The Deal: Onyx Trials Cloud Amgen Deal

NEW YORK (The Deal) -- A Bloomberg article that ran Aug. 14 cited anonymous sources saying that Amgen's (AMGN) $10 billion, $120 per share, acquisition of Onyx Pharmaceuticals (ONXX) was hanging on whether Amgen could see results of a clinical trial for Onyx's Kyprolis.

However, the reference to the study results was ambiguous and left parties tracking the deal trying to figure out which trial the sources were alluding to and whether access to the data could truly be a deal-breaker.

Kyprolis is a key element in Onyx's valuation. It's a next-generation proteasome inhibitor that received accelerated approval in the U.S. last year as a third-line treatment for multiple myeloma, a cancer of specific blood cells. The company needs approval in the U.S. and EU to meet its revenue guidance.The Food and Drug Administration offers urgently needed drugs accelerated approval based on preliminary data. However, the drug company must continue to pursue more proof of the drug's clinical effectiveness to attain permanent, or regular, approval.

To attain that approval, and market the drug in the EU, Onyx has two major ongoing Kyprolis clinical trials: Focus and Aspire. One of these two trials is very likely what the unnamed source was referencing in the Bloomberg article."It's very unlikely that Amgen wanted results of a trial that's incomplete," ISI Group analyst Mark Schoenebaum said Aug. 16 in a research note.

During its second-quarter sales and earnings call, Onyx said Focus had recently undergone an interim analysis and that Kyprolis hadn't met its endpoint yet. That is not a bad signal. It's simply an early look at a trial and quite often at that point a trial hasn't met its outcome goal. Final analysis for Focus is expected next year.

These trials are "blinded," meaning nobody is supposed to know which patients are in the treatment arm and which are controls. They are coded so only an independent research committee can "unblind" the data to do an interim analysis. If the data are unblinded any other way, the trial could very well not be accepted by regulators and that could delay approval.

A key data element Amgen may be looking for, Schoenebaum noted, is an aggregate event rate, which would count total deaths in a trial, so it's not looking at a difference between the Kyprolis-treated patients and the controls.

Asking to look at aggregate event rate would be "a totally reasonable request," by Amgen, Schoenebaum said. "Sometimes companies do track blinded aggregate safety data. That could be where the hangup is. But I believe Onyx is tracking that and don't see why they wouldn't give it to Amgen."

And, too, many investors believe the leak to the press was simply an Amgen maneuver to get Onyx to come to the table at a more reasonable price, or concede to a contingent value right based on the outcome of one or both of the trials.

To gain permanent U.S. approval, Kyprolis must also complete Aspire, a Phase 3 clinical trial with an endpoint of progression-free survival to remain on the market. (A patient with progression-free survival is cancer-free at that time.) Final results for Aspire are expected in 2014.

The other trial, Focus, should end a little earlier, but also will have a final read-out in 2014. It has always been viewed as risky by investors and analysts because it compares Kyprolis to "best supportive care," meaning the treatment regimen is left up to the individual doctor. So the control arm is not truly controlled.

However, the outcome of Focus is not as critical as that of Aspire, Schoenebaum said.

Even if Focus were to fail, Onyx management has said that positive Aspire trial results would be enough to gain EU approval. When asked the question during Onyx's Aug. 8 earnings call, executive vice president of global research and development Pablo Cagnoni said, "We're very confident on the design of Aspire ... progression-free survival is the primary endpoint, this has been established as an approvable endpoint in patients with myeloma." Cagnoni also said the company is "very confident that Aspire will show a difference in progression-free survival that would be more than sufficient to support registration in Europe and certainly in the U.S."

It's clear that physicians are rapidly adopting the drug. Kyprolis revenue was $64 million in the first quarter and $153 million for the second quarter. Bloomberg estimates it could bring in $2.4 billion by 2019.

On Aug. 15, Onyx shares dropped about $9, or 7.5%, to $115 on the reports that merger talks could be stalled. Onyx shares ended Aug. 16 at about $116, up by 29 cents, or 0.25%, on the day.

-- Written by Pamela Taulbee in New York

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