In yesterday’s trade alert posted on our site (and widely disseminated around the web), KERX was one of the stocks highlighted.  We had several emails asking for more info on KERX, so we are happy to oblige.

The first thing to say is that we are not experts in pharma….very few people are.  Pharma seems to be one of those niches that people act like they are experts, but there are so many “wild cards” in pharma that I believe they are kidding themselves and you.  KERX is a case in point.  Do they have a viable new drug or are they playing the news release game with old info? (they have been accused of that)

Just who is KERX?  Keryx Biopharmaceuticals Inc. (Nasdaq: KERX) is a company that (from their website) is dedicated to developing and commercializing novel therapies for the treatment of life-threatening diseases, including diabetes and cancer.  I, for one, am rooting for them.  My Mom and Stepmon both died from cancer and my Dad suffers from diabetes.  My Dad’s diabetes has reached the stage that he is probably going on kidney dialysis (one of the unfortunate side-effects of the disease).  Just because I want them to succeed doesn’t mean I would invest in them.

Let’s take a look at KERX.  A 9 cent stock as recently as February 9th, the stock has climbed “off the mat” to close at $1.25 on June 9th.  In between, it tickled $1.58 intraday in early June when the company reported positive news on their kidney disease drug, Zerenex., which is currently in its phase II clinical development stage.  They also have a promising anti-cancer drug called KRX-0401 (perifosine), an oral anti-cancer agent that modulates Akt, a protein in the body associated with tumor survival and growth. The drug candidate is in phase II clinical development for multiple tumor types.

The technical analysiis from our trade alert is good and some of it is re-printed here.  In its recent chart, KERX’s Bollinger Bands indicate greater than normal volatility as reflected by an increase in distance between the upper and lower bands. It is trading at the upper limit of the Bollinger Bands, the stock reflects neither an overbought nor oversold condition relative to its recent price trend. MACD reflects a strong bullish signal, with the indicator above the 9-day moving average signal line, and also above the 0 level, indicating that moving averages are trending higher. Stochastics are not yet showing that the stock is overbought, but it is close.  The stock is trading well over both its 50 and 200 MA lines.

However, we don’t live in charts alone.  We also live in fundamentals and news.  Let’s talk about news.  Keryx has gotten some very good news lately and with their drug, Zerenex, awaiting approval from the FDA to start stage III tests, more good news might follow.  Fundamentals are a different matter.   Keryx’s auditors issued a going concern stipulation in their audit report and as most pharma companies they bleed money prodigiously.  You have to ask yourself the question whether Keryx will be able to fund the development and trial to bring these drugs to market.

I believe that this is a short-term play only.  And, watch the downside.  This stock could be a 9 cent stock again very quickly.  I tend to doubt that, but with Pharma swings of that magnitude are not uncommon.