Portola Pharmaceuticals Inc.'s Green Light Sends Its Stock Soaring as Much as 51%

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What happened

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Shares of Portola Pharmaceuticals (NASDAQ: PTLA), a biotech company focused on the development of drugs designed to treat thrombosis, bleeding disorders, and inflammation, skyrocketed by as much as 51% following a trading halt after the company announced that the Food and Drug Administration (FDA) had approved Bevyxxa (previously, betrixaban) for the treatment of venous thromboembolism (VTE) in patients hospitalized for acute medical illness. 

So what

Two factors, in particular, make today's FDA approval especially exciting for shareholders. First, there was no guarantee that the FDA was going to approve betrixaban. The drug actually missed its primary endpoint in its APEX study, released in March of 2016, but investors found out in a May 2016 data release in the New England Journal of Medicine that it was a very small miss.

The drug appeared to provide a clear benefit in VTE compared to the placebo with a similar safety profile. However, the p-value of the study -- the measure that takes chance into account -- was 0.054 as opposed to the usual upper limit of acceptance of 0.05. Today's ruling from the FDA confirms that it's willing to accept the clinical-benefit improvement in VTE as more important than a minor miss in the APEX study primary endpoint.

The other exciting aspect of today's approval is that it gives Portola a green light to claim dominant market share. Though there's VTE-fighting competition within the hospital setting, Bevyxxa becomes the only approved once-daily oral drug to fight VTE in the home setting. According to Portola, most deep-vein thrombosis events occur in the home, which could give it a clear path to becoming a go-to oral anti-coagulation therapy.

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As such, many analysts on Wall Street foresee the drug hitting $1 billion in annual sales by, perhaps, 2023. What's more, a subsequent analysis that compared Portola's Bevyxxa to approved therapy Lovenox found that Bevyxxa reduced the overall rate of death and blood clots by 1.6% relative to Lovenox. 

Now what

The next step for Portola is to prepare for the launch of Bevyxxa, which it anticipates will happen between August and November of this year. It needs to complete hiring a sales and marketing staff, as well as build up its inventory for initial orders.

Additionally, Portola has the potential to see added benefits from a possible European Medicines Agency approval. Its drug is currently being reviewed under standard protocol.

Considering that most drugmakers tend to be valued in the neighborhood of three times the peak annual sales potential of their lead drug, Portola's current valuation of approximately $3.1 billion -- with the stock up 40% on the day as of 3 p.m. EDT -- seems like a pretty fair price for the company. However, that doesn't mean it won't head higher.

Portola will need to show Wall Street and investors that it can effectively harness its at-home advantage with its oral anticoagulant, and that it can turn recurring quarterly profits. If Portola is able to do all of the above, it's not out of the question that it moves higher through organic sales growth, or that it attracts the interest of a larger drugmaker looking to add an innovative new drug portfolio and pipeline to its own.

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Sean Williams has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.