Anyone following the Keryx Biopharm saga has got to be amazed at how fast the prospective fortunes of a company can change with the Wall Street winds. Before April Fools Day fittingly, Keryx (NASDAQ:KERX) shares were seemingly headed " to the moon", at least in the raucous world of The Yahoo Finance Message Boards and the Twittersphere. Then, on April 2, Keryx announced that one of it's treatments in Phase III FDA Trials had failed to achieve statistical significance in over all survival against the already approved drug and suddenly, Keryx, at least in the virtual world, had become a stock pariah …destined for the trash heap.
Was Keryx( a Biopharmaceutical company focused on the acquisition, development and commercialization of medically important pharmaceutical products for the treatment of life-threatening diseases, including cancer and renal disease) ever headed to the moon? I don't think so. Is it headed to the trash heap? Not yet anyway. With $32M in the coffers, potential millions of dollars in milestone payments coming from Japanese Partner JT Torii, and another Phase III drug with SPA that even Keryx detractors admit will likely gain approval due to finish it's trial in October, it is premature at the very least to believe Keryx is headed to the graveyard.
What do we make of all the virtual world's hyping and hacking of this small cap biotech? I believe we are witnessing another example of the Wall Street Culture taking it's 10 pounds of flesh out of the poor, little retail " muppets." They work together, these "professionals", to drive expectations of a company. They pump when they are looking to short and then bash when they are looking to buy. I believe Keryx offers the perfect illustration of this culture of sleazy greed which has taken over the investing world and scared most of the investing public out of the market all together.
Exhibit 1.) Perifosine looked like it was going to be a successful treatment in Metastatic Colon Cancer but in reality it was a long shot. This indication is full of desperately ill people and the drug fell short, just like dozens before it developed by some of the largest drug companies in the world. Twitter, Yahoo, and many other forums (this one included) supplied the platform for bulls and bears to hype, batter, and advertise Keryx's attempt to bring a new treatment to desperate people. The result, a PPS run up driven by a long shot drug that was taken advantage of by the Wall Street Sharks, who were shorting it all the way up, judging by the short share figures. All verifiable public knowledge was pointing to a possible, successful outcome for Perifosine on March 31… and on April 2, it was a complete failure. The stock price plummeted. Unrelenting virtual world bashing intensified and continues today. Many long time retail holders who purchased at higher prices sold, taking the loss. The insecure stock pickers who did not hold have been shaken in their beliefs that the stock market is an honest place. This brings me to exhibit 2.
Exhibit 2.) Zerenex is a treatment for Hyperphosphatemia, a condition which occurs in the blood of dialysis patients and which causes a great deal of harm to those unfortunate people suffering from renal failure. Zerenex, judging by past trials should demonstrate significant advantages over existing treatments in pill burden, safety, acidosis, and iron retention in a worldwide $1.5B growing market. Clinicaltrials.gov clinicaltrials.gov/ct2/show/NCT01554982already has the Zerenex safety extension trial scheduled, so it does look as though approval is in the cards, but many retail longs who purchased Keryx during the " irrationally exuberant" run up have sold at a loss to…you guessed it, The Wall Street Sharks. The Sharks have scooped up the Keryx shares at rock bottom prices at the rate of millions of shares. The retail investors who did not hold were sucked in, fleeced, and then scared out before any payoff. The Sharks will be the owners of Keryx as it heads into potential Zerenex approval, a much better bet than Perifosine was.
What can a retail investor do? Research your investing ideas. Trust your instincts. Write your government representatives and complain about the Wall Street Culture and the non-taxation of Hedge Funds. Stand your ground and to paraphrase the late actor Peter Finch in the movie "Network"," turn off your computers. Turn them off right now! Turn them off in the middle of this sentence!"
One more point I've been thinking about. Many people have questioned Keryx's CEO Benstur's handling of the release of the XPect Trial data. It came out of the blue, seemingly without warning catching even Keryx's Perifosine partner AEterna Zentaris's management by surprise. I believe Keryx's actions were an attempt to protect shareholders. Crazy idea, huh? Think about it. The hype was building. The share price was rising steadily. If another week or two had gone by, the PPS might have been $10/share or more. I believe Keryx released the over all survival numbers immediately upon discovery of their failure to stop the run up before more damage to people's finances had occurred. It feels pretty bad to see the share price at $1.40 when you bought at $5. Picture your reaction if you bought at $10.
All of the musings in this post are the opinion of this little ol' retail investor and should be taken with a large grain of salt….and a tequila with lime.
Disclosure: I am long KERX.
Additional disclosure: I am a self managed, retail investor and as such I am no better informed than a mushroom. Kept in the dark and fed...you know how it goes.