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Keryx Biopharmaceuticals (NASDAQ:KERX)

JPMorgan Healthcare Conference

Jan 15, 2014 11:30 AM ET

Executives

Ron Bentsur - CEO

Analysts

Cory Kasimov - JPMorgan

Operator

Cory Kasimov - JPMorgan

All right good morning everyone. We’re going to keep going here. My name is Cory Kasimov, a Senior Biotech Analyst at JPMorgan. It’s my pleasure to introduce our next company which is Keryx Biopharmaceuticals. Presenting for Keryx is the Company CEO Ron Bentsur and following Ron’s presentation there will be a breakout session down the hall to the right in the Yorkshire room. So, with that I will turn it over to Ron.

Ron Bentsur

Thank you all for coming. I want to thank JPMorgan for inviting us to present at the conference. I will be making some forward-looking statements so I do encourage anyone who is interested in the Keryx story to read our disclaimers in particular the risk factors that are available in our public filings the most recent 10Q, the third quarter 10Q and also the 2012 10K.

With that I want to turn into the key investment highlights for the company and then obviously we will go into more detail about our drug Zerenex. So Zerenex is a ferric citrate coordination complex and we believe that this is a compound that could be highly differentiated as a phosphate binder and also for the treatment of iron deficiency Anemia and dialysis and pre-dialysis patients.

We successfully completed the Phase III program in dialysis patients, that was conducted pursuant to a special protocol assessment and recently we completed a Phase II study in pre- dialysis patients what we call non-dialysis dependent CKD say just 3 to 5 patients. Again that study was highly successful. We filed our U.S. NDA for dialysis in August of 2013 and we have been assigned a target PDUFA date of June 7th, of this year so it's about 4.5 months away.

In addition on the European front we plan to file our European MAA by the end of the first quarter and that will include dialysis and pre-dialysis. So after we generated the data from the Phase II study in pre-dialysis we asked for a face to face meeting with EMA and they granted that meeting to us and we presented the pre-dialysis information to them and they were very receptive to us including the pre-dialysis filing as part of the overall MAA filing so obviously that’s a very big achievement for the company on the MAA front.

In terms of the Japanese approval we expect that shortly and we’re highly confident that that will occur. I will talk more about later. Let me talk a little bit about the hyperphosphatemia which is elevated phosphate levels that is the condition that we’re trying to treat with Zerenex in addition to additional conditions. The hyperphosphatemia condition is basically a very ubiquitous condition in dialysis patients; in fact over 80% of dialysis require phosphate binders chronically to maintain their serum phosphorus. If left untreated it can lead to vascular calcification, a cardiovascular disease et cetera and that’s why phosphate binders were invented.

The worldwide phosphate binder sales are 1.7 billion approximately and that is growing at a rate of about 10% year-on-year. There are four phosphate binders that are approved PhosLo, Renagel, Renvela which is the market leader, Velphoro which was approved recently about two months ago and Fosrenol. We believe that all four have significant shortcomings. I will address those in just a couple of slides. Renagel, Renvela as I mentioned is the market leader and their annual sales are approximately 950 million so pretty much a $1 billion franchise for Genzyme Sanofi.

In terms of the growth, the projected growth of the dialysis population worldwide that population is actually expected to double pretty much within the next decade so currently it's about 2.5 million people mostly in the U.S., Western Europe and Japan. Over the next decade many more patients unfortunately for mankind are going to come on board from the emerging markets as western medicine becomes more accessible to those countries and that includes Latin America, Eastern Europe, China. So by the turn of the next decade the projection is that there will be north of 4 million dialysis population worldwide.

One thing that’s very important to understand about dialysis is that these patients also suffer from Anemia very frequently. They all lose blood during the dialysis procedure and as a result of that and also as a result of the fact that the kidneys obviously are not functioning and the erythropoiesis product is impaired. These patients start to suffer from iron depletion and Anemia and consequently almost all of them will require IV iron and/or ESA injections to treat this condition and as you can imagine that becomes extremely costly to the healthcare system and cumbersome to the patients and the dialysis units and we believe that Zerenex now with a clinical data that we have in hand has the potential to overtime increase iron stores in these patients and also reduce the need for IV iron and ESAs in these patients and create a pretty significant pharmacoeconomic benefit for these patients.

So when you talk about the competitive landscape of phosphate binders today we’re really talking about four phosphate binders, PhosLo, Renvela, Fosrenol and Velphoro the most recent entrant and PhosLo is a calcium based phosphate binder so the biggest risk associated with PhosLo or the biggest disadvantage is the fact that many patients encounter hypercalcemia and therefore they need to be basically taken off PhosLo. The market leader is Renagel, Renvela, the issue there is high pill burden and also a lot of GI, particularly constipation and GI bloating that occurs in patients.

Next in line is Fosrenol that is a drug that’s marketed by Shire. The main issue there actually it's a two clear disadvantages one is that it's chewable and chewable compounds are the least preferred lab [ph] administration of these patients because most of these patients are elderly and they just don’t like to chew these very tough wafers. In addition to that Fosrenol is lanthanum based and there is this perception of the risk of lanthanum accumulation. Lanthanum is a rare earth metal that the scientific world just doesn’t know that much about and Fosrenol is based, is lanthanum based.

Velphoro is the newest entrant; it's a chewable so again that’s a clear advantage right from the gate. In addition to that when you look at their head to head study against Renvela, this was a six month head to head in about 700 patients. I think it was clearly inferior to Renvela in terms of it's phosphate controlling fact. Velphoro was unable to normalize the patients on average they ended up with a score of about 5.7 as opposed to where you want to be which is 5.5 or below. So where we feel that we can come in is an oral drug that will have a lower pill burden versus the market leader Renvela. Certainly we’re not calcium based; we can also address metabolic acidosis which is the increase of serum bicarb which is beneficial to these patients. Renvela can also do that, none of the other compounds have been shown to be able to provide that. We’re not lanthanum based, certainly we’re not a chewable, we’re an oral but it's really the far right column that can set us apart from the rest of the pack and that is the iron absorption and that’s where we start getting into the iron story and our ability to increase iron stores and lower the need for IV iron and EPO in significant fashion.

So let me talk a little bit about the long term Phase III study that we conducted where we saw this benefit in a head to head fashion versus an active control group. So 441 patients were enrolled into the study, they all went into a two week washout, following the two week washout they were randomized in the two to one fashion Zerenex was an active control and by the way in the active control we allowed Renvela and/or PhosLo so this was a real life [ph] standard of care active control and after the two week washout after randomization, all patients went into a 52 week safety assessment period and in that 52 week safety assessment period that is where we had the head to head comparison of our drug versus the active control in so far as the iron parameters are concerned.

Ferritin and TSAT, cumulative IV iron and cumulative ESA use, these were predefined secondary end points in the (indiscernible) to avoid a Type-1 error the FDA specifically required that and you will see the results in them [ph] but we succeeded on each and every one of these. The primary endpoint was actually a four week withdrawal period at the end of the study so patients on Zerenex who have successfully completed the 52 week safety assessment period stayed on for another four weeks were by they were randomized in the one to one fashion to stay on Zerenex or receive a placebo for that four week period and we saw a pretty dramatic divergence of the curves in that four week period and that was the primary endpoint of the study.

This slide over here basically shows you that in terms of serum phosphorous now we control serum phosphorous very effectively basically the same as the active control group that’s exactly where you want to see the phosphate numbers below 5.5 generally. Moving on to the iron story and here is where we really start to separate ourselves from the rest of the pack meaning the rest of the phosphate binders because none of them can offer this iron story and this iron benefit. So first and foremost Ferritin which is one of the key iron storage parameters that is measured in dialysis centers. Ferritin along with TSAT are the triggers for the IV iron protocols in the U.S. and in the rest of the world in fact. And what you see here is an increase in Ferritin in the Zerenex arm versus really no change in the active control arm. The difference between the two groups was highly statistically significant and also what you see is that the increase in the Zerenex arm occurs in the first six months and then essentially there is a plateau of what you see between week 24 and week 52 as essentially just noise. There really appears to be a very nice plateau here. With TSAT you can see it even more clearly.

Basically at baseline both were at 31 and after the 52 week treatment period Zerenex went up to about 40 whereas the active control group did not change so again we see a very nice increase in the key iron storage parameter and in the plateau in this case after three months or after 12 weeks. Moving on to IV iron use in the study, we saw 52% drop in IV iron use versus the active control that was highly statistically significant. The chart below basically gives you a visual that basically reflects the percentage of patients who are completely off IV iron in the last nine months, in the last six months of the study and you can see a pretty dramatic difference in terms of the patients who essentially did not receive a single dose of IV iron in the last six months, in the last nine months of the study. Again very encouraging information there.

With respect to ESA we saw a drop of 24% versus the active control group in the use of ESA in our study and what’s important to understand here you can see this on the chart is that the active control actually went down by about 20% start to finish you can see the quarterly usage on this chart over here and that is very consistent with what you would expect that would occur in the bundle. So we ran the study right in the midst of the bundle, our first patient was enrolled right around the introduction of the bundle in January of 2011. So the way the active control group behaved here is exactly what you would expect and we were able to basically generate decreases in the ESA use above and beyond what we saw in the active control. So this is we believe rather compelling information.

Moving on to hemoglobin so not only did we see a statistically significant drop in IV iron and ESA use versus the active control but it did not come at the expense of hemoglobin, in fact our hemoglobin’s look better than the active control in this clinical trial. The active control group went down from 11.7 to a 11.1, again that’s very consistent with what occurred in the bundle during the time we ran the study which is basically between the beginning of 2011 through the end of 2012 versus the Zerenex group which essentially basically essentially stayed flat and that difference between the two groups was statistically significant. So again the ability to maintain hemoglobin better than the active control was still allowing for decreases in IV iron and ESA we think is quite compelling.

Moving on to a SAE, serious adverse events in the study. here again we feel that we have an advantage over the active control group, you can see the frequency of adverse events 49% versus 39% and most of that difference between the two groups can be explained by several or 2 or 3 key categories focusing on infections and infestations and cardiac disorders where we saw a clear advantage in favor of the Zerenex group. Those two key categories we believe can intuitively be associated with the fact that we’re giving the Zerenex patients less IVs than the active control and we believe that that could be associated with the fact that we’re seeing less infections and infestations, less cardiac disorders versus the active control. Over the next few months what you will probably see our several publications and abstracts related to the pharmacoeconomic aspects of this data that you’re seeing here.

Moving on to the open label extension study that we have ongoing. So first of all this is not a regulatory requirement. This is a study that we decided to conduct as a result of physician and patient desire to basically stay on the drug longer beyond the one year Phase III study. So after we received numerous request to stay on drug we decided to open up this open label extension study and this is essentially another one year follow-up study.

However what we’re seeing in this study is actually further reinforcing to our overall story and it's very encouraging. So again in this study we’re seeing an increase and plateau of Ferritin and TSAT at weeks 12 and 24 which again is very consistent with what we saw in the long term Phase III. In fact Ferritins are starting to decrease after week 36 and we believe that that could be related to the fact that Ferritin is also a marker of inflation it's not just a marker of iron stores and if you give less IV iron overtime you could be reducing the inflammatory factor in these patients and that could be what is happening here. In addition to that we’re basically for all intents and purposes eliminating the use of IV iron in the majority of patients that are in this study. In fact 69% of the patients and this is the cut off as of October 31 of 2013 so this is a cut-off from about three months ago but as of that cut-off close to 70% of the patients did not receive a single dose of IV iron, keep in mind all of these patients are obviously on Zerenex this is a Zerenex one year follow-up. There is no control group. In addition to that when you compare this to the national averages which are published on the internet and you compare the average IV iron dose that we’re seeing in this study weekly versus the nation average. We’re talking about an 85% drop in our weekly usage versus what we see for the national average in addition with respect to ESAs we’re seeing very low use of ESAs in the study and again if you compare that to the national average you’re basically talking about a 60% decrease compared to those published numbers and it's also very important to mention that in this study as well we’re not compromising hemoglobin. In fact so far hemoglobin is going up a little bit from 11.1 to 11.2 or 11.3 on average.

So in terms of positioning Zerenex in the marketplace I think it's very clear to see that we’re talking about a drug that can day one create an economic benefit for the dialysis providers essentially by lowering the need of IV iron and ESAs in these patients and I think that’s going to be very well received by the dialysis providers who by the way are not paying for these phosphate binders because the phosphate binders are not in the bundle right now. In addition to that we will basically try to quantify all the safety benefits that we believe that we’re seeing certainly from the Phase III study and I think that will drive the pharmacoeconomic argument even further. We can all do the back of the envelope math and in terms of what a 24% drop in ESA means, what a 52% drop in IV iron means for the Phase III study. We actually that in a real world these reductions to be further enhanced with the right IV iron and ESA protocols and we’re talking about fairly significant pharmacoeconomic benefits.

Now I want to switch gears very quickly to pre-dialysis. The numbers are just staggering. They are close to 30 million patients in the U.S. who are chronic kidney disease patients, stages one to five. They are about 420,000 dialysis stations. Roughly 16 million patients are chronic kidney disease stages 3 to 5 and a very conservative estimate puts the number at 1.5 million of those patients that actually also have iron deficiency Anemia within the chronic kidney disease stages 3 to 5 population.

As chronic kidney disease progresses or iron deficiency Anemia becomes much more prevalent. However many nephrologist refrain from administrating IV iron and ESAs to these patients simply because of logistical insurance liability constraints particularly as it relates to the black box warning associated with ESAs and the black box warning associated with one of the IV irons and in fact over 80% of the pre-dialysis clinics in the country do not have IV equipment. So as you can see this creates a tremendous opportunity for an oral drug that actually works particularly when you take into account the fact that the current oral iron formulations which are predominantly ferrous formulations or ferric are basically ineffective and they have major tolerability issues and in fact none of them are FDA approved. So we believe that with our drug this creates a tremendous opportunity to leverage that essentially that disconnect that exists in the CKD market.

So we set out and conducted a Phase II study in exactly in this patient population. We actually looked in addition to iron deficiency Anemia to patients that also had elevated phosphate which is also a very important lead indicator for mortality and morbidity and this was a multi-center randomized placebo control study, 149 patients were enrolled this was a 12 week treatment period. It's very important to mention that we did not allow IV iron or ESAs in the study so we didn’t want anything confounding the data that would be generated and in fact there is a washout of IV iron and ESAs leading up to the study so the data that we generated is pure single agent activity of the compound and the study met the primary and all the key secondary endpoints which are mentioned here. So in terms of phosphate we lower tier [ph] phosphorus versus placebo, TSAT again a very dramatic difference between us and the placebo groups that we’re basically repleading these iron deficient patients, placebo is not, Ferritin again similar story and hemoglobin is a very important endpoint because that is an approval endpoint for CKD for iron deficiency Anemia and what you see here for hemoglobin again is a very nice increase, highly statistically significant, a difference between us and the placebo group of 0.7. We increased hemoglobin from 10.5 to 11 and it's very important to mention that when you look at the IV iron studies in pre-dialysis in many cases they parse out the subpopulations within those studies that did not receive an ESAs during those studies and when you look at that data the average increase in hemoglobin in the IV iron studies is 0.6.

So they increased hemoglobin by 0.6, this is IV iron with no ESAs, there are four sub-studies and we increased by 0.5 so we’re right there along with IV iron. When you look at the oral iron formulations in those studies as it relates to the sub-groups they increased hemoglobin by 0.1 so basically there is no change. So we’re very encouraged by that information.

Moving on to safety the safety profile looked fairly benign. Discontinuations, the rate was higher and the placebo group that includes treatment failures. SAEs were slightly higher in the placebo group, death, there were two of them both in the placebo group and when you look at treatment failures these are patients that had hemoglobin scores below nine on two consecutive visits at any time during the study or phosphate above six at two consecutive visits at any time during the study. Those patients were considered treatment failures and a picture is worth a thousand words obviously you can see a very dramatic advantage in fair on Zerenex.

Also very importantly there were no changes in the liver enzymes in these patients. We’re talking about ALT and AST so obviously that’s very encouraging. In addition there were no changes in calcium. So we believe that Zerenex really has the potential to obtain this dual to pursue this dual approach of providing these patients with the phosphate control which is badly needed in this phase. There are no phosphate binders approved in CKD. The FDA has simply not recognized phosphates an approvable endpoint in CKD while it has in dialysis. However, 9 out of 10 the nephrologist will tell you that it's very important to start treating phosphate much earlier on. In addition to that obviously hemoglobin is an approvable endpoint and that’s the route we’re going to march down and obviously if we’re able to include phosphate along with hemoglobin that will be a very nice added benefit for these patients.

A couple of words on our Japanese partnership again just to repeat what I said before, we’re highly confident that the Japanese approval will occur and will occur shortly and this will be for both dialysis and pre-dialysis we believe and when you think about the Japanese phosphate binder market currently is 350 million but that’s almost entirely dialysis because the only branded approval for phosphate binder in pre-dialysis occurred two months ago or three months ago that was Fosrenol. We expect Zerenex to become second one very shortly.

In terms of the economies that are due to us so there will be a milestone upon approval. In addition to that we expect double digit royalty starting at low teens escalating mid-teens depending on sales thresholds and in addition to that there will be sales milestones, cash milestone. So we believe a very lucrative partnership with a very strong partner that we’re very happy to be associated with.

In terms of intellectual property I’m going to keep it very simple, we have patent protection through 2024 at a minimum. I would be happy to talk to you offline about that. In addition to that we believe that the buy equivalency route for drug such as ours that on one hand the GI action so basically it's locally acting if you try to do a PK study you’re not going to find the drug in the system, so that’s one complexity. The additional complexity that generics would have with respect to our drug is the fact that we do have systemic absorption, that systemic absorption is manifested by the fact that we’re seeing the iron stores go up but however you still cannot run a PK and measure the drug in the system so the only way to really address a bioequivalency as it relates to that aspect of it, we believe is the Ferritin and TSAT story and we believe that that would entail a fairly lengthy clinical trial.

Any further questions can be taken at the breakout session. I know this is very strict in terms of timeline. So thank you very much and we’re at the Yorkshire room. Thank you.

Question-and-Answer Session

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