Relypsa Inc (NASDAQ:RLYP) came rushing out the gate on massive volume Thursday morning, soaring just shy of 60% on some 20 million shares (versus 2.55 million on average) in early Tuesday’s trade. The mad rush to buy RLYP stock was sparked by news that Galenica AG would pay about $1.53 billion for the biotech firm.
Galenica’s offer translates into $32 per share, a 59% premium to Wednesday’s close of $20.10. That’s good news for RLYP stock holders — especially to those who held on through the 50% drop from January through March. Even before today, shares had only recovered to a 30% loss since the start of the year.
Both companies’ boards approved the deal, and Galenica plans to split into two separately listed companies when the deal is finalized.
Shares of Galenica, which is traded on the VTX, dropped roughly 9% in response.
What Galenica Wants With RLYP Stock
Galenica’s plan is to get its hands on Relypsa’s Veltassa drug and a foothold in the U.S. commercial market.
With RLYP, Galenica’s business unit, Vifor Pharma, will hold the global rights to Relypsa’s Veltassa drug, the first medicine in half a century approved in the States for hyperkalemia, a potassium blood condition whose effects can range from mild malaise to severe heart rhythm irregularities.
From Executive Chairman of Galenica Etienne Jornod:
“The combination of Vifor Pharma and Relypsa is an important step towards achieving our goal of building a world-leading specialty pharmaceutical company focused on nephrology, cardiology and gastroenterology medicines. This acquisition will give Vifor Pharma direct access to the key U.S. market, enabling us to maximize the potential of our compelling product portfolio and enhancing our growing attraction as an international partner of choice. This transaction demonstrates the commitment of the Galenica Board of Directors to achieve the separation of Vifor Pharma and Galenica Santé, with both businesses in the strongest possible position. We look forward to welcoming Relypsa to Vifor Pharma.”
But there’s also some roadblocks with Veltassa as well, as the Food and Drug Administration slapped it with a strict “black box” warning from the FDA stating that Veltassa is “not appropriate for rapid correction of severe hyperkalemia because lowering of serum potassium may take hours to days.”
That led to a slow uptake for the drug as doctors distanced themselves from recommending it, which was what caused much of the rout in RLYP stock this year. Still, being the only new drug in a specific market has its benefits, and Veltassa is now the market leader for hyperkalemia drugs.
The condition affects some 3 million in the U.S. alone and the market is potentially worth about $6 billion. But Galenica could soon see competition in the likes of the ZS-9, a drug from AstraZeneca Plc (ADR) (NYSE:AZN) — if it ever gets approval from the FDA, that is. Once it does, it likely won’t carry the same FDA black box warning, which could see it claw some market share from Veltassa.
In the meantime, Galenica plans to continue growing through licensing deals and buyouts, with Vifor focusing on cardio-renal and gastroenterology drugs.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
