Despite having a drug on the market, Onyx is more analogous to drugless companies like Exelixis (Nasdaq: EXEL) and Seattle Genetics (Nasdaq: SGEN) than to companies like Biogen Idec (Nasdaq: BIIB) and Celgene (Nasdaq: CELG).
There's so much potential wrapped up in its cancer drug, Nexavar, that
clinical trial results to expand the drug into additional indications
will drive the stock price more than the current double-digit sales
increases.
For instance, Nexavar was recently shown to lengthen the time it
takes for breast tumors to start growing again when used in combination
with Roche's Xeloda. Assuming that result holds up in a phase 3 trial,
I see a potential to double Nexavar's sales from the current level,
where it's approved to treat liver and kidney cancer.
The drug is also in (or will soon be in) phase 3 trials for thyroid
and lung cancer and earlier-stage trials for ovarian and colorectal
cancers. There's no guarantee for success -- competitor Pfizer (NYSE: PFE) has seen its similar drug, Sutent, fail multiple trials to expand its label -- but it's clear that Onyx's stock price is going to live or die by the trials.
In keeping with its baby-biotech look, Onyx even announced, in
conjunction with its earnings release, an offering of stock and
convertible senior notes to raise additional cash. Because of
regulations, management was hesitant to discuss what it's going to do
with the cash, but it seems likely that the one-drug wonder will use it to beef up its barren pipeline.
It's a good move for the long-term health of the company, but it's not likely to change investors' feelings for it.
Everyone has a different cup of tea. Some people love biotechs; some people hate them. It's clear Onyx isn't going to get any love until it gets some positive clinical trial data.
Use the comments box below to let your fellow Fools know what you think about the love situation at Onyx.
Copyright 2009 by United Press International.
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