Non-GAAP Net Income of $22 Million, 34% Increase Over Third Quarter
2008 EMERYVILLE, Calif., Nov. 3 /PRNewswire-FirstCall/ -- Onyx
Pharmaceuticals, Inc. (NASDAQ:ONXX) today reported its financial
results for the third quarter 2009. Global Nexavar net sales as
reported by Onyx's collaborator Bayer HealthCare Pharmaceuticals,
or Bayer, were $229.2 million for the third quarter 2009, a 27%
increase compared to $180.9 million in the same period in 2008.
Onyx and Bayer are marketing and developing Nexavar® (sorafenib)
tablets, an anticancer therapy currently approved for the treatment
of liver cancer and advanced kidney cancer in the U.S., European
Union, Japan and other territories. Onyx reported non-GAAP net
income of $22.2 million, or $0.35 per diluted share, for the third
quarter 2009 compared to non-GAAP net income of $16.6 million, or
$0.29 per diluted share, for the same period in 2008. Non-GAAP net
income excludes employee stock-based compensation expense, non-cash
imputed interest expense related to the application of Accounting
Standards Codification ("ASC") Subtopic 470-20 (formerly known as
Financial Accounting Standards Board Staff Position, or FSP APB,
14-1), acquisition related transaction costs and a payment to BTG
International Limited in connection with the achievement of a
development milestone in the ONX 0801 program. Net income for the
third quarter 2009 reflected growth in Nexavar sales and lower
Nexavar commercial expenses, offset by expanded clinical
development efforts, lower investment income and interest expense
on the convertible senior notes issued in August 2009. On a GAAP
basis, Onyx reported net income of $8.2 million, or $0.14 per
diluted share, for the third quarter 2009 compared to net income of
$12.2 million, or $0.21 per diluted share, in the same period in
2008. A description of the non-GAAP calculations and reconciliation
to comparable GAAP measures is provided in the accompanying table
entitled "Reconciliation of GAAP to Non-GAAP Net Income."
"Delivering another quarter of strong financial performance points
to our success in building Nexavar as an oncology blockbuster and
demonstrates our commitment to executing on our strategic
priorities," said N. Anthony Coles, M.D., president and chief
executive officer of Onyx. "As the next step in our plans to grow
the company strategically, we recently announced our intention to
acquire Proteolix Inc., a leader in the science of proteasome
inhibition. Through continued investigation of Nexavar in a broad
array of additional tumor types and investment in a growing number
of pipeline candidates, we are creating multiple opportunities for
additional value creation." Revenue from Collaboration Agreement
For the third quarter 2009, Onyx reported revenue from its Nexavar
collaboration agreement of $69.1 million compared to $50.8 million
for the same period in 2008. The 36% increase in revenue from
collaboration agreement between periods resulted from an increase
in Nexavar sales and royalty revenue and a decrease in Nexavar
commercial expenses. Operating Expenses Onyx recorded research and
development expenses of $35.6 million in the third quarter 2009,
compared to $21.8 million for the same period in 2008. Higher
research and development expenses in the third quarter 2009 were
primarily due to planned increases in the development program for
Nexavar across additional tumor types, such as thyroid, colorectal
and adjuvant liver cancer and Onyx's costs to further develop ONX
0801, including a milestone payment of $7.0 million to BTG
International Limited. Selling, general and administrative expenses
were $23.4 million in the third quarter 2009, compared to $19.3
million for the same period in 2008. Higher selling, general and
administrative expenses were primarily due to headcount-related
expenses to support Onyx's growth. Investment Income Investment
income was $1.0 million for the third quarter 2009 compared to $2.8
million in the same period in 2008. The decrease was primarily due
to lower effective interest rates as a result of market conditions
as well as a change in the asset allocation of Onyx's investment
portfolio. Interest Expense Interest expense of $2.3 million for
the third quarter 2009 relates to the 4.0% convertible senior notes
due 2016 issued in August 2009, and includes non-cash imputed
interest expense of $1.0 million as a result of the application of
ASC Subtopic 470-20 (formerly known as FSP APB 14-1). Cash, Cash
Equivalents and Marketable Securities At September 30, 2009, cash,
cash equivalents, and current and noncurrent marketable securities
were $843.1 million, compared to $458.0 million at December 31,
2008. This increase was primarily due to net proceeds of debt and
equity financings in August 2009 and cash generated from
operations. Nine-Month Results Nexavar net sales, as recorded by
Bayer, were $608.3 million and $501.3 million for the nine months
ended September 30, 2009 and 2008, respectively. Non-GAAP net
income for the nine months ended September 30, 2009 was $45.6
million, or $0.73 per diluted share, compared to non-GAAP net
income of $45.9 million, or $0.81 per diluted share for the same
period in 2008, excluding employee stock-based compensation
expense, non-cash imputed interest expense related to the
application of ASC Subtopic 470-20 (formerly known as FSP APB
14-1), acquisition related transaction costs and a payment to BTG
International Limited in connection with the achievement of a
development milestone in the ONX 0801 program. A description of the
non-GAAP calculations is provided below in the accompanying table
entitled "Reconciliation of GAAP to Non-GAAP Net Income." For the
nine months ended September 30, 2009, on a GAAP basis Onyx recorded
net income of $21.7 million, or $0.37 per diluted share, compared
with a net income of $32.1 million, or $0.57 per diluted share, for
the same period in 2008. Management Conference Call Today Onyx will
host a teleconference and webcast to provide a general business
overview and discuss financial results. The event will begin at
5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) on November 3,
2009. The live webcast will be available at:
http://www.onyx-pharm.com/view.cfm/32/Event-Calendar or by dialing
847-619-6547 and using the passcode 25674242. A replay of the
presentation will be available on the Onyx website or by dialing
630-652-3044 and using the passcode 25674242 approximately one hour
after the teleconference concludes. The replay will be available
through December 3, 2009. About Onyx Pharmaceuticals, Inc. Onyx
Pharmaceuticals, Inc. is a biopharmaceutical company committed to
improving the lives of people with cancer. The company, in
collaboration with Bayer HealthCare Pharmaceuticals, is developing
and marketing Nexavar® (sorafenib) tablets, a small molecule drug.
Nexavar is currently approved for the treatment of liver cancer and
advanced kidney cancer. Additionally, Nexavar is being investigated
in several ongoing trials in a variety of tumor types. For more
information about Onyx, visit http://www.onyx-pharm.com/. Nexavar®
(sorafenib) tablets is a registered trademark of Bayer HealthCare
Pharmaceuticals. This news release contains "forward-looking
statements" of Onyx within the meaning of the federal securities
laws. These forward-looking statements include, without limitation,
statements regarding sales trends and commercial activities, the
timing, progress and results of clinical development, regulatory
filings and actions and Onyx's anticipated acquisition of
Proteolix, Inc. and its lead product candidate, carfilzomib. These
statements are subject to risks and uncertainties that could cause
actual results and events to differ materially from those
anticipated, including, but not limited to, risks and uncertainties
related to: Nexavar being our only approved product; competition;
failures or delays in our clinical trials; dependence on our
collaborative relationship with Bayer; market acceptance and the
rate of adoption of our products; pharmaceutical pricing and
reimbursement pressures; serious adverse side effects, if they are
associated with Nexavar; government regulation; possible failure to
realize the anticipated benefits of business acquisitions or
strategic investments; protection of our intellectual property; the
indebtedness incurred through the sale of our 4.0% convertible
senior notes due 2016; product liability risks; and the
consummation and anticipated benefits of the proposed acquisition
of Proteolix. Reference should be made to Onyx's Annual Report on
Form 10-K for the year ended December 31, 2008, filed with the
Securities and Exchange Commission, under the heading "Risk
Factors" for a more detailed description of these and other risks,
as well as the company's subsequent quarterly reports on Form 10Q.
Readers are cautioned not to place undue reliance on these
forward-looking statements that speak only as of the date of this
release. Onyx undertakes no obligation to update publicly any
forward-looking statements to reflect new information, events, or
circumstances after the date of this release except as required by
law. (See attached tables.) ONYX PHARMACEUTICALS, INC. CONDENSED
STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
(unaudited) Three Months Ended Nine Months Ended September 30,
September 30, -------------- ------------------ 2009 2008 2009 2008
---- ---- ---- ---- Revenue: Revenue from collaboration agreement
$69,137 $50,766 $183,074 $144,693 ------- ------- -------- --------
Total operating revenue 69,137 50,766 183,074 144,693 Operating
expenses: Research and development (1) 35,635 21,792 92,478 63,845
Selling, general and administrative (1) 23,440 19,319 68,899 58,985
------ ------ ------ ------ Total operating expenses 59,075 41,111
161,377 122,830 ------ ------ ------- ------- Income from
operations 10,062 9,655 21,697 21,863 Investment income 1,015 2,763
3,108 10,696 Interest expense (2,255) - (2,255) - ------ -----
------ ----- Income before provision for income taxes 8,822 12,418
22,550 32,559 Provision for income taxes 589 175 878 424 --- ---
--- --- Net income $8,233 $12,243 $21,672 $32,135 ====== =======
======= ======= Net income per share: Basic $0.14 $0.22 $0.37 $0.58
===== ===== ===== ===== Diluted (2) $0.14 $0.21 $0.37 $0.57 =====
===== ===== ===== Shares used in computing net income per share:
Basic 60,248 56,197 58,201 55,755 ====== ====== ====== ======
Diluted (2) 60,624 57,194 58,511 56,773 ====== ====== ====== ======
(1) Includes employee stock-based compensation charges of: Research
and development $517 $694 $2,286 $2,083 Selling, general, and
administrative 4,455 3,646 12,647 11,726 ----- ----- ------ ------
Total employee stock- based compensation $4,972 $4,340 $14,933
$13,809 ====== ====== ======= ======= (2) Computation of diluted
net income per share: Net income $8,233 $12,243 $21,672 $32,135
Add: Interest and issuance costs related to dilutive convertible
senior notes (3) - - - - ----- ----- ----- ----- Net income -
diluted $8,233 $12,243 $21,672 $32,135 ====== ======= =======
======= Basic shares 60,248 56,197 58,201 55,755 Dilutive effect of
options and restricted stock 376 997 310 1,018 Dilutive effect of
convertible senior notes (3) - - - - ----- ----- ----- -----
Diluted shares 60,624 57,194 58,511 56,773 ====== ====== ======
====== (3) Under the "if-converted" method, potential common shares
related to the Company's convertible senior notes were not included
in diluted net income per share for the three and nine months ended
September 30, 2009 because their effect would be anti-dilutive.
ONYX PHARMACEUTICALS, INC. CALCULATION OF REVENUE FROM
COLLABORATION AGREEMENT (In thousands, unaudited) Three Months Nine
Months Ended September Ended September 30, 30, ----------------
---------------- 2009 2008 2009 2008 ---- ---- ---- ---- Nexavar
product revenue, net (as recorded by Bayer) $229,243 $180,887
$608,295 $501,303 ======== ======== ======== ======== Revenue
subject to profit sharing (as recorded by Bayer) $199,774 $168,141
$548,093 $476,584 Combined cost of goods sold, distribution,
selling, general and administrative expenses 76,309 79,362 222,531
222,200 ------ ------ ------- ------- Combined collaboration
commercial profit $123,465 $88,779 $325,562 $254,384 ========
======= ======== ======== Onyx's share of collaboration commercial
profit $61,732 $44,390 $162,781 $127,192 Reimbursement of Onyx's
shared marketing expenses 5,342 5,484 16,079 15,771 Royalty revenue
2,063 892 4,214 1,730 ----- --- ----- ----- Revenue from
collaboration agreement $69,137 $50,766 $183,074 $144,693 =======
======= ======== ======== ONYX PHARMACEUTICALS, INC. RECONCILIATION
OF GAAP TO NON-GAAP NET INCOME (In thousands, except per share
amounts) (unaudited) Three Months Nine Months Ended Ended September
30, September 30, -------------- ------------- 2009 2008 2009 2008
---- ---- ---- ---- GAAP net income per share - basic $0.14 $0.22
$0.37 $0.58 GAAP net income per share - diluted (4) $0.14 $0.21
$0.37 $0.57 GAAP net income $8,233 $12,243 $21,672 $32,135 Non-GAAP
adjustments: Employee stock-based compensation 4,972 4,340 14,933
13,809 Imputed interest related to the application of ASC 470-20
1,027 - 1,027 - Acquisition related transaction costs 1,011 - 1,011
- Milestone payments 7,000 - 7,000 - ----- ----- ----- -----
Non-GAAP net income (5) $22,243 $16,583 $45,643 $45,944 =======
======= ======= ======= Computation of non-GAAP diluted net income
Non-GAAP net income (5) $22,243 $16,583 $45,643 $45,944 Add:
Interest and issuance costs related to dilutive convertible senior
notes (6) 1,228 - 1,228 - ----- ----- ----- ----- Non-GAAP net
income - diluted (5) $23,471 $16,583 $46,871 $45,944 =======
======= ======= ======= Computation of non-GAAP diluted shares
Basic shares 60,248 56,197 58,201 55,755 Adjustments for dilutive
effects: Dilutive effect of options and restricted stock 376 997
310 1,018 Dilutive effect of convertible senior notes (6) 5,801 -
5,801 - ----- ----- ----- ----- Non-GAAP diluted shares (5) 66,425
57,194 64,312 56,773 ====== ====== ====== ====== Non-GAAP net
income per share (5) $0.37 $0.30 $0.78 $0.82 Non-GAAP net income
per share - diluted (5) $0.35 $0.29 $0.73 $0.81 (4) Under the
"if-converted" method, dilutive potential common shares related to
the Company's convertible senior notes were not included in GAAP
diluted net income per share for the three and nine months ended
September 30, 2009 because their effect would be anti-dilutive. (5)
This press release includes the following non-GAAP financial
measures: non-GAAP net income and non-GAAP net income per share.
The foregoing table reconciles these non-GAAP measures to the most
comparable financial measures calculated in accordance with GAAP.
Onyx management uses these non-GAAP financial measures to monitor
and evaluate our operating results and trends on an on-going basis
and internally for operating, budgeting and financial planning
purposes. Onyx management believes the non-GAAP information is
useful for investors by offering them the ability to better
identify trends in our business and better understand how
management evaluates the business. These non-GAAP measures have
limitations, however, because they do not include all items of
income and expense that affect Onyx. These non-GAAP financial
measures that management uses are not prepared in accordance with,
and should not be considered in isolation of, or an as alternative
to, measurements required by GAAP. These non-GAAP financial
measures exclude the following items from GAAP net income and
diluted EPS: Employee stock-based compensation: Onyx management
excludes the effects of employee stock-based compensation because
of varying available valuation methodologies, subjective
assumptions and the variety of award types; such exclusion
facilitates comparisons of Onyx's operating results to peer
companies. Imputed interest related to the application of ASC
Subtopic 470-20: Onyx management excludes the effects of imputed
interest related to the Company's convertible senior notes due 2016
because this expense is non-cash; such exclusion facilitates
comparisons of Onyx's cash operating results to peer companies.
Milestone payments and acquisition related transaction costs: Onyx
management excludes the effects of milestone payments and
acquisition related transaction costs as they do not relate to the
normal and recurring transactions of our business; such exclusions
allow for a better representation of the ongoing economics of the
business, facilitates comparison to peer companies and is
reflective of how Onyx management internally manages the business.
(6) Under the "if-converted" method, potential common shares
related to the Company's convertible senior notes were included in
non-GAAP net income per share - diluted for the three and nine
months ended September 30, 2009 because their effect is dilutive.
ONYX PHARMACEUTICALS, INC. CONDENSED BALANCE SHEETS (In thousands)
Sep. 30, Dec. 31, 2009 2008 (unaudited) (7) ------------ --------
Assets Cash, cash equivalents and marketable securities $804,670
$418,424 Other current assets 58,833 43,635 ------ ------ Total
current assets 863,503 462,059 Property and equipment, net 3,124
3,363 Marketable securities, non-current 38,410 39,622 Other assets
9,014 4,723 ----- ----- Total assets $914,051 $509,767 ========
======== Liabilities and stockholders' equity Current liabilities
22,888 33,304 Convertible senior notes due 2016 141,559 - Other
long-term liabilities 986 1,263 Stockholders' equity 748,618
475,200 ------- ------- Total liabilities and stockholders' equity
$914,051 $509,767 ======== ======== (7) Derived from the audited
financial statements included in the Company's Annual Report on
Form 10-K for the year-ended December 31, 2008. DATASOURCE: Onyx
Pharmaceuticals, Inc. CONTACT: Julie Wood, Vice President, Investor
Relations of Onyx Pharmaceuticals, Inc., +1-510-597-6505 Web Site:
http://www.onyx-pharm.com/
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