After a strong rally in 2007, shares of Onyx Pharmaceuticals Inc. (ONXX) were hit hard in 2008 and now trade around $30, roughly half their year's high. After all, being in a dicey business where fortunes rise or fall based on the success of a single drug, the stock price reversal of Onyx is no surprise.
But with the company's key cancer drug Nexavar having blockbuster potential, Onyx may find itself back in the spotlight. Nexavar is developed by Onyx and Bayer HealthCare Pharmaceuticals Inc. Onyx funds 50% of the development costs for Nexavar worldwide, except in Japan. Everywhere else in the world, except in Japan, the two companies equally split the profits or losses of the drug. In Japan, Bayer funds all development cost for Nexavar, and Onyx receives a high single-digit royalty on sales.
February Blues - Nexavar Fails In Lung Cancer Trial
Closing at $55.62, the stock ended 2007 with its biggest-ever annual percentage gain of 418%. But Nexavar's failure in a late-stage trial for lung cancer in early February of this year thwarted the stock's upward momentum. However, continued growth of Nexavar has piqued investor's interest, resulting in a rebound in the company's stock price.
In late February, following Nexavar's failure to meet its primary goal of improving overall survival, Onyx and Bayer halted a phase III study testing Nexavar against non-small cell lung cancer, or NSCLC when administered in combination with chemotherapeutic agents carboplatin and paclitaxel.
In the phase III study dubbed ESCAPE (Evaluation of Sorafenib, Carboplatin And Paclitaxel Efficacy in NSCLC), higher mortality was observed in the subset of patients with squamous cell carcinoma of the lung treated with Nexavar in combination with two types of chemotherapeutic agents, compared to those treated with the chemotherapeutic agents alone.
This is not the first time that Onyx is pulling the plug on a late-stage trial of Nexavar. In December 2006, the company halted a phase III trial, which was designed to test the effectiveness of Nexavar in combination with chemotherapeutic agents against melanoma, the most serious type of skin cancer. The trial failed to meet its primary endpoint of progression-free survival, which is defined as the time that a patient lives without meaningful tumor growth.
Despite the failures, Onyx remains committed in maximizing the potential of Nexavar. In 2005, Nexavar was approved by the FDA for treating advanced forms of kidney cancer. The drug won the FDA approval in November 2007 for expanded use in the treatment of a form of liver cancer known as hepatocellular carcinoma, when the cancer is inoperable. Nexavar is currently being investigated in several ongoing trials in non-small cell lung cancer, melanoma, breast cancer and other tumor types.
Impressive Nexavar Sales Growth
In the United States, Nexavar competes with Pfizer Inc.'s (PFE) Sutent and Wyeth's (WYE) Torisel. Nexavar continues to gain widespread acceptance across the globe, spurring the drug's sales. The net proceeds from the drug's sales after costs are shared equally between Onyx and Bayer worldwide, except in Japan.
In January, the drug was approved in Japan for the treatment of renal cell carcinoma, a form of kidney cancer. The drug is the first oral targeted therapy to be approved in Japan. Renal cell carcinoma is the most common form of kidney cancer and accounts for around 8,000 new cases per year in Japan alone.
In July, Nexavar was approved in China for the treatment of liver cancer. In the Asia-Pacific region, over 8% of the general population is infected with chronic hepatitis B, while 2%-4% is infected with chronic hepatitis C. Both infections are the leading causes of primary liver cancer worldwide. Nexavar has also been approved for liver cancer in South Korea.
In Japan, the application seeking approval of Nexavar for liver cancer is pending and the drug is expected to be launched in the first half of 2009. Annual deaths due to liver cancer in Japan are estimated at over 35,000. Expanding the drug's label will further boost Nexavar's sales in Japan. In Japan, Onyx gets royalties on sales of Nexavar.
Despite heightened competition, Nexavar raked in sales of $181 million in the third quarter ended September 30, 2008, an increase of an impressive 73% over the comparable quarter last year. According to the company, approximately $133 million of the sales were generated outside the United States and about $48 million were generated within the United States.
In the European Union, Nexavar has been launched for liver cancer in Germany, France, Spain, Italy and Greece. The drug is currently approved in more than 60 countries for the treatment of liver cancer and in over 70 countries for treating kidney cancer. According to the company, most launches worldwide in the kidney cancer market have now been completed.
The ongoing global launches of Nexavar and successful outreach to new patient population, bodes well for Onyx.
Solid Showing; Yet Conservative Outlook
Onyx Pharma is headed by Tony Coles who took over as CEO in July. On the first-quarter earnings conference call Tony Coles said that he expects the company to be "breakeven or profitable on the bottom line for the full year 2008".
On a GAAP basis, Onyx's net income for the third-quarter ended September 30, 2008, surged up to $12.2 million or $0.21 per share from $0.6 million or $0.01 per share in the same period in 2007.
Excluding employee stock-based compensation expense, non-GAAP net income for the quarter rose nearly four-fold to $16.6 million or $0.29 per share from $4.2 million or $0.08 per share in the year-ago quarter. Wall Street analysts were expecting the company to earn $0.02 per share.
Quarterly net revenue from unconsolidated joint business was $39.9 million compared to $17.6 million for the same period in 2007.
For the full year 2008, analysts have revised their projections within the past 7 days, raising the consensus earnings estimate by a penny to $0.34 per share.
Onyx has never provided sales guidance in its history before. But that has changed under the tenure of Coles who is willing to provide as much clarity as possible to everyone on Wall Street.
In May, the company said that it expects Nexavar sales for 2008 to range between $600 million and $650 million. Nexavar net sales for the nine months ended September 30, 2008 were $501.3 million, compared to $246.8 million in the year-ago period.
Donning A New Image
Onyx, which has long remained a one-trick pony dependant on Nexavar, licensed an anticancer compound, BGC 945 from London-based BTG plc. in a deal valued at $320 million early this month. That seems to be a wise move on the company's part to build its pipeline and moderate any risk associated with being a one-product business. BGC 945, which has been renamed as ONX 0801 by Onyx, is currently in late-stage preclinical development.
Under the terms of the licensing deal, BTG will receive $13 million upfront and has the potential to receive development milestone payments of up to $72 million plus additional payments of up to $235 million for product approval and commercialization milestones. BTG will also receive a royalty on any future sales worldwide.
One of the lead compounds - PD 332991, a cyclin-dependent kinase inhibitor, identified by Onyx under a research collaboration with Warner-Lambert Co., a subsidiary of Pfizer, entered clinical testing in September 2004. Upon the commercialization of PD 332991 by Pfizer, Onyx will receive milestone payments and royalties on worldwide sales.
Conclusion
Onyx will continue to ride on Nexavar's success, and approval in additional indications will further boost the drug's sales. That said, the company could see downside if it fails to obtain label expansion for Nexavar, which exemplifies the risk-fraught nature of the biotech business.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.