Keryx Biopharmaceuticals (NASDAQ: KERX)
Following recent declines, Keryx Biopharmaceuticals is having a great day in the market today. However, the big question is, can the climb last? So today, we’ll take a look at what’s causing the stock to jump, see how high it’s gotten so far, and discuss whether or not the uptrends are likely to continue for the long run.
Why Is Keryx Biopharmaceuticals Climbing Today?
After a bit of research, I’ve come to the conclusion that the climb is caused purely by a change in investor attitude toward the stock. The reality is that KERX has been falling for more than a month. At this point, the stock has simply reached support in the market and seems to be recovering. Currently (2:06), the stock is trading at $10.31 after a gain of 10.62% so far today. Which leads us to the big question…
Is The Climb Likely To Last
In this particular case, I have two conflicting outlooks for the stock; depending on how far in the future you plan to look. In the short term, it looks like we’re going to see more gains. However, as Richard Pearson from Seeking Alpha pointed out KERX is on a dangerous path toward a slap from the FDA and declining stock prices. Here’s how I see it.
Short Term – In the short term, there’s no denying that technically, KERX looks like there’s little resistance and tons of support at this point; insinuating little downside risk. As a result, we can expect to see more gains over the short term period; that is…until the FDA steps in!
Long Term – Long term, I think that Keryx Biopharmaceuticals may be in a bit of trouble; thanks to the compelling article written by Mr. Pearson that I linked to above. In the article, Mr. Pearson explained that KERX is headed for a warning from the FDA and severely declining stock prices as a result of unapproved and what the FDA would consider to be misleading advertising.
It all stems from the branding and advertising efforts Keryx Biopharmaceuticals has made toward their drug Auryxia. The marketing campaign for this drug conveys a clear “two for one benefit”, including an “iron benefit” that’s incredibly important to the campaign. Unfortunately however, Auryxia hasn’t been approved by the FDA to provide an iron benefit. In the article, Mr. Pearson points out that KERX has gone as far as advertising the financial benefit involved from the unapproved indication. He also explained that there was a similar case where Aegerion received an FDA warning letter, Department of Justice investigation, and an incredible decline to their stock price. Based on what we’ve seen in similar cases and the current actions of KERX, we can expect to see FDA warnings, DOJ investigations, and declining stock prices from KERX in the long run.