Start the conversation
On August 29, 2012, shares of Keryx Biopharmaceuticals, Inc. (Nasdaq: KERX), a company focused on pharmaceutical products for patients with renal disease, closed for the day's session at $2.06. Exactly two years later, on August 29, 2014, the same stock closed at $18.19.
That's right. Investors made a 780% profit over their original position, and it looked like the price per share (PPS) was destined to climb considerably higher.
In fact, analysts had set their average first-year target for the stock at about $23. And there was every reason to believe KERX would reach and break through that target after the FDA approved it for marketing in the United States on its PDUFA date, set for September 7.
But then something odd happened…
The FDA rendered its decision early, on September 5, and although the news was good -KERX's drug had been approved – the stock fell more than 11% by the session opening the following Monday and continued falling over the next few weeks – giving traders today an opportunity to take advantage of the situation and make huge profits.
A Great Drug with Phenomenal Potential
The developmental drug undergoing review, ferric citrate (formerly Zerenex), treats high phosphate levels (hyperphosphatemia) in patients with chronic kidney disease (CKD) who are on dialysis. People with this condition can end up with bone disease, vascular calcification, cardiovascular disease – and early death. Ferric citrate demonstrated that it could significantly lower phosphate in the blood, with an excellent safety and tolerability profile.
But that isn't its only benefit.
As it turns out, the drug can simultaneously treat iron deficiency anemia (IDA), a common secondary disorder in CKD patients with high phosphate levels. This, of course, would be a separate indication for the drug, and the FDA would not be reviewing both indications at the same time.
In fact, the agency would be unlikely to approve a separate indication for the treatment of IDA, because this isn't a drug you would want to give to patients who don't have hyperphosphatemia. Still, both the medical community and Wall Street viewed this as a huge plus for ferric citrate, lifting it head and shoulders above its competitors.
In fact, it could quickly knock its competitors out of the ring and earn very, very big profits. For dialysis patients alone, it would be in the $250 million to $500 million range, but KERX hopes to expand that market to include pre-dialysis patients, which would put it in the $1.2 billion range – a blockbuster.
So you might think Wall Street would hold a parade on approval of a drug like this one. But it was not to be. Instead, the press, along with many so-called "experts" on the Web, completely misunderstood and misrepresented the agency's decision and actually turned great news into bad.
The Media Apologizes
You see, as KERX was preparing its press release to announce the FDA approval, it requested a temporary halt to trading in its stock. This is a common practice among pharmaceutical companies when they're about to make an important announcement that may affect stock market sentiment.
During the halt, the Associated Press (AP), a not-for-profit cooperative of news organizations, released a story that the approval came with a caveat: the label would have to include a warning that instructed physicians to monitor blood iron levels in patients who were already on iron replacement therapy-that is, were already taking drugs for IDA. So as a result of this "unexpected" warning, the AP story said, the price-per-share (PPS) for KERX had already dropped by nearly six 6%.
That's right. The story made this claim while trading was still halted…
About the Author
Ernie Tremblay has more than 25 years of experience in following and analyzing the latest developments in health, medicine, and related technologies. He understands the FDA approval process, as well as the "hard science" behind new, experimental drugs and the market demand for them - and has a comprehensive grasp of the complex dynamics that determine whether a new drug will be a breakthrough winner, or just another casualty of the FDA approval process.