Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Keryx Biopharmaceuticals (KERX), a biopharmaceutical company focused on developing therapies to treat renal diseases, plunged as much as 12% after announcing midday Friday that Ferric Citrate (previously known as Zerenex) has been approved by the Food and Drug Administration as an oral iron-based treatment for dialysis patients with hyperphosphatemia.
So what: Generally speaking an approval from the FDA is usually good news. In this case it wasn't the approval that did Keryx in but the labeling of the drug that went along with it. As Keryx pointed out in its studies, Ferric Citrate helped control serum phosphate levels in patients, which is good news since high phosphate levels can lead to serious complications such as heart disease and bone density problems.
On the other hand, Ferric Citrate also raises patients' iron levels, which is meant to help fight anemia and reduce patients' dependence on anemia medications. However, the FDA expressed concerns over a potential overload of iron, noting on a warning label that physicians would need to monitor patients' iron levels, and that intravenously administered iron therapies may need to be reduced or stopped entirely due to dialysis patients taking Ferric Citrate.
Now what: Based on today's reaction investors have construed this warning label as bad news and the suspicion is that it could reduce physicians desire to prescribe Ferric Citrate.
The good news is that Keryx is dealing with a relatively wide moat patient pool of some 400,000 end-stage renal disease (ESRD) patients with hyperphosphatemia in the U.S., so it should still see substantial patient pick-up even with this warning label in place. Ultimately we could discover that today's move lower is merely an overreaction as the warning label merely implies closer monitoring of ESRD patients' iron administration, which is something physicians should be monitoring on a regular basis anyways.
Initial Wall Street estimates have pegged Keryx to deliver as much as $2 in EPS by 2017 making this a potential value play if Ferric Citrate is launched successfully. Now we simply watch and wait for the company to launch its drug sometime within the next 12 weeks and see how everything plays out in the early going.
