Source: Relypsa

What: After a key competitor was acquired last Friday, shares in Relypsa (RLYP) climbed by 10% earlier today.

So what: AstraZeneca (AZN 0.28%) reported on Friday that it is acquiring ZS Pharma (NASDAQ: ZSPH) for $2.7 billion to get its hands on ZS-9, a therapy for the treatment of hyperkalaemia, or unnaturally elevated levels of potassium, that is life threatening and that can often occur in hospitalized patients, particularly those with kidney or heart failure.

The ZS Pharma deal is leading investors to speculate that an acquirer could be interested in buying Relypsa to obtain Relypsa's recently FDA approved hyperkalaemia drug, Veltassa, which will compete against ZS-9, if ZS-9 gets FDA approval.

In clinical trials, Veltassa controlled potassium levels in patients for one year, which is significant given that:

  • Hyperkalaemia affects 3 million people in the United States;
  • It can lead to life threatening organ damage; and
  • Hyperkalamia is a side effect caused by medications that are commonly used to treat kidney and heart failure patients.

Now what:  Veltassa is the first new approved medicine to treat hyperkalaemia that's been approved by the FDA in 50 years, but if the FDA approves ZS-9 on its May 26 PDUFA date, Veltassa could face-off against ZS-9 as early as this summer.

If ZS-9 is approved, then it's unclear which of these two drugs could be elevated to standard of care, but ZS-9 could have an edge.

When the FDA approved Veltassa it did so with a black box warning on its label that requires patients not to take any other oral medicine within six hours of taking Veltassa. That warning could limit Veltassa's appeal because many patients with hyperkalaemia have co-morbidities that require drug treatment.

However, investors might not want to count Relypsa out -- at least not yet. Last quarter, the company inked an exclusive deal with Vifor Fresenius Medical Care Renal Pharma to develop and market Veltassa outside the U.S. and Japan and with Sanofi (SNY 2.00%) to market Veltassa in America. Since Sanofi has a significant marketing team already embedded in the U.S., it could be able to navigate a future competitive threat from AstraZeneca.

Overall, I'm not sure investors ought to bank on a potential acquisition of Relypsa by Sanofi, or any other drugmaker, because it seems unlikely to me that Sanofi would have cut its deal without considering (and opting against) an outright purchase of Relypsa. Also, Veltassa's appeal to another suitor may be limited by the Vifor Fresenius and Sanofi marketing deals. If so, then it's probably better to invest in Relypsa on Veltassa's merits alone. In that regard, there are too many question marks surrounding the upcoming battle for market share for me to buy Relypsa -- at least until I know whether or not ZS-9 gets approved.