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Actionable news in PTLA: Portola Pharmaceuticals, Inc.,

Portola Set For Big Gains

Summary

Portola Pharmaceuticals reported earnings Thursday after the close, and commented on its major pipeline projects.

It appears to me that its lead product ANDEXXA is moving along on the "right track."

There might be some hope for betrixaban; the company continues to profess optimism.

Given that the stock has always been very risky, fundamentally, I find its current valuation, even with more dilution coming, attractive given possible very strong prospects for ANDEXXA.

Background

With highly-leveraged recent pharma faves such as Valeant (NYSE:VRX), Endo (NASDAQ:ENDP), Perrigo (NYSE:PRGO) and Allergan (NYSE:AGN) either fading or crashing, it's no surprise that other risky plays in the sector are seeing some crisis of confidence. There is nothing riskier than a development-stage, or junior, biotech, especially one with a high cash burn and a low ratio of cash in the bank to cash outlay rate.

Among the once-hot stocks in that category is Portola Pharmaceuticals (NASDAQ:PTLA). This IPO'ed in 2013 at $15, quickly rose above $20, peaked last September near $58, by which time I had made a sort of killing and sold, nervous about the biotech sector (NASDAQ:IBB), especially money-losing juniors (NYSEARCA:XBI) such as PTLA.

PTLA then did another secondary offering in the high $40s in December. To my surprise, the stock appeared to hold up well, and I bought back at $50.

Then, on no news, it began dropping almost as fast as VRX on no bad news. Did someone know, or suspect, something?

That I can't say, but in March, the company announced disappointing results from what it was still calling its lead drug, betrixaban. The stock dropped another 30%+ to the $21 range. Since then, it has bounced around listlessly.

PTLA is a falling knife, and I have just now begun cautiously buying more. Here's the updated bull case for this very risky stock with a market cap around $1.2 B at a price around $21 (Note that the company will need to raise more money this year, so more dilution is coming).

I'll begin with what I considered its lead drug from day one, mid-2014 when I first bought in around $29.

Andexanet is now ANDEXXA and shoots for blockbuster status by 2020

As most people reading this article know, ANDEXXA is a fusion protein, functionally similar to an antibody or a "trap" such as Enbrel. It was designed by PTLA, I believe in-house, to "trick" Factor Xa inhibitors (which I call Xais) such as Xarelto and Eliquis from binding to Factor Xa. These drugs, which were joined by Savaysa on the US market much more recently, act as novel oral anticoagulants. Hindered initially by high prices, they have now become a sort of tsunami and have begun displacing the old standby warfarin (Coumadin is the brand) from its unchallenged status as the leading oral anticoagulant.

The concept of ANDEXXA is a little tricky; basically it acts as an inhibitor of the Xais. So, just as multiplying a negative number by a negative number gives a positive number, ANDEXXA takes the coagulation system back to its positive state of normal, not excessive, bleeding when given IV to a patient receiving a Xai. So ANDEXXA is a Xaii, as it were.

The FDA has committed to the potential approval of ANDEXXA via the accelerated pathway, in this case with a PDUFA date of August 19. The agency has asked for limited clinical data on bleeding patients, so a Phase 3/4 study is underway and enrolling well.

However, the principal approval data comes from studies showing reversal of Xai anticoagulant effect in healthy volunteers, both via a quick bolus and separately via a time-limited IV drip.

This may or may not be unprecedented, but it's quite unusual at the very least. Because of this potential approval based mostly on Phase 2 studies, the path to approval also involves the sort of production scale-up issues that we outside investors...


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