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Analysis: A long lineup of potential buyers crowds Onyx picture

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Now that Onyx ($ONXX) has put out the 'for sale' sign after confirming--and rejecting--Amgen's $10 billion-or-so offer for the company, the speculation over who's most likely to step in and grab it is the hot story of the day. And bullish estimates on the final price stretch from $140 to $180 a share--or higher.

The first round of reports and analysts' projections has these companies in the spotlight: Amgen ($AMGN) (of course), Bayer, Novartis ($NVS), Pfizer ($PFE), Merck ($MRK), Celgene ($CELG), Gilead ($GILD), Bristol-Myers ($BMY) and AstraZeneca ($AZN). That's a very long list and bodes well for Onyx if it can get just a few of them to the bargaining table. It also says a lot about how hot cancer drugs are in the biopharma world these days.

First, don't expect Amgen to walk away now that the company has managed to get the ball rolling with the low bid. It's big, suffers from aging products and faces the first round of generic biologic competition. Amgen could easily snap Onyx's product list and experimental medications into its oncology lineup. It doesn't hurt that the CEO, Bob Bradway, was an investment banker at Morgan Stanley earlier. M&A is something he understands better than drug development. And Amgen is due to pull off something big, as Reuters notes, with no sizeable buyout in around a decade. Also, ISI's Mark Schoenebaum has repeatedly been offering cheers from the sidelines on an Amgen/Onyx tie-up, so Bradway wouldn't be criticized too much for paying a hefty premium.

Pfizer makes the list because it's eager to build on its oncology work and has a licensing pact in place with Onyx, which is in line for an 8% royalty stream on palbociclib, a "breakthrough" drug that has generated excitement for its breast cancer data. One analyst has already modeled a deal in which Pfizer buys Onyx and keeps palbociclib and Kyprolis and then spins off the Nexavar rights to Bayer, which keeps Bayer in the game at a reasonable price. That's a strategy some other potential bidders could be looking at as well.

Most of the big players are doing deals on cancer treatments, which has added substantially to the list of suspects. Celgene--which has been pulling off one drug deal after the next for several years now--fits the bill, as does Gilead, which has been heavily focused on blood cancers over the last two years, and Bristol-Myers Squibb.

Novartis comes up on all the analysts' screens. Like Amgen, Merck and others, the pharma giant could lop off Onyx's $700 million in R&D and administrative costs, the kind of "synergies" likely to motivate any bidder. Novartis knows cancer drugs and would have no trouble getting the most out of Onyx's newly-approved blood cancer treatment Kyprolis--the once underestimated cancer treatment it acquired in the Proteolix buyout.

AstraZeneca is on the list because despite all the bold talk about new beginnings, the pharma giant is still desperate to do something decisive on the product front. Late-stage programs have continued to founder with disturbing regularity, early-stage deals couldn't possibly deliver anything substantial for years and a couple of Phase III acquisitions isn't going to convince Wall Street that AstraZeneca has mapped out a true turnaround plan.

Like AstraZeneca, Merck hasn't had a lot to show for its multibillion-dollar R&D budget. Yes, there's a new immunotherapy drug that has been in the spotlight recently and new R&D chief Roger Perlmutter has helped the giant gain some added credibility, but with its sleep drug suvorexant headed into a shrinking market as a likely backup to popular generic drugs, it needs to demonstrate that it has some business savvy and can add new products to the lineup.

Bayer looks like an obvious player. It's closely partnered on key products with Onyx, which the company understands intimately. Also, just about every analyst in the book has already speculated that Bayer wants Onyx--but it's been all smoke and no fire.

Over at the Wall Street Journal, Barclays' analysis is leaving doubts about Bayer. Unlike the other possible buyers, Bayer wouldn't save much money if it acquires Onyx and merges the two organizations. Their sales organizations don't overlap. It already has the right to remove Onyx's co-promotion rights on a product if the company is sold, and Bayer has been enjoying a series of wins with new products, taking off the pressure that motivates a struggling giant like Amgen.

Also, if Bayer really wanted Onyx, why didn't it already move in? The Journal cites Bayer's "discipline" at M&A, which could be another way of saying that the German company really isn't a wheeler and dealer--which may be what it will ultimately take to close on this deal. 

- here's the Reuters report
- here's the story from the Wall Street Journal

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