Kyprolis Approved Early; Estimates Must Go Up, ONXX Now In The Mid-Cap Sweet Spot As A Take Out Candidate

Onyx Pharmaceuticals (NASDAQ:ONXX) just announced FDA approval of Kyprolis (carfilzomib), ONXX’s next-generation treatment for multiple myeloma. The FDA action (PDUFA) date was set for July 27th, and early approval indicates that the agency was fully satisfied with the safety and efficacy data behind the drug, and didn’t waste time getting it to market. Based on the opinion of doctors that have used the treatment in clinical trials, Kyprolis should be in high demand given that it is more potent and has a much better tolerability profile vs. market leading treatment, Velcade. Velcade sales are roughly $1.8 billion annually, and it is possible that Kyprolis could take significant share (and sales) away from Velcade in its first year on the market. Despite having great performance since the FDA Panel’s recommendation for approval, shares of ONXX still have room to run on the upside. In addition to today’s de-risking event, most analysts need to raise estimates as the potential for early approval in 2012 was not in most Wall Street models. Importantly, today’s approval will put ONXX on the radar screen of potential acquirers of the business, such as BayerAG or many other major pharmaceutical companies.

Kyprolis is estimated to have peak annual sales of up to $2 billion, worldwide, suggesting that this compound could drive a valuation, on its own, of $6 billion. Adding in about $1 billion in value for the company’s commercial treatment, Nexavar, plus over $600 million in cash and equivalents, one could see ONXX being acquired for up to twice its current valuation. In addition to the potential Kyprolis approval, another key upcoming event for the company is data from the DECISION trial, which is for Nexavar as a treatment for thyroid cancer. Earlier clinical data supporting Nexavar in thyroid cancer are strong and results of this trial, expected soon, are likely to be favorable. Expect shares to continue to trade higher today, as focus shifts from Kyprolis approval to results of the DECISION trial and potential acquisition of the company.

And yes, we covered this event in a post, titled ‘Kyprolis Approval Could Drive ONXX Higher, DECISION Trial Results Also A Key Event‘, earlier this morning