of hematologic cancers, with again a focus on subsets of patients with certain genotypes.

So, in summary, we are pleased with the progress we have made to date in each of our three major programs. We look forward to reporting additional proof-of-concept and pivotal data over the next two years.

I will now turn the call over to Mardi Dier, who will review the financial results for the quarter.

Mardi Dier

Thank you, John.

Collaboration revenue for the third quarter of 2013 was $2.8 million earned under Portola's collaborations with BMS/Pfizer, Bayer and J&J and Daiichi Sankyo, all for andexanet alfa, and Lee's Pharmaceutical, our partner in China, for the APEX study, compared with the $700,000 earned in the same period last year under Portola's collaboration with Novartis, which was terminated effective July 1, 2012.

Total operating expenses for the third quarter of 2013 were $22 million, compared with $12.8 million for the third quarter of 2012. Research and development expenses were $18.1 million for the quarter, compared with $10 million for the third quarter of 2012, as we continued to support our Phase 3 trial of betrixaban, multiple proof-of-concept Phase 2 trials of andexanet alfa and the advancement of PRT2070 into the clinic.

General and administrative expenses in the third quarter were $3.9 million, compared with $2.9 million for the third quarter of 2012, and increased primarily due to increased stock-based compensation expense and public company-related expenses. Going forward, we expect our operating expenses to continue to increase both as a result of moving our wholly owned programs through multiple clinical trials and the BLA-enabling process development work and commercial-scale manufacturing of andexanet alfa.

On our second-quarter call we discussed the transfer of manufacturing to the Lonza Group, which initially involves moving production to larger tanks and developing a lyophilized product to enable the filing of our BLA. The second phase of our manufacturing changes being conducted in parallel focuses on optimizing our production process to further improve yield and reduce cost of goods.

For the third quarter we reported a net loss of $18.6 million, or $0.53 per share, compared with a net loss of $11.5 million, or $8.38 per share, for the third quarter of 2012.

Cash, cash equivalents and investments as of September 30, 2013 were $218.9 million, compared with $137.4 million as of December 31, 2012. As Bill mentioned, subsequent to the quarter end we completed a successful follow-on offering of common stock, which raised approximately $100 million in net proceeds for the Company. Together with the cash, cash equivalents and investments on hand, we are in a strong position to achieve our goal of retaining full rights to all three of our clinical assets and progress them to important milestones planned for the remainder of 2013 as well as into 2014 and 2015.

I will now turn the call back over to Bill.

Bill Lis

Thanks, Mardi.

Looking ahead, we expect to execute on several value-creating milestones during the remainder of this year and through 2015.

For betrixaban, we expect to complete a futility analysis of the APEX study in 2014. Additionally, we are currently on track to complete enrollment and report Phase 3 data in 2015.

For andexanet alfa we expect to report data from two additional Phase 2 studies over the next two quarters. These studies are with the Factor Xa inhibitor Xarelto and the low molecular weight heparin Lovenox. Based on our discussions with the FDA, we are planning to pursue an accelerated pathway. We expect to reach final protocol agreement with the FDA and initiate our label-enabling studies in the first half of 2014.

For PRT2070 we expect to report proof-of-activity data from our Phase 1/2 study in 2014.

In closing, we are very pleased with our recent accomplishments, and we believe this is an exciting time for Portola. We have multiple programs that target multibillion-dollar markets, and in these markets we have a unique opportunity to advance the fields of both thrombosis and hematologic cancers. Importantly, we are well capitalized to advance these programs independently through late-stage milestones.

And with that, we'll open the call to questions.

Question-and-Answer Session


Ladies and gentlemen, we will now open up the lines for the question-and-answer portion of the call. (Operator Instructions). And our first question will come from the line of Geoffrey Peorges, Sanford Bernstein.

Unidentified Speaker

Oh, hi. This is Wenshy [ph] for Geoff. Congratulations on the quarter as well as on the hiring of Mark Gossett. I have two questions, right? So first was the building of your commercial infrastructure, right, so what are your current thoughts in terms of the commercial strategy and infrastructure for betrixaban versus for the antidote? So how much do you think it's going to be pivoted toward one versus the other? And do you have any latest thoughts on that?

And the second question is regarding the antidote, specifically Phase 4 confirmatory study, right, so can you give a little bit more color on this specific population, right? Presumably this is going to be in patient population, how large it's going to be and what's the timeline and such. Thank you very much.

Bill Lis

Yes, thanks, Wen. This is Bill. I'll start, and then, John, if you want to add to it. First, from the commercial standpoint, the good thing, Wen, is from a sales team's perspective, the same sales force that will commercialize betrixaban will be the same sales force that will commercialize andexanet. It's just a matter of having about – we estimate probably about 100 to 125 sales representatives are required to commercialize either one of these agents independently, and so how large would it be if you had two products?

Suffice to say there's somewhere between 1,200 and 1,500 hospitals that will drive – in the United States will drive about 80% of all of the business. We know the size of what those sales forces will be. Those are the sales forces consistent with the ones that I've been involved with that launched the product of Lovenox and Integrilin with COR Therapeutics or Natrecor at Scios.

And so they're somewhere between 100 and 150, and we think that size of a sales force can promote both products. And, again, that's the leverage that we get from having two is what we call synergistic or complementary programs together.

Let's now go on to the Phase 4 program. We're still in discussions with the – or I should say final discussions with the FDA. We believe this will be hundreds of patients, not thousands of patients. Let me just make that statement.

And we believe that the endpoint that we will look at will be some type of cessation of bleeding in one of two patient populations, either those that are having excessive ongoing major bleeds that could be GI bleeds or other, and then the other patient population may be patients who are on a Factor Xa inhibitor and requiring emergency surgery. I think at this time we're just trying to decide as to which way we will pursue it.

Again, we're having good discussions, and I think as I began with, this – we believe these patient studies will be hundreds of patients, not thousands of patients, to support the confirmation of the approval of these – of the drug. John, do you have anything else to add?

John Curnutte

No, Bill. I think that's a great summary. Thanks.

Unidentified Speaker

Thank you.


Your next question will come from the line of Phil Nadeau, Cowen and Company.

Phil Nadeau – Cowen and Company

Good afternoon. Thanks for taking my question. John, first one for you on the Lovenox Phase 2 trial. What should we expect the reversal to look like there? Is there any reason to think that the PK or depth of reversal will be different for Lovenox than the direct Factor Xa inhibitors?

John Curnutte

Thanks, Phil. That's a very good question. We're in the middle of investigating it right now. But from a theoretical point of view we would expect, given that Lovenox will block about 80% of the total – 80% of the total anticoagulant effect will be through its effect on antithrombin III and Factor Xa that we will see at least 80% if not more reversal. As you know, the other 20% is due to its effect on thrombin. So we are exploring that right now.

But what's different than the normal Factor – the direct Xa inhibitors is that the reversal that we've seen in animals and that we're now seeing in humans is in fact mediated through antithrombin III. So the kinetics are different. You might predict that they might be more favorable. The system is quite sensitive in animal models to the andexanet.

So we're very much as you are all looking forward to seeing the complete data set from our Lovenox studies. But we have theoretical reasons and animal reasons to believe that the reversal will be quite extensive and may be fairly prolonged.

Phil Nadeau – Cowen and Company

Okay. Great. And on the Phase 3 – I appreciate that you're probably or you're certainly still in discussions with the FDA over the final protocol there, but can you give us your most recent thinking on dose? What dose do you think will be most appropriate for those studies? And will it be a single dose or will you also have an infusion component to the Phase 3s, as well?

Bill Lis

Yes, thanks, Phil. This is Bill. We're really just in the midst of dosing decisions, and, as you know, they're pretty critical. We are going to look at – I think before the final dosing decisions we'll look at the some of the final Phase 2 data that we're going to get. As you know, we're in the midst of the ongoing Xarelto study, and I think some of that data will inform us.

I think suffice to say, and we've been pretty consistent, I think at the end of the day we're talking about multiple, if you look at the Factor Xa inhibitor space, multiple drugs, right, Phil, with multiple doses, right, so correlating to multiple concentrations of the drugs for individual patients. And then each of the Factor Xa inhibitors has a different dose for each of the indications.

We think we can probably cover about 80% or more of all the potential situations either in the surgical setting or in an active bleeding setting with all of the anticoagulants at varying doses with probably two different dosing regimens. And that would include a high, probably a high dose and a lower dose. And then you'd probably see the opportunity to have a bolus only and a bolus plus infusion, because, again, some of the patients in clinical scenarios will just require a longer period of drug. And, again, that's why in Phase 2 we started with a bolus only and then went to an infusion.

So consider it like this, a high dose, a lower dose and then a bolus and a bolus plus infusion to take care of a different duration of anticoagulation. Does that make sense?

Phil Nadeau – Cowen and Company

Yes. Yes, that's very helpful. And then just one last question. The ASH meeting's coming up. Is Portola going to have any data at the ASH meeting?

John Curnutte

Yes, Phil, this is John. We have a poster on the rivaroxaban data. It will be most of the data from that Phase 2 study. It won't be fully complete. But it will be an extensive data set we'll present I believe it's on Monday afternoon, Monday evening at ASH, which I think is December 9, I believe.

Phil Nadeau – Cowen and Company

Okay, great. Thanks for taking my questions.


(Operator Instructions). Your next question is from the line of David Friedman, Morgan Stanley.

David Friedman – Morgan Stanley

Hi. Thanks for taking the question. Just two quick ones. The first is around the futility analysis for betrixaban. Is there anything that you can say in more detail around the cutoff for futility or timing of it?

And then for andexanet, just a question around manufacturing. The first is have you gotten a sense of where you think cost of goods will be when you would be ready to launch that, if that's – is that the same or different than sort of during the IPO process where you talked about that? And then the other is have you settled on how you're going to actually supply the drug, meaning in single lyophilized vials versus something more central in a kind of a big pharmacy bulk-type setting and whether that actually matters as a variable?

Bill Lis

Yes, Dave, this is Bill. Let me start, and then I'll let John. I think first let me hit your last question. I think a lot of those decisions are still being made. We know we have a lyophilized formulation now. That's in Phase 3 clinical trials. We'll have single vial. Whether that will be what we eventually commercialize with, that decision will have to – is yet to be made. So that's first, or your last question.

Let me get to your first question, and maybe a clarifying question for you. When you said cutoff point with respect to the futility analysis, can you clarify what you meant, Dave?

David Friedman – Morgan Stanley

Yes, I mean, is there something you can disclose around a specific bleeding rate imbalance or efficacy imbalance that would signify futility?

Bill Lis

Yes, so, Dave, there's not specifics that are done. Again, we're going to do just – we're going to take a very precedented approach to this, so this is very consistent with what was done in all the other Factor X inhibitor trials, all the antithrombotic trials that we've conducted previously as far as the team here.

And just before the futility analysis first we'll take a look at the blinded aggregate data. I think we'll give some guidance as to whether based on that we think the current sample size is good enough or it'll need additional sample size to it. Again, that's fairly common. We'll take a look at that at the time.

There is no specific cut point, though. Remember, there will be a team of statisticians that will be part of the group that does the futility analysis, and this futility analysis will be done when just a little bit over half of the clinical trial is enrolled. And so, again, they'll take the data from the clinical trial, they'll do some projections with it from a statistical standpoint and try to project out with still a number, quite a few thousand patients, still expected to enroll in the clinical trial, where are the probabilities.

So you still have a fairly wide margin, confidence margin there, right, because you're – if you're talking about 6,800 patients we're looking at somewhere around 4,000 or so that'll have been enrolled when we do the futility analysis. So hopefully that gives you a sense of how it's done without going into specific details.

David Friedman – Morgan Stanley


Bill Lis

And that's the same, again. Primarily it's for efficacy at that point, because we have completed two – to date we have completed two data monitoring committee safety analyses, and there'll likely be at least one more if not two more that will be conducted prior to the futility analysis, and that data will be fed in. But certainly that'll be combined so that – and they'll be taking a look at an overall net clinical benefit, as well.

John Curnutte

Good. And, Dave, this is John. So your question about the sense of where the cogs are and whatnot, so there have not been any changes since our last earnings call in August in our evaluation. What I can say is that the tech transfer to Lonza is going very well. The production systems at [bent] scale getting ready for the transfer to the large tanks are right on schedule and right along the lines we were expecting. So we're very pleased with the progress.

David Friedman – Morgan Stanley

Great. Okay. Thank you.

Bill Lis

Did you want to clarify at all how the dosing administration or the vials and...

John Curnutte

Yes, the – yes, I think you covered it, but just right now what we're doing is we will have relatively small vials with a smaller amount of drug for the Phase 3 trial, as we are – needed to lock down that process for lyophilization, which is now all accomplished and we now have the lyophilized procedure all buttoned up and ready to go. But we, without knowing the full range of doses, we made smaller size vials.

We built into the process, though, the ability, if, as Bill said, we decide to go with lyophilized vials for each patient, a range of sizes that would be supported by our method. So we've not really determined that size yet, Dave, but right now our current thinking is that we would go with lyophilized vials where a given patient could be treated with one, two or three vials of the drug depending upon the dose needed and the severity and duration of bleeding.

David Friedman – Morgan Stanley

Got it.


Ladies and gentlemen...

John Curnutte

And yes, and just one other thing, in the current plan would be to have it simply refrigerated. It would not require special storage other than that.


And, ladies and gentlemen, at this time that will conclude the Q&A portion of the call. I would like to turn the call back over to Mr. Bill Lis for any closing remarks.

Bill Lis

Just thanks, everybody, for joining us. We – for those of you that attend either the American Heart Association scientific sessions that will take place in November or the American Society of Hematology scientific sessions which will take place in December, we would look forward to seeing you there.


Ladies and gentlemen, this concludes today's third quarter 2013 financial results conference call for Portola Pharmaceuticals. You may now disconnect, and have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.


If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!