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conference date: November 7, 2006
for quarter ending: September 30, 2006 (3rd Quarter)
Overview: Rapidly increasing sales of Nexavar by Bayer, but still not enough to generate revenues yet for Onyx. Continuing to invest heavilly to get approvals in cancers other than kidney cancer.
Basic data:
$100,000 in revenues, down from $150,000 the prior quarter. Net loss of $20.1 million or .49 per share, greatly improved compared to the June quarter's loss of $31.5 million or .76 per share. Prior year net loss was $22.6 million or .64 per share.
Bayer booked Nexavar revenues of $45.4 million, up 41% from $32.2 million in the June 2006 quarter.
Cash and equivalents ended at $218.2 million, down $25.3 million sequentially.
Guidance:
Q4 development expense will return to Q2 levels. Nexavar revenues (to Bayer) to continue to increase.
Conference Highlights:
The net Nexavar expense for Onyx (which is paid to Bayer) was $3.6 million, down from $12.5 million sequentially. This accounted for much of the improvement in net loss this quarter.
Net loss includes $3.5 million or .08 per share for stock-based compensation expense.
Onyx and Bayer are continuing investing in Nexavar for additional indications including Phase III trials for Nexavar in advanced melanoma, liver cancer, renal, and lung cancer. Also building commercial distribution structure. R&D expense for the quarter was $7.6 million, which includes the R&D component of the $3.6 million due to Bayer for Nexavar expense.
Selling, general and administrative (SG&A) expense was $11.9 million.
Bayer did an excellent job obtaining approvals and pricing structures for Nexavar in Europe and other nations, as well as marketing. Sales are underway in Germany and France. Expects sales in Italy this quarter, with Britain and Spain coming along some time in 2007.
Believes Nexavar could be used in a wide variety of cancers. Results for current trial in advanced melanoma will be ready by end of 2006 or early 2007. Many additional cancer types being looked at, notably breast and lung cancer. Preliminary results are promising. Many combination studies with other drugs are underway or planned.
60% of Nexavar sales were in the U.S.
Q&A:
Guidance for Q4 expenses? Commercial side likely to increase as both R&D and distribution expense return to Q2 levels.
Sales in Europe began during the quarter, so did not show a full quarter's worth of revenue.
Renal cancer market size? Epidemiology used to be 12 months survival. With non-Nexavar drugs the survival times will be longer, so patients will see multiple courses of therapy. So does not want to speculate on total number of potential patients.
Phase III lung study? Started in Q1, cannot project a completion date because of survival endpoint.
Off label sales? Possibly some in lung and melanoma, but too small to be meaningful at this stage.
Inventory stocking for Europe? Would be nominal.
US sales flat quarter to quarter? Guided to stable in U.S. with growth globally, which will be the case for renal cell market.
Versus Avastin? Believes Nexavar will do well because costs one-half as much and is orally administered.
Expenses for R&D? Will be lumpy, certainly will not decrease in 2007.
Break-even for Nexavar with Bayer? Not targetting short-term profitability. Seeking to maximize by continue to seek new indications.
R&D costs for studies? New Phase II's will come on line as Phase III's wind down, then if good results Phase II's will lead to new Phase III's. New trials with collaborators may be more cost effective.
Liver cancer trial? Results potentially in late 2007.
Breast cancer trials? Have not finalized plan. Many segments to population. Particularly interested in treating as early as possible. In other diseases would like to move Nexavar to earlier stages as well.
Joint business likely to switch to positive next quarter? Product revenue versus costs, does expect revenue to increase, would not predict a net positive revenue for ONXX.
Ovarian cancer trials? Likely to lead to clinical trials; some data in 2007.
Phase II study combining with interferon? Will be reported in first half of 2007.
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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. Before making or terminating an investment you should always verify any factual basis of your decision.
Copyright 2006 William P. Meyers