Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Amgen, Inc. (AMGN), Pfizer Inc. (PFE), Merck & Co., Inc. (MRK): A Closer Look at the Battle Over Cancer Treatments

Amgen, Inc. (NASDAQ:AMGN)Over the past year, the battle over cancer treatments has heated up considerably. Big pharma companies such as Amgen, Inc. (NASDAQ:AMGN), Pfizer Inc. (NYSE:PFE) and Merck & Co., Inc. (NYSE:MRK) are struggling to avoid the upcoming patent cliff by acquiring companies with promising oncology treatments. In this article, I’ll take a look at several of the key companies to follow in this field, and what investors can expect from this fast paced market over the next few months.

All roads lead to Onyx

At the center of this oncology takeover frenzy is Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX), which has three approved cancer treatments on the market today – Nexavar (sorafenib), Kyprolis (carfilzomib), and Stivarga (regorafenib). Nexavar, which was co-developed with Bayer, is the company’s flagship drug, and is used to treat kidney cancer. Kyprolis is used to treat patients with multiple myeloma, and Stivarga is a colorectal cancer treatment that is co-promoted with Bayer in the United States. Last quarter, Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX)’s revenue rose 102% year-on-year, although earnings remain in the red.

Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) drew a lot of attention to itself when it put itself on sale on June 30, after rejecting an $8.7 billion offer from Amgen, Inc. (NASDAQ:AMGN). Amgen, Inc. (NASDAQ:AMGN)’s offer valued the company at $120 per share — a 50% premium over the previous day’s closing price. Amgen’s big bid revealed its desperation to diversify its pipeline, since four of its five best-selling drugs face patent expirations in 2015.

In addition to Amgen, Inc. (NASDAQ:AMGN), which is reportedly still interested in acquiring Onyx, other interested parties include Bayer and Pfizer Inc. (NYSE:PFE). Bayer already has existing collaborations and royalty-licensing agreements with Onyx for Nexavar and Stivarga, which means an acquisition should go fairly smoothly. Meanwhile, Onyx holds the rights to future milestone and royalty payments from Pfizer Inc. (NYSE:PFE)’s experimental breast cancer treatment, palbociclib. An acquisition would not only strengthen Pfizer Inc. (NYSE:PFE)’s aging pipeline but also negate those payments.

All eyes on Merck

Another company that biotech investors have been watching closely is Merck & Co., Inc. (NYSE:MRK). Just like Amgen, Inc. (NASDAQ:AMGN) and Pfizer Inc. (NYSE:PFE), Merck desperately needs to add new drugs to its pipeline. The company took a huge hit last year after it lost patent exclusivity for its asthma and allergy medication, Singulair.

Merck & Co., Inc. (NYSE:MRK) is now relying on its two diabetes medications, Januvia and Janumet, to carry it through this rough patch, but sales of Januvia have been hit by FDA investigations regarding its link to pancreatic cancer. It then suffered another setback in July, when the FDA warned that its insomnia treatment, suvorexant, was unsafe at recommended doses. All that negative news took its toll on Merck & Co., Inc. (NYSE:MRK), which reported a 49.5% year-on-year plunge in earnings and a 10.6% decline in revenue last quarter.

Therefore, many analysts have been looking at Merck & Co., Inc. (NYSE:MRK)’s oncology segment, which only accounted for 3% of its 2012 revenue. In that segment, Merck & Co., Inc. (NYSE:MRK) will lose an estimated $1 billion in annual sales by 2015 after Temodar, its brain cancer drug, and Emend, which treats chemotherapy-related nausea, lose their patent protection.

A smaller, smarter buy

While some analysts have suggested that Merck will join in the bidding war to take over Onyx, a smaller name has emerged as a more affordable alternative: Inovio Pharmaceuticals Inc (NYSEMKT:INO), which has a market cap of $540 million.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.