The U.S. FDA approved Keryx Biopharmaceuticals’ (KERX) phosphate binder, ferric citrate, at mid-day on Friday. A widely expected outcome, KERX closed the day down 5%, at $17.00, after a tumultous afternoon in which the stock dipped as low as $14.80.
PropThink readers who followed our lead in the last two years and purchased KERX have watched the stock appreciate by more than 500% as ferric citrate approached this final hurdle, now approved as a treatment for hyperphosphatemia in chronic kidney disease (CKD) patients on dialysis.
This Wednesday we suggested selling the stock at $18.00, a 550% gain since we first picked up the downtrodden equity late in 2012, before ferric citrate’s first phase 3 readout. Keryx won’t have an easy task selling ferric citrate in a landscape of generics and similar products, a landscape that has changed meaningfully in the last few years – now, it’s all about execution. Additionally, we suspected the approval announcement would be a sell-the-news event (sure enough), and outlined a seperate, short-term trade specifically designed to take advantage of this phenomenon. Given uncertain commercialization prospects for the oral phosphate binder in obtaining meaningful market share, due to newer managed care and competitive risks, our view is that investors should look to lock in profits – it’s been a great ride. Read “Booking Gains on Keryx and What to Look for Next.”
Orexigen Therapeutics (OREX) is scheduled to receive an approval decision for obesity drug Contrave by next Thursday. We explained to PropThink Premium readers why the decision next week, and the stock’s trading around the event, aren’t as clear-cut as some may expect. There are a number of potentially confounding events upcoming, highlighted in the article, in addition to a simple strategy to maximize profits on the decision. Continue reading . . .
Also this week, we revisited Illumina (ILMN), one of Mr. Deryugin’s longtime favorite ideas in life-sci, and another big winner since he first suggested owning the stock on weakness nearly two years ago. Mr. Deryugin points out that in early 2013 this growth story was considered by many to be “expensive,” and even Roche walked away from a hostile takeover attempt in the $50s.
The stock is up over 100 points since.
The bottom line: Illumina trades at a clear premium to the large-cap life science group, but it’s a premium that’s been worth paying for more than two years.
“Paying Up for Illumina’s Growth was the Right Move 140 Points Ago – It Still Is”
Jason Napodano and his colleagues at Zacks Small Cap Research have organizedan investor meet-up for next Monday evening, Sept. 8, in New York City. The event, in conjunction with the annual Rodman & Renshaw Healthcare Conference, is all about networking: meet and mingle with management from a slew of small-cap biotechnology companies, as well as fellow investors, over cocktails and hors d’oeuvres.
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One or more of PropThink’s contributors are long ILMN or OREX.
