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Onyx Pharmaceuticals, Inc. (ONXX) Reports Full Year and Fourth Quarter 2012 Financial Results  
2/22/2013 9:25:38 AM

SOUTH SAN FRANCISCO, CA--(Marketwire - February 21, 2013) - Onyx Pharmaceuticals, Inc. (NASDAQ: ONXX) today reported its financial results for the full year and fourth quarter 2012 and provided a business update.

"This past year was transformational, as Onyx grew from a company with one therapy in two indications to one with three therapies approved in four indications and positive Phase 3 data for another two potential indications," said N. Anthony Coles, M.D., chairman and chief executive officer of Onyx. "We enter 2013 with the architecture for near-term momentum in our business and sustained growth. The successful launch of Kyprolis, Onyx's first wholly-owned product, serves as the foundation of our emerging proteasome inhibitor franchise, and we are committed to investing in a broad Phase 3 clinical development program across all lines of therapy to reach more patients globally. 2013 will be an important year for commercial execution in the United States, while developing select capabilities to expand our business internationally."

Dr. Coles continued, "The second launch of 2012 was Bayer's Stivarga with additional regulatory actions expected this year in the United States, Europe and Japan. Contributions from worldwide sales of Nexavar and royalty revenue from Stivarga provide increasing cash flow to enable the strategic investment in Kyprolis and oprozomib."

Onyx reported total revenue of $362.2 million for the full year 2012 and $127.9 million for the fourth quarter 2012. Onyx reported non-GAAP net loss of $162.9 million, or $2.50 per diluted share, for the full year 2012 and $24.0 million, or $0.36 per diluted share, for the fourth quarter 2012. On a GAAP basis, Onyx reported net loss of $187.8 million, or $2.88 per diluted share, for the full year 2012 and $42.9 million, or $0.64 per diluted share, for the fourth quarter 2012. A description of the non-GAAP calculations and reconciliation to comparable GAAP financial measures is provided in the accompanying table entitled "Reconciliation of GAAP to Non-GAAP Financial Measures."

Revenue
For the full year and fourth quarter of 2012, Onyx reported total revenue of $362.2 million and $127.9 million, respectively, as compared to total revenue of $447.2 million and $237.0 million for the comparable periods in 2011. For the full year and fourth quarter of 2011, total revenue included $160.0 million in contract revenue from collaboration received from the sale of the Japan royalty rights of Nexavar® (sorafenib) tablets.

  • Revenue from the Nexavar collaboration agreement for the full year and fourth quarter of 2012 was $288.4 million and $72.9 million, respectively, as compared to $287.0 million and $76.8 million for the comparable periods in 2011. The increase in full year revenue from collaboration is primarily a result of increased Nexavar net sales as recorded by Bayer, excluding Japan, of $861.4 million and $229.1 million for the full year and fourth quarter of 2012, respectively, as compared to $839.9 million and $231.5 million for the full year and fourth quarter of 2011. The increase in full year Nexavar sales was driven by increased sales in the U.S. and demand driven growth in emerging markets including Asia Pacific and Latin America.
  • Kyprolis® (carfilzomib) for Injection net sales for the full year and fourth quarter of 2012 were $64.0 million and $45.3 million, respectively, representing orders shipped to and received by end customers such as physician offices and hospitals post-approval. The U.S. Food and Drug Administration (FDA) granted accelerated approval of Kyprolis on July 20, 2012. In addition, Onyx recorded deferred revenue of $9.8 million as of December 31, 2012, representing Kyprolis inventory at distributors which has not yet shipped to physician offices and hospitals.
  • Stivarga® (regorafenib) tablets royalty revenue was $8.3 million and $8.2 million for the full year and fourth quarter of 2012, respectively, following marketing approval by the U.S. FDA on September 27, 2012. Onyx receives a 20% royalty on Bayer's global net sales of Stivarga in human oncology.

Operating Expenses
Non-GAAP cost of goods sold was $1.3 million and $0.8 million for the full year and fourth quarter 2012, respectively. Cost of goods sold related to sales of Kyprolis is not representative of Onyx's future expectations of cost of goods sold because product costs associated with Kyprolis sales in 2012 were charged to research and development expense in periods prior to approval.

Non-GAAP research and development expense was $316.0 million and $80.3 million for the full year and fourth quarter 2012, respectively, compared to $249.1 million and $82.5 million for the same periods in 2011. Higher research and development expense between periods was primarily due to the global development of Kyprolis, particularly the ongoing Phase 3 ASPIRE, FOCUS and ENDEAVOR trials. On a GAAP basis, research and development expense was $325.3 million and $82.6 million for the full year and fourth quarter 2012, respectively, compared to $268.1 million and $84.0 million for the same periods in 2011.

Non-GAAP selling, general and administrative expense was $198.1 million and $68.0 million for the full year and fourth quarter 2012, respectively, compared to $147.8 million and $50.1 million for the same periods in 2011. Higher selling, general and administrative expense between periods was primarily related to hiring of the field force associated with the Kyprolis commercial launch as well as promotional costs. On a GAAP basis, selling, general and administrative expense was $224.2 million and $74.6 million for the full year and fourth quarter 2012, respectively, compared to $168.0 million and $52.6 million for the same periods in 2011.

Onyx recorded contingent consideration expense of $69.2 million and $2.9 million for the full year and fourth quarter 2012, respectively, compared to a benefit of $93.5 million and $116.7 million for the same periods in 2011. The increase in contingent consideration expense for the full year was primarily a result of the accelerated approval of Kyprolis.

Amortization expense for certain acquired intangible assets was $9.3 million and $5.2 million for the full year and fourth quarter 2012, respectively, and reflects the amortization of a portion of the intangible asset, which was acquired in the 2009 acquisition of Proteolix, Inc.

Provision for Income Taxes
Provision for income taxes for the full year 2012 primarily consisted of a $96.8 million non-cash tax benefit to recognize a change in the net deferred tax balance related to the U.S. approval of Kyprolis.

Cash, Cash Equivalents and Marketable Securities
On December 31, 2012, cash, cash equivalents and current and non-current marketable securities were $492.8 million, compared to $668.4 million at December 31, 2011. This decrease was largely due to Kyprolis development and commercialization expenses, partly offset by cash proceeds from the exercise of employee stock options. During January 2013, Onyx raised approximately $352 million in net proceeds from a public offering of 4.4 million shares of common stock.

Non-GAAP Financial Measures
This press release includes the following non-GAAP financial measures: non-GAAP net income (loss), non-GAAP net income (loss) - diluted, non-GAAP net income (loss) per share, non-GAAP net income (loss) per share - diluted, non-GAAP cost of goods sold, non-GAAP research and development expense and non-GAAP selling, general and administrative expense. The following table reconciles these non-GAAP measures to the most comparable financial measures calculated in accordance with GAAP.

Onyx management uses these non-GAAP financial measures to monitor and evaluate our operating results and trends on an on-going basis, and internally for operating, budgeting and financial planning purposes. Onyx management believes the non-GAAP information is useful for investors by offering the ability to better identify trends in our business and better understand how management evaluates the business. These non-GAAP measures have limitations, however, because they do not include all items of income and expense that affect Onyx. These non-GAAP financial measures are not prepared in accordance with, and should not be considered in isolation of, or as an alternative to, measurements required by GAAP. A description of the non-GAAP calculations and reconciliation to comparable GAAP financial measures is provided in the accompanying table entitled "Reconciliation of GAAP to Non-GAAP Financial Measures."

Non-GAAP operating expenses exclude contingent consideration expense (benefit), employee stock-based compensation expense, imputed interest related to the convertible senior notes due 2016, the write-off of certain research and development expenses, equity investment impairment, the impact of the S*BIO termination, lease termination exit costs, amortization of certain acquired intangibles and related tax impact of certain acquired intangible assets.

Management Conference Call Today
Onyx will host a webcast and conference call with management to discuss full year and fourth quarter 2012 financial results, as well as provide a general business overview, today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time).

To access a live audio webcast of the conference call, log onto the Company's website at: http://www.onyx.com/investors/event-calendar

To access the live conference call, dial 847-585-4405 and use the passcode 34138405#. A replay of the call will be available on the Onyx website, or by dialing 630-652-3042 and using the passcode 34138405# beginning approximately one hour after the teleconference concludes through March 7, 2013.

About Nexavar® (sorafenib) tablets
Nexavar is approved in the U.S. for the treatment of patients with unresectable hepatocellular carcinoma and for the treatment of patients with advanced renal cell carcinoma.

For information about Nexavar, including U.S. Nexavar prescribing information, visit www.nexavar.com or call 1.866.NEXAVAR (1.866.639.2827).

About Kyprolis® (carfilzomib) for Injection
Kyprolis® (carfilzomib) for Injection is approved in the U.S. for the treatment of patients with multiple myeloma who have received at least two prior therapies including bortezomib and an immunomodulatory agent (IMiD), and have demonstrated disease progression on or within 60 days of completion of the last therapy. Approval was based on response rate. Clinical benefit, such as improvement in survival or symptoms, has not been verified.

Full prescribing information is available at http://www.kyprolis.com.

About Stivarga® (regorafenib) tablets
Stivarga is approved in the U.S. for the treatment of patients with mCRC who have been previously treated with fluoropyrimidine-, oxaliplatin- and irinotecan-based chemotherapy, an anti-VEGF therapy, and, if KRAS wild type, an anti-EGFR therapy.

For full prescribing information, including BOXED WARNINGS, visit www.stivarga-us.com.

About Onyx Pharmaceuticals, Inc.

Based in South San Francisco, California, Onyx Pharmaceuticals, Inc. is a global biopharmaceutical company engaged in the development and commercialization of innovative therapies for improving the lives of people with cancer. The Company is focused on developing novel medicines that target key molecular pathways. For more information about Onyx, visit the Company's website at www.onyx.com.

Forward-Looking Statements

This news release contains "forward-looking statements" of Onyx within the meaning of the federal securities laws. These forward-looking statements include, without limitation, statements regarding our expected financial results for 2013, the anticipated growth of our business, investments in and launch of Kyprolis, development of our oral proteasome inhibitor oprozomib, global expansion, generation of cash flows from sales of Nexavar, commercial, regulatory, and clinical results and milestones, royalties on Bayer's global net sales and development of Stivarga, promotion of Stivarga in the U.S., overall costs from sales of Kyprolis and our future clinical trials. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those anticipated, including, but not limited to, risks and uncertainties related to: Nexavar® (sorafenib) tablets, Kyprolis® (carfilzomib) for Injection and Stivarga® (regorafenib) tablets being the only approved products from which we may obtain revenue; competition; failures or delays in our clinical trials or the regulatory process; dependence on our collaborative relationship with Bayer; supply of Nexavar, Stivarga or Kyprolis; market acceptance and the rate of adoption of Nexavar, Stivarga and Kyprolis; pharmaceutical pricing and reimbursement pressures; serious adverse side effects, if they are associated with Nexavar, Stivarga or Kyprolis; government regulation; possible failure to realize the anticipated benefits of business acquisitions or strategic investments; protection of our intellectual property; the indebtedness incurred through the sale of our 4.0% convertible senior notes due 2016; and product liability risks. Reference should be made to Onyx's Prospectus Supplement dated January 16, 2013 to Prospectus dated January 15, 2013 filed with the Securities and Exchange Commission (the "Commission") on January 17, 2013, as updated by Onyx's subsequent filings with the Commission, under the heading "Risk Factors" for a more detailed description of these and other risks. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this release. Onyx undertakes no obligation to update publicly any forward-looking statements to reflect new information, events, or circumstances after the date of this release except as required by law.

Kyprolis® (carfilzomib) for Injection
Nexavar® (sorafenib) tablets is a registered trademark of Bayer HealthCare Pharmaceuticals, Inc.
Stivarga® (regorafenib) is a Bayer compound being developed by Bayer. Onyx receives a 20% royalty on global net sales in human oncology. Bayer and Onyx are jointly promoting Stivarga in the U.S.

                                                                            
                         ONYX PHARMACEUTICALS, INC.                         
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
                  (In thousands, except per share amounts)                  
                             (unaudited)                                    
                                                                            
                                  Three Months Ended        Year Ended      
                                     December 31,          December 31,     
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011   
                                 ---------  ---------  ---------  --------- 
Revenue:                                                                    
Revenue from collaboration                                                  
 agreement                       $  72,936  $  76,821  $ 288,416  $ 286,963 
Product revenue                     45,319          -     63,955          - 
Royalty revenue                      8,163          -      8,294          - 
Contract revenue from                                                       
 collaborations                      1,500    160,211      1,500    160,211 
                                 ---------  ---------  ---------  --------- 
Total revenue                      127,918    237,032    362,165    447,174 
                                 ---------  ---------  ---------  --------- 
                                                                            
Operating expenses:                                                         
Cost of goods sold (excludes                                                
 amortization of certain                                                    
 acquired intangible assets) (1)       832          -      1,328          - 
Research and development (1)(2)     82,572     83,990    325,256    268,060 
Selling, general and                                                        
 administrative (1)                 74,566     52,611    224,164    167,959 
Contingent consideration expense                                            
 (benefit)                           2,937   (116,663)    69,173    (93,468)
Lease termination exit costs             -     (4,540)         -      6,317 
Intangible asset amortization        5,221          -      9,331          - 
                                 ---------  ---------  ---------  --------- 
Total operating expenses           166,128     15,398    629,252    348,868 
                                 ---------  ---------  ---------  --------- 
Income (loss) from operations      (38,210)   221,634   (267,087)    98,306 
Investment income                      675        678      2,678      2,405 
Interest expense (3)                (5,659)    (5,069)   (21,785)   (20,224)
Other income (expense) (4)            (728)      (326)     1,638     (4,103)
                                 ---------  ---------  ---------  --------- 
Income (loss) before provision                                              
 (benefit) for income taxes        (43,922)   216,917   (284,556)    76,384 
Provision (benefit) for income                                              
 taxes (5)                          (1,000)       242    (96,769)       274 
                                 ---------  ---------  ---------  --------- 
Net income (loss)                $ (42,922) $ 216,675  $(187,787) $  76,110 
                                 =========  =========  =========  ========= 
                                                                            
Net income (loss) per share:                                                
Basic                            $   (0.64) $    3.40  $   (2.88) $    1.20 
                                 =========  =========  =========  ========= 
Diluted (6)                      $   (0.64) $    3.16  $   (2.88) $    1.19 
                                 =========  =========  =========  ========= 
                                                                            
Computation of diluted shares:                                              
Basic                               67,028     63,700     65,148     63,422 
Dilutive effect of convertible                                              
 senior notes                            -      5,801          -          - 
Dilutive effect of options               -        629          -        588 
                                 ---------  ---------  ---------  --------- 
Diluted (6)                         67,028     70,130     65,148     64,010 
                                 =========  =========  =========  ========= 
                                                                            
                                                                            

(1) Includes employee stock-based compensation charges of:

                                                                            
                                  Three Months Ended        Year Ended      
                                     December 31,          December 31,     
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011   
                                 ---------  ---------  ---------  --------- 
Cost of goods sold               $       4  $       -  $       6  $       - 
Research and development             2,255      1,461      9,296      6,269 
Selling, general, and                                                       
 administrative                      6,568      2,556     26,024     20,121 
                                 ---------  ---------  ---------  --------- 
Total employee stock-based                                                  
 compensation                    $   8,827  $   4,017  $  35,326  $  26,390 
                                 =========  =========  =========  ========= 
                                                                            

(2) Includes a $12.7 million non-cash expense related to the unamortized balance of funding provided to S*BIO which was recorded in the first quarter of 2011.

(3) Includes $11.5 million and $3.0 million imputed interest expense recorded for the full year and fourth quarter in 2012, related to the convertible senior notes due 2016. For the comparable periods in 2011, imputed interest expense was $10.2 million and $2.6 million.

(4) Includes a $0.5 million impairment charge which reflects the write off of Onyx's equity investment in S*BIO which was recorded in the third quarter of 2012 and $4.1 million net proceeds received pursuant to the sale of Jak2 inhibitors by S*BIO during the year ended December 31, 2012. In 2011, a $3.8 million impairment charge was recorded which reflected the reassessment of the fair value of Onyx's equity investment in S*BIO.

(5) Includes a $96.8 million and $1.1 million tax benefit representing the non-cash tax related effect on certain acquired intangible assets for the full year and fourth quarter of 2012, respectively.

(6) Under the "if-converted" method, interest and issuance costs and potential common shares related to the Company's convertible senior notes were excluded in the computation of diluted per share amounts for the three months ended December 31, 2012, and the years ended December 31, 2012 and 2011 because their effect would be anti-dilutive.

                                                                            
                         ONYX PHARMACEUTICALS, INC.                         
           RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES            
                  (In thousands, except per share amounts)                  
                             (unaudited)                                    
                                                                            
                                  Three Months Ended        Year Ended      
                                     December 31,          December 31,     
                                 --------------------  -------------------- 
                                    2012       2011       2012       2011   
                                 ---------  ---------  ---------  --------- 
                                                                            
                                                                            
(i) Net income                                                              
  Net income (loss) - GAAP       $ (42,922) $ 216,675  $(187,787) $  76,110 
  Non-GAAP adjustments:                                                     
    Contingent consideration                                                
     expense (benefit) (a)           2,937   (116,663)    69,173    (93,468)
    Employee stock-based                                                    
     compensation (b)                8,827      4,017     35,326     26,390 
    Imputed interest related to                                             
     the convertible senior                                                 
     notes due 2016 (c)              3,009      2,605     11,511     10,191 
    Advance funding to S*BIO (d)         -          -          -     12,666 
    Impairment of equity                                                    
     investment in S*BIO (d)             -        750        500      3,750 
    Proceeds received pursuant                                              
     to the sale of Jak2                                                    
     inhibitors by S*BIO (e)             -          -     (4,096)         - 
    Lease termination exit costs                                            
     (f)                                 -     (4,540)         -      6,317 
    Amortization of certain                                                 
     acquired intangible assets                                             
     (g)                             5,221          -      9,331          - 
    Non-cash tax related effect                                             
     on certain acquired                                                    
     intangible assets (h)          (1,066)         -    (96,843)         - 
                                 ---------  ---------  ---------  --------- 
  Net income (loss) - Non-GAAP   $ (23,994) $ 102,844  $(162,885) $  41,956 
                                 =========  =========  =========  ========= 
                                                                            
(ii) Cost of goods sold                                                     
  Cost of goods sold - GAAP      $     832  $       -  $   1,328  $       - 
  Non-GAAP adjustments:                                                     
    Employee stock-based                                                    
     compensation (b)                   (4)         -         (6)         - 
                                 ---------  ---------  ---------  --------- 
  Cost of goods sold - Non-GAAP  $     828  $       -  $   1,322  $       - 
                                 =========  =========  =========  ========= 
                                                                            
(iii) Research and development                                              
 expenses                                                                   
  Research and development                                                  
   expenses - GAAP               $  82,572  $  83,990  $ 325,256  $ 268,060 
  Non-GAAP adjustments:                                                     
    Employee stock-based                                                    
     compensation(b)                (2,255)    (1,461)    (9,296)    (6,269)
    Advance funding to S*BIO (d)         -          -          -    (12,666)
                                 ---------  ---------  ---------  --------- 
  Research and development                                                  
   expenses - Non-GAAP           $  80,317  $  82,529  $ 315,960  $ 249,125 
                                 =========  =========  =========  ========= 
                                                                            
(iv) Selling, general and                                                   
 administrative expenses                                                    
  Selling, general and                                                      
   administrative expenses -                                                
   GAAP                          $  74,566  $  52,611  $ 224,164  $ 167,959 
  Non-GAAP adjustments:                                                     
    Employee stock-based                                                    
     compensation (b)               (6,568)    (2,556)   (26,024)   (20,121)
                                 ---------  ---------  ---------  --------- 
  Selling, general &                                                        
   administrative expenses -                                                
   Non-GAAP                      $  67,998  $  50,055  $ 198,140  $ 147,838 
                                 =========  =========  =========  ========= 
                                                                            
(v) Earnings per share                                                      
                                 ---------  ---------  ---------  --------- 
  Net income (loss) - Non-GAAP   $ (23,994) $ 102,844  $(162,885) $  41,956 
                                 =========  =========  =========  ========= 
  Add:                                                                      
    Interest and issuance costs                                             
     related to dilutive                                                    
     convertible senior notes                                               
     (i)                                 -      2,456          -          - 
                                 ---------  ---------  ---------  --------- 
  Net income (loss) - diluted -                                             
   Non-GAAP                      $ (23,994) $ 105,300  $(162,885) $  41,956 
                                 =========  =========  =========  ========= 
                                                                            
  Computation of non-GAAP                                                   
   diluted shares                                                           
  Basic shares - GAAP               67,028     63,700     65,148     63,422 
  Dilutive effect of options and                                            
   restricted stock                      -        629          -        588 
  Dilutive effect of convertible                                            
   senior notes (i)                      -      5,801          -          - 
                                 ---------  ---------  ---------  --------- 
  Diluted shares - Non-GAAP         67,028     70,130     65,148     64,010 
                                 =========  =========  =========  ========= 
                                                                            
  Net income (loss) per share -                                             
   Non-GAAP                      $   (0.36) $    1.61  $   (2.50) $    0.66 
                                 =========  =========  =========  ========= 
  Net income (loss) per share -                                             
   diluted - Non-GAAP            $   (0.36) $    1.50  $   (2.50) $    0.66 
                                 =========  =========  =========  ========= 
                                                                            
                                                                            
                                                                            
                         ONYX PHARMACEUTICALS, INC.                         
           RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES            

These non-GAAP financial measures exclude the following items:

(a) Contingent consideration expense (benefit): The effects of contingent consideration expense (benefit) are excluded due to the nature of this charge, which is related to the change in fair value of the liability for contingent consideration in connection with the acquisition of Proteolix; such exclusion facilitates comparisons of Onyx's operating results to peer companies.

(b) Employee stock-based compensation: The effects of employee stock-based compensation are excluded because of varying available valuation methodologies, subjective assumptions and the variety of award types; such exclusion facilitates comparisons of Onyx's operating results to peer companies.

(c) Imputed interest related to the convertible senior notes due 2016: The effects of imputed interest related to the convertible senior notes due 2016 are excluded because this expense is non-cash; such exclusion facilitates comparisons of Onyx's ca

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