•Our readers will be well-aware of our interest in KERX (+200% since we our first report) and its phosphate binder Zerenex. Despite much speculation to the contrary, we don’t believe that Zerenex will face exclusivity issues, and Zerenex’s impressive anemia benefits suggest it will seize a significant portion of the phosphate binder market. Nevertheless, these concerns pressured the stock 13% lower by Friday’s close.
"When one thinks about the value of a drug product, understanding the macroeconomics of what alternative treatments cost, as well as the costs of a patient's poor quality of life or lack of productivity, are typically considered. In the case of Zerenex, Keryx's drug is expected to directly save a substantial amount of money in the dialysis setting given its ability to spare IV iron and erythropoetin stimulating agent (ESA) use, on top of the drug's phosphate binding benefits. With a demonstrated ability to reduce IV iron use by ~52% and ESA treatments by ~27%, $560 million and $2.7 billion markets in the U.S., respectively, the savings to the U.S. healthcare system alone is estimated at $1.02 billion annually. With a market cap of less than $500 million, we note that KERX trades substantially below the long-term dollar benefit that Zerenex will create for the healthcare system in the U.S. and abroad."
" Zerenex has shown to produce significant absorption of iron, because of the company's unique formulation. Megadoses of other iron formulations have been given to patients before, and iron absorption similar to Zerenex has never been achieved. This is actually a key reason to own KERX, and demonstrates the company's unique patent-protected formulation."
"the FDA granted the company a special protocol assessment (SPA), and given the very impressive results, Zerenex is heading for approval."
"Zerenex's clinical data was superb, and this drug will not be the subject of a very large outcomes trial that could derail the long-term prospects, like Vascepa. The big risk/reward for Zerenex will be a potential indication in the broad CKD (chronic kidney disease) population, and management may have to decide how much value it will have to leave on the table to get a deal done. Most importantly, a CKD indication is all upside to the story at the stock's current level. Perhaps a CVR can apply to this situation, and KERX may pull it off."
"KERX has two weapons against early generic competition: potential for both NCE designation and patent-term extension (PTE) for the '706 patent. While many, including some bullish analysts on KERX, have chosen to focus on the company's ability to obtain NCE status for Zerenex, we continue to be more focused on the high likelihood of the company getting PTE (see prior article); this would extend U.S. exclusivity protection out to 2022. Given that the '706 patent is solid, includes composition of matter claims, and if extended, would protect Zerenex from generic competition for 3 more years than NCE designation, it's important for investors to know that NCE status is not a must-have for a potential acquirer to buy KERX."