Onyx CEO turns $1B into $10B with Amgen takeout

The biotech's decision to buy privately held Proteolix in October 2009 was a jackpot.

By TheStreet Staff Aug 26, 2013 11:55AM

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pills corbisBy Adam Feuerstein


Every biotech CEO wants to say they bought an asset for X and sold it for 10X, yet few top executives manage to create value on this mammoth scale. Onyx Pharmaceuticals' (ONXX) CEO Tony Coles just did it.


The 10X is Amgen (AMGN) paying $10 billion in cash ($125 per share) to acquire Onyx. The deal, much discussed and analyzed since June, was finally announced Sunday night. But Amgen wouldn't be buying Onyx if Coles hadn't committed $800 million of the company's cash to buy Proteolix, a privately held maker of blood cancer drugs, in October 2009 (TheStreet).


From the Proteolix deal, Onyx gained control of the multiple myeloma drug carfilzomib. The Food and Drug Administration approved carfilzomib last year, and the drug, now sold under the brand name Kyprolis, is expected to generate peak sales of $2 billion.


There are more than a few reasons why Amgen is buying Onyx, but Kyprolis is at the top of the list. That makes Coles' $800 million decision to buy Proteolix a bit less than four years ago -- the X deal -- a very, smart one.


This is a chart of Onyx's market value since buying Proteolix in October 2009:

ONXX1 ONXX Market Cap data by YCharts

 

What strikes me about this chart is that it illustrates the distrust and apprehension many investors had about Kyprolis, even after successful clinical trials. It really took until the positive FDA advisory panel meeting in June 2012 -- two and half years after the Proteolix deal was announced -- for Wall Street to give Coles and Onyx the credit they deserved.


If anyone deserves an "I told you so" moment, it's Coles!


Here's the same story, told in the relative stock prices of Onyx and the Nasdaq Biotechnology Index. Again, Onyx doesn't start to outperform its peers until Kyprolis' won a recommendation for approval from an FDA advisory panel in June 2012. 

ONXX 2

ONXX data by YCharts

 

I remember when Coles was appointed Onyx's CEO in February 2008, replacing Hollings Renton. His selection was not universally applauded (TheStreet). Prior to joining Onyx, Coles had successfully restructured NPS Pharmaceuticals (NPSP) as CEO, but investors gave him and the company little credit for the effort.


Onyx was also on shaky ground at the time and no one knew if Coles was the man to help turn the company around. The Bayer partnership established to commercialize the cancer drug Nexavar was deemed too one sided in the German's favor. Investors complained the Nexavar joint venture was spending too much money, preventing Onyx from seeing any profits from what should have been a money-making drug. Onyx was too reliant on Nexavar, with no internal research and development capability to develop new drugs on its own and seemingly incapable of in-licensing anything of value.


No one is complaining or concerned about Coles' stewardship of Onyx any longer. The company's relationship with Bayer is on a more equal footing, in large part because Coles and his team fought back against the German bullying. Case in point, when Bayer tried to claim full ownership of the colon cancer drug Stivarga, Onyx sued for its rights to the drug -- and won.


There's the Proteolix deal, as mentioned already, plus Onyx owns rights to another cancer drug being developed by Pfizer (PFE), which many analysts predict has blockbuster status written all over it.


X to 10X. Well done, Tony Coles.



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