Onyx Pharmaceuticals Inc.‘s (ONXX) third quarter 2011 loss of 44 cents per share came in 6 cents wider than the Zacks Consensus Estimate. In the year-ago quarter the company had reported earnings of 76 cents per share. Lower revenues and higher operating expenses led to the loss.
Quarterly Details
Quarterly revenues declined 38.9% to $75.0 million, marginally missing the Zacks Consensus Estimate of $76.0 million. In the previous-year quarter, the company had booked license revenue of $59.2 million, as a part of the September 2010 license agreement with Ono Pharmaceutical Co. Ltd. Onyx Pharma did not receive any such payment during the reported quarter, leading to a steep decline in the company’s revenues.
In the third quarter, Onyx Pharma booked collaboration revenues of $75.0 million (up 17.8%) under the company’s agreement with Bayer (BAYRY) for the development and marketing of Nexavar (sorafenib). 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 $250.3 million in the third quarter of 2011, reflecting an increase of 11%. Continued worldwide uptake of the drug for liver cancer helped boost sales. Nexavar continued to experience robust sales in the Asia-Pacific region, led primarily by Japan and China. The company expects to book impressive Nexavar sales from this region.
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.
Research and development (R&D) spend went up 31.2% to $58.5 million, primarily due to increased investment for the development of carfilzomib.
Selling, general and administrative (SG&A) expenses climbed 64.5% to $42.6 million, due to an increase in employee headcount and related costs, legal expenses and pre-launch costs for carfilzomib.
Forecast for 2011
For 2011, Onyx Pharma continues to expect worldwide Nexavar sales in the range of $975 million to $1.25 billion, with sales likely to fall near the mid-point of the guidance range.
The company reaffirmed its R&D expense guidance range of $225 – $250 million for 2011. Additionally, Onyx Pharma expects SG&A expenses for the fourth quarter of 2011 to be in line with the third quarter figure.
Moreover, the company expects to post positive earnings for fiscal 2011.
Our Take
We currently have a Neutral recommendation on Onyx Pharma. The stock carries a Zacks #3 Rank (Hold rating) in the short-run. Going forward, we expect investor focus to remain on the approval status of carfilzomib. Onyx Pharma recently completed the submission of a rolling new drug application (NDA) for gaining accelerated approval of carfilzomib for the treatment of patients with relapsed and refractory multiple myeloma. 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.
