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Biotech Stock Mailbag: Galectin, Keryx, Navidea, Cytori

Stocks in this article: GALT KERX NAVB AMRN CYTX

There's a chance Galectin wows us with phenomenal liver fibrosis data on GR-MD-02 in January, but the provenance of the drug and the company should make you wary.

No. I still believe investors are significantly under-estimating the risks involved with Keryx Pharmaceuticals (KERX). I'm not surprised to see Keryx shares higher following the release of the Zerenex pre-dialysis kidney disease data this week. Keryx today is where Amarin (AMRN) was 18 months ago before reality set in and the stock blew up. The two companies are very similar.

Keryx has weak intellectual property protection for Zerenex and isn't likely to receive the market exclusivity or patent term extensions it needs. These are important issues I wrote about last March and are still very much in play.

Keryx CEO Ron Bentsur has shifted his position and now insists he can market Zerenex on its own. What this tells me is partners are scared off by the patent and market exclusivity issues.

I told you, Keryx is Amarin redux.

Did you know Keryx isn't alone developing an iron-based phosphate binder? Vifor Pharma, a unit of Galenica Group, has already submitted its own iron-based phosphate binder PA21 for FDA approval. The expected approval decision date is Dec. 1.

PA21 was developed in partnership with Fresenius Medical Care, which controls about one-third of the kidney dialysis market. If PA21 is approved, Fresenius isn't likely to put its own iron-based phosphate binder on the shelf in favor of Zerenex. That leaves Keryx in the difficult position of negotiating with Davita (DVA), the other large dialysis service provider without much leverage.

Another interesting wrinkle: PA21 was designed specifically so the iron is not absorbed by the body, which means there is no effect on iron stores, hemoglobin or anemia. This is not a bug, but a feature of PA21.

Keryx will have you believe dialysis providers are clamoring for Zerenex because its iron is absorbed by the body and therefore has positive effects on hemoglobin and anemia and reduces utilization of IV irons.

Yet Fresenius chose PA21, even though Zerenex has been around forever.

Lastly, there's this week's study results in which Keryx re-packages Zerenex for kidney disease patients not yet on dialysis. A much larger commercial market than kidney dialysis. Now, Zerenex is no longer a phosphate binder, it's an alternative iron therapy! Why? Because FDA won't approve phosphate binders in non-dialysis kidney disease patients without positive outcomes data. Genzyme went down this route with its phosphate binder Renagel but failed. I see no reason to expect a better ending for Keryx and Zerenex.

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