Onyx Pharmaceuticals Inc. (ONXX), the developer of the kidney-cancer treatment Nexavar, is exploring options, including a possible sale, said two people with knowledge of the matter.
Potential buyers are studying Onyx’s business and its experimental carfilzomib cancer therapy, said one of the people who declined to be identified as the discussions are private. Onyx, based in South San Francisco, California, had a market value of about $2.4 billion as of Nov. 25 and is working with Centerview Partners LLP to review alternatives, said the people.
Onyx gave itself more strategic options last month when it settled a lawsuit with Bayer AG (BAYN) over the experimental cancer medicine regorafenib and amended its collaboration agreement for Nexavar, said Jim Birchenough, an analyst at Bank of Montreal. (BMO) The Oct. 11 agreement relieves Onyx from any future development or commercialization costs for regorafenib.
“With the elimination of that change-of-control provision any third-party acquirer now would get full economics to Nexavar and regorafenib,” Birchenough said. “Carfilzomib would be of interest to large pharma, but that interest may be expressed by partnership as opposed to M&A.”
The deal with Leverkusen, Germany-based Bayer includes a 20 percent royalty payment on future sales of regorafenib for Onyx, or its acquirer. The drug may generate $106 million by the end of 2014, according to analysts. Potential buyers of Onyx also retain 50-50 profit sharing rights to Nexavar, which could hit $518.2 million in sales this year, according to the average estimate of six analysts in a Bloomberg survey.
Onyx gained 14 percent to $42.80 at the close in New York, for the company’s biggest single-day increase since July 2010.
After today’s jump, Onyx trades at 9.7 times trailing 12- month sales, while the median biotech deal in the last five years was valued at about 5.4 times, according to data compiled by Bloomberg.
Regulators are reviewing Onyx’s carfilzomib, which treats multiple myeloma, a cancer of plasma cells. The Food and Drug Administration is due to decide soon whether to accept Onyx’s filing for accelerated approval, leading to a possible marketing clearance date of March 28, Birchenough said.
“I would think that any potential acquirer would want to see the outcome of carfilzomib regulatory review,” said Howard Liang, an analyst at Leerink Swann & Co. in Boston. “We are only a few months away.”
Carfilzomib may generate $241.7 million in sales by the end of 2014, according to the average estimate of three analysts surveyed by Bloomberg.
Onyx reported a net loss of $84.9 million in 2010 and has reported an annual profit twice since 1996 when it first offered shares to the public. The company had $324.5 million in revenue last year.
Lori Melancon, a spokeswoman for Onyx, declined to comment, as did a spokeswoman for Centerview. No deal is certain and the business review is still at a preliminary stage, the people said.
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