Here’s Why This Pharmaceutical Company Is Up 70% Today

RAHWAY, NJ - NOVEMBER 29: A man walks by a sign at a Merck plant November 29, 2005 in Rahway, New Jersey. U.S. pharmaceutical giant Merck, announced plans to cut some 7,000 jobs, or 11 percent of its global workforce, by the end of 2008. (Photo by Marko Georgiev/Getty Images)
Photograph by Marko Georgiev — Getty Images

Relypsa (RLYP), a U.S. developer of treatments for high blood potassium, is exploring a sale following overtures from a number of potential buyers, according to several people familiar with the matter.

Relypsa shares jumped over 70% on the news in after-hours trading Thursday, giving it a market capitalization of close to $1 billion. The stock was up 50% at $21.78 percent at mid-afternoon.

Relypsa is working with investment bank Centerview Partners Holdings to review offers, the people said this week. The discussions are in their early stages and may not lead to a sale, said the sources, who asked not to be identified because the talks are private.

Relypsa declined to comment. Centerview did not respond to a request for comment.

Relypsa and its primary competitor, ZS Pharma, are racing to develop treatments for hyperkalemia, or excessive potassium in the blood. Some analysts estimate the market to be worth about $6 billion.

Interest in Relypsa has picked up in recent months after the $2.7 billion sale of ZS Pharma to AstraZeneca (AZNCF), the people said. Several companies that unsuccessfully bid for ZS Pharma have reached out to Relypsa, the sources said.

Relypsa, based in Redwood City, California, received U.S. Food and Drug Administration approval in October for the sale of its primary hyperkalemia drug Veltessa. ZS Pharma’s rival drug, ZS-9, is awaiting FDA approval.

The sources said they expect ZS-9 to outperform Veltessa over time.

Relypsa’s stock has been caught in the recent biotech sell-off, dropping from more than $30 in August to around $14 early Thursday.

Merck & Co (MRK), Pfizer (PFE) and Biogen have all expressed interest in acquiring undervalued biotechnology companies.

Unlike some of its biotech peers, Relypsa has strong finances, with nearly $300 million of cash and near-term investments as of September.

About 17 percent of Relypsa’s stock is owned by its largest investor, investment firm OrbiMed Advisors.

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