October 28, 2011

Dow Jones VentureWire

Portola Pharma Strikes $554M Deal With Biogen For Phase III Study

Portola Pharmaceuticals Inc. has struck a deal worth up to $553.5 million with Biogen Idec Inc. to help fund its plan to push its lead anticoagulant drug into a Phase III study of over 5,000 people next year.

With the new partnership, Portola expects to finish 2011 with over $100 million in the bank, said Chief Financial Officer Mardi C. Dier. Though it has funds to get through Phase III studies, it will look to raise more money, possibly by going public in late 2012, so it can continue to advance its entire portfolio, Lis said. Its pipeline also includes a Factors Xa inhibitor antidote that could be used to curb the effects of the anticoagulant betrixaban.

Portola and Biogen are teaming up to develop drugs for diseases such as rheumatoid arthritis and systemic lupus erythematosus. Portola gains $45 million up front: $36 million cash, plus $9 million in equity that adds to its $218 million in venture funding. The South San Francisco, Calif., company also could net $508.5 million more in development and regulatory milestones.

The infusion will help Portola fund a large Phase III trial of another drug, the anticoagulant betrixaban. In March, Merck & Co. returned rights to betrixaban that it had gained through a 2009 partnership. That left Portola free to pursue a new partner or to push forward on its own.

Choosing the latter, Portola in the first half of 2012 plans to begin an international Phase III trial of more than 5,000 subjects. The study will enroll acute medically ill patients, or hospitalized people who aren't having surgery but are at risk for blood clots, said Chief Executive William Lis. The drug could be taken in the hospital and then at home to reduce their risk, he said.

A Phase III study of this size is rare for a venture-backed company, but Portola investors say Lis and his team have the experience to pull it off. If Portola succeeds on its own it will be the sole owner of a drug that could help many types of patients in the giant anticoagulant-drug market. But the move also puts all the risk on Portola.

"There's no question it's a major challenge for a biotech to do a Phase III trial in [the] anticoagulation space," said James Topper, general partner of Frazier Healthcare Ventures and a member of the Portola board. "But it has the potential to be incredibly rewarding as well."

More venture-backed companies could find themselves in a similar situation as big drug companies re-evaluate their pipelines to determine which programs they can afford to keep. Amid a portfolio review, Merck returned betrixaban rights even after paying for Phase II studies that showed the drug, a Factor Xa inhibitor, reduced incidence of bleeding compared with the blood thinner warfarin in patients with atrial fibrillation.

A drug maker's own programs have the edge in those reviews because people within the organization champion them. But Portola is positioned to absorb a setback because of the support of its venture backers and its ability to partner other programs. The lead molecule in this new alliance with Biogen, a selective spleen tyrosine kinase inhibitor, has potential to treat a range of inflammatory and autoimmune diseases, according to Portola.

Biogen will lead global development of the Syk inhibitors for major diseases, like rheumatoid arthritis, while Portola will take the lead in the U.S. on smaller-market diseases. Portola retains an option to co-promote alongside Biogen in the U.S. in major indications. Worldwide costs and profits will be split by Biogen and Portola 75% and 25%, respectively, companies said.

In addition to this alliance, Portola in 2009 partnered another program, the anti-clotting drug elinogrel, to Novartis AG.

With the new partnership, Portola expects to finish 2011 with over $100 million in the bank, said Chief Financial Officer Mardi C. Dier. Though it has funds to get through Phase III studies, it will look to raise more money, possibly by going public in late 2012, so it can continue to advance its entire portfolio, Lis said. Its pipeline also includes a Factors Xa inhibitor antidote that could be used to curb the effects of the anticoagulant betrixaban.

Betrixaban will not be the first drug that inhibits Factors Xa, a protein made in the liver that contributes to blood clotting. The Johnson & Johnson product Rivaroxaban, sold as Xarelto, earned U.S. approval this year. Another drug, apixaban, or Eliquis, is approved in Europe to prevent venous thromboembolism in patients undergoing total knee and hip replacements.

The drug, developed by Bristol-Myers Squibb Co. and Pfizer Inc., will be submitted for U.S. and European approval this year to prevent ischemic stroke in atrial fibrillation patients, according to Chrissy Trank, a Bristol-Myers spokeswoman. In addition, data from studies of acute medically ill patients will come out in November, she said.

Portola can learn from the experience of these trailblazers as it develops betrixaban, a long-acting, oral drug that shows potential to effectively anti-coagulate patients through once-daily dosing, among other benefits, according to the company.

With a Phase III drug, alliances with Novartis and Biogen, and other programs that have yet to be partnered, Portola is positioned to deliver returns or an exit to its backers in a fairly reasonable time frame, said Lis. The company, formed in 2003, has numerous investors, including Frazier, Abingworth Management, Advanced Technology Ventures, Alta Partners, MPM Capital, Prospect Venture Partners and Sutter Hill Ventures.

They have been willing to be patient with a company that they say has great potential.

"Significant companies take time to create value for," said Nicholas Galakatos, a board member and managing director of Clarus Ventures.