美國安進 (AMGN) 2008 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Second Quarter Financial Results Conference Call.

(OPERATOR INSTRUCTIONS) I will now turn the call over to Onyx Pharmaceuticals.

Thank you, Theresa.

Hello and welcome.

I'm Julie Wood, Vice President of Investor Relations and Corporate Communications at Onyx Pharmaceuticals.

We thank you for joining us today for our second quarter 2008 financial results conference call.

Leading our call today is Onyx' President and Chief Executive Officer, Dr.

Tony Coles.

Also participating on the teleconference are Laura Brege, our Chief Operating Officer; Dr.

Hank Fuchs, our Chief Medical Officer; and Greg Schafer, our Chief Financial Officer.

Please note that we will be making forward-looking statements during this teleconference that could include financial, clinical or commercial projections.

Statements that are not historical facts 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 a discussion of these risks and uncertainties, we refer you to our 10-K for the year ended December 31, 2007, as well as to our 10-Q for the second quarter of 2008, which is on file today.

In addition, we will be presenting and discussing non-GAAP financial measures in this presentation.

For a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures, please see our press release of today, which is posted on our website at www.onyx-pharm.com.

I would now like to turn the call over to Tony Coles, who will begin the discussion with an overview of our business.

After Tony's remarks, the management team will review commercial, clinical, and financial highlights.

Tony?

Thanks, Julie.

After four months leading Onyx and immersing myself in the business, I want to start today's call by sharing my perspective on our growth prospects, both for Nexavar the brand and for Onyx the Company.

For Nexavar, we have seen strong global demand continue this quarter, as confirmed by the net sales our partner Bayer reported last week, and we expect this to continue with additional launches worldwide.

Fueling further growth for the brand, both in the near-term and the longer-term, is the still to be tapped potential in the global liver cancer market.

The first stage of our launch in liver cancer has been very successful, as we are rapidly penetrating the traditional oncology segment of this indication in the Western markets.

Now, in the upcoming second stage of our global launch, we look forward to further developing the non-oncology business in these markets, driving patients to treatment and referral earlier, as well as to extending the global reach of this brand into the largest markets outside the U.S.

where the demographics and the unmet need for this tumor are the greatest.

With these solid underpinnings and strong early liver cancer launch results, we are absolutely convinced that Onyx is a strong, stabile standout, poised to deliver results today and in the years to come.

In 2006, net sales for Nexavar, in its first year of commercialization, were $165 million.

The next year net sales more than doubled to $372 million.

And in the first six months of 2008, Nexavar has already achieved more than $300 million in net sales, placing it well on track for a third consecutive year of successful performance.

Looking at other top performing oncology products at comparable periods following their launch, Nexavar is performing ahead or on par with them.

Examples are Rituxan and Herceptin.

Our current revenue track record indicates Nexavar's trajectory is consistent with that of an emerging top performer and this with only two indications that historically would have been considered relatively small for this market, oncology.

By any objective measure, the sales performance for Nexavar to date has been outstanding, but the question in front of us can these past achievements reliably predict future performance in these two indications, each with its own unique opportunity.

Let me tell you what I've discovered, what I believe and most importantly, what we're doing to tap Nexavar's full potential.

However, before I share my thoughts on the opportunities in front of us and how we'll leverage them, I want to briefly review this quarter's results.

We're pleased to report that in the most recent quarter Nexavar achieved significant growth, compared to the same period last year, reflecting increasing global sales demand for the brand and impact from additional launches.

This robust quarterly performance is consistent with the continued growth trends we believe exist for the brand.

Additionally, the earnings per share performance for the quarter indicate a solid impact on the Onyx bottom line.

Looking ahead, we see continued market and brand growth, particularly in liver cancer, occurring over time and in stages.

We are now entering the second stage of our global launch where we expect that an important part of Nexavar's future growth will be fueled by a series of rolling worldwide launches in liver cancer that will take us well into 2009.

For example and by comparison, just last quarter we finally completed our last major market launch for our first indication in kidney cancer, with the launch of this indication in Japan, roughly two-and-a-half years after the first approval for kidney cancer, a common timeframe for rolling global launches.

Also important to consider in understanding the growth we see ahead, and as I mentioned a moment ago, we see the liver cancer market growing in waves, with the first stage dominated by traditional oncologists prescribing.

As we initiate the second stage of our launch, we expect to reach multiple new non-oncology prescribers treating patients with liver cancer, as we develop and expand the opportunity to attract new patients and new prescribers to this market.

This step-wise penetration, including both new geographies and new prescribers, is expected to deliver revenue growth for months and years to come.

Now let me share with you what I believe about Nexavar and what we're doing.

In kidney cancer, Nexavar continues to be an important cornerstone treatment option for many patients.

As additional new drugs have been approved and the market becomes more competitive, we believe Nexavar's use has already been well established with loyal prescribers.

Ongoing efforts are aimed at fortifying our position in this market with additional clinical trials that we are engaged in now.

Some of these studies, such as the adjuvant trial, have the potential to reshape the therapeutic landscape for kidney cancer.

At the same time, we are amassing additional tolerability data, particularly concerning co-existing conditions where safety concerns appear to be an increasingly important factor influencing physicians' choice of treatment for this disease.

In liver cancer, Nexavar has already achieved market leadership.

With the recent approval in China announced just last week, Nexavar now has the opportunity to help patients in a country where liver cancer claims hundreds of thousands of lives annually.

In the markets where we've already launched, we believe there is tremendous upside opportunity, driven by an expanding patient population and by reaching patients earlier in the course of their disease.

With Bayer, we are currently working to penetrate the traditional oncologist-dominated market.

However, the full market potential resides in the segment of patients that historically had never seen an oncologist until it was too late.

In a time when no effective oral therapy existed for this disease, many patients were simply sent home or to hospice to live out their final days.

This is the expectation we expect to change for all prescribers who see these patients.

With Nexavar, we're changing the paradigm for the treatment of liver cancer, reaching new patients and new prescribers, and supporting breakthrough approaches, among the many physician types treating liver disease.

We expect to reach greater numbers of patients earlier in their disease course as, over the next few years, we expand this market.

This market remains our exclusive market space and we are the first and only oral therapy approved for these patients.

As a result of our recent performance, and our belief in how this market will continue to evolve, we are increasing our net sales guidance for 2008.

This upward revision in sales estimates is based on the emerging growth trends I've just described and our belief in the liver cancer indication's responsiveness to market expansion initiatives.

For 2008, we believe Nexavar is poised to deliver worldwide net sales in the range of $660 million to $675 million, representing strong growth and the third year of consecutive and substantial revenue gains.

Going beyond 2008, we believe that Nexavar will continue to deliver strong annual growth, as we continue our second stage launch efforts to unlock the full potential in liver cancer and maintain Nexavar's role in the treatment of advanced kidney cancer.

Because we still have much more to learn about Nexavar's potential, we are continuing to invest in a robust development program with Bayer to identify new opportunities where Nexavar can help additional patients affected by cancer and development indications.

Consistent with this strategy of making focused investments with financial discipline, we're executing a program with our partner of randomized, signal generating Phase II studies to guide our Phase III investments.

This commitment to maximizing the near-term and the long-term value for Nexavar includes exploring potential non-oncology applications as well and will be reflected in the initiation of a number of trials in new settings and new indications over the next 12 months.

We'll share data as it is generated in these exciting potential new indications.

And while Nexavar remains our core asset and the engine for growth for our business, over time we do expect to expand our portfolio as a means to build a sustainable profitable company.

It is now my pleasure to turn the call over to Laura Brege who will highlight our commercial progress.

Laura?

Thank you, Tony.

As an oral targeted therapy, we believe that Nexavar represents a key step forward in the evolution of cancer medicine.

Nexavar builds on the innovations offered by single mechanism-targeted therapies, uniquely combining both antiproliferative and antiangiogenic properties into a single pill.

In addition to its proven efficacy in two types of cancer, Nexavar's tolerability and convenient oral dosing potentially make it an ideal drug to benefit patients with many different types of cancer.

We are pleased with Nexavar's continued sales momentum.

In the second quarter, Bayer and Onyx achieved global net sales of $168.5 million.

For the second quarter, approximately $122 million in sales were generated outside the United States and approximately $46 million were sales generated in the United States.

The strong second quarter sales performance was driven in part by uptake in liver cancer.

In the EU, Bayer has begun launching Nexavar for liver cancer in Germany, France, Spain, Italy and Greece.

The launch in Spain began earlier this year, while the launches in Italy and Greece began in the second quarter.

As we've discussed previously, Asia, the region of the world most impacted by this difficult cancer, represents an important opportunity.

We are pleased to report that Nexavar was approved in China and launched for liver cancer just last month with reimbursement pending.

We anticipate that important and positive macro environmental changes, including a rapidly emerging middle class and an expanded government-based reimbursement system, will facilitate continued and strong uptake of Nexavar in China for months and years to come.

Nexavar has also been approved for liver cancer in South Korea and an application for government-based reimbursement is pending.

We anticipate an approval in Taiwan in the second half of the year, with reimbursement in 2009.

In Japan, where annual death due to liver cancer are estimated at more than 35,000, the application for liver cancer is pending and we anticipate Bayer will launch for liver cancer in the first half of 2009.

As Tony described, we expect a number of liver cancer patients treated with Nexavar to grow over time, with ongoing global launches and successful outreach to new medical audiences.

Our goal is to reach all patients who can benefit from Nexavar, including those patients who are at earlier stages of their disease.

In the U.S., we have already successfully penetrated the oncologist audience in the first stage of our launch.

We're making terrific progress with these prescribers and have additional opportunities to expand penetration into earlier stages of the disease.

We are now building awareness in non-oncology audiences, such as gastroenterologists and herpetologists.

To amplify our efforts with these prescribers, I am pleased to announce that as part of our second stage launch effort and together with Bayer, we are adding to our U.S.

field sales efforts by deploying a dedicated team of liver disease specialists to detail and focus on key non-oncology physicians.

We nonetheless are treating patients with liver cancer.

We expect this to result in an increasing percentage of new physician audiences as potential prescribers of Nexavar.

The recent publication of the pivotal Phase III data in the New England Journal of Medicine is timely in support of these efforts, as it is expected to reach an unprecedented number of these new audiences and provide another opportunity to bring important data to potential new prescribers, both within the United States and throughout the world.

Looking at the kidney cancer market, most launches worldwide are now completed.

As mentioned, the process of gaining approvals in over 70 countries spanned approximately two-and-a-half years from the very first approval at the end of 2005.

Today, kidney cancer patients are benefiting from multiple drug options newly available to them in the last few years.

With the introduction of new drugs, there is competitive market share within the market, which will largely continue as additional agents are introduced.

At the same time, kidney cancer patients are benefiting as sequential administration of targeted agents appears to be improving survival and allowing patients to receive multiple therapies.

Nexavar, as a cornerstone of therapy, with a broad base of prescribers, continues to have an important and valuable place in the treatment arsenal of healthcare professionals globally for treating patients with advanced kidney cancer.

As we look forward, we continue to explore initiatives in this market and are appropriately identifying all the kidney cancer patients who can benefit from Nexavar.

And in the first stage of the global liver cancer launch, we have seen and expect to continue seeing growing demand for Nexavar's unique benefits.

This is an important time for the Nexavar franchise, as commercially we invest to maximize our leadership potential today and in the future.

I would now like to turn the call over to Hank Fuchs who'll provide us with an update on our development program.

Thank you, Laura.

In liver cancer, the medical teams are supporting our second stage launch efforts to unlock the full potential of Nexavar globally through program trials.

Later this year, we will be launching Gideon, the largest prospective registry of liver cancer patients, to further characterize the safety of Nexavar in global practice settings.

We are also launching randomized trials in the adjuvant setting and in combinations with targeted therapies, local therapies, and chemotherapies.

Finally, we have a broad global program of investigator initiated trials that complement and extend our global experience with Nexavar.

While competition appears far away on the horizon, we intend to continue to build on the outstanding HCC data we first reported at ASCO in 2007.

Beyond liver cancer, we have a broad development program assessing Nexavar's applicability across multiple tumor types, with consideration for specific patient populations and disease settings.

This is being done within the context of a rigorous lifecycle plan that maximizes the value of incremental investments and includes a number of tumor types in addition to those already under study.

Given Nexavar's success in two different cancers, we are increasingly confident that Nexavar maybe effective in additional tumor types.

As a result, we have a diverse clinical program that encompasses Company-sponsored cooperative group and investigator-sponsored studies.

Data from some of these studies were presented at ASCO in early June.

In lung cancer, an independent investigator from ECOG, or the Eastern Cooperative Oncology Group, shared data from a randomized discontinuation trial demonstrating that Nexavar improved progression-free survival in patients who had failed at least two previous therapies.

Treatment with Nexavar significantly improved the proportion of patients alive and free of progression eight weeks after randomization, from 19% for placebo to 47% for Nexavar.

These data are both interesting and encouraging, and we are currently assessing how and whether these findings might augment our existing development program in lung cancer.

We already have ongoing a Phase III trial administering Nexavar in combination with chemotherapy to first-line patients, a study that we expect will complete enrollment in the first half of next year, as well as multiple Phase II trials in combination with other anticancer agents for second-line patients.

Signal generating studies in gastric, ovarian and thyroid cancers, as well as in GIST were also presented at ASCO.

In gastric cancer, it was reported that patients treated with Nexavar and chemotherapy had a median overall survival of longer than 14 months, which compares favorably with historical controls whose survival is fewer than 10 months.

In ovarian cancers, findings from a Gynecologic Oncology Group, or GOG, Phase II study demonstrated that approximately 25% of patients were alive and free of progression six months after starting therapy with Nexavar.

And this compares favorably with that group's criteria for advancing interesting and important compounds.

In thyroid cancer, findings from a single arm Phase II study show that iodine refractory patients of mixed histology treated with Nexavar had a median progression-free survival of approximately 18 months and this compares quite favorably to historical controls with approximately eight months of overall survival.

More recently, data from this study was published in the Journal of Clinical Oncology and we received compendia listing from the National Comprehensive Cancer Network, or NCCN, for thyroid cancer.

In GIST, patients previously treated with one or two targeted agents, median progression-free survival was 5.7 months, and median overall survival was 13 months for Nexavar treated patients.

This reinforces our belief, and as the data's suggesting, that sequential treatment with multi-kinase inhibitors confers additional therapeutic benefit.

Let me also remind you that ECOG is sponsoring a Phase II trial enrolling chemo naive advanced melanoma patients.

Enrollment in this study, which is designed to compare overall survival of patients treated with carboplatin and paclitaxel to treatment with these agents, plus or minus Nexavar, has been completed.

Outside of oncology, a small study conducted by external investigators showed provocative results in treating patients with pulmonary hypertension.

In this trial, all patients studied experienced some objective improvement in cardiovascular function.

In summary, with demonstrated efficacy in two previously under-served cancers and a broad yet disciplined clinical development program designed to leverage Nexavar's tolerability, efficacy, and oral administration, we believe that Nexavar is well positioned to make an increasingly significant mark in the treatment of cancer and potentially other diseases.

Now, I'll turn the call over to Greg.

Thank you, Hank.

Once again we are pleased to report on a profitable quarter driven by the strong growth in global Nexavar sales.

As discussed earlier, total global net sales of Nexavar for the second quarter of 2008 were $168.5 million, representing an increase of 107% compared to the second quarter of last year.

This includes sales in Japan following the second quarter approval in kidney cancer.

As a reminder, all Nexavar revenue is recorded by Bayer, and Onyx and Bayer share profits worldwide except in Japan, where we earn a single-digit royalty.

For the second quarter, our net income was $4.5 million or $0.08 per share fully diluted on a GAAP basis.

On a non-GAAP basis, excluding stock-based compensation expenses, net income was $8.7 million or $0.15 per share.

As we have seem in the past, going forward we continue to expect bottom line performance to vary from quarter-to-quarter due to unevenness in expenses across the quarters.

Total shared Nexavar sales and marketing expenses incurred by Onyx and Bayer, including cost of goods sold and distribution expenses, were $80.1 million for the second quarter of 2008.

Sales and marketing expenses were higher, with increased sales levels in activities relating to the launch of the liver cancer indication.

Total shared Nexavar development expenses under the collaboration were $43.9 million for the second quarter.

Development expenses included clinical trial activities in liver, breast, non-small cell lung and other cancers.

Looking forward, we will continue to make the necessary commercial and clinical investments to achieve revenue growth for both the near-term and the longer-term.

As such, we remain comfortable with the 2008 collaboration expense guidance previously provided in our year-end call, annualizing the fourth quarter 2007 collaboration expenses for both shared sales and marketing expenses and shared R&D expenses.

As a reminder, Onyx's direct expenses associated with Nexavar are included with our other direct expenses in the R&D and SG&A line items of our income statement.

Onyx's direct R&D expense was $8.6 million in the second quarter of 2008, an increase over the first quarter expenses, primarily due to expenses associated with the breast cancer trials led by Onyx.

Included in our R&D expense is $809,000 in R&D related non-cash stock-based compensation.

Onyx's SG&A expense was $19.8 million for the second quarter of 2008.

This line item includes the cost of our U.S.

sales force, the portion of share mix of our marketing expenses that we incur directly, the cost that we incur for general and administrative support of the Company and SG&A-related non-cash stock based compensation expense of $3.4 million.

Total non-cash stock-based compensation was $4.3 million in the second quarter of 2008.

Interest income of $2.7 million is lower than that we recorded in the first quarter of the year due to declining interest rates.

At June 30, 2008, we had cash, cash equivalents, and marketable securities of $471.2 million, as compared with $456.6 million at the end of the first quarter.

Now, I will turn the call back over to Tony.

Having been here for over four months now, I have to admit that I am even more excited about the Company's prospects and I'm optimistic that we have the necessary elements for near-term and long-term growth.

We've set a near-term priorities for the business, we've delivered on our commitment to grow topline sales and adjusted guidance as the according, and we're poised to continue to deliver on this and every other front to create a sustainable business.

Commercially, with our partner Bayer, we've established an excellent track record of success maximizing the potential for Nexavar.

Building on this success, we see Nexavar sales performance on a trajectory comparable to other targeted therapy blockbusters that have become leading commercial success stories.

On the development front, Nexavar is benefiting patients with liver and kidney cancer worldwide, and is being studied in over 200 clinical trials.

Building upon this momentum as Hank described, we're committed to exploring the full promise of this unique dual mechanism targeted oral therapy.

And financially, we're in strong position with a very healthy balance sheet and positive contributions from the Nexavar business and over time, we expect Nexavar will deliver increasing margins to the overall performance for the Company.

As a result of the sales growth and the key investments we expect to make for the future of our Company and its growth, we anticipate that Nexavar, as a brand, will be profitable for the full year 2008.

As a result, we continue to expect that our existing business will be cash flow positive and is likely to be breakeven or profitable on the bottom line for the full year 2008.

We are very pleased with the continued strong performance of Nexavar as a brand and its projected impact on Onyx financials for this year.

As we continue our efforts, I'm enthusiastic about our ability to make a difference for patients and their families, and in so doing, continue building a sustainable Company for the benefit of our shareholders.

This concludes our formal presentation.

Operator, let's open the call for questions.

Thank you.

(OPERATOR INSTRUCTIONS) Our first question comes from Jim.

Please state your full name and the company you're from.

Hi.

It's Jim Birchenough with Lehman.

Hi, Jim.

How are you?

Good.

How are you, Tony?

Good.

Thank you.

So a question on trends in Europe.

It seems that there's either been some deceleration from the first quarter to the second quarter, or there is some lumpiness that we should be accounting for.

As I see it we had $24 million sequential increase in the first quarter, only $9 million in the second quarter.

So I was just wondering if you'd maybe give some insights into what is going on in Europe, whether trends are truly decelerating or whether there's some timing issues we should be aware of?

Yes, Jim.

I think lumpiness is the right word.

One of things that we are getting everyone focused on is staging for the various launches and you will certainly appreciate, along with your colleagues, that we had a very successful first phase of the launch.

Both the RCC indications, the Western markets and HCC and we see now that there is additional work to do to continue to expand and develop HCC in the Western markets and this will include Europe.

So we fully expect that over the next several months and quarters to begin working on this market development and expansion, reaching out to additional prescribers.

And I think the best word for it is the one that you've used, which you have used which is lumpy.

But Laura, do you have any other comments?

Yes I'd like to add that as we look at the EU, as Tony said, it's really quite an extraordinary opportunity when you look at the growth potential available in the EU, and as you pointed out, lumpy is the word to describe it.

For example, as we look today, the market win in Europe with the highest potential, when you look at the highest incidents of HCC in Italy, is just coming onboard late in the second quarter.

So, if you look at the stages that are necessary to be able to go ahead and be successful in each market, it's important to get approvals, to get reimbursement, to have the drug available to all patients and then to have the salesforce meet with all of the potential prescribers.

And just as we're seeing in other markets, in all the western markets, it's important to get the early prescribing happening out of the existing market and to build the market of awareness with all the prescribers who treat and potentially are important in the lives of the HCC patients.

So, if I could just follow up on that, Laura, and it pertains to your guidance.

We exited the second quarter on a run rate of roughly $672 million for the year and your guidance really suggests not much growth in the second half of the year, despite the fact that you are launching in Italy just now.

So I'm wondering if the suggestion that the Italian launch will occur more slowly than expected or are some of the markets you've launched into already saturated?

Just trying to better understand what the guidance suggests.

Well, Jim, we should probably just take a quick look at your calculation there, because that's not the calculation we have.

But I think the broader point for your question is, what do we expect for the remainder of this year?

And I think what you see, between this call and the previous call, we have an open willingness to, based on market data, come back and revise the guidance and that's what we're doing on this call.

My expectation is that we will continue to grow in the important markets this year, but that that growth is not complete.

I think it's very fair to say that we are just entering the second stage of our global launch efforts with Bayer and as such, believe we have a very long way to go before we approach the peak in the sales curve for these two indications and for HCC specifically.

So look for growth to continue into 2009 as the most important market to come online and as we continue on market development and market expansion efforts.

Great.

Thanks for answering the questions.

Thanks, Jim.

Stephan Willey, Thomas Weisel Partners.

Yes, hi, Stephan Willey from Thomas Weisel Partners.

If I could, just maybe revisit the guidance that Jim just brought up?

If we assume just a flat growth in Japan heading into the second half of the year that's about $24 million in revenue, if I am correct.

And so, if you actually back that out of the run rate going forward, I think you are assuming just 3.0% growth in the US and in Europe.

And it's just confusing, I guess, with the way that you talk about the Italy launch coming onboard and the growth potential that you have in the European markets.

Can you maybe just comment on that a little bit?

Yes.

Let me try this once more and this is probably the last guidance question I'm going to address in this fashion.

Happy to take all of the questions, but let me speak again about the staging for these launches.

Now, this is a brand that has an enormous capacity for growth and we've talked about that.

Yet we have a fair bit of work to do to continue to develop and expand this market place.

So you're looking at your numbers on a calendar basis.

What I'd encourage you to do is spread that beyond the calendar and into the subsequent quarters and pick up on the expectation that we have for the markets that are coming online.

The Italian launch will take several months to kick in.

As well as the efforts in China and Taiwan and Japan we haven't even begun to talk about, because those are 2009 efforts.

So appreciate that this is a market that will be very different than ones you're used to following.

It has staged growth.

You will see continued growth, which is what we expect into 2009.

And we are working diligently and expanding resources to identify new patients and new prescribers.

Remember this is a new indication in a new market and growth takes time.

Okay and then I'm sure you're probably aware of the editorial that accompanied the Phase III trial article in the New England Journal of Medicine.

Can you maybe just comment on some of the pricing that was raised in that editorial in terms of the ex-US pricing, specifically in some areas?

I think it was Taiwan where they mentioned the pricing was only $1,400 a month and I thought that Bayer had intended to price the drug at a pretty tight collar to where it is in the US.

Let me take that.

So, in the New England Journal of Medicine article, which is just super that that is available to prescribers worldwide now, did see an editorial where it was actually the Korean price, which was noted at a lower number and that number is actually incorrect.

Okay.

So, to the broader question of how is pricing happening worldwide, you are correct.

There is a relatively tight band worldwide with pricing here.

So, clearly, taxes such as reimbursement and differences in individual health country systems provide some flexibility in that.

But the number that you see in there for Korea is incorrect.

Great.

Thanks for taking my questions.

Thank you, Steven.

Jessica Li, Goldman Sachs.

Hello?

Thank you.

Can you hear me?

Yes, Jessica, we can hear you just fine.

Good afternoon.

Great.

Jessica Li, from Goldman Sachs.

I'm wondering -- first question is in Japan, I assume most of the usage is in RCC at this point.

Can you comment on any possible off-label use in Japan?

And the second question is I'm wondering whether you could just comment on the status of getting the reimbursement in China.

Thank you.

I think you broke up a little bit, Jessica.

I think the end of your second question was comment on the status of reimbursement for Japan?

For China.

For China, okay.

All right, very good.

Yes, Laura, I'm going to ask Laura to take both of those.

So, Jessica, for Japan, actually as you point out, the approval is in RCC and we're looking forward together with Bayer for an approval in HCC next year.

You really should be looking for this year's numbers to be RCC numbers and not off-label HCC numbers as you go through.

And so, as we look forward, that's a great growth opportunity coming into 2009.

In terms of reimbursement for China, again, that's something that happens over time and we don't have a particular date.

I will tell you that piece by piece, as we look into China, you'll see that we have some early usage in terms of the private pay and there are other opportunities for patients to have access to the drug.

Great.

Thank you.

Yes, Jessica, just to follow up, there's a couple of quick comments.

Bayer does have a patient access program underway for patients for RCC, in China in particular, for those who can't afford treatment and anticipate the standing issues to include HCC patients.

I will remind everyone that China uses a self-pay and a private insurance model and we certainly expect that the pricing in China will be similar to Europe.

Great.

Thanks.

Okay.

Thank you.

Jason Zhang, BMO Capital Markets.

Yes, Jason Zhang from BMO Capital Markets.

Thanks for taking my question.

A couple of questions.

One is related to the New England Journal of Medicine publication.

I guess this will be to Hank.

We realize that the trial, the SHARP trial have two co-primary end points and but the publication was the first time we actually saw that one of the co-primary endpoints, the trial did not see or show a benefit on that.

My question is actually related to what is the implication in the marketplace, because time to symptomatic progression on the drug is shorter than the placebo.

Whether you think that may actually stop patients earlier than necessary, because the symptoms, if they consider it to be clinically meaningful and then they will have to stop the drug to address those symptoms?

So, Jason, we do not think so, but Hank, maybe you have some specific comments.

Yes.

As you know, there has until recently been no approved therapy for liver cancer and so, our ability to measure symptoms in liver cancer has been greatly impaired and so this was the first time that FSHI-8 instrument had been used in a randomized trial.

And what we learned is that the instrument is apparently insensitive to detect the treatment benefits of Nexavar.

Clearly, Nexavar is beneficial.

It prolongs survival by more than 44%, an effect that was large enough to stop the trial substantially early on the recommendation of a Data Monitoring Committee.

So, as Tony indicated, we really don't think that the results of this facet of the trial have any relevant meaning for clinicians.

And what clinicians are focused on is that, for the first time ever, they have an agent that can prolong survival in the terrible condition for which there had been essentially no hope.

I understand that but again, in practice, if a patient does have a serious deterioration of some of the symptoms and do you actually see physicians encourage their patients to stay on the drug beyond that symptom deterioration if it is problematic?

I mean, how can you convince the patient really to stay on, because you really couldn't see much of radiological response anyway?

So this is Laura.

So, we just look at here, what I'd like to share with you is that we have actually some new market research data, which is showing early trends indicating a couple of really important pieces of it.

First is that the early experience that physicians, who have primarily been oncologists, has been quite positive.

And that as you look at how patients are dealing with, staying on the drug and with the promise of overall survival as a benefit, then, in fact, patients are staying on the drug longer and longer.

So, both patients and physicians are becoming increasingly comfortable with the benefits that Nexavar can deliver.

As you look at -- we also found in this research we are just beginning to see the non-oncology professionals beginning to write prescriptions.

And their expectation to continue to have increases is another really important point to the New England Journal of Medicine article, and actually to all three trials, which were stopped early for efficacy, centers around how much benefit patients get from starting the treatment early.

So in every way you cut, you look at your patients.

Your patient is benefited taking a look at having Nexavar early and so what we can tell you today is that the market research and the early experience has been really quite excellent.

And can you share with us the average duration at this point, roughly?

No.

As I can tell you and really have wound up with this all the way through in the period of time for us with Nexavar, what we can tell you is that duration is increasing, but it's very difficult to give you a specific number.

So I'm not going to be comfortable doing that.

Okay.

Thanks and I have quick financial question.

So, again your guidance for the joint ventures expense is based on the earlier of the year guidance to basically place on the fourth quarter's number last year and if I do that calculation that would suggest, again a much higher SG&A or R&D in the third and fourth quarter.

I just want to make sure that I understood it correctly.

Yes, Greg, do you want to talk about the expense guidance?

Sure.

Yes, we are holding to the guidance and it does indicate that we will be increasing investments throughout the year.

And just to give you a little more detail on that, on the commercial front we and Bayer are investing, too, in advance of the market to reach its full potential.

And as Laura pointed out, we are also investing to reach new prescribers beyond the traditional Nexavar prescriber, the oncologist.

And finally, we're developing a new market.

So, all those are going to portend increased investment on a commercial front.

On the development front, we're really continuing to increase investment in two areas, two key areas.

One is in HCC, so, as Hank pointed out, we have some key trials that we're ramping up in that area and finally, expanding our Phase II signal-generating program into additional settings and tumor types.

Okay, thanks.

Thanks, Jason.

Steve Harr, Morgan Stanley.

Steve Harr from Morgan Stanley.

So a question on your guidance.

You made $0.35 in the first half of the year and you're still not comfortable, and you've raised your topline guidance, but you're still not comfortable putting out guidance for profit for the year.

And that is on GAAP basis.

On non-GAAP you made over $0.50.

What's holding you back and what does that imply about either your confidence on the topline or how aggressive this spending may be?

And do we see profitability in the second half of the year being negative?

No, let me talk through this from the perspective of spend for a moment and I'll just expand what Greg has just said and I think, you'll get color to your question.

So, on the spend level, we're committed to three things.

First, product investments ahead of launches and as noted, we are in the middle of a number of very important launches in critical markets.

We don't think it would be good business judgment for us to pull back in spending at such a critical time in the brand's growth trajectory.

We still have China, Japan, and Taiwan to launch where some of the highest death rates from HCC are experienced.

Second, maintaining and growing our dominant market position in HCC and this means, for us, adding additional resources.

Laura has talked about the expansion of the U.S.

field salesforce to develop and expand the market and continued investing in lifecycle opportunities, to make sure we know where Nexavar can be used in HCC.

And that it establishes itself as the platinum standard in that indication, that will take funds.

We understand, though.

We want to understand how it should be used in conjunction with all other care approaches for HCC, including surgery and local therapy.

And finally, what we're committed to in terms of our spend and support for the brand, is an investment in Nexavar today for the value that it will deliver tomorrow.

And this does require investing today to generate important data for new indication in new tumors, so Nexavar can be an even bigger brand and achieve the blockbuster status we believe is possible.

In summary, we expect to use market research data that we have in-house as we learn more about potential for growth, prescriber enthusiasm and in relevant settings to increase our knowledge of where to invest commercially and clinically to maximize the value.

So, most of our guidance comes around the topline opportunity we see in terms of growth.

And the guidance on the bottom line we said that we could be breakeven to profitable, so it's still possible that we would end the year in that position.

That doesn't -- I was just wanted to get -- you are -- you think it's reasonably, it's likely, then, that you will see a loss for this third and fourth quarter?

Because it is only possible to show a profit, you must be saying it's likely that you that have negative earnings for the third and fourth quarters.

Yes, at this moment Steve, I'm not prepared to comment on the third and the fourth quarter in advance of either topline or the expenses.

But we said in the first call and now we reiterate again today that we really do want to manage both Nexavar as a business, and obviously Onyx, the Company towards the best margin.

So I'm not making a commitment today for expectations for third and fourth quarter.

We still think it's possible, but we're not going to under-invest in the brand.

Okay.

I didn't think this was a tough question.

How big is the liver salesforce going to be?

It's going to be about a 10% expansion in the U.S.

Of the Onyx side or of the Onyx/Bayer combined salesforces?

Yes, combined, Steve.

Okay.

Thank you.

Thank you.

Howard Liang, Leerink Swann.

Howard, I am from Leerink Swann.

Thanks very much.

Could -- I think it's probably for Laura, the reimbursement in Korea, can you talk about the timing, when do you expect reimbursement from the National Health Care Insurance?

Just so we understand Howard, which country?

Korea, South Korea.

Okay, Laura?

So, Howard, as we look at it here, we are just in the beginning phases of launching.

We would look to see reimbursement probably in the second quarter of 2009.

Okay, and for the Japanese sales, it looks like royalty is 7.0%.

Can you -- is the royalty rate flat in terms --your growth versus sales?

Howard, we have not and don't intend to comment on that, with full respect for our partners.

So, we have not disclosed the royalty rate or the structure of it.

Okay.

Can you talk about your spending on patient assistant programs both in the US and overseas?

Laura?

So, actually since before the launch of the drug, we had an expanded access program available for patients who were suffering from kidney cancer and have had an active patient assistance program both in the U.S.

and the appropriate places around the world.

Tony mentioned the patient's assistance program, which is available today in China for RCC patients.

And so I think that we can be comfortable and proud of the availability we've made of the drug broadly and have seen, from a trend perspective, that we've seen pretty steady trends there.

Okay, if I can ask a last question on RCC, the trend now both in the US and in Europe.

Have you seen the impact in Europe from Avastin?

So a specific -- so Avastin here?

I would say that, no, we're not really seeing anything coming there.

Nexavar is an oral targeted therapy, which has great features in terms of efficacy, safety, tolerability, convenience, and so we look at this and we have not seen an impact.

In fact, orals are preferred in Europe where you don't have the same reimbursement momentum behind intravenous agents as you do in the West.

So, orals are really the preference and Laura is exactly spot on.

Thanks, Howard.

Katherine Kim, Banc of America.

This is Katherine Kim from Banc of America.

Hi Katherine.

Hi, Tony.

How are you?

Good, thank you.

So the first question I have is, in Europe, ahead of the pricing approval, have you seen any lost label use in HCC ahead of the official pricing approval, or do you really need to get that to get usage?

So, Katherine, this is Laura.

For broad usage you absolutely need to have pricing approval as you take a look at how the patients are used to having government access programs and government pay programs as being a critical piece of it here.

Depending upon the country, you can get some earlier usage through some hospital systems.

But primarily reimbursement is really a critical piece in the equation.

So it's only a minimal type of off-label use ahead of official pricing approval?

Yes, I would say again that it varies, geography-by-geography.

We're having a broad discussion in terms of all of it here, but as you take a look at each country, you'll find that reimbursement is really very important in the European market.

Okay, and then just your guidance at this point.

Are there any new major countries other than what you've said, China, basically China and Japan and Korea not coming on board until next year?

Are there any other major new countries that you are still expecting to get pricing approval that's not in your assumption for the guidance for this year?

Yes.

So, let me give you a high level answer and Laura's going to give you some specifics.

What I will say, Katherine, is that if you look at the number of countries where we're approved for RCC, it's 70 countries or just over 70 countries.

To date, we are only approved for HCC in 40 countries.

So it tells you we've got a very long way to go in terms of bringing on additional countries, some of which are the most important potential revenue opportunities for the brand outside of the U.S.

and for Europe.

So you can get a sense that what we're saying about rolling launches is going to take some additional time.

Laura, do you want to make comments about specific countries?

No, I think Tony is exactly right here, which is as we look forward we see continued roll out, both in the countries we're approved and then get reimbursement and then become widely available to patients and then patient or countries where we will just begin approvals.

So, as I look at it today and you look at 40 countries, certainly we have many of the important countries, but not all.

And we have quite a ways to go and as you look back at how long the RCC piece of it is, you saw that it takes some time.

In Japan, of course, we're looking at in the first part of next year and Taiwan as well, later this year.

So, can you just talk about which specific countries, maybe a couple of countries that you can mention that is not part of your guidance that you expect to get pricing approval this year?

Katherine, I'm sorry would you state that again?

I lost the last part of it.

Okay.

What I wanted to know is if there are a few, like one or two major countries that you expect pricing approval this year that's not in your assumption for the guidance, that we can kind of talk about later, like at the next conference call?

I think that I can't give you a specific country that we have not included in guidance that we do expect to go ahead and have approval here.

Because, as you look at it again, these are estimates of time, as we look at country by country, and then approval is one step of the way as we look forward to reimbursement.

I think an important piece of it here, and we talked a little bit ago about Italy here, where the instance is the very highest in Europe, and we're just at the beginning days of that.

So, I do not know that I can make a connect for you about a specific country.

But I can tell you, as you look at the rolling launches, both approval, reimbursements, high incidence that we have quite a lot in front of us.

Okay and then my final question has to do with the deployment of the new salesforce in the U.S.

So, is it your expectation that until the salesforce comes onboard, and if you could tell me timing-wise how long it will take, do you expect the U.S.

portion to remain kind of in the flat range in the growth coming from outside US?

Well, we always believe that the greatest growth, on a percent basis, will occur outside the U.S., because that is where the greatest number of patients are.

But that doesn't mean that we're not going to continue with our market development efforts in the U.S.

where we are clearly focused on educating new physician types, including gastroenterologists and hepatologists, about the opportunities that they have to use Nexavar for their patients.

Some of the market research data that Laura referred to suggests very strong trends in these new populations, with a high level of willingness and enthusiasm for writing Nexavar as well as earlier referrals to oncologists as appropriate.

So, we think that there are a number of things that we can and we will do in the months between now and to the end of the year to really stimulate growth in the U.S., and that is just an example.

Our expectation is to have the salesforce addition up and running very shortly and we won't comment beyond that.

But we are aggressively working to have those individuals in place and to extend the dialog that we're having with the non-oncology audience where we see a lot of potential.

So, thanks very much for your question, Katherine.

Anything else?

No.

That's it.

Thank you.

Okay.

We appreciate it.

Thank you.

And thank you.

This concludes the Q&A session.

I would like to turn the call over to Onyx Pharmaceuticals for any closing remarks.

Thanks, operator, and thank you to each one of you for participating and for joining us today.

It's been a good dialog.

We hope you have a much better sense about how we're managing the business and the potential we see for Nexavar and a better understanding of the second stage of our launch that we're entering where we will be continuing our efforts, both on the commercial front and the clinical front, to realize the potential on Nexavar that we think is enormous.

So, thanks for joining us.

I'll remind you that, as usual, Julie Wood and Greg Schafer will be available for additional detailed questions following the end of the call.

Thanks and have a good evening.

And thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for your participation.

You may all disconnect.