Onyx to buy Proteolix for as much as $850 million to get blood cancer drug

California, USA-based Proteolix has agreed to a takeover bid from Onyx Pharmaceuticals, valuing the firm at a potential $851 million based on upfront and milestone payments. Proteolix' lead compound is carfilzomib, a proteasome inhibitor currently in multiple clinical trials, including an advanced Phase IIb

Onyx, which investors have perceived as being over reliant on its deal with German drug major Bayer for the likely £1 billion a year cancer drug Nexavar (sorafenib), itself has been viewed as an acquisition target. According to CNBC news on the morning of the deal, the US firm as $475 million in cash, so well able to afford the buy, which involves relatively little money upfront.

Under the terms of the transaction, Onyx will make a $276 million cash payment on closing of the transaction. Additional payments include $40 million due in 2010 based on the achievement of a development milestone and up to $535 million contingent upon the achievement of anticipated approvals for carfilzomib in the USA and Europe. Of the potential $535 million, a payment of $170 million is based on gaining accelerated US Food and Drug Administration approval. The transaction is expected to close in the fourth quarter of 2009, subject to the receipt of clearance under the Hart-Scott-Rodino Act and customary closing conditions.

Why not bought by Takeda or Celgene?

Cannacord Adams' biotechnology analyst George Farmer, quoted by TheStreet.co, told his clients this is probably a fair deal based on his, early assessment. He says that carfilzomib has reported encouraging data in studies treating very late-stage muliple myeloma patients. An FDA approval filing could be submitted next year and the drug has the potential to be a better Velcade (bortezomib), the $1 billion-plus multiple myeloma drug from leading Japanese drugmaker Takeda. However, on the negative side, he asks: "if carfilzomib is so promising, why wasn't the company bought by Celgene or Takeda, the most likely contenders?"

Anthony Coles, chief executive of Onyx, said: "This acquisition leverages Onyx' proven expertise in developing and commercializing Nexavar and provides strategic expansion into the $16 billion hematological malignancies market. The transaction structure reflects our approach to growing our business in a disciplined fashion, including earnout payments contingent on specific approval-based events. In addition, our development plan is designed to maintain our ability to continue to grow operating cash flow in 2010 and beyond."

"Proteolix has succeeded in pioneering a new class of potent proteasome inhibitors, as demonstrated by the promising data achieved in multiple studies of our lead candidate, carfilzomib. We believe Onyx truly shares our vision for carfilzomib as an important new therapy in oncology and recognizes Proteolix' scientific leadership in proteasome inhibition," said John Scarlett, chief executive of Proteolix.