Setback for Onyx, Bayer - Analyst Blog

Recently, Onyx Pharmaceuticals Inc. (ONXX) announced that its lung cancer candidate Nexavar (sorafenib) failed to prolong the overall survival in patients suffering from advanced non-squamous non-small cell lung cancer (NSCLC) in a late stage study. Onyx is co-developing Nexavar with German company Bayer HealthCare Pharmaceuticals (BAYRY).
 
The randomized, double-blind, placebo-controlled study, known as NExUS (NSCLC research Experience Utilizing Sorafenib), evaluated Nexavar as a first-line therapy in combination with standard therapies, gemcitabine and cisplatin. The late-stage study has enrolled approximately 900 patients from Europe, South America, Asia Pacific and the Middle East since February 2007.
 
Even though the trial failed to meet its primary endpoint of overall survival, it did satisfy a secondary goal of progression-free survival (PFS) (the time before patients' tumors started growing again was prolonged). Despite the failure of the study to improve the overall survival, the co-developers intend to continue exploring Nexavar in combination with targeted agents and as a monotherapy for treating patients suffering from lung cancer, which apart from being the most common form of cancer is among the most difficult to treat.
 
Nexavar is currently approved and marketed for the treatment of liver cancer and advanced kidney cancer in the US, the European Union as well as other territories worldwide. Global sales of the drug was $843.5 million in 2009, up 24% from the year-earlier period.
 
Apart from lung cancer, the candidate is being studied for several other indications such as breast, ovarian and thyroid cancers. Onyx and Bayer are splitting the development cost for Nexavar and share profits equally in all territories excluding Japan. Bayer pays royalty to Onyx on sales in Japan. Furthermore, all development costs in Japan are incurred by the German firm.
 
We believe current investor focus is primarily on the development of carfilzomib, Onyx’s candidate for treating multiple myeloma. Carfilzomib became a part of Onyx’s portfolio following its 2009 acquisition of Proteolix, a privately held biopharmaceutical company.
 
While we are pleased to note that the company’s pipeline is quite diversified, development and regulatory risks remain. The majority of these candidates, being in the initial to middle stages of development, are several years away from commercialization. Any hiccups in the development process or any adverse trial results will weigh heavily on the stock. We are Neutral on both Onyx and Bayer.