Amgen Will Buy Onyx Pharmaceuticals

With a slightly sweetened offer of $10.4 billion, Amgen has persuaded Onyx Pharmaceuticals to submit to a takeover. On June 30, the small-molecule drug developer rejected an unsolicited $10 billion cash offer from Amgen.

The deal will give Amgen a stronger position in the growing oncology market—particularly in kinase and proteasome inhibitors. It also will add to Amgen’s pipeline of small-molecule drugs at a time when its biologics are facing generics competition. Amgen’s cancer drug pipeline has several biologic drugs in late-stage development, but any small molecules are still in Phase I.

Onyx brings a wholly owned multiple myeloma drug, Kyprolis (carfilzomib), that was FDA approved a year ago. Although Kyprolis sales in the first half of 2013 totaled only $125 million, analysts predict that the drug could bring in more than $2 billion annually within six years.

“Kyprolis is at an early stage in its life cycle, and that’s important to us as we feel that this is a point where we can still help maximize the full potential of the product,” Amgen CEO Robert A. Bradway told analysts in an Aug. 26 conference call. “We think Onyx fits well with our commercial oncology portfolio and with our pipeline generally.”

Onyx also gets income from two drugs sold in partnership with Bayer: 50% of sales of Nexavar, a kidney and liver cancer drug approved in 2005, and 20% royalties on Bayer’s sales of the stomach and colon cancer treatment Stivarga, approved in late 2012. Onyx also has an 8% royalty interest in the breast cancer treatment palbociclib, which Pfizer is developing.

Citigroup stock analyst Yaron Werber is optimistic about the future of palbociclib and anticipates that sales could exceed $2 billion annually within 10 years. Onyx’ “promising” pipeline includes another myeloma drug, oprozomib, he adds.

For Amgen, acquiring Onyx will “restore much-needed top-line growth until the internal pipeline begins to deliver in 2015,” Werber says. Given the overlap in the oncology area, he anticipates that Amgen will cut 25% of Onyx’ R&D costs and 50% of its operating costs.