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Matthew K. Fust – Executive Vice President and Chief Financial Officer

Onyx Pharmaceuticals, Inc. (ONXX) Credit Suisse 2012 Healthcare Conference Call November 14, 2012 11:00 AM ET

Ryan Martins – Lazard Capital Markets

Ryan Martins, biotech analyst here at Lazard. Next presenting company is Onyx Pharmaceuticals. Onyx has had a pretty exciting year with the approval of KYPROLIS and the recent launch which is gone pretty well. They’ve also had approval of STIVARGA for colorectal cancer. So it’s been a pretty exciting transformational year for the company and now to give you some more details around what the company has been up to, I’d like to invite Matt Fust, the CFO of the company.

Matthew K. Fust

Good morning. Ryan, thank you so much for the invitation to join the conference and thanks for all of you as well for joining us to hear an update on the evolving Onyx story as Ryan said. Let me also introduce my colleague Amy Figueroa, our Senior Director of Investor Relations. She is here at the conference with me today.

I remind as usual that my remarks today may include forward-looking statements relating to Onyx’s financial results, business prospects, and the development and commercialization of our products and encourage you to reference our recent SEC 10-Q and 10-K for more information in particular on the risk factors.

So during the last several years, Onyx has made significant progress and is trying to build a leading oncology company. If you look back just half a dozen years, the first generation of Onyx’s growth with the initial approval of NEXAVAR in advanced kidney cancer and subsequently in liver cancer which really forms the foundation for Onyx’s growth today.

In our current inclination ONYX 2.0, we continue to see strong growth in NEXAVAR sales notably in liver cancer and especially in the Asia Pacific region where NEXAVAR sales globally last year exceeded $1 billion for the first time and have grown 4% on a year-to-date basis through 2012 again with strong growth in the liver cancer arena in particular.

New to the story in ONYX 2.0 is our franchise strategy with the addition of STIVARGA or regorafenib in the kinase inhibitor franchise, and the recent U.S. launch of KYPROLIS or carfilzomib as the anchor for our proteasome inhibitor franchise. These two platforms for growth are enabling ONYX 3.0, three approved products, NEXAVAR, KYPROLIS and STIVARGA with two of those products currently in launch with here in the U.S.

In addition to potential regulatory approvals for STIVARGA, we expect over the next year to bring additional clinical results both for NEXAVAR and for KYPROLIS, which we give us data or marketing approvals and up to six different indications across those three products, which I think gives us very important optionally for driving the business and of course in helping patients.

Let's dig just a little bit deeper into each of the franchises, which enable ONYX 3.0. Those of you followed the company for sometime clearly familiar with NEXAVAR with approvals beginning in 2005 for kidney cancer and in 2007 for liver cancer. NEXAVAR, however, also has an ongoing development program which I will talk about more momentarily including important Phase 3 trials in both thyroid cancer and in breast cancer.

New to the kinase inhibitor franchise is STIVARGA, STIVARGA is a multi-kinase inhibitor, which recently completed clinical trials, recent U.S. regulatory approval for metastatic colorectal cancer, and a number of regulatory submissions in place both for metastatic colorectal cancer and for gastrointestinal stromal tumors or GIST along with an ongoing clinical program seeking to develop new indications for STIVARGA.

Both of these kinase inhibitors are covered under a global collaboration agreement with Bayer Corporation, NEXAVAR under a global profit split in most countries of the world except Japan, and STIVARGA under a global royalty agreement. The proteasome inhibitor franchise on the other side of the slide includes KYPROLIS which was recently launched in United States for multiple myeloma and oprozomib, an oral proteasome inhibitor which may have a role in various settings both for multiple myeloma as well as potentially in other indications.

Beginning with the proteasome inhibitor franchise, I’d like to focus on the opportunities for KYPROLIS and oprozomib in treating multiple myeloma and market which we expect could reach $9 billion in global sales by 2016.

Here in the United States, KYPROLIS was approved on July 20 by the FDA under an accelerated approval process. KYPROLIS’ approved marketing indication as you see here is for the treatment of patients with multiple myeloma who received at least two prior therapies including treatment with bortezomib and an IMiD and we demonstrated disease progression within 60 days after completion of the their last therapy. KYPROLIS is an injectable agent and its dosed on two consecutive days over a three-week period followed by 12 day rest period.

I'll point out that full data from the clinical study on which KYPORILS was approved was recently published in Blood, the pre-review Journal of the American Society of Hematology, which is a great overview of the details of that clinical trial.

Let me pause here to provide you with some perspectives on the KYPORILS U.S. launch which has been a source of great focus obviously for the company as well as the investment community over the past several months.

We announced on our earnings call last week that, net sales for the approximately two months that KYPORILS was on the market during the third quarter were $18.6 million reflecting orders, which have been placed and received by clinics, hospitals and infusion centers which administer KYPORILS.

In addition, we've reported approximately $5 million of deferred revenue as of September 30. We estimate that there are probably in a range of 10,000 to 15,000 advanced myeloma patients annually in the U.S. who are candidates for KYPROLIS under its approved label. Prior to KYPROLIS’ approval, there was no approved standard-of-care for these late stage patients. We estimate that as of the end of the third quarter, KYPROLIS penetration in this third line plus patient population was approximately 10%, just 8 weeks after the launch.

We deployed a multidisciplinary field team here in the U.S. focused solely on KYPROLIS and separate from the NEXAVAR commercial team. Our KYPROLIS team has a deep oncology experience and a track record of success in successfully commercializing oncology products. We are targeting as you see here approximately 2,000 physician offices, hospitals and infusion centers where the vast majority of myeloma patients are treated in this country.

Our initial priority has been calling on those accounts with the highest volume of potential patients and in those centers who participate in the expanded access program for KYPROLIS. Through the end of September, approximately half of those targeted accounts had already placed at least one order for KYPROLIS. Our field based market sales personnel and nurses were trained in advance of July 20 FDA approval and rapidly deploy in July and August to begin making calls.

These initial calls have primarily focused on educating and answering questions about KYPROLIS administration as well as responding to questions from physician offices around reimbursement and other dimensions of treatment. We put our product, supply and distribution programs in place rapidly after approval with product distributed through a network of specialty distributors here in the U.S.

Orders placed by providers are typically filled within 24 hours, so we don’t expect or have not seen prescribers carrying any significant level of inventory at their level, instead their ordering products has needed.

Regarding coverage and reimbursement, always a critical question in a product launch phase, the comprehensive program that we’ve rolled out includes our Onyx 360 patient support program as well as deployment of field based reimbursement specialists who work with physician offices around reimbursement topics.

As of September 30, we received confirm coverage from all 12 Medicare Administrative Carriers and as a latest update, about 70% of the roughly 167 million lives covered in the top 67 commercial plants have already confirmed coverage for KYPROLIS. Of note as well, our experience has been that majority of commercial plants who have not yet published the coverage policy are also covering KYPROLIS on an individual patient basis.

The coverage policies and any prior authorizations that are in place have been generally consistent with the label indication and we have not seen any significant barriers to use or to reimbursement in the launch trajectory so far.

We expect approximately that 80% of myeloma patients who qualify under the label will be covered under either Medicare or under commercial insurance. KYPROLIS is available under the medical benefit for Medicare and physicians from a process standpoint purchase drug and then submit reimbursement claims to Medicare for other commercial carriers.

We also have in place as I mentioned a comprehensive patient assistance program Onyx 360, which we staffed with oncology nurses who can provide direct support to patients both on reimbursement as well as all the dimensions of their KYPROLIS treatment. Onyx 360 is also the basis by which we are connecting patients with cancer advocacy groups and other resources in their communities. So far we’ve been very pleased with the KYPROLIS launch, and we’ll look forward to updating you more as we have another quarter of the launch trajectory under our belts.

Let's turn to bit next to the clinical development program across the proteasome inhibitor franchise. For KYPORILS as you see here, we are currently conducting three Phase 3 trials, testing KYPORILS in various combinations and different lines of therapy. We are also planning our fourth Phase 3 trial, which will test KYPORILS in front-line newly diagnosed multiple myeloma patients. We also have as you see here Phase 2 trial KYPORILS monotherapy which is under way assessing KYPORILS in the treatment of solid tumors.

You also see at the bottom of the slide here an overview of the clinical program for oprozomib. Oprozomib is on oral proteasome inhibitor and that is currently in two Phase 1 trials, which evaluate that compound again both in hematologic and solid tumor types.

It's probably useful to put the proteasome inhibitor development program in a bit of context as we continue to drilling towards making this product available for more patients. We put together a comprehensive development program with the over-arching objective transform multiple myeloma into a chronic disease.

We're conducting international Phase 3 trial as you see at the top of the slide here called FOCUS. The FOCUS trial is in the relapsed and refractory multiple myeloma setting and we anticipate could be the basis for KYPORILS approval outside the United States in various jurisdictions.

The FOCUS trial was powered to demonstrate an overall survival benefit, and it completed patient enrollment ahead of schedule in October of this year. This study incorporates our plan to interim analysis and depending on the rate of event accrual it's possible we can have top line results from the FOCUS trial as early of the second half of 2013.

We are also conducting a second Phase 3 trial called ASPIRE, this one in the population of multiple myeloma patients who relapsed after one to three previous therapies. The ASPIRE trial, which is a combination with Revlimid/dexamethasone is being conducted in under a special protocol assessment here in the U.S. as well as the scientific advise from the European Medicine Agency, and could form the basis both for expanded label in the U.S. as well as an initial registration pathway in the European Union.

The ASPIRE trial completed an enrollment in February of 2012 and as a primary endpoint of progression-free survival. We're continuing to monitor the accrual of progression-free survival events in this trial, and given the current rate of event accrual, we now expect results from an interim analysis on this trial could be available in the fourth quarter 2013 or potentially bit later. As we continue to see promising utility for KYPROLIS in various combinations and in other lines of therapy, we are also progressing with additional Phase 3 trials.

One important one you see in the second row here is the ENDEAVOR trial. We announced in July the initiation of enrollment in the ENDEAVOR trial, which is an international Phase 3 trial of approximately 900 patients, which will compare KYPROLIS in combination with the low-dose and dexamethasone against VELCADE also with the low-dose of dexamethasone either in a subcutaneous or intravenous administration mechanism in both cases focusing on patients who relapsed after at least one, but not more than three prior therapeutic regimens. The primary endpoint for the ENDEAVOR trial is also progression-free survival and that trial is currently underway enrolling subjects.

And finally for KYPROLIS, we are finalizing plans for a trial in the front-line setting, which we hope to initiate in the first half of 2013. For oprozomib in the bottom row on this slide, we anticipate an opportunity for dosing across the range of treatment settings for multiple myeloma, which bring us a franchise management opportunity across these two compounds. Dose escalation is well underway in a current Phase 1b/2 trial for oprozomib and we’ve seen some initial clinical responses in the treatment of multiple myeloma patients with this drug. And we expect we will continue to see data from that Phase 1b trial as we move forward including at the American Society of Hematology meeting coming up next month.

Of that ASH Meeting, we will have a total of 7 presentations including mix of company sponsored and investigator sponsored data both on KYPROLIS and on oprozomib. I think it’s safe to say we are very optimistic about the opportunities for the producer and franchise. KYPROLIS may provide us mean to meaningfully change the treatment of myeloma both as a single agent as well as in combination with other therapies.

Multiple myeloma just set contacts a bit, is the second most common hematologic malignancy with more than 180,000 patients worldwide about one third of those here in the U.S. Although advances in treatment have significantly improved duration of life for patients with multiple myeloma. Unfortunately the disease remains uniformly failed. We estimate peak sales across our franchise, KYPROLIS plus oprozomib could exceed $2 billion.

Our global commercialization strategy for the proteasome inhibitor franchise encompasses leadership by Onyx here in North America where distinct kinase inhibitor franchise as well as in Europe, where we begun to build a small commercial team in anticipation of European regulatory process and ultimate commercial launch.

We control global rights to KYPROLIS and oprozomib in all countries except Japan where we have an ongoing partnership with Onyx Pharmaceutical who are leading the development and commercialization efforts in Japan.

Let’s turn next to the kinase inhibitor franchise beginning with STIVARGA our second product launch in the third quarter.

STIVARGA was approved by the US FDA at the end of September, months ahead this plan PDUFA dates. And the Bayer and ONYX sales teams were prepared to and began launch in STIVARGA rapidly thereafter.

As you see here the STIVARGA approval is for the treatment of patients with metastatic colorectal cancer who been previously treated with other currently approved agents, and you face very limited options in the current market. We estimate that there are in the range of 20,000 to 30,000 patients annually here in the U.S. who indicated under STIVARGA's colorectal cancer label.

While it is still too early to provide specifics, the initial feedback has been that there is significant appreciation of the unmet medical need in this population for patients in third-line+ with metastatic colorectal cancer and a significant interest in physicians on the part of what we are learning from our sales force and learning more about STIVARGA.

We expect that STIVARGA will be reimbursed again by most insurance plans and by Medicare. And as we await formally reviews, there is a patient assistance program called REACH, which was originally set up for NEXAVAR patients, which is also assisting individuals and obtaining coverage for STIVARGA.

Outside the U.S. Bayer for potential launch of STIVARGA in the European Union pending regulatory approval, and also in Japan were STIVARGA has received priority review for the colorectal cancer indication.

We walk through just a bit of a clinical data on STIVARGA for you here. STIVARGA is an old multi-kinase inhibitor, and it is believe to target three primary mechanisms of tumor growth, for genesis, angiogenesis as well as changes in tumor of micro environment. There are two late stage clinical programs, which are the focus of STIVARGA and which have completed their trials.

First in colorectal cancer the trial called CORRECT and the data shown here in the slide. In the U.S., there are an annual incidence of about 150,000 cases of collateral cancer, more than a million cases worldwide on an incident basis with a five year prevalence of 3.5 million cases worldwide, one of the most significant diagnosis on cancer. Collateral cancer is a tumor that can be treated but unfortunately cannot often be cured. More than half of patients progress to develop metastatic disease.

Metastatic collateral cancer unfortunately is generally not resectable meaning that systemic therapy, like that offered by STIVARGA is often the only alternative for patients. Following the recommendation from the independent data monitoring committee responsible for the correct trial, that trial was actually stopped early last year, following a preplanned interim analysis which determines that the STIVARGA arm showed significant improvement in overall survival. As you see here, a noteworthy hazard ratio and very strong p-value.

The second key clinical trial for STIVARGA is called grid. This is a trial in patients with gastrointestinal stromal tumor or GIST as we refer to it. This placebo-controlled Phase 3 trial had evaluated STIVARGA in approximately 175 patients who had either metastatic and/or unresectable GIST and we progressed after treatment with Gleevec in the currently approved for the treatment of GIST. This trial met its primarily endpoint of significantly improving progression free survival again with the strong hazard ratio and a strong P value.

They have obtained both fast track and orphan drug designations for STIVARGA in this indication and recently received notice that the U.S. supplemental NDA for the approval of STIVARGA in the treatment of GIST has received priority review. That submission went in at August, which suggest we could see regulatory action on STIVARGA in just – in the early part of 2013.

I'll remind you in terms of our collaboration with Bayer that ONYX has a significant economic interest in STIVARGA in what is a very P&L friendly structure. We will receive a 20% worldwide royalty on future oncology sales of STIVARGA with no commitment either to fund development or commercial expenses.

As I mentioned, we've exercised our options to co-promote STIVARGA alongside Bayer in the U.S. which complements our commercial efforts with NEXAVAR in the solid tumor space. Bayer has said publicly, they expect STIVARGA could have peak annual sales potential in excess of €1 billion.

Importantly as well STIVARGA provides us with an opportunity to strategically manage the kinase inhibitor franchise across the broad development program targeting the best of two molecules for new indications. Bayer have already indicated, they plan to make investments in new Phase 3 trials for STIVARGA including trials in an additional colorectal cancer patient population as well as in second-line HCC.

Which brings out to NEXAVAR, the engine behind our growing operating business and early foundational aspect of the way that we continue to transform ONYX. For the first time in 2011, NEXAVAR product sales exceeded $1 billion globally and the product has sold more than $4 billion and dose tens of thousands of patients since its launch in 2005.

Sales are growing in the important Asia-Pacific region, which represents the greatest demographic incidence of liver cancer, the primary market opportunity for NEXAVAR. Liver cancer sales grew nearly 20% through the first three quarters of 2012 excluding Japan where ONYX does not receive revenue from NEXAVAR.

I'd remind you that NEXAVAR remains the only systemic therapy approved for advanced hepatocellular carcinoma despite multiple entrances attempting to enter that space.

There are more than three quarters of a million new cases of liver cancer annually. And liver cancer responsible for more than 600,000 deaths per year, the third leading cause of cancer deaths worldwide. We continue to see growth potential for NEXAVAR in its current education, specially increased penetration in liver cancer as well as in some new indications where I'll turn next.

Let me pause here to note though that we and Bayer are also committed to growing NEXAVAR's commercial margin, which reached 60% in 2011 and 63% year-to-date in 2012. And in growing cash flow from the product, which is an important source of funding [Solannex] is other development programs.

Together with Bayer, we’re continuing to drive a strong development program for NEXAVAR, seeking new indications including across four ongoing Phase 3 trials. In liver and in kidney cancer these Phase 3 trials are focused on the adjuvant setting, looking for opportunities to extend life for those patients. And we are also conducting Phase 3 trials for NEXAVAR in both thyroid cancer and in breast cancer, which I will review next.

We expect to report data by the end of this year from a trial called DECISION; this is a Phase 3 trial of NEXAVAR in the treatment of – in this case approximately 400 patients with differentiated radio iodine refractory thyroid cancer.

You see at the top of this slide, the design of the DECISION trial with progression-free survival its primary endpoint. At the bottom of the slide, I'll point you some data from a Phase 2 trial in this indication led by Dr. Marcia Brose, which demonstrated in median 96 weeks of progression-free survival and 140 weeks of overall survival in this population.

If the decision study is positive, we would expect to move forward with the registration opportunity, which would make NEXAVAR the first new thyroid cancer treatment in 30 years for patients for progressive differentiated thyroid cancer. The market opportunity we think is significant, partly in number of patients especially in potential duration of treatment as we look at this population.

And I’d remind you again that the RESILIENCE trial in breast cancer, is continuing enrollment, we expect completion in the first half of next year in this trial, which looks at NEXVAR plus capecitabine or Xeloda versus capecitabine alone in a population of HER2-negative metastatic breast cancer patients.

We think this combination of assets gives us great opportunity to grow the business both in the kinase inhibitor franchise, driving cash flows and increased margins, and in the proteasome inhibitor business where we see significant investment opportunities ahead.

And we are very much looking forward to a number of readouts including additional data later this year, as I had mentioned, as well as progress for both the KYPROLIS and STIVARGA launches as we report on our year-end results and a number of interesting clinical and [regular] opportunities next year.

Thank you so much for your attention. And we appreciate your interest in the company.

Ryan Martins – Lazard Capital Markets

Thanks.

Question-and-Answer Session

[No Q&A session for this event]

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