Biotech Beat: Cantor Bullish on Relypsa Inc (RLYP) and Celgene Corporation (CELG)

Earlier today, Cantor analyst Mara Goldstein weighed in on two biotech stocks, Relypsa Inc (NASDAQ:RLYP) and Celgene Corporation (NASDAQ:CELG). The ratings come amid the American Society of Hematology conference and rumors of an acquisition as the volatile biotechnology sector continues to consolidate.

Celgene Corporation

Goldstein maintained a Buy rating on Celgene with a $163 price target after the company announced positive data at the American Society of Hematology conference. Although the company did not release “pivotal data” at ASH, she believes “the sum total of data continues to support a growth story.” Even though she has lowered her 2016 EPS estimate by $0.05 to reflect “increased interest expense associated with the Receptos transaction,” Goldstein continues to believe “substantive cash flow will support a high level of growth.”

The analyst specifically points to Revlimid, an approved treatment for mantle cell lymphoma, and Pomalyst, an approved drug for advanced multiple myeloma, in combination with the advancement of earlier stage assets belonging to both Celgene and other partners. Goldstein calls Revlimid and Pomalyst the company’s “one-two punch” and continues to “expect growth for the franchise, particularly with the emergence of more combinations that use Revlimid as a backbone in treatment and Pomalyst in the relapsed setting.”

Goldstein continues to discuss Revlimid’s potential upside, but in addition notes Celgene’s diverse portfolio. She explains, “[Celgene] has also embarked on a strategy to diversify the portfolio, diminishing Revlimid’s impact over time. To this end, a number of partnerships have been undertaken, and appear promising, such as luspatercept in MDS, where data was presented at the conference.”

According to TipRanks, all six analysts who cover Celgene are bullish on the stock. The average 12-month price target between these six analysts is $152, marking a 39% potential upside from current levels.

CELG consensus

Relypsa Inc

Separately, Goldstein weighted in on Relypsa after shares were up on Friday due to a rumor that Merck will acquire the company.

Analysts have been concerned that the company’s recently approved drug, Veltassa, was given a black box warning by the FDA. However, Goldstein maintains that the company’s shares remain undervalued despite the warning. Furthermore, Goldstein is also not concerned about competition from AstraZeneca’s ZS-9; a pipeline drug targeting the same market as Veltassa.

There are also several rumors that Relypsa is on the brink of a takeout. Although the analyst is not sure whether or not the takeout will occur, she states that the “company’s valuation and Veltassa’s profile suggest upside from Friday’s levels.” The analyst also states that this potential takeout is timed with competitor AstraZeneca’s $2.7 billion offer for ZS Pharma, the company which develops ZS-9. Goldstein believes that although Merck is Relypsa’s most likely buyer, there are 5 potential others “given the attractive hyperkalemia market.” The analyst continues to note that Veltassa’s valuation could drive an acquisition, but she is unsure of when such an event will occur. Goldstein concludes, “We maintain BUY and $42 PT based on our view of the market for Veltassa.”

According to TipRanks’ statistics, out of the 7 analysts who have rated RLYP in the last 3 months, all 7 gave a Buy rating. The average 12-month price target for the stock is $46.57, marking a 65% upside from where shares last closed.

RLYP consensus



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