Amgen, Inc. (AMGN), Onyx Pharmaceuticals, Inc. (ONXX): Avoid This Biotech Investment, For Now

The market capitalization of Amgen, Inc. (NASDAQ:AMGN) is around $74 billion, and the company has around $21 billion in cash. The acquisition of Onyx can be synergetic for Amgen, which already has a stellar oncology portfolio. Amgen’s commercialization machine can significantly increase Kyprolis’s potential. The Street expects Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) to fetch around $140 per share; the company is already trading above $130. If Amgen, Inc. (NASDAQ:AMGN) increases its bid and manages to buy Onyx, the acquisition will affect the company’s top-line by 2015.

There is a lot of speculation on other healthcare giants that might be interested in buying Onyx. The most common target of speculators is Bayer. Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) and Bayer are already partners, and co-commercialize the kidney and liver cancer drug Nexavar and the colon treatment Stivarga. From a business standpoint the deal might make sense, but it is highly unlikely logistically. Bayer doesn’t have any presence in the United States, which makes it highly unlikely that it would go for Onyx. The company will have to invest in infrastructure and counter other geographical limitations.

Bottom-line

Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) has rejected Amgen’s bid for now, but is hoping to find new suitors. The stock is trading around $130 on acquisition speculation and has limited upside at these levels. If the company doesn’t find any active interest from investors soon, the shares will slide. Amgen, Inc. (NASDAQ:AMGN) is still the top contender to buy Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX), and the chances are slim that Bayer will be interested in the company. Investors that have missed yesterday’s rally should avoid this investment until the valuations are adjusted downwards or any other potential suitors surface.

The article Avoid This Biotech Investment, For Now originally appeared on Fool.com.

Mohsin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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