Onyx Pharmaceuticals Reports Full Year and Fourth Quarter 2011 Financial Results

SOUTH SAN FRANCISCO, Calif., Feb. 22, 2012 /PRNewswire/ -- Onyx Pharmaceuticals, Inc. (NASDAQ: ONXX) today reported its financial results for the full year and fourth quarter 2011. Onyx reported non-GAAP net income of $42.0 million, or $0.66 per diluted share, for the full year 2011 compared to non-GAAP net income of $39.2 million, or $0.63 per diluted share, for the same period in 2010. Onyx reported a non-GAAP net income of $102.8 million, or $1.50 per diluted share, for the fourth quarter 2011 compared to non-GAAP net loss of $17.4 million, or $0.28 per diluted share, for the same period in 2010.

“2011 was a remarkable year, with Nexavar sales growth driven by continued leadership in liver cancer, expansion of our portfolio with regorafenib, and a New Drug Application filing acceptance for carfilzomib,” said N. Anthony Coles, M.D., president and chief executive officer of Onyx.  “We begin 2012 well-positioned to advance multiple therapies that could serve even greater numbers of patients with cancer.  By the end of this year, we hope to transform Onyx from a company with one product in two types of cancer to as many as three products in seven types of cancer with either Phase 3 data or regulatory approval.  Our cash position and the cash flow from Nexavar sales further enable strategic investment in our proteasome inhibitor franchise as we advance our carfilzomib development program across a variety of treatment landscapes for patients with multiple myeloma.”

On a GAAP basis, Onyx reported a net income of $76.1 million, or $1.19 per diluted share, for the full year 2011 compared to net loss of $84.8 million, or $1.35 per diluted share, in the same period in 2010. On a GAAP basis, Onyx reported a net income of $216.7 million, or $3.16 per diluted share, for the fourth quarter 2011 compared to net loss of $17.1 million, or $0.27 per diluted share, in the same period in 2010. A description of the non-GAAP calculations and reconciliation to comparable GAAP measures is provided in the accompanying table entitled “Reconciliation of GAAP to Non-GAAP Net Income (Loss).”

Operating Revenue

Global Nexavar net sales which are recorded by Onyx’s collaborator, Bayer, were $1.008 billion and $276.8 million for the full year and fourth quarter 2011, respectively, an increase of 8% in both periods, compared to $934.0 million and $257.4 million in the same periods in 2010. Onyx and Bayer are marketing and developing Nexavar® (sorafenib) tablets, an anticancer therapy currently approved for the treatment of unresectable liver cancer and advanced kidney cancer in over 100 countries worldwide.

For the full year and fourth quarter 2011, Onyx reported total operating revenue of $447.2 million and $237.0 million, respectively, compared to $324.5 million and $70.0 million for the same periods in 2010. Total operating revenue is comprised of revenue under the Nexavar collaboration agreement and contract revenue from collaborations. Revenue under the Nexavar collaboration agreement was $287.0 million and $76.8 million for the full year and fourth quarter 2011, respectively, compared to $265.4 million primarily and $70.0 million for the same periods in 2010. Contract revenue from collaboration agreement in the fourth quarter 2011 related to the sale of the Nexavar royalty rights in Japan for $160.0 million.

In the third quarter 2010 Onyx recorded license revenue of $59.2 million, reflecting a fee earned as a part of the consideration under the September 2010 exclusive license agreement with Ono Pharmaceutical Co., Ltd.

Operating Expenses

Onyx recorded research and development expenses of $268.1 million and $84.0 million for the full year and fourth quarter 2011, respectively, compared to $185.7 million and $54.3 million for the same periods in 2010. Higher research and development expenses between periods were primarily due to investments in the development of carfilzomib, particularly the Phase 3 ASPIRE and FOCUS trials as well as increased investment in the manufacturing of carfilzomib.

Selling, general and administrative expenses were $168.0 million and $52.6 million for the full year and fourth quarter 2011, respectively, compared to $114.2 million and $36.9 million for the same periods in 2010. Higher selling, general and administrative expenses between periods were primarily due to planned increases in employee headcount and related costs, higher legal costs, and selected pre-launch spending for carfilzomib.

The liability for contingent consideration in connection with the Amended Agreement and Plan of Merger with Proteolix, Inc. was reduced from $276.7 million at September 30, 2011 to $160.0 million at December 31, 2011. Based on the July 27, 2012 Prescription Drug User Fee Act (PDUFA) date set by the U.S. Food and Drug Administration (FDA) for completion of its review of the Company’s New Drug Application (NDA) for carfilzomib, Onyx believes the milestone payment for accelerated approval in the U.S. that could be owed to former Proteolix, Inc. shareholders is $80.0 million. In addition, based on current development timelines for the European Union (EU), the Company does not believe that the marketing approval for relapsed/refractory multiple myeloma will be obtained in the EU prior to the milestone expiration date outlined in the merger agreement. As a result of these revisions to the potential milestones owed, Onyx recorded a benefit relating to the re-measurement of the contingent consideration liability of $93.5 million and $116.7 million were recorded for full year 2011 and fourth quarter 2011, respectively.

Interest Expense

Interest expense of $20.2 million and $5.1 million for the full year and fourth quarter 2011, respectively, primarily relates to the 4.0% convertible senior notes due 2016 issued in August 2009 and includes non-cash imputed interest expense of $10.2 million and $2.6 million, respectively, as a result of the application of ASC 470-20.

Cash, Cash Equivalents and Marketable Securities

On December 31, 2011, cash, cash equivalents, and current and non-current marketable securities were $668.4 million compared to $577.9 million, excluding restricted cash of $31.9 million, at December 31, 2010. This increase was partly due to receipt of $160.0 million received in October 2011 from the sale of Nexavar royalty rights in Japan, to Bayer.

Management Conference Call Today

Onyx will host a webcast and teleconference with management to discuss fourth quarter and full year 2011 financial results, as well as provide a general business overview, on Wednesday, February 22, 2012, at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time).

Interested parties may access a live webcast of the teleconference on the company’s website at: http://www.onyx.com/investors/event-calendar or by dialing 847-585-4405 and using the passcode 31754065#.  A replay of the presentation will be available on the Onyx website or by dialing 630-652-3042 and using the passcode 31754065# approximately one hour after the teleconference concludes.  The replay will be available through March 7, 2012.

About Onyx Pharmaceuticals, Inc.

Based in South San Francisco, California, Onyx Pharmaceuticals, Inc. is a global biopharmaceutical company engaged in the development and commercialization of innovative therapies for improving the lives of people with cancer and other serious diseases.  The company is focused on developing novel medicines that target key molecular pathways. For more information about Onyx, visit the company's website at www.onyx.com.

Nexavar® (sorafenib) tablets is a registered trademark of Bayer HealthCare Pharmaceuticals, Inc.

This news release contains “forward-looking statements” of Onyx within the meaning of the federal securities laws. These forward-looking statements include, without limitation, statements regarding sales trends and commercial activities, the timing, progress and results of clinical development and the regulatory approval process. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those anticipated, including, but not limited to, risks and uncertainties related to: Nexavar being our only approved product; we may never receive marketing approval for carfilzomib or regorafenib; competition; failures or delays in our clinical trials or the regulatory process; dependence on our collaborative relationship with Bayer; if approved, we or Bayer, as the case may be, may be unsuccessful in launching, maintaining adequate supply of or obtaining reimbursement for carfilzomib or regorafenib; market acceptance and the rate of adoption of our products; pharmaceutical pricing and reimbursement pressures; serious adverse side effects, if they are associated with Nexavar, regorafenib or carfilzomib; government regulation; possible failure to realize the anticipated benefits of business acquisitions or strategic investments; protection of our intellectual property; the indebtedness incurred through the sale of our 4.0% convertible senior notes due 2016; and product liability risks. Reference should be made to Onyx’s Annual Report on Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission, as updated by Onyx’s subsequent Quarterly Reports on Form 10-Q, under the heading “Risk Factors” for a more detailed description of these and other risks. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this release. Onyx undertakes no obligation to update publicly any forward-looking statements to reflect new information, events, or circumstances after the date of this release except as required by law.

(See attached tables)

(2) Includes a $12.7 million non-cash expense related to the unamortized balance of funding provided to S*BIO which was recorded in the first quarter of 2011.

(3) Includes a $3.8 million impairment charge which reflects the reassessment of the fair value of Onyx’s equity investment in S*BIO during the second and fourth quarters of 2011.

(4) Under the “if-converted” method, interest and issuance costs and potential common shares related to the Company’s convertible senior notes were excluded in the computation of diluted per share amounts for the three months ended December 31, 2010 and the years ended December 31, 2011 and 2010 because their effect would be anti-dilutive.

(6) This press release includes the following non-GAAP financial measures: non-GAAP net income (loss), non-GAAP net income (loss) – diluted, non-GAAP net income (loss) per share, and non-GAAP net income (loss) per share – diluted. The foregoing table reconciles these non-GAAP measures to the most comparable financial measures calculated in accordance with GAAP.

Onyx management uses these non-GAAP financial measures to monitor and evaluate our operating results and trends on an on-going basis and internally for operating, budgeting and financial planning purposes. Onyx management believes the non-GAAP information is useful for investors by offering them the ability to better identify trends in our business and better understand how management evaluates the business. These non-GAAP measures have limitations, however, because they do not include all items of income and expense that affect Onyx. These non-GAAP financial measures that management uses are not prepared in accordance with, and should not be considered in isolation of, or as an alternative to, measurements required by GAAP.

These non-GAAP financial measures exclude the following items from GAAP net income (loss) and diluted per share amounts:

Contingent consideration (benefit) expense: The effects of contingent consideration (benefit) expense are excluded due to the nature of this charge, which is related to the change in fair value of the liability for contingent consideration in connection with the acquisition of Proteolix; such exclusion facilitates comparisons of Onyx’s operating results to peer companies.

Employee stock-based compensation: The effects of employee stock-based compensation are excluded because of varying available valuation methodologies, subjective assumptions and the variety of award types; such exclusion facilitates comparisons of Onyx’s operating results to peer companies.

Imputed interest related to the convertible senior notes due 2016: The effects of imputed interest related to the convertible senior notes due 2016 are excluded because this expense is non-cash; such exclusion facilitates comparisons of Onyx’s cash operating results to peer companies.

Advance funding to S*BIO and impairment of equity investment in S*BIO: The effects of the termination of the S*BIO collaboration agreement are excluded because they do not relate to the normal and recurring transactions of Onyx's business; such exclusion allows for a better representation of the ongoing economics of the business, facilitates comparison to peer companies and is reflective of how Onyx management internally manages the business.

Lease termination exit costs: The effects of lease termination exit costs and reoccupation of facilities are excluded because they represent non-cash items that relate to Onyx’s exit from facilities it previously occupied in Emeryville and in South San Francisco, California.

(7) Under the “if-converted” method, interest and issuance costs and potential common shares related to the Company’s convertible senior notes were excluded from non-GAAP diluted per share amounts for the three months ended December 31, 2010 and the years ended December 31, 2011 and 2010 because their effect would be anti-dilutive.

SOURCE Onyx Pharmaceuticals, Inc.