With reimbursement issues in the rearview mirror and efforts from an amped-up sales force finally starting to yield momentum after a slower-than-expected launch for hyperphosphatemia drug Auryxia (ferric citrate), Keryx Biopharmaceuticals Inc.'s second-quarter earnings should have been a resounding message of reassurance. Instead, the Boston-based firm disclosed an "unexpected supply interruption" that will make Auryxia unavailable to U.S. patients until sometime during the fourth quarter.

Shares of Keryx (NASDAQ:KERX) slid $2.64, or 35.9 percent to close Monday at $4.72, as the negative news overshadowed Auryxia's sales growth. For the three months ending June 30, Keryx reported U.S. sales totaling $8.3 million, besting consensus estimates of $7.4 million. Sales resulted from roughly 13,150 prescriptions, representing 44 percent growth over the same quarter in 2015.

Keryx management attributed that increase in part to its recently expanded sales force – from 60 to 95 reps "who have not yet hit full stride," CEO Greg Madison told investors on the conference call. "The sales team has done a tremendous job," he said; however, its focus right now will be on helping health care professionals manage patients currently on Auryxia during the coming months as Keryx works to get manufacturing back online.

Madison attributed the supply interruption to a production-related issue, having no impact on the safety profile of currently available Auryxia – no product recalls are involved, he assured. As with many small, single-product firms, Keryx has relied on a single contract manufacturing organization (CMO) to supply commercial-grade drug product. The unnamed CMO was responsible for turning Auryxia's active pharmaceutical ingredient (API) into tablet form, Madison explained, "and they've been successfully producing commercial batches for approximately two years."

In the past few months, however, "we began experiencing difficulties converting active ingredient, or API, to finished drug product, which resulted in variable yields as compared to our historical rates." Still, the firm was able to keep up with increasing demands generated by the enlarged sales team, until last week. That was when the CMO "notified us that the production issue reoccurred in their latest run, and we agreed to stop production to identify the cause," Madison said. "As a result of halting production, combined with the previous low yield and increased demand, we've exhausted our reserves of finished drug tablets."

In response to an analyst's question, he clarified that the remaining wholesaler inventory would likely run out in the next one to two weeks.

Aiming to resolve the issues "as quickly as possible," Keryx is employing a two-pronged solution strategy. While continuing to work with the current CMO to resolve the production issues as quickly as possible, the company also aims to bring online a second CMO. The latter process began in 2014 and, to date, the new CMO has produced Auryxia, with several production runs scheduled, Madison said. The new CMO is under FDA review, with a decision expected Nov. 13.

"With the finished tablets on hand, coupled with additional production runs scheduled," Madison told investors, Keryx believes it will be able to come back to market with Auryxia in the fourth quarter, pending that FDA approval.

"We never really want to have an interruption in supply like that [again]," he added. "We want to ensure that when we come back [to market] we have an adequate supply to make sure this doesn't happen again."

Management disclosed that the new CMO would have a larger capacity overall, which will be necessary if the firm succeeds in expanding the approval for Auryxia into the larger indication of chronic kidney disease (CKD) patients with iron deficiency anemia.

In the meantime, Keryx also is forced to withdraw its full-year financial guidance for 2016, a disappointing move given that, based on Auryxia sales growth for the first half, the firm had been "looking forward to raising Auryxia guidance for the year," said Scott Holmes, chief financial officer.

How much of an impact the supply interruption will have, however, is difficult to gauge. It would "be naïve to sit here and say there wouldn't be any effect," Madison said, but to quantify that "is impossible." He pledged the firm would "stay engaged and stay out in front of this."

Keryx, which ended the second quarter with $156 million in cash, expects to have sufficient funding to manage through the interruption.

SUPPLEMENTAL NDA STILL ON TRACK

Managing commercial expectations has proved to be Keryx's biggest challenge with Auryxia. The iron-based drug, previously known as Zerenex, gained FDA approval in 2014 for use in hyperphosphatemia, or elevated serum phosphorous levels, in CKD patients on dialysis, based on phase III data showing the drug caused a significant change in serum phosphorous vs. placebo, while boosting ferritin and transferrin saturation and reducing the use of intravenous iron and erythropoiesis-stimulating agents vs. active control. (See BioWorld Today, Sept. 8, 2014.)

Given the product's early signs of differentiation over existing phosphate binders Renvela (sevelamer carbonate, Sanofi SA) and Phoslo (calcium acetate, Fresenius Medical Care), Street expectations at Auryxia's launch were high – too high, in fact, with many analysts later adjusting their estimates as Keryx worked its way through the reimbursement process. (See BioWorld Today, Feb. 12, 2015.)

Patients with hyperphosphatemia with CKD on dialysis comprises a population of more than 400,000 end-stage renal disease subjects in the U.S. An expanded label including iron-deficient anemia (IDA), nondialysis-dependent CKD patients could open up Auryxia's use to about 1.6 million.

Keryx reported positive top-line data in March, showing that Auryxia hit the primary endpoint in the phase III trial, with 52 percent of patients who received the drug achieving a 1g/dL or greater rise in hemoglobin at any time point during the 16-week randomized efficacy period, compared to 19 percent in the placebo group (p<0.001). The trial also hit all of its secondary endpoints, with statistical significance including mean change in hemoglobin, mean change in transferrin saturation, mean change in ferritin, percent of patients with durable response and mean change in serum phosphate. (See BioWorld Today, March 30, 2016.)

The company has met with the FDA and expects a supplemental NDA submission late in the third quarter for patients with IDA in stages 3-5 nondialysis-dependent CKD. The current production issues are not expected to have any impact on that timeline, Madison said.

Auryxia also has gained approval in Europe, where it is branded Fexeric. Keryx continues to seek partnerships for European commercialization. In Japan, the drug is sold by partner Japan Tobacco Inc. and Torii Pharmaceutical Co. Ltd., under the brand Riona. Keryx earned license revenue of $1 million associated with royalties on Riona net sales for the second quarter.

Keryx posted a second-quarter net loss of $44.7 million, or 42 cents per share.