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A price target of $80 to $100 for a buyout?

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My estimate for PTLA takeover price is around $80 to a $100 per share.

Estimated sales at $1 to $1.5B peak for both approved drugs, and then a multiplier of about 6 times.  So average level is around $7.5 and the price about  $100 per share after adding perhaps as much as 10M shares to 65M today. 

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A clinical trial for C, phase III would be likely only in 2019.  Looking at the layout of the event timeline the stock performance has other important points involving EU, and of course Gen 2 approval, which should be one of the easiest in comparison, as long as it is done right.

So what about the stock price? Unless the PTLA is becoming an immediate acquisition objective, the shares are not looking for an immediate boost and manipulation is relatively easy against the timeline of the events. The growth of the stock would be dependent now on the level of revenues, the EPS, PE and other conditions. It also appears that growth of the stock will be more reactive to the company’s actions than manipulation closer to 2019 than now.

So how does this look like for purpose of acquisition?

CFO stated following “As Bill mentioned earlier, we are in great corporate shape owning global rights for each of those our 3 products. This gives us tremendous financial flexibility as we determine whether we want to further fund these programs on our own, through debt, through equity or through royalty tech structure like the one we have with Andexxa or whether we seek 1 or more partnerships in various jurisdictions.”

Reading this statement PTLA is looking mostly for being part of the revenue growth at various levels of handing out rights to the product.  Andexxa has 5% or royalty for global sales. At the peak of $2.8B, the payment of $150M would pay off in one year, so it does not show a lot of return for it. Now this may change, however partnerships still require work for PTLA, and that work and its quality is dependent on management.

It is important what CEO said as well

“Yes, I think it's a good question. Matt, it's Bill. We look to partnering. For us, because we have global rights, we can look, x U.S. first, which is our primary source, and the discussions are ongoing. We have a little bit of time here given that the timetables have moved out for andexanet. We'll see what happens with betrixaban. And certainly, there's cerdulatinib in the mix now as well. As we alluded to, some of the data's encouraging. We've now had discussion with the FDA. There is a potential. I think the data is still maturing. We'll see a flash of that data in ASCO. I think if that data holds over the rest of the course of the year as we complete enrollment in Phase II clinical trial, it offers another opportunity to build in this flexibility for us from a partnering standpoint. So it's active, and we think we have a little bit of time to make the right decisions, potentially, for the right deals and then for the value of the company.”

The value of the company remark suggests that the company is for sale. The CEO is also discussing partnering for the US market. There is a potential for cash injections via partnerships and reaction of the stock to partnerships, however, depending on the agreements PTLA would have to produce a lot of work. I think there is no doubt that marketing strength is not a skill PTLA has in comparison to a major pharma.

If PTLA was sold this year, most of the expectations for the share price would be likely based on the estimates of future revenues, cash on hand and so on. Such price would likely not exceed $5.2B and likely be in the range of $80 per share.

Assuming for a moment, that sales of the product would be around $2B for both drugs without royalties, based on companies having sales of $2 to $3B, like VRTX, INCY, JAZZ the market cap is somewhere between 3 to 11 times of revenue.

Royalties could take away as much as 25% of revenue (5% is already sold for Andexxa) peaking revenue at $1.5B perhaps in 2023 for Portola. PTLA selling 20M shares would end up with 85M shares and a market cap of $7.5B, and price per share moving only $5 to $90 in a span of some 5 years. Of course, the multiple going from 5 to 7 would make a huge difference to this estimate, but the length of developing of revenues seems not so attractive even at the price of adding $5 to $10 every year or two to the share price.

While the price of the acquisition is debatable selling the company this year could offer instant gratification even though the price may not offer the maximum value. $80 per share would be 94% greater than the current price and it would seem higher than any deal made recently. What supports it is the two approved drugs, which would explain such a premium.

 

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Goldman Sachs analyst, Dana Flanders, reiterated his Buy rating on shares of Portola Pharmaceuticals (NASDAQ: PTLA) after shares jumped +24% on FDA approval of AndexXa. Despite the upside, this is less than the analyst originally anticipated and due, in large part, to investor concerns about commercial execution.

The analyst believes concerns over a string of several recent Bevyxxa setbacks including a delayed U.S. launch, lack of EU approval and slower reimbursement access are pressuring shares. Additionally, he believes there are some lingering concerns on the higher than expected price point of AndexXa at ~$27,500 per patient.

Despite the market concerns, the analyst is confident enough to raise his price target to $60.

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Interesting conversation on the product’s inventory elsewhere in the forum. I thought I would add few cents. On Andexxa. The product has two runs of commercial production campaign, which has enough product for supply for 1000 hospitals already. This inventory would be available for sale upon Gen 2 approval. What is very important about it the inventory of Andexxa is not capitalized on the balance sheet at the end of March 31, 2018. Cost of production of this drug is under quarterly R&D. 
Interestingly, since Q4 2017 or PAS for Bevyxxa, PTLA has capitalized inventory of it. Few observations. In Q4, inventory levels were $1.09M including $67K of finished goods. In the last quarter total inventory increased to $3.18M and finish goods were $63K. Capitalized costs were $8.2M in Q1, and $2.3M in Q4, dedicated to the purchase of inventories to be converted into finish goods within next 12 months. 
In addition, prepayments of $4.8 million and $9.6 million were made in the quarter ending on March 31, 2018, and December 31, 2017, respectively, shown under prepaid and other long-term assets as the production is expected after the next twelve months. 
In 3 months PTLA has sold $600K of Bevy. Let’s assume this is about 50% margin which means about $300K of inventory value was removed. The COGS are essentially inventory as the company employs third-party manufacturing. The company has moved $7.8M into inventory and prepayments within a year of deliveries, in just one quarter. The move could be made preemptively in a preparation for sales, but such a rapid deployment could be an expression of the demand. 
Jus from the increase of inventory one could assume revenue in Q2 be around $4M, which is about 7 times Q1. the However, the potential could be as much as $14M. Observing levels of inventory, and the lines on the balance sheet could help estimate sales of the Bevy this year. Analysis for Andexxa would have to wait for capitalizing inventory in the Q Gen 2 is approved.

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This one is a long one but I suggest to read for those who look at the reaction of the market to statistical data.
Some comparison can be drawn to Jounce Therapeutics Inc (NASDAQ: JNCE) publication of the poster from I/II stage trails abstract, which essentially took 35% out of the stock as a result, today. As a reminder, Celgene paid Jounce $225 million upfront and offered as much as $2.6 billion in total for a drug that was not tested in humans.
Jounce result: 
Methods: P2 gastric (GC) and triple negative breast (TNBC) combo cohorts completed enrollment. RECIST antitumor activity: JTX-2011 mono: 1/7 partial response (PR) in GC; 2/5 stable disease (SD) in P1 TNBC. JTX-2011 combo: 2 PRs (0.1, 0.3mg/kg) and 2 ongoing SD in 19 P1/2 GC; 1 PR in 15 P2 TNBC. Of 17 evaluable pts, 4 had emergence of peripheral CD4 T cell ICOS hi subsets during JTX-2011 therapy, including 1 PR mono, 2 PR combo and 1 SD; none were seen in pts with progressive disease. Conclusions: JTX-2011 mono and combo with nivo were well tolerated with antitumor responses in heavily pre-treated GC and TNBC pts. Emergence of peripheral blood CD4 ICOS hi T cell subsets may be a surrogate biomarker of response. Further trials of JTX-2011 are planned.

Portola
Results: 99 patients enrolled (FL: 36, CLL/SLL: 28, PTCL: 18, marginal zone lymphoma: 8, aggressive: 5, Waldenstrom’s macroglobulinemia: 4). Median age is 68 (42-93) and median # of prior therapies is 3 (1–13). 30 patients had prior BTK, PI3K or BCL-2 inhibitor therapy. The most common AEs of any grade are diarrhea (42%), fatigue (36%), and nausea (32%). Grade 3+ AEs occurring in ≥5% patients are neutropenia (18%), lipase increase (15%), pneumonia (12%), diarrhea (10%), and fatigue (7%). 5 patients have had Grade 5 infections considered related to study drug (3 of 5 in the CLL cohort). The target PK range has been achieved with an average SSCmin of ~0.8 µM. 

And focus on PTCL by Portola
Patients included PTCL-NOS (7), AITL (6), ALCL (2), HSTCL (1), Gamma-delta TCL (1), and EITL (1); median age 70 [48-84]; prior transplant 28%; and 44% refractory to last therapy. Eleven patients were evaluated for clinical response, 3 discontinued prior to evaluation (2 due to progression; 1 withdrew consent), and 4 patients have yet to be evaluated. Six patients have responded (ORR 43%). Of these, 4 achieved a CR after 2 cycles, 2 achieved a PR, and 2 SD. Four responding patients remain on drug: 1 for 11+ months and the remaining for 3-7 months. A patient with CR was referred to allogeneic transplant and censored after cycle 2. An additional patient achieved complete remission of target lesions but discontinued therapy due to a new lesion.

My view: Looking at the ORR Jounce had 5% versus Portola’s being around 41% with 164 versus 99 patients. Out of selected PTCL group of 14 patients, 6 had ORR including 4 CR. Jounce had total 8 out of 36 with zero CRs. I am reading this wrongly as Portola seem to show 8 patients 4 CR, 2 PR and 2 SD, but it is compounding perhaps. Using 43% ORR and 4 CR, now a combination of potentially the same patients for Jounce, you have 22% ORR with 8 including 4 PR and 4 SDs. 
The results for the entire population count are 800% percent better for Portola and 100% better in the selected group, but I am not sure how one counts superiority for CR presence, which is amazing.
Analyst opinion on Jounce: The overall response rate for JTX-2011 as a monotherapy in gastric cancer and triple negative breast cancer, and for the JTX-2011-Opdivo combo in gastric cancer and TNBC, is underwhelming, Birchenough said in a Thursday note. The modest anti-tumor effects may not translate into clinical benefit, Birchenough said. 
Citing the data, HC Wainwright analyst Chattopadhyay said he's removing gastric and TNBC indications from his model. The less positive outcomes for patients receiving the JTX-2011 and Opdivo combo in spite of the high ICOS expression should raise questions about the mechanistic rationale, the analyst said.

The pipeline candidate is not competitive with other investigational drugs and "appears undifferentiated in a crowded category," the analyst said. Citing the data, HC Wainwright analyst Chattopadhyay said he's removing gastric and TNBC indications from his model. The less positive outcomes for patients receiving the JTX-2011 and Opdivo combo in spite of the high ICOS expression should raise questions about the mechanistic rationale, the analyst said. The stock dropped 35% today.

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CR stands for complete response and in the RECIST it means complete disappearance of all target lesions. Out 14 evaluated patients, 3 quit, 2 due to progression on one to consent, but 4 had a complete response or CR. That is one life-changing or rather saving binary event.  From likelihood of death to cure? If this sounds too much, imagine 1000 patients and 285 of them had all their lesions completely disappeared. 142 had 30% reduction in diameter of the sum of lesions. Oh, I think this could be a game changer. If those were phase III results, it would be an immediate approval on a fast track. I actually expect fast track designation after talks with FDA and good design for phase III trial.  

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Oppenheimer analyst Jay Olson reiterated a Buy rating on Portola Pharma (NASDAQ: PTLA) yesterday and set a price target of $80. The company’s shares closed yesterday at $40.97.

Olson noted:

“ASCO and EHA abstracts for cerdulatinib posted online providing incremental insights into the promising profile of this under-appreciated asset. Cerdulatinib is an orally available dual-kinase inhibitor for hematologic malignancies. We believe cerdulatinib has potential to benefit patients with FL, CLL/SLL and PTCL based on clinical data contained in ASCO and EHA abstracts featuring results with 99 patients from an ongoing Ph2a trial of cerdulatinib in B-cell malignancies and PTCL. We see cerdulatinib as an overlooked, well-differentiated asset with impressive preliminary data that should deliver incremental shareholder value. We expect to see updated cerdulatinib data at ASCO and EHA based on more recent data cuts. Our theoretical SOTP valuation includes $4/sh for cerdulatinib, which we believe could increase post- ASCO and EHA.”

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While browsing yesterday I came along the following release from 24 Wall Street, link below, which had a paragraph dedicated to Portola, I quote below:

“The abstract from Portola Pharmaceuticals, Inc. (NASDAQ: PTLA) gave a detailed look at data from cerdulatinib, a potentially underappreciated pipeline asset for the company. The efficacy does appear promising, particularly in peripheral T-cell lymphoma and maybe in other indications as well. Analysts would like to see more details on the drug's safety profile, however, given five patients had Grade 5 infections that were considered related to the study drug. Analysts are waiting for the full data at ASCO before potentially assigning some value to this drug.”

https://www.marketwatch.com/story/9-companies-bracing-for-big-asco-reactions-2018-05-19

I have seen this AE in the abstract.  I quote the abstract: The most common AEs of any grade are diarrhea (42%), fatigue (36%), and nausea (32%). Grade 3+ AEs occurring in ≥5% patients are neutropenia (18%), lipase increase (15%), pneumonia (12%), diarrhea (10%), and fatigue (7%). 5 patients have had Grade 5 infections considered related to study drug (3 of 5 in the CLL cohort).

Just a reminder that the CLL/SLL population was 36 patients, and using 99 patients we are looking at 5% infection of 5 grade and in the specific 8% in CLL/SLL population. AE 3+, reminder 5 is death was seen in greater or equal to 5%.  Considering that the note was somewhat negative I decided to look deeper into infections in CLL patients.

A current drug which makes huge gains is ibrutinib or Imbruvica, which is used to treat B cell cancers like mantle cell lymphoma, chronic lymphocytic leukemia, and Waldenström's macroglobulinemia. It has sales of $2.7B, which grew 40% in 2017.  Owner Abbvie. I was curious what was the rate of this drag infections in CLL population using ibrutinib.  I found following:

In a recent review published in Blood Reviews, researchers at the Mayo Clinic in Phoenix, Arizona estimated that up to 10% of patients on ibrutinib have a 10% rate of opportunistic infection, but noted that in randomized phase 3 clinical trial participants receiving ibrutinib, grade 3 or worse infections were seen in up to 24% of patients.

This means for the population with CLL number of infections in PTLA 2b study is lower than the after-approval condition for ibrutinib and about one-third of the rate in phase III study. Of course, I am curious what additional details will be provided, but cerdulatinib seems to be safer than ibrutinib statistically. I imagine that PTCL will be pursed first anyway, which seems to be especially attractive based on results.

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