Onyx Pharmaceuticals: Upside Remains After DECISION Approval

The positive outcome of the Phase III trial, DECISION, should have an immediate impact on Onyx Pharmaceutical's (ONXX) Nexavar revenue growth, which was relatively flat in the last few quarters and expected to remain so due to sales from the drug’s approved indications peaking. Additional revenue could be in the $200m to $250m range worldwide for radioactive iodine-refractory (RAI) differentiated thyroid cancer (DTC), a condition currently without approved systematic treatment options.

DECISION details
DECISION is a Phase III trial of Nexavar in patients with locally advanced or metastatic RAI DTC, comparing Nexavar to placebo with progression-free survival (PFS) as its primary end point. Top-line data showed that treatment with Nexavar resulted in a statistically significant improvement of PFS. Detailed data are expected to be presented at an upcoming medical meeting, most likely at the ASCO in 2013. Investors will pay close attention to the magnitude of PFS improvement and whether there is an improvement of overall survival (OS), a secondary end point, when the results of the trial are presented.

Revenue could precede approval
We believe these positive results could be translated into sales increase in the next few quarters, particularly after the (ASCO) presentation, and before the formal approval for this indication, likely to be in a 10-12 month timeframe, because currently there is no approved treatment option for RAI DTC and Nexavar is approved for renal cell carcinoma (RCC) and hepatocellular carcinoma (HCC) in more than 100 countries. Nexavar sales increased dramatically following the positive outcome of the SHARP trial, which demonstrated an OS benefit of Nexavar over placebo in HCC in February 2007, well before the drug’s formal approval for this indication in the US in November 2007.

Valuation: Upside remains if M&A premium included
Onyx’s EV is $5.6bn if convertible shares and stock options are included. Its EV is underpinned by Nexavar, Kyprolis and royalties on sales from Stivarga (regorafenib). Given its three approved cancer drugs and an attractive pipeline, Onyx may become an attractive takeover target.

To Read the Entire Report Please Click on the pdf File Below.