Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) is trading higher after rejecting a takeover bid. As other stocks in its sector also trade higher in sympathy, will any of them become takeover targets, too?
What’s Creating The Buzz
The analysts, bloggers, and columnists were out in full force last Monday morning to assess the true “worth” of Onyx. The company markets cancer drugs Nexavar and Stivarga with Bayer, and solely develops Kyprolis. According to most analysts, Onyx has the potential to produce peak sales between $4 billion and $4.5 billion, and would add value to any company developing cancer therapeutics.
Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) is trading higher by 51% at $131, now that many investors expect a $150 per share bid after the company rejected a $120 offer from Amgen. At $150, Onyx would be valued at $11 billion for its $4 billion-$4.5 billion in peak sales potential.
While I have little doubt that Amgen, Bayer, or one of many other Big Pharma companies will acquire Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX), there are countless stocks rallying in sympathy. Investors apparently believe that they, too, are acquisition targets. Here are two that I believe may also be acquired, each with a strong presence in oncology.
High Margins and Blockbuster Sales Make This Company a Target
Pharmacyclics, Inc. (NASDAQ:PCYC) is a market leader in the development of chronic lymphocytic leukemia. Its lead product, Ibrutinub, is being tested in seven different clinical trials, and is estimated to produce sales north of $3.5 billion by 2019.
Like Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) and its partnership with Bayer, Pharmacyclics is partnered with Johnson & Johnson in a deal to develop Ibrutinub that could be worth $957 million. Pharmacyclics will be responsible for 40% of the product launch costs and receive 50% of the revenue — in short, it got a very good deal.
If $3.5 billion in peak Ibrutinub sales are reached, Pharmacyclics, Inc. (NASDAQ:PCYC) should earn $1.75 billion. Most importantly, analysts project that because of the company’s low costs, a profit margin of 40% is possible for Pharmacyclics. Therefore, Pharmacyclics could earn $700 million in annual profits, and it should have many years of exclusivity due to the diversified development of the drug. This makes Pharmacyclics, Inc. (NASDAQ:PCYC) very attractive.