Onyx Pharmaceuticals Agrees to Buy Proteolix

Onyx Pharmaceuticals Agrees to Buy Proteolix

Drug maker Onyx Pharmaceuticals Inc. agreed to acquire privately held Proteolix Inc. for $276 million cash plus potential milestone payments, giving Onyx a foothold in what it estimates to be a $16 billion market for blood-cancer drugs.

The deal could fill what Wall Street has perceived to be a hole in Onyx's research pipeline, giving it access to Proteolix's experimental drug carfilzomib, which is being studied in midstage, or Phase 2, clinical trials for people with multiple myeloma.

Onyx, of Emeryville, Calif., currently co-promotes Nexavar, a treatment for kidney and liver cancers, with Bayer AG, but a recent study of the drug in breast cancer had disappointing results and illustrated how continued sales growth for the drug might be difficult. Also, Onyx has had a relatively thin pipeline of additional drugs with potential to hit the market in coming years.

Onyx shares rose $1.51, or 5.6%, to $28.41 in late-afternoon trading Monday, as investors were pleased with the deal's financial structure and its potential to brighten the company's prospects.

Under the deal, Onyx will pay $276 million in cash for Proteolix at closing, which is expected in the current quarter. The company also agreed to pay an additional $40 million next year if the drug reaches a development milestone and as much as $535 million if it receives regulatory approvals in the U.S. and Europe. Of the $535 million, about $170 million is conditioned upon accelerated approval by the U.S. Food and Drug Administration.

Investors had been expecting Onyx to make some sort of deal because the company raised about $310 million in a securities offering in August. "Investors appear relieved that the upfront payment is digestible and the asset has a reasonably high chance of reaching the market," Morgan Stanley analyst Steven Harr wrote in a research note Monday.

Carfilzomib is called a proteasome inhibitor, which blocks the effect of a protein complex that helps tumor cells survive and grow. It is similar to Velcade, a blood-cancer treatment co-marketed by Johnson & Johnson and Takeda Pharmaceutical Co.