(By Balachander) Onyx Pharmaceuticals Inc. (NASDAQ:ONXX) shares were initiated with a "Buy" rating and a price target of $58.00 by Deutsche Bank analyst Navdeep Singh, who views the company as an attractive M&A asset.
The U.S. Food and Drug Administration's (FDA) Oncologic Drugs Advisory Committee (ODAC) voted favorably for risk/reward with the company's Kyprolis blood cancer treatment in relapsed/refractory myeloma, which could set up launch in 2012.
Singh said Onyx is a mid-cap biotech focused on developing oncology therapeutics. In collaboration with Bayer, it markets Nexavar (>$1B) for liver & kidney cancer. Behind Nexavar, Onyx's Kyprolis is being evaluated in several lines of myeloma.
Based on his survey, Singh estimates $1.5B in peak Kyprolis sales.
"Given the more negative FDA briefing documents, we still think there is a small chance that accelerated approval is not granted on PDUFA (07/27/12)," Singh wrote. "To be conseratvie, we model launch in 2014 post phase 3 ASPIRE (Rd +/- Kyprolis), which we believe will be positive. Launch in 2012 would increase our valuation by only $2 ($58 to $60)."
Singh's analysis indicates Onyx would have to spend materially on Kyprolis launch. Large biotech or pharma with global oncology sales force could extract launch synergies. The analyst sees several potential acquirers & M&A fair value at $68-$76.
Shares of the South San Francisco, California-based company surged 43.14 percent to trade at $63.82. Over the past year, the stock has been trading in the range of $27.17 and $64.39.