Relypsa, a small biotech company had a strong stock volume last Wednesday, June 1, after an analyst forecast its drug launch to be better than what was originally considered.
Irina Rivkind, Mizuho analyst, lifted the price target from 12 to 20. This is in response to FDA’s refusal to approve AstraZeneca’s ZS-9, a drug supposedly used to treat hyperkalemia. Hyperkalemia is a condition wherein a patient has high levels of potassium in the blood which can become deadly if not immediately attended to.
Although, Wall Street is expecting the drug to be released in due time, this delay may be helpful for the slow launch of Relypsa’s lead drug, Veltassa. Rivkind noted that this makes Relypsa a potential buy out candidate.
The uncertainty of ZS-9 launch, made Rivkind to presume that Veltassa may have a scarcity value. The management has indicated that payers were receptive to coverage since they were waiting for the approval of ZS-9.
Relypsa’s position may be different now and Rivkind believes that Relypsa needs to start building its growth trajectory. They should also remain visible so they could generate a takeout rumor. This may eventually lead to getting an actual bidder.
Relypsa ended its trading stock to 4% higher with a closing price of 19.86. Rivkind upgraded the company’s position from neutral to underperform based from the current price performance.
The company’s stock is down to 30% this year, but it still carries a resilient IBD Accumulation or Distribution Rating of A- which indicates institutional buying.
The better stock performance was due to the fact that Veltassa got defended by Adam Feuerstein, a columnist of TheStreet. Previously, Veltassa has been linked with serious adverse effects and an unusual number of deaths. But Feuerstein noted in his column that the said attacks against Veltassa were not scientifically collected and the report failed to prove that the drug can cause such serious side effects.
Relypsa’s Buyout Rumors
The rumor of potential buyout of Relypsa Pharmaceutical has actually been going on for months. This is not the first time where the company’s stock soars high in the stock market because of a buyout rumors. Since April, the company has already been considering the possibility of selling the company following the interest showed by prospective buyers.
The company has been an attractive acquisition target because of Veltessa, their only FDA approved drug. This drug for hyperkalemia was released in the market last December 2015. Since then, the sales of Veltessa are encouraging and the company hopes to generate a billion dollar sales.
But their competitor ZS Pharma threatens the encouraging sales of their lead drug as they are also working on another experimental drug for hyperkalemia which is the ZS-9. ZS Pharma got a financial support of $2.7 billion from AstraZeneca plc.
There are rumors that those companies who were not successful in acquiring ZS Pharma will now have a bidding war to win over Relypsa.
The potential market of hyperkalemia drug is very huge considering that there are nearly 3 million patients in US that suffer this condition. More so, Veltessa is the first new approved drug to treat hyperkalemia in US for more than 50 years.