PTLA Q3 2018 CC Transcript

Cara Miller Portola Pharmaceuticals, Inc. - VP of IR and Corporate Communications * J. Scott Garland Portola Pharmaceuticals, Inc. - President & CEO * Jeet Mahal Portola Pharmaceuticals, Inc. - VP of Business Development * John T. Curnutte Portola Pharmaceuticals, Inc. - Executive VP and Head of Research & Development * Mardi C. Dier Portola Pharmaceuticals, Inc. - Executive VP & CFO ================================================================================ Conference Call Participants ================================================================================ * Dana Carver Flanders Goldman Sachs Group Inc., Research Division - Research Analyst * Jay Olson Goldman Sachs Group Inc., Research Division - Research Analyst * Kenneth Atkins * Matthew Christopher Phipps William Blair & Company L.L.C., Research Division - Analyst * Matthew Kelsey Harrison Morgan Stanley, Research Division - Executive Director * Vamil Kishore Divan Crédit Suisse AG, Research Division - Senior Analyst * Yigal Dov Nochomovitz Citigroup Inc, Research Division - Director ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Welcome to Portola Pharmaceuticals Conference Call. This call is being recorded. (Operator Instructions). I would now like to turn the call over to Cara Miller, Portola's Vice President of Investor Relations and Corporate Communications. Please go ahead. -------------------------------------------------------------------------------- Cara Miller, Portola Pharmaceuticals, Inc. - VP of IR and Corporate Communications [2] -------------------------------------------------------------------------------- Thank you, and welcome to Portola's third quarter financial results conference call. Joining me are Scott Garland, President and CEO, Mardi Dier, Chief Financial Officer, and Dr. John Curnutte, Head of Research and Development. Also with us this afternoon for the Q&A portion of the call are Glenn Brame, Senior Vice President of Technical Operations, and Jeet Mahal, Vice President and the AndexXa Early Supply Program Lead. Before we begin, I would like to remind you that remarks on this call will contain forward-looking statements. For a more detailed description of important risk factors that could cause our actual results to differ materially, please refer to our most recent quarterly report on Form 10-Q and our annual report on Form 10-K. With that, I will turn the call over to Scott Garland. -------------------------------------------------------------------------------- J. Scott Garland, Portola Pharmaceuticals, Inc. - President & CEO [3] -------------------------------------------------------------------------------- Good afternoon, and thank you for joining us on our third quarter 2018 financial results call. Before we begin, I'd like to share how excited I am to join Portola at such a pivotal moment in the company's history. It is incredibly rare for a company at this stage to have 2 potentially lifesaving medicines on the market and another therapy in late stage clinical development. AndexXa, Bevyxxa and Cerdulatinib were all discovered and developed here and each uniquely addresses significant unmet needs. What drew me to Portola is its strong scientific foundation and the opportunity to potentially save patients' lives. I was also impressed by the caliber of our employees and the strength and commitment of the executive team. As this is my first opportunity to chat with you, I'd like to tell you about my early observations at Portola and my immediate priorities. Let's start with AndexXa. Since joining, I've had the chance to dig deep into physician market research and speak with a number of clinical thought leaders and it's clear that AndexXa has significant potential to address life-threatening bleeds. Mardi will give you more details later in the call, but early interest in AndexXa remains high and we continue to receive numerous inbound inquiries from physicians and healthcare systems. As you know, under the leadership of John and Mardi, the company executed a pivot in August to focus a greater portion of our resources on AndexXa. This was a critical move and I fully endorse this change in direction. With just a few months into launch, we're already pleased with what we're seeing from a utilization perspective and we're excited about the opportunity to educate the physician community fully on the important role AndexXa can play in their hospitals. Our top priority at Portola is AndexXa, ensuring the approval of the Gen 2 supply and a successful launch. While we still believe that Bevyxxa is a best in clast factor Xa inhibitor, overcoming the many barriers that exist on the hospital market remains a challenge and revenues continue to lag behind our expectations. As you know, we've now focused our approach for Bevyxxa. We've tightened our resources to a small number of high potential accounts to see if we can crack the code for driving use of Bevyxxa. As Mardi mentioned at the Morgan Stanley conference call in September, we call this our Centers of Excellence program. We believe this tight focused effort will provide insights into how we might ultimately unlock the full potential of Bevyxxa and we look forward to sharing key learnings from this approach in the future. Importantly, as a result of our change in focus to prioritize AndexXa, we've been able to expand our cash runway into the first half of 2020. Mardi will talk more about this later. I'm excited to get on the road with the team over the next couple of weeks to attend medical and investor conferences. Then, with a few more months under my belt, I'll share my broader vision for the company during our JP Morgan presentation. Before I finish, I want to add one more thing. On behalf of the entire organization, I want to say thank you to John and Mardi for their thoughtful leadership and guidance during this period of change. Managing Portola through a transition like this took a lot of hard work and strong leadership. I look forward to working with them and the rest of the executive committee in making Portola a highly successful company. So Mardi and John, a huge thank you for all your efforts. With that, I'll turn it over to Mardi. -------------------------------------------------------------------------------- Mardi C. Dier, Portola Pharmaceuticals, Inc. - Executive VP & CFO [4] -------------------------------------------------------------------------------- Thank you, Scott, and welcome to the team. We are very excited to have you here and look forward to partnering with you in this next critical phase in the company's evolution. And good afternoon, everyone. I am pleased to provide you with an update on our progress this quarter and share some new insights on our AndexXa launch. The market opportunity for AndexXa remains significant. We estimate that more than 4 million people in the United States are currently taking a factor Xa inhibitor and we expect that number to continue to grow at strong double-digit rates. Among these patients, we estimate that approximately 3% will be admitted to the hospital with a factor Xa inhibitor related bleed. In 2017, that equated to approximately 140,000 hospital admissions in the US alone. Based on third party data, we also estimate that up to an additional 1% of these patients may require emergency surgery, further increasing the overall opportunity for AndexXa over time. As you know, Q3 marked our first full quarter of launch for the AndexXa early supply program and we are very encouraged by the demand from participating hospitals. We've also had a strong response from medical societies, 3 of which added AndexXa to their guidelines and guidance documents in advance of approval. The American College of CHEST physicians recently became the fourth society to add AndexXa to its guidelines and we expect more to follow. Now for more specifics on the ESP or Early Supply Program. We have been managing the ESP to ensure we are getting our Gen 1 supply to as many patients as possible. Since launch, we've been able to release more Gen 1 supplies than we anticipated and we have a better understanding of the ordering patterns of the participating hospitals. As a result, starting in late August, we determined we could expand the ESP to include additional sites that were requesting AndexXa. To date, more than 100 hospitals have ordered AndexXa. More importantly, even at this early stage of the launch, approximately 40% of these hospitals have already reordered. We believe the success we are having in getting formulary approvals, orders and reorders is setting us up nicely for the anticipated launch of Gen 2 in early 2019. Additionally, the CMS New Technology Add-on Payment, or NTAB, which went into effect on October 1st, will be beneficial for hospitals as it provides direct reimbursement from CMS of up to $14,000 per claim. During this first full quarter of the launch, we have observed that it takes -- we have observed that the time it takes to get hospitals up and running is variable among institutions with some being staffed with doctors and others needing to go through a more protracted process. We anticipate this variability to continue once Gen 2 is approved. The takeaway is we are experiencing strong hospital activation and we are seeing routine utilization trends that are very encouraging. We have a number of exciting milestones ahead including the FDA PDUFA date of December 31, 2018 for our Gen 2 process and the CHMP Opinion, which we also expect by the end of this year. In preparation for an anticipated positive outcome in the US, we are moving ahead with plans to increase our US field force in early 2019. While our focus is on the AndexXa US market, we continue to assess our European launch strategy as we approach the CHMP Opinion date. Our plan is to move forward with an initial launch in a handful of countries where pricing and market access are more predictable and where factor Xa use is the highest. As in the US, we will initially target high volume stroke and trauma centers. In parallel, we will be evaluating partnership opportunities in Europe and elsewhere. We'll provide further updates on our launch strategy upon EMA approval anticipated in early 2019. Overall, we are excited by the progress this quarter and remain very positive about the future of AndexXa. This early launch period has provided great insight into the demand for AndexXa, the approval process at our target hospitals, and the encouraging results that reflect the ordering and reordering patterns of AndexXa at the hospitals that are up and running. Now, briefly on Bevyxxa, as Scott mentioned, we are narrowing our focus to a small targeted group of hospitals that have Bevyxxa on formulary. We are calling these hospitals our Centers of Excellence and our goal in 2019 is to establish a blueprint of success for Bevyxxa, both in the hospital and outpatient settings. Experience within the Centers of Excellence will help us make a strategic decision on how best to maximize the benefit of Bevyxxa and, as we stated on the second quarter call, during this evaluation period in 2019 we expect revenues to remain the same as prior quarters. I will now turn it over to John for an update on our R&D activities. -------------------------------------------------------------------------------- John T. Curnutte, Portola Pharmaceuticals, Inc. - Executive VP and Head of Research & Development [5] -------------------------------------------------------------------------------- Thank you, Mardi, and good afternoon to everyone. In addition to our progress with the early supply program which Mardi has just outlined, we also accomplished a number of clinical milestones during the quarter. First, we are on track for the December 31, 2018 PDUFA data for the anticipated approval of our AndexXa Gen 2 manufacturing process. In fact, we just received notification from the FDA that the PAS was deemed okay to file. To date we have successfully manufactured enough Gan 2 supply to meet anticipated demand for the next couple of years. We have also finalized the protocol for the randomized clinical trial the FDA requested which compares AndexXa to the standard of care including PCCs. We are on track to initiate the study and to dose our first patient in Q1 of 2019. We are also developing a registry that will deliver important real-world data once the broader Gen 2 supply is approved. We plan to launch the registry in Q1 2019 and look forward to updating you on our 2018 full year financial results call. Finally, we expect to present the full AndexXa 4 results at a major medical meeting sometime in the first quarter of next year and we are hoping for a simultaneous peer reviewed publication in a prestigious medical journal. Now upon completion of these milestones, we will continue moving forward with our plans to evaluate strategies to expand our label. Importantly, we plan to initiate a study for patients on factor Xa inhibitors needing emergency surgery in 2019. I will now turn to cerdulatinib, our Syk-JAK kinase inhibitor and the third compound discovered in our labs. I'm excited to share our progress with this compound and the encouraging ongoing clinical activity we are seeing across a range of B and T-cell malignancies, particularly in the T-cell lymphomas. These include peripheral T-cell lymphoma or PTCL and cutaneous T-cell lymphoma or CTCL, 2 difficult to treat blood cancers for which there are limited treatment options. We were pleased to hear from the FDA in late September that the agency had granted cerdulatinib orphan drug designation status for PTCL. This is an important designation for the program. And just last week, we announced that we will be presenting new interim data from our Phase 2 study during an oral presentation at the American Society of Hematology meeting in San Diego on December 3rd. The oral presentation will include additional data beyond what is in the abstract, including greater patient numbers, duration of response, and the impact of cerdulatinib on the resolution of cutaneous and nodal lesions. Based on these data and recent feedback from the FDA, we believe there may be an accelerated approval pathway for cerdulatinib in certain tumor subtypes. We look forward to continuing discussion with the FDA including our end of Phase 2 meeting targeted for Q1 2019 to determine the regulatory path forward. I will now turn it back to Mardi for the quarterly financial report. -------------------------------------------------------------------------------- Mardi C. Dier, Portola Pharmaceuticals, Inc. - Executive VP & CFO [6] -------------------------------------------------------------------------------- Thanks, John. Total revenue for the third quarter was $14.2 million. This includes $7.7 million in product revenue for our first full quarter of AndexXa sales and $7 million in collaboration and license revenue. Please note that based on the terms of these partnerships, we expect minimal contribution from these collaborations in 2019. As we projected on our second quarter call, Bevyxxa product orders remained relatively flat during the third quarter. However, we recognized a net product loss for Bevyxxa during the quarter of $552,000. This adjustment was primarily related to potential returns of initial launch quantities provided to wholesalers. Net loss for the quarter as $71.3 million or $1.08 net loss per share, an improvement from the previous quarter primarily due to the timing of Gen 2 AndexXa manufacturing and reduction in Bevyxxa spending. Our total operating expense for the quarter was $83.3 million, down from $107.7 million in the second quarter driven primarily to the timing of AndexXa manufacturing and further spend reduction. This number also includes $11.4 million in stock-based compensation expense. Cost of goods sold for the quarter was $4.3 million. With our refined sales estimates for Bevyxxa, we took a $2.9 million charge in the third quarter related to Bevyxxa manufacturing. Research and development expense was $40.2 million for the third quarter of 2018, a decrease of $26.2 million from the second quarter, again, mainly driven by the timing of AndexXa Gen 2 manufacturing and overall spend reduction. Approximately $12 million or 30% of R&D expense for the quarter and $75 million or 45% for the 9 months year-to-date of total R&D expense was related to AndexXa manufacturing. Upon anticipated FDA approval of Gen 2, AndexXa manufacturing costs will be capitalized and no longer flow through R&D expense. As a result, we anticipate decreased R&D spend in 2019, but as discussed, 2019 R&D will include clinical costs for the randomized controlled study and AndexXa label enhancing work like the surgical study John discussed. Additionally, until we have further clarity on our ongoing strategy for Bevyxxa and our potential path forward for cerdulatinib, both remain a small percentage of total R&D expense. SG&A expense for the third quarter was $38.8 million, consistent with the prior quarter. We expect an increase in SG&A in 2019 to reflect the expansion of the salesforce and associated commercial spend with the Gen 2 AndexXa launch. Today we are improving our operating expense guidance for 2018 to a range of $355 million to $365 million, down from our prior stated range of $390 million to $430 million. This spend improvement reflects the reduction in spend on Bevyxxa as well as additional savings for the year. Cash, cash equivalent and investment at September 30, 2018 totaled $380.9 million, compared with $534.2 million at December 31, 2017. As a result of our strategic decisions and cost management, we've extended our cash runway into the second quarter of 2020 while still making important investments to grow the topline over time. This includes spend for the success of our potential near term catalysts which include the FDA approval and launch of Gen 2 AndexXa product in the US, the positive CHMP Opinion and EMA approval for AndexXa and associated launch readiness in Europe, and our end of Phase 2 meeting with the FDA and clarity on our regulatory path forward for cerdulatinib. And with that, I'll turn it back over to Scott. -------------------------------------------------------------------------------- J. Scott Garland, Portola Pharmaceuticals, Inc. - President & CEO [7] -------------------------------------------------------------------------------- Thanks, Mardi. In closing, we remain excited about the future of Portola. In the first 9 months of 2018, we've gone through a significant transition as a company and we're starting a new chapter of leadership with a solid foundation. We bolstered our operational capabilities by making several key leadership hires and I am looking forward to working with the new executive team to achieve our goals. As you heard on the call today, AndexXa is our top priority and we are encouraged by the early uptake we're seeing in the market. In addition, we've limited our Bevyxxa efforts to a small number of target accounts and as a result, we've been able to improve our operating expense and our cash runway. And finally, I'm excited about the early signs of clinical activity for cerdulatinib. More work needs to be done to flesh out the development pathway, and until then, it remains a relatively small part of our R&D spend. I want to thank you for your continued interest in Portola. I look forward to meeting you all at an upcoming investor conference or medical meeting. And with that, I'll turn it over to questions. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first comes from the line of Dana Flanders with Goldman Sachs. Your line is now open. -------------------------------------------------------------------------------- Dana Carver Flanders, Goldman Sachs Group Inc., Research Division - Research Analyst [2] -------------------------------------------------------------------------------- Hi, thank you very much for the questions. Can you just flesh out a little bit, I think you said 100 hospitals you were able to expand to, what are you seeing across these accounts? Are they limited in what they can order for AndexXa? And as they gain more experience, are you seeing month-over-month growth in ordering? That's my first one. Thanks. -------------------------------------------------------------------------------- J. Scott Garland, Portola Pharmaceuticals, Inc. - President & CEO [3] -------------------------------------------------------------------------------- Thanks, Dana, this is Scott here. I'll turn that question over to Jeet who is running our AndexXa early program. Jeet? -------------------------------------------------------------------------------- Jeet Mahal, Portola Pharmaceuticals, Inc. - VP of Business Development [4] -------------------------------------------------------------------------------- Thanks, Scott. Dana, so as Mardi mentioned, we have over 100 hospitals now that have stocked AndexXa, post the focus changing to AndexXa in late August. About 40% of those have reordered. So it's still early in terms of being able to take a look at the data and make projections on where we're going, but we're very encouraged by what we see so far from those hospitals. As you know, the label is for life-threatening and uncontrolled bleeding. And what we've seen from these hospitals that have shared protocols is the protocols follow the label very well. Like all drugs though, in the initial usage, the physicians want to use it in kind of the most clear subset of patients. So we do think some of the early usage is more focused on intracranial hemorrhage patients and that will probably change as they get more comfortable with AndexXa over time. But again, their protocols seem to follow the label, so they will be able to do that. -------------------------------------------------------------------------------- Dana Carver Flanders, Goldman Sachs Group Inc., Research Division - Research Analyst [5] -------------------------------------------------------------------------------- Okay, great. Then my follow-up, just on the discussions you're having with formularies, and I know you said some of them are a little bit longer than others. What's driving that? And as you look out into 2019 and you get Gen 2 approved, how does that impact how you plan to roll out AndexXa to those 1,000 hospitals? And I know that will be over a multiyear period, but maybe just think about or discuss how that is going to impact your kind of commercial strategy as you get expanded supply. Thank you. -------------------------------------------------------------------------------- Jeet Mahal, Portola Pharmaceuticals, Inc. - VP of Business Development [6] -------------------------------------------------------------------------------- Yeah. As you noted, we do see activation time for these stocked accounts to vary from weeks to months and I don't think we're surprised by that at all. Hospitals are very complex institutions and some of them have multiple committees where they have to go seek approval for it as they are writing the protocol for AndexXa. And then they've got to turn around and implement it in various spots of the hospital. So those institutions just take longer and a lot of those institutions tend to be the big academic centers. And what we've seen in our early supply program is this variability. The important part is though, again, from the now over 100 hospitals stocked, we do see many of these hospitals are able to get up and running and running very quickly with the protocols that support the use on the whole label. So we expect that to continue next year as we target more accounts. So going into the second part of your question, in terms of the Gen 2 rollout, we have multiple tiers and we've I think discussed this a little bit previously. The tier one or our first set of targets are about 600 US hospitals that are level one or level two trauma centers or have comprehensive stroke designation. So those are the biggest institutions across the country. The next tier are about 900 additional accounts, additional hospitals with advanced stroke center designations. Those are all pretty important accounts for us. And then finally, from what we've seen in the early supply program, we also want to be able to stock affiliates of these accounts too. Because oftentimes, patients might present to an affiliate account. That's where we want the drug started if they are showing up there and then they are transferred to the larger accounts. So we'll be going out next year to target as many as we can, but that's basically how we see the universe. We think a portion will be up and running by the end of 2019, and that the new site activation rate will be roughly consistent with what we've seen across the first 6 months of the ESP program. So we expect it to be a kind of expanded, but continuous process that we've seen so far. -------------------------------------------------------------------------------- J. Scott Garland, Portola Pharmaceuticals, Inc. - President & CEO [7] -------------------------------------------------------------------------------- And maybe, Dana, just to add one more thing, obviously we're still early in our launch. We're just getting our marketing and sales efforts up and running. But so far, we're very encouraged with what we're seeing. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Thank you. Our next question comes from the line of Yigal Nochomovitz with Citigroup. Your line is now open. -------------------------------------------------------------------------------- Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [9] -------------------------------------------------------------------------------- Hi, guys, thanks for taking the questions. So maybe the first one for me is, regarding the 100 hospitals that have now ordered the product, it would be helpful if you could just provide a little bit more granularity in terms of how that is working. So I assume a subset of those are the fast adopters and then a subset are the ones that have had slower adoption. Could you just give us some clarity on how that breaks out? What percent of those 100 hospitals are in the bucket that are still working through the protocols although they have the drug there, not able to use it yet? Thanks. -------------------------------------------------------------------------------- Jeet Mahal, Portola Pharmaceuticals, Inc. - VP of Business Development [10] -------------------------------------------------------------------------------- Hi, Yigal. So yeah, over 100 hospitals now have stocked and that's been a big jump from where we were on the last call in terms of the delta in terms of the number of hospitals. So it's a little early to really I think put them in buckets. Most of those hospitals that have stocked have done so in the last 6 to 8 weeks, as we did the post pivot. So I don't know if we're ready to qualify those 40% or the 60% that haven't started using it as slower adopters yet. We'll just have to wait and see. But again, we are encouraged by getting this much interest so quickly in the product. Even without significant expansion of the salesforce yet which we plan on next year or other commercial activities which we plan on rolling next year. So again, it's just a little early I think to try to bucket them into different accounts or typing by time. -------------------------------------------------------------------------------- Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [11] -------------------------------------------------------------------------------- Okay. On the $7.7 million for the quarter, can you just give us a sense as to what percent of that was drug that was actually administered to patients versus what is ordered and waiting to be used? -------------------------------------------------------------------------------- Mardi C. Dier, Portola Pharmaceuticals, Inc. - Executive VP & CFO [12] -------------------------------------------------------------------------------- Yeah, hi, Yigal, it's Mardi. I think what we said on the call, which is the best proxy for answering that question, is that we have over 100 hospitals that have drug and approximately 40% of those are starting to reorder. Reordering in our view is the proxy for usage. I think we talked on the last call, these hospitals, now remember, all these hospitals know that there's a finite amount of supply, so they're stocking a certain amount, they're using it carefully, at least we've heard this anecdotally, like they know they may not be able to get as much supply as they want. But then they do reorder. And we've been able to dropship the drug to them on an overnight basis. So it's all very efficient with these hospitals right how. -------------------------------------------------------------------------------- Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [13] -------------------------------------------------------------------------------- Okay. Then more generally in terms of the demand trajectory looking into 2019, I don't know if you're able to do it now, but we would be very interested in getting a sense as to how you think about the number of uses of this product at the different hospitals that you're targeting, both the urban centers and the more regional centers. Can you just provide some color on the range of expected use per month? That would helpful just so people can think about the trajectory. Thanks. -------------------------------------------------------------------------------- Jeet Mahal, Portola Pharmaceuticals, Inc. - VP of Business Development [14] -------------------------------------------------------------------------------- Yeah, I think you noted that we do expect that there is going to be a distribution depending on the type and location of a hospital. A lot of these small affiliate sites, we don't expect to have tremendous volume as they are in smaller areas in terms of population. The other thing we want to make sure is that we're overlaying that on Xa usage, right? So in a particular hospital it will depend on the local Xa use patterns as well. But so far, we're really encouraged with what we've seen in terms of reaching utilization. As Mardi noted, these hospitals as far as we know aren't stocking drug just to put on shelves. They're using it and they're using it once they get up and running pretty regularly. At this point, I don't think we have enough data to really project how that's going to play out across the expansion next year across the United States, but so far, it's been very encouraging. -------------------------------------------------------------------------------- J. Scott Garland, Portola Pharmaceuticals, Inc. - President & CEO [15] -------------------------------------------------------------------------------- Yigal, maybe -- I know, just sorry, Yigal, this is Scott. We anticipated we'd get a lot of questions about detail of usage patterns so far, but we really need to be careful. This is still very early in our launch. We are quite excited about what we're seeing from a utilization perspective as Mardi said. We don't anticipate a lot of this is stocking, I don't think a lot of hospitals are going to order a product that's this much and let it sit on their shelves in this dropship model. But when it comes to any detail specific questions about 2019, we really don't want to get into that right now just because we don't want to get ahead of ourselves. Hopefully you understand that, Yigal. -------------------------------------------------------------------------------- Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [16] -------------------------------------------------------------------------------- Yeah, understood. Then just one final one, when you talk about the 600 hospitals and then the 900 additional in 2019, are you including the IDNs in that or those are all individual hospitals? -------------------------------------------------------------------------------- Jeet Mahal, Portola Pharmaceuticals, Inc. - VP of Business Development [17] -------------------------------------------------------------------------------- Great question. That does include hospitals that are within IDNs. So that will be a separate effort. But within those targets, as you know, the IDNs, many of them have a longer involved process in terms of making sure that they're approving it on an IDN basis. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- Thank you. Our next question comes from the line of Matt Phipps with William Blair. Your line is now open. -------------------------------------------------------------------------------- Matthew Christopher Phipps, William Blair & Company L.L.C., Research Division - Analyst [19] -------------------------------------------------------------------------------- Thanks for taking my question and Scott, welcome. Look forward to meeting you soon. First, John, you mentioned the CHMP Opinion by yearend, but can you just say if everything has been submitted what you anticipated being included in the CHMP next week? Or are you targeting the December meeting? -------------------------------------------------------------------------------- John T. Curnutte, Portola Pharmaceuticals, Inc. - Executive VP and Head of Research & Development [20] -------------------------------------------------------------------------------- Everything has been submitted, Matt. And pretty much everything has been right on time as we have worked out with the CHMP. As you know, there's a fair amount of information that they have to review and our current thought is that this will be an opinion in December, end of the year as we've been saying. -------------------------------------------------------------------------------- Matthew Christopher Phipps, William Blair & Company L.L.C., Research Division - Analyst [21] -------------------------------------------------------------------------------- Got it. Thanks. And then Jeet, you kind of touched on this, but there was a recent publication from the Brigham & Women's Hospital on their initial use of AndexXa. And also provided their own institutional criteria use guidelines. Do you feel like that is pretty typical for the hospital so far in the early supply program and might translate to most of those kinds of tier one 600 hospitals that you've been talking about, upon the supply expansion? -------------------------------------------------------------------------------- Jeet Mahal, Portola Pharmaceuticals, Inc. - VP of Business Development [22] -------------------------------------------------------------------------------- Yeah, that's what we're referring to is that type of protocol in line with the label for AndexXa is what we're seeing across many of the institutions that are sharing them with us. So we do really see that the unmet need is there. Not just with these intracranial patients where we know the morbidity and mortality is so high, but also these other life-threatening situations. So we really do think that this is being viewed as a breakthrough therapy by these hospitals and filling a critical need. -------------------------------------------------------------------------------- J. Scott Garland, Portola Pharmaceuticals, Inc. - President & CEO [23] -------------------------------------------------------------------------------- And Matt, maybe just to add something to that, I've been involved in a lot of drug launches. You often see utilization in the early phases of a launch in the most high-risk patients. And as physicians develop comfort with the drug, you would expect utilization to broaden thereafter. So I think what we're seeing in the Brigham paper is essentially what we were expecting at this point. -------------------------------------------------------------------------------- Matthew Christopher Phipps, William Blair & Company L.L.C., Research Division - Analyst [24] -------------------------------------------------------------------------------- Got it, thanks. Just one last one. Scott, I know you're still early days there, so probably kind of feeling things out, but if you could give your personal longer-term thoughts. Obviously focusing on AndexXa now in the US, getting the PAS. But in Europe you guys have talked a little bit about maybe select countries versus licensing, cerdulatinib is interesting, but can you afford the cost at this point or do you have to wait on that a little bit just because of the capital situation? Just any high-level thoughts you can provide at this point, Scott, would be helpful. -------------------------------------------------------------------------------- J. Scott Garland, Portola Pharmaceuticals, Inc. - President & CEO [25] -------------------------------------------------------------------------------- Yeah, happy to, Matt. So obviously right now it's first and foremost about AndexXa utilization in the United States and delivering solid revenue quarter-over-quarter and demonstrating our executional excellence in that regard. We've obviously talked about Bevyxxa being moved into a more Centers of Excellence focused approach and I'm completely onboard with that strategy. And again, with cerdulatinib, I'm excited. Being an oncology guy, I actually think that's an active drug and it's something that I think has activity beyond the initial T-cell lymphomas. And so I see that as a product we want to move forward. But obviously it remains a pretty small piece of our overall R&D spend until we get a better sense. As it relates to Europe, what Mardi had said on the call is essentially the strategy. We're going to go after the larger select markets where we think the factor Xa use is significant. And just to point out, in Europe right now, factor Xa use is 50% higher than it is in the United States, so there's a real market opportunity there. But we'll go after smaller markets, I'm sorry, larger markets when we think there is high factor Xa as well as better access to pricing and market access. At the same time, we're going to be discussing in parallel, partnership opportunities. We'll do those in unison and we'll see where those conversations head. We have a CHMP Opinion that we're hoping to get at the end of the year and we need to start executing against that. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- Thank you. Our next question comes from the line of Jay Olson with Oppenheimer. Your line is now open. -------------------------------------------------------------------------------- Jay Olson, Goldman Sachs Group Inc., Research Division - Research Analyst [27] -------------------------------------------------------------------------------- Thanks for taking the questions. I think I understood that you said 60% of hospitals that have not reordered AndexXa have not starting using it. Can you just talk about what the average order size is per hospital in terms of the number of doses in an order? -------------------------------------------------------------------------------- J. Scott Garland, Portola Pharmaceuticals, Inc. - President & CEO [28] -------------------------------------------------------------------------------- Jeet, why don't you take that? -------------------------------------------------------------------------------- Jeet Mahal, Portola Pharmaceuticals, Inc. - VP of Business Development [29] -------------------------------------------------------------------------------- Yeah, so I think in terms of the initial order, as Scott mentioned, there's no real incentive for the hospitals to put a lot of drug on the shelf, right? So what we do see them is stocking with a couple of doses. And then, anytime they use it, that's when they can just reorder and we dropship and it comes straight to them within 24 hours or so. So the reorders are on the frequency we think that is roughly equivalent with the use and can range from anywhere from 1 pack, and remember, each pack is 4 vials of drug, so they have to order in 4 vial quantities, to a few packs. But again, they can do that any day of the week, on a Friday and we dropship it. So it's pretty constant. -------------------------------------------------------------------------------- J. Scott Garland, Portola Pharmaceuticals, Inc. - President & CEO [30] -------------------------------------------------------------------------------- Maybe the point there is that we're obviously on an upward ramp as we activate these accounts. Some of these have come on relatively recently, so this is something we're going to see continuing over time as these accounts mature. -------------------------------------------------------------------------------- Jay Olson, Goldman Sachs Group Inc., Research Division - Research Analyst [31] -------------------------------------------------------------------------------- Thank you, that's very helpful. Then for the hospitals that have used AndexXa, I think you touched on this, but I didn't hear if you gave a percentage of the patients who've received AndexXa that have ICH bleeds? -------------------------------------------------------------------------------- Jeet Mahal, Portola Pharmaceuticals, Inc. - VP of Business Development [32] -------------------------------------------------------------------------------- As we mentioned, we don't have a formal way of collecting the data. It's anecdotal at this point. As Dr. C mentioned, we'll be starting a registry, we'll be able to have better insight into patterns of use once that's up and running and we start getting data from that. So anecdotally, as Scott mentioned, the physicians are early part of their experience curve with this drug and a large portion of the use is intracranial hemorrhage. Now we do see, or have been told, of uses outside of intracranial hemorrhage so we do believe that's very important again for this drug to be used in any of these life-threatening and uncontrolled bleeding situations. But early days. Early days at the hospitals, the physicians there tend to start with intracranial hemorrhage patients. -------------------------------------------------------------------------------- Operator [33] -------------------------------------------------------------------------------- Thank you. Our next question comes from the line of Matthew Harrison with Morgan Stanley. Your line is now open. -------------------------------------------------------------------------------- Matthew Kelsey Harrison, Morgan Stanley, Research Division - Executive Director [34] -------------------------------------------------------------------------------- Hi, this is Hannah on for Matthew. So we know you're probably not going to give us too detailed expense guidance for 2019 right now, but we were hoping you could elaborate a bit on what the puts and takes are when it comes to 2019. So how much spending do you need to complete for AndexXa either through R&D or manufacturing versus what are some areas of variable costs? Thanks. -------------------------------------------------------------------------------- Mardi C. Dier, Portola Pharmaceuticals, Inc. - Executive VP & CFO [35] -------------------------------------------------------------------------------- I think I did a pretty good job outlining that in the script. When we talked about R&D, we said that most, a good portion of R&D year-to-date was for AndexXa manufacturing. And that will be capitalized starting with Gen 2 approval. So we do expect Gen 2, I mean R&D expense to go down in 2019. However, we will have increased clinical costs for AndexXa that looks like the randomized controlled study and label enhancing studies that John talked about such as the surgical study. So that's R&D. And then for SG&A, we said that SG&A will expand commensurate with the expansion of the salesforce that we anticipate for AndexXa early 2109. So salesforce and related commercial expense for the Gen 2 launch. So we did give those parameters. I think from a COGS perspective, I think we've said that we have a lot of Gen 2 supply for AndexXa, so we intend to pave the next couple of years of sales for AndexXa, you will not see the inventory flow through COGS. So that pretty much sums up your OpEx. And we'll provide OpEx guidance on the yearend call. -------------------------------------------------------------------------------- Operator [36] -------------------------------------------------------------------------------- Thank you. Our next question comes from the line of Vamil Divan with Credit Suisse. Your line is now open. -------------------------------------------------------------------------------- Vamil Kishore Divan, Crédit Suisse AG, Research Division - Senior Analyst [37] -------------------------------------------------------------------------------- Thanks for taking my questions. So just a couple on AndexXa. One, as we think about the PAS approval around December 31st, I guess what are the main risks as you see it? I think some investors who have spoken have just tried to see what's the probability of success. Are there major things we should be concerned about or are things pretty standard at this point and more likely to get approved? The second one is on the perioperative side and I think you said you'll be starting a study in 2019. If you could maybe just talk about what, maybe a broad frameup of what that study would look like, how long you think it would take to get data from that study, and if you're seeing any off-label use in that sort of setting right now? -------------------------------------------------------------------------------- John T. Curnutte, Portola Pharmaceuticals, Inc. - Executive VP and Head of Research & Development [38] -------------------------------------------------------------------------------- Vamil, John Curnutte here. As far as the PAS, the great news is that everything is really on track from everything that we see for the December 31st PDUFA date. And as we just shared, we've just heard from the FDA that the filing occurred on schedule as well and everything has been pretty much routine in terms of our interactions with the FDA. As you know, for at least the routine things, we really don't comment on those. So overall, I think we're on, based on everything we know right now, we're on an excellent track toward December 31. Now you know we all know theoretically things can happen. The guidelines for the FDA allow them to extend the review by 2 months, or up to 2 months, if there is a bolus of new data that comes into the application that they might request. That certainly has not happened at this point, but it is certainly a theoretical risk. So in summary, we're really right on track for that December 31 date based on everything we know today. And then on the surgery side of things, first of all, we have already had preliminary discussions as we've shared in the past, with the FDA on a surgery study. It's also on our or has been on our discussion list with the EMA. Certainly, let's focus on the FDA side of this, right now, I think we and they want to entirely focus on the PAS. As you recall, this is a pretty substantial document that we sent to them that I think requires pretty much their full attention. So what we're planning to do is, as soon as they complete their review of the PAS, we will initiate discussions with them on the surgery study. Now the surgery study is one where the exact design of which we have not come to an agreement with the FDA. There are many ways that one could do the study and right now, one of the templates that we certainly are looking at is the way Praxbind studied surgery for the reversal of Pradaxa. So that is one type of an approach. I would say though that given the amount of effort that we've put into thinking about surgery, that I would hope that the discussions with the FFA would go smoothly and that we would be able to get the study up and going by later in the year. With regard to how long it will take, that really depends on what we negotiate. It may be, again, a range of numbers of patients and whatnot. What I can tell you is, talking with surgeons out there in the community and in surgical meetings, that there is a great deal of interest in this study. So I don't think it's going to be a lack of enthusiasm on the part of surgeons to raise their hand and say we'd like to help you out with this study. So again, first things first, the PAS, and as soon as the dust settles on that, we'll give you a lot more information about the details on surgery. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- Thank you. (Operator Instructions) Our next question comes from the line of Kenneth Atkins with Cowen. Your line is now open. -------------------------------------------------------------------------------- Kenneth Atkins, [40] -------------------------------------------------------------------------------- Hi, guys, thanks for taking my questions. I'm just wondering if you can give us any updates on your thoughts about the best path forward for Bevyxxa, whether that asset is best developed in your hands or potential partnered and what factors would go into that decision. -------------------------------------------------------------------------------- J. Scott Garland, Portola Pharmaceuticals, Inc. - President & CEO [41] -------------------------------------------------------------------------------- Thanks. As we were saying earlier, clearly what we've done is focused our efforts on Bevyxxa to the Center of Excellence plan. I think doing that is important because it gives us insights into how ultimately we might be able to maximize the value of this drug. Either ourselves or with a partner which gets to your second question. At this point, all options are on the table. We won't comment on any specificity around that. That's certainly something that we'll be considering going forward. -------------------------------------------------------------------------------- Operator [42] -------------------------------------------------------------------------------- Thank you. And it looks like we have a follow-up question from the line of Yigal Nochomovitz with Citigroup. Your line is now open. -------------------------------------------------------------------------------- Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [43] -------------------------------------------------------------------------------- Hi, thanks again. In some of the research we've done, we've noticed that there's a higher use of the high dose versus the low dose than maybe had been expected, at least from my perspective. I was just wondering if you could comment on whether you're seeing any trends regarding high dose versus low dose. And then also, regarding the ordering, when hospitals order, are they ordering for an assumed low dose for a patient or a high dose or a mixture of both? Can you just help with that? Thank you. -------------------------------------------------------------------------------- Jeet Mahal, Portola Pharmaceuticals, Inc. - VP of Business Development [44] -------------------------------------------------------------------------------- Hi, Yigal. We again don't have a formal way of collecting data via a registry, so everything that we know about utilization is anecdotal. As far as we can tell, there are some uses of high dose, but most institutions are using the low dose. In the AndexXa 4 study, the utilization rate of the high dose versus the low dose, it was very much favored towards the low dose, kind of 85% to 90%. As far as we can tell so far, that seems to be the case. Now when we get more data, either through a registry or more months of utilization and we start to see the reviews come from the hospitals, we'll have more. But at this point we do expect the majority to be the low dose. In terms of the hospital ordering, again, we don't know what they are specifically refilling for. So it's more of a refill model than it is ordering for the patient at hand. But in terms of the order sizes, they cover sometimes a low dose, sometimes a high dose, sometimes a little bit more than either one of those two. -------------------------------------------------------------------------------- Operator [45] -------------------------------------------------------------------------------- Thank you. And I am not showing any further questions. -------------------------------------------------------------------------------- J. Scott Garland, Portola Pharmaceuticals, Inc. - President & CEO [46] -------------------------------------------------------------------------------- Well thanks again, everybody, for joining us on the call today. I look forward to seeing you in the future. Take care. --------------------------------------------------------------------------------