Onyx's Myeloma Drug Shifts To The Slow Lane

| About: ONYX Pharmaceuticals, (ONXX)

Hopes that Onyx Pharmaceuticals (NASDAQ:ONXX) would finish the year on a high note have gone flat with a surprising and curious decision by the FDA over the company's application for accelerated approval of carfilzomib in multiple myeloma.

Just a few weeks ago the FDA accepted the filing on the basis of results from a single arm, open label, phase IIb trial – a clear positive only tempered by no word on the regulator's intention to review the drug on a priority or standard basis. Given the acceptance of the accelerated data package, most assumed a priority, six-month review as most logical, hence the surprise at the FDA’s decision for a standard, ten-month review period - shares in the Californian biotech slipped 6% to $38.16 in early trade Monday. More curious are the number of concerns raised by the FDA which threaten the validity of carfilzomib’s application and make accelerated approval next year seem highly unlikely.

Surprise and intrigue

The FDA’s decision to accept Onyx’s application seemed to have answered the lingering questions over whether carfilzomib ticked all the required boxes of manufacturing compliance, robustness of clinical data and the extent of the unmet medical need (Onyx making nice progress but takeover rumours seem wide of the mark, November 30, 2011).

Hence the somewhat surprising decision by the regulator to only classify carfilzomib as a standard review drug - an almost unprecedented situation with few if any historical examples.

Yet what is more surprising and of most concern is what Onyx revealed about the FDA’s designation letter, which said the agency’s cancer advisory committee is increasingly keen on seeing phase III data for accelerated approvals - an odd statement given the very nature of the accelerated approval pathway.

The FDA also apparently has concerns about whether the ‘data provided within the NDA meets accelerated approval criteria’ - despite already accepting carfilzomib’s application - and questions whether the ‘benefit and risk are appropriately balanced, given that the application is based on a single-arm study.’

On this final point, it is worth noting that the FDA has already approved two novel cancer drugs so far this year on the basis of trial data and design of a very similar nature to carfilzomib. Seattle Genetics’ (NASDAQ:SGEN) Adcetris for rare types of lymphoma and Pfizer’s (NYSE:PFE) Xalkori for a specific type of lung cancer were both approved on the basis of response rates from single-arm, phase II studies.

With Adcetris and Xalkori appearing to address more significant unmet needs, there may be question marks over the extent of the unmet medical need in multiple myeloma, a disorder with a median overall survival – time it takes for half of patients to die – of four to five years. Meanwhile some of the newer targeted treatments are proving increasingly effective: Celgene’s (NASDAQ:CELG) Revlimid was launched in 2007 and Millennium’s (now Takeda) Velcade, a proteasome inhibitor like carfilzomib, reached the market in 2003.

Phase III required

Whatever the reasons behind the FDA’s decision, Onyx appears to be guiding investors to expect a rejection of carfilzomib on an accelerated application basis. The company is currently assuming an FDA advisory committee will be held in the second quarter next year, ahead of the drug’s PDUFA of July 27, 2012, which will provide much greater insight into the FDA’s stance and views of some independent experts.

Assuming the FDA does reject carfilzomib at this stage, interim results from the ongoing phase III trials will therefore be critical. Initial results from a 700-patient, global phase III trial called Aspire should be available in the first half of 2013, which if positive could support an application by the end of that year. Canaccord Genuity analysts are now assuming carfilzomib reaches the market in 2014 instead of next year and have reduced their price target on Onyx's stock to $43 from $48.

Onyx bought Proteolix two years ago for $316m to acquire carfilzomib. Onyx's chief executive, Dr Anthony Coles, admitted on a conference call with investors Monday that gaining accelerated approval was always a 'high bar.' It looks increasingly unlikely that bar will be cleared next year.