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.
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