Onyx Gets $160M in Settlement With Bayer for Cancer Drug, Royalty Stream on Next Treatment

10/12/11Follow @xconomy

Onyx Pharmaceuticals has snapped up a $160 million upfront payment as part of a legal settlement with Bayer, its longtime partner.

South San Francisco-based Onyx (NASDAQ: ONXX) said today it has restructured its partnership with Bayer for the marketing of their existing drug sorafenib (Nexavar) for kidney and liver cancers, while striking a new agreement for regorafenib, another drug candidate still in late-stage development. Under the agreements, Bayer will pay Onyx a one-time sum of $160 million and stop making royalty payments to Onyx for sales of Nexavar in Japan. On the new cancer drug, Bayer will pay Onyx a 20 percent worldwide royalty on sales, and Onyx will have the right to co-promote the product in the U.S.

Onyx and Bayer struck their original partnership, a joint venture, in 1994 to develop and market sorafenib, as part of a class of cancer therapies known as kinase inhibitors. Onyx had contended in a recent court case that the next drug, regorafenib, also fell under the terms of that agreement. Now that the two sides have more clarity on their share of ownership in the regorafenib compound, investors should be able to model in revenues for Onyx if a pair of pivotal clinical trials turn out positive in 2012, said Cory Kasimov, an analyst with JP Morgan. Because of the uncertainty around the ownership of the new drug, many investors had primarily been almost entirely focused on Onyx’s lead compound, carfilzomib, which now has an application on file at the FDA.

“We view this as a clear positive development,” Kasimov said in a note to clients, adding that “Onyx remains one of our favorite ideas in biotech.”

Tony Coles, Onyx’s CEO, said in a statement that: “These new agreements strengthen the collaboration and provide Onyx the opportunity to participate significantly in the market potential of regorafenib. Together we are taking our collaboration to the next level by more effectively structuring our future working relationship.”

Shares of Onyx climbed 4.4 percent to $33.31 at 10:36 am Eastern time.

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