Justifying the $1.53 billion price tag for Relypsa Inc., Galenica Group executive chairman Etienne Jornod compared the plan to moves made by his firm in 2008 and 2010, saying "very few people understood the strategic reach of these two deals [then], but I am convinced that this time it will be different. They didn't know us well, after all. But now things have changed. We have been surprising the market for 20 years, and our performance has been consistently hitting double-digit growth in net profit after tax, year after year, over the past two decades." Investors, he predicted, will see the rationale of the latest transaction, "perhaps not immediately, but in the next days or a week."

To strengthen its iron replacement unit, Vifor Pharma Ltd., Berne, Switzerland-based Galenica is paying $32 per share in cash for Relypsa, of Redwood City, Calif., gaining complete ownership of potassium binder Veltassa (patiromer) for hyperkalemia. Vifor already holds rights to Veltassa outside the U.S. and Japan by way of a deal struck about a year ago, and approval is pending in Europe. The agreed-upon price represents a 59 percent premium over Wednesday's closing price. Shares (NASDAQ:RLYP) filled in the gap Thursday to end at $31.95, up $11.85, or 59 percent. It's been publicly known since December that Relypsa sought an acquirer.

Jornod likened the Relypsa grab to the 2008 buyout of Canada's Aspreva Pharmaceuticals Corp. and to the 2010 creation of Vifor Fresenius Medical Care Renal Pharma Ltd. (VFMCRP) in 2010, accomplished by way of Vifor's relationship with Fresenius Medical Care AG & Co. KGaA, of Bad Homburg, Germany. He characterized Vifor as leading the way with products that represent "gold-standard iron worldwide in nephrology." They include Ferinject (ferric carboxymaltose), Venofer (iron sucrose) and Maltofer (iron polymaltose). The position will only grow stronger with Veltassa in the hopper, he predicted. "This is not a Swiss success story anymore. This is becoming a worldwide success," with Vifor positioned to become a major player in the U.S. in its core therapy areas, including the cardio-renal space.

Among those unimpressed by the Relypsa deal terms was Jefferies analyst James Vane-Tempest. "We are surprised by this bold move, as the [Veltassa] launch has been sluggish in the U.S. and Galenica is doubling down on the product," he wrote in a research report, noting that a supplemental NDA "has been submitted to change the initial restrictive label and the outcome is not expected until the end of 2016 or early 2017, which is a binary risk, in our view." Veltassa was cleared with a label that warned of potential drug-drug interactions and specified it's not to be taken within six hours of any other drug. (See BioWorld Today, Oct. 19, 2007, and Oct. 23, 2015.)

Christoph Springer, deputy CEO of VFMCRP, said during the conference call with investors that Relypsa has "published the data on their drug-drug interactions" and officials are "expecting an answer by the end of the year. We believe there [are] good data supporting [the possibility] that the drug-drug interaction [warning] can be withdrawn from the label. Having said that, when we looked into the physicians' reactions [with regard to] the prescriptions of Veltassa, so far there have been no limitations due to this fact. We're looking forward to having that resolved shortly."

Vane-Tempest hammered at the purchase price for Relypsa, "given this is essentially your entire firepower for acquisitions," and said Galenica was "putting all the eggs in one basket." In response, Galenica pointed out that it has secured a bridging loan and plans to pull down equity proceeds in 2017, either through an IPO of its well-valued Santé unit or another option, so other purchases could still be possible. Galenica disclosed in May that it would be splitting the group into two independently listed companies, and said it intends to raise sufficient equity to maintain implied investment grade ratings for Vifor Pharma and Galenica Santé in the medium term after the separation.

STILL ON SIDELINES, ZS-9

In his report, Vane-Tempest also said "it also remains to be seen how the acquisition will work in conjunction with Relypsa's existing two-year (signed in August 2015) agreement with [Paris-based Sanofi SA] to utilize its nephrology sales force." During the conference call, the matter came up but Gianni Zampieri, vice-CEO for Vifor, said the firm "will analyze the situation in due time and then we will decide how to go forward with that. It's clear that if we have agreements that can help us to increase our market share in the U.S. with Veltassa, we will do that. That's an open question now."

Relypsa reported that prescriptions for Veltassa grew 40 percent in June over May, and H.C. Wainwright analyst Ed Arce also found that the drug "has experienced significant gains in commercial pay reimbursement recently, with several large plans choosing either preferred status or 100 percent coverage, such as, in the state of Florida, United Health Group, Aetna and Cigna. In addition, Veltassa is 100 percent covered for beneficiaries of the Department of Veterans Affairs plans, and 100 percent preferred by the Department of Defense Tricare program." VFMCRP's Springer said that ramp-up "might [be] slow, but looking at the prescriptions as they grow month over month, this is very encouraging and is actually in line with our plans."

The boards of both companies have approved the buyout, and Relypsa will recommend that shareholders accept the offer, tendered as an all-cash proposal 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.

Not subject to a financing, the deal is expected to close in the third quarter of this year, and will involve 400-employee Relypsa delisting from the Nasdaq board and integrating into Vifor, which said it intends to retain the Relypsa leadership team in order to support the melding of Relypsa into Vifor Pharma, as well as the ongoing business and the future development of Veltassa.

Would-be competition for Veltassa from London-based Astrazeneca plc was hamstrung in May when the FDA smacked with a complete response letter (CRL) the NDA for sodium zirconium cyclosilicate, an oral suspension better known as ZS-9. It was the prize in Astrazeneca's 2015 buyout of ZS Pharma Inc. for $2.7 billion. The CRL referred to "observations arising from a pre-approval manufacturing inspection," and Astrazeneca stressed that regulators did not ask for more clinical data. (See BioWorld Today, Nov. 15, 2015, and May 31, 2016.)

No Comments