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What's in Store for Keryx (KERX) this Earnings Season?

Keryx Biopharmaceuticals, Inc. KERX is scheduled to report first-quarter 2016 results on Apr 28.

Keryx’s track record has been disappointing so far. Over the four trailing quarters, the company has posted an average negative earnings surprise of 16.50%, having met earnings expectations in two quarters and missed the same in the other two.  Let’s see how things are shaping up for this announcement.

Factors Influencing This Quarter

Apart from license fees, Keryx’s top line comprises revenues generated by Auryxia (ferric citrate). Auryxia (approved for the control of serum phosphorus levels in patients with chronic kidney disease/CKD) remains the growth engine at Keryx.

In Sep 2015, Keryx gained EU approval for Fexeric (EU trade name for Auryxia) for the control of elevated serum phosphorus levels, or hyperphosphatemia, in both dialysis and pre-dialysis patients suffering from CKD, which was an important milestone for the company. It is currently seeking partners for the EU launch of the drug.

We note that Keryx is investing a lot of resources in the commercialization of Auryxia. Moreover, the company has expanded its sales force by 50%. Going forward, the company plans to leverage its expanded sales force to increase the utilization of Auryxia. The company plans to further interact with nephrologists and dietitians regarding Auryxia’s profile in treating hyperphosphatemia and its mechanism of action.

Although the company did not provide a quarterly guidance, it did provide its annual guidance. Keryx expects Auryxia sales in the U.S to be $31–$34 million. It projects 2016 cash operating expenses in the range of $87 million to $92 million. Cost of goods sold, as a percentage of net Auryxia sales, is anticipated in the mid-20s. The company exited 2015 with a 1.4% share of the phosphate binder market, while its 2016 guidance implies an exit share of around 3% by the year end. However, the company does not expect sales in the first quarter of 2016 to grow at the 40%-plus rate that it recorded last quarter. Demand growth is projected between 20% and 35% on a sequential basis, with a further ramp-up as the company realizes the full impact of its sales force.

Meanwhile, ferric citrate is being evaluated in a phase III study for the treatment of iron-deficiency anemia in patients suffering from stage III–V non-dialysis dependent chronic kidney disease (NDD CKD). The trial demonstrated statistically significant differences from placebo in the primary as well as all the pre-specified secondary endpoints. These encouraging trial results should support Keryx’s plan 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.

What Our Model Indicates

Our proven model does not conclusively show that Keryx is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and Zacks Consensus Estimate stand at a loss of 22 cents.

Zacks Rank: Though Keryx’s Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks You May Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Gilead Sciences GILD has an Earnings ESP of +1.65% and a Zacks Rank #2. The company is scheduled to report first-quarter results on Apr 28.

The Earnings ESP for Sanofi SNY is +4.17% and it carries a Zacks Rank #2. The company is scheduled to release results on Apr 29.

The Earnings ESP for BioMarin Pharmaceutical Inc. BMRN is +22.35% and it carries a Zacks Rank #3. The company is scheduled to release first-quarter results on Apr 28.

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SANOFI-AVENTIS (SNY): Free Stock Analysis Report
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KERYX BIOPHARMA (KERX): Free Stock Analysis Report
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