Keryx ($KERX) Milestone Payment Nears As Torii Readies Zerenex for Phase III
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Keryx Biopharmaceuticals, Inc. (Nasdaq: KERX, Twitter $KERX) has been best known for its anti-cancer drug perifosine, now in Phase III clinical development. Less known, and with considerable potential profitability for Keryx, is its anti-hyperphosphatemia drug Zerenex. Zerenex is intended to treat end-stage renal disease by preventing formation of phosphates. In the USA, under Keryx's guidance, Zerenex is already in Phase III trials.
Massive Japan Tobacco, Inc., through its subsidiary Torii Pharmaceutical, licensed Zerenex from Keryx for development and sale in Japan. Under terms of that agreement, Keryx is entitled to potentially receive more than $100 million in royalties and milestone payments. A key milestone is marked by Zerenex's entry (in Japan) into Phase III trials, an event which appears imminent. That deal has been percolating since September 2007 and appears about to bear fruit for Keryx.
In addition, there's more to this than at first meets the eye. It has to do with Keryx's choice of strategic Japanese partner and the potential effects of milestone payments.
Torii Pharmaceutical is an experienced player in Japan's regulatory drug-licensing thicket. The backing of Japan's tobacco giant JT certainly helps too. In 2003, Torii acquired Japanese marketing rights from American company Gilead Sciences, Inc. to a pair of anti-HIV drugs, Emtriva and Truvada. Truvada is a combination of Gilead's Emtriva and Viread drugs. In less than two years, Torii whisked through regulatory hurdles and got approval to begin marketing the drugs in March of 2005. This kind of skill is a good sign for early approval of Keryx's Zerenex and the milestone payments that go with it.
Although merely entering Phase III trials in Japan isn't the same as final approval, milestone payments can help support and lift Keryx's share price. By having large amounts of cash in hand, Keryx will be able to avoid the painful processes sometimes borne by drug development companies in need of operational funds for ongoing development. Such processes often involve dilution in some form or other. Add to this the psychological boost that a milestone payment can provide to investors and it's a match made in heaven, so to speak.
Zerenex, Keryx's anti-hyperphosphatemia drug, is chemically known as ferric citrate. Its stated mechanism of action is to bind with phosphate radicals to render them biologically unavailable. All subjects of its Phase III trial are dialysis patients and interim reports have been excellent.
Keryx's oral anti-cancer drug perifosine, also a potentially massive profit-center, is aimed principally at colo-rectal cancers and multiple myelomas. It's considered by some researchers to be a seminal drug, due to its uniqueness in inhibiting Akt activation in certain biological pathways related to cell growth, differentiation, and programmed cell death (apoptosis), all important issues in cancer research and treatment. One of the Akt genes, Akt-1, prevents apoptosis in cells and therefore has a key role in extending the life-cycle of cancer cells. So by inhibiting Akt-1, cancer cells can be permitted to die.
For the past year, Keryx shares have been largely immune to the violent downside swings characteristic of some other biotechs, staying roughly in the $3.50 to $6 range throughout. Its downward moves, when they have come, have been modest and temperate, no more than about 30 cents in any one day from open to close, allowing investors plenty of time to make decisions. March, with the exception of a few days, has seen a steady upward climb to a price in excess of $5.00 as of today’s trading.
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