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Is It Too Late to Buy Portola Pharmaceuticals Stock?

Portola Pharmaceuticals (NASDAQ: PTLA) is enjoying the best year ever -- at least in terms of stock performance. After losing more than half of its market cap last year, the biotech's share price is up more than 140% so far in 2017.

There has been nothing but good news for Portola this year. But with the enormous gains, is it now too late to buy this high-flying biotech stock? 

Image source: Getty Images.

What drove Portola stock higher

On Feb. 3, the company announced a royalty agreement with Healthcare Royalty Partners. Portola received $50 million up front and stands to receive another $100 million upon Food and Drug Administration approval of AndexXa (andexanet alfa) as a reversal agent for factor Xa anticoagulants such as Eliquis and Xarelto. In exchange, Healthcare Royalty Partners will make the lion's share of sales from the drug if approved, with Portola receiving tiered mid-single-digit percentage royalties.

This deal provided Portola with a nice influx of cash. The company is using the money to fund clinical and regulatory activities, as well as an anticipated commercial launch of AndexXa. The market appeared to view the deal positively, with Portola's share price climbing on the announcement. 

Five days later, Portola received more good news. The FDA told the company that there was no need for an advisory committee to review betrixaban, Portola's factor Xa anticoagulant. At the time, John Curnutte, Portola's head of research and development, expressed confidence that betrixaban would win FDA approval.

His confidence was warranted. On June 23, the FDA approved betrixaban. Portola stock soared around 50% on the news.  

What could send the stock even higher

There are three major potential catalysts for Portola that could send its stock up even more. One is the launch of betrixaban (now branded as Bevyxxa). The company expects to launch the drug sometime between August and November of this year. Investors will no doubt pay close attention to early prescription volumes and to Portola's fourth-quarter results, to be announced in early 2018, which will include the first sales figures for Bevyxxa.

Another catalyst is possible approval of AndexXa. Portola had not resubmitted the Biologics License Application (BLA) at the time of this writing, but the company previously stated that it anticipated doing so in the second quarter of 2017. If Portola stays on this expected schedule, the FDA should make an approval decision on AndexXa in the first half of 2018.

Portola's other major pipeline candidate is Syk inhibitor cerdulatinib. A few weeks ago, the biotech announced interim results from a phase 2a study of the drug in treating patients with relapsed/refractory B-cell malignancies. Those results showed promising efficacy, but three patients experienced severe adverse effects including two grade 5 infections and one case of grade 3 pancreatitis. 

The company is continuing with this study but has lowered the dosage from 35 mg to 30 mg administered twice daily. Portola expects to provide an update on cerdulatinib by late 2017 and a decision regarding future development of the drug.

There's also a possibility that Portola could find itself an acquisition target. Perhaps the most likely candidates are Bristol-Myers Squibb (NYSE: BMY)Pfizer (NYSE: PFE), and Johnson & Johnson (NYSE: JNJ). All three big drugmakers already partner with Portola. 

What could get in the way

It's not hard to identify factors that could stop Portola's momentum in its tracks. A weak launch of Bevyxxa would certainly raise concerns about the company's ability to market the drug. 

AndexXa has already been turned down by the FDA once. A second rejection would definitely take the wind out of Portola's sails.

Disappointing results for cerdulatinib could also derail the stock. However, at this point, Portola's fortunes are more closely tied to its anticoagulants. 

One other possible thing that could get in the way of Portola stock moving higher is a negative development for biotechs in general. The most likely scenario is probably introduction of a serious effort to curtail drug prices by the Trump administration. There have already been rumblings of potential action on this front.

Too late to buy?

Is it too late to buy Portola Pharmaceuticals stock? I don't think so.

Even though the company's market cap now stands at more than $3 billion, that's not a high valuation if Bevyxxa achieves its potential. Some analysts peg peak annual sales for the drug at $1 billion.

I also wouldn't be surprised a bit if Portola is bought out. J&J might not be as interested in another acquisition so closely following its purchase of Actelion. However, both Bristol-Myers Squibb and Pfizer -- and perhaps others -- could be highly interested in Portola.

Investors shouldn't expect Portola's share price to soar as much as it has so far in 2017. The remaining catalysts aren't as significant as the ones the company has already enjoyed. However, the stock could still go higher from here in my view.

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Keith Speights owns shares of Pfizer. The Motley Fool owns shares of and recommends Johnson & Johnson. The Motley Fool has a disclosure policy.