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Portola in the News

The Pink Sheet
July 10, 2009
By Emily Hayes

Privately-held Portola Pharmaceuticals has reeled in Merck to develop and commercialize its Phase II Factor Xa inhibitor betrixaban, in the process gaining breathing room to develop other drugs in its pipeline while nurturing hopes for a public offering down-the-line.

According to the terms of the deal, announced July 9, Merck will pay $50 million upfront for betrixaban, plus another $420 million in milestone payments and double-digit royalties.

The deal marks the second major collaboration this year for South San Francisco, Calif.-based Portola. In February, the company sold rights for the anti-thrombotic elinogrel to Novartis for $75 million upfront plus another $500 million in milestone payments and undisclosed royalties ('The Pink Sheet' DAILY, Feb. 12, 2009).

Portola, born of a spinout in 2003 from Millennium, says it now has $175 million in cash to advance the rest of its proprietary pipeline and will not need to hunt for additional capital anytime soon.

"We are excited about the prospects of this [deal]. Between the two programs, the company will be effectively financed for many years. Financing risk is off the table," said Alan Frazier, managing partner of Frazier Healthcare Ventures, one of the firms backing Portola.

Drug developers have been keen to find better alternatives to traditional anti-coagulants, which are associated with bleeding as well as drug and food interactions, and Factor Xa inhibition has become a very hot area of research.

For Merck, the deal with Portola allows entry into an important emerging class of therapeutics, with an aggregate U.S. market potential of about $5 billion by 2015, wrote Credit Suisse analyst Catherine Arnold in a July 9 note.

"Although we forecast only $350 million in U.S. revenues for betrixaban by 2015, there has been minimal data shown thus far, and if the drug's advantages prove true, the opportunity is substantially greater," the analyst wrote.

Betrixaban may wind up as the fourth direct thrombin inhibitor on the market after Johnson and Johnson/Bayer's Xarelto, Boerhinger Ingelheim's Pradaxa, and Pfizer/Bristol-Myers Squibb's apixaban. Yet there is still reason to be optimistic about its prospects despite the heavy competition.

The company has stressed that betrixaban could offer lower risk for bleeding in the atrial fibrial setting than other compounds seeking to compete with traditionally used anti-coagulants warfarin (Bristol-Myers Squibb's Coumadin) and enoxaparin (Sanofi-Aventis' Lovenox).

Betrixaban is minimally excreted through the kidneys and is the only new Factor Xa inhibitor currently being studied in patients with severe and moderate renal impairment without dose adjustment ('The Pink Sheet' DAILY, Nov. 5, 2008).

"It has less renal excretion than Xarelto or apixaban," Arnold observed. "In addition, it's a true once-a-day pill due to its relatively long half life of about 19 hours. Apixaban is dosed twice a day, Xarelto is dosed once daily but with a shorter half life that could be problematic."

During a July 9 investors' call, executives stressed these advantages, plus the potential for fewer drug-drug interactions due to the way the compound is metabolized.

Merck to foot whole R&D bill

Pfizer had paid $250 million upfront for exclusive worldwide rights (excluding Japan) for apixaban from Bristol-Myers Squibb in 2007. In that agreement, Pfizer agreed to take on 60 percent of R&D expenses and split profits, losses and commercialization costs with Bristol.

Explaining why betrixaban fetched a much lower upfront payment, VP-Business and Commercial Operations William Lis pointed out in an interview that betrixaban is at an earlier stage of development.

Phase IIb results are still forthcoming. Last year, the company launched EXPLORE Xa, a dose-finding trial of 500 patients, pitting betrixaban against warfarin for stroke prevention in patients with atrial fibrillation. ('The Pink Sheet' DAILY, Nov. 5, 2008)

Also, in contrast with to the 60 percent share of R&D picked up by Pfizer, Merck is going to cover 100 percent of development expenses, which will be substantial, Lis pointed out.

Lis estimates Phase III costs for betrixaban in one indication would likely amount to $350 million or $400 million, and additional indications will bring the price-tag up to about $1 billion. Merck will also be paying for Phase II expenses from the date the deal takes effect.

The scope of the Phase III program has not been determined yet but it is likely to include other indications beyond atrial fibrillation, such as treatment or prevention of life-threatening blood clots in patients undergoing high risk orthopedic and general surgery. Ideally, Portola would also like to test more than one dose in Phase III.

As part of the agreement, Portola retained options to co-fund Phase III clinical trials in return for higher royalties and to co-promote betrixaban with Merck in the U.S.

As with the Novartis deal, Portola is obligated to pay some sales royalties to Millennium, but they are minimal - in the low single digits, the company said.

Though the Novartis deal involved a higher upfront cash payment, the terms overall are "strikingly similar," but in the case of betrixaban, the agreement is more rewarding later on, Lis said.

"We have more opportunity to share in the back end if the product is successful," Lis said.

Nurturing the IPO dream

At the time the Novartis deal was sealed, company executives noted that partnering one major compound was not necessarily going to complicate an exit by way of merger or acquisition. The firm now says that an M&A deal is still possible. Either Novartis or Merck is an obvious suitor.

However, for now, Merck appears to have decided that sharing the risk associated with betrixaban - even if it means shouldering the bulk of the development costs - is preferable to purchasing the company outright. Portola's prior deal with Novartis could have influenced Merck's decision to go the licensing route. It's also possible that Merck didn't want the added responsibility and complications of buying a company with 130 employees.

"Generally speaking, there has been a trend of Big Pharma companies doing very large licensing deals as opposed to acquiring companies," Frazier said.

Ideally, Portola aspires to go public. In terms of the value of its products, Portola says it would be "well-poised for an IPO" if the economy improves.

"We are watching the capital markets closely," said Marci Dier, chief financial officer.

With "two, multi-billion dollar products," Portola could be well-received, but for the foreseeable future, the market is "amazingly challenging," Frazier said.