Onyx Pharmaceuticals Inc. (NASDAQ:ONXX)
Q2 2009 Earnings Call Transcript
August 4, 2009 5:00 pm ET
Julie Wood – VP, IR and Corporate Communications
Tony Coles – President and CEO
Laura Brege – EVP and COO
Matt Fust – EVP and CFO
Todd Yancey – VP, Clinical Development
Jim Birchenough – Barclays Capital
Jessica Li – Goldman Sachs
Howard Liang – Leerink Swann
Jason Zhang – BMO Capital Markets
David Moskowitz – Caris & Company
Blake Arnold – Robert W. Baird & Co.
Derek Jellinek – Boenning & Scattergood
Phil Nadeau – Cowen and Company
Good afternoon ladies, and gentlemen, and welcome to the Onyx Pharmaceuticals conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.
I’ll now turn the call over to Onyx Pharmaceuticals Inc. You may begin.
Thank you. Hello and welcome. I’m Julie Wood, Vice President of Investor Relations and Corporate Communications at Onyx Pharmaceuticals. We thank you for joining us today for our second quarter 2009 financial results conference call.
Leading our call is Onyx President and Chief Executive Officer, Dr. Tony Coles. Also providing updates on the teleconference are Laura Brege, our Chief Operating Officer; and Matt Fust, our Chief Financial Officer. Joining us during the Q-and-A period will be Dr. Todd Yancey, Vice President of Clinical Development
Please note that we will be making forward-looking statements during this teleconference that could include financial, clinical or commercial projections. Statements that are not historical facts are forward-looking. References to what we expect, believe, intend to do, plan, estimate or other statements referring to future events or results are intended to identify these statements as forward-looking.
Forward-looking statements are inherently subject to risks and uncertainties. For a discussion of these risks and uncertainties, we refer you to our 10-K for the year ended December 31, 2008, as well as to our 10-Q for the second quarter of 2009.
In addition, we will be presenting and discussing non-GAAP financial measures in this presentation. For reconciliation of these non-GAAP financial measures to the corresponding GAAP measures, please see today’s press release which is posted on our website.
I would now like to turn the call over to Tony Coles, who will begin the discussion with an overview of our business. After Tony’s remarks, the management team will review commercial, clinical and financial highlights before we open the call for questions-and-answers. Tony?
Thanks, Julie, and good afternoon. Let me start the call by saying how we pleased we are that our strategy to grow Nexavar as a brand and Onyx as a company continues to yield significant results. The quarterly results we have announced today indicate continued strong growth for Nexavar and strong underlying fundamentals for our business. Onyx remains firmly on course to realize its vision of becoming a leading bio-pharmaceutical company. And given Nexavar’s continued sales growth, encouraging new clinical data, and or expanding pipeline, we are continuing to build a strong foundation for the company.
First, I would like to highlight the promising breast cancer results we’ve recently announced. As you know, we have a diverse clinical program evaluating Nexavar in a wide range of malignancies beyond its approved use in liver and kidney cancer, including our program in breast cancer, one of our most valuable potential opportunities. Despite treatment advances, breast cancer remains a devastating disease with 1.3 million cases worldwide each year.
In our large randomized Phase II trial, investigators looked at Nexavar in combination with the oral chemotherapeutic, capecitabine, in patients with advanced and metastatic breast cancer. We were pleased to report that trial met its primary endpoint of extending progression free survival in patients treated with the Nexavar, capecitabine combination compared to patients receiving capecitabine and placebo. These results were highly statistically significant and based on these encouraging data; we are evaluating various strategies to determine the most expeditious regulatory path forward.
We expect to present the full dataset at an upcoming medical meeting this year and or thrilled with these results, particularly with what an all-oral combination regimen could mean as a new treatment option for these patients. At the same time, we continue to leverage our demonstrated success with Nexavar to maximize its potential in liver and kidney cancer. For the first time ever, Nexavar sales surpassed the $200 million threshold this quarter, demonstrating continued strong performance in key markets worldwide.
There remains tremendous opportunity for market expansion and are currently approved indications and key drivers to additional sales growth include increasing penetration in existing markets, expanding Nexavar’s use earlier in the treatment continuum for HCC patients, maximizing duration of therapy and importantly, broadening and deepening access within various geographies through additional marketing and reimbursement approvals.
In the second quarter, we continue to see the success of our efforts in driving faster penetration of Nexavar in existing liver cancer market and in expanding our reach to additional geographies through approvals and reimbursements with 19%growth in global net sales of Nexavar compared to the same period last year. In May, we delivered on a key corporate milestone when Nexavar was approved in Japan, where liver cancer incident is amongst the highest in the world. This is an important step forward for these patients and a great development for the brand.
With free randomized trials in liver cancer stopped early for efficacy, we are pleased with the clinical data we have amassed to date and look forward to additional opportunities to venture patients with these diseases. To further expand our leadership position in liver cancer, we are conducting a broad clinical program aimed at reaching even more patients at different stages of the disease. This program is generating data across the treatment continuum with a goal of identifying all patients who benefit from Nexavar in doing so earlier in the course of their disease.
In the second quarter, Onyx and Bayer initiated a Phase III trial Nexavar in combination with placebo. This international 700 patient study called the SEARCH trial will examine whether two oral targeted therapies in combination can improve survival compared to Nexavar treatment alone. This study aims to build on the success of Nexavar as a monotherapy in improving overall survival in patients with advanced liver cancer.
Given Nexavar’s efficacy and tolerability profile, we believe that has the potential to become the standard of care across a variety of additional tumor types. Therefore, we have initiated or will be initiating several Phase III and several signal generating Phase II trials that will help us determine potential registration pathways in new indications. We would begin randomized Phase II trials in multiple tumors including ovarian and colorectal cancers, and we recently announced the initiation of a Phase III monotherapy trial in third and fourth line lung cancer.
We also plan to start a Phase III trial in thyroid cancer, given the positive results from a Phase II study in this tumor type, published in last year’s journal of clinical oncology and updated recently at ASCO in June. Our extensive clinical development program clearly speaks to our conviction in the compound and a significant investment we believe is warranted to achieve its full opportunity as a potential blockbuster.
Beyond Nexavar, we have begun building a pipeline with compelling compounds by focusing on identifying and acquiring next generation therapies with broad potential utility. Clinical development of ONX 0803 selective JAK2 inhibitor is ongoing and we expect Phase I results this year. As you recall, we have an option to acquire the development and commercialization rights to all potential indications in the US and Europe for this compound, and for ONX 0805.
Depending upon the results of the Phase I studies for 0803, we may be in a position to exercise our option in this agent before year end. In addition, we are planning to initiate a Phase I trial for ONX 0801, the first in class targeted alpha-folate receptor inhibitor by the end of the year. As we move forward, we continue to evaluate a wide range of corporate development opportunities. We are excited to have already accomplished many of the goals we set out to achieve this year. We believe Nexavar is on the path to block bluster status and that our expanding pipeline compelling clinical programs and ongoing corporate development efforts position Onyx to continue to grow and build sustainable value.
Now, let me turn the call over to Laura Brege to review our commercial progress and provide you with some data highlights.
Thank you, Tony. We are very pleased with the continuing strong performance of Nexavar worldwide. As Tony mentioned, we hit a new sales milestone in the second quarter of 2009 reporting global net sales with Nexavar of $201 million with approximately $53 million in sales generated in the United States and $148 million in sales generated outside of the United States. Importantly, demand grew in all regions of the world.
Looking at the US market, we had the best quarter ever of volume demand with growth of 8% over the first quarter of 2009. Performance was driven by our solid base of oncology prescribes, complemented by the efforts of our recently deployed market development specialists. These specialists were put into place in the third quarter of last year to reach out to non-oncology (inaudible) professionals who are instrumental in treating patients with liver cancer. I am pleased to report that we are seeing strong results from their contributions.
Broader specialists, hepatologists, gastroenterologists and surgeons account for 110% more volume this quarter as compared to this time last year. While oncologists continue to be responsible for the greatest number of prescriptions, prescriptions from the broader specialty groups increased by more than 60% compared to the second quarter of 2008. What we have observed is that, when these physicians write, they are more productive and whether they write or refer, we are accessing patients earlier.
This success reinforces our belief that continued development of the liver cancer market requires a multidisciplinary approach to both commercial and mindful education activities, and we remain committed to expanding on these strong earnings results.
If you turn to Europe, where the country is generating the strongest sales of Nexavar include Germany, France, Italy and Spain. In kidney cancer, the sales, marketing and medical teams have done an excellent of maintaining a significant worldwide market position. As more patients are being treated sequentially, with several targeted therapies to extend their lives, we expect that Nexavar will continue to an important auction for physician.
In liver cancer, we expect strong continued growth as we work to increase penetration of Nexavar existing markets and to expand our reach throughout the broader geographies of Europe including the Mediterranean and Eastern Europe where we believe meaningfully growth opportunities exist.
Turning to the Asian market, China is one of the leading contributors to overall sales for Nexavar. This performance is outstanding and kind of even before government reimbursement for liver cancer has been obtained. Today, most Nexavar patients in China are private-pay, with only a small percentage being covered under multinational insurance. Beyond China, we anticipate approval for liver cancer in Taiwan later this year and expect to receive reimbursement for liver cancer in South Korea sometime early next year.
In Japan, where Onyx receives a 7% royalty on Nexavar sales, we were pleased that Nexavar was approved for the treatment of liver cancer at the end of May. Due to the success we are seeing today in kidney cancer in this market, we expect that Japan will be a significant driver of sales growth over time given the much higher number of annual liver cancers, approximately 14,000 each year compared to approximately 11,000 annual cases of kidney cancer.
In light of our success with two improved monotherapy indications and now the very exciting combination data and breast cancer were even more set fast and our belief the next pharma might bring benefit to patients across a variety of diseases. Now, I would like to spend a moment on our most exciting recent clinical news.
As Tony highlighted in his remarks, we were very pleased to report that one of Phase II breast cancer studies met its primary end point. Achieving a statistically significant improvement and progression free survival with the p-value of 0.00006. This double blind placebo controlled Phase II study randomized 229 locally advanced or metastatic HER-2 negative breast cancer patients. Patients with HER-2 negative breast cancer account for approximately 75% of the total breast cancer pollution. While there is no widely recognized single standard of care for advanced metastatic disease, eager to say that we are extremely excited about what these results could mean for breast cancer patients.
This is the first trial to report data from our comprehensive ongoing breast cancer program. And look for the detailed trial results to be presented in upcoming scientific meeting. In addition to this trial, three randomized Phase II investigator and cooperative group sponsored studies in locally advanced and metastatic breast cancer. We were pleased to report they include a trial to evaluate Nexavar plus paclitaxel in the first line setting, which we expect will report results this year. A trial to evaluate Nexavar plus gemcitabine or cisplatin in the first or second line setting following progression on bevacizumab and a trial to evaluate Nexavar plus docetaxel or letrozole in the first line setting.
Based on the positive Phase II results of Nexavar (inaudible) capecitabine, we are evaluating the best of our impact starts and we will keep you apprised of our progress. We are in the privileged position of having tremendous investor interest in developing Nexavar multiple settings. And there were more than 60 abstracts accepted with data on over 15 tumor types at ASCO. Some of the key presentations include update from liver, thyroid and lung cancers.
In addition to results in solid tumors, there is also data presented on hematologic malignancies. Investigators reported data from Phase I, II trial in patients with acute AML [ph] demonstrating an encouraging early efficacy signal for Nexavar, while administered is a single agent or in combination with chemotherapy. As you have heard, we have comprehensive clinical development programs in a variety of tumor types, and have yet to report our data including long additional combination in breast, colorectal and ovarian cancers.
As mentioned earlier, several new trials in these indications as well as in other tumor types were recently initiated. Next as far as the subject of hundreds of ongoing clinical trials and coactively results from these trial will continue to act on ever expanding base of data as we together work to identify all those patients who could benefit from Nexavar’s treatment.
Let me now turn the call over to Matt Fust for a discussion of our financials.
Thank you, Laura. I am pleased to report that the company was profitable again this quarter and that the Nexavar brand continues to be cash flow positive. Non-GAAP net income for second quarter 2009 was $15 million or $0.27 per share on a fully diluted basis. Non-GAAP net income excludes stock-based compensation expense. Our GAAP net income for second quarter was $9 million or $0.16 per share, again on a fully diluted basis.
Global net sales of Nexavar for second quarter 2009 were $201 million, demonstrating excellent year-over-year growth of 19% compared to $169 million in net sales in second quarter 2008. The average exchange rate during the second quarter 2009 was $1.36 per euro. We are maintaining the global Nexavar net sales guidance for 2009 of $850 million to $875 million. And we anticipate that sales in Japan will contribute meaningfully to the top line in the second half of the year.
Based on a number of factors that may influence performance, we believe it is likely that net sales will not be at the upper end of the guidance range. These factors include the timing of Nexavar marketing and reimbursement approvals in additional countries, the trajectory of Nexavar’s liver cancer voluntary in Japan, general macroeconomic conditions and currency exchange rates.
Shared Nexavar sales and marketing expenses incurred by Onyx and Bayer, which includes cost of goods sold and distribution expenses grew modestly to $74 million for the second quarter 2009 compared to $72 million for first quarter 2009. We are maintaining guidance of an approximately 10% year-over-year increase in shared SG&A from 2008 to 2009 reflecting margin expansion activities and ongoing launches, and anticipate that there will be quarter-to-quarter variability in this expense lawn.
Research and development expense was $28 million in the second quarter 2009, similar to expense in first quarter 2009. R&D expense primarily consists of investment in the Nexavar clinical development program. During the second quarter, two new Phase III trials for Nexavar were initiated. Mission, our monotherapy study of Nexavar in non-small cell lung cancer as such our combination study of Nexavar and Placebo and liver cancer. These trials together with the upcoming initiation to the Phase 3 study in viral cancer, potential increased activity in breast cancer, and the events of the broader Nexavar development program reliantly increase Nexavar R&D spending in the second half of this year.
R&D expense also includes the cost of advancing ONX 0801 towards the clinic. As Tony mentioned, we expect to begin a Phase I clinical trial for ONX 0801 by the end of the year, triggering a milestone payment to BTG. As a reminder, the R&D expense line on our P&L includes half of our development expenses related to Nexavar, Onyx’s non-Nexavar R&D expense and R&D related non-cash stock-based compensation expense.
Onyx’s selling, general and administrative expense was $24 million for second quarter 2009 compared to $22 million in the first quarter of this year. Growth in Onyx SG&A expense primarily reflects headcount-related expenses. This line item includes the cost of our US sales force, the portion of shared Nexavar marketing expenses that we incurred directly, the cost that we incurred for general and administrative support of the company and SG&A related stock-based compensation expense.
Consistent with previous guidance, we continue to expect an increase of approximately 5% in total operating expense for the company over the annualized fourth quarter 2008 levels, excluding one-time charges associated with corporate development. For the second quarter and first half of 2009, we recorded income tax expense of $300,000 which represents alternative minimum tax of 2% of net income, which is owed to Federal State tax authorities.
For the second quarter and first half of this year in accordance with GAAP, we’ve continued our income tax provision on a year-to-date basis, rather than estimating an annual effective tax rate for the full year. The current investment vehicles for cash coupled with current low market interest rates resulted in interest income of approximately $1 million to second quarter 2009 compared to $2.7 million in second quarter of 2008.
Earlier today, we announced our intention to offer subject to market and other conditions, shares of our common stock and convertible senior notes due in 2016, which is unless the first capital raising more than two years. A separate press release was issued and perspective supplements will be filed provided details of our proposed financing transactions. These offerings are being made only means of the prospective supplements and related prospects. I would refer you to the press release and when available the prospective supplements for more specific about the financing because of the context of this public offering, we are unable to say more about the financing on this call.
In summary, I would like to briefly mention Oynx’s achievements over the last year. We have cleared a clear vision for success and we have been executing on these strategies. This direction has directed strong top and bottom line growth for Nexavar, an important new opportunity whether the potential breast cancer indication along with promising early stage pipeline opportunities.
Notably, we have negotiated business development transactions that our P&R friendly and our structure to defer additional investments on until program risk have been reduced. And then importantly we’ve been focused on shareholder value creation. In short, we have been building the fundamentals to grow our business, which is establishing as an emerging bio-pharmaceutical event. From a financial perspective, that strong performance means reinforcing operating discipline as we have done and will continue to do.
I am now going turn the call back over to Tony.
Thanks, Matt. With another quarter of positive cash flow from Nexavar and profitability for the company, these results demonstrate that Onyx is indeed striving with strong fundamental performance. We have a clear vision for corporate growth and our vision to build a leading bio-pharmaceutical company and leverage our strengths and development and commercialization in oncology to ensure mix of our success in existing indications and expands usage in tumors to invest in our portfolio and to actively evaluate new opportunities. We’ve built the very strong business foundation with the drug that is benefiting tens of thousands of patients worldwide and with sales that are generating positive cash flow. Features that distinguish us in this space comparatively. We have put in place the outlook for a success that will drive future growth, hundreds of ongoing clinical trials evaluating Nexavar in a diverse array to tumor types and treatment settings. Continually adding to a compelling body data and positioning us well for a significant upside potential as our breast cancer data demonstrate. And finally, to secure sustained growth we have begun the built the strong portfolio and to expand our opportunities between Nexavar. We believe the groundwork we’ve laid and the opportunities we have in front of us both provide an excellent position to continue building the future we envision for the company.
Operator, we will now open the call for questions.
Thank you. (Operator instructions) Our first question comes from Jim Birchenough from Barclays Capital. Please go ahead.
Jim Birchenough – Barclays Capital
Hi, guys and congratulations on the strong quarter. Just wondering if you could spent a moment previewing round, you are disappoint around business development and specifically whether you would entertain another business development activities that wouldn’t be P&L friendly? I think people have been reassured by the deals you have done so far, but there was some concern that you might contemplate a dilutive transaction in the future and just wondering how you think about that.
Hi, Jim. Let me start with the first part of your question which is the disciplined around BD and I just want to talk a little bit about our process, and it really does constitute what we consider a search in the evaluation process, where we literally scour the entire globe for opportunities. We are very focused on identifying those opportunities which complement our existing strength in oncology development and in commercialization. And I think have been quite successful at turning up a number of potential opportunities, some of which have already resulted in the transactions we did at the end of 2008. So the key message in this portion of my answer should focus on complementing our existing strengths in oncology and a very thorough process of oncology focus search and evaluation.
The two transactions we did last year were earlier stage and by design gives us opportunity to manage the P&L, while we are at the peak of our spending for Nexavar because as these newer compounds come along, we don’t have quite a significant expense burden from them and it gives us an opportunity to manage the spend portfolio. I think as the future transactions, it’s probably premature to speculate. But I think it’s safe to say that we are always looking for very good opportunity and I think the deals we have done demonstrate as a fact that we have shareholders at the top of our line in terms of the kind of transactions and the way we structure them so that they can be penal friendly and that we use our cash resources prudently. And those are the same criteria we will use going forward.
Next question, operator.
Our next question comes from Jessica Li from Goldman Sachs. Please go ahead.
Jessica Li – Goldman Sachs
Thank you for taking my questions. First question with regard to your expense guidance, does it include any potential new business development activities.
Yes. I am going to ask Matt to make a comment and just so I got that, you are asking about the expense guidance, we couldn’t hear that.
Jessica Li – Goldman Sachs
Yes. Matt will comment in just a moment. I think its fair to say that we did build in some expectations around the (inaudible) transaction that we could actually be moving forward first and that is Matt’s comments would trigger our milestone payment. But those are existing corporate development transaction opportunities. Matt, do you want to comment?
Sure, Tony. Consistent with Tony just mentioned as we built our operating plan and laid out our guidance for the year, we were able to build out based on what we have in hand, which is obviously the Nexavar franchise and the R&D investment opportunities along with ONX 0801 moving as Tony said towards the clinic by the end of the year. As you recall, the other development programs that we currently have as part of our portfolio, the two compounds that we are in partnership with Bayer are components for which we have an option, but are not currently incurring R&D expense. So if any R&D expense that might be associated with a future exercise of that option should we decide to do so or other future business development activities are not build into our guidance at this point, since we obviously don’t the details of those programs from which we build in the development expense forecast.
Okay. Thanks, Jessica. Next question operator.
Our next comes from Howard Liang with Leerink Swann. Please go ahead.
Howard Liang – Leerink Swann
Thanks very much. Can you talk about where do you feel candidates for next part in Phase III trials? You mentioned thyroid and breast cancer, can you talk about where it might be contemplating additional Phase III trials in lung cancer? There are some data presented in combination with Nexavar – in combination with Tarceva randomized Phase II trial that seem to show a part of the signal, will that be a phase III trial or in combination with Tarceva?
Yes. Let me, if I can, Howard, just back up a little bit and talk about our lung cancer program together with Bayer, we have got a broad lung cancer program. The nearest of opportunity there is with the Nexus trial, which is our first line trial with the combination with gemcitabine and cisplatin. That has completed enrollment earlier this year and we are looking forward to analyzing those data once all the events have appropriately approved. To complement that study which is a study of Nexavar in combination with standard chemotherapy, we have also initiated a trial of Nexavar as mono therapy in third and fourth line patients with non small cell lung cancer, and that is I think that is testing a slightly different hypothesis, whether in the later stage setting monotherapy might actually rescue of the survival benefit potentially. The third potential area for us is the one that you mentioned, which is the very exciting Phase II data of Nexavar in combination with Tarceva that was presented at ASCO recently. I am going to ask Todd Yancey, our Vice President of Clinical Development to talk a little bit those data, but I think its very fair to say that we’ve made no plans as of yet to add back to our non-small cell lung cancer program, but are evaluating it as potential opportunity. Todd?
So, Howard, just to add to Tony’s comments, we are evaluating the opportunities in the second line with Nexavar in combination with established agents including Tarceva but not limited to Tarceva, we have an ongoing trial as well in combination with Alimta and we are evaluating the combination with docetaxel. As Tony indicated, we did see the data on the combination of Nexavar and Tarceva at ASCO in the first line setting where a non-progression rate at six weeks up 74% was achieved. As well, Dr. David Spiegel presented this week data for the combination of Nexavar and Tarceva in the second line setting and that data is available a line, but affirmed our belief going into the clinical trial that this would be a tolerable combination and that would bring incremental value for patients in the second line setting. And on basis of those data sets and a few additional that are available, we will access what our opportunities after this particular patient population.
I will add Howard, that we are setting Nexavar and Tarceva in combination with liver cancer. So we will get some information there about how these two drugs together might actually be helpful in that particular indication. Thank you. Next question?
Our next question comes from Jason Zhang from BMO Capital Markets. Please go ahead.
Jason Zhang – BMO Capital Markets
Okay. Thanks for taking my questions. You said that you are not going to talk too much about the transaction, can I just ask a question from a different angle that you have more than $460 million cash, you have licensed to earlier stage compounds, if you try to really build a balanced pipeline, I guess we can assume that your focus will be more on the late stage component and that probably the way you are doing the transaction because of later stage compound clearly might cost more. And I am just wondering whether it's rather -- the reason behind this is still more of an opportunistic transaction that you wanted to have the money prepared for future opportunities that might arise.
I think Jason, what I would probably correct one assumption in your comments and that is to advice everyone that we continue to look at opportunities at every stage and continue to look at opportunities that are early stage and intermediate stage as well. So it would be wrong to assume that we are only interested in late state opportunities, in fact we think that we like the pipeline that we have now and we are continuing to consider phase I and preclinical assets as part of the mix of things that we clearly take on. So I don’t think you should necessarily consider that we would go for late stage opportunity. I think that’s fair on the financing. Okay, next question?
Our next question comes from David Moskowitz from Caris & Company. Please go ahead.
David Moskowitz – Caris & Company
Thanks for taking my questions. So first of all, just quickly on the strike price of the convert, I imagine what it says there, the 20% to 25% premium that would be from where the deal prices, is that correct?
David, this is Matt. Unfortunately because this is a transaction in registration, I am not going to be able to provide any specific comments on the terms of the financing on today’s call.
David Moskowitz – Caris & Company
Okay. And just over to the potential amount of cash that you could have on the balance sheet, could you talk a little bit about the business development strategy and what’s embedded in the need for having more than $750 million bucks on the balance sheet. So are you talking about a mega deal? Doesn’t look like this would be enough money to do a mega deal. Or we talking about a high number of products or we talking about the few products with a lot of spend around them say $100 million on each products. Can you give us a little color around the type of BD that you might be engaging in?
I think David you might have joined the call after I commented to Jim Birchenough’s question, but I will repeat that in summary. We’ve got a very disciplined BD approach and we use it as our searching evaluation engine, if you will, since we don’t have discovery, and are looking at a variety of opportunities across the stages. The transactions we did in 2008 have served us quite well and continue to be interested literally across the spectrum of opportunities.
Most important point, I would like to leave you with is that oncology is our focus, its where we got our greatest strength and which way we have the greatest synergistic opportunities and so we like very much staying focused in oncology for the time being and beyond that, we look to sign -- potentially take us where it might in terms of other therapeutic areas. But I think it's very clear from the transactions that we done that we are thoughtful about the operating statement and how we manage the operating statement, and how we use cash and we will bring that same discipline forward and the way we think about the balance sheet going forward. Next question, operator?
Our next question comes from Chris Raymond from Robert W. Baird & Co. Please go ahead.
Blake Arnold – Robert W. Baird & Co.
Yes. Hi, this is Blake Arnold calling in for Chris Raymond. Thanks for taking my questions. Once you comment on how much room do you think you have for additional Nexavar price increases going forward and also how does US price for Nexavar compared to Europe and also Southeast Asia? Thanks.
Sure. Laura would love to talk a little bit about that. Laura?
Sure. Thank you, Tony. So let me start with the second part of your question, which is how does Nexavar fit worldwide enterprising and from the very beginning together with our partner Bayer, we have been successful in being able to Nexavar at the good price in terms of those value, worldwide and the recently tight then. So I would say that while it fluctuates in terms of currency, in fact the prices really will establish worldwide. We are committed and as you talk about the US, we are committed to making certain that Nexavar is available the broader set of patients that are possible to be able to get the benefit of Nexavar. And so to that end, a way to think about that is about 70% commercial patients have $50 or less co-pay each month and we have various patient assistance program which have been in place from the very beginning of the launch of the product in order to help people to think a partial or full aid.
Okay. Thanks, Laura. Okay, operator, next up?
Our next question comes from Derek Jellinek from Boenning & Scattergood. Please go ahead.
Derek Jellinek – Boenning & Scattergood
Right. Thanks for my taking question. Just quick from me, maybe you can comment, and Laura as well, what do you see as an opportunity in breast cancer, given a vast needs placement. And for Matt, the expense structure on the VC going forward, you are looking at 10% over 2008, in fact we had almost the $300 million plus for ’09, you did 146 in the first half, that’s a double going into the second half. Can you kind of comment on that? Thanks.
Derek, we'll take the breast cancer question, opportunity question. And then I may ask you to repeat the second part of your question because fro some reason, you – but I think we may actually have captured as if we don’t then let us know. Laura, you want to talk about breast cancer opportunity?
Sure. As Tony said in his prepared remarks, 1.3 million breast cancer patients worldwide and 75% of them actually are not well severed in terms of what availability they have in the HER-2 negative population. So as we look forward for what Nexavar can add in this trial in the quarter as the opportunity to show in combination with the oral chemotherapy (inaudible) what the potential for Nexavar could be as two oral agents. For the first combination ever that might be able to provide benefit to patients there. So if I look at it, a devastating disease worldwide with more than 75% of those 1.3 million patients who could be potential for Nexavar as we look forward.
Okay. Good and I think Matt let me just toss it to you and see if we can't get this addressed.
Derek, so I understood your question correctly. You were focused on the expansions reported as part of the collaboration P&L, and in particular the combined positive goods distribution and SG&A line. There we have given guidance as I reaffirmed in our prepared remarks that we expect to file could increase by approximately 10% over the level in 2009. Fortunately we have been able to disciplined collaboration with our partner Bayer to manage that expense line tightly through the first half of the year supporting the ongoing product launch and commercial activities worldwide, while actually improving the leverage relative to the expense line item. We are maintaining our guidance at this point, but obviously will continue to closely monitor expenses as part of the financial oversight of the collaboration as we move through the second half of the year. So no change in the guidance at this point, but we are pleased, that we have to manage that expense number through the first half.
Okay. Very Good. I think we are ready for next and operator?
Our next question comes from Phil Nadeau with Cowen and Company. Please go ahead.
Phil Nadeau – Cowen and Company
Good evening. Thanks for taking my question. It’s actually another one on the transaction; I hope you can answer and that’s on the timing of the transaction. Your stocks moved pretty significantly after the breast cancer data for top line release, but we still haven't seen the full data. So, why do a raise now? I think some people are going to interpret this as a lack of confidence and what the detailed breast cancer data are going to look like, just hoping you could comment it.
Yes. I think Phil, you know that, I won't be able to comment on the timing for the raise, just given everything that Matt has already provided about referring it to the press release, but I would love to talk about the breast cancer data and focus everyone there. I think it's extraordinary when you find the results with this degree of statistical significance and I think that they are almost once in a lifetime opportunity to determine these kinds of results and try to understand the clinical significance. We are expecting that the medical meeting later this year, we will be able to share the full data set and work closely with the principal investigator to make that happen, but let me reassure you that as a former practicing physician, we're very confident and very comfortable with the statistical significance of the finding and believe that when the full data set are shared with everyone, that you'll be as thrilled and as pleased as we are around these particular findings.
Okay. I think operator that may be all the time we have for the day. Let me just close, if I can, with a couple of thoughts. We really couldn’t be more pleased with the progress we have made really just in the first half of the year. It’s hard to believe that it's August already, but we have made a stunning amount of progress in the business, but on the operating side, the financial performance side of the business and the clinical side and are just thrilled and enthused about the breast cancer opportunity that we have in front of us. Thank you for joining us today. We will provide updates regarding the discussion of the breast cancer data at the medical meeting later this year and we look forward to providing additional updates on business performance. Thanks again and good evening.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may all disconnect.
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