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Keryx Biopharmaceuticals, Inc. (NASDAQ:KERX)

Q2 2014 Results Earnings Conference Call

August 07, 2014, 08:00 AM ET

Executives

Amy B. Sullivan - VP, Corporate Development and Public Affairs

Ron Bentsur - CEO

James F. Oliviero - CFO

Greg Madison - EVP and COO

Analysts

Matthew Kaplan - Ladenburg Thalmann

Mario Corso - Mizuho Securities

Joseph Pantginis - ROTH Capital Partner

Jonathan Aschoff - Brean Capital, LLC

Michael King - JMP Securities

Stephen Willey - Stifel Nicolaus

George B. Zavoico - MLV & Co.

Operator

Good morning. My name is Dishantha and I will be your conference operator today. At this time I would like to welcome everyone to the Second Quarter Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions). Thank you.

I will now like to turn the call over to Ms. Sullivan. You may now begin.

Amy B. Sullivan

Thank you, Dishantha. My name is Amy Sullivan, Vice President, Corporate Development and Public Affairs at Keryx. Good morning and welcome to the Keryx Biopharmaceuticals conference call to discuss our second quarter 2014 financial results and the progress that we have made to prepare for the commercialization of Zerenex, pending potential approval on the PDUFA action goal date which is September 7th.

Before we beginning the call please be advised that various remarks that we make about our future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Keryx cautions that these forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from those indicated. We encourage you to review all of the risk factors associated with our business as filed in our 2013 10-K and subsequent SEC filings.

This conference call is being recorded for audio rebroadcast on Keryx's website at www.keryx.com, where it will be available for the next 15 days. All participants on this call will be in listen-only mode. The agenda for our call will be as follows; Ron Bentsur, our Chief Executive Officer will provide an update on the FDA review of our NDA for Zerenex; James Oliviero, our Chief Financial Officer will provide a brief overview of our financial results for the second quarter; Greg Madison, our Chief Operating Officer will provide an update on our launch preparations; and finally Ron will provide a general business update and then open the call for Q&A.

I will now turn the call over to Ron.

Ron Bentsur

Thank you, Amy, and good morning to those of you that have joined us on the call. Let me first update you on the progress on the review of the NDA, which I'm sure is top of mind for all of you. Since receiving CMC related questions from the FDA in May we believe that we have satisfactorily responded to their questions. In fact, with about a month to go until our PDUFA action goal date the FDA has informed us that we should be receiving a draft label in the coming days. We are therefore very pleased with the progress that's been made and are looking forward to potentially bringing Zerenex to market in United States.

With that brief overview, I will turn the call to James for a review of our financial results for the quarter.

James F. Oliviero

Thanks, Ron. At June 30, 2014, we had cash, cash equivalents, short-term investments and interest receivable of $137.1 million, reflecting a cash burn of approximately $18 million for the quarter. We reported a net loss for the second quarter ended June 30, 2014 of $22.4 million or $0.24 per share compared to a net loss of $11.4 million or $0.14 per share for the comparable quarter in 2013, representing an increase in net loss of $11 million. For the second quarter ended June 30, 2014 research and development expenses increased by $3.1 million to $10.3 million as compared to second quarter of 2013 related to the Zerenex program including costs associated with the manufacturing of pre-launch inventory and capacity expansion.

General and administrative expenses during the second quarter of 2014 increased by $8 million to $12.3 million, as compared to second quarter of 2013, primarily related to pre-commercial activities related to Zerenex. The net loss for the second quarter ended June 30, 2014 included $2.6 million of non-cash compensation expense related to equity and investment grants.

As we continue to gear up for launch our cash burn is expected to modestly increase. That said, we believe that we have sufficient cash to take this well in the U.S. launch. I will now turn the call over to Greg for an update on the important work he and his team have been doing.

Greg Madison

Thanks James and good morning everyone. We have made significant progress in our preparations for potential launch of Zerenex in the U.S. We want to ensure that the launch gets off to a strong start as possible and critical element of this is patient access. So as we noted in our press release this morning, we're planning for commercial launch within 12 weeks post approval to allow some time to build a base of formulary coverage to ensure that patients have access to the drug after their prescriptions are written. I will spend some more time on it in few minutes but first I would like to update you on our progress on the sales and marketing front.

Over the past several weeks we have continued to conduct expensive market research to ensure that we fully understand the market, including the way physicians, nurses and dieticians think about hyperphosphatemia and currently available treatment options and the reaction to the profile of Zerenex and how they see it fitting into care of their patients. The feedback that we have received has been extremely informative and has helped to guide the development of our message platform and our promotional materials which we plan to have ready to submit to the FDA’s office of Prescription Drug Promotion or OPDP soon after approval.

The OPDP process is fairly straightforward, you submit representative selection of your promotional materials and they'll typically get back to you within 45 days of comments. Our goal is to get their feedback and have all of our promotional materials finalized and ready for the Annual ASM Meeting which begins on November 11th. ASM should be a good meeting for us to drive increased awareness of Zerenex and the benefit it can provide along with a large group and brand presence, there’s been a great deal of data submitted as abstracts at the presentation and we hope to have a significant number of them accepted.

Shifting to our sales force, we completed our territory alignments and divided the country in six regions each between eight and 10 sales territories. We have recently hired all six regional sales directors and attracted a top-notch sales leadership team. We have also now begun the recruiting process for our sales representatives and we plan to make offer to sales team contingent on FDA approval, which will enable us to hire, train and have them calling on targeted physicians within 12 weeks of approval.

As I alluded to earlier, it's important to realize that having your sales force in the field calling on targeted physicians will be a challenge if patients don't have access to your drug. You don't want physicians to write their first prescription for your drug, the patient turned away from pharmacy because the drug isn't covered by the patient’s respective payer. We spent a lot of time with payers both in market research and direct interactions and determined it will be worthwhile adding a few weeks between approval and commercial launch to ensure we'll have time to build the basic coverage.

Now the payers are a very concentrated group for approximately 20 payers both Medicare Part D and commercial representing more than 80% of the dialysis patients adds. We have met and continued to meet these payers to present the clinical profile of Zerenex and gain understanding of when they’ll review Zerenex for potential addition to their formulary. The feedback to-date has been quite encouraging, and payers that cover the both, the pharmacy benefit and the medication for dialysis patients are quick to understand that the profile of Zerenex is differentiated and that the reduction in ESA and IVR end use in patients seen in our clinical studies could lead to overall healthcare savings. Our goal is to have unrestricted access for Zerenex across a vast majority of both -- and commercial plans within 12 months of approval.

Our goal of extensive coverage for Zerenex won't happen overnight however and of this year we will use approximately 12 weeks between approval and launch to get in front of Formulary Review Committees that are scheduled in that timeframe so we can come of the gate with some established coverage allowing for immediate use by physicians when our sales reps call on them. At launch we’ll also have central reimbursement hub in place which will help physicians and their staff identify which patient have health plans that has Zerenex on formulary. This hub will also provide direct links to a broad ray of patient assessment programs.

So how we are thinking about the launch and potential trajectory of prescriptions? So any product launch is a natural evolution with physicians, that from trial in a select group of patients to then broader adoption and then finally the full advocacy for the brand. Interestingly, we have taken a very close look at the launch curves of every other branded phosphate binder including Phoslo, Renagel, Renvela, Fosrenol and Velphoro. With the exception of Velphoro the uptake curves of every other launch really overlay each other and within 12 months end up at an average of approximately 13,000 monthly prescriptions based on IMS' TRX data.

The range of the 12 month timeframe is also very tight with the low end at about 12,000 prescriptions and the high end at about 14,000 prescriptions. And after 12 months the curves tend to diverge. So we see this as a good indicator of the time it takes in the nephrology community to gain experience with a new drug and determine how it will fit in his or her practice. So in thinking about the potential launched trajectory for Zerenex the curve will be impacted by this typical evolution we just described as well as the timing of payer coverage especially in the age of Medicare Part D. As with most other phosphate binder launches we would expect to start-up gradually and build steady momentum overtime and favorable covered physicians could help to fuel such growth.

So in summary we have made outstanding progress in very short period of time in our preparations for launch. We have hired an exceptional team who will continue to impress with their focus, passion and ability to get the job done. I look forward to continue updating you on our progress and with that I will turn the call back over to Ron.

Ron Bentsur

Thank you, Greg. Along with the important and extensive work that Greg and his team are doing to prepare us for the potential U.S. launch of Zerenex, our medical team has also been hard at work. We are very pleased with the publication of the long-term Phase III data in the Journal of American Society of Nephrology or JASN which is a prestigious reviewed nephrology journal. The timing of this publication is important for us as it will help inform the clinical discussion that our managed market team is having with payers and help to raise awareness of the potential important benefit of Zerenex within the nephrology community.

We are also very pleased with the top line 48 week data from our long-term open-label expansion or OLE study of Zerenex in dialysis-dependent chronic kidney disease patients. As a reminder, patients who have participated in and successfully completed the long-term pivotal Phase III study regardless of their treatment arm in the Phase III [inaudible] active control were eligible in enrollment into the OLE study. This study provides us with valuable safety and efficacy information with now up to two years of cumulative exposure for patients. Patients in the OLE study, 168, were titrated to achieve and maintain Serum Phosphorus levels within the normal range of 3.5 to 5.5 milligrams per deciliter with a maximum daily dose of 12 grams per day of Zerenex.

Data from the study showed that Zerenex controlled Serum Phosphorus within the normal range of 3.5 to 5.5 milligrams per deciliter that transparent saturation or TSAT increased and plateaued and that ferritin plateaued and in fact decreased after week 36. Additionally, the use of IV iron was extremely low in the study and the use of ESA was also low and both continued to decrease overtime during the study with, for example 85% of the patients not receiving any IV iron in the last 12 weeks of the study.

We believe that the safety profile observed in the OLE study was also consistent with vaccine in the pivotal Phase III study. And importantly, just like in the Phase III study there were no significant or clinically meaningful changes in liver enzymes or aluminum level observed in the study. As Greg mentioned earlier, we plan to submit the full data from the OLE study as an abstract at a major medical meeting.

On the clinical development side we are preparing for the commencement of the pivotal Phase III study of Zerenex for the treatment of iron deficiency anemia in pre-dialysis chronic kidney disease patients. As we gear up logistically and fine tune the design I would like to remind everyone that this trial will be a double blind placebo controlled study evaluating hemoglobin as the primary end point in just over 200 patients. We plan to initiate this trial in the coming weeks.

Additionally on a regulatory front, we have recently received the day 120 questions from the EMA. So as we expect to wrap up the regulatory discussions in the U.S. we will shift our focus on to the MAA review. Let me close the scripted portion of the call with a few brief remarks and we will then open it up for Q&A.

The transformation that Keryx has undergone in the past few months is impressive. We are growing from pure development organization towards an integrated commercial company and I'm pleased to say that we have been able to attract a very talented pool of employees to join the team. As we eagerly await our PDUFA decision next month we believe that the collective experience of the team bodes well for this important transition and the successful commercial launch, pending potential approval.

With that, I will ask the operator to open the call for questions. Thank you.

Question-And-Answer Session

Operator

(Operator Instructions). You first question comes from Matt Kaplan with Ladenburg.

Matthew Kaplan - Ladenburg Thalmann

Hi, good morning guys.

Ron Bentsur

Good morning.

Matthew Kaplan - Ladenburg Thalmann

Congrats on the progress, impressive. Could help us interpret what that means in terms of your ongoing discussions with the FDA, with your expectation to receive the draft label in the near-term?

Ron Bentsur

Yes, from our vantage point today we believe that we are on track to receiving approval on or by the PDUFA date. That's our interpretation of what's going on right now.

Matthew Kaplan - Ladenburg Thalmann

Great, and then a second question with respect to your preparation for launch. Could you give us a little bit of color in terms of the number of sales people in the six regions, I guess you plan to hire once it's approved.

Greg Madison

Yes. Matt, this is Greg. So we are going to hire a total sales force of 59 people. Again we’re going to divide the country up between six regions, each region will have approximately between eight and ten sales representatives all together.

Matthew Kaplan - Ladenburg Thalmann

Okay, great. And then final question in terms of building your payer access, can you give us a sense in terms of when you expect to start to have a sense in terms of the number of payers on board? Is that pre-launch or is that shortly after launch?

Greg Madison

Yeah, it will shortly after launch because there not much you can do pre-launch. So all those contracting discussions will have our payer team ready to go pending FDA approval on September 5th. We have finalized our pricing and contracting strategy. So that team will be ready to go literally September 8th let's assume a day after PDUFA to get in front of the payers. As we noted earlier we are going to use the 12 weeks kind of post potential approval and before commercial launch to get in front of as many payers as possible to establish this base line of coverage because during the market research that's came back as just extremely important. So we think it's worthwhile taking couple of weeks, build up a base of coverage and that's what we will be looking out there.

Now every payer does things a little bit different. So everybody has their own schedule, when they’ll review that, some of that we know now, some of that we will learn only the day after launch, which is why we are giving ourselves to stay within the first 12 weeks post approval that's when we do our commercial launch.

Matthew Kaplan - Ladenburg Thalmann

Okay. Thanks for the detail.

Greg Madison

Thanks, Matt.

Ron Bentsur

Thanks, Matt.

Operator

You next question comes Mario Corso with Mizuho USA.

Mario Corso - Mizuho Securities

Good morning. Thanks for taking my questions. A couple of them, I just wanted to ask about in terms of label or potential label and how it relates to commercial? What has your market research shown and how do you think this fits with the label in terms of the importance of the anemia treatment even within the dialysis population obviously it's not the primary end point at this studies, but just curious how you are thinking commercializing that aspect of the products profile. And then in terms of launch timing, making a big flash at ASN is great and if physicians come back from there and would like to write the product, will it be in pharmacy in that time before kind of 12 week timeframe you talked about? Thanks very much.

Greg Madison

Sure, Mario. This is Greg. So, the answer to your first question is yes. We have done an extensive model market research with the physician all along with the payers. The general feedback based on the profile of Zerenex and potential benefits it could offer in all these diseases contingent on what end up in the label, of the positive feedback has I think quite positive. They view this as a potentially differentiated process binder, different than anything else in the market place. The benefits it can provide to patients are profound as seen in our clinical trials. So as we await potential label there, I think iron parameters that we have talked about there are obviously a critical component of that and a potential big differentiator for us in the market place.

Second question you had asked in terms of timing, yes, we are guiding to within 12 weeks, we are not seeing it's going to be 12 weeks exactly. So it's within 12 weeks. A part of that is just dependent on how exactly when some of the larger payers will put us in a review process or some of that, as I said earlier, doesn't get determined until after you actually have FDA approval which is why we are giving ourselves a little bit of window. But, the goal will be certainly to have all of full promotional materials ready to go at ASN. So we try to drive increased awareness of Zerenex, build up anticipation of demand. As we mentioned obviously we will hopefully a lot of data, abstracts submitted there.

So it really will help to build up their awareness with increased appetite potentially for Zerenex and then our goal is probably relatively shortly thereafter to have product available in the channel but again we are just deferring from giving an exact date at this time for reasons I just stated earlier.

Mario, are you there?

Operator

Next question?

Ron Bentsur

Next question.

Operator

Your next question comes from Joe Pantginis with ROTH Capital Partners.

Joseph Pantginis - ROTH Capital Partners

Hey, guys. Good morning. Thanks for taking the question. First quick question is, can you give some sense of, since it's been on the market and I'd say, late January, how Riona doing in Japan?

Ron Bentsur

Yes. Greg will answer that.

Greg Madison

Yeah, Jonathan, this is Greg. So Riona officially launched in mid-May. So that's when the team actually officially launched up there they just reported revenues of $2.6 million. They are reported in yen, but $2.6 million and that's basically represents, their went into wholesalers in the Japanese market at this stage where it just launched in Mid may, we don't have any insight yet on prescription levels and physician uptake and thinks like that. But anecdotally the feedback we referred from a Japanese partner is quite good, high level of interest in the products, but we really don't have any more details beyond the first initial reported sales.

Joseph Pantginis - ROTH Capital Partners

It's still really helpful. Thank you. And then, I guess I'd like to dive a little more into the, I guess all the work, the very big effort you're putting into that you mentioned with payers and I guess I wanted to sort of line that up with some timeline. So in May when you received notice that the PDUFA will be extended, you are saying you are hoping that you could still get the drug launched by the end of September timeframe around that.

So totally understand all the work that's going in. I think it’s very adorable having the payers in place. So I guess I wanted to get a sense of what was sort of may be rate limiting steps in some of the payers of types of questions or feedback that they might been putting to you or any other types of feedback that you wanted to make sure was a 100% covered before you really went forward with the launch?

Ron Bentsur

Yeah. Great question. So the reason was that feedback was less from the payers because the payers are generally excited about the potential product, the benefits overall, each payers has their own timeline as far as when they'll overview the product. So kind of that mercy of those folks doing that for the payer community is actually fairly excited. I don't see that as a big rate limiting step. What the feedback we have got from physicians in dialysis however to make sure that we have some level of coverage of established before going out there and starting to talk about launch.

So what we don't want to do is have our sales force kind of come out say end of September start driving awareness, start driving prescriptions of Zerenex but they may not be in establish kind of base line coverage and that would frustrate physician and staff. So that's why we have taken the time to give ourselves approximately 12 weeks, build up a level of coverage overall, that will not be 100% as I mentioned before.

Our goal is to have a broad array of access available, especially across Part D in commercial plans within 12 months of launch. But we do have kind of a number in our head that what we would like to see in that first couple of weeks there so that our reps can go out there and start really targeting physicians, talking about the benefits of Zerenex, drive any level of interest into this reimbursement hub that can then be an assistance to the doctors identify which patient actually available have coverage. So that's the reason why we kind of shifted our strategy a little bit. It’s based on feedback from the physicians and the dialysis staff community.

Joseph Pantginis - ROTH Capital Partners

Great. Thanks a lot.

Operator

Your next question comes from Corey Kasimov with JPMorgan.

Unidentified Analyst

Hi, good morning. This is Whitney on for Corey Kasimov. Just to follow-up on the last question, you mentioned that you have a sort of level of coverage in mind that you would like to have established at launch, can you say what that is or talk about your thinking about that.

Ron Bentsur

No. We are going to keep that for ourselves Whitney. But suffice it to say we kind of looked at that payer community very carefully. We've get understanding of kind of when some folks will review us as I mentioned before, other will not give us a date until after the approval. So literally depending upon when some payers may review us for formulary addition that would literally shift our thinking in terms of weeks in which we launched commercially. So we want to make sure that we come out there with some base line of coverage. It's not a 100% for sure.

We also want to sure it's not zero at the startup which is why again we want to take 12 weeks and kind of get in front as many people possible in the commercial and Part D side to get that base line of coverage.

Unidentified Analyst

Got it. And then relative to what you guys have been talking about before in terms of pricing has your strategy changed there at all in your talks with payers?

Ron Bentsur

No. It's fairly consistent. As we mentioned both the feedback from the physician and staff and the payer community has really helped us to understand what that pricing parameters to look like. We have pretty much got that finalized at this point in time. We’re fine tuning our kind of contracting strategy, but now the interest levels remain high and our pricing strategy that we kind of thought we’d go out with is pretty much being validated through a lot of the market research we talked to.

Unidentified Analyst

Great. Thanks for taking questions.

Ron Bentsur

You bet.

Operator

Your next question comes from Jonathan Aschoff with Brean Capital.

Jonathan Aschoff - Brean Capital, LLC

Hi. Thanks guys. Thank you. You guys have definitely spoken out with pricing though that would be qualified at a premium to everything else, could you go that fat at this point?

Ron Bentsur

Yeah. I'm not going to disclose quite that far. I think as we talked in previous calls that if you look at Renvela for example it’s a phosphate binder that's leading the U.S. market place and if you look at that as a comparable price point, we talked about before that we're looking at potential scenarios that include equivalent pricing, a slight premium or slight discount to that aspect. So we are not at a point where we are going to disclose exactly what that looks like overall and then whatever we come out with from a wholesale acquisition cost price will also dictate our contracting strategy and rebates that what we offer to payers to get on to their formularies.

Jonathan Aschoff - Brean Capital, LLC

Okay, and then lastly, how many patients started the OLE trial, finished at two years and what was the median, thereabouts the median on and I guess what kind of character who did not make it for the full two years?

Ron Bentsur

So Jonathan, I don't have the numbers right in front of me, but 168 patients started the study, 166 patients were dosed. So the intent to treat is effectively 166 and the number that completed was, I believe 125, something like that. So about a 25% drop-out rate which one is lower than what we had with Zerenex in the Phase III and it's consistent with the drop-out rate that we had with the active control in the Phase III. And reasons for a drop-out were essentially more or less the same to what they were in the Phase II primarily related to GI adverse event, obviously to a few patients that went on to kidney transplant. So I mean, that's a favorable outcome for the patient but they need to be included in the drop-out. Those were the two main reasons for patients discontinuing in the extension study.

Jonathan Aschoff - Brean Capital, LLC

And I guess lastly were there any appreciable difference in percentage of those completing between Zerenex from day one and active control for the first year?

Ron Bentsur

Appreciable difference in what sense? In terms of the iron parameters...

Jonathan Aschoff - Brean Capital, LLC

No. In terms of the patients who actually got to end of the two years, were there any differences between those who started versus ended…

Ron Bentsur

No. Not from where we can clean in terms of top-line. So it appears to be very consistent with the type of data that we saw in the Phase III.

Jonathan Aschoff - Brean Capital, LLC

Thanks a lot.

Ron Bentsur

Thank you.

Operator

You next question comes from Mike King with JMP Securities.

Michael King - JMP Securities

Good morning guys. Thanks for taking the question. Real, quick two things, can you just comment about whether you can say definitively one way the other regarding any required FDA inspections of the manufacturing to satisfy the CMC?

Ron Bentsur

I can't go in the detail, but as we all are aware, it is common practice for the FDA to conduct what's call PAIs. But I just can't go in any more detail on that at this point.

Michael King - JMP Securities

Okay. And then a question on the open-label extension data, just wondering, I'm sure you are saving it for presentation and I don't want to spoil that, but I know that T-SAT and the ferritin rises were -- the source of some investor discussion when the data were first released and just wondering if you can talk about the decline, especially in just kind of general terms from what done by what or into the normal range or any other sort of qualitative information you will be able to share? Thanks.

Ron Bentsur

Yes. So first of all, I was not aware that T-Sat was ever an issue. I have never heard that before, but with respect to Ferritin the basically we are looking at numbers that are very consistent with the national averages, that are prevalent right now in the U.S. So we feel very good about that.

Michael King - JMP Securities

Great. Thanks.

Ron Bentsur

Thank you.

Operator

The next question comes from Stephen Willey with Stifel Nicolaus.

Stephen Willey - Stifel Nicolaus

Yeah thanks and congrats on the progress here. With respect to the conversations you are having with payers, of course I appreciate it. But I guess, any color you could provide in terms of where you are in your conversations with providers would be helpful as well. And I guess as we kind of look at the Velphoro kind of struggling here over the last 12 months or so, just kind of wondering if that makes you any more optimistic with respect to the opportunity that might exist within some of the Fresenius centers. Thanks.

Ron Bentsur

Yes, it’s a great question. We have actually been spending a decent amount of time with our payers to our account team and as you can imagine, let's say, certainly high level of interest within the dialysis provider community, particularly with the news early this year with the orals being delayed from inclusion of the bundle until 2024. So we're in discussions with them. Some approach us about potential pilot type programs and so exploring those options right now, none of which would be a gaiting factor for us for us going for utilization.

As we have seen with Velphoro thus far to the launch, it's definitely following below some of the other launch trajectories that I talked about earlier with other phosphate binders. I believe the latest weekly data has them about 0.6 of 1%, so six-tenth of 1% probably about eight, twelve weeks in the launch here.

I think those numbers should put to rest any kind of three years of concerns folks have that Fresenius may want to drive utilization of Velphoro and that may be a [regular] step for us as we go out into the market place. As I said, previously the LBOs and the MBOs and the SCOs typically do not dictate their physicians why phosphate binders they need to utilize. They very much take a hands-off approach. They certainly can influence but they do not dictate that. I think the slow uptake thus far with Velphoro is a clear indicator that somebody like Fresenius is certainly not dictating to their physicians what phosphate binder they need to prescribe, which we believe is consistent with all we have been saying and I believe that we have seen in the market place that we will have just as enough good an opportunity with Fresenius type of doctors as we do with DaVita type doctors, or other type of dialysis organizations. So, I think that bodes well for us.

Stephen Willey - Stifel Nicolaus

Great. Thanks.

Operator

You next question comes from Jason Kolbert with Maxim Group.

Unidentified Analyst

Hi. Good morning. This is actually Dr. Jason [McCarthy] for Jason Kolbert and my question, is there a strategy to negotiate bundling with major dialysis centers?

Ron Bentsur

There is not. So, as I just mentioned that, that with the orals being excluded from the bundle now until 2024 the dialysis providers do not purchase these types of drugs compared to the wholesale and retail sectors. So, there is no need, nor desire for us to have to go to dialysis providers and do any type of discussion with them in terms of purchasing.

Unidentified Analyst

Great. And as far as the strategy in Aisa, is there a heavy dialysis market in Japan?

Ron Bentsur

Yes. Dialysis market is quite large in Japan. It's approximately 350,000 patients out there in the Japanese marketplace. As we commented before we did get our partners to get approval for both dialysis and pre-dialysis in Japan. So the dialysis market is fairly well established and it's very sizable number there. U.S. is about 450,000 so it's a large number of patients, a significant opportunity, the pre-dialysis market it's a little bit harder to put a number one because it's very much untapped type of opportunity. So it's kind of greenfield if you will with a lot of market development that can be done there. So, we see that as a fairly sizable opportunity for our partners in Japan.

Unidentified Analyst

Great. And just one more question, what are the requirements to get the reimbursement in EU and in Japan compared to the United States?

Ron Bentsur

Well, it's more of a centralized type of procedures compared to the countries that we are dealing with versus in the U.S. you get a fairly fragmented market with as I mentioned before 20 payers that concentrate about 80% of the dialysis lives across commercial and Part D versus European countries as well as Japanese countries you tend to go to a more centralized approach overall which provides products for patients.

Unidentified Analyst

Great. Thank you.

Operator

Your next question comes from George Zavoico with MLV.

George B. Zavoico - MLV & Co.

Hi. Good morning. Thanks for taking my question and looks like you are getting ready for quick start. The first question about the product label strategy because the phosphate binding data of course came out earlier than the IV iron and the ESA. So, when you first drafted the product label, could you include the iron and ESA and if not, have you now amended it or will you have to amend it perhaps after approval? And in Japan, the Japanese label has the iron and ESA benefits in the label?

Ron Bentsur

So the iron and ESA information did go into the label because if you recall, we submitted the MDA after the completion of Phase III study, the long-term Phase III study which had the iron parameters and the IV iron as pre-defined secondary end point -- So all that went into the MDA. So those concepts were built into the label, day one, that we submitted.

In terms of the Japanese label that's available online. Their basically acclaim is the treatment of hyperphosphatemia in chronic kidney patients which include dialysis and pre-dialysis patients. I don't remember off hand whether the iron and ESA information is included somewhere in that package. I just don't have in front of me and I just don't remember. But, obviously in Japan the fact that [Veronux] is able to increase iron stores and have an effect on or reduces the needs for IV iron and ESA is well known to many of the physicians out there and as part of the marketing strategy.

George B. Zavoico - MLV & Co.

That's great. Thank you very much.

Ron Bentsur

Thank you.

Operator

The next question comes from [Ren Benjamin with ATC]

Unidentified Analyst

Hi. Thanks guys for taking the questions and congratulations on the progress.

Ron Bentsur

Thanks.

Unidentified Analyst

Can you provide any color from providers regarding the potential introduction of generic Renagel or Renagel and then what your strategy would be if such an introduction happened?

Ron Bentsur

So payers are aware that they have generic Renvela in the marketplace, I think as folks are aware their patent expires in September of this year. At this point in time, there has been five or six ANDAs filed over the last three to five years none of which have obtained approval just yet and Impax even announced yesterday or two days ago on their earnings call just how difficult a product it is to manufacture. So we are monitoring that very carefully in terms of if something comes out, if it's able to get approved and I think the other piece to consider with any type of potential generic entrant of Renvela because it’s so difficult to produce, there could be a capacity contract.

So it's certainly hard to manufacture but to do at any scale that would match-up with the total demand of the U.S. market place is not an insignificant challenge. So timing of a potential entrant of a generic how many generics come in and their [inaudible] that is applied, what percent of marketplace will all have factors involved with their overall pricing strategy. So we are watching that carefully overall. Regardless of the potential entrant of a generic Renvela which would certainly impact the brand Renvela, doesn't tend to impact other phosphate binders.

Regardless of any time that, that comes in we do believe that with the product profile we have with Zerenex, the potential differentiated benefit that can provide overall that we can succeed in the market place even with the generic Renvela. And I think that's proven out a bit in the fact that right now there is the generic [Calcimacitate] available in the market place that Renvela competes with, the difference in price is about 15x, Renvela being much more expensive than this generic. However, physicians clinically believe that Renvela is a far superior drug compared to Calcimacitate therefore they have a dominant market share.

So same type of scenario we envision going forward that we believe we have a very differentiated profile, physicians and the feedback we have in the marketplace are very excited about the opportunity to utilize this, both for the patient benefits, to control of disease and potential reduction of IV iron and ESA. So if a generic is there I will watch out for pricing standpoint but we do believe we will able to effectively compete nonetheless.

Unidentified Analyst

Okay. And just as a follow up. Regarding the Ferritin levels, you mentioned that Ferritin levels had increase than decreased by week 36. I don't remember this being a profile that we saw in the first Phase III trials. So do we know anything about the patients that are behaving this way? For example, were ones that were treated longer on Zerenex and is this kind of pertain any sort of an effect in longer-term duration of T-SAT or even on hemoglobin?

Ron Bentsur

So to answer your question, it could be obviously an effect of the amount of time that these patients are on Zerenex cumulatively and we believe that it's also a factor that is correlated with the level of IV iron and in this open-label extension study we saw extremely low levels of IV iron and we believe that, that is also a contributing factor to the fact that, Ferritin levels have plateaued and then subsequently in the study, actually decreased between week 36 and week 48. One thing I would say about the Phase III is that we didn't see that aspect of it. We didn't see a decrease in the ferritin, but the ferritin level between week 24 and week 48 was not statically different.

So for all intents and purposes, Ferritin did not rise beyond week 24 in the Phase III and again that's consistent theme was seen also in the open-label extension study.

Unidentified Analyst

Perfect. Thanks very much and good luck going forward.

Ron Bentsur

Thank you.

Operator

We have time for one additional question. We will take the final question from Matt Kaplan with Ladenburg

Matthew Kaplan - Ladenburg Thalmann

Hey, guys. Thanks for taking my follow-up. Just a quick follow up on the earlier question with respect to discussions with the LDOs, the providers. Can you talk a little bit about how, you think Zerenex is going to be integrated in treatment algorithms for iron and phosphate management? And the secondly, how will Zerenex be used of fit into RX and with respect to the channel distribution strategy?

Greg Madison

Yeah, Matt. It's Greg. So let me handle the second one first. So DaVita RX it's similar to a mail order pharmacy that specialize in dialysis patients. So we are talking to DaVita RX and they've typically pull their product through the wholesaler channels, some of the other mail order pharmacies. So it will show light into their overall scheme of whatever the physician prescribes, if that patients is a member of DaVita Rx so the mail order benefits allows [inaudible and we will have Zerenex available through that channel.

In regards to the first question around the LDOs and treatment algorithms, so the LDOs and a lot of the medium size organizations right now, they do not have defined phosphate binder algorithms. This is mostly because they don't have a direct financial responsibility to purchase those agents nor do they get reimbursed for those. Hence forth they do allow the physicians to decide what binder they want to utilize based on his or her patient profile. Most of the organizations certainly have phosphorus levels targets, which are typically consistently what you will see -- which is less than 5.5 milligrams per deciliter but again they don't have dictated phosphate binder protocols.

They do have establish iron protocols and ammonia protocols for ESA utilization and we do believe that the portfolio of Zerenex will allow them to be able to utilize Zerenex and not have to alter any of those types of protocols that already fit right in right inside their existing protocol. So we expect that they will be able to utilize if they want the adoption of product pretty much easily.

Unidentified Analyst

Great. Thank you.

Greg Madison

You bet.

Operator

I will now turn the call over to Mr. Ron Bentsur for closing remarks.

Ron Bentsur

Thank you. The amount of work that it has taken to get our company to this point in evolution is tremendous, and I want to take this opportunity to thank those that have contributed over the years. First, our investigators and patients without whom, we could not thoroughly evaluated Zerenex and truly understood the potential benefits of this drug; our shareholders who have supported our efforts through the years; and finally our dedicated employees who have really given it their all particularly throughout NDA review process. While we aren't over the finish line yet, we are more confident that in the coming weeks, we will complete the transition to an integrated commercial entity. Thank you again for joining us this morning. Have a wonderful day.

Operator

Thank you Ladies and gentlemen. This concludes today second quarter financial results conference call. You may disconnect at this time.

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Source: Keryx Biopharmaceuticals' (KERX) CEO Ron Bentsur on Q2 2014 Results - Earnings Call Transcript
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