Onyx Loss up on Wider Costs - Analyst Blog
August 08 2012 - 3:15AM
Zacks
Onyx Pharmaceuticals
Inc. (ONXX) reported second quarter 2012 loss per share of
85 cents, wider than the Zacks Consensus Estimate of a loss of 81
cents and the year-ago loss of 56 cents per share. Despite higher
revenues, increased operating expenses led to the wider loss.
Quarterly revenues climbed 7% to
$72.7 million, just above the Zacks Consensus Estimate of $72
million.
Quarterly
Details
Onyx Pharma books revenues entirely
from royalties received from its collaboration with
Bayer (BAYRY) for the development and marketing of
Nexavar. The drug is currently marketed worldwide as a treatment
for unresectable liver cancer and advanced kidney cancer.
Global Nexavar sales, recorded by
Bayer, amounted to $214.5 million in the reported quarter, up 3.8%.
Impressive sales in the US ($65 million), along with increased
demand in emerging markets, especially Latin America and Asia
Pacific, led to the upside.
Onyx Pharma and Bayer are looking
to expand the drug’s label to boost sales. Late-stage trials with
Nexavar are ongoing for lung and thyroid cancer.
Quarterly research and development
(R&D) expenses went up 21.1% to $76.4 million, primarily due to
increased investment on the development, manufacturing and launch
of Kyprolis (carfilzomib).
Selling, general and administrative
(SG&A) expenses climbed 28% to $48.9 million due to investment
in commercial infrastructure and pre-launch expenses for
Kyprolis.
Onyx Pharma was in the news
recently with the US Food and Drug Administration (FDA) approving
the company’s multiple myeloma (MM) candidate, Kyprolis
(carfilzomib). Kyprolis has been approved for use in
treatment-experienced MM patients who have received at least two
prior therapies, including Johnson & Johnson’s
(JNJ) Velcade (bortezomib) and an immunomodulatory agent and whose
disease has progressed on or within 60 days of completion of the
last therapy. Onyx has also begun shipments of Kyprolis following
the FDA approval.
Kyprolis is currently in a phase
III study (ASPIRE), which is being conducted to assess the clinical
benefit of the candidate with interim data expected to be out by
first half of 2013. The study is being conducted under the FDA’s
Special Protocol Assessment (SPA) program. The FOCUS trial which
studies Kyprolis in relapsed and refractory multiple myeloma is
expected to complete enrollment of patients in the first quarter of
2013. The company also initiated a head-to-head study
(ENDEAVOR) in multiple myeloma patients.
We note that Onyx is liable to make
an $80 million milestone payment to former Proteolix Inc.
shareholders following the accelerated approval of Kyprolis in the
US. While $63 million will be paid in the form of Onyx’s stock, the
balance will be paid in cash.
Meanwhile, Bayer and Onyx Pharma’s
oncology candidate, regorafenib, recently received priority review
status in the US, for the treatment of metastatic colorectal cancer
(mCRC) in patients whose disease has progressed despite prior
treatment. Onyx expects a regulatory decision from the FDA and EU
in the fourth quarter 2012 and the first half of 2013 respectively.
Bayer also plans to file submission for an additional indication of
regorafenib in the US in the second half of 2012.
Onyx Pharma is entitled to receive
a 20% royalty on any future worldwide net sales of regorafenib in
oncology. Bayer is also seeking regulatory approval for regorafenib
in the EU.
Outlook
Revised
Additionally the company revised
its expense guidance for 2012. It now expects R&D expenses
(excluding stock-based compensation) to be in the range of $305
million to $320 million instead of $270 million to $290 million.
Also the revised SG&A expenses guidance (excluding stock-based
compensation) is expected to range between $210 million and $220
million instead of $170 million - $180 million.
Our Take
The speedy approval of Kyprolis is
a major positive for Onyx Pharma. Kyprolis’ approval should remove
concerns about the company’s dependence on Nexavar for growth. We
currently have a Neutral recommendation on Onyx Pharma. The stock
carries a Zacks #3 Rank (Hold rating) in the short run.
BAYER A G -ADR (BAYRY): Free Stock Analysis Report
JOHNSON & JOHNS (JNJ): Free Stock Analysis Report
ONYX PHARMA INC (ONXX): Free Stock Analysis Report
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