Keryx (KERX) Q1 Loss in Line, Auryxia Up on Strong Demand (Revised)

Keryx Biopharmaceuticals Inc.'s KERX first-quarter 2016 loss of 22 cents per share (excluding $15.7 million in non-cash interest expense related to amortization of the debt discount on its convertible senior notes and a $2.0 million non-cash charge related to the increase in fair value of derivative liability that was recorded in connection with the issuance of convertible senior notes) was in line with the Zacks Consensus Estimate but wider than year-ago loss of 28 cents.

On a reported basis, the company posted a loss of 39 cents per share.

The company generated revenues of $6.8 million in the quarter, in line with the Zacks Consensus Estimate. Reported revenues were up from the prior-year figure of $1.2 million.

The Quarter in Details

Net sales of Auryxia in the U.S. were about $5.6 million, up from $4.8 million in the previous quarter. The drug's prescriptions were approximately 9,150, up 17% sequentially, driven in part by continued gains from new prescribers and an increase in the number of prescriptions per prescriber. The company gained EU approval for Auryxia, under the trade name Fexeric, in Sep 2015. It is now looking for pan-European or regional partners for the commercialization of the drug in the region.

The company recorded license revenues of $1.2 million.

Meanwhile, ferric citrate (the compound name for Auryxia in additional indications) is being evaluated in a phase III study for the treatment of iron-deficiency anemia IDA in patients suffering from stage III–V non-dialysis dependent chronic kidney disease (NDD CKD). The company reported positive data from the trial that demonstrated statistically significant differences from placebo in the primary as well as all the pre-specified secondary endpoints.

These results should support Keryx's plans to submit a supplemental new drug application (sNDA) in the third quarter of 2016, through which it intends to expand the ferric citrate's label to include the treatment of IDA in patients with stage III–V NDD CKD.

Research and development expenses declined 20.6% year over year to $7.6 million, primarily due to a decrease in costs associated with the company's recently completed phase III trial evaluating ferric citrate for the treatment of IDA stage III-V NDD CKD in adults.

Selling, general and administrative expenses were $20.8 million, up 10.2%, primarily related to incremental costs associated with the hiring and onboarding of Keryx's expanded field team.

2016 Guidance Reiterated

Keryx continues to expect Auryxia sales in the U.S in the range of $31–$34 million. It projects sales to ramp up throughout the year, as the company realizes the full impact of its expanded sales force. Notably, Keryx completed its sales force expansion in 2015, whereby the company now has some 95 sales representatives pitching in for the drug. The company expects cash operating expenses in the range of $87 million to $92 million.

Our Take

Keryx reported in-line results for the first quarter. The sequential improvement in Auryxia revenues was encouraging. Going forward, growth should be driven by the sales force expansion in 2015, which will increase the company's reach and frequency of contact with physicians, dieticians and the entire dialysis care team. Meanwhile, a potential approval of the compound for IDA in patients suffering from stage III–V NDD CKD will further boost sales. The company is gearing up for a potential launch in 2017 for this indication.

Keryx carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector include ArQule, Inc. ARQL, Aegerion Pharmaceuticals, Inc. AEGR and Shire plc SHPG. All the stocks sport a Zacks Rank #1 (Strong Buy).

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(We are reissuing this article to correct a mistake. The original article, issued on Apr 28, 2016, should no longer be relied upon.)

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