Relypsa Inc (RLYP)

[H2R]

Consensus $42: SA O'Neil Summary of BO Potential PPS

IF (big IF) the BO is going through,
http://seekingalpha.com/article/3964623-relypsa-rely-rumors

What are analysts saying about the deal and the upside potential?

Wedbush - outperform and $52 PT: most logical acquirer is Sanofi, which "has been clearly successful at counter detailing metal-based phosphate binders." Sanofi is already involved with Veltassa and is likely to accelerate Veltassa uptake considering its long-term relationship with nephrologists who prescribe phosphate binders. ZS Pharma equivalent price is $62 per share based on 43.3 million shares outstanding.

Citi -$30 PT: low end of the range is the 42% premium for ZS Pharma last year, which translates to a $1.4 billion price or $33 per share. High end of the range - Veltassa peak sales of $770 million versus ZS-9 estimate of $930 million and a deal based on ZS Pharma peak sales multiple, which translates into $51 per share. The firm also noted that there were four additional bidders for ZS Pharma in addition to AstraZeneca and Actelion.

Stifel - $36 PT: DCF using a big pharma cost of capital (8%) and a 25% tax rate yields $55 per share. The firm was speculating a $75 takeover price in December 2015, but has lowered it due to Veltassa's lower than expected uptake. Stifel also thinks that Relypsa's negotiating position is somewhat constrained due to financing needs and that the company would need $500 million to bridge it to cash flow break-even. In a note from December 2015, Stifel noted that "any of the Veltassa-mediated anti-hypersensitive benefit speculation was to be validated in a large/prospective randomized trial - which the company has hinted on initiating in FY16 - then it might be equally appropriate to argue a ZSPH-like bid may not come close to appropriately reflecting longer-term valuation."

BTIG thinks Relypsa could fetch $45 to $50 per share.
Raymond James (market perform) is questioning the timing of these rumors and thinks that fair value is around $16 based on Veltassa peak sales of $920 million by 2027. The firm's bull case scenario assumes a Veltassa peak within 6 years, which could drive the stock to the mid-$50s while they think the acquisition price should be around $35.
Cantor Fitzgerald - $42 PT: Relypsa takeover makes sense for the firm. Based on ZS Pharma takeout, Relypsa could fetch $75 per share.

The consensus price target is $42 and most of the analysts speculate that the takeover price should be above that level - the average takeover price estimate is around $53. Citi has the lowest price at the bottom of the range ($33 per share), but I think that the rationale for the low end of the range does not make sense since ZS Pharma's share price was near all-time highs when the takeover was announced. The estimate also completely disregards the value of the company as it just slaps a premium on the current price based on the ZS Pharma deal.

Note: SmithOnStocks says between 35 and 90, depending on a number of scenarios.