Is It "Game Over" After Portola's FDA Rejection?

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Investors will have to wait to find out if Portola Pharmaceuticals' (NASDAQ: PTLA) first-generation antidote to factor Xa anticoagulants will be as big of a hit as they thought it might. Yesterday, the FDA issued the company a complete response letter, rather than a green light to begin marketing the drug. Does the FDA rejection make this biotech a sell?

The backstory

Portola Pharmaceuticals developed AndexXa to reverse the anticoagulant effects of a new and fast-growing class of drugs known as factor Xa inhibitors.

Rather than reducing the risk of blood clots by targeting vitamin K's role in clotting, like warfarin, these drugs target the factor Xa enzyme. Because factor Xa-inhibiting drugs, including Johnson & Johnson's (NYSE: JNJ) Xarelto and Bristol-Myers Squibb's (NYSE: BMY) and Pfizer's (NYSE: PFE) Eliquis work differently than warfarin, they don't require the same testing, dose adjustment, or dietary changes that warfarin requires.

Factor Xa inhibitors' advantages have turned Xarelto and Eliquis into multibillion-dollar-per-year blockbusters already. But the absence of an antidote that can reverse their anticoagulant effects has kept factor Xa inhibitors from being used in sickly and frail patients, which has limited the peak sales potential of this class of medicine.

To overcome that headwind and broaden the use of their drugs, Johnson & Johnson, Bristol-Myers Squibb, and Pfizer provided funding to Portola Pharmaceuticals so it could develop AndexXa. Until now, that's appeared to be money well spent, because clinical trials have proven AndexXa reverses the effects of both Xarelto and Eliquis.

Troubles emerge

Because of the big unmet need for an antidote to factor Xa drugs, the FDA awarded AndexXa breakthrough status and agreed to an accelerated review of AndexXa's filing. Portola Pharmaceuticals estimates that up to 100,000 factor Xa patients per year suffer from emergency events that could require a factor Xa antidote.

While the FDA's accelerated review of AndexXa was undeniably a big win for the company, it appears Portola Pharmaceuticals was unprepared for that accelerated timeline.

According to management, the FDA sent it a letter yesterday rejecting AndexXa's approval, based on question marksassociated with AndexXa's manufacturing and its efficacy and safety in drugs other than Xarelto and Eliquis. The FDA also indicated that it needs more time to review documents recently submitted by Portola Pharmaceuticals.

In speaking with investors earlier today to discuss rejection, Portola Pharmaceuticals CEO Bill Lis offered up management's take on the FDA's concerns.

First, Lis explained that meetings with the FDA, following regulators' preapproval manufacturing inspections, left them comfortable that questions raised were noncritical and addressable after FDA approval.Obviously, that wasn't the case.

Next, Lis said it was less surprising that the FDA had questions regarding AndexXa's use in drugs other than Xarelto and Eliquis. The FDA requested information regarding AndexXa's use in patients receivingSavaysa and Lovenox. Xarelto and Eliquis, which dominate the market, were always the main focus of AndexXa. Including Savaysa and Lovenox on the label was secondary, and Lis appears to have been operating under the assumption that the FDA could choose to exclude use in those patients, while still approving AndexXa's use in Xarelto and Eliquis patients. Clearly, that didn't happen.

Finally, Lis explained that ongoing communication with the FDA had resulted in Portola Pharmaceuticals supplying additional, specific information requested by the FDA on patient cohorts and various endpoints. That information was provided to regulators during the past few weeks and unfortunately, the agency has said it has yet to complete its review of it. Conceivably, getting the information to the FDA sooner could have eliminated that roadblock, depending on how long ago the information was requested.

All hands on deck

Lis used the word "disappointing" at least four times in his opening remarks and for many, that's an understatement. AndexXa addresses a big unmet need and its review was a FDA priority.

Portola Pharmaceuticals now has to double down on efforts to fill in the blanks on its manufacturing data, but it would seem to me that the other reasons for AndexXa's rejection are easier to address. Specifically, management could remove Savaysa and Lovenox from the application, thereby eliminating those question marks. Ostensibly, the FDA review of the recently submitted information is ongoing, which means that it should wrap up soon enough.

Because the items in the rejection letter aren't overly daunting, Lissuggested a possibility of refiling for AndexXa's approval prior to year-end. However, the exact timing of a filing is anyone's guess and will depend a great deal on the post-rejection sit-down between Lis, his team, and regulators.

Unquestionably, management's reputation is on the line on AndexXa. AndexXa revenue is critical to keeping Portola Pharmaceuticals on firm financial footing, so I'm sure it will be all hands on deck to get this drug back in front of the FDA.Nevertheless, a shift in AndexXa launch from this year to next year is undeniably frustrating because -- at a minimum -- it means more quarters of shareholder-unfriendly cash burn.

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Todd Campbell owns shares of Portola Pharmaceuticals.Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned.Like this article? Follow him onTwitter where he goes by the handle@ebcapitalto see more articles like this.

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