美國安進 (AMGN) 2009 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the first quarter financial results conference call.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session.

Please note that this conference is being recorded.

I'll now turn the call over to Onyx Pharmaceuticals.

Onyx Pharmaceuticals, you may begin.

Thank you.

Hello, and welcome.

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

We thank you for joining us today for our first quarter 2009 financial results conference call.

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

Tony Coles.

Also providing updates on the teleconference, are Laura Brege, our Chief Operating Officer; and Matt Fust, our Chief Financial Officer.

Joining us during the Q&A period will be Dr.

Todd Yancey, Vice President of Clinical Development.

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 10K for the year ended December 31, 2008, as well as to our 10Q for the first quarter of 2009.

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 corresponding GAAP measures, please see today's press release, 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 before we open the call for questions and answers.

Tony?

Thanks, Julie.

There is little doubt that we are living in interesting times, and that the rules as we knew them are changing.

his is even apparent in our industry, once thought of as recession-proof, where we are now seeing the impact of the global economic recession, even among bellwether companies.

We would like to offer that there are some things that will continue to be indicators of success, despite the current economic situation.

Onyx continues to generate revenue from Nexavar, as it expands the large, untapped market in liver cancer and drives positive cash flow.

We are also increasing our development opportunities, maintaining our profitability, and growing already-strong cash reserves.

These are positive and fundamental indicators of our current and expected success.

Our goal, short- and long-term, is to continually strengthen topline performance and manage Nexavar as a business.

So let's get started.

We're pleased to report our progress for the first quarter of 2009.

Global net sales of Nexavar grew 17% in the first quarter compared to the same period last year.

This growth was driven largely by a string of successful liver cancer launches and the first stages of a focused market expansion for liver cancer.

While the current economic conditions caused some headwinds for Nexavar in the first quarter, we believe this effect will be temporary, and that product and reimbursement approvals throughout the year will complement our ongoing market development efforts to achieve strong growth for the brand in 2009.

With our clinical program for Nexavar and our recently expanded product portfolio, we remain positioned for continued success.

With this in mind, I want to take a few minutes to highlight the strengths that differentiate the Company today.

First, in kidney cancer, Nexavar remains an important therapy for treatment.

With more physicians using targeted therapies sequentially to extend patient lives, we expect Nexavar will remain an important choice for physicians.

In liver cancer, which is the third leading cause of cancer-related deaths, Nexavar is the only approved oral targeted therapy.

We don't expect any competition for some time, giving us a leadership advantage in this market.

We've continued unmet medical need in these two tumors around the world.

We believe we're a long way from realizing the full value of Nexavar.

Second, it's our expectation that Nexavar will have broad application across a number of other tumors.

Nexavar's dual mechanism of action, proven efficacy in two tough-to-treat diseases, and established safety profile in tens of thousands of patients worldwide, have spurred tremendous interest from clinicians wanting to explore its use across a range of cancers.

In collaboration with these investigators, as well as through Onyx and Bayer-sponsored trials, there are literally hundreds of ongoing studies evaluating Nexavar in a variety of treatment settings.

Chief among these, are several Phase 3 Company-sponsored studies that are either ongoing or planned.

As a result, we're positioning Nexavar in years to come with an ongoing stream of new data from these potential registrational trials and several more Phase 2 signal generating studies.

Third, we're building a portfolio of diversified compounds by identifying and acquiring the next generation of leading therapeutics.

While we're committed to building a valuable pipeline, we are simultaneously mindful of the need to focus our resources and execute deals that play to our strengths and require measured investment as we work to reduce clinical risk.

And finally, as mentioned a moment ago, we are in an excellent financial position.

With over $467 million in cash and no debt on our balance sheet, we have the resources and financial flexibility to maximize the opportunities we have in front of us, and ensure that we remain largely sheltered from today's economic pressures.

Despite the economic turbulence, Onyx is in a position not only to weather short-term challenges, but also to thrive as a result of the solid business foundation we've put in place.

We expect the pressure that the industry is currently facing will be contained in the long run.

With our partner Bayer, we have successfully established Nexavar as a leading therapy in a very short period of time, and continue to believe that it is on track to be a blockbuster brand.

As a result, short-term fluctuations in sales do not undercut the potential we see ahead with Nexavar.

The depth and breadth of our development program ensures multiple potential shots on goal for the brand and our other products, and we're strategically focused on building a long-term and sustainably profitable Company.

Now I'll turn the call over to Laura Brege to discuss our commercial and our pipeline progress.

Laura?

Thank you, Tony.

For the first quarter of 2009, global net sales of Nexavar were $178 million, of which approximately $48 million were US sales and $130 million were sales generated outside the United States.

This represents a 17% increase in sales over the same period of last year.

As Tony mentioned, in the first quarter, broader economic pressures impacted sales.

In the United States, this was reflected in inventory de-stocking at the specialty pharmacies that sell Nexavar, where inventory levels were lower than in 2008.

We also believe there was some anticipatory buying by patients in the fourth quarter of 2008.

Though in assessing the most recent demand trends, we believe this phenomenon has largely resolved and worked itself out of the system.

Turning to the opportunities in the liver cancer market, in the United States, we are continuing to drive awareness among the many physician specialty types that participate in the management of liver disease patients.

Early evidence suggests that the broader prescriber market is developing as expected, and proving to be a productive segment.

We believe the opportunity for market expansion is significant, and that the impact of our field-phased market development specialist teams is beginning to drive prescriptions in new audiences.

In Europe, critical markets such as Germany, France, Italy and Spain continue to contribute meaningfully to sales.

In addition, countries in the broader European region outside of the top four, represent largely untapped revenue opportunities for us.

Turning to Asia, China continues to have the largest potential market opportunity, with approximately 50% of the annual liver cancer cases worldwide.

We have seen strong sales performance in this region since approval last summer, even ahead of government reimbursement.

Approval for the liver cancer indication in Japan is anticipated in the second quarter of this year.

With nearly 40,000 liver cancer deaths annually, over 2.5 times the number in the United States, we expect that Japan will drive the significant portion of sales growth, particularly in the second half of the year, once approval is in place.

In other important markets of the Asia-Pacific region, we anticipate approval in Taiwan later this year, and in South Korea, Nexavar has already been approved, and we are awaiting reimbursement.

We are pleased with the progress we've made in establishing this new market.

In addition to driving increased oncologist and physician specialty awareness and securing additional approvals in reimbursement, we are partnering with several groups to advance education for healthcare providers and patients.

We are also generating additional data across the continuum of treatment to benefit more liver cancer patients earlier.

Several studies that could impact the next wave of market expansion, are those evaluating Nexavar with local regional therapies, such as [TASE], including both Company and investigator-sponsor trials.

Additionally, we anticipate initiating a randomized Phase 3 trial in combination with Tarceva this year.

For the longer term, we are evaluating Nexavar's role in the [adjuvant] setting in our 1,100-patient STORM trial, which is enrolling patients with a resectable disease.

Nexavar is also an important therapy in the treatment paradigm for kidney cancer, having been on the market now for more than three years.

With an increasing number of treatment options available to physicians, sequential use of targeted agents is becoming more common.

As physicians tailor treatment practices to individual patient profiles, we believe data demonstrating benefit and safety across patients' groups differentiates Nexavar.

We are dedicated to advancing care for kidney cancer patients, and there are a number of ongoing studies, including two Phase 3 adjuvant studies and several Phase 2 investigator-initiated combination studies.

Nexavar revolutionized the treatment landscape for two different types of cancer.

Today, we have a broad development program underway, as we look to identify where Nexavar might make significant impact for patients with other deadly cancers.

While there are hundreds of clinical trials with Nexavar under ay, I would like to highlight some of the key trials.

We are pleased to announce the initiation of a randomized Phase 2 colorectal cancer trial.

This trial is evaluating Nexavar in combination with a well-established chemotherapy regimen known as FOLFOX.

Our trial will compare treatment with FOLFOX alone to treatment with FOLFOX plus Nexavar as a first-line therapy in patients with metastatic colorectal cancer.

Nexavar is also being evaluated as a treatment for non-small-cell lung cancer.

We've completed enrollment of our first-line study assessing Nexavar in combination with [gemcitabine and sisplatinum] versus a chemotherapy [double arm].

And based on Phase 2 data generated last year, we are starting a Phase 3 trial evaluating Nexavar's monotherapy and later lines of therapy for patients with advanced non-small-cell lung cancer.

We've previously announced plans to initiate a Phase 3 trial in thyroid cancer based on data from a single-arm Phase 2 study that showed that iodine refractory-advanced thyroid cancer patients treated with Nexavar, demonstrated a significantly longer median progression-free survival as compared to chemotherapy.

And finally, in breast cancer, there are ongoing randomized studies looking at several combination therapies and treatment settings.

Two studies, one in combination with paclitaxel, and another in combination with [capecitabine], completed enrollment at the end of 2008, and we could see trial results from these studies this year.

Beyond Nexavar, we are developing ONX 080, a targeted antifolate inhibitor.

With its dual mechanism of action that combines a proven approach with a novel method of selecting and entering certain cancer cells, we believe it has the potential to benefit many different types of cancer patients, including those with ovarian, lung or breast cancers.

In addition, we are closely monitoring the progress of ONX 0803 and ONX 0805, two JAK2 inhibitors that we have the option to in-license.

Data from Phase 1 dose ranging studies evaluating ONX 0803 in patients with primary myelofibrosis, could also be available this year.

There is a tremendous amount of momentum and effort underway to ensure we're maximizing our opportunities across both commercial and development fronts.

We have a strong product delivering value today, and great opportunity ahead of us.

And we are focusing our investments in targeted opportunities with the greatest potential for value creation.

Now I would like to turn the call over to Matt Fust, who will review our financials.

Thank you, Laura.

Let me begin my commenting on a few growth drivers for our business.

On our year-end earnings call, Tony outlined three themes for 2009 -- growing Nexavar sales, managing Nexavar as a business and building momentum in advancing our development pipeline.

We're pleased to report progress on all three fronts during this first quarter.

And we're fortunate that Nexavar is generating cash for investments in optimizing the commercial potential of this valuable asset, funding the search for new Nexavar indications, enhancing our commercial capabilities and building Onyx' emerging development portfolio.

While making these important investments in our future, Onyx also delivered another quarter of profitability.

Non-GAAP net income for first quarter 2009 was $8 million, or $0.14 per share on a fully-diluted basis.

GAAP net income for first quarter was $4 million, or $0.07 per share, also on a fully-diluted basis.

As we've seen in the past, we expect earnings performance will vary from quarter to quarter due to variations in revenue and expense.

On April 29, Bayer reported first quarter 2009 global Nexavar sales of EUR137 million, reporting a currency adjusted growth in Euros of 29% over first quarter 2008.

Translated into US dollars, global net sales of Nexavar for first quarter 2009 were $178 million, a 17% increase compared to first quarter 2008.

The average exchange rate during first quarter 2009 was $1.30 per Euro.

The dollar was stronger against the Euro in first quarter 2009 by approximately 13% compared to first quarter 2008.

We are reaffirming our global Nexavar net sales guidance of $850 million to $875 million for 2009.

Although we will continue to monitor global economic conditions, including the impact of foreign exchange rates on sales that are reported in US dollars, we continue to believe this level of Nexavar sales is achievable in 2009.

We expect to accomplish this through increased penetration in countries where Nexavar has been approved, through sales expansion in countries with recent approvals, and most importantly, through growth in countries where we expect reimbursement or approvals later this year, such as Japan.

Although there may be quarter-to-quarter variability in sales, we expect that launch progress and reimbursement approvals will continue to drive growth in the Nexavar business.

Shared Nexavar sales and marketing expenses incurred by Onyx and Bayer, which includes cost of goods sold and distribution expenses, were $72 million for the first quarter, a modest reduction in expense compared to the fourth quarter 2008.

As a reminder, we have guided to an approximately 10% year-over-year increase in shared SG&A expense from 2008 to 2009.

Though again, we do expect variability across the quarters of this year.

I'll now turn to Onyx' research and development expense, with the sequential quarter comparison.

R&D expense was $29 million for first quarter 2009 compared to $60 million in fourth quarter 2008.

As a reminder, fourth quarter 2008 R&D expense included one-time expenses of approximately $34 million, which related to corporate development.

After accounting for these fourth quarter items, Onyx' first quarter 2009 R&D expense increased approximately 10% from our fourth quarter 2008 level.

R&D expense in first quarter 2009 reflects continued investment in the Nexavar development program, as well as development costs for ONX 0801.

The R&D expense line on our P&L includes half of all development expenses related to Nexavar, Onyx' non-Nexavar R&D expense and R&D-related non-cash stock-based compensation expense.

Onyx' SG&A expense was $22 million for first quarter 2009, essentially unchanged from fourth quarter 2008.

This line item includes the cost of our US sales force, the portion of shared Nexavar marketing expenses that we incurred directly, the costs that we incur for general and administrative support of the Company, and SG&A-related stock-based compensation expense.

As a reminder, on our year end call, we estimated that for full year 2009, we expect an increase of approximately 5% in total operating expense over the annualized fourth quarter 2008 levels, excluding one-time charges associated with corporate development in the fourth quarter of last year.

In these challenging economic times, we are continuing to manage our cash reserves carefully, with the majority of our cash in conservative investments with short-term maturities.

This strategy, coupled with current market conditions, resulted in interest income of only $1 million in first quarter 2009, compared to $5 million in the first quarter of 2008.

However, we believe this conservative investment approach is the right one for this time.

And at March 31, 2009, we had $467 million in cash, cash equivalents and marketable securities.

With this healthy cash position, no debt and positive cash flow from operations, we are in an excellent financial position.

And with that, I'll turn the call back over to Tony.

Okay, Matt.

As I mentioned on our last call, we've got some ambitious goals for 2009, and are pleased with our progress against those goals during the first quarter of the year.

For example, we have several Phase 2 trials underway as planned, including a study scheduled to begin shortly, intended to extend our leadership in liver cancer.

This trial combines Nexavar with Tarceva.

Additionally, we're starting a Phase 3 monotherapy trial in patients with advanced stages of lung cancer.

And in the second half of the year, we intend to initiate a Phase 3 monotherapy trial in thyroid cancer, following very interesting data from a Phase 2 signal generating study last year.

We've also begun several other signal generating Phase 2 studies including, recently starting randomization for our colorectal trial and an [end] in ovarian cancer trials.

And in our Phase 2 breast cancer program, we may have data presented from two of these trials this year.

We also expect additional approvals in liver cancer, including Japan in the second quarter of this year as Laura described.

And finally, we plan to [access] our option exercises for ONX 0803 and ONX 0805 as data becomes available for these two JAK2 compounds.

With Nexavar, we've got a pioneering drug and one that is well on its way to achieving blockbuster status, as I mentioned a moment ago.

With strong annual sales growth and hundreds of trials underway to evaluate Nexavar's use across a broad range of tumors, we believe we've only begun to tap the full potential of this asset.

Additionally, we have started to create a portfolio beyond Nexavar as we continue to drive towards our ultimate goal of transforming the lives of patients affected by cancer.

Indeed, our story, the story of Onyx, has itself been one of transformation, transforming into a product sales-driven Company, into a profitable Company and into a Company with multiple pipeline compounds.

These changes have been possible because of the solid business fundamentals that position us well today and for the future.

Operator, now let's open the call for some questions.

Thank you.

We'll now begin the question-and-answer session.

(Operator Instructions).

We have our first question from Cory Kasimov from JPMorgan.

Please go ahead.

Hi, good morning, or good afternoon.

This is Mona for Cory.

A couple of questions.

Last week, when Bayer reported, you also reiterated Nexavar sales guidance.

And I was hoping actually that you could speak a little bit more about the key upside drivers, what you're relying on.

You've spoken about some of them, but perhaps if you could rank all of them.

Is it the EU?

Is it Japan?

Other divisions in Asia?

Okay, Mona, thanks.

We're happy to address that.

We're not going to rank order them because it's still fairly early in the year and there are a lot of moving parts.

But suffice it to say, we underscore and reiterate our full-year sales guidance.

And I'm going to ask Laura to field that question.

Thank you, Tony.

So as we look around the world, we expect first of all growth in each of the regions.

So liver cancer remains a largely untapped opportunity for Nexavar.

And so in each region, as you go through Europe, the United States, Asia-Pacific and markets where we are already approved, we expect to see growth from each place.

But as you point out, and in addition, in the markets where we are expecting approval in launches including Japan, and as we look in the broader European, meaning past the four countries we generally think about, but more perhaps in some of the Eastern European or around the Mediterranean, we do in fact see growth opportunities in addition coming from each of those regions.

And Japan, as I said in my prepared remarks, with 40,000 cases per year, 2.5 times the United States, is absolutely an important driver, particularly in the latter half of the year.

Okay.

That's helpful.

And then -- and then last week, Bayer also noted that about $35 million of Nexavar sales were derived from regions outside of the US, EU, Japan and Canada, and presumably that was from Asia.

And I wonder if you could speak a little bit more about -- is that largely patients who are paying out of pocket in regions such as China?

So the quick answer to that, Mona, is that in several of the Asia-Pacific markets, because I take your question to be focused on Asia-Pacific, in several of those markets, we are still awaiting reimbursement approval.

China's a great example.

Although we are already on the market in Japan for kidney cancer, and we are currently reimbursed there, we are awaiting the HCC, or liver cancer approval in that key market.

Which is the same for South Korea, where we have approval for liver cancer but, again, are awaiting reimbursement.

So you -- as you move across Asia-Pacific, you do see a blend of markets where we are already approved and being sold and distributed for kidney and liver cancer.

But some key ones, where reimbursement approvals are pending, the the business to date in those markets where we don't have reimbursement approval is largely out of pocket, as supplemented by patient assistance programs in some of the key markets that Bayer is responsible for.

Okay.

Thank you.

Thank you.

We have our next question from Jim Birchenough from Barclays Capital.

Please go ahead with your question.

Yes, hi, guys.

Just wondering if we can focus on the European opportunity.

It doesn't seem like we saw much sequential growth in that market, so I'm just wondering if you could talk about what you're seeing in general terms for volume trends in Europe.

And maybe comment on what's the market opportunity, what market do you already have approvals in, and what's the incremental market you could gain with approvals over the course of the year?

Okay.

Jim, let me make a couple of general comments and then I'll ask Laura to address this one as well.

I think what we saw through most in 2008 were a series of accelerating sales in what we call the big four markets.

We do sell a small amount in the United Kingdom through Bayer's efforts there, but we are not currently reimbursed according to NICE.

So we typically think of Germany, Italy, France and Spain, and have talked on calls past about -- a, both the solid foundation in those markets, and also the growth potential we see in big markets like Italy and Spain, for instance.

But one of the things that Laura likes to talk about, and I'm sure she'll comment on, are some of the markets outside of those big four where we have the demographics which support continued growth, and as we move through the reimbursement process, some interesting opportunities.

So, Laura, do you want to walk through those?

So as we look -- so Jim, as we look at Europe, as Tony said, centering on the four countries and Italy being the last of the big four that received reimbursement approval last summer, we're seeing continued strong demand in growth in each of those countries.

Traveling around, starting first in the, in the former Eastern European block and thinking in terms of Romania, Bulgaria, Poland, Czechoslovakia, these are countries which historically have not been as strong a market, perhaps, in kidney cancer, but are very important in liver cancer.

And so we expect to see growth in each of those markets throughout 2009 and beyond.

In addition, coming around the Mediterranean, Greece, Turkey, Egypt, countries, again, that we have historically really seen a different opportunity in are very, very important, and are important growth drivers in 2009.

In addition coming around to -- to the former USSR and the countries around the Scandinavian side for different reasons, the demographics point to opportunity in HCC.

So in summary, as I look at it, the top four countries are in fact each contributing strongly and each growing.

Then as we look more broadly, I think about that in the three regions I described, each with a growth opportunity.

And maybe just a follow-up, and in the US specifically, there was a sequential decline in the first quarter and you described the headwinds.

But just wondering if you could maybe quantify the headwinds you saw in terms of the inventory reductions and maybe let us know if you actually saw continued volume demand in the first quarter in the US.

Sure.

So as you point out in the sequential quarter, that's the case.

Year-over-year, we saw worldwide from a context perspective, good growth at 17% worldwide.

In the US, the two phenomena, which I think you've been generally hearing from other companies in our marketplace, is that we did have two phenomena.

De-stocking, meaning lower inventory levels, carrying in 2009 than has historically been seen, and some anticipatory buying by patients who are doing well on Nexavar and pulling that prescription in forward in 2008.

So in terms of numbers,as we've analyzed that, that's looking like about $3 million to $5 million or so in the US in the first quarter.

Importantly, we looked at where we're watching the trends, as you would expect here.

And importantly, as we got later in the quarter and in the recent months, you're seeing very strong trends, which are telling us that this has worked its way out of the system.

Great.

Thanks for taking the questions.

Okay.

Thanks, Jim.

Thank you.

We have our next question from Jessica Li from Goldman Sachs.

Please go ahead.

Thank you for taking my questions.

First, sales from Japan seem to have declined sequentially as well from about $16 million in 4Q 2008 to about $11 million in 1Q.

What do you think has contributed to the sequential declines there?

I, I'll -- I think the quick response, Jessica, is that Japan is still in its earliest days of launching.

And so we can expect some random variation quarter-to-quarter.

I think we we're all very pleased with the third quarter sales from Japan, which represented the first quarter of real sales there.

And equally strong performance in fourth quarter.

So it's not unexpected that you would find in the third quarter of that market, which is this current quarter we are reporting on, lighter sales as -- as Japan is getting its arms around the opportunity.

What's most interesting, is that the RCC opportunity has been so important in Japan, which is a country that has more modest demographics for that particular disease, in comparison to liver cancer where, as Laura pointed out, you have about 40,000 cases of liver cancer annually compared to the US at 15,000 and Europe at 54,000.

So we don't make very much of at all as a sign of future demand, and think it's well within normal in terms of the random variation for an early launch.

So is it fair to assume that you haven't seen too much economic pressure in that region?

I think that that is fair to assume.

Bayer is -- it's a market that Bayer leads on, and it's our expectation as we chat with our partners, that we have not seen significant pricing pressure in that particular market.

So may I ask another question?

In the US, you've cited a few factors that could have contributed to the [sequential] decline in the US.

I'm just wondering whether you've seen any sort of changing prescription due to the economic condition, meaning have you observed any delay in drug use, given sort of the out-of-pocket expenses?

Laura, do you want to comment?

Yes, certainly.

The -- we are seeing in the US that, as I said, both about distributors and patients are being thoughtful.

But we are not seeing a change in the underlying behavior.

We have had good programs in place from the very beginning of the launch of Nexavar over three years ago, and really feel that patients are able to, through their REACH program in particular, to be able to access drug.

And not really is seeing major changes in behavior.

Great, thank you.

Thank you, Jessica.

Thank you.

We have our next question from Howard Liang from Leerink Swann.

Please go ahead.

Thanks very much.

Is Korean reimbursement approval still expected for this year?

I -- so the Korean approval is approved in the -- for liver cancer.

But, so on reimbursement, where we are, is always reluctant to predict what a government is going to do, and so we expect it in the coming year.

When that comes in the coming year, I don't know.

Okay.

Then related, Taiwanese HCC approval, I think is later this year.

What will be the impact of that?

I think it's already approved there for RCC, so do you need to have reimbursement approval for HCC before seeing a ramp-up?

Laura?

So for Taiwan, as you point out, we await both the approval and reimbursement.

Expect those would come very close together.

Oh, okay, great.

And then can I ask you about rational of the randomized colorectal cancer trial?

I thought the -- almost the very first trial with Nexavar was -- there were a large number of colorectal cancer patients that was limited to single agent activity of Nexavar in the setting.

I guess what's the rationale for testing of colorectal cancer?

So, Howard, I'm going to make a couple of comments and then ask Todd Yancey, our Vice President of Clinical Development,to take that.

I'll remind everyone, and we're clearly well aware that there is significant unmet medical need in colorectal cancer.

We have certainly learned a lot about the association of [kay red] status and response to therapy.

But we still have a lot of unmet medical need in this particular cancer, and we all know that the five-year survival rate remains poor.

But having set that backdrop, that there's a lot more we need to do in cancer, Todd, would you make any additional comments?

Howard, I would only offer that we think we may have a unique opportunity in colorectal cancer based on our mechanism of action.

There's proof of antiangiogenic benefit in this opportunity.

And as Tony mentioned, KRAS and also [BRAF] mutant status may also offer a differentiator for us with 40% of colorectal cancers.

Cancer patients having a KRAS mutant status, and an additional 10% having BRAF.

And this, as I'm sure you're aware, is an opportunity for patients where the monoclonal antibodies are not apparently demonstrating benefit.

[It will be based] on patients based on KRAS or BRAF status?

Howard, I'm sorry, would you mind repeating it?

We missed just the first part of your question.

Sorry.

Just wondering whether this trial will be selecting patients based on KRAS or BRAF status?

Howard, we don't generally get into detail on the study designs.

But what I can tell you, is we will certainly be assessing KRAS status and BRAF status because of the reasons that I mentioned to you.

Great.

Thanks very much.

Sure.

Thank you.

Thanks, Howard.

Thank you.

We have our next question from Jason Zhang from BMO Capital Markets.

Please go ahead.

Thanks.

I have couple questions.

First, for Matt, out of the $29 million of R&D, how much is your non-Nexavar-related R&D in this quarter?

Hi, Jason.

We have not made a practice, and won't be today, of specifically breaking out Nexavar versus non-Nexavar spending within R&D.

What I can say qualitatively, is that the level of spending on ONX 0801, which is the only program outside of Nexavar that is in active development, is at a relatively low level of R&D spend, as you would expect for a program that is still pre-clinical.

I see.

$2 million, $3 million, in that range?

I think it's probably fair to say in that range.

We haven't talked a lot about the cost of that particular program.

But I think Matt is right to point out that it is still fairly early-stage.

And what we're working on now, are preparing for the [INDNCTA] filings, finishing some of the early animal -- late animal work, I'm sorry, in order to get to first [demand].

And you can imagine those activities are not very expensive.

Okay.

And then the question for Laura.

You mentioned that you have seen Nexavar growth in all regions, including US, Europe, and of course outside of Europe.

If I just look at the US, you have a sequential down quarter.

And looking at the last five quarters in a row, there's really not any growth at all.

So I'm wondering going forward, what makes you to think it would be different than the last five quarters?

What signs do you see that will show growth?

And actually wanted to know, even though the revenue is relatively flat, do you see a difference between RCC and [Niva]?

What I mean is, do you see RCC declining, offset by HCC increase?

So Jason, I think on -- in terms of the time period you're talking about, the five quarters in the US.

Let me just make an observation, which is something that we talked a lot about in the middle of last year, but I want to underscore is, is that is we expect the greatest growth contribution to come outside of the US.

And this is a different paradigm than for most other companies and most other therapies.

But just given the demographics for liver cancer, we expect the greatest amount of growth.

So while we clearly care a lot about the United States, we're looking for the future of the brand to be driven by external US growth.

Now, Laura has commented already that we expect regional growth in each of the major regions.

But I would note for you and for the rest of our listeners, that the fourth quarter performance in the United States was quite significant in terms of its growth.The fourth quarter saw about 8% to 10% growth over the previous quarter.

So I don't think it's a good characterization to suggest that the US sales have been flat for several quarters.

So I point that out because in the third quarter, we made a conscious decision to expand our sales force efforts to call on non-oncologists.

And we are continuing with those efforts where we do have some signs that we're gaining traction.

Having said all of that, I'll just remind us again that we expect the greatest volume growth to occur outside of the United States.

So we'll continue to stay focused in the US, continue to focus on non-oncologists, but we will be working collaboratively with Bayer to ensure that the ex-US regions out-perform our expectations.

Okay, great.

Can I just follow on that?

So Laura talked a lot about the European countries outside of the big four, mentioning Turkey, Poland, Russia.

Were you referring -- in particular, you're saying the opportunities in these countries upon approval.

I guess you mean approval for HCC.

So my question is in those countries, have you seen product sales for RCC already?

Or are you still waiting for even the revenue for RCC use in those regions as well?

So for, for separation in terms of where we are in approvals and sales, we do have approval in more than 80 countries for kidney cancer.

So yes, indeed, we are seeing sales from those countries in RCC, which is great, meaning that there's physician comfort and usage and we're well established in the healthcare marketplace there.

The reason that they are so important, as we look forward to the growth in 2009 and beyond, is because of the underlying epidemiology and demographics associated with the HCC opportunity, which is much larger than the RCC opportunity.

Okay.

Just one quick one.

Now we're in the middle of May.

Is April different than what you have seen in the first three months of the quarter?

Yes, I think -- and Laura made reference to this in one of her earlier responses.

We do actually see trends which are quite encouraging for this current second quarter performance, and are encouraged that some of the dynamics that Laura talked about in terms of inventory de-stocking, as well as anticipatory buying have largely worked their way through.

We're tracking it very, very closely, but the recent data suggest a good uptick in trends.

Thanks.

Great.

Okay.

Thank you, Jason.

Thank you.

We have our next question from Steve Willey from Thomas Weisel Partners.

Please go ahead.

Hi.

Thanks for taking my question.

Laura, I know you had mentioned that there was some strong sales performance in some of the pan-Asia regions ahead of -- ahead of reimbursement approval.

And just kind of wondering if you could quantify maybe what percentage of that rest-of-world number may have been derived out of those private pay markets?

And secondly, I guess, too, if you have any early inclination as to what the treatment durations might look like in those regions.

If they are on the order of something that we saw in the Asia SHARP trial.

Laura?

So for the demand that we are seeing and the sales in the Asian Pacific countries, and primarily China as we think about reimbursements, that is all -- almost all private pay.

So in fact, when you look at the China performance, it is just the beginning and just the tip of what will be able to happen.

And in Japan, that is reimbursed.

In RCC, and as you know, we await the HCC opportunity.

And most of the -- most of the opportunity here will come on reimbursement.

So we're seeing nice performance now, but it's still very early days.

In terms of the question about duration of therapy in Asia Pacific and the trial that we've seen, as you know, in the SHARP trial we saw duration therapy in HCC over five months.

And in the Asia-Pacific trial, we saw [a chore] as those patients were sicker, who had been enrolled in that trial.

So I think as we look at it, in the early days of a market, we'll have shorter duration of therapy as the sickest patients wind up being treated and that that steadily increases.

We have seen that both in RCC and in HCC and in every region.

Okay.

And if you had to I guess compare the private pay demand that you saw come out of those regions in the first quarter, would it be -- would it be safe to say that there was a similar amount of demand that came out of the second half of 2008?

Or would what you saw in the first quarter be kind of quantified as an uptick?

Stephen, I'm not sure that we can actually answer that question.

We haven't analyzed the data that particular way.

What we know about 2008 is that it's a year of launch and there is a mix of governments that have provided reimbursement or not.

So beyond the regional level, it's really hard to comment any specific country.

But I think suffice it to say, there seems to be broad support across the world for providing reimbursement for Nexavar.

Bayer has been very effective at gaining reimbursement in all the major markets to date.

And we are quite optimistic about continued reimbursement approvals in the Asia-Pacific markets where we think we've got the greatest demographic opportunity and sales opportunity.

So stay tuned, but our expectation is that we are on track for what we said we would deliver.

Okay.

And then maybe just one more question and some clarity on the Phase 3 Nexavar trial in non-small-cell lung cancer as a monotherapy, if I heard that correctly --

You did.

Is that going to be in a refractory setting?

And if it's front line, can you maybe give a little of color as to what kind of patient subsets you're going to be targeting in front line?

Sure, it's non-small cell first of all.

It's not front line.

It's third or fourth line, and this is following on some very provocative data out of the ECOG 2501 study that was presented last year at ASCO, which suggested very positive trends in terms of improving progression three survival in the later stages of treatment.

This was monotherapy, so it will be a different design than our previous two large Phase 3 studies.

and we're quite encouraged by the signal we saw in that Phase 2 program.

Great.

Thanks for taking my questions.

Okay, thank you.

Thank you.

We have our next question from David Moskowitz from Caris & Company.

Please go ahead.

Yes, thanks for taking the questions.

Good afternoon.

Hello, David.

Hi.

First question is on unit growth.

Can you talk about unit growth that we've seen on a yar-over-year basis?

A lot of currencies in [here].

Matt, you kind of went through it with regard to Bayer sales up 17% and currency impact to Bayer of 13%.

So am I to assume we're looking at 30% year-over-year unit growth worldwide?

And I would like to understand how that splits out between US and rest of world?

Thanks.

Okay.

Let me -- I think this is a question that both Matt and Laura will want to have some comment on.

So why don't we start with Laura and then, Matt, I'll ask you to add -- add on.

So as you point out, we had very nice strong unit growth irrespective of the currency side of it here.

And if you account for currency, you see that our 17% year-over-year growth was actually understated, and was quite a bit larger as a result of that.

In terms of any detail on the unit growth, I don't have anything to share with you there.

Yes, that's right, Laura.

We -- neither Bayer nor we have provided any specific detail on units or quantitative demand information.

I think our intent, and I apologize it was confusing, was to provide as much visibility as possible on the currency impacts by providing, again, on this call a restatement of Bayer's numbers, as well as our dollar-translated numbers.

So are you saying we shouldn't be thinking about that 30% as unit growth?

The 30% that you're referring to is what [Bayer said], is that what you're asking?

Yes, I mean if -- right, the Bayer currency impact was 13%, 17% in sales growth.

So if I'm just to do simple math, that seems like 30% year-on-year growth on a global basis.

Are you saying that that -- for some reason that's not a good way to look at this?

I would say that if I were doing that math, I would do it reasonably similarly.

Okay, well, thank you.

And on top of that would also be price.

So can we at least talk about the US?

Has there been any price increases on the product and when would that have been?

Yes, we had a price increase in January, David, of 8%.

Okay, very good.

That's very helpful.

Okay.

And just on some of the P&L items.

First of all, on your R&D, on the P&L, it looks like it was a little higher than we were expecting.

Is that a good trend to be thinking about going forward?

And similar question on the collaboration cost, obviously light and impacted by currency in a favorable way.

But nevertheless, still looks relatively flat-ish with fourth quarter.

So have we started to see the collaboration costs normalize here?

So I think, David, and let me just remind you that Julie and Matt will be available right after the call because we would like to get to everyone's more detailed questions on the P&L.

I think what you will continue to see from us is that we've got continued investment in the development area, as we've talked about, and with the several Phase 3 and other trials we've got going on.

And we'll continue those investments as well as the launch investments for -- throughout this year.

We've provided guidance both for our own Company expenses, as well as the collaborative expenses, and our expectation is that we will fall within the guidance that we've provided.

But let me refer you specifically perhaps in a follow-up conversation to Matt and Julie,and they can go through all the details that you need.

Fair enough.

Thanks.

All right, thank you.

Operator, we've got time for one more question.

Thank you.

We have our final question from Phil Nadeau from Cowen and Company.

Please go ahead.

Good evening.

Thanks for taking my question.

My question is specifically on the impact of Afinitor.

I noticed that in your discussions of the headwinds facing Nexavar, competition wasn't one of them.

Can you provide more detail on maybe what you saw in Q1 leading up to Afinitor's late quarter launch?

And have you seen any impact of Afinitor's availability now in Q2?

Okay.

Laura and her team are thoroughly familiar with that topic.

So, Laura, do you want to take that one?

Yes.

The great news for kidney cancer patients, which I shared in my prepared remarks, is that sequential use of therapy is, as well as combination, is a path for longer life for these patients, which we saw for the first time actually in an Afinitor trial last year.

Which had about half of the patients who were actually third- and fourth-line patients, and tested the hypothesis about adding Afinitor post-TKI to TKI.

And patients did very well on that.

And we look forward to having patients do well by taking TKI to TKI, so Nexavar in that treatment continuum early on.

And then patients being able to live longer and get the benefit of additional drugs.

So as we look forward in 2009, we are very comfortable with how we are approaching this marketplace.

Okay.

Thank you.

Thank you.

Okay.

I think the good news -- the good news there is that patients are living longer with kidney cancer, and it's happening as a result of sequencing therapies, which is the new dynamic we're seeing.

So we're going to wrap up the call.

And what I would like to say in closing is that with our cash-generating oncology business, our comprehensive development program, the potential of the newly in-licensed compounds and our financial strength, we continue to believe that Onyx stands apart from many of those in our industry.

We will leverage the strength of our position today to weather the challenges ahead as they come, and work to create further leadership for our business tomorrow.

Thanks for joining us today.

And we absolutely look forward to keeping you apprised of our progress throughout the year.

Thanks a lot.

Thank you.

Ladies and gentlemen, this concludes today's conference.

Thank you for participating, and you may all disconnect.