美國安進 (AMGN) 2010 Q4 法說會逐字稿

Welcome to the Onyx Pharmaceuticals fourth quarter financial results conference call.

My name is John and I'll be your operator for today's 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 Julie Wood, Vice President of Public Affairs at Onyx Pharmaceuticals, Incorporated.

You may begin.

Thank you.

Good afternoon.

I'm Julie Wood, Vice President of Public Affairs at Onyx.

We thank you for joining us for our year-end 2010 financial results conference call.

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

Tony Coles.

Also providing updates are Dr.

Ted Love, Executive Vice President and Head of Research and Development and Technical Operations, Laura Brege, Executive Vice President and Head of Corporate Affairs, and Matt Fust, Executive Vice President and Chief Financial Officer.

Please note that we'll 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, 2010, filed today, as well as to our other filings.

In addition, we will be presenting and discussing non-GAAP financial measures during the teleconference.

For a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures, please see today's press release which is posted on the Onyx website, within the news and media section.

A slide presentation that supplements the financial information in this teleconference is also available on our website.

The presentation is located within the investor section on the financial information page.

I would now like to turn the call over to Dr.

Tony Coles, who will begin the discussion with an overview of our business.

Tony?

Thanks, Julie.

Good afternoon and thank you for joining us today.

Let me start the call by saying how energized we are with the progress achieved in 2010.

I would like to provide some perspective on the transformation Onyx has experienced over the past 12 months, and what this means for us as we move into 2011.

Last year at this time, our operating focus was two-fold.

Grow the Nexavar franchise and exercise continued financial discipline.

As the year unfolded, we became excited about the most recent additions to our pipeline, Revlimid, and ONX 0914And became increasingly confident that we could create significant near term value for shareholders with landmark clinical data.

Flash forward to today.

First, Carfilzomib has evolved from a high potential project to a top strategic asset, and, as such, we intend to invest appropriately to fully realize its value.

Second, we received fast track designation for Carfilzomib, and submitted the first module of our NDA as part of a rolling submission.

Third, we have a comprehensive and expanding development program across our growing proteasome inhibitor franchise including our Phase-III ASPIRE and FOCUS trials, supporting our belief that Carfilzomib, as a single agent and, in combination with other agents, has the potential to benefit patients in multiple treatment settings, including front-line therapy.

And, very importantly, we are announcing our strongest quarter and strongest full year of Nexavar sales to date, and our third consecutive year of non-GAAP profitability.

Nexavar has provided the cash flow to enable investment across our product portfolio, and continues to show growth around the world.

Later in the call, Matt will review our guidance for 2011, including our expectation for another year of non-GAAP profitability, driven by a combination of Nexavar sales and targeted partnering transactions.

As I said last quarter, Nexavar is entering what could be the most profitable and productive years of its life cycle,and it remains foundational to our business.

Nexavar continued to be a strong engine of growth for Onyx in 2010, delivering $934 million in worldwide sales, which represents an 11% increase over 2009.

As our efforts to reach liver cancer patients earlier in their disease begin to bear fruit, we expect continued momentum and further opportunities to accelerate sales, particularly in emerging markets.

Later in the call, Laura Brege will elaborate on the trends we are seeing in the Nexavar franchise, and provide an update on the SPACE, STORM and SEARCH trials in liver cancer.

We also envision potential new indication opportunities in lung cancer, thyroid cancer and breast cancer, and Ted Love will provide an update on these exciting opportunities in a moment.

As we think about our business today, it is the consistent cash flow delivered by Nexavar sales that enables Onyx to fund operations and leverage our pipeline assets.

Today, Onyx has the opportunity with both Carfilzomib and ONX 0912 to build a proteasome inhibitor franchise that may have the potential to radically change the treatment landscape for myeloma.

What we know is that this kind of value creation requires investment.

And, we intend to move forward quickly and aggressively to deliver these therapies to patients as soon as possible.

Since taking the helm at Onyx almost three years ago, we have transformed the Company from a single asset company to a portfolio-based pipeline-driven leader in oncology with multiple products and multiple paths to help cancer patients and we still have more to accomplish.

As we prepare to file the remaining modules of our NDA submission for Carfilzomib, there is a growing level of excitement and anticipation about the continued transformation of Onyx on behalf of patients and shareholders.

As we start this year, we're focused on flawless execution of our top three priorities, including completing the filing of the NDA for accelerated approval of Carfilzomib as quickly and effectively as possible, continuing our commercial expansion with Nexavar in liver cancer and driving additional revenue streams through potential new indications for this compound, and maintaining the financial discipline that aligns our strategic development investment and our commercialization goals with our P&L.

Based on the commercially successful business in Nexavar and the potential for new revenues from Carfilzomib in the not-so-distant future, Onyx continues to stand apart as an emerging oncology leader with the means to grow and sustain ourselves organically.

Now, let me turn the call over to Ted, for a review of the strong progress we've made in our clinical development programs.

Thank you, Tony.

As Tony said, our top priorities in 2011 after filing the NDA, include advancing multiple clinical trials that will support US and European approval of Carfilzomib, broaden and expand our Nexavar franchise, and move our earlier stage pipeline assets forward.

Before providing an update on our current clinical programs, I'd like to review the exciting news we recently shared about the NDA for Carfilzomib.

Last month, we announced that the FDA has granted fast track designation for Carfilzomib for the potential treatment of patients with relapsed refractory multiple myeloma.

In addition, the FDA has agreed that Onyx is eligible to submit the NDA on a rolling basis.

We are happy to have started the filing process last month with a submission of the first module of the NDA.

These are important achievements on our path to accelerated approval.

The Carfilzomib data presented at ASH, both as a single agent and in combination, reinforce our belief that this is one of the most active agents ever studied in multiple myeloma, and we believe we've only begun to scratch the surface of the opportunity with this molecule.

In support of our NDA filing, we intend to include data from front-line patients receiving Carfilzomib plus Revlimid and Dex.

This first-line study was presented by Dr.

Andrzej Jakubowiak from the University of Michigan.

To remind you, we saw an overall response rate of 96% after two cycles, increasing to 100% response rate in patients who completed four cycles.

In addition, the CR, our complete response rate, was already 36% after only four cycles, and increased to 67% after only eight cycles.

Needless to say, these data created quite a stir at ASH.

Now, let me turn to our current clinical programs and plan with Carfilzomib and ONX 912, and then provide an update on Nexavar and what these studies may mean for our ongoing efforts.

Starting with Carfilzomib for European registration, we have the FOCUS study, an 84 patient Phase-III study of single agent Carfilzomib in the relapsed refractory setting, comparing Carfilzomib's efficacy to that of Dex-supportive care.

We expect to complete enrollment shortly and have top-line data from this trial in early 2012.

This puts us on a path for possible European launch in 2013.

We are also pursuing approval of Carfilzomib in combination with Revlimid and low dose Dexamethasone in earlier stage myeloma.

Encouraged by the strong Phase-II data, we initiated an international 700 patient Phase-III study, the ASPIRE trial.

In this trial, patients with relapsed disease, after one to three prior treatments, are randomized to receive combination treatment with or without Carfilzomib.

This study is being conducted under a SPA from the FDA and scientific advice from the European Medicines Agency, and will serve as the basis for full approval in both the US and Europe.

We reaffirm our expectation that trial enrollment will complete in the first half of 2012, with 120 sites active in the second quarter of this year.

ONX 912 is an orally administered compound that we believe may play an important role in our proteasome inhibitor franchise.

We recently shared some early data from a Phase-I study dose escalation trial where we saw approximately 85% proteasome inhibition at well-tolerated doses.

This level of proteasome inhibition is comparable to what we see with Carfilzomib.

We are quite encouraged by the activity and safety profile we've seen to date.

Turning to our new potential indications with Nexavar, lung cancer, despite treatment advances, is still a disease with significant unmet medical need, representing a $6 billion market.

Onyx is exploring the third and fourth line setting, which are the focus of our Phase-III mission trial.

This study completed enrollment at the end of last year, and depending upon event accrual, we may be able to share top-line data from this trial by year-end.

In breast cancer, we are building on the compelling Phase-II data reported with Nexavar in combination with Capecitabine in women with metastatic HER2 negative breast cancer.

HER2 negative breast cancer accounts for the majority of breast cancer cases worldwide.

The estimated market for all types of metastatic breast cancer is estimated at $5 billion.

The RESILIENCE trial will randomized 520 advanced and metastatic breast cancer patients to either Nexavar plus Capecitabine or placebo plus Capecitabine.

Patients are currently enrolling in this trial.

In thyroid cancer, our ongoing Phase-III study called the DECISION trial is designed to confirm the efficacy in multiple Phase-II study with single agent Nexavar.

DECISION is targeting differentiated thyroid cancer, which accounts for approximately 90% of all patients.

The opportunity for Nexavar is to create a brand-new market, estimated to be between $500 million and $1 billion.

At our analyst briefing last December, Dr.

Marsha Brose of the University of Pennsylvania shared preliminary Phase-II data that suggested the overall survival as a result of Nexavar in this disease is 140 weeks.

The opportunity in this patient population is not only in the treatment of the disease, but also the potential for extended maintenance therapy.

DECISION is expected to complete enrollment this year.

In summary, we are executing on a broad development strategy that is aimed at bringing valuable new therapies to cancer patients.

We believe success in any of these high potential areas could bring significant benefit to patients.

Now, I'd like to turn the call over to Laura Brege for a discussion of the Nexavar business.

Thank you, Ted.

Nexavar global net sales in the fourth quarter were $257 million, up 9% compared to the fourth quarter of 2009, representing the strongest quarter ever reported.

Fourth quarter sales include approximately $60 million in the United States, and $197 million from the rest of the world.

For the full year, global net sales for Nexavar were $934 million, up 11% compared to 2009.

Outside the United States, the Asia-Pacific market opportunity continues to take shape, as evidenced by robust fourth-quarter sales in that region.

Led by Japan with sales of $43 million, and China with sales of $18 million, we're beginning to see the kind of growth opportunity that Asia-Pacific represents for Nexavar, and we expect to see continued strong growth in this region, where over half of all liver cancer incidents occurs.

China, a market currently driven solely by the private sector, was the fourth leading country for Nexavar sales in the quarter.

This strong trend and healthy dynamic speaks to a therapeutic need and market demand in this region of the world, as more of the global sales for Nexavar are driven by liver cancer.

Also in Asia-Pacific, we were pleased to have recently announced the South Korean reimbursement for Nexavar for the treatment of liver cancer, effective the beginning of 2011.

With reimbursement now in two Asia-Pacific countries, and potentially Taiwan by year-end, we're confident in continued penetration and double-digit growth in this region.

Turning to the United States, our ongoing outreach to oncologists, as well as our comprehensive program focused on the interdisciplinary healthcare teams that treat patients with unresectable liver cancer continues to make good progress.

In the fourth quarter, commercial use prescribed by non-oncologists grew 22%, as compared to the same period last year.

As the only target systemic therapy approved in liver cancer, we believe there are significant growth opportunities ahead for Nexavar.

We're pleased that our SEARCH, STORM and SPACE trials have all completed enrollment, bringing us even closer to expanding the liver cancer market with Nexavar.

Nexavar for liver cancer accounts for about 70% of total worldwide sales, though it varies from country to country.

These sales are primarily in the advanced setting, estimated to be 50% of the patient population.

We see an opportunity to expand our reach in the advanced and intermediate settings, as well as to reach a new patient population in the early stage setting.

In the intermediate stage, representing about 20% of the population, we believe data from the Phase-II SPACE trial will demonstrate the utility of Nexavar in combination with TACE.

We hope to share data from the SPACE trial by year-end.

In early stage patients, the Phase-III STORM trial in the adjuvant setting completed enrollment at the end of last year.

Success in these trials could add meaningful commercial opportunity to the Nexavar franchise.

Turning to Carfilzomib, we are excited about the prospects of entering the growing multiple myeloma market, which is expected to exceed $7 billion by 2015.

We believe our proteasome inhibitor franchise has the potential to generate $2.5 billion in worldwide sales, in multiple myeloma alone.

Multiple myeloma is the second most common hematologic cancer, with more than 200,000 people living with the disease, and approximately 100,000 new cases diagnosed annually.

Researchers have made treatment advances in the last decade, and lives are being extended.

However, myeloma remains a fatal disease.

We see multiple avenues for commercial growth in Nexavar, and a real franchise opportunity in myeloma.

Both through the expansion of the in-line Nexavar business, as well as the potential of new pipeline products such as Carfilzomib and ONX 0912.

As Tony said, Onyx stands apart as an emerging oncology leader with a commercially successful business in Nexavar and potentially Carfilzomib in the not-so-distant future.

Now, I'd like to turn the call over to Matt who will review the financials.

Thank you, Laura.

I'll begin today with highlights of this record quarter and year of Nexavar sales.

During 2010, we invested in R&D strategically and with discipline, while generating cash flow and maintaining ample cash reserves to expand our business.

For 2010, we were profitable on a non-GAAP basis for the third year in a row, and reported non-GAAP net income of $39 million, or $0.63 per share on a fully-diluted basis.

As a reminder, we report non-GAAP income as a meaningful measurement of core corporate performance.

This income calculation excludes non-cash items, the details of which are described in today's press release, and posted on our website.

Worldwide Nexavar sales of $934 million represented 11% growth in 2010, as compared to 2009.

Measured in Euros, global net sales of Nexavar increased 17%, compared to EUR705 million last year.

The average exchange rate for 2010's fourth quarter was $1.36 per Euro, and $1.33 per Euro for full year 2010.

Combined cost of goods, distribution, selling and G&A expenses for Nexavar were $93 million in fourth quarter 2010, 3% higher than the same period last year, and consistent with the pattern of higher fourth-quarter expense we've seen in the past few years.

For the year, commercial margin for the collaboration was roughly flat to 2009.

Total net R&D expense for the Company in 2010 was $186 million.

During the year, Onyx's share of the Nexavar development investment was $103 million, and was roughly unchanged from our Nexavar development expense in 2009.

Development of our proteasome inhibitor franchise contributed to R&D spending in 2010, with $69 million in investment.

Key components of Onyx R&D included the support of multiple Carfilzomib trials, including ASPIRE and FOCUS, as well as the Phase-I development of ONX 0912.

Onyx's SG&A expense was $114 million in 2010, reflecting the growth of our organization and the addition of key capabilities to support early preparation for the potential launch of Carfilzomib.

Let's now turn to 2011.

Our financial management and guidance for the year ahead is aligned with the strategic direction you heard earlier in this call.

We remain intent on continued generation of cash flow from our core business, and disciplined spending on our core priorities which you've seen in 2010 and over the last few years.

For 2011, we expect to be cash flow positive, and plan to achieve another year of non-GAAP profitability, through a combination of Nexavar revenue, and one or more partnering transactions, revenues from which will offset our Carfilzomib development investment as you saw in 2010 with the Ono transaction.

Turning to Nexavar sales, in order to provide increased transparency in our financial results, we will provide both our guidance and our quarterly financial results in both US dollars and Euros, along with visibility to the underlying exchange rate assumptions.

For 2011, we expect global Nexavar net sales of approximately $975 million to $1.025 billion for the year, representing 5% to 10% year-over-year growth.

Our financial forecasts assume a US dollar-Euro exchange rate for 2011 in the range of $1.35 per EUR1 , consistent with the current trading range, and resulting in Euro-based net sales range of approximately EUR725 million, to EUR760 million.

In the US, in 2011, we anticipate the impact of healthcare reform to be in the range of $20 million to $25 million, and this is reflected in the net sales guidance.

We'll keep you posted on these factors as we move through the year.

We expect Nexavar sales to be driven mainly by double-digit growth in the Asia-Pacific region.

Variables that could influence sales growth in 2011 include global pressure on pricing and discounts, healthcare reform in various countries, and the dynamics of an increasingly competitive kidney cancer market, along with currency exchange rate movements.

We expect to achieve Nexavar commercial margins of 60% or better in 2011.

Key elements of the collaboration commercial expense will be effective cost discipline, the impact of currency exchange rates, and the liver cancer launch in South Korea.

Our R&D expense guidance reflects strong investment for Carfilzomib and across our entire portfolio, specifically new trials to support the development of Carfilzomib across multiple lines of therapy.

We expect reported R&D expense in 2011, including non-cash stock-based compensation to be in the range of $225 million to $250 million, both are roughly 5% to 15% above the annualized fourth quarter 2010 run rate.

We're committed to investing the R&D dollars necessary to advance our two Phase-III trials for Carfilzomib, and to prepare for new trials that unlock the value of this key asset, and we expect R&D spending to be weighted toward the second half of 2011.

We also anticipate advancing ONX 0912 development from Phase-I to Phase-II, to remain on track with our plans to build a strong proteasome inhibitor franchise.

We expect Nexavar development expense to be roughly flat to the 2010 level, with investment driven by registration-enabling programs across tumor types.

Our selling, general and administrative expense, again including non-cash stock-based compensation, is expected to be approximately $130 million in 2011, supporting a targeted pre-launch commercial investment ahead of a sales force build-out.

Later this year when we he have more clarity on the US regulatory pathway for Carfilzomib, we will update you on plans for sales force and further commercial expansion.

We anticipate net interest expense in 2011 will be approximately $20 million, net of investment income,with approximately half of the net interest expense as a non-cash charge.

We expect non-cash charges in 2011 of approximately $35 million for stock-based compensation expense, and approximately $25 million representing the time value of money for contingent consideration related to the Proteolix acquisition.

And, finally, we expect once again to pay alternative minimum income tax rates in 2011.

We ended 2010 with approximately $578 million in cash and investments.

Given the positive cash flow that our core business generates, Onyx's financial and business fundamentals remain strong in what was a challenging year for many companies.

We see significant opportunities ahead and we intend to invest appropriately to maximize our growth potential.

We begin 2011 from a position of strength, both in terms of the balance sheet and cash generated by sales, that gives us the financial flexibility to move our product portfolio forward.

Thank you.

And, I'll now turn the call back over to

Thanks, Matt.

In 2010, we created momentum across both our pipeline and our product portfolio.

During 2011, we expect a number of important milestones.

I'd like to highlight them for you now.

For our proteasome inhibitor franchise, we expect to, one, file the full NDA submission for accelerated approval of Carfilzomib as early as mid-year.

Two, completed enrollment in the FOCUS trial to support European registration.

Three, continued enrollment in our ASPIRE Phase-III trial to support full approval in the US and Europe.

And, four, initiate a Phase-II study with ONX 0912.

For Nexavar, we look forward to, one, growing Nexavar's commercial contribution in approved indications.

Two, providing data from our SPACE trial with Nexavar and TACE.

Three, potential top-line data from the Phase-III MISSION trial as monotherapy for non-small cell lung cancer.

Four, ongoing enrollment of the Phase-III breast cancer trial RESILIENCE in combination with Capecitabine.

And, five, completing enrollment in the DECISION trial in thyroid cancer.

As you've heard today, we have advanced and expanded the pipeline and have emerged with a portfolio of compounds to treat patients with cancer.

Our financial guidance strikes a balance between continued top line growth, targeted investment in R&D, and new capabilities to ensure commercial success, with disciplined management of both commercial and development spending.

We look toward this year with excitement in keeping with our mission of making a difference in the lives of patients, and we're now ready to open the call and take your questions.

Operator?

Thank you.

We will now begin the question-and-answer session.

(Operator Instructions).

Our first question comes from Cory Kasimov from JPMorgan.

Please go ahead.

Hi.

Thanks for taking our questions.

This is actually Karen Jay for Cory Kasimov.

Thank you for providing the breakdown on the Nexavar sales.

That was helpful.

I have a couple questions.

Your guidance for as early as mid-year filing hasn't changed, and we're getting closer to that date, so can we read into that positively that things are going as planned, maybe you could update us on manufacturing as well?

Yes, I think you can certainly take that we are on track.

Maybe Ted wants to provide a little more color on both of those questions, but, I think, yes, it's safe to assume that we are on track for as early as the middle of this year.

Ted?

I'll just reiterate that, Tony.

Obviously, we came together with a plan.

We've been executing on that plan and the fact that you've not heard anything suggests that we're proceeding on that plan.

Our confidence has increased that we'll be able to meet the guidance that we promised.

And, just one more on Nexavar and the HCP market.

To what extent can we expect growth in the existing markets that you're commercializing the product right now?

So, the good news is that more and more of our business is driven by HCP sales and we've recognized over the last 18 to 24 months that migrating the business to liver cancer was going to be important because of the competitive space in RCC.

We've been successful at doing that.

We've migrated the business now to approximately 70% or so, as driven by liver cancer sales, and this is the greatest growth opportunity, particularly in the Asia-Pacific markets.

So, we're actually quite pleased with this.

We're still very focused on this operationally and expect that securing business in liver cancer with the current indications and the potential new opportunities driven by new data will only reinforce the growth opportunity for Nexavar both worldwide and specifically in Asia-Pacific.

Operator, we'll take the next question.

Our next question comes from Joel Sendek from Lazard Capital Markets.

Please go ahead.

I'm just wondering what your interpretation is of the recent ODAC meeting with regard to accelerated approval and how that impacts Carfilzomib in your view.

Thanks for the question.

Actually, the ODAC meeting was very similar to an ODAC that was held several years ago and actually came to very similar conclusions.

Most of which I think are quite favorable for our strategy.

Number one, I think the ODAC meeting reinforced the belief that accelerated approval to bring market unmet where medical need continues to be important, and the historic success of almost 50 compounds reinforces that.

The other point made is that they would like to see trials to confirm the efficacy, randomized trials, and as you know, we've already initiated two Phase-III trials, which are randomized in FOCUS and ASPIRE, so we certainly meet their expectation there.

Lastly, there's always a desire that these compounds look good in earlier stages of disease, because one of the concerns with the FDA is that they approve these drugs based upon a patient population, and then when you get to broader markets, the drug does not look encouraging, and, as you know, one of the most exciting things at the ASH meeting was that the Jakubowiak data showed very impressive results.

So, I think what we've created here is a situation where we've shown impressive results in patients that have essentially run out of options, but we've also shown the FDA and the world that Carfilzomib may even be more exciting when you get to patients with earlier stages of disease.

Okay.

Thanks, Ted.

Next question, Operator.

Our next question comes from Rachel McMinn from Merrill Lynch.

Please go ahead.

Yes, thanks very much.

Two questions.

I guess both of you guys mentioned that Carfilzomib would be developed front line, and you also talked about putting that as part of the NDA.

Could you give us a little bit more color on what your strategy is?

I assume the front line data's really just supportive, but how do you -- what trials are you going to be running?

Is it head to head versus Velcade?How do you anticipate running studies without Revlimid being approved in that setting?

And, then, Tony, you also talked about doing the transactions or partnering this year for, I guess I just wanted additional color whether you're thinking about Carfilzomib monetization or maybe some of your earlier-stage pipeline.

Thanks.

Okay.

Why don't we start with the second half of that question, Rachel, if we can.

I'll cover partnering transactions and I'm sure Ted will have a lot to add on the front line question.

I think, as we've shown in the past, the way we structure all of our transactions are that we're very thoughtful about how we put them together and they're, in a way, P&L sensitive, so that they enhance or optimize the management of the operating statement.

You know that we've got a variety of assets, both early stage as well as later stage, where we could have very important, very substantive partnering conversations.

And, I think it's fair to say that since the second half of 2010, and the data releases for Carfilzomib, if anything, the interest around Carfilzomib has only grown, and there are a number of interested parties who would love to have access to Carfilzomib in markets outside of the United States.

So, we're gratified that we've got a compound that is attracting a lot of attention, but do keep in mind that we've got earlier stage assets that we can also monetize in some way, and strengthen the P&L.

Ted, on the front line strategy?

So, Rachel, thanks for the question about front line.

One of the benefits actually of not filing the NDA at the end of last year and filing it this year is that we actually now have the Jakubowiak data in the front line setting and I think we'll all agree that data was unprecedented in terms of the demonstration of the regimen of Carfilzomib, Rev/Dex to generate a very high rate of complete response and very high rate of complete response very rapidly.

One of the other things I didn't mention in the prepared remarks is that a number of those patients underwent harvest for bone marrow transplant, all of which were extremely successful.

I think the front line data really does suggest that going into the front line with an approval strategy is something that's important for us, and we will be pursuing that.

You also touched on head to head.

We have not yet formally initiated effort to do a head to head, but we're working very hard on coming up with a thorough life-cycle management program for Carfilzomib and that likely will be part of it in addition to the front line study.

Right now, however, we remain very focused on delivering what we promised this year, which is the NDA, and completion of the FOCUS trial and getting the ASPIRE trial out and available to you as soon as possible.

Operator, next question.

Our next question comes from Jim Birchenough from Barclays Capital.

Please go ahead.

Hi, guys.

A couple questions.

Just on the FOCUS trial, what's the hurdle there in terms of the PFS benefit you're going to need to show over best supportive care?

And, then, I have a follow-up.

Jim, I don't believe we've actually released the specific data in terms of powering, but I think one of the things that you well know is that we are studying a very similar patient population to what was studied in 003A1, and in that trial, it has been reported from the Kumar data that the response rate for these patients would typically be in the range of 11% and the survival of these patients, would typically be in the range of six to nine months.

We are studying 84 patients in the FOCUS trial, so I think what you can extrapolate from that is that obviously we're expecting to produce a fairly significant amount of progression-free survival compared to supportive therapy, which I think you know is simply low dose steroids and low dose Dexamethasone.

So, it's not a very potent comparator but it is appropriate in that these patients have exhausted all available options.

Operator, I don't know if we're going to be able to get Jim back for the second part of his question so in the meantime, can we just move to the next question and see if we can't get Jim back on the line.

Jim's line is now open again.

Jim?

Hi, guys.

Yes, so, just on the spend, just trying to understand the range of the R&D expense from $225 million to $250 million, and that's a pretty big -- if you go to the 250 end of it, it's a pretty substantial ramp from where you are in 2010, and I'm just wondering what that contemplates.

At that higher end, would we expect full enrollment of ASPIRE to be completed?

Just trying to understand the range there.

I'm going to let Matt provide probably lots of color and lots of detail.

I do want to pick up on something Ted said, and just underscore for everyone.

That is that we've got a broad lifecycle management plan for Carfilzomib.

So, at that higher end, Jim, you're really contemplating initiating several other studies that would be Phase-III type trials that might deleverage some of the benefits that we begin to explore, and that we've been talking about, first line, potentially head to head, and exploring that as a possibility and IST as well because one of the keys to success in the commercial marketplace for oncology compounds are IST trials.

So, think about that as an expansive life cycle management effort to take advantage of some of the near-term opportunities we see.

But, let's go through the R&D piece with Matt.

But, I wanted you to have that context so you could understand Matt's comments.

Hi, Jim.

Just to provide a little context on our 2011 guidance for R&D, this is broadly a story about accelerating investment in the proteasome inhibitor program and specifically around Carfilzomib.

A couple things to keep in mind as we think about the guidance for next year.

First and probably most important, 2011, we expect will include a full-year of both Phase-III pivotal trials, both ASPIRE and FOCUS, and recall that when comparing to 2009, both of those trials began enrollment in the third quarter.

So, that will be a key difference in terms of the R&D spend as we move forward in 2011.

Also, remind you that in 2011, costs that we incur for production readiness of Carfilzomib, as we head toward production of commercial supplies are required to be treated as R&D expense under US GAAP, until such point as the product is approved.

And, we wanted to provide guidance that included the possibility of ramping up on the commercial readiness for Carfilzomib.

We'll also be, as was mentioned in the call, advancing ONX 0912 from Phase-I into Phase-II, and want to provide the R&D room for that.

I think I probably reiterate the comments that Ted made with regard to your specific question on ASPIRE, which is our expectation at this point is that trial enrollment will be complete in the first half of 2012, but we do have the ASPIRE trial enrollment and frankly a range of enrollment rates baked into that guidance.

And, just the final point I'd make, in terms of R&D guidance for 2011, is to remind you that our non-cash stock-based compensation is a component of the R&D expense and both as our headcount increases and as we have a higher stock price, that non-cash charge will be higher than we expect in 2011.

Okay.

Good.

Thanks, Matt.

Operator, next question.

Our next question comes from Ling Wang from Brean Murray.

Please go ahead.

Thank you for taking my questions.

A couple of questions, for the Phase-II SPACE trial, I was wondering whether you can give us more refined time line for data and also whether you can comment on the current penetration of Nexavar in that setting.

And, then, for Carfilzomib, I was wondering whether we should expect additional data from the front line trial and if you could provide -- also provide us more color on the progress on the manufacturing issue, that would be great.

Thank you.

Okay.

Let me suggest Ted, why don't you if you can take the SPACE Phase-II trial question.

Laura, can you address the current penetration of Nexavar in the TACE setting?

Certainly.

That is the future on the SPACE trial.

We think it's a very important trial and look forward to unlocking another 20% of the market with SPACE data.

And, keep in mind there too that those patients are already in the current label for unresectable disease so this would not necessarily count or need an additional label expansion.

Ted, I think there's a question about an update on the SPACE Phase-II data and a couple of clinical questions including the additional front line data that could be coming this year and an update on CMC.

On the CMC, there really are no specifics other than to reinforce that we feel that the plan we put in place for CMC is working and it gives us continued confidence that our guidance that we will file as early as the middle of this year, the first half of this year, is appropriate.

So, the update there is no news is good news.

We feel very confident as we've executed on the CMC plan.

With regard for timing for SPACE, obviously we would like to present SPACE at a major medical meeting and so there are two issues that will dictate that.

One is an appropriate meeting, number two is the accrual of events.

You know we completed enrollment in that trial last fall and we feel very confident that the data will be out this year.

Probably around the middle of the year, but we're not exactly sure about the meeting form at this stage.

And, then, finally, in terms of additional front line data, there will be additional data.

Those patients continue to be treated, continue to be followed and we expect at the various meetings coming up, Dr.

Andrzej Jakubowiak will continue to update that data as well.

Okay.

Thanks, Ted and Laura.

Next question, please.

Our next question comes from Shiv Kapoor from Morgan Joseph.

Please go ahead.

Thanks.

Got a question on ONX 0912.

Just based on what I've seen in the Phase-I data from Carfilzomib, and what you've mentioned on ONX 0912, is it safe to hypothesize that ONX 0912 is likely more potent and will the dose that you take in Phase-II actually be more potent than the current dosage of Carfilzomib and based on that, what's your clinical development strategy on the drug?

Ted?

So, thanks for the question.

The issue of potency is an interesting one.

I would say that if you give these molecules in controlled conditions, not to humans but in assays, the potency is actually quite similar.

But, an orally available compound obviously now, has the variable of the rate of absorption.

What I can say, though, is that we think that based on the data that we've seen so far, that we're able to give doses of drugs which are well-tolerated and have sufficient absorption that we achieve high levels of proteasome inhibition and the next step in terms of a development strategy will be obviously to go into patients with hematologic disorders and show that proteasome inhibition correlates with an improved clinical response.

That's where we are in the development strategy.

I would also say that long-term, we would obviously like to have a different market opportunity for 912 than for Carfilzomib, specifically we see 912 as a drug which might be better used in the long-term maintenance setting in hematologic disorders.

And, we also see it potentially as a better drug to pursue in solid tumors, because in solid tumors it's likely that we will need to achieve not only high levels of proteasome inhibition, but frequent and more sustained proteasome inhibition and that's likely to be more readily achieved with an orally available molecule like 912.

Next question, Operator.

Our next question comes from George Farmer from Canaccord.

Please go ahead.

Hi.

Good afternoon, thanks for taking my questions.

I have two.

First off, Ted, can you comment in the ASPIRE trial whether Revlimid will be administered in the maintenance setting following induction and how that may impact time lines of data read-out.

And, also, Matt, can you comment on the operating margin guidance of 60%.

I think you gave similar guidance last year and you didn't hit it.

Could you kind of give us some sort of degree of confidence as whether you arrive at that figure.

Thanks.

So, why don't we start with the operating margin guidance question first, stay with that theme and then Ted will comment on the ASPIRE piece.

With regard to commercial margin, this reflects the relationship between costs and commercial revenue on the Nexavar business.

We and Bayer together during 2010 actually did a very successful job of managing commercial expenses in line with our jointly agreed budget and with our expectations for the year.

However, we had an adverse FX rate movement of about 5%, which obviously disproportionately impacts the revenue side of that equation, and made it more challenging for us to reach the guidance target that we hoped for in 2010.

As we move into 2011, fair to say that Bayer and Onyx are tightly aligned in our objective to continue to improve Nexavar's global commercial margin.

We will still be subject to FX rate pressure as relates to dollar reported margin.

But, I think we have good alignment with our partner toward improving those margins in 2011.

Okay.

And, I think George's second question was, let's talk a little bit about the use of Revlimid in the maintenance setting, and the potential impact on time lines.

Ted?

So, a good detailed question about the maintenance dose of Revlimid.

I don't have a protocol in front of me so I don't want to misstate at all but it's not designed primarily as a maintenance trial.

It's really designed as a trial to look at standard dose Revlimid in combination with Dex with the addition of Carfilzomib.

So, we're not really looking at maintenance therapy, per se.

I don't have the exact treatment cycle in front of me so I don't want to misspeak about that.

Okay.

Good.Thank you, George.

Operator, next question.

Our next question comes from Phil Nadeau with Cowen and Company.

Please go ahead.

Good afternoon, thanks for taking my questions.

Just two questions.

First, on the thyroid study, could you give us some idea when we're going to see data there?

Is that a 2012 event after enrollment completes this year, or is the likely survival of those patients too long that data might be in 2013?

Second, Ted, just to kind of push back on your answer to Joel's question about the recent FDA panel, the panel said two things I thought were remarkable.

One was, made a comment that he wanted very, very high response rates.

Second, the panel voted to support the fact that you need two randomized control confirmatory studies ongoing prior to approval.

So, could you maybe talk a little bit more about how your data and your program fit those criteria?

So, first, thanks for the question and I would say that high response rate is a relative term.

I think many people would suggest that the 24% response rate we saw would be a high response rate if you start out with the assumption that the historical response rate is 11%.

So, I would argue that more than doubling the response rate is an exciting response and I think the myeloma community has generally agreed with me on that.

The second issue related to DECISION, we have announced that we will complete enrollment of that trial this year.

As you know, these patients have had prolonged durability of response.

It's possible that we could have data as early as 2012, but it's hard to know until we begin to see more data.

And, then, finally, to your question about the ODAC, again with regard to two randomized trials, we actually think that we have really met the bar there already.

We already have started the ASPIRE trial, which is a randomized, 700 patient Phase-III trial.

In addition, we have ongoing the randomized FOCUS trial, which is a smaller trial but it is obviously looking at a rigorous comparison of best supportive therapy in patients that have exhausted options.

We are likely, as Tony and I both said already, likely to additional trials, because our goal as you would know is to extend Carfilzomib treatment across every setting in multiple myeloma, and so there will be additional trials in addition to the two that we've got ongoing.

Okay.

Operator, next question.

Our next question comes from Howard Liang from Leerink Swann.

Please go ahead.

Thank you very much.

Two questions.

First is on the JAK2 inhibitor.

When do you have to make a decision about opt-in and how do you think about that decision?

All right.

I think, Ted, why don't you take that one.

I may have something to add.

Why don't you start that one.

I don't think we've released the specific milestones for what would trigger our option decision on 803.

But, it is fair to say that we have not exhausted our options.

At this stage, what we are very committed to do is look at all the available data that's been generated with 803, look at all of the comparative data for other molecules and based upon a rigorous assessment of that really leverage the wonderful nature of the contract that we entered into which is an option arrangement.

So, we're still studying the information, still looking at data and we'll make a decision to opt in or not based upon fully vetting all the information.

The only thing I would add is that, remember, too, that we have 005, the second JAK2 inhibitor in that same option program.

We've got a couple shots on goal.

As insight and other companies progress their programs we're actually learning quite a bit, which will inform our decision.

We want to make a good, high quality decision.

It would be an additional commitment in terms of our R&D spend, and we want to ensure that when we make the decision, it's one that we can stick by and we can fund fully.

Operator, I think we've got time for just a couple questions more.

So, let's see what we've got here.

Who's next, please.

Our next question comes from Chris Raymond from Robert Baird.

Please go ahead.

Okay.

Thanks for letting me ask a question.

Just two questions, actually.

First one is on the 2011 guidance.

Just want to understand a little bit better the dynamics between the fourth-quarter number and what you stated.

As you said, year-on-year, the numbers look to be up nicely but if you annualize Q4, the guidance is for flat to down like 5% even including healthcare reform impact, so I guess the question is, is there some dynamic going on with Q4 that perhaps is a special event, or something that's maybe non-repetitive?

And, then, the second question, maybe more relates to the filing strategy.

Europe has kind of been on record, at least from our view, as being a little bit more amenable to conditional marketing authorizations and your data set in 003 specifically would seem to be something that would be kind of in that wheelhouse for conditional approval filing.

Can you maybe explain why you haven't gone after Europe with your existing data set?

So, let me take that second one because it was a important part in our decision to acquiring Proteolix.

Proteolix, before we acquired it, had actually already negotiated with the EMA to do a Phase-III best supportive care study like the FOCUS trial that Ted described.

So, we're just delivering on that commitment with the agency.

You may also know that Europe does have a different set of standards than US does in terms of accelerated approval opportunities, and in general the European Medicines Agency doesn't prefer single-arm trials.

So, we're really working to, A, deliver on the commitment made by Proteolix prior to the acquisition, as well as honoring the regulations within Europe for advancing an application on the basis of a randomized trial.

So, that was fairly, I think, straightforward.

Matt, do you want to take the 4Q guidance question?

Top-line guidance question.

Sure.

So, I think we start where you start, which is that we were very pleased to see full-year growth of 11% and even higher growth Q3 to Q4 for global Nexavar sales.

To the best of our knowledge, there were no unusual items in the fourth quarter that affected that trajectory, and the best evidence we have for that is that we saw Nexavar growth across all regions in the fourth quarter.

That growth was led in the fourth quarter as it had been throughout the year, particularly in the emerging markets, in Asia-Pacific, steady growth in Latin America, and, as we look toward 2011 guidance, we again expect that we will see strong growth in Asia-Pacific region.

We saw Japan, for example, grow at more than 50%, 2009 to 2010, and expect strong growth there again in 2011.

As Laura mentioned in her remarks, China now with increasing sales and very robust run rate coming out of the year.

So, we do have an expectation for double-digit growth as we move into next year.

We've tried to provide a range that best outlines our view of what we think the year will look like, and what we do know coming through 2010 is that we have variability from quarter-to-quarter, and I think you'll see we have provided a guidance range that reflects that while certainly looking to strong growth as we move again in 2011.

I think the only thing I would add before we take our last question is that with the South Korean reimbursement approval earlier, late last year, effective the beginning of this year, we're now beginning to see momentum in the Asia-Pacific region that we've been talking about for several quarters now and are really gratified that the second of the four very large Asia-Pacific markets can now deliver some additional traction for Nexavar so it gives us lots of reason to believe that we've got great growth prospects ahead for the compound.

Operator, let's take our last question and, after this, we will close the call.

Our final question comes from David Moskowitz from Madison Williams.

Please go ahead.

I just have a couple.

Number one, any price increases taken on Nexavar recently in the US or abroad?

Two, it sounds like you guys mentioned partnerships that could impact the P&L, and I'm not sure if I heard this or not, but I think you said partnerships like what you have in Japan on Carfilzomib.

So, could we be thinking about an ex-US partnership on Carfilzomib, say in Europe or some broader geographies?

Also, on the stock-based comp, could you give us a little bit of a ratio between SG&A and R&D?

I think last year, we were seeing about a four to one ratio, four to one, four in the SG&A and one in R&D.

And, then, my last question is you guys mentioned that you could be cash flow positive on a non-GAAP basis.

If I start doing the math, it looks like -- that's always dangerous of course -- it looks like a loss of about $50 million on a non-GAAP basis.

I'm just wondering how you get to cash flow positive.

So, I'm taking out the non-cash stock option expense.

Is there anything else that I'm missing to get to cash flow positive in 2011?

Thanks.

So, I think what I'll do is let me start.

The simple answer on price is yes, we took a 9% price increase in the US in January.

And, that brings the total monthly price for Nexavar up to $7,900, approximately.

In terms of partnerships, one of the things that we like very much about the Ono transaction is in addition to the upfront exchange of value, there's also an important contribution in terms of the R&D expenses for that particular program, and we would consider that an important part of any kind of transaction that we would do going forward.

I mentioned earlier in the call, that we would give consideration to partnering earlier-stage assets but certainly on any kind of Carfilzomib transaction for Latin America, Asia-Pacific markets, et cetera, we would be looking for an R&D cost sharing opportunity and based on the interest in the compound, that should be achievable.

I think, in terms of being cash-flow positive and on a non-GAAP basis, Matt, I know will want to make a couple of comments but do keep in mind that for the last three years running, this is a commitment that we have set, it's a commitment that we are focused on, and we are managing business prudently to achieve that.

I think Matt, you'll probably wrap up the answer to this with some comments.

Sure.

Just I think two points on your remaining questions, David.

First, on the stock-based compensation, I think that we don't provide specific guidance with regard to forward-looking line item detail on the stock-based comp.

I would suggest as I referenced in answer to a question earlier, we do expect to be adding capabilities, particularly in our development organization, as the suite of proteasome inhibitor development program increases, so you might think toward a somewhat faster rate of increase in the stock-based comp component in that line, and I think that historical detail that we disclosed today in the press release and the 10-K probably provides a good basis for thinking about that in moving into 2011.

Finally, picking up on Tony's comments, as we look to 2011, we believe that the target for non-GAAP profitability is an important financial discipline for the Company, and really see two broad directions, certainly envision that partnering revenues may play a significant component in that, and, in light of the increased interest that we can easily see in Carfilzomib partnering, feel very comfortable about incorporating that in our planning for 2011.

And, the other, as I alluded to earlier, is we're obviously very pleased to see the strength in Nexavar sales here in Q4 and recognize that Nexavar top line sales and margin improvement may also play an important role as we move through 2011.

So, I think those would be the two things we would primarily look at, toward achieving that goal of non-GAAP operating profitability again in 2011.

David, I would point you and everyone else towards Matt's last comment in particular about Nexavar revenues.

We provided, I think strong guidance year-over-year and talked a little about how we get there but that's before any of the other additional opportunities that -- and Laura talked about during the call.

So, let's wrap the call, if we can.

We're starting 2011 extremely well-positioned.

It's the best quarter ever for Nexavar, the best year ever for Nexavar with approximately $3 billion cumulatively in sales since its introduction, and we're on the cusp of delivering our next product, Carfilzomib, which can be a second potential blockbuster.

Thanks for joining us today.

We look forward to providing you updates in the weeks and months ahead.

Take care.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for participating.

You may now disconnect.