<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________to______________
Commission File Number: 0-28298
-------
ONYX PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3154463
-------- ----------
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
3031 Research Drive
Richmond, California 94806
(Address of principal executive offices)
(510) 222-9700
(Registrant's telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
(XX) Yes ( ) No
The number of outstanding shares of the registrant's Common Stock, $0.001 par
value, was 17,947,054 as of November 1, 2000.
<PAGE>
ONYX PHARMACEUTICALS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Balance Sheets - September 30, 2000 and
December 31, 1999 3
Condensed Statements of Operations - Three and Nine Months
Ended September 30, 2000 and 1999 4
Condensed Statements of Cash Flows - Nine Months ended
September 30, 2000 and 1999 5
Notes to Condensed Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 20
PART II: OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
EXHIBIT INDEX 23
</TABLE>
2
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ONYX PHARMACEUTICALS, INC.
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------------- ----------------
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 25,897 $ 12,671
Short-term investments 7,334 1,792
Receivable from related party 4,820 3,300
Other current assets 905 460
----------------- ----------------
Total current assets 38,956 18,223
Property and equipment, net 3,214 3,000
Notes receivable from related parties 322 386
Other assets 56 19
----------------- ----------------
$ 42,548 $ 21,628
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,570 $ 2,149
Accrued liabilities 1,482 1,194
Accrued clinical trials and related expenses 2,193 1,110
Accrued compensation 853 1,250
Deferred revenue 2,597 3,548
Long-term debt, current portion 733 2,199
----------------- ----------------
Total current liabilities 9,428 11,450
Long-term debt, noncurrent portion - 183
Long-term deferred revenue 958 2,333
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none
issued and outstanding - -
Common stock, $0.001 par value; 50,000,000 shares authorized; 14,486,403
and 11,551,681 shares issued and outstanding as of September 30, 2000
and December 31, 1999, respectively 14 12
Additional paid-in capital 114,367 85,723
Accumulated deficit (82,219) (78,073)
----------------- ----------------
Total stockholders' equity 32,162 7,662
----------------- ----------------
$ 42,548 $ 21,628
================= ================
</TABLE>
See accompanying notes.
3
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ONYX PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- --------------------------------
2000 1999 2000 1999
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Revenue:
Contract and other revenue $ 66 $ 290 $ 243 $ 1,292
Contract revenue from related parties 4,929 1,406 19,599 5,431
------------- ------------- ------------- ---------------
Total revenue 4,995 1,696 19,842 6,723
Operating expenses:
Research and development 7,570 5,422 19,940 16,548
General and administrative 1,903 1,240 5,563 4,001
------------- ------------- ------------- ---------------
Total operating expenses 9,473 6,662 25,503 20,549
------------- ------------- ------------- ---------------
Loss from operations (4,478) (4,966) (5,661) (13,826)
Interest income, net 574 168 1,515 671
------------- ------------- ------------- ---------------
Net loss $(3,904) $(4,798) $(4,146) $(13,155)
============= ============= ============= ===============
Basic and diluted net loss per share $ (0.27) $ (0.42) $ (0.30) $ (1.14)
============= ============= ============= ===============
Shares used in computing basic and diluted net loss per
share 14,399 11,525 14,036 11,492
============= ============= ============= ===============
</TABLE>
See accompanying notes.
4
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ONYX PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,146) $ (13,155)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 1,117 1,601
Forgiveness of notes receivable 43 72
Stock-based compensation and amortization of deferred compensation 1,353 165
Changes in assets and liabilities:
Receivable from related party (1,520) -
Other current assets (461) (96)
Other assets (37) 27
Accounts payable (579) (727)
Accrued liabilities 288 (305)
Accrued clinical trials and related expenses 1,083 (1,177)
Accrued compensation (397) (178)
Deferred revenue (2,326) (1,233)
Deferred rent - (28)
-------------- --------------
Net cash used in operating activities (5,582) (15,034)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (9,069) (2,045)
Sales and maturities of short-term investments 3,527 9,776
Capital expenditures (1,331) (1,034)
Notes receivable from related parties 37 150
-------------- --------------
Net cash (used in) provided by investing activities (6,836) 6,847
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (1,649) (1,650)
Net proceeds from issuances of common stock, net of repurchases 27,293 249
-------------- --------------
Net cash provided by (used in) financing activities 25,644 (1,401)
-------------- --------------
Net increase (decrease) in cash and cash equivalents 13,226 (9,588)
Cash and cash equivalents at beginning of period 12,671 21,368
============== ==============
Cash and cash equivalents at end of period $ 25,897 $ 11,780
============== ==============
</TABLE>
See accompanying notes.
5
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ONYX PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
nine months ended September 30, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000, or for any
other future operating periods.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the financial statements and footnotes thereto
included in the Onyx Pharmaceuticals, Inc. (the "Company" or "Onyx") Annual
Report on Form 10-K for the year ended December 31, 1999.
NOTE 2. NET LOSS PER SHARE
Basic and diluted net loss per share have been computed using the
weighted-average number of shares of common stock outstanding during the
period. Common Stock equivalents have been excluded since their effect is
antidilutive.
NOTE 3. COMPREHENSIVE LOSS
As of January 1, 1998, the Company adopted FASB Statement No. 130, or SFAS 130,
"Reporting Comprehensive Income." SFAS 130 establishes new rules for the
reporting and display of comprehensive income and its components; however, the
adoption of SFAS 130 had no impact on the Company's net loss or stockholders'
equity. SFAS 130 requires unrealized gains or losses on available-for-sale
securities, which prior to adoption were reported separately in stockholders'
equity, to be included in other comprehensive income (loss). During the three
and nine month periods ended September 30, 2000 and September 30, 1999, total
comprehensive loss equaled net loss.
NOTE 4. RECENTLY ISSUED ACCOUNTING STANDARDS
In July 1999, the FASB announced the delay of the effective date of Statement
of Financial Reporting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," or SFAS 133. Also, in June 2000, the
FASB issued Statement of Financial Reporting Standards No. 138, an amendment
to SFAS 133. SFAS 133, as amended, requires that all derivative instruments
be recorded on the balance sheet at their fair value. Change in the fair
value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designed as part
of a hedge transaction, and, if so, the type of hedge transaction. We must
adopt SFAS 133, as amended, on January 1, 2001. Management does not currently
expect that adoption of SFAS 133, as amended, will have a material impact on
our financial position or results of operations.
On March 31, 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation," or FIN 44, which provides
guidance on several implementation issues related to Accounting
6
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ONYX PHARMACEUTICALS, INC.
Principles Board Opinion No. 25. The adoption of FIN 44 on July 1, 2000 did
not have a material effect on the financial position or results of operations
of the Company.
In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements,"
or SAB 101, which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. We are currently evaluating
the impact of SAB 101 and the related "Frequently Asked Questions Document"
issued on October 13, 2000 on our revenue recognition policy related to our
collaborative research and development agreements. Required adjustments, if
any, to the reporting of revenues would be recognized as a cumulative effect
of a change in accounting principle in the fourth quarter of 2000.
NOTE 5. SUBSEQUENT EVENT
On October 12, 2000, the Company sold 3.0 million shares of common stock at a
price of $15.00 per share in a public offering. On October 20, 2000, the
underwriters exercised an option to purchase an additional 450,000 shares of
common stock at a price of $15.00 per share to cover over allotments. The
Company received an aggregate of $48.6 million of net proceeds from this public
offering.
7
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ONYX PHARMACEUTICALS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. WHEN USED HEREIN, THE WORDS "MAY," "WILL," "EXPECTS,"
"ANTICIPATES," "ESTIMATES," "INTENDS," "PLANS," "PREDICTS," "POTENTIAL,"
"BELIEVE," "SHOULD," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH UNDER "BUSINESS RISKS."
OVERVIEW
We are engaged in the discovery and development of novel cancer therapies.
Based on our proprietary virus technology, we are developing our lead
product, CI-1042 (formerly ONYX-015). We have completed two Phase II clinical
trials evaluating CI-1042 as a treatment for head and neck cancer. Based on
the results from these trials and in collaboration with Warner-Lambert
Company, a wholly-owned subsidiary of Pfizer, Inc., we recently initiated a
300-patient, multi-center Phase III clinical trial of CI-1042 for head and
neck cancer. We are also evaluating CI-1042 in clinical trials for a number
of additional cancer indications. Further, in collaboration with Bayer
Corporation, we have initiated a Phase I clinical trial for a small molecule
anticancer compound.
We have not been profitable since inception and expect to incur substantial and
increasing losses for the foreseeable future, primarily due to expenses
associated with the expansion of our self-funded virus research and development
programs. We expect that losses will fluctuate from quarter to quarter and that
such fluctuations may be substantial. As of September 30, 2000, our accumulated
deficit was approximately $82.2 million.
Our business is subject to significant risks, including the risks inherent in
our research and development efforts, the results of the CI-1042 clinical
trials, uncertainties associated with obtaining and enforcing patents, the
lengthy and expensive regulatory approval process and competition from other
products. We do not expect to generate revenues from the sale of proposed
products in the foreseeable future. We expect that all of our revenues in the
foreseeable future will be generated from collaboration agreements.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999.
REVENUES
Our revenues increased 195 percent to $5.0 million for the three months ended
September 30, 2000 and 195 percent to $19.8 million for the nine months ended
September 30, 2000 as compared to the same periods in 1999. Revenues were
$1.7 million for the three months ended September 30, 1999 and $6.7 million
for the nine months ended September 30, 1999. Revenues for the three and nine
months ended September 30, 2000 and the same periods in 1999 were primarily
attributable to amounts earned for research performed under our
collaborations with Warner-Lambert. The increase in revenues for the three
and nine months ended September 30, 2000 as compared to the same periods in
1999 is due primarily to revenue recognized from our agreement with
Warner-Lambert to develop and commercialize CI-1042 as well as two additional
product candidates. We did not have this agreement during the first nine
months of 1999. Total revenue for the nine months ended September 30, 2000
also included earning $3.7 million for the achievement of a milestone related
to this agreement.
8
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ONYX PHARMACEUTICALS, INC.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased 40 percent to $7.6 million for the
three months ended September 30, 2000 and 20 percent to $19.9 million for the
nine months ended September 30, 2000 as compared with $5.4 million and $16.5
million for the same periods in 1999. The increase in expenses for the three and
nine months ended September 30, 2000 as compared to the same periods in 1999 was
primarily due to increased clinical trial expenses. In collaboration with Bayer,
we have initiated a Phase I clinical trial in Germany of a ras pathway
inhibitor. We are currently co-funding 50 percent of clinical development costs.
Also contributing to the increase in research and development expenses for the
nine months ended September 30, 2000 were increased contract manufacturing
expenses as we scale-up production to provide CI-1042 for our Phase III clinical
trials that commenced in June 2000. We expect to continue to expand the scope of
our self-funded virus research and development programs in future periods, which
may result in substantial increases in research and development expenses.
Collaborators may not fund these research and development expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased 53 percent to $1.9 million for
the three months ended September 30, 2000 and 39 percent to $5.6 million for
the nine months ended September 30, 2000 as compared with $1.2 million and
$4.0 million for the same periods in 1999. The increase in expenses for the
three and nine months ended September 30, 2000 as compared to the same
periods in 1999 was primarily due to increased employee-related expenses for
the hiring of additional staff. General and administrative expenses may
continue to increase at comparable levels in future periods to support our
research and development efforts.
NET INTEREST INCOME
We had net interest income of $0.6 million for the three months ended
September 30, 2000 and $1.5 million for the nine months ended September 30,
2000 as compared with $0.2 million and $0.7 million for the same periods in
1999. The increase in net interest income was principally due to increased
cash and investment balances from the $18.0 million private placement
financing of common stock in January 2000 and the $5.0 million common stock
issuance to Warner-Lambert in February 2000, resulting in more interest
income for the three and nine-month periods ended September 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, our cash expenditures have substantially exceeded our
revenues, and we have relied primarily on the proceeds from the sale of equity
securities and revenues from collaborative research and development agreements
to fund our operations.
At September 30, 2000, we had cash and investments of $33.2 million compared
with $14.5 million at December 31, 1999. The increase in cash and investments of
$18.8 million at September 30, 2000, compared with December 31, 1999, is due to
the private placement of common stock completed in January 2000, which raised
$18.0 million and the sale of our common stock to Warner-Lambert in February
2000, which raised $5.0 million. In addition, $4.4 million of cash was received
from the exercise of stock options. These increases were partially offset by
cash used in operations of $5.6 million and repayment of debt of $1.6 million.
In addition, we raised $48.6 million in net proceeds from our public offering of
3.45 million shares of our common stock in October 2000 (see footnote 5).
9
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ONYX PHARMACEUTICALS, INC.
Total capital expenditures for equipment and leasehold improvements for the
nine-month period ended September 30, 2000, were $1.3 million. We currently
expect to make expenditures for capital equipment of approximately $0.7 million
for the remainder of 2000.
We also have the right to cause Warner-Lambert to purchase an additional $5.0
million of our common stock during calendar year 2001. If we exercise this
right, we would sell common stock to Warner-Lambert at the trailing average
closing price per share of our common stock over the twenty-day period
commencing two days prior to exercise.
We believe that our existing capital resources and interest thereon including
approximately $48.6 million of net proceeds from our public offering in October
2000 and anticipated revenues from existing collaborations will be sufficient to
fund our current and planned operations through at least September 2002. We
cannot assure you, however, that changes in our research and development plans,
revenues from collaborators or other changes affecting our operating expenses
will not result in the expenditure of these resources before September 2002, and
in any event, we will need to raise substantial additional capital to fund our
operations in future periods. We intend to seek additional funding through
collaborations, public and private equity or debt financings, capital lease
transactions or other financing sources that may be available. However, we
cannot assure you that additional financing will be available on acceptable
terms or at all. If additional funds are raised by issuing equity securities,
substantial dilution to existing stockholders may result. If adequate funds are
not available, we may be required to delay, reduce the scope of or eliminate one
or more of our research or development programs or to obtain funds through
collaborations with others that are on unfavorable terms or that may require us
to relinquish rights to certain of our technologies, product candidates or
products that we would otherwise seek to develop on our own.
BUSINESS RISKS
IF WE ARE NOT ABLE TO DEMONSTRATE THE EFFECTIVENESS OF CI-1042 IN OUR CLINICAL
TRIALS OR IF OUR CLINICAL TRIALS ARE DELAYED, WE MAY BE UNABLE TO COMMERCIALIZE
CI-1042.
We have completed Phase II clinical trials designed to obtain safety and
effectiveness trend information for CI-1042 for the treatment of head and neck
cancer, both as a single agent and in combination with chemotherapy. Based on
data from these Phase II clinical trials, we, together with Warner-Lambert, have
recently initiated a Phase III clinical trial designed to obtain effectiveness
information for CI-1042 for the treatment of head and neck cancer that has
progressed following initial treatment with surgery and/or radiation, or
recurrent disease. Historically, many companies have failed to demonstrate the
effectiveness of pharmaceutical products in Phase III clinical trials
notwithstanding favorable results in Phase II clinical trials. We may fail to
demonstrate desired effectiveness levels in our Phase III clinical trial of
CI-1042. In addition, we may observe previously unforeseen side effects. We may
fail to extend the findings of previous clinical trials in our Phase III
clinical trial of CI-1042, including similar tumor response rates, duration of
tumor response or safety.
The process of obtaining Food and Drug Administration, or FDA, and other
required regulatory approvals, including foreign approvals, often takes many
years and can vary substantially based upon the type, complexity and novelty of
the products involved. We have had only limited experience in filing and
pursuing applications necessary to gain regulatory approvals. The FDA may not
accept the results of our Phase III clinical trial, or accept as sufficient for
market approval other elements of the application that we may file for CI-1042.
The FDA may require additional clinical trials, which may be extensive,
expensive and time-consuming. We cannot market CI-1042 unless we receive
regulatory approval.
In addition, in our clinical trials we treat patients who have failed
conventional treatments and who are in advanced stages of cancer. During the
course of treatment, these patients may die or suffer adverse medical effects
for reasons that may be unrelated to CI-1042. These adverse effects may impact
the interpretation of clinical trial results.
10
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ONYX PHARMACEUTICALS, INC.
WE MAY FAIL TO DEMONSTRATE THAT CI-1042 IS EFFECTIVE FOR THE TREATMENT OF OTHER
TYPES OF CANCER EVEN IF CI-1042 IS PROVEN EFFECTIVE FOR THE TREATMENT OF HEAD
AND NECK CANCER.
We are initially developing CI-1042 for treatment of head and neck cancer, using
intratumoral injection. Even if we are successful in developing CI-1042 for this
type of cancer, we may not demonstrate that CI-1042 is effective in the
treatment of a broader array of cancer types. We are currently conducting a
Phase I/II clinical trial for treatment of liver metastases of colorectal cancer
with CI-1042 administered through an artery leading to the liver, or
intrahepatic artery infusion. In addition, we are in the process of completing
Phase I/II clinical trials for CI-1042 for treatment of pancreatic cancer. The
Phase I/II clinical trial in liver metastases of colorectal cancer is based on a
small number of patients and we may not reproduce the results from these
clinical trials in future clinical trials with additional patients. In addition,
we may not succeed in our efforts to deliver CI-1042 to tumors through routes
other than intratumoral injection and intrahepatic artery infusion. If we are
not successful in developing additional routes of administration for CI-1042, or
establishing its effectiveness in a broad range of cancer types, CI-1042 may not
have a broad commercial use.
WE DO NOT FULLY UNDERSTAND THE BIOLOGICAL CHARACTERISTICS OF OUR THERAPEUTIC
VIRUSES, AND THEIR INTERACTIONS WITH OTHER DRUGS AND THE HUMAN IMMUNE AND OTHER
DEFENSE SYSTEMS, WHICH MAY CAUSE US TO FAIL TO DEMONSTRATE THE SAFETY AND
EFFECTIVENESS OF OUR PRODUCTS IN CLINICAL TRIALS.
Therapeutic viruses are novel and we are still determining the biological
characteristics of these viruses. For example, in our clinical trials to date,
we have achieved the best results when CI-1042 is used in combination with
standard chemotherapy drugs, but we are uncertain as to the reasons for and the
nature of the interaction of the virus with these drugs. In addition, we are
still investigating the response of the human immune system to our therapeutic
viruses, and the immune system may play a role in limiting the tumor-killing
effect of our therapeutic viruses. We also do not know the extent the human body
may clear our therapeutic viruses from circulation in the bloodstream and limit
the tumor-killing activity of our therapeutic viruses. Further, we are uncertain
as to whether the killing activity of CI-1042 is specific to cells having the
abnormal function involving the p53 gene. Moreover, we do not understand all of
the many factors that contribute to the formation of each individual patient's
cancer. These factors include not only the cancer type, but also the pressures
within the tumor and the presence of normal cells and fibrous tissue within the
tumor. These factors make each tumor unique. Because of the variety of factors,
some cancer patients respond to a particular type of cancer therapy while others
do not, even among patients with the same cancer type. The novelty and
scientific uncertainties regarding our therapeutic viruses and the uniqueness of
human cancers from patient-to-patient increase the risk that we will not
successfully develop our product candidates or prove their safety and
effectiveness in clinical trials. Even if we succeed in developing our product
candidates, our product candidates may not have a therapeutic effect in a broad
patient population.
WE ARE DEPENDENT UPON COLLABORATIVE RELATIONSHIPS TO DEVELOP, MANUFACTURE AND
COMMERCIALIZE OUR PRODUCTS AND TO OBTAIN REGULATORY APPROVAL, WHICH COULD DELAY
THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS.
Our strategy for developing, manufacturing and commercializing our products and
obtaining regulatory approval depends in large part upon maintaining and
entering into collaborative agreements with pharmaceutical companies or other
collaborators. We have entered into a number of collaborative agreements with
different parties, including research, development and marketing agreements with
Warner-Lambert and Bayer. If we fail to maintain these collaborative
relationships or to establish new collaborative relationships, we would need to
undertake these research, development and marketing activities at our own
expense, which would significantly increase our capital requirements and limit
the programs we are able to pursue. Further, we would incur significant delays
with the development, manufacture or sale of our products.
We are subject to a number of risks associated with our dependence upon
collaborative relationships, including:
- the amount and timing of expenditure of resources can vary for
reasons outside our control;
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ONYX PHARMACEUTICALS, INC.
- business combinations and changes in a collaborator's business
strategy may adversely affect the party's willingness or
ability to complete its obligations under the collaboration
agreement with us;
- the right of the collaborator to terminate its collaboration
agreement with us on limited notice and for reasons outside
our control;
- loss of significant rights to our collaborative parties if we
fail to meet our obligations under these agreements;
- disagreements as to ownership of clinical trial results or
regulatory approvals, and the refusal of the FDA to recognize
us as holding the regulatory approvals necessary to
commercialize our products;
- withdrawal of support by a collaborator following the
development or acquisition by the collaborator of competing
products; and
- disagreements with a collaborator regarding the collaboration
agreement or ownership of proprietary rights.
Due to these factors and other possible disagreements with collaborators, we
could suffer delays in the research, development or commercialization of our
products or we may become involved in litigation or arbitration, which would be
time consuming and expensive.
CHIRON MAY HAVE PREFERENTIAL RIGHTS TO ESTABLISH COLLABORATIONS WITH US, WHICH
MAY COMPLICATE OUR FUTURE COLLABORATIVE ARRANGEMENTS.
We were established in April 1992 by means of a transfer from Chiron Corporation
to us of the drug discovery program conducted at Chiron by Dr. Frank McCormick,
our scientific founder, and his research team. Under the agreement executed at
that time, we granted Chiron preferential rights to receive product licenses in
the fields of diagnostics and vaccines, and also established a mechanism for our
making proposals to Chiron for future collaborations. Chiron has advised us that
it believes this mechanism requires us to offer gene therapy programs to Chiron
before licensing any of these programs to a third party. We and Chiron have
different interpretations of this agreement as it relates to the scope of
Chiron's rights. We executed our agreement with Warner-Lambert for the
development of CI-1042 and two other virus products pursuant to a waiver letter
from Chiron. If Chiron does not grant us further waivers and asserts rights
under the April 1992 agreement, or if disputes arise, we may encounter
difficulties or delays in entering into future collaborations for other product
candidates.
PFIZER HAS ACQUIRED WARNER-LAMBERT, WHICH COULD RESULT IN THE MODIFICATION,
DISRUPTION OR TERMINATION OF OUR COLLABORATIVE RELATIONSHIP WITH WARNER-LAMBERT.
In June 2000, Pfizer acquired Warner-Lambert. As the parent of Warner-Lambert,
Pfizer may not be interested in continuing the multiple research and development
and marketing collaboration agreements we have with Warner-Lambert, including
the collaboration agreement related to CI-1042, in part because these
collaborations may address smaller markets than Pfizer generally seeks to
address. Pfizer may have no interest in commercializing CI-1042 for tumor types
where CI-1042 is administered by intratumoral injections or intrahepatic artery
infusions. In addition, Pfizer may have no interest in the development of
therapeutic viruses. As the parent of Warner-Lambert, Pfizer could cause
Warner-Lambert to modify, disrupt or terminate the collaborative agreements we
originally entered into with Warner-Lambert, subject to the terms of these
agreements. Under the agreement relating to CI-1042, Warner-Lambert has the
right to terminate the agreement for any reason with 90 days notice, in which
case Warner-Lambert is required to return all rights to CI-1042 to us
royalty-free.
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ONYX PHARMACEUTICALS, INC.
If Warner-Lambert terminates our agreement relating to CI-1042, we would lose a
significant portion of the $40 million of funding for the development of
CI-1042, including the cost of clinical trials, which Warner-Lambert had agreed
to provide under the agreement. In addition, we would not have access to
Warner-Lambert's sales and marketing capabilities and expertise to commercialize
CI-1042 as provided in the agreement. We currently intend to rely on the sales
and marketing services provided to us under the agreement. Further, if
Warner-Lambert terminates our agreement relating to CI-1042 and does not agree
to manufacture CI-1042 for commercial use, we would have to establish an
alternative manufacturing source for CI-1042. If we need to establish an
alternative manufacturing source for CI-1042, we will experience a delay in
completing our Phase III trials and submitting applications for regulatory
approval.
WE DO NOT HAVE MANUFACTURING EXPERTISE OR CAPABILITIES AND ARE DEPENDENT ON
THIRD PARTIES TO FULFILL OUR MANUFACTURING NEEDS, WHICH COULD RESULT IN THE
DELAY OF CLINICAL TRIALS OR REGULATORY APPROVAL.
We lack the resources, experience and capabilities to manufacture our products
on our own. We would require substantial funds to establish these capabilities.
Consequently, we are dependent on third parties, including collaborative parties
and contract manufacturers, to manufacture our products and product candidates.
These parties may encounter difficulties in production scale-up, including
problems involving production yields, quality control and quality assurance and
shortage of qualified personnel. These third parties may not perform as agreed
or may not continue to manufacture our products for the time required by us to
successfully market our products. These third parties may fail to deliver the
required quantities of our products or product candidates on a timely basis and
at commercially reasonable prices. Failure by these third parties could delay
our clinical trials and our applications for regulatory approval. If these third
parties do not adequately perform, we may be forced to incur additional expenses
to pay for the manufacture of our products or to develop our own manufacturing
capabilities.
WE CURRENTLY RELY ON A SOLE SOURCE OR LIMITED NUMBER OF SOURCES FOR THE
MANUFACTURING OF CI-1042, AND IF THESE SOURCES ARE UNABLE OR UNWILLING TO
DELIVER THE REQUIRED QUANTITIES, WE MAY NOT BE ABLE TO FIND REPLACEMENT
MANUFACTURERS, WHICH COULD RESULT IN A DELAY IN CLINICAL TRIALS OR IN REGULATORY
APPROVAL.
We currently rely on a sole source contract manufacturer for the supply of
CI-1042 for Phase III clinical trials. This contract manufacturer has produced
multiple batches of material for our Phase III clinical trials. However, we and
Warner-Lambert have held up final release of some of this material until the
manufacturer completes documentation that complies with Warner-Lambert's and our
manufacturing standards. We will limit the number of clinical sites that are
enrolling patients for the Phase III clinical trial until product release is
occurring on a routine basis. If our contract manufacturer is unable or
unwilling to deliver the required quantities of CI-1042 on a regular basis or
terminates our relationship, we will need to find a replacement manufacturer and
we may not find a replacement manufacturer within a reasonable amount of time or
at commercially reasonable rates. This could delay our clinical trials and our
applications for regulatory approval. If this third party fails to supply us
with sufficient materials, we may be forced to incur additional expenses to pay
for the manufacture of materials, if we can find a replacement manufacturer, or
to develop our own manufacturing capabilities.
WE OR WARNER-LAMBERT MAY NOT BE ABLE TO PRODUCE COMMERCIAL QUANTITIES OF
CI-1042, WHICH COULD DELAY REGULATORY APPROVAL.
To obtain regulatory approval for CI-1042, we will need to treat patients in our
Phase III clinical trial using CI-1042 produced from the same manufacturing
process and in the same manufacturing facility that we intend to use following
FDA approval. In conjunction with Warner-Lambert or alone, we will need to
modify the manufacturing process to produce large quantities of CI-1042 and to
lower the cost by improving the efficiency of the process. To modify the
manufacturing process and to meet our quality standards for CI-1042, in
conjunction with Warner-Lambert or alone, we will need to spend a significant
amount of time and capital and complete a substantial amount of experimentation.
In conjunction with Warner-Lambert or alone, we will need to expand or modify an
existing manufacturing facility to
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produce commercial quantities of CI-1042. Warner-Lambert is reviewing the
manufacturing process for CI-1042 and the related facility requirements but has
not yet commenced facility expansion or modification or put in place a specific
plan to do so. If we do not treat patients in our Phase III clinical trial with
product from the new process manufactured at the new facility, the FDA will most
likely require a bridging study to show that the CI-1042 produced from the new
process is comparable to CI-1042 produced from our existing manufacturing
process at our contract manufacturer's existing facility. Filing of our
applications for regulatory approval may be delayed if we:
- encounter difficulties in modifying the manufacturing process;
- fail to treat patients in our Phase III clinical trial with
product from the new manufacturing process; or
- fail to conduct a bridging study prior to FDA review of our
Phase III clinical trial.
EVEN IF OUR PRODUCTS ARE APPROVED, THE MARKET MAY NOT ACCEPT OUR PRODUCTS.
Even if our product development efforts are successful and even if the requisite
regulatory approvals are obtained, our products may not gain market acceptance
among physicians, patients, healthcare payers and the medical community. A
number of additional factors may limit the market acceptance of products
including the following:
- rate of adoption by healthcare practitioners;
- types of cancer for which the product is approved;
- rate of the products' acceptance by the target population;
- timing of market entry relative to competitive products;
- availability of alternative therapies;
- price of our product relative to alternative therapies;
- availability of third-party reimbursement;
- extent of marketing efforts by us and third-party distributors
or agents retained by us; and
- side effects or unfavorable publicity concerning our products
or similar products.
If any of our products do not achieve market acceptance, we may lose our
investment in that product which may cause our stock price to decline.
WE DO NOT HAVE MARKETING OR SALES EXPERIENCE OR CAPABILITIES AND ARE DEPENDENT
ON THE EFFORTS OF OTHERS, WHICH COULD LIMIT OUR ABILITY TO COMMERCIALIZE OUR
PRODUCTS.
We intend to enter into agreements with third parties to market and sell most of
our products if we receive regulatory approval for a product. We may not be able
to enter into marketing and sales agreements with others on acceptable terms, if
at all. To the extent that we enter into marketing and sales agreements with
other companies, our revenues, if any, will depend on the efforts of others. We
also have the right under our collaboration agreements to co-promote our
products in conjunction with our collaborators. If we are unable to enter into
third-party agreements or if we are exercising our rights to co-promote a
product, then we will be required to develop marketing and sales capabilities.
We may not successfully establish marketing and sales capabilities or have
sufficient resources to do so. If we do not develop
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marketing and sales capabilities, we may not meet our co-promotion obligations
under our collaboration agreements, which could result in our losing these
co-promotion rights. If we do develop such capabilities, we will compete with
other companies that have experienced and well-funded marketing and sales
operations and we will incur additional expenses.
ADVERSE EVENTS IN THE FIELD OF VIRAL GENE THERAPY MAY NEGATIVELY AFFECT
REGULATORY APPROVAL OR PUBLIC PERCEPTION OF OUR PRODUCTS, WHICH COULD DELAY OUR
CLINICAL TRIALS.
We depend in part on public acceptance of the use of viruses as therapeutics or
as delivery vehicles for gene therapy for the prevention or treatment of human
diseases. Public attitudes may be influenced by claims that these therapies are
unsafe, and these therapies may not gain acceptance by the public or the media.
As a result of negative public reaction to these therapies, the FDA may impose
greater regulation, stricter clinical trial oversight and stricter commercial
product labeling requirements.
The media has widely publicized the recent death of a patient at the University
of Pennsylvania undergoing viral gene therapy. As a result of this death, the
United States Senate held hearings to determine whether additional legislation
is required to protect volunteers and patients who participate in gene therapy
clinical trials. The Recombinant DNA Advisory Committee, or RAC, which acts as
an advisory body to the National Institutes of Health, has extensively discussed
gene therapy clinical trials. This death and any other adverse events in the
field of gene therapy that may occur in the future may result in greater
governmental regulation of our product candidates and potential regulatory
delays relating to the testing or approval of our product candidates.
WE HAVE A HISTORY OF LOSSES AND WE EXPECT TO CONTINUE TO INCUR LOSSES.
As of September 30, 2000, we had an accumulated deficit of approximately $82.2
million. We have incurred these losses principally from costs incurred in our
research and development programs and from our general and administrative costs.
We have derived no significant revenues from product sales or royalties. We
expect to incur significant and increasing operating losses over the next
several years as we expand our research and development efforts and preclinical
testing and clinical trial activities. We expect that the amount of operating
losses will fluctuate significantly from quarter to quarter as a result of
increases or decreases in our research and development efforts, the
establishment or termination of collaborations, the timing and amount of
collaboration payments under the terms of our collaborative agreements, or the
initiation, success or failure of clinical trials.
We do not expect to generate revenues from the sale of products for the
foreseeable future. We expect that substantially all of our revenues for the
foreseeable future will result from payments under our collaborative agreements.
Our ability to achieve profitability depends upon our success in completing
development of our potential products, obtaining required regulatory approvals
and manufacturing and marketing our products.
WE WILL NEED SUBSTANTIAL ADDITIONAL FUNDS, AND OUR FUTURE ACCESS TO CAPITAL IS
UNCERTAIN.
We will require substantial additional funds to conduct the costly and
time-consuming research, preclinical testing and clinical trials necessary to
develop our technology and proposed products, and to establish or maintain
relationships with collaborative parties. Our future capital requirements will
depend upon a number of factors, including:
- continued scientific progress in the research and development
of our technology programs;
- the size and complexity of these programs;
- our ability to establish and maintain collaboration
agreements;
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- progress with preclinical testing and clinical trials;
- the time and costs involved in obtaining regulatory approvals;
- the cost involved in preparing, filing, prosecuting,
maintaining and enforcing patent claims;
- competing technological and market developments; and
- product commercialization activities.
We may not be able to raise additional financing on favorable terms, or at all.
If we are unable to obtain additional funds, we may delay or terminate clinical
trials, curtail operations or obtain funds through collaborative and licensing
arrangements that may require us to relinquish commercial rights or potential
markets or grant licenses that are unfavorable to us.
IF WE LOSE OUR KEY EMPLOYEES AND CONSULTANTS OR ARE UNABLE TO ATTRACT OR RETAIN
QUALIFIED PERSONNEL, OUR BUSINESS COULD SUFFER.
The loss of the services of one or more of our key employees could have an
adverse impact on our business. We do not maintain key person life insurance on
any of our officers, employees or consultants, other than for our chief
executive officer. We depend on our continued ability to attract, retain and
motivate highly qualified management and scientific personnel. We face
competition for qualified individuals from numerous pharmaceutical and
biotechnology companies, universities, and other research institutions. Because
of the scientific nature of our business, we are highly dependent on principal
members of our scientific and management staff. To pursue our product
development plans, we will need to hire additional management personnel and
additional qualified scientific personnel to perform research and development,
as well as personnel with expertise in clinical testing, government regulation
and manufacturing. We may not be successful in hiring or retaining qualified
personnel.
WE FACE INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGE, AND MANY OF OUR
COMPETITORS HAVE SUBSTANTIALLY GREATER MANAGERIAL RESOURCES THAN WE HAVE.
We are engaged in a rapidly changing and highly competitive field. We are
seeking to develop and market products that will compete with other products and
therapies that currently exist or are being developed. Many other companies are
actively seeking to develop products that have disease targets similar to those
we are pursuing. Some of these competitive products are in clinical trials. In
particular, among other trials, Schering-Plough Corporation is conducting a
Phase II clinical trial in liver metastases of colorectal cancer for a product
which targets the abnormality in cells involving the p53 gene. Aventis,
Inc./Introgen Therapeutics, Inc. have initiated a Phase III clinical trial in
head and neck cancer with their product which targets the abnormality in cells
involving the p53 gene. If approved, the products of these and other competitors
now in clinical trials will compete directly with CI-1042. Other companies are
developing drugs targeting other abnormal functions in cancer cells that may
compete with our other product candidates.
Many of our competitors, either alone or together with collaborators, have
substantially greater financial resources and larger research and development
staffs than we do. In addition, many of these competitors, either alone or
together with their collaborators, have significantly greater experience than we
do in:
- developing products;
- undertaking preclinical testing and human clinical trials;
- obtaining FDA and other regulatory approvals of products; and
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- manufacturing and marketing products.
Accordingly, our competitors may succeed in obtaining patent protection,
receiving FDA approval or commercializing products before we do. If we commence
commercial product sales, we will compete against companies with greater
marketing and manufacturing capabilities, areas in which we have limited or no
experience.
We also face, and will continue to face, competition from academic institutions,
government agencies and research institutions. Further, we face numerous
competitors working on products to treat each of the diseases for which we are
seeking to develop therapeutic products. In addition, our product candidates
compete with existing therapies that have long histories of safe and effective
use. We may also face competition from other drug development technologies and
methods of preventing or reducing the incidence of disease and other classes of
therapeutic agents.
Developments by competitors may render our product candidates or technologies
obsolete or noncompetitive. We face and will continue to face intense
competition from other companies for collaborations with pharmaceutical and
biotechnology companies for establishing relationships with academic and
research institutions, and for licenses to proprietary technology. These
competitors, either alone or with collaborative parties, may succeed with
technologies or products that are more effective than ours.
We anticipate that we will face increased competition in the future as new
companies enter our markets and as scientific developments surrounding other
cancer therapies continue to accelerate. If our products receive regulatory
approval but cannot compete effectively in the marketplace, our business would
suffer.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION, WHICH CAN BE COSTLY, TIME
CONSUMING AND SUBJECT US TO UNANTICIPATED DELAYS; EVEN IF WE OBTAIN REGULATORY
APPROVAL FOR SOME OF OUR PRODUCTS, THOSE PRODUCTS MAY STILL FACE REGULATORY
DIFFICULTIES.
Our product candidates under development are subject to extensive and rigorous
domestic and foreign regulation. We have not received regulatory approval in the
United States or any foreign market for any of our product candidates.
We expect to rely on collaborative parties to file investigational new drug
applications and generally direct the regulatory approval process for many of
our product candidates. These collaborative parties may not obtain necessary
approvals from the FDA or other regulatory authorities for any product
candidates. If we fail to obtain required governmental approvals, we or our
collaborative parties will experience delays in or be precluded from marketing
products developed through our research. In addition, the commercial use of our
products will be limited. If we have disagreements as to ownership of clinical
trial results or regulatory approvals, and the FDA refuses to recognize us as
holding, or having access to, the regulatory approvals necessary to
commercialize our products, we may experience delays in or be precluded from
marketing products developed through our research.
The regulatory review and approval process takes many years, requires the
expenditure of substantial resources, involves post-marketing surveillance, and
may involve ongoing requirements for post-marketing studies. Additional or more
rigorous governmental regulations may be promulgated that could delay regulatory
approval of our or a collaborator's product candidates. Delays in obtaining
regulatory approvals may:
- adversely affect the successful commercialization of any
products that we or our collaborators develop;
- impose costly procedures on us or our collaborators;
- diminish any competitive advantages that we or our
collaborators may attain; and
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- adversely affect our receipt of revenues or royalties.
In addition, problems or failures with the products of others, including our
competitors, could have an adverse effect on our ability to obtain or maintain
regulatory approval for any of our product candidates or products.
OUR CLINICAL TRIALS COULD TAKE LONGER TO COMPLETE THAN WE PROJECT OR MAY NOT BE
COMPLETED AT ALL.
Although for planning purposes we project the commencement, continuation and
completion of clinical trials, the actual timing of these events may be subject
to significant delays relating to various causes, including scheduling conflicts
with participating clinicians and clinical institutions, and difficulties in
identifying and enrolling patients who meet trial eligibility criteria. We may
not commence clinical trials involving any of our products or complete them as
projected.
We have limited experience in conducting clinical trials. We rely on academic
institutions or clinical research organizations to conduct, supervise or monitor
some or all aspects of clinical trials involving our products. We will have less
control over the timing and other aspects of these clinical trials than if we
conducted them entirely on our own. Failure to commence or complete, or delays
in, any of our planned clinical trials would adversely affect our stock price
and prevent us from commercializing our products.
IF TESTING OF A PARTICULAR PRODUCT DOES NOT YIELD SUCCESSFUL RESULTS, THEN WE
WILL BE UNABLE TO COMMERCIALIZE THAT PRODUCT.
If preclinical or clinical testing of one or more of our products does not yield
successful results, the product will fail. To achieve the results we need, we
must demonstrate our products' safety and effectiveness in humans through
extensive preclinical and clinical testing. Numerous unforeseen events may arise
during, or as a result of, the testing process, including the following:
- safety and effectiveness results attained in early human
clinical trials may not be indicative of results that are
obtained in later clinical trials;
- the results of preclinical studies may be inconclusive, or
they may not be indicative of results that will be obtained in
human clinical trials;
- after reviewing test results, we or our collaborators may
abandon projects that we previously believed to be promising;
- we, our collaborators or regulators, may suspend or terminate
clinical trials if the participating subjects or patients are
being exposed to unacceptable health risks; and
- potential products may not have the desired effect or may have
undesirable side effects or other characteristics that
preclude regulatory approval or limit their commercial use if
approved.
Clinical testing is very expensive and can take many years. The failure to
adequately demonstrate the safety and effectiveness of a product would delay or
prevent regulatory approval of the product.
WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY OR OPERATE OUR BUSINESS
WITHOUT INFRINGING UPON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
We can protect our technology from unauthorized use by others only to the extent
that our technology is covered by valid and enforceable patents or effectively
maintained as trade secrets. As a result, we depend in part on our ability to:
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- obtain patents;
- license technology rights from others;
- protect trade secrets;
- operate without infringing upon the proprietary rights of
others; and
- prevent others from infringing on our proprietary rights.
The patent positions of biotechnology and pharmaceutical companies are highly
uncertain and involve complex legal and factual questions. Our patents, or
patents that we license from others, may not provide us with proprietary
protection or competitive advantages against competitors with similar
technologies. Competitors may challenge or circumvent our patents or patent
applications. Courts may find our patents invalid. Due to the extensive time
required for development, testing and regulatory review of our potential
products, our patents may expire or remain in existence for only a short period
following commercialization, which would reduce or eliminate any advantage the
patents may give us.
We may not have been the first to make the inventions covered by each of our
issued or pending patent applications or we may not have been the first to file
patent applications for such inventions. Competitors may have independently
developed technologies similar to ours. We may need to license the right to use
third-party patents and intellectual property to develop and market our
products. We may not acquire such required licenses on acceptable terms, if at
all. If we do not obtain such licenses, we may need to design around other
parties' patents, or we may not be able to proceed with the development,
manufacture or sale of our products. We may face litigation to defend against
claims of infringement, assert claims of infringement, enforce our patents,
protect our trade secrets or know-how, or determine the scope and validity of
others' proprietary rights.
In addition, we may require interference proceedings declared by the United
States Patent and Trademark Office to determine the priority of inventions
relating to our patent applications. These activities, and especially patent
litigation, are costly.
Specifically, we are aware of patent applications filed in the United States and
abroad that, if they were to issue, would cover CI-1042 and other viruses that
selectively replicate. We are also aware of patent applications that claim
enzymes for converting drugs to their active forms for treating disease,
including cancers, and claim methods of delivering the enzymes using a virus. We
may be unable to commercialize our products affected by these patents, if any of
these patents are issued and we are unable to:
- successfully challenge any claims asserting that our product
candidates or products infringe the patent;
- design around the patent; or
- negotiate a reasonable license under the patent.
WE FACE PRODUCT LIABILITY RISKS AND MAY NOT BE ABLE TO OBTAIN ADEQUATE
INSURANCE.
The use of any of our product candidates in clinical trials, and the sale of any
approved products, exposes us to liability claims resulting from the use or sale
of our products. We have obtained limited product liability insurance coverage
for our clinical trials. We intend to expand our insurance coverage to include
the sale of commercial products if marketing approval is obtained for product
candidates in development. However, insurance coverage is becoming increasingly
expensive. We may not be able to maintain insurance coverage at a reasonable
cost. We may not be able to obtain
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insurance coverage that will be adequate to satisfy any liability that may
arise. Regardless of merit or eventual outcome, product liability claims may
result in:
- decreased demand for a product;
- injury to our reputation;
- withdrawal of clinical trial volunteers; and
- loss of revenues.
Thus, whether or not we are insured, a product liability claim or product recall
may result in losses that could be material.
WE DEAL WITH HAZARDOUS MATERIALS AND MUST COMPLY WITH ENVIRONMENTAL LAWS AND
REGULATIONS, WHICH CAN BE EXPENSIVE AND RESTRICT HOW WE DO BUSINESS.
Our research and process development activities involve the controlled use of
hazardous materials. We cannot eliminate the risk of accidental contamination or
injury from these materials. In the event of an accident or environmental
discharge, we may be held liable for any resulting damages, which may exceed our
financial resources and may seriously harm our business. In addition, if we
develop a manufacturing capacity, we may incur substantial costs to comply with
environmental regulations and would be subject to the risk of accidental
contamination or injury from the use of hazardous materials in our manufacturing
process.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market rate risk for changes in interest rates relates primarily
to our investment portfolio. We do not use derivative financial instruments in
our investment portfolio. By policy, we place our investments with high quality
debt security issuers, limit the amount of credit exposure to any one issuer,
limit duration by restricting the term, and hold investments to maturity except
under rare circumstances. We classify our cash equivalents or short-term
investments as fixed rate if the rate of return on an instrument remains fixed
over its term. As of September 30, 2000, all of our cash equivalents and
short-term investments are classified as fixed rate. There were no significant
changes in our market risk exposures during the nine months ended September 30,
2000. For further discussion of our market risk exposures, refer to Part II,
Item 7A., "Quantitative and Qualitative Disclosures About Market Risk" in our
Annual Report on Form 10-K for the year ended December 31, 1999.
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PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 10.33 Employment Offer Letter between Leonard E.
Post, Ph.D. and the Company dated July 28,
2000.
Exhibit 27.1 Financial Data Schedule.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by
this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ONYX PHARMACEUTICALS, INC.
Date: November 13, 2000 By: /s/ HOLLINGS C. RENTON
----------------------
Hollings C. Renton
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive and Financial Officer)
Date: November 13, 2000 By: /S/ MARILYN E. WORTZMAN
-----------------------
Marilyn E. Wortzman
Controller
(Principal Accounting Officer)
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS
-------------- -----------------------
10.33 Employment Offer Letter between Leonard E. Post, Ph.D.
and the Company dated July 28, 2000.
27.1 Financial Data Schedule.
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