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Keryx Biopharmaceuticals: The Best Performing Biotechs of 2013

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With the Nasdaq Biotechnology Index up 65% since the start of the year, it's clear that the biotech sector performed extraordinarily well in 2013-but which stocks were the biggest winners? Several small-cap and mid-cap biotech companies posted returns of 200% or more through the middle of December this year, and, in this series, I review the 15 biggest movers of 2013. Let's continue this review with number 4 on the list, Keryx Biopharmaceuticals  (NASDAQ: KERX  ) .

Developing a better treatment

Patients with chronic kidney disease, or CKD, and are typically treated with dialysis and often suffer from hyperphosphatemia, a commonly occurring buildup of phosphates. Keryx plans to treat this disorder with its drug Zerenex.

While phosphorous is a key building block of healthy bones, too much phosphorous strips calcium away from bones, weakening them, and potentially leading to calcium deposits causing heart disease.

To keep that from happening, doctors treat dialysis receiving CKD patients with phosphate binding drugs designed to capture and remove excess phosphorous from the body.  

The most commonly prescribed of those binders are Renagel, and its successor Renvela, which were developed by Genzyme and became part of Sanofi (NYSE: SNY  ) following Sanofi's $20 billion acquisition of Genzyme in 2011.  Those two drugs racked up sales of 533 million euros in the first nine months of this year.

However Sanofi may soon see sales slide because, as fellow Fool Maxx Chatsko points out, Zerenex may be a better mouse trap thanks to its ability to help patients store iron. Iron deficiency is common among CKD patients, requiring them to take intravenous iron injections. So the potential for Zerenex to reduce the need for those procedures is something patients and doctors will likely applaud.

A healthy market opportunity

Zerenex has made its way safely through phase 3 and with data in hand; Keryx filed an NDA for FDA approval during August.   A decision on whether to approve the drug is expected on June 7th, 2014.   Keryx also plans to file for use in Europe  and Keryx's partner Torii Pharmaceutical has filed for approval in Japan too. Overall, analysts think Zerenex could generate up to $300 million in annual sales because 2 million people worldwide receive end stage kidney dialysis. But Keryx's hopes for Zerenex stretch a bit further than solely for those on dialysis. An ongoing phase 2 study is evaluating the drug in non-dialysis, stage three to five CKD patients too.

If Zerenex can succeed in this indication, it significantly broadens the potential patient pool. In the U.S. alone, Keryx estimates 10% to 15% of the population is affected by non-dialysis dependent CKD.   Currently, there aren't any phosphate binders approved for these patients, giving Keryx a substantial green field opportunity. Additionally, Zerenex iron boosting abilities could lead to use in even earlier stage CKD patients given Iron deficiency crops up as early as stage 1 kidney disease and usually worsens over time.

Fool-worthy final thoughts

The ability to boost iron is a major marketing advantage for Keryx that the company can use to win share away from Sanofi's phosphate binders.  Given Zenerex's strong phase 3 showing, its likely the drug will win approval and sales will start coming into Keryx in late 2014.

After that, investors will need to see Zenerex succeed in phase 3 trials in non-dialysis patients. If it does, a much larger revenue opportunity could be coming.  Or, possibly a suitor.  A number of potential acquirers have strong kidney franchises, including Amgen (NASDAQ: AMGN  ) that could benefit from including Zerenex.

If Keryx goes it alone it may have a tougher time.  Much like Puma Biotechnology, another biotech stock that went on a tear this year, Keryx has just one drug to its name. That means sales of Zenerex will need to be reinvested to acquire or develop new therapies.

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