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Onyx Pharmaceuticals Reports Record Full Year and Fourth Quarter 2009 Financial Results
Date:2/23/2010

EMERYVILLE, Calif., Feb. 23 /PRNewswire-FirstCall/ -- Onyx Pharmaceuticals, Inc. (Nasdaq: ONXX) today reported its financial results for the full year and fourth quarter 2009.  Global Nexavar net sales as recorded by Onyx's collaborator, Bayer HealthCare Pharmaceuticals, Inc., or Bayer, were $843.5 million for the full year 2009 and $235.2 million for the fourth quarter 2009 compared to $677.8 million and $176.5 million for the same periods in 2008.  Onyx and Bayer are marketing and developing Nexavar® (sorafenib) tablets, an anticancer therapy currently approved for the treatment of liver cancer and advanced kidney cancer in the U.S., European Union, Japan and other territories.

"2009 was a transformational year for Onyx as we continued to grow Nexavar sales, increased cash flow from operations, augmented our cash reserves, delivered promising clinical data in breast cancer, and created a broad and balanced portfolio of compelling compounds," said N. Anthony Coles, M.D., president and chief executive officer of Onyx.  "As a result, Onyx has successfully established its position as an emerging oncology leader.  With a 24% increase in annual Nexavar sales and growing commercial margins, it is this outstanding performance that has enabled us to invest in our future with an expanding number of pipeline products to improve the lives of patients and create additional value for shareholders."

Onyx reported GAAP net income of $16.2 million, or $0.27 per diluted share, for the full year 2009 compared with net income of $1.9 million, or $0.03 per diluted share, for the same period in 2008.  For the fourth quarter 2009 Onyx reported a GAAP net loss of $5.5 million, or $0.09 per diluted share, compared to a net loss of $30.2 million, or $0.53 per diluted share, in the same period in 2008.  Onyx reported non-GAAP net income of $54.4 million, or $0.89 per diluted share, for the full year 2009 compared to non-GAAP net income of $54.8 million, or $0.97 per diluted share, for the same period in 2008.  For the fourth quarter 2009, Onyx reported non-GAAP net income of $8.8 million, or $0.14 per diluted share, compared to $8.9 million, or $0.16 per diluted share for the same period in 2008.  Non-GAAP net income excludes, among other things, employee stock-based compensation expense, transaction costs related to Onyx's acquisition of Proteolix, Inc. in November 2009 and upfront and milestone payments.  For a complete description of the items excluded to arrive at non-GAAP net income and a reconciliation to comparable GAAP measures, refer to the accompanying Reconciliation of GAAP to Non-GAAP Net Income (Loss) provided below.

Revenue from Collaboration Agreement

For the full year and fourth quarter 2009, Onyx reported revenue from its Nexavar collaboration agreement of $250.4 million and $67.3 million, respectively, compared to $194.3 million and $49.7 million for the same periods in 2008.  The increase in revenue from collaboration agreement between periods is due to an increase in Nexavar revenue recognized by Bayer and higher royalty revenue, partially offset by an increase in commercial expenses related to Nexavar.

Operating Expenses

Onyx recorded research and development expenses of $128.5 million for the full year 2009 and $36.0 million for the fourth quarter 2009, compared to $123.7 million and $59.9 million for the same periods in 2008.  Research and development expenses for the full year 2009 increased compared to 2008 primarily due to increases in the development program for Nexavar across additional tumor types, such as thyroid, breast, colorectal and adjuvant liver cancer; expenses related to the development of carfilzomib following the acquisition of Proteolix; and Onyx's costs to further develop ONX 0801, including a milestone payment of $7.0 million to BTG International Limited (BTG).  In 2008, research and development expenses included payments totaling $33.8 million made to S*BIO Pte Ltd (S*BIO) under a development collaboration, option and license agreement and to BTG under a development and license agreement.

Onyx recorded selling, general and administrative expenses of $101.1 million in the full year 2009 and $32.2 million in the fourth quarter 2009, compared to $81.0 million and $22.0 million for the same periods in 2008.  Higher selling, general and administrative expenses were primarily due to headcount-related expenses to support Onyx's growth and to legal and acquisition-related costs.

Onyx recorded $1.5 million of non-cash expense in the fourth quarter of 2009 associated with the increase in the fair value of the liability for contingent consideration related to the acquisition of Proteolix.

Investment Income

For the full year and fourth quarter 2009, investment income was $4.0 million and $0.9 million, respectively, compared to $12.7 million and $2.0 million for the same periods in 2008.  The decrease was primarily due to lower effective interest rates as a result of market conditions, as well as a change in the asset allocation of Onyx's investment portfolio.

Interest Expense

Onyx recorded interest expense of $6.9 million and $4.6 million for the full year and fourth quarter 2009, related to the 4.0% convertible senior notes due 2016 issued in August 2009, which includes non-cash imputed interest expense of  $3.1 million and $2.1 million for the same periods.

Cash, Cash Equivalents and Marketable Securities

At December 31, 2009, cash, cash equivalents, and current and noncurrent marketable securities were $587.3 million, compared to $458.0 million at December 31, 2008.  This increase was primarily due to net proceeds of debt and equity financings in August 2009 and cash generated from operations, offset by cash paid in connection with the Proteolix acquisition.

Management Conference Call Today

Onyx will host a teleconference and webcast to provide a general business overview and discuss financial results. The event will begin at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on February 23, 2010.  The live webcast will be available at: http://www.onyx-pharm.com/view.cfm/32/Event-Calendar or by dialing 847-619-6547 and using the passcode 26379728.  A replay of the presentation will be available on the Onyx website or by dialing 630-652-3044 and using the passcode 26379728 approximately one hour after the teleconference concludes.  The replay will be available through March 9, 2010.

About Onyx Pharmaceuticals, Inc.

Onyx Pharmaceuticals, Inc. is a biopharmaceutical company committed to improving the lives of people with cancer. The company, in collaboration with Bayer HealthCare Pharmaceuticals, Inc., is developing and marketing Nexavar ® (sorafenib) tablets, a small molecule drug that is currently approved for the treatment of liver cancer and advanced kidney cancer.  Additionally, Nexavar is being investigated in several ongoing trials in a variety of tumor types.  Beyond Nexavar, Onyx has established a development pipeline of anticancer compounds at various stages of clinical testing, including carfilzomib, a next-generation proteasome inhibitor, that is currently being evaluated in multiple clinical trials for the treatment of patients with relapsed or relapsed/refractory multiple myeloma and solid tumors, and ONX 0801, a targeted alpha-folate inhibitor, currently in Phase 1 testing.  For more information about Onyx, visit http://www.onyx-pharm.com.

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

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, regulatory filings and actions, the creation of opportunities for value creation and the integration of the operations and assets of Proteolix.  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; competition; failures or delays in our clinical trials; dependence on our collaborative relationship with Bayer; 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; 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; product liability risks; and the anticipated benefits of the acquisition of Proteolix.  Reference should be made to Onyx's Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission, under the heading "Risk Factors" for a more detailed description of these and other risks, as well as the company's subsequent quarterly reports on Form 10-Q.  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.)

    
    
                           ONYX PHARMACEUTICALS, INC.              
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS   
                    (In thousands, except per share amounts)
                                (unaudited)                             
                                             
                                       Three Months           Year 
                                          Ended               Ended
                                       December 31,        December 31,
                                     -----------------   -----------------
                                      2009       2008     2009       2008  
                                     ------     ------   ------     ------
    Revenue:                                
      Revenue from collaboration
       agreement                     $67,317   $49,650  $250,390  $194,343
      Contract revenue from
       collaboration                   1,000         -     1,000         -
                                       -----       ---     -----       ---
    Total revenue                     68,317    49,650   251,390   194,343
    Operating expenses:                     
      Research and development (1)    36,028    59,905   128,506   123,749
      Selling, general and
       administrative (1)             32,232    22,008   101,132    80,994
      Contingent consideration         1,528         -     1,528         -
                                       -----       ---     -----       --- 
    Total operating expenses          69,788    81,913   231,166   204,743
                                      ------    ------   -------   -------
    Income (loss) from operations     (1,471)  (32,263)   20,224   (10,400)
    Investment income                    920     1,999     4,028    12,695
    Interest expense                  (4,603)        -    (6,858)        -
                                      ------    ------   -------   ------- 
    Income (loss) before provision
     for income taxes                 (5,154)  (30,264)   17,394     2,295
    Provision (benefit) for
     income taxes                        355       (77)    1,233       347
                                      ------    ------   -------   -------
    Net income (loss)                $(5,509) $(30,187)  $16,161    $1,948
                                     =======  ========   =======    ======
                                             
    Net income (loss) per share:            
    Basic                             $(0.09)   $(0.53)   $ 0.27    $ 0.03
                                     =======  ========   =======    ======
                                             
    Diluted (2)                       $(0.09)   $(0.53)   $ 0.27    $ 0.03
                                     =======  ========   =======    ====== 
                                            
    Shares used in computing
     net income (loss) per share:           
    Basic                             62,189    56,430    59,215    55,915 
                                     =======  ========   =======    ====== 
    Diluted (2)                       62,189    56,430    59,507    56,765
                                     =======  ========   =======    ======
                                             
    (1) Includes employee stock-based
         compensation charges of:           
        Research and development      $1,288    $1,083    $3,574    $3,166
        Selling, general, and
         administrative                4,858     3,904    17,506    15,630
                                      ------    ------   -------   -------
          Total employee
           stock-based compensation   $6,146    $4,987   $21,080   $18,796
                                     =======  ========   =======   =======
                                             
    (2) Computation of net income
         (loss) used in computing
         diluted per share amounts:         
        Net income (loss)            $(5,509) $(30,187)  $16,161    $1,948
        Add: Interest and issuance
             costs related to
             dilutive convertible
             senior notes (3)              -         -         -         - 
                                      ------    ------   -------   -------
        Net income (loss) used in
         computing diluted per
         share amounts               $(5,509) $(30,187)  $16,161    $1,948
                                     =======  ========   =======    ====== 
                                             
        Basic shares                  62,189    56,430    59,215    55,915 
        Dilutive effect of options
         and restricted stock              -         -       292       850
        Dilutive effect of
         convertible senior
         notes (3)                         -         -         -         -
                                      ------    ------   -------   ------- 
          Diluted shares              62,189    56,430    59,507    56,765 
                                     =======  ========   =======    ======
    
    
    (3) 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 and year ended December 31, 2009 because their 
        effect would be anti-dilutive.
    
    
                        ONYX PHARMACEUTICALS, INC.
             CALCULATION OF REVENUE FROM COLLABORATION AGREEMENT
                       (In thousands, unaudited)
                                             
                                       Three Months           Year 
                                          Ended               Ended
                                       December 31,        December 31,
                                     -----------------   -----------------
                                      2009       2008     2009       2008  
                                     ------     ------   ------     ------
    Nexavar product revenue,
     net (as recorded by Bayer)     $235,175  $176,503  $843,470  $677,806
                                    ========  ========  ========  ========
    Revenue subject to
     profit sharing (as recorded
     by Bayer)                      $205,247  $160,874  $753,340  $637,459
    Combined cost of goods sold,
     distribution, selling,
     general and administrative
     expenses                         89,674    76,593   312,205   298,792
                                      ------    ------   -------   -------
    Combined collaboration 
     commercial profit              $115,573   $84,281  $441,135  $338,667
                                    ========   =======  ========  ========
    Onyx's share of collaboration
     commercial profit               $57,787   $42,141  $220,567  $169,334
    Reimbursement of Onyx's shared
     marketing expenses                7,435     6,415    23,514    22,185
    Royalty revenue                    2,095     1,094     6,309     2,824
                                       -----     -----     -----     -----
    Revenue from collaboration
     agreement                       $67,317   $49,650  $250,390  $194,343
                                     =======   =======  ========  ========
    
    
                           ONYX PHARMACEUTICALS, INC.
             RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (LOSS)
                  (In thousands, except per share amounts)
                                 (unaudited)
                                             
                                         Three Months           Year 
                                            Ended               Ended
                                         December 31,        December 31,
                                       -----------------   -----------------
                                        2009       2008     2009       2008  
                                       ------     ------   ------     ------
    GAAP net income (loss) 
     per share - basic                $(0.09)   $(0.53)   $ 0.27    $ 0.03
    GAAP net income (loss) 
     per share - diluted (4)          $(0.09)   $(0.53)   $ 0.27    $ 0.03
                                             
    GAAP net income (loss)           $(5,509) $(30,187)  $16,161    $1,948
    Non-GAAP adjustments:                   
      Employee stock-based
       compensation                    6,146     4,987    21,080    18,796
      Imputed interest related
       to the convertible senior
       notes due 2016                  2,111         -     3,137         -   
      Transaction costs                4,480       330     5,491       330
      Upfront and milestone
       payments                            -    33,750     7,000    33,750
      Contingent consideration         1,528         -     1,528         -
                                       -----       ---     -----       ---   
        Non-GAAP net income
         (loss) (5)                   $8,756    $8,880   $54,397   $54,824
                                      ======    ======   =======   =======
                                             
    Computation of non-GAAP net
     income (loss) used in computing
     non-GAAP diluted per share
     amounts:                               
    Non-GAAP net income (loss) (5)    $8,756    $8,880   $54,397   $54,824
    Add:                                    
      Interest and issuance costs
       related to dilutive convertible
       senior notes (6)                    -         -     3,683         -
                                         ---       ---     -----       ---   
        Non-GAAP net income (loss)
         used in computing non-GAAP
         diluted per share
         amounts (5)                  $8,756    $8,880   $58,080   $54,824
                                      ======    ======   =======   =======
                                             
    Computation of non-GAAP 
     diluted shares                         
    Basic shares                      62,189    56,430    59,215    55,915
    Adjustments for dilutive
     effects:                               
      Dilutive effect of options
       and restricted stock                -         -       292       850
      Dilutive effect of
       convertible senior notes (6)        -         -     5,801         -
                                         ---       ---     -----       ---
    Non-GAAP diluted shares (5)       62,189    56,430    65,308    56,765
                                      ======    ======    ======    ======
                                             
    Non-GAAP net income (loss)
     per share (5)                     $0.14    $ 0.16    $ 0.92    $ 0.98
    Non-GAAP net income (loss)
     per share - diluted (5)           $0.14    $ 0.16    $ 0.89    $ 0.97
    
    
    (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 and year ended December 31, 2009 because their 
         effect would be anti-dilutive.
           
    (5)  This press release includes the following non-GAAP financial         
         measures: non-GAAP net income (loss) and non-GAAP net income (loss)  
         per share. 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 an as alternative to, measurements required by GAAP.
           
         These non-GAAP financial measures exclude the following items from 
         GAAP net income (loss) and diluted net income (loss) per share:
           
           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.
    
           Upfront and milestone payments and transaction costs: The effects 
           of milestone payments and transaction costs are excluded as they 
           do not relate to the normal and recurring transactions of our 
           business; such exclusions allow for a better representation of the 
           ongoing economics of the business, facilitate comparison to peer 
           companies and are reflective of how Onyx manages the business.
    
           Contingent consideration expense: The effects of contingent 
           consideration 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.
    
    (6)  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 non-GAAP diluted 
         per share amounts for the three months ended December 31, 2009 
         because their effect is anti-dilutive and included in the 
         computation of non-GAAP diluted per share amounts for the year 
         ended December 31, 2009 because their effect is dilutive.
    
    
                            ONYX PHARMACEUTICALS, INC.                         
                      CONDENSED CONSOLIDATED BALANCE SHEETS  
                
                                                    (In thousands)                  
                                              December 31,      December 31,   
                                                 2009              2008   
                                              (unaudited)           (7)   
                                              -----------       -----------    
    Assets                                             
    Cash, cash equivalents and current
     marketable securities                     $550,108          $418,424   
    Other current assets                         88,615            43,635 
                                                 ------            ------  
    Total current assets                        638,723           462,059   
    Property and equipment, net                   7,473             3,363   
    Marketable securities, non-current           37,174            39,622   
    Intangible assets - in-process
     research and development                   438,800                 -   
    Goodwill                                    193,675                 -   
    Other assets                                  8,835             4,723
                                                  -----             -----   
    Total assets                             $1,324,680          $509,767
                                             ==========          ========   
    Liabilities and stockholders' equity               
    Current liabilities                        $107,790           $33,304   
    Convertible senior notes due 2016           143,669                 -   
    Liability for contingent consideration, 
     non-current                                160,528                 -   
    Deferred tax liability                      157,090                 -   
    Other long-term liabilities                   5,047             1,263   
    Stockholders' equity                        750,556           475,200
                                                -------           -------   
    Total liabilities and stockholders'
     equity                                  $1,324,680          $509,767
                                             ==========          ========   
                                                        
    (7)  Derived from the audited financial statements included in the
         Company's Annual Report on Form 10-K for the year-ended 
         December 31, 2008. 
    

SOURCE Onyx Pharmaceuticals, Inc.

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