Onyx Doubles on Positive Cancer Drug News

Onyx (ONXX) and Bayer (BAY) announced positive results for cancer drug Nexavar (sorafenib) in patients with liver cancer.

The drug was so successful in a Phase III trial that the trial was stopped early, on the advice of the data safety monitoring committee, and Nexavar was given to all participants. There was no significant difference between Nexavar and the placebo in terms of side effects.

The endpoint of the trial was overall survival. Specific data from the trial were not released, but the full results are expected at ASCO in June.

The news had a very positive effect on the shares of Onyx, which rose over 90%. Often when surprising results are announced, the stock price will react with an early surge, which fades as investors take profits. Onyx has defied that pattern by continuing to rise. The reaction at Bayer, where Nexavar is a small contributor to overall results, was more muted.

We have been positive on Nexavar for some time (see Onyx’s Promising Cancer Drug), jumping to its defense when the drug was encountering increasing skepticism. The drug has not had a history of uninterrupted success, partly because Nexavar had trouble living up to the huge amounts of hype that built up around it. Nevertheless, Nexavar has produced solid results, even if it has not proven to be a cure for all forms of cancer in all patients.

Nexavar was originally designed to knock out an enzyme known as RAF kinase, which plays a key role in cell division. It later turned out to also block other proteins, which are involved in angiogenesis or blood vessel growth. The angiogenesis mechanism added to the hype surrounding Nexavar.

From a high of $60 per share in early 2004, the stock of Onyx dropped to about $20 in late 2004, when the drug was shown to work in “only” 70% of kidney cancer patients. Then, Nexavar was slow to win approval, and by the time it was on the market, Sutent from Pfizer (PFE) was hot on its heels.

In December of 2005, Nexavar won initial FDA approval for kidney cancer. Sutent was approved just a month later, in January of 2006, for the same indication. In the third quarter of 2006, Bayer reported revenues for Nexavar of $45.4 million. Those are decent sales, but not really blockbuster level. Sutent had revenues of $104 million for all of 2006, so it isn’t setting the world on fire either.

In December of 2006, Nexavar had another setback when its makers reported that Nexavar was not effective against melanoma. That took a 30% bite out of Onyx’s stock price, sending it down to close to $10 per share.

In the latest trial, which enrolled 602 patients, Nexavar was given as a first-line treatment for hepatocellular carcinoma, also known as primary liver cancer. Hepatocellular carcinoma causes 90% of all liver cancer, and liver cancer is, in turn, the fifth most common cancer world-wide.

After the announcement, Onyx shot up a spectacular $11.53 to $23.79, a jump of 94%. Bayer was 60 cents higher at $58.43, an increase of 1%.

Disclosure: none.

ONXX vs. BAY vs. PFE 1-yr chart