Post by tomsylver on Jul 2, 2017 20:22:41 GMT
If the Better Care Reconciliation Act of 2017 (BCRA) eventually becomes law and replaces Obamacare, the Congressional Budget Office (CBO) estimates 22 million Americans will end up uninsured by 2026.
Following the CBO's report, Senate Majority Leader Mitch McConnell decided to wait until after the July 4 recess to schedule a vote on it. Can this plan cross the Senate finish line? Or will big changes to it be necessary? In this episode of The Motley Fool's Industry Focus: Healthcare podcast, Kristine Harjes and Todd Campbell explain the BCRA, the CBO's forecast, and what's next for "repeal and replace."
Also, what's it called when a stock climbs more in one day than an investor's original cost basis? According to Motley Fool co-founder David Gardner, it's a spiffy-pop! In this episode, Harjes and Campbell explain what caused Portola Pharmaceuticals' (NASDAQ:PTLA) spiffy-pop last week, and what investors should be doing with their shares now.
A full transcript follows the video.
10 stocks we like better than Portola Pharmaceuticals
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Portola Pharmaceuticals wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of June 5, 2017
This video was recorded on June 28, 2017.
Kristine Harjes: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. Today is June 28, and this is the Healthcare edition of the show. I'm your host, Kristine Harjes and I have healthcare specialist Todd Campbell on the line. Welcome to the show, Todd.
Todd Campbell: Happy Wednesday, Kristine!
Harjes: Happy Wednesday to you, too. How's your week going?
Campbell: End of quarter is always really busy for me, and wouldn't you know, we have all this fantastic news that I've been diving into over the course of the last few days, listening to conference calls and tracking the news flow like a boss.
Harjes: You are a boss. Love it. Yeah, there's been a lot of things going on out there in the world at large, and also in the healthcare world. Today, we're going to touch on what we thought was some of the more important points from what happened in the last week or so. The first thing we're going to talk about today is maybe a little bit self-congratulatory, it's maybe a bit of a victory lap, but, if you've been listening to the show for a while, you've heard us talk about Portola Pharmaceuticals. Portola finally had some really good news after a long period of time watching this stock and at times being kind of disappointed by it. They finally got their first drug approved by the FDA on Friday, and the stock experienced a 45% pop.
Campbell: Yeah, I think it's safe to say that Portola is a fan favorite of Kristine and I. We've talked about it in the past, and I know a lot of listeners have had a lot of questions over the last couple days, and those questions have stemmed by the FDA approval of their first commercial drug, a drug named Bevyxxa.
Harjes: Yes. I still want to call it by its old name, so excuse me if I do call it betrixaban, it now has an official market name, which is Bevyxxa. This is a pretty big deal. This is the company's first FDA-approved drug. It looks like it has the potential to be a blockbuster, meaning $1 billion in sales or more. I've seen some estimates that count up to $3 billion annually. Definitely something we'll be watching over the next couple quarters to see how it ramps up. Todd, do you want to talk a little bit about what makes the drug so exciting?
Campbell: I think why we were interested in this company to begin with -- they have two drugs, we'll get to the second drug in a minute -- but one of the reasons that I know I was interested in this company is because the drug they were working on was targeting the same mechanism of action that has already been proven to be effective by Johnson & Johnson, Bristol-Myers Squibb, and Pfizer. Basically, what we're talking about is a new anticoagulant, and it belongs to a class of drugs called factor 10a, or Xa, drugs. What they do is help prevent blood clots in patients who maybe have undergone surgery, like knee surgery or hip surgery, or suffer from atrial fibrillation. Now, with this approval -- Bevyxxa, not the other ones -- can be used in the treatment of acute medically ill patients who have been discharged from the hospital. That's a very large and important market. We'll explain that in a second. But I think the big takeaway to frame the whole conversation is, factor Xa drugs, there's some already on the market, they rack up billions of dollars a year in sales. Now we have a new drug coming out of Portola that's launching into another new indication, and it too could end up being an important blockbuster drug.
Harjes: One point that I really want to emphasize is that this is a new indication. When you look at the Xa inhibitors that are already approved, they're not approved for patients that have already been released from hospitals. So, this is the first time that you have an oral Xa inhibitor that is approved for preventative use in these patients. So, what it's looking to do here is displace a drug called Lovenox, which was at one point a $3-billion-plus annual sales drug. This was something that was taken, and it wasn't the best drug. It's an injection, it comes with the risk of hemorrhage. So, when you look at the clinical trial results, Bevyxxa was tested against Lovenox, and it reduced clotting better, and it also didn't have the added risk of bleeding events. This is an enormous phase 3 trial of 7,500 patients. So, it really does have the opportunity here to displace this long-standing drug that's been on the market for quite a while, and that makes a lot of money.
Campbell: Yeah. Last year, Kristine, we were a little nervous that maybe the FDA wouldn't give a green light to this drug following the trial results only because the trial results were really mixed. You had these multiple cohorts, and it had a statistical significance across the entire group of patients, but in one subset of patients it didn't, and people were worried that because it didn't in that one subset maybe the FDA would frown on the entirety of the data. Obviously that wasn't the case. It's been approved. And that's great news for doctors and patients, because as you said, Lovenox is not a fantastic drug. It is a standard of care still, and that's why in the trial, Portola went head-to-head up against it. I think, now, what we're going to see -- time will tell. This drug will get launched somewhere between August and November, according to management. I think what we'll see is that doctors will relatively quickly start transitioning patients over to this. Because if you think about it, Kristine, these are very sick patients. They've had strokes or heart attacks, something pretty drastic has landed them in the hospital. And they're older patients, so they're a little bit frail. And when they're being released from the hospital, a lot of times, you have mobility concerns, they're going to be in the bed for a while, which of course increases the risk of blood clots. Portola said when they announced to fanfare that they won the approval that there are 24 million people in the G7 countries who get admitted to hospitals with conditions, and 1 million of those people, when they are released from the hospitals, end up returning because they have a blood-clotting event that theoretically could be prevented by the use of this newly approved drug. So, this is a massive indication. The U.S. is just the start. I imagine we'll see the potential to roll this out in other countries like in Europe and Japan. On the conference call last week, a question was, "Are you still going to go in alone in marketing this drug?" Management says, in the U.S., absolutely. Their plan is to commercialize it themselves. They're hiring their own sales team to do that. They'll be rolling those out. Overseas, the doors seem to be left a little bit open, maybe talking to one of the other players out there about licensing.
Harjes: Right. And when you talk about adoption, and whether doctors will immediately flock toward this new drug as opposed to Lovenox, that brings us to the other side of the Portola story. One potential hurdle that these Xa inhibitors have to overcome is the fact that there is no currently approved antidote. When you think about a blood thinner, you also have to keep in mind that sometimes patients who are on blood thinners have unexpected major bleeding events, or they'll need an emergency surgery, and in those situations, you need to have an antidote on hand to stop the effects of the blood thinner.
Campbell: Right. Warfarin was, for 50 years, the leading anticoagulant. It still has 40% market share in the indication. And that's easily reversed by given vitamin K. That's one of the reasons that warfarin is actually losing market share, because it interacts with vitamin K and causes people to have severe dietary restrictions. So, warfarin has this antidote, and it's one of the reasons it's been so widely used, and it's still widely used in a lot of elderly patients who could be subject to, say, a fall, or something that would cause a bleeding event. So the thinking here is, if you can get an antidote approved by the FDA that would reverse these factor Xas, the top-selling of which are Xarelto, which is a J&J drug teamed up with Bayer, and Eliquis, which is a Pfizer drug teamed up with Bristol-Myers, then that antidote could also become an important top-selling drug.
Harjes: Right. And Portola is developing exactly that. They are very close to the finish line at this point. They have already filed for approval once. The approval unfortunately did not come. They received a complete response letter, a CRL, which is not a good sign. But, when you look into the details of their CRL, it was due to manufacturing issues and a request for another piece of data specifically about how this drug works to reverse the effects of some of the lesser-known, less commonly used factor Xa inhibitors. So, this wasn't the FDA saying, "Your drug doesn't work." This was the FDA saying, "We need you to tweak a couple of things in the manufacturing process and provide us with a little bit more data, and then we'll reconsider."
Campbell: As a refresher, this is a drug that, its competitors theoretically really want to see get approved. Pfizer, Bristol-Myers, Johnson & Johnson, they all helped provide financing for AndexXa's trials. They really want to see this drug get across the finish line.
Harjes: I wrote an article a long time ago, something about the little biotech that's getting a free lunch from big pharma, and that's because Portola is getting so much money handed to them from these big pharmas that aren't even demanding that much back from Portola, because these companies just want to see an antidote on the market to then boost their own drugs.
Campbell: Absolutely. The more of that warfarin market share you can chip away at, the better -- that's the way they're looking at it. AndexXa, as it stands right now, is going to be refiled, according to management, for approval in August. Previously they were targeting July, now they're looking at August. Who knows how many months it will be before the FDA makes a ruling on it. Let's assume it gets approved late this year, early next year. That's big news, because Portola estimates about over 90,000 people could benefit from the use of this antidote per year. And depending on pricing, that could add a few hundred million dollars in revenue to the top line. So, now you have a potentially billion-dollar drug in Bevyxxa, and you have another few hundred million potentially coming in from AndexXa.
Harjes: I think the big question here, and this is the root of most of the listener questions that we've gotten, between the Twitter and the Facebook group and writing in to industryfocus@fool.com -- you guys want to know what we're doing now. Are we taking some profits off the table? Todd and I are both shareholders. Personally, I'm not. I want to wait it out. This is a very exciting time to be a shareholder in this company. Of course, it still comes with risks, even though they've now crossed the line to becoming a commercial-stage company. You could still see the stock suffer pretty dramatically if, say, AndexXa doesn't get approved. What do you think, Todd?
Campbell: Right. This thing had, what, a 45% pop on the day of the approval? Some gap and fill is to be expected.
Harjes: And it's still a $3 billion company. That's pretty small.
Campbell: Yeah. It's not like Kristine and I are expecting another 40% pop next month. I'm going to stick with this stock. I'm riding it out. Assuming you've got $1 billion, $3 billion in revenue a couple years out, I wouldn't be shocked by a $5 [billion]-$6 billion market cap on this company. And in a takeout situation, which, again, who knows, never buy a stock because it could become a target of another company, but maybe that increases the valuation to $7 [billion]-$8 billion. Time will tell.
Following the CBO's report, Senate Majority Leader Mitch McConnell decided to wait until after the July 4 recess to schedule a vote on it. Can this plan cross the Senate finish line? Or will big changes to it be necessary? In this episode of The Motley Fool's Industry Focus: Healthcare podcast, Kristine Harjes and Todd Campbell explain the BCRA, the CBO's forecast, and what's next for "repeal and replace."
Also, what's it called when a stock climbs more in one day than an investor's original cost basis? According to Motley Fool co-founder David Gardner, it's a spiffy-pop! In this episode, Harjes and Campbell explain what caused Portola Pharmaceuticals' (NASDAQ:PTLA) spiffy-pop last week, and what investors should be doing with their shares now.
A full transcript follows the video.
10 stocks we like better than Portola Pharmaceuticals
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Portola Pharmaceuticals wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of June 5, 2017
This video was recorded on June 28, 2017.
Kristine Harjes: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. Today is June 28, and this is the Healthcare edition of the show. I'm your host, Kristine Harjes and I have healthcare specialist Todd Campbell on the line. Welcome to the show, Todd.
Todd Campbell: Happy Wednesday, Kristine!
Harjes: Happy Wednesday to you, too. How's your week going?
Campbell: End of quarter is always really busy for me, and wouldn't you know, we have all this fantastic news that I've been diving into over the course of the last few days, listening to conference calls and tracking the news flow like a boss.
Harjes: You are a boss. Love it. Yeah, there's been a lot of things going on out there in the world at large, and also in the healthcare world. Today, we're going to touch on what we thought was some of the more important points from what happened in the last week or so. The first thing we're going to talk about today is maybe a little bit self-congratulatory, it's maybe a bit of a victory lap, but, if you've been listening to the show for a while, you've heard us talk about Portola Pharmaceuticals. Portola finally had some really good news after a long period of time watching this stock and at times being kind of disappointed by it. They finally got their first drug approved by the FDA on Friday, and the stock experienced a 45% pop.
Campbell: Yeah, I think it's safe to say that Portola is a fan favorite of Kristine and I. We've talked about it in the past, and I know a lot of listeners have had a lot of questions over the last couple days, and those questions have stemmed by the FDA approval of their first commercial drug, a drug named Bevyxxa.
Harjes: Yes. I still want to call it by its old name, so excuse me if I do call it betrixaban, it now has an official market name, which is Bevyxxa. This is a pretty big deal. This is the company's first FDA-approved drug. It looks like it has the potential to be a blockbuster, meaning $1 billion in sales or more. I've seen some estimates that count up to $3 billion annually. Definitely something we'll be watching over the next couple quarters to see how it ramps up. Todd, do you want to talk a little bit about what makes the drug so exciting?
Campbell: I think why we were interested in this company to begin with -- they have two drugs, we'll get to the second drug in a minute -- but one of the reasons that I know I was interested in this company is because the drug they were working on was targeting the same mechanism of action that has already been proven to be effective by Johnson & Johnson, Bristol-Myers Squibb, and Pfizer. Basically, what we're talking about is a new anticoagulant, and it belongs to a class of drugs called factor 10a, or Xa, drugs. What they do is help prevent blood clots in patients who maybe have undergone surgery, like knee surgery or hip surgery, or suffer from atrial fibrillation. Now, with this approval -- Bevyxxa, not the other ones -- can be used in the treatment of acute medically ill patients who have been discharged from the hospital. That's a very large and important market. We'll explain that in a second. But I think the big takeaway to frame the whole conversation is, factor Xa drugs, there's some already on the market, they rack up billions of dollars a year in sales. Now we have a new drug coming out of Portola that's launching into another new indication, and it too could end up being an important blockbuster drug.
Harjes: One point that I really want to emphasize is that this is a new indication. When you look at the Xa inhibitors that are already approved, they're not approved for patients that have already been released from hospitals. So, this is the first time that you have an oral Xa inhibitor that is approved for preventative use in these patients. So, what it's looking to do here is displace a drug called Lovenox, which was at one point a $3-billion-plus annual sales drug. This was something that was taken, and it wasn't the best drug. It's an injection, it comes with the risk of hemorrhage. So, when you look at the clinical trial results, Bevyxxa was tested against Lovenox, and it reduced clotting better, and it also didn't have the added risk of bleeding events. This is an enormous phase 3 trial of 7,500 patients. So, it really does have the opportunity here to displace this long-standing drug that's been on the market for quite a while, and that makes a lot of money.
Campbell: Yeah. Last year, Kristine, we were a little nervous that maybe the FDA wouldn't give a green light to this drug following the trial results only because the trial results were really mixed. You had these multiple cohorts, and it had a statistical significance across the entire group of patients, but in one subset of patients it didn't, and people were worried that because it didn't in that one subset maybe the FDA would frown on the entirety of the data. Obviously that wasn't the case. It's been approved. And that's great news for doctors and patients, because as you said, Lovenox is not a fantastic drug. It is a standard of care still, and that's why in the trial, Portola went head-to-head up against it. I think, now, what we're going to see -- time will tell. This drug will get launched somewhere between August and November, according to management. I think what we'll see is that doctors will relatively quickly start transitioning patients over to this. Because if you think about it, Kristine, these are very sick patients. They've had strokes or heart attacks, something pretty drastic has landed them in the hospital. And they're older patients, so they're a little bit frail. And when they're being released from the hospital, a lot of times, you have mobility concerns, they're going to be in the bed for a while, which of course increases the risk of blood clots. Portola said when they announced to fanfare that they won the approval that there are 24 million people in the G7 countries who get admitted to hospitals with conditions, and 1 million of those people, when they are released from the hospitals, end up returning because they have a blood-clotting event that theoretically could be prevented by the use of this newly approved drug. So, this is a massive indication. The U.S. is just the start. I imagine we'll see the potential to roll this out in other countries like in Europe and Japan. On the conference call last week, a question was, "Are you still going to go in alone in marketing this drug?" Management says, in the U.S., absolutely. Their plan is to commercialize it themselves. They're hiring their own sales team to do that. They'll be rolling those out. Overseas, the doors seem to be left a little bit open, maybe talking to one of the other players out there about licensing.
Harjes: Right. And when you talk about adoption, and whether doctors will immediately flock toward this new drug as opposed to Lovenox, that brings us to the other side of the Portola story. One potential hurdle that these Xa inhibitors have to overcome is the fact that there is no currently approved antidote. When you think about a blood thinner, you also have to keep in mind that sometimes patients who are on blood thinners have unexpected major bleeding events, or they'll need an emergency surgery, and in those situations, you need to have an antidote on hand to stop the effects of the blood thinner.
Campbell: Right. Warfarin was, for 50 years, the leading anticoagulant. It still has 40% market share in the indication. And that's easily reversed by given vitamin K. That's one of the reasons that warfarin is actually losing market share, because it interacts with vitamin K and causes people to have severe dietary restrictions. So, warfarin has this antidote, and it's one of the reasons it's been so widely used, and it's still widely used in a lot of elderly patients who could be subject to, say, a fall, or something that would cause a bleeding event. So the thinking here is, if you can get an antidote approved by the FDA that would reverse these factor Xas, the top-selling of which are Xarelto, which is a J&J drug teamed up with Bayer, and Eliquis, which is a Pfizer drug teamed up with Bristol-Myers, then that antidote could also become an important top-selling drug.
Harjes: Right. And Portola is developing exactly that. They are very close to the finish line at this point. They have already filed for approval once. The approval unfortunately did not come. They received a complete response letter, a CRL, which is not a good sign. But, when you look into the details of their CRL, it was due to manufacturing issues and a request for another piece of data specifically about how this drug works to reverse the effects of some of the lesser-known, less commonly used factor Xa inhibitors. So, this wasn't the FDA saying, "Your drug doesn't work." This was the FDA saying, "We need you to tweak a couple of things in the manufacturing process and provide us with a little bit more data, and then we'll reconsider."
Campbell: As a refresher, this is a drug that, its competitors theoretically really want to see get approved. Pfizer, Bristol-Myers, Johnson & Johnson, they all helped provide financing for AndexXa's trials. They really want to see this drug get across the finish line.
Harjes: I wrote an article a long time ago, something about the little biotech that's getting a free lunch from big pharma, and that's because Portola is getting so much money handed to them from these big pharmas that aren't even demanding that much back from Portola, because these companies just want to see an antidote on the market to then boost their own drugs.
Campbell: Absolutely. The more of that warfarin market share you can chip away at, the better -- that's the way they're looking at it. AndexXa, as it stands right now, is going to be refiled, according to management, for approval in August. Previously they were targeting July, now they're looking at August. Who knows how many months it will be before the FDA makes a ruling on it. Let's assume it gets approved late this year, early next year. That's big news, because Portola estimates about over 90,000 people could benefit from the use of this antidote per year. And depending on pricing, that could add a few hundred million dollars in revenue to the top line. So, now you have a potentially billion-dollar drug in Bevyxxa, and you have another few hundred million potentially coming in from AndexXa.
Harjes: I think the big question here, and this is the root of most of the listener questions that we've gotten, between the Twitter and the Facebook group and writing in to industryfocus@fool.com -- you guys want to know what we're doing now. Are we taking some profits off the table? Todd and I are both shareholders. Personally, I'm not. I want to wait it out. This is a very exciting time to be a shareholder in this company. Of course, it still comes with risks, even though they've now crossed the line to becoming a commercial-stage company. You could still see the stock suffer pretty dramatically if, say, AndexXa doesn't get approved. What do you think, Todd?
Campbell: Right. This thing had, what, a 45% pop on the day of the approval? Some gap and fill is to be expected.
Harjes: And it's still a $3 billion company. That's pretty small.
Campbell: Yeah. It's not like Kristine and I are expecting another 40% pop next month. I'm going to stick with this stock. I'm riding it out. Assuming you've got $1 billion, $3 billion in revenue a couple years out, I wouldn't be shocked by a $5 [billion]-$6 billion market cap on this company. And in a takeout situation, which, again, who knows, never buy a stock because it could become a target of another company, but maybe that increases the valuation to $7 [billion]-$8 billion. Time will tell.