What this really comes down to is what sort of multiple Onyx can command. In recent years, it hasn’t been uncommon to see buyers pay upward of two to three times peak revenue estimates for a company. Perhaps the best example of an overzealous bidder came last year when Bristol Myers Squibb Co. (NYSE:BMY) and AstraZeneca plc (ADR) (NYSE:AZN) combined forces to purchase diabetes drug maker Amylin Pharmaceuticals for $7 billion. At the time, peak sales estimates for its lead drug, Bydureon, were only $1.5 billion. In 2011, Amylin only produced $651 million in revenue, so you can definitely say that the pair of Bristol Myers Squibb Co. (NYSE:BMY) and AstraZeneca plc (ADR) (NYSE:AZN) paid through the nose for Amylin.
With Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX), you get quite a bit of cancer-focused potential, but you also have a shared royalty stream and the potential for increasing competition — especially in colorectal cancer and multiple myeloma. All said, I could foresee Onyx going for 2.5 times peak sales plus its $553 million in cash, or, in my best estimates, what amounts to roughly $145 per share.
Who might be the buyer?
I’m not certain we’ll see a buyer step up so shortly after Amgen’s offer, but the most logical choice to me seems like Bayer.
Bayer has been on an acquisition tear recently, purchasing birth-control device maker Conceptus for $1.1 billion in April and vitamin maker Schiff for $1.2 billion in late October, presumably to expand existing market share and boost its U.S. presence. Swooping in and gobbling up Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) would secure its remaining Stivarga stake, the entirety of the Nexavar stake (which would be great if it gained additional indications) and net it $553 million in cash!
It remains to be seen how Onyx’s negotiations will unfold, but I’d certainly say that there is a chance of additional upside in shares based on my crude calculations. Onyx has a promising array of cancer-fighting drugs and plenty of solid licensing partnerships that would be conducive of ongoing sales growth. If anything, Onyx should be firmly planted on your watchlist moving forward.
The article How Much Is Onyx Pharmaceuticals Really Worth? originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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