Onyx Pharmaceuticals delivered investors a nice positive surprise when it reported its third quarter 2008 results at its analyst conference on November 6: better than expected revenue and earnings. Given the minefield the stock market has become lately, it is good to have a stock like Onyx in my portfolio.
Onyx is in a partnership with Bayer to develop and market a cancer therapy, Nexavar. Because Bayer takes in all the revenue and generates much of the expense, what Onyx reports as revenue is their share of the profits, which only turned positive in 2007. Since Onyx has its own operating expenses as well, at first when Bayer started transferring revenues over, Onyx still was recording net losses.
But Nexavar global sales continue to grow at a healthy clip, mainly due to its approval for reimbursement in new nations. In the quarter Bayer's Nexavar revenues were $181 million, up 73% from year earlier. Onyx's share was $40 million, more than doubling the $18 million it got in the year-ago quarter.
After taking into account Onyx operating expenses, it reported a GAAP net income of $12.2 million or $0.21 per share. For those of you who like non-GAAP numbers, the net income was $16.6 million or $0.29 per share. The main difference between GAAP and non-GAAP was stock-based compensation. This requires no cash from the company, but GAAP requires it to be valued and taken as an expense.
As I have written in earlier columns, Onyx has chosen to try to maximize long-term rather than short term profits. This has meant a high R&D spend on proving Nexavar's efficacy and safety in the two indications for which it is already approved, liver cancer and kidney (renal) cancer. They also have been spending on clinical trials for other forms of cancer, notably lung cancer, colorectal cancer, and ovarian cancer.
While Onyx's stock price popped up a bit on the news, it is still very reasonably priced because of the gloom on Wall Street. At this moment it is trading for exactly $30 per share. That is off a 1 year low of $21.66 but off the 1 year high of $61.18.
All biotechnology and pharmaceutical stocks are risky (as Anesiva showed yesterday) so ...
My Onyx (ONXX) analyst conference summaries page