Brean's Yang: Relypsa Monthly Prescription Data Met Expectations, A Takeout Still 'Probable'

Relypsa Inc RLYP’s March prescription data was in line with analyst expectations, but the stock is selling off hard in Friday’s session. Despite the 14.5 percent sell-off, Brean Capital analyst Difei Yang believes the stock still has plenty of upside.

“While the data did not blow investors away, it met our expectations; as such, we are keeping our Q1 and full-year estimates intact,” Yang explains.

Relypsa’s stock skyrocketed 67 percent in a single day earlier this month on buyout rumors, so much of Friday’s selloff could be profit-taking.

On Thursday, Benzinga reported that Relypsa may have dropped Centerview as an M&A advisor, and Yang believes this report has sparked a new wave of M&A speculation.

Related Link: Source: Relypsa Said To Have Dropped M&A Advisor Centerview Partners

The Centerview news has not impacted Brean’s view that Relypsa will still likely be acquired due to its potential strategic fit with a larger pharmaceutical company.

Yang calculates Relypsa’s value in the $25-26 range using two different methods. Applying a 5.0x multiple on Brean’s 2020 sales estimates yields $26. In addition, DCF analysts based on a conservative revenue forecast at a 7.0 percent discount rate yields a $25 valuation.

For now, Brean maintains its Buy rating on Relypsa and the firm’s overall price target of $26.

Disclosure: the author holds no position in the stocks mentioned.