According to the American Cancer Society, colorectal cancer holds third place for the most commonly diagnosed cancer and leading cause of cancer-related deaths in the U.S. Even though an early diagnosis of this type of cancer can actually lead to a complete recovery, the survival rate in the last stage (IV stage) is only around 6%.
Keryx (KERX) was the main player in this game but somehow the end result of the Phase III trial for Perifosine, the company's colorectal cancer drug, turned to be more like someone pulling a late April's fool joke on the stock holders when its share value dropped for about 65%. This happened just after the company announced that a late-stage clinical study of their anti-cancer drug performed at 65 U.S. sites missed its main goal of improving overall survival in patients. What else to say than that this wasn't really expected and that it came as a major disappointment for many investors hoping to hear good news.
When a biotech company takes on a "Sisyphean task" of developing a drug for treating a certain type of cancer, the investor's rush of what kind of a breakthrough this could be becomes amazing. I must say however, that this endeavor is like a two-sided blade - while it can reward you greatly if it succeeds, it can also backfire on you and leave you empty handed. Let's just say that if we're talking about one of the serious biotech companies on the market, your stock chances are 50-50, if the company is developing a specific cancer treatment, which translates into high-risk, high-reward investment.
Together with Keryx, its licensing partner, another biotech company suffered a significant loss. A Canadian drug maker, AEterna Zentaris (AEZS) suffered a loss of about 67% at the Toronto Stock Exchange. AEterna is preparing another couple of anti-cancer drugs for FDA approval such as AEZS 108 (Perifosine for endometrial, prostate, ovarian and bladder cancers) - which is in Phase II trials - and AEZS-130 (Perifosine for multiple myeloma and advanced metastatic colorectal cancer) - which is in Phase III trials. Compared to Keryx, which only has one product in the pipeline, AEterna's pipeline looks more attractive.
While Perifosine was still in its testing Phase, Keryx was thought of as a decent competitor to many other companies in the market; therefore, I think that a failed Phase III trial for Perifosine brought a smile to the face of many investors who were betting on another horse. Even though significantly smaller in comparison to some other companies in the market, Keryx showed promise. After the disappointing start of the month, this is not the case anymore.
One of the strongest competitors to Keryx was definitely Vertex Pharmaceuticals (VRTX). After Keryx dropped from almost $5 to around $1,74 at the beginning of April, investors as well as observers could see a noticeable rise in Vertex. With a revenue of around $1.41 billion, Vertex is dedicated to development and commercialization of drugs aimed at treating serious conditions such as chronic hepatitis C and viral diseases. It already has three drugs approved and four in the pipeline.
Achillion Pharamceuticals (ACHN) is another biotech company that was up after Keryx broke the disappointing news. If you were thinking about going for Keryx, now is the time to consider some other options. Achillion develops treatments for the most challenging conditions such as hepatitis C, HIV and bacterial infections. With 6 products in the pipeline - from which antiviral - ACH-1625 is definitely well worth your attention - and a market cap of close to $773 million, this company looks very promising as it seems to be heading towards $12.
A more direct Keryx competitor when it comes to anti-cancer drugs, Amgen (AMGN), is far too large of a player to feel any impact from the Keryx headache. With the market cap of close to $54 billion and its stock trading at around $68, this biotech giant surely leaves its competitors with plenty of homework.
Another competitor, Baxter International (BAX), with a market cap of over $33 billion is considered to be one of the leading biotech companies and a good opportunity for investment if you're looking for a rock-solid stock. Focused on developing products for people suffering from a kidney disease, hemophilia, infectious diseases immune disorders and other chronic medical conditions, Baxter managed to cover a wider market. Its products are manufactured in 27 countries and are available in more than 100 countries worldwide.
So what would be a good tactic at this point?
If you belong to the group of disappointed Keryx investors, my advice is not to be trigger happy but rather patient at this point in order to recover from your loss. There is still hope that things will go better as the company stated it will put its focus on Zerenex, which is the second drug in their pipeline aimed at treating patients with a chronic renal failure. The Phase III study of this drug is ongoing and is expected to be complete at the end of 2012.
If you currently have plans to buy, then I suggest you stay away from Keryx for the time being. Even though as a risk-tolerant investor you may be drawn to a possible great catch stock like this one could have been you if all went as planned, I would go for a company that already has a FDA approved product on the market that actually gives results, especially if it's a drug aimed at rare or difficult to treat diseases. In my opinion low-risk, high-reward is the safest way to invest.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.