ONYX Pharmaceuticals Inc. Reports Operating Results (10-Q)
Onyx Pharmaceuticals Inc. has a market cap of $1.64 billion; its shares were traded at around $26.49 with a P/E ratio of 153.8 and P/S ratio of 6.5. ONXX is in the portfolios of Stanley Druckenmiller of Duquesne Capital Management, LLC, Edward Owens of Vanguard Health Care Fund, Columbia Wanger of Columbia Wanger Asset Management, Paul Tudor Jones of The Tudor Group, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations: In November 2009, we made a significant move towards achieving our goal in becoming a multi-product portfolio company by acquiring Proteolix, Inc., or Proteolix, a privately-held biopharmaceutical company located in South San Francisco, California. Proteolix focused primarily on the discovery and development of novel therapies that target the proteasome for the treatment of hematological malignancies, solid tumors and autoimmune disorders. This acquisition, which included carfilzomib, has provided us with an opportunity to expand into the hematological malignancies market. The aggregate cash consideration to former Proteolix stockholders at closing was $276.0 million with another $40.0 million paid in April 2010 upon the achievement of a pre-specified milestone. In addition, we may be required to pay up to an additional $535.0 million in earn-out payments upon the receipt of certain regulatory approvals and the satisfaction of other milestones.
Nexavar, our only marketed product, was approved in the United States in December 2005. In accordance with our collaboration agreement with Bayer, Bayer recognizes all revenue from the sale of Nexavar. As such, for the three and nine months ended September 30, 2010 and 2009, we reported no product revenue. For the three and nine months ended September 30, 2010, Nexavar net sales recorded by Bayer were $226.2 million and $676.7 million, primarily in the United States, the European Union and other territories worldwide and includes the impact of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act. This represents a decrease of $3.1 million, or 1%, and an increase of $68.4 million, or
Our share of the research and development costs incurred for Nexavar includes 90% and 87% of the costs incurred by Bayer for Nexavar for the three and nine months ended September 30, 2010, respectively, and 83% and 79% of the costs incurred by Bayer for Nexavar for the three and nine months ended September 30, 2009, respectively. As a result of the cost sharing arrangement between us and Bayer for research and development costs, there was a net reimbursable amount of $22.7 million and $57.7 million due to Bayer for the three and nine months ended September 30, 2010, respectively, and $17.7 million and $47.8 million due to Bayer for the three and nine months ended September 30, 2009, 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. 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 September 30, 2010, our share of the Nexavar development costs incurred to date under the collaboration was $570.3 million.
As a result of the acquisition of Proteolix, we made a payment of $40.0 million in April 2010 and may be required to pay up to an additional $535.0 million in four earn-out payments upon the receipt of certain regulatory approvals and the satisfaction of other milestones. We recorded a non-current liability for this contingent consideration related to the four earn-out payments with a fair value of $261.6 million at September 30, 2010 based upon a discounted cash flow model that uses significant estimates and assumptions, including the probability of technical and regulatory success (PTRS) of the product candidate, carfilzomib. Contingent consideration expense is due to the change in the fair value of the recognized amount of the non-current liability for contingent consideration. For the three months ended September 30, 2010, the change in the fair value resulted from the passage of time. For the nine months ended September 30, 2010, the change in the fair value resulted from an $88.5 million increase due to an increase in the PTRS in the second
Investment income consists of interest income and realized gains or losses from the sale of marketable equity investments. We had investment income of $0.6 million for the three months ended September 30, 2010, a decrease of $0.4 million, or 38%, from $1.0 million in the same period in 2009. For the nine months ended September 30, 2010, we recorded investment income of $2.2 million, a decrease of $0.9 million, or 29%, from $3.1 million in the same period in 2009. These decreases were primarily due to lower effective interest rates in the market.
Interest expense of $4.9 million and $14.5 million for the three and nine months ended September 30, 2010, respectively, primarily relates to the 4.0% convertible senior notes due 2016 issued in August 2009, and includes non-cash imputed interest expense of $2.3 million and $6.7 million, respectively, as a result of the application of ASC 470-20.
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