Report: Pfizer backs off Onyx bid as price gets too rich
An exclusive report from Reuters has thrown cold water on rumors about Pfizer ($PFE) making a bid for Onyx Pharmaceuticals ($ONXX). At this time Pfizer is opting to forgo a buyout offer for Onyx, the developer of cancer drugs whose shares have soared since the company rejected a $10 billion bid from Amgen ($AMGN) last month and began a process to garner richer deals, the news service reported.
|Onyx CEO Tony Coles|
Onyx shares dipped a modest 3.3% to $128.55 on Thursday after roaring up more than 50% since late June, when CEO Tony Coles and company shot down Amgen's $120-per-share proposal.
Expectations for major buyouts in biotech have fueled a rally in shares among some of the hottest companies in the sector, so much so that some of the would-be buyers might view the smaller companies as too expensive. Two unnamed sources gave Reuters the scoop about Pfizer backing out of the process to bid on Onyx, eliminating one of the strongest prospects from the pack of potentially interested drugmakers. Yet Pfizer isn't alone. AstraZeneca ($AZN), which needs new products badly, Bristol-Myers Squibb ($BMY) and Gilead ($GILD) have also been turned off by the high price of Onyx, the wire reports.
Pfizer's reported decision to drop out of the Onyx chase comes just days after reports that chilled talk about Roche ($RHHBY) making a multibillion-dollar bid for Alexion ($ALXN), which sells the ultrapricey therapy Soliris for the ultrarare blood disorder PNH. A report from Bloomberg about a potential Roche buyout of Alexion sparked a rally for shares of Regeneron ($REGN), Vertex ($VRTX) and other biotech outfits. Yet investors betting on a spike in large acquisition deals might regret their recent trades.
"We haven't had a rally like this in more than 10 years--where all the stocks go up and the valuations go out the window," said Summer Street Research Analyst Carol Werther, as quoted by Reuters. "Once this trend reverses it is going to be very, very ugly."
Onyx has been discussed numerous times in recent years as an ideal acquisition target for a large drugmaker because of the South San Francisco-based company's growing lineup of marketed cancer drugs. They company is partnered with Germany's Bayer on Nexavar and Stivarga and last year won approval of the expected blockbuster myeloma drug Kyprolis.
Still, buyers might show some discipline, dimming the chances of a landmark M&A event or two.