H.C. Wainwright Weighs In On Two Healthcare Stocks: Relypsa Inc (RLYP) and Biogen Inc (BIIB)

Relypsa Inc

Yesterday, Relypsa Inc (NASDAQ:RLYP) announced that Galenica and Relypsa have entered into a definitive agreement under which Galenica will acquire Relypsa. Under the terms of the merger agreement, Galenica will pay $32 per share in cash, or a total of approximately $1.53 billion.

In reaction, H.C. Wainwright analyst Ed Arce downgraded shares of Relypsa from Buy to Neutral with a price target of $32, as the offer price matches his price target.

Arce commented, “Given that the consideration for this acquisition represents a fully-diluted equity value of $1.53B, we believe some investors may view the price as relatively low. Specifically, we believe Relypsa management has experienced unrelenting investor pressure to sign a strategic transaction ever since ZS Pharma (a close comp to Relypsa, with a competing hyperkalemia drug, ZS-9) agreed to be acquired by AstraZeneca for $2.7B in November 2015. However, we point out that not only was the ZSPH deal struck when the equity capital markets were (or at least were perceived to be) significantly stronger than they are now, but the deal announcement came one day before data at ASN 2015 revealed that ZS-9 carries increased risks of edema and hypertension. Despite this adverse event profile, some investors continued to view ZS-9 as the inherently better hyperkalemia drug, to which we firmly disagree. Ultimately, however, as a deal comp, we are more inclined to view AZN’s takeout of ZSPH as “overpaid”, rather than view the price offered to RLYP as “too low”.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Ed Arce has a yearly average return of 10.1% and a 39% success rate. Arce has a 57.9% average return when recommending RLYP, and is ranked #491 out of 4075 analysts.

Biogen Inc

In a research report released Friday, H.C. Wainwright analyst Andrew Fein reiterated a Buy rating on shares of Biogen Inc (NASDAQ:BIIB), with a price target of $360, after the company released strong second-quarter earnings results relative to consensus expectations.

Fein noted, “While revenue guidance is modestly increased for the remainder of FY16, we caution against extrapolating from this on long-term growth, due to: (1) flattened US revenue for Tecfidera with any growth primarily driven by pricing rather than a growth in scripts, although we note that EU growth is still strongly based on unit expansion across territories; (2) an average 20% discontinuation rate for Tecfidera, attributable to GI tolerability issues and adds to continued concerns over PML risk; (3) headwinds for the IFN franchise from growing use of orals and overall decline in the injectable market expected; and (4) newly announced patent challenges to the IFN franchise resulting in single digit royalty payments to an, as yet, undisclosed third party.”

“While short-term growth and share support are good, we look forward to seeing business development as a key value-driver,” the analyst concluded.

According to TipRanks.com, analyst Andrew Fein has a yearly average return of 10.4% and a 48% success rate. Fein has a 1.8% average return when recommending BIIB, and is ranked #331 out of 4075 analysts.

Out of the 21 analysts polled by TipRanks, 12 rate Biogen stock a Buy, while 9 rate the stock a Hold. With a return potential of 22%, the stock’s consensus target price stands at $344.69.

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