Shares of Onyx Pharmaceuticals
How it got here
It hasn't been the smoothest move higher for Onyx Pharmaceuticals' shareholders, but two key events have caused Onyx to rocket higher over the past year.
First, in October the company settled a long-standing lawsuit with Bayer over the rights to cancer-fighting drug Nexavar. The settlement ended with Bayer receiving marketing rights for the drug in Japan and Onyx receiving $160 million in cash with the rights to an additional $15 million in milestone payments. The settlement also meant that if Onyx were purchased by a larger pharmaceutical company, it would still receive royalty rights to Nexavar even after the buyout, a nice bonus for the acquirer.
The other big news surfaced this past week when an FDA panel unanimously recommended Kyprolis, the company's experimental treatment for relapsed and refractory multiple myeloma. The decision was somewhat of a surprise, given the concerns raised about the drugs' effects on patients' heart, liver, and lung functions.
The news instantly sent Ligand Pharmaceuticals
How it stacks up
Let's see how Onyx stacks up next to its peers.
Here you can really see how Onyx has left Celgene in the dust over the past few months.
Normally, here is where we'd compare fundamental metrics, but I'm not going to do that this time around. Instead, since Kyprolis is a tertiary treatment that follows Celgene's Revlimid and Takeda's Velcade and isn't a direct competitor, let's take a further look at what pitfalls could await Onyx since we've examined all of the good news moving the stock higher.
The first thing to keep in mind is that a favorable FDA panel review does not mean a guaranteed, or timely, approval. The FDA is under no obligation to follow the recommendation of its advisory panel, although it often serves as a good indication as to how the FDA will lean with its overall recommendation. Because of its noted toxicity implications, Kyprolis could find itself struggling to get approved by the FDA, much as Covidien's
The other factor of concern is that if Kyprolis does get approved, can Onyx successfully launch the drug? Investors shouldn't assume success is inevitable. Human Genome Sciences'
Now for the $64,000 question: What's next for Onyx Pharmaceuticals? That question depends entirely on what the FDA has to say on Kyprolis on or before July 27, Kyprolis' PDUFA date.
Our very own CAPS community gives the company a two-star rating (out of five), with 84.5% of members expecting it to outperform. This is one case where I've been wholeheartedly optimistic about the company's future, and my CAPScall of outperform is currently up by 54 points.
While approval is anything but assured -- even considering the unanimous FDA panel vote -- I believe persistence will pay off and Onyx will either successfully launch Kyprolis, or a larger company will outright buy Onyx. Since the royalty rights to Nexavar are transferable and Onyx has $600 million in the bank, it remains a top-tier buyout candidate in my opinion.
Onyx Pharmaceuticals clearly has a pipeline that's changing lives. If you'd like the inside scoop on a stock our Motley Fool Rule Breakers team thinks could offer the next revolutionary product, get free access to our latest report.
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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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