Note: More details to come; changes are highlighted. Except where noted, and highlighted, no other section of this report has been updated.
Reason for Report: Flash Update: 2Q13 Earnings
Prev. Ed.: Jun 30; 1Q13 Earnings with new reports (brokers’ material considered till Jun 17)
Note: The tables below (Revenue, Margins, and Earnings per Share) contain material from fewer brokers than in the Valuation table. The extra figures in the Valuation table come from reports that did not have accompanying spreadsheet models.
Flash Update
Narrower Loss from Onyx – Aug 8, 2013
Onyx Pharmaceuticals Inc. reported an adjusted loss of $0.64 per share in the second quarter of 2013, well below the year-ago loss of $0.85. Excluding amortization expenses, second quarter 2013 loss was $0.57, below the Zacks Consensus Estimate of a loss of $0.63.
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 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.
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.
Details, other news update and broker comments will be provided in the next edition.
Portfolio Manager Executive Summary
Onyx Pharmaceuticals is a biopharmaceutical company focused on the development and commercialization of therapeutics for the treatment of cancer. Its lead product, Nexavar (sorafenib), is marketed for advanced kidney cancer and liver cancer. Bayer Healthcare is Onyx' partner for the development and commercialization of Nexavar. In Nov 2009, Onyx acquired Proteolix Inc., which added Kyprolis (carfilzomib) to its portfolio. Kyprolis (multiple myeloma) gained U.S. approval in late Jul 2012. Stivarga (regorafenib), another oncology product developed by Bayer, gained U.S. Food and Drug Administration (FDA) approval for the treatment of metastatic colorectal cancer (mCRC) and metastatic and/or unresectable gastrointestinal stromal tumors (GIST).
Of the 14 firms providing ratings on Onyx, 12 (85.7%) gave positive ratings and 2 (14.3%) gave neutral ratings. Notably, none of the firms are negative on the stock.
Positive or equivalent outlook (12/14 firms): The bullish firms believe that beyond liver and kidney cancer, additional upside from Nexavar will come as and when the drug gets approved for other indications. Meanwhile, the firms are pleased by the U.S. approval of Kyprolis and Stivarga and the strong launch trajectory of both the drugs. They believe Kyprolis represents blockbuster potential. These firms are also positive about the company’s settlement with Bayer for Stivarga. They believe that this settlement makes Onyx an attractive takeout target. The firms view Onyx as a growth story.
Neutral or equivalent outlook (2/14 firms): While the firms are pleased by Kyprolis and Stivarga’s launch trajectory, they remain concerned about the company’s high spend and potential competition for Kyprolis in the form of Celgene’s Pomalyst. The firms believe the stock is fairly valued at current levels.
Apr 5, 2013
Overview
Onyx Pharmaceuticals Inc., headquartered in South San Francisco, Calif., is a biopharmaceutical company engaged in the discovery and development of small molecule drugs for the treatment of cancer. Its primary product is Nexavar, which inhibits proliferation of cancer cells and angiogenesis. Onyx gained U.S. approval for two products in 2012 – Kyprolis (Jul 2012) and Stivarga (Sep 2012).
For more information on the company, visit its website http://www.onyx.com/.
The firms have identified the following issues for evaluating the investment merits of Onyx:
Key Positive Arguments / Key Negative ArgumentsNexavar is currently approved for liver cancer and advanced kidney cancer. It is being studied for several other indications. Approval for any of these indications will boost the top line. / Nexavar faces competition from Pfizer’s Sutent. The approval of Sutent eliminated two key advantages previously enjoyed by Nexavar, an extended first-mover advantage and a broad label.
The acquisition of Proteolix has added Kyprolis to Onyx’ portfolio, which has significant potential. Firms expect Kyprolis peak sales to exceed a billion dollars. / Onyx is heavily dependent on its partner, Bayer. Any conflict leading to the termination of the agreement will influence the stock adversely.
The settlement of the lawsuit with Bayer for Stivarga has removed a major overhang for Onyx.
Note: The company’s financial year coincides with the calendar year.
Jan 9, 2013
Long-Term Growth
Onyx is focused on expanding Nexavar’s label as well as investing in its pipeline. The company is currently exploring the drug’s effectiveness in treating other types of cancer. This represents a potential ongoing positive catalyst for Onyx, given the possibility of a successful breakthrough in treating various types of tumors. With Nexavar’s growth slowing down, approval for additional indications would be a major boost for the company.
Meanwhile, Onyx has successfully transformed itself from a one product company to a three product company. The approval of Kyprolis was a major positive for the company. Kyprolis has immense commercial potential. Onyx believes Kyprolis could achieve blockbuster status. Some firms expect peak sales of more than $1 billion.
The third product in Onyx’s portfolio is Stivarga which gained FDA approval for the treatment of mCRC and metastatic and/or GIST. Stivarga also represents significant commercial potential for Onyx.
With Kyprolis and Stivarga in its portfolio, Onyx could be an attractive takeover candidate. In fact, on Jun 30, 2013, Onyx announced that it had received and rejected a takeover proposal from Amgen. Amgen had extended an offer to acquire Onyx for $120 per share in cash. However, Onyx’ Board rejected the offer on the grounds that it is undervalued and not in the best interests of the company. Along with announcing the rejection of the Amgen proposal, Onyx announced that it is available for sale.
Apr 5, 2013
Target Price/Valuation
Rating DistributionPositive / 85.7%↓
Neutral / 14.3%↑
Negative / 0.0%
Avg. Target Price / $107.00↓
Digest High / $115.00↑
Digest Low / $93.00
No. of firms with TP/Total / 14/14
Risks to target price include:
1. Setbacks associated with Nexavar’s label expansion
2. Slower-than-expected ramp of Kyprolis and Stivarga
3. Unexpected competition for Nexavar, Kyprolis and Stivarga
4. Lower-than-expected sales of Nexavar
Recent Events
Amgen Proposal Rejected – Jun 30, 2013
Onyx announced that it had received and rejected a takeover proposal from Amgen. Amgen had extended an offer to acquire Onyx for $120 per share in cash. However, Onyx’ Board rejected the offer on the grounds that it is undervalued and not in the best interests of the company. Along with announcing the rejection of the Amgen proposal, Onyx announced that it is available for sale.
Narrower Loss from Onyx, Guidance Maintained – May 7, 2013
Onyx Pharmaceuticals Inc. reported a loss of $0.32 per share in 1Q13, well below the Zacks Consensus Estimate of a loss of $0.59 and the year-ago loss of $0.79. Excluding the impact of stock-based compensation expense, the company reported 1Q13 loss of $0.19 per share compared to the year-ago loss of $0.68.
Quarterly revenues were $145.5 million, well above the Zacks Consensus Estimate of $131 million and the year-ago revenues of $72.0 million. 1Q13 revenues included a $2 million milestone payment from Pfizer in connection with the initiation of a phase III study with oncology candidate, palbociclib.
Quarterly Details
Onyx Pharma’s revenues include royalties received under its collaboration with Bayer for the development and marketing of Nexavar, Kyprolis sales and royalties on Stivarga.
Global Nexavar sales (excluding Japan), recorded by Bayer, amounted to $198.5 million in the reported quarter, down 5.3%. Performance was affected by inventory reductions at specialized oncology pharmacies in the U.S. and lower sales in Europe. However, Nexavar continued to perform well in Asia-Pacific and benefited from continued improvement in commercial margin.
Onyx Pharma and Bayer are looking to expand the drug’s label to boost sales. Late-stage trials with Nexavar are ongoing for breast cancer (RESILIENCE study results due in the first half of 2014). The company also intends to file for Nexavar’s approval for thyroid cancer in mid-2013.
Kyprolis, which gained FDA approval in Jul 2012, is off to a strong start with sales coming in at $64.0 million in the March quarter, significantly above $45.3 million and $18.6 million in the preceding two quarters. 1Q13 sales included demand sales of $58.1 million. Sales included a favorable gross-to-net accrual adjustment of $5.9 million. Sales also included deferred revenues of $9.3 million in the form of Kyprolis inventory at distributor level.
Onyx Pharma reported an expansion in the number of patients receiving novel agents in the third line plus setting in response to the continued adoption of Kyprolis and the entry of Celgene’s Pomalyst. The company said that novel agent use increased from more than 30% at the end of 4Q12 to more than 40% at the end of 1Q13. Additional expansion is expected.
At the end of the reported quarter, about 2,100 unique accounts had ordered Kyprolis since launch, up from 1,700 in 4Q12.
Stivarga royalty revenues came in at $9.2 million in 1Q13. The oncology product, on which Onyx Pharma receives a 20% royalty from Bayer, gained FDA approval in Sep 2012 for use in treatment-experienced mCRC patients and for patients suffering from metastatic and/or unresectable GIST in Feb 2013.
Quarterly research and development (R&D) expenses increased 13.2% to $91.3 million. Selling, general and administrative (SG&A) expenses climbed 86.3% to $72.5 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’s 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.
Revenue
The company reported total revenue of $145.5 million in 1Q13, up 102% y/y. 1Q13 total revenue was above the expectations of a few firms. The Zacks Digest average total revenue for 1Q13 was in line with the company’s report.
Revenue($ in million) / 1Q12A / 2012A / 1Q13A / 2Q13E / 3Q13E / 4Q13E / 2013E / 2014E / 2015E
Digest
Average / $72.0 / $362.2 / $145.5 / $150.2↑ / $159.3↑ / $166.9 / $621.3↑ / $864.4↑ / $1,226.3
Digest High / $72.0 / $362.2 / $145.5 / $159.0↑ / $167.4↓ / $179.2 / $650.5↑ / $885.8 / $1,316.5
Digest Low / $72.0 / $362.2 / $145.5 / $144.6↑ / $149.2↑ / $152.7 / $590.0↑ / $832.9↑ / $1,151.0
Specific Products