Onyx Pharmaceuticals (ONXX) is a global biopharmaceutical company engaged in the development and commercialization of innovative therapies for improving the lives of people with cancer and other serious diseases. The company is focused on developing novel medicines that target key molecular pathways.
I see at least 3 reasons to buy the company:
1. Promising pipeline
The company's first commercially available product, Nexavar, is approved by the United States Food and Drug Administration, or FDA, for the treatment of patients with unresectable liver cancer and advanced kidney cancer.
Onyx Pharmaceuticals and Bayer (BAYZF.PK) are commercializing Nexavar for the treatment of patients with unresectable liver cancer and advanced kidney cancer. Nexavar was approved for the treatment of patients with advanced kidney cancer by the FDA in December 2005. It was approved by the European Union in July 2006 for the treatment of patients with advanced kidney cancer who have failed prior therapy or are considered unsuitable for other therapies. In the fourth quarter of 2007, Nexavar was approved in the European Union and United States for the treatment of patients with unresectable liver cancer. Nexavar is now approved in over 100 countries worldwide for the treatment of advanced kidney cancer and unresectable liver cancer. In the United States, Onyx Pharmaceuticals co-promote Nexavar with Bayer. Outside of the United States, Bayer manages all commercialization activities. In 2011, worldwide net sales of Nexavar, as recorded by Bayer, totaled $1.0 billion.
Onyx Pharmaceuticals is developing carfilzomib, a next-generation, selective proteasome inhibitor, as a potential cancer treatment. The proteasome is a protein complex that exists in all cells, whether healthy or cancerous. The proteasome controls the turnover of proteins in cells in a regulated manner, but cancer cells are more susceptible to cell death when the proteasome is inhibited. Carfilzomib is a novel small molecule, belonging to a class known as peptide ketoepoxides, and is designed to inhibit the proteasome and enable sustained suppression of protein degradation in tumor cells. Carfilzomib is currently in multiple clinical trials as summarized above.
Oprozomib is an oral proteasome inhibitor in Phase 1b/2 clinical development that is based on similar novel chemistry as carfilzomib. Oprozomib has demonstrated preclinical anti-tumor activity and a broad therapeutic window in preclinical models. In 2011 the company initiated a Phase 1b/2 study of oprozomib to assess optimal dosing in patients with hematologic malignancies.
2. Strong financials
The company's operating results for the three months ended March 31, 2012 included revenue from the Nexavar collaboration agreement of $72.0 million as compared to $67.1 million for the three months ended March 31, 2011 primarily driven by increased net sales of Nexavar as recorded by Bayer.
Total operating expenses for the three months ended March 31, 2012 were $122.8 million, an increase of $14.3 million, or 13% from $108.5 million for the same period in 2011. The increase in operating expenses was primarily due to the increase in research and development expenses for the development of carfilzomib, particularly the Phase 3 ASPIRE and FOCUS trials, offset by lower contingent consideration expenses recorded in the first three months of 2012 compared to the same period last year.
Worldwide sales of Nexavar, as recorded by Bayer, in countries around the world increased from $235.5 million for the three months ended March 31, 2011 to $243.3 million for the three months ended March 31, 2012. The strong growth is driven primarily by the increased sales in the U.S. and Asia-Pacific region, particularly China.
Cash, cash equivalents and current and non-current marketable securities at March 31, 2012 were $622.4 million, a decrease of $46.0 million, or 7%, from $668.4 million at December 31, 2011. The decrease is primarily attributable to net cash used in operations and the increase in research and development expenses for the development of carfilzomib.
3. ODAC will review carfilzomib at its meeting on June 20th
The U.S. Food and Drug Administration's (FDA) Oncologic Drugs Advisory Committee (ODAC) will review the company's new drug application (NDA) for carfilzomib for the treatment of patients with relapsed and refractory multiple myeloma who have received at least two prior therapies. ODAC will review Kyprolis (carfilzomib) at its meeting on June 20, 2012. The Prescription Drug User Fee Act (PDUFA) date for completion of review by the FDA is July 27, 2012.
"Multiple myeloma is a deadly disease for which there are no cures, and we are committed to bringing carfilzomib to patients as quickly as possible," said Ted W. Love, M.D., Executive Vice President, Research and Development and Technical Operations at Onyx Pharmaceuticals. "Our team looks forward to discussing the potential efficacy benefit and safety profile of carfilzomib with the advisory committee and will continue to work closely with the FDA during its review."
I believe the stock will have a runup to the June 20th ODAC meeting and to the July 27th PDUFA date of Kyprolis. If we do get positive decisions at both dates I believe the stock could reach $70 which is the price objective of the Point&Figure chart.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.