Higher-than-Expected Loss at Onyx

Onyx Pharmaceuticals Inc.’s (ONXX) first quarter 2011 loss of 31 cents per share was a couple of cents wider than the Zacks Consensus Estimate and 21 cents wider than the year-ago loss. Despite an increase in revenues, higher operating expenses led to the wider loss.

Quarterly Details

Quarterly revenues increased 6.7% to $67.1 million, missing the Zacks Consensus Estimate of $71 million.

Revenues primarily comprise collaboration revenues under the company’s agreement with Bayer AG (BAYRY) for the development and marketing of Nexavar (sorafenib).

Global Nexavar sales, recorded by Bayer, amounted to $235.5 million in the first quarter of 2011, reflecting an increase of 10%.

Onyx Pharma and Bayer are looking to expand Nexavar’s label to boost sales. The companies recently started enrolling patients in a phase III trial (RESILIENCE) that will evaluate Nexavar in combination with capecitabine (oral chemotherapeutic agent) for the treatment of advanced breast cancer. Further, late-stage trials with the drug are ongoing for lung and thyroid cancer.

Research and development (R&D) spend went up 14.2% to $49.8 million, primarily due to higher expenses for the development of carfilzomib.

Selling, general and administrative (SG&A) expenses were 39.7% higher at $34.5 million due to an increase in employee headcount and related costs, legal costs, pre-launch costs for carfilzomib and increased facilities-related costs.

Pipeline Update

Onyx Pharma is on track to submit a rolling new drug application (NDA) for carfilzomib for the treatment of relapsed and refractory multiple myeloma. The company is preparing itself for the potential US launch of carfilzomib planned for 2012. The drug has been granted fast track status by the US Food and Drug Administration (FDA). Further, Onyx Pharma plans to initiate a mid-stage trial with ONX 0912 (a follow-on version of carfilzomib) in 2011.

The company is currently conducting a phase III study (FOCUS) with carfilzomib in patients with advanced myeloma. Onyx Pharma plans to use the results of this study to support its European marketing application.

Onyx Pharma is also studying carfilzomib in combination with Celgene Corp.’s (CELG) Revlimid and low-dose dexamethasone in early-stage patients. The phase III study, ASPIRE, is being conducted under the FDA’s special protocol program.

Our Take

We currently have a Neutral recommendation on Onyx Pharma. Going forward, we expect investor focus to remain on the approval status of carfilzomib.

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