A Little Confidence Goes a Long Way

Investing in KeryxBiopharmaceuticals (NAS: KERX) just got a whole lot easier.

Valuing Keryx and its partner AeternaZentaris (NAS: AEZS) prior to the unveiling of phase 3 trial results testing perifosine in colon cancer was risky, because it was hard to handicap the likelihood of success given the limited phase 2 data. Keryx doesn't seem to have that problem with its next phase 3 drug candidate.

The trial for Zerenex isn't scheduled to wrap up until later this year, but there's substantially more evidence that the trial should work. This week Keryx said its Japanese partners, Japan Tobacco and Torii Pharmaceutical, successfully completed a phase 3 trial. Compared to Sanofi's (NYS: SNY) Renagel, Zerenex produced similar levels of serum phosphorus in hemodialysis patients with high levels of phosphate.

Success in Japan shouldn't be taken as a guarantee of success stateside, however, since the trials weren't designed the same way. The Japanese trial measured efficacy and safety over 12 weeks. Keryx's phase 3 trial in the U.S. has a 52-week safety component and a four-week efficacy component. The efficacy is being measured against a placebo, so even though it's over a shorter time frame, it shouldn't be that hard to show an effect.

Safety, on the other hand, will be measured against Renagel and Fresenius Medical Care's (NYS: FMS) PhosLo, and the longer time frame allows for more issues to crop up. It's a minor risk to keep in mind, but probably not worth worrying about.

Keryx, by the way, has a Special Protocol Assessment on the trial, so the FDA has already signed off on the trial design.

The bigger issue for Keryx comes once it gets the drug approved. Renagel will see generic competition in 2014. Unless Zerenex has some great advantage over Renagel, a vast majority of the patients are going to go with the cheap generic, making it difficult to capture patients.

In addition to giving investors a little more confidence that Zerenex will succeed in the U.S., the positive results in Japan could also help the balance sheet. Keryx is due up to another $72 million for milestone payments associated with Zerenex developed in Japan. That cash will come in handy considering that the company has said it has only enough cash to make it through filing the FDA marketing application.

While you're waiting for the Zerenex stateside trial data, take a look at what Fool analysts believe is the next rule-breaking multibagger. Get the free report by clicking here.

At the time thisarticle was published Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool has a disclosure policy.
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