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Onyx Pharmaceuticals (ONXX) is a $3 billion pharmaceutical company which has improved its prospects dramatically in the last two years leading to a doubling of its stock price. Now trading at about $46/share on the heels of analyst upgrades (like Merrill Lynch's "Buy" rating on June 8th), it may be look a bit expensive. Still, many think Onyx has plenty of room to appreciate - especially on development of its promising proteasome inhibitor Kyprolis (carfilzomib), which is being developed as a multiple myeloma/tumor drug.

Supporting the company's prospects is a strong balance sheet, which is nearly debt free and contains $685 million worth of current assets (of $133 million is held as cash or cash equivalents). In the first quarter of 2012, the company reported a net loss of $56,212 after huge increases in the R&D budget. This implies at least two years of smooth operation (without the sale of any non-cash assets), which is helped significantly by significant and increasing revenue from Nexavar (sorafenib).

According to Onyx, Nexavar (sorafenib) is an inhibitor of multiple kinases that promote angiogenesis and cell proliferation. One important aspect is its ability to act as an angiogenic inhibitor, meaning that it can prevent cancer cells from inducing the production of new blood vessels (which feed a tumor the nutrients it needs to expand).

This means that Nexavar may have diverse applications in oncology. Already approved for the treatment of liver and kidney cancer in the United States and European Union, it is now undergoing phase III trials for thyroid and breast cancer. Onyx should earn about $300 million annually with Nexavar just from liver and kidney cancer. This is after the 50% share that Bayer (OTCPK:BAYZF) takes from overseas revenue (except Japan). Ultimately we can conclude that Nexavar has been an extremely successful project which has yet to fill its full potential.

Bayer's major project, Regorafenib, is also exciting (this drug falls under Bayer and Onyx's joint ventures, under which Onyx will receive a share of the revenue). At ASCO (the American Society of Clinical Oncology) 2012, Bayer presented results from its phase III "GRID" trials which met the primary progression-free survival endpoint. The median PFS in the regorafenib population was measured at 4.8 months, versus the placebo group (.9 months) which is impressive.

Lastly, the potential for an acquisition of Onyx by cash-rich Bayer seems to attract some attention. While there seems to be an abundance of M&A speculation in the biotech sector recently, it seems that higher development costs and an abundance of cash is driving some of the larger pharmaceutical companies towards acquisition-focused strategies.

Despite all this good news, about 11% of ONXX shares are being shorted. The bears are focused on Kyprolis (carfilzomib), which is due for a review by ODAC (the FDA's Oncologic Drugs Advisory Committee) on June 20th. While the designated PDUFA date for the FDA's final decision on Kyprolis' NDA for the treatment of multiple myeloma isn't until July 27th 2012, this committee could partially confirm or disprove the bears' negative outlook on the drug. Although ONXX has experience massive appreciation in the last couple of years, prospects remain bright enough to propel the stock higher. If Kyprolis induces any major dips on shares of ONXX it will be a great stock to accumulate.

Source: Onyx Pharmaceuticals' Shorts Appear Focused On Upcoming FDA Review Of Drug