Keryx Is On Its Way To Securing Ample Insurance Coverage For Auryxia
Jun. 3, 2015 2:05 PM ET | About: Keryx Biopharmaceuticals, Inc. (KERX)
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Management has indeed secured some wins among top Medicare prescription drug plan providers.
There is a trend supporting broader coverage in the future.
A distraction of potential disciplinary action from the FDA is totally baseless.
Keryx Biopharmaceuticals (NASDAQ:KERX) is a mid-sized ($1.05 billion cap) biopharmaceutical company focused on pharmaceutical products geared towards renal disease. The company sells ferric citrate as Riona in Japan and Auryxia in the U.S. to treat hyperphosphatemia in patients with chronic kidney disease (CKD) on dialysis, and is waiting for an imminent regulatory decision in Europe. In the initial coverage of Keryx on March 10, investors were warned that there would be a substantial revenue miss for the first quarter, the knowledge of which may have led to shares depreciating 17% by the May 4 Q1 report. It is now also useful to know the current insurance coverage of Auryxia, which is a predictor of future sales.
But first, a recent article by Richard Pearson, who was shorting Keryx, tried to convince readers that the company was trying to promote off-label use of Auryxia's iron benefit. Mr. Pearson proudly admitted submitting a complaint to the Food and Drug Administration (FDA). Unfortunately for him, even the laymen of Wall Street saw through his easily-defeated premise that some words from management constitute off-label marketing. Shares only dropped 5% the day the article was published, and even rallied more than 20% from the intraday low, probably because Mr. Pearson inadvertently raised public awareness of what makes Auryxia a unique phosphate binder. These properties and comparisons to rival products PhosLo and Velphoro from Fresenius (NYSE:FMS), Genzyme's Renagel and Renvela, and Fosrenol from Shire (NASDAQ:SHPG), were all detailed in previous coverage.
Mr. Pearson was hoping that enough investors forgot the concept of ferric = iron, which they learned in high school chemistry. Which is why management has to remind listeners (and analysts) who don't remember in the first place. Furthermore, the "safety issue" Mr. Pearson brought up only showed his ignorance that any drug can be overdosed. In contrast, doctors don't need to be told that Auryxia, by its very nature, has quantifiable elemental iron, or how much this iron will affect anemic patients. And of course, the FDA knows better than to waste its time with the meritless accusation. Management and Keryx representatives are well within their right to promote anything on the current label, specifically the iron benefit spelled out in Section 12.2 Pharmacodynamics:
"In addition to effects on serum phosphorus levels, Auryxia has been shown to increase serum iron parameters, including ferritin, iron and TSAT. In dialysis patients treated with Auryxia in a 52-week study in which IV iron could also be administered, mean (SD) ferritin levels rose from 593 (293) ng/mL to 895 (482) ng/mL, mean TSAT levels rose from 31% (11) to 39% (17) and mean iron levels rose from 73 (29) mcg/dL to 88 (42) mcg/dL. In contrast, in patients treated with active control, these parameters remained relatively constant."
With the frightening prospect of an FDA warning out of the way, investors can focus on how Keryx can increase sales. The past couple of quarterly calls, management has been citing insurance wins, focusing on Medicare Part D. Their claim of 4 wins among the top 15 providers has been verified (Table 1). The current report also surveys the coverage of Auryxia from the 3 largest pharmacy benefit managers and the top 25 U.S. health insurers as ranked by market share.
Table 1. Status of Auryxia at the Largest U.S. Insurers
Pharmacy Benefit Managers
Express Scripts Medicare Part D
Catamaran Medicare Part D
Blue Cross Blue Shield (BCBS) of Michigan
Health Insurance Marketplace
BCBS New Mexico
Highmark (PA, DE, WV)
CareFirst BCBS (MD, DC, VA)
Humana (most plans)
Health Care Service Corporation
Blue Shield of California
Independence Blue Cross
BCBS of Michigan
CareFirst BlueCross BlueShield
Excellus BlueCross BlueShield
BCBS of Massachusetts
Legend: # = Tier (out of 5); √ = Preferred Brand or equivalent to Tier 1 or 2 (lower copay); * = Non-Preferred Brand or Tier 3 or 4 (higher copay); - = Non-Formulary (not covered); ** = Specialty Brand or Tier 5 (highest copay); PA = Prior Authorization (patient doesn't get prescription right away, or not at all if denied); Blank = Not Listed (not covered/too new)
Among the more interesting findings:
#2 Kaiser Permanente, known for its comparative effectiveness research and generally stricter standards for adopting expensive new brands, saw fit to cover Auryxia for its seniors.
#4 Aetna (NYSE:AET) covers Auryxia with its Medicare Part D plan; however, its commercial formularies were last updated in February.
#6 Health Care Service Corporation, who owns 5 Blue Cross Blue Shield (BCBS) affiliates, provides coverage for its Health Insurance Marketplace (HIM) members in all 5 states, but hasn't listed Auryxia in its standard national formulary.
#11 Ambetter Health is a HIM provider in 10 states; so far, Ambetter from Coordinated Care (WA) is the only one covering Auryxia.
#14 BCBS of Michigan covers Auryxia under Medicare Part D plan; however, its Custom Select Drug List was last updated in January.
These early adoptions mean that several of the top Pharmacy & Therapeutics committees in the nation have determined that Auryxia is cost-effective. Where there are discrepancies in different formularies within a health system, inclusion in future updates is more likely as more doctors experience successful results and savings while using Auryxia. The existing coverage base, as well as management's plan to introduce samples to doctors who haven't prescribed Auryxia yet, should increase prescriptions going forward. In addition to the European catalyst, Keryx has an ongoing Phase 3 trial to support a label expansion for Auryxia as a treatment for iron deficiency anemia in a much larger market of non-dialysis dependent CKD patients or pre-dialysis patients.