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Keryx (KERX) Q2 Earnings Preview: Will the Stock Gain?

Keryx Biopharmaceuticals, Inc.KERX is expected to report second-quarter 2016 results on Aug 3.

Keryx's track record has been disappointing so far. Over the four trailing quarters, the company posted an average negative earnings surprise of 16.50%, having met expectations twice and missed the same on the other two occasions. 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)) is 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, marking an important milestone for the company. Keryx is now looking for partners for the EU launch of the drug, where it is facing pricing issues following the introduction of generic Renvela in certain marketplaces.

We note that Keryx is investing a lot of resources in the commercialization of Auryxia. The company expanded its field-based team to 95 sales representatives. Increasing coverage and additional reach should help boost sales.

Demand for Auryxia is driven by continued gains from new prescribers as well as an increase in the number of prescriptions per prescriber.

Although the company did not provide a quarterly guidance, it did provide an annual guidance. Keryx expects Auryxia sales in the U.S to be $31-$34 million. Demand is expected to grow further as the company realizes the full impact of its expanded sales force. 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.

Meanwhile, Keryx is also working on expanding ferric citrate's label. 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 NDD CKD. The study met its primary endpoint and all prespecified secondary endpoints. Keryx plans to submit a supplemental new drug application (sNDA) in the third quarter of 2016.

What Our Model Indicates

Our proven model shows that Keryx is likely to beat estimates this quarter because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat estimates, and Keryx has the right mix.

Zacks ESP : The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +27.59%. This is because both the Most Accurate estimate stands at a loss of 21 cents, while the Zacks Consensus Estimate stand at a loss of 29 cents.

Zacks Rank: Keryx's Zacks Rank #2 when combined with a positive ESP, makes us reasonably confident of positive surprise this season.

Conversely, 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.

KERYX BIOPHARMA Price and EPS Surprise

KERYX BIOPHARMA Price and EPS Surprise | KERYX BIOPHARMA Quote

Other Stocks You May Consider

Here are a few other companies you may want to consider as our model shows that they too have the right combination of elements to post an earnings beat this quarter:

Ironwood Pharmaceuticals IRWD has an Earnings ESP of +13.33% and a Zacks Rank #2. The company is expected to report earnings on Aug 4.

Exelixis, Inc. EXEL has an Earnings ESP of +3.70% and a Zacks Rank #3. The company is scheduled to report results on Aug 3.

Impax Laboratories IPXL has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is scheduled to report results on Aug 9.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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