conference date: August 5, 2008 @ 7:00 AM Pacific Time
for quarter ending: June 30, 2008 (2nd quarter 2008)
Overview: Continued improvement in Nexavar sales, but resulting revenue from Bayer decreased sequentially.
Basic data (GAAP) :
Revenues from joint unconsolidated venture with Bayer were $30.2 million, down 20% sequentially from $37.7 million but up 300% from $7.5 million year-earlier.
Net income was $4.5 million, down 71% sequentially from $15.4 million but up from negative $10.8 million year-earlier.
Earnings per share (EPS) were $0.08, down 70% sequentially from $0.27, but up from negative $0.22 year earlier.
Increasing guidance for 2008 to net $660 to $675 global sales of Nexavar. Q4 2007 collaboration expenses should be typical during 2008. Expect to show a profit for the full year 2008.
Strong global demand continues, particularly for liver cancer. Nexavar's trajectory is consistent with historic top cancer drug performers. Entering second stage, global liver cancer launch, having completed the kidney cancer launch. Use of Nexavar for kidney cancer is well established and may be helped by new trial results despite increased competition.
Non-GAAP numbers, which exclude stock-based compensation expense of $4.3 million, are: net income $8.7 million; EPS $0.15. Net income is expected to remain lumpy due to variations in R&D and marketing expenses from quarter to quarter.
Bayer reported global Nexavar revenues of $168.5 million, up sequentially from $151.9 million, and up 107% from $81.3 million year-earlier.
"Based on a series of rolling launches worldwide, we expect to see additional growth opportunities for Nexavar, particularly for the treatment of liver cancer," including in China, where approval was granted recently.
Bayer and Onyx "continue to make focused investments aimed at maximizing both the near-term and long-term value of this important oncology agent. This includes investing in expanded commercial capabilities to support the liver cancer indication, as well as, continuing to support a robust development program to identify new opportunities for the use of Nexavar and to drive our growth strategy for the brand."
The decrease in revenues to Onyx despite an increase in Nexavar revenues at Bayer was due to increased research and development expense within the joint venture. Onyx's separate R&D expenses also increased, but just to $8.6 million, primarily for the breast cancer program. Selling, general and administrative expense increased to $19.8 million. Total operating expense was $28.4 million. Income from operations was $1.7 million. Investment income was $2.7 million. There was a slight tax benefit.
Cash and equivalents ended at $471 million, up $14 million from $457 million at the end of Q1.
Randomized signal-generating Phase II trials will lead to focused Phase III trials in new indications. Increasingly confident that Nexavar may be successful in more tumor types. Lung cancer data from independent trial was encouraging. We have a Phase III trial in lung cancer, combined with chemotherapy. Gastric cancer, ovarian cancer, thyroid cancer, results also encouraging.
Italy and Greece launches were made in the quarter. Expect reimbursements in liver cancer later in 2008 or in 2009 in Taiwan, Korea and Japan.
Deploying a dedicated team of sales specialists in U.S. focused on non-oncologist doctors treating liver cancer.
Most kidney cancer launches have been completed globally.
European sales slowing down? Lumpiness is the right word. Fully expect to expand market in Europe over the next few months. There is a lot of growth potential available in the EU. The highest potential country is Italy, which is just now coming on board.
Guidance does not seem to imply revenue growth in 2nd half of year? Don't agree with your calculation. My expectation is we will continue to grow in important markets. Growth should continue into 2009.
Same question, trying to figure out why guidance is not higher given new launches? The Italian launch, Taiwan, Japan will take months to get traction. You need approval, reimbursement approval, then sales effort.
Pricing issue for ex-US mentioned in New England Journal of Medicine? Great article, the Korean price was noted as lower than U.S. But that number was incorrect. There is a tight band for pricing world wide.
Off label use in Japan? Approval is in renal cancer, liver cancer should be next year. Numbers should be renal numbers, not off-label liver cancer.
Reimbursement in China? We have some early usage with private pay, no timeline for reimbursement. Bayer does have a patient access program for RCC (renal) in China, and will be extended to HCC (liver cancer).
Early dropping of Nexavar therapy possible? Until recently has been no approved therapy for liver cancer. Our ability to detect benefits is somewhat impaired, except for prolonged survival. We have some new market research data showing early experience of physicians has been quite positive. Patients are staying on the drug longer and longer.
Do intend to increase investment on commercial (sales) front and R&D, particularly for liver cancer and additional indications.
Lack of profit guidance? Spend level will include product investments ahead of national market launches. Spend to establish Nexavar as the platinum standard in liver cancer. Investments will deliver value tomorrow, when it achieves blockbuster status. So no profit guidance for Q3 and Q4 that would prevent us from doing what we need to do for long term profitability.
Japan royalty rate? Have not disclosed and will not disclose.
Off label use for liver cancer in Europe prior to price approval? For broad use you need reimbursement and price approval.
Any countries that may get reimbursement approval that are not included in guidance? 70 RCC approvals, only 40 HCC approvals, so long way to go to complete liver cancer launches. There is no specific country that is not included in guidance that we expect approval in within 2008.
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