Keryx (NASDAQ:KERX) is a development-stage biotech company currently awaiting approval of its NDA for phosphate binder drug Zerenex (ferrous citrate). This niche kidney failure space, which generated more than $1 billion in annual sales in 2009, already includes a few major contenders to Zerenex.

These heavy hitters include Sanofi's (NASDAQ:SNY) Renagel, Fresenius' Phoslo, and generic calcium acetate versions of Phoslo. Additionally, Impax Laboratories (NASDAQ:IPXL) intends to market a generic sevelamer product following for Renagel's 2014 patent expiration.

A major splash from Zerenex in the phosphate binder arena would likely pull significant market share away from these contenders. Impax in particular has much to lose given wavering earnings confidence among investors who see new generic product opportunities as an avenue back to brighter days.

With these major competitors already occupying the space, investors should be asking what, if anything, gives Zerenex a clinical advantage in this highly competitive market?

Everybody is special in their own way

The differences between Renagel, Phoslo, and Zerenex are summarized below:

Renagel (sevelamer)

Renagel is a polymer-based phosphate binder that has minimal effect on blood levels other than phosphate and is generally free of major side effects. The drug is relatively expensive compared to its cousin, Phoslo, but a generic product slated for release in 2014 is likely to significantly reduce the cost barrier for many patients.

Phoslo (calcium acetate)

Phoslo (and its generic equivalents) is the old workhorse of phosphate binders and is well recognized as such by many prescribers. While Phoslo is inexpensive, it is inappropriate for use in some patients with advanced kidney failure characterized by abnormally high calcium levels and can sometimes decrease the effectiveness of other medications taken at the same time. Both Phoslo and Renagel are effective in their use as phosphate binders though some conflicting studies have shown one superior than the other.

Zerenex (ferrous citrate)

Zerenex is an iron-based phosphate binder that can potentially reduce the need for intravenous iron replacement and red blood cell stimulation. Phase 3 trial results show Zerenex is statistically non-inferior in terms of effectiveness when compared to Renagel and Phoslo.

Niche or too niche?

One of Zerenex's major potential advantages over competing products is its potential in preventing patients from requiring expensive anemia treatments or at least shortening the amount of time patients will need to undergo those treatments.

This may seem like a major advantage. In fact, Keryx bulls have recently rushed to point out Zerenex Phase 3 results indicate a 52% decrease in the need for intravenous iron and 27% decrease in the need for costly Erythropoetin Stimulating Agents (ESAs) in trial subjects as a blockbuster advantage.

However, the trial design compared Zerenex head-to-head against non-iron based competitors, suggesting that investors should almost obviously expect better anemia-related results. Furthermore, non-Zerenex patients were explicitly prevented from receiving iron replacement.

Claims of lowered pill burdens are similarly inflated given trial patients received as many as three capsules of Zerenex per dose- more or less on par with its competitors.

There are plenty of iron replacement products already commonly used as separate agents. In patients that require both phosphate binding and iron replacement, there is not necessarily a compelling case to use Zerenex instead of a combination of a competing phosphate binder and a separate iron replacement product. This would be doubly true if that Zerenex enters the market priced too high to offer a cost effective alternative.

In other words, while Zerenex results show undeniable promise with mild side effects and potential usefulness in anemia, there is still some reasonable concerns about its market viability. Another risk is that Zerenex may not necessarily capture enough market share to make it a winning product against generic competitors that prescribers have known for years.

Good news, bad news

The results suggest that Zerenex is likely to receive FDA approval. The Phase 3 trials establish Zerenex's effectiveness in binding phosphate and there are few if any concerns that stand in the way. This has sent Keryx shares soaring more than 30%.

That being said, some of the claims surrounding Zerenex's ability to decrease need for iron replacement and ESAs may be suffering from a degree of unchecked enthusiasm. With tried and true competitors among both phosphate binders and iron supplements becoming cheaper thanks to patent expiration, I believe that Keryx needs to approach this market wisely and collect post-marketing data to further establish its clinical utility.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.