美國安進 (AMGN) 2012 Q2 法說會逐字稿

Welcome to the Onyx Pharmaceuticals conference call.

My name is Trish and I will 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 would now like to turn the call over to Onyx Pharmaceuticals.

Thanks, Trish.

Good afternoon.

I'm Amy Figueroa, Senior Director of Investor Relations at Onyx Pharmaceuticals.

Thank you for participating on our second quarter 2012 financial results conference call.

Leading the call today is Dr. Tony Coles, President and Chief Executive Officer.

After Tony's introductory comments, Dr. Helen Torley, Executive Vice President and Chief Commercial Officer, will discuss the progress in our franchises.

Next we will have Matt Fust, Executive Vice President and Chief Financial Officer, review our financial results for the second quarter of 2012 and provided an update on financial guidance.

Then Dr. Barb Klencke, Senior Vice President of Clinical Development, will discuss our ongoing clinical programs.

After that, we will open the call to your questions.

Please note that we will be making forward-looking statements during this conference call that could include financial, clinical, regulatory, 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, 2011, as well as to our other filings.

We expect to file our 10-Q for the second quarter ended June 30, 2012 early next week.

For full prescribing information on Kyprolis, we refer you to the package insert posted at www.kyprolis.com.

Kyprolis corfiltomib for injection has been approved for the treatment of patients with multiple myeloma who have received at least two prior therapies, including bortezomib and an immunomodulatory agent, or/and have demonstrated disease progression on, or within 60 days of, completion of last therapy.

The indication for Kyprolis is based on response rate.

Currently no data are available for Kyprolis that demonstrates an improvement in progression-free survival or overall survival.

On today's call, we will be presenting and discussing non-GAAP financial measures.

For a reconciliation of these non-GAAP financial measures to the corresponding GAAP measure, please see today's press release, which is posted on the Onyx website at www.onyx.com within the News and Media Section.

A slide presentation that supplements the information on this conference call is also available on the Onyx website.

The presentation is located on the Financial Information page of the Investor section.

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

Thanks, Amy.

Good afternoon, and thanks for joining us today.

Over the past three years we've executed on our strategy to build a leading oncology company with two franchises and multiple therapies to treat increasing numbers of patients with cancer.

With the recent accelerated approval of Kyprolis, the transformation of Onyx has accelerated, and our growth strategy is being realized.

We are on track to reach our goal of taking Onyx from a company with one therapy to a company with as many as three therapies, with the recent approval of Kyprolis, and with regorafenib regulatory action on the horizon for later this year.

We're proud of these achievements, and we expect the significant momentum in our business to continue in the second half of this year and into 2013, as we build Onyx for future success.

For the protensome inhibitor franchise, in the United States we are launching our first wholly-owned product, Kyprolis.

This important milestone provides us with the opportunity to serve more patients and expands our footprint in oncology.

While we are very early in the launch, literally days, it's gratifying to see the execution of our commercial plans going well, with the experienced team that Helen has assembled.

To further unlock the value of this franchise, we are also executing a broad global development program across additional lines of therapy in myeloma.

Additionally, we are advancing Oprozomib, our all-proteasome inhibitor in the clinic.

Before turning the call over to Helen, I'd like to spend a moment on or kinase inhibitor business, where we have also made good progress.

Nexavar is the foundation of this successful global business, and Bayer's regorafenib, now under priority review by the FDA, represents a second asset in this franchise.

With Nexavar's increasing cash flow generation and continued leadership in liver cancer, and with regorafenib as a potential near-term revenue driver in colorectal cancer, we're well positioned to invest in the future growth of Onyx.

Now I'd like to the call over to Helen.

Thank you, Tony.

Let me begin by providing an update on the first phase of the Kyprolis launch, and in particular some milestones the team has achieved and the early feedback we have received.

Kyprolis was available for ordering from wholesalers on July 27, several days ahead of plan, and orders have begun being shipped to clinics and hospitals this week.

As I mentioned on the July 20 call, our approach has been to put in place an approximately 100-person multidisciplinary field team.

The field base market access experts, nurses, and sales leadership team were trained in advance of the early approval, and our market access experts, nurses, and sales leaders were immediately deployed upon approval, beginning calls in July 23.

Our full sales team is completing their training, and will be calling on offices later this month.

With only just over a week under our belt and very early days of our experience, I can provide the following early feedback.

The market access experts have completed a number of calls in pairs, and we have received the first confirmations of coverage by both Medicare administrative carriers and commercial plans.

There have also been encouraging initial feedback from healthcare practitioners, who acknowledge the unmet need that exists in the Kyprolis-indicated population, and are expressing interest in learning more about Kyprolis.

We've initiated the steps to conclude the [c-mat] program, with Onyx 360 standing by to provide assistance for patients converting to commercial drug.

There are a number of steps the clinic and patients must undertake, so we expect the first patients to begin transitioning to commercial drugs in the next few weeks.

In summary, while it is early days, we are encouraged by the preliminary response to Kyprolis.

Turning to our kinase inhibitor franchise, Nexavar is now approved in over 100 countries worldwide, with approximately 70% of Nexavar's sales generated outside of the United States.

In the second quarter of 2012, Nexavar global net sales, excluding Japan, were $214 million, 4% higher than prior year.

Net sales in the rest of the world, excluding Japan and the United States, were $149 million, as demand driven sales growth in Latin America and Asia Pacific was offset by unfavorable euro foreign exchange rate decline.

In the United States, net sales were $65 million, 13% higher than prior year.

In the second half of the year, we're continue to focus on increasing use in unresectable hepatocellular cancer, where Nexavar remains the only approved targeted therapy.

Looking forward, a key upcoming event for Nexavar is the decision data readout expected in Q4.

If registration supporting, this could add an additional indication for Nexavar in patients with differentiated thyroid cancer where there have been no new therapies approved for patients in over 30 years.

Moving now to regorafenib, with FDA priority review designation for the metastatic colorectal cancer filing, we are preparing for a second potential launch for Onyx this year.

As I mentioned in our call last quarter, many of the physicians we call on today for liver and kidney cancer also manage colorectal cancer patients.

This results in the need for only a modest increase in our sales force size to be able to reach the physicians managing the majority of colorectal cancer patients, while continuing to call on the liver and kidney cancer prescribers.

We have completed the hiring of our additional sales team members and will be initiating training in the next weeks.

Upon approval, regorafenib will be jointly promoted with Bayer in the United States.

Onyx will be reimbursed on a fee-for-service basis for regorafenib promotion provided by our kinase-inhibitor sales team, and we will also receive a 20% royalty on global net sales.

Now I will hand the call over to Matt.

Thank you, Helen.

2012 continues to be a year characterized by growing cash flow contributions from our kinase inhibitor franchise and strategic investment in our proteasome inhibitor franchise.

Our business is strong, and we're advancing our plans for future growth.

I'll begin today with a review of financial highlights for second quarter, and then provide an update on financial guidance for 2012.

As Helen mentioned, Nexavar global net sales, excluding Japan, were $214 million in second quarter 2012, 4% higher than second quarter 2011.

After taking into account an 11% erosion in the dollar-euro exchange rate, Nexavar net sales grew approximately 10% on a currency neutral basis.

Nexavar collaboration revenue of $73 million in second quarter 2012 grew 7% over second quarter 2011, or 11% growth after adjusting for $3 million in royalties on sales in Japan, which were booked in second quarter 2011, as Onyx no longer receives royalties on Japan sales.

Collaboration revenue growth was driven both by higher sales and by improved commercial margin, which expanded to 61% in second quarter 2012 compared to 57% in second quarter 2011.

Non-GAAP net research and development expenses of $74 million in second quarter 2012 was primarily driven by investment in carfilzomib, along with Onyx' share of Nexavar R&D.

Second quarter included carfilzomib trial and clinical drug supply expenses for the three ongoing Phase 3 clinical trials, ASPIRE, FOCUS, and the recently launched ENDEAVOR, as well as commercial supply for the US product launch of Kyprolis.

Non-GAAP selling, general and administrative expense was $41 million for second quarter 2012, primarily driven by investment in commercial infrastructure and the associated support to prepare for the launch of Kyprolis.

Contingent consideration expense of $53 million in second quarter 2012 primarily reflects an adjustment in the liability associated with the $80 million milestone payment to the former Proteolix stockholders, which was triggered by the US accelerated marketing approval of Kyprolis.

We've decided to make the milestone payment, which is due later this month, using a combination of stock and cash.

Approximately $63 million will be paid in the form of Onyx common stock to the former holders of Proteolix' preferred stock, and $17 million will be paid in cash to the other former Proteolix security holders.

At the current trading price of Onyx common stock, we expect to issue approximately 850,000 shares, representing just over 1% of our current fully diluted share count.

We expect non-cash contingent consideration expense for 2012 to be approximately $70 million, inclusive of the adjustment made in second quarter.

We ended the quarter with $590 million in cash and investments, which together with expanding cash flow from Nexavar, will allow us to continue to invest strategically in advancing the development of carfilzomib and oprozomib.

Let me turn next to 2012 corporate financial guidance.

Nexavar global net sales guidance which excludes Japan, is unchanged.

Because the dollar-euro exchange rate is volatile, it's far more challenging to predict sales reported in US dollars, and Nexavar sales could also be impacted by pressure on pricing and demand, discounts, rebates and health care reform in various countries.

We are not providing guidance for Kyprolis net sales as we monitor sales trends for this newly launched product.

It's important to note that until we receive a Kyprolis-specific Medicare J code, which are expecting January 2014, a miscellaneous J code will be used.

While this is common practice with injectable products, it can require extra time for physicians to receive reimbursement, especially in the initial launch phase.

Consistent with our practice, 2012 expense guidance is provided on a non-GAAP net basis, excluding stock-based compensation.

We continue to believe this better represents our operations, and is aligned with how we evaluate the business internally.

In anticipation of the accelerated approval of Kyprolis, we made some important investments in building commercial pre-launch supplies, which in accordance with GAAP were charged to R&D expense prior to Kyprolis' approval, and we accelerated our broad development program.

Consequently, for 2012, our guidance for non-GAAP net R&D expense is increasing to a range of $305 million to $320 million.

Specific to the kinase inhibitor franchise as planned, we continue to expect to reduce Nexavar R&D expense by 10% to 15% in 2012 compared to 2011, as multiple Nexavar Phase 3 clinical trials reach completion.

Remember, we do not incur expenses for the development of regorafenib.

As you'll recall, the selling, general, and administrative expense guidance we provided earlier this year did not include a US commercial launch for Kyprolis.

As Helen mentioned, we now have added a field team and the related infrastructure and support staff, and have begun incurring marketing costs.

We now expect non-GAAP selling, general, and administrative expense for 2012 within a range of $210 million to $220 million.

We continue to expect a non-GAAP net loss in 2012, a year in which investment in our proteasome inhibitor franchise, including US launch of Kyprolis, will exceed the contribution from the kinase inhibitor franchise.

Let me close by discussing a few anticipated accounting treatment items related to the Kyprolis US launch.

First, as is common for new product launches, we expect to recognize Kyprolis sales revenue upon shipment to the physician, infusion center, or hospital, the with revenue recognition model known as sell through, rather than upon product shipment to our specialty distributors.

As a result, some Kyprolis sales will be recorded as deferred revenue on the balance sheet, rather than as net sales on the P&L, until the requirements for sales revenue recognition, including the sell through, have been met.

Second, we expect that the adjustment to gross product sales that will be required to determine net sales, the gross-to-net adjustment, will be in a range of 10% to 15% during the launch period.

It's too early to project what the gross-to-net adjustment will be longer term, and as we build experience to enable accurate estimates of the components, such as government discounts, co-pay assistance, and product returns, we'll provide you with additional color on this adjustment.

Finally, prior to the Kyprolis approval, commercial supply costs were charged to research and development expense.

Following approval, commercial supply costs for Kyprolis are capitalized into inventory, and will be expensed through cost of goods sold.

As we sell the product that was charged for research and development expense, we may report a higher gross margin, and thus we expect it will be several quarters before representative product gross margin will be reported in our financial statements.

Our business today has significant opportunities, underscoring the importance of investing to realize the full potential of our pipeline.

As we've demonstrated in the past, we will be both mindful and disciplined in our approach.

Now I'd like to turn the call over to Barb for an update on our clinical program.

Thank you, Matt.

Starting with our proteasome inhibitor franchise, we are executing a comprehensive global development strategy for carfilzomib, a therapy we believe has promise across a variety of lines of patient treatment.

We are excited to have Kyprolis approved under the accelerated approval pathway, and our work to support post-marketing requirements and full approval is well underway.

Importantly, last week the full data from our 003-A1 study, on which Kyprolis is approved, was published in Blood, the premier peer-reviewed medical journal for the American Society of Hematology.

The carfilzomib program currently includes three ongoing Phase 3 trials.

The ASPIRE study is the primary confirmatory study, and enrolls patients who had had one to three prior therapies.

Based on a planned interim analysis, we could have data in the first half of 2013, depending on the rate of event accrual.

If the trial goes to full completion, we would expect a data readout in the first half of 2014, but again, depending on event accrual rate.

The FOCUS trial is designed to support registration for carfilzomib in relapsed and refractory multiple myeloma outside of the United States.

We are on track to complete enrollment of 300 patients in the first quarter of 2013.

Our development plan also includes evaluating carfilzomib's superiority over existing therapy.

We recently initiated ENDEAVOR, our first head-to-head study.

This global Phase 3 trial is in multiple myeloma patients who had relapsed after one to three prior regimens, and compares carfilzomib, in combination with low dose with dexamethasone, to Velcade with dexamethasone, and we are also finalizing our plans on the protocol designed for a head-to-head trial in a front-line setting, which we hope to initiate in 2013.

For our oral proteasome inhibitor, oprosomib, which is a compound we believe could play a role across a variety of multiple myeloma treatment settings and warrants further development.

Dose escalation is going well in our ongoing Phase 1b/2 trial, and the maximum tolerated dose with the split dose regimen has not yet been reached.

We have seen initial clinical responses in multiple myeloma patients, and expect to have preliminary data from the Phase 1b portion of the trial before the end of the year.

We are also working on a new formulation for oprozomib, and plan to introduce this in our ongoing phase 1b/2 trial this year.

Turning now to the kinase inhibitor franchise, the Phase 3 decision study in differentiated thyroid cancer is nearing completion.

We expect to have top line data from this in the fourth quarter of this year.

If a progression-free survival benefit is demonstrated, we worked, together with Bayer, pursue a supplemental regulatory submission for Nexavar, and in advanced breast cancer, we expect to complete patient enrollment in the Phase 3 resilience trial in the first half of next year.

For regorafenib, a Bayer compound, we have seen positive data from the Phase 3 correct trial, showing a 29% improvement in the overall survival of metastatic colorectal cancer patients.

Bayer has submitted regulatory applications in the EU and in the United States.

We expect a regulatory decision by the FDA in the fourth quarter of this year, based on priority review designation, and in Europe, a regulatory decision is expected in the first half of next year.

In a second Phase 3 study, known as Grid, presented at ASCO this year, regorafenib showed a 4.8 month median progression-free survival in the treatment arm, versus only a 0.9 month median PFS in the placebo arm in patients with metastatic or unrectable GIST.

An additional submission is planned by Bayer for this indication in United States in the second half of this year.

In summary, there's an active development program across our proteasome inhibitor and kinase inhibitor franchises, and we anticipate moving our trials forward as we look for more opportunities to help additional patients.

I'd now like turn the call back over to Tony.

Thanks, Barb.

There you have a remarkable description of the achievements in the second quarter, highlighted by the accelerated approval of Kyprolis, as well as the priorities with new designation for regorafenib.

I think what we'll do now is take questions, and then we'll come back with some final comments.

Operator, would you open the call to questions?

Yes, thank you.

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

(Operator Instructions)

Mike King, Rodman & Renshaw.

I wanted to ask a commercial strategy question.

Some of the feedback that we got regarding the Kyprolis pricing, in that it's a very expensive drug.

So I'm just wondering how we should think about commercial uptake in that light, and competitive positioning vis-a-vis Velcade especially, in the subcutaneous delivery modality where the toxicity is far less.

And how you also might think about it as you escalate doses from the currently approved dose to what would be eventually higher doses?

Okay, yes.

I'll ask Helen to address that.

I think, Mike, if we've got the question, it's to make some comments on the competitive positioning vis-a-vis Velcade and their sub-Q administration twice weekly, and then pricing in general.

So Helen?

Yes.

Mike, if I can begin just with the pricing.

As we selected the price for Kyprolis, we took into account feedback from both physicians and peers looking at the value that Kyprolis was seen to bring.

Importantly, our indication and the size of that population was also an important part of that consideration, as people considered that these are patients who have significant unmet needs to date, no standard of care, and few treatment options.

So as we think about competitive positioning against Velcade sub-Q, our patients generally are patients who have already been exposed to Velcade and an i-med, and have progressed on, or within 60 days of therapy of one of those agents.

So we do expect the majority of our patients will already have either progressed on or have issues with their response to Velcade.

The other comment I'd end on for that particular question is, remember we do have the unique patient support program, the Onyx 360 program, which will help triage insurance coverage for all the appropriate patients.

So those patients who have insurance will be covered appropriately.

Those who don't will actually be provided assistance, and those who are under-insured, essentially without a co-payment, will also receive some support.

So we're doing everything that we can to ensure that all appropriate patients who deserve to be on Kyprolis get access to it.

Operator, let's take the next question.

Cory Kasimov, JPMorgan.

Good afternoon, guys.

Thanks for taking the question.

Two of them for you.

First of all, will we be able to track the Kyprolis launch -- or the Kyprolis script data via IMS or other similar services?

And then with the product outside of the US, I realize that FOCUS is the key study there, but if you get a positive interim analysis for ASPIRE before your first look at FOCUS survival data, would you use that data to file for European approval?

Thanks.

Okay, sure.

Let me ask Matt to talk a little bit about our ability to track prescriptions, and what our normal practice has been, and then I'll ask Barb to comment on using ASPIRE globally.

Hi, Cory.

It's Matt.

With regard to prescription tracking, we are distributing Kyprolis through a small network of specialty pharmaceutical distributors, who in turn sell the drug onto the hospitals, physician offices, infusion centers, and so forth.

Our experience, and our expectation, is that those early data reported by third party data sources tend both to be incomplete and inconsistent.

So I'd caution you about relying too heavily, particularly in this launch period on data available from those third party sources.

This is Barbara to answer your question about ASPIRE.

As we were in the protocol design phase we sought health authority input on that design from global regulatory authorities.

So yes, the European health authorities are aware that ASPIRE could be finished with an interim analysis.

So we would anticipate filing that data.

Yes, and I think that's really important point, because our goal is to get Kyprolis to patients worldwide as quickly as possible.

So if there's an opportunity to provide Kyprolis on the basis of the Phase III program ahead of the FOCUS study, then we'd want to do that, and so we won't slow things down.

We will be going as quickly as we possibly can.

Enrollment is done.

We expect interim analysis results in the first half of 2013, as Barb mentioned in her comments.

So stay tuned, and we will be doing our best to get it broadly available.

Next question, operator.

Terence Flynn, Goldman Sachs.

I just was wondering if you can give us any sense of the vials shipped at this point, or maybe the accounts that have ordered?

And then a second question I had was can you tell us anything about the amount of inventory you expensed in R&D in the second quarter?

Thanks.

Okay.

Helen, you want to talk a little bit about distribution, and then Matt will cover the inventory question.

Yes.

Terence, what I can say is for the network of specialty distributors that we have in place, all of them have certainly placed orders, or have supply and have received orders from both clinics and hospitals.

In terms of the amount, we're not really prepared to share that yet, but I think the good news is that that product is now available for patients in hospitals and clinics to be used.

I will just underscore Helen's comment that in record time we finalized distributor agreements and got product in the channel as quickly as we could.

So it's probably close to a record that we've got product available for an earlier than expected approval.

So just something to note there.

And then Matt, I think there's a question on the Q2 inventory expense.

Yes.

So maybe just a couple points on inventory.

First to reiterate an observation that Helen made on an earlier conference call, we feel comfortable that we have sufficient inventory quantity in connection with our forecast for the launch.

With regard to the expenses, we have not broken out specific details of the inventory that flow through R&D expense.

I would re-emphasize a point I made in my prepared remarks today, which is we expect that the cost of goods sold and the resulting gross margin that flows through in these initial launch quarters is probably not representative of the ongoing cost of goods that we'll see, because a significant fraction of the cost associated with this launch inventory has been expenses through the R&D line.

Okay, thank you.

Next question, operator?

Rachel McMinn, Bank of America.

Three part question.

One just on the last issue.

Matt, if you can give us a sense of what the normalized gross margin would be after you finish going through the pre-expensed inventory?

Two, if you could talk about the R&D guidance that you gave implies either flat or maybe up R&D expense in the back half of the year.

Should we expect that to continue into 2013, when you kind of think on a blended basis with Nexavar going down and Kyprolis going up, how we should be thinking about that?

Finally, just on oprozomib, I was curious if you could give us a little bit more detail.

Tony, you seemed to be talking about that a lot, but I'm just wondering with the new formulation going in, it sounds like the drug's clearly active, but maybe the split dose isn't really commercially viable.

How should we think about development there?

Thanks.

So let me start with oprozomib, and Barb may have some additional comment as well, and then we'll have Matt take the financial questions.

Oprozomib is progressing well in the clinic.

We have identified a formulation that we like very much and think that will work.

It's too early yet to provide any real read on the split dose data, because we have called it -- the split dose study is done in malignant patients, which did include some multiple myeloma patients, and you heard Barb comment in her answer that we have seen some initial clinical responses, but we're hesitant to comment more specifically.

It is possible that we'll have data from that Phase 1b/2 study later this year.

So do stay tuned for that, and we'll bring that to you as quickly as we have it.

Then next, I think it's really to take the new formulation into a 1b/2 study and try to get to myeloma proof concept as quickly as we can.

Barb, would you add something?

The only other point to the point of split dosing, with the new formulation we will be studying that with a once a day dosing regimen again.

So that may help the convenience with the new formulation.

Not yet in the clinic, but to be started.

Hi, Rachel.

It's Matt.

So on your couple of financial questions.

First with regard to cost of goods sold and gross margin.

Not yet in a position, I think, to be able to give specific guidance on cost of goods, although I certainly would suggest adding two things.

One, you could expect cost of goods and the resulting gross margin to be consistent with other small molecule prescription drugs as we move into a more normal phase.

Again, I would emphasize we don't expect that over the first couple of quarters, when we're moving the inventory which has already been expensed through the R&D line through the cost of goods equation, that we'll see a normalized gross margin.

We'll probably take a few quarters until that sorts out.

With regard to research and development expense, we've not yet given guidance beyond calendar year 2012, but I think in you question you hit on a couple of the key themes as we think about R&D rest of this year and going forward.

Here in 2012, we're already beginning to see some of the impacts of the reduction in Nexavar research and development spending, as some of the Phase III trials wind down.

We had given guidance that we expected Nexavar R&D spend would be 10% to 15% lower in 2012 than it was in 2011, and that still looks right to us for this year.

We'd expect that trend will continue as we move into next year, and continue to see reductions in the R&D investment in Nexavar.

By contrast, we expect that the carfilzomib Phase III programs, FOCUS, ASPIRE and ENDEAVOR already underway, as well as the front line trial that Barb mentioned in her remarks, will be the key drivers for Kyprolis R&D spend next year.

And as Tony and Barb just discussed, we hope we have an opportunity to make an investment in a continued oprozomib development program next year.

So we'll certainly be back with more details on 2013 as we get closer, but I think those are the right trends to think about from R&D spend.

Very good.

Thanks Matt and Barb.

We'll take the next question, operator.

Howard Liang, Leerink Swann.

Can your sales force for Nexavar and regorafenib sell Kyprolis, and vice-a-versa, and if so, what is the total headcount in the field?

Yes.

We have put in place two separate oncology field forces.

So the kinase inhibitor field force that you referenced will be, if regorafenib is approved, we'll add regorafenib and sell both regorafenib and Nexavar.

We just hired about 100 field based personnel for the promotion of Kyprolis, but that will be all that field force sells.

So two separate sales forces now.

Okay.

Thanks Helen.

Operator, next question.

Biren Amin, Jefferies.

II guess two questions.

What do you expect to be the PFS threshold to meet the stats hurdle on interim analysis in ASPIRE?

Second, and lastly, what is the status update on Ted Love's replacement?

Thanks.

Okay.

Barb, could you take the ASPIRE question?

Well, we don't talk, we have not posed any powering of our study.

Historical benchmarks for the control arm with Revlimidex might be approximately a year.

And whatever sort of threshold we do have, just to remind you, we do have a spa, so we do have FTA agreement around the type of benefit that we would need to see in order to stop the study.

Then in terms of the Global Head of Research, Development, and Technical Operations, a global search is now underway.

We have seen a number of candidates who are highly qualified, and we are continuing the review process.

Our expectation is, because we want a world-class R&D organization, we want a world-class R&D leader, and we'll take the time that we think we need to find such a person, who can not only reinforce the strategies we have in place today, but help us build towards the future.

So we'll bring an update as soon as it is appropriate, but the search is well underway.

And we, as you can tell, have expert help and assistance by the team led by Dr. Barb Klencke, who has been involved in multiple oncology launches through her career at Genentech.

So she's certainly provided a very strong and very steady hand in this period of transition.

Next question?

Chris Raymond, Robert W Baird.

This is Matt in for Chris.

Just two questions.

First on Nexavar, I think Bear Head Lake, China is one of the regions that had a strong quarter.

Can you just tell us what the number was, and why China was strongest quarter?

And then on regorafenib, moving upstream in colorectal, can you just maybe update us on when we might see that Phase II second line data?

And then any plans for future studies?

Thanks.

So let me take the rego question and I'll ask Matt to make some color commentary on China.

The CRC Phase II study is well underway.

We don't have expectations yet for when we might see data for that, but one thing we have commented on previously is that both teams, Bayer and Onyx, are working on a full lifecycle management program for regorafenib and we'll bring you additional details as they're appropriate.

We expect a broad global development plan for regorafenib.

And the expectation's that Bayer have and that we have also provided include global net sales estimates of in excess of $1 billion for CRC GIST and other indication opportunities, as they become available.

So we will provide updates as they're appropriate.

Then Matt, if you could talk a little bit about China, that'd be traffic.

Sure.

So China specifically had sales of $25 million in second quarter 2012, which was a more than 30% growth on a year-on-year basis, and we think is representative of the strength we're seeing, both across the Asia-Pacific region, and more broadly across emerging markets.

For those of you who heard Bayer's earnings call earlier this week, they specifically called out a number of emerging markets in addition to Asia-Pacific region as particularly strong drivers for Nexavar, which as mentioned in the prepared remarks today, sales outside the US now account for nearly 70% of Nexavar sales.

Okay, terrific.

Thank you for that question.

Next question, operator.

Navdeep Singh, Deutsche Bank.

Just a couple of quick questions.

Do you have any updates for the design of the Kyprolis Phase III trial in the newly diagnosed population?

Secondly, I think you've updated your timelines for the readout of the decision trial to be in Q4.

Can you describe how you're thinking of this opportunity, and why the trial is taking much longer to readout than previously expected?

Thanks.

Okay.

Barb, would you mind taking those two questions?

So the decision trial I'll take first, and data is expected in the fourth quarter of this year.

Why?

It is an event-driven analysis.

Our Phase II data showed something like a 96-week median time to progression-free survival.

And so one might hope, but cannot tell until we do that analysis, that the treatment arm with Nexavar could be longer than what the study was minimally powered to detect.

With regard to the first line trial, what we have said is that we are in the process of developing that trial and speaking with health authorities in the coming months.

We've mentioned that it is likely to be a head-to-head.

So presumably a Velcade-based carfilzomi-based treatment arm, but we've not finalized our plans at this point.

Yes.

I think it is fair to say that the ENDEAVOR trial is squarely in our sights, and we really want to get that went up and running as quickly as we can.

We've got first patient, first visit there, and we'll turn our attention now towards the front line study in part, just to elaborate.

So making excellent progress on both fronts, and as you know, the head-to-head comparisons are really essential to our development and our regulatory strategies.

Operator, let's take the next question.

Geoff Porges, Bernstein.

Just first on financial, and then one on the trials.

On the SG&A, it clearly is a step up with the new sales force, and without trying to get guidance for next year, but should we be assuming that the sort of roughly, looks like $60 million to $70 million a quarter for the balance of the year will be the baseline for future periods, given it is mostly infrastructure.

And then just a question on the ASPIRE trial.

Barb, if you could give us some sense of the distribution of treatment failures that would be second, third and later lines, how many -- is there some criteria, or what you think we should estimate that at?

Thanks.

Okay.

Barb, actually why don't you take the ASPIRE question.

Then we'll ask Matt to comment on expense, SG&A expense.

The ASPIRE trial, as it's still an ongoing trial, we've not done any analysis of baseline characteristics or how many of those patients had received one versus two or three prior regimens

Hi Geoff.

With regard to the SG&A expense, we are not yet providing guidance specifically for 2013, but would expect the key drivers in the SG&A line to largely be in place in the second half of this year.

Which is to say the now-established Kyprolis commercial infrastructure, as Helen mentioned, the expansion in the kinase inhibitor franchise, with a modest increase in sales force to cover what we hope will be an opportunity to co-promote regorafenib alongside Nexavar.

So I think if you were to look at the increase in our SG&A guidance, now reflecting the Kyprolis launch, that probably gives you a sense for the incremental selling, marketing, and infrastructure cost associated with Kyprolis.

And that's a good baseline for rounding into 2013.

Okay.

Operator, we'll take the next question.

Ling Wang, Summer Street Research.

I have two questions.

First, could you please provide some details on your royalty agreements for Kyprolis with Ligand.

And then secondly, for regorafenib, NDA filing in colorectal cancer, would you expect all that this year?

Thank you.

Okay.

I think in terms of regorafenib, all we know, and all disclosed, is that it's been accepted for priority review by the FDA after and end of April filing.

So I think you can expect an FDA decision date somewhere near the end of October or so.

We will certainly try to understand whether there will be a ODAC required, but we do know that the ODAC for September has been canceled, and we will continue our work with the FDA as they review the application.

Our job is to get them everything that they need so that they can make a good decision on time for the PDUFA date near the end of October.

Than I think Matt, could you address the Ligand question?

Hi, sure.

Yes.

We have, in connection with our purchase of Captisol from Ligand, Captisol is a component of the Kyprolis product, a royalty obligation to Ligand, which is tied to global net sales of Kyprolis.

Those royalty obligations range from 1.5%, which is the starting rate, up to a highest rate of 3% of global Kyprolis net sales.

That top 3% royalty rate is triggered at sales levels over $750 million, and the royalty rate steps up between 1.5% and 3%, with increasing levels of sales.

Okay, good.

Thank you.

Next question, operator.

Echo He, Maxim Group.

Just want to ask that approximately you have about 300 patients that's on your Phase II trials, Kyprolis.

You have any idea, or you could provide any idea, that how many of these patients, what percentage, would be paying patients?

Okay.

Helen, I'll ask you to take that but I do want to point one thing out.

These 300 patients are part of the expanded access program for Kyprolis which was launched in the United States near the end of the summer last year.

So it's not a Phase II program per se, but the expanded access program, and Helen, comment?

Yes.

We really don't have specifics on that at this point in time.

This is obviously a process that the clinics and patients are going through working, many of them, with Onyx 360 to understand their insurance coverage and their payment.

We do think the majority of them will be able to transfer to commercial drug and be on paying -- pay for it, but we don't have any specific estimates at this time.

That is another place where Onyx 360 program, the patient support program, will be facility that transfer of patients from the extended access program to a commercial product.

So we will have some reinforcements in making sure all patients continue to get the therapy.

Operator, we'll take the next question.

Ryan Martens, Lazard Capital.

Just following up on the previous question with the expanded access program.

Can you give us an idea of generally how far along these patients maybe in your treatment as they move onto commercial drug.

And secondly, with your increased focus on liver cancer, can you give us any updates in terms of reimbursement in the Asia-Pacific countries, Taiwan, China, et cetera?

So sure.

I think for C-MAP, Barbara, if you've got a perspective on that.

I think the question is how far along in their treatment are these patients?

We're seeing a span.

As Tony mentioned, we opened this quite some time ago.

And then as we saw with 003-A1, some patients continued to benefit for extended lengths of time.

On the other hand, the program was close to enrollment for a little while when we reached 250 patients.

We needed to amend, and as the trial got reopened at sites over the recent months, we also saw another bolus of patients who have actually not been on very long.

So a variety.

Good.

I think it's important to underscore there the exact same type of patients as in the 003-A1 study.

So they're relapse and refractory patients.

They look exactly like that study population.

I think in terms of liver cancer, yes we are continuing to expect growth in liver cancer for next fall on a worldwide basis.

We've talked for a number of quarters about the Asia-Pacific opportunity, and we've already talked on this call about the progress that's been made in China, which is quite good.

31% growth in China year-over-year, up 24% quarter-over-quarter.

So really good progress.

The one new reimbursement we would report would be for Taiwan, which has happened recently.

We don't have additional details to provide at this time, but I think of the major Asia-Pacific markets, China, South Korea, and Taiwan; South Korea and Taiwan already have reimbursement, and China remains an open question.

But you can see how well China continues to do in the private-pay market.

Operator, let's take the next question.

Nicholas Bishop, Cowen & Company.

My question is on the safety profile of Kyprolis.

And we saw at the FDA advisory committee some concern about potential association of the drug with cardio-pulmonary toxicity, although of course without a control arm it's impossible to say whether there is an association.

My question, then, is if you have any insight into the likelihood of discovering an association with such toxicity when the ASPIRE data is seen.

And if an association is found, what's the best strategy for optimizing uptake into earlier lines?

So let me make a couple of general comments, and then Barb can add some additional detail.

I think what I'd say is there is a DSMB in place for the ASPIRE study, and they have endorsed the continuation of that particular trial.

So I think that's a very good sign that there's been no cause to stop the trial on the basis of safety.

You do know from, certainly, our ODAC presentation that a multiple myeloma, the disease itself causes co-morbid conditions, including cardiovascular conditions, as well as some of the therapies used to treat myeloma, particularly the anthracyclines, that can cause some cardio-toxicity.

So we have some post-marketing requirements, which Barb described, which will help us further understand this particular question.

And we'll continue to work with the FDA to make sure that they have all the data they need to assess the safety profile for Kyprolis.

So it's squarely in our sights, and we'll have more information as these other Phase III programs continue.

Operator, why don't we take the next question?

Ying Huang, Barclays.

Hey, I have a few.

Number one, can you tell us how quickly you might convert all these patients in the expanded access program to commercial paying patients?

Then number two, can you give us an update on timeline for the reporting from the Storm trial in the adjuvant study.

Then number three, how should we think about your launch trajectory?

I know it's probably too early for you to give any guidance, but should we use the initial launch from Valcade as a proxy?

Thanks.

I'll take the guidance question on Kyprolis, and then ask Helen and Barb to help on the other two.

We're not going to provide guidance, or either analogs or reference points at this moment for the sales of Kyprolis.

We really are very early days in the launch, and want to be careful not to either mislead or set inappropriate expectations.

Just stay tuned for additional color commentary on how the launch is going to go.

We believe that there are about 10,000 to 15,000 patients or so in the United States who would be eligible for therapy.

We will work our very best to reach all appropriate patients.

Helen, why don't you take the C-MAP conversion question, and then Barb, if you can comment on Storm.

Yes.

As Tony mentioned in the last call, while 300 patients have been enrolled in C-MAP, obviously at this point in time not all of those patients are on drug.

What we do expect is that those patients who are still in drug will be working with the clinics and contacting Onyx 360 to identify their insurance coverage and determine how they're going to transfer over to commercial drug, and that is going to start in the next several weeks.

This will be a process.

We think that we'll then take several weeks for all patients to continue.

So if you're thinking of a timeframe, it is going to be, we believe, in the possibly 8 to 12 week timeframe for this process to be complete.

Thanks, Helen.

To answer the question about Storm.

Storm is a Phase III adjuvant program for hepatocellular carcinoma, randomizing patients to Nexavar versus placebo.

The question was specifically around timelines to final data.

This is an event-driven analysis, so given that, timelines are impossible to predict with accuracy.

Adjuvant trials are quite long horizon trials, however, and currently we're looking at most likely the 2014 timeframe.

Okay.

Operator, we've got time for just two more quick questions.

Let's take the next one.

Marshall Urist, Morgan Stanley.

So just two for me.

First, Helen, maybe just talk about in your initial payer discussions kind of what your understanding is of the mechanisms, if any, payers are using to kind of verify the patient profile in terms of prior lines of therapy.

And how that is going to work as we think about this sort of realized Kyprolis patient population, even though I know you guys won't obviously promote anything other than the label, but just how that's working in the market would be helpful.

Then second, any plans for a compendia and maybe file some of the other data that you've got out of Phase II around also earlier lines of therapy, and what timelines you can give us there, if any?

Thanks a lot.

Marshall, thanks for the question.

With regard to the payer feedback, it's obviously early days, so I just want to put that caveat, but where we are seeing them require any documentation, it is just a documentation that the patient has been exposed previously to protasamib and an immunomodulatory agent.

Which is consistent with --

Which is totally consistent with the labels, yes.

Right, and then Barb, do have a comment on the compendia and Phase II studies?

I don't think there's a lot we can say.

There's no plans that we have to pursue that at the moment.

Right, and most of the compendia decisions are independent of the Company in any case.

So we don't really control those decisions on a routine basis.

Okay.

Operator, this has to be the last question.

Jim Birchenough.

BMO Capital.

Question on the sales force that you've hired.

Maybe, if you can comment, Helen, on where these reps came from.

Are they Revlimid reps, Velcade reps, what expense do they have in myeloma?

Then the second part of the question is just in terms of coverage.

What proportion of Revlimid and Velcade prescribers are you targeting initially, and what proportion of prescribers have experience with carfilzomib right now?

Thanks.

Let me start with the representatives that we were able to hire, and I have to say we were able to hire just a top-class group of experienced representatives.

We had a hiring profile which was experience in oncology, experience with injectable drugs, and if they had experience in myeloma that considered, obviously, a bonus.

So we have representation from all of the top oncology companies, team members who have launched multiple successful products over the last several years.

So a very strong team is in place.

In terms of the coverage we have, as we looked at it we really sought to understand where the majority of patients who would have been exposed to multiple lines of therapy were managed.

And so I mentioned in the last call we're targeting about 2000 clinics and hospitals.

I would say that that will be very consistent with where the majority of Velcade and Revlimid is used today.

So a vast majority of that use, what we're calling on the clinics where the vast majority of those products are used.

Well, I think that's all the time we have for questions.

My final comments are look, this has really been an amazing quarter, and really quite a remarkable year, starting with the restructuring of our agreement with Bayer, which brought us regorafenib as part of our portfolio, the accelerated approval for Kyprolis, and all the progress that we've made.

We continue to make significant progress as momentum builds across the business.

And as we look at the back half of the year, we draw your attention to several upcoming events.

First, the continued execution of our launch with Kyprolis in the US.

We've had a lot of conversation today about how that's going.

The early returns are encouraging, and while we continue to execute a broad development program for the franchise, which includes oprozomib, the oral protesome inhibitor, and the ongoing and planned head-to-head study for carfilzomib on a world-wife basis.

Additionally, we look forward to announcing regulatory action for regorafenib in metastatic colorectal cancel, and importantly additional filings in GIST, which are expected to take place later this year in the United States and in 2013 in Europe.

Then finally the decision data for Nexavar in thyroid cancer.

So the agenda is quite full for the team.

We're really excited about the progress we've made in the business and what's unfolding for patients and for shareholders.

We look forward to talking with you as we deliver on these growth strategies and building a premiere company, and we appreciate you joining us today.

Thanks.

Thanks, operator.

Thank you.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for participating.

You may now disconnect.