Next month, Portola Pharmaceuticals Inc (NASDAQ:PTLA) will hear back from the FDA as to whether its Andexanet alfa candidate will pick up approval or not. In March, Portola took a real hit, as data from another of its lead candidates (this time in the opposite indication – we'll address this in a little more detail shortly) fell short of expectations. On that data's release, Portola lost nearly 35% of its market capitalization, and while it has since recovered about half of these losses, it remains well down on both its 2016 open (-48%) and its 2015 highs (-57%). If the upcoming FDA decision swings in its favor, sentiment could quickly reverse and we could see some sharp upside on approval.

With this in mind, here's a look at the drug in question, and what an approval might mean for Portola going forward into the latter half of the year and beyond.

So, as mentioned, the drug is called Andexanet alfa. Explaining exactly what it targets is pretty complicated, without going into how it works, but stick with us and we'll try and simplify both. There are a wide range of conditions that arise from blood that is too thin. Thrombosis is one, high blood pressure is another. They can cause a range of symptoms and – in turn – complications, but the worst case scenario is a blood clot. Blood clots restrict flow, and have obvious implications. In order to mitigate the risk of blood clots happening in patients with – for want of a better phrase – thick blood, physicians administer from a family of drugs called anticoagulants. A good example is warfarin. There are a few different types of anticoagulant, but one of the primary (new generation) types is what are called direct Xa inhibitors. Factor Xa is an activated form of a coagulation factor called thrombokinase, and without going into too much detail, inhibits  Xa from undertaking its standard actions (which is to cause clotting and coagulate blood), and in doing so, serves as a blood thinner.

Now, sometimes, these anticoagulants have too much of an impact. They thin blood excessively, and lead to blood loss. This is where Andexanet alfa comes into the picture. It's an antidote for factor Xa inhibitors, designed to render them useless (or at least, incapacitated in terms of efficacy). It does this by mimicking factor Xa, but (by ways we don't really need to go into too much detail here) having a higher affinity to the inhibitors than the natural Xa does. In other words, it looks more like Xa to the inhibitors than Xa does. This means the inhibitors bind to Andexanet alfa, rather than the natural Xa, leaving the natural Xa to go about its coagulating duty. Simple.

Portola has developed both sides of the equation as its two lead candidates. The drug for which data hit markets, and on which the company's market capitalization tanked in March, is a factor Xa inhibitor called Betrixaban. To quickly touch on this, the data did hint at efficacy, but a slightly odd trial design mean that statistically the drug didn’t meet its phase III endpoint. In this author's opinion, the swift decline was a bit harsh, but that's for another discussion.

The candidate we are looking at is the antidote to its Betrixaban, and other factor Xa inhibitors. The trial on which the BLA for the drug is based is a phase III that pitted Andexanet alfa against two already well established factor Xa inhibitors, rivaroxaban and apixaban, in healthy volunteers. The data indicated a certain level of efficacy, and no serious adverse events arose as part of the trial. This bodes well for the drug's chances come PDUFA, as with little to no safety issues, the FDA is often (and increasingly) willing to give a green light on the assumption that it's better to have another safe alternative available to the current SOCs in the space than not.

So what's the market potential, and what would an approval mean for Portola? In the US, every twelve months, around 50,000 patients that have taken a factor Xa inhibitor are admitted to hospital for bleeding issues. Globally, Portola believes there are around 100,000 patients who would right now benefit from its antidote. Based on anticoagulant growth, expectations put this number at 500,000 in G7 countries by 2020. With no current antidotes approved that target factor Xa inhibitors, an approval for Andexanet alfa come PDUFA would be a big deal.

Almost certainly, it would be enough to reverse the year to date losses, with expectations of a 30-50% upside on current price not unreasonable.

Of course, there's the risk that the FDA will turn the drug down. Given current sentiment (weak) and the condition of its other lead candidate (unconvincing) this would severely hit Portola's market capitalization. An FDA decline outright, or a CRL, will likely catalyze a similar decline to that we saw in March, and potentially even more severe depending on the response.

One to watch, with caution. PDUFA is August 17, 2016.