KERYX BIOPHARMACEUTICALS INC (KERX) SEC Filing 10-Q Quarterly report for the period ending Sunday, September 30, 2018
Keryx Biopharmaceuticals Announces Third Quarter 2018
Third quarter 2018 total revenues of $28.0 million including net U.S. Auryxia® (ferric citrate) product sales of $26.6 million, a 96 percent increase compared to the third quarter of 2017
Approximately 47,500 Auryxia Prescriptions were written in the third quarter of 2018, nearly double the number reported in the third quarter of 2017
Merger with Akebia Therapeutics on track to close by year end, subject to stockholder approval and the satisfaction of other closing conditions
BOSTON, MA, November 8, 2018 Keryx Biopharmaceuticals, Inc. (Nasdaq: KERX), a biopharmaceutical company focused on bringing innovative medicines to people with kidney disease, today announced its financial results for the third quarter ended September 30, 2018. The company also reviewed its commercial progress with Auryxia and provided a general business update.
We continued to see significant growth year-over-year in the number of prescriptions written and the revenue generated by Auryxia, said Jodie Morrison, interim chief executive officer of Keryx Biopharmaceuticals. We are continuing to make progress on consummating our merger with Akebia and have scheduled a stockholder meeting to approve the transaction for December 11, 2018. We are excited about the potential strategic, financial and operational benefits of this transaction and are aiming, subject to stockholder approval and satisfaction of other customary conditions, to close the transaction by the end of the year.
Net U.S. Auryxia product sales were $26.6 million in the third quarter of 2018, as compared to $13.6 million in the same quarter in 2017, representing growth of 96 percent.
Approximately 47,500 Auryxia prescriptions were reported in the third quarter of 2018, representing 9.4 million Auryxia tablets. This compares to approximately 25,200 prescriptions and 5.4 million Auryxia tablets in the third quarter of 2017.
Auryxia market share for the third quarter of 2018 was 6.4 percent, compared to 3.5 percent in the third quarter of 2017.
The breadth of physicians prescribing Auryxia continued to expand in the third quarter of 2018 compared to the same period in 2017, with approximately 6,500 prescribers in the 2018 quarter, nearly 2,000 more than the third quarter of 2017.
The depth of Auryxia prescribing also increased significantly in the third quarter of 2018, with a 28 percent increase in the average number of prescriptions per prescriber as compared to the third quarter of 2017.
As expected, there was a shift in channel mix for Auryxia during the third quarter of 2018, with 61 percent of prescriptions coming through IMS reporting channels and 39 percent coming through specialty pharmacies (including Fresenius Rx and Davita Rx); the shift in mix is due the closing of Davitas specialty pharmacy business, which occurred in September 2018.
The gross-to-net adjustment for Auryxia for the third quarter of 2018 was 50 percent. This is consistent with year-to-date 2018 gross-to-net adjustment of 50 percent.
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The following information was filed by KERYX BIOPHARMACEUTICALS INC on Thursday, November 8, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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- 17828549_2Other - OtherForward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our results could differ materially from the results anticipated by our forward-looking statements as a result of many known or unknown factors, including, but not limited to, those factors discussed under the heading "Risk Factors" in this report.
- 17828549_134Legal - OtherThe increase was primarily due to business development and legal expenses related to our proposed merger with Akebia as well as costs related to the launch of Auryxia for the treatment of iron deficiency anemia in adults with CKD, not on dialysis.
- 17828549_159Legal - OtherThe increase was primarily due to business development and legal expenses related to our proposed merger with Akebia as well as costs related to the launch of Auryxia for the treatment of iron deficiency anemia in adults with CKD, not on dialysis.
- 17828549_76Revenue - ProductThe FASB has subsequently issued amendments to ASU No. 2014-09 that have the same effective date and transition date: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing; ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients; and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.
- 17828549_131Financial - ExpenseWe expect our quarterly research and development expenses will increase slightly for the remainder of 2018 as compared to the three months ended September 30, 2018, due to continued process development-related manufacturing costs, as well as clinical trial costs.
- 17828549_203Other - OtherThis increase in net cash used in operating activities was primarily related to an increase in cash outflows arising from changes in our operating assets and liabilities, in particular purchases of inventory, partially offset by a decrease in our net loss after non-cash adjustments.
- 17828549_129Financial - ExpenseResearch and development expenses decreased by $1.4 million to $7.9 million for the three months ended September 30, 2018, as compared to $9.3 million for the three months ended September 30, 2017.
- 17828549_39MA - OtherAt the effective time of the Merger, (i) each share of our common stock issued and outstanding immediately prior to the effective time of the Merger (other than the shares that are held by Akebia, Merger Sub, any subsidiary of Akebia or us, or held by us as treasury shares) will be converted into and become 0.37433 fully paid and non-assessable shares of common stock of Akebia, such that the pre-Merger stockholders of us and Akebia will each own approximately 50% of the voting power of the combined company upon the closing of the Merger, based on each of the companies? fully diluted market capitalizations as of signing of the Merger Agreement and before taking into account the 4.0 million additional shares issuable to funds managed by Baupost Group Securities, L.L.C., or Baupost, described below.
- 17828549_73Revenue - ProductThe new standard provides a five-step framework whereby revenue is recognized when promised goods or services are transferred to a customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
- 17828549_107Other - OtherNEW ACCOUNTING PRONOUNCEMENTS For a discussion of new accounting standards, see Note 2-Basis of Presentation and Summary of Significant Accounting Policies to our condensed consolidated financial statements included in this report.
- 17828549_62Financial - Cash FlowGENERAL CORPORATE We have devoted substantially all of our efforts to the identification, in-licensing, development and partnering of drug candidates, as well as pre-commercial/commercial activities related to Auryxia, and have incurred negative cash flow from operations each year since our inception.
- 17828549_215Financial - ExpenseThe deferred lease incentive is being amortized as a partial offset to rent expense over the term of the lease, and the receivable was drawn down as cash was received from our landlord.
- 17828549_217Other - OtherImprovements made to our leased space have been recorded as fixed assets and will be amortized over the assets? useful lives or the remaining lease term, whichever is shorter.
- 17828549_51Revenue - ProductEven though our trials demonstrated that Auryxia is effective in the control of serum phosphorus levels in patients with CKD on dialysis and for the treatment of iron deficiency anemia in patients with CKD, not on dialysis, there is no guarantee that we will be able to record meaningful commercial sales of Auryxia in the future or become profitable.
- 17828549_213Other - OtherAs such, we have determined that we are the owner of the improvements and account for tenant improvements paid by our landlord as a lease incentive.
- 17828549_83Revenue - ProductWe recognize revenues following the five step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.
- 17828549_211Other - OtherIn order to make the space usable for our operations, substantial improvements were made.
- 17828549_197Revenue - ProductOur capital raising activities may include, but may not be limited to, one or more of the following: the issuance of common stock or other securities via private placement or public offerings, including the potential future sales of our common stock under the Sales Agreement; the issuance of debt, including the asset-based credit facility with SVB; or possible business combinations, such as the proposed merger with Akebia.
- 17828549_180Revenue - GeographyIn July 2017, we filed a new prospectus supplement with the SEC relating to the Sales Agreement under which we may offer and sell, from time to time, through Cantor Fitzgerald, shares of our common stock having an additional aggregate offering price of up to $75.0 million.
- 17828549_214Other - OtherOn May 1, 2015, in accordance with the Financial Accounting Standards Board's Accounting Standards Codification 840-20, Operating Leases, we recorded a deferred lease incentive, and an associated receivable from our landlord, for the total amount to be paid by the landlord for improvements.
- 17828549_139Financial - IncomeIncome tax (benefit) expense for the three months ended September 30, 2018 was zero as compared to $20,000 expense for the three months ended September 30, 2017.
- 17828549_163Financial - IncomeIncome tax (benefit) expense for the nine months ended September 30, 2018 was $0.6 million (benefit) as compared to $20,000 expense for the nine months ended September 30, 2017.
- 17828549_78Revenue - ProductThe new revenue standards became effective for us on January 1, 2018 and were adopted using the modified retrospective method.
- 17828549_111Revenue - ProductGross Auryxia product sales increased for the three months ended September 30, 2018 as compared to the same period in 2017 as a result of an increase in patient prescriptions and related units sold.
- 17828549_143Revenue - ProductGross Auryxia product sales increased for the nine months ended September 30, 2018 as compared to the same period in 2017 as a result of an increase in patient prescriptions and related units sold.
- 17828549_124Financial - ExpenseThis increase was primarily due to additional units sold in the 2018 period as compared to the 2017 period, as well as an increase of $0.7 million in inventory write-offs in the 2018 period as compared to the 2017, period partially offset by value added tax, or VAT, refunds of $1.6 million that were received during the three months ended September 30, 2018 which were recorded as a reduction of cost of goods sold.
- 17828549_55Financial - ExpenseOperating Expenses Our research and development expenses consist primarily of salaries and related personnel costs, including stock-based compensation, fees paid to consultants and outside service providers for clinical and laboratory development, manufacturing, including inventory manufactured prior to regulatory approval of a product or a new contract manufacturing site, regulatory, facilities-related and other expenses relating to the design, development, manufacture, testing, and enhancement of our drug candidates and technologies, as well as expenses related to in-licensing of new product candidates.
- 17828549_176Other - OtherAs of September 30, 2018, the borrowing base available under the Revolving Loan Facility was approximately $20.0 million, of which $15.0 million was outstanding as of the end of the period.
- 17828549_127Revenue - ProductThe increase was due to an increase in license revenue recorded in the 2018 period as compared to the 2017 period.
- 17828549_153Revenue - ProductThe increase was due to an increase in license revenue recorded in the 2018 period as compared to the 2017 period.
- 17828549_188Revenue - ProductOn May 9, 2018, we also entered into a Registration Rights Agreement with the purchaser of the New Notes, or the New Registration Rights Agreement, on substantially similar terms as the registration rights agreement we entered into with the same purchaser of the Old Notes, pursuant to which we agreed to (i) file a registration statement with the SEC covering the resale of the New Notes and the underlying common stock which the New Notes are convertible into upon the written request of Baupost, and (ii) use commercially reasonable efforts, subject to receipt of necessary information from all the purchasers of the New Notes, to cause the SEC to declare such resale registration statement effective.
- 17828549_181Financial - Shares / EquityDuring the year ended December 31, 2017, we sold 11,937,174 shares under the Sales Agreement for aggregate net proceeds of $75.7 million, which included all of the initial $75.0 million shares issuable pursuant to the Sales Agreement.
- 17828549_41Financial - Shares / EquityPursuant to the terms of the Conversion Agreement, Baupost has agreed to convert the total outstanding amount of our $164.746 million of Convertible Senior Notes due 2021, or the New Notes, issued to Baupost in May 2018 into the 35.6 million shares of our common stock into which the New Notes are currently convertible, immediately prior to the effective time of the Merger, conditioned upon our issuance to Baupost of an additional 4.0 million shares of our common stock.
- 17828549_133Financial - ExpenseSelling, general and administrative expenses increased by $3.7 million to $26.5 million for the three months ended September 30, 2018, as compared to $22.7 million for the three months ended September 30, 2017.
- 17828549_158Financial - ExpenseSelling, general and administrative expenses increased by $10.2 million to $81.0 million for the nine months ended September 30, 2018, as compared to $70.8 million for the nine months ended September 30, 2017.
- 17828549_182Revenue - ProductAs of the date of this report, we may sell up to an additional $72.4 million under the Sales Agreement pursuant to the July 2017 prospectus supplement.
- 17828549_31Other - OtherWe believe strong fundamentals are in place to drive commercial adoption of Auryxia in the dialysis setting and maximize the potential of Auryxia as a treatment of iron deficiency anemia in adults with CKD, not on dialysis.
- 17828549_113Other - OtherOur gross-to-net adjustments may fluctuate depending on our mix of business between Medicare Part D and commercial payers as well as the portion of our business coming from the use of Auryxia as a treatment for hyperphosphatemia as compared to the portion of our business coming from the use of Auryxia as a treatment for iron deficiency anemia.
- 17828549_208Other - OtherOBLIGATIONS AND COMMITMENTS As of September 30, 2018, our contractual obligations and commitments primarily consist of our obligations under non-cancelable leases, the New Notes, and various agreements with third parties, including selling, general and administrative, research and development and manufacturing agreements.
- 17828549_34Other - OtherWe will seek to add assets that leverage the infrastructure we have built to support our foundational medicine, Auryxia, including our clinical development and commercial teams.
- 17828549_222Other - OtherOFF-BALANCE SHEET ARRANGEMENTS We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support, or engages in leasing, hedging, or research and development services on our behalf.
- 17828549_144Revenue - ProductProvisions for product sales allowances and accruals as a percentage of gross Auryxia product sales for the nine months ended September 30, 2018 as compared to the same period in 2017 remained relatively consistent.
- 17828549_96Revenue - ProductThe transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenues recognized will not occur in a future period.
- 17828549_138Financial - IncomeIncome Tax (Benefit) Expense.
- 17828549_162Financial - IncomeIncome Tax (Benefit) Expense.
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- Form Type: Quarterly
- Number of times amended: 1
- Accession Number: 0001114220-18-000104
- Submitted to the SEC: Thursday, November 8, 2018 5:32:07 PM EST
- Accepted by the SEC: Thursday, November 8, 2018
- Period ending: September 2018
- Industry: Pharmaceutical Preparations
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