Onyx Pharmaceuticals Offers Upside Beyond Kyprolis

| About: ONYX Pharmaceuticals, (ONXX)
This article is now exclusive for PRO subscribers.

On Wednesday, the FDA Oncologic Drugs Advisory Committee recommends whether the FDA should approve Onyx Pharmaceuticals (NASDAQ:ONXX) accelerated application for its multiple myeloma drug Kyprolis (carfilzomib).

It's far from a slam dunk approval.

The panels focus will be in determining whether the drug's risk outweighs its benefit.

6% of patients in the 266 person study dropped out because of cardiac related problems and at least 7 died during the study.

However, 23% of the patients saw their tumors shrink.

And, while a 23% response rate may not seem high, the 5 year survival rate of metastasized multiple myeloma is an unsettling 39.8%. Nearly 11,000 die and 22,000 new cases are diagnosed every year, which suggests a big unmet need.

Given Kyprolis patients have previously failed to respond to existing drugs, such as Celgene's (NASDAQ:CELG) revlimid, the panel may tilt toward approval.

A Kyprolis denial isn't a death knell.

If the panel denies the application, the stock could trade down to its 200 day moving average near $40.

If it does, long term investors will likely use the weakness to boost positions ahead of anticipated approval for Bayer's (OTCPK:BAYRY) regorafenib.

Bayer has already filed an NDA for the drug as a treatment for metastic colorectal cancer. And, it plans to file for approval in treating gastrointestinal stromal tumors "GIST" too.

If approved, Bayer will pay Onyx a 20% royalty thanks to an agreement earlier this year. With Bayer predicting regorafib's sales could top $1 billion, Onyx revenue would climb substantially.

Bayer could be an eventual buyer.

Bayer has a similar deal with Onyx for the drug Nexavar, which is used to treat both kidney and liver cancer.

The drug, which generated global sales of $1 billion last year, produced $72 million in sales for Onyx in Q1, up 7% from a year ago.

And, despite a recent disappointment in treating lung cancer, Nexavar is in Phase III trials for both Breast and Thyroid cancers.

Any positive news from those trials would make Onyx more attractive to Bayer, who'd likely rather hold onto those royalties than pay them out.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ONXX over the next 72 hours.