What's Up With Portola?

| About: Portola Pharmaceuticals (PTLA)

Summary

Portola Pharmaceuticals stock plunged on disappointing clinical trial data on betrixaban.

The paradox of the stock is that while the company has emphasized this drug, I have focused on a different one, andexanet.

In this article, I review the APEX betrixaban trial, provide some current thoughts on it, and update my understanding of andexanet.

Then I speculate about whether Portola is going to be sold or at least whether it will sell the rights to andexanet.

Introduction

I've written a lot about Portola Pharmaceuticals (NASDAQ:PTLA), and own it. The stock has treated me very well (until this year!), performing brilliantly in the winter and spring of 2015 when I upped my exposure to it massively. Now my exposure is significant but much less; in essence I'm now investing with "house money" from realized gains - which helps allow me to stay cool-calm-collected when the stock acts as it has today on disappointing clinical trial results.

I will review my knowledge of that data and then provide an update on what I have always viewed as its lead drug, andexanet alfa, an antidote for a class of oral anticoagulants that is rapidly replacing warfarin (Coumadin).

As with any article written immediately after breaking news, please read this with the understanding that these are first impressions of the APEX trial and PTLA at a price between $20 and $21. The company raised money in the high $40s just a few months ago. Quite the change, reminiscent of what happened in the Tech Wreck in 2000.

Then I will try to answer the question I posed in the title - a difficult task.

First, the bad news.

APEX betrixaban trial mostly fails

In what PTLA has generally referred to as its lead candidate but which I have dumped on many times, a factor Xa inhibitor called betrixaban had summary data of its large Phase 3 APEX trial released today.

The design of the study was complex. For reasons that now appear dubious, the company focused on what it thought would be a subset of patients at risk for venous thrombotic disorders that would show the greatest benefit. These were patients with an elevated blood level at entry into the study of a clot-related protein called D-dimer.

Betrixaban treatment was compared with standard of care treatment, which was in-hospital use of the injectable drug enoxaparin (Lovenox) and then placebo. The treatment population was high-risk patients for lower extremity blood clots and complications thereof who were hospitalized for acute, serious medical conditions. The goal was to safely prevent complications, something that other Factor Xa inhibitors had not previously accomplished. This was a project that PTLA had, several years ago, been partnered with Merck (NYSE:MRK) on. MRK canceled its participation in this project following its merger with Schering-Plough, and PTLA carried on alone with no partner.

Under the statistical plan of data analysis, that group was analyzed first. If the results showed a P value of 0.05 or less, then analysis of subgroups of increasingly larger size was allowed to be done.

As fate would have it, the P value for the D-dimer positive subgroup was 0.054. This rounds to 0.05. How to proceed?

Well, I do not know what the FDA will say, but for what it's worth, the company went ahead and analyzed the larger subgroup of D-dimer positive + "old old" patients, and then the entire group.

This is their summary data presentation:

Primary Efficacy Analysis
(VTE)
Primary Safety Analysis
(Major Bleeding)
RR* p value RR* p value
Cohort 1: Elevated D-Dimer 0.806 0.054 0.88 0.722
Cohort 2: Elevated D-Dimer or Age >75 0.800 0.029 1.19 0.564
Overall Study Population 0.760 0.006 1.19 0.554
Click to enlarge

*RR = relative risk calculated as the frequency of events with betrixaban divided by the frequency of events with enoxaparin

We do not have any of the details, which will be presented in about two months at a scientific conference. Betrixaban has Fast Track designation from the FDA; a meeting will occur ASAP.

The entire betrixaban situation was confusing, as it involved one large study. Typically the FDA requires two Phase 3 studies; if there is just one, then a P value more like 0.01 or even 0.052 (0.025) is required to show efficacy.

Thus the entire study population reached the 0.01 threshold but not the 0.0025 threshold.

Among the important details we do not know are inferences about the clinical relevance of the positive outcomes trend in the data. The composite endpoint ranges from "soft" outcomes such as asymptomatic clots all the way up to pulmonary embolism and deaths from the clot.

In any case, we will just have to wait to see how the regulators deal with this borderline P value. It may turn out that the company had matters completely backwards in focusing on the D-dimer positive patients. Those are patients who by definition are showing evidence of blood clot formation. Maybe an oral Xa inhibitor is not the ideal medicine for them.

So maybe it will turn out that excluding D-dimer positive patients from analysis will allow the FDA to approve this drug.

In any case, I always felt that the commercial value was in andexanet. Now that the large costs of APEX are already booked, either betrixaban goes away and ceases to be a cost center, or it struggles through to FDA approval and generates some sales. I do not think it matters a lot anymore.

With PTLA's market cap at $1.17 B as I write this, the question is how much andexanet is worth. Here's an update.

Andexanet - updating its commercial value

This is an antidote to the anticoagulants Xarelto, Eliquis and Savaysa, as well as probably to enoxaparin and similar injectable low-molecular weight heparins. Andexanet is a fusion protein that acts similarly to an antibody and binds those drugs more avidly than the receptor(s) they block to achieve their anticoagulant effects.

The Xa inhibitors are used to prevent thrombotic/embolic complications of atrial fibrillation and prevention and treatment of lower extremity blood clots.

I've been saying that approval of andexanet would be a game-changer, as it would remove the one advantage of warfarin (antidotes exist) and would also encourage greater use of the Xa inhibitors, as they would be perceived as "safe." Thus it was nice to see to PharmD's who disclaim any relationship with PTLA or other anticoagulant-related company provide a review of andexanet and a similar reversal agent for Pradaxa and conclude this way:

Given the rapid onset and short duration of andexanetalfa and lack of serious and thrombotic adverse effects in clinical trials thus far, it may be a game changer for anticoagulation reversal and further increase the utilization of Factor Xa inhibitors.

(Source: Cardiology today, March 2016)

The same article discusses Praxbind, an antibody fragment which is the reversal agent for Pradaxa. Two vials, the standard dose, were reported to wholesale for $4200 together.

That's less than I expect andexanet to sell for. As a placeholder, I'll assume $5000 per dose, with one dose per patient. The question is how large the market is at that price. Given the high costs to a hospital of a serious bleed, not to mention the human costs, I find this price point attractive enough to allow most cases of what would be judged as non-minor bleeds in Xarelto etc. patients to be treated with andexanet.

The number of patients in developed countries who will be on an Xa inhibitor by, say, 2020, is unknown, and so is the real world rate of serious bleeds or need for emergency surgery that cannot wait until the drug's effect wears off on its own. Even the prevalence of atrial fibrillation in the US is unknown. It is certainly in the millions but not tens of millions; and it is increasing as the population ages.

Overall, I think that it's not unreasonable to think of 100,000 patients treated yearly in developed countries with andexanet (or some future competitor) annually. If the pricing averages $5000 per patient, that would provide $500 million in revenues per year.

However, if andexanet proves very safe and efficacious clinically, perhaps the profit-maximizing company that markets andexanet will find a way to charge more than $5000, perhaps a lot more.

How the companies with the best information, much better than I have, about the probable volume that awaits andexanet if approved globally, think about its revenue potential is a question I just cannot answer.

Will PTLA get taken over, and if so when?

Management and the board of PTLA have to be embarrassed. They spent a lot of money on a drug that now looks like a loser. Meanwhile, their truly innovative andexanet, and the kinase inhibitor cerdulatinib, could have used just a portion of the funds spent on APEX to good effect. The company has had several rounds of fund-raising at and above $25 per share; all those investors are underwater. So all will be happy with a generous takeover offer.

With betrixaban assumed off the table as a commercial product (though there is real hope according to management), then the marketers of Eliquis might be interested. These are Bristol-Myers Squibb (NYSE:BMY) and Pfizer (NYSE:PFE). Eliquis is patent-protected until Feb. 2023 in the US. I would think that they would be able to co-promote this drug in the US and help Eliquis gain some market share against Xarelto, which I believe goes generic in 2021. Then their sophistication has to help global marketing, pricing, setting of guidelines for usage of andexanet, etc. to maximize profits.

Now that BMY and PFE have agreed to market andexanet in Japan, the stage might be set for one of them, or both jointly, to acquire either PTLA or andexanet.

Since andexanet is basically limited to emergency use, mostly in the emergency room of a hospital or else when an in-patient comes to need andexanet, any company oriented toward that marketing channel - and PFE certainly is now since the Hospira acquisition - could easily fold andexanet in with its business lines.

When might any acquisition occur?

Your guess is as good as mine. At this stage, many companies would want to kick the tires and then wait for FDA to approve andexanet; the PDUFA date is in August.

Concluding thoughts - the difficult path for a junior pharma company to go it alone

I was always concerned about betrixaban, in large part because MRK walked away from it, though also because I thought the effort to get it to market was too expensive and uncertain for tiny PTLA. And, maybe spending on APEX got out of control. The importance of having a big partner, as PTLA has (several of them, actually) with andexanet, is great in my view. That's one reason I have found Ionis (NASDAQ:IONS) investable. The same is true for Acceleron (NASDAQ:XLRN) with its Celgene (NASDAQ:CELG) connection, though I took profits on XLRN months ago.

At the current valuation of $1.2 B or so, and with basic profit potential to many companies and perhaps some strategic potential to a few, PTLA may now have been de-risked enough to be worthy of buying interest from speculative investors who have been on the fence about it. It's very important to emphasize that nothing at all is guaranteed with andexanet. If it is approved by the FDA in August or any time soon, that will be conditional on completion of an adequate clinical program in acutely bleeding patients. So, even if it is approved, which again is not guaranteed, that approval could be revoked. Other fundamental risks, such as manufacturing scale-up being done successfully, exist with this company. Please see the company's 10-K and other disclosures to appreciate a fuller delineation of risks attendant to owning shares in this company.

More broadly, it sure looks like some sort of re-run of the 2000-2 Tech Wreck in biotech-land. Given both Mrs. Clinton and at least Donald Trump amongst the Republicans complaining about pharmaceutical costs on the campaign trail, simplistically I am targeting September-October as a potential cyclical bottom in biotech stocks, or perhaps a first bottom if they are in for a 2 1/2 year bear market as happened to "tech" beginning in March 2000 and bottoming in October 2002.

I actually bought a little more PTLA this AM under $21 on the thought that the company may now or soon be "in play," and that andexanet has enough value to an acquirer of it or the whole of PTLA to more than justify that price with a reasonably patient approach. If by some chance, betrixaban actually can come to market, so much the better, but for now, I'm assuming that PTLA has one asset which, if approved globally, will provide substantial future profits.

Thanks for reading; I look forward to any comments.

Disclosure: I am/we are long PTLA,IONS.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Not investment advice. I am not an investment adviser.