Portola Pharmaceuticals Inc (NASDAQ:PTLA) just announced that the FDA had issued complete response letter (CRL) for its co lead development project, AndexXa. The drug is a Factor Xa inhibitor, designed to reverse the effect of an anticoagulant in patients that are at risk of death through excessive blood loss. It’s a very large unmet need, and Portola looked like it was going to pick up an approval and meet that need with its candidate. In response to the CRL, markets sold off on the company to the tune of 23%, and it’s falling further at time of writing.

As a follow up to the press release noting the CRL, company management held a conference call at market open in the US. We sat in on the call to try and gain some clarity as to the driver behind the decision.

Here’s what we learnt.

First, it seems as though the company is genuinely surprised. One of the major elements of the CRL related to CMC (read: manufacturing processes), but the agency undertook a pre approval inspection of its facility earlier this year and the FDA raised no issues at that point. According to this review there were no critical observations, but something has obviously flagged up between now and that point.

A minor issue related to clinical data. The FDA has requested additional data relating to dosing in healthy volunteers. Specifically, the agency wants to see bolus plus infusion data relating to an anticoagulant called enoxaparin, and the same for one called edoxaban. These two don’t make up the primary market that Portola will be targeting, and the company didn’t do late stage trials investigating interactions with AndexXa for this reason. Now, however, it’s going to have to. This shouldn’t be too much of an issue, maybe a bit of a time and cost problem, but easily resolvable if we assume AndexXa is effective across the full class of anticoagulants. This is basically just regimen confirming stuff.

The takeaway on this data issue is that the company spent its development process focusing on the drug’s interaction with two of the lead anticoagulants, and assumed that the FDA would approve the drug without late stage interaction data that addressed the small side of the market that it isn’t going after initially. Chances are the company can overcome this with labelling, even if the extended data presents some issues.

Finally, there is an ongoing study that the company has been updating its application with data from, and the FDA has asked for some additional data relating to these updates. Comparison data, secondary endpoint analysis, that sort of thing. This (according to Portola) is all complete and submitted, but the FDA has not yet completed its own review of the submission.

As things stand, neither the company nor analysts know exactly how things are going to play out, but it doesn’t look like there are any hurdles that can’t be overcome. This assumes that the manufacturing issue (which seems to be the major issue, if there is one) is nothing too large. On this topic, there is a well known issue with breakthrough therapy development that because of the expedited development process, the timeframe that manufacturers and a company will normally use to complete the CMC evaluation is shortened. Portola expected to be able to complete this process post evaluation, but it looks like the agency isn’t completely happy with what it got pre approval.

The bottom line on this one is that while there might be a delay in the process, it looks as though that is all this will be. Management is clearly surprised (based on the tone of the call) at the outcome, and genuinely believed that AnexXa was set for approval at PDUFA.

What now?

Everyone is looking to a post-CRL meeting between the FDA and Portola for clarification. This call should take place over the next couple of weeks, and we expect Portola to issue a release (and hopefully hold a conference call) to pass the meat of that discussion on to us.

Management (tentatively) expects to resubmit before the end of the year, but there’s no certainty in these expectations as yet given it doesn’t know the exact issues raised.

Given current cash, which is expected to run through to mid 2017, chances are the company will need to raise if this drags out too long. This would probably be dilutive, and is a downside on this development.

Stick with us and we’ll keep you updated as we hear more.