The drug, perifosine, is currently in a late-stage trial to treat multiple myeloma -- a type of cancer that affects plasma cells.

"No announcement was made regarding the future of the multiple myeloma study, but in our view, we expect the study will be terminated," Bloom Burton & Co analyst Philippa Flint said in a note to clients.

Keryx said recruitment for the multiple myeloma study could become increasingly difficult given the negative outcome of the colorectal cancer study.

"We will evaluate whether our Phase 3 study of perifosine in relapsed/refractory multiple myeloma will continue as planned," Keryx's Chief Executive Ron Bentsur said in a statement.

Shares of Keryx lost two-thirds of their value and fell to a nearly two-and-a-half-year-low of $1.63 in early trade on Monday to become the biggest percentage loser on Nasdaq.

Aeterna's stock plunged 67 percent to a two-year-low of 69 Canadian cents on the Toronto Stock Exchange.

The 468-patient colorectal cancer trial showed that a combination of Keryx's drug perifosine and chemotherapy failed to prolong survival in patients with refractory advanced colorectal cancer when compared with a dummy drug along with chemotherapy.

Keryx acquired the North American rights to the experimental drug KRX-0401 -- perifosine -- through a licensing deal with Canadian biotech company Aeterna Zentaris in September 2002.

In August 2011, an independent safety panel had given its go-ahead for the experimental drug and recommended the late-stage study continue to completion.

Brean Murray Carret & Co analyst Jonathan Aschoff halved his price target on Keryx shares to $5 from $10.

FOCUS ON ZERENEX

Keryx's only other drug -- Zerenex -- is currently in a late-stage trial for hyperphosphatemia in patients with end-stage renal disease.

"We have removed perifosine from our projections and our $4 target is based entirely on the Zerenex opportunity," said Roth Capital analyst Joseph Pantginis, who downgraded the stock to "neutral" from "buy".

Hyperphosphatemia is a condition where patients cannot excrete phosphorous due to renal failure, and results in elevated levels of phosphate in the blood. This causes bone disease and calcification of all tissues including the lungs, heart and blood vessels.

The drug is currently undergoing a second late-stage trial, topline data from which is expected by the end of 2012.

"When the perifosine dust settles, we believe investors will revisit what we consider to be the lower-risk Zerenex Phase III program," Pantginis wrote in a note.

Zerenex could target a market of $700 million to $750 million in the United States and $1.5 billion worldwide, Ladenburg Thalmann analyst Matthew Kaplan told Reuters.

Keryx expects to file for marketing approval for Zerenex in the United States in the first quarter of 2013. It expects its Japanese partners Japan Tobacco and Torii Pharmaceutical to apply for regulatory approval for the drug in Japan around the same time.

(Reporting by Balaji Sridharan in Bangalore; Editing by Joyjeet Das, Roshni Menon)

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