Disclosure: I am long KERX.
Keryx Biopharmaceuticals (KERX) has a pending new drug application (NDA) filing for Zerenex, which treats hyperphosphatemia in patients on dialysis with end stage renal disease (ESRD). The company has indicated that it will submit its NDA to the United States Food and Drug Administration (FDA) by August of this year. Based on publicly available scientific literature and clinical data, we believe that the FDA will accept this NDA and then ultimately approve Zerenex. As outlined below, we also believe that these events will have a substantial positive impact on Keryx's stock price.
Background
Keryx Biopharmaceuticals focuses on the acquisition, development, and commercialization of pharmaceuticals for the treatment of renal diseases. In 2010, Keryx licensed Zerenex from Taiwan-based Panion & BF Biotech. Zerenex has been developed for the treatment of hyperphosphatemia in ESRD patients on dialysis. Hyperphosphatemia, characterized by an increase in the level of phosphate in the blood, can lead to brittle bones and cause damage to the cardiovascular system. Hyperphosphatemia occurs universally in ESRD patients. These patients often require phosphate-binding agents to lower and maintain serum phosphorus at an acceptable level. In the United States, there are approximately 600,000 patients with ESRD, more than 400,000 of whom require dialysis. Worldwide, there are approximately three million patients with ESRD, with the majority of them--over two million--requiring dialysis.
Phosphate is a common additive in processed food and soda drinks. Consequently, it is difficult to control phosphate intake through diet alone. Typically, hyperphosphatemia is treated through oral administration of phosphate binders that sequester excess phosphate derived from ingested food. Relevant phosphate-binding drugs includeRenagel by Genzyme/Sanofi (SNY), Fosrenol by Shire Pharmaceuticals (SHPG), and over-the-counter drugs, such as Oyster Cal and Calphron. These drugs function by reacting with phosphate anions to form insoluble precipitates that the body then secretes, thereby lowering the amount of phosphate in the blood. However, these drugs also have quite meaningful limitations. Calcium or aluminum found in phosphate binders can accumulate and cause ectopic tissue calcification. Furthermore, although Fosrenol tablets are supposed to be chewed, they present a choking hazard because patients sometimes attempt to swallow the tablets without chewing them first. In contrast to existing therapies, Zerenex is an iron-based phosphate binder. Its effective component is ferric citrate, which binds to phosphate and forms non-absorbable complexes that do not result in calcium accumulation. Additionally, Zerenex is produced as a relatively small pill that does not require chewing, thus avoiding the risk of choking.
The efficacy and safety profiles of Keryx are impressive
In early June 2013, Keryx released phase III clinical trial results for Zerenex. The trial was conducted pursuant to a special protocol assessment (SPA) with the FDA. This SPA represents a dialogue between the FDA and Keryx through which predetermined goals were set prior to the formal drug approval process. Absent any extreme circumstances, Zerenex should receive FDA approval if Keryx demonstrates that Zerenex performs as expected in one or more trials carried out in accordance with the SPA.
As outlined in the SPA, Keryx's phase III clinical program for Zerenex consisted of two studies: a relatively short-term study to assess safety and a longer-term study to more fully assess both safety and efficacy. The short-term efficacy study evaluated whether the drug has a dose-dependent effect on phosphate in the blood. The results met all of the study's primary endpoints. The longer-term trial was a three-period, multicenter, safety-and-efficacy trial designed as follows: the first segment was a 2-week washout period, the second segment was a 52-week safety assessment period, and the third segment was a 4-week efficacy assessment period. In this trial, more than 400 ESRD patients on dialysis were randomized 2:1 (Zerenex to control) during the safety assessment. During the subsequent 4-week efficacy assessment, only patients who received Zerenex during the safety assessment were again randomized 1:1 to either continue treatment with Zerenex or to switch to placebo.
All primary endpoints of the safety and efficacy studies specified in the SPA were reached. Serum phosphate levels were measured over both safety and efficacy assessment periods. Patients in Zerenex had well maintained serum phosphorus levels -- 5.1 mg/dL at baseline (week 0 of the 4-week efficacy period) and 4.9 mg/dL at the end of the 4-week efficacy period. In contrast, the placebo group experienced an almost 40% increase in mean serum phosphate -- from 5.4 mg/dL at baseline to 7.2 mg/dL at the end of the four week period (p < 0.0001).
Zerenex also produced favorable and consistent serum phosphate levels during the 52-week safety assessment period, reducing serum phosphate levels by 27%, 30%, 30%, 28%, and 28% (relative to the baseline at week 0) at weeks 12, 24, 36, 48 and 52, respectively. In terms of safety, Zerenex appears to be comparable, if not superior, to current commercial phosphate binders. The side-effect profiles of Zerenex and the active control group are similar, with the most common events being mild to moderate in severity and gastrointestinal in nature.
Zerenex's dual action is a game changer
One significant advantage of Zerenex over its competitors is that patients on Zerenex seem to require substantially less intravenous iron supplementation and erythropoietin stimulating agents (ESAs). Most patients on dialysis need to receive iron supplementation because their kidneys do not function properly. In particular, the kidneys of dialysis patients often fail to make enough erythropoietin to sustain a healthy red blood cell count. Often, iron can limit the red blood cell count of these patients. Zerenex, being an iron compound, may provide an added benefit to ESRD patients, a boon that was highlighted in Keryx's phase III clinical trial. For patients on Zerenex, the need for intravenous iron supplementation was reduced over the study's 52-week assessment period. Moreover, the use of ESAs to stimulate red blood cell production has been the subject of controversy due to its propensity to stimulate tumor growth and the formation of blood clots. Notably, Zerenex induces the production of red blood cells, moderately raising patients' red blood cell count, possibly without the carcinogenicity risk associated with ESAs. We believe that this dual function of Zerenex is a substantial improvement in the phosphate-binder field and that the FDA will view this aspect of Zerenex very favorably.
Summary of the Clinical Trials for Zerenex
Zerenex offers ESRD patients on dialysis an alternative to currently marketed drugs. Keryx's drug is quite distinct from other phosphate-lowering drugs in that it reduces such patients' reliance on intravenous iron supplementation with no overt concern of ectopic calcification. In our opinion, the most salient concerns with Zerenex are only marginally significant and the efficacy-to-safety ratio Zerenex is high. We conclude that the FDA will likely accept Keryx's NDA in the near term and then approve Zerenex in the first half of 2014.3 Humongous Health-Care Stocks This Week
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While the Super Bowl isn't played until Sunday, the past week had several health-care stock champions. Here are three of the most humongous winners of the week.
Kick off with KeryxKeryx Biopharmaceuticals (NASDAQ: KERX ) scored big-time this week with its announcement of phase 3 results for kidney disease drug Zerenex. Shares soared nearly 100% before ending the week up more than 42%.
The phase 3 study found that Zerenex helps lower phosphate levels in patients with end-stage renal disease, or ESRD. Because high phosphate levels can lead to serious health problems, these results were very encouraging. Additionally, the study showed that Zerenex reduced the need for ESRD patients to receive intravenous treatments to address iron deficiencies.
Keryx's other big news of the week was a secondary share offering of $55 million. Actually, this news ties into the good news for Zerenex. The company moved ahead with the offering to raise cash for commercialization plans for the drug.
Get a little help from the rockShares of Sunesis Pharmaceuticals (NASDAQ: SNSS ) jumped nearly 27% this week. Why? You won't find a clinical study result announcement, earnings release, or analyst upgrade that served as a catalyst. Nonetheless, there was some great news for Sunesis this week.
Huge investment firm Blackrock filed form SC 13G with the Securities and Exchange Commission on Wednesday. An SC 13G is required anytime an entity's ownership of a publicly traded company reaches 5%. What this means is that Blackrock has bought -- and perhaps is continuing to buy -- a much larger stake in Sunesis. As of last September, Blackrock owned less than 2% of the biotech.
The attraction to Sunesis no doubt stems from the company's promising cancer drug vosaroxin. The drug is currently in two phase 3 trials targeting treatment of acute myeloid leukemia, or AML. Sunesis thinks vosaroxin could reach annual sales of $1 billion if it gains regulatory approval in the U.S. and Europe.
My hunch is that Blackrock views Sunesis as a prime acquisition target for a larger company in the not-too-distant future. Celgene (NASDAQ: CELG ) could make a good fit. The booming biotech has a sales force in place for Vidaza but no longer has patent protection for the drug in the U.S.
No need for alignmentShares of Align Technologies (NASDAQ: ALGN ) climbed more than 11% this week. The company reported solid earnings results on Wednesday.
Sales for its Invisalign dental alignment product were up nearly 10% in the fourth quarter, driving overall revenue up. Align's adjusted earnings of $0.27 per share easily beat analyst expectations of $0.22 per share.
The positive results yielded more good news for Align as well. Jefferies announced a buy rating for the stock with a $36 price target. That amount happens to exactly match the median price target for Align and represents a potential 13% upside.
Super championWhich of this week's winners has the best chance to score the most in 2013? It just might be Sunesis. The company should announce interim safety results from its phase 3 VALOR trial of vosaroxin in June. If those results are positive, Sunesis could be a champion stock this year. As for that other competition being played on Sunday, I'll pick San Francisco by seven points.
The Motley Fool's chief investment officer has selected his No. 1 stock for the year, but it's not any of our humongous stocks of the week. Find out which stock it is in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.
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