Many, but not all, analysts had a dim view of Onyx Pharmaceuticals (ONXX) at the beginning of 2012. Onyx had only one approved therapy, Nexavar for liver and kidney cancer. Between sharing Nexavar revenues with marketing partner Bayer and heavy R&D spending on new drugs and indications, Onyx ended in the red in most quarters.
What a difference a year makes. Onyx now had 4 approved indications and data that should earn approval for 2 more. A deeper pipeline exists as well. Its newly approved drug Kyprolis for MM (multiple myeloma) had revenues of $62 million, most of which would have been in the fourth quarter. This does not necessarily mean that Onyx will show a profit for Q4, but it does look like 2013 will be remarkably good, with 2014 even better.
The third approved therapy, and fourth approved indication, is Stivarga (formerly Regorafenib), which was also developed in conjunction with Bayer. Bayer will do the selling and Onyx will receive a 20% royalty, which will be cash that goes straight to the bottom line. Stivarga was approved in September 2012 for colorectal cancer patients who have been previously treated with currently available therapies. Royalties should ramp in 2013.
The fifth indication is Nexavar for iodine-refractory differentiated thyroid cancer. Again, Bayer will do the sales and share revenue with Onyx. The Phase III trial results are still to be submitted to the FDA, but approval is likely and revenue could commence in late 2013 or early 2014.
Sixth we have Stivarga for GIST, gastrointestinal stromal tumors.
So in 2013 we have a mid-sized biotechnology company with high expectations of multiple revenue ramps which should continue into 2014 and beyond.
Early in 2012 you could have bought ONXX at its 52-week low of $35.73. As I write the price is $81.41, or 128% above that. It already hit a 52 week high of $93.18.
I see Onyx as a company that will demonstrate its ability to generate revenue and profits during 2013 and 2014, but it is important to keep in mind how lengthy global cancer ramps can be. There is the whole rest of the world and even today Nexavar is still expanding into new nations for liver and kidney cancer, several years after introduction. Cancer approvals often start in second-line or later settings. Revenues can ramp significantly if the drugs can will approvals for administering to new, first-line patients.
Also, there has to be a lot of unrealized value in the management team. There are a lot of therapies out there to buy the rights to develop. Most drugs fails somewhere between Phase I trials and FDA approval. Onyx management, led by Anthony Coles, M.D., has done a remarkable job picking therapies and targets for development. It might be just luck, but it likely means they will do well with their earlier-stage pipeline and any future rights they acquire.
Onyx still has a very high P/E ratio, but that should drift down as profits ramp in 2013.
It looks to me like Onyx Pharmaceuticals is a stock to buy and hold for at least the remainder of this decade. If you can think that long-term.
Disclaimer: I am long ONXX and will not trade the stock for 3 days after the publication of this report.
William P. Meyers
See also:
www. onyx.com
My main Onyx Pharmaceuticals analyst conferences page.
My October 30, 2012 Onyx Q3 conference notes
Showing posts with label colorectal cancer. Show all posts
Showing posts with label colorectal cancer. Show all posts
Monday, January 7, 2013
Monday, November 21, 2011
Onyx Pharmaceuticals (ONXX) Sees New Product Upside
Onyx Pharmaceuticals (ONXX) was one of the few stocks that were up today, closing up $0.63 to $37.86. Still, it is well beneath it's 52-week high of $45.90.
Management thinks the full year will be non-GAAP EPS positive, based largely on a $160 million payment from Bayer this quarter. Bayer sells Onyx's Nexavar for kidney and liver cancer, splitting the after-costs profits. The $160 million was to buy-out the rights for Nexavar in Japan, which has been ramping up to be a lucrative market because of the high incidence of liver cancer there. This was part of a larger deal to end litigation for a Nexavar-related drug, Regorafenib. Under the settlement Onyx will get 20% royalties if the drug makes it to market.
Regorafenib recently had positive Phase III data for metastatic colorectal cancer. Like Nexavar, it appears it may be a useful therapy for a variety of cancers.
The predicted annual positive non-GAAP results were hard to predict before the deal announcement because in most quarters so far Onyx's own operating expenses have been sufficient to wipe out the receipts from Bayer. For Q1 non-GAAP net loss was $14.2 million, for Q2 net loss was $27.2 million, and for Q3 net loss was $19.5 million. One reason for the net losses is that both Bayer and Onyx have been spending large sums on running Nexavar through a set of clinical trials that have shown it may be effective for other forms of cancer, and to strengthen its role in liver caner. If you subtract out the research and development (R&D) costs, in most quarters Onyx would have shown a profit. Onyx has started recruiting patients for Nexavar Phase III trials for breast cancer and thyroid cancer, and has Phase II trials underway in colorectal and ovarian cancer.
Fortunately Onyx Pharmaceuticals has been able to maintain a high cash balance despite the regular losses, ending Q3 2011 at $530 million. Assuming the $160 million payment is a Q4 event, cash at the end of the year should approach $675 million.
I would not expect Regorafenib revenue until at least 2013, and like any drug it could fail for a currently unknown reason.
Carfilzomib is still the key to Onyx's value in the 2012 to 2015 time frame. Carfilzomib is a proteasome inhibitor that had positive data for relapsed and refractory multiple myeloma in a Phase IIb trial. In fact the data was good enough that it is being submitted to the FDA for approval. At the same time two Phase III trials have been initiated. More detailed data from the Phase IIb trial will be presented at the American Society of Hematology (ASH) Annual Meeting, December 10-13, 2011. While there is an outside possibility carfilzomib will not gain FDA approval, the main question is when it will get approval.
If both Regorafenib and carfilzomib are approved by the FDA, the nature of Onyx's model will change. It should be possible, starting in 2013, to have a vigorous R&D program to continue expanding the indications for Nexavar, carfilzomib and other pipeline candidates without actually throwing the bottom line into the red.
I believe that there is always risk in biotechnology stocks from competition, the need for FDA and other national medical agency approvals, and from failure to execute.
However, with expanded indications for Nexavar, plus likely revenues from carfilzomib and royalties on Regorafenib, in the next few years Onyx should become a highly profitable company. I do not think the current stock price reflects full value.
Disclosure: I am long Onyx Pharmaceutical. I have no plans to sell or buy ONXX in the immediate future.
Keep Diversified!
Management thinks the full year will be non-GAAP EPS positive, based largely on a $160 million payment from Bayer this quarter. Bayer sells Onyx's Nexavar for kidney and liver cancer, splitting the after-costs profits. The $160 million was to buy-out the rights for Nexavar in Japan, which has been ramping up to be a lucrative market because of the high incidence of liver cancer there. This was part of a larger deal to end litigation for a Nexavar-related drug, Regorafenib. Under the settlement Onyx will get 20% royalties if the drug makes it to market.
Regorafenib recently had positive Phase III data for metastatic colorectal cancer. Like Nexavar, it appears it may be a useful therapy for a variety of cancers.
The predicted annual positive non-GAAP results were hard to predict before the deal announcement because in most quarters so far Onyx's own operating expenses have been sufficient to wipe out the receipts from Bayer. For Q1 non-GAAP net loss was $14.2 million, for Q2 net loss was $27.2 million, and for Q3 net loss was $19.5 million. One reason for the net losses is that both Bayer and Onyx have been spending large sums on running Nexavar through a set of clinical trials that have shown it may be effective for other forms of cancer, and to strengthen its role in liver caner. If you subtract out the research and development (R&D) costs, in most quarters Onyx would have shown a profit. Onyx has started recruiting patients for Nexavar Phase III trials for breast cancer and thyroid cancer, and has Phase II trials underway in colorectal and ovarian cancer.
Fortunately Onyx Pharmaceuticals has been able to maintain a high cash balance despite the regular losses, ending Q3 2011 at $530 million. Assuming the $160 million payment is a Q4 event, cash at the end of the year should approach $675 million.
I would not expect Regorafenib revenue until at least 2013, and like any drug it could fail for a currently unknown reason.
Carfilzomib is still the key to Onyx's value in the 2012 to 2015 time frame. Carfilzomib is a proteasome inhibitor that had positive data for relapsed and refractory multiple myeloma in a Phase IIb trial. In fact the data was good enough that it is being submitted to the FDA for approval. At the same time two Phase III trials have been initiated. More detailed data from the Phase IIb trial will be presented at the American Society of Hematology (ASH) Annual Meeting, December 10-13, 2011. While there is an outside possibility carfilzomib will not gain FDA approval, the main question is when it will get approval.
If both Regorafenib and carfilzomib are approved by the FDA, the nature of Onyx's model will change. It should be possible, starting in 2013, to have a vigorous R&D program to continue expanding the indications for Nexavar, carfilzomib and other pipeline candidates without actually throwing the bottom line into the red.
I believe that there is always risk in biotechnology stocks from competition, the need for FDA and other national medical agency approvals, and from failure to execute.
However, with expanded indications for Nexavar, plus likely revenues from carfilzomib and royalties on Regorafenib, in the next few years Onyx should become a highly profitable company. I do not think the current stock price reflects full value.
Disclosure: I am long Onyx Pharmaceutical. I have no plans to sell or buy ONXX in the immediate future.
Keep Diversified!
Wednesday, October 26, 2011
Biogen Idec, Onyx Pharmaceutical score big
Today two of my biotechnology stocks, Biogen Idec (BIIB) and Onyx Pharmaceuticals (ONXX), are climbing on good results from clinical trials. In Biogen's case results are for daclizumab for multiple sclerosis and for BG-12 for MS as well. Onyx's results are for regorafenib for metastatic colorectal cancer, which is being developed by Bayer, but for which Onyx gets royalties.
This made me think about my now ancient Choosing A Biotech Stock 3 part series. I wrote Part I, the Overview, on September 3, 2007. Was my advice, which I followed, any good?
My hopes were high. I said, "I think some biotechnology stocks are going to be worth a lot more money (better than market returns) in a few years than they are now, and may make me filthy rich if I live to see the long run. I could spread the risk out by buying a lot of different biotechs, or going to a fund. But, well, while I would recommend a fund to anyone too lazy to do their own research, the problem with spreading risk broadly is that you can't get any alpha (profits above typical market) that way."
I already owned Celgene, Dendreon, and Anesiva (which went bankrupt later). I mentioned Gilead Sciences (GILD) and Biogen Idec (BIIB) as being the kinds of companies that I would look at. In Part 2 I took a close look at Gilead. In Part 3 I took a close look at Biogen, but then said that despite their pipeline, "Wow, they have a very strong pipeline (See BIIB pipeline page)," I would buy Gilead first.
Of course after that purchase we had the recession, when most stocks were oversold. I ended up buying Biogen and Onyx as well, and added to each position. The result, so far, has been a mixed bag.
I already owned Celgene, which I first bought in June 2007 for $59.34. I bought more as low as $38.59 in May 2009. As I write it is selling for $66.09.
I first bought Gilead in October 2007 for $42.23. I bought more for $46.55 in February 0f 2010. As I write it is selling for $41.06.
I first bought Biogen in February 2008 for $61.57. I bought more at a low of $46.67 in September of 2008. As I write it is selling for $117.87. Clearly this turned out to be the best investment in the group, so far.
I first bought Onyx in May 2008 for $34.87. My best purchase was for $26.20 in May 2010. As I write it is selling for $39.59.
Clearly Gilead has been the dog of the group, but my selection criteria were pretty good overall. That reminds me, and should remind all of us who are seeking alpha, to keep diversified, even when we have found a sound strategy for investing.
It also reminds me of the importance of patience when doing long-term investing. When a biotechnology company has value in its therapy pipeline, it helps to think in terms of 5 to 10 years, not 5 to 10 days.
This made me think about my now ancient Choosing A Biotech Stock 3 part series. I wrote Part I, the Overview, on September 3, 2007. Was my advice, which I followed, any good?
My hopes were high. I said, "I think some biotechnology stocks are going to be worth a lot more money (better than market returns) in a few years than they are now, and may make me filthy rich if I live to see the long run. I could spread the risk out by buying a lot of different biotechs, or going to a fund. But, well, while I would recommend a fund to anyone too lazy to do their own research, the problem with spreading risk broadly is that you can't get any alpha (profits above typical market) that way."
I already owned Celgene, Dendreon, and Anesiva (which went bankrupt later). I mentioned Gilead Sciences (GILD) and Biogen Idec (BIIB) as being the kinds of companies that I would look at. In Part 2 I took a close look at Gilead. In Part 3 I took a close look at Biogen, but then said that despite their pipeline, "Wow, they have a very strong pipeline (See BIIB pipeline page)," I would buy Gilead first.
Of course after that purchase we had the recession, when most stocks were oversold. I ended up buying Biogen and Onyx as well, and added to each position. The result, so far, has been a mixed bag.
I already owned Celgene, which I first bought in June 2007 for $59.34. I bought more as low as $38.59 in May 2009. As I write it is selling for $66.09.
I first bought Gilead in October 2007 for $42.23. I bought more for $46.55 in February 0f 2010. As I write it is selling for $41.06.
I first bought Biogen in February 2008 for $61.57. I bought more at a low of $46.67 in September of 2008. As I write it is selling for $117.87. Clearly this turned out to be the best investment in the group, so far.
I first bought Onyx in May 2008 for $34.87. My best purchase was for $26.20 in May 2010. As I write it is selling for $39.59.
Clearly Gilead has been the dog of the group, but my selection criteria were pretty good overall. That reminds me, and should remind all of us who are seeking alpha, to keep diversified, even when we have found a sound strategy for investing.
It also reminds me of the importance of patience when doing long-term investing. When a biotechnology company has value in its therapy pipeline, it helps to think in terms of 5 to 10 years, not 5 to 10 days.
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