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Relypsa Just Made a Move That Could Give AstraZeneca Pause

Last month we told you about Relypsa (NASDAQ: RLYP) a biopharmaceutical company that was enjoying being the sole provider of a drug used to treat hyperkalemia, a condition that causes life-threatening levels of potassium in a person’s blood.

At the time we first reported Relypsa, we noted that the company’s stock was up and had even more room to run.

Well, that has proven to be an understatement.

Last week the company announced that the Swiss-based Galenica Group bought it in an all-cash deal, which sent Relypsa’s stock higher by almost 60%. On that day, Thursday, the company’s stock closed at $31.95, which was just shy of the $32 per share offered by the Galencia Group. That amounts to $1.53 billion.

Through this acquisition, Relypsa’s hyperkalemia drug is better positioned to impending competition, especially in the U.S. Specifically the deal is touted as helping Relypsa strengthen its presence in the U.S. cardio-renal market, which is a key area of focus.

It has been benefitting from being the only supplier of a hyperkalemia treatment drug. Its drug, called Veltassa, had been the only FDA-approved drug in the market used to treat the condition.
 

 · Staving off Big Pharma AstraZeneca

 
The Galencia acquisition seems right on time. There was some dustup earlier this year when it appeared that a drug from Big Pharma company AstraZeneca (NASDAQ: AZN) was trying to get its hyperkalemia drug approved by the Food and Drug Administration. Its approval by the FDA was thought to be a slam dunk, and observers thought Relypsa’s days of being the sole treatment provider would be over once AstraZeneca’s ZS-9 was approved. While it was delayed, there’s little doubt among observers that AstraZeneca’s drug will be approved. It’s just a matter of when.
 

 · Long-term growth strategy

 
In the statement announcing the acquisition, officials say the transaction is in line with the Galenica strategy of growth through in-licensing and acquisitions.

Relypsa has developed an extensive specialist commercial organization in the United States targeting nephrologists and cardiologists and focused on developing market access and awareness. The market size of those affected by hyperkalemia totals roughly three million people, which includes people with stage 3 or stage 4 chronic kidney disease (CKD) and/or heart failure.

Offer Recommended by Relypsa Board of Directors
Under the terms of the merger agreement, Galenica will commence a tender offer to acquire all of the issued and outstanding common stock of Relypsa.

The Boards of Directors of both Relypsa and Galenica have approved the terms of the merger agreement, and the Board of Directors of Relypsa has resolved to recommend that shareholders accept the offer, once it is commenced.

The acquisition is structured as an all-cash tender offer for all outstanding issued common stock of Relypsa followed by a merger in which remaining shares of Relypsa would be converted into the same U.S. dollar per share consideration as in the tender offer. The transaction is not subject to a financing condition. All this according to the company statement released about the acquisition.
 

 · Not all analysts happy

 
On the news of the acquisition, there were mixed reactions from analysts. Brean Capital and H.C. Wainwright downgraded Relypsa from buy to hold and neutral, respectively. However, Morgan Stanley upgrades the company from underweight to equal-weight.

Prior to these actions, there were other moves by analysts. Wedbush had restated its outperform rating, while Stifel Nicolaus restated its buy rating. BTIG Research restated its buy rating with a huge $35 price target.

Relypsa is expected to be delisted from the NASDAQ and integrated into Vifor Pharma, which is a unit of Galenica. The transaction is expected to close during the third quarter of 2016.





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