by Susan Wright
In the continuously up-and-down moving stock market, most investors may tend to shy away from the word "aggressive" in any sense - especially as it relates to investing their funds. Yet, for those who are a bit more willing to move forward on a potential growth opportunity, Keryx Biopharmaceuticals (KERX) could prove to be a real winner as 2013 approaches on the back of Zerenex phase 3 trials.
In this article, I will discuss how Keryx is in many ways shaking up the investment world while possibly providing investors a great avenue for long-term growth, and why I consider the stock a great bargain at its current share price.
Where Keryx Is Heading Today
Keryx primarily focuses on the acquisition and development of pharmaceutical products - especially those that are used in the treatment of renal disease and cancer in humans.
Keryx has been in the process of developing a number of drugs that are associated with programmed cell death, as well as for cell growth and differentiation. In addition, Keryx is also developing medications that assist patients who are suffering from multiple myeloma and advanced colorectal cancer.
Recently, the company also announced the late stage clinical trial information in relation to Perifosine, a new drug developed by Keryx that what hoped to be used for the stopping of tumor growth for those with colorectal cancer.
Because the drug had been tested for other forms of the disease as well, Perifosine had also been rumored to be a type of cancer cure. Had this have been the case, Keryx was expected to quickly catapult to the top of the biopharmaceutical industry, while current investors in the shares of this company could quite possibly have been able to ride up the stock price as the positive news hit the market.
Unfortunately, upon the much anticipated release of the Perifosine studies, it was found that Perifosine failed to produce the hoped-for results - and with this news, the shares of the company fell considerably from its near high of over $5 per share to $1.64.
Indeed, the company just missed on one major initiative. Yet, all news of Perifosine aside, there are other reasons that I think investors should still take a good look at Keryx shares. Specifically, Zerenex could be the company's winner as it is Keryx' next major initiative.
The company still has $31 million in cash on hand (as of March 31) to fund the trials. Given the current burn rate of approximately $4-6 million per quarter, Keryx should still have around $20 million in quarter four. I believe these funds are sufficient to progress to Zerenex trial completion and to obtain an NDA for Zerenex. However, investors should note that (1) a successful trial and (2) a new drug application from the FDA are by no means guaranteed. In addition, however well-controlled Keryx's cash burn rate is, the company could exceed the current rate due to unforeseen demands on its cash.
Analyzing The Fundamentals
In light of the overall market fluctuations that occurred at the end of the 2011 calendar year, Keryx shares had been trading under $2.50 per share. Yet, even so, the company's trading volume stayed the same.
Soon afterward, though, based on the anticipated results of the Periforine study, the trading volume on Keryx shares rose tremendously when it went from under 2.9 million to nearly 3 million within just a two day period of time.
In conjunction with this, the stock's value nearly doubled from its $2.50 share price of just two months prior. Presently, Keryx possesses a market capitalization of just above $112 million, while its trading volume has risen to over 5 million shares per day.
Given the stock's P/E ratio of -3.76, investors may be somewhat cautious. Although, the stock shares of Keryx were recently trading in the neighborhood of $5 per share and have fallen to below $2, the company is still above 52-week low of just $1.29 per share and, based on other potential drugs that are in the works, it could inch its way back up considerably by year end. With the potential to pick up a large number of shares at its current price, investors could see a great deal of growth from these shares within a relatively short period of time.
Watching The Competition
Baxter International (BAX) is another leader in the biopharmaceutical industry, with a market capitalization of over $33 billion. This company offers drug solutions for those who are suffering from kidney disease. Although the company's stock is currently trading in the range of $60 per share, it is unlikely that this will change. In any case, when comparing the two companies for investment purposes, I firmly believe that Keryx is the way to go for investors who seek growth in this industry and bargain priced shares through which to do so.
Yet another biotech company, Teva (TEVA), ranks at the top for its production of both brand name and generic drug products. Similar to Baxter, Teva may also have seen a rise in its share price that is based on the potential Keryx share price increase from Perifosine. Yet, without this push, the investment return from Keryx shares could still far surpass this competitor's growth potential for investors.
In any case, and without placing too much emphasis on the failure of Perifosine, Keryx' shares should still be considered a great bargain - even though this new potential cancer curing drug did not perform as expected - due to the large number of other potentially successful biopharmaceutical products that the company has been developing in the pipeline.
With the current share price of just a few dollars, it would be quite easy for investors to purchase a large number of Keryx shares and to see them rise within a very short period of time. Analysts tend to agree as well. As far back as late 2011, the stock has held a unanimous buy rating and is considered to be an "outperformer."
However, investors must understand the risks involved. Namely, the company risks failure to gain approval for Zerenex, its next drug slated for phase 3 trials. If the company fails to gain approval for Zerenex it will almost certainly need to tap the debt or equity markets again for additional liquidity to keep its research initiatives in-play. Even if the drug is approved, competition in the renal space is fierce with Fosrenol, the Shire Pharmaceuticals (SHPGY) product already on the market.
Although there are certainly never any guarantees with any type of investment, the company could rise from its recent disappointment, albeit only as we approach quarter four when Zerenex phase 3 trials begin. I feel that investors will still be well-rewarded with a purchase of Keryx shares because of the prospects for Zerenex. Nonetheless, investors should heed the risks facing the company I've outlined above.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.