A potential blockbuster

Keryx (KERX) has just got a drug approved, called ferric citrate. It treats hyperphosphatemia (or high phosphate levels) in patients with chronic kidney disease who are on dialysis. These are very sick patients, who often end up with bone disease, vascular calcification, cardiovascular disease  that could lead to early death. For dialysis patients alone, it would be in the $250 million to $500 million range, which is big for a biotech as small as Keryx. So you would think KERX should soar following the FDA approval news a few weeks ago. Wrong, the stock got crashed by 11% on that day and continued in the following weeks. On one hand, it is a typical Wall Street behavior to buy the rumors and sell the news. There is another wrinkle in this case. Investors were kind of spooked by the “unexpected” finding that there is a warning in the product label that the iron levels have to be monitored during treatment. Is this really unexpected? Not at all in my book. Almost any drugs on the market will include some sort of warning & precautions since no drug is side effect free. I really don’t think this is a big deal and oftentimes the company can use the label information as the marketing means to approach physicians. In my mind, this is again a typical Wall Street overreaction! There is even another huge potential not many people understand, which may turn Keryx into another very profitable and successful biotech company. KERX is working on to expand its indication into pre-dialysis patients with chronic renal failure. This is really an extremely big market and if successful, this drug may bring in over $1 billion for KERX, a truly blockbuster product.

If you are willing to take some risk and have a long-term horizon, I think the current weakness of KREX is a great opportunity!