KERX Chart

KERX data by YCharts

What: Shares of Keryx Biopharmaceuticals (NASDAQ:KERX), a biopharmaceutical company focused on developing treatments for renal diseases, plummeted 14% in January per data from S&P Capital IQ following a share issuance and a change in management.

So what: The biggest downside catalyst for Keryx in January was the announcement that it had priced 9,166,667 shares for sale at $12 per share. While it did raise gross proceeds of $110 million before taxes, the offering was priced 13% below where shares had closed on the previous day. Although Keryx enacted this offering to help pay for the launch of its hypophosphatemia drug Auryxia, and the cost of launching a drug can be expensive, a 13% dilutive factor to its offering signifies to me that there may have been little interest in these shares. That's somewhat worrisome.

Also, on Jan. 11 Keryx announced that it would be moving current chief operating officer Greg Madison into the chief executive officer role once current CEO Ron Bentsur's contract is up in May. Although the two will be working side-by-side to deliver a smooth transition, it's always scary when new management takes the helm right when a critical drug launch is still ongoing. Not to mention that Madison has only been with the company for a year, so there could be concerns about his long-term vision for a company he's still getting acquainted with.

Source: Department of Foreign Affairs & Trade via Flickr.

Now what: On one hand this drop is intriguing as Auryxia has a real shot at hitting $500 million in sales by 2018. At this rate Keryx could be capable of $2 in EPS in 2018, making its current price appear like a bargain. However, biotech valuations are about far more than just drug approvals these days. A company has to successfully launch and price its product in order to be successful. I believe Keryx has those tools in place, but I still remain somewhat concerned about its timing on the share offering and the change in management just months after its launch.

For now I plan to remain a bystander and watch Keryx closely for signs of strength or additional weakness. If the estimates prove correct on Keryx this is a steal over the long-term, but I've witnessed enough launch failures recently to suggest investors play this cautiously for the time being.