Onyx Pharmaceuticals Inc. (ONXX) reported fourth quarter 2011 earnings of $1.44 per share, in contrast to the Zacks Consensus Estimate of a loss of 56 cents and the year-ago loss of 37 cents per share. Full year 2011 earnings came in at 24 cents per share, beating the Zacks Consensus Estimate of a loss of $1.82, but lower than the year-ago earnings of 27 cents per share.
Higher revenues in the fourth quarter led to the year-over-year increase in earnings. Onyx Pharma’s 2011 results were in line with the company’s forecast of posting positive earnings for the year.
Quarterly revenues shot up 239% to $237.0 million, beating the Zacks Consensus Estimate of $201.0 million. Full year 2011 revenues amounted to $447.2 million, beating the Zacks Consensus Estimate of $413 million and the year-ago revenues of $324.5 million.
Quarterly Details
In the fourth quarter, Onyx Pharma booked collaboration revenues of $160.2 million, related to the sale of Japanese Nexavar (sorafenib) royalty rights. The rest of the $76.8 million came from the company’s agreement with Bayer (BAYRY) for the development and marketing of Nexavar. The drug is currently marketed worldwide as a treatment for unresectable liver cancer and advanced kidney cancer.
Global Nexavar sales, recorded by Bayer, amounted to $1.0 billion in the reported quarter, reflecting an increase of 8%. Continued worldwide uptake of the drug for liver cancer helped boost sales. Nexavar continued to experience robust sales in the Asia-Pacific region and Latin America.
Onyx Pharma and Bayer are looking to expand the drug’s label to boost sales. Late-stage trials with Nexavar are ongoing for breast, lung and thyroid cancer.
Quarterly R&D expenses went up 138.0% to $84.0 million, primarily due to increased investment on the development and manufacturing of carfilzomib.
SG&A expenses climbed 42.6% to $52.6 million, due to an increase in employee headcount and related costs, legal expenses and pre-launch expenses for carfilzomib.
Forecast for 2012
For 2012, Onyx Pharma expects worldwide Nexavar sales of more than $1 billion. Excluding Japan, sales are expected in the range of $840 – $850 million. Moreover, the company anticipates higher drug sales in the second half of the year.
Onyx Pharma expects Nexavar sales to be driven by growth in emerging markets like the Asia-Pacific region and Latin America.
Additionally, the company provided its expense guidance for 2012. It expects R&D expense in the range of $270 – $290 million, while SG&A expenses for 2012 are likely to be in the range of $170 – $180 million.
Onyx Pharma expects to record a loss in 2012, as investment in its proteasome inhibitor franchise is expected to exceed the contribution from the kinase inhibitor franchise.
Our Take
Going forward, we expect investor focus to remain on the approvability of carfilzomib. The company is seeking to get the candidate approved as a treatment for patients with relapsed and refractory multiple myeloma. The US Food and Drug Administration (FDA) has granted a standard review designation to carfilzomib’s new drug application (NDA) and set a target date of July 27, 2012.
We believe that the approval of carfilzomib would be a major positive for Onyx Pharma, which currently has just one marketed product, Nexavar, in its portfolio.
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