Onyx Pharma Poised to Crack Asian Market

Onyx and Bayer announced last month that a study of Nexavar in Asian liver cancer patients was stopped early because of a significant survival benefit reported in patients taking the drug compared to placebo. This was followed by Bayer's upbeat comments Monday about Chinese liver cancer patients who are reportedly paying for Nexavar themselves.

Combined, this is prompting a recalculation of Nexavar's revenue model, adding in the potential for higher Asian sales.

"I don't expect Bayer [and Onyx] to achieve anywhere near the kind of liver cancer market penetration with Nexavar in Asia that they'll get in the U.S. or Europe, but then, at this point, I didn't expect anyone in China to be paying for the drug," says one institutional investor who is long Onyx and had heard the Bayer executives speak at the UBS Global Life Sciences Conference.

"To me, Asia revenue is nice upside in my Nexavar model," he added.

Now the question becomes, is the stock fairly valued here? Or is there still fuel in the tank to send the stock higher?

With the stock at $45 and change and a market cap of about $2.5 billion, Onyx is pricing in Nexavar sales in the neighborhood of $1 billion. (Remember, it basically shares revenue and profit equally with Bayer.) That's a lot, considering that the drug hasn't yet been approved for the treatment of liver cancer (although that's widely expected by year-end).