Cantor Hits Relypsa With Buy Rating, Sees Coming Binary Event And 25% Upside

In a report published Tuesday, Cantor Fitzgerald initiated coverage of Relypsa Inc RLYP with a Buy rating and a price target of $42. Relypsa is awaiting FDA approval for Patiromer FOS, a treatment for elevated serum potassium levels, associated with chronic kidney failure and heart failure patients. "We assume an 80% probability of approval by the October 21 PDUFA date, which we believe is a key binary event that could rally the stock. We also view shares as fundamentally undervalued given the size of the U.S. Patiromer market opportunity and our longer term peak sales estimates of over $1.6B," Cantor Fitzgerald noted in the report. Patiromer is expected to provide a therapeutic solution in a highly unmet need category resulting in Relypsa carving a niche for itself in a highly attractive segment. The company plans to build a 120-people sales force to target nephrologists and cardiologists in a category that is highly reliant on Medicare Part D reimbursement. "We expect penetration of the milder CKD patients and gradual growth of the top line over time as primary care doctors adopt usage of Patiromer and managed care coverage improves. We model profitability in 2020 due to our expectations of significant commercial investment behind this program, continued R&D spending to build out the category, and additional in-licensing activities," the report added.