RYLP -.30 to 22.02 after BOA/Merrill reiterates "BUY" rating but maintains a fairly modest $27 price target along with sales of just $23M from Veltassa in 2016 -
per BOA/Merrill -
Veltassa on track to benefit from significant market opp We conducted a survey of 60 physicians to gauge their perception of the Veltassa FDA approval and black box warning on potential drug/drug interactions (DDIs) as well as the hyperkalemia (HK) market opportunity. The survey results were highly encouraging and suggest a large market opportunity with significant use of these new hyperkalemia therapies and favorable views on Veltassa’s competitive position in the market. RLYP is on track to launch Veltassa in the US in the first week of January. We expect a gradual launch and estimate sales of ~$23M in 2016 and peak sales of ~$600M in the US.
We reiterate our Buy rating on Relypsa.
Physicians indicate meaningful use despite black box The black box warning on Veltassa’s label raised significant concerns that physicians would shy away from prescribing the product. This survey eased our concerns, as 35% of the physicians indicated they would prescribe Veltassa for over 30% of their hyperkalemia patients and 60% would prescribe for over 20% of patients even after being presented with the black box warning. For the first year on the market, physicians the fifth year, these rates increase to ~36% for Veltassa and ~35% for ZS-9. These responses assume ZS-9 is approved with the same indication but without a boxed warning on DDIs. If ZS-9 receives a warning/precaution on edema, the use of Veltassa could meaningfully surpass that of ZS-9 by ~5% pts in the first year to ~10% pts by the fifth year. Our market estimates appear conservative compared to these survey results. Human DDI study results expected early 1Q16 RLYP is conducting a human DDI study in hopes of either reducing the separation time from 6 to 3 hours or even moving to a warning/precaution versus a black box. The FDA recently released Veltassa review documents that included comments to suggest the FDA may be reluctant to change the black box warning regardless of what the human DDI study shows. The reviewer worries it would complicate the label and that results for a set of drugs cannot be extrapolated to a broader target population. RLYP has not discussed possible changes with the FDA and will wait until the results are available. We are not assuming any changes to the label but see potential upside to our estimates if it is changed. Even if the FDA does not grant a label change, having the results available to present to physicians would be beneficial for Veltassa.
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