Tuesday, February 19, 2008

Onyx Pharma (NASDAQ:ONXX): Strong bounce candidate below $40

We have couple of firms commenting on Onyx Pharma (NASDAQ:ONXX) after partner Bayer announced that Nexavar's Phase III trial in lung cancer was stopped early by the trial's data safety monitoring board because of futility.

- Morgan Stanley maintains their Overweight rating and $65 tgt saying the failed ESCAPE trial for Nexavar in non-small cell lung cancer (NSCLC) is a disappointment, and they expect the stock to be down ~5-10% on the news. However, their numbers, price target, and rating are based upon their thesis in liver cancer, particularly ex-US, and they continue to believe the Street underestimates this $500 million + opportunity. MSCO making no changes to numbers or price target.

- Cowen notes they did not have any estimates for lung cancer in their model. However, they believe that some investors and analysts did. Moreover, even for those who didn't have explicit lung cancer estimates, the option value of lung cancer likely supported several points in Onyx's stock price. Firm expects Onyx will be weak today no matter what Q4:07 Nexavar sales number is reported later this morning.

If ONXX is significantly weak today they believe it would provide a buying opportunity. Maintains Outperform.

Notablecalls: I see some pre-market trades crossing around 15-20% below Friday's close. Make sure you're involved on the long side as expectations regarding the lung cancer trial were very modest. I think MSCO's right with their 5-10% downside estimate. That would equal to a $40+ stock price, not the $35-38 level we are seeing in the pre mkt. I suspect we're dealing with some daytraders who are simply shorting the thing down 20% without any real knowledge of the situation.

Oh and btw, ONXX is a monster bouncer. Would not be surprised to see it trade over $40 level today.


GuybrushT said...

99.3% inst. ownership means what, some 380k free float. And about 6 mill short. Numbers all over the place on this. Down to 32.95 at 9.45AM. Did you put a hard stop on your calls?

notablecalls said...

Feelin' awful here.

lowly habitat said...

i worked on this all day. using the bullish optomism angle..
It looks like the deep dip of
$65 to mid $45s was sandbagged even lower by poor quarter announcement. this looks manufactured. 3 negative shockers were swirled together and magnified to slam the chart down as much as possible. 1) cancelling the trial creates uncertainty 2) coming in light on the Q4/07 top line by perhaps $10-ish million or 7% 3) offerring no guidance for the year at a time when assurances are most needed. crafted after their euthporic optomism statements at last quarters result. and thus the shares had to slamm down to lower 30s before a attempted bottom. The shares and story were so like the shares were "undersold" in the market decline from Nov to Jan and thus this had to reverse and atone itself today. i suppose dip buys will have a sweet spot somewhere in next 1-5 days but puts might be neccessary to protect from the manipulated rollcoaster.

Rammohan said...

Is there any chnace this stock will come back at least $35 range where I bought it - After today's downgrade, stock still maintaining the $30 resistance which is good. I expected strong bounce as per his notes on Tuesday but no luck

AJ said...

RamMohan, dont buy stocks just on someone's tip... its a sure way to loose capital fast! Do you own homework as well and only buy if u agree with the thesis.. Else, your trading account will shrink to nothing before you know it..