Who Is the Best Suitor for Onyx Pharmaceuticals, Inc. (ONXX)?

Bayer seems to be a logical choice. The German company has good relations with Onyx, and they have the same end-goal. Bayer has experience selling the two most important drugs of Onyx for years. It may want to forgo the royalty relationship and enjoy the full ownership of Nexavar and Stivarga drugs.

So far, the German company hasn’t been interested in the acquisition because it didn’t have a strong presence in the United States. But Bayer has acquired Schiff for $1.2 billion and Conceptus for $1.1 billion over the past 10 months to boost its U.S. presence. Gobbling up Onyx would further strengthen its position in the United States.

Bottom line

Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) can drive a hard bargain, given its strong cash position of about $541 million. Analysts expect its revenues will reach $624 million in fiscal 2013, $881 million in 2014 and $1.2 billion in 2015. With such huge growth potential, offers may come from even unexpected companies. But I believe Bayer would offer great synergies.

If you are an Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) shareholder, you can sell at current record-high levels, or you may continue to hold the stock hoping that it will get a better offer. But if you don’t have a position in the stock, I recommend you to wait and watch rather than jump into the buyout buzz. Yes, the company has an attractive product portfolio, but the current speculative spike poses the risk of a downside. What if the potential acquirers get reluctant to pay the kind of premium Onyx is expecting? Think about that and wait until you see a clear picture.

The article Who Is the Best Suitor for Onyx? originally appeared on Fool.com and is written by Vikas Shukla.

Vikas Shukla has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Vikas is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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