Onyx Pharmaceuticals’ (ONXX) fourth quarter 2010 loss of 37 cents per share was way below the year-ago earnings of 4 cents. Results missed the Zacks Consensus Estimate of a loss of 11 cents per share. For 2010, Onyx Pharma’s earnings came in at 27 cents per share, beating the Zacks Consensus Estimate of a loss of 42 cents, but falling short of 2009 earnings of 57 cents.
Higher operating expenses led to the decline in earnings.
Quarterly revenues increased 2.5% to $70 million, barely missing the Zacks Consensus Estimate of $71 million. Annual revenues came in at $324.5 million, reflecting a year-over-year improvement of 29.1% and beating the Zacks Consensus Estimate of $297 million.
Revenues consisted of collaboration revenues under the company’s agreement with Bayer AG (BAYRY) for Nexavar (sorafenib) and the license agreement with Ono Pharmaceutical Co., Ltd.
2010 revenues were aided by a $59.2 million payment received in the third quarter under Onyx Pharma’s agreement with Ono Pharmaceutical for carfilzomib.
Global Nexavar sales, recorded by Bayer, amounted to $934.0 million and $257.4 million for the full year and fourth quarter 2010, respectively, reflecting an increase of 11% and 9%. Nexavar sales for 2010 were above the company’s guidance of $905 – $925 million.
During the quarter, Onyx Pharma saw an improvement in Nexavar sales in the Asia-Pacific region, led primarily by Japan and China. Additionally, the company was granted reimbursement for Nexavar for the treatment of liver cancer in South Korea. Moreover, the company expects to receive reimbursement for Nexavar in Taiwan by year end. This should lead to double-digit growth in Nexavar sales in this region.
The improvement in Nexavar’s performance is encouraging as the drug had performed below expectations in the first nine months of 2010.
Onyx Pharma and Bayer are looking to expand Nexavar’s label to boost sales. The companies recently started enrolling patients in a phase III trial (RESILIENCE) that will evaluate Nexavar in combination with capecitabine (oral chemotherapeutic agent) for the treatment of advanced breast cancer. Further, late-stage trials with the drug are ongoing for lung and thyroid cancer.
Quarterly Details
Research and development (R&D) spend increased 50.8% to $54.3 million due to higher expenses for the development of carfilzomib.
Selling, general and administrative (SG&A) expenses were 14.4% higher at $36.9 million, on increased costs arising from the acquisition of Proteolix and higher employee related expenses.
Expectations for 2011
For 2011, the company expects to be cash flow positive and to record profits on an adjusted basis.
Onyx Pharma expects Nexavar sales to amount to $975 million to $1.025 billion in 2011, reflecting a year-over-year increase of 5% to 10%. Moreover, Nexavar sales are anticipated to experience double-digit growth in the Asia-Pacific region.
The company provided a guidance range of $225 million to $250 million for R&D expenses, with the spending concentrated mainly in the second half of 2011. Expenditure related to the development of Nexavar is expected to remain at levels similar to 2010.
SG&A expenses are expected to amount to $130 million in 2011. Both R&D and SG&A expense figures are inclusive of non-cash stock-based compensation.
Onyx Pharma expects to take a $20 million – $25 million impact from the health care reform.
Pipeline Update
On the fourth quarter call, Onyx Pharma provided an update on its pipeline. The company has started the process of submitting a rolling new drug application (NDA) for carfilzomib for the treatment of relapsed and refractory multiple myeloma. The filing is expected to be completed as early as mid 2011. The drug has been granted fast track status by the US Food and Drug Administration (FDA). Further, Onyx Pharma plans to initiate a mid-stage trial with ONX 0912 (a follow-on version of carfilzomib) in 2011.
The company is currently conducting a phase III study (FOCUS) with carfilzomib in patients with advanced myeloma. Onyx Pharma plans to use results from this study, due in early 2012, to support its European marketing application.
Onyx Pharma is also studying carfilzomib in combination with Celgene Corp.’s (CELG) Revlimid and low-dose dexamethasone in early-stage patients. The phase III study, ASPIRE, is being conducted under the FDA’s special protocol program and is expected to complete enrolment in the first half of 2012.
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