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ONYX Pharmaceuticals Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 6, 2012 05:27PM
ONYX Pharmaceuticals Inc. (ONXX) filed Quarterly Report for the period ended 2012-06-30. Onyx Pharmaceuticals, Inc. has a market cap of $4.53 billion; its shares were traded at around $72.27 with and P/S ratio of 10.1.
Highlight of Business Operations:Worldwide sales of Nexavar, as recorded by Bayer, in countries around the world increased from $245.7 million and $481.1 million for the three months and six months ended June 30, 2011 to $251.2 million and $494.5 million for the three months and six months ended June 30, 2012. The growth is driven primarily by the increased sales in the U.S. and Asia-Pacific region.
Nexavar was our only marketed product during the three and six month periods ended June 30, 2012 and 2011. In accordance with our collaboration agreement with Bayer, Bayer recognizes all revenue from the sale of Nexavar. As such, for the three months and six months ended June 30, 2012 and 2011, we reported no product revenue related to Nexavar. Nexavar revenues subject to profit sharing as recorded by Bayer were $214.5 million and $424.2 million for the three months and six months ended June 30, 2012, respectively and $206.6 million and $399.8 million for the same periods in 2011, primarily from sales in the United States, the European Union, Asia-Pacific and other territories worldwide. This represents an increase of $7.9 million, or 4% and $24.2 million, or 6%, over Nexavar net sales recorded by Bayer for the three and six months ended June 30, 2011, respectively.
Revenue from collaboration agreement was $72.7 million and $144.7 million for the three months and six months ended June 30, 2012, respectively and $68.0 million and $135.1 million for the three months and six months ended June 30, 2011, respectively. The increase in revenue from collaboration for the three months and six months ended June 30, 2012 from the same periods in 2011 was primarily driven by higher sales in various regions around the world which was partially offset by a decline in the
Our share of the research and development costs incurred for sorafenib include 95% and 96% of the costs incurred by Bayer for sorafenib for the three months and six months ended June 30, 2012, respectively and 93% and 92% of the costs incurred by Bayer for sorafenib for the three months and six months ended June 30, 2011, respectively. As a result of the cost sharing arrangement between us and Bayer for research and development costs, there were net reimbursable amounts of $14.0 million, and $38.6 million due to Bayer for the periods ended June 30, 2012 and December 31, 2011, respectively. Such amounts were recorded based on invoices and estimates we receive from Bayer. When such invoices have not been received, we must estimate the amounts owed to Bayer based on discussions with Bayer. For the periods covered in the financial statements presented, there have been no significant or material differences between actual amounts and estimates. However, if we underestimate or overestimate the amounts owed to Bayer, we may need to adjust these amounts in a future period, which could have an effect on earnings in the period of adjustment. As of June 30, 2012, our share of the sorafenib development costs incurred to date under the collaboration was $728.0 million.
At June 30, 2012, our investment portfolio includes $22.9 million AAA rated securities with an auction reset feature (auction rate securities) that are collateralized by student loans. Since February 2008, these types of securities have experienced failures in the auction process. However, a limited number of these securities have been redeemed at par by the issuing agencies. As a result of the auction failures, interest rates on these securities reset at penalty rates linked to LIBOR or Treasury bill rates. The penalty rates are generally higher than interest rates set at auction. Based on the overall failure rate of these auctions, the frequency of the failures, the underlying maturities of the securities, a portion of which are greater than 30 years, and our belief that the market for these student loan collateralized instruments may take in excess of twelve months to fully recover, we have classified the auction rate securities with a par value of $23.8 million as non-current marketable securities on the accompanying Consolidated Balance Sheet. We have determined the fair value to be $22.9 million for these securities, based on a discounted cash flow model, and have decreased the carrying value of these marketable securities by $0.9 million through accumulated other comprehensive income (loss) instead of earnings because we have deemed the impairment of these securities to be temporary. Further adverse developments in the credit market could result in an impairment charge through earnings in the future. The discounted cash flow model used to value these securities is based on a specific term and liquidity assumptions. An increase or decrease of 1% in the discount rate would have a $0.9 million charge in the auction rate securities valuation. An increase or decrease of 1 year in the expected holding period would have a $0.2 million charge in the auction rate securities valuation.
Stocks Discussed: ONXX,