Investors need to give Onyx Pharmaceuticals (NASDAQ:ONXX) a break. Yes, its phase 2 trial didn't show a statistically significant effect of Nexavar compared to placebo in breast cancer, but it certainly doesn't warrant the 9% decrease in Onyx's stock since the results were released.
It was just a phase 2 trial, after all. The purpose of the midstage trial is to get enough information to see whether a larger phase 3 trial is warranted. Sure, sometimes a drug can hit a jackpot in a phase 2 trial -- Nexavar did in an earlier breast cancer trial -- but most phase 2 trials are small enough that it's hard to see a statistical difference. Heck, some companies -- hey there, Genzyme (NASDAQ:GENZ) and Johnson & Johnson (NYSE:JNJ) -- run trials without placebo controls. At least we have something to compare the effectiveness of Nexavar with.
According to the company, Nexavar combined with Bristol-Myers Squibb's (NYSE:BMY) Taxol "demonstrated a positive trend towards improvement of progression-free survival" compared to Taxol alone. That's probably good enough to warrant a phase 3 trial.
Onyx still has two more phase 2 breast cancer trials in the works. One is an add-on therapy with Eli Lilly's (NYSE:LLY) Gemzar or Roche's Xeloda, and the other tests Nexavar plus sanofi-aventis' (NYSE:SNY) Taxotere and/or Novartis' (NYSE:NVS) Femara. Considering the strong results from the first trial, and a positive trend in the second, it seems likely that the trials will turn out positive enough to warrant moving into a phase 3 trial.
Investors looking for a better price to get into Onyx have just been handed a gift, as far as I can tell.
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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson is a Motley Fool Income Investor pick. Novartis is a Global Gains selection. The Fool has a disclosure policy.
