Narrower Loss from Onyx, Guidance Maintained
Onyx Pharmaceuticals Inc. (ONXX) reported a loss of 32 cents per share in the first quarter of 2013, well below the Zacks Consensus Estimate of a loss of 59 cents and the year-ago loss of 79 cents.
Quarterly revenues were $145.5 million, well above the Zacks Consensus Estimate of $131 million and the year-ago revenues of $72.0 million. First quarter 2013 revenues included a $2 million milestone payment from Pfizer (PFE) 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 (BAYRY) 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 US 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-13.
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. First quarter 2013 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 (CELG) Pomalyst. The company said that novel agent use increased from more than 30% at the end of fourth quarter 2012 to more than 40% at the end of first quarter 2013. 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 the fourth quarter of 2012.
Stivarga royalty revenue came in at $9.2 million in the first quarter of 2013. The oncology product, on which Onyx Pharma receives a 20% royalty from Bayer, gained FDA approval in Sep 2012 for use in treatment-experienced metastatic colorectal cancer patients and for patients suffering from metastatic and/or unresectable gastrointestinal stromal tumors (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 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.
Our Take
Onyx Pharma’s first quarter results were well above expectations. Kyprolis continues to perform well and the strong uptake should continue thanks to existing prescribers, adoption by additional clinics and hospitals and new patient additions.
Onyx Pharma currently carries a Zacks Rank #1 (Strong Buy). The company has successfully transformed itself from a one-product company to a three-product company with several oncology indications. Kyprolis represents significant commercial potential and its performance should remove concerns regarding Onyx Pharma’s dependence on a single product for growth. We expect investor focus to remain on Kyprolis and Stivarga’s commercialization and pipeline updates.
Currently, Celgene, a Zacks Rank #2 (Buy) stock, also looks well positioned.
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