Is Financing An Overhang For Relypsa?

Cantor Fitzgerald's Mara Goldstein reiterated a Buy rating on Relypsa Inc RLYP, with a price target of $42.

Mentioning that the "Veltassa prescription data released by RLYP looks good," Goldstein said that the numbers looked especially robust when compared to "recent cardio-renal launches as well as other consumer-oriented new drug launches."

This data, combined with other developments, such as the ability to file an sNDA based on the DDI data, are expected to drive share price performance for Relypsa.

"However, a financing overhang based on 2016 projected operating expenses could reign in excitement," the analyst cautioned.

The company released its first prescription data along with its 4Q15 earnings, with 1,229 outpatient prescriptions since the launch and 815 patient starter packs having seen dispensed since February 12.

"Veltassa was added to the CMS formulary reference file a few weeks ago, which facilitates Medicare reimbursement," Goldstein said, adding that "agreements with Express Scripts and CVS CareMark, covering greater than 80 million lives, has been inked."

The analyst expects the company's operating expenses to rise significantly in 2016, with the company guiding to $275-$300 million, which is higher than the estimate of $240 million.

"It is also roughly similar to current cash, which suggests some type of infusion this year. We don't think this should come as a surprise, and think a financing could deviate from standard equity-based capital raising, removing such an overhang on the shares," according to the Cantor Fitzgerald report.