Onyx Pharma Poised to Crack Asian Market

Back in June, after the Nexavar liver cancer data was presented at the ASCO meeting with Onyx shares at $30, I crunched some numbers to come up with a fair value for the stock in the low-$40 range. That valuation relied on a fairly conservative revenue model for Nexavar sales in the U.S. and Europe -- with no Asian revenue at all.

In February, right after that great Nexavar liver cancer data was first announced, I made a similar valuation argument for Onyx with the stock in the low-$20s. This isn't a boast, but merely a reminder that while I do get some picks wrong (like Sonus Pharmaceuticals(SNUS Quote)), I also get some right.

If early sales of Nexavar in liver cancer are strong, and the drug does get traction in Asia, there's room for Onyx shares to move higher. A buy-side analyst who has overseen a long position in Onyx since it was in the low-$20s tells me that his fair value for the stock right now is in the low-$50s. That estimate does include modest Asian sales of Nexavar.

Full disclosure, though: He has been trimming his position somewhat with the stock in the mid-$40s to lock in profits, but he's also willing to add to his position if the stock takes any significant dips. There's still a possibility that Bayer buys Onyx outright, and if that happens, the German drugmaker will have to make a premium bid.