BIOTECH RESEARCH

A FREE INVESTMENT REPORT

www.bretjenseninvests.com

PORTOLA PHARMACEUTICALS

THE POSITIVE POTENTIAL PROMISE OF

In this week’s free investment report we take a look at Portola Pharmaceuticals (PTLA) which several Biotech Forum subscribers and SeekingAlpha followers have asked me to do an analysis on recently.

BY BRET JENSEN

COMPANY OVERVIEW

• Portola Pharmaceuticals is a clinical stage biopharmaceutical company that is focusing on developing and commercializing therapeutics for patients in the areas of thrombosis, other hematologic disorders, and inflammation. The company is based in San Francisco, came public almost exactly three years ago and currently sports a market capitalization of around $1.5 billion and a stock price of just over $26.00 a share at the time of this report.

• The company definitely have the multiple “shots on goal” we look for before making a small investment in this sort of developmental concern. Let’s take a look at some of key potential compounds.

PIPELINE

PORTOLA IS CURRENTLY PRIMARILY FOCUSED ON DEVELOPING THREE PRODUCT CANDIDATES; ANDEXXA (ANDEXANET ALFA), BETRIXABAN, AND CERDULATINIB.

BY BRET JENSEN

BETRIXABAN• What it Does: Betrixaban is a Factor Xa inhibitor (anti-coagulant / blood thinner),

one of several new drugs that are referred to as a Novel Oral Anti-Coagulant (NOAC).

• Key Differentiator(s): While NOACs (including Betrixaban) perform nearly identically to warfarin, they have the advantages of convenience, lack of dietary interactions, fewer drug-drug interactions, and reduced strain on renal function. Also, NOACs provide an alternative for those patients who don’t do well with warfarin. Warfarin is injected on a strict schedule and requires very close management by nurses, whereas Betrixaban will be taken orally, once-daily. If approved, PTLA plans to leverage Betrixaban for extended patient use post hospitalization to reduce the risk of stroke, whereas current therapies are short term for in-hospital use only. Bextrixaban has the potential to be the first Xa inhibitor to be approved to treat blood clotting in the hospital and at home post discharge. Betrixaban will appeal to those seeking cost reductions related to nursing and the length of the patient’s hospital stay, while maintaining or improving patient outcomes.

• Phase / Status / Expected Launch: When the FDA designated Betrixaban as a Fast Track Therapy, hopes were high that PTLA would have a 2017 commercial launch. Unfortunately, disappointing Phase III clinical trial topline results were released on March 24th, 2016 indicating that the smallest of three study groups missed the study’s threshold. This smallest subset of patients the highest risk for blood clots and therefore were expected to show the greatest benefit from using Betrixaban. Although that group missed the study's threshold, the other two, larger groups in the study did meet the measure. The study showed no statistical difference in major bleeding compared against the current standard of care for all groups. Despite the unexpected results for the high risk group, the company believes discussions with regulatory agencies will still result in an NDA by the end of 2016 based on the results of this single Phase III study. It should be noted that generally there are two Phase III studies prior to approval but Fast Track Therapy planning with the FDA planned for only one study in this case. The study data will be presented at the International Society on Thrombosis and Haemostasis (ISTH) SSC Meeting in late May. Portola’s goal is still to file an NDA this year and launch Betrixaban commercially sometime in 2017.

• Expected Market: Approximately one million patients suffer blood clots and over 150,000 die every year. According to Portola, about 20 million patients in G7 countries are at risk for venous thromboembolism during or after a hospital stay. The company has indicated that the acute medically ill population who can benefit from Betrixaban represents a market opportunity of about $3 billion to $4 billion annually.

• Other Considerations: Differentiation may be necessary to unseat well entrenched Lovernox (Enoxaparin injections). Performance of Betrixaban is not shown to be superior, but price and convenience remain strong potential levers. Betrixaban is expected to be the first Factor Xa inhibitor to market but has one competitor rivaroxaban several years behind it. The company retains 100% of worldwide commercialization rights to Betrixaban.

— Bret Jensen

I PERSONALLY INVITE YOU TO TRY A SUBSCRIPTION IN THE BIOTECH FORUM AND INVEST ALONGSIDE ME! ”

“

JOIN THE BIOTECH FORUM NOW!

ANDEXXA• What it Does: ANDEXXA is designed as a universal antidote in patients treated with a

Factor Xa inhibitor (an anti-coagulant / blood thinner) who experience a serious uncontrolled bleeding event or who require urgent surgery.

• Key Differentiator(s): ANDEXXA is an antidote for Betrixaban as well as other Factor XA inhibitors (which are alternatives to warfarin). Though NOACs are easier to use and have fewer side effects than the previous generation of anti-coagulant drugs, there is currently no anti-dote. Only warfarin has an antidote today should bleeding become a problem while using the drug. ANDEXXA has the potential to be the first agent approved as a universal Factor Xa inhibitor antidote, making Doctors more comfortable with prescribing NOACs.

• Phase / Status / Expected Launch: ANDEXXA is currently on an accelerated pathway to approval and has been designated as a Breakthrough Therapy. August 17th, 2016 is the PDUFA goal date for the FDA to complete a review of the Biologics License Application that PTLA submitted in Q1 2016. The FDA required a limited Phase 3b/4 study, which is now underway. Study enrollment is on track for patients receiving apixaban, rivaroxaban, edoxaban or enoxaparin who present with an acute major bleed. With Q1 Financial Results, the company re-iterated the goal of launching ANDEXXA commercially within the United States in 2016 and in the EU in 2017 assuming the BLA is approved on or before the PDUFA approval date.

• Expected Market: The company forecasts more than 500,000 Factor Xa inhibitor treated patients in the G7 countries will be hospitalized due to bleeding and will require urgent surgery by 2020.

• Other Considerations: The FDA designation as a Breakthrough Therapy indicates a high likelihood of approval for use as “a reversal agent for betrixaban as well as market leaders Xarelto and Eliquis”. No major competitors to ANDEXXA have been identified. Portola worked in collaboration with multiple Factor Xa inhibitor manufacturers but retains commercialization rights in all worldwide markets, excluding Japan. Manufacturing must scale up quickly and effectively. Generation 1 (for the most critical patients at 200-300 hospitals in the US) and Generation 2 (for a broader US and EU launch) manufacturing plans are in progress prior to the NDA approval. Sales staff hiring has also been initiated. Overall the anti-coagulant space is a ~$10 billion annual market.

CERDULATINIB• What it Does: Cerdulatinib is an oral therapy for

blood cancers, and inflammatory disorders. It inhibits two enzymes that regulate signaling pathways.

• Key Differentiator(s): Cerdulatinib’s claim to fame is that it inhibits two different pathways in B-Cells that are known for cancer cell growth. Hypothetically, Cerdulatinib may be more effective than a single pathway agent in specific patients. Additionally, it is a convenient oral therapy.

• Phase / Status / Expected Launch: Cerdulatinib has completed a Phase I proof-of-concept study with encouraging data results. Results so far have shown clinical activity and that the drug is well tolerated.

• Expected Market: In the United States, an estimated 59,000 people were diagnosed with leukemia in 2015 and Non Hodgekin Lymphoma is the sixth-most common type of cancer in the United States. No pricing information is available.

• Other Considerations: Development and commercialization will be a challenge in the increasingly competitive hematological oncology space. PTLA retains 100% of worldwide commercialization rights.

BY BRET JENSEN

ANALYST COMMENTARY

• There is decent analyst support from the analyst community on this biotech concern since March selloff. Three of the four analysts who commented on the company after the March 24th Phase III study results have issued Buy recommendations. The five analysts that cover the firm have a $33.00 a share median price target on Portola at the present time.

• Solid analyst support for Portola is rooted in long term gains expected from ANDEXXA revenue, and is not strictly counting on Betrixaban or Cendulatinib (though several articles did indicate there is still hope for each of these pipelines as well).

• William Blair declared on Monday, March 28th that he views the selloff of Portola Pharmaceuticals as a buying opportunity, undervalued based on [ANDEXXA] alone and reissued a “buy” rating. The analyst firm also holds out hope for betrixaban as well. “While the Phase III APEX trial evaluating betrixaban…failed to meet the pre-specified level of statistical significance in the primary patient population …the overall clinical benefit [among all patients in the trial] may support regulatory filing.”

• On March 28th, Goldman Sachs downgraded the rating on the company from Buy to Neutral, while reducing the price target from $65 to $30. “While we think PTLA’s unique antidote [ANDEXXA] for bleeding in Factor Xa patients is poised to deliver on significant unmet medical need, we expect this scenario to take over a year to materialize.” On March 25th, Cowen and Company set an “outperform” rating on the stock but dropped their price target from $65.00 to $40.00. Credit Suisse also maintained an “outperform” rating after the stock tumble.

• The company has consistently been rumored to be a buyout target. Late in March, Citigroup named Portola as one of the top “eight biotech companies that it viewed as most likely buyout targets over the next 18 months.”

BALANCE SHEETThe company has a cash burn rate of approximately $55 million to $65 million per quarter. As of the end of last quarter, Portola has approximately ~$420 Million cash on hand. The company’s financial position and marketing prospects are bolstered by active collaboration agreements with Bristol-Myers Squibb; Pfizer Inc.; Bayer Pharma, AG; Janssen Pharmaceuticals, Inc.; Daiichi Sankyo, Inc.; Lees Pharmaceutical (HK) Ltd.; and Daiichi Sankyo Company, Limited.

The company seems slightly undervalued just based on the promise of ANDEXXA alone which looks heading to approval this summer. Given it would alleviate the need to develop and build its own salesforce, a buyout by a larger player at a substantial premium with an already established salesforce is one outcome that cannot be discounted. This would make logical sense especially if the “animal spirits” come back into the M&A market. Obviously, if the company is able to get Betrixaban back on track and eventually get that drug approved, this would be a major potential upward catalyst and could push Portola close to its 52 week highs of more than $55 a share. Given this, the stock seems like it has a favorable risk/reward profile at its current levels and the shares are worthy of serious consideration for investors with a well-diversified biotech portfolio.

OUTLOOK

The Biotech Forum provides investors with insight and research into my very profitable investment strategy in the biotech space. Maintaining a portfolio of 15 attractive small cap biotech stocks and five more heavily weighted large cap concerns creating a balanced portfolio geared to provide outstanding performance over time. And in a very short time, The Biotech Forum has delivered substantial outperformance compared to its benchmark and is highly ranked by our subscribers.

A subscription to The Biotech Forum investment service offers several benefits including:

100% pro-rated money-back guarantee Weekly updates and monthly portfolio reviews Detailed deep dives on new selections for the portfolio Monthly and annual billing options

Join NOW! Free Trial Memberships May 26 thru Memorial Day!

www.bretjenseninvests.com

Bret Jensen