Onyx Shares Zoom on Cancer-Drug News

The company and partner Bayer ended trials of Nexavar early after data showed the drug's efficacy in treating liver cancer

Bayer Pharmaceuticals (BAY) and Onyx Pharmaceuticals (ONXX) had seen enough. Based on trial data, their new drug Nexavar actually helps people with liver cancer survive longer. The companies said Feb. 12 that they're planning to end their advanced stage trials of the drug early, after their study already showed Nexavar's efficacy. Now other patients in the study who had received placebos instead of the drug can have access to Nexavar too.

Researchers at companies like Bayer and Onyx have been struggling to invent treatments that can target tumors with minimal side effects, keeping the cancer at bay for months or even years. The drugs are especially helpful for people whose tumors can't be removed surgically (see BusinessWeek.com, 6/5/06, "More Weapons for Fighting Cancer").

The National Cancer Institute estimated that 16,780 people in the U.S. will die from liver cancer in 2007 alone. While Nexavar's successful results bring hope, they also take place after new fears flared up recently that the drug might fail. An advanced trial of the drug had showed that Nexavar didn't improve the odds that people suffering from advanced melanomas would not get any worse; when that news hit in December, Morningstar analyst Karen Andersen reduced her estimate that Nexavar gets approval for use as a treatment of melanoma from 60% to 20% and of liver cancer to 50% from 60%.

Now the picture has changed. Bayer and Onyx are planning to continue discussions with health authorities like the U.S. Food and Drug Administration about the next steps on filing for approval of their new liver cancer treatment.

Bayer and Onyx already said Dec. 20, 2005 that the U.S. Food and Drug Administration had approved Nexavar for use in kidney cancer. But Onyx and Bayer might be under pressure from the competition, which has been heated and frenzied lately. For example, Nexavar's use as a kidney cancer treatment has a rival in the New York drug maker Pfizer's (PFE) treatment Sutent.

After the news hit Feb. 12, investors bid up Onyx shares more than 69% to $20.73 per share in early trading on the Nasdaq. Bayer shares rose 0.6% to $58.19 on the New York Stock Exchange.

Life or death hopes for cancer patients aside, Onyx's commercial success rests largely with the fate of Nexavar, after the company realigned business in 2003 to focus primarily on developing the drug.

"Should Nexavar prove inferior to several competing cancer drugs or experience more commercialization setbacks, the company will probably have very little market or acquisition value," Morningstar's Andersen said in a note Dec. 7. But she also pointed out that Nexavar sales rose to more than $100 million in the first nine months of 2006, after expenses like research and development pushed Onyx to a $95 million loss in 2005. "With Nexavar now on the market, we believe that Onyx could move out of the red within the next several years," Andersen said.

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