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Onyx Rejects Amgen Offer

Biotechnology: Cancer drug firm will likely attract other bidders

by Lisa M. Jarvis
July 3, 2013 | A version of this story appeared in Volume 91, Issue 27

Onyx Pharmaceuticals has spurned a $10 billion takeover bid from Amgen, saying that it will instead solicit offers from other suitors. With so many big drug companies desperate to bolster their cancer portfolios, the South San Francisco-based biotech firm is expected to fetch as much as $12.5 billion.

Onyx is one of just a few biotech companies to boast a wholly owned product, and it is part of an even more elite group with a cancer drug. Kyprolis (carfilzomib), a proteasome inhibitor for the treatment of a blood cancer called multiple myeloma, was approved in July 2012. Deutsche Bank stock analyst Robyn Karnauskas expects annual sales of the drug, which costs nearly $10,000 a month, will top $2.2 billion by 2019.

Moreover, Onyx has a stake in several other cancer drugs. The firm’s revenues were $362 million in 2012, but they are expected to cross the $1 billion mark by 2015, enough to provide even a large pharmaceutical firm with a nice boost.

Although Amgen’s $120.00-per-share offer was well over Onyx’ closing stock price of $86.82 on June 28, the final trading day before the news was revealed, Onyx’ board swiftly dismissed the bid as too low. “We assume it will take significantly more than $120 to secure a deal,” JPMorgan analyst Cory Kasimov said in a note to investors.

With few cancer-oriented biotech firms in the same category as Onyx and with most major drug firms hunting for deals that can immediately bolster their portfolios, analysts expect that Onyx will attract a lot of interest.

Bayer and Pfizer top the list of likely bidders. Bayer and Onyx have a long-standing relationship that has yielded two drugs: the kidney and liver cancer drug Nexavar, approved in 2005, and the colon cancer treatment Stivarga, approved last September. Nexavar sales are split evenly between the partners, and Onyx gets a 20% royalty on Stivarga revenues.

As part of a decades-old pact with Pfizer, Onyx also holds an 8% royalty on future sales of palbociclib, a small molecule that shows promise in treating breast cancer. Analysts think Pfizer will get FDA’s nod to sell the drug in 2016.



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