Onyx Pharma Narrows Loss in Q2

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Onyx Pharmaceuticals Inc. (ONXX) reported an adjusted loss of 64 cents per share in the second quarter of 2013, well below the year-ago loss of 85 cents. Excluding amortization expenses, second quarter 2013 loss was 57 cents, below the Zacks Consensus Estimate of a loss of 63 cents.

Quarterly revenues were $153 million, above the Zacks Consensus Estimate of $146 million and the year-ago revenues of $72.7 million.

Quarterly Details

Onyx Pharma’s revenues include royalties received under its collaboration with Bayer (BAYRY) for the development and marketing of Nexavar, Kyprolis sales and royalties on Stivarga.

Global Nexavar sales (excluding Japan), recorded by Bayer, amounted to $230 million in the reported quarter, up 7% from the year-ago period. Revenues were driven by sales growth in the U.S. and the Asia-Pacific regions and continued improvement in commercial margin.

Onyx Pharma and Bayer are looking to expand the drug’s label to boost sales. A late-stage trial with Nexavar is ongoing for breast cancer (RESILIENCE study results due in mid-14). The company also filed for Nexavar’s approval for thyroid cancer in the U.S. and EU.

Kyprolis, which gained FDA approval in Jul 2012, posted second quarter 2013 sales of $61.0 million, slightly below the $64.0 million reported in first quarter 2013. Demand, however, grew 6% sequentially due to growth in patient share. Onyx Pharma said that Kyprolis’ share increased to more than 40% of the prevalent eligible third line plus patient population at the end of the second quarter, up from the 30%+ patient share at the beginning of the year. Share of second line patients doubled to about 10% at the end of the reported quarter. Meanwhile, the company continued to witness expansion of novel agent use in the third line plus setting.

At the end of the reported quarter, about 2,400 unique accounts had ordered Kyprolis since launch, up from 2,100 in the first quarter of 2013.

We note that Celgene’s (CELG) Pomalyst, a multiple myeloma drug launched earlier this year, delivered sales of $66 million in the Jun 2013 quarter, which was the first full quarter of sales in the U.S. for the drug.

Meanwhile, Onyx Pharma is preparing for the potential launch of Kyprolis in Europe. Positive results from two ongoing studies, ASPIRE (interim results due in the first/second quarter of 2014) and FOCUS (results due in the first/second quarter of 2014), would allow the company to file for EU approval in the second half of 2014. Once Kyprolis gains EU approval, Onyx Pharma intends to commercialize Kyprolis directly in about 12 markets.

Stivarga royalty revenue came in at $10.2 million in the second quarter of 2013. The oncology product, on which Onyx Pharma receives a 20% royalty from Bayer, is approved in the U.S. for use in treatment-experienced metastatic colorectal cancer patients and for patients suffering from metastatic and/or unresectable gastrointestinal stromal tumors. Global net sales (reported by Bayer) grew 15% sequentially to $61 million in the second quarter of 2013. Launch in additional markets and increasing adoption by physicians should drive sales further.

Quarterly research and development (R&D) expenses increased 34.6% to $102.8 million. Selling, general and administrative (SG&A) expenses climbed 78.9% to $87.5 million due to investment in commercial infrastructure and launch activities for Kyprolis.

2013 Guidance Maintained

Onyx Pharma maintained its guidance that was issued in Feb 2013. The company expects Nexavar net sales (excluding Japan) in the range of $890 million - $920 million. Price increases and increased use in liver cancer should help drive sales. Onyx Pharma did not provide guidance for Kyprolis or Stivarga as both products are still in the early stages of commercialization.

The company expects R&D expenses (excluding stock-based compensation expense) in the range of $400 million to $450 million. Expense will be driven by the additional studies being conducted with Kyprolis. SG&A expenses (excluding stock-based compensation expense) are expected in the range of $290 million - $320 million. Onyx Pharma expects to report a loss in 2013.

Our Take

Although Onyx Pharma’s second quarter 2013 loss was narrower than the year-ago loss, Kyprolis revenues were slightly soft during the reported quarter. Moreover, we were disappointed to see that the FOCUS study missed the interim analysis.

That being said, we expect investor focus to remain on the company’s ongoing strategic process that was announced on Jun 30. Onyx Pharma said that it is currently in discussions with several interested parties and we believe an acquisition could be announced soon.  

Onyx Pharma currently carries a Zacks Rank #3 (Hold). Currently, Biogen Idec (BIIB), a Zacks Rank #1 (Strong Buy) stock, looks well positioned.
 

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