Portola Pharmaceuticals' FDA Nod Could Spark M&A Interest

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Portola Pharmaceuticals' (NASDAQ: PTLA) investors who stuck with it after stumbles caused share prices to crash last year are feeling a bit better about their position today. On Friday, the Food and Drug Administration approved the company's first drug, Bevyxxa, and that news caused shares to spike over 45% by late in the trading day.

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Because Bevyxx is an anticoagulant that could displace the use of Lovenox in acute, medically ill patients who are being released from hospitals, and Lovenox was once a top seller with $3 billion in annual sales, I wouldn't be too surprised if suitors come knocking on Portola Pharmaceuticals' door.

What's the deal?

Portola Pharmaceuticals had been awaiting an FDA decision on two late-stage medicines that it's developed, and both of those drugs have significant sales potential. Today, the FDA gave the go/no-go for Bevyxx, and in August, the regulator is expected to weigh in on AndexXa.

Bevyxx is a factor Xa anticoagulant that's now approved to prevent venous thromboembolism (VTE) in acutely ill medical patients. These are patients who have been hospitalized for serious conditions, including heart failure, stroke, and infection, and because of their condition, they're more at risk to develop life-threatening blood clots.

Portola Pharmaceuticals estimates that there are 24 million acutely ill medical patients hospitalized in the G7 countries that are at risk of blood clots, and that every year, over 1 million of those patients are suffering a clotting event. Sadly, 150,000 of these patients will pass away.

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Currently, these patients are treated with Lovenox, which won approval for this indication in 2000 after reducing the risk of clots at the 14-day mark in trials. Typically, patients receive daily Lovenox injections for between six to 14 days. However, Lovenox comes with risks, including an increased risk of hemorrhage. 

Unlike Lovenox, trials show that use of oral Bevyxx for up to 47 days not only reduces the risk of clotting when compared to Lovenox, but it does so without increasing the risk of major bleeding events. Based on these findings, and this approval, Bevyxx has a very good shot at replacing Lovenox as the standard of care in this big market.

What makes this so interesting

There's reason to believe that Bevyxx can deliver on lofty multibillion-dollar peak sales forecasts.

Factor Xa drugs that work similarly to Bevyxx are already approved and being widely used in other indications. For instance, Pfizer (NYSE: PFE) and Bristol-Myers Squibb's (NYSE: BMY) Eliquis won FDA approval in 2012, and in the first quarter, its sales clocked in at over $1.1 billion, up 50% year over year. Meanwhile, Johnson & Johnson's (NYSE: JNJ) Xarelto has been on the market since 2011, and its first-quarter sales were $513 million. Neither of those drugs are approved for the same indication as Bevyxx, but both suggest doctors are very comfortable with the mechanism of action of these drugs, and thus could be willing to widely prescribe Bevyxx.

Bevyxx market opportunity makes Portola Pharmaceuticals a very intriguing acquisition target, but Bevyxx isn't the only one of its drugs that an acquirer might want to get its hands on.

On Aug. 17, the FDA is expected to issue a decision on AndexXa, and if approved, it will become the first approved reversal agent of factor Xa anticoagulants. Currently, Eliquis and Xarelto aren't being prescribed in patients at risk of bleeding events because there's no FDA-approved antidote. Therefore, an approval would not only help solidify the use of this class of drugs, but it could also help expand their use in more patients.

According to Portola Pharmaceuticals, between 1% to 3% of patients on oral factor Xa inhibitors experience a major bleeding event, and another 1% of patients require emergency surgery. That puts the addressable market for AndexXa at about 90,000 people per year in the United States alone.

AndexXa's importance hasn't been lost on factor Xa drugmakers. J&J, Pfizer, and Bristol-Myers all helped finance AndexXa's trials, and in the case of Pfizer and Bristol-Myers, they've ponied up money to license rights to AndexXa in Japan. Pfizer and Bristol-Myers also agreed to loan Portola Pharmaceuticals $25 million each last December to continue development of AndexXa, which will be paid back from royalties on AndexXa sales.

What's up next

Bevyxx and AndexXa could be top-selling medicines, and since factor Xa is a validated target with multibillion-dollar drugs on the market already, I think that Portola Pharmaceuticals could fit very nicely into a larger biopharma company, especially one that already has an established factor Xa sales team (and deep pockets). Obviously, it's anyone's guess if a deal will ever materialize, but following this approval, I think the odds of it happening improved significantly.

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Todd Campbell owns shares of Pfizer and Portola Pharmaceuticals. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Johnson & Johnson. The Motley Fool has a disclosure policy.