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Executives

James Oliviero – VP, Finance

Michael Weiss – Chairman and CEO

Analysts

Jonathan Aschoff – Brean Murray

Matt Kaplan – Ladenburg Thalmann

Phil Nadeau – Cowen and Co.

Keryx Biopharmaceuticals, Inc. (KERX) Q2 2008 Earnings Call Transcript August 11, 2008 8:30 AM ET

Operator

Good day, everyone and welcome to the Keryx Biopharmaceuticals investor conference call. Today's call is being recorded. (Operator instructions) At this time for open remarks and introduction, I would like to turn the conference over to your host, Mr. James Oliviero. Please go ahead sir.

James Oliviero

Thank you. Good morning and welcome to our conference call regarding Keryx Biopharmaceuticals' second quarter 2008 financial results. I’m James Oliviero, Vice President of Finance at Keryx and I welcome you to our conference call today. Following our Safe Harbor statement, I will provide a brief overview of financial results for the second quarter of 2008. I will then turn the call over to Michael Weiss, Chairman and Chief Executive Officer of Keryx, who will provide an update on the ongoing clinical development of Zerenex, our phosphate binder for the treatment of hyperphosphatemia; and our lead oncology product candidate, KRX-0401, also known as Perifosine.

Before we begin, I would like to remind everyone 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. Factors that may affect Keryx Biopharmaceuticals' operations include various risk factors and uncertainties that can be found in our SEC filings. This conference call is being recorded for audio rebroadcast on Keryx's web site, www.keryx.com, where it will be available for the next 15 days. All participants on this call will be on listen-only mode. The call will be followed by a brief Q&A session.

Now, I would like to briefly discuss the financial results for the second quarter, as well as the company's overall financial condition. Our second quarter financial results were released Friday evening and can be viewed on the Investor Information section of our web site at www.keryx.com.

The net loss for the second quarter ended June 30, 2008 was $7,697,000 or $0.17 per share compared to a net loss of $19,460,000 or $0.45 per share for the comparable quarter in 2007, representing a decrease in net loss of $11,763,000. The decrease in net loss is primarily attributable to $10,390,000 decrease in research and development expenses related to the cessation of the development of Sulonex in March 2008, an $852,000 decrease in expenses related to our other clinical compounds, a $567,000 decrease in non-cash compensation expense related to equity incentive grants, and a $309,000 decrease in other selling, general and administrative expenses, partially offset by a $926,000 decrease in interest and other income.

At June 30, 2008, the company had cash, cash equivalents, investment securities, and interest receivable of $34.6 million as compared to $64.7 million at December 31, 2007. Approximately $10.1 million of company’s investment at June 30, 2008 represents auction rate securities which are classified as long-term investments, as these securities have continued to fail auctions since February 2008.

Accounts payable, accrued expenses, and accrued compensation at June 30, 2008 was approximately $10.6 million, of which approximately $4 million was related to the completion and shutdown of the Sulonex clinical program in March 2008.

We expect our cash burn to be approximately $6 million to $8 million for the remaining six months of 2008 and intend to continue to focus our resources on creating value in our product portfolio.

I will now turn the call over to Michael.

Michael Weiss

Thanks, James, and good morning everybody. Let me begin by providing an update on both Zerenex and Perifosine programs, starting with the Zerenex. As previously mentioned in support of a planned Phase III program, the company has been conducting animal toxicity studies and a Phase II high-dose study looking at the safety of Zerenex in end stage renal disease patients at doses in excess of 6 grams per day, the highest dose tested in prior studies up to approximately 11 grams per day of Zerenex.

During the second quarter, we commenced enrollment into the high-dose Phase II study and enrolled approximately 35 patients in less than two months, considerably faster than expected.

We have currently suspended further enrollment into the study pending a protocol amendment designed to ensure even more patients reach the higher doses compensated in the study, for example, approximately 9 to 11 grams per day. Following the amendment, we expect to complete enrollment of an additional approximately 30 patients by year-end to complete the high-dose Phase II program also again by year-end as previously guided.

Just as a reminder, our Phase II high-dose program is a multicenter study being conducted by the Collaborative Study Group that's held in the US and Puerto Rico. With respect to the toxicity studies, the inline proportion of the both the 90-day rat and 16-week canine studies have been completed. We currently rate the results of the histopathology analysis which we expect before yearend.

Some additional notes on Zerenex. During the quarter, we continue to work with our partners, Japan Tobacco and Torii Pharmaceuticals to move Zerenex forward in Japan, another key market for Zerenex. In addition, during the quarter, we conducted our fist qualitative market research on Zerenex with nephrologists, payers, and patients, and we are very pleased with the reception that the Zerenex product profile received by these key potential customers for Zerenex.

Based on our market research, we believe there is potentially a significant role for Zerenex in this treatment of hyperphosphatemia in patients with end stage renal disease.

Now, let me turn to Perifosine. As we touched upon during our first quarter conference call in connection with the now complete restructuring, we had determined that it was in the best interest of the company to delay the commencement of the Perifosine Phase III clinical trial in renal cell carcinoma until additional data are accumulated and analysis from ongoing exploratory studies of Perifosine can be completed. We continue to recruit patients into our Renal Cell Carcinoma Phase II Studies and several other Phase II studies, in particular in patients with multi-myeloma, and we continue to evaluate the data as it becomes available to determine the best next steps for Perifosine.

I will note that we and our clinical investigators have been impressed with the effects of Perifosine in the treatment of patients with multi-myeloma in combination with the standard treatments for that disease, and we look forward to sharing more information about those study results with you later this year at the American Society of Hematology meeting.

In the meantime, we are currently exploring the design of a Phase III program in multi-myeloma as we await more results from the Phase II study as they mature in the coming months. Additionally, we remain interested in Waldenstrom and the renal cell carcinoma and will continue to explore potential next steps in those diseases as well.

So with that, let me just stop here and turn the call back over to the conference operator to begin the Q&A session.

Question-and-Answer Session

Operator

(Operator instructions) We’ll first hear from Jonathan Aschoff of Brean Murray.

Jonathan Aschoff – Brean Murray

Good morning, Mike.

Michael Weiss

Hey, good morning, Jonathan.

Jonathan Aschoff – Brean Murray

I was wondering how sort of the fishing is going, the fishing for maybe something else to in license, what’s it like out there now looking around?

Michael Weiss

There is actually good opportunities. We are trying to be careful and thoughtful about what we might bring in. More obviously, we are seeing good things – we believe we are seeing good things from Zerenex and Perifosine, so we want to be careful about what we are looking at. I think the environment is reasonably friendly at this point for in-licensing opportunities and even small acquisition. So we are being careful. We are looking – we do see opportunities, but we haven’t made any commitments.

Jonathan Aschoff – Brean Murray

But it's something as active as it would have been, let’s say, six months ago or so, or maybe like four of five months ago.

Michael Weiss

Yes, our program is very active.

Jonathan Aschoff – Brean Murray

Okay. Thanks a lot, Mike.

Michael Weiss

Thanks, Jonathan.

Operator

Matt Kaplan, Ladenburg Thalmann.

Matt Kaplan – Ladenburg Thalmann

Hi. Good morning, Mike.

Michael Weiss

Hi, good morning.

Matt Kaplan – Ladenburg Thalmann

Just a quick question on Zerenex, with the changing in the enrollment, when do you now expect to have some data for the Phase II High-Dose Study?

Michael Weiss

Yes, our plan I think was always to finish the study by yearend. So that hasn’t changed and our fingers are crossed to be able to get that data out mostly by NKF, and that’s the major conference into the New Year. So we hope to be able to show it there for whatever therapy, the study is designed as a safety study. So, what we should expect is primarily safety information coming out of the study and I hope that we can get that out in someway into NKF.

Matt Kaplan – Ladenburg Thalmann

Will you announce some of the results before the, I guess, top line results before the NKF meeting?

Michael Weiss

Certainly, I don't think it is announce-able but certainly in a conference call, we would talk about if there is any safety issue or concern, we would clearly raise it. As a safety study, they are not really top line results that we can share. I will only [ph] to say that we didn’t see any safety concerns, and we felt comfortable that we can get to the higher doses. So, to get that as top line data in some respect, right, since the primary objective of the study is, can we get to the higher doses safely? So having said it now to myself out loud, I think it’s more than likely that at some point even before NKF that we would at least discuss whether it's on this kind of call or even a presentation that we didn’t have any issues. If we have any issue, we'll certainly raise it quickly.

Matt Kaplan – Ladenburg Thalmann

Right. And then, one more final question, I guess with all the settlements that are going on recently with the auction rate securities and UBS and Citigroup and Merrill Lynch, any implications for the $10.1 million you have in auction rates?

Michael Weiss

Yes, and I think we're optimistic that something will happen with our auction rate notes. Unfortunately, I don’t think we have anything through any of the banks that have settled just yet. But I think we are feeling that there is something – something should break shortly on these things. We would hope and we've also pushed the dialog pretty aggressively with the folks at (inaudible).

Matt Kaplan – Ladenburg Thalmann

Great, thanks a lot.

Michael Weiss

Thanks, Matt.

Operator

Phil Nadeau, Cowen.

Phil Nadeau – Cowen and Co.

Good morning. Thanks for taking my questions. My first is on Perifosine. Could you give us a little bit more detail on when you could initiate a Phase III or what type of data events will allow you to make a go-no go decision on Phase III’s for either multiple myeloma or renal cancer?

Michael Weiss

So for multi-myeloma, we're finishing off our Phase II study in combination with Partuzimib [ph]. I think that’s probably the most important Phase II studies for us. We also have Phase II’s running, we have another Phase II running in combination with Revlimid, but the Partuzimib one is clearly in more advanced patients. They've already seen Partuzimibs of -- we think that that's probably the key study once we have the final results from that study. We think that could form the basis of a Phase III program. And so, that data will be maturing over the next several months and we'll be presenting that data at ASH.

Phil Nadeau – Cowen and Co.

Okay, great. That's helpful. In renal cancer, what will allow you to make a go-no go decision there?

Michael Weiss

Yes. We're still also recruiting. We have two studies ongoing, one looks at patients who have failed PKI and one study looks at patients who have failed PKIs and/or mTOR inhibitors. So we'd like to get a read on the activity into more advanced patients. We clearly – the original data that we presented were research and good response rate were in I won't say naive patients but they are patients who had PKI inhibitors yet.

Phil Nadeau – Cowen and Co.

Okay.

Michael Weiss

So we're trying to get engaged on the activity in a little bit more advanced patient population before we make a jump into a clinical program that would I think require us to be with more advance patients at this time based on the landscape in renal cell right now.

Phil Nadeau – Cowen and Co.

Great. And one last question, it seems like you have enough money for at least 12 to 18 months – maybe not a war chest, especially to do in-licensing, do you have any plans for financings?

Michael Weiss

We don’t have any current plans for financings. We are hoping to present some data. We think the next six months are important for both Perifosine and Zerenex. I think from the Zerenex standpoint, we're going to have answers to some of the safety issues to make sure that everything is clean, we can go to high doses, that there's no issues in the animal tox, and that should resolve itself over the next less than six months now sort of into the end of the year.

And same thing for Perifosine, we see some important information coming out which will carry us forward, also coming out before the end of the year. So we don’t want to do anything in advance of that. We'd like to get better information, let that be incorporated. We obviously think that trading in less than cash is not a good place to raise money. (inaudible) quite dramatically, as James mentioned, we think we're going to burn probably another 6 or 7 for the remainder of the year even without the auction rate securities that gets us a good way into next year. Once the auction rates are resolved, that would take us well into next year.

So, we have time. We don't want to rush it. I don’t think we're getting much value in the pipeline right now. I don’t think there is much interest right now in looking at Keryx. I think we are still in the penalty box [ph]. I think it's a long winded answer to say we don't have any current plans to raise capital.

Phil Nadeau – Cowen and Co.

Alright, that's helpful. Thank you.

Michael Weiss

Okay. Thanks, Phil.

Operator

That concludes the Q&A session for today. Mr. Weiss, I'll turn the conference back over to you for any additional or closing comments.

Michael Weiss

Great, thank you very much. I just wanted to thank everyone for joining us on the call, and of course if there are any follow-up questions, please don't hesitate to give us a call in the company. Have a nice day, bye.

Operator

That concludes today’s teleconference. Thank you all for your participation. You may now disconnect.

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