Onyx Pharma Drawing Buyout Buzz

So, working with round numbers, my forecast gets to peak worldwide Nexavar sales of $800 million in both kidney and liver cancers. If Bayer wanted full ownership of the drug, it might pay two to three times sales for the half it doesn't already own, which would work out to an Onyx market value in the range of $1.6 billion to $2.4 billion.

Even with the stock up sharply Monday, Onyx's market cap is still around $1 billion.

I like my two-to-three times sales comparable because that's what Eli Lilly(LLY) paid recently to acquire Icos(ICOS) to gain full rights to the erectile-dysfunction drug Cialis. The situations are somewhat similar.

Of course, these are just broad projections based on the information we have so far. The actual data from the Nexavar liver cancer study will be presented in June at the American Society of Clinical Oncology meeting. That's when the full extent of Nexavar's survival benefit and treatment duration will be seen for the first time.

Also, with Onyx and Bayer already linked together in a Nexavar marketing partnership, the likelihood of another bidder for Onyx is diminished. But keep in mind that Nexavar may one day work in other cancers. A phase III lung cancer trial was recently started.

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