Onyx Pharmaceuticals (ONXX) reported third quarter 2010 earnings of 76 cents per share, well above the year-ago earnings of 28 cents. Results surpassed the Zacks Consensus Estimate of a loss of 4 cents. The better-than-expected results were mainly due to higher revenues.
Revenues came in at $122.9 million, well above the Zacks Consensus Estimate of $72 million. Revenues were boosted by a $59.2 million payment received under Onyx’s exclusive license agreement with Ono Pharmaceutical Co., Ltd. for carfilzomib. Year-ago revenues, consisting of only revenues from collaboration agreements, were $69.1 million.
Revenues consisted of collaboration revenues under the company’s agreement with Bayer (BAYRY) for Nexavar (sorafenib) and the license agreement with Ono. While overall revenues were boosted by the $59.2 million license payment from Ono, we note that collaboration revenues declined 7.8% to $63.7 million. The decline in collaboration revenue was primarily due to lower Nexavar sales which came in at $226.2 million, down 1.3%.
Moreover, Onyx reported a slight increase in combined Nexavar costs. Onyx and Bayer split the development cost for Nexavar and share profits equally in all territories excluding Japan. Bayer pays royalty to Onyx on sales in Japan.
Nexavar sales in the US were impacted by the health care reform and increased competition in the kidney cancer market. Meanwhile, ex-US sales of Nexavar were impacted by foreign exchange fluctuations and pricing austerity in certain European countries. Sales in Japan also lagged expectations.
Based on these factors, Onyx Pharma once again cut its expectations for Nexavar sales and is now guiding towards Nexavar revenues in the range of $905 – $925 million (earlier guidance: $925 – $975 million). Going forward, Onyx Pharma expects Nexavar sales to grow in the single-digit range in the US. A similar growth rate is expected in major European markets.
Operating expenses increased 19.3% during the quarter to $70.5 million. Both research and development and selling, general and administrative expenses increased during the quarter. R&D spend increased 25.1% to $44.6 million due to higher expenses for the development of pipeline candidates, carfilzomib and ONX 0912.
This was partially offset by reimbursements received from Ono for both candidates and lower expenses on ONX 0801. Fullyear R&D expense is expected in the range of $165 – $180 million.
Selling, general and administrative expenses were higher by 10.6% on increased costs arising from the acquisition of Proteolix.
On the third quarter call, Onyx Pharma provided an update on its development plans for carfilzomib. Onyx Pharma intends to seek accelerated approval for carfilzomib in the US for multiple myeloma in mid -2011.
The company is currently conducting a phase III study (FOCUS) with carfilzomib in patients with advanced myeloma. Onyx Pharma will use results from this study, due in early 2012, to support its European marketing approval application.
Onyx Pharma is also studying carfilzomib in combination with Celgene’s (CELG) Revlimid and low-dose dexamethasone in early-stage patients. The phase III study, ASPIRE, is being conducted under the US Food and Drug Administration’s (FDA) special protocol program and is expected to complete enrolment in the first half of 2012.
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