美國安進 (AMGN) 2005 Q1 法說會逐字稿

Good day, Ladies and gentlemen. Welcome to the first quarter, 2005 Onyx Pharmaceuticals financial results conference call. My name is Megan and I'll be your coordinator for today. (OPERATOR INSTRUCTIONS). I would now like to turn the presentation over to Onyx Pharmaceuticals Inc.

Thank you, Megan. Good afternoon. I'm Julie Wood, vice president of investor relations and corporate communications at Onyx Pharmaceuticals. Thank you for joining us today for our regular quarterly update.

During this call, we will review our first quarter financial results that were released earlier today. In addition, we will provide a short review of the clinical and preclinical data presented during the first quarter, as well as an overview of some of our ongoing precommercial activities. Please note this call being held on May 5, 2005, is the property of Onyx Pharmaceuticals. Any redistribution, retransmission, or re-broadcast of the call in any form without the express written consent of Onyx Pharmaceuticals is strictly prohibited.

First, Hollings Renton, our CEO, will make introductory remarks and Marilyn Wortzman, our Vice President of Financial Administration will review our first quarter 2005 financial results. Subsequently, Dr. Leonard Post, Onyx' Senior Vice President of R&D will summarize some of the sorafenib data presented in the first quarter. He will comment briefly on the data presented at ASCO. Next, Edward Kenney, our Executive Vice President and Chief Business Officer will talk about some of the precommercial marketing activities now underway. Finally, Hollings will make closing comments before opening up the session question-and-answer with the management team.

Please note we will be making forward-looking statements during this teleconference that could include financial, clinical, and commercial projections. Statements that are not historical fact are forward-looking. References to what we expect, believe, intend to do, plan, estimate, or other statements referring to future events or results are intended to identify these statements as forward-looking. Forward-looking statements are inherently subject to risks and uncertainties. For discussion of these risks and uncertainties, we refer you to our annual report on form 10-K for the year ended December 31, 2004 as amended, filed with the Securities and Exchange Commission.

Specifically the section entitled additional business risks, as well as to our quarterly reports on form 10-Q including our first quarter report, which will be filed with the SEC by May 10, 2005. Also note that the forward-looking statements are based on our beliefs and assumptions as of today. These beliefs and assumptions may change as a result of future events or passage of time to cause the forward-looking statements to be outdated and no longer our view. We undertake no duty to update these forward-looking statements.

Now, I would like to turn the call over to Hollings Renton.

Thank you, Julie.

We're pleased to have these ongoing opportunities to talk with the investment community. The first quarter was a very productive time for Onyx, and I would like to highlight a few of our achievements.

Together with our collaborator Bayer, we completed enrollment in our Phase III kidney cancer trial. This is the largest randomized trial ever conducted in this syndication, enrolling well over 800 patients in five quarters. Importantly, the final analysis of progression-free survival. A secondary endpoint in the pivotal study was conducted in the first quarter. An independent data-monitoring committee reviewed the results from this analysis and concluded that the study had met its predefined surrogate end-point of delaying disease progression and patients treated with sorafenib.

Subsequently, after further review of the data, as well as discussions with clinicians and regulatory authorities, Bayer and Onyx made the decision to allow patients on placebo to cross over to active drug. This decision is based on our belief it would have been unethical to continue a placebo-controlled trial, based on the results generated to date on the Phase III study.

The two companies are now moving rapidly to assemble a new drug application for this indication. We believe that given these recent encouraging events and depending on a positive review by the FDA, that we could commercially launch sorafenib in the United States in the first half of 2006.

In that regard, we do intend to file the NDA on a rolling basis, given our announcement yesterday that sorafenib was accepted in the FDAs pilot one program. We're also in discussions with other regulatory authorities about registration and other territories.

Also during the first quarter, Bayer and Onyx initiated a Phase III liver cancer study, and we plan to begin a Phase III metastatic melanoma trial shortly. With the initiation of these trials, we're creating three distinct paths to registration, in advanced kidney cancer, in advanced liver cancer and in metastatic melanoma.

We also have a number of single-agent and combination studies underway in a variety of other tumor types. These include both company-sponsored trials and studies sponsored through the National Cancer Institute. Through these trials, we intend to identify additional paths to registration and other tumor types.

Throughout the first quarter, additional preclinical and early clinical data were also presented by investigators at different scientific meetings, including at the recent American Association for Cancer Research meeting in Anaheim, California. Len will give an overview of that data briefly in the call.

This past quarter has been one of the most eventful and significant in Onyx's history. With the successful analysis of disease progression from the Phase III renal cancer trial, we're excited to make the transition to a commercial company. As you will hear from Ed Kenney, we and Bayer will have established our commercial capabilities and completed the prelaunch activities by the end of this year to be ready to launch sorafenib in the U.S. market.

We look forward to sharing the data from both the large randomized Phase III and the phase II randomized discontinuation trial later next week at the American Society of Clinical Oncology meeting in Orlando, Florida. This is an exhilarating time for Onyx as we prepare for our first product launch arming patients and physicians with a new weapon in the fight against cancer is enormously satisfying and gratifying to all of us here at Onyx.

I will turn the call over to Marilyn to discuss our first quarter financial results.

Thank you, Hollings.

Onyx reported a net loss of $16.1 million or $0.46 per share for the three months ended March 31, 2005. Onyx reported revenues of $1 million in the first quarter compared to no revenue in the same period last year. The $1 million reflects the licensing payment from Sunway Biotech Company of Shanghai for exclusive rights of Onyx-015, one of our therapeutic viruses.

R&D expenses for the first quarter, ended March 31, 2005, were $13.5 million dollars, compared to $6.6 million in the same period last year. The increase in R&D expenses in 2005 reflect higher clinical development costs associated with sorafenib, as we continue our Phase III kidney cancer program.

We have also recently initiated a Phase III study in liver cancer and soon we plan to begin a Phase III study in metastatic melanoma. In addition to the numerous Phase I and Phase II company and NCI-sponsored trials that are ongoing, we plan to initiate additional studies this year that will also contribute to an increase in R&D expenses.

Marketing expenses were $2 million in the first quarter of 2005. This compares to $289,000 of marketing expenses from the same period last year. We expect expenses in this category to increase as we establish a commercial infrastructure and engage in pre-commercial activities to support a 2006 launch of sorafenib.

General and administrative expenses were $2.8 million in the first quarter of 2005. In 2004 general and administrative expenses were $1.8 million in the first quarter. We anticipate that G&A expenses will increase during the year to support the needs of the growing commercial organization. Headcount has more than doubled, growing to 36 at the end of this quarter, as compared to 16 at the end of the first quarter last year.

Interest income was $1.2 million in the three month period ending March 31, 2005. This compares to interest income of $524,000 in the comparable period of 2004. At March 31, 2005, we had cash, cash equivalence and marketable securities of $193.6 million, as compared to $209.6 million on December 31, 2004. On May 2, 2005, we had 35.3 million shares of common stock outstanding.

As we discussed previously, our balance sheet reflects an advance of $20 million from milestones paid by Bayer when we initiated the Phase II and Phase III trials. The interest-free loans will be repayable to Bayer from a minority portion of any future Onyx profit. Onyx will receive an incremental $10 million upon the filing of an NDA and another $10 million when sorafenib is approved. These payments, not booked as revenue, go straight to the balance sheet where they're recorded as cash and a liability.

With the recent positive outcome on the Phase III trial, we do expect expenses to increase throughout 2005 as we prepare for the possibility of a commercial launch in the first half of 2006, And continue expanding our clinical program. Given the recent decision to unblind the placebo patients on the Phase III trial, we're exploring ways to make sorafenib more broadly accessible to other kidney cancer patients. If successful, this will also impact our expenses.

Though we still anticipate that expenses will fluctuate on a quarterly basis, we now are estimating that the net loss for the full-year 2005 will be at or above the high end of the $75-$85 million range that we provided during our last financial results teleconference.

Based on the anticipated timing of approval and the initiation of the program to provide earlier access to sorafenib, Bayer and Onyx will update our financial plan. We'll have more specific information available for on you the next quarterly call.

I would now like to turn the call over to Dr. Leonard Post for a review of the Sorafenib data presented during the quarter.

Thank you, Marilyn.

As Hollings mentioned during the quarter, we completed the formal analysis on progression free survival and decided, based on those results, to allow crossover for placebo patients. The analysis of PFS was based on Independtly reviewed radiologic assessments, and this data will be presented by Dr. Bernard Escudier, one of the co-primary investigators of the Phase III study on Saturday, March 14, at the American Society of Clinical Oncology meeting.

During the first quarter, there were multiple sorafenib updates with investigators presenting both pre-clinical and clinical data. At the American Association For Cancer Research meeting last month, Dr. Edwin Posadas of the NCI reported on a Phase I study administering sorafenib in comparison with Avastin. This is primarily a safety study, and it's early in the study and with 12 patients enrolled and only seven of those patients to the point of even their first eight-week assessment.

But, even at this stage, Dr. Posadas reported signs of activity, including two parts for responses in ovarian cancer , and two minor responses, one in melanoma and one in renal cancer and also drops in tumor markers and anecdotal symptom improvements. He commented that the expected side affects of hypertension and hand/foot syndrome were observed. While this study is still at a very early stage, and combines two agents that by themselves are active, it suggests the combination of sorafenib and Avastin merits further study.

In another ACR presentation, Bayer scientists report on the possible mechanism of action of sorafenib in renal subcancer. In a mouse model of kidney cancer, it was demonstrated that sorafenib significantly inhibits time our -- tumor neovascularization in this, the tumors of this rinka model.

This suggests sorafenib's mechanism of action and in this particular model of kidney cancer is primarily antiangiogenic, which could be via the inhibition of the the VEGF receptor, or the inhibition of the ras signalling pathway. In another update by Bayer scientists, it was shown that Sorafenib also inhibits the protein kinase 3 and was very potent in an animal model with the flit-3 driven tumor.

Flit-3 is a kinase involved in AML, and this result is consistent with clinical results presented at last year's ASCO and as well as the European Society for Medical Oncology on a small study of sorafenib in AML patients. Other presentations on sorafenib at AACR gave new insights into the antiangiogenesis and cell death mechanisms of sorafenib.

At the Frontiers in Thyroid Cancer meeting also held in April Dr. Santoro of the University of Naples described a new target for sorafenib, the raf tirase in kinase. Raf is involved in thyroid cancer. Sorafenib is currently being tested in thyroid cancer in a study sponsored by the Cancer Therapy Evaluation Program of NCI.

In February, Bayer and Onyx announced the initiation of a Phase III study designed to measure differences in overall survival, time to symptom progression and time to tumor progression of sorafenib versus placebo in patients with advanced liver cancer. The trial will also evaluate the safety and pharmacokinetics of sorafenib in this population.

More than 500 patients with advanced liver cancer who have not received previous systemic treatment for their disease will be randomized to receive 400 milligrams of oral Sorafenib twice daily or matching placebo. This study is expected to enroll patients in the Americas, Europe, and Australia. And as previously mentioned, we expect to announce the start of the Phase III metastatic melanoma program very soon.

At ASCO, we'll have a number of updates scheduled. The data from the successful Phase II randomized discontinuation trial will be presented by Dr. Mark Ratain. In addition to the Phase III and Phase II renal cancer data, there will be updates on combination studies ongoing with DTIC in advanced melanoma patients, as well as IRESSA in non-small-cell lung cancer patients in Bayer's Phase I study in Japan.

There will also be pharmacokinetic and pharmacodynamic data from several studies presented in the meeting. For a complete list of sorafenib data including the dates and the times of the ASCO presentations, you can visit our website at www.onyx-pharm.com. Subsequent to ASCO, we'll be holding our annual post-ASCO meeting for the financial community on May 26 in New York. Participating in that meeting will be doctors Escudier, Ratain, Eisen and Flaherty.

I will now turn the call over to Ed Kenney.

Thank you, Len. It's been a very busy quarter on the commercial side, as we engaged in a number of important preparatory activities associated with the anticipated launch of sorafenib in the first half of 2006.

These included adding key headcount, establishing operational and training infrastructure, engaging in pre-commercial activities, and preparing programs for the clinical community. I have been very pleased with the recent hires, as with Bayer, we continue building an experienced sales and marketing organization. During the first quarter, we hired a vice president of medical affairs, a director of marketing and we put in place our entire field sales management team.

In addition, the majority of our field-based medical science liaisons have also been hired, as well as the head of training. These new employees are undergoing initial training and education on sorafenib and its use in treating kidney cancer in preparation for ASCO and beyond. In fact, I just returned from the first joint training meeting.

By the end of the year, the field managers will add individual territory representatives to build out the respective regions. It's worth noting our partner, Bayer is engaged in a similar set of activities as they build out their new oncology organization with similarly qualified and experienced oncology marketing and sales professionals. Together with Bayer, we have reached a number of key structure configuration and division of labor decisions that will permit us to maximize the commercial impact of the two organizations.

In addition to our intensive hiring, we have also engaged in a number of pre-commercial activities so they will be ready to act as soon as we receive an approval. These include finalizing product packaging, performing reimbursement and pricing analyses and creating a comprehensive sales training program. Since we have hired seasoned managers with significant oncology experience,in marketing, sales, and in medical affairs, all of these tasks are moving quickly forward.

With regard to clinical outreach at ASCO, we will be sponsoring a symposium entitled, Merging Strategies For Managing Advanced Kidney Cancer. This CME program will be held on the afternoon of May 17. Subsequently, we have a number of other medical education programs being planned with input from our active and very helpful medical advisory board. So I hope that gives you a flavor of the speed and the intenset at which we're working to prepare the commercial and medical affairs side of the organization.

Now, Hollings will make closing comments.

Thanks, Ed. While Bayer and Onyx have made significant progress in the clinical development of sorafenib during the first quarter, the pace will continue accelerating in the coming months. Right now, a core team is engaged in mammoth task of assembling the new drug application for submission to the FDA. At the same time, as Ed just described, both Bayer and Onyx are building a sales and marketing organization that will be in place by the end of the year and poised to start as soon as sorafenib might be approved.

In addition to those important registration and commercialization activities, there is still a tremendous amount of clinical work underway to identify additional indications for sorafenib. As we amass more data in new tumor types and with other anticancer agents, we will share this information at various specific and clinical meetings throughout the year.

Discovering and developing a new drug takes good science, dedication, hard work and luck. We're fortunate to have had our share of these ingredients. While we have not yet filed a new drug application, we feel the probability of of eventual success has significantly increased as a result of the positive Phase III analyses.

Where we are today is the result of many years of combined effort since starting our collaboration with Bayer in 1994. Working closely with Bayer and together with patience -- patients and clinicians, sorafenib has advanced from its entry into the clinic in 2000, to preparing an NDA in five years. We're extremely pleased the Phase III trial accrued so rapidly and that the earliest analysis was so strong that we could move placebo patients on to sorafenib. Without the interest, commitment, and hope of courageous patients and dedicated doctors, this could not have happened. And now, we would be happy to turn the call over to your questions.

Thank you, sir. (OPERATOR INSTRUCTIONS) your first question comes from the line of Steve Harr with Morgan Stanley.

Good afternoon. I had a quick, couple of quick questions. First on the expanded access that you touched upon. Would that be in the U.S. and Europe and, when might we expect this program put in place?

Len, you want to answer that one?

Well, this is -- we're still working out the details of what we can do by way of making the drug available to patients, so I think it's a little early for us to go into that, Steve.

All right. Which of the studies that are coming out of ASCO, obviously, outside of r renal cell, do you think will have the opportunity to guide you towards now potential label indication trials?

Again -- Len, you want to comment.

A lot of what is at ASCO this year is really centering around the renal cancer program, both the Phase II,, the Phase III and the -- and some pharmacodynamic work being done, and also the melanoma program, so I would have to say the theme at ASCO this year is going to be to develop the story around the indications that we're, that you already know about that we're going into Phase III with.

Things like we have talked about ongoing Phase II work and some of the other indications. That has gone pretty well, and we're starting to get data on that, but those studies weren't at a point where we could submit abstracts in time for this year's ASCO. There will be things like some additional combination data that I think will continue to develop that theme, but the specific Phase II work we referred to earlier was not ready to submit to ASCO this year.

And then Ed, as we're building our models, what size of sales force should you be thinking about for your half of the P&L.

I think the only guidance that is, that has been out there, Steve, has been with -- about 100 field-based folks. That's between the two companies. And we're still pretty comfortable with that number.

Great. Thanks a lot.

Your next question comes from the line of James Birchenough with Lehman Brothers.

Hi, guys. A few questions. Just one on the melanoma Phase III, wondering what the gating factor is for initiating that trial, whether you're waiting for an SPA on the protocol and whether that's going to be a DTIC combo or a paclitaxel carbo combo. Or both.

Obviously we're anxious to get the study started. The last item is really finalizing the SPA. Everything is pretty much now in place and this trial should start shortly. The registration path for us will be carbotaxol plus or minus sorafenib, not DTIC, though we have initiated a randomized DTIC study, a smaller-phase study to get data to see the activity with DTIC.

Great. And this might be a more difficult question to answer in front of ASCO, but I'll ask it anyways. The decision to cross over the renal cell trial, one of the perceived risks is, you have a surrogate and may not have the answer as to how good the surrogate is now for survival.

The question is is the -- is the FDA comfortable PFS or do you have some survival data that was able to augment the PFS

We have not been unblinded to survival. We don't have survival data on this stage. The decision was based on the results with the progression-free survival analysis. Len, you want to comment further?

I think that pretty much sums it up; even though we can't talk about the numbers yet until after ASCO, it was, as we said, a positive analysis. And you're quite right that this certainly will confound the survival data that will come out of this study if very many of the patients elect to take sorafenib.

We certainly thought that through and that's why we took the time to actually have some dialogue with the regulatory authorities and as you might guess, there are no guarantees. They won't give you a definitive response until you submit an NDA and they review it, but we did have good dialogue with the FDA that we factored in to making the decisions.

Great, thanks for taking the questions.

Great, Jim.

You now have a question from the line of David Bouchey with RBC.

Hey, David.

Hey, guys My first question is really for Len. May be you can give us some views on what the best way to measure activity of sorafenib versus the Sutent drug could be. With response rate or something else.

Well, and I guess the bottom-line answer to the question is that the compounds have been studied in different types of trials and from what we know from the abstracts, there is going to be different types of data that will be presented. My understanding is that Sutent will be presenting single-arm data in which they will, of course, be able to get response rate and won't have a control arm for numbers like -- like progression metrics.

In the sorafenib case, we'll be presenting the Phase III, which is a randomized controlled study where, as we have already said, progression-free survival is the analysis that was done for this presentation. We're pretty convinced after -- from really, after multiple sources of data and work that has been done that looking at tumor progression rather than a response rate is the right metric for a drug like sorafenib.

Even though you haven't seen the numbers yet, we have talked about the conclusions the randomized discontinuation show the stable disease of the drug effect and its progression-free survival that led us to our path to filing an NDA and even crossing over the studies.

So, we think progression is going to be the right way to measure sorafenib and this, my understanding is that the data that is going to be available on Sutent won't have the control arm it's going to let you interpret time to progression or PFS types of data.

All right, and one last -- last question, a follow-up on Steve's question on the expanded- access program. Could you go of us more information, may be this is better for Ed, on exactly how this would be set up, what kind of restrictions there could be and which patients could get on Sorafenib.

We really can't go into that until we're fairly sure of what we're doing. The important thing for us is to work with the agency to get the product available to those that are, that we're sure will benefit from it as quickly as we can. A lot of the details are yet to be worked out.

Will that depend on when you actually file the NDA?

I am not so sure that that is depend upon when we file. It's a matter of doing the administrative chores that are necessary before you can actually announce any kind of patient access program.

Okay. Well, I'm looking forward to next week then. Thanks a lot.

Thanks, David.

Your next question comes from the line of Philip Nadeau with Cowen.

Thanks for taking my question and congratulations on a very productive quarter. Len, my first question's for you and it's a follow-up on something that you just previously said. You said that -- or i think it was you that said, you were still blinded to the survival data and then it sounded like the survival data didn't play a part in your decision to cross patients over onto sorafenib in the Phase III trial. Was the data safety monitoring board also blinded to survival and did that group play any role in deciding to cross the trial over?

The data safety monitoring board is the one group that has looked at survival data. That's their job in this trial is on an ongoing basis to keep track what have is going on, just to make sure there are no patient safety issues coming up during the course of the trial. So, they do -- of the trial. They do see the unblinded survival data.

But they did not share that with the companies and so -- the companies are the ones that made the decision to allow the crossover, although of course we had some interaction with the data monitoring committee, because, they have a stake in this as well. Where you're going with this is did they go of us any specific feedback on the survival analysis, and, of course, they're not allowed to do that.

Okay, great. And then my second question, and I think I know the answer to this, but I'll ask anyway. The ASCO presentation, can we assume there is not going to be any survival data in that presentation?

That's correct. Because we do remain blinded to the data.

Okay. Great. And last -- lastly, to follow up on a previous question, Sutent will be on the market at some point and from our conversations with physicians, your drug and that drug are really going champ the paradigm in renal cancer.

Do you have any plans to look at studies, to look at either combinations with your drug with that compound or treatment paradigms, you know, looking at your drug before or after that compound?

Len, you may want to talk about studies and combination studies in general and, Ed, a little bet about the treatment paradigm and how it's going to shift with the advent of drugs like Sorafenib.

Well, yeah, I think the whole question of combinations is a really important one. We have, as we talked about many times, we have a whole variety of studies to show that Sorafenib is combinable with cytotoxic chemotherapies, you will see at ASCO, its combinability with Iressa, and we saw at AACR, like I mentioned earlier, the very early data about combination with Avastin.

We have seen in the case of melanoma that, that that combination can make quite a difference. We didn't see a lot of single-agent activity with melanoma, but in the chemotherapy combination, we see some quite encouraging activities.

So, the answer is we think combinations will be a really important part of the future, the sort of hints that came out of the early data on that Avastin study that says combining Sorafenib with other antiangiogenics could be a good idea and certainly should be studied further.

We can't do that study yet with Sutent, you know, neither compound is on the market, but I think it's just a matter of time before we have to sort out this question of how the drugs, you know, might be able to be used either sequentially or together. There are things going that it's too early with them being investigational drugs.

thank you.

Ed, you want to comment on the treatment paradigm.

Yes, that's an important point. It's the same thing that we believe and the treatment paradigm is changing, in fact, if can you consider the patients that we have been treating in our, both of the Phase II RDT and the Phase III trial.

Patients who were are essentially refractory to cytokines may not exist -- soon they won't exist the numbers that are available today, because what we're hearing is the same thing that the new agents are going to move up front. Just to, not to put too a fine a point on Len's message, but the issue of combinations, where the things can be used together, simultaneously perhaps, or in sequence is very important. It has a major impact on us now in the market modeling we're doing, trying to sort this out to see what we think is going to be the lay of the land of the year from now.

Thanks, that's very -- helpful.

Your next question comes from the line of Geoffrey Meacham with J.P. Morgan.

Hi, Geoff.

Thanks for taking the question. I joined late so I apologize if this has been asked. I look at the number of trials both of you have ongoing, both you and the NCI includes lung, ovarian, breast, prostate, et cetera. I want to get a sense as to your thought process. How do you select the next indications, be it a controlled Phase II or a larger Phase III?

That's an excellent and timely question. Len, you want to comment on that?

It's a great question and it's something we're spending a lot of time on right now. And in the -- the answer is that there is no magical formula to take all of this data and come out the other end with what is the right trial to do. There are lots of data points.

You point out there is the Company-sponsored studies as well as the things being sponsored by the NCI and the way you have to do it, you have to collect this data and evaluate it and look for signals that are suggestive of what studies to do and you're right. They're not controlled studies, so there is not always going to be a real crisp answer, but with the drug that is active like we now believe sorafenib is, I think there will be some signals that we can use and we can queue off from to make decisions about which studies to do.

As you point out, there are a variety of things it could be. In some cases, it will be guiding us to randomized Phase II studies to test particular possibilities and maybe even something to -- that would suggest a Phase III study. That's kind of a long-winded answer is to say there there is no easy answer to your question.

I think the other thing, Geoff, too, which occurs in this process, which is an important process since i we have been generating quite a bit of data and we do see the potential for broad utility, is also interacting with the experts in the area in terms of managing the various diseases to understand not only the current lay of the land, but the other things that are happening in terms of those specific disease studies. With that input and the data, we'll prioritize the trials and put the effort behind evaluating the agent much more broadly than the first three indications that have been identified.

As a follow up to that, so there is a potential then to start a larger controlled Phase III if the data, if the number of data points, really, come out with respect to other studies or NCI studies?

I think that is a possibility. I think it's too soon for us to say that would be necessarily the next step as opposed to randomized Phase IIs. It's a possibility.

Okay. Thank you.

Thanks a lot.

And your next question comes from the line of Ron Ellis with Leerink Swann & Company.

Hi, thanks for taking the question. Just a couple for modeling. Just remind us how you're going to be booking the actual sorafenib revenues in the U.S. versus ROW and the second question to that is what will trigger your payments back to buyer for the milestones that you have received?

Marilyn, you want to take those?

Sure, once we're on the market, we will be booking our share of profits, which is revenue less, selling G&A expenses and actually any other product development expenses, and they'll be recording revenue and and then we -- our agreement provides we pay back to Bayer on a quarterly basis the minority share of those profits. To repay them for the milestones.

So would you book on the top-line then, it's somewhat of a JV line? It's the net and then out of that net also comes your payment back to Bayer?

Well, no we will be recording our profit. Yes, on the JV line is the revenue, and then the repayment is just -- that;s sort a balance sheet transaction. We'd record a receivable for the revenue, and we reduce the receivable and the liability.

So there is no P&L impact or reduction in our revenues. Nothing runs through the income statement.

Correct.

For the repayment of those advances, those interest-free advances. Those have strictly been received as a balance sheet item and will be paid back as a balance sheet flow. There is no impact there. Again, as you were suggesting, Bayer books the sales and we book our 50% profit after Bayer takes away all of their expenses as our revenue line-item.

And how will that work ex-U.S.

Similarly. It's the only thing different. The percentage breakdown is slightly less than 50% outside of the U.S. and, of course, in Japan as we said, it's high-single digit royalty, a separate flow of income.

Thank you.

Your next question comes from the line of from Hanzhong Li with SunTrust Robinson Humphrey

I have a couple of questions. First question for Hollings. Can you remind us who is in charge of the manufacturing of [inaudible - heavy accent]?

Yeah, the really excellent relationship here with Bayer and the ability to leverage here in this collaboration comes from their established manufacturing facilities in Germany. So they have done all of the work, very successfully at not only formulating the product, but also scaling it up and all of the packaging and distribution efforts as well. So, we're able to leverage that in place capacity without any incremental investments and they're obviously very, very good at this.

Going forward, the German side, going to be the side to supply all the clinical and those commercial product?

Yeah, importantly as you suggest, that'll be the commercial supplier.

Okay. I want to confirm that the clinical expenses are split at 50/50 between you and Bayer.

Yes, clinical expenses and all other development expenses including the scale-up expenses for manufacturing, for example in the supply cost for clinical trials, all the development expenses are 50/50 expense sharing. The only exception to that is in Japan, where Bayer funds all of the expenses to get the product registered in Japan and in that case, we get a high, single-digit royalty.

Another question for Len, where are you at for the first line study in the renal cell carcinoma. This is in combination with interferon. Where will we see some of the data?

The combination with interferon is -- that's ongoing work. There's not a specific plan yet for when that is going to be presented.

And it's in Phase I or Phase II or --

you could probably call it a Phase II study.

Is it --

Pardon me?

Is it NCI-sponsored?

There is an NCI-sponsored one. That's right.

Okay. Thank you.

You now have a question coming from the line of Jason Zhang with Prudential.

Thanks. The question is for postmarking studies that you might have to do. [Inaudible - heavy accent] the progression I'm sorry, progression-free survival . That will be still considered as a surrogate for survival .And you expect to fill some requirement, another study to really show the survival benefit -- but now you have lots of patients, and so if that's the case, what kind of trial are you considering with the survival studies from other disease is satisfactory to the FDA or you have to do something else?

So, Len, were you going to comment on that?

Yeah, I will try. I didn't hear that real well, Jason, but I think your question is whether we may have to do a survival study post-approval.

Right.

Was that the question?

Yes.

And like I said earlier, it's a little early for us to know how the FDA is going respond to our NDA because you have to submit it to them and give them a chance to review it. Whether or not they're going to, what they might ask for post-approval, we obviously don't know. It's certainly any survival study would have to be done differently, because once the agent and others for that matter are out there, it's probably not going to be 80ical to do a placebo-controlled survival study in renal cancer anymore.

I just had a couple of things. One, Jason, you made a statement on a pre-supposed that the approval would come as an accelerated approval and, again, although there is still the review process to go, I think in the discussion with the FDA we all recognized the survival data could be confounded in the placebo arm because of the crossover and there is still a possibility of full approval here. That may or may not be a relevant question.

So the full approval would be based on the progression-free survival, not -- or you, are you suggesting that a trial data based on, data set s today could be survival --

I'm saying it's possible to receive full approval. We don't want to pre-suppose anything, until we complete the dialogue with the agency after the filing.

Okay. Maybe I can just also step back and previously we, when were discussing about this trial, the uniqueness that you have highlighted is that the trial is designed to have an indeterminate -- [ inaudible - heavy accent] But at the same time, try to finish the trial as it is designed so you will also have survival data and, of course, now, the plan has changed.

And I was just wondering what really have triggered this change of trial design and you said that you have done this in consultation with the FDA. I wonder what kind of role the FDA has to play. If can you point out one or two major factors in this huge deficient, what are the factors.

Let me comment briefly and then Len, you may want to add to that. I think fundamentally this change is based -- based on the strength of the data and the results in the analysis of the PFS and the conclusion on our part, as well as post-discussion with the data-monitoring board, the clinicians, as well as importantly, the agency, that the, that strength, left us in a position of feeling that would be unethical to continue to treat patients on placebo and to not, to deny them access to the drugs.

That's the reason and certainly it's a change from the original SPA that we had with the agency. Of course, we would not have done something we felt could have jeopardized the opportunity for the approval built into that. Again, it will be a reviewed decision by the FDA. Again, this is something we made the decision, but after close collaboration with the FDA.

The roles the FDA has played is basically they're, they look at the data and Len has said, FDA never gave you at a guarantee, but can you point to a historical example where progression--free survival, is used when originally the survival was the primary point of the trial?

Well well -- well, I think this, number one, this trial which we also developed in close collaboration with the FDA at the initiation, was in and of itself, to my knowledge, anyway, the first trial where an analysis, a formal analysis of PFS and survival was built into the same study. That was in close collaboration with discussions with the agency, as well as the decision to cross over the patients.

Okay. Thanks.

Thanks, Jason.

[OPERATOR INSTRUCTIONS]. and -- and you now have a question comes from the line of Howard Liang with A.G. Edwards.

Thank you very much. You spoke about doing a rolling submission to the FDA. Can you talk about what will be submitted first what, comes next?

As you know, a rolling submission, this pilot one program is something that came out of Padufa-3, which is a formalized -- the rolling submission is now called a continuous marketing application and it does allow us to submit to the agency each of the specific parts of the application as they're originally ready. Those being pre-clinical, manufacturing or CMC and the clinical section, which we have said historically, the rate-limiting step for us is the clinical section and as you know, have only been unblinded to this data not for purposes of preparing that data the for last 6 weeks.

Obviously, we have had the opportunity to be working on the pre-clinical and the manufacturing sections. Those will go in first. We're not going to discussion the specific order or when those submissions are made, but the benefit of this program is that when we make those ahead of the clinical submissions, the reviews start, the feedbacks start in the sections, as well as the six-month clock.

Okay. Now on the, going back to the survival data, I guess you said you're not -- you're still unblinded. You will not see survival there at ASCO, and how we -- might be able to see survival data on the currently-available patients, can you talk about whether there are provisions in the protocol that will allow us you to do analysis of the data before the triggering event.

No, we are blinded to the survival data under the protocol until the completion of the trial and the pre-specified number of events for that final analysis. So we remain blinded at this -- stage. There won't be any survival data available to us for presentation until that's complete.

Thank you.

With no further questions, I would like to turn the call back over to to Onyx Pharmaceuticals for closing remarks.

Once again, we appreciate very much the opportunity for this, not only the opportunity to present what is going in the Company and the quarterly results but also this opportunity to have the dialogue with you. Stay tuned, the next few weeks will be important, starting with the presentations at ASCO and we have other follow-up meetings scheduled. We look forward to our ongoing dialogue. Thanks a lot.

Ladies and gentlemen, we thank you for your participation in today's conference This concludes the presentation and you may now disconnect. Good day.