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Onyx Pharmaceuticals Reports First Quarter 2013 Financial Results

May 7 2013 12:00AM

Marketwire

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SOUTH SAN FRANCISCO, CA -- (Marketwired) -- 05/07/13 -- Onyx Pharmaceuticals, Inc. (NASDAQ: ONXX) today reported its financial results for the first quarter 2013 and provided a business update on Kyprolis® (carfilzomib) for Injection, Nexavar® (sorafenib) tablets and Stivarga® (regorafenib) tablets.

"We began 2013 with a broad portfolio of products driving growth and momentum across our business," said N. Anthony Coles, M.D., chairman and chief executive officer of Onyx. "In our proteasome inhibitor franchise, we continue to execute a successful launch of Kyprolis in the United States, adding select capabilities internationally, and investing in a broad Phase 3 clinical development program across all lines of therapy. Our global kinase inhibitor business, with Nexavar as the cornerstone, and Bayer's Stivarga, continues to provide important contributions enabling our strategic investments."

Onyx reported total revenue of $145.5 million for the first quarter 2013. Onyx reported non-GAAP net loss of $13.7 million, or $0.19 per diluted share, for the first quarter 2013. On a GAAP basis, Onyx reported net loss of $33.7 million, or $0.47 per diluted share, for the first quarter 2013. A description of the non-GAAP calculations and reconciliation to comparable GAAP financial measures is provided in the accompanying table entitled "Reconciliation of GAAP to Non-GAAP Financial Measures."

Revenue
For the first quarter of 2013, Onyx reported total revenue of $145.5 million, as compared to total revenue of $72.0 million for the comparable period in 2012.

•Revenue from the Nexavar collaboration agreement with Bayer for the first quarter of 2013 was $70.3 million, as compared to $72.0 million for the comparable period in 2012. The decrease in revenue from collaboration is primarily due to inventory reductions of specialized oncology pharmacies in the United States and lower sales in Europe which were partially offset by growth in the Asia-Pacific region and improved commercial margin in the business. •Kyprolis net sales for the first quarter of 2013 were $64.0 million, including a favorable gross-to-net accrual adjustment of $5.9 million. Demand sales were $58.1 million, representing orders shipped to and received by end customers such as physician offices and hospitals. In addition, Onyx recorded deferred revenue of $9.3 million as of March 31, 2013, representing Kyprolis inventory at distributors which has not yet shipped to physician offices and hospitals. •Stivarga royalty revenue was $9.2 million for the first quarter of 2013. Onyx receives a 20% royalty on global net sales of Stivarga in jurisdictions that have received commercial marketing approval. Stivarga is a Bayer compound developed by Bayer and jointly promoted by Bayer and Onyx in the United States.

Operating Expenses
Non-GAAP cost of goods sold was $1.9 million for the first quarter of 2013. Cost of goods sold related to sales of Kyprolis is not representative of Onyx's future expectations of cost of goods sold because certain product costs associated with Kyprolis sales in the first quarter of 2013 were charged to research and development expense in periods prior to approval. On a GAAP basis, cost of goods sold was $2.0 million for the first quarter 2013.

Non-GAAP research and development expense was $88.8 million for the first quarter of 2013, compared to $78.7 million for the same period in 2012. Higher research and development expense between periods was primarily due to the global development of Kyprolis, particularly the ongoing Phase 3 ENDEAVOR trial and start-up activities associated with the front-line CLARION study, which was offset by lower Nexavar development expense. On a GAAP basis, research and development expense was $91.3 million for the first quarter 2013, compared to $80.7 million for the same period in 2012.

Non-GAAP selling, general and administrative expense was $66.5 million for the first quarter 2013, compared to $34.1 million for the same period in 2012. Higher selling, general and administrative expense between periods was primarily related to the increased headcount following the hiring of the field force associated with the commercial launch of Kyprolis in the United States. On a GAAP basis, selling, general and administrative expense was $72.5 million for the first quarter 2013, compared to $38.9 million for the same period in 2012.

Amortization expense for certain intangible assets was $5.2 million for the first quarter 2013, and reflects the amortization of a portion of the intangible asset, which was acquired in the 2009 acquisition of Proteolix, Inc.

Cash, Cash Equivalents and Marketable Securities
On March 31, 2013, cash, cash equivalents and current and non-current marketable securities were $738.9 million, compared to $492.8 million at December 31, 2012. The increase is primarily due to proceeds of approximately $352 million received from a public offering of 4.4 million shares of common stock, completed in January 2013.

Non-GAAP Financial Measures
This press release and the reconciliation table included herein 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, non-GAAP net income (loss) per share - diluted, non-GAAP cost of goods sold, non-GAAP research and development expense, non-GAAP selling, general and administrative expense and non-GAAP operating expenses. A description of the non-GAAP calculations and reconciliation to the comparable GAAP financial measures is provided in the accompanying table entitled "Reconciliation of GAAP to Non-GAAP Financial Measures."

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 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 are not prepared in accordance with, and should not be considered in isolation of, or as an alternative to, measurements required by GAAP. A description of the non-GAAP calculations and reconciliation to comparable GAAP financial measures is provided in the accompanying table entitled "Reconciliation of GAAP to Non-GAAP Financial Measures."

Non-GAAP operating expenses exclude contingent consideration expense (benefit), employee stock-based compensation expense, imputed interest related to the convertible senior notes due 2016 and amortization of certain intangible assets.

Management Conference Call Today
Onyx will host a webcast and conference call with management to discuss first quarter 2013 financial results, as well as provide a general business overview, today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time).

To access a live audio webcast of the conference call, log onto the Company's website at: http://www.onyx.com/investors/event-calendar

To access the live conference call, dial 847-585-4405 and use the passcode 34676954#. A replay of the call will be available on the Onyx website, or by dialing 630-652-3042 and using the passcode 34676954# beginning approximately one hour after the teleconference concludes through May 21, 2013.

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. 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.

Forward-Looking Statements
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 the anticipated growth of our business, global expansion and increases to our international capabilities, our launch of Kyprolis in the United States, our investments in Phase 3 clinical trials, contributions from our kinase inhibitor business and future cost of goods sold with respect to Kyprolis. 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® (sorafenib) tablets, Kyprolis® (carfilzomib) for Injection and Stivarga® (regorafenib) tablets being the only approved products from which we may obtain revenue; competition; failures or delays in our clinical trials or the regulatory process; dependence on our collaborative relationship with Bayer; supply of Nexavar, Stivarga or Kyprolis; market acceptance and the rate of adoption of Nexavar, Stivarga and Kyprolis; pharmaceutical pricing and reimbursement pressures; serious adverse side effects, if they are associated with Nexavar, Stivarga or Kyprolis; government regulation; possible failure to realize the anticipated benefits of business acquisitions or strategic investments; protection of our intellectual property; and product liability risks. Reference should be made to Onyx's Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission (the "Commission"), as updated by Onyx's subsequent filings with the Commission, 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.


ONYX PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (unaudited) Three Months Ended March 31, -------------------------- 2013 2012 ------------ ------------Revenue:Revenue from collaboration agreement $ 70,307 $ 72,031Product revenue 64,008 -Royalty revenue 9,177 -Contract revenue from collaborations 2,000 - ------------ ------------Total revenue 145,492 72,031 ------------ ------------Operating expenses:Cost of goods sold (excludes amortization of certain intangible assets) (1) 1,968 -Research and development (1) 91,302 80,660Selling, general and administrative (1) 72,545 38,944Contingent consideration expense (benefit) 2,930 3,178Intangible asset amortization 5,220 - ------------ ------------Total operating expenses 173,965 122,782 ------------ ------------Income (loss) from operations (28,473) (50,751)Investment income 602 758Interest expense (2) (5,626) (5,296)Other income (expense) (156) (905) ------------ ------------Income (loss) before provision (benefit) for income taxes (33,653) (56,194)Provision (benefit) for income taxes 18 18 ------------ ------------Net income (loss) $ (33,671) $ (56,212) ============ ============Net income (loss) per share:Basic $ (0.47) $ (0.88) ============ ============Diluted (3) $ (0.47) $ (0.88) ============ ============Computation of diluted shares:Basic 71,087 63,697Dilutive effect of convertible senior notes - -Dilutive effect of options - - ------------ ------------Diluted (3) 71,087 63,697 ============ ============(1)Includes employee stock-based compensation charges of: Three Months Ended March 31, -------------------------- 2013 2012 ------------ ------------Cost of goods sold $ 74 $ -Research and development 2,543 1,932Selling, general and administrative 6,053 4,864 ------------ ------------Total employee stock-based compensation $ 8,670 $ 6,796 ============ ============(2) Includes $3.1 million and $2.7 million imputed interest expenserecorded for the three months ended March 31, 2013 and 2012, respectively,related to the convertible senior notes due 2016.(3) Under the "if-converted" method, interest and issuance costs andpotential common shares related to the Company's convertible senior noteswere excluded in the computation of diluted per share amounts for the threemonths ended March 31, 2013 and 2012 because their effect would be anti-dilutive. ONYX PHARMACEUTICALS, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In thousands, except per share amounts) (unaudited) Three Months Ended March 31, -------------------------- 2013 2012 ------------ ------------ (i)Net income Net income (loss) - GAAP $ (33,671) $ (56,212) Non-GAAP adjustments: Contingent consideration expense (benefit) (a) 2,930 3,178 Employee stock-based compensation (b) 8,670 6,796 Imputed interest related to the convertible senior notes due 2016 (c) 3,103 2,749 Amortization of certain intangible assets (d) 5,220 - ------------ ------------ Net income (loss) - Non-GAAP $ (13,748) $ (43,489) ============ ============ (ii)Cost of goods sold Cost of goods sold - GAAP $ 1,968 $ - Non-GAAP adjustments: Employee stock-based compensation (b) (74) - ------------ ------------ Cost of goods sold - Non-GAAP $ 1,894 $ - ============ ============(iii)Research and development expenses Research and development expenses - GAAP $ 91,302 $ 80,660 Non-GAAP adjustments: Employee stock-based compensation(b) (2,543) (1,932) ------------ ------------ Research and development expenses - Non- GAAP $ 88,759 $ 78,728 ============ ============ (iv)Selling, general and administrative expenses Selling, general and administrative expenses - GAAP $ 72,545 $ 38,944 Non-GAAP adjustments: Employee stock-based compensation (b) (6,053) (4,864) ------------ ------------ Selling, general & administrative expenses - Non-GAAP $ 66,492 $ 34,080 ============ ============ (v)Earnings per share ------------ ------------ Net income (loss) - Non-GAAP $ (13,748) $ (43,489) ============ ============ Add: Interest and issuance costs related to dilutive convertible senior notes (e) - - ------------ ------------ Net income (loss) - diluted - Non-GAAP $ (13,748) $ (43,489) ============ ============ Computation of non-GAAP diluted shares Basic shares - GAAP 71,087 63,697 Dilutive effect of options - - Dilutive effect of convertible senior notes (e) - - ------------ ------------ Diluted shares - Non-GAAP 71,087 63,697 ============ ============ Net income (loss) per share - Non-GAAP $ (0.19) $ (0.68) ============ ============ Net income (loss) per share - diluted - Non-GAAP $ (0.19) $ (0.68) ============ ============




ONYX PHARMACEUTICALS, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In thousands, except per share amounts) (unaudited) Three Months Ended March 31, --------------------------- 2013 2012 ------------- -------------(vi)Operating Expenses Operating Expenses - GAAP $ 173,965 $ 122,782 Less: non-GAAP adjustments: Contingent consideration expense (benefit) (a) 2,930 3,178 Employee stock-based compensation (b) 8,670 6,796 Amortization of certain intangible assets (d) 5,220 - ------------- ------------- Operating Expenses - Non-GAAP $ 157,145 $ 112,808 ============= =============




These non-GAAP financial measures exclude the following items:

(a) Contingent consideration expense (benefit): The effects of contingent consideration expense (benefit) 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.

(b) 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.

(c) 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.

(d) Amortization of certain intangible assets: The effects of amortization of certain intangible assets are excluded because this expense is non-cash; such exclusion facilitates comparisons of Onyx's operating results to peer companies.

(e) 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 March 31, 2013 and 2012 because their effect would be anti-dilutive.


ONYX PHARMACEUTICALS, INC. CALCULATION OF REVENUE FROM COLLABORATION AGREEMENT (In thousands, unaudited) Three Months Ended March 31, --------------------------- 2013 2012 ------------- -------------Nexavar revenue subject to profit sharing (as recorded by Bayer) $ 198,524 $ 209,700Combined cost of goods sold, distribution, selling, general and administrative expenses 66,139 76,317 ------------- -------------Combined collaboration commercial profit $ 132,385 $ 133,383 ============= =============Onyx's share of collaboration commercial profit $ 66,192 $ 66,692Reimbursement of Onyx's shared marketing expenses 4,115 5,339 ------------- -------------Revenue from collaboration agreement $ 70,307 $ 72,031 ============= ============= ONYX PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) March 31, 2013 December 31, (unaudited) 2012(1) ------------- -------------AssetsCash, cash equivalents and current marketable securities $ 730,677 $ 484,436Accounts receivable, net 132,637 79,117Other current assets 151,783 124,403 ------------- -------------Total current assets 1,015,097 687,956Marketable securities, non-current 8,178 8,323Property and equipment, net 30,034 25,933Finite-lived intangible assets, net 252,749 257,969Intangible assets - in-process research and development 171,500 171,500Goodwill 193,675 193,675Other assets 6,085 6,215 ------------- -------------Total assets $ 1,677,318 $ 1,351,571 ============= =============Liabilities and stockholders' equityCurrent liabilities $ 113,138 $ 131,369Convertible senior notes due 2016 177,503 174,404Liability for contingent consideration, non- current 152,093 149,163Deferred tax liability 51,940 51,940Other long-term liabilities 23,985 24,576Stockholders' equity 1,158,659 820,119 ------------- -------------Total liabilities and stockholders' equity $ 1,677,318 $ 1,351,571 ============= =============(1)Derived from the audited financial statements, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.





Contacts:

Investors
Amy Figueroa, CFA
Senior Director, Investor Relations
(650) 266-2398

Media
Lori Melancon
Senior Director, Corporate Communications
(650) 266-2394





Source: Marketwire


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