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

From Notable Calls:

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.

For more calls go to http://notablecalls.blogspot.com/

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