Keryx Biopharmaceuticals (KERX): Boris Peaker Sees Big Hurdle Ahead for Auryxia’s Commercial Adoption

KERX pulled Auryxia guidance for the year after a rocky third quarter performance; Cowen's Boris Peaker thumbs down.

Keryx Biopharmaceuticals (NASDAQ:KERX) shares toppled 17% on Tuesday when investors were met with a rude awakening that iron deficiency anemia (IDA) drug Auryxia sales were a far cry from what consensus had predicted for the third quarter. Whereas the Street thought the IDA asset would yield $17.2 million, Auryxia merely had $13.6 million to show for the quarter.

While the biotech firm may have revealed a label expansion in the IDA arena, Cowen analyst Boris Peaker is less than enthused, more concerned that guidance for the year was wiped from the table. Peaker likewise was disappointed with a prediction for domestic sales for the drug that were even more confident than consensus at $17.8 million.

In reaction to a weak print, the analyst maintains a Market Perform rating on KERX stock without suggesting a price target. (To watch Peaker’s track record, click here)

Peaker attributes Keryx’s shortcoming to “both decreased script growth and increased gross-to-net adjustments,” and adds that on another note of caution: “We believe IDA label expansion was largely priced in and that physician education will present the biggest hurdle for commercial adoption.”

Even though total Auryxia scripts for the quarter saw a rise from the second quarter’s 21,000 to 24,900, marking 18% quarter-over-quarter growth, this is nonetheless lower than the 34% quarter-over-quarter script growth seen in the second quarter for the firm. IMS capture rate has stayed at 55% with around 70% of usage stemming from second-line setting from patients who are switched off patients with Renvela, designed to control phosphorus levels in patients suffering from chronic kidney disease and are on dialysis.

The analyst comments, “Specifically, KERX cited a disproportionate growth in Medicare Part D adoption, which carries the highest level of rebates and outpaced commercial growth. Medicare Part D represented 60% of scripts in the quarter, similar to the overall phosphate binder market, but since total script numbers remain small this led to an increase in gross-to-net of 10%.”

Peaker concludes anticipating further discounts heading Renvela’s way, highlighting: “KERX believes generics are currently priced at a 40% discount to Renvela and are expected to be discounted even further over time, but management does not expect an impact to Auryxia. We disagree with that view and believe that KERX will likely have to offer higher discounts in the frontline setting as generics further drive down sevelamer price.”

Wall Street is just not sure about this biotech player, considering that according to TipRanks, out of 6 analysts polled in the last 12 months, 2 are bullish on the stock while 4 remain sidelined. With a return potential of nearly 45%, the stock’s consensus target price stands at $7.30.

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