A Fresh Look At KERX; High Odds For Zerenex Phase III Success

Keryx Biopharmaceuticals (NASDAQ:KERX) announced disappointing news earlier this year for its cancer compound perifosine, and the stock remains in the penalty box. However, the story is now shifting to the company’s kidney disease treatment, Zerenex, which is around the corner from significant late-stage clinical milestones. As a result, investors have a chance to invest in the Zerenex opportunity at a discounted valuation, and trading activity is expected to heat up soon.

Zerenex is a ferric iron-based compound (ferric citrate) taken orally to bind phosphate in the gastrointestinal tract. Patients with chronic kidney disease (CKD) typically have elevated serum phosphate, given that their compromised kidneys are unable to properly remove excess phosphates that come from the foods they consume. Elevated phosphate can cause significant health problems in CKD patients. Zerenex is undergoing Phase III testing for hyperphosphatemia (elevated phosphate levels) in patients with end-stage renal disease (ESRD), and results are expected by year-end. Importantly, key evidence from clinical trials, that we will review later, indicate that the company’s Phase III trial has a high probability of success, and Keryx expects to file for both U.S. and European approval of Zerenex if the current trial meets its primary endpoint (control of serum phosphate levels). Beyond the ESRD patient population (which are CKD patients on dialysis), Keryx is alsopreparing to test the drug in pre-dialysis CKD patients, significantly broadening the potential market opportunity. Analysts estimate approximately $300 million for Zerenex peak sales in the ESRD indication, and if the pre-dialysis indication is successfully developed, annual sales for the drug could peak above the half billion dollar mark. WhileKERX shares are still somewhat hung over from the bad perifosine news, near-term Phase III results from multiple trials and the potential for FDA and EU regulatory filings for Zerenex in early 2013 suggest that the momentum in KERX could begin to build again soon. (more…)