Onyx Pharmaceuticals' Management Presents at Citi 2013 Global Healthcare Conference (Transcript)

Feb.26.13 | About: ONYX Pharmaceuticals, (ONXX)

ONYX Pharmaceuticals, Inc. (NASDAQ:ONXX)

February 26, 2013 1:30 pm ET


Matthew K. Fust - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Julianna Wood - Vice President of Public Affairs

Unknown Analyst

Our next presenter, which is Onyx Pharmaceuticals. And from Onyx, we have Matt Fust, who's the Executive Vice President and Chief Financial Officer. Matt?

Matthew K. Fust

Great. Thanks so much for the introduction and for the invitation to join you here at the conference today. I'm really pleased to have this opportunity to update you on Onyx and our continued evolving story as an emerging diversified biotechnology company. Let me also introduce my colleague, Julie Wood, our Vice President of Public affairs, who's here with me today.

As noted on this slide, my remarks today may include the usual forward-looking statements relating to Onyx's financial results, our business prospects, development plans for our pipeline candidates and so forth. I'll encourage you to review our SEC filings for the appropriate risk factors.

This past year has been one of tremendous transformation for Onyx. Just one year ago, Onyx had only a single-marketed therapy, Nexavar, in 2 indications, for the treatment of liver cancer and for kidney cancer. During 2012, 2 new products, Kyprolis and Stivarga, obtained marketing approvals and registration enabling data were obtained which may lead to additional indications for both Stivarga and Nexavar. Meaning, as we come to 2013, Onyx is a company with 3 approved therapies with marketing approvals and/or data in 6 different indications.

And importantly, this is just the beginning. This next chapter for Onyx includes expanding the global reach of the company to bring these therapies to patients around the world. This chapter starts with the foundation of Nexavar, already a blockbuster in oncology with more than $1 billion in sales in 2012 globally, and a product for which we recently announced continued growth expectation in 2013. The kinase inhibitor franchise is complemented by Stivarga, a Bayer product, which also has blockbuster potential. Both of these kinase inhibitors are covered under collaboration agreements with Bayer Corporation, Nexavar under a profit split in most countries and Stivarga, under a global royalty arrangement.

In 2012, we began commercializing Kyprolis, the first approved product in our proteasome inhibitor franchise. Kyprolis launched here in the U.S. in 2012, and we're pursuing plans to launch Kyprolis in other countries, which I'll discuss further in just a moment. Importantly, these multiple current and future revenue streams bring us significant value, diversification opportunity and optionality to this business.

The Onyx of today has been carefully crafted through the long history of the company. Therapies, including Nexavar, Stivarga and Pfizer's palbociclib, were developed through collaboration arrangements which provide this important foundation for our business. Over the course of the past 5 years, that foundation has been complemented with other transactions, including in licensing and one acquisition transaction that have fundamentally transformed Onyx's business. Today we are risk diversified with a much broader portfolio of opportunities, including an international expansion, which will be enabled by Kyprolis.

Let's start with a little bit deeper dive into the proteasome inhibitor franchise, where we're focusing initially on opportunities to treat multiple myeloma, a market which we expect could reach $10 billion by 2018 on a global basis, with compounded annual growth of 10% in the newly diagnosed, relapsed and later lines of therapy.

Here in the U.S., Kyprolis was approved in July of last year. Kyprolis has approved marketing indication for the treatment of patients with multiple myeloma, who received at least 2 prior therapies, including bortezomib and an IMiD, and who demonstrated disease progression on or within 60 days after completion of their last therapy. Kyprolis sales during approximately 5 months on the market in 2012 were $64 million, reflecting the orders that were placed and products received by clinics and hospitals, along with an approximately $10 million of deferred revenue as of the end of the year, a very strong start for the product and evidence to the significant unmet need among these late stage myeloma patients.

We estimate that there are probably 10,000 to 15,000 patients in the U.S. who are eligible each year under our label for Kyprolis. This number reflects the influx of newly eligible patients, as well as, unfortunately, the mortality rate for this deadly cancer. Last year, we deployed a multidisciplinary field team that focuses exclusively on Kyprolis, which is separate from our Nexavar and Stivarga field team. The Kyprolis team has deep expertise in oncology and a track record of success in communicating the clinical information, as well as experience working on injectable product.

Our commercial team is targeting approximately 2,000 physicians, offices and hospital infusion centers, where the vast majority of the patients eligible for Kyprolis therapy received their care and treatment. In the first 7 months after the launch, we've managed to establish a large base of Kyprolis prescribers, more than 75% of that 2,000 initial target have already ordered Kyprolis at least once, and more than 80% of those accounts report ordering more than once through December of 2012. We expect this year the new patient growth will come both from these established Kyprolis prescribers, as well as from newly adopting clinics and hospitals. And our market research continues to confirm that Kyprolis is predominantly being used for our indicated population and its approved dosing regimen.

Kyprolis is now enabling an international expansion, a first in Onyx's history. Moving now beyond the capabilities of our U.S. commercial organization, we are preparing to bring Kyprolis to additional patients around the world. In Europe, we are in the initial stages preparing to commercialize Kyprolis in the key markets of Western Europe. Today, our modest European footprint includes the small core leadership team, who are preparing for potential launches in these markets, following approval by the European Medicines Agency, which may be available if we obtain positive results from either the ASPIRE or the FOCUS clinical trials for Kyprolis, which I'll talk about further in just a moment. Our early efforts in Europe this year are focused on activities such as preparing the reimbursement dossier, the advanced regulatory work and development of relationships with key myeloma thought leaders in Europe and elsewhere.

As you can see on this slide, beyond the U.S. and the core European markets, we're assessing opportunities to quickly ensure patient access to Kyprolis around the world through a mix of direct commercialization with our own sales forces, distributorships or partnerships. For example, in Japan, as you see here, we have a relationship with Ono Pharmaceutical, who are developing and will commercialize Kyprolis in Japan. Our international development plans also include targeting countries, particularly those in some of the emerging markets, that may allow marketing authorization for Kyprolis based on the U.S. approval and the data behind it. And we're beginning to engage with regulators and evaluating local distributors in those markets, in an effort to bring Kyprolis to patients as quickly as possible.

Let's drill in a bit on the Kyprolis development program, which will be a key piece of our work during 2013. We have tried to build a comprehensive development program around Kyprolis, with the goal of helping to transform multiple myeloma into a chronic disease. Our commitment and our opportunity is to invest significantly behind Kyprolis, where a range of investigator-led Phase I and Phase II studies has given us increasing information, both about how the drug works and how it may transform the treatment of multiple myeloma, the second most common blood cancer. We're currently conducting 3 Phase III trials, which are evaluating Kyprolis in various combinations and lines of myeloma therapy. And planning a fourth Phase III trial, which will test Kyprolis in the frontline or newly diagnosed multiple myeloma population.

Beginning at the bottom of this slide, you'll see the randomized Phase III trial in the relapsed and refractory multiple myeloma population, which we referred to as FOCUS. We anticipate that FOCUS could enable marketing approval for Kyprolis outside the United States and in particular, in Europe. The FOCUS trial, which is powered to demonstrate in overall survival advantage for Kyprolis, completed enrollment of patients back in October of 2012. We designed the study to include a preplanned interim analysis, and depending upon the rate of event accrual in the FOCUS trial, it's possible that we could have top line interim results from the trial as early as the second half of 2013.

We're also conducting a second international Phase III trial, called ASPIRE, which you see in the center of the slide here. The ASPIRE trial is in a population of multiple myeloma patients, who have relapsed after receiving 1 to 3 previous therapies. The ASPIRE trial, which is in a combination with Revlimid and dexamethasone, is being conducted under a special protocol assessment with the U.S. Food and Drug Administration, as well as scientific advice from the European Medicines Agency, and a quick form the basis point expanded label here in the U.S. and either an initial approval or a label expansion opportunity in Europe, depending upon the progress of the FOCUS trial. The ASPIRE trial completed enrollment about 1 year ago in February of 2012. The primary endpoint for the ASPIRE trial is progression-free survival, and we're continuing to monitor the accrual of events in that trial. Given our current expectations about the rate of events accrual, we expect we could see results from a preplanned interim analysis under the ASPIRE trial in the fourth quarter of 2013 or potentially later, depending upon the rate of event accrual.

Also in the center of this slide, you see the initiation of ENDEAVOR, a second trial in the population of patients with 1 to 3 prior lines of myeloma therapy. ENDEAVOR is also a Phase III trial with approximately 900 patients on an international basis. Testing Kyprolis together with dexamethasone and comparing it to either subcutaneous or IV, Velcade, also in combination with dexamethasone, in patients whose multiple myeloma has relapsed after at least 1, but not more than 3 prior therapeutic regimens. The primary endpoint of the ENDEAVOR trial is also progression-free survival, and that trial is currently enrolling subjects.

And then finally, as you see at the top of the slide here, we're finalizing plans for a new trial, also a Phase III registration-enabling trial in the front-line setting for multiple myeloma patients, and we're hopeful that, that trial will begin very shortly.

This slide gives you a view of the overall development program across proteasome inhibitor franchise, both the Kyprolis trial, as we've discussed, as well as trials for our oprozomib, which is our oral proteasome inhibitor. Oprozomib is in a pair of Phase Ib/II trials in both solid and hematologic malignancies. Late in 2012, we began testing a new formulation of oprozomib, an extended relief tablet. We are continuing to pursue dose escalation with that new formulation, and we are hopeful that we'll be able to present data from the small number of patients in this new formulation trial at the International Myeloma Workshop coming up in April.

Let's turn next to the kinase inhibitor franchise, where 2013 was also a year of very important progress for both Nexavar and Stivarga. For those of you who follow the company for some time, are clearly familiar with Nexavar, with approvals in 2005 for the treatment of kidney cancer and in 2007, for the treatment of liver cancer. Nexavar also has an important ongoing development program, including recent top line data from the study of Nexavar in thyroid cancer, which we announced earlier this year, as well as ongoing Phase III programs in breast cancer, liver cancer and kidney cancer.

Nexavar is really the engine of our successful and growing operating business and a foundational aspect of the continued transformation of Onyx. Nexavar remains the only systematic therapy approved for the treatment of advanced HCC or liver cancer, despite multiple attempts by other entrants to gain access to that market.

There are more than 3 quarters of a million new cases of liver cancer each year, and liver cancer is responsible for more than 600,000 deaths per year worldwide, making it the third leading cause of cancer-related death. We see significant continued growth potential for Nexavar, both in its current indications, particularly increased penetration in the liver cancer market, as well as in new indications, which I'll talk about momentarily. We are very pleased to see continued growth in Nexavar sales, as you see here, notably in liver cancer and especially in the Asia Pacific region and in other emerging markets. Globally, Nexavar sales exceeded $1 billion, again, in 2012 and sales in countries outside Japan, which are the countries that formed the basis of Onyx's revenue stream and Nexavar, grew 3% in 2012 to $861 million, despite an adverse foreign exchange rate environment during the year.

Let me also note here that we and Bayer are jointly committed to growing both Nexavar's commercial margin, which reached 60% in 2011 and 62% in 2012 and in growing cash flow from the product, which is a really important source of funding for our investment in the proteasome inhibitor franchise.

Together, Onyx and Bayer are continuing to drive a development program seeking new indications for Nexavar. We have 3 Phase III trials currently underway. In liver cancer and in kidney cancer, those trials are focused on gathering data in the adjuvant settings.

But let me spend just a moment here to talk about Nexavar's opportunity in breast cancer. We expect that we will complete in the first half of 2013 enrollment in the breast cancer trial called RESILIENCE, which is a Phase III trial of Nexavar in combination with Xeloda or capecitabine in the treatment of metastatic breast cancer. The RESILIENCE trial is an international, randomized placebo-controlled trial that's looking at capecitabine, with or without Nexavar, in approximately 520 patients who have either a locally advanced or metastatic HER-2 negative breast cancer. Patients in this study are resistant to or have failed either prior Taxane and anthracycline, or in some cases, are not recommended for further anthracycline therapy. And we're focusing on a primary endpoint in this trial of progression-free survival.

Turning now to thyroid cancer and the results from the DECISION trial. We announced earlier this year that this Phase III trial of Nexavar in a population of approximately 400 patients with differentiated radio iodine refractory thyroid cancer demonstrated an improvement in progression-free survival, which was the prespecified primary endpoint of the trial. We have submitted data from the DECISION trial for the ASCO meeting, coming up in June, and we expect that Bayer will be pursuing a supplemental NDA for Nexavar in this new indication during 2013.

Thyroid cancer represents the population of cancer patients in which, once again, there's a significant unmet medical need, and one where Nexavar may play an important role. The data you see here provide a bit of the shape of the thyroid cancer markets. Differentiated thyroid cancer is the type we're targeting with Nexavar, represent more than 90% of the thyroid cancer population. Our estimates suggest there are probably between 3,000 and 4,000 radioactive iodine refractory differentiated thyroid cancer patients annually in the U.S. alone. The current standard of care for these patients is various typically generic chemotherapies, often a product like cytotoxic doxorubicin, so an opportunity exists to meaningfully improve patient care if Nexavar is approved in this opportunity.

Newer to the kinase franchise is Stivarga, a multi-kinase inhibitor with recently completed clinical trials, a U.S. regulatory approval and launch in metastatic colorectal cancer in 2012, and a number of regulatory opportunities upcoming, including several in 2013, along with an ongoing development program that I'll share a bit more about in just a moment. Two cancers are the subject of our near-term focus for Stivarga. First as you see on this slide, colorectal cancer, a tumor type that can generally be treated, but typically not cured. More than half of colorectal cancer patients progressed to develop metastatic to these. We estimate as you see here, there are probably 20,000 to 30,000 third line-plus patients annually in the U.S. alone in the metastatic colorectal cancer population. Metastatic CRC is generally not receptible, meaning that systemic therapy is the only alternative available to these patients. And there's, unfortunately, no well accepted standard of care for this late stage population, prior to the approval of Stivarga last year.

Following a recommendation from an independent data monitoring committee, the trial you see here, the correct trial, was stopped early in this third, fourth-line patient population, following a preplanned interim analysis, which showed that Stivarga arm showed significant improvement in overall survival in this colorectal cancer patients. Patients in the Stivarga arm showed an average 29% improvement in our median overall survival, with a mean treatment duration of about 12 weeks in this study.

We expect that 2013 will bring a number of key evidence for Stivarga worldwide including 2 in the last 2 days. In the U.S., the FDA announced yesterday, approval for Stivarga in a second cancer GI stromal tumor or GIST in patients who have, again, metastatic and/or unreceptable disease and who progressed after treatment with Gleevac and Sutent. Bayer are preparing for a potential Stivarga launch in Europe, behind an already filed application for Stivarga in the treatment of metastatic colorectal cancer, and where Bayer is expecting action in the first half of this year in Europe.

You may have also seen earlier today in Japan that Stivarga has received priority review for the GI's stromal tumor indication, in addition to priority review already received for the colorectal cancer indication, based on an application which Bayer submitted for that indication last year. So we would expect, in Japan, to have regulatory action in the colorectal indication, as well as the GI stromal tumor indication in the months to come. Bayer also expects to file an application for the GI stromal tumor indication in Europe, following completion of FDA action in the colorectal cancer indication.

As I mentioned, Stivarga was approved here in the U.S. in September of 2012, and the Bayer and Onyx combined kinase inhibitor sales team was rapidly prepared to launch and promote Stivarga after that approval. We reported last week $8 million in royalty revenue to Onyx from Stivarga sales in 2012, reflecting our significant economic interest in a very P&L friendly structure. Onyx receives a 20% royalty on global oncology sales of Stivarga worldwide with no commitments to either fund development or commercial expenses behind the product. Bayer has stated that they expect Stivarga could have annual peak sales in excess of EUR 1 billion annually.

Stivarga, we think also provides an opportunity, together with Bayer, for us to strategically manage the broader kinase inhibitor franchise across its full development program, targeting the best molecule for potential new indications. Bayer have already indicated plans for 2 new clinical trials for Stivarga, one looking at patients in second-line HCC, following failure of first-line treatment with Nexavar, and the second trial also in the colorectal cancer population.

If we turn next to one of Onyx's older compound, which ironically represents one of our newest opportunities, palbociclib, formerly PD-991, is a compound which was discovered through a research collaboration between Onyx and a company subsequently acquired by Pfizer. And we're very excited about Pfizer's recently announced plans for an upcoming Phase III trial of palbociclib.

Late last year at the San Antonio breast cancer meeting, Pfizer provided Phase II data from a study with palbociclib which showed very encouraging results for this potential first-in-class therapy for breast cancer patients with ER-positive, HER2-negative breast cancer. Key components from those Phase II data, which are shown here, include a more than 3x improvement in progression-free survival, which was the primary measurement in that Phase II trial, as you can see a very strong hazard ratio and a strong p-value. Pfizer, as I mentioned, have announced their intention to move this program rapidly into future development, and they announced in our earnings call last week that Onyx is entitled to an 8% royalty on future sales of palbociclib, along with some development milestones as the development programs proceed under Pfizer's leadership.

We think that unlocking the potential for Onyx's portfolio will require a significant effort in execution and investment in the near term, especially in the proteasome inhibitor franchise. And I'll pause here with this slide as an anchor to talk a bit about some of the key financial drivers in the business. Looking first on the right side of the slide at the kinase inhibitor franchise. For Nexavar where we have a 50/50 global profit-share arrangement with Bayer in all territories around the world, except for Japan. We envision continued opportunity for growth in the currently approved indication, especially as I mentioned, in HCC and especially in the Asia Pacific and emerging markets.

We may also have opportunities to grow Nexavar sales, as I alluded to earlier, as additional clinical trials readout and additional regulatory approvals are obtained, including we hope in the near term from prosecuting the thyroid cancer applications, as well as potential future data readouts in breast cancer and the adjuvant HCC and RCC study. We also expect that we'll see continued improvement in Nexavar's commercial margin, as Bayer leverages its global commercial infrastructure in approximately 100 countries around the world and especially as Stivarga begins to obtain approvals in those territories.

Meanwhile, our investment in Nexavar's development, which is funded 50% by Onyx, except again in Japan, should continue to decline in the coming years. In 2013, for example, we announced that we expect Nexavar R&D spending will drop by approximately 10% to 15%, compared to the levels in 2012. Taken together these 3 trends, top line growth, improving commercial margin and the reduction in R&D expenses, should combine to yield a growing level of cash flow from Nexavar to support Onyx's business.

We also think the financial story will be bright for Stivarga. Onyx, as I mentioned, receives a 20% royalty on global Stivarga oncology sales, if and when it is approved in additional territories beyond the U.S. And importantly, Onyx has no obligation to fund Stivarga global development or commercial costs.

On the right side of the slide, in the proteasome inhibitors franchise, we expect continued investments behind the compounds that we know have biological activity, Kyprolis and oprozomib. In which in the case of Kyprolis has already demonstrated improvement over current therapies in the late-line myeloma population. We've already begun generating significant Kyprolis sales revenue in the U.S. And I discussed earlier, we're rapidly advancing this aggressive clinical development program for Kyprolis with potential to have 4 Phase III trials underway in 2013. We'll also be continuing to invest in oprozomib development, albeit in the context at this time of less expensive earlier stage trials, and are looking forward to bringing you new data at the International Myeloma Workshop in April.

Let me close with a summary of some of the key milestones that we see upcoming in 2013 and an overview of these opportunities that may lie beyond. We expect we'll have, of course, continuing updates on the sales progress in the U.S. for both Kyprolis and Stivarga, as well as providing updates to you on the advancement of the FOCUS, ASPIRE and ENDEAVOR trials, along with a frontline trial for Kyprolis in multiple myeloma, which we hope to launch shortly.

We may see interim data from both the FOCUS and ASPIRE trials later this year, and look forward to updating you on plans for the frontline trial. And for the kinase inhibitor franchise, we expect regulatory submissions to begin for Nexavar in the treatment of thyroid cancer, to announce completion of enrollment in the RESILIENCE breast cancer study, as well as continuing to update you on regulatory progress for Stivarga in various territories around the world, and monitoring updates from Pfizer on the palbociclib program.

We think this franchise approach, with an increasingly diversified business and a number of options, both for cash flow generation and investment, gives us an important opportunity to really strategically manage the business, as well as to address a range of unmet medical needs in oncology. We know medicine has made tremendous strides in treating cancer, but we know there's still a lot of work ahead of the us and that's very much our focus.

I thank you very much for your attention and your interest in Onyx.

Question-and-Answer Session

Matthew K. Fust

Are there any other questions or other items I may address?

Unknown Analyst

[indiscernible] since launch? And then also with Celgene's Pomalyst coming into the stage for the same patients this year, how do you view the 2 drugs? Do you think all patients are going to get all drugs eventually or do you view this as more of a competitor?

Matthew K. Fust

Let me just repeat the first part of the question, I think the microphone doesn't quite working in the beginning. The question was around market share information for Kyprolis and then second question, about the potential competitive dynamic with Pomalyst coming to market. I introduced earlier my colleague, Julie Wood, who's Vice President of Public Affairs. And Julie, maybe I'd ask you to respond to the first question, at least, around market share.

Julianna Wood

Sure. I think for those of you who might have listened to our year-end conference call, we talked about having a market share of -- in excess of 30% in that third-line or greater patient population, which is where our label is. That was based on chart auditing that had been done and information derived in the December-January time frame. And then when you look at the interim, more recently Pomalyst has been approved in a similar patient population, we think it is highly likely that patients will see both these agents in the course of their disease. We're pleased with the progress we have made since the approval of Kyprolis in July of last year. I think, also on the call, Helen Torley, who is our Head of Commercial, mentioned that of the top accounts we had penetrated and have sales of at least 1 order and over 75% of those, and then of those 80% had ordered more than once. So very, very pleased with how we have done with Kyprolis and the benefits of that bringing to patients.

Matthew K. Fust

Any other questions that we can address?

Unknown Analyst

Could you speak a little bit about the duration of therapy, I know it's probably really early, but are you seeing a similar duration of therapy on Kyprolis that you saw in your Phase II trials about 3 or 4 months or any color on that?

Matthew K. Fust

Sure. So with regard to Kyprolis, I think, the product only launched in July 2012, it's a bit early yet to have a strong sense for what the duration of the therapy will be in the commercial setting. As you mentioned in the 003-A1 trial, which on the basis of the accelerated approval here in the U.S., we saw an average treatment duration of about 4.5 months on the 003-A1 trial, included patients who had median and 5 prior lines of treatment. So a patient population that may have been a bit more advanced in their disease, potentially a bit sicker than certainly the patient population envisioned under our U.S. label, which provides for patients who have seen and are progressing on both bortezomib and an IMiD. But frankly, still too early to tell, and likely it will be some time until we get a broader sense of the actual duration experience in the market here in the U.S.

Any other questions? Thank you once again for your interest. Really appreciate your joining us and thanks for your interest in the company.

Julianna Wood

Thank you.

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