Onyx Pharmaceuticals Management Discusses Q1 2013 Results - Earnings Call Transcript

May. 7.13 | About: ONYX Pharmaceuticals, (ONXX)

Onyx Pharmaceuticals (NASDAQ:ONXX)

Q1 2013 Earnings Call

May 07, 2013 5:00 pm ET

Executives

Amy Figueroa - Senior Director of Investor Relations

N. Anthony Coles - Chairman, Chief Executive Officer and President

Helen I. Torley - Chief Commercial officer and Executive Vice President

Pablo J. Cagnoni - Executive Vice President of Global Research & Development and Technical Operations

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

Analysts

Matthew Roden - UBS Investment Bank, Research Division

Cory William Kasimov - JP Morgan Chase & Co, Research Division

Philip Nadeau - Cowen and Company, LLC, Research Division

Rachel L. McMinn - BofA Merrill Lynch, Research Division

Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division

Howard Liang - Leerink Swann LLC, Research Division

Carter L. Gould - JMP Securities LLC, Research Division

Biren Amin - Jefferies & Company, Inc., Research Division

Geoffrey C. Porges - Sanford C. Bernstein & Co., LLC., Research Division

Ryan Martins - Lazard Capital Markets LLC, Research Division

Salveen J. Richter - Canaccord Genuity, Research Division

Gene Mack - Brean Capital LLC, Research Division

Terence C. Flynn - Goldman Sachs Group Inc., Research Division

Ying Huang - Barclays Capital, Research Division

Echo Yinghui He - Maxim Group LLC, Research Division

Jim Birchenough - BMO Capital Markets U.S.

Operator

Welcome to the Onyx Pharmaceuticals First Quarter 2013 Conference Call. My name is Ellen and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded.

I will now turn the call over to Onyx Pharmaceuticals. You may begin.

Amy Figueroa

Thank, Ellen. Good afternoon. I'm Amy Figueroa, Senior Director of Investor Relations at Onyx Pharmaceuticals. Thank you for participating on our First Quarter 2013 Financial Results Conference Call. Leading the call today is Dr. Tony Coles, Onyx' Chairman and Chief Executive Officer. After Tony's introductory comments, Dr. Helen Torley, Executive Vice President and Chief Commercial Officer, will discuss the commercial performance in our proteasome and kinase inhibitor franchises. Next, Dr. Pablo Cagnoni, our new Executive Vice President of Global Research and Development and Technical Operations, will provide an update on our global clinical program. Finally, Matt Fust, Executive Vice President and Chief Financial Officer, will review our financial results. We will then 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, 2012, as well as to other filings. We expect to file our 10-Q for the first quarter ended March 31, 2013 tomorrow.

During today's call, we will be discussing Kyprolis carfilzomib for injections and Bayer Stivarga regorafenib tablets. For full prescribing information on Kyprolis, we refer you to the package insert posted at www.kyprolis.com. For full prescribing information on Bayer Stivarga, we refer you to the package insert posted at www.stivarga-us.com.

In addition, we'll be presenting and discussing non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures, please see today's press release and slide presentation, which are posted on the Onyx website at www.onyx.com.

For additional information, please visit our website or follow us on Twitter, @OnyxPharm, or at www.twitter.com/OnyxPharm.

I'll now turn the call over to Tony.

N. Anthony Coles

Thanks, Amy. Good afternoon. And as I've begin, let me just take a moment to welcome Dr. Pablo Cagnoni, our newly appointed Executive Vice President of Global R&D and Technical Operations. As many of you know, Pablo has an established track record of success and is known for his role in developing some of the most important cancer therapies available today. The entire team and I are excited to have him leading the innovation of new medicines at Onyx.

Over the course of the last several months, Onyx has entered a new phase of growth as a company, a new era of global development and global commercialization. Onyx has evolved into a diversified oncology company, with 3 approved therapies in 5 different cancer indications with a substantial number of commercial, clinical and regulatory milestones that are expected in the months ahead.

Following the transformational period for the company in 2012, we've now advanced to the next chapter of our story, one of top line growth and significant opportunity across our business. In the first quarter of 2013, total revenues doubled to $145 million compared to the same period a year earlier, all driven by our increasingly broad portfolio.

Let's review some of our recent developments, beginning with Kyprolis, the first therapy from our proteasome inhibitor franchise. We've executed a successful launch, generating net sales of $128 million since Kyprolis was approved in July of 2012. And we're moving ahead quickly, with plans for expansion as we focus on broadening the reach of Kyprolis to potentially even more patients in the U.S. and around the world.

To deliver on this goal, we're driving a comprehensive global development program across all lines of myeloma therapy. The Phase III FOCUS trial has a planned interim analysis with results expected in the second half of this year. This study would be expected to support registrations globally in the relapsed and refractory patient population, notably in Europe.

For relapse patients, the ASPIRE trial has a planned interim analysis that could occur as early as the fourth quarter of this year or later, depending on event accrual. As these trials progress, we're also preparing for the fastest possible path to approval for patients internationally. We carefully analyzed the opportunity to help patients globally and have determined the best approaches for various regions and countries around the world.

In the core countries, Onyx intends to go it alone, marketing Kyprolis directly through affiliates or subsidiaries. While in other select markets, we will work with local distributors. As we did in the U.S., the pace for international expansion with our own affiliates will be judiciously guided by regulatory progress.

At the same time, we're moving rapidly to get Kyprolis to patients as quickly as possible and this includes an early access program that is just beginning in Europe, making Kyprolis available to appropriate patients in those markets. Helen will describe the implementation of our global commercialization strategy in more detail in just a moment.

Behind Kyprolis, or in addition to Kyprolis, we're excited about oprozomib, our oral proteasome inhibitor and are advancing this development program with our new extended release tablet formulation. Pablo will highlight additional detail for this program in his comments.

Turning to the newest product launch, Bayer Stivarga, the second major therapy in the kinase inhibitor franchise, the U.S. launched in 2 indications now, both metastatic colorectal cancer and advanced GIST, has certainly been impressive. Globally, momentum is building with approvals already secured in Japan, Switzerland and Canada. Additionally, Bayer is conducting a global development plan that includes 2 new Phase III trials: one already underway; and another plan to start in the second half of this year.

Let me turn the Nexavar, the foundational product for Onyx that helps patients in more than a 100 countries globally and generates important cash flow for our business. In addition to the advanced kidney and unresectable liver cancer approvals that have been the cornerstone of this success, we now have a potential opportunity in thyroid cancer to further extend our patient reach.

And finally, in breast cancer, the Phase III RESILIENCE study completed enrollment in the first quarter, with top line results expected in the first half of next year.

In 2013, Kyprolis, Nexavar and Stivarga, each with potential for a continued growth, are expected to drive top line momentum across our business. The portfolio also includes an important economic interest in Pzifer's palbociclib, which yielded encouraging preliminary data in a randomized Phase II study, leading to a recent initiation of a Phase III trial by Pfizer. We'd like to congratulate Pfizer on their progress and the recent FDA designation of palbociclib as one of the new breakthrough therapies.

Finally, we continue to evaluate assets in the oncology space to further augment our portfolio and position Onyx for continued top line growth as a global oncology leader. And we continue to make significant strides in building our presence as a global organization committed to bringing important new therapies to cancer patients throughout the world.

Now let me turn the call over to Helen for a review of our commercial progress.

Helen I. Torley

Thank you, Tony. We entered 2013 with momentum, with the launches of Kyprolis and Stivarga driving a doubling of our total revenues in the first quarter compared to the same period last year.

Beginning with Kyprolis. We reported $64 million in net sales for the first quarter of 2013, including a favorable gross-to-net-accrual adjustment of $6 million. Demand sales were $58 million for the first quarter of 2013. We continue to expect quarter-over-quarter demand growth throughout this year, driven by existing prescribers and expansion in a number of newly adopting clinics and hospitals and new patient starts.

Importantly and as expected, the continued adoption of Kyprolis and the entry of an additional therapy are resulting in an expansion of the number of patients receiving novel agents in the third-line-plus setting. Novel agents use grew from over 30% at the end of Q4 to greater than 40% at the end of Q1, with further expansion anticipated. Kyprolis is already well established as a leading agent for the third-line-plus patient population. At the end of Q1, approximately 2,100 unique accounts had ordered Kyprolis since launch, an increase of approximately 400 accounts from the 1,700 who had ordered at the end of Q4 2012. This continued strong adoption trend we believe is a result of physician's response to the Kyprolis clinical profile and to the excellent growth and coverage and time to reimbursement.

The number of new Kyprolis patient starts grew in the first quarter. Kyprolis' share of this larger prevalent eligible third-line-patient population continued to grow. In general, Kyprolis use has displayed retreatment with prior regimens, including Velcade and Revlimid and also cytotoxic. At this point in the launch, the mean duration of therapy hasn't been established, as the number of the patients who started Kyprolis shortly after approval still remains on therapy.

Turning to Europe. For the demographic support, a multiple myeloma patient opportunity similar in size to the United States, launch rate in this preparation are well underway. We call a regulatory approval, which will be based on positive FOCUS or ASPIRE results. We currently plan to market Kyprolis directly in about a dozen key European markets, establishing our own initial affiliates in France, Germany, Italy, Spain and the United Kingdom. In the remaining European markets, we will engage local companies to distribute Kyprolis to manage and limit our infrastructure costs.

In further support of our goal to have Kyprolis available for patients globally, our strategy in Latin America and Canada, Asia Pacific and Middle East and Africa is to focus initially on those countries that accept a regulatory filing or allow pre-approval access based on the current U.S. approval and to engage local companies to distribute Kyprolis when authorized.

In the Latin America and Canada region, 2 agreements have now been signed for Columbia and for Argentina. We expect preregistration access for patients in these 2 countries to begin via these local companies within the next few months. In the Asia Pacific region, we have submitted regulatory applications for approval to health authorities in both Singapore and Thailand. And finally, in the Middle East and Africa region, we communicated in March that we had signed our first agreement in Israel. I'm pleased to announce that we have received orders and shipped product for that country. Additionally, we have also now signed an agreement in Turkey. This is indeed an exciting and very busy time as we bring Kyprolis to patients globally.

Turning now to our kinase inhibitor franchise. Bayer reported Stivarga net sales of $53 million in the first quarter of 2013, of which Onyx recorded $9 million as royalty revenue. Global net sales for Nexavar, excluding Japan, were $199 million, result in collaboration revenue of $70 million to Onyx.

Beginning with Stivarga. The U.S. launches in third-line-plus metastatic colorectal cancer and in third-line GIST are progressing well. A broad base of approximately 3,000 physicians has prescribed Stivarga at least once since launch, with approximately 1,000 new prescribers in the first quarter. The patient opportunity for Stivarga in metastatic colorectal cancer is 20,000 to 30,000 patients annually in the United States. And for third-line GIST, an estimated 1,000 to 1,500 patients are eligible to receive Stivarga based on the U.S. label. With the launch success in the U.S. and current projected global approvals anticipated in 2013, Stivarga is well on its way to becoming an important medicine across its approved indications.

Turning now to Nexavar. Net sales for the first quarter declined principally in the United States and Europe. In the U.S., the decline was mainly due to inventory reduction as we evolve our distribution approach, streamlining the number of specialty pharmacies. As expected, this was partially offset by continued double-digit growth in Asia Pacific region and continued improvement in commercial margin. As we look forward, we expect growth in United States, as well as continued growth in emerging markets, while new potential indications present further opportunities for Nexavar. Beyond the currently approved indications, recent progress has been made with thyroid and breast cancer registration enabling studies, as Pablo will describe next.

2013 will be an important year for the Onyx Commercial team, as we execute our plans to grow both our proteasome inhibitor and our kinase inhibitor franchises domestically and internationally.

Let me now turn the call over to Pablo.

Pablo J. Cagnoni

Thank you, Helen. Let me start by saying that I'm excited to join Onyx at this pivotal point in the company's development. As a rapidly emerging biopharmaceutical leader, we have in place a thoughtful development program and a solid commercial presence in oncology designed to extend our global reach.

Beginning with the proteasome inhibitor franchise. Our objective is to establish a broad label for Kyprolis as a treatment for patients with myeloma across all lines of therapy. The FOCUS trial is in relapsed and refractory multiple myeloma patients who have progressed up to 3 or more therapies.

Patients in this study are randomized to receive either Kyprolis monotherapy or best support of care, which includes steroids and optional cyclophosphamide. This trial, which was an active comparator arm, was designed to demonstrate to survival improvement and we expect to complete the planned interim analysis in the second half of this year. If the interim study results are positive, we're planning regulatory submissions with the EMA and globally.

ASPIRE, the trial in relapsed patients who have received 1 to 3 prior therapies, has a planned interim analysis as well. We continue to expect data as early as the fourth quarter of this year or later depending on the rate of event accrual.

The ENDEAVOR study also in relapsed patients provides an opportunity to assess the superiority of Kyprolis over Velcade. In addition to evaluating a higher dose of Kyprolis at 20 and 56 milligrams per meter squared, this study is looking at a 2-drug combination of a proteasome inhibitor and dexamethasone.

Moving earlier in the treatment paradigm, our strategy for newly diagnosed patients are transplant-ineligible, includes a registration-enabling trial, known as CLARION, to support submission globally. This head-to-head study is designed to assess superiority over Velcade in the front-line setting. It includes a melphalan-prednisone background and will evaluate PFS as a primary endpoint. As you know, VMP is a global regulatory standard for transplant-ineligible patients, which was a key factor in our selection of comparator for this trial.

Our overarching objective is to establish an indication for Kyprolis that allows for broad use in multiple myeloma patients around the world. Additionally, a set of complementary studies to assess Kyprolis in multiple combination regimens across all lines of therapy are already underway.

Switching to our oral proteasome inhibitor, oprozomib. New data was reported in April from a Phase Ib2 study. Although preliminary and from a small number of patients, results following the use of a once daily extended-release tablet suggest a trend toward better tolerability. Dose-dependent proteasome inhibition was observed, with 80% inhibition of the highest doses tested and we are continuing dose escalation until we reach the maximum tolerated dose. Given the preliminary data showing promising clinical activity, we have selected this tablet formulation as the formulation for further development and are moving ahead with this molecule in the clinic. We look forward to sharing updated data from the ongoing Phase Ib2 dose-escalation study in June at the European Hematology Association, or EHA Congress.

For the kinase inhibitor franchise, Bayer is executing a development program for Stivarga to support approvals globally with 2 Phase III trials in 2013, one already initiated and one plan to start in the second half of this year. The first is evaluating Stivarga in second-line liver cancer patients after progression of Nexavar and the second will be conducted in patients with colorectal cancer following resection of liver metastasis. Both studies are designed to test Stivarga versus placebo.

Turning our attention to Nexavar. There were 2 important developments in the first quarter. First, we reported positive top line data from the Phase III DECISION study in patients with thyroid cancer. The data from this trial will be presented at the plenary session at ASCO early next month and an sNDA filing is now planned for midyear in the U.S., with additional submissions globally thereafter. Second, in March, we completed patient enrollment for the RESILIENCE study in HER-2 negative advanced breast cancer. This Phase III trial is evaluating capecitabine with Nexavar or placebo and the primary endpoint is PFS. We expect the report results from this registration-enabling trial in the first half of 2014.

With multiple Phase III trials advancing, we look forward to a number of important clinical and regulatory milestones in the months ahead and the potential to reach even more cancer patients with our therapies.

I will now turn the call over to Matt.

Matthew K. Fust

Thank you, Pablo. Our first quarter results demonstrate the increasingly diversified revenue stream as generated by our portfolio of medicines, driving top line growth and enabling strategic investments in Kyprolis and oprozomib. First quarter revenue of $145 million was more than double the $72 million reported in first quarter 2012.

Kyprolis net sales in first quarter 2013 were $64 million and include a $6 million favorable gross-to-net adjustment in the quarter, reflecting update assumptions for product replacement reserves. For full year 2013, we now expect gross-to-net sales adjustment to be between 10% and 15%, with continued quarter-to-quarter variability. Approximately $9 million in the Kyprolis' gross deferred revenue was carried on the balance sheet at quarter end. Gross margin on Kyprolis net sales was 97% for first quarter 2013 as we continued to sell the lower-cost inventory, which was expensed prior to launch. We expect gross margin on Kyprolis net sales to average approximately 90% for full year 2013.

Turning to Nexavar. Collaboration revenue for first quarter 2013 was $70 million, with a commercial margin of 67%. For Stivarga, Bayer reported $53 million in first quarter net sales, which resulted in $9 million of royalty revenue to Onyx based on worldwide sales and jurisdictions where Stivarga is approved and commercially available.

Our first quarter revenue also included a $2 million milestone payment, triggered by Pfizer's initiation of our Phase III palbociclib trial in patients with ER positive, HER-2 negative advanced breast cancer. Under our agreement, Onyx is eligible to receive up to an additional $9.5 million in milestone revenue and an 8% royalty on potential future global net sales.

Non-GAAP net R&D expense was $89 million in first quarter, comprised primarily of Kyprolis development expenses, including the fully-enrolled FOCUS and ASPIRE trials, the actively enrolling ENDEAVOR study and preparation for patient enrollment in CLARION. Non-GAAP SG&A expense was $66 million in first quarter, driven primarily by Kyprolis U.S. commercial expense. Finally, we ended first quarter with $739 million in cash and investments.

With a first quarter performance that included increasingly diversified top line revenue growth drivers, continued strong delivery by the U.S. commercial organization and advances in the Kyprolis and oprozomib development programs, we are maintaining the 2013 financial guidance provided on our financial results call in February.

Now I'll turn the call back over to Tony.

N. Anthony Coles

Thanks, Matt. Well, this has really been an exciting and an important quarter, with some terrific sales and revenue performance as we continue to deliver on our commitment to build the business with multiple core revenue streams, of which allow investment in our next phase of products and our business expansion.

Looking ahead, we are looking forward to momentum across portfolio with continued top line revenue growth, as well as several upcoming commercial regulatory and clinical milestones, notably and including the following: first, progressing the commercial launch of Kyprolis through continued demand growth for Kyprolis in the U.S. and as a result of building and expanding our international access and global capabilities; second, advancing the global registration-enabling development program for Kyprolis across all lines of treatment, with interim data possible this year from FOCUS and potentially, ASPIRE; third, advancing the new oprozomib tablet formulation for further development now that we have finally selected a formulation for full development; fourth, reporting Nexavar data and thyroid cancer at ASCO and expanding Nexavar's reach with global filings; fifth, sharing Bayer's progress with global commercial, regulatory and clinical progress for Stivarga; and finally, continuing to evaluate assets that provide opportunities for us to not only sustain our long-term and meaningful growth, but extend our pipeline.

Ellen, we'll now open the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Matt Roden with UBS.

Matthew Roden - UBS Investment Bank, Research Division

Great. So Helen, you characterized the growth here is based on market growth, market expansion and share growth in the relapse setting. And I realized it's very early here, but the feedback we've heard from the field is that there is interest in the KRD combination regimen upfront consistent with the NCCN treatment Guidelines. So I'm just wondering if there's anything you can share, anecdotally or in aggregated data, that would tell us whether or not that started to impact the sales line at this point?

Helen I. Torley

Yes. Well, first and importantly, I have to make a comment that the NCCN guidelines don't expand our FDA-approved label and clearly, Onyx is promoting Kyprolis purely on the label. While we do hear anecdotes of KRD in first-line, it is very rare. The majority of Kyprolis continues to be used on labels. So I think a few academic centers maybe doing that, but infrequent at this time.

Operator

We have Cory Kasimov with JPMorgan.

Cory William Kasimov - JP Morgan Chase & Co, Research Division

Helen, I'm interested in your feedback that you've provided since the introduction of Pomalyst in the first quarter. It seems like both Pom and Kyprolis had very strong -- both had very strong starts to the year. So you provided some numbers around the growth and novel agents and spoke qualitatively around that as well. But do you think that the performance that these drugs have had for to begin in 2013 is enough to kind of dismissed the concerns that were out there, that you're going to have some sort of near-term competitive issues from a commercial standpoint and we've moved on from that at this time?

N. Anthony Coles

So Cory, I don't know if Helen will have a point of view, but let me offer just a little bit of context. I think that we've said all along that the market -- we expected the market for use of novel agents to expand as we're moving into the period where Pomalyst was added to the therapeutic choices. So we're not surprised at all that the number of patients receiving novel therapy is going up. We've also long held a view that physicians are really as interested in the potential combination of Kyprolis and pomalidomide, or proteasome inhibitor and an IMiD across all lines of therapy, well established in the front line, as you know, and even relapsed setting. We've reported some data in previous meetings on this potential combination and we expect that this could continue to be a source of interest for a number of physicians. So, so far it appears to be a fair bit of room for both therapies. And we're really quite pleased with the continued performance of the Kyprolis launch. But Helen is going to give you some more color, I'm sure.

Matthew K. Fust

Yes, Cory, just to talk about where we're seeing Kyprolis now being used. And it really is, as you know, in the larger third-line population is we're where seeing most of it. And it's displacing retreatment with Velcade and Revlimid and with cytotoxic agents. And so while the combination of Kyprolis and now, Pomalyst coming into market has changed some of that dynamic, the remains are still patient opportunity and we do project a continued expansion in the number of patients available for treatment. Then it comes then to the Kyprolis profile and we've said before and our research continues to show that, that Kyprolis physicians tell us is meeting their needs for these patients. So we continue to project that we will see quarter-on-quarter demand growth.

Operator

We have Phil Nadeau with Cowen and Company.

Philip Nadeau - Cowen and Company, LLC, Research Division

Just 2, to follow up on the Pomalyst launch. I believe Celgene on its earnings call discussed the order that it was seeing use suggesting today, it's Kyprolis third and then Pomalyst fourth. Are you seeing the same thing and do you expect to change in that? And then secondly, I was wondering if you'd be willing to give us any sort of idea of how new patient adds for Kyprolis have changed month-over-month in February, March and April?

N. Anthony Coles

Okay, Helen.

Helen I. Torley

Yes. In terms of where we're seeing Pomalyst now being used, it is being predominantly at this time sequenced after Kyprolis. So Kyprolis in third-line and Pomalyst, I think, its larger share occurring in the fourth-line population. With regard to new patient adds, that isn't information we've been providing or updating. So at this time, I'm not able to provide that information.

Operator

We have Rachel McMinn with Bank of America Merrill Lynch.

Rachel L. McMinn - BofA Merrill Lynch, Research Division

Yes, I was wanting to get a little bit more comments from you, Tony. I was interested, you've emphasized a couple of times in the call about this kind of full formulation for oprozomib. Can you comment on when you expect like the, I guess, possibility of a Phase III start? I know there's still some dosing work that you're doing and it's early. And then secondly, just on duration, you made a comment about mean duration just impossible to tell right now. But it seems like, based on what you're saying, that it should be over 4 months as patients -- you've got a big bolus of patients in September following the launch and you still have quite a fair number of patients still on therapy, that, that bodes very well for duration.

N. Anthony Coles

Sure. Thanks, Rachel. I'm actually going to ask Pablo to take the oprozomib question. Pablo?

Pablo J. Cagnoni

Thank you, Tony. So I think it's important that the first point to make is that we're very happy to have made a decision to move forward with the new tablet formulation. The patients -- the number of patients that we reported data in Q2 is relatively small and it's early, but we're very encouraged by the very good safety profile they were observing with the new tablet formulation. Based on that, we've made a decision that this is going to be the formulation of oprozomib to move forward and for the development. As a result of that, over the next several months, we'll be initiated combination trials of oprozomib with other agents in multi-myeloma and we look forward to keeping you updated on the progress of the oprozomib program.

N. Anthony Coles

And Rachel, I'm sure you and everyone else knows that on clinicaltrials.gov, there's already a listing for the oprozomib dexamethasone as study in relapse refractory patients. So we are beginning the Phase II program in earnest. Too early to guide on a Phase III start, but we really do like this new formulation and we're ready to drive forward with it. And Helen, on the mean duration of treatment question?

Helen I. Torley

Yes. Rachel, I would just repeat, we do think it's still too early to know the mean duration of therapy. We're looking at different cohorts of patients in our chart audits and looking to build a robust answer for you. So premature to comment at this time.

Operator

We have Chris Raymond with Robert Baird.

Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division

So just a question on the ASP change from ASP plus 60, ASP plus 4, I think it was back in March, you guys talked about this is a potential headwind. You've now got a little over a month in the rearview mirror this experience. Can you maybe talk about whether, is it as big a deal as you thought it was or worse? Kind of give us some perspective.

N. Anthony Coles

Yes. I think, Chris, what I'll probably say is, obviously, we're watching everything that's happening with the sequester very carefully. And this was, as everyone knows, a direct result of sequestration, which went into effect in late March, early April. It's probably very early. Too early for us to tell. I think we're still encouraged by the number of new patient starts that you heard Helen mention a moment ago. And of course, we'll be following events in Washington really carefully. But Helen, any color specifically on Kyprolis?

Helen I. Torley

Yes. Just one of the things we were tracking was what we're hearing from our oncology physicians. And to date, while I think there were a lot of discussion about sequestration, we have not seen any acceleration on how they're treating patients, where they're treating patients. So certainly, to date, no impact on how we're seeing Kyprolis being used.

N. Anthony Coles

Good. And I think it's fair to say, just to finalize that comment, docs are going to choose the best therapies for their patients. And so whether they are administered in the office setting, on the hospital setting, we still think that the virtues of Kyprolis will speak for themselves.

Operator

We have Howard Liang from Leerink Swann Company.

Howard Liang - Leerink Swann LLC, Research Division

Can you update us on the STORM trial, whether we're still expecting data second half of 2014?

N. Anthony Coles

Thanks, Howard. No, I think because that's an adjuvant study, we're going to not make any update specifically on timing for data. The enrollment did finished sometime ago and, as you know, these adjuvant trials can take a while. But certainly, they hit all the relevant events. So no further guidance on STORM at this time, but we're, obviously, very excited about the FDA opportunity for thyroid and we'll be following that very closely for Nexavar, as well as what could be coming up in the RESILIENCE study in breast cancer as well. That's made very nice progress. Enrollment's done and we're just now waiting for the rest of the events to accrue. So it could be possible that we'll have data from STORM in the second half of 2014. And we'll obviously watch that very, very carefully.

Operator

We have Michael King with JMP Securities.

Carter L. Gould - JMP Securities LLC, Research Division

This is Carter on for Mike. My question is, can you offer any color on the doses being used in the field, specifically if oncologists are pushing doses higher or using longer infusion times? And the second question is for Matt. If the commercial margin seen with Nexavar for the quarter or new run rate that's what we should we expect going forward?

N. Anthony Coles

I'm going to assume for a moment that you mean that doses for Kyprolis, just to clarify. So, Helen...

Carter L. Gould - JMP Securities LLC, Research Division

Yes, excuse me. Yes.

N. Anthony Coles

Okay, good. Helen will take that one. And Matt on the commercial margin.

Helen I. Torley

As we've previously commented, we're continuing to see the majority of Kyprolis uses is on label, not just in terms of the patient population, but also with the dosing. So 2027 is, by far, the most commonly used regimen.

Matthew K. Fust

And Carter, this is Matt on the Nexavar commercial margin. We have reported 67% commercial margin on Nexavar in the first quarter. I'll remind you that our full year guidance, which we are not changing at this juncture, is for commercial margins in the range of 62% to 64%. So although we're off to a good start on the year, we'll stick with that 62% to 64% guidance for the full year.

Operator

We have Biren Amin with Jefferies.

Biren Amin - Jefferies & Company, Inc., Research Division

I think you mentioned on the call earlier that oprozomib continues on track with the dose-escalation phase and that you haven't reached MTD. So just trying to understand how far above you've gone from the 210-milligram dose that was reported at IMW in Kyoto.

N. Anthony Coles

Okay. Pablo?

Pablo J. Cagnoni

Okay. Yes, so as I mentioned, that's still an ongoing study. We are going to present updated results at the European Hematology Association Meeting in Stockholm next month. So I'm afraid you're going to have to wait until that meeting so we can discuss the results at that time.

N. Anthony Coles

Very good. Good news is that we don't have an MTD.

Pablo J. Cagnoni

Correct.

N. Anthony Coles

And we are advancing the Phase II program. So that's very good.

Operator

We have Geoffrey Porges with Sanford Bernstein.

Geoffrey C. Porges - Sanford C. Bernstein & Co., LLC., Research Division

Helen's the flavor of the month today, so I'll follow up with further questions there. Helen, quickly, was there any revenue to any of the distributors in the reported results and all main patient basis to Europe? And if not, presumably, when would you anticipate that revenue starting to occur? And then, could you give us a little more color, you mentioned very little was mostly used for Kyprolis was third-line, but was there any use in second-line patients who have already failed 2 drugs? And related to that, could you give us some color on the mix of combination versus monotherapy, or at least straight steroid combination use for Kyprolis?

N. Anthony Coles

Okay. Jeff, I'm going to actually ask Helen to address the first couple of questions and then ask Matt to make a comment on the expectation for revenues from some of the international programs. So Helen?

Helen I. Torley

Yes. Jeff, let me start with what we're seeing on label second-line use. It really was pretty stable in the first quarter as compared to the fourth quarter last year at the low-single digit percentages, so the majority of our use is indeed in the third and fourth-line patients. And then, your second question, Jeff, was -- oh, the mix of combination. Again, as I mentioned, the majority of the uses is on label. We do see some use with dexamethasone and occasional use with Revlimid as we talked about a few moments ago. But the majority of users is single agent on label in the third- and fourth-line population.

N. Anthony Coles

Okay. Good. And then, Matt.

Matthew K. Fust

Sure. So with regard to Kyprolis net sales in the first quarter. The overwhelming majority of the net sales were reported are U.S. sales from the U.S. commercial organization. We're very excited about the ability to begin to bring Kyprolis to patients in other countries, but those will initially be, for the most part, countries which are referencing the U.S. label, so it will be in a similar population. And as you've heard us begin to discuss, some of the countries will be -- we suspect not a significant impact on Kyprolis sales here in 2013.

Operator

We have Ryan Martins with Lazard Capital Markets.

Ryan Martins - Lazard Capital Markets LLC, Research Division

On oprozomib. You've said you've selected -- you've decided to move forward with the new formulation. Have you decided what schedule you're going to use, or are you waiting for the final data to be presented at EHA? And then I have a follow-up, which is, I guess, related to the previous question on duration for Kyprolis. I know, Helen, you said the majority of patients are staying on the drug. Do you have an idea what the discontinuation rate has been?

N. Anthony Coles

So I think on a oprozomib, it's -- we don't have the final dosing schedule. I know that we're doing the Phase Ib2 work concomitant with beginning the Phase II program, so stay tuned for what the final schedule will be there. And then on the DOT, the duration of treatment question.

Helen I. Torley

Right. Just to mention that I said a number of patients were staying on therapy. And as part of the way we're calculating what the mean duration of therapy, we obviously are looking at cohorts to anticipate and calculate what the discontinuation rate is. So that is data that is also maturing. So we're not in a position to give a specific answer at this point in time, but we are continuing to evaluate that.

Operator

We have Salveen Richter with Canaccord Genuity.

Salveen J. Richter - Canaccord Genuity, Research Division

Just one, really, on BD activities. As you look to potentially in license products, what disease areas and criteria are you looking for here?

N. Anthony Coles

Yes. I think we've been very clear and also very consistent in saying that we want to stay focused in the hematology and the oncology spaces. That seems to work very well for where our strength is, where our areas of expertise are and the capabilities we've built in the organization. So we understand a lot about the new targets and the new mechanisms that are emerging in this space. So in this one, we want to play to our strengths. We will, as you pointed out, continue to think about in licensing arrangements, options, acquisitions and the full gamut within the hematology and the oncology space.

Operator

We have Gene Mack with Brean Capital.

Gene Mack - Brean Capital LLC, Research Division

All right. We'll go back to the queue, operator. Who's next?

Operator

We have Terence Flynn with Goldman Sachs.

Terence C. Flynn - Goldman Sachs Group Inc., Research Division

First, can you just remind us about the 006 data that we're going to be seeing at ASCO and the key differences between the ASPIRE trial that's ongoing just to kind of make sure everyone's expectations are set appropriately there? And on oprozomib. I was just wondering, now that you have formulation locked down, can you comment if you're going to owe any third party royalties on that?

N. Anthony Coles

Yes. None on oprozomib. That's wholly proprietarily owned when we purchased Proteolix, so there'll be no outstanding royalties there. That's actually quite good for the ultimate economics. And then, Pablo, on the comparison between 006 and ASPIRE?

Pablo J. Cagnoni

So the updated results of 006 would be provided at the EHA and at ASCO and we will present a PFS for that study. I think the main difference between 006 and ASPIRE that we have to keep in mind is the inclusion of lenalidomide refractory patient in 006 and those patients would be excluded from the ASPIRE trial. So I think that we need to be careful about extracting any conclusions from 006 that could apply to ASPIRE with different trials with different designs.

N. Anthony Coles

Right. So more heavily pretreated population, you say, for 006.

Pablo J. Cagnoni

Yes.

N. Anthony Coles

Okay. Good. Thank you.

Operator

We have Gene Mack with Brean Capital.

Gene Mack - Brean Capital LLC, Research Division

Okay. Just a quick question on the current formulation of Kyprolis. Are you -- and I apologize if you already went through this, and you're staying on the call late. Are you working on any other formulations, any other injectable formulations of carfilzomib? And can you just talk a little bit about that if you are?

N. Anthony Coles

Yes. What can I tell you, and we did talk a little bit about this at Analyst Day, is that we do have some data for Kyprolis with alternative formulations that will increase the pharmacokinetic profile or extend the pharmacokinetic profile for Kyprolis, which we think actually makes a difference, not only in the degree of proteasome inhibition, but also in tumor self-killing activity. They're -- we don't have a large program, that's looking at an alternative formulation for Kyprolis, but are taking these preclinical findings and trying to -- to the best to our ability, translate them potentially to what this could mean for oprozomib, as an example. So we will -- in addition to that, I'll also keep thinking about backup programs for oprozomib, which Chris Kirk talked about at Analyst Day as well.

Operator

We have Ying Huang with Barclays.

Ying Huang - Barclays Capital, Research Division

I guess I have one for Matt. That is can -- you guys had a pretty large favorable adjustment on the gross to net of $5.9 million last quarter. Can you elaborate a little bit why? And then what should we assume going forward for 2013 for our growth to net adjustment here?

Matthew K. Fust

Sure. So just starting a bit of context, recall that when we report Kyprolis sales each quarter, we actually take the gross sales which we make to our customer and then make a set of adjustments for various reserves, including charge backs, rebates, potential product returns and replacements to drive the net sales number, which we report to you each quarter. In the first quarter of 2013, as you noted, the Kyprolis net sales number reflects a roughly $6 million favorable adjustment, which reflects an update in our assumptions about the launch related product replacement program. We do expect this will be the only accrual adjustment that we make related to this particular program. And so as a result for the full year 2013, we now expect the gross-to-net sales adjustment will be in the range of between 10% and 15%, still some possibility for quarter-to-quarter variability, but a 10% to 15% range, we think is in good estimate for the full year.

Operator

We have Eco He with Maxim Group.

Echo Yinghui He - Maxim Group LLC, Research Division

The first one about the capture rate for database. And seemingly like the last quarter, the capture rate went down a little bit. Why was that? And also should that be considered in the future, we should consider about around 60% of capture rate? The second is about R&D. There are many trials, especially Phase III trials that are ongoing and about to start. Should we think about this year's R&D expense should peak in terms of absolutely spending levels? Or we should consider that next year, the R&D expense is going to be even higher?

N. Anthony Coles

Okay. Very good. I think, Helen, if you could talk a little bit about the data capture rate from the various audits and surveys that are out there, presumably this is for Kyprolis as well, so we will just echo our thoughts.

Helen I. Torley

Yes. On the Wolters Kluwer capture rate for Kyprolis, we certainly do see week-to-week variability and we do project that's going to continue to change. I think for Stivarga, just a word on that, because we distribute Stivarga with specialty pharmacy, the data reported is certainly incomplete and we've seen a lot of variability in that. So while I know you want that information, we just want to say that it will change from week-to-week, be different amounts, and interpret with caution.

N. Anthony Coles

Good. And then, Matt, on the Phase III trials and R&D spending?

Matthew K. Fust

Sure. So maybe a little bit of context around the R&D spend and our assumptions there. As you noted, the key driver for our Research and Development expense in this period of time is investment unlocking the full value of Kyprolis with the 4 Phase III trials, which you heard Pablo discuss in today's call. Within that set of trials, the ASPIRE and FOCUS trials are fully enrolled and so expenses are ramping down. At the same time, the expenses for the ENDEAVOR trial are ramping up, as enrollment proceeds with that trial and the anticipated rapid advancement of the front-line trial, as you've heard discussed today. Also against that backdrop, keep in mind that we have given guidance that we expect the investment in Nexavar Research and Development expense to trend downward again in 2013, as some of the key Nexavar programs come to fruition. But I think at a top line level, you should continue to expect us to make prudent but important investment decisions, particularly behind Kyprolis and oprozomib. And although we haven't given guidance beyond 2013, we do remain comfortable with the 2013 non-GAAP R&D expense guidance we provided on the call in February in the range of $400 million to $450 million for the year.

Operator

We have Jim Birchenough with BMO Capital Markets.

Jim Birchenough - BMO Capital Markets U.S.

So just a couple. One, just on preregistration sales x U.S. Could you let us know how you're pricing Kyprolis in those territories? And then just one follow-up on a bit on some prior questions regarding second-line use. What we've heard is, with VRD as a standard and care front line, when patients get an inadequate response, they're not really going to respond to a second-line doublet and second-line KRD would be in label. So just trying to get a sense of why you're not seeing more second-line KRD use, or is there some trend where you're starting to pick that up?

N. Anthony Coles

Okay. Jim, on your first one, in terms of the preregistration access programs, I think you are inquiring about pricing. Helen?

Helen I. Torley

In terms of pricing, it certainly is at or close to the U.S. level is what we are making the products available to distributors at. And thereafter, they make their own decisions, or after that. In terms of the second-line use, we certainly are not actively promoting the combination of KRD in second-line use, although we are seeing some use of it. And I think in terms of physicians reticent to use it to date is perhaps concerned with regard to reimbursement and other factors like that. Our focus is, is making sure physicians understand the appropriate use of Kyprolis according to our label and, really, the majority of patients are in the third and fourth-line.

N. Anthony Coles

Okay. Very good. Okay. Well, look, this has been a really terrific quarter for us. Sales have been strong, double on the top line, with great continued quarter-over-quarter growth for Kyprolis, good progress with Stivarga and with Nexavar, as well. I mean, really firing on all cylinders across the business. So we are excited about what's happening at Onyx. We're clearly committed to the focus on patients. We've got the team; we've got the run rate; we've got the assets, and look forward to bring you additional updates.

I suspect the next time we'll see everyone is at ASCO, at the plenary session for our thyroid where the full data results will be presented that we expect will enable the sNDA for Nexavar later this year.

So it's been terrific so far and just stay tuned. The year has got a lot more time left in it for additional progress. Thanks for joining us today.

Operator

Thank you. Ladies and gentlemen, this concludes Onyx Pharmaceuticals First Quarter 2013 Conference Call. Thank you for participating. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Onyx Pharma (ONXX): Q1 EPS of -$0.19 beats by $0.30. Revenue of $145.5M beats by $11.14M. Shares +2.3% AH. (PR)