#relypsa

Yet again, the biotech space hasn’t failed to disappoint from a volatility perspective, and we’ve seen plenty of movers across the last twenty-four hours. Here are three of the biggest movers, and a look at what’s driving the volatility.

Adamas Pharmaceuticals Inc (NASDAQ:ADMS)

We’ll start with Adamas. For those not familiar with the company, it’s a small cap biotech with a pipeline and product portfolio focused on disorders of the central nervous systems (CNS). It’s lead development candidate is called ADS-5102, and it targets a condition called levodopa-induced dyskinesia (LID). LID is something that affects individuals with Parkinson’s disease. The standard of care treatment for Parkinson’s is levodopa, but long term use results in dyskinesia, which is the involuntary movement that characterizes the condition. With ADS-5102, Adamas is attempting to bring to market an oral administration version of a drug that can counter this dyskinesia. The company expects to submit an NDA at some point this year, but that’s not what served up the recent volatility – the action came as the company announced an expanded indication approval from the FDA for a drug it shares with Allergan plc Ordinary Shares (NYSE:AGN), NAMZARIC. It’s an Alzheimer’s indication, and it just got approved for use as a combination therapy in patients with a moderate to severe version of the disease, who are currently stabilized on a drug called Aricept. This is a big deal, as the moderate to severe population accounts for about 75% of the Alzheimer’s population as a whole, so the company’s target market just expanded considerably.

Markets recognized this, of course, and traded Adamas up on the back of the fresh potential. The company is up just shy of 10% mid session in the US. Allergan is also up on the news, but to an (as expected) far smaller degree. Circa 1% at time of writing.

Relypsa Inc (NASDAQ:RLYP)

Next up, Relypsa. This is the big news of the day. Premarket on Thursday, Relypsa announced that it had agreed to a takeover bid from Swiss biotech Galenica AG (VTX:GALN). Under the terms of the deal, Galenica, through its US operational arm Vifor, will pick up all of the outstanding shares of Relypsa at a per share price of $32 a share – a 60% premium on the company’s pre-announcement share price. This is a good deal for both companies – Relypsa benefits from the premium pricing, and Galencia picks up a solid asset in Relypsa’s hyperkalemia drug, Veltassa, and something strong to at the American market with as lead. Analysts have put a $1 billion peak sales estimate on the drug, and while certain labeling issues disappointed when the FDA approval hit press, there’s still plenty of potential going forward on a solid commercialization strategy execution.

As expected, Relypsa is up just shy of its premium as things stand, currently trading 58% higher than session open for a market capitalization of $1.43 billion. The acquisition deal sees it valued at circa $1.5 billion based on its outstanding shares.

Biogen Inc (NASDAQ:BIIB)

Let’s finish up with Biogen. Biogen is up nearly 7% at time of writing, on what has been something of a mixed bag of news for the company. Earlier this morning, Biogen reported better than expected results for the second quarter of this year, with revenues increasing 12% year over year and net income rising by a little over $1 billion across the period. The company beat out on consensus forecast pretty much across the board, as sales from three of its strongest drug gained double digit percentage point sales on the year earlier quarter.

However, as the announcement came, we also learned that the company’s CEO, George Scangos, will be stepping down before the end of the quarter. The only reason given was that it is time for new leadership, but markets are speculating that buyout rumors have contributed to his decision.

Whatever the reason, markets are putting more weight behind the financial data than they are behind his departure, and it looks like the company is set to finish the week strong.

Across the Thursday US session, California based biotech Relypsa Inc (NASDAQ:RLYP) gained close to 70% on speculation that it’s is looking to sell itself to a big pharma suitor. News outlet Reuters reported on an anonymous sources claims that the company has hired an investment bank to oversee the transaction, and has fielded offers from a number of potential candidates. It’s an interesting situation, and an (albeit) speculative thesis for investment. There have been some heavy premiums paid for buyouts over the past twenty-four months, and with its lead product, Veltassa, having just kicked off commercialization in what has the potential to be a multi billion-dollar market, Relypsa could justifiably command just such a premium. There’s a catch, however. One that – at present – markets seem to be overlooking. That catch is AstraZeneca plc (ADR) (NYSE:AZN).

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Before we get to why, let’s quickly address the buy side of the rumors. Relypsa’s Veltassa is a hyperkalemia indication drug, which the FDA approved back in October last year. Hyperkalemia is a condition that involves a patient having too high a level of potassium in their blood. Potassium is required for the smooth everyday function of a number of the nucleated cells in our body. In healthy patients, the kidneys filter the potassium out of the blood to maintain a healthy and safe amount. In patients with hyperkalemia, this filtration isn’t effective, and the potassium doesn’t get removed. It builds up, and can have some pretty serious effects on the heart – specifically, its natural rhythm. Veltassa binds to potassium, which means it isn’t taken up by the gastrointestinal system, and never reaches the blood stream. It’s the first drug of its kind to treat this condition, and previously Hyperkalemia suffers were forced to manage it through dietary control.

Trials proved the drug to be effective and safe, and the FDA agreed.

So, all looks good there. What’s the issue? Well, alongside the approval, the agency issued the requirement for a boxed warning, stating that the drug shouldn’t be taken within six hours of any other – that is, a patient shouldn’t take Veltassa and then take another drug within a six-hour period. The reason, that other drugs could bind to Veltassa, and inhibit its ability to bind to potassium. Essentially, other drugs taken within the six-hour window could render Veltassa ineffective.

This is where AstraZeneca comes into play. At present, Veltassa is the only approved drug of this type available. Relypsa has the market cornered, and can price its drug as it likes, boxed warning or not. Back in November, however, just a few weeks after the FDA approved Veltassa, AstraZeneca bought ZS Pharma for $2.6 billion. Interestingly, and almost counterintuitively, this buyout is one of the drivers behind the premium markets are speculating another big pharma will pay for Relypsa, but that’s an aside. The real point here is that with its purchase of ZS, AstraZeneca picked up ZS-9, a hyperkalemia development candidate that the FDA is set to report its judgment on by 26 May, 2016.

There has been much written about the safety profile of ZS-9. The drug resulted in quite a high number of adverse events, at least when compared to Veltassa, and this may influence the FDA when it comes to decision day. However, if it can avoid the boxed warning, it has the potential to seriously compete with Veltassa, and redirect a large portion of the latter’s potential revenues towards AstraZeneca.

Chances are any big pharma company will want to wait and see what happens with ZS-9 before coming up with a dollar figure valuation on Relypsa. The uncited sources suggest offers have already been fielded, but surely these offers are highly unstable, given that a month from now there could be a competing drug in a market that – at present – is dominated by the company being valued?

When AstraZeneca paid $2.6 billion for ZS, many suggested the company rushed in and overpaid for an as yet unapproved drug. If a company picks up ZS ahead of the FDA decision on ZS-9, this would be a similar hasty decision, as the PDUFA has the potential to dramatically alter the fortunes of both companies, on both sides of the decision.

As an individual investor, I’d also want to wait and see what the FDA says about ZS-9 before picking up an exposure to Relypsa, regardless of the buyout rumors. One to keep an eye on going forward.

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Relypsa Leaders Set the Tone for Hilarious but Productive Redwood City Workshop

It speaks volumes when company leaders are part of team building workshops.

It’s not every leader who can interact in a workshop setting where hierarchy is checked at the door! The message being sent: this stuff is important so let’s do this!

A recent workshop for a group from Relypsa included several layers of the company, right up to a cluster of VP’s who arrived for the challenges. Meeting in Redwood City at the Sofitel Hotel San Francisco this Fall, they had booked a Bike-A-Thon workshop and arrived ready to go…

Demonstrating the power of positive energy.

Well they were almost ready to go! We had a late start so there was very little time for icebreakers. And with a group like this, whose members may not know each other well because they come from varying ranks in the company, icebreakers are pretty useful!

No worries, though: the little cluster of VP’s made everyone feel right at home with their wonderfully powerful positive energy.

That kind of energy is highly contagious, and it soon spread to the other groups in the room (even one which didn’t seem to be feeling the whole workshop thing at first…).

From reluctant doubters to creative singing geniuses- team building works!

Those VP’s again…they turned out to really lead the way in creativity, too. In our “Commercials” activity, the group is divided into teams. Each team must write an original TV commercial for a product, then perform their commercial for the others.

If you were to measure energy levels, the VP group certainly went off the charts. Their commercial involved dancing and singing and even jumping around the room.

Of course it looks and sounds like fun and games, but all this is actually the result of some very good communication, collaboration and other important skills.

Hands-on activities that work for the whole Relypsa group.

Once the “reluctant” group felt the energy, they got into their commercial as well and actually produced a nice piece. Their collaborative creativity had the rest of their colleagues laughing and applauding them.

You could feel the teamwork growing- the high-energy activities and the very high-energy group was able to overcome a tiny bit of negativity in the beginning, with a little help from their leaders.

There were new Relypsa employees present, who didn’t know anyone…the team building even worked for them as they were made to feel that they were part of the group, and their input mattered during the creative problem-solving activities.

The boorish nature of the stock market is not a secret to anyone, especially with biotech stocks during this (rather extended) boom/bubble phase. I usually don’t cover (mostly due to the fact that I am illiterate of the inner workings of investing/trading) the biotech industry stock market news, but something interesting that has rather overpowered my twitter feed recently. It is the Relypsa story. Frankly, I wasn’t familiar with either the company or its (freshly FDA-approved) drug Veltassa until recently. Some background for readers, who like me aren’t familiar with the drug - it is a novel polymer molecule that binds to potassium and hence can be used for the treatment of hyperkalemia (a condition seen in patients with chronic kidney disease (CKD)). It is given as an oral suspension that sequesters potassium in the gut thereby lowering its overall levels. As you might expect this drug has been shown to cause some drug interactions and therefore comes with black box warning. 

Well, this sounds like a run-of-the-mill new therapeutic with some minor concerns that requires a careful watch by the physicians. But, this is where the story gets rather interesting. The presence of the black-box warning obviously spooks the traders and Relypsa’s stock ($rlyp) takes a tumble to below $20. To add fuel to the fire, at around the same time AstraZeneca acquired ZS Pharma, which is also studying a potassium binder (Zirconium silicate to be exact) (ZS-09) in a clinical trial, for an absurd $2.7 billion (at $90 a share, a 42% premium at its stock price at the time!). Well it turns out (the trials are not complete yet but this is based on compelling predictions) that ZS-09 might actually have a higher (compared to Veltassa) incidence of side effects, especially edema and cardiovascular problems. Furthermore, Veltassa can begin treating patients by early 2016, while ZS-09 awaits completion of the trial and FDA-approval.