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Relypsa (RLYP) Surges Higher After AstraZeneca's ZS-9 Receives CRL from FDA

May 27, 2016 6:18 AM EDT

Relypsa (NASDAQ: RLYP) is surging 39% in pre-open trade after rival AstraZeneca (NYSE: AZN) received a CRL from the FDA on competing drug ZS-9, the investigational medicine being developed for the treatment of hyperkalaemia, made by ZS Pharma, a wholly-owned subsidiary of AstraZeneca.

The CRL refers to observations arising from a pre-approval manufacturing inspection. The FDA also acknowledged receipt of recently-submitted data which it has yet to review. The CRL does not require the generation of new clinical data. AstraZeneca and ZS Pharma are evaluating the content of the CRL and will work closely with the FDA to determine the appropriate next steps for the NDA.

Mizuho analyst Irina Koffler expects the delay to persist well into 2017.

Wedbush analyst Liana Moussato said the CRL reduces near-term commercial risk for Veltassa and Relypsa. "Based on the comments in AstraZeneca's press release about manufacturing, new data received and the lack of need to generate new clinical data, we estimate a new PDUFA deadline around August 26, 2016 at the earliest though not disclosed in the press release," she said. "This extra time allows Relypsa and Sanofi to further establish Veltassa as the sole option for nephrologists and cardiologists learning to prescribe a new treatment for chronic hyperkalemia." She reiterated an Outperform rating and $51 price target on Relypsa.

Meanwhile, bearish-leaning Koffler said this outcome represents the best possible scenario for Relypsa as it gives it more time to gain traction in the market as first-mover and increases the likelihood of takeout interest in the name. She expects a strong rebound in the stock towards her $31 takeover valuation. The analyst is re-evaluating her Underperform rating and $12 PT amid the development.



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