Keryx Biopharmaceuticals - baby steps towards giant success

Keryx Biopharmaceuticals (KERX), a NY-headquartered company, possesses a duo of mid/late-phase investigational new drug programs aiming to actualize the commercialization of a cancer-treating and a phosphate-binding drug. Backed by positive phase II efficacy data, FDA’s declaration of the Special Protocol Assessment (SPA), and solid funding, Keryx has the potential to soar in niche markets such as multiple myeloma and hyperphosphatemia. More importantly, the company actively extends its force into acquisition and in-licensing of advanced technologies to supplement its drug development efforts, thereby speeding up progress while trimming down cost before their products reach the pharmacy shelf.

Why multiple myeloma?

The evolution of the pharmaceutical industry over the past decade has resulted in increasing interest in multiple myeloma, a targeted niche market for smaller biotech start-ups whose primary goal is often to attain rapid approvals for orphan drug status through smaller, less-expensive trials. Once this is accomplished, the revenues that accompanied the sales of the approved products will enable companies to pursue more profitable cancer indications. Simply put, concentrating on niche markets such as multiple myeloma assists smaller companies to take baby, yet less-risky, steps towards gaining an entry ticket to the more rewarding and competitive pharmaceutical arena.

That said, multiple myeloma is, not at all, a trivial cancer indication. In fact, it is conceivably one of the most profitable niche tumor indications for novel treatments due to the large amount of drug in demand. The nature of myeloma, being a disseminated cancer, precludes the effectiveness of surgery and radiotherapy, and thus patients require drugs that travel in the blood throughout the body in order to survive. When taken consistently to maintain tumour remission, myeloma drugs allow patients to live for many years, and, for this reason, these drugs supply a wide population of patients that need them to stay alive.

What is multiple myeloma?

Multiple myeloma is a type of blood cancer characterized by the uncontrolled proliferation of B cells, a type of white blood cells responsible for the production of antibodies, constituting an important part of the immune system. The major symptoms of multiple myeloma include bone pain, increased risk of infection, renal failure, and anemia.

Current drugs on the market, although effective at high-dose, suffer from harsh toxicity that poses a limitation. Adding to this, patients ultimately face relapse and experience disease progression when forced to be taken off drugs to avoid fierce side effects. Consequently, drug therapies that offer a low toxicity profile can drastically improve the outcome of the patients by making long term remission possible with continuous dosing.

Why Keryx?

Keryx Biopharmaceuticals is currently testing the efficacy of their novel, potentially first-in-class, oral anti-cancer agent, KRX-0401 (perifosine), in a phase III trial, under the FDA’s Special Protocol Assessment (SPA), against multiple myeloma. With reduced toxicity, KRX-0401 blocks a key cell growth signalling event, the phosphoinositide 3-kinase (PI3K)/Akt pathway, preventing excess cell growth and cell transformation. The agent has demonstrated both safety and clinical efficacy in several tumor types, both as a single agent and in combination with novel therapies. The minimal toxicity and the convenient oral administration route make KRX-0401 suitable as a maintenance therapy post initial remission, warranting large-volume usage by a large patient group.

Outside of multiple myeloma, Keryx is also tapping into the swelling market of end-stage renal disease by developing an oral phosphate-reducing medication, Zerenex (ferric citrate). The drug, indicated for hyperphosphatemia (elevated circulating phosphate levels) in patients with end-stage renal disease, is currently expected to enter phase III trials, pending FDA’s SPA agreement. With dominating drugs, such as Genzyme’s Renagel and Renvela, expiring in 2014, Zerenex could be ripe just in time for the thirsty market.

As a growing company, Keryx also devotes their efforts in actively seeking strategic relationships for its product candidates and hunting down fitting compounds and companies for in-licensing or acquisition, ensuring the company’s competitiveness against other firms.

Summary

All investments in small biotech businesses come with potentially lucrative returns at the expense of immense risks. Keryx has surprised analysts by showing better-than-expected earnings per share (EPS) of ~200% averaged across the past 4 quarters. Currently, the company retains $33.68 million in cash/equivalents plus long-term investment securities, and approximately 56 million shares of common stock outstanding (70 million shares fully diluted) with no debt/convertibles. With a partnership in Japan with JT & Torii Pharmaceuticals, Keryx is expecting over $100 million in potential milestone payments and sales royalties upon the commercialization of Zerenex. Specifically, following the completion of the ongoing phase II study in Japan, the start of the phase III trial will bring in a development milestone payment during 2010.

Based on the promising results obtained thus far with both end-trial investigational new drugs, the debt-free balance sheet, and recommendation by several other analysts covering the company, it is time for strong acquisition of Keryx with anticipation of positive data from the drug trials in 2H11 for KRX-0401 (Perifosine) and 2H10/1H12 for Zerenex.

Gilead - source of healing during hurting economy

With 13 products on the market, 4000 employees worldwide, operating in more than 20 locations across the globe, Gilead Sciences (GILD) is well positioned as a dominating player in the HIV/AIDS drug market. The company, ranked #1 by BusinessWeek among the 50 best-performing companies in 2009 (up from #2 in the previous year), discovers easy treatments for patients and delivers outstanding returns for shareholders.

I know Gilead Sciences (GILD) is not a small-cap biotech. However, I can’t help but talk about it after reviewing the company’s recent stunning balance sheet that disclosed eye-catching earnings that will be of interest to many healthcare sector investors out there. Gilead was among the first companies to develop once-a-day tablets for HIV patients, eliminating the need to administer cocktails of medications through intravenous infusions with complex dosing schedules, thereby encouraging exposure and compliance to treatment. Because of this, approximately 8 out of 10 newly diagnosed HIV patients in the US today are initiated on Gilead’s drugs, which usually stay with the patients for years to come.

Less than two weeks ago, Gilead reported positive 4Q earnings with $2.03 billion in revenue, 42% more compared to last year’s figure, yielding $802.2 million in profit, or 87 cents per share, from $560 million, or 59 cents per share, thanks to strong sales of their HIV/AIDS drugs, Atripla, Truvada, and Viread, which grew 50, 19, and 10%, respectively, compared to 4Q2008. The company's announcement exceeded analysts’ expectation of a profit of 85 cents per share and $1.93 billion in revenue according to a Thomson Reuters estimate.


In addition to the HIV/AIDS market, the company also received income from their high blood pressure drug Letairis (44% increase to $52.2 million), and chest pain drug Ranexa ($46 million). Gilead will also be collecting royalty payments for Tamiflu, the first first neuraminidase inhibitor tablet for the treatment and prevention of flu, from Hoffmann-La Roche.

http://www.gilead.com/product_chart

As a whole in 2009, Gilead’s profit grew 33% to $2.64 billion, or $2.82 per share, from $1.98 billion, or $2.06 per share. Revenue rose 31%, to $7.01 billion from $5.34 billion.


In the US alone, 56,300 people were estimated to contract HIV infection in the year of 2006, and at present only about 50% of infected people are being treated. Gilead’s popular medications will continue to provide an easy and uncomplicated way to treat patients in this growing disease pool. Complementary to the core HIV/AIDS drug collection, the company also boasts a wide range of products specific for liver, cardiovascular, respiratory, and eye diseases, and has no shortage of drug candidates in clinical trials (4 in phase III, 8 in phase II, and 5 in phase I). These will ensure that, amid other giants, the company remains in the spotlight - one that investors should not miss.