This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Biotech Stock Mailbag: Enteromedics, ARCA Biopharma, Keryx Pharma

While we were feasting on turkey and mashed potatoes last week, the FDA approved Velphoro (PA21), a competing iron-based phosphate binder developed under a joint venture between Galenica and Fresenius Medical Care (FMS - Get Report).

I'll give you five reasons why Velphoro's approval is a negative for Keryx and Zerenex. You're free to ignore these risks now but remember where you heard them when they're realized.

1. The FDA approved Velphoro but did not grant the drug marketing exclusivity as a new chemical entity (NCE) because its active ingredient (moiety) is ferric iron, which is already the active ingredient in drugs previously approved by FDA. [A Galenica spokesperson confirmed no Velphoro NCE.] The active ingredient in Keryx's Zerenex is ferric citrate, which is chemically identical to ferric iron.

If FDA didn't grant NCE status to Velphoro, Zerenex won't get the NCE designation either. Without NCE and burdened by weak patents, Keryx won't find a marketing partner for Zerenex. Sounds a lot like Amarin, doesn't it?

2. Velphoro is a chewable tablet taken three times a day by kidney dialysis patients (at each meal.) Currently approved phosphate binders require patients to swallow up to 12 pills per day. A daily dose of Zerenex is 6-9 pills. Compliance i.e. making sure patients take their phosphate binders is a big problem. Doctors and patients will favor the convenience of Velphoro, which also works just as well as Sanofi's Renagel, the current market leader among phosphate binders.

3. Fresenius gets 45% of the profits from Velphoro. Fresenius controls one-third of the dialysis treatment market in the U.S. Which phosphate binder do you think Fresenius will use in its dialysis clinics? Hint: It won't be Zerenex.

4. Keryx claims Zerenex (unlike Velphoro) will reduce the use of IV iron and EPO thereby saving dialysis clinics money. Perhaps, but keep in mind Davita and Fresenius, which control two-thirds of the dialysis market, already receive discounts on EPO, which would cut into the cost savings from Zerenex. And biosimilar EPO is coming to the U.S. as early as next year, which will further cut costs. In 2016, the Medicare "bundle" will include oral drugs like phosphate binders for the first time, again reducing the demand for premium priced products like Zerenex. [Velphoro might be okay because, again, Fresenius derives profits from the drug's use.]

5. Lastly, think about this: Fresenius is the world's largest dialysis treatment provider, which I'd say makes the company an unequaled expert in the field and its economics. Interesting, then, that Fresenius chose to develop an iron-based phosphate binder -- Velphoro -- which does not have an effect on IV iron or EPO use. Zerenex and its iron-boosting data have been around for years. I'm sure Keryx CEO Ron Bentsur would have gladly hooked up with Fresenius had the phone rang. Yet Keryx remains all alone with Zerenex while Fresenius -- dialysis experts -- move forward with Velphoro.

I keep coming back to the Keryx-as-Amarin analogy because it's so fitting. Amarin bulls scoffed at all the Vascepa risks before approval. How many times did we hear Amarin bulls insist, "NCE doesn't matter! Our patents will make Vascepa a blockbuster!" We know what happened to Amarin. Ignoring the Vascepa risks worked for awhile but in the end, the strategy was financially ruinous.

Keryx is driving down the same road.

-- Reported by Adam Feuerstein in Boston.  

Follow Adam Feuerstein on Twitter.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
ABIO $0.77 0.00%
ETRM $1.11 0.00%
FMS $43.22 0.00%
KERX $10.33 0.00%
VVUS $2.53 0.00%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs