Onyx Says the Price Isn't Right

Sorry, Bob Barker and Drew Carey -- the price isn't right.

That's the message from Onyx Pharmaceuticals (NASDAQ: ONXX  ) over the weekend after Amgen (NASDAQ: AMGN  ) made an unsolicited offer to buy the company. Shares in Onyx jumped a whopping 51% higher on Monday following the company's decision to spurn the Amgen offer. Here's the full story.

One bid
On Friday, Onyx hovered around $87 per share. The stock was down 13% from its 2013 highs hit in mid-May. After the market closed, though, Canada's Financial Post published a story about an attempted buyout of Onyx by Amgen for $120 per share. According to the detailed account provided in the story, Amgen sent a letter expressing its interest two weeks ago following a meeting with senior executives from both companies.

Onyx shares surged to $109 per share in after-hours trading on the report. That left Friday night and Saturday for speculation to mount about what Onyx would do. The biotech ended such speculation on Sunday when it announced that it told Amgen on Friday that it wasn't interested.

In particular, Onyx's board of directors felt that $120 per share wasn't nearly enough considering the company's prospects. Apparently, other potential suitors had already come calling. The announcement by Onyx over the weekend stated that "based upon expressions of interest received from other third parties and the recent proposal from Amgen," the board authorized its financial advisor, Centerview Partners, to get in touch with other potential acquirers.

Come on down?
This move by Onyx led to even more speculation about who the other "contestants" might be. One name mentioned frequently is Pfizer (NYSE: PFE  ) , which licensed breast cancer drug palboclib from Onyx. Pfizer received breakthrough therapy designation status for the drug from the Food and Drug Administration in April.

Pfizer's CEO, Ian Read, has said in the past that the company preferred to spend its cash on share repurchases instead of acquisitions or dividend hikes. The big pharma recently announced yet another big share buyback program of $10 billion. Read would need something of a change of heart to begin scooping up smaller companies, although that could be a smart move for Pfizer.

Bayer is another top candidate. The German pharmaceutical company and Onyx co-market kidney and liver cancer drug Nexavar. The two companies are also seeking to expand indications for the drug to thyroid cancer.

If it could get past regulators' antitrust concerns, Celgene (NASDAQ: CELG  ) would be a good fit to buy Onyx. Celgene already dominates the multiple myeloma market with Revlimid. Pomalyst, which was approved by the FDA earlier this year, competes against Onyx' Kyprolis as third-line and fourth-line treatments for the blood disease. Celgene's sales force would be able to easily merge Kyprolis into the rest of the company's product lineup.

The right price
Of course, nearly any pharmaceutical company that makes cancer drugs could be a potential acquirer for Onyx. The big question is: "What price is right?"

Deutsche Bank analyst Robyn Karnauskas says Onyx is worth $148 per share. Geoffrey Porges at Sanford C. Bernstein puts the price tag at $150 per share, but Porges says that $180 per share isn't out of the question. The Motley Fool's own Sean Williams thinks $145 per share is reasonable.

With Onyx stock trading a little over $130 per share right now, any of these prices would make for a decent profit. Despite the huge jump since Friday, the current price for Onyx shares just might still be right for investors.

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