Event - Expectations building for Keryx cancer drug

Analysis

Keryx Biopharmaceuticals shares surged impressively yesterday on anticipation of a second quarter readout of its pivotal trial of perifosine in colorectal cancer. Positive data would be a transformative event for the New York group, which is why some investors appear to be willing to take the gamble that drove shares up one-third to a nine-month high of $4.94 yesterday.

It is a high-risk bet, however. Perifosine is the most advanced PI3K inhibitor in development but it is practically the only drug in the mid or late-stage pipeline that is neither partnered in the US nor owned by big pharma or established players, which some read as an indication that the compound lacks promise. Whilst Keryx has other opportunities in haematological and brain cancers, failure in this colorectal disease trial would confirm those suspicions.

Company Keryx Biopharmaceuticals Æterna Zentaris 
Product KRX-0401 (perifosine)
Market cap $351m $225m
Product NPV $311m $313m
% of market cap 89% 139%
Event type Phase III results
Date Q2 2012

Waiting

Keryx expects the 360th death among enrolees in its 430-patient, phase III trial to occur in March, which will trigger a final analysis in subsequent weeks, chief executive Ron Bentsur told investors during a fourth-quarter earnings call last week. The trial pits perifosine, also known as KRX-0401, in combination with capecitabine against capecitabine alone, measuring overall and progression free survival among advanced colorectal cancer patients who have failed other available treatments.

The trial is being conducted under a special protocol assessment agreed by the FDA, which suggests the agency will be less likely to object to trial design or endpoint selection and could give it a smoother regulatory path. It also has been given fast track designation enabling rolling review of the application. As such, Mr Bentsur said if the trial is successful, the compound could be on the market as early as the end of the year.

If so, it would be at the head of the PI3K inhibitor class (Therapeutic focus - PI3Ks in the spotlight in 2012, January 27, 2012). The class targets phosphatidylinositol 3-kinase, a protein that lies upstream of validated targets such as mammalian target of Rapamycin (mTOR) and is linked to a number of cell growth, proliferation, differentiation, motility, survival and intracellular trafficking functions.

It is the only PI3K-targeting drug in phase III – a second phase III trial in multiple myeloma is recruiting – and as an unpartnered asset in the North American market the results of the colorectal cancer trial are being closely watched. Candidates in phase II are partnered by such major oncology players as Roche and Novartis, but companies with a smaller interest in cancer such as Gilead Sciences and Sanofi have their own entries; Oncothyreon is the only company with a phase II PI3K inhibitor that does not already have a marketed product.

Investors hope trial success will trigger partnering talks if not outright takeout negotiations. News that an independent data monitoring board had allowed the trial to continue following an interim safety and futility analysis last August was sufficient to drive shares up 7% at a time when much of the sector was suffering from wider market declines.

Doubts

However, there are reasons to view the drug with some scepticism, which may go some way towards explaining the 14% share drop in early trading today. The presence of strong oncology players Roche and Novartis in the mid-stage PI3K pipeline suggests a great deal of interest in the mechanism of action. The fact that perifosine is nearing a trial completion without having gained a major partner - Aeterna Zentaris holds European rights - can be taken as a sign that big pharma has seen the supporting data so far and has passed until phase III reads out.

Also, there is the matter of phase II data in colorectal cancer – the company had planned to enrol 381 patients but when it announced successful completion of the trial in 2010, data from only 38 patients was disclosed.

Thus Keryx has its bears as well as bulls – 16% of its free-floating shares have been sold short, a sign that a significant number of investors are betting on negative results and a stock price slump.

The readout will not be for the faint of heart. It is clear many investors have high expectations for success even if the signs have not all been positive; it will be difficult for Keryx to earn trust back should perifisone disappoint.

Trial ID NCT01097018

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