Onyx in the Black -- for Now

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For investors in Onyx Pharmaceuticals (Nasdaq: ONXX), there was no question as to what the top-line sales of its only drug were going to be; partner Bayer spilled the beans last week. The big question last night was whether it kept costs under control. The stock is in the red today, so you can guess what investors thought of the bottom line.

Sales of the duo's cancer treatment, Nexavar, more than doubled from the second quarter of last year to more than $168 million. Most of that increase is attributable to the launch of Nexavar as a treatment for liver cancer, where the drug pretty much has the market all to itself. Nexavar is also approved for treating kidney disease, but competes heavily for patients with Pfizer's (NYSE: PFE) Sutent.

On the bottom line, Onyx brought in $0.08 per share. Anything that's positive is usually a good sign for a small drug company, but that's less than a third of what it brought in during the first quarter on lower drug sales. At one time, analysts expected full-year earnings of $0.91 per share. Currently, the expectation is $0.58. Based on management's latest comments, that probably won't happen.

On the earnings conference call, Onyx said it expects to be "breakeven or profitable on the bottom line for the full year 2008." Being conservative and doing the math, that means investors should expect some red ahead as the company spends more on marketing, as well as on clinical trials to get Nexavar approved for other indications.

A quick search of clinicaltrials.gov shows dozens and dozens of trials. Now, granted, Onyx and Bayer aren't paying for all of the clinical trials Nexavar is involved in, but they are funding quite a few, including using Nexavar in combination with already approved medications like Eli Lilly's (NYSE: LLY) Alimta or Tarceva from OSI Pharmaceuticals (Nasdaq: OSIP) and Genentech (NYSE: DNA).

I'm not sure whether it's the fact that Nexavar failed to show an effect in lung cancer earlier this year or because Onyx has a new CEO running the show, but the one-drug-wonder appears to be shying away from its mantra that Nexavar is a "pipeline in a drug." Instead, it said that it expects to expand its pipeline in the future -- presumably through acquisitions, although this wasn't explicitly stated.

That's always been my issue with Onyx. Nexavar may be a wonder drug, but without a pipeline to speak of, the company's long-term future has always been in question. The slight shift in focus has piqued my interest, but I'll be sitting on the sidelines until we know exactly what the company has in store for its next big thing.