Earlier this year, Onyx Pharmaceuticals ' (Nasdaq: ONXX) stock shot down by more than 14% in a single day, when it made an offeringof stock and convertible senior notes. Investors worried that the company would squander the money on an overpriced acquisition.

Maybe investors should have had a little more faith in the folks on the management team.

Yes, they made an acquisition, but Onyx looks to be getting a good deal that's fairly well hedged if the pipeline it's acquiring fails. The company is paying only $276 million upfront for privately held Proteolix, but it's on the hook for another $575 million. This is mostly for milestone payments if Proteolix's phase 2b drug candidate, carfilzomib, an experimental treatment for multiple myeloma, is approved by the Food and Drug Administration and elsewhere.

Onyx basically has two pathways to get carfilzomib approved. First, it may be able to use the phase 2b data expected in the second half of next year as a basis for its marketing application with the FDA, since the drug trial is focusing on patients with essentially no other treatment options.

Alternatively, Onyx plans to start a phase 3 trial in combination with Celgene 's (Nasdaq: CELG) Revlimid and a generic drug next year. That trial is necessary regardless of how good the phase 2b trial turns out, because it'll allow Onyx to market the drug for patients earlier in the progression of the disease. Still, it would be nice to see some revenue from the acquisition come sooner rather than later.

The only downside I can see from the acquisition -- besides being out $276 million right now if carfilzomib fails -- is that Onyx doesn't have any experience in blood cancers. Its only drug, Nexavar, competes with Pfizer 's (NYSE: PFE) Sutent in kidney cancer and is also approved to treat liver cancer, so it'll probably have to field a whole new sales force.

Onyx may not have much of a choice anyway. Depending on its partnership deal with Bayer to market Nexavar, Onyx may have to field a new sales force even if it were to pick up a solid tumor-drug candidate, as Johnson & Johnson (NYSE: JNJ) did acquiringCougar Biotechnology.

Don't expect this acquisition to squelch the rumors that Bayer will acquire Onyx. If anything, positive results from carfilzomib could throw fuel on the fire.

This article was originally published as Onyx Strikes Goldon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.