Why Keryx is Lagging But Acadia is Zooming (Hint: It's About NCE)

KERX Chart KERX data by YCharts

BOSTON ( TheStreet) -- Something is ailing Keryx Biopharmaceuticals ( KERX) because the stock is significantly underperforming the rest of the booming biotech sector.

The chart above explains what I mean. Keryx shares (the blue line) are down almost 13% since the start of February while the Nasdaq Biotechnology Index (NBI in orange) is up more than 23%.

I used the beginning of February as the meaningful starting point to track Keryx's performance on purpose to exclude the upward spike in the stock's value on Jan. 28. That's the day Keryx released positive results from the long-term, phase III study of its kidney dialysis phosphate binder Zerenex. Over four trading days starting Jan. 28 through Jan. 31, Keryx's stock almost tripled in value -- a reaction biotech investors are accustomed to seeing on positive clinical trial results.

Since that four-day burst of buying activity, the value of Keryx shares is down 13%. Odd, particularly in the raging biotech bull market where even low-quality stocks are moving higher.

Keryx is still up more than 200% year to date, so I don't mean to suggest the stock is a total laggard. Just noting that after the initial buying surge in late January caused by the Zerenex data, investors have been avoiding the stock.

Why? A lot of factors might be working against Keryx but my best guess is investors lack confidence in the patent protection and market exclusivity for Zerenex. If Keryx has trouble defending its Zerenex patents and/or fails to obtain five years of market exclusivity as a New Chemical Entity (NCE) from the FDA, a Big Pharma partner or acquirer isn't likely to materialize. Investors aren't thrilled with the idea of Keryx selling Zerenex on its own, hence the stock's underperformance for most of this year.

In short, Keryx equals Amarin ( AMRN).

I'm not going to replay the bull-bear argument over Zerenex's patents and NCE status here. Keryx and its supporters believe the Zerenex patents are enforceable and Big Pharma interest in the new phosphate binder will be significant. Investors shorting Keryx believe otherwise.

Judging by the stock's performance this year, I'd say Keryx has more work to do clearing up worries about Zerenex's patents and potential for market exclusivity.

One more chart to look at. This one (on the next page) tracks the performance of Acadia Pharmaceuticals ( ACAD) since the end of November 2012, after the release of positive results from the phase III study of pimavanserin in Parkinson's psychosis.

^NBI Chart ^NBI data by YCharts

Unlike Keryx, Acadia's stock (the orange line) kept pace with the Nasdaq Biotech Index. In April, Acadia zoomed and has since outperformed the broader biotech sector. What happened in April? That's when Acadia announced plans to seek FDA approval for pimavanserin based on the phase III data in hand. Before this, it was thought Acadia would need to run another, confirmatory study before seeking FDA approval.

The big difference between Acadia and Keryx is there is no debate about the patents or market exclusivity for pimavanserin. The FDA is widely expected to grant pimavanserin five years of market exclusivity as an NCE, and with that designation and the patents, investors are more confident that Acadia can land a Big Pharma marketing partner or be acquired.

The lesson here: Patents and market exclusivity matter -- a lot. Acadia has both, Keryx and Amarin do not. The results are reflected in the performance of their respective stocks.

-- Reported by Adam Feuerstein in Boston.

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.