The inherent nature of the biotechnology space causes the underlying stocks to be extremely volatile. Clinical trial data, interim clinical data, FDA rulings, third party medical opinion voiced in industry journals are but a handful of catalysts that can impact a biotechnology’s stock price in either direction. Because biotechnology investors are so heavily focused on milestones and catalysts, the interim time periods between them often results in depressed stock prices. That said, the selling pressure created from these impatient investors can often prove to be a blessing for those with patience.

Keryx Biopharmaceuticals is a company that is experiencing just such an interim period or “lull” between significant milestones. The next significant milestone (Phase III data in colorectal cancer) is likely in the second half of this year. There is, however, a major “X” factor in the Keryx story which could catalyze the stock and leave those investors flatfooted who were hoping to get involved closer to the milestone date. The company has publicly stated that they are having discussions with potential partners for both of their compounds, Perifosine and Zerenex. Although there is certainly no guarantee that a deal will be struck, such a partnership could be inked and announced at any time. We see it happen in the market all the time. Moreover, with the “patent cliff” big pharma is experiencing, the motivation to replenish pipelines has never been greater. In the next 5 years, the industry will see big pharma losing tens of billions of dollars in annual revenue to patent expiration of major drugs. Pfizer (NYSE: PFE), for example, stands to lose the $12 billion in annual sales from its blockbuster cholesterol drug, Lipitor, as it will go generic in November of this year. Lipitor is well known to be the single biggest selling drug in pharmaceutical history.

Keryx Biopharmaceuticals has two late-stage drug candidates, Perifosine and Zerenex, both of which are in Phase 3 trials conducted under Special Protocol Assessments by the FDA. An “SPA” is a declaration from the FDA that a proposed Phase III trial’s design, clinical endpoints, and statistical analyses are acceptable for FDA approval.

Perifosine

Primarily indicated for both metastatic colorectal cancer and multiple myeloma, Perifosine is a novel, potentially first-in-class, oral anti-cancer agent that inhibits Akt activation in the phosphoinositide 3-kinase (PI3K) pathway, and also affects a number of other key signal transduction pathways, including the JNK pathway, all of which are pathways associated with programmed cell death, cell growth, cell differentiation and cell survival. The drug is being evaluated as a potential mechanism to overcome treatment resistance in both metastatic colorectal cancer as well as relapsed and/or refractory multiple myeloma patients. Keryx has received “Fast Track” designations from the FDA for both indications.

Perifosine is currently in Phase 3 clinical trials for metastatic colorectal cancer and multiple myeloma, with metastatic colorectal expected to be the first to complete in the second half of 2011. The Phase 2 randomized study in metastatic colorectal demonstrated a statistically-significant survival advantage over the control group, a very important and uncommon feat in the Phase 2 setting.

Keryx is looking toward other cancer indications for Perifosine as well. At the 52nd Annual Meeting of the American Society of Hematology in early December 2010, the Company unveiled interim data from separate Perifosine studies. In two Phase 2 studies, Perifosine achieved objective responses and a high rate of stable disease as a single-agent in the treatment of Chronic Lymphocytic Leukemia (CLL), and in combination with sorafenib in the treatment of relapsed/refractory Hodgkin’s Lymphoma (HL).

Zerenex

Keryx is also developing ZerenexTM (ferric citrate), an oral, ferric iron-based compound that has the capacity to bind to phosphate and form non-absorbable complexes. The Phase 3 clinical program of Zerenex in the treatment for hyperphosphatemia (elevated phosphate levels) in patients with end-stage renal disease on dialysis is being conducted pursuant to an SPA agreement with the FDA.

In November of last year, Keryx reported highly positive short-term Phase 3 results for Zerenex, meeting both primary and secondary endpoints. There is currently a long-term (58-week) Phase 3 study under way. Keryx also has a Japanese partnership with JT Torii which can potentially yield Keryx over $100 million in milestones and royalties. Phase 3 trials in Japan by JT Torii are pending commencement, at which time Keryx will receive a milestone payment. This could serve as a positive validating catalyst for the program.

Hyperphosphatemia is associated with the development of cardiovascular disease and is believed to be involved in approximately 50% of the deaths amongst dialysis patients. Between the US and the EU, there are approximately 700,000 dialysis patients, over 90% of whom develop Hyperphosphatemia. In 2010, phosphate binders generated $1.5 billion in worldwide sales. Genzyme’s RenvelaÒ dominates the market with just under a 50% market share. The balance of the market share is mostly owned by PhosLoÒ and FosrenolÒ which are marketed by Fresenius Medical Care (NYSE: FMS) and Shire Pharmaceuticals (NASDAQ: SHPGY), respectively.

What competitive advantage does Zerenex offer over the 3 other binders? Plenty… for starters, Zerenex has a lower pill burden than Renvela. Patients on Renvela need to take, on average, 10 pills per day, whereas patients on Zerenex should only require 5 to 6. Generally speaking, patient compliance (taking their pills) is a major issue amongst indications that have higher pill burdens. Fosrenol is a lanthanum-based binder and can lead to metal accumulation in the body and negative gastrointestinal side effects. PhosLo is calcium-based and can result in longer-term calcium build-up in patients. Zerenex is ferric citrate and as such, it does not lead to elevated calcium levels, and appears to have a very favorable safety profile. Zerenex also treats Metabolic Acidosis, a condition resulting in a low blood pH when kidneys are ineffective in removing enough acid from the body. Lastly, the use of Zerenex, an iron-based compound, may lower the need for patients to be treated with intravenous iron and/or erythropoiesis-stimulating agents (ESAs), a potentially huge advantage over the other 3 binders.

Keryx commands a $243 million market cap. With a current stock price of about $4.00, the stock is 40% off of its 52 week high of $6.67. There are 5 Wall Street firms that have research opinions on the stock and all have the stock as a BUY recommendation. Stifel Nicolaus holds the most conservative price target of $8.00 whereas ROTH Capital has a $10.00 price target. If biotechnology stock activity is any indication, KERX could move higher as it gets closer to revealing Phase III trial data on Perifosine and Zerenex later this year. However, if the company lands a strategic pharma partner resulting from interest in either or both of their compounds, KERX stock could achieve Wall Street firm price targets faster than the street anticipates.

More information on Keryx can be found on the Company’s website at www.keryx.com