Oppenheimer Report Keryx Biopharmaceuticals, Inc.


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Zerenex Alone Supports Current Valuation; Perifosine Carries Significant Upside

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Oppenheimer Report Keryx Biopharmaceuticals, Inc.

  1. 1. EQUITY RESEARCH COMPANY UPDATE November 15, 2011 HEALTHCARE/EMERGING BIOTECHNOLOGY Stock Rating: OUTPERFORM KERYX Biopharmaceuticals Inc. 12-18 mo. Price Target $8.00 Zerenex Alone Supports Current Valuation; Perifosine KERX - NASDAQ $2.82 Carries Significant Upside 3-5 Yr. EPS Gr. Rate NA SUMMARY 52-Wk Range $5.91-$2.58 This weekend Keryx presented a poster supporting a pharmacoeconomic argument Shares Outstanding 71.0M behind using Zerenex in high-dose ESA patients. In our prior valuation of the Float 40.2M company, we combined the models for Zerenex and perifosine and derived a single Market Capitalization $200.3M NPV. Given the stocks recent weakness and the concerns raised about perifosine Avg. Daily Trading Volume 1,501,492 (despite a positive DSMC meeting), we looked at the value of Zerenex as a stand-alone asset, which we believe is worth ~$3/share. While investors are Dividend/Div Yield NA/NM focused on perifosine Phase III results in colorectal cancer, anticipated in 1Q12, we Fiscal Year Ends Dec believe that the negative outcome is largely factored in at the current valuation, and Book Value $0.28 we believe that Zerenex will serve as a valuation floor for the perifosine bear thesis. 2007E ROE NA We reiterate our Outperform rating and $8 target. LT Debt NA KEY POINTS Preferred NA s We would like to be crystal clear that our view on perifosine has not changed. In Common Equity $23M our opinion, the overenrollment in the Phase III study validates the unmet Convertible Available No medical need in refractory colorectal cancer, and the positive DSMC review last EPS Diluted Q1 Q2 Q3 Q4 Year Mult. month confirms perifosines safety. 2010A (0.07) (0.09) (0.10) (0.09) (0.34) NM s The pharmacoeconomic analysis of Zerenex was performed by DaVita, the 2011E (0.10)A (0.05)A (0.15)A (0.14) (0.45) NM second-largest dialysis provider in the US, with ~1/3 of the overall market. The 2012E (0.25) (0.26) (0.20) 0.13 (0.53) NM analysis assumed Zerenex pricing on par with current phosphate binders and the iron increase observed in studies to date. s The data suggests cost savings of $320/patient/month in high-dose ESA users. Since our model assumes a more competitive Zerenex price, the cost savings could be even higher. As such, we believe that our peak market share of 15% for Zerenex in the US is conservative and justified. s Based on our assumption of a peak market share of 15% and pricing of $2.5K/year for Zerenex (for reference, Renagel and Fosrenol are priced at $3-5K/year), we built an NPV model for Zerenex (see p.5). The analysis suggests that Zerenex is worth $3.10/share, a slight discount to KERXs current valuation. Stock Price Performance Company Description 1 Year Price History for KERX Keryx Biopharmaceuticals a late-stage 6 biotechnology company with two drugs 5 in Phase III clinical studies. The 4 companys pipeline is focused on 3 oncology and nephrology. 2 1 Q3 Q1 Q2 Q3 2011 2012 Created by BlueMatrix Oppenheimer & Co. Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect theBoris Peaker, Ph.D., CFA objectivity of this report. Investors should consider this report as only a single factor in making their212 667-8564 investment decision. See "Important Disclosures and Certifications" section at the end of this report forBoris.Peaker@opco.com important disclosures, including potential conflicts of interest. See "Price Target Calculation" and "Key Risks to Price Target" sections at the end of this report, where applicable. Oppenheimer & Co Inc. 300 Madison Avenue New York, NY 10017 Tel: 800-221-5588 Fax: 212-667-8229
  2. 2. KERYX Biopharmaceuticals Inc. Pharmacoeconomic Data Supports Zerenex We believe that the posters presented at the American Society of Nephrology this past weekend confirm the pharmacoeconomic benefit of Zerenex. As a reminder, Zerenex (ferric citrate) is a phosphate binder that also improves iron stores by decreasing usage of ESA, the most expensive drug utilized in dialysis. The current reimbursement trend in dialysis capitates reimbursement on a per patient basis (adjusted for complications), which places pressure on the providers to minimize ESA usage while at the same time maintaining minimal Hb targets. We believe that a phosphate binder (an essential drug for the majority of dialysis patients) like Zerenex, which may reduce ESA usage and associated costs, may be economically attractive to dialysis providers. Zerenex Carries Relatively Low Clinical Trial Success Risk Over the last several months, there has been a debate in the investor community regarding the success or failure of perifosine in the ongoing Phase III (X-PECT) trial in refractory colorectal cancer. While we maintain our positive view on this study based on the strong data observed in the Phase II, we believe that Zerenex carries a lower clinical trial risk than perifosine. Specifically, Zerenex has shown a strong efficacy and an excellent safety profile in the studies to date, and phosphate binder study outcomes tend to be quite consistent with prior data. We assess a probability of approval for Zerenex of 80% in the US and 75% in Japan. Phase III Program Includes Short- and Long-Term Studies Based on the positive results from the Phase IIb program (Exhibits 1 and 2), Keryx has negotiated a Special Protocol Assessment (SPA) with the FDA for a registration program for Zerenex. Exhibit 1: Phase IIB Dose Ranging Efficacy Data For Zerenex Placebo 2g/day 4g/day 6g/day n = 16 n = 31 n = 32 n = 32 Change in serum phosphorus concentration (mg/dL) Baseline (day 0) 7.2 ± 1.4 7.2 ± 1.2 7.1 ± 1.3 7.3 ± 1.3 End of treatment (day 28) 7.2 ± 1.2 6.9 ± 2.2 6.0 ± 1.3 5.8 ± 1.8 Mean difference from placebo -0.02 -1.1 -1.5 p-value Not significant 0.06 0.0119 Mean difference from baseline -0.1 -0.3 -1.1 -0.5 p-value Not significant Not significant Not significant <0.01 Change in calcium×phosphorus (mg/dL) Baseline (day 0) 62.8 ± 13.9 62.9 ± 13.2 63.5 ± 10.7 65.8 ± 12.2 End of treatment (day 28) 63.2 ± 12.6 61.7 ± 21.3 55.4 ± 13.4 54.1 ± 17.7 Mean difference from placebo -0.9 -7.91 -11.4 p-value 0.895 0.1375 0.0378 Mean difference from baseline -0.3 -1.1 -8.1 -11.7 p-value Not significant Not significant Not significant <0.01 Source: Company report2
  3. 3. KERYX Biopharmaceuticals Inc.Exhibit 2: Phase IIB Dose Ranging Safety Data For ZerenexAdverse events Placebo 2g/day 4g/day 6g/dayMild 7 (43.8%) 13 (39.4%) 9 (26.5%) 14 (42.4%)Severe 1 (6.23%) 0 2 (5.9%) 1 (3.0%)Possibly related to drug 4 (25%) 7 (21.2%) 8 (23.5%) 7 (21.2%)Source: Company report The Phase III program includes a randomized, open-label, short-term study (28 days), which enrolled 146 patients. Subjects were randomized (1:1:1) to one of three doses of Zerenex (1, 6 or 8 grams/day) following a two-week washout period from their prior phosphate binders. The primary endpoint of the study is dose response in the change of serum phosphorus from baseline. The long-term study is also randomized and open-label, and includes a two-week washout period. However, the long-term trial will enroll twice the number of dialysis patients (~300) and assess safety over 52 weeks compared to the short-term study. Additionally, at the end of the 52-week period, patients will be randomized (1:1) to either continue on Zerenex or placebo. Final results for the short-term study were presented at the National Kidney Foundation meeting in late April 2011 (Exhibit 3). The data shows that patients were well randomized, with a baseline serum phosphorus level of 7.3-7.6 mg/dL across the three arms of the trial. The data also indicates that patients in the 8g/day arm reached the normal range for serum phosphorus (<5.5mg/dL), while the 6g/day arm came very close (5.7mg/dL). Both results were highly statistically significant (p<0.0001). We view these results as encouraging, considering the short duration of the study. Additionally, while the 6g/day (6 pills/day) dose did not reach the threshold of normal, we believe that results are likely to improve with additional duration on drug as was observed in the Taiwanese extension study. The investigators also noted a positive increase in ferritin (iron stores) and TSAT (the ratio of serum iron to total iron-binding capacity) in the 6g and 8g groups. Zerenex appeared to be safe and well tolerated with gastroenterological side effects that were generally mild. No severe adverse events were deemed to be drug-related by the Data Safety Monitoring Board (DSMB). Additionally, the lead investigator of the trial, Dr. Julia Lewis, further highlighted the attractive profile of Zerenex, which included excellent reduction of serum phosphorus, increase in bicarbonate, and modest increase in iron. Exhibit 3: Efficacy Results From Short Phase III Study of Zerenex 1g/day 6g/day 8g/day n = 50 n = 51 n = 45 Baseline Serum Phosphorus 7.3 7.6 7.5 (at end of washout), mg/dL Serum Phosphorus at Day 28, 7.4 5.7 5.3 mg/dL Change from Baseline to Day -1.9 -2.2 0.1 28, mg/dL (p<0.0001) (p<0.0001) % change from Baseline to 0.50% -25% -28.8% Day 28, mg/dL Source: Company report 3
  4. 4. KERYX Biopharmaceuticals Inc. Phase III Studies Ongoing In US and Japan; EU Authorities Give Positive Opinion Keryx is currently conducting the long-term Phase III trial, which completed enrollment in September 2011. The study will add to the safety and efficacy dataset for Zerenex, and will further define Zerenex’s product profile. The final data is anticipated a year later in 4Q12, followed by an NDA filing and potential approval in 2H13. In parallel, Keryx’s Japanese partner, JT Torri (Torii Pharmaceuticals is the pharmaceutical subsidiary of Japan Tobacco), conducted their own placebo- controlled, double-blind Phase II study of Zerenex for 28-days following a three- week washout period in ~160 patients. Following the successful results from the Phase II study, a Japanese Phase III program was initiated in April 2011. Additionally, in May 2011 the European Medicines Agency (EMEA) gave a positive opinion on the Zerenex development program. This means that if the Phase III is successful, the combined data package is adequate to file for European approval of Zerenex without requiring additional studies. Zerenex Alone Supports Current Valuation We assess our value for Zerenex based on an NPV analysis (Exhibit 4). Our target market estimate is the end stage renal disease (ESRD) population in the US (~592,000 people in 2011), 80% of whom are estimated to require chronic phosphate binder therapy. We assumed a price point for Zerenex of $2,500/patient year, which we believe is a conservative estimate given the cost of ~$5K/year for Renagel (market leader). Our pricing assumption is based on the expectation of a generic Renagel launched in the US following patent expiry in 2014. Our market share assumption commences with 1% of the US market in 2013 (partial year) and grows to 15% in five years. We believe that the 15% peak market share is conservative and may be heavily influenced by the reimbursement rules that may come into effect in 2014. Our market share estimate is predicated on Renagel remaining the dominant phosphate binder, with Zerenex prescribed to patients who do not adequately respond to Renagel or other phosphate binders. Combining these estimates we arrive at US sales of ~$300M+ for Zerenex. For expenses we estimate $8M in milestones to Panion ($3M upon successful outcome in the long-term in Phase III study and $5M upon approval) and a 5% royalty on US sales. We estimate costs of goods sold at 9% of revenue and sales & marketing costs reaching 25% of US sales. We extend our model through 2021 based on the expiry of the composition of matter patent in 2017 and assumed 4- year patent extension based on Hatch-Waxman legislation. We further adjust the cash flow in each year by the probability of occurrence, with 100% probability to the costs in the years through 2013 and 80% of success in reaching market. We believe that the risk of gaining FDA approval for Zerenex is lower than for an average drug based on the encouraging results from the clinical trials conducted to date and the well-understood mechanism of action. In our view the greatest uncertainties in the commercial value of Zerenex in the US are associated with its product profile and reimbursement environment. For the Japanese market we estimated that Keryx could receive $10M upon successful completion of clinical studies and another $20M upon approval in 2014. For the market size we estimated total Japanese sales to be ~1/3 of the US, and for Keryx to receive a 15% royalty rate on total Japanese sales. Further, we assigned a 75% probability of success to the approval of Zerenex in Japan.4
  5. 5. KERYX Biopharmaceuticals Inc.Exhibit 4: Zerenex Commercial Model in US and Japan Zerenex US 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 ESRD patients in the US (000s) 592 615 640 666 692 720 749 779 810 842 876 Patients on phosphate binders (000s) 473 492 512 532 554 576 599 623 648 674 701 Price ($/patient year) 2500 2575 2652 2732 2814 2898 2985 3075 3167 Market Share 1% 4% 6% 8% 15% 15% 15% 15% 15% US Revenue ($M) 18 55 88 126 253 271 290 311 333 Expenses Royalty to Panion ($M) 1 3 4 6 13 14 15 16 17 Milestones to Panion ($M) 3 5 COGS ($M) 0 2 5 8 11 23 24 26 28 30 Sales & Marketing ($M) 2 2 10 20 26 38 63 68 73 78 83 R&D + G&A ($M) 7 9 12 5 2 2 2 2 2 2 2 Net pre-tax cashflow ($M) (9) (14) (12) 22 47 68 152 163 175 188 201 Probability of cashflow 100% 100% 100% 80% 80% 80% 80% 80% 80% 80% 80% Risk-adjusted pre-tax cashflow ($M) (9) (14) (12) 18 38 55 122 131 140 150 161 Zerenex in Japan Japan Milestones ($M) 10 20 Japanese Sales (by JT Torii in $M) 6 18 29 42 84 90 97 104 Royalty to Keryx on Japan sales ($M) 1 3 4 6 13 14 15 16 Total Japanese cashflows to Keryx ($M) 10 27 21 34 48 97 104 111 119 Probability of cashflow 75% 75% 75% 75% 75% 75% 75% 75% 75% Risk-adjusted pre-tax cashflows ($M) 8 20 16 25 36 73 78 83 89 Total risk-adjusted pre-tax Zerenex cashflows ($M) (9) (14) (4) 38 54 80 158 203 218 233 250 Pre-Tax Risk Adjusted Cashflow Zerenex ($MM) (9) (14) (4) 38 54 80 158 203 218 233 250 Perifosine in colorectal ($M) Perifosine in multiple myeloma ($M) Total Risk-Adjusted Pre-tax cashflows (9) (14) (4) 38 54 80 158 203 218 233 250 Taxes 0 0 0 13 19 28 55 71 76 82 88 After-tax cashflow (9) (14) (4) 25 35 52 103 132 142 152 163 Discount rate 15% NPV ($M) 270 NPV per share $3.10Source: Oppenheimer & Co. estimates. Potential Upsides to Our Zerenex Model Penetration of Pre-Dialysis Market Although phosphate binders are primarily utilized in dialysis patients, there is suggestive medical evidence that patients in late stage kidney failure who are not yet on dialysis may benefit from phosphate binders as well. There are no phosphate binders approved for pre-dialysis in the US, but Renvela and Fosrenol are approved for pre-dialysis in some European countries. We believe that a potential off-label use of Zerenex in pre-dialysis and/or formal approval in pre- dialysis may significantly expand its potential market. In our opinion, additional studies are likely necessary for label expansion in pre-dialysis. Pricing We assumed a price of $2,500 per patient per year to remain competitive with the likely launch of generic Renagel in 2014 or 2015. However, if Zerenex shows significant improvements outside of serum phosphorus reduction, such as reduced need for iron, ESAs, and/or improved metabolic acidosis profile, a price point of $3,000-5,000 per year may be justifiable. Market Penetration Similar to the pricing upside described above, we believe that if Zerenex shows significant benefits outside of serum phosphorus and pill burden reduction, it may 5
  6. 6. KERYX Biopharmaceuticals Inc. potentially gain much higher than the 15% peak market share that we currently estimate. Patent Extension Our model assumes the expiry of Zerenex’s exclusivity in 2021. However, the patent estate includes a manufacturing patent extending through 2023. An extension of Zerenex’s exclusivity could further increase its commercial value. Risks To Our Zerenex Thesis And NPV Model There are multiple risks and uncertainties associated with investment in development-stage biotechnology companies. We recommend that investors review Keryx’s regulatory filings for the detailed summary of investment risks, and below we highlight the top three risks that relate to our Zerenex thesis and NPV model. Dialysis Reimbursement Risk The reimbursement regulations for dialysis are evolving rapidly, from an inclusion of injectable drugs into a fixed reimbursement bundle in 2011, to the likely addition of oral drugs, like phosphate binders, to the fixed payment bundle in 2014. It is possible that the combination of these two variables (low incremental bundle increase for the addition of oral drugs and low penalty for high serum phosphorus) may jeopardize Zerenex’s value proposition in the context of generic Renagel. Competitive Risk There are multiple approved phosphate binders, as well as competing products in development. The patent for Renagel, the leading phosphate binder in the US, expires in 2014. The introduction of generic Renagel, in addition to potential approval of new phosphate binders, may negatively impact Zerenex’s commercial potential. Clinical Trial Risk There is a risk that the current ongoing Phase III trial of Zerenex may show an unexpected safety finding, which could negatively impact the approvability of the drug and/or its label if approved. Stock prices of other companies mentioned in this report (as of 11/12/2011): Davita Inc. (DVA-NYSE, $74.81, Not Rated)6
  7. 7. KERYX Biopharmaceuticals Inc.Exhibit 5: Keryx Income StatementHistorical and Projected Income Statement Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 FY09A FY10A FY11E FY12E FY13EFY Ending Dec 31st 1QA 2QA 3QA 4QA 1QA 2QA 3QA 4QE 1QE 2QE 3QE 4QEREVENUEPerifosine Revenue 5,000 25,000 30,000 321,484Zerenex Revenue 17,918License revenue 21,616 5,000 5,000 8,000 8,000 10,000Service revenueOther revenue 3,575Total Revenue 25,191 5,000 5,000 5,000 33,000 38,000 349,401OPERATING EXPENSESCost of Good Sold 250 1,250 1,500 17,687Non-cash research and development 1,233 242 434 322 238 1,236 259 205 152 200 816 400 400 450 450 1,700 2,700Operating research and development 7,372 2,554 3,129 3,901 4,144 13,728 4,618 6,295 8,620 8,500 28,033 6,500 5,000 4,000 4,000 19,500 14,000Non-cash general and administrative 1,867 407 261 291 278 1,237 314 314 320 300 1,248 350 350 350 350 1,400 1,800Operating general and administrative 4,904 898 1,356 1,419 1,341 5,014 1,284 1,404 1,263 1,200 5,151 1,400 1,500 1,600 1,600 6,100 7,500Sales & Marketing 9,000 12,000 14,000 15,000 50,000 104,445Total Operating Expenses 15,376 4,101 5,180 5,933 6,001 21,215 6,475 8,218 10,355 10,200 35,248 17,650 19,250 20,400 21,400 78,700 130,445Operating (loss) income 9,815 (4,101) (5,180) (5,933) (6,001) (21,215) (6,475) (3,218) (10,355) (10,200) (30,248) (17,650) (19,250) (15,400) 11,600 (40,700) 218,956Interest and other income, net 667 86 26 85 567 764 70 122 108 100 400 120 120 120 120 480 600(Loss) income before income taxes 10,482 (4,015) (5,154) (5,848) (5,434) (20,451) (6,405) (3,096) (10,247) (10,100) (29,848) (17,530) (19,130) (15,280) 11,720 (40,220) 219,556Income taxes 120Gain from discontinued operations 120Net (loss) income 10,482 (4,015) (5,154) (5,848) (5,314) (20,331) (6,405) (3,096) (10,247) (10,100) (29,848) (17,530) (19,130) (15,280) 11,720 (40,220) 219,556Basic and diluted income (loss) per share 0.21 (0.07) (0.09) (0.10) (0.09) (0.34) (0.10) (0.05) (0.15) (0.14) (0.45) (0.25) (0.26) (0.20) 0.13 (0.53) 2.49Weighted average basic and diluted shares outstanding 50,499 56,881 58,427 59,325 59,425 58,988 61,550 66,287 70,484 70,643 67,042 71,293 74,493 77,693 87,782 75,468 88,282Source: Oppenheimer & Co. estimates. 7
  8. 8. KERYX Biopharmaceuticals Inc. Investment Thesis Keryx is a development-stage biotechnology company with a therapeutic focus in oncology and renal disease. Keryx has two drugs, perifosine and Zerenex, in Phase III studies conducted under Special Protocol Assessments from the FDA. Perifosine also received a Fast Track designation, which suggests that it addresses a life-threatening condition and a significant unmet medical need, and allows for a six-month FDA review cycle. We believe that the company is well positioned to capitalize on the potential commercial value of its assets in the US and ex-US. Price Target Calculation We derive our price target for Keryx shares based on an NPV calculation (see Exhibit 4). We estimate the commercial value for perifosine in colorectal cancer and multiple myeloma as well as Zerenex in hyperphosphatemia, and combine these assessments in our NPV calculation. Key Risks to Price Target Risks to our price target include clinical trial risk, reimbursement risk and competitive risks. Note: We view KERX, as a stock trading under $5, as speculative and appropriate for risk-tolerant investors. Important Disclosures and Certifications Analyst Certification - The author certifies that this research report accurately states his/her personal views about the subject securities, which are reflected in the ratings as well as in the substance of this report.The author certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Potential Conflicts of Interest: Equity research analysts employed by Oppenheimer & Co. Inc. are compensated from revenues generated by the firm including the Oppenheimer & Co. Inc. Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. Oppenheimer & Co. Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, Oppenheimer & Co. Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers. In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, Oppenheimer & Co. Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.8
  9. 9. KERYX Biopharmaceuticals Inc. Rating and Price Target History for: KERYX Biopharmaceuticals Inc. (KERX) as of 11-14-2011 05/16/11 06/07/11 I:O:$7 O:$8 8 6 4 2 0 2009 2010 2011 2012 Created by BlueMatrixAll price targets displayed in the chart above are for a 12- to- 18-month period. Prior to March 30, 2004, Oppenheimer &Co. Inc. used 6-, 12-, 12- to 18-, and 12- to 24-month price targets and ranges. For more information about target pricehistories, please write to Oppenheimer & Co. Inc., 300 Madison Avenue, New York, NY 10017, Attention: Equity ResearchDepartment, Business Manager.Oppenheimer & Co. Inc. Rating System as of January 14th, 2008:Outperform(O) - Stock expected to outperform the S&P 500 within the next 12-18 months.Perform (P) - Stock expected to perform in line with the S&P 500 within the next 12-18 months.Underperform (U) - Stock expected to underperform the S&P 500 within the next 12-18 months.Not Rated (NR) - Oppenheimer & Co. Inc. does not maintain coverage of the stock or is restricted from doing so due to a potentialconflict of interest.Oppenheimer & Co. Inc. Rating System prior to January 14th, 2008:Buy - anticipates appreciation of 10% or more within the next 12 months, and/or a total return of 10% including dividend payments,and/or the ability of the shares to perform better than the leading stock market averages or stocks within its particular industry sector.Neutral - anticipates that the shares will trade at or near their current price and generally in line with the leading market averages due toa perceived absence of strong dynamics that would cause volatility either to the upside or downside, and/or will perform less well thanhigher rated companies within its peer group. Our readers should be aware that when a rating change occurs to Neutral from Buy,aggressive trading accounts might decide to liquidate their positions to employ the funds elsewhere.Sell - anticipates that the shares will depreciate 10% or more in price within the next 12 months, due to fundamental weaknessperceived in the company or for valuation reasons, or are expected to perform significantly worse than equities within the peer group. 9
  10. 10. KERYX Biopharmaceuticals Inc. Distribution of Ratings/IB Services Firmwide IB Serv/Past 12 Mos. Rating Count Percent Count Percent OUTPERFORM [O] 328 55.30 145 44.21 PERFORM [P] 257 43.30 84 32.68 UNDERPERFORM [U] 8 1.30 3 37.50 Although the investment recommendations within the three-tiered, relative stock rating system utilized by Oppenheimer & Co. Inc. do not correlate to buy, hold and sell recommendations, for the purposes of complying with FINRA rules, Oppenheimer & Co. Inc. has assigned buy ratings to securities rated Outperform, hold ratings to securities rated Perform, and sell ratings to securities rated Underperform. Company Specific Disclosures In the past 12 months Oppenheimer & Co. Inc. has provided investment banking services for KERX. Oppenheimer & Co. Inc. expects to receive or intends to seek compensation for investment banking services in the next 3 months from KERX. In the past 12 months Oppenheimer & Co. Inc. has managed or co-managed a public offering of securities for KERX. In the past 12 months Oppenheimer & Co. Inc. has received compensation for investment banking services from KERX. Oppenheimer & Co. Inc. makes a market in the securities of KERX. Additional Information Available Please log on to http://www.opco.com or write to Oppenheimer & Co. Inc., 300 Madison Avenue, New York, NY 10017, Attention: Equity Research Department, Business Manager. Other Disclosures This report is issued and approved for distribution by Oppenheimer & Co. Inc. Oppenheimer & Co. Inc transacts Business on all Principal Exchanges and Member SIPC. This report is provided, for informational purposes only, to institutional and retail investor clients of Oppenheimer & Co. Inc. and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The analyst writing the report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with respect to any security recommended in this report, the recipient should consider whether such recommendation is appropriate given the recipients particular investment needs,10
  11. 11. KERYX Biopharmaceuticals Inc.objectives and financial circumstances. We recommend that investors independently evaluate particular investments and strategies, andencourage investors to seek the advice of a financial advisor.Oppenheimer & Co. Inc. will not treat non-client recipients as its clientssolely by virtue of their receiving this report.Past performance is not a guarantee of future results, and no representation or warranty,express or implied, is made regarding future performance of any security mentioned in this report. The price of the securities mentionedin this report and the income they produce may fluctuate and/or be adversely affected by exchange rates, and investors may realizelosses on investments in such securities, including the loss of investment principal. Oppenheimer & Co. Inc. accepts no liability for anyloss arising from the use of information contained in this report, except to the extent that liability may arise under specific statutes orregulations applicable to Oppenheimer & Co. Inc.All information, opinions and statistical data contained in this report were obtained orderived from public sources believed to be reliable, but Oppenheimer & Co. Inc. does not represent that any such information, opinion orstatistical data is accurate or complete (with the exception of information contained in the Important Disclosures section of this reportprovided by Oppenheimer & Co. Inc. or individual research analysts), and they should not be relied upon as such. All estimates, opinionsand recommendations expressed herein constitute judgments as of the date of this report and are subject to change withoutnotice.Nothing in this report constitutes legal, accounting or tax advice. Since the levels and bases of taxation can change, any referencein this report to the impact of taxation should not be construed as offering tax advice on the tax consequences of investments. As withany investment having potential tax implications, clients should consult with their own independent tax adviser.This report may provideaddresses of, or contain hyperlinks to, Internet web sites. Oppenheimer & Co. Inc. has not reviewed the linked Internet web site of anythird party and takes no responsibility for the contents thereof. Each such address or hyperlink is provided solely for the recipientsconvenience and information, and the content of linked third party web sites is not in any way incorporated into this document.Recipients who choose to access such third-party web sites or follow such hyperlinks do so at their own risk.This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Oppenheimer & Co. Inc.Copyright © Oppenheimer & Co. Inc. 2011. 11