By Joseph Walker
Onyx Pharmaceuticals Inc. (ONXX), which has seen its shares
double after the approval of the blood-cancer drug Kyprolis in
July, is on the hunt for new drugs to add to its pipeline.
"We've got great prospects for this company, so there is every
indication that we should just keep going on our own," Chief
Executive N. Anthony Coles said in an interview after the firm's
investor meeting in New York Thursday. "The way to build a
successful, sustainable business is through acquisitions, either
companies or products--even licensing deals."
The strategy is intended to help Onyx transform itself from a
drug development shop dependent on partners like Bayer AG (BAYRY)
to shoulder sales costs to a full-fledged pharmaceutical company
with its own sales organization and multiple revenue streams. Mr.
Coles said he's interested in acquiring more biopharmaceutical
drugs, which can be sold at premium prices but are also more costly
to develop and manufacture.
Analysts, meanwhile, are watching closely for whether the
company, based in South San Francisco, Calif., can become more
disciplined in its spending and begin to generate profits.
"Onyx is in transition from a royalty and development company to
a revenue and commercial one," and some companies have suffered
hiccups during the transition, said Geoff Porges, a Sanford C.
Bernstein analyst, in a note to investors Friday.
Investor interest in the company is being driven by Kyprolis,
which Onyx acquired through its 2009 acquisition of start-up
Proteolix Inc.
On Thursday, Onyx said it would soon begin two late-stage trials
to help get the drug approved in more patients, including newly
diagnosed patients who haven't received treatment previously and
are ineligible for stem-cell transplants. Kyprolis is currently
only approved for relapsed cancer patients whose tumors don't
respond to other treatments.
If Onyx can gain expanded approvals for the drug, as analysts
expect, Kyprolis could have annual sales of $2 billion to $3
billion after 2018, according to Mr. Porges. Last week, the
National Comprehensive Cancer Network, which creates treatment
guidelines, recommended Kyprolis with new patients, which could
help bolster off-label use of the drug ahead of formal
approval.
However, Kyprolis is competing against several existing drugs
for multiple myeloma, a blood cancer that kills 10,710 Americans
annually. Its rivals include Velcade, made by Takeda Pharmaceutical
Co. (4502.TO) and Celgene Corp.'s (CELG) Pomalyst, which received
U.S. regulatory approval in February.
Dr. Coles, a trained cardiologist, said he hoped to make deals
that would replicate the success of the Proteolix acquisition, for
which Onyx agreed to pay $276 million upfront and up to $539
million in milestone payments.
He said he particularly is interested in drug candidates with
biomarkers, a diagnostic tool that can predict which patients will
respond to a certain therapy. The company also would like to add a
class of biotechnology drugs known as monoclonal antibodies that
are designed to attach to the specific defects of cancer cells,
according to the Mayo Clinic.
Onyx, which ended the fourth quarter with $492.8 million in cash
and cash equivalents and raised $352 million in a stock sale in
January, may beef up its pipeline without an outright acquisition
of a company, an approach that could be less costly and carry fewer
risks.
"We could buy the product, not the company, or license rights in
certain parts of the world," he said. "We'll do all of those
things."
Another question surrounding Onyx is how soon it can become
profitable. The firm is still spending large sums on clinical
trials to gain new indications for Kyprolis and its liver and
kidney cancer drug Nexavar. Bernstein's Mr. Porges predicts Onyx
will break even next year but not generate significant earnings
before 2016.
Dr. Coles defended the firm's research and development spending,
projected to be between $400 million and $450 million this year, as
being directed toward advancing Kyprolis, its most promising
product.
"We really want to make sure that we're investing appropriately
and strategically in Kyprolis," he said. "We would hate to
shortchange any opportunity to bring Kyprolis to patients."
Write to Joseph Walker at Joseph.Walker@dowjones.com
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