--New agreement with Bayer means Onyx would keep current Nexavar rights if there is change of control
--Onyx gets $160 million payment for Nexavar royalty rights in Japan
--Onyx also gets access to experimental cancer drug regorafenib
(Updates throughout with details on agreement, analyst company, background.)
Onyx Pharmaceuticals Inc. (ONXX) has reached an agreement with Bayer AG (BAYRY, BAYN.XE) ensuring Onyx will retain profit-sharing and co-promotion rights to its main product, the cancer drug Nexavar, if Onyx is bought out by another company.
The restructured partnership also calls for Bayer to pay Onyx $160 million, and potentially up to $15 million later on, for Nexavar royalty rights in Japan. Additionally, the deal resolves a lawsuit Onyx filed in 2009 seeking access to an experimental cancer drug called regorafenib by giving Onyx a fifth of future sales, which the company would retain if there is a change in control.
Onyx shares recently traded up 6.3% at $33.92. The reworked deal clarifies some big questions for any potential suiters that might have interest in the San Francisco-based biotechnology firm, which has a market capitalization of about $2 billion.
"These new agreements strengthen the collaboration and provide Onyx the opportunity to participate significantly in the market potential of regorafenib," said N. Anthony Coles, president and chief executive at Onyx, in a release.
Onyx and Bayer have long collaborated over Nexavar, which accounts for all of Onyx's sales to date, but their agreement previously said Onyx would get royalty-based payments if it were bought out, and that the new company would lose co-promotion rights. But under the deal announced Wednesday, Onyx would keep the 50-50 profit-sharing arrangement plus co-development and co-promotion rights, Onyx said in a filing with the Securities and Exchange Commission.
The co-promotion part is key because any potential acquirer would want the ability to sell the drug, and not just collect royalties, analysts said.
Onyx has not said it is for looking for a buyer, but mid-sized biotechnology firms have been sought-after targets as bigger pharmaceutical companies look to diversify their offerings and defray the impact of patent expirations on key drugs. Morningstar considers Onyx among the top 20 takeover candidates in biotechnology and specialty pharmaceuticals for 2011, analyst Lauren Migliore said.
Regorafenib, in late-stage studies for two types of cancer, is at least a couple years from going on sale, pending regulatory approval. But there were questions about Onyx's access if the drug does reach the market; Onyx sued Bayer in 2009 seeking monetary damages and a court ruling giving it rights to the drug.
Under the new agreement, which resolves the lawsuit, Bayer will pay Onyx a royalty of 20% of future worldwide regorafenib sales in human oncology, and Onyx or a future buyer would retain rights to royalties if there is a change of control. Bayer would, however, would be able to terminate Onyx's co-promotion rights for regorafenib in such a circumstance.
Another key question for Onyx, which could be answered by late November, is whether the Food and Drug Administration will give the company's application for a blood-cancer treatment a priority review that could yield a decision in the first half next year.
Copyright © 2011 Dow Jones Newswires
