The Biotech Model for Success: Is Keryx on Track?

Includes: KERX, VRX
by: Prohost Biotech

The biotechnology company model founded on management skills rather than purely on scientific skills has begun to gain investors’ appreciation. The reason is that many firms built around skilled, experienced entrepreneurs have succeeded in bringing a large number of drugs to the market and in marketing them competently. These firms license or acquire drugs in mid-or late-phase trials. They sometimes acquire therapeutic molecules in early-stage development only if these molecules prove to have optimal affinity on validated proteins in pathways of diseases, and produce desired agonist or antagonist effects. In order to select the products that can be called breakthroughs, the most successful of the firms established and run by entrepreneurs with strong business acumen employ specialists in pharmaceutical sciences and in clinical trials. These scientists have experience in sensitive areas such as drug development, clinical trials, medicinal chemistry, and other important disciplines required for drug discovery, development and testing.

Recently, Samuel Waksal, the former CEO of Imclone, has embarked on a new biotech venture based on this model. The firm he established, Kadmon Pharmaceuticals, which is described as a privately held company that focuses on next-generation drugs in the areas of oncology, infectious diseases, and immunology. Kadmon has already executed some transactions, including acquiring a company called Three Rivers Pharmaceuticals LLC, which is intended to serve as Kadmon's operational and commercial base. It also signed a development and commercialization agreement with Valeant Pharmaceuticals (NYSE:VRX), in addition to acquiring PhytoCeutica Inc., a firm that develops traditional Chinese medicine for the treatment of cancer.

Valeant agreement

On November 1, 2010, Kadmon signed two strategic agreements with Valeant Pharmaceuticals International for the development and commercialization of Valeant’s taribavirin and ribavirin for viral diseases, including hepatitis C virus. Kadmon was granted an exclusive, worldwide license to taribavirin, excluding the territory of Japan, in exchange for an upfront payment of $5 million, in addition to milestones, and royalty payments in the range of 8-12% of future net sales. Under a separate agreement, Valeant has paid Kadmon $7.5 million for exclusive rights to all Kadmon dosage forms of ribavirin, including 200mg, 400mg, and 600mg tablets and capsules, in Poland, Hungary, Czech Republic, Slovakia, Romania and Bulgaria. Valeant will source these products from Kadmon.

Three Rivers Pharmaceuticals Acquisition

One month later, on December 2, 2010, Kadmon finalized the acquisition of Three Rivers Pharmaceuticals, which is marketing Infergen, Ribasphere and RibaPak for hepatitis C and Amphotec, for systemic fungal infection and for malignancies. The firm also develops generic drugs. Not long after the acquisition, Three Rivers Pharmaceuticals received FDA approval for a generic version of GlaxoSmithKline's (NYSE:GSK) Hycamtin® (topotecan hydrochloride) 4 mg Injection for small cell lung cancer also used in combination with cisplatin for stage IV-B recurrent or persistent carcinoma of the cervix not amenable to curative treatment with surgery and/or radiation therapy.

Kadmon hopes to develop a new model for small biotech firms that allows them to focus on drug research and development without having to worry about raising money.

As we said before, the new model is not new. Many firms have adopted it and have proven successful in getting breakthrough drugs to the market. In the case of Kadmon, the acquisitions made to date have no breakthroughs yet, except potentially XL647, a drug developed by Exelixis (NASDAQ:EXEL), which we heard Kadmon might have gotten from the developer?! This drug has had good results in clinical trials on non-small cell lung cancer. So, what’s in Waksal’s mind?

If Dr. Waksal is serious in bringing drugs that provide unmet needs, our speculation would be that he acquired the Three Rivers Pharmaceuticals company and licensed Valeant’s drugs for strategic reasons and for the sake of generating early revenues to sustain the development of the breakthrough drugs. The generic products could be part of an expanding commercial platform supporting Kadmon's pipeline of pioneering, targeted medicines in oncology, infectious diseases, and immunology, as the firm has claimed. What remains is to see is what breakthrough drugs Kadmon experts will select that could generate the big bucks.

Long before Kadmon, the entrepreneurial model of biotech firms had attracted other entrepreneurs to form firms around it. Many have reached their goals and transformed into top-tier drug developers, while others are still in the development stage and yet to put a product on the market. From the latter group, a small firm called Keryx (NASDAQ:KERX) attracted our attention through recently announced good news about its two drugs, both in late-phase trials.


Keryx is a small biotech firm that focuses on cancer and kidney treatments. The firm got its products from outside sources. It took a long time to develop these two products, but it seems they will soon reach the finish line. The first good news is about its phosphate-binding product Zerenex™ (ferric citrate) for the treatment of elevated serum phosphorus levels (hyperphosphatemia) in patients with end-stage renal disease (ESRD) who are on dialysis. The product is an iron-based phosphate binder, which makes it different from the currently available phosphate binders.

ESRD patients on dialysis retain phosphate. This hyperphosphatemia is associated with secondary hyperparathyroidism, renal osteodystrophy, soft tissue mineralization, and progression of renal failure. To reduce serum phosphorus to acceptable levels, patients take phosphate-binding agents.

The old aluminum-based phosphate binders can cause aluminum toxicity and are no longer used. The calcium-type phosphate binders, which bind dietary phosphate, increase the risk of metastatic calcification in many patients, particularly those taking vitamin D analogs and those with adynamic bone disease. Non-calcium-based non-absorbed phosphate binders, including sevelamer products are the most prescribed phosphate-binders in the U.S. However, Sevelamer hydrochloride is associated with increased risk of metabolic acidosis, which has potentially severe consequences including coma and death. Sevelamer carbonate can affect concomitant vitamin K and vitamin D pharmacotherapy. Lanthanum-type phosphate binders seem to be relatively safe. Lanthanum is a rare earth element that is minimally absorbed from the gastrointestinal tract. The long-term adverse effects owing to accumulation of lanthanum in vital organs and tissues have not been clearly defined.

Keryx’ drug Zerenex met the primary endpoint in the Phase III short-term efficacy study component of phase 3 registration program of Zerenex. The results showed a highly statistically significant dose response (p<0.0001) in the change in serum phosphorus from baseline to Day 28 in the intention to treat (ITT) group of patients. The drug also met secondary endpoints with high statistical significance, including a dose response increase in serum bicarbonate, indicating the potential ability of Zerenex to manage metabolic acidosis. In other positive results, no clinically meaningful change in serum calcium was observed, which demonstrates a statistically significant dose response reduction in calcium-phosphorus products. Modest upward trends in ferritin and transferrin saturation levels were observed in the 6 grams/day and 8 grams/day dose groups, which suggests that Zerenex might reduce the need for intravenous iron supplements and/or erythropoiesis-stimulating agents (ESA) in dialysis patients (IV iron and ESA use is being evaluated in the ongoing Phase III long-term study). If reductions in their use are confirmed, Keryx believes this additional benefit would significantly expand Zerenex' market potential. Zerenex appeared to be safe and well tolerated in the study, with only 6% in the ITT group dropping out of the study. Full efficacy and safety data from the study will be presented at a future medical conference.

A Targeted Small Molecular Weight Cancer Drug

Keryx’ pipeline includes an oral cancer drug KRX-0401 (perifosine) that inhibits Akt activation in the phosphoinositide 3-kinase (PI3K) pathway, and it seems also to inhibit the JNK pathway that affects cell growth, cell differentiation, and cell survival. KRX-0401 has demonstrated both safety and clinical efficacy in several tumor types, both as a single agent and in combination with novel therapies. The drug is currently in Phase III clinical development for both refractory advanced colorectal cancer and multiple myeloma, and in Phase I and II clinical development for several other tumor types, including relapsed or refractory chronic lymphocytic leukemia.

Phase III studies with KRX-0401 are being conducted under a Special Protocol Assessment agreement with the FDA. Keryx announced a poster presentation on the drug has been selected for the upcoming 52nd Annual Meeting of the American Society of Hematology in Orlando, Florida from December 4-7, 2010.


With regard to the Keryx’ Zerenex for ESRD, we believe more homework is needed to assess possible long-term side effects. As for the cancer drug KRX 0401, the target has recently been validated. We will continue to study and evaluate the drug’s previous clinical trial results. We hope that future results confirm the safety and efficacy of the molecules.

Zerenex is well positioned to potentially become market leader in the $1.5 billion, rapidly growing market. There is legitimate reason for enthusiasm for Keryx’ drug Zerenex. This is especially true as the Phase III trial results have demonstrated that the drug does not cause the same side effects and toxicities associated with the currently available phosphate binders.

Disclosure: No position