Keryx is an emerging pharmaceutical company headquartered in New York.  It’s not an innovator company, instead Keryx acquires pharmaceutical products, then develops and commercializes them.  The company has had a rocky few years, but recently, the news has improved for Keryx.

Keryx is an emerging pharmaceutical company based in New York City.  The company is virtual in that it appears to have minimal internal capabilities outsourcing its activities to third party CROs and CMOs instead.  The company has two clinical programs, discussed in a moment, Zerenex (ferric citrate) for patients in end-stage renal disease and perifosine (KRX-0401) undergoing two phase III trials, one for multiple myeloma and another for colorectal cancer.  Additionally, perifosine is in some other phase II trials for various cancers.

The company enjoyed revenues of $25 million in 2009 with net income of over $10 million.  No revenues were reported in either of the last two quarters.  The company has a relatively healthy balance sheet with assets of $40 million and little long-term debt.  The company had negative cash flow of over $3.5 million in the most recent quarter.

Zerenex

Zerenex is an oral compound, ferric citrate, that binds phosphate.  As kidney failure progresses, various toxins amass in the blood stream; there are various ways to fight this problem.  A tablet which allows the absorption of ferric citrate into the bloodstream is a simple solution.  The company is currently engaged in a phase III clinical trial under a Special Protocol Assessment (see the glossary) with the FDA on January 5, 2010.  The implication of this agreement being that if safety and efficacy are demonstrated as well as a positive risk/benefit assessment, then the clinical trial is sufficient to realize marketing approval for the drug.  Interestingly, I haven’t been able to find mention of this NDA on the FDA website, which isn’t a concern.  The company announced a registration program for the trial on May 6.  Here’s the link to that trial:

http://www.clinicaltrials.gov/ct2/show/NCT01074125?term=keryx&rank=11

Perifosine

Perifosine (octadecyl-(N,N-dimethylpiperidino-4-yl)phosphate) is a small molecule drug active, it appears, against different cancers.  The molecule appears to characteristics of a cellular membrane causing inhibition of cell growth.  There are currently seven, ongoing clinical trials with this API.  The mechanism of action of this drug is such that it could play a role in a great many different cancers.

The company reported that in its extensive clinical trials the drug doesn’t seem to induce the side effects seen in many competing therapies.  The company has an ongoing phase III trial in refractory multiple myeloma.  The FDA has given both Orphan Drug and Fast Track status for this indication.  Last April, registration started on a phase III trial for colorectal cancer.  Additionally, there is a phase I/II trial for recurrent or progressive malignant glioma; a phase II trial in small lymphocytic lymphoma; a phase I trial in various forms of leukemia; and two phase I trials in the area of solid tumors.

For Keryx, renal failure is a good market, but it’s not going to drive the company to the next level; Keryx must be successful in the cancer market.  To date, indications are very positive for KRX-0401, but the true test of any drug is the phase III trial.  It’s impossible to predict the outcome.  Many promising drugs have crashed and burned in the clinic.

While its challenging enough trying to decipher the science, one also has to divine human behavior and determine what the masses are going to do with Keryx.  It looks to me as if Zerenex could get approved.  If it doesn’t, I don’t see it as being a good, but not great drug.  In fact, approval could be an anticlimax; it could be even better for the average investor if the FDA turns the drug down.  We have to wait first for the results of the ongoing trial, then the verdict of the FDA.  If the trial results are good, then I think there’s a ninety percent chance that the FDA will approve the drug.  The next thing to watch will be the clinical trial results, then the FDA filing for KRX-0401.

At the current level, based on the financials alone, KERX seems overpriced to me.  I am inclined to wait, hoping that the stock might retrench to the $3 range before splurging on this company.  Every drug that I have ever seen has some sort of glitch or hiccup in the approval process.  It’s very rare to see a drug go through all the steps unscathed.  I’d expect Keryx to enjoy a similar experience.  The investigational drugs that this company has, particularly those targeting cancer, look good; if they continue towards approval, they have the potential to generate at least $300 to $500 million each.

For now, I am putting Keryx on my watch list.  If the stock price retreats, I will move in; I need more news.