Positive Quarter in an Volatile Biotech Market - Keryx ($KERX)

Biotech Market: KERX

Yesterday, Keryx BioPharaceuticals (NASDAQ: KERX) announced good results for the June quarter. The loss for the quarter was $0.05 per share which was somewhat more than Street consensus estimate, but the company was strong where it should have most counted with investors, such as:

* Cash, cash equivalents, interest receivable and investment securities of $52.5 million. The company is adequately funded to reach their major value creation milestones.
* Completion of enrollment for the Perifosine Phase III program for advanced refractory colorectal cancer, with completion of patient enrollment for Multiple Myeloma expected in the second half of 2011.
* Continued progress in the development of Zerenex (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 is being conducted pursuant to an SPA agreement with the FDA.

Biotech stocks have been primary casualties in the recent market decline and KERX has declined more than most. , even though there is no fundamental reason as to why this has happened. It was only in mid-March that the Biotechnology Industry Organization (BIO.org) reported the results of 135 investment professional was highly positive for the biotech field. Highlights:

* 51% indicated that the biotech was undervalued;
* 86% expected increase in biotech sector this year;
* 61% preferred late stage companies and resounding 75% voted for small caps;
* 43% expect generalists to come into the sector this year.

Growth prospects for biotechnology are more attractive than many other sectors of the economy. The aggregate market cap of biotech is small relative to the potential buying power of many generalists should they choose to come back into the sector, especially relative to the stocks that beat expectations which should be in the greatest demand.

The company has publicly stated that they have had discussion(s) with potential partners for both of their compounds, Periforsine and Zerenex. Although there is certainly no guarantee that a deal will be struck, such a partnership could be announced at any time. Moreover, with the "patent cliff" big pharma is experiencing, the motivation to replenish pipelines has never been greater.

See Bio.org 2011 Outlook.
Dave Talbot

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