Onyx Fund-Raising Sparks Cry for Shareholder Input

EMERYVILLE, Calif. (TheStreet) -- A large investor in Onyx Pharmaceuticals(ONXX Quote) wants shareholders to have the right to approve or veto any significant deal the company may seek to do in the future.

Samuel Isaly, portfolio manager at Orbimed Advisors, which owns about 4% of Onyx, requested greater shareholder control over Onyx's deal-making decisions after the company announced a new offering of stock and debt securities.

Isaly says he's worried that Onyx's desire to raise another $300 million or more -- on top of the $460 million already in the company's coffers -- might lead management into an expensive or highly dilutive deal that won't benefit shareholders.

"Onyx has said little about how they intend to use these proceeds. We're worried about the company embarking on a transaction of significant size in which the shareholder can't vote," says Isaly.

Asked to define "significant size," Isaly says he wants Onyx to rewrite its corporate by-laws to require a shareholder vote on any transaction greater than 25% of the company's market value.

Onyx's market capitalization is currently around $2 billion, so Isaly is asking for shareholder votes on deals priced at $500 million or higher.

Onyx executives could not be reached for comment.

Isaly says he hopes to steer Onyx clear of making the same mistake OSI Pharmaceuticals(OSIP Quote) made when it acquired Eyetech Pharmaceuticals in 2005 for about $1 billion. OSI engineered that deal in a way that prevented a shareholder vote, but the acquisition never delivered promised returns because Eyetech's eye drug failed commercially.