Shares of Keryx Biopharmaceuticals (NASDAQ: KERX ) have nearly quadrupled this year after the company reported that its chronic kidney disease, or CKD, drug met all primary and secondary endpoints in a critical phase 3 trial. Perhaps critical is an understatement: Zerenex is the company's lone drug in development or otherwise. That made events surrounding its development the primary driving force in 2013.
Not surprisingly, Zerenex developments will be the driving force for Keryx in 2014 as well. It may not seem like a company with one drug candidate would be that exciting, but there is plenty to be on the lookout for next year. Will approval from the United States Food and Drug Administration and European Medicines Agency tank sales of competing phosphate binders from companies such as Sanofi (NYSE: SNY ) ? Or perhaps even lead to a buyout from a company such as Amgen (NASDAQ: AMGN ) , which is a well-positioned player in kidney treatments? Here are three bold predictions for the developmental company in 2014.
1. Zerenex awarded FDA and EMA approval.
Given the tremendous results announced in January from the phase 3 trial in dialysis-dependent CKD, there shouldn't be much standing in the way of Keryx and marketing approval in the United States and Europe. The FDA has set June 7 as the Prescription Drug User Fee Act, or PDUFA, goal date. Investors will want to circle that day on their calendars (and get the champagne ready). Why is approval likely?
Zerenex was demonstrated to be safe and effective, while also showing that it comes with a substantial benefit over current phosphate binders used to treat CKD: the ability to increase iron storage. That alone makes the drug a more convenient treatment option over available therapies, which often require that patients receive intravenous iron to increase serum ferritin, or iron levels in the blood. Analysts believe the annual sales opportunity for treating dialysis dependent CKD could be $300 million.
2. Progress toward non-dialysis indication.
In early November, management announced that Zerenex completed another endpoint sweep in a phase 2 trial for non-dialysis CKD, or NDD CKD, patients. Once again, the drug was safe and effectively reduced mean levels of phosphorus in the blood while increasing serum ferritin. The market opportunity for NDD CKD is considerably larger than dialysis-dependent CKD (the indication that exited a phase 3 trial in January), which would result in higher annual sales of Zerenex and a more convenient treatment option for more patients.
How much more? Some analysts think the drug has blockbuster potential if approved for both indications. Luckily, management plans on meeting with the FDA to discuss an expanded label for NDD CKD, which could be possible without a comprehensive phase 3 trial. Whether or not that occurs in a timely manner will have an impact on shares.
3. A potential buyout.
Speculation of a buyout should never be your main reason for investing in a company, but it can certainly be an added bonus. I think there are a few solid reasons that a buyout makes sense for Keryx and the right buyer. Consider that the company is essentially a one-trick pony at this point without other compounds in development. Management has gone all-in on developing Zerenex and getting it approved in as many locations for as many indications as possible. That doesn't mean Keryx can't be successful marketing the CKD drug on its own, but the best way to maximize returns for shareholders would be to sell the company to realize the most value in the present.
A few companies with dysfunctional pipelines would make good potential suitors for Keryx, although I tend to agree with fellow Fool Keith Speights in thinking that Amgen -- which is quite functional, mind you -- is the best fit. The company is flush with cash and is already an entrenched player in the kidney disease market, with leading therapies such as Aranesp, Epogen, and Sensipar. Amgen's experienced sales force could also maximize the value of Zerenex in a way an inexperienced Keryx team could only dream of.
Foolish bottom line
Keryx had a great 2013 and should continue to bag positive developments in 2014. However, investors need to consider that the market is already fairly pricing in the first approval for Zerenex at a market cap of $1 billion. The next big driver for share gains will be developments on the path to obtaining expanded approval for NDD CKD or even a potential buyout. Just don't be too surprised if shares don't pop when approval is announced next June.
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