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Keryx Biopharmaceuticals Inc. Message Board

  • rob_cos rob_cos Feb 15, 2013 4:12 PM Flag

    Feb 4 Brean Capital rpt...."Zerenex Is A NCE Protectable Through 2022 In The U.S. And 2024 In The E.U....Price Target $15"

    Brean Capital, LLC. Equity Research



    Keryx Biopharmaceuticals, Inc.

    February 4, 2013

    Buy

    PT: $15.00

    Zerenex Is A NCE Protectable Through 2022 In The U.S. And 2024 In The E.U.



    Investment Summary

    Shares of Keryx took a 22% hit Friday due to a combination of published opinions that we strongly consider to be exaggerated concerns and flat out misinformation. The net result of Friday’s new chemical entity (NCE) concern, the more impactful of the two pieces promoting a cautious approach to investing in Keryx, is that Zerenex was described as being at a real risk of having indefensible patents, which therefore would

    have afforded the drug only a maximum U.S. market exclusivity of 3 years under Hatch Waxman. We, however, strongly believe that Zerenex is a NCE and that the composition of matter patent expiring in 2017 is valid and extendable by 5 years under Hatch Waxman, as well as protected for at least a decade in the E.U. under any circumstance. According to the original FerriSeltz NDA, as well as the Code of Federal Regulations, the FerriSeltz API (ferric ammonium citrate (FAC)) is chemically distinct from Zerenex (ferric

    citrate). Zerenex is protected by several patents and patent applications. Three issued U.S. patents, expiring in 2017, 2024 and 2026 (exclusive of patent term extension), include composition claims, as well as method of use claims, which we believe would be hard for a generic company to get around. We are conservatively only assuming that the composition of matter patent expiring in 2017 keeps completion at bay, but are additionally confident that Zerenex is eligible for the 5 years of patent term extension afforded by the Hatch Waxman Act.

    Discussion

    Shares of Keryx took a 22% hit Friday due to a combination of published opinions that we strongly consider to be exaggerated concerns and flat out misinformation. The net result of Friday’s new chemical entity (NCE) concern, the more impactful of the two pieces promoting a cautious approach to investing in Keryx, is that Zerenex was described as being at a real risk of having indefensible patents, which therefore would have afforded the drug only a maximum U.S. market exclusivity of 3 years under Hatch Waxman. We, however, strongly believe that Zerenex is a NCE and that the composition of matter patent expiring in 2017 is valid and extendable by 5 years under Hatch Waxman, as well as protected for at least a decade in the E.U. under any circumstance.

    Salt, ester, neither?...we confidently say neither.

    According to the original FerriSeltz NDA (October 14, 1997) and the FerriSeltz NDA, as well as what is published in the Code of Federal Regulations, the FerriSeltz API (ferric ammonium citrate (FAC)) is chemically distinct from Zerenex (ferric citrate) and not simply a salt or ester of Zerenex. This distinction as a NCE allows

    for new chemical entity exclusivity and/or patent term extension for Zerenex. FerriSeltz, is FDA approved for adults undergoing T1-weighted MRI to enhance the delineation of the bowel from nearby tissues. FerriSeltz is one (the “Brown Form”; (CAS Reg. No. 1332-98-5)) of two chemically distinct forms of FAC having a unique elemental composition and distinct physiochemical properties from the other form. According to the Code of Federal Regulations (21 CFR 184.1296), the Brown Form of FAC is a complex salt of undetermined structure and occurs as reddish-brown or garnet red scales or granules or as a brownish-yellow powder with a molecular composition of approximately 9% ammonia, 16.5%-18.5% iron, and 65% citric acid. Additionally, according to the FerriSeltz label, FAC has an average stoichiometric formula of FeCit1.1(NH+4)1.6(OX)2, an elemental formula of C6.6H12.8FeN1.6O9.7, and exists as a large, polymeric coordination complex of undetermined structure and undetermined molecular weight. Its iron content of 17.2% is theoretical. Zerenex (ferric citrate) is distinct from both forms of FAC in its composition of elemental iron (elemental iron is the primary active moiety of both pharmaceutical agents) and is therefore fundamentally distinct from both forms of FAC. More specifically, according to the Code of Federal Regulations (21 CFR 184.1298), ferric citrate has a molecular formula of C6H5FeO7 and has an indefinite ratio of citric acid and iron. CAS Reg. No. 2338-05-8 (iron (III) citrate tribasic monohydrate) specifies that the iron content of ferric citrate is 18%-20% (by contrast to the 16.5%-18.5% iron content of FerriSeltz. Since the average iron content of ferric citrate is 19% and the same for FerriSeltz is 17.5%, a molecule with 8.6% higher iron content (i.e., ferric citrate) would be characterized as a distinct molecular entity.

    Well protectable through 2022 in the U.S. and through 2024 in the E.U.

    Zerenex is protected by several families of patents and patent applications. Three issued U.S. patents (USPTO 5,753,706, 8,338,642, 8,299,298), expiring in 2017, 2024 and 2026, respectively (exclusive of patent term extension), include composition claims (5,753,706), as well as method of use claims, which we believe would be hard for a generic company to get around. We are conservatively only assuming that the composition of matter patent expiring in 2017 keeps completion at bay, but are additionally confident that Zerenex is eligible for the 5 years of patent term extension afforded by the Hatch Waxman Act. We are not even counting on the other two issued patents to add additional protection, despite the fact that they offer some useful barriers to entry. These two patents cover surface area and intrinsic dissolution. More specifically, the surface area protection blocks any ferric citrate of high (i.e., useful

    for binding phosphate) concentration because they cover ferric citrate having a BET (BET stands for the last name initials of 3 scientists) active surface area greater than 16 m2/g and/or an intrinsic dissolution rate of 1.88-4.0 mg/cm2/min. Zerenex is up around 38-40 m2/g and comfortably within the 1.88-4 mg/cm2/min, whereas nutrition supplements are about 2 mg2/g and 0.02 mg/cm2/min. The patents therefore force competing forms of ferric citrate (once the 2017 patent expires and runs out of extension) to be of a lower concentration that would require more pills in a pill burden sensitive indication. At present, the ferrous sulphate and ferrous gluconate forms of iron available at

    nutrition supplement stores would require about 60 pills per day, likely cause severe constipation, and need to be taken on an empty stomach (the last point being completely inconsistent with timing a dose to optimize phosphate binding). Regarding intrinsic dissolution, the Zerenex API can be 85% dissolved within 1 hour at the appropriate test conditions whereas taking nutrition supplement iron and concentrating it would essentially result in an insoluble rock, uselessly bioavailable.

    Other recently filed patent applications relate to drug product formulation, clinical data (like the recent ESRD data, filed 1Q13), and the use in CKD (filed in 2H12). Importantly, regardless of any patent litigation outcome, Zerenex will automatically receive 10 years (possibly 11 years) of marketing exclusivity in the E.U. under the Data Exclusivity Directive, since Keryx is required to submit a full MAA in Europe.

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