Ferric Citrate has numerous health benefits that help CKD patients manage serum phosphorus and iron stores
Drug is approved by the FDA
Helps those on dialysis avoid intravenous iron infusions lowering bundle costs for dialysis clinics
Improves patient quality of life and could extend mortality
Improves the economics in dialysis clinics
Drug will be readily available in December 2014
Keryx Biopharmaceuticals CEO, Ron Bentsur, recently spoke at the Rodman and Renshaw 16th Annual Global Investment Conference. During his lecture, he outlined what he believes to be a blockbuster drug that helps patients with chronic kidney disease on dialysis. A transcript of the discussion follows:
“First, I want to thank Rodman and Renshaw for inviting us to present at the conference. With no further ado, I want to basically tell you about the updated Keryx story, now that we have our first FDA approval for ferric citrate in dialysis patients. So, before we start, I just want to caution that I will be making forward-looking statements, so I do encourage anyone who is interested in the company story to read our disclosures that are available on the Internet; in particular the risk factors that appear in our public filings including the most recent 10K for 2013 and the second quarter 10-Q. So, in terms of the company’s evolution, we are a very typical biotech story, if you will… We started out with early-stage development, some early clinical work and we became a later stage development company; and I’m very happy to say that now we are a fully integrated commercial entity; we have a very strong clinical team, as well as a very strong commercial team, and we’re ready to go. Our first FDA approval is for ferric citrate as many of you around the room know. This was approved last Friday on September 5th by the FDA and what it is, is a prescription proprietary pharmaceutical grade drug; and right now, were still using the generic name ferric citrate. Initially the name Zerenex, which we were using for several years was approved by the FDA, but subsequently that approval was rescinded. The re-review of the name occurred as a result of the fact that we had to submit a major amendment which led to the three month PDUFA extension, that I’m sure many of you remember. So, right now we’re in the process of basically getting a brand name approved by the FDA and we do believe that we will have a brand name certainly by the time we launch the product which is approximately 12 weeks from today. The indication for the compound is the control of serum phosphorus in patients with chronic kidney disease on dialysis and we plan to sell the drug (as I just mentioned) in the United States beginning in the fourth quarter; approximately 12 weeks from today, and, also keep in mind that the drug is already marketed in Japan; that approval came in January of this year with the launch by our partners Japan Tobacco Torii. That launch occurred in May of this year, and also, we have submitted the MAA, which is the European filing, a few months ago, and we expect a decision by around the middle 2015 for our filing in the European Union. Just a couple of words in terms of the chronic kidney disease market in the patient population where these patients all reside. So, obviously when you think about chronic kidney disease, that’s a very substantial pyramid of about 25 million people, and right now we’re focused on (in terms of the first approval) the dialysis patients in the US, so there are approximately 450,000 dialysis patients, and approximately 80% of those patients are on phosphate binders chronically, so hundreds of thousands of patients make up the addressable patient population, and they’re all in dialysis clinics. When you think about the typical dialysis patient, this is a patient who is very burdened; they have elevated phosphate, they have vitamin D issues, they are anemic, iron deficient, obviously, they need the required retro co esis for red blood cell production and so on; and when you think about the dialysis treatment, they come in three times a week, like clockwork for sessions that can be anywhere from 3 to 4 hours at a time, they take multiple medications, including phosphate binders, but a whole host of other drugs, including many IV medications as well, such as IV iron and ESAs; and it’s very important to mention that all these parameters, anemia parameters, including the iron parameters such as ferritin and TSAT are monitored routinely in the dialysis clinics. Our drug is not going to change any of that, so we will essentially be part of the routine monitoring that these patients undergo. When you think about the dialysis providers, who are these companies that provide these dialysis services? So, there are about 15 main (or key) dialysis providers including the two big ones including Davita and Fresenius that cover about 90% of these dialysis patients in the country, and these are dialysis providers that essentially provide treatment, A-Z for these patients, the minute they walk in, they are fully taken care of in terms of nurses, in terms of dietitians, in terms of social workers, and so on. The dialysis providers really are responsible for the well-being of the patient and obviously that’s what they try to provide; but, at the same time, these dialysis providers are also businesses, so they need to think about their profitability; so, when you think about that aspect of the dialysis providers, you also need to think about the bundled payment system. This is a capitation system that was put into place at the beginning of 2011, and it covers the dialysis procedures, so there’s a set fee that the dialysis providers receive every time a patient comes in for a dialysis procedure. But, also the IV drugs are covered under the bundle. So, IV iron, the Vitamin Ds, and also the ESAs of course. It’s very important to keep in mind, that these drugs (the drugs that are in the bundle currently), represent a cost center for these dialysis providers. The oral drugs, which include the phosphate binders, are not in the bundle, and they are not expected to be in the bundle until 2024. The dialysis providers do not pay a penny for those drugs-that’s all through reimbursement. On one hand, you’ve got IV drugs which is a cost center. On the other hand, you’ve got oral drugs, which they don’t pay for. It’s very important to understand that these providers; not only do they need to take care of the well being of the patients (which I think they do fairly well), but they also need to worry about the economics of running a business. There was no better example about the shifting of the usage of these medications, such as we saw when the bundle was introduced in January of 2011. Before the bundle was introduced, there was a fairly high amount of ESA usage, and a relatively lower use of IV iron; and that kind of crisscrossed as the bundle came into being. The use of ESAs started to decline, because it was a higher priced point drug as opposed to IV iron, and to compensate for that (remember the well being of the patient comes first), so the use of IV iron went up. Again, these are all the toggling types of decisions that dialysis providers need to make. Keep in mind that with the bundle that’s put in place, they are financially constrained, they need to find new ways to continue to generate the profits that they seek to make; keeping in mind they need to first of all take care of the patient. So, when you think about our phase 3 study (the long term phase 3 study), the primary end point in that study was the control of serum phosphorus. Then we had secondary end points of serum ferritin, TSAT, and then the use of IV iron, and the use of ESA versus the active control group. It’s also very important to mention that these secondary end points were all analyzed by using a statistical hierarchy, so we had to hit first of all, phosphate (obviously), but then we had to hit ferritin, with a P value of .05 or better, then we can move on to TSAT, and so on. I urge all of you to seek out and read the recently published results from the study in the The Journal of the American Society of Nephrology publication. It’s a highly prestigious nephrology journal; and that data is all there, and I certainly urge all of you to read that. But, just to kind of touch on the data that we saw… so, the primary end point was phosphate, and you can see there that we hit that with a high statistical significance, and then we moved on to the ferritin and TSAT. It’s very important to understand that ferritin and TSAT are the key differentiators. The minute you can show a difference in ferritin and TSAT, that demonstrates that you have iron absorption. Once you’ve got iron absorption as an oral compound, and you prove that, everything else really flows from there. So, your ability to reduce IV iron, your ability to reduce ESAs, you would not have that if you don’t have an increase in iron stores, or iron absorption. So, those two parameters were particularly important for us, and you can see that those were achieved with very highly statistically significant results. Then, as essentially a byproduct of the fact that the drug was able to increase iron stores, that also led to dramatic reductions in IV iron versus the active control group and ESAs. Now, moving on to the label… Of course, we would’ve liked to have seen more in the label; however, we do believe that there is sufficient differentiation in the label as it currently exists, and in fact, we would not stop including the risk of extending the PDUFA further, if we didn’t believe that. So, when you look at the pharmacodynamics section, the iron absorption, the increase in ferriting and TSAT, and serum iron for that matter, are clearly there. That is the key differentiator folks. That allows you then to see these other effects that we saw in the clinical trials. In addition to that, when you look at the warnings, clearly, it states again, that there is iron absorption with ferric citrate; the monitoring of the ferritin and TSAT part, as I alluded to in the prior slide, that is routine… We’re not changing anything in the monitoring of iron parameters in dialysis centers. That is routine (part and parcel) of regular visits that these patients come in for. When you look at that warning and precaution, we believe it clearly alerts the physician to the fact that they may need to reduce or all together discontinue the use of IV iron when the patients are on ferric citrate, just like we saw in the phase 3 study. So, again, we believe that ferric citrate is the only phosphate binder that has that; the increase in iron stores, that makes it differentiated. All the other phosphate binders control hyperphosphotemia; well, we do that too. But none of the other phosphate binders increase iron stores, with all these benefits that could come about by doing so. When you think about it visually, in terms of phosphate binding, we’re the same as the other phosphate binders. Certainly, the market leader is Phoslo and Renvela. We’re non-calcium based, Phoslo is calcium based as many of you know, and we’re the only ones that can increase iron stores, so we, again, truly feel that we can set a new paradigm in the way patients are treated for their hypophosphatemia and also to increase iron stores and generate benefits on that front; and we believe that ferric citrate could become the dominant phosphate binder on the market. It’s not going to happen day one, give it a little bit of time, but we believe that it will happen. When you think about the hypophosphatemia market in the US; this is essentially the growth graph that we’ve seen over the last five or six years; the annual growth rate or the CAGR has been above 10% in terms of revenue and right now it’s approaching 1.3 billion in the US; the market leader in terms of dollars and also in terms of scripts is Renvela; and then you have the other two ones which are PhosLo and Fosrenol; and again, this is a growing market with patient population growth of about 3% year on year; and the pricing obviously exceeds that and you end up with a CAGR of about 11 or 12%. Now shifting gears to our commercial effort… Again, that is something, as the CEO of the company excites me very much; because I think we’ve put together a very strong commercial team. Greg Madison who is standing over there in the room. Many of you may know a little bit about his bio, but Greg headed up the Genzyme renal division for a couple of years, including the launch of Renvela which was one of the most successful launches in the history of renal drugs, and we’re very fortunate to have Greg as the chief Operating Officer and leading the charge on the commercial front. In addition to Greg, we’ve been able to bring together a team of very seasoned, very experienced, senior managers, each within their own disciplines. So marketing, operations, sales, and payer access; and again, I urge you to look at some of the bios of these people; very, very distinct experiences in the key areas that were looking for… renal, phosphate binders, etc. When you think about the ferric citrate launch and what we’re doing right now, as we head toward the expected launch in about 12 weeks. The offers have been extended to the majority of the sales reps, or the slots that we need to fill, so we’re targeting just under 60 sales reps for the launch. Two thirds of those roles or slots have already been filled; again, with people that were essentially hand-picked by all these folks that I mentioned earlier who are heading up the key parts within the commercial team; and of course, now we can begin formal contracting discussions with the payers. We had a lot of informal discussions with them prior to the approval, now that we have the approval, we can begin the formal part of the discussion on formulary; and again, we expect the launch to occur within 12 weeks of today. When you think about the growth opportunities for the company, now we need to shift our eyes to the right side of this pyramid of chronic kidney disease and what it is that we’re doing in pre-dialysis, or chronic kidney disease stages 3 to 5, so, it’s a very large patient pool… we believe that there are easily well over one and a half million people that have chronic kidney disease stages 3 to 5 that are also suffering from iron deficiency anemia, and that is the target population that we are going to go after in pre-dialysis. When you think about anemia and chronic kidney disease; the overwhelming majority of the patients will become iron depleted, and many of them will start suffering from anemia; even before they go on dialysis, and when you think about the oral preparations for iron that are available they typically don’t work for a variety of reasons they could either be poorly tolerated, or they just don’t work in terms of of efficacy, or they’re not absorbed adequately, so we believe there is a tremendous window for drugs such as ferric citrate and we party proven that in the phase 2 study for an oral iron-based drug that actually works in this indication and we believe we can really address; essentially an undertreated, or an untreated patient population that runs in the hundreds of thousands if not millions. When you think about the phase 2 study that we conducted… that was completed about nine months ago. This was a double-blind placebo controlled study looking at chronic kidney disease patients stages 3 to 5, who also had iron deficiency anemia, and you can see the results there; the primary endpoint in fact was phosphorus and TSAT; it was a co-primary endpoint, but we also look at other parameters like ferritin and of course hemoglobin, which is the path forward if you want to get a drug approved in pre-dialysis. We showed statistically significant results along all those parameters, and our phase 3 study; which is pending commencement, we expect to start that this month, so in the next couple of weeks, we will be looking at hemoglobin as the primary endpoint. This will be a pivotal study; if we succeed with this study, we believe that we will be able to file an FN DA for label extension to go into pre-dialysis. We are going to target enrollment of 230 patients, at stages 3 to 5 chronic kidney disease with iron deficiency anemia. The primary endpoint, as I mentioned before, is hemoglobin. At week 16, there’s going to be a two month safety follow up, so all together, a six month program. This is something we’re doing with the hematology division within the FDA, so we filed an IND within that division and that’s going to be routed through that division. In terms of the international expansion, we talked about the Japanese approval that occurred earlier this year and the launch that occurred a few months ago. Just a couple of words on the economics. So, first of all, the end-stage renal disease market in Japan for phosphate binders (or the dialysis market) is about $350 million, growing at about pretty nice clip year over year, and the first branded phosphate binder to ever get approval in pre-dialysis, not just dialysis; that approval occurred about a year ago, and ferric citrate which is sold under the trade name Riona in Japan was the second one. So, that approval in January covered both dialysis and pre-dialysis in Japan. In terms of our economics, we are owed double-digit royalties that start at the low teens escalating to the mid teens, and there are still are about $55 million in cash milestones that are due to us based on sales thresholds in Japan. I also discussed the European marketing authorization. Before we filed our MAA in Europe, so that’s the equivalent of the NDA in Europe, earlier this year and we expect an action date around the middle of 2015, and we are determining the path forward in other geographies such as Latin America, Eastern Europe and places like that. So, let’s just recap and talk about the milestones; what people can expect over the next few months. So, we had the Riona approval in Japan or the launch that occurred in the second quarter of this year. We did have pharmaco-publications that were made public, highlighting what we saw in the clinical trials, the ability of ferric citrate in those clinical trials to lower IV iron and ESA use by way of its ability to increase iron stores. You’re going to continue to see a flow of information on that front. Obviously, September 5th was an exciting day for us with the FDA approval of ferric citrate in the US. We do expect to initiate the pivotal phase 3 pre-dialysis study testing ferric citrate for iron deficiency anemia in pre-dialysis patients in the US; that’s expected to occur in the next few weeks, this month. In terms of the commercial launch, that I discussed, we expect that will occur approximately 12 weeks from today. And ASN, we expect will be an exciting conference for us. It’s the biggest nephrology conference of the year. It’s particularly important for us this year because it will be just ahead of our launch and we expect to have several data presentations there and I also urge you to look for additional journal publications that will occur over the next few months highlighting the clinical benefits and highlighting the pharmeco-economic benefits that we see with the compound. So, we do look forward to an exciting and eventful next few months ahead.”
I know that the above presentation is lengthy, but I felt it necessary to lay the ground work for what I’m about to tell you about ferric citrate. This is a drug that benefits patients on dialysis and was recently cleared by the FDA. The hard part is over; and Keryx will soon begin marketing the drug in the United States, while continuing to establish the markets in both Japan and Europe. Remember, the approval in Japan is complete with the ability to treat dialysis, and pre-dialysis patients. Keryx has double digit royalties and milestone payments being accrued daily. European approval will be here in the middle of 2015 and will catalyze sales once marketed.
Because it offers outstanding results as both a phosphate binder and an iron store producer, dialysis clinics will be able to cut their costs and run more efficiently by not having to provide IV iron. Since iron levels are checked frequently by healthcare providers, there’s no increased testing requirement for those on ferric citrate. So, the big question on everyone’s mind is how much money will it make? Well, if you assume that ferric citrate will become the market leader for 400,000 patients across America (only), and the company sells the drug at $5,000/year per patient, you’re looking at gross sales of $2B annually. If you assume a 20% overhead rate, you’re looking at $1.6B in earnings. Carry that through to a PE of 15 and the company is worth $24B. That’s more than 20 times what it’s selling for in the market today. Now, lets say things don’t go quite as planned, but they get approval in Europe and are granted a label extension for pre-dialysis patients… Well, since these patients are looking for phosphate binders and are probably anemic and iron deficient, their medical providers will almost certainly want to try the drug on them. This has the potential to explode the stock beyond the $100 mark. Ok, I know it’s hard to predict the future, but I (for one) am very LONG KERX for all of the above reasons.