Analyst Conference Call Summary

biotechnology

conference date: May 7, 2013 @ 2:00 PM Pacific Time
for quarter ending: March 31, 2013 (Q1, first quarter 2013)

Forward-looking statements

Overview: Revenue growing rapidly, but still in the red.

Basic data (GAAP) :

Revenue was $145.5 million, up 14% sequentially from $127.9 million and up 102% from $72.0 million in the year-earlier quarter.

Net income was negative $33.7 million, improved sequentially from negative $42.9 million and also improved from negative $56.2 million year-earlier.

EPS (earnings per share) were negative $0.47, improved sequentially from negative $0.64 and also improved from negative $0.88 year-earlier.

Guidance:

Maintaining guidance provided in February. [See Onyx Q4 2012 summary]

Conference Highlights:

Non-GAAP numbers: net income negative $13.7 million, improved sequentially from negative $24.0 million. EPS was negative $0.19 per share.

The losses largely reflected the increase in SG&A expense related to the Kyprolis launch and ongoing R&D spend on the Phase 3 Kyprolis trials.

Kyprolis revenue for treating third-line multiple myeloma was $64.0 million, up sequentially from $45.3 million. An $5.9 million favorable gross-to-net accrual adjustment was included in the $64.0 million. Expects quarter/quarter demand growth for the rest of 2013. Gaining market share in third-line setting. Believes size of potential European market is similar to U.S. In rest of world is prioritizing those countries that accept U.S. approvals. Columbia and Argentina launching soon. Already shipping to Israel and has an agreement to ship to Turkey.

Nexavar (sorafenib) for liver cancer and kidney cancer revenues from partner Bayer were $70.3 million, down 4% sequentially from $72.9 million, and down 2% from $72.0 million year-earlier. Thyroid cancer on track for mid-year FDA filing following positive data. Breast cancer Phase III study completed enrollment, data won't be in until 2014.

Royalty revenue from Bayer for Stivarga for metastatic colorectal cancer (3rd line) and GIST was $9.2 million, up sequentially from $8.3 million. Will also be expanding globally.

Cash and investments balance $738.9 million. Raised an $352 million in January with a public stock offering.

Looking to possibly use acquisitions to expand the potential pipeline.

Optimistic about Oprozomib, which is in Phase 1 dose escalation studies for hematological malignancies and solid tumors. Palbociclib for advanced breast cancer being developed by Pfizer would generate 8% royalties for Onyx if approved by the FDA & global agencies.

See also Onyx Pharmaceuticals clinical pipeline.

Cost of goods sold was $1.9 million. Research and development expense was $91.3 million. Sales, general and administrative expense $72.5 million. Contingent expense $2.9 million. Intangibles amortization $5.2 million. Total operating expense $174.0 million. Income from operations negative $28.5 million. Other expense $0.2 million. Income tax $0 million.

Q&A:

Interest in KRD combined? Guidelines does not change label. Does not believe first line use is common, might be done by some academic centers.

Competitive concerns for Kyprolis? We said all along we expected the market for use of novel agents to expand. Physicians are interested in Pomalidomide combined with Kyprolis. There appears to be a fair bit of room for both therapies. Kyprolis is mostly used in third line patients rather than retreating them with incumbent therapies. So we expect continued demand growth.

Celgene suggested seeing Kyprolis 3rd, Pomalyst 4th? We also see Pomalyst mainly 4th after Kyprolis.

Oprozomib timing for Phase III start? We are happy to have decided to move forward with tablet formulation. We are encouraged by safety profile. We will initiate MM combination Phase 2 trials with other agents in the next few months. It is too early to predict timing to Phase 3.

Sequester effects? It is too early to know if it will have an effect. So far Kyprolis patient numbers are ramping.

Kyprolis doses in field? Majority of use is on label, including dosing.

Kyprolis revenues outside the U.S. are not expected to be significant in 2013, just some countries that accept the U.S. approval.

006 data to be revealed at ASCO? Main difference from ASPIRE is exclusion of Lenalidomide. 006 population is more heavily pre-treated.

3rd party royalties on Oprozomib? No royalties, we bought it with Kyprolis.

Believes the Q1 gross to net adjustment to be the only accrual or benefit; normally it is a reduction in revenue.

We are seeing some KRD second-line use but we are not promoting it.

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