Onyx Pharmaceuticals, Inc.
) recently announced its intention to raise funds through the
issuance of 4.4 million shares. An additional 0.66 million shares
can be purchased by the underwriters who have been granted a
30-day option for the same.
Onyx Pharma expects to raise gross proceeds of about $538
million from this offering, which is scheduled to close on Jan
22, 2013. The company intends to use the funds for its research
& development programs, the commercialization of Kyprolis and
general corporate purposes.
We believe the company, which exited the third quarter with
cash and equivalents of about $573 million, will also use the
funds for the repayment of its convertible senior notes due
Onyx Pharma is also liable to make three earn-out payments of
up to $365 million to Proteolix shareholders on the achievement
of certain milestones relating to Kyprolis.
These include a payment of $65 million that would be triggered
on the EU approval of Kyprolis for relapsed/refractory multiple
myeloma by Dec 31, 2013 and $150 million each on the FDA and EU
approval of Kyprolis for relapsed multiple myeloma by Mar 31,
Moreover, we believe the company may use a part of the
proceeds for small business development deals for the expansion
of the pipeline or product development.
We currently have an Outperform recommendation on Onyx Pharma.
Onyx Pharma recently provided an update on its performance in
2012 and its plans for 2013. Kyprolis, which was launched in late
Jul 2012, is off to a solid start with 2012 sales expected to
cross $62 million. Strong adoption trends and rapid account
penetration should ensure continued strong ramp of Kyprolis
Onyx Pharma, which was a one-product company until a year
back, has successfully transformed into a multi-product company.
With two recent product approvals (Kyprolis and Stivarga) in its
bag and Nexavar continuing to perform well, Onyx Pharma looks all
set for growth. We expect 2013 to be a catalyst-rich year for
Onyx Pharma as the company works on expanding the labels of
currently marketed products and progresses with the development
of other candidates.
While Onyx Pharma currently carries a Zacks Rank #3 (Hold),
) currently carry a Zacks Rank #1 (Strong Buy).
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