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Amgen, Inc. (AMGN), Onyx Pharmaceuticals, Inc. (ONXX): Avoid This Biotech Investment, For Now

Mergers and acquisitions have always been a big part of the biotechnology industry, and the patent cliff has further increased M&A activity. We are only mid-way into 2013, but the biotech industry has already seen M&A of over $93.6 billion, as the generic threat and empty pipelines are forcing big-pharmaceutical players to adopt aggressive M&A strategies.

Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX)

Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) has said that it has rejected an acquisition offer from Amgen, Inc. (NASDAQ:AMGN). Amgen was prepared to offer around $120 per share for Onyx, but the board considers this an extremely low offer–it believes that Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX)’s rich drug portfolio can fetch around $140 to $150 per share. Onyx has recently gained prominence for its cancer drug Kyprolis, which received FDA approval last year.


The FDA approved Kyprolis last July. The drug is for patients with multiple myeloma who had not responded to at least two other medications. Multiple myeloma is a rare but deadly disease that attacks the plasma cells in the bone marrow. Every year approximately 21,000 patients are diagnosed with multiple myeloma in the U.S., and almost 10,000 do not survive. During the first 8 months of clinical trials, Kyprolis reduced tumors in 23% of patients from a total population of 266. The drug also showed a number of common side-effects including fatigue, shortness of breath, low platelet count, diarrhea, fever, etc.

Kyprolis is for patients who have already stopped responding to at least two other treatments, including Velcade and Revlimd/Thalomid. Kyprolis is a 3rd line treatment for multiple myeloma and is a pretty expensive drug. First line treatments like Velcade cost around $1,471 per vial, whereas Kyprolis costs around $1,658 per vial. The sell side expects the multiple myeloma market to exceed $5 billion in a couple of years and Kyprolis to reach peak annual sales of $3 billion.

The competition in the multiple myeloma market is tough. Celgene has recently launched Pomalyst, which is also approved for patients not responding to Revlimd or other first line treatments. Despite these issues, Kyprolis managed to beat the Street’s sales expectations for the first quarter. The Street was expecting sales to be around $54.7 million, but Kyprolis sales were $58 million. The drug can continue to trump estimates as its off-label usage as a 2nd line treatment grows. The drug can become an official 2nd line treatment if the data from the Aspire trial is good; trial results are expected later this year.

The Offer

Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) jumped more than 50% on Monday after the announcement that Amgen, Inc. (NASDAQ:AMGN) had offered $120 for the company. Amgen is the largest biotechnology company in the world, with over 40 drug candidates in its pipeline. Despite the strongest pipeline in the world, Amgen is struggling to maintain growth. Its high-earners Epogen and Aranesp are declining in demand due to safety concerns and restrictions.

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