Many, but not all, analysts had a dim view of Onyx Pharmaceuticals (ONXX) at the beginning of 2012. Onyx had only one approved therapy, Nexavar for liver and kidney cancer. Between sharing Nexavar revenues with marketing partner Bayer and heavy R&D spending on new drugs and indications, Onyx ended in the red in most quarters.
What a difference a year makes. Onyx now had 4 approved indications and data that should earn approval for 2 more. A deeper pipeline exists as well. Its newly approved drug Kyprolis for MM (multiple myeloma) had revenues of $62 million, most of which would have been in the fourth quarter. This does not necessarily mean that Onyx will show a profit for Q4, but it does look like 2013 will be remarkably good, with 2014 even better.
The third approved therapy, and fourth approved indication, is Stivarga (formerly Regorafenib), which was also developed in conjunction with Bayer. Bayer will do the selling and Onyx will receive a 20% royalty, which will be cash that goes straight to the bottom line. Stivarga was approved in September 2012 for colorectal cancer patients who have been previously treated with currently available therapies. Royalties should ramp in 2013.
The fifth indication is Nexavar for iodine-refractory differentiated thyroid cancer. Again, Bayer will do the sales and share revenue with Onyx. The Phase III trial results are still to be submitted to the FDA, but approval is likely and revenue could commence in late 2013 or early 2014.
Sixth we have Stivarga for GIST, gastrointestinal stromal tumors.
So in 2013 we have a mid-sized biotechnology company with high expectations of multiple revenue ramps which should continue into 2014 and beyond.
Early in 2012 you could have bought ONXX at its 52-week low of $35.73. As I write the price is $81.41, or 128% above that. It already hit a 52 week high of $93.18.
I see Onyx as a company that will demonstrate its ability to generate revenue and profits during 2013 and 2014, but it is important to keep in mind how lengthy global cancer ramps can be. There is the whole rest of the world and even today Nexavar is still expanding into new nations for liver and kidney cancer, several years after introduction. Cancer approvals often start in second-line or later settings. Revenues can ramp significantly if the drugs can will approvals for administering to new, first-line patients.
Also, there has to be a lot of unrealized value in the management team. There are a lot of therapies out there to buy the rights to develop. Most drugs fails somewhere between Phase I trials and FDA approval. Onyx management, led by Anthony Coles, M.D., has done a remarkable job picking therapies and targets for development. It might be just luck, but it likely means they will do well with their earlier-stage pipeline and any future rights they acquire.
Onyx still has a very high P/E ratio, but that should drift down as profits ramp in 2013.
It looks to me like Onyx Pharmaceuticals is a stock to buy and hold for at least the remainder of this decade. If you can think that long-term.
Disclaimer: I am long ONXX and will not trade the stock for 3 days after the publication of this report.
William P. Meyers
See also:
www. onyx.com
My main Onyx Pharmaceuticals analyst conferences page.
My October 30, 2012 Onyx Q3 conference notes
Showing posts with label liver cancer. Show all posts
Showing posts with label liver cancer. Show all posts
Monday, January 7, 2013
Monday, November 21, 2011
Onyx Pharmaceuticals (ONXX) Sees New Product Upside
Onyx Pharmaceuticals (ONXX) was one of the few stocks that were up today, closing up $0.63 to $37.86. Still, it is well beneath it's 52-week high of $45.90.
Management thinks the full year will be non-GAAP EPS positive, based largely on a $160 million payment from Bayer this quarter. Bayer sells Onyx's Nexavar for kidney and liver cancer, splitting the after-costs profits. The $160 million was to buy-out the rights for Nexavar in Japan, which has been ramping up to be a lucrative market because of the high incidence of liver cancer there. This was part of a larger deal to end litigation for a Nexavar-related drug, Regorafenib. Under the settlement Onyx will get 20% royalties if the drug makes it to market.
Regorafenib recently had positive Phase III data for metastatic colorectal cancer. Like Nexavar, it appears it may be a useful therapy for a variety of cancers.
The predicted annual positive non-GAAP results were hard to predict before the deal announcement because in most quarters so far Onyx's own operating expenses have been sufficient to wipe out the receipts from Bayer. For Q1 non-GAAP net loss was $14.2 million, for Q2 net loss was $27.2 million, and for Q3 net loss was $19.5 million. One reason for the net losses is that both Bayer and Onyx have been spending large sums on running Nexavar through a set of clinical trials that have shown it may be effective for other forms of cancer, and to strengthen its role in liver caner. If you subtract out the research and development (R&D) costs, in most quarters Onyx would have shown a profit. Onyx has started recruiting patients for Nexavar Phase III trials for breast cancer and thyroid cancer, and has Phase II trials underway in colorectal and ovarian cancer.
Fortunately Onyx Pharmaceuticals has been able to maintain a high cash balance despite the regular losses, ending Q3 2011 at $530 million. Assuming the $160 million payment is a Q4 event, cash at the end of the year should approach $675 million.
I would not expect Regorafenib revenue until at least 2013, and like any drug it could fail for a currently unknown reason.
Carfilzomib is still the key to Onyx's value in the 2012 to 2015 time frame. Carfilzomib is a proteasome inhibitor that had positive data for relapsed and refractory multiple myeloma in a Phase IIb trial. In fact the data was good enough that it is being submitted to the FDA for approval. At the same time two Phase III trials have been initiated. More detailed data from the Phase IIb trial will be presented at the American Society of Hematology (ASH) Annual Meeting, December 10-13, 2011. While there is an outside possibility carfilzomib will not gain FDA approval, the main question is when it will get approval.
If both Regorafenib and carfilzomib are approved by the FDA, the nature of Onyx's model will change. It should be possible, starting in 2013, to have a vigorous R&D program to continue expanding the indications for Nexavar, carfilzomib and other pipeline candidates without actually throwing the bottom line into the red.
I believe that there is always risk in biotechnology stocks from competition, the need for FDA and other national medical agency approvals, and from failure to execute.
However, with expanded indications for Nexavar, plus likely revenues from carfilzomib and royalties on Regorafenib, in the next few years Onyx should become a highly profitable company. I do not think the current stock price reflects full value.
Disclosure: I am long Onyx Pharmaceutical. I have no plans to sell or buy ONXX in the immediate future.
Keep Diversified!
Management thinks the full year will be non-GAAP EPS positive, based largely on a $160 million payment from Bayer this quarter. Bayer sells Onyx's Nexavar for kidney and liver cancer, splitting the after-costs profits. The $160 million was to buy-out the rights for Nexavar in Japan, which has been ramping up to be a lucrative market because of the high incidence of liver cancer there. This was part of a larger deal to end litigation for a Nexavar-related drug, Regorafenib. Under the settlement Onyx will get 20% royalties if the drug makes it to market.
Regorafenib recently had positive Phase III data for metastatic colorectal cancer. Like Nexavar, it appears it may be a useful therapy for a variety of cancers.
The predicted annual positive non-GAAP results were hard to predict before the deal announcement because in most quarters so far Onyx's own operating expenses have been sufficient to wipe out the receipts from Bayer. For Q1 non-GAAP net loss was $14.2 million, for Q2 net loss was $27.2 million, and for Q3 net loss was $19.5 million. One reason for the net losses is that both Bayer and Onyx have been spending large sums on running Nexavar through a set of clinical trials that have shown it may be effective for other forms of cancer, and to strengthen its role in liver caner. If you subtract out the research and development (R&D) costs, in most quarters Onyx would have shown a profit. Onyx has started recruiting patients for Nexavar Phase III trials for breast cancer and thyroid cancer, and has Phase II trials underway in colorectal and ovarian cancer.
Fortunately Onyx Pharmaceuticals has been able to maintain a high cash balance despite the regular losses, ending Q3 2011 at $530 million. Assuming the $160 million payment is a Q4 event, cash at the end of the year should approach $675 million.
I would not expect Regorafenib revenue until at least 2013, and like any drug it could fail for a currently unknown reason.
Carfilzomib is still the key to Onyx's value in the 2012 to 2015 time frame. Carfilzomib is a proteasome inhibitor that had positive data for relapsed and refractory multiple myeloma in a Phase IIb trial. In fact the data was good enough that it is being submitted to the FDA for approval. At the same time two Phase III trials have been initiated. More detailed data from the Phase IIb trial will be presented at the American Society of Hematology (ASH) Annual Meeting, December 10-13, 2011. While there is an outside possibility carfilzomib will not gain FDA approval, the main question is when it will get approval.
If both Regorafenib and carfilzomib are approved by the FDA, the nature of Onyx's model will change. It should be possible, starting in 2013, to have a vigorous R&D program to continue expanding the indications for Nexavar, carfilzomib and other pipeline candidates without actually throwing the bottom line into the red.
I believe that there is always risk in biotechnology stocks from competition, the need for FDA and other national medical agency approvals, and from failure to execute.
However, with expanded indications for Nexavar, plus likely revenues from carfilzomib and royalties on Regorafenib, in the next few years Onyx should become a highly profitable company. I do not think the current stock price reflects full value.
Disclosure: I am long Onyx Pharmaceutical. I have no plans to sell or buy ONXX in the immediate future.
Keep Diversified!
Wednesday, October 12, 2011
Onyx Pharmaceuticals Gets $160 million for Nexavar, Plus Regorafenib Royalties
Onyx Pharmaceuticals (ONXX) today announced it is receiving a major cash infusion at a time when it is transitioning from being a successful biotechnology startup into a major player. The cash, $160 million from Bayer, is for the Japanese rights for Nexavar, a cancer therapy. The deal is in the context of settling litigation about Regorafenib, an analog of Nexavar developed by Bayer. Onyx will receive a 20% royalty on future worldwide sales of Regorafenib.
Nexavar is sold by Bayer. Onyx, which discovered and co-developed the drug, gets a share of the profits after Bayer's expenses. But in most quarters so far Onyx's own operating expenses have been sufficient to wipe out the receipts from Bayer. An important treatment for liver and kidney cancer, sales of Nexavar continue to ramp globally. Liver cancer rates are far higher in Asia than in the West, but Asia is the last area Nexavar has become available, so sales are just beginning to ramp in China and other nations in the region.
Bayer and Onyx have been running Nexavar through a set of clinical trials that have shown it may be effective for other forms of cancer, and to strengthen its role in liver caner. If you subtract out these research and development (R&D) costs, in most quarters Onyx would have shown a profit. Onyx has started recruiting patients for Nexavar Phase III trials for breast cancer and thyroid cancer, and has Phase II trials underway in colorectal and ovarian cancer.
Fortunately Onyx Pharmaceuticals has been able to maintain a high cash balance despite the regular losses, ending Q2 2011 at $550 million. Assuming the $160 million payment is a Q4 event, cash at the end of the year should approach $700 million.
Regorafenib does not yet have its first FDA approval. It is in a Phase III trial for a type of stomach cancer, and will doubtless be tried for a variety of solid cancer types. I would not expect any revenue until 2014, and like any drug it could fail for a currently unknown reason, but the royalties are a great thing to have in Onyx's likely future.
Given the background of success with Nexavar, tempered with losses due to R&D spend, Carfilzomib is still the key to Onyx's value in the 2012 to 2015 time frame. Carfilzomib is a proteasome inhibitor that had positive data for relapsed and refractory multiple myeloma in a Phase IIb trial. In fact the data was good enough that it is being submitted to the FDA for approval. At the same time two Phase III trials have been initiated.
If both Regorafenib and carfilzomib is approved by the FDA the nature of Onyx's model will change. It should be possible, starting in 2013, to have a vigorous R&D program to continue expanding the indications for Nexavar and carfilzomib without actually throwing the bottom line into the red.
Yesterday Onyx ended with a market capitalization of $2.0 billion, at $31.91 per share. As I write the market cap has risen to $2.15 billion, with the stock price at $33.80. I believe that there is always risk in biotechnology stocks from competition, the need for FDA and other national medical agency approvals, and from failure to execute.
Disclosure: I am long Onyx Pharmaceutical. I have no plans to sell or buy ONXX in the immediate future.
Keep Diversified!
See also my notes on the Q2 2011 Onyx Pharmaceuticals analyst call
Onyx Pharmaceuticals home page
Nexavar is sold by Bayer. Onyx, which discovered and co-developed the drug, gets a share of the profits after Bayer's expenses. But in most quarters so far Onyx's own operating expenses have been sufficient to wipe out the receipts from Bayer. An important treatment for liver and kidney cancer, sales of Nexavar continue to ramp globally. Liver cancer rates are far higher in Asia than in the West, but Asia is the last area Nexavar has become available, so sales are just beginning to ramp in China and other nations in the region.
Bayer and Onyx have been running Nexavar through a set of clinical trials that have shown it may be effective for other forms of cancer, and to strengthen its role in liver caner. If you subtract out these research and development (R&D) costs, in most quarters Onyx would have shown a profit. Onyx has started recruiting patients for Nexavar Phase III trials for breast cancer and thyroid cancer, and has Phase II trials underway in colorectal and ovarian cancer.
Fortunately Onyx Pharmaceuticals has been able to maintain a high cash balance despite the regular losses, ending Q2 2011 at $550 million. Assuming the $160 million payment is a Q4 event, cash at the end of the year should approach $700 million.
Regorafenib does not yet have its first FDA approval. It is in a Phase III trial for a type of stomach cancer, and will doubtless be tried for a variety of solid cancer types. I would not expect any revenue until 2014, and like any drug it could fail for a currently unknown reason, but the royalties are a great thing to have in Onyx's likely future.
Given the background of success with Nexavar, tempered with losses due to R&D spend, Carfilzomib is still the key to Onyx's value in the 2012 to 2015 time frame. Carfilzomib is a proteasome inhibitor that had positive data for relapsed and refractory multiple myeloma in a Phase IIb trial. In fact the data was good enough that it is being submitted to the FDA for approval. At the same time two Phase III trials have been initiated.
If both Regorafenib and carfilzomib is approved by the FDA the nature of Onyx's model will change. It should be possible, starting in 2013, to have a vigorous R&D program to continue expanding the indications for Nexavar and carfilzomib without actually throwing the bottom line into the red.
Yesterday Onyx ended with a market capitalization of $2.0 billion, at $31.91 per share. As I write the market cap has risen to $2.15 billion, with the stock price at $33.80. I believe that there is always risk in biotechnology stocks from competition, the need for FDA and other national medical agency approvals, and from failure to execute.
Disclosure: I am long Onyx Pharmaceutical. I have no plans to sell or buy ONXX in the immediate future.
Keep Diversified!
See also my notes on the Q2 2011 Onyx Pharmaceuticals analyst call
Onyx Pharmaceuticals home page
Wednesday, August 17, 2011
Onyx Pharmaceuticals Readies Carfilzomib
I learned about the Biotech Disappointment Curve from watching Onyx Pharmaceuticals. I started following Onyx (Nasdaq: ONXX) in 2005 and first bought stock in 2008. Often new biotechs run up large market capitalizations when they have their first positive Phase II or Phase III data in. After FDA approval, however, investors sometimes start looking at a company differently. They want to see market caps based on earnings, not on future expectations. We recently saw the down side of this curve again when Dendreon announced that its ramp of Provenge had slowed in Q2 [See Dendreon Provenge Demand Questioned].
In the case of Onyx, if you look at the stock price going back a decade, the stock in 2002 was under $7 per share. The 2003 ramp was impressive, with a peak of over $48 in April of 2004. Nexavar (sorafenib) data for advanced kidney cancer was positive, and in December of 2005 the FDA approved the therapy. Then came the show-me-the-money slump, as it takes a while for a sales force to actual get traction for a cancer therapy. At the bottom of the slump, in late 2006, you could buy the stock for under $11 per share. Then in 2007 there was another ramp when Nexavar was getting approved for liver cancer. From 2008 until present Onyx stock has mainly stayed in a broad range around $30 per share.
Another factor is that Nexavar is sold by Bayer. Onyx gets a share of the profits after Bayer's expenses. But in most quarters Onyx's own operating expenses have been sufficient to wipe out the receipts from Bayer.
Bayer and Onyx have been running Nexavar through a set of clinical trials that have shown it may be effective for other forms of cancer, and to strengthen its role in liver caner. If you subtract out the research and development (R&D) costs, in most quarters Onyx would have shown a profit. Onyx has started recruiting patients for Nexavar Phase III clinical trials for breast cancer and thyroid cancer, and has Phase II trials underway in colorectal and ovarian cancer.
Fortunately Onyx Pharmaceuticals has been able to maintain a high cash balance despite the losses, end Q2 2011 at $550 million.
Given the background of success with Nexavar, tempered with losses due to R&D spend, Carfilzomib is the key to Onyx's future value. Carfilzomib is a proteasome inhibitor that had positive data for relapsed and refractory multiple myeloma in a Phase IIb trial. In fact the data was good enough that it is being submitted to the FDA for approval. At the same time two Phase III trials have been initiated.
If carfilzomib is approved by the FDA, either based on current data or after Phase III results, the nature of Onyx's model will change. Again, there is likely to be a phase of investor euphoria followed by disappointment at the time needed to ramp a new cancer therapy. It should be possible, starting in 2013, to have a vigorous R&D program to continue expanding the use of Nexavar and carfilzomib without actually throwing the bottom line into the red. If profitability comes earlier, so much the better.
Even should carfilzomib and new indications for nexavar fail, Onyx could show profits by cutting back on R&D and because it has a long ramp ahead for Nexavar for liver cancer in Asia, where the majority of global liver cancer cases occur.
Today Onyx ended with a market capitalization of $2.1 billion, at $33.52 per share. I believe that there is always risk in biotechnology stocks from competition, the need for FDA and other national medical agency approvals, and from failure to execute. However, I am a long term investor in Onyx Pharmaceutical based on the potential of Nexavar and carfilzomib. I have no plans to sell or buy ONXX in the immediate future.
Keep Diversified!
See also my notes on the Q2 2011 Onyx Pharmaceuticals analyst call.
In the case of Onyx, if you look at the stock price going back a decade, the stock in 2002 was under $7 per share. The 2003 ramp was impressive, with a peak of over $48 in April of 2004. Nexavar (sorafenib) data for advanced kidney cancer was positive, and in December of 2005 the FDA approved the therapy. Then came the show-me-the-money slump, as it takes a while for a sales force to actual get traction for a cancer therapy. At the bottom of the slump, in late 2006, you could buy the stock for under $11 per share. Then in 2007 there was another ramp when Nexavar was getting approved for liver cancer. From 2008 until present Onyx stock has mainly stayed in a broad range around $30 per share.
Another factor is that Nexavar is sold by Bayer. Onyx gets a share of the profits after Bayer's expenses. But in most quarters Onyx's own operating expenses have been sufficient to wipe out the receipts from Bayer.
Bayer and Onyx have been running Nexavar through a set of clinical trials that have shown it may be effective for other forms of cancer, and to strengthen its role in liver caner. If you subtract out the research and development (R&D) costs, in most quarters Onyx would have shown a profit. Onyx has started recruiting patients for Nexavar Phase III clinical trials for breast cancer and thyroid cancer, and has Phase II trials underway in colorectal and ovarian cancer.
Fortunately Onyx Pharmaceuticals has been able to maintain a high cash balance despite the losses, end Q2 2011 at $550 million.
Given the background of success with Nexavar, tempered with losses due to R&D spend, Carfilzomib is the key to Onyx's future value. Carfilzomib is a proteasome inhibitor that had positive data for relapsed and refractory multiple myeloma in a Phase IIb trial. In fact the data was good enough that it is being submitted to the FDA for approval. At the same time two Phase III trials have been initiated.
If carfilzomib is approved by the FDA, either based on current data or after Phase III results, the nature of Onyx's model will change. Again, there is likely to be a phase of investor euphoria followed by disappointment at the time needed to ramp a new cancer therapy. It should be possible, starting in 2013, to have a vigorous R&D program to continue expanding the use of Nexavar and carfilzomib without actually throwing the bottom line into the red. If profitability comes earlier, so much the better.
Even should carfilzomib and new indications for nexavar fail, Onyx could show profits by cutting back on R&D and because it has a long ramp ahead for Nexavar for liver cancer in Asia, where the majority of global liver cancer cases occur.
Today Onyx ended with a market capitalization of $2.1 billion, at $33.52 per share. I believe that there is always risk in biotechnology stocks from competition, the need for FDA and other national medical agency approvals, and from failure to execute. However, I am a long term investor in Onyx Pharmaceutical based on the potential of Nexavar and carfilzomib. I have no plans to sell or buy ONXX in the immediate future.
Keep Diversified!
See also my notes on the Q2 2011 Onyx Pharmaceuticals analyst call.
Sunday, May 8, 2011
Onyx Pharmaceuticals Sees Future Growth
Onyx Pharmaceuticals (ONXX) reported its first quarter (Q1) 2011 results and held its analyst call on Wednesday.
I like companies that invest in the future with healthy R&D spending, but usually a biotechnology company won't spend more than 100% of its revenue on operating expenses, unless it is in startup mode.
Onyx has had revenues from its liver and kidney cancer drug Nexavar for several years now. Bayer actually distributes Nexavar; Onyx revenues are from Bayer, so there is no cost of goods sold. Revenues were $67.1 million, down 4% sequentially from $70.0 million but up 7% from $62.9 million year-earlier.
But operating expense were $108.5 million. R&D was bad enough, at $62.5 million, but they spent $34.5 million on selling, general, and administrative expenses. Since Bayer does their selling, that seems like a lot. It appears they (management) are paying themselves in advance for carfilzomib.
Carfilzomib is an admittedly promising drug for multiple myeloma, but it has not been approved by the FDA yet. Onyx has a lot of cash (not generated by Nexavar, but put in by investors), so there is little to make management act frugal. Management, being management, thinks it is their cash.
On the plus side, because Onyx keeps failing the profitability test, the stock is cheap (but not dirt cheap), on the assumption (be careful here) that carfilzomib will become a profit-generating multiple myeloma blockbuster.
Another plus is ramping Nexavar sales in Asia, where there is a much higher incidence of liver cancer than in Europe and America. With some care, Onyx could have been managed to profitability in each of the four trailing quarters. The stock price would be higher, and I suspect the carfilzomib story would not be any different.
Thankfully I am a long term investor. Right now long-term means at least two years. But keep in mind we have a pattern developing. What should happen is that combined carfilzomib and nexavar sales in 2012 should be doable with less operating expense than we are seeing in 2012. Then the stock will start pricing at actual profitability, not the cautious prices that are fair when you show losses and FDA approval is still in question. What could happen, instead, is that management will find new indications for the drugs and spend all revenues on clinical trials for new indications, or even pick up the spending pace on other drugs in the pipeline. Managing to more losses.
A biotechnology company can grow quickly and profitably. Hopefully soon the FDA will approve carfilzomib and Onyx will shift to that ideal.
Another reminder to myself and all of you to: keep diversified.
For more insight see my Onyx (ONXX) Q1 2011 analyst call summary.
See also Onyx Pharmaceuticals
I like companies that invest in the future with healthy R&D spending, but usually a biotechnology company won't spend more than 100% of its revenue on operating expenses, unless it is in startup mode.
Onyx has had revenues from its liver and kidney cancer drug Nexavar for several years now. Bayer actually distributes Nexavar; Onyx revenues are from Bayer, so there is no cost of goods sold. Revenues were $67.1 million, down 4% sequentially from $70.0 million but up 7% from $62.9 million year-earlier.
But operating expense were $108.5 million. R&D was bad enough, at $62.5 million, but they spent $34.5 million on selling, general, and administrative expenses. Since Bayer does their selling, that seems like a lot. It appears they (management) are paying themselves in advance for carfilzomib.
Carfilzomib is an admittedly promising drug for multiple myeloma, but it has not been approved by the FDA yet. Onyx has a lot of cash (not generated by Nexavar, but put in by investors), so there is little to make management act frugal. Management, being management, thinks it is their cash.
On the plus side, because Onyx keeps failing the profitability test, the stock is cheap (but not dirt cheap), on the assumption (be careful here) that carfilzomib will become a profit-generating multiple myeloma blockbuster.
Another plus is ramping Nexavar sales in Asia, where there is a much higher incidence of liver cancer than in Europe and America. With some care, Onyx could have been managed to profitability in each of the four trailing quarters. The stock price would be higher, and I suspect the carfilzomib story would not be any different.
Thankfully I am a long term investor. Right now long-term means at least two years. But keep in mind we have a pattern developing. What should happen is that combined carfilzomib and nexavar sales in 2012 should be doable with less operating expense than we are seeing in 2012. Then the stock will start pricing at actual profitability, not the cautious prices that are fair when you show losses and FDA approval is still in question. What could happen, instead, is that management will find new indications for the drugs and spend all revenues on clinical trials for new indications, or even pick up the spending pace on other drugs in the pipeline. Managing to more losses.
A biotechnology company can grow quickly and profitably. Hopefully soon the FDA will approve carfilzomib and Onyx will shift to that ideal.
Another reminder to myself and all of you to: keep diversified.
For more insight see my Onyx (ONXX) Q1 2011 analyst call summary.
See also Onyx Pharmaceuticals
Tuesday, December 14, 2010
Onyx Pharmaceuticals Clinical Trial Overview
I listened to the Onyx Pharmaceuticals (ONXX) presentation to analysts today. It mainly reported on Onyx's therapeutic pipeline. I have covered Onyx in more depth elsewhere (see my Onyx Pharmaceuticals ONXX page); here I am just recording my immediate impressions from the presentations.
Carfilzomib for multiple myeloma data seems to be excellent. Carfilzomib could become the drug of choice for MM patients. Revenues could begin in late 2011, but would more likely be a 2012 story (they already got a large milestone payment from Ono Pharmaceutical in Japan).
In addition to extending Nexavar (Sorafenib) for liver cancer, there are three main targets for Nexavar: breast, lung, and thyroid cancer.
The breast cancer results seemed somewhat marginal to me. With the right subtype target, they should be able to get results good enough for FDA approval, but it is not a sure thing. A big Phase III trial is about to get underway, which will give everyone a much better view.
The lung cancer results seemed fairly solid, again with the best chance of success being based on subtype identification. I would give Nexavar a better-than-average chance of approval based on data available so far.
The best data appeared to be for thyroid cancer. Here we have a good combination of a lack of any good therapy availability to date and the method of action of Nexavar working out well for the most common type of thyroid cancer. I would bet this indication will be approved.
In the short run, the biggest impact on the stock would come from the approval of reimbursement for Nexavar for liver cancer in South Korea. Liver cancer is far more common in Asia than in the U.S. or Europe (over 10 times as common), so the bulk of the global profits will eventually come from Japan, Korea, and China. China has approved prescribing Nexavar, but not reimbursement for the costs. The Korean approval won't take effect until January 1, so it won't effect Q4 2010 revenues.
My overal impression is that the Onyx stock I own is now very underpriced, but that is based on future trial results, FDA approvals, and marketing successes, so making stock purchases on that assumption involves pretty much risk.
Onyx stock (ONXX) ended the day up $1.04 or 3.1%, at $34.54.
See also Onyx Pharmaceuticals site
Carfilzomib for multiple myeloma data seems to be excellent. Carfilzomib could become the drug of choice for MM patients. Revenues could begin in late 2011, but would more likely be a 2012 story (they already got a large milestone payment from Ono Pharmaceutical in Japan).
In addition to extending Nexavar (Sorafenib) for liver cancer, there are three main targets for Nexavar: breast, lung, and thyroid cancer.
The breast cancer results seemed somewhat marginal to me. With the right subtype target, they should be able to get results good enough for FDA approval, but it is not a sure thing. A big Phase III trial is about to get underway, which will give everyone a much better view.
The lung cancer results seemed fairly solid, again with the best chance of success being based on subtype identification. I would give Nexavar a better-than-average chance of approval based on data available so far.
The best data appeared to be for thyroid cancer. Here we have a good combination of a lack of any good therapy availability to date and the method of action of Nexavar working out well for the most common type of thyroid cancer. I would bet this indication will be approved.
In the short run, the biggest impact on the stock would come from the approval of reimbursement for Nexavar for liver cancer in South Korea. Liver cancer is far more common in Asia than in the U.S. or Europe (over 10 times as common), so the bulk of the global profits will eventually come from Japan, Korea, and China. China has approved prescribing Nexavar, but not reimbursement for the costs. The Korean approval won't take effect until January 1, so it won't effect Q4 2010 revenues.
My overal impression is that the Onyx stock I own is now very underpriced, but that is based on future trial results, FDA approvals, and marketing successes, so making stock purchases on that assumption involves pretty much risk.
Onyx stock (ONXX) ended the day up $1.04 or 3.1%, at $34.54.
See also Onyx Pharmaceuticals site
Tuesday, November 23, 2010
Onyx Pharmaceuticals (ONXX) Jumps on Carfilzomib Revenue
As I have discussed several times, most recently in Onyx Pharmaceuticals Jumps on Carfilzomib Data [August 8, 2010], Onyx Pharmaceuticals (ONXX) could have shown a nice profit in 2009 with revenues from its liver and kidney cancer drug Nexavar. Instead it has spent its potential profits on research and development, seeking proof that Nexavar is effective in more kinds of cancer, and acquiring other potential therapies, notably Carfilzomib.
The payoff from that strategy was seen in the Onyx report on Q3 2010, which included a $59.2 million payment from Ono Pharmaceutical of Japan for the rights to develop and sell Carfilzomib in Japan. Carfilzomib was acquired with Proteolix. Its first indication is for multiple myeloma. It is in a class of drugs known as proteasome inhibitors. It causes cell death by preventing protein degradation, essentially poisoning the cell with its own products. The hope is that it kills cancer cells with minimal harm to other cell types.
A Phase II trial of Carfilzomib has been completed, with full data to be reported at the ASH (American Society of Hematology) meeting beginning December 7th. This trial data may support FDA approval; it has to be very good data to get approval from a phase II trial, because of the small number of patients enrolled. A full Phase III trial is also already being enrolled.
The payment from Ono is not indicative of regular quarterly revenues. Most revenue in 2011 will be from Nexavar sales through Bayer. This means net income may be positive or negative on a quarterly basis. So expect volatility in the stock price. Good news on Carfilzomib will drive the stock higher; there should be a floor under bad news because of Nexavar sales.
Nexavar itself is being tested for further indications: adjuvant liver and kidney cancers; non-small cell lung cancer; thyroid, breast, and ovarian cancer. These trials are mostly in Phase II or early in Phase III.
Onyx currently has 6 additional compounds in preclinical or in clinical trials. In biotechnology it is a good idea to have a wide pipeline, because most promising therapies bomb out at some point. Having six compounds in addition to Nexavar and Carfilzomib is reasonable for a company with Onyx's resources.
Onyx Pharmaceuticals is also sitting on a good pile of cash, $588 million. That is a good cushion for the dicey game of drug development and sales.
On the negative end, while liver cancer sales for Nexavar are still ramping as it gains approval in more countries, kidney cancer sales are about flat, due to increased competition.
I think the chances of Onyx fizzling are reasonably low, and the upside potential is very good. The price ($29.65 as I write) strikes me as still not taking into account its full future profit making potential if Carfilzomib is approved, but it isn't in the bargain basement the way it was earlier this year (52 week low $19.54).
See also:
Onyx Pharmaceuticals site
My Onyx Pharmaceuticals main page
The payoff from that strategy was seen in the Onyx report on Q3 2010, which included a $59.2 million payment from Ono Pharmaceutical of Japan for the rights to develop and sell Carfilzomib in Japan. Carfilzomib was acquired with Proteolix. Its first indication is for multiple myeloma. It is in a class of drugs known as proteasome inhibitors. It causes cell death by preventing protein degradation, essentially poisoning the cell with its own products. The hope is that it kills cancer cells with minimal harm to other cell types.
A Phase II trial of Carfilzomib has been completed, with full data to be reported at the ASH (American Society of Hematology) meeting beginning December 7th. This trial data may support FDA approval; it has to be very good data to get approval from a phase II trial, because of the small number of patients enrolled. A full Phase III trial is also already being enrolled.
The payment from Ono is not indicative of regular quarterly revenues. Most revenue in 2011 will be from Nexavar sales through Bayer. This means net income may be positive or negative on a quarterly basis. So expect volatility in the stock price. Good news on Carfilzomib will drive the stock higher; there should be a floor under bad news because of Nexavar sales.
Nexavar itself is being tested for further indications: adjuvant liver and kidney cancers; non-small cell lung cancer; thyroid, breast, and ovarian cancer. These trials are mostly in Phase II or early in Phase III.
Onyx currently has 6 additional compounds in preclinical or in clinical trials. In biotechnology it is a good idea to have a wide pipeline, because most promising therapies bomb out at some point. Having six compounds in addition to Nexavar and Carfilzomib is reasonable for a company with Onyx's resources.
Onyx Pharmaceuticals is also sitting on a good pile of cash, $588 million. That is a good cushion for the dicey game of drug development and sales.
On the negative end, while liver cancer sales for Nexavar are still ramping as it gains approval in more countries, kidney cancer sales are about flat, due to increased competition.
I think the chances of Onyx fizzling are reasonably low, and the upside potential is very good. The price ($29.65 as I write) strikes me as still not taking into account its full future profit making potential if Carfilzomib is approved, but it isn't in the bargain basement the way it was earlier this year (52 week low $19.54).
See also:
Onyx Pharmaceuticals site
My Onyx Pharmaceuticals main page
Monday, August 9, 2010
Onyx Pharmaceuticals Jumps on Carfilzomib Data
Onyx Pharmaceuticals stock rose 3% today to $28.11 per share. Lately it has been on a bit of a run, after hitting a near term low of $20.37 on July 19, versus a 52 week low of $19.54. This was not, in particular, due to Q2 results reported on August 8. GAAP net income for the quarter was negative $97.2 million. Taking away a $92 million charge for a carfilzomib milestone being reached, Onyx still lost $5.2 million GAAP. Non-GAAP net income was $2.9 million, not much to crow about either.
As I have discussed before, Onyx could have had a nice profitable business if they had just stuck to selling Nexavar for kidney and liver cancer. Nexavar sales are still growing, mainly internationally, since it has taken time to get approvals in many nations. But instead of ramping some profits, and the short term stock price, management decided to use cash to do studies of Nexavar for more forms of cancer, and to acquire companies or drugs to broaden their pipeline. R&D expense in Q2 was $43 million.
In pharmaceuticals and biotechnology research and development is a risky business. Drugs can fail in stage I clinical trials, or in Phase II or Phase III trials. Good Phase III data can be disputed by the FDA, as we saw with Dendreon's Provenge. And drugs that have been on the market for years can be brought into question. Plenty of examples there.
So the strategy mapped out by Onyx management could just amount to blowing profits. Or it could be the beginning of a round of new profits. You can look at the data and make educated guesses, but you can't know for sure. If we could know for sure, we would not need double-blind clinical trials. Wise biotech investors want diversity. You can get this by spreading your bets over many small companies, or by investing in companies that have pipelines with multiple good candidates. You can bet some candidates will fail, but a company has, say, five candidates with good Phase II results, it is unlikely that all of them will fail Phase III trials. It is a probability-driven business.
Which brings us to carfilzomib for multiple myeloma. Onyx bought the potential therapy, partly for cash and partly for further payments if positive milestones are reached, because they looked at the early data and the commercial potential and thought they were making a good bet. They could have been wrong, they could still be wrong, but recent data pushes us strongly in the direction of being winners. You can learn more from the July 26, 2010 carfilzomib press release.
The hope is now that the FDA will approve carfilzomib for multiple myeloma based on the data already available. But if that does not happen, Onyx would just design and conduct a Phase III trial (or two). That is more expensive and takes longer, but it would still lead to approval if the data is good.
Add that to the possibility that Nexavar will prove to be a therapy for cancers beyond liver and kidney, and you have the potential that Onyx will be, in five years say, a company that you wish you had bought when the stock was cheap.
See also my Onyx (ONXX) Q2 2010 analyst call summary and my tools for biotechnology investors page.
Keep Diversified!
As I have discussed before, Onyx could have had a nice profitable business if they had just stuck to selling Nexavar for kidney and liver cancer. Nexavar sales are still growing, mainly internationally, since it has taken time to get approvals in many nations. But instead of ramping some profits, and the short term stock price, management decided to use cash to do studies of Nexavar for more forms of cancer, and to acquire companies or drugs to broaden their pipeline. R&D expense in Q2 was $43 million.
In pharmaceuticals and biotechnology research and development is a risky business. Drugs can fail in stage I clinical trials, or in Phase II or Phase III trials. Good Phase III data can be disputed by the FDA, as we saw with Dendreon's Provenge. And drugs that have been on the market for years can be brought into question. Plenty of examples there.
So the strategy mapped out by Onyx management could just amount to blowing profits. Or it could be the beginning of a round of new profits. You can look at the data and make educated guesses, but you can't know for sure. If we could know for sure, we would not need double-blind clinical trials. Wise biotech investors want diversity. You can get this by spreading your bets over many small companies, or by investing in companies that have pipelines with multiple good candidates. You can bet some candidates will fail, but a company has, say, five candidates with good Phase II results, it is unlikely that all of them will fail Phase III trials. It is a probability-driven business.
Which brings us to carfilzomib for multiple myeloma. Onyx bought the potential therapy, partly for cash and partly for further payments if positive milestones are reached, because they looked at the early data and the commercial potential and thought they were making a good bet. They could have been wrong, they could still be wrong, but recent data pushes us strongly in the direction of being winners. You can learn more from the July 26, 2010 carfilzomib press release.
The hope is now that the FDA will approve carfilzomib for multiple myeloma based on the data already available. But if that does not happen, Onyx would just design and conduct a Phase III trial (or two). That is more expensive and takes longer, but it would still lead to approval if the data is good.
Add that to the possibility that Nexavar will prove to be a therapy for cancers beyond liver and kidney, and you have the potential that Onyx will be, in five years say, a company that you wish you had bought when the stock was cheap.
See also my Onyx (ONXX) Q2 2010 analyst call summary and my tools for biotechnology investors page.
Keep Diversified!
Thursday, February 26, 2009
Onyx Pharmaceuticals Sees Strong 2009
Onyx Pharmaceuticals (ONXX) reported strong sales of Nexavar for the fourth quarter of 2008, at the February 23, 2009 analyst conference. The liver and kidney cancer therapy, sold though a joint venture with Bayer, resulted in $49.6 million in revenues for Onyx. This is up 24% from Q3 2008 and up 90% from the year earlier.
Onyx management sees global 2009 Nexavar sales by Bayer in the range of $850 to $875 million. Operating expenses are expected to rise about 5% for the year. After costs, Onyx splits the profits with Bayer. In Q4 profit ran at about 50% of revenues.
In the fourth quarter GAAP net income was negative $30.2 million. However, this included a one-time charge for acquired research expenses of $34 million.
Onyx just became profitable this year. Prior to 2008 it had been selling Nexavar for kidney cancer. Sales for liver cancer ramped up in 2008. A number of large national markets are in the process or approving Nexavar for liver cancer, or of approving reimbursements for it. As these mostly European and Asian markets come on line in 2009 and 2010 they will drive revenue growth.
The company is also hoping that Nexavar will prove to be effective in other kinds of cancer, including lung cancer, breast cancer, thyroid cancer, and melanoma. Clinical tests have given positive indications, but they won't know for sure until Phase III tests are completed and the FDA makes its rulings.
For a more detailed report on Q4, see my Onyx analyst conference summary for February 23, 2009.
The main risks for all drug companies are competition from new products and the discover of previously-unknown adverse effects.
Onyx certainly seems poised to turn into a cash cow, but the risks should not be discounted.
Keep diversified!
Onyx Pharmaceuticals
My main Onyx page
Onyx management sees global 2009 Nexavar sales by Bayer in the range of $850 to $875 million. Operating expenses are expected to rise about 5% for the year. After costs, Onyx splits the profits with Bayer. In Q4 profit ran at about 50% of revenues.
In the fourth quarter GAAP net income was negative $30.2 million. However, this included a one-time charge for acquired research expenses of $34 million.
Onyx just became profitable this year. Prior to 2008 it had been selling Nexavar for kidney cancer. Sales for liver cancer ramped up in 2008. A number of large national markets are in the process or approving Nexavar for liver cancer, or of approving reimbursements for it. As these mostly European and Asian markets come on line in 2009 and 2010 they will drive revenue growth.
The company is also hoping that Nexavar will prove to be effective in other kinds of cancer, including lung cancer, breast cancer, thyroid cancer, and melanoma. Clinical tests have given positive indications, but they won't know for sure until Phase III tests are completed and the FDA makes its rulings.
For a more detailed report on Q4, see my Onyx analyst conference summary for February 23, 2009.
The main risks for all drug companies are competition from new products and the discover of previously-unknown adverse effects.
Onyx certainly seems poised to turn into a cash cow, but the risks should not be discounted.
Keep diversified!
Onyx Pharmaceuticals
My main Onyx page
Tuesday, November 11, 2008
ONYX Positive Surprise for Investors
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 ...
Keep diversified!
More data:
My Onyx (ONXX) analyst conference summaries page
Onyx Pharmaceuticals
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 ...
Keep diversified!
More data:
My Onyx (ONXX) analyst conference summaries page
Onyx Pharmaceuticals
Monday, August 11, 2008
Onyx Pharmaceuticals Chooses the Long Run
Onyx Pharmaceuticals (ONXX) disappointed biotechnology investors with short time horizons when management announced that most of this year's potential profits from cancer drug Nexavar will be reinvested in research and development.
Nexavar (Sorafenib) has been approved by the FDA as a therapy for liver cancer (aka HCC) and kidney cancer (aka RCC). It is marketed through a partnership with Bayer. Under this arrangement Bayer sells the drug and tracks expenses for marketing and research and development costs. The net proceeds after costs are split, with Onyx receiving 50%. Until this year the revenues from Nexavar did not cover the costs, so Onyx received nothing. In addition Onyx had costs of its own, so it reported net losses.
However, global Nexavar sales for Q2 were $168.5 million, more than doubling Q2 2007 sales of $81.3 million. Mostly this reflects Nexavar being approved for use with liver cancer, in addition to its prior approval for kidney cancer. On a global scale most major nations now allow Nexavar for kidney cancer, but it is still being rolled out for liver cancer. All indications are that sales will continue to grow rapidly well into 2009.
Onyx received $30.2 million from Bayer, down from Q1 despite increased sales because of increased joint expenses. GAAP net income was reported as $4.5 million, because Onyx racked up $28.4 million in operating expenses outside the Bayer partnership. It also had some interest and investment income.
Today Onyx, with a stock price of $39.55, has a market capitalization of about $2.2 billion. That is a lot of market capitalization for $4.5 million net income in a quarter. If anything goes wrong (like serious, previously undetected adverse reactions), a lot of that value could disappear.
But Nexavar could also become a blockbuster. It is the first drug to show good results against HCC. It attacks cancer metabolic pathways at multiple points. Chances are good (but not certain) that it will have some effectiveness against a variety of cancers beyond liver and renal. Under FDA rules clinical tests have to be done for approval for each cancer type.
Of course Nexavar could fail with other cancers, either overall or by not doing as well as other therapies. So investing in R&D presents a risk, the possibility that profits from already-approved indications will mostly be drained away for further research.
On the other hand, a good result in a common form of cancer, say one of the common types of breast cancer, would propel the value of Nexavar through the stratosphere.
So I own some Onyx stock, but I realize it is a risky deal. All the more reason to keep a portfolio within the pharmaceutical or biotechnologies segments diversified.
It may be 2010 or later before Nexavar is approved for more cancer types. In the meantime the ramp for liver cancer should result in improved financial numbers. HCC is rare in the United States, where most liver cancer actually started as a different type of cancer. But it is one of the most common types of cancer in China and some other Asian nations. Approval to market Nexavar in China was recently granted.
Nexavar (Sorafenib) has been approved by the FDA as a therapy for liver cancer (aka HCC) and kidney cancer (aka RCC). It is marketed through a partnership with Bayer. Under this arrangement Bayer sells the drug and tracks expenses for marketing and research and development costs. The net proceeds after costs are split, with Onyx receiving 50%. Until this year the revenues from Nexavar did not cover the costs, so Onyx received nothing. In addition Onyx had costs of its own, so it reported net losses.
However, global Nexavar sales for Q2 were $168.5 million, more than doubling Q2 2007 sales of $81.3 million. Mostly this reflects Nexavar being approved for use with liver cancer, in addition to its prior approval for kidney cancer. On a global scale most major nations now allow Nexavar for kidney cancer, but it is still being rolled out for liver cancer. All indications are that sales will continue to grow rapidly well into 2009.
Onyx received $30.2 million from Bayer, down from Q1 despite increased sales because of increased joint expenses. GAAP net income was reported as $4.5 million, because Onyx racked up $28.4 million in operating expenses outside the Bayer partnership. It also had some interest and investment income.
Today Onyx, with a stock price of $39.55, has a market capitalization of about $2.2 billion. That is a lot of market capitalization for $4.5 million net income in a quarter. If anything goes wrong (like serious, previously undetected adverse reactions), a lot of that value could disappear.
But Nexavar could also become a blockbuster. It is the first drug to show good results against HCC. It attacks cancer metabolic pathways at multiple points. Chances are good (but not certain) that it will have some effectiveness against a variety of cancers beyond liver and renal. Under FDA rules clinical tests have to be done for approval for each cancer type.
Of course Nexavar could fail with other cancers, either overall or by not doing as well as other therapies. So investing in R&D presents a risk, the possibility that profits from already-approved indications will mostly be drained away for further research.
On the other hand, a good result in a common form of cancer, say one of the common types of breast cancer, would propel the value of Nexavar through the stratosphere.
So I own some Onyx stock, but I realize it is a risky deal. All the more reason to keep a portfolio within the pharmaceutical or biotechnologies segments diversified.
It may be 2010 or later before Nexavar is approved for more cancer types. In the meantime the ramp for liver cancer should result in improved financial numbers. HCC is rare in the United States, where most liver cancer actually started as a different type of cancer. But it is one of the most common types of cancer in China and some other Asian nations. Approval to market Nexavar in China was recently granted.
Wednesday, May 7, 2008
Onyx In The Black
Onyx Pharmaceutical reported GAAP net income yesterday for Q1 2008, a first. It has been a long road for Onyx, which was set up in 1992. Nexavar (sorafenib) for advanced kidney cancer (also referred to as RCC, renal cell carcinoma), was approved by the FDA in December 2005. It was developed with Bayer, which also does the sales and marketing.
Onyx reported no revenues for Q1. How, then, can it make a profit? All Nexavar sales are by Bayer. Onyx has always reported their joint venture as an expense item. Their joint expenses are deducted from sales. Half of the remaining profit or loss in the joint venture is transferred onto Onyx's statements. Until Q4 2007, this had been a loss. The joint venture loss was added to Onyx's own operating expenses to get their net loss.
In Q4, the joint venture netted Onyx $4.4 million from Bayer, but that was swamped by Onyx's own expenses. This latest quarter the joint venture was $37.7 million, quite a leap, and allowing Onyx to show an overall profit of $15.4 million, or $0.24 per share.
You might think the stock price would have jumped today, but it opened down. Maybe some traders just sold on the news. But probably this was a result of the guidance Onyx gave and its responses to analysts' questions about the guidance (See my Onyx Analyst Conference Summary for Q1 2008 for details). The low end of guidance for revenue for all 2008 was basically flat against Q1 revenue.
A couple of things might be going on here. This is the first time ever management has given forward guidance. They probably just wanted to give a number they are sure to beat. On the other hand growth in revenues has been heavily dependent on introducing Nexavar to new countries internationally. If for some reason introductions are delayed, it is conceivable that revenue growth could flatten out.
Right now Onyx is a one drug company, so growth depends on three things. Of course they will try to sell more Nexavar for liver and kidney cancer, for which they have received approval. They also have a number of trials underway for other types of cancers. Third, they may license other drug candidates for development.
Downside risks are the usual for a pharmaceutical development company. Some downside to Nexavar that did not show up in clinical trials could appear -- that is what happened to Amgen. And it might turn out that Nexavar is not good for anything besides renal and liver cancer. There has already been one disappointment, the failure of a study last year of Nexavar for non-small cell lung cancer.
Probably the future is bright for Onyx. I have it on my short list of potential buys.
Keep diversified.
More data:
Onyx Pharmaceuticals corporate web site
My main Onyx page
Onyx reported no revenues for Q1. How, then, can it make a profit? All Nexavar sales are by Bayer. Onyx has always reported their joint venture as an expense item. Their joint expenses are deducted from sales. Half of the remaining profit or loss in the joint venture is transferred onto Onyx's statements. Until Q4 2007, this had been a loss. The joint venture loss was added to Onyx's own operating expenses to get their net loss.
In Q4, the joint venture netted Onyx $4.4 million from Bayer, but that was swamped by Onyx's own expenses. This latest quarter the joint venture was $37.7 million, quite a leap, and allowing Onyx to show an overall profit of $15.4 million, or $0.24 per share.
You might think the stock price would have jumped today, but it opened down. Maybe some traders just sold on the news. But probably this was a result of the guidance Onyx gave and its responses to analysts' questions about the guidance (See my Onyx Analyst Conference Summary for Q1 2008 for details). The low end of guidance for revenue for all 2008 was basically flat against Q1 revenue.
A couple of things might be going on here. This is the first time ever management has given forward guidance. They probably just wanted to give a number they are sure to beat. On the other hand growth in revenues has been heavily dependent on introducing Nexavar to new countries internationally. If for some reason introductions are delayed, it is conceivable that revenue growth could flatten out.
Right now Onyx is a one drug company, so growth depends on three things. Of course they will try to sell more Nexavar for liver and kidney cancer, for which they have received approval. They also have a number of trials underway for other types of cancers. Third, they may license other drug candidates for development.
Downside risks are the usual for a pharmaceutical development company. Some downside to Nexavar that did not show up in clinical trials could appear -- that is what happened to Amgen. And it might turn out that Nexavar is not good for anything besides renal and liver cancer. There has already been one disappointment, the failure of a study last year of Nexavar for non-small cell lung cancer.
Probably the future is bright for Onyx. I have it on my short list of potential buys.
Keep diversified.
More data:
Onyx Pharmaceuticals corporate web site
My main Onyx page
Subscribe to:
Posts (Atom)
