Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

AstraZeneca is suddenly finding out how it feels to be the underdog. 

Until Friday, AstraZeneca looked smart for its November purchase of ZS Pharma and its potential blockbuster hyperkalemia drug ZS-9. Relypsa, which has a competing drug on the market, looked in trouble. Though its treatment for the blood condition was approved in October, it's saddled with restrictive FDA guidelines and slow sales growth. The company's high cash burn rate led it to take out $150 million in loans in April, expensively

All that changed early Friday morning, when AstraZeneca announced the FDA had rejected ZS-9. Relypsa is remembering how to enjoy life again, and AstraZeneca may be diverting scientists into time-machine research. 

It looks like AstraZeneca may have shelled out too early and on the wrong company. Relypsa, in contrast, may be back on the blockbuster track and back to being an acquisition target. Relypsa's shares spiked as much as 27 percent Monday morning, while AstraZeneca's dropped as much as 1 percent. 

Good Morning!
Relypsa's shares are up on the news that a rival drug to treat a blood disorder did not get approved.
Source: Bloomberg
Intraday times are displayed in ET.

The FDA declined to approve ZS-9 after finding issues in a manufacturing inspection. The agency also said it hasn't reviewed some of AstraZeneca's data on the drug. The company is working to figure out next steps and will try again for approval, but the lack of a timeline makes things unpredictable. Resolving the agency's issues and getting a new approval date may take a year or more. And the FDA could still reject the drug again based on its clinical data.

Until Friday, analysts expected ZS-9 to outsell Relypsa's drug Veltassa by nearly $100 million in 2020. That was based partly on expectations AstraZeneca's drug, unlike Veltassa, could be approved without a so called "black box" warning label -- the FDA's strictest warning -- or to treat a broader group of patients. 

Veltassa's growth has been sluggish. An average of 290 new patients per week started on the drug with a free starter supply in April, the same as in March. It's tough to tell if that's because of the black box, poor execution on Relypsa's part, or understandably slow uptake of a new rare-disease drug. 

The bullish scenario for AstraZeneca would have put Relypsa in serious trouble; doctors likely would have preferred a freely approved ZS-9 to Veltassa, creating more acute cash worries. The company had $205 million in cash on hand as of March 31, then raised $150 million with its debt financing in May. But Relypsa has also projected spending $275 to $300 million this year. That doesn't leave much of a cushion. 

Now Relypsa has more time -- potentially a lot more time -- for its drug to gain traction in the market. With what now looks like prescient timing, Relypsa submitted new data to the FDA Wednesday that it hopes will convince the agency to lift Veltassa's black box. That could give it a much stronger competitive position. 

About That...
Before a delay to ZS-9's potential approval, consensus analyst sales estimates had the drug comfortably beating Veltassa. That may need to change.
Source: Bloomberg

Relypsa's woes have made it less attractive to potential acquirers. Any buyer will likely want to see some improvement in Veltassa's sales trends, or may wait for more ZS-9 clarity. But the company is far more appealing as a target than it was a day ago. 

At the very least, AstraZeneca no longer spells certain doom for Relypsa. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Max Nisen in New York at

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