Bay Area ZS Pharma Jumps on Merger Talks, Actelion Stock Drops

Bay Area ZS Pharma Jumps on Merger Talks, Actelion Stock Drops
September 18, 2015
By Mark Terry, Breaking News Staff

Switzerland-based Actelion Ltd. last week confirmed that it was in talks to acquire ZA Pharma Inc. As a result, the stock dropped about 3.2 percent overnight. ZS Pharma , headquartered in Mateo, Calif., found its stock price jumping 28 percent.

Actelion focuses on pulmonary arterial hypertension (PAH) and markets Veletri, Tracleer and Opsumit. Its drug selexipag is currently under regulatory review. Tracleer, for PAH, made up about 75 percent of Actelion’s revenue in 2014. However, its U.S. patent expires in November 2015.

Actelion is the biggest biotech company in Europe. On Sept. 11, the company announced it had made a preliminary offer in August for ZS Pharma for $2.5 billion. ZS was founded in 2008 and uses proprietary ion-trap technology to develop drugs that mimic or exploit the body’s own ion channels.

ZS currently has a drug candidate, ZS-9, for the treatment of hyperkalemia, under review, having recently received its acceptance of its New Drug Application (NDA) with the FDA. A decision is expected on May 26, 2016.

ZS Pharma doesn’t yet produce revenue. The company went public in June 2014 after a $112 million IPO, then raised another $175 million in a share sale in March 2015.

Apparently the acquisition bid for ZS Pharma is an attempt to broaden its portfolio, which is so clearly bound to Tracleer. Investors, however, do not appear convinced. traded for $107.50 on Feb. 9, 2015, rose to $155.81 on June 11, then drifted down to $137.79 on Sept. 9. After news of the potential bid broke, stock traded for $132.50, but has since risen to $136.85.

, on the other hand, benefitted from the news. Shares traded on Oct. 22, 2014 for $74.80, dropped to $60.86 on May 27, 2015, and even lower to $47.11 on Aug. 24. News of the possible acquisition, however, drove the share price to $76.99. It is currently trading for $74.80.

Analyst indicate, perhaps belatedly, that ZS Pharma stock is expected to reach $72.33 in the short term. The higher estimate is $75 and the lower is $67, based on three analysts. Zacks analysts gave the stock a short-term rating of “hold.” Morgan Stanley rates it as “overweight.”

Competitors in the PAH space include Bayer , GlaxoSmithKline and Gilead Sciences, Inc. . Actelion itself was recently rumored to be an acquisition target for Shire or Bayer.

Analysts have expressed some skepticism over the rationale for a ZS Pharma acquisition. “We do not see in ZS-9 an immediate synergistic effect for Actelion’s portfolio but more an opportunistic approach from the company for a specialty-care product that is approaching the market,” Peter Welford, an analyst at Jefferies in London wrote in a research note last week. “The target market is not crowded and is unlikely to require massive commercial investments to make ZS-9 a drug.”

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