Bayer AG (OTCMKTS: BAYZF)
On Monday May 23, 2016 Bayer had made an offer to buy Monsanto (NYSE: MON) for $62 billion. Although this deal is not one in which it was a mix of stock and cash. Instead, this was an all cash-type deal which is pretty large one indeed. Bayer is a mix of a crop and pharmaceutical company, and it has a multitude of products in various areas. It thought that buy adding seed maker Monstanto it would be a good strategic fit for the company.
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Even though this was good news for Monsanto, the stock didn’t act appropriately. By that I mean that the stock traded at $105.66 per share, but the offer that Bayer made was at $122 per share. Typically when a company bids a certain price, investors in the stock market bid up the company’s stock to that offer price. That’s not the case here, which was quite confusing. There is, however, a good explanation for such price movement. The reason for the share price not running up to the offer price is because not many believed that the deal would go through.
Of course to many of us, $62 billion sounds like a lot of money. The problem is that management of Monsanto believe that the company is worth a lot more, and of course as you would expect it refused the offer. Monsanto cited that the offer severely undervalues the company as a whole, and that it would need to receive a better offer in order to consider selling itself. This is kind of a huge dilemma because while Monsanto believes that the offer is too low, Bayer shareholders believe that the offer is way too high. This means that Bayer is now stuck in a hard place with its shareholders. If Bayer shareholders believe that the offer is way too high now, there is no way management can make a bigger offer to acquire Monsanto.
Relypsa (NASDAQ: RLYP)
On Friday May 27, 2016 shares of Relypsa finished the day higher by 8% as one of its rivals AstraZeneca (NYSE: AZN) had their drug ZS-9 rejected. One thing to note is that AstraZeneca had their drug rejected based on manufacturing issues, and not because of the drug’s safety or efficacy. In this case, it is a very easy fix for AstraZeneca to handle. The downside is that it probably will have to wait almost one year before it can seek FDA approval again.
This gives Relypsa ample time to obtain sales for its drug Valtessa, which received FDA approval last October. AstraZeneca will fix the issue, but for now it is probably feeling slightly bad about this FDA rejection. That is because it paid $2.7 billion to acquire ZS Pharma last year. Of course, again the FDA rejection had nothing to do with the drug. Had AstraZeneca obtained FDA approval it would have been a disaster for the share price of Relypsa.
Hyperkalemia occurs when patient has abnormally high potassium levels in the blood. The problem with this is that it causes life-threatening diseases. Both Valtessa and ZS-9 were created to reduce the amount of potassium levels in the blood. With AstraZeneca failing to receive FDA approval for ZS-9, this leaves Relypsa’s Valtessa to take the entire market share. Analysts expect that peak sales for Valtessa could reach up to $1 billion.
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Relypsa has been doing okay in the stock market, but most investors believe that it will probably be bought out by a big pharmaceutical company. This does make sense as AstraZeneca paid a hefty amount of money to buy ZS Pharma last year. Any pharmaceutical company that wants to get its hand on Valtessa can probably do so with ease. While all this acquisition talk is speculation, as long as the drug continues to sell well in the market the company should be good for the long-term.
[Image Courtesy of Pixabay]