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ONYX (ONXX): Deal or No Deal Time For Payoff

Prohost Biotech - Tuesday, November 29, 2011

When Onyx (ONXX) announced its intention to acquire the privately held company Proteolix in 2009, investors rushed to sell the stock. Investors are brainwashed into selling any biotech firm that would spend money, regardless of the reason for spending, including acquiring firms with promising breakthrough drugs in final phase trials. As a matter of fact, Onyx’ acquisition of Proteolix added to its products’ portfolio a new generation proteasome inhibitor, Carfilzomib, a drug designed for resistant multiple myeloma. Takeda’s breakthrough drug Velcade (bortezomib) and Celgene’s drug Revlimid (lenolidamide) considered top treatments for multiple myeloma could not prevent the cancer from offsetting their efficacy on a large percentage of patients. In contrast, clinical trials demonstrated that Carfilzomib has broken the cancer’s capability to recur and resist in a substantial percentage of late-stage cancer patients. The new drug is definitely more effective proteasome inhibitor than the current treatments, in addition to having a better safety profile, especially with regard to the intractable pain and numbness that patients experience with Velcade.

The promises of Carfilzomib failed to halt ONXX’ free fall from a 52-week high of $36.59 to $20.  Since then, various trial results have demonstrated the drug has met its endpoints of safety and efficacy. A pivotal study has demonstrating that Carfilzomib was able to induce a clinically meaningful tumor response in 24% of multiple myeloma patients with a median duration of response of 7.4 months. The big news here is that the patients responding to carfilzomib were plagued with cancers that were minimally responsive or not responsive at all to Velcade and Revlimid, in addition to they had received a median of five prior lines of therapy. They were considered hopeless cases.

To demonstrate the importance of Carfilzomib results Onyx’ CEO Tony Coles said "If you look at the natural history of relapsed and refractory disease, only about 11% of patients would be expected to respond. Well, Carfilzomib patients showed a response rate of 24%.” Dr. Ken Anderson, chief of the hematologic cancer division at Boston's Dana Farber Cancer Center said, "I'm encouraged by the extent of the response, the durability of the response and the lack of side effects."

After Onyx filed for approval of Carfilzomib, many negative analysts perpetrated the notion that the FDA would condemn the drug, bringing irrelevant reasons, including that the study is a single arm. It simply does not make sense. The patients who responded to Carfilzomib were subjected to the best available treatments for multiple myeloma, and the drugs had not worked for them. Don’t Velcade and Revlimid represent the missing arm.

The trial results are more than sufficient to convince the FDA of the extra value of carfilzomib compared to the current treatment regimens. Velcade was approved on a 28% response rate from a single-arm study? Dr. Coles said that the results were really good news. It validates the firm’s growth strategy and the reason for acquiring Proteolix.

In October 8, 2010, we posted multiple-choice questions, asking the skeptics to explain the reason for selling ONXX. We asked:

Which one of the following four reasons made you sell ONXX?

1. Failure of the firm’s multiple myeloma drug carfilzomib?

2. Your expectation that the FDA will reject Carfilozmib’s NDA?

3. Your expectation that the FDA will recall of Nexavar from the market?

4. None of the above?

The correct answer was # 4.

A couple of months later, results from the Phase 2b 003-A1 study of carfilzomib demonstrated a stunning efficacy as a single-agent on patients with relapsed and refractory multiple myeloma who had received a median of five prior lines of therapy (corresponding to a median of 13 anti-myeloma agents). Carfilzomib achieved an overall response rate (ORR) of 24.1 percent and a median duration of response (DOR) of 8.3 months. The clinical benefit rate (CBR) in the study population was 34.2 percent. The median overall survival (OS) was 15.5 months. Overall survival for responding patients were not yet been reached. These results are exciting.

Another trial with Carfilzomib in combination with lenalidomide and low-dose dexamethasone demonstrated that all the 31 patients enrolled in the study responded with at least 50 percent reduction of the disease and the cancer was completely or nearly eliminated in a significant number of patients. The response continued to improve with additional treatment. More than two-thirds of the patients who completed eight cycles of therapy achieved a complete response, meaning that they showed little or no signs of cancer. After a median follow-up of six months, all patients were alive with no progression of their cancer. The results were impressive.

The study included patients who were eligible for a stem cell transplant. It was interesting to learn that these patients were able to remain on the Carflizomib combination and achieve responses similar to, or better even than those observed after stem cell transplant. This outcome delayed the need for a stem cell transplant in these patients.

Carflizomib, alone and in combination with lenalidomide and low-dose dexamethasone, or other combinations is expected to save many of the 10, 650 condemned multiple myeloma victims.

What’s new?

Filing NDA with the FDA for the approval of Carfilzomib, for relapsed or relapsed/refractory multiple myeloma and solid tumors was good news. This good news was followed by other good news announcing Onyx settling its lawsuit with Bayer over the experimental cancer medicine regorafenib and amending its collaboration agreement over Nexavar. The new agreement with Bayer gave Onyx rights on Bayer’s late-stage cancer compound regorafenib. Onyx is promised  around 20% royalty on the drug sales and possible co-marketing of the drug.

Regorafenib an investigational oral multi-kinase inhibitor of angiogenic, stromal and oncogenic receptor tyrosine kinases (TK) currently being investigated in clinical trials for its potential to treat patients with various tumor types, including advanced colorectal cancer.

Following the agreement, Bayer announced more good news for both companies. It stopped Phase III trials with regorafenib on metastatic colorectal cancer (mCRC) patients whose cancer had progressed with the standard therapies, as the results have met the primary endpoint of statistically significant improvement in overall survival.  The Independent Data Monitoring Committee recommended, unblinding the study with regorafenib and giving the drug to patients who were on the placebo arm.

Colorectal cancer CRC is a serial killer of middle age and older males and females. That’s why colonoscopy is advised to this age group every 5 years, or every 2,5 years if susceptibility for cancer is found in any of the performed colonoscopies. The cancer is curable when discovered early, but, unfortunately, in a substantial number of patients, the cancer grows and metastasizes before being diagnosed. That’s how it is the third leading cause of cancer death in the United States, in both men and women. More than 140,000 new people are yearly diagnosed with colorectal cancer and nearly 50,000 people will die from the disease.

The data from regorafenib trials have, indeed, demonstrated increased overall survival," said Ted W. Love, M.D Executive Vice President, Research and Development and Technical Operations at Onyx Pharmaceuticals. "We look forward to seeing this promising therapy becomes available to patients as quickly as possible."

From having Nexavar only as its approved product, Onyx is suddenly expected to soon have two additional approved breakthrough products on the market. The three products cover kidney cancer, pancreatic cancer, multiple myeloma and colorectal cancer.

Bayer will continue discussions with health authorities worldwide, including the European Medicines Agency (EMA) and the FDA regarding next steps in filing for approval of regorafenib in the treatment of mCRC.

Now the talk of the town is of Onyx exploring options, including a possible sale.  It seems that potential buyers do exist and are studying Onyx’s Carfilzomib cancer therapy and regorafenib. The rumors (or news) has been expected all along as the firm has positioned itself as to generate yearly revenues that are almost equal to, or even higher than its market cap, which has not reached $3b even following the rally on the acquisition rumors.

ONXX has rallied on the rumors. As a matter of fact, the extremely undervalued stock deserves a rally whether there will be a deal, or in case there is no deal. Onyx has opened the door to a new future that is totally different than its past, thanks to its successful strategy.

We long ONXX


For other Prohost picks, The Prohost Newsletter #318 will be posted before the end of the week.  

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