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Here's Why Keryx Biopharmaceuticals and Akebia Therapeutics Are Plunging Today

By Brian Feroldi - Jun 28, 2018 at 11:21AM

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Shares of both companies tumble after the two entities announced the signing of a merger agreement. Here's what investors need to know.

What happened

In response to the companies signing a merger agreement, shares of Akebia Therapeutics (AKBA -1.73%) and Keryx Biopharmaceuticals (KERX) fell 18% and 12%, respectively, as of 10:47 a.m. EDT on Thursday. 

So what

Akebia Therapeutics and Keryx Biopharmaceuticals announced today that they have signed an agreement to merge. Here are the details that investors need to know: 

  • This deal will be an all-stock transaction.
  • The newly created company will be called Akebia Therapeutics, Inc.
  • Keryx shareholders will receive 0.37433 shares of the newly formed company for each share currently owned.
  • Akebia's current president and CEO, John Butler, will lead the new company.
  • Akebia's current CFO, Jason Amello, will retain his title in the new company as well.
  • Keryx will be responsible for picking the chairperson of the board of directors of the new company. 
  • Both companies' boards have unanimously approved the deal.
  • The Baupost Group -- which owns 21.4% of Keryx -- supports the transaction.
  • The deal is expected to close before the end of the year. 
Two businessmen shaking hands in front of another businessman in a suit

Image source: Getty Images.

As you'd expect, both companies provided investors with a number of reasons for why this deal makes sense:

  • Both companies are focused on kidney disease.
  • Keryx already has a commercial team in place. That will make it easy for the combined company to market Akebia's lead product candidate, vadadustat, should it win regulatory approval.
  • This transaction solves Keryx's leadership problems. 
  • The combined company will have $453 million in cash on its balance sheet. 

It also doesn't hurt that both companies are headquartered in Boston. 

According to Butler, "Combining Akebia and Keryx creates a leading renal company and provides it with the infrastructure to maximize the market potential of Auryxia and build launch momentum for vadadustat in the United States, subject to FDA approval. I look forward to leading the talented teams of both Akebia and Keryx as we work to establish new standards of renal care and unlock growth potential for shareholders."

Greg Ciongoli, a partner at the Baupost Group, also chimed in with some positive commentary in support of the deal, saying, "Akebia and Keryx bring together assets and capabilities that should lead to new business opportunities and substantial realizable synergies. The combined company will be well positioned for future growth."

Despite all of the potential positive, Wall Street doesn't appear to be thrilled with the merger news and is thrashing shares of both companies in response. 

Now what

Only time will tell if this transformative deal will pay off for shareholders but my initial reaction to this news is to view it as a net positive. This single transaction solves problems for both companies at the same time and the newly created company should have plenty of financial firepower on hand to execute against its growth strategy moving forward.

Having said that, mergers can be notoriously tricky to pull off and there are no guarantees that vadadustat will win regulatory approval or have market success. Given the uncertainty and magnitude of this transaction, my plan is to approach this stock with a wait-and-see mind-set.

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Stocks Mentioned

Keryx Biopharmaceuticals, Inc. Stock Quote
Keryx Biopharmaceuticals, Inc.
Akebia Therapeutics, Inc. Stock Quote
Akebia Therapeutics, Inc.
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