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Actelion Down on Confirmed Discussions with ZS Pharma

Actelion Ltd. 's ALIOF shares fell 3.2% following the company's confirmation on the news that it has initiated preliminary discussions with ZS Pharma, Inc. ZSPH . The drop reflects skeptical reaction of investors regarding the proposed deal.

While ZS Pharma stated that the discussions were regarding a potential strategic transaction.

We note that this offer came on the heels of a previous speculation regarding Shire's SHPG intention of acquiring Actelion in an endeavor to pursue acquisitions in the rare disease space.

The potential acquisition of ZS Pharma will add regulatory-stage hyperkalemia candidate, ZS-9 (under FDA review for hyperkalemia - response expected by May 26, 2016) to Actelion's pipeline, it should also help the company venture beyond the market for PAH and increase its market value.

Actelion's blockbuster PAH drug, Tracleer, is currently facing steep generic competition. In the first half of 2015, Tracleer generated sales of CHF645 million, down 9% at constant exchange rates. With Tracleer set to lose exclusivity in the U.S. in Nov 2015, the company is gearing up to bring new treatments to the market. Actelion has already launched a new PAH product, Opsumit (approved in the U.S. and the EU in Dec 2013 and Oct 2013, respectively), to compensate for the loss of Tracleer sales. Addition of ZS-9 to its portfolio should prove beneficial, if approved, and further help reduce the company's dependence on Tracleer.

However, investors were not convinced by the rationale behind the deal. While the addition of ZS-9 will diversify Actelion's pipeline, it may not have a synergistic effect on the company's portfolio in the near term. Additionally, Relypsa Inc.'s RLYP Patiromer for oral suspension (Patiromer FOS) is under FDA review for hyperkalemia, with a response from the agency expected by Oct 21, 2015.

We expect investor focus to remain on further updates regarding the potential acquisition.

Actelion carries a Zacks Rank #2 (Buy). Another well-ranked stock in the health care sector is Valeant Pharmaceuticals International, Inc. VRX , carrying a Zacks Rank #1 (Strong Buy).

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ACTELION LTD (ALIOF): Free Stock Analysis Report

VALEANT PHARMA (VRX): Free Stock Analysis Report

SHIRE PLC-ADR (SHPG): Free Stock Analysis Report

ZS PHARMA INC (ZSPH): Free Stock Analysis Report

RELYPSA INC (RLYP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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