Galencia's Bid For Relypsa Is 'Reasonable,' Another Bidder 'Unlikely'

Swiss healthcare group Galenica has agreed to acquire Relypsa Inc RLYP for $1.53 billion. Relypsa received two downgrades from analysts citing the offer being fair and the low probability of another bidder emerging.

Downgrade At Citi

Citi’s Yigal Nochomovitz downgraded the rating on the company from Buy to Neutral, while raising the price target from $25 to $32. The analyst commented that the Galenica deal was likely to close.

Nochomovitz pointed out that Galenica already had the EU rights to Veltassa and would “know the asset well.” Moreover, the negotiations for a complete takeover of Relypsa were likely to have been “brewing for some time.”

“Plus the deal highlights Relypsa's bridge debt financing strategy which in retrospect successfully extended negotiating leverage without equity dilution,” the analyst wrote, while adding that the solid launch of Veltassa in May and June may have added to Galenica’s decision to acquire Relypsa.

Downgrade At Brean Capital

Brean Capital’s Difei Yang downgraded the rating on Relypsa from Buy to Hold, saying that Galenica's cash offer of $32 per share seemed reasonable, given “our Veltassa intrinsic value plus synergy consideration.”

Veltassa’s commercialization would require a massive burn rate, which would be “too much for a small company like Relypsa to bear,” and the company likely had several talks with potential buyers prior to the announcement of the Galenica deal, Yang mentioned.

Another bid for Relypsa would need to be substantially higher, maybe 15 percent more than the current offer, “to warrant another look,” and this appears “highly unlikely at this time,” the analyst commented.

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