美國安進 (AMGN) 2009 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Onyx Pharmaceuticals 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 will now turn the call over to Onyx Pharmaceuticals Incorporated.

You may begin.

Thank you.

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 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 10-K for the year ended December 31, 2008 as well as to our 10-Q for the second 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 the corresponding GAAP measures, please see today's press release, which is posted on our website.

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, and good afternoon.

Let me start the call by saying how pleased we are that our strategy to grow Nexavar as a brand and Onyx as a company continues to yield significant results.

The quarterly results we've announced today indicate continued strong growth for Nexavar and strong underlying fundamentals for our business.

Onyx remains firmly on course to realize its vision of becoming a leading biopharmaceutical company.

And given Nexavar's continued sales growth, encouraging new clinical data, and our expanding pipeline, we're continuing to build a strong foundation for the Company.

First, I'd like to highlight the promising breast cancer results we recently announced.

As you know, we have a diverse clinical program evaluating Nexavar in a wide range of malignancies beyond its approved use in liver and kidney cancer, including our program in breast cancer -- one of our most valuable potential opportunities.

Despite treatment advances, breast cancer remains a devastating disease with 1.3 million cases worldwide each year.

In our large, randomized Phase II trial, investigators looked at Nexavar in combination with the oral chemotherapeutic capecitabine in patients with advanced and metastatic breast cancer.

We were pleased to report that the trial met its primary endpoint of extending progression-free survival in patients treated with Nexavar and capecitabine combination, compared to patients receiving capecitabine and placebo.

These results were highly statistically significant, and based on these encouraging data, we are evaluating various strategies to determine the most expeditious regulatory path forward.

We expect to present the full data set at an upcoming medical meeting this year and are thrilled with these results -- particularly with what an all-oral combination regiment could mean as a new treatment option for these patients.

At the same time, we continue to leverage our demonstrated success with Nexavar to maximize its potential in liver and kidney cancer.

For the first time ever, Nexavar's sales surpassed the $200 million threshold this quarter, demonstrating continued strong performance in key markets worldwide.

There remains tremendous opportunity for market expansion in our currently approved indications, and key drivers to additional sales growth include increasing penetration in existing markets; expanding Nexavar's use earlier in the treatment continuum for HCC patients; maximizing duration of therapy; and importantly, broadening and deepening access within various geographies through additional marketing and reimbursement approvals.

In the second quarter, we continued to see the success of our efforts in driving faster penetration of Nexavar in existing liver cancer markets and in expanding our reach to additional geographies through approvals and reimbursements, with 19% growth in global net sales of Nexavar compared to the same period last year.

In May, we delivered on a key corporate milestone when Nexavar was approved in Japan, where liver cancer incidence is amongst the highest in the world.

This is an important step forward for these patients and a great development for the brand.

With three randomized trials in liver cancer stopped early for efficacy, we're pleased with the clinical data we've amassed to date, and look forward to additional opportunities to benefit patients with this disease.

To further expand our leadership position in liver cancer, we're conducting a broad clinical program aimed at reaching even more patients at different stages of the disease.

This program us generating data across the treatment continuum with the goal of identifying all patients who might benefit from Nexavar and doing so earlier in the course of their disease.

In the second quarter, Onyx and Bayer initiated a Phase III trial of Nexavar in combination with Tarceva.

This international 700-patient study, called the Search Trial, will examine whether two oral targeted therapies in combination can improve survival compared to Nexavar treatment alone.

This study aims to build on its success of Nexavar as a monotherapy in improving overall survival in patients with advanced liver cancer.

Given Nexavar's efficacy and tolerability profile, we believe it had the potential to become the standard of care across a variety of additional tumor types.

Therefore, we have initiated or will be initiating several Phase III and several signal-generating Phase II trials that will help us determine potential registration pathways in new indications.

We have begun randomized Phase II trials in multiple tumors, including ovarian and colorectal cancers, and we recently announced the initiation of a Phase III monotherapy trial in third and fourth-line lung cancer.

We also plan to start a Phase III trial in thyroid cancer, given the positive results from a Phase II study in this tumor-type, published in last year's Journal of Clinical Oncology and updated recently at ASCO in June.

Our extensive clinical development program clearly speaks to our conviction in the compound and the significant investment we believe is warranted to achieve its full opportunity as a potential blockbuster.

Beyond Nexavar, we've begun building a pipeline of compelling compounds by focusing on identifying and acquiring next-generation therapies with broad potential utility.

Clinical development of ONX-0803, the selective JAK2 inhibitor, is ongoing, and we expect Phase I results this year.

As you recall, we have an option to acquire the development and commercialization rights to all potential indications in the US and Europe for this compound, and for ONX-0805.

Depending upon the results of the Phase I studies for 0803, we may be in a position to exercise our option on this agent before year-end.

In addition, we are planning to initiate a Phase I trial for ONX-0801, the first-in-class targeted alpha folate receptor inhibitor, by the end of the year.

As we move forward, we continue to evaluate a wide range of corporate development opportunities.

We're excited to have already accomplished many of the goals we set out to achieve this year.

We believe Nexavar is on a path to blockbuster status and that our expanding pipeline, compelling clinical programs and ongoing corporate development efforts, position Onyx to continue to grow and build sustainable value.

Now, let me turn the call over to Laura Brege to review our commercial progress and provide you with some data highlights.

Thank you, Tony.

We are very pleased with the continuing strong performance of Nexavar worldwide.

As Tony mentioned, we hit a new sales milestone in the second quarter of 2009, reporting global net sales of Nexavar of $201 million, with approximately $53 million in sales generated in the US and $148 million in sales generated outside of the US.

Importantly, demand grew in all regions of the world.

Looking at the US market, we had the best quarter ever of volume demand, with growth of 8% over the first quarter of 2009.

Performance was driven by our solid base of oncology prescribers, complemented by the efforts of our recently deployed Market Development specialists.

These specialists were put into place in the third quarter of last year to reach out to non-oncology (technical difficulty) who are instrumental in treating patients with liver cancer.

I am pleased to report that we're seeing strong results from their contributions.

Broader specialists, hepatologists, gastroenterologists and surgeons account for 110% more volume this quarter as compared to this time last year.

While oncologists continue to be responsible for the greatest number of prescriptions, prescriptions from the broader specialty groups increased by more than 60% compared to the second quarter of 2008.

What we've observed is that when physicians write, they're more productive.

And whether they write or refer, we're accessing patients earlier.

This success reinforces our belief that continued development of the liver cancer market requires a multi-disciplinary approach to both commercial and medical education activities.

And we remain committed to expanding on these strong, early results.

Let me turn to Europe, where the country is generating the strongest sales of Nexavar, include Germany, France, Italy and Spain.

In kidney cancer, the Sales, Marketing and Medical teams have done an excellent job of maintaining a significant worldwide market position.

As more patients are being treated sequentially, with several targeted therapies to extend their lives, we expect that Nexavar will continue to be an important option for physicians.

In liver cancer, we expect strong continued growth as we work to increase penetration of Nexavar in existing markets and to expand our reach throughout the broader geographies of Europe, including the Mediterranean and Eastern Europe, where we believe meaningfully growth opportunities exist.

Turning to the Asian market, China is one of the leading contributors to overall sales for Nexavar.

This performance is outstanding and comes even before government reimbursement for liver cancer has been obtained.

Today, most Nexavar patients in China are private-pay, with only a small percentage being covered under multinational insurance.

Beyond China, we anticipate approval for liver cancer in Taiwan later this year, and expect to receive reimbursement for liver cancer in South Korea sometime early next year.

In Japan, where Onyx receives a 7% royalty on Nexavar sales, we were pleased that Nexavar was approved for the treatment of liver cancer, at the end of May.

Due to the success we've seen to date in kidney cancer in this market, we expect that Japan will be a significant driver of sales growth over time, given the much higher number of annual liver cancers --approximately 40,000 each year compared to approximately 11,000 annual cases of kidney cancer.

In light of our successes with two approved monotherapy indications and now the very exciting combination therapy data in breast cancer, we're even more steadfast in our belief that Nexavar might bring benefit to patients across a variety of diseases.

Now I'd like to spend a moment on our most exciting recent clinical news.

As Tony highlighted in his opening remarks, we were very pleased to report that one of our Phase II breast cancer studies met its primary endpoint, achieving a statistically significant improvement in progression-free survival with a P value of 0.0006.

This double-blind placebo-controlled Phase II study randomized 229 locally advanced or metastatic HER2 negative breast cancer patients.

Patients with HER2 negative breast cancer account for approximately 75% of the total breast cancer population, where there is no widely recognized single standard of care for advanced metastatic disease.

Needless to say, we are extremely excited about what these results could mean for breast cancer patients.

This is the first trial to report data from our comprehensive, ongoing breast cancer program, and look for the detailed trial results to be presented at an upcoming scientific meeting.

In addition to this trial, three randomized Phase II investigator and cooperator group-sponsored studies in locally advanced and metastatic breast cancer are ongoing.

They include a trial to evaluate Nexavar plus paclitaxel in a first-line setting, which we expect will report results this year; a trial to evaluate Nexavar plus gemcitabine or capecitabine in the first or second-line setting following progression on bevacizumab; and a trial to evaluate Nexavar plus docetaxel or letrozole in the first-line setting.

Based on the positive Phase II results observed administrating Nexavar plus capecitabine, we're evaluating the best development path forward, and we will keep you apprised of our progress.

We are in the privileged position of having tremendous investigator interest in developing Nexavar in multiple settings.

And there were more than 60 abstracts accepted with data on over 15 tumor types at ASCO.

Some of the key presentations included updates in liver, thyroid, and lung cancers.

In addition to results in solid tumors, there was also data presented on hematologic malignancies.

Investigators reported data from Phase I/II trials in patients with acute AML, demonstrated an encouraging early efficacy signal for Nexavar, when administered either as a single agent or in combination with chemotherapy.

As you have heard, we have comprehensive clinical development programs in a variety of tumor types that have yet to report out data, including lung, additional combinations in breast, colorectal, and ovarian cancers.

As mentioned earlier, several new trials in these indications, as well as in other tumor types, were recently initiated.

Nexavar is the subject of hundreds of ongoing clinical trials.

And collectively, results from these trials will continue to add to our ever-expanding base of data, as we together work to identify all those patients who could benefit from Nexavar's treatments.

Let me now turn the call over to Matt Fust for a discussion of our financials.

Thank you, Laura.

I'm pleased to report that the Company was profitable again this quarter and that the Nexavar brand continues to be cash flow positive.

Non-GAAP net income for second quarter 2009 was $15 million or $0.27 per share on a fully diluted basis.

Non-GAAP net income excludes stock-based compensation expense.

Our GAAP net income for the second quarter was $9 million or $0.16 per share, again, on a fully diluted basis.

Global net sales of Nexavar for second quarter 2009 were $201 million, demonstrating excellent year-over-year growth of 19% compared to $169 million in net sales in second quarter 2008.

The average exchange rate during second quarter 2009 was $1.36 per euro.

We are maintaining global Nexavar net sales guidance for 2009 of $850 million to $875 million, and we anticipate that sales in Japan will contribute meaningfully to the top line in the second half of the year.

Based on a number of factors that may influence performance, we believe it is likely that net sales will not be at the upper end of the guidance range.

These factors include the timing of Nexavar marketing and reimbursement approvals in additional countries; the trajectory of Nexavar's liver cancer launch in Japan; general macro economic conditions; and currency exchange rates.

Shared Nexavar sales and marketing expenses incurred by Onyx and Bayer, which includes cost of goods sold and distribution expenses, grew modestly to $74 million for second quarter 2009, compared to $72 million for first quarter 2009.

We are maintaining guidance of an approximately 10% year-over-year increase in shared SG&A from 2008 to 2009, reflecting market expansion activities and ongoing launches, and anticipate that there will be quarter-to-quarter variability in this expense line.

Research and development expense was $28 million for second quarter 2009, similar to expense in first quarter 2009.

R&D expense primarily consists of investment in a Nexavar clinical development program.

During the second quarter, two new Phase III trials for Nexavar were initiated.

MISSION, our monotherapy study of Nexavar in non-small cell lung cancer, and SEARCH, our combination study of Nexavar and Tarceva in liver cancer.

These trials, together with the upcoming initiation of a Phase III study in thyroid cancer, potential increased activity in breast cancer, and the advancement of the broader Nexavar development program, will likely increase Nexavar R&D spending in the second half of this year.

R&D expense also includes the cost of advancing ONX-0801 toward the clinic.

As Tony mentioned, we expect to begin a Phase I clinical trial for ONX-0801 by the end of the year, triggering a milestone payment to BTG.

As a reminder the R&D expense line on our P&L includes half of all development expenses related to Nexavar; Onyx's non-Nexavar R&D expense; and R&D-related non-cash stock-based compensation expense.

Onyx's selling, general and administrative expense was $24 million for second quarter 2009 compared to $22 million in the first quarter of this year.

Growth in Onyx SG&A expense primarily reflects headcount-related expenses.

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

Consistent with previous guidance, we continue to expect an increase of approximately 5% in total operating expense for the Company over the annualized fourth quarter 2008 levels, excluding one-time charges associated with corporate development.

For the second quarter and first-half of 2009, we've recorded income tax expense of $300,000, which represents alternative minimum tax of approximately 2% of net income, which is owed to federal and state tax authorities.

For the second quarter and first half of this year in accordance with GAAP, we've computed our income tax provision on a year-to-date basis rather than estimating an annual effective tax rate for the full year.

The current investment vehicles for our cash, coupled with current low market interest rates, resulted in interest income of approximately $1 million for second quarter 2009 compared to $2.7 million in second quarter 2008.

Earlier today, we announced our intention to offer, subject to market and other conditions, shares of our common stock and convertible senior notes due in 2016, which is Onyx's first capital raise in more than two years.

A separate press release was issued and prospectus supplements will be filed providing details about the proposed financing transactions.

These offerings are being made only by means of the prospectus supplements and related prospectus.

I would refer you to the press release and, when available, the prospectus supplements, for more specifics about the financing.

Because of the context of this public offering, we are unable to say more about the financing on this call.

In summary, I'd like to briefly mention Onyx's achievements over the last year.

We've crafted a clear vision for success and have been executing on these strategies.

This direction has generated strong top and bottom line growth for Nexavar, an important new opportunity with a potential breast cancer indication, along with promising early-stage pipeline opportunities.

Notably, we've negotiated business development transactions that are P&L-friendly, and are structured to defer additional investments until program risk has been reduced.

And importantly, we've been focused on shareholder value creation.

In short, we've been building the fundamentals to grow our business, which is establishing Onyx as an emerging biopharmaceutical leader.

From a financial perspective, that strong performance means reinforcing operating discipline, as we have done and will continue to do.

I'll now turn to call back over to Tony.

Thanks, Matt.

With another quarter of positive cash flow from Nexavar and profitability for the Company, these results demonstrate that Onyx is indeed thriving with strong fundamental performance.

We have a clear vision for corporate growth, and our vision is to build a leading biopharmaceutical company and leverage our strengths in development and commercialization in oncology, to ensure Nexavar's success in existing indications and expand its usage in new tumors, to invest in our portfolio and to actively evaluate new opportunities.

We've built a very strong business foundation with a drug that is benefiting tens of thousands of patients worldwide and with sales that are generating positive cash flow -- features that distinguish us in this space competitively.

We've put in place the elements for success that will drive future growth; hundreds of ongoing clinical trials evaluating Nexavar in a diverse array of tumor types and treatment settings; continually adding to a compelling body of data, and positioning us well for a significant upside potential, as our recent breast cancer data demonstrate.

And finally, to secure sustained growth, we've begun to build a strong portfolio and to expand our opportunities beyond Nexavar.

We believe the groundwork we've laid and the opportunities we have in front of us both provide an excellent position to continue building the future we envision for the Company.

Operator, we'll now open the call for questions.

(Operator Instructions).

Jim Birchenough, Barclays Capital.

Congratulations on the strong quarter.

Just wondering if you could spend a moment reviewing your discipline around business development, and specifically, whether you'd entertain any business development activities that wouldn't be P&L-friendly?

I think people have been reassured by the deals you've done so far, but there is some concern that you might contemplate a dilutive transaction in the future, and just wondering how you think about that.

Let me start with the first part of your question, which is the discipline around BD.

And I just want to talk a little bit about our process.

And it really does constitute what we consider a search and evaluation process, where we literally scour the entire globe for opportunities.

We are very focused on identifying those opportunities, which complement our existing strengths in oncology development and in commercialization.

And I think have been quite successful at turning up a number of potential opportunities, some of which have already resulted in the transactions we did at the end of 2008.

So, the key messages from this portion of my answer should focus on complementing our existing strengths in oncology and a very thorough process of oncology-focused search and evaluation.

The two transactions we did last year were earlier stage and by design.

It gives us an opportunity to manage the P&L while we are at the peak of our spending for Nexavar, because as these newer compounds come along, we don't have quite the significant expense burden from them and it gives us an opportunity to manage the spend portfolio.

I think as to future transactions, it's probably premature to speculate, but I think it's safe to say that we are always looking for very good opportunities.

And I think the deals we've done demonstrate the fact that we have shareholders at the top of our line, in terms of the kind of transactions and the way we structure them, so that they can be P&L-friendly and that we use our cash resources prudently.

And those are the same criteria we'll use going forward.

Next question, Operator.

Jessica Li, Goldman Sachs.

Thank you for taking my questions.

First question with regard to your expense guidance.

Does it include any potential new business development activities?

Yes, I'm going to ask Matt to make a comment.

And, Jessica, just so I got that, you're asking about the expense guidance, in case everyone couldn't hear that.

Yes.

Yes.

Matt will comment in just a moment.

I think it's fair to say that we did build in some expectations around the 0801 transaction, that we could actually be moving forward first in man.

And that, as Matt in his comments, would trigger a milestone payment.

But those are existing corporate development transaction opportunities.

Matt, do you want to make a comment?

Sure, Tony.

Consistent with what Tony just mentioned, as we built our operating plan and laid out our guidance for the year, we were able to build that, based on what we have in-hand -- which is obviously the Nexavar franchise and the R&D investment opportunities, along with ONX-0801 moving, as Tony said, toward the clinic by the end of the year.

As you'll recall, the other development programs that we currently have as part of our portfolio, the two compounds that we are in partnership with S*BIO, are compounds for which we have an option but are not currently incurring R&D expense.

So, any R&D expense that might be associated with a future exercise of that option, should we decide to do so, or other future business development activities, are not built into our guidance at this point, since we obviously don't have the details of those programs from which we'd be building a development expense forecast.

Okay.

Thanks, Jessica.

Next question, Operator?

Howard Liang, Leerink Swann.

Can you talk about where do you see opportunities for Nexavar in Phase III trials?

You mentioned thyroid and perhaps breast cancer.

Can you talk about whether you might be contemplating additional Phase III trials in lung cancer?

There's some data presented in combination with Nexavar -- sorry, in combination with Tarceva, in a randomized Phase II trial that seems to show a positive signal.

Would there be a Phase III trial in combination with Tarceva?

Yes.

Let me, if I can, Howard, just back up a little bit and talk about our lung cancer program.

Together with Bayer, we've got a broad lung cancer program.

The nearest term opportunity there is with the NExUS trial, which is our first-line trial in combination with gemcitabine and cisplatin.

That has completed enrollment earlier this year and we're looking forward to analyzing those data, once all the events have appropriately accrued.

To complement that study, which is a study of Nexavar in combination with standard chemotherapy, we've also initiated a trial of Nexavar as monotherapy in third and fourth-line patients with non-small cell lung cancer.

And that is, I think, testing a slightly different hypothesis, whether in the later stage setting, monotherapy might actually rescue off the right of survival benefit, potentially.

The third potential area for us is the one that you mentioned, which is the very exciting Phase II data of Nexavar in combination with Tarceva that was presented at ASCO recently.

I'm going to ask Todd Yancey, our Vice President of Clinical Development, to talk a little bit about those data.

But I think it's very fair to say that we've made no plans as of yet to add back to our non-small cell lung cancer program, but are evaluating it as a potential opportunity.

Todd?

So, Howard, just to add to Tony's comments, we are evaluating the opportunities in the second-line with Nexavar in combination with established agents, including Tarceva but not limited to Tarceva.

We have an ongoing trial as well, in combination with Alimta, and we're evaluating the combination with docetaxel.

As Tony indicated, we did see data on the combination of Nexavar and Tarceva at ASCO in the first-line setting, where a non-progression rate at six weeks of 74% was achieved.

As well, Dr.

David Spiegel presented this week, data for the combination of Nexavar and Tarceva in the second-line setting at World Lung, and that data is available online; but affirmed our belief going into the clinical trial that this would be a tolerable combination and that it would bring incremental value for patients in the second-line setting.

And on the basis of those data sets and a few additional that are available, we will assess what our opportunities are for this particular patient population.

I will add, Howard, that we are studying Nexavar and Tarceva in combination in liver cancer.

So we'll get some information there about how these two drugs together might actually be helpful in that particular indication.

Okay, thank you.

Next question?

Jason Zhang, BMO Capital Markets.

Okay, thanks for taking my questions.

You said that you were not going to talk too much about this transaction.

Can I just ask a question from a different angle -- that you have more than $460 million cash; you have license to earlier stage compounds.

If you try to really build a balanced pipeline, I guess we can assume that your focus will be more on the late stage compound and that's probably why you are doing the transaction, because a later stage compound clearly might cost more.

I'm just wondering whether -- is that the reason behind this deal?

Or is it more of an opportunistic transaction that you wanted to have the money prepared for a future opportunity that might arise?

You know, I think, Jason, I would probably correct one assumption in your comments, and that is to advise everyone that we continue to look at opportunities at every stage, and continue to look at opportunities that are early-stage and intermediate stage as well.

So it would be wrong to assume that we are only interested in late stage opportunities.

In fact, we think that we like the pipeline that we have now.

And we're continuing to consider Phase I in preclinical assets as part of a mix of things that we could take on.

So I don't think you should necessarily consider that thought, that we would go for a late stage opportunity.

I think that's about all we can say on the financing.

Okay, next question?

David Moskowitz, Caris and Company.

Thanks for taking my questions.

So, first of all, just quickly on the strike price of the convert.

I imagine what it says there -- the 20% to 25% premium, that would be from where the deal prices, is that correct?

David, this is Matt.

Unfortunately, because this is a transaction in registration, I'm not going to be able to provide any specific comments on the terms of the financing on today's call.

Okay.

And just over to the potential amount of cash that you could have on the balance sheet -- could you talk a little bit about the business development strategy and what's embedded in the need for having more than $750 million on the balance sheet?

So, are you talking about a mega-deal?

It doesn't look like this would be enough money to do a mega-deal.

Are we talking about a high number of products?

Are we talking about a few products with a lot of spend around them, say, $100 million on each product?

Can you give us a little color around the type of BD that you might be engaging in?

Yes, I think, David -- and you may have joined the call after I commented to Jim Birchenough's question, but I'll repeat that in summary.

We've got a very disciplined BD approach.

And we used it as our search and evaluation engine, if you will, since we don't have discovery, and are looking at a variety of opportunities across the stages.

The transactions we did in 2008 we believe have served us quite well, and continue to be interested, literally, across the spectrum of opportunities.

The most important point I'd like to leave you with is that oncology is our focus.

It's where we got our greatest strengths and it's where we have the greatest synergistic opportunities.

And so, we like very much staying focused in oncology for the time being.

And beyond that, we'll let the science potentially take us where it might, in terms of other therapeutic areas.

But I think it's very clear from the transactions we've done that we are very thoughtful about the operating statement and how we manage the operating statement, and how we use cash.

And we'll bring that same discipline forward in the way we think about the balance sheet going forward.

Okay?

Thanks very much.

Next question, Operator?

Chris Raymond, Robert W.

Baird.

This is Blake Arnold calling in for Chris Raymond.

Thanks for taking my questions.

Wonder if you could comment on how much room you think you have for additional Nexavar price increases going forward?

And also, how does US price for Nexavar compare to Europe and also Southeast Asia?

Thanks.

Sure.

I'm sure Laura would love to talk a little bit about that.

Laura?

Sure, thank you, Tony.

So the -- let me start with the second part of your question, which is how does Nexavar fit worldwide in our pricing.

And from the very beginning, together with our partner Bayer, we have been successful in being able to deliver Nexavar at a good price in terms of its value, worldwide, in a reasonably tight band.

So I would say that while it fluctuates in terms of currency, in fact, that the price is really well-established worldwide.

We are committed -- and as you talk about the US, we are committed to making certain that Nexavar is available for the broadest set of patients that are possible to be able to get the benefit of Nexavar.

And so to that end, a way to think about that is about 70% partial patients have a $50 or less co-pay each month.

And we have various patient assistance programs, which have been in place from the very beginning of the launch of the product, in order to help people if they need partial or full aid.

Great.

Thanks, Laura.

Okay, Operator, next up?

Derek Jellinek, Boenning & Scattergood.

Great.

Thanks for taking my question.

Just quick for me.

Tony, maybe you can comment, and Laura as well, what do you see as a opportunity in breast cancer, given a vast needs placement?

And for Matt, the expense structure on the VC going forward, you're looking at 10% over 2008 -- practically almost a $300 million plus.

For '09, you did 146 in the first half; that's a double going into the second half.

Can you kind of comment on that?

Thanks.

So, Derek, we'll take the breast cancer question, opportunity question.

And then I may ask you to repeat the second part of your question because for some reason, you broke up.

But I think we may actually have captured it, so if we don't, then you can let us know.

Laura, do you want to talk about breast cancer opportunity?

Sure.

As Tony said in his prepared remarks, there are 1.3 million breast cancer patients worldwide.

And 75% of them actually are not well-served in terms of what availability they have in the HER-2 negative population.

So as we look forward for what Nexavar can add, and this trial, of course, has the opportunity to show in combination with the oral chemotherapy/capecitabine, what the potential there for Nexavar could be as two oral agents, for that first combination ever that might be able to provide benefit to patients there.

So if I look at it, I look at a devastating disease worldwide with more than 75% of those, 1.3 million patients who could be a potential for Nexavar as we look forward.

Okay.

Good.

And I think, Matt, let me just toss it to you and see if we can't get this addressed.

Derek, so if I understood your question correctly, you were focused on the expenses reported as part of the collaboration P&L, and in particular, the combined cost of goods, distribution and SG&A line.

There we have given guidance, as I reaffirmed in my prepared remarks, that we expect that that line could increase by approximately 10% over the level in 2009.

Fortunately, we have been able, through a disciplined collaboration with our partner Bayer, to manage that expense line tightly through the first half of the year, supporting the ongoing product launches and commercial activities worldwide, while actually improving the leverage relative to that expense line item.

We are maintaining our guidance at this point, but obviously, will continue to closely monitor expenses as part of the financial oversight of the collaboration, as you move through the second half of the year.

So, no change in the guidance at this point, but we are pleased that we've been able to manage that expense number through the first half.

Okay, very good.

I think we're ready for the next one, Operator.

Phil Nadeau, Cowen and Company.

Thanks for taking my question.

It's actually another one on the transaction; I hope you can answer it.

And that's on the timing of the transaction.

Your stocks moved pretty significantly after the breast cancer data for top line release, but we still haven't seen the full data.

So, why do a raise now?

I think some people are going to interpret this as a lack of confidence in what the detailed breast cancer data are going to look like.

Just hoping you could comment on that.

Yes.

I think, Phil, you know that I won't be able to comment on the timing for the raise, just given everything that Matt's already provided about referring everyone to the press release; but I would love to talk about the breast cancer data and focus everyone there.

I think it is extraordinary when you find results with this degree of statistical significance.

And I think that they are almost once in a lifetime opportunities to determine these kinds of results and try to understand their clinical significance.

We are expecting that, at a medical meeting later this year, we'll be able to share the full data set and are working very closely with the principal investigator to make that happen.

But let me reassure you that, as a former practicing physician, we're very confident and very comfortable with the statistical significance of these findings, and believe that when the full data set are shared with everyone, that you'll be as thrilled and as pleased as we are around these particular findings.

Okay.

I think, Operator, that may be all the time we have for the day.

Let me just close, if I can, with a couple of thoughts.

We really couldn't be more pleased with the progress we've made, really just in the first half of the year.

It's hard to believe that it's August already.

But we have made a stunning amount of progress in the business, both on the operating side, the financial performance side of the business and the clinical side, and are just thrilled and enthused about the breast cancer opportunity that we have in front of us.

Thank you for joining us today.

We will provide updates regarding the discussion of the breast cancer data at a medical meeting later this year.

And we look forward to providing additional updates on the business performance.

Thanks again and good evening.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for participating.

You may all disconnect.