Thursday, August 15, 2013

Back in Onyx Pharmaceuticals Once Again

I nibbled back into Onyx Pharmaceuticals, Inc. (Ticker: ONXX) today at $116. Fortunately, I was short the August 120 puts and closed those out on Monday. I now view the risk reward as favorable with a potential deal price of $130. The sell off today was a bit of over reaction on news that Amgen (Ticker: AMGN) is holding off based on review of data from an ongoing trial. I have to say that Amgen is playing their cards perfectly.

24 Comments:

At August 16, 2013, Anonymous Anonymous said...

MT,

Yes ONXX, real good entry points today. Do you think todays news leak was orchestrated by Amgen? If so, what is Amgen attempting to do here?

The article excerpts below seem to indicate Amgen may be positioning for a lower price.

"Amgen said the reports that it was seeking information on Kyprolis did not originate from Amgen.

Onyx declined to comment except to reiterate that multiple parties remain interested in a potential deal.

The major concern seems to be that the Onyx auction is not as robust as initially expected, with hopes of a price topping $150 per share for the company.

The public nature of the negotiation suggests that Onyx does not have as much active interest as the company expected.

The odd element to the reports is the notion that Amgen is looking for additional data on Kyprolis application that is not yet available. Amgen did not have the data when it pitched its $120 offer in late June or when the bidder apparently raised to $130 earlier this month.

Interim data on Kyprolis is not important enough to derail a deal with Amgen, a sell-side analyst said. An interim look is neither crucial nor definitive, and the request for unavailable data is unreasonable on the surface, the analyst said. It feels more like Amgen, if the story is accurate, does not think it faces competition in the auction, the analyst said. But the availability of an interim update on Kyprolis is not worth screwing up a deal over $10 per share, the analyst said."

http://www.thestreet.com/story/12010304/1/the-deal-onyx-tanks-on-report-amgens-interest-cooling.html?puc=yahoo&cm_ven=YAHOO


Regards,

inforesource7

 
At August 16, 2013, Blogger Money Turtle said...

This deal has been full of leaks from both sides trying to gain the advantage. I wouldn't be surprised if this was leaked from Amgen to try to get a few dollars off the price, which I doubt will work. It's hard to imagine that Amgen will walk if they don't like what they see in that particular trial. $130 is a good price for Amgen.

 
At August 16, 2013, Blogger Money Turtle said...

I like this article...

http://www.bioworld.com/content/amgen-onyx-back-round-two-big-biotechs-are-mum?ref=latest_news&news_type=Deals%20And%20M&A

 
At August 16, 2013, Anonymous Anonymous said...

MT,

Thanks for the bioworld link. I was only able to read only a short paragraph before they requested subscribing to read the rest of the article. I dont know beyond Amgen raising offer to $130 if the article has any more important details.

If you were the ONXX chief negotiator here, how would you answer Amgen's request to see blinded trial data?


Regards,

inforesource7

 
At August 16, 2013, Blogger Money Turtle said...

No way Onyx would allow Amgen to unblind the trial at this point unless there is an agreed upon minimum price with potential upside based on the data results.

 
At August 16, 2013, Anonymous Anonymous said...

MT,

So as ONXX chief negotiator you would deny the request and stand firm. So how is Amgen playing thier cards perfectly here?

FYI, Amgen Chairman/CEO was a former investment banker at Morgan Stanley. Also I believe ONXX had hired Centerview Partners as their advsior3 and Centeview has worked on other pharma deals that have included a CVR. For example OPTR and TSRX to name two.


Regards,

inforesource7

 
At August 16, 2013, Blogger Money Turtle said...

Amgen let the market know what they were offering and the other players basically just folded right away. Now Amgen is not going to bid against itself so the max price is looking like $130 to get this deal done on a friendly terms.

I don't think ONYX will go for a CVR.

 
At August 16, 2013, Anonymous Anonymous said...

MT,

OK so competition has been removed. Do you think Amgen or their bankers leaked information about wanting to see trial data? If so, whats the purpose? If not, then who do you think made the leak?


Regards,

inforesource7

 
At August 16, 2013, Blogger Money Turtle said...

Like you said, Amgen's CEO is an ex banker and knows how to get the best price. I would guess that Amgen's banker leaked the news to test the market reaction to Onyx. This gives some additional leverage to Amgen in price negotiation. Just my conspiracy theory...

Here's a good write up:
http://www.epvantage.com/Universal/View.aspx?type=Story&id=449303&isEPVantage=yes

 
At August 16, 2013, Anonymous Anonymous said...

MT,

Thanks. Funny I was just reading the epvantage article before reading your post. So this sounds to me like a $130 takeout price may not actually be a lock as reported in the press. Its too good to be true that an actually deal price is made public well before a deal is official.

Regards,

inforesource7

 
At August 16, 2013, Anonymous Anonymous said...

I am in sept 125c against jan 130c.. 130 is a good price for Monday morning
Aapltrader

 
At August 18, 2013, Anonymous Anonymous said...

MT,

I happen to come across some history on another deal that included a CVR. Add this to your knowledge base.

Genzyme-Sanofi deal

1. Genzyme's price was $49.86 when on July 2, 2010 Bloomberg reported Sanofi's interest.
2. On Aug. 29 Sanofi made a bid of $69--a 38.4% premium.
3. On Oct. 4 Sanofi went hostile at the same price.
4. In February 16, 2011 Sanofi bought Genzyme for $74 (a 48.4% premium over the July 2 price) plus a CVR of up to $14/share depending on the performance iof Genzyme's experimental MS drug Lemtrada and production levels of two other products.

ticker symbol for CVR of Genzyme (GCVRZ) and selling around $1.80

You can look up this symbol on yahoo including a message board. Use bigcharts dot com for three year chart view and a single news story about CVR 2011 production targets being missed.

The lesson here might be CVR may not be what they are all cracked up to be, such as a very illiquid market and news might be very hard to come by extending out 2 to 3 years.

I found two other CVR's also on yahoo and bigcharts.
CELGZ
WMGIZ


Regards,

inforesource7

 
At August 18, 2013, Blogger Money Turtle said...

Yes, they may agree on a CVR, but I don't think that will happen. There is not a big disagreement on price unlike Genzyme. In Genzyme's case, the company was forecasting several billion in sales of Lemtrada and Sanofi did not believe it was a billion dollar product. A CVR was needed to bridge the gap. I still hold the Genzyme CVRs and the FDA decision is expected late this year, which will trigger the $1 payment if approved.

 
At August 19, 2013, Anonymous T Bhat said...

Have you checked out CTB? The spread looks interesting and FFH has taken a minor position in it. ( 1200 shares ).

The spread has widened because of the turmoil in Indian markets and issues in China.

 
At August 19, 2013, Blogger Money Turtle said...

Thanks for the heads up on CTB. I haven't followed since the initial sell off when the deal was announced. Now it gets interesting with a potential annualized return of + 20%. May be worth a shot here.

 
At August 20, 2013, Anonymous T Bhat said...

ctb has two uncertainties
- India's cap on capital flows. This shouldnt apply to Apollo tires but you never know as the rupee is falling against the dollar every day.
- Chinese workers strike preventing an Indian take over of their company

Financing seems to be in place and CTB is going to be one heck of a levered institution. (per apollo conf call transcript from their website)I haven't opened a position yet, may do so this week or next.

 
At August 20, 2013, Anonymous Anonymous said...

MT / T Bhat,

FYI CTB

The word out of India yesterday was a new local regulatory requirement won’t prevent Apollo Tyres from completing its acquisition of Cooper Tire & Rubber (CTB) and that this deal should be done within two months. But given that CTB was down again yesterday and the fact that the spread on this deal is now as wide as it’s been since late June, it would appear that some arbs aren’t buying the optimism Apollo is peddling. Without getting too specific, this deal has always traded with a little bit of "hair" on it. But ever since CTB announced uninspiring earnings on 8 August and hinted that day of possible deal delays, the spread on this USD 35 deal has come under pressure. That pressure then ticked up on 14 August when India’s Reserve Bank put new limits on overseas direct investments. The thought here is the limits might have posed a problem for Apollo, though according to a CNBC-TV18 report out of India yesterday, this won’t be the case and the company is still expecting the deal to be finalized in about two months. That news did little to help CTB’s stock, which was down another USD 0.19 and closed at USD 32.25. (For what it’s worth, credit default swaps in CTB just keep creeping wider, and are now up to 526bps per Bloomberg, up from the mid-200s in the days before the Apollo deal was announced. Given that roughly USD 2bn of new CTB debt will be issued to support the Apollo deal, the higher CDS prices would seem to suggest that fixed income investors are still thinking the deal will get done.)


Regards,

inforesource7

 
At August 21, 2013, Anonymous Anonymous said...

MT,

FYI, ONXX

Onyx Pharmaceuticals (ONXX) traded as low as USD 108 on Monday, which seems pretty tame considering Amgen (AMGN) reportedly has a USD 130 a share offer on the table. Of course, Bloomberg News muddied up these waters last week when it reported that ONXX was prepared to take USD 130, but AMGN now wanted some more data from an ongoing ONXX drug study. Well, August’s hottest sale process shows no sign of cooling off. Last night, Dealreporter reported that ONXX still hasn’t signed an exclusivity agreement with a potential buyer. The story also mentions that AstraZeneca (AZN) is still conducting due diligence on ONXX and may need some more time to formulate a bid.


As a side note that if an exclusivity agreement is ever signed they generally take approx. 30 days to work out the details.


Regards,

inforesource7

 
At August 21, 2013, Blogger Money Turtle said...

Thanks for the info... I have an ~ 10% position now in ONXX. I dunno, but I have a feeling that AZN may jump in.

 
At August 22, 2013, Anonymous Anonymous said...

MT,

FYI, ONXX. You are probably way ahead of me on this but if not enjoy. I am playing ONXX with call options. Trade idea for you stock holders. Variation of a covered call, sell SEP $115 call for approx. $15 premium if ONXX stock pops over $120 (currently $8.55 premium). Your downside protection would give you a breakeven of $100.

ISI Ggroup Analyst Mark Schoenebaum seems to be the man in the know. Here are two hard to find comments from him recently plus the 8-21-13 exclusive reuters article. All should be music to our ears.

1)
August 19, 2013 3:09 PM EDT
Amgen, Onyx Deal Will Go Through Pending New Kyprolis Data
ONXX) is lower Monday amid continued speculation over how quickly Amgen might pursue a deal. Amgen has been apprehensive on moving forward until it gets more information on the latest Kyprolis trial.

ISI analyst Mark Schoenebaum said in a conference call today that Onyx might have aggregated Kyprolis survival data and could only have access to safety data. He thinks Amgen will be more "disciplined" on price and due diligence for Onyx, while still wanting to see aggregate event rate data for Kyprolis.

Onyx's ASPIRE Phase 3 next interim analysis report might appear at the same time as its Focus Phase 2, which is slated to be out in the first-half of next year, Schoenebaum said.

Amgen has wanted an anticancer drug for at least a decade. Currently, the pharma has cancer drugs, but not an antitumor drug.

Schoenebaum thinks a deal will eventually go through, but there is just a lot of "posturing going on."

Shares of Onyx are down about 4.2 percent.


2)
8-21-13 4:36PM
Schoenebaum now expects an ONXX deal in a few days at about $130 - now that Amgen apparently has its data


3)
http://www.reuters.com/article/2013/08/21/us-onyx-deal-idUSBRE97K18C20130821?feedType=RSS&feedName=innovationNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+news%2Fdeals+%28Reuters+Deals+News%29


Regards,

inforesource7

 
At August 22, 2013, Anonymous Anonymous said...

MT,

FYI, ONXX. AstraZeneca (AZN) has $9B in cash so they are in a position to deal. If we receive any news leak that AZN has pulled out of the running ONXX stock price may be impacted. Your thoughts on AZN as a viable bidder and fit would be welcome.


AstraZeneca May in Onyx's Future

"Reports that AstraZeneca plc may yet be seeking to acquire Onyx Inc. make sense because of Onyx's recent stock slide and AZ's need for late-stage oncology candidates.

Oncology is one in a triad of core therapeutic areas AstraZeneca discussed during an investor day presentation in June. The company's focus on renewing growth underlined the pursuit of bolt-on acquisitions that strengthen those three core portfolios.

Onyx is desirable because it has several late-stage cancer assets, including Nexavar for thyroid cancer and Stivarga for colon cancer, and it just recently received accelerated approval for Kyprolis to treat blood cancers.

Onyx said June 30 that it had put itself up for sale after Amgen Inc. made an unsolicited bid of $120 per share, or about $10 billion. Onyx refused the offer, saying it undervalued the company.

Onyx shares skyrocketed, gaining 54% in early August and hovered in the mid-$130s. At that time, sources were saying an unjustifiably high stock price, coupled with heated valuations on biotechnology companies generally, was making other potential buyers skittish.

However, a news report on Aug. 14 that raised the possibility of a breakdown in the Amgen negotiations caused Onyx shares to take a 7.3% hit.

London-based AstraZeneca, whose revenue has suffered with the loss of exclusivity from drugs such as Seroquel, could use an acquisition that would fill its late-stage oncology pipeline.

AstraZeneca recently launched Caprelsa in the U.S. and the European Union for medullary thyroid cancer and is looking to extend that to the Japanese market. It expects to file moxetumomab for hairy cell leukemia in 2017. That's pretty much it for late-stage oncology at the company.

AstraZeneca has several oncology products in Phase 2 development or earlier. It paid $240 million up front to Moderna Therapeutics to develop therapeutics that modulate mRNA targets.

The company has made several collaborations and smaller, bolt-on acquisitions since its $15.6 billion buyout of Rockville, Md.-based MedImmune in 2007. MedImmune is now the biologics arm of AZ.

AZ struck a roughly $200 million deal in April with Bind Therapeutics Inc. (which recently filed for an initial public offering) to develop Accurin, a nanomedicine. Plus, it plans to develop three preclinical projects in a new research laboratory on the University of Cambridge biomedical campus. Partners there include the School of Clinical Medicine and the Cancer Research UK Cambridge Institute.

Onyx shares were trading up 1.85% midday Wednesday at $116.69, up $2.12 from the start of trading in New York."


Regards,

inforesource7

 
At August 22, 2013, Blogger Money Turtle said...

The way I see it is that both AMGN and AZN need ONXX. The big question is who is willing to pay up?

 
At August 22, 2013, Anonymous Anonymous said...

MT,

FYI, ONXX make sure you check your news sources before trading resumes today.

"Amgen pushes for lower Onyx buyout price amid data dispute, Bloomberg says"


Regards,

inforesource7

 
At August 22, 2013, Blogger Money Turtle said...

Here we go again... I can understand that Amgen's CEO is an ex banker and wants to get the best deal possible for its shareholders, but it's about time to seal the deal. I can see Amgen shaving $1 or $2 off the $130 price, but nothing more.


 

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