Analyst Conference Summary

Onyx Pharmaceuticals

conference date: August 4, 2010 @ 2:00 PM Pacific Time
for quarter ending: June 30, 2010 (second quarter 2010)

Forward-looking statements

Overview: Revenues are ramping and data looks good for treating more cancer types, but still investing or spending more beyond revenues.

Basic data (GAAP) :

Revenues from joint unconsolidated venture with Bayer were $68.8 million, up 9% sequentially from $62.9 million and up 14% from $60.2 million in the year-earlier quarter.

Net income was negative $97.2 million, down sequentially from negative $12.0 million and also down from positive $9.4 million year earlier. [Includes a $92 million contingent consideration charge; see below]

EPS (earnings per share) were negative $1.55, down sequentially from negative $0.19 and also down from positive $0.16 year-earlier.

Comparisons: ONXX Q1 2010; ONXX Q2 2009


$925 to $975 million global Nexavar sales in 2010. R&D spending will continue to grow because of carfilzomib program.

Conference Highlights:

Excited about momentum with possibility of treating more types of cancer.

Nexavar (sorafenib) for liver cancer and kidney cancer global sales by partner Bayer were $236.1 million, up 17% from $201.0 million year-earlier and up 10% sequentially. Demand grew in all regions, and y/y growth would be 20% adjusted for currency changes. In the U.S. only half the patients eligible for Nexavar for liver cancer are currently being treated. 32% sales increase in Asia-Pacific region, where over half of liver cancer incidence occurs. China sales continue to ramp ahead of reimbursement approval.

Non-GAAP numbers: net income $2.9 million, EPS $0.05, down from $15.3 million and $0.27 year-earlier. Excludes $92.0 million non-cash expense for the increase in fair value liability for potential payments related to Proteolix acquisition, which is required by GAAP. Excluded stock-based compensation was $5.8 million. A $2.2 million charge for interest on senior notes was also excluded.

The one-time non-cash accounting charge is based on the positive results from the Phase 2b and Phase 1b carfilzomib for multiple myeloma trials. Could have a new revenue stream as early as 2011 with accelerated approval. For European registration will start a Phase III study.

Cash and equivalents ended at $527.0 million. Liability for contingent consideration is $256 million. 2016 convertible senior notes are a $148.0 million liability.

Operating expenses, aside from the contingent consideration, were $43 million for research and development plus $26.6 million for selling, general and administrative. Loss from operations was $93.2 million. Interest expense was $4.8 million. There was no income tax provision.

Partnering discussions for carfilzomib are ongoing; Onyx has the global rights.

Potential for Nexavar for breast, thyroid, lung, and other cancers continues to build.

Nexavar for kidney cancer is still important despite the increased number of therapies in this market. Nexavar can be tolerated over long (for cancer drugs) periods of time.

Work on JAK2 inhibitors continues in early stages.

$40 million was paid to Proteolix for a carfilzomib milestone in April, but did not flow through except to balance sheet.


FDA process for carfilzomib? In these circumstances it is standard to try to have a pre-NDA meeting with the FDA for feedback. If the NDA is accepted, it means there are no automatic reasons your applciation is unacceptible.

$9 million purchase effect on Q2 sales? We believe this was a great quarter with growth in all regions including the U.S. Clinical orders are a normal part of the Nexavar business. In Q2 they were outside the U.S., not part of the U.S. revenues.

Is hurdle now higher in breast cancer, due to FDA Avastin decision? Avastin and Nexavar are very different drugs. Nexavar has a unique mechanism of action that distinguishes it from Avastin and other compounds. Still, we don't know what the Avastin outcome will be, but the decision will be data driven. The data for Nexavar for breast cancer is strong.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2010 William P. Meyers