Morgan Stanley Calls ZS Pharma 'Best In Class,' Upgrades Stock

• The share price of ZS Pharma Inc ZSPH has increased 53.8 percent year to date, reaching a high of $76.99 on September 11.
• Morgan Stanley’s Andrew S. Berens has upgraded the rating on the company from Equal-weight to Overweight, while raising the price target from $67 to $76.
• Berens expects the company candidate, ZS-9, to emerge as the best-in-class potassium binder, “well differentiated” from its competitor.

Analyst Andrew Berens believes that the recent approval for Relypsa Inc’s RLYP hyperkalemia drug, Veltassa, spells good news for ZS Pharma.

“Label restrictions issued for patiromer seem molecule specific, likely making ZS-9 best in class. We also see less regulatory risk to ZS-9's action date in May, and think strategic optionality has increased,” Berens stated.

According to the Morgan Stanley report, Veltassa is likely to face commercial constraints, given that its label includes a “highly restrictive black box warning,” regarding drug interactions with several oral medications. This requires a 6-hour window before and after the ingestion of Veltassa.

On the other hand, ZS-9 has not shown any such drug interactions, which not only differentiates it but also makes a black box unlikely. “Additionally, the FDA's willingness to approve Veltassa even with black box concerns, suggests a less rigorous pathway for ZS-9,” the report said.

If ZS-9 received approval with a black box warning or a tedious dosing regimen, Huberty believes that it would be “difficult for clinicians to opt for Veltassa in most cases.” In addition, ZS-9 wins over Veltassa, given that the latter has “slower onset of action, need for refrigerated storage and centralized, cold chain distribution.”