Shares of the clinical-stage biotech Keryx Biopharmaceuticals (NASDAQ:KERX)have risen over 84% in the past year following a positive data readout for the company's flagship drug, Zerenex, indicated as a potential treatment for hyperphosphatemia in dialysis-dependent chronic kidney disease, or CKD, patients. Even so, short-sellers have been piling into the stock ahead of the drug's Prescription Drug User Fee Act goal date of Sept. 7, 2014. 

KERX Chart

KERX data by YCharts.

With short-sellers now holding close to 23% of the float, it's important to consider four reasons why Wall Street is betting against Keryx going into this key event. 

Reason No. 1
Short-sellers have repeatedly cited Keryx's lack of ownership over Zerenex as a cause for concern. Keryx licensed Zerenex from Panion & BF Biotech. While in-licensing is a fairly standard process across the health care industry, shorts have argued that Zerenex's continued development for additional indications and commercial performance depends at least partly on its owner. Put simply, if Panion & BF Biotech does not hold up its end of the bargain, Keryx could have trouble maximizing Zerenex's commercial potential.

My view is that such trouble is unlikely for one reason. Licensing agreements almost always have well-defined clauses that allow the licensee to seek financial compensation in case a partner causes an unwarranted delay. In other words, Keryx should have legal recourse in the event that Panion & BF Biotech drags its feet. Conversely, Keryx also must meet certain developmental milestones to keep the license in good standing, but with the drug now under regulatory review the company appears to be well on track to meet this obligation. Overall, I don't see this in-licensing issue as a major red flag.    

Reason No. 2
Concerns have also been voiced over Keryx's lack of a partnership to market Zerenex. The idea is that large pharmas simply aren't interested in this drug because its commercial potential isn't that impressive. Indeed, we haven't heard much from Keryx regarding expectations on peak sales for Zerenex for this initial indication. That said, I think Keryx likely wants to market the drug in the U.S., and perhaps in the EU, itself during the initial launch in order to receive the bulk of the revenue. I would only expect the company to seek a partner in other foreign markets like it has previously in Japan.

Reason No. 3  
One of the best arguments going for short-sellers is the existing competition within the phosphate-binding market space. Presently, Sanofi's (NYSE:SNY) Renagel and Renvela dominate this market, with a handful of other products available as well. 

The counterargument is that Zerenex has a better clinical profile with fewer side effects than these other products. While that may be true, it's important to keep in mind that Keryx will be competing against large pharmas with a wealth of marketing experience. Whether it can overcome this lack of marketing experience remains an open question. 

Reason No. 4
Keryx's pipeline is Zerenex. Although the company is looking to expand Zerenex's label, the truth is that Keryx is highly dependent upon the success of this single drug. If Zerenex fails to live up to some investors' lofty expectations, the market could sour on Keryx in a hurry.  

Foolish wrap-up
It's safe to say that investors never like to see shorts making a huge bet against one of their long positions. By the same token, short-sellers aren't always correct in their investing thesis.

When considering the four reasons above, I think the biggest issue moving forward is Zerenex's commercial potential as a treatment for hyperphosphatemia. Assuming FDA approval come September, the pressure will be on Keryx to quickly garner market share in this space given that the company already sports a market cap of $1.25 billion.

If the launch is strong, as predicted by bulls, then Keryx looks like a good short-squeeze candidate. On the flip side, short-sellers will undoubtedly be ready if the numbers are weak. Overall, I think long-term investors should remain on the sidelines until the approval is in the bag and the first full-quarter sales are posted.  

Will this stock be your next multi-bagger?
Give us five minutes and we'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.