Will Onyx Pharmaceuticals Continue to Rise?

With shares of Onyx Pharmaceuticals (NASDAQ:ONXX) trading around $118, is ONXX an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Onyx Pharmaceuticals is a biopharmaceutical company. The company is developing therapies that target the molecular mechanisms that cause cancer. It has built two franchise platforms: one in kinase inhibition and one in proteasome inhibition. In its kinase inhibitor franchise, its product, Nexavar is approved for unresectable liver cancer and advanced kidney cancer. With its development and marketing partner Bayer, the company shares equally in the profits and losses of Nexavar worldwide, except Japan.

Onyx Pharmaceuticals has reluctantly agreed to give trial data about its new blood cancer drug Kyprolis to suitors interested in the company, including Amgen (NASDAQ:AMGN). Onyx had hesitated on providing data about Kyprolis as tests have not yet been completed. Amgen is in talks to pay $9.5 billion for Onyx. Kyrpolis is seen as a potential blockbuster drug, but it has yet to receive approval from the Food and Drug Administration as phase three trials are not finished.

T = Technicals on the Stock Chart are Strong

Onyx Pharmaceuticals stock has been surging higher over the last several months. The stock is now trading near all-time high prices but may need some time to digest recent gains. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Onyx Pharmaceuticals is trading slightly above its rising key averages which signal neutral to bullish price action in the near-term.

ONXX

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Onyx Pharmaceuticals options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Onyx Pharmaceuticals Options

56.19%

80%

78%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

September Options

Flat

Average

October Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Onyx Pharmaceuticals’ stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Onyx Pharmaceuticals look like and more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

55.76%

46.59%

-119.38%

143.10%

Revenue Growth (Y-O-Y)

110.50%

102.00%

-46.03%

19.28%

Earnings Reaction

-0.17%

5.85%

11.98%

-4.97%

Onyx Pharmaceuticals has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about Onyx Pharmaceuticals’ recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Onyx Pharmaceuticals stock done relative to its peers, Pfizer (NYSE:PFE), Eli Lilly (NYSE:LLY), Bristol-Myers Squibb (NYSE:BMY), and sector?

Onyx Pharmaceuticals

Pfizer

Eli Lilly

Bristol-Myers Squibb

Sector

Year-to-Date Return

56.80%

12.32%

6.49%

27.88%

18.75%

Onyx Pharmaceuticals has been a relative performance leader, year-to-date.

Conclusion

Onyx Pharmaceuticals is a biopharmaceutical company that aims to tackle a variety of illness. The company is reportedly giving trial data to a number of companies for one of its most noteworthy drugs. The stock has been rising higher in the last couple of years and is now trading near all-time high prices. Over the last four quarters, earnings and revenues have been rising, however, investors in the company have had mixed feelings. Relative to its peers and sector, Onyx Pharmaceuticals has been a year-to-date performance leader. Look for Onyx Pharmaceuticals to OUTPERFORM.

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