Across the Thursday US session, California based biotech Relypsa Inc (NASDAQ:RLYP) gained close to 70% on speculation that it’s is looking to sell itself to a big pharma suitor. News outlet Reuters reported on an anonymous sources claims that the company has hired an investment bank to oversee the transaction, and has fielded offers from a number of potential candidates. It’s an interesting situation, and an (albeit) speculative thesis for investment. There have been some heavy premiums paid for buyouts over the past twenty-four months, and with its lead product, Veltassa, having just kicked off commercialization in what has the potential to be a multi billion-dollar market, Relypsa could justifiably command just such a premium. There’s a catch, however. One that – at present – markets seem to be overlooking. That catch is AstraZeneca plc (ADR) (NYSE:AZN).

Click Here For More Market Exclusive Updates & Analysis

Before we get to why, let’s quickly address the buy side of the rumors. Relypsa’s Veltassa is a hyperkalemia indication drug, which the FDA approved back in October last year. Hyperkalemia is a condition that involves a patient having too high a level of potassium in their blood. Potassium is required for the smooth everyday function of a number of the nucleated cells in our body. In healthy patients, the kidneys filter the potassium out of the blood to maintain a healthy and safe amount. In patients with hyperkalemia, this filtration isn’t effective, and the potassium doesn’t get removed. It builds up, and can have some pretty serious effects on the heart – specifically, its natural rhythm. Veltassa binds to potassium, which means it isn’t taken up by the gastrointestinal system, and never reaches the blood stream. It’s the first drug of its kind to treat this condition, and previously Hyperkalemia suffers were forced to manage it through dietary control.

Trials proved the drug to be effective and safe, and the FDA agreed.

So, all looks good there. What’s the issue? Well, alongside the approval, the agency issued the requirement for a boxed warning, stating that the drug shouldn’t be taken within six hours of any other – that is, a patient shouldn’t take Veltassa and then take another drug within a six-hour period. The reason, that other drugs could bind to Veltassa, and inhibit its ability to bind to potassium. Essentially, other drugs taken within the six-hour window could render Veltassa ineffective.

This is where AstraZeneca comes into play. At present, Veltassa is the only approved drug of this type available. Relypsa has the market cornered, and can price its drug as it likes, boxed warning or not. Back in November, however, just a few weeks after the FDA approved Veltassa, AstraZeneca bought ZS Pharma for $2.6 billion. Interestingly, and almost counterintuitively, this buyout is one of the drivers behind the premium markets are speculating another big pharma will pay for Relypsa, but that’s an aside. The real point here is that with its purchase of ZS, AstraZeneca picked up ZS-9, a hyperkalemia development candidate that the FDA is set to report its judgment on by 26 May, 2016.

There has been much written about the safety profile of ZS-9. The drug resulted in quite a high number of adverse events, at least when compared to Veltassa, and this may influence the FDA when it comes to decision day. However, if it can avoid the boxed warning, it has the potential to seriously compete with Veltassa, and redirect a large portion of the latter’s potential revenues towards AstraZeneca.

Chances are any big pharma company will want to wait and see what happens with ZS-9 before coming up with a dollar figure valuation on Relypsa. The uncited sources suggest offers have already been fielded, but surely these offers are highly unstable, given that a month from now there could be a competing drug in a market that – at present – is dominated by the company being valued?

When AstraZeneca paid $2.6 billion for ZS, many suggested the company rushed in and overpaid for an as yet unapproved drug. If a company picks up ZS ahead of the FDA decision on ZS-9, this would be a similar hasty decision, as the PDUFA has the potential to dramatically alter the fortunes of both companies, on both sides of the decision.

As an individual investor, I’d also want to wait and see what the FDA says about ZS-9 before picking up an exposure to Relypsa, regardless of the buyout rumors. One to keep an eye on going forward.