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Portola Pharmaceuticals, Inc. (NASDAQ:PTLA)

Q1 2014 Earnings Conference Call

May 12, 2014 4:30 p.m. ET

Executives

Alexandra Santos - Director, IR

Bill Lis - CEO

John Curnutte - EVP, Research & Development

Mardi Dier - EVP and CFO

Analysts

Jason Kantor - Credit Suisse

Len Sheehy - Bernstein

David Friedman - Morgan Stanley

Christina Kanute - Cowen

Operator

Good day, everyone, and welcome to the Portola Pharmaceuticals First Quarter 2014 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 we will provide specific instructions at that point.

I'd now like to turn the call over to Alexandra Santos, Director of Investor Relations at Portola Pharmaceuticals. Please proceed.

Alexandra Santos

Thank you, and welcome to Portola's first quarter 2014 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 first quarter 2014 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 that we make on this call contains forward-looking statements subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied. 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 our 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 or other duplication or rebroadcast without the expressed written consent of Portola Pharmaceuticals is prohibited.

With that, I'll turn the call over to Bill Lis, CEO of Portola.

Bill Lis

Thank you, Alex. Good afternoon, I'd like to thank everybody for joining us on the call today. It's been a productive quarter for Portola. We've executed on a number of milestones, and we have several value-creating milestones to achieve between now and the end of the year.

We remain confident we can accomplish our goal of bringing to the market three wholly-owned and potentially groundbreaking treatments for patients with blood clots and blood cancers. We have a clear strategy focused on biomarker and genetic approaches to clinical development. We believe these strategies increase the probability of clinical, regulatory and commercial success of our pipeline products.

Each one of our therapies has the potential to adjust a significant unmet need. I'll start with betrixaban. Betrixaban is our potentially groundbreaking oral Factor Xa inhibitor. This is currently enrolling in a pivotal Phase 2 trial called APEX. Betrixaban is the only APEX study for prevention of Venous Thromboembolism or VTE in medically ill patients starting in a hospital and continuing following discharge.

We have two goals with this program. First is to address the limitations of the current in-hospital standard-of-care enoxaparin, and second is to address the major unmet medical need for an anticoagulant where there is none approved and that is in an after hospital discharge setting.

Betrixaban has distinct properties that may enable it to demonstrate efficacy without a significant increase in major bleeding that was seen in previous clinical trials in this population with other Factor Xa inhibitors, such as XARELTO.

Phase 3 APEX study is unique. It's unique because patients are identified and enrolled using a biomarker. The FDA and EMA support this approach, and we believe it increases our probability of success. This approach can also help us commercially by allowing physicians, [in pairs] (ph), to easily identify patients most likely to benefit from betrixaban.

If we are successful, betrixaban has a very compelling value proposition. Betrixaban would be the only anticoagulant available to address both the in-hospital and post-discharge segments of this very large market that has potential to lower the influence of the life-threatening blood clots, and in these patients doing it with a reduced daily price compared with the standard-of-care, enoxaparin. And we can do this with about a 150 or 150 person sales force that is hospital-based.

Now, I'll turn to andexanet alfa. This is our first-in-class recombinant Factor X inhibitor antidote. It's designed to reverse the anticoagulation activity in patients suffering a major bleed or those requiring an emergency surgery. This compound is targeted to be our first approved product. The FDA granted andexanet formal breakthrough therapy designation and has agreed to an accelerated clinical development path. Currently there is no true reversal agent for millions of patients who are treated with Factor Xa inhibitor. And as the adoption of Factor Xa inhibitors continue to increase, so does the need for an antidote.

We're now on track to be able to track the growing number of Factor Xa inhibitor patients hospitalized either due to a major bleed or those requiring urgent surgery, and John will review this in just a moment.

And finally, cerdulatinib; our oral, dual Syk-JAK kinase inhibitor for patients with leukemias and (indiscernible) is in a Phase 1/2 study. Cerdulatinib as a single agent targets two signaling pathways for cancer cell growth. Our development plan and our commercial strategy focuses on difficult-to-treat patients not addressed by other agents. These are patients that can be identified by the subtype or genetic mutation. And as we've seen in the field of oncology, targeted therapies can address critical unmet medical needs and have significant commercial opportunities.

Now, let me walk you through our recent achievements; first, betrixaban. During the first quarter we continued our progress in enrolling patients in our pivotal Phase 2 APEX study. In March we had our highest enrolling month ever and achieved our target number of sites. APEX is now 40% enrolled in more than 430 active sites worldwide. We are on track to complete the utility analysis in early 2015, and complete enrollment by the end of 2015. Our projections for enrollment factor in the usual seasonality enrollment over summer month and holidays.

Importantly the pool's blinded aggregate event rate in APEX remains on track with our expectations. What does that mean? It suggests we're enrolling the right patient. In March the independent data safety monitoring committee had its first scheduled Phase 2 review and recommended that we proceed with the study as planned. Also in March, The American Heart Journal published a paper reviewing the design and rationale of the APEX study.

Turning to our achievements for andexanet; and we have several. We executed two Phase 3 clinical collaborations agreement this year that are providing funding to our pivotal program. We initiated a Phase 2 proof-of-concept study to evaluate andexanet alfa as a reversal agent for edoxaban, the Daiichi Sankyo Factor Xa inhibitor. We expect to report data from addition of Phase 2 studies in the upcoming months. We strategically revised our manufacturing plan and continue to expect to file a Biologics License Application or BLA at the end of 2015. John will review the details of this.

And finally just this morning we announced the initiation of our second of two Phase 3 clinical trials in andexanet under our accelerated approval pathway. These studies are evaluating the compound safety and efficacy using validated biomarkers consistent with our Phase 2 study. One study is with Bristol-Myers Squibb and Pfizer's Factor X inhibitor, Eliquis. And the second study is with Bayer and Johnson & Johnson Factor X inhibitor XARELTO. Initial data from our Phase 3 trials are expected in the fourth quarter of this year.

I'll now finish with cerdulatinib, our Phase 1/2a clinical study in patients with hematologic cancer is progressing. We have advanced into the third cohort of the dose escalation phase of the study. Initial Phase 1 data have been accepted for presentation at the American Society of Clinical Oncology at ASCO Annual Meeting.

And finally, we have strengthened our board this quarter with the appointment of John Johnson. John is currently the Chairman and President, CEO of Dendreon. John was formerly CEO of Imclone, and formerly a company group chairman of Johnson & Johnson. John's experience and track record will serve Portola well as we advance our compounds in late stage development and commercialization.

Now, I will turn the call over to John Curnutte, our head of R&D to provide more details about each of our clinical development programs. John?

John Curnutte

Thank you, Bill. Let me start with betrixaban, our oral once-daily Factor Xa inhibitor that has been studied for the prevention of VTE in acute medically ill patients. Our goal with this program is to address two significant and as yet unsolved problems in medical patients who are at high risk for potentially fatal blood clots. First are the limitations of the current in-hospital standard-of-care enoxaparin. This was a costly injectible agent associated with an increase in bleeding, injection site hematomas and variability in blood levels due to its high renal clearance.

Second, over 50% of the life-threatening blood clots occur following hospital discharge where there is no approved therapy. We believe that betrixaban can address both of these problems. Its success with this could benefit the more than 14 million acute medically ill patients at extended risk for VTE in the hospital and the post-discharge seg.

Now, other novel oral Factor Xa inhibitors have been studied in this population including XARELTO in the MAGELLAN study. XARELTO was effective that was associated with the significant increase in the rate of major bleeding. Unlike these other Factor Xa inhibitors, betrixaban's differentiated properties make it particularly well suited for acute medically ill patients, more often elderly, frail, renally compromised in taking multiple concomitant medications.

These properties of the drug include a 20-hour half-life for true once-daily dosing, the lowest renal clearance in the class in the lack of CYP3A4 metabolism, which reduces the risk for drug/drug interactions.

Betrixaban is now being evaluated in a global pivotal Phase 3 study called APEX, which is designed to demonstrate superiority of extended duration of betrixaban compared to the in-hospital standard-of-care enoxaparin.

The study uses biomarkers to identify and enroll patients most likely to benefit from therapy. Specifically these patients have elevated levels of D-dimer in protein fragments present in the blood after clotting, more patients who are over the age of 75. While there have been numerous publications highlighting the role of these two prognostic markers in identifying patients at risk of VTE, we've met with the FDA and the EMA to discuss our strategies, and they're both supportive of the APEX approach.

We believe betrixaban could become the first therapy approved for VTE prevention in both the hospital and post-discharge settings by reproducing the efficacy that has been established with this class of agents, but without the significant increase in rate of major bleeding seen in this population.

Now, let me turn to our Factor Xa reversal agent, an FDA designated breakthrough therapy, andexanet alfa. There is an urgent unmet need for Factor Xa reversal agent, and we are working to bring andexanet alfa to market as quickly as possible for the benefit of patients. The rate of bleeding associated with Factor Xa inhibitors was relatively low. However, as the number of patients on these novel agents has increased, so has the number of hospital visits by patients who need an antidote.

Let me give you some numbers. In the 12 months through June 2013 there were approximately 75,000 U.S. patients on Factor Xa inhibitors who presented to the hospital with bleeding. Of these, approximately 50,000 were on enoxaparin and 25,000 were on oral Factor Xa inhibitors. And note that this includes only those patients who administer these agents in the outpatient setting. Moreover it does not include Factor Xa patients that require emergency surgery. So we expect the total number of patients who may benefit from an antidote to grow to approximately 500,000 in the year 2020 in the G7 countries.

Now, in the first few months of this year we advanced the clinical development program substantially with the initiation of two Phase 3 studies to evaluate the efficacy of andexanetin in reversing the anticoagulant activity of Eliquis or XARELTO. In the first part of the study, healthy volunteers are given Eliquis or XARELTO daily, and then randomized to andexanet alfa or placebo administered as an IV bolus.

In the second part of each study, healthy volunteers will be randomized to receive andexanet alfa or placebo administered as an IV bolus followed by continuous infusion. We're using biomarker endpoints agree to with the FDA for these studies things support the potential for accelerated approval of andexanet alfa. These endpoints include anti-Factor Xa levels, plasma free fraction of the anticoagulant in thrombin generation. The first date of readout from these studies is on track for year end with additional data readouts expected in the first half of 2015.

Also during the first quarter we also completed our Phase 2 proof-of-concept study with enoxaparin, a low molecular weight heparin. These results have been accepted for presentation at the 60th Scientific and Standardization Committee Meeting of the International Society on Thrombosis and Haemostasis or ISTH on June 25. We're pleased to share with this data submission received distinction as the top rated abstract in this category.

Additionally we initiated a Phase 2 study with andexanet alfa in the Factor Xa inhibitor edoxaban. This randomized double-blind placebo-control Phase 2 study is similar in design to our other Phase 2 studies. And it will evaluate andexanet's ability to reverse the anticoagulant effects of edoxaban in healthy volunteers. We expect to have data from this trial later this year.

Now, with regard to manufacturing, we've made a change to our plans for commercial launch following our first engineering run at Lonza. The run successful produced drug substance that met our comparability specifications, but it did not achieve the yield we expected. So, we need some more time to lockdown the process. This will not affect our long-term scale of plans with Lonza, but it would have an effect or an impact on our BLA timeline for commercial production. Therefore we'll continue our ongoing work and expand our capacity at CMC Biologics and use this product to support BLA on our current timeline in 2015.

This was supported by both the FDA and EMA as it allows us to use the same process we've used for the last three years for the clinical drug supply. Of course this may also reduce our regulatory risk. And our original plan can support broader worldwide supply through Lonza with optimized COGS approximately 24 months following the initial BLA filing remains the same.

Now, turning to cerdulatinib, our oral, dual Syk-JAK inhibitor; this agent blocks the B-cell receptor pathways via Syk and cytokine pathways via JAK 1, 3 and TET 2. Both of the pathways contribute to tumor cell growth and survival in certain hematologic malignancies.

We're evaluating cerdulatinib in an open label multi-center Phase 1/2 study in patients with chronic lymphocytic leukemia and non-Hodgkins lymphoma, and we are now in the third cohort in the doze escalation part of the study. As Bill mentioned, Phase 1 PK/PD data from our early patient cohorts has been accepted for presentation at ASCO later this month.

In the Phase 2 portion of the trial we will be building upon the data we are still generating to identify the characteristics of the patients who may respond to cerdulatinib. Based on the preclinical and clinical data thus far, we believe these patients include dose with CLL and DLBCL, particularly subtypes or certain genetic mutations that alter cytokine's signaling or cause resistant to other targeted therapies. We anticipate having both additional data from the Phase 1 portion of the study as well as the initiation of the Phase 2 study by later this year.

Altogether we have made significant progress in advancing the clinical development of our three innovative programs, and we are encouraged by the potential of these compounds to change clinical practice.

Now, I'll turn the call over to Mardi, who will review the financial results for the first quarter.

Mardi Dier

Thank you, John. In the first quarter we executed two Phase 3 clinical collaboration agreements to provide development funding for andexanet alfa without relinquishing any of our rights to the asset. Agreements are with BMS-Pfizer and J&J-Bayer for Phase 3 clinical studies of andexanet w Eliquis and XARELTO respectively. Both agreements provide for upfront and milestone-based payments to Portola.

Collaboration revenue recognized for the first quarter of 2014 was $2.4 million earned in the Portola's multiple collaborations with the manufacturers of the Factor Xa inhibitors. Collaboration revenue for the first quarter of 2013 was $3.1 million.

Total operating expenses for the first quarter of 2014 were $33.4 million compared with $20.8 million in the first quarter of 2013. So, total operating expenses for first quarter of 2014 included $2.3 million in stock-based compensation expense compared with $700,000 for the first quarter of 2013.

Research and development expenses were $28.2 million for the first quarter of 2014 compared with $17.7 million for the first quarter of 2013 as we continue to support our Phase 3 APEX study of betrixaban, multiple Phase 3 and Phase 2 studies of andexanet alfa and the Phase 1/2 clinical study of cerdulatinib.

General and administrative expenses for the first quarter of 2014 were $5.2 million compared to $3 million for the same period in 2013. This increase was the result of greater stock-based compensation expense, increased headcounts as the part of the growth and public company-related expenses.

For the first quarter of 2014 we reported a net loss of $30.7 million or $0.75 net loss per share compared with the net loss of $18.1 million or $12.94 net loss per share for the same period in 2013. As a remainder, there were approximately 41 million shares used to compute net loss per share in the first quarter of 2014 compared with only approximately 1.4 million shares used to compute net loss share for 2013.

Importantly, we have a strong cash position. Cash, cash equivalents and investments as of March 31, 2014 totaled $305.7 million compared with $319 million as of December 31, 2014.

We're currently reviewing the impact that our new manufacturing strategy will have on our 2014 expenses and cash flow; however, we do not expect any material change in the guidance we provided previously.

Additionally, we continue to evaluate a number of strategic financial levers that we have available to us to support our capital needs, and we will provide more information on this in the following upcoming data readouts throughout the year.

I'll now turn the call back over to Bill.

Bill Lis

Thanks, Mardi. So, looking ahead we have many short and long-term value drivers with each of our program within the next two years for betrixaban. We expect to conduct additional plan data safety monitoring committee reviews for the APEX study, complete the APEX study's utility analysis in early 2015, and complete patient enrollment by the end of 2015 in the top line results available shortly thereafter.

For andexanet alfa, we expect a number of Phase 2 milestones. They're reporting Phase 2 proof-of-concept data with enoxaparin at the ISTH meeting this summer, and present the full dataset from Phase 2 study with Eliquis at the European Society of Cardiology Congress in August, report Phase 2 proof-of-concept data with edoxaban in 2014 and initiate proof-of-concept study with betrixaban in 2015.

We'll also have a number of Phase 3 milestones for andexanet. We'll pull data from the first part of the Phase 3 study on time in the fourth quarter of 2014. We'll report data from the second part of the Phase 3 study on time in the first half of 2015, and we expect to initiate our Phase 3b for confirmatory study on time in late 2014 and early 2015 offsetting the space to file a BLA for conditional approval under the accelerated approval pathway at the end of 2015.

For cerdulatinib, we expect to present PK/PD data from early patient cohorts at ASCO in June, and we expect to pull proof-of-concept data from the Phase 1 (indiscernible) 23:30** NHL trial in patients with refractory non-Hodgkin's lymphoma or chronic lymphocytic leukemia later this year.

In conclusion, we believe we have a compelling foundation for continued growth. We're targeting multibillion dollar hospital and specialty-based markets with our three wholly-owned potential life saving treatments for patients that have thrombosis or hematologic cancers. Our strategy is to take compounds with validated mechanisms of action, advance them in undeserved indications and increase the probability of success with the biomarkers and genetics to drive development. We believe this differentiates us as a company and we look forward to advancing our programs and reporting additional proof-of-concept and pivotal Phase 3 clinical trial data this year and next year.

I'll now open the call to questions with the operator.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Jason Kantor with Credit Suisse. Please proceed.

Jason Kantor - Credit Suisse

Great. Thanks for taking my question. I wanted to just ask a little bit more about the manufacturing, I guess what impact do you expect that will have on your capacity, I guess what will your capacity be at launch? Do you expect to be able to fulfill the market needs? What can you say about the impact of going with the current process in terms of your cost of goods? And then, what is going to be different? What do you need to do to make the process at Lonza actually function along the timeframe that you now set out?

Bill Lis

Well, Jason this is Bill, I'll answer the first, and then John can pick it up. So, you have asked probably three or four questions in there. So maybe I'll try to give you a top line answer and then we can get down to the specifics of it.

I'd look at it this way, what we decided to do, as John said, after we got the first Lonza 10,000 meter run, we assessed it. Again, we hit comparability. What we try to accomplish the year with a bit lower than we had thought. And so in order to hit the BLA we on our current timeline we know we have to rush to lockdown the process with Lonza. So therefore we look to our colleagues at CMC Biologics to stay on track. Again, if you think about what we're trying to do from a company standpoint, it's really to get this market as soon as possible to the market to address the unmet medical need.

So what did you exchange here? What stays the same? What stays the same is the current timeline and the BLA. What stays the same is the long-term, right, the long-term plan not only for cost of goods, but also the supply that we need to have. What has changed? And what has changed is what you -– I think alluded to in one of your questions, that is what will you supply at launch, and then what we'll supply long-term m the cost of goods?

So, at launch we have basically the same cost of goods that we have planned to have. We'll just have a little less supply, and we will have that little less supply for probably around six months, maybe one would say six to nine months because what we're doing is we're using the capabilities I think the Biologics has now for that initial launch phase and then up until we can transfer to the long-term commercial supply chain at Lonza, which we have maintained. It's probably around 24, we previously said. I know we said somewhere around 18 to 24 months falling in initial BLA. What's good in that also has changed. If you look at some of the silver lining, okay, so you have lower supply for the first six months or so of your launch. What do you gain from that? The other thing we gained from that is potentially we think a higher probability of success for the BLA because we are using the same commercial -- we are using the same supply process and manufacturing process that we've used for the last three years to generate all of our clinical development supply. So, what we are now doing is that the launch will be with basically the same drug supply that we've used in the clinical trials. So I know that was a lot of answers, but I think even for -- probably the three or four questions in yours. So I hopefully I've kind of covered all the bases.

Jason Kantor - Credit Suisse

Could you clarify just one bit of timing on that? You said you may be a more limited supply for the first six to nine months but you also said could be up to 24 months from the time of the BLA filing until the time the Lonza materials come online …

Bill Lis

Yeah. So, the Lonza, as you know -- so what you have to factor in there is you got to factor in the launch or the BLA filing. It takes time to get the BLA approved. And then your Lonza material is coming in thereafter. So I think you have to look at it at a timeline from the fourth quarter or the end of 2015 for the BLA filings. And then look at the launch with the Lonza material sometime in, say, 2018, late 2017 I should say or 2018. So was that consistent with Jason's memory? We've always said there is two stages for this. Remember we talked about it before. We just thought there was two stages we are going to kind of occur at Lonza, now they are occurring at CMC biologics, and then to Lonza. Does that make sense?

Jason Kantor - Credit Suisse

It does. Thank you.

Bill Lis

Yeah. So just think of that, the only thing that has really changed is that the time from the BLA launch and then consider that the launch actually occur in 2016, and then for around six months thereafter and maybe long, we are saying maybe six to nine months, that period there, that's when you have a lower supply of drug than we have planned to. We still believe we can meet many of the goals that we achieved. And a lot of that is going to dependent on markets. Remember, when you have -- can you supply the -- we have to remember that we are still sitting around a year and a half two years from now rather when we launch. And we have to look at -- we've to take a look at how much supply is really going to be required then to (indiscernible). So we will continue to make that assessment. John, do you want to …

John Curnutte

Yeah. Jason, let me just add a couple of points. It's John here. As Bill said, our number one goal here is to get this out to patients. And actually as we've done quite a bit of work on there even with the initial waiver supply, we've learned quite a bit on in terms of how to target it to certain kinds of hospitals where we are learning where these bleeds are tending to show up. So I think we are going to be able to help hundreds of patients very quickly with this launch. The other thing is that really for the longer term, lower cost of goods, as Bill said, the timelines have really not changed. And one of the things that is also a huge positive here is that we have been successful in the TET transfer. And if you think about TET transfer, it really has four parts. It has transferring it to bench scale at Lonza and then moving it up to the 10,000 liter scale. In each of those steps, in and of itself, you need to talk both about comparability and yield. We've hit on three out of the four. We've been able to generate very comparable material both at bench scale and a 10,000 liter scale.

We've had very good yield that bench scale we are simply trying to solve for that last part of the square which is the higher yield that we want at the 10,000 liter. But I think we are right now in a position to achieve that and then really the lower cost of goods will be really a set of changes to that now base process that will allow us over the subsequent time to be able to bring in large quantities at a much lower cost to make the drug even more widely available to patients.

Jason Kantor - Credit Suisse

Thank you.

Operator

Your next question comes from line of Geoffrey Porges with Bernstein. Please proceed.

Len Sheehy - Bernstein

Hi. This is actually Len Sheehy here for Jeff. I have two questions. One is a follow up on manufacturing Just to clarify, right? So, you are expecting to launch with the CMC Biologics materials, right? So, can you explain a little bit more about the transition between the clinical process to a Lonza commercial process, right? So when will the comparability study take place? And would you need additional approval from the regulatory agencies and do you envision any kind of disruption as you are first launching with one process and then you are kind of switching -- while you are on the market through another process.

Bill Lis

Good question. And again that's one of the things that has not changed. We have always said that we were going to launch with one process and then file a supplemental BLA for the second process. So that's -- because again that Lonza process that we are expecting for the optimized cost of goods and a larger global supply, that has not changed, there is no change in the plan for that process. So that remains the same if that makes sense, and then we've always communicated that. The only thing we are fixing for, again, is that as I mentioned, the kind of first six to nine months of commercial launch, we want to do it on the timeline that -- so we want to do it in 2015 which cause us to stay with CMC Biologics for that period of time for launch.

So, none of the things that we were planning on doing in transitioning the process, the only good thing is, this is the upside of it. The good thing is we are not going to a new process for commercial launch. We are staying with the same process we currently have today for commercial launch. So in one sense we are really not taking a three step approach, we are really taking a two step approach to the manufacturing. Is that fair to say, John?

John Curnutte

Absolutely. And the key thing you asked about comparability, Len, this is the same drug we've been using in both the FDA and EMA, view our current drug substance drug product as being the gold standard now. So we are basically -- there is no comparability testing that we have to worry about with regard to our initial launch.

Bill Lis

Yeah. And that's why we believe that in the probability in excess. Now, we have to show comparability with that Lonza material, and I think that was the second part of your question, Len. So again, I think with respect to that, I just think we have more focus, more time to get that process right, so that when we file the supplemental BLA there can be a good transition to that broader clinical supply. We've always said from the start whether we will have to do additional clinical trials to support that material and that process remains to be seen. And again that's now and has always been several years or a few years after our initial BLA file.

Len Sheehy - Bernstein

Right. So would it be fair to say that the timeline for a Lonza process is delayed six to nine months versus your initial expectations. So that's why (indiscernible)?

Bill Lis

No, it's not. The process for the Lonza, what we call our Generation 2 is on the same timeline. Basically what we did is we took out a little bit of a transition to an earlier Lonza process, we've kind of taken out of the equation. We kind of take an interim step. We take an interim step out.

Len Sheehy - Bernstein

And another question about Betrixaban; we know that J&J recently started the MARINER study, which looks at a similar indication and -- but they are only focusing on post-hospital discharge. Do you see this as a positive in terms of affirmation for the indication or do you see it as more potential potentially competition potentially coming in? How would you compare and contrast your trial design target patient population versus MARINER? Thanks.

Bill Lis

Yeah. It's a very good question. So we do see it as further confirmation of the large market opportunity and the large unmet medical need. Remember, this is the second go at it for J&J and Bayer for this indication after they had some success that really failed in their first attempt. So that gives it the affirmation that it's a large market and large unmet medical need. What it does for us then is we are happy to have competition in this market because, again, it is a very large market as we've said. Currently, over 20 million -- over 15 million patients or as many as 20 million patients are treated around the world for this indication. The problem is they are only treated in the hospital currently. What J&J Bayer trying to fix for in the MARINER study is the post-discharge study. We believe they are trying to fix for that particular setting only because as you know they had a significant increase in the rate of major bleeding and a significant increase in the rate of fatal bleeding associated with the use of the XARELTO at the 10 milligram dose in this particular indication. We think that's probably one of the ways they are trying to fix for it, maybe just particularly stay in the out-patient setting after you determined who may bleed least.

What we are trying to fix for as John said, we are trying to fix for both things. Lovenox had significant limitations in the hospital. It is costly, it's an injectable, it causes bleeding, it causes large hematomas. It is by a large degree cleared through the kidney, so it has many limitations. We are trying to fix for that by being able to identify a patient when they hit the hospital based on a biomarker and say that patient should be initiated therapy now and continue through hospitalization. And so we think we have this unique opportunity, not only because we think we have a better dose, a better drug, but also that strategy to treat the patient from hospital to home.

And you remember that hospital and home strategy has been a very, very effective strategy for J&J and say VTE treatment or in hip replacement surgery or in the -- and historically has been a very, very effective strategy for, remember, Plavix. If you remember the launch of Plavix, 80% of their revenue was generated by patients who have started in the hospital and continued out of the hospital. So we know it's a very effective strategy to choose one drug instead of going from one drug in the hospital one to discharge and continuing that therapy. That's what we are trying to do. We just believe that the properties of Betrixaban allow us to do that a little bit better. So I think this should be -- this is a welcome to have XARELTO coming to this indication, but doing so just in the out-patient setting.

So hopefully that gives you some, not only my answer, but also will give us some perspective.

Len Sheehy - Bernstein

Yeah. Thanks Bill, and thanks John to follow up.

Operator

Your next question comes from the line of David Friedman with Morgan Stanley. Please proceed.

David Friedman – Morgan Stanley

Hi. Thanks for taking the question. Could you maybe just talk about the actual volume that you will be supplying the market with initially? And I guess the second part of that is, do you have a sense yet as to the average amount of drug a patient would need in the clinical setting? Averaging across the Xa that they are on, as well as whether you think more people will be getting boluses, plus infusions. Do you have a sense as to the number of patients that you will be actually supplying? And then I guess the second part of this is how do you think about the supply that you will have initially, vis-a-vis stocking -- I know you talked about target hospitals. Does that mean that certain hospitals wouldn't be stocked? Thanks.

Bill Lis

Yeah. Again, I have seen you talking about indefinite for these questions. And so let me answer it this way, first of all, I think some of what you asked still needs to be determined. We are still waiting from phase 2 data and then obviously the phase 3 data, Dave, to determine where precisely the dosing will be. The second by and large is going to be determined by the market for not only how much drug has to be giving per patient, but what's going to be required at launch. The third aspect of it is our European development path. As you know we are still in discussions currently with EMA regulators as to on what timeline the drug could be approved outside of the United States.

So let me try to then dig down to the next level. That's kind of a high level answer, Dave. Let me try to dig down. As you know we are seeing some of the phase 2 data for patients that are on Eliquis or for patients that are on a lower dose of XARELTO or for patients that will be on enoxaparin or for patients that will be on Betrixaban, the dose will be lower than if their -- the dose of andexanet will be lower whether it's bolus-only or bolus plus infusion than the 20 milligram dose of XARELTO. Now, today if you look at the utilization of XARELTO, the 20 milligram dose only makes up about 20%-25% of all the patients treated with XARELTO by in large it's 15 milligrams, 20 milligrams, it's split between 15 milligrams, 20 milligrams and then the 10 milligrams QD dose across the indications. And I think then there's some use of even the 2.5 milligram b.i.d. dose. And then for Eliquis which is an emerging competitor to XARELTO, you are starting to see more and more use of the 5 milligram b.i.d. You will see the results this summer of the dose that it's going to require for enoxaparin. I think you will probably see that that dose is going to be more in line with Eliquis than it is XARELTO. So you pull all of those factors and you can start to see where the dose may go relative to a higher dose versus a lower dose.

Then in your second part of the question, what about bolus-only versus bolus plus infusion, I think we have to wait and see some of the phase 3 data, and then we will probably have to wait to even see some of the phase 4 data to make that determination. What we do know, Dave, is we have said from the start, if you look at our pre-clinical data there is an argument that extent versus duration for many patients is going to be more important. That's why we have done the bolus-only portion of it, right? That's really a bolus over 30 minutes. And then we've always said from the start that those patients who will have the more severe bleeding, maybe trauma or undergoing an emergent surgical procedure would require a longer or the infusion. And so I think we have to wait to see how these things play out.

Certainly right now we are looking pretty good for the United States. We have to see how quickly the EMA approval could come, and we are in those discussions. So I think I've answered not specifically all of your questions, but hopefully I given you some perspective. I think we are going to know more by the end of this year and in early next year, we will be able to answer your question better than we can today.

David Friedman – Morgan Stanley

Okay, thanks.

Bill Lis

The important thing is from when we said after six to nine months of launch almost starting to have rev up the engine at CMC biologics to get that yield -- to get the supply up. We are going to be pretty much on par at six to nine months after the initial launch. We are going to be on par with anywhere we could have been with Lonza for that initial phase. And then as we said to win this question that nothing has changed with respect to the timing or the expected quantity we expect to have available for that second phase, the larger phase and the optimized phase that will come through Lonza.

David Friedman – Morgan Stanley

Got it. Okay, thanks.

Bill Lis

Did I answer your question?

David Friedman – Morgan Stanley

Yeah, you did. Thanks.

Bill Lis

Okay.

Operator

Your next question comes from the line of Christina Kanute with Cowen & Company. Please proceed.

Christina Kanute - Cowen

Hi. Thank you for taking my question. This is on andexanet alfa and dosing. And since many patients come to the hospital not knowing which drugs they are on, which inhibitor -- and you need a higher dose of andexanet alfa to neutralize XARELTO would it mean that in the hospital setting the 800 milligram will actually be the standard of care? If so would safety data from the XARELTO trial be referenced when you have patients that come in with other inhibitors? Thank you.

Bill Lis

Yeah. So how are we going to go about this? Well, we talked to the agency already about the high dose or low dose, we will be using algorithm. Many patients you won't know specifically who, their anticoagulant. So, yes, one could say that the default will be the higher dose. Others have felt that they will start with a lower dose and then increase from our assessment of clinicians and how they will use the drug. So you have either way, you can go to a fall back higher dose or you can start with something and then continue if you don't see the clinical results that you need. I think we will have to wait to see how some of the clinical trial data plays out. So that's one way to look at it, but I think we are also trying to determine because the doses again for one drug, one dose could be considerably different. Remember, we are talking about XARELTO doses out there that are in some cases two fold of their own -- within the own same agent, but just across a different medication.

So we are trying to determine good ways for physicians and caregivers to identify which dose it is, so that an algorithm can be used. It's not only what dose they took, it's when they took their last dose. That's important as well. There is two ways when you take a look at the current clinical trial data even fall back on. Remember, we studied up to very high doses in patients who have not for safety, from a safety standpoint in our phase one trial of healthy volunteers where we did not have the anticoagulant on board. So those early studies, we are up to fairly high doses and they were not on an anticoagulant at all. So that's our fallback with respect to safety. The positive news is we've not seen any safety signals either for patients who are not on a Factor Xa inhibitor or on a Factor Xa inhibitor up to these higher doses for those that are on XARELTO.

So if one would have to use the fall back strategy we think thus far again, given where we are today, thus far we believe that's probably an okay strategy. I just think we have to wait and see the final data set when they come at the end of this year and then at the early part of next year. John, I don't know if you have anything else to add.

John Curnutte

Yeah. I would just add one other bit of data. We anticipated the setting in our GLP toxicology studies before we ever went into the human. So we did expose animals including non-human primates to very high levels of Andexanet without any anticoagulant present. And very happily we really saw toxicologic findings in those animals. So in the biology and bio chemistry the coagulation cascade was quite similar between humans and the non-human primates. So I think we have a expensive data from that that I do think supports the likely although to be tested safe use of this higher dose, this default dose, that's what physicians want to use in a patient that comes on in with an unknown anticoagulant.

Christina Kanute - Cowen

Sounds good. Thanks.

Bill Lis

And the good thing is we will be reporting out again more data this summer with enoxaparin, more data this summer with edoxaban and then by the end of the year, it's not only -- what are the things that we are looking for. We are still looking closely at immunogenicity. We still look at any potential prothrombotic or antithrombotic effects of andexanet in healthy volunteers and then future in the patient population. Thus far we feel very, very comfortable. And again as we said in the past, we continue to derisk this program from a commercial standpoint, also a regulatory standpoint as well. And now most recently what I change is in manufacturing we are trying to derisk the program from a manufacturing standpoint which we said from probably the last year that this remains probably the biggest risk factor in the development of andexanet.

Operator

(Operator Instructions) We have a follow up question next from Jason Kantor with Credit Suisse. Please proceed.

Jason Kantor – Credit Suisse

Yeah. I'd like to just change the subject for the moment, just to talk about the JAK/Syk inhibitor. I guess my question there is -- you say you are in the third cohort but obviously ASCO abstracts were submitted a while back, so I'm just trying to get some sort of expectation about -- what kind of data you might have an abstract versus what you might have had at ASCO. Will we be seeing data at doses that one might expect to see efficacy? Or will this really be something we should be looking for later in the year, like at ASH?

John Curnutte

Hi, Jason, John Curnutte here; let me answer that question for you. So you are absolutely right. The ASCO abstracts reduced some time ago. We continue to make progress in the clinic where we are in this third cohort. The data that we will show will be PK data where, for the early cohorts you will see some really beautiful results in terms of half life etcetera. And then you will see data in terms of target engagement or clinical core set of pharmacodynamic markers. And what you will be able to see is the degree to which these earlier doses of cerdulatinib inhibit Syk and inhibit the various JAKs is measured by multiple ways of measuring that.

And I think what you will be able to infer from that is really some critical properties of the drug as far as its PK, half life and its ability to at those doses to impact the pathways that we are trying to target. The other part here is -- so that's to foreshadow what you will see. Clearly broader clinical data will be later this year as we progress through this. The phase 1 study of course is a dose escalation to determine maximum tolerated dose. It's designed to tease that out, not to tease out efficacy. But certainly we are expecting to see elements or proof of activity, proof of concept through this. So we will have more to say on that later this year, Jason.

Bill Lis

Yeah, Jason, again I think I think you have a pretty good picture of the profile of this compound after ASCO and then the true clinical profile of the program as you alluded to will be later in the year.

Jason Kantor – Credit Suisse

Got it. Thanks.

Bill Lis

We will also be making decisions as to whether to go on to the expansion days by the middle of this year as well and we told everybody that they should expect to have some sense of the clinical activity of the compounds given our decision there as well sometime in the middle of year or later this summer.

Operator

We will now conclude the Q&A portion of the call. I'd like to turn the call back over to Bill Lis for closing remarks.

Bill Lis

Yeah. So I just want to thank everybody again for your interest in Portola. We look forward to seeing many of you this month. We are going to be up to Bank of America Merrill Lynch healthcare conference in Las Vegas. We will be at the UBS Global Healthcare Conference in New York. With that again I'd like to say thanks to everybody for your questions and your attendance.

Operator

And this concludes today's first quarter 2014 financial results conference call for Portola Pharmaceuticals. You may disconnect.

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Source: Portola Pharmaceuticals' (PTLA) CEO Bill Lis on Q1 2014 Results - Earnings Call Transcript

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