"The most important opportunity for Nexavar is Asia/Pacific, where hepatitis B and C and liver cancer—and they're related in an epidemiologic way—are at epidemic levels," says CEO Anthony Coles. "That's orders of magnitude larger than the US and Europe put together."

Certainly, the Chinese approval was a historic moment for the company. But even as it validates Onyx's previous course of action, it raises the question: What's next?

In the short term, the answer is easy—it's all about maximizing Nexavar. Bayer and Onyx will develop it for a variety of cancers, despite poor results earlier this year in lung cancer. And as one of the top five pharmas in China, Bayer has the muscle and the mandate to deliver on the commercial front. Here, pricing remains the wild card. England's National Institute of Clinical Health and Excellence recently shot down Nexavar, and the pill's high price may dampen acceptance elsewhere.

So why hasn't Bayer already made a bid? (It's not for lack of speculation.) Nexavar is promising: First quarter sales rose by 149 percent to $151.9 million. With Genentech and ImClone about to be swallowed, Nexavar is one of the most promising cancer assets out there today. And Bayer could use another blockbuster to bolster its pipeline, with only one current hopeful, the anti-clotting pill Xarelto (rivaroxaban).

Certainly, another suitor is unlikely. The Nexavar agreement contains a provision that allows Bayer to terminate Onyx's co-development and co-promotion rights if Onyx is acquired. (Bayer would continue to pay royalties, but Onyx would lose a substantial amount of revenue.) Even if Bayer plans the acquisition, it can presumably wait until it feels the time is right. Bayer's partnership on Nexavar means it doesn't need the acquisition for strategic reasons. "Bayer could buy any time they want, but I think they want to see another big indication before pulling the trigger," says Howard Liang, a Leerink Swann analyst.

Perhaps the next milestone could be further validation of the strength of the Chinese market. The numbers seem enormous, but there are still unknowns. "It could be bigger than we thought, but we don't have a proxy," Liang says.

TRENDWATCH: MICHAEL LATWIS, analyst for Decision Resources: "We will see a number of bigger companies buying their partners just to improve the profitability of their underlying portfolios."

SEQUENOM

Diagnostics as bridge to personalized medicine

Few things in life are 100 percent. But in June, genetics analysis provider Sequenom offered two: Results from a study showing perfect accuracy of its prenatal test for Down's syndrome and—upon releasing the news to the market—a 100 percent gain in the company's stock price.

The stock's spike is not surprising. Sequenom's test appears to be more sensitive, safer, and cheaper than existing technologies. Currently, prenatal testing for Down's syndrome is done by amniocentesis or chorionic villus sampling, both invasive procedures that can cause miscarriage. These tests only identify 70 to 90 percent of samples with Down's syndrome (with 5 percent false positives). Sequenom's T21 test, which can be done as a simple blood test on the mother, correctly identified 10 Down's syndrome samples from the 201 tested samples, with no false positives.

The new test fits into an already established market—which still has room to grow. The American College of Obstetricians and Gynecologists recommends testing all pregnant US women for Down's. But today, only 2.8 million out of 4.2 million pregnant women get the test, says CEO Harry Stylli. If you add in emerging countries, Stylli says the global market for Down's testing may be as large as $8 billion.