Among its currently approved cancer drugs, Kyprolis is Onyx's most important growth driver with 2018 consensus sales of $1.9 billion.
Kyprolis is currently approved in the U.S. as a treatment for multiple myeloma patients who no longer respond to other therapies, but Onyx is conducting clinical trials to demonstrate the drug's efficacy in patients with newly diagnosed cancer. The company also intends to get Kyprolis approved in Europe.
Importantly but perhaps overlooked by many investors, Onyx also gets an 8 percent royalty on future sales of an experimental and very exciting
(PFE - Get Report)
breast cancer drug known as palbociclib.
"The market opportunity for [palbociclib] is at least $2 billion in our view and perhaps much more," writes ISI Group analyst Mark Schoenebaum in an email to clients on Saturday. He estimates palbociclib could be approved sometime between 2015 and 2017.
Sanford Bernstein analyst Geoff Porges is even more bullish on palbociclib, forecasting 2019 global net sales of $3 billion, meaning Onyx's royalty would bring in $230 million.
That royalty revenue from Pfizer has no costs associated with it and is therefore is very valuable to Onyx -- or a potential acquirer -- because it flows directly to the bottom line.
"Strategically, this deal makes a great deal of sense for Amgen, in my opinion," Schoenebaum said in an email to clients. "As you may know, Amgen already has a very large cancer franchise. Aranesp, Neupogen, Neulasta, and Xgeva are all major cancer franchises for the company. However none of these drugs are direct anti-tumor agents. Thus, strategically, Onyx's drug Kyprolis would fit in exceptionally well with Amgen's existing sales and marketing infrastructure."
Over the weekend, Schoenebaum polled institutional investors for their thoughts on the Amgen-Onyx deal. Eighty-six percent of the 154 investors who responded to the poll said buying Onyx makes good strategic sense for Amgen.
On average, investors polled by Schoenebaum said the highest "fair" price Amgen should pay for Onyx is $130 per share.
-- Reported by Adam Feuerstein in Boston.
Follow Adam Feuerstein on