Onyx balloons on news of Kyprolis approval

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Onyx Pharmaceuticals shares have hit a new record again following the regulatory approval of its first wholly owned drug. The FDA granted approval on Friday to Kyprolis in advanced multiple myeloma, setting the stage for launch next month of a product executives hope will be the first in a franchise of proteasome inhibitors.

Given a spate of good news lately not just on Kyprolis but also on pipeline projects and possible commercial risks, not to mention takeout speculation, it is not too surprising to see values rising above all but the most bullish analysts’ price targets. Given the challenges faced by many recently launched products, news from Kyprolis’ launch trajectory will be closely watched; and the company’s commercial team will need to execute on a better-than-expected label to prevent a fallback in valuation.

High hopes

The FDA approved Kyprolis (carfilzomib) in multiple myeloma patients who have progressed within 60 days of concluding therapy with Velcade and an immunomodulatory agent such as Revlimid. It was backed under the agency’s accelerated review authority on the basis of response rates in a single-arm trial indicating the paucity of treatment options. Progression free and overall survival have not been confirmed yet, but will be the subject of post-marketing study.

The population eligible for treatment in that indication is 10,000-15,000 a year, Helen Torley, Onyx’s chief commercial officer, told investors in a call on Friday following news of the FDA’s approval. With that in mind, the California group is deploying 100 sales representatives starting this week to visit some 2,000 targeted specialists in a first round of physician education calls.

Onyx will be ready to take orders beginning August 1. At a price of $1,658 per vial, Kyprolis will cost nearly $10,000 per month for a patient weighing 70 kilograms, according to the company. In a note following the call, analysts from Deutsche Bank said the price was greater than the $7,000-$7,500 they were expecting. Deutsche Bank is now forecasting up to $3bn in annual sales based on Kyprolis' ability to expand into earlier lines of treatment.

This forecast is well above the EvaluatePharma consensus, which currently stands at $943m in 2018; with approval, that number has the potential to rise, although the ranks of recently launched products are rife with commercial disappointments.

Other positives taken from the label was that patients do not have to be refractory to Velcade, but rather progress in the first 60 days following the end of Velcade or an immunomodulatory drug, the Deutsche Bank analysts write.

The label will come with precautions about cardiac toxicity raised in FDA’s analysis of pivotal data; post-marketing trials will include analysis of cardiac markers such as changes in electrocardiogram readings to further refine data on risk indicators (Onyx soars as Kyprolis backing allays safety concerns, June 21, 2012). However, the label did not include black box warnings, which will be taken as positive news.

Deutsche Bank was among the most bullish of analysts on Onyx prior to the Kyprolis approval, setting a price target of $77, still higher than the $76.38 of Friday’s close. Following approval, the bank raised its target to $110.

Good news, and even more

To give its analysts credit, the group has had a number of positive catalysts in recent weeks in addition to the rising expectation of the Kyprolis approval. Partner Bayer has already submitted kinase inhibitor, regorafenib, for FDA approval in colorectal cancer, the extension of a franchise that began with Nexavar; last month, the FDA granted priority review, which means the group could have two new drugs approved this year.

Other good news was the failure of Bristol-Myers Squibb’s brivanib’s to show non-inferiority in a head-to-head liver cancer trial against Nexavar, which came last week, and hopes that Nexavar might succeed in a trial among thyroid cancer patients resistant to radioactive iodine.

News today that adding Tarceva to Nexavar failed to show a survival benefit in liver cancer did not blunt Onyx’s continued rise; shares were up another 1% today, to $76.83 in early trade.

Rumour mill

And of course, having continued M&A speculation never hurts a company’s valuation, even if current values make that a slim possibility (A chill pill for the Onyx buyout bulls, July 3, 2012). Certainly, that was among the reasons for Deutsche Bank’s upgrade, who saw the potential for a takeout at $122 a share.

Fellow analysts, all of whom currently have targets below Onyx’s current share price, have yet to upgrade, which may be a sign that they are sceptical of the takeout talk or that they would like to see some firm indicators of the commercial promise of Kyprolis, which at a current net present value of $2.38bn constitutes half of Onyx’s market capitalisation

Thus the pressure is on now for Onyx’s commercial team to perform. With a permanent J-code not likely to come until 2014, the group is declining to provide any guidance on sales until early reimbursement issues are worked through. With a sky-high valuation, investors will be attuned to any signs whether current sales expectations can be met.

To contact the writer of this story email Jonathan Gardner in London at jonathang@epvantage.com

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