Thursday, August 15, 2013

Onyx and Amgen Marriage -- Not So Fast

The key asset driving the upside valuation for Onyx (ONXX-$126.26) is Kyprolis (carfilzomib), a proteasome inhibitor recently approved for the treatment of patients with relapsed and refractory multiple myeloma (whose disease has progressed (got worse) on their last therapy or within 60 days of their last therapy). Analysts opine that this disrupter of cancer cell growth could generate peak annual sales of up to $2.1 billion by 2020.

Nonetheless, there are risk considerations that could thwart the assigned value attached to Kyprolis, including a failure to gain label expansion (earlier usage). Whether Kyprolis can take share from Celgene (CELG), whose $4.3 billion immunomodulatory drug Revlimid (lenalidomide) is used in all stages of multiple myeloma (MM), will depend on clinically significant improvements in comparative overall survival outcome studies....

Given competitive risks, future regulatory uncertainties, and a price-to-sales multiple almost twice the industry average of 11.2 times sales, Onyx management’s price could prove too rich a multiple even for the hungriest of dug manufacturers.

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

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