Rodman and Renshaw update on $KERX

Perifosine Strikes Out – Zerenex at Bat – A Potential Home Run Opportunity

Rodman and Renshaw update on KERX (PDF)
 
Summary: X-PECT Trial Fails to Meet Primary Endpoint – Removing All Perifosine Revenues from Model Today, Keryx announced that the Phase 3 X-PECT trial for the treatment of metastatic colorectal cancer failed to meet its primary endpoint of overall survival (OS). During the conference call, management elaborated that the median OS observed in the control arm of capecitabine + placebo was significantly higher than any other historical control treatment investigated in other randomized trials for the similar patient population. Additionally, further analysis revealed no benefit of perifosine + capecitabine treatment in the KRAS wild type or mutant population, or any other subgroup of patients. No further details regarding the difference in the survival between the treatment and the control arm, or the toxicities related to the treatment were provided. The management further indicated that given the failure of the X-PECT trial, the recruitment in the Phase 3 multiple myeloma trial may be affected, and the company is contemplating whether to continue the Phase 3 trial of perifosine with Velcade and dexamethasone in relapsed / refractory multiple myeloma patients. In our opinion, the company will likely shut down all clinical programs involving perifosine in an effort to conserve cash.
 
Phase 3 Zerenex Trial for Hyperphosphatemia to Report in 4Q12 During the call, the management also reminded investors about the ongoing Phase 3 trial evaluating Zerenex for the treatment of hyperphosphatemia in end-stage renal disease (ESRD) patients. Keryx is conducting a 58-week long-term, multicenter, randomized, open-label, safety and efficacy Phase 3 trial evaluating Zerenex, a phosphate binder, in 440 patients with ESRD on dialysis. During the call today, management reiterated that the data from the Phase 3 trial is expected to be available in 4Q12, with potential filing of the NDA and MAA in 1H13. In our opinion, the long-term study of Zerenex has a higher than average likelihood to succeed given that the short-term Phase 3 trial of Zerenex in ESRD patients met its primary endpoint of demonstrating a dose response in the change of serum phosphorous from baseline to day 28 (p-value < 0.0001). Of additional significance, Zerenex may reveal additional benefits in combating anemia if the Phase 3 data demonstrate a reduced need for intravenous and/or EPO blood cell stimulating drugs such as Procrit, Epogen and Aranesp.
 
Zerenex Market Potential We would like to remind investors that the US market for phosphate binders in the dialysis setting is approximately $700 MM and worldwide the market is approximately $1.2 BN. The 25% year-over-year growth in the phosphate binding market over the past 5 years has been driven by an increased incidence of dialysis with a growing diabetic population, as well price increases from market leader Genzyme for Renagel and Renvela. We believe that Zerenex has the potential to address the deficiencies among marketed phosphate binders, and capture 14% of the hyperphosphatemia market, corresponding to peak US revenues of approximately $250 MM by 2018, if successful.
 
Quick Take We are reiterating our Market Outperform / Speculative Risk rating but lowering our target price of $8 to $3 based on a discounted 2015 revenues and earnings multiples analysis. In our opinion, the failure of perifosine is a temporary setback, and provides an opportunity to a value-oriented investor to invest in the potential of the Zerenex franchise. The potential cost-savings benefit, combined with previous efficacy data, makes Zerenex an attractive treatment option in the approximately $700 MM U.S. market for agents that lower phosphate in ESRD patients on dialysis. We believe that Keryx represents a significantly undervalued and underappreciated company and is potentially suitable for the risk-oriented investor.

Comments

[colon help]

It is my experience that those who have not complied with a strict diet are also those who imagine that the psychological rewards could offset the inconvenience of the diet. I’m sure there are isolated cases such as you suggest, but most such individuals would quickly be dissuaded by the many inconveniences associated with dietary avoidance.