These are busy times at Keryx Biopharmaceuticals (NASDAQ:KERX). The company is focused on completing its Phase III long-term study of Zerenex (ferric citrate) as a treatment for hyperphosphatemia and end-stage renal disease patients on dialysis. It also initiated a Phase II study of Zerenex for the management of phosphate and iron deficiency in anemic non-dialysis dependent chronic kidney disease patients.
A lot is riding on Keryx's Phase III clinical trial that is determining if Zerenex is a viable treatment for elevated phosphate levels (hyperphosphatemia) in patients with end-stage renal disease (ESRD). The study is being conducted pursuant to a Special Protocol Assessment (SPA) agreement with the U.S. Food and Drug Administration (FDA). The study should be completed soon. The company expects to report top-line data by year-end. If the trial is successful, Keryx anticipates filing a new drug application (NDA) with the FDA in the first quarter of 2013.
Many people are still recovering from the bad news last April when Keryx shares lost approximately two-thirds of their value and fell to a near two-and-a-half-year-low of $1.63.
It happened on April 2, 2012, when Keryx reported that the Phase III "X-PECT" (Xeloda + Perifosine Evaluation in Colorectal cancer Treatment) clinical trial evaluating perifosine (KRX-0401) and capecitabine (Xeloda), manufactured by Genentech (Roche), in patients with refractory advanced colorectal cancer did not meet the primary endpoint of improving overall survival versus capecitabine and placebo. In other words, the colorectal cancer trial, which was comprised of 468 people, found that a combination of Keryx's perifosine and the chemotherapy drug Xeloda failed to prolong survival in patients with refractory advanced colorectal cancer when compared with a placebo and chemotherapy.
"With approximately $31 million in cash as of March 31, 2012, and a well-controlled burn rate, we plan to focus our resources on the pending completion of the Zerenex long-term Phase III study for ESRD patients with hyperphosphatemia, expected in the fourth quarter of 2012, and the NDA filing for Zerenex which will hopefully follow shortly thereafter," Ron Bentsur, Keryx's CEO, stated.
A number of analysts who saw a lot of promise in Keryx's drug were not pleased. Stifel Nicolaus cut their price target on Keryx from $8.00 to $4.00. Ladenburg Thalmann downgraded Keryx from a "buy" rating to a "neutral" rating. Roth Capital downgraded the stock to "neutral" from "buy." Brean Murray Carret & Co. cut their price target on shares of Keryx from $10.00 to $5.00.
On April 23, Keryx announced that its Japanese partner, Japan Tobacco Inc. and Torii Pharmaceutical Co.,Ltd., found positive top-line results from a Phase III study of ferric citrate in Japan for the treatment of hyperphosphatemia in end-stage renal disease patients on hemodialysis. This study is part of an ongoing Phase III program for ferric citrate in Japan for the treatment of hyperphosphatemia.
The Phase III study, conducted in Japan, was an open-label, randomized study evaluating the efficacy and safety of ferric citrate against an active control, sevelamer hydrochloride, over 12 weeks in hemodialysis patients with hyperphosphatemia. In the top-line results, which evaluated the change of serum phosphorus from baseline, the primary endpoint of efficacy met non-inferiority to sevelamer hydrochloride. Furthermore, there were no clinically significant findings on safety and tolerability of ferric citrate within the treatment period.
JT/Torii stated that it is aiming to submit the marketing application for ferric citrate in Japan in the fiscal year ending March 31, 2013.
"We congratulate our partner, JT/Torii, on their successful Phase III study and we are excited by their progress. We are also encouraged about our partner's plans to file their marketing application in Japan within less than a year, similar to our expected timelines for the U.S. NDA and European MAA filings. We are enthusiastic about Zerenex's potential differentiated product profile and its prospects for becoming an important part of the treatment of hyperphosphatemia in dialysis patients worldwide," Ron Bentsur, Chief Executive Officer of Keryx, said,
Zerenex (ferric citrate), a ferric iron-based phosphate binder, is also in a Phase III clinical program in the United States for the treatment of hyperphosphatemia (elevated phosphate levels) in patients with end-stage renal disease on dialysis, which is being conducted pursuant to a SPA agreement with the FDA.
The future appears to be brighter now for Keryx. In May, Roth Capital upgraded Keryx from a "neutral" rating to a "buy" rating with a $7 price target. Brean Capital rated Keryx a "Buy" in their November 7, 2012 report. Burrill Institutional Research initiated coverage on shares of Keryx in November and placed an "outperform" rating and a $6.00 price target on the stock. Ladenburg Thalmann raised their price target on shares of Keryx Biopharmaceuticals from $3.00 to $5.00 on October 10. They now have a "buy" rating on the stock. Oppenheimer reiterated an "outperform" rating on shares and set a price target of $3 for Keryx on September 5.
Zerenex is also in Phase II development for the management of phosphorus and iron deficiency in anemic patients with Stage 3 to 5 non-dialysis dependent chronic kidney disease. On November 1, 2012, Keryx initiated a Phase II study of Zerenex in managing serum phosphorus and iron deficiency in anemic patients with Stage 3 to 5 non-dialysis dependent chronic kidney disease (NDD-CKD).
According to Keryx, over 1.5 million people living with Stages 3 to 5 NDD-CKD have iron deficiency anemia, and there are currently no oral iron supplements with an FDA label in NDD-CKD or any FDA approved phosphate binders in NDD-CKD.
Approximately 10% to 15% of the U.S. adult population is affected by chronic kidney disease (CKD), a condition generally characterized by greater than 50% reduction of normal kidney function. In addition, elevated levels of serum phosphorus become more prevalent in Stages 3 to 5 non-dialysis dependent CKD (NDD-CKD) patients. Several studies have shown that higher serum phosphorus concentrations may be associated with increased mortality and morbidity in CKD, however, no phosphate binders are currently FDA approved for NDD-CKD.
Iron deficiency anemia, which develops early in the course of CKD and worsens with disease progression, is extremely prevalent in the NDD-CKD population and is associated with fatigue, lethargy, decreased quality of life and is also believed to be associated with cardiovascular complications, hospitalizations, and increased mortality. Based on data contained in a 2009 publication in the Journal of the American Society of Nephrology, it is estimated that over 1.5 million adults with NDD-CKD in the United States are also afflicted with iron deficiency anemia. To combat this anemia, iron replacement therapy is essential to increase iron stores, such as ferritin and TSAT levels, and raise hemoglobin levels. Currently available oral iron supplements are associated with limited efficacy and dose-limiting tolerability issues. No oral iron agents are currently FDA approved to treat iron deficiency anemia in NDD-CKD. Erythropoiesis stimulating agents (ESAs) and intravenous (IV) iron are not frequently administered in NDD-CKD due to both the FDA warning label of potential cardiovascular risk for ESAs in NDD-CKD and logistical complications associated with administering IV medicines in office settings which lack the necessary facilities, such as emergency equipment and/or emergency medical access. Consequently, the NDD-CKD patient population remains underserved.
On November 7, Keryx announced the company's results for the third quarter ended September 30, 2012.
As of September 30, 2012, the company had cash, cash equivalents, interest receivable, and investment securities of $20.2 million, as compared to $39.5 million at December 31, 2011.
"Importantly, we believe that we have sufficient cash to take us beyond our key anticipated clinical and regulatory milestones," Ron Bentsur, Keryx's CEO, stated.
In terms of the company's financial guidance for the remainder of 2012, Keryx expects the cash burn rate to remain well controlled at approximately $4 million to $5 million per quarter going forward.
The net loss for the quarter ended September 30, 2012 was $5.5 million, or $0.08 per share, compared to a net loss of $10.2 million, or $0.15 per share, for the comparable quarter in 2011, representing a decrease in net loss of $4.7 million. Other research and development expenses for the third quarter ended September 30, 2012 decreased by $4.9 million, as compared to the third quarter of 2011, principally related to the termination of the KRX-0401 (perifosine) Phase III clinical development program in May 2012. The net loss for the third quarter ended September 30, 2012 included $0.5 million of non-cash compensation expense related to equity incentive grants.
The net loss for the nine months ended September 30, 2012 was $16.1 million, or $0.22 per share, compared to a net loss of $19.7 million, or $0.30 per share, for the comparable period in 2011, representing a decrease in net loss of $3.6 million.
The net loss for the nine months ended September 30, 2012, included a non-cash extraordinary gain of $2.6 million related to a write-off of the contingent equity rights liability following the termination of the license agreement for KRX-0401 in May 2012 and $1.6 million of non-cash compensation expense related to equity incentive grants. The net loss for the nine months ended September 30, 2011, included license revenue of $5.0 million related to a milestone payment from the Company's Japanese partner for Zerenex, Japan Tobacco Inc. and Torii Pharmaceutical Co., Ltd., for their commencement, in April 2011, of a Phase III clinical program in Japan.
According to Keryx, the phosphate binders market is approaching $1.5 billion. The overall growth is due to an increase in worldwide dialysis populations and emerging markets as their medical infrastructures become more modernized and accessible.
According to Fresenius Medical Care, the number of dialysis patients worldwide is expected to double within the next decade from approximately $2 million today to over $4 million within the next decade.
Keryx is convinced that in the future dialysis providers will be constantly seeking ways to cut costs, and Keryx should be prepared to provide them with ways of potentially doing so.
Zerenex is the only phosphate binder that has the potential to provide the cross benefits of anemia management. Keryx's Phase II study of Zerenex in the pre-dialysis setting, tests Zerenex not just as a phosphate binder, but also as an oral iron supplement. Keryx believes this market is a significant untapped opportunity for Zerenex. Elevated levels of serum phosphorus are very prevalent in stages 3 to 5 pre-dialysis patients. Several studies have shown that higher serum phosphorus concentrations are associated with increased mortality and morbidity in chronic kidney disease pre-dialysis. However, no phosphate binder is approved by the FDA for pre-dialysis chronic kidney disease.
Iron deficiency anemia is another disorder often experienced by chronic kidney disease (CKD) patients that develops early in the course of CKD and worsens with disease progression. Over 1.5 million adults with pre-dialysis CKD in the United States have iron deficiency anemia. To combat this anemia, iron replacement therapy is essential to increase iron stores such as ferratin and transferrin saturation (TSAT) levels and raise hemoglobin levels.
As Keryx explains it, people assume that the treatment of iron deficiency anemia in pre-dialysis is similar to that of end-stage renal disease patients on dialysis. However, the use of erythropoiesis-stimulating agents (ESAs) and IV-iron in the pre-dialysis setting is very limited because there are safety concerns associated with digital subtraction angiography (DSAs) and the CKD setting in a highly regulated environment. There are also logistical constraints in the pre-dialysis treatment setting, which are usually doctor's offices. IV-iron and ESAs are not readily accessible to many patients. For these reasons, the majority of the pre-dialysis centers refrain from providing intravenous therapy services due to the legal, liability and logistical issues involved.
Keryx believes that iron deficiency anemia in pre-dialysis represents a substantial underserved medical need, and that Zerenex's potential to address iron deficiency, may enable it to become an important agent in the pre-dialysis setting.
Since there are no oral iron supplements approved by the FDA, and given the fact that the use of ESAs and IV-iron is limited in this setting, an approved oral iron supplement with proven efficacy, such as Zerenex, could be ideal for this indication.
Back in April, many thought Keryx was out of the game. The company may have struck out with perifsone, but Zerenex may give the company the opportunity to hit a home run. I believe Keryx is undervalued and offers a significant opportunity for the aggressive, risk-oriented investor.