Onyx Has Blockbuster Potential

Onyx Pharmaceuticals Inc.’s (ONXX - Analyst Report) second-quarter financials were a little disappointing, but we continue to believe Nexavar will perform well in the second half of 2008 and beyond. We believe sales of the drug will continue to grow over the next several years since the label has expanded to liver cancer.

The current Nexavar sales driver is apparently the liver cancer market while Nexavar’s market share for kidney cancer has stabilized. This has been evidenced by the worldwide Nexavar sales in the first half of 2008.

In addition to the US and EU, Nexavar has been approved in South Korea and China for liver cancer. Demographically Asia, especially China, is a much bigger market for liver cancer in terms of patient population. Other international filing is underway. Label expansion for Nexavar into other cancer indications such as breast cancer is under way.

We believe Nexavar has the potential to become a blockbuster for Onyx and model sales of the drug will reach $.1 billion in 2010. Current price is attractive and we recommend investor to buy its shares at current levels. We arrive at our $46 price target by using biotech industry average P/E of 38 x, multiplied by our estimated 2010 EPS of $1.73, discounted at 20% for two years.

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