Mehta Biotech Capital: Week 4 Update

You can learn more about Mehta Biotech Capital here:

The long-awaited September meeting of the FOMC takes place this coming Thursday. Market participants are unusually attuned to this particular meeting due to the ongoing debate over when the Federal Reserve will raise its funds rate - and interest rates as a result. This will definitely have an impact on the Biotech sector.

Since the flash crash last month, the IBB has been slowly winding up, setting up for a break - in one direction or the other - in conjunction with the FOMC meeting. We’ve contemplated the interest rate event at Mehta Biotech Capital, and we have positioned our portfolio to maximize the risk-reward profile for our subscribers.

ZS Pharma (ZSPH) was the subject of rumors mid-week that Switzerland-based Actelion (ALIOF) had made an initial approach regarding an acquisition. In a unique twist, both companies confirmed preliminary discussions shortly thereafter, sending ZSPH from a pre-rumor $57 to a high of $85 on Thursday.

ZS develops ZS-9, a potential treatment for high potassium, known as hyperkalemia. ZS Pharma filed a New Drug Application with the FDA this year and has a PDUFA decision slated for next May.

According to ZS Pharma’s corporate statement this week, the company “has participated in preliminary discussions with Actelion Ltd. (ALIOF) regarding a potential strategic transaction. ZS Pharma regularly and routinely explores opportunities with various strategic partners and will continue to do so. These discussions may or may not lead to any transaction. ZS Pharma does not intend to comment further on market speculation or disclose any developments unless and until it otherwise deems further disclosure is appropriate or required.”

The acquisition is particularly relevant for biotech investors because ZS-9 has a close competitor potentially months from approval, and ZS-9 is likely to be the second treatment for hyperkalemia to market in the next year. Competitor Relypsa (RLYP), which develops its own hyperkalemia drug patiromer, has a PDUFA decision approaching in October, 7 months ahead of the ZS-9 decision.

ZS Pharma ended the week with a market value of $1.9 billion; Relypsa, $1.04 billion. Relypsa bulls contend that a $2.5B+ acquisition of ZS Pharma offers great validation of what patiromer and Relypsa should be worth, roughly 2-3x upside by that logic. But while RLYP reacted positively to the ZSPH/Actelion news this week, the alternative read-through is that Actelion took a look at Relypsa in the hyperkalemia space and passed, despite that its patiromer should be first to market.

Yet again, biotech investors will be watching for a deal to get done over the weekend, setting Monday morning up for some meaningful newsflow.

You can learn more about Mehta Biotech Capital here:

From your biography in your C2 profile: “Due to Nirav’s results-driven approach, Mehta Biotech Capital is ranked in the top 5% among all funds trading on the C2 platform.”

Do you believe that your “fund” would still rank in the top 5% if all of the penny stocks that were traded in your system (at ) actually transacted at the quantities in your hypothetical track record?

For example, the intraday time and sales data for ticker symbol FORU shows only 200 shares bought at $0.15 on August 31st. How many of the 5,000 FORU shares shown in your hypothetical “fund” do you believe you could have purchased at $0.15 (since the offer price at that time was $1.90)?

Also, only 1,700 shares were transacted that day at or above the price of $1.90 (shown in your hypothetical track record). How many of the 5,000 FORU shares shown in your hypothetical “fund” do you believe you could have sold that day at or above $1.90 (since the highest bid that day was $1.90 for 1,000 shares)?