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There have been several noteworthy developments in the drug space recently, which will likely have a material impact on the companies in this sector and the markets they serve. Companies mentioned in this review include Eli Lilly & Co. (LLY), Merck & Co. (MRK - Free Merck Stock Report), Amgen (AMGN) and Onyx Pharmaceuticals (ONYX).

Eli Lilly’s New Cancer Drug Shows Promise

On August 13th, Eli Lilly announced that its potential lung cancer treatment Necitumumab met its primary endpoint in a recently completed Phase III study. The trial found that patients with an advanced form of lung cancer (stage 4 metastatic squamous non-small cell lung cancer) experienced increased overall survival when administered Necitumumab in combination with two different chemotherapies, as compared to chemotherapy alone. Indeed, it was some much-needed positive news for Lilly who has struggled in recent years due to patent expirations on several key franchises. The drugmaker plans to present results from this study at a scientific meeting in 2014, and currently anticipates submitting to regulatory authorities before the end of 2014.

Merck Suspends Zilmax in the U.S. and Canada

On August 16th, the New Jersey-based drugmaker announced that it would be temporarily halting sales of its Zilmax animal feed additive in the United States and Canada. The growth-promoting drug, which is given to cattle to increase their weight before slaughter, is widely used within the U.S. beef industry and Merck estimates that roughly 70% of the cattle supply in the country is fed with either Zilmax or its competitor Optaflexx, made by Eli Lilly. However, concerns regarding the drug’s future arose last week when Tyson Foods Inc. (TSN) announced it would no longer be accepting Zilmax-fed cattle. Tyson indicated in a letter to its suppliers it would stop buying such cattle effective September 6th because it believed Zilmax may have been a factor in some cattle showing up to its plants unable to walk or to move. Merck noted that its decision to suspend sales will allow the company time to conduct a scientific audit that will monitor the feeding process of Zilmax to determine potential causes of lameness and other mobility issues, but offered no set timetable of how long this may take. Shares of Merck’s stock slipped modestly on the news but are still up more than 15% year to date.

Amgen Emerges as the Favorite in Onyx Bid

Since announcing it was “actively exploring” a merger partner back in June, California-based drugmaker Onyx Pharmaceuticals had generated significant interest from potential suitors including big-time players Pfizer and Novartis. However, with recent reports indicating that these two companies have removed themselves from a possible bidding war, Amgen now appears to be the most likely to strike a deal.

Amgen, a biopharmaceutical company based in Thousand Oaks, California. was one of the first to express legitimate interest in taking over Onyx back on June 30th when it submitted a bid of $120 a share. However, the offer, which represented a premium of about 38% at the time, was quickly rejected by Onyx with the company indicating it significantly undervalued its prospects. After several weeks of deliberation, Amgen reportedly increased its offer to $130 a share and currently appears to be the last man standing. While Onyx looks poised to accept the offer, no official announcement has yet been made. It is possible that a third-party bid could still emerge in the coming weeks.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.