Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Keryx Biopharmaceuticals Plunged 44.3% in August

By Brian Feroldi – Sep 6, 2016 at 3:03PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Manufacturing issues related to its one and only drug, Auryxia, caused management to abandon its full-year financial guidance.

Image source: Getty Images.

What happened

Investors in Keryx Biopharmaceuticals (KERX), a commercial-stage biopharma focused on renal diseases, had an August their portfolios would like to forget. Shares were obliterated during the month, dropping 44.3%, according to data from S&P Global Market Intelligence.

KERX Chart

KERX data by YCharts.

So what

The huge drop can be directly traced to an announcement made during the company's second-quarter earnings report.

Management stated that manufacturing issues were going to cause an interruption to the supply of Auryxia, the company's drug that helps patients with chronic kidney diseases on dialysis control their serum phosphorus levels. As a result, management will not have enough product to meet expected demand, causing them to abandon their financial guidance for 2016. 

Understandably, investors sold off the stock when the news hit the wires and have stayed down ever since.

Now what

Despite the terrible manufacturing news, Keryx's second-quarter results suggest that providers are finally starting to get comfortable using Auryxia. The company generated 13,150 prescriptions in the U.S. during the quarter, which was up a strong 44% over the first quarter of last year. That suggests that Auryxia is successfully stealing market share away from Sanofi's (SNY -0.10%) drugs Renagel and Renvela, which is an encouraging sign.

U.S. sales totaled $8.3 million, and when adding in the $1 million in royalties gained from its overseas partnership with Torii Pharmaceutical/Japan Tobacco, total revenue came in at $9.3 million. That was ahead of Wall Street's estimate of only $9 million.

Image source: Keryx Biopharmaceuticals.

Of course, we don't yet know how providers will respond to the news of manufacturing issues with Auryxia, so it's possible that the strong prescription growth we saw in the second quarter is about to come to a screeching halt. After all, Sanofi can now make the argument that potential supply issues are a yet another reason to stick with Renagel and Renvela instead of trying Auryxia, which may be messaging that resonates with some providers.

Looking forward, Keryx's management believes that this supply issue will be resolved by the fourth quarter. In addition, the company is still planning to file a label expansion claim with the Food and Drug Administration later this quarter to allow patients who are not on dialysis to use Auryxia. If that goes well, it could significantly expand the drug's addressable market.

Still, this news about manufacturing problems adds a huge unknown to this company's future. For that reason, it may make sense to stay away from this stock until we have more clarity about how this situation will play out.

Brian Feroldi has no position in any stocks mentioned. Like this article? Follow him on Twitter where he goes by the handle @Longtermmindset or connect with him on LinkedIn to see more articles like this.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Keryx Biopharmaceuticals Stock Quote
Keryx Biopharmaceuticals
KERX
Sanofi Stock Quote
Sanofi
SNY
$38.86 (-0.10%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
338%
 
S&P 500 Returns
108%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.