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Onyx Pharmaceuticals (NASDAQ:ONXX) ruffled some feathers last week by announcing a fundraising effort to raise around $300m, prompting shareholders to fret about what the already cash-rich company has planned. Vague talk about licensing opportunities by management, who refused to say what type of deals they were pursuing, did little to quell fears.

The company will have $800m in the bank following the equity and debt offering, enough to strike several smaller deals or a significant larger one, although a risky acquisition is probably what most investors are fearful of. However, with only Nexavar driving sales growth, Onyx is right to be thinking about the future as there are plenty of opportunities in oncology at the moment, at all stages of development.

With sales of expensive oncology drugs outstripping growth in most other therapy areas, research into medicine's most valuable field has been blazing in the last few years. This has spelt a lot of deal activity; the table below shows that, over the past 12 months, there have been almost double the amount of deals struck over experimental cancer drugs than any other therapeutic area.

This has driven deal values up, so clearly Onyx will need plenty of cash on the hip if it wants to compete for promising looking assets.

Product deals struck in the last 12 months
Therapy AreaProduct Count
Oncology & Immunomodulators145
Central Nervous System78
Systemic Anti-infectives52
Sensory Organs25
Report Total504

Source: EvaluatePharma

A recent analysis by EP Vantage revealed a rich pipeline of unpartnered oncology assets out there for the taking by the highest bidder (Pfizer spoilt for choice of oncology assets , July 14, 2009). Plenty to chose from, which ever stage Onyx is leaning towards.

On a conference call last week, Onyx’s bosses said they were looking at all opportunities. However, considering the cash call and the fact that the last product deal the company struck was relatively early stage, a more advanced compound might be next.

Other than Nexavar, Onyx already has two phase II candidates, one in phase I and a couple of pre-clinical projects. Two of these are JAK kinase inhibitors licensed from S*Bio in January, one of which is in phase II. The other phase II candidate is fluoro-sorafenib, a derivative of Nexavar, the rights to which are being contested by Onyx and its partner Bayer.

Late stage research

However, to say that Onyx does not have any late-stage candidates is slightly misleading, considering the huge amount of research still being conducted with Nexavar in new indications. Bayer and Onyx are funding an extensive discovery programme with trials ongoing in seven further cancer types, the most advanced being a pivotal non-small cell lung cancer study.

The website lists 210 studies which are actively recruiting patients, a significant financial commitment, particularly if more indications like breast or colorectal cancer move into phase III.

This might also help to explain why Onyx has decided to raise more capital. If the company is growing more hopeful about further success for Nexavar, a large amount of cash will need to be earmarked for these trials.

Fast cash

More phase II data from Nexavar in breast cancer is due later this year, following encouraging top line results released last month which prompted Onyx shares to touch 10-month highs (Shareholders latch on to new Nexavar potential , July 23, 2009). If the next data set is equally as positive, Onyx shares are likely to receive another boost.

For this reason, some commentators questioned the timing of the fundraising, saying it might indicate the company is not hugely confident of success, so took the opportunity to sell shares whilst the price was high.

This might be true, but possibly Onyx needs the cash fast. With a number of exciting oncology assets approaching key pivotal events such as Allos Therapeutic’s PDX, which could hear on FDA approval next month, and Poniard’s picoplatin (Event - Poniard approaching pivotal phase III data point, July 13, 2009), which is due to report pivotal data imminently, it feels like Onyx wants the flexibility to move quickly.