Onyx may be a precious gem right now for eager Big Pharmas
by Jeffrey Bouley  |  Email the author


UPDATES July 9, 2013 -- Substantial updates throughout article
SOUTH SAN FRANCISCO, Calif.óOn June 30, Onyx Pharmaceuticals Inc. acknowledged receipt of a $120-per-share unsolicited acquisition offer from Amgen Inc. and "concluded that the price proposed by Amgen significantly undervalued Onyx and its prospects, and was not in the best interest of Onyx or its shareholders." This sentiment was reportedly expressed back to Amgen two days earlier on Friday.
The very same press release that told that story, though, also noted that Onyx had "authorized its financial advisor to contact potential acquirers who may have an interest in the company in a transaction that is in the best interest of Onyx shareholders." That refusal of Amgen and welcome of better offers sent the biotech's shares from around $86 to more than $130 per share in Monday trading.
"Onyx has tremendous momentum and, with the expansion of our pipeline and two successful product launches, the company and our talented employees have created significant value for Onyx shareholders," said Dr. N. Anthony Coles, chairman and CEO of Onyx. "The board and the management team remain focused on the opportunities in front of us, including the potential to expand the use of our existing therapies in different types of cancer and across different lines of therapy, as a result of several ongoing Phase III studies. We are actively exploring the potential to combine Onyx with another company as an option to create additional value for Onyx shareholders."
"There can be no assurance that an improved proposal will be made by Amgen or any other entity," Onyx noted, or "that a definitive agreement will be executed relating to any proposed transaction, or that any transaction will be approved or consummated," Onyx noted, adding that it does not intend to communicate further regarding the Amgen proposal or the process by which the board of directors will consider other proposals. More than a week after the initial announcement, Onyx has stayed true to its word, and the company has been quiet while Wall Street and other market-watchers continue to chatter. Amgen has likewise kept mum, which makes for one of the quieter and calmer unsolicited acquisition bids in recent memory.
Reuters cited two unnamed sources close to the matter as saying that both Pfizer and Novartis had expressed interest in upping Amgen's ante, and several other companies have been noted as likely future suitors as a likely bidding war emerges.
"We believe that Amgen will continue to pursue Onyx as the acquisition of the latter will further strengthen Amgen's presence in the oncology field," noted Zacks Investment Research. "We believe that if the deal ultimately goes through it will do so at close to $130 per share."
But the opinions vary widely. Deutsche Bank analyst Robyn Karnauskas predicts the price could go to $148 per share, while Geoffrey Porges at Sanford C. Bernstein thinks a company could easily be willing to spend as much as $180 per share to gain Onyx. Whether or not Amgen would be willing to go that high, if such a number becomes reality, remains to be seen, but Zacks doesn't see any reason why Amgen would give up this early in a process where the bidding war hasn't even broken out yet.
Onyx is engaged in the development of novel cancer therapies that target the molecular basis of the disease, Zacks notes, further writing that "The key drugs at Onyx are Nexavar (hepatocellular carcinoma or liver cancer and advanced renal cell carcinoma or advanced kidney cancer), Stivarga (colorectal cancer and Kyprolis (multiple myeloma). Onyx is working hard to expand the label(s) of its marketed products. Onyx is also developing oprozomib for various oncology indications."
Leerink Swann, for its part, noted that it was increasing its price target for Onyx (trading under the name ONXX) from $112 to $140 "based on the disclosed AMGN (Amgen) acquisition offer, disclosed interests from other third parties, and our preliminary modeling which suggests an ONXX acquisition could be accretive to AMGN and other acquirers starting...in the $140 per share range."
As the firm had discussed in a biopharma industry today July 1, "we believe ONXX is an attractive acquisition target as in our opinion ONXX is among a limited number of small to mid-cap companies with a wholly owned product and big enough revenue base and potential to move the needle for large biopharma companies. We see a particularly strong strategic rationale for the proposed acquisition of ONXX by AMGN and we believe an acquisition of ONXX by AMGN makes sense even at a higher valuation than the currently disclosed offer of $120/share. "
One interesting twist in this otherwise quiet acquisition tale is a small soap-opera style drama triggered by the U.S. Securities and Exchange Commission (SEC). On July 3, the SEC obtained an emergency court order to, as it noted in a new release, "freeze the assets of traders using foreign accounts to reap approximately $4.6 million in potentially illegal profits by trading in advance of the Sunday, June 30, 2013 announcement that Onyx Pharmaceuticals Inc. had received, but rejected an acquisition offer from Amgen Inc."
The SEC alleges that unknown traders took risky bets that Onyx's stock price would increase by purchasing call options on June 26, 27 and 28, the three trading days before the announcement. Through quick, cross country coordination between the agency's Los Angeles and New York offices, the SEC says it ook emergency action to freeze the traders' assets before courts closed for the holiday.
"This action demonstrates that the SEC will not hesitate to freeze the assets of suspicious foreign traders when the timing and size of their trades indicate that they were misusing inside information, and use of foreign accounts will not dissuade us," said Michele Wein Layne, director of the SEC 's Los Angeles Regional Office.

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