##### Table of Contents



UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
    DECEMBER 31, 2006.o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE
    SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
    FROM               TO               .   Commission File
    No. 0-28298
      Onyx Pharmaceuticals,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

94-3154463(State or other jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)   2100 Powell Street
 Emeryville, California 94608
 (510) 597-6500
 (Address, including zip code,
    and telephone number,
 including area code, of
    registrants principal executive offices)
  Securities Registered Pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock $0.001 par value

Nasdaq Global Market   Securities Registered Pursuant to Section 12(g) of the
    Act: None
      o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ




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TABLE OF CONTENTS  PART I.Item 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Securities HoldersPART II.Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures about Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes In and Disagreements With Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMItem 9B. Other informationPART III.Item 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accountant Fees and ServicesPART IV.Item 15. Exhibits, Financial Statement SchedulesSIGNATURESPOWER OF ATTORNEYREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMEXHIBIT 10.12EXHIBIT 10.13(i)EXHIBIT 10.13(ii)EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 32.1    Table of Contents   DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.
    *
    Excludes 11,347,009 shares of Common Stock held by
    directors, officers and stockholders whose beneficial ownership
    exceeds 5% of the Registrants Common Stock outstanding.
    The number of shares owned by stockholders whose beneficial
    ownership exceeds 5% was determined based upon information
    supplied by such persons and upon Schedules 13D
    and 13G, if any, filed with the SEC. Exclusion of shares
    held by any person should not be construed to indicate that such
    person possesses the power, direct or indirect, to direct or
    cause the direction of the management or policies of the
    Registrant, that such person is controlled by or under common
    control with the Registrant, or that such persons are affiliates
    for any other purpose.




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PART I.
  This Annual Report on
    Form 10-K
    contains forward-looking statements within the meaning of
    Section 27A of the Securities Act of 1933 and
    Section 21E of the Securities Exchange Act of 1934. These
    statements involve known and unknown risks, uncertainties and
    other factors that may cause our or our industrys results,
    levels of activity, or achievements to differ significantly and
    materially from that expressed or implied by such
    forward-looking statements. These factors include, among others,
    those set forth in Item 1A Risk Factors and
    elsewhere in this Annual Report on
    Form 10-K.
    In some cases, you can identify forward-looking statements by
    terminology such as may, will,
    should, intend, expect,
    plan, anticipate, believe,
    estimate, predict,
    potential, or continue, or the negative
    of such terms or other comparable terminology.
  Although we believe that the expectations reflected in the
    forward-looking statements are reasonable, we cannot guarantee
    future results, events, levels of activity, performance or
    achievements. We do not assume responsibility for the accuracy
    and completeness of the forward-looking statements. We do not
    intend to update any of the forward-looking statements after the
    date of this Annual Report on
    Form 10-K
    to conform these statements to actual results, unless required
    by law.
  Unless the context otherwise requires, all references to
    the Company, Onyx, we,
    our, and us in this Annual Report on
    Form 10-K
    refer to Onyx Pharmaceuticals, Inc.
 
  Item 1.
    Business  Overview
  changing the way cancer is
    treated tm
  ®




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change the way
    cancer is
    treatedtm
   2




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Our
    Product Candidates
    Product/Program

Technology

Indication

Current StatusNexavar (sorafenib)
    Tablets

Small molecule inhibitor of tumor
    cell proliferation and angiogenesis, targeting RAF,
    VEGFR-1,
    VEGFR-2,
    VEGFR-3,
    PDGFR-ß,
    KIT, FLT-3,
    and RET.

Advanced kidney cancer

Approved in U.S., EU and other
    territories worldwideSingle-agent trial for liver cancer

Phase 3Combination trial for metastatic
    melanoma

Phase 3Combination trial for non-small
    cell lung cancer

Phase 3Various single-agent trials for
    kidney and liver cancer

Phase 2Combination trials for kidney and
    liver cancer, as well as metastatic melanoma

Phase 2Single-agent trials for breast,
    non-small cell lung and other cancers

Phase 2Combination trials with standard
    chemotherapies for melanoma, colorectal, non-small cell lung,
    ovarian and other cancers

Phase 2 and 1b ExtensionAdditional combination trials with
    other anticancer agents

Phase 1bPD 332991 (licensed 
    to Pfizer)

Small molecule inhibitor of
    cyclin-dependent kinase 4

Multiple cancer types

Phase 1   Nexavar
  VEGFR-1, VEGFR-2, VEGFR-3 PDGFR-ß,
  Commercialization
    Status
   3




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Development
    Strategy
    Clinical
    Trials
    Kidney
    Cancer Program
  Phase 3 Trial.
     4




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Phase 2 Trial.
  Liver
    Cancer Program
  Phase 3 Trial.
  Phase 2 Trial. time-to-tumor
  Metastatic
    Melanoma Program
  Phase 3 Trials.
 5




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Phase 2 Trial.
  Phase 1/2 Trial. and/or
  Lung
    Cancer Program
  Phase 3 Trial.
  Phase 1/Phase 2 Trials.
 6




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Breast
    Cancer Program
    Earlier
    Stage Clinical Development
  Phase 2 in Multiple Tumor Types.
  Phase 1b in Combination with Anticancer Agents in
    Multiple Tumor Types.
  Cell
    Cycle Program
    Virus
    Platform
   7




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Collaborations
  Bayer
          Warner-Lambert
   8




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Research
    and Development
    Marketing
    and Sales
  point-of-contact
  Manufacturing
      Patents
    and Proprietary Rights
     9




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Government
    Regulation
      
    preclinical studies;
    the submission to the FDA of an IND that must become effective
    before human clinical trials may commence;
    adequate and well-controlled human clinical trials to establish
    the safety and efficacy of the product candidate;
    the submission of an NDA to the FDA; and
    FDA approval of the NDA, including inspection and approval of
    the product manufacturing facility.   10




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
    manufacture of the product;
    testing;
    quality assurance;
    packaging;
    storage;
    documentation;
    record-keeping;
    labeling;
    advertising; and
    marketing procedures.   11




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
    warning letters;
    civil penalties;
    criminal prosecution;
    injunctions;
    seizure or recall of products;
    total or partial suspension of production;
    refusal of the government to grant approval; or
    withdrawal of approval of products.       12




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Competition
          tm
 13




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tm
    
    product efficacy and safety;
    availability of patients for clinical trials;
    the timing and scope of regulatory approvals;
    availability of supply;
    marketing and sales capability;
    reimbursement coverage;
    price; and
    patent position.  Employees
    Company
    Information
  (510) 597-6500. http://www.onyx-pharm.com.
  Available
    Information
  Form 10-K, Form 10-Q, Form 8-K, Form 10-K, Form 10-Q, Form 8-K Form 10-K 1-800-SEC-0330.
  Code of
    Ethics
   14




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Item 1A.
    Risk
    Factors  You should carefully consider the risks described below,
    together with all of the other information included in this
    report, in considering our business and prospects. The risks and
    uncertainties described below contain forward-looking
    statements, and our actual results may differ materially from
    those discussed here. Additional risks and uncertainties not
    presently known to us or that we currently deem immaterial also
    may impair our business operations. Each of these risk factors
    could adversely affect our business, operating results and
    financial condition, as well as adversely affect the value of an
    investment in our common stock
    and/or
    contingent value rights.
  Risks
    Related to Our Business
  Nexavar®
    (sorafenib) tablets is our only product, and we do not have any
    other product candidates in Phase 2 or Phase 3
    clinical development. If Nexavar is not commercially successful,
    we may be unable to identify and promote alternative product
    candidates and our business would fail.
    If our
    clinical trials fail to demonstrate that Nexavar is safe and
    effective for cancer types other than kidney cancer, we will be
    unable to broadly commercialize Nexavar as a treatment for
    cancer, and our business may fail
      ®
   15




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Even
    though we have stopped the Phase 3 liver cancer trial, Nexavar
    may never be approved for use in this indication, or its
    approval may be significantly delayed.
      There
    are competing therapies approved for the treatment of advanced
    kidney cancer, and we expect the number of approved therapies to
    rapidly increase, which could harm the prospects for Nexavar in
    this indication.
     16




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We are
    dependent upon our collaborative relationship with Bayer to
    manufacture and to further develop and commercialize Nexavar.
    There may be circumstances that delay or prevent the development
    and commercialization of Nexavar.
       17




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
    the amount and timing of resource expenditures can vary because
    of decisions by Bayer;
    possible disagreements as to development plans, including
    clinical trials or regulatory approval strategy;
    the right of Bayer to terminate its collaboration agreement with
    us on limited notice and for reasons outside our control;
    loss of significant rights if we fail to meet our obligations
    under the collaboration agreement;
    withdrawal of support by Bayer following the development or
    acquisition by it of competing products; and
    possible disagreements with Bayer regarding the collaboration
    agreement or ownership of proprietary rights.    Our
    clinical trials could take longer to complete than we project or
    may not be completed at all.
       18




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If
    serious adverse side effects are associated with Nexavar,
    approval for Nexavar could be revoked, sales of Nexavar could
    decline, and we may be unable to develop Nexavar as a treatment
    for other types of cancer.
    
    Hypertension may occur early in the course of therapy and blood
    pressure should be monitored weekly during the first six weeks
    of therapy and treated as needed.
    Gastrointestinal perforation has been reported in less than one
    percent of patients taking Nexavar.
    Incidence of bleeding, regardless of causality, was
    15 percent for Nexavar vs. 8 percent for placebo and
    the incidence of treatment-emergent cardiac ischemia/infarction
    was 2.9 percent for Nexavar vs. 0.4 percent for
    placebo.
    Most common treatment-emergent adverse events with Nexavar were
    diarrhea, rash/desquamation, fatigue, hand-foot skin reaction,
    alopecia and nausea. Grade 3/4 adverse events were
    38 percent for Nexavar vs. 28 percent for placebo.
    Women of child-bearing potential should be advised to avoid
    becoming pregnant and advised against breast-feeding.
    In cases of any severe or persistent side effects, temporary
    treatment interruption, dose modification or permanent
    discontinuation should be considered.    Our
    operating results are unpredictable and may fluctuate. If our
    operating results are below the expectations of securities
    analysts or investors, the trading price of our stock could
    decline.
     19




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We
    have a history of losses, and we expect to continue to incur
    losses.
      We are
    subject to extensive government regulation, which can be costly,
    time consuming and subject us to unanticipated
    delays.
        
    adversely affect the successful commercialization of Nexavar;
    impose costly procedures on us;
    diminish any competitive advantages that we may attain; and
    adversely affect our receipt of revenues or royalties. 20




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While
    Nexavar has received approvals for sale in several countries
    outside of the United States, it has not received pricing
    approval in all of these foreign countries, and may not receive
    marketing approval in additional countries.
      We
    face intense competition and rapid technological change, and
    many of our competitors have substantially greater resources
    than we have.
   21




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tm tm
    
    developing products;
    undertaking preclinical testing and human clinical trials;
    obtaining FDA and other regulatory approvals of
    products; and
    manufacturing and marketing products.          We
    will need substantial additional funds, and our future access to
    capital is uncertain.
    
    the size and complexity of our Nexavar program; 22




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
    decisions made by Bayer and Onyx to alter the size, scope and
    schedule of clinical development;
    repayment of our of milestone-based advances;
    progress with clinical trials;
    the time and costs involved in obtaining regulatory approvals;
    the cost involved in enforcing patent claims against third
    parties and defending claims by third parties (both of which are
    shared with Bayer);
    the costs associated with acquisitions or licenses of additional
    products;
    competing technological and market developments; and
    global product commercialization activities.        We are
    dependent on the efforts of Bayer to market and promote Nexavar
    in countries outside the United States where Nexavar has
    received approval.
     23




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If
    Bayers business strategy changes, it may adversely affect
    our collaborative relationship.
    We do
    not have manufacturing expertise or capabilities and are
    dependent on Bayer to fulfill our manufacturing needs, which
    could result in lost sales and the delay of clinical trials or
    regulatory approval.
  scale-up,
  If the
    specialty pharmacies and distributors that we and Bayer rely
    upon to sell our products fail to perform, our business may be
    adversely affected.
    
    not provide us with accurate or timely information regarding
    their inventories, the number of patients who are using Nexavar
    or complaints about Nexavar;
    not effectively sell or support Nexavar;
    reduce their efforts or discontinue to sell or support Nexavar; 24




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
    not devote the resources necessary to sell Nexavar in the
    volumes and within the time frames that we expect;
    be unable to satisfy financial obligations to us or
    others; and
    cease operations.    If we
    lose our key employees and consultants or are unable to attract
    or retain qualified personnel, our business could
    suffer.
      The
    market may not accept our products and pharmaceutical pricing
    and reimbursement pressures may reduce
    profitability.
     25




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
    rate of adoption by healthcare practitioners;
    types of cancer for which the product is approved;
    rate of a products 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;
    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.    We may
    not be able to protect our intellectual property or operate our
    business without infringing upon the intellectual property
    rights of others.
    
    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.       26




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and/or
  We may
    incur significant liability if it is determined that we are
    promoting the off-label use of drugs or are
    otherwise found in violation of federal and state regulations in
    the United States or elsewhere.
      We
    face product liability risks and may not be able to obtain
    adequate insurance.
     27




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
    decreased demand for a product;
    injury to our reputation;
    withdrawal of clinical trial volunteers; and
    loss of revenues.    If we
    do not receive timely and accurate financial and market
    information from Bayer regarding the development and sale of
    Nexavar, we may be unable to accurately report our results of
    operations.
    Our
    stock price is volatile.
    
    reported sales of Nexavar by Bayer;
    interim or final results of, or speculation about, clinical
    trials from Nexavar;
    decisions by regulatory agencies;
    changes in the regulatory approval requirements;
    ability to accrue patients into clinical trials;
    success or failure in, or speculation about, obtaining
    regulatory approval by us or our competitors;
    public concern as to the safety and efficacy of our product
    candidates;
    developments in our relationship with Bayer;
    developments in patent or other proprietary rights;
    additions or departures of key personnel;
    announcements by us or our competitors of technological
    innovations or new commercial therapeutic products;
    published reports by securities analysts;
    statements of governmental officials;
    changes in healthcare reimbursement policies;
    sales of our common stock by existing holders, or sales of
    shares issuable upon exercise of outstanding options and
    warrants; and 28




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
    sales by us of our common stock, including sales under our
    committed equity financing facility arrangement with Azimuth.  We are
    at risk of securities class action litigation due to our
    expected stock price volatility.
    Existing
    stockholders have significant influence over us.
      Provisions
    in our collaboration agreement with Bayer may prevent or delay a
    change in control.
    Provisions
    in Delaware law, our charter and executive change of control
    agreements we have entered into may prevent or delay a change of
    control.
    
    the board of directors approved the transaction where the
    stockholder acquired 15 percent or more of the
    corporations stock; 29




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
    after the transaction in which the stockholder acquired
    15 percent or more of the corporations stock, the
    stockholder owned at least 85 percent of the
    corporations outstanding voting stock, excluding shares
    owned by directors, officers and employee stock plans in which
    employee participants do not have the right to determine
    confidentially whether shares held under the plan will be
    tendered in a tender or exchange offer; or
    on or after this date, the merger or sale is approved by the
    board of directors and the holders of at least two-thirds of the
    outstanding voting stock that is not owned by the stockholder.      
    our board is classified into three classes of directors as
    nearly equal in size as possible with staggered three-year terms;
    the authority of our board to issue up to 5,000,000 shares
    of preferred stock and to determine the price, rights,
    preferences and privileges of these shares, without stockholder
    approval;
    all stockholder actions must be effected at a duly called
    meeting of stockholders and not by written consent;
    special meetings of the stockholders may be called only by the
    chairman of the board, the chief executive officer, the board or
    ten percent or more of the stockholders entitled to vote at the
    meeting; and
    no cumulative voting.      Accounting
    pronouncements may affect our future financial position and
    results of operations.
   
  Item 1B.
    Unresolved
    Staff Comments   30




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Item 2.
    Properties     
  Item 3.
    Legal
    Proceedings   
  Item 4.
    Submission
    of Matters to a Vote of Securities Holders   
  PART II.
  
 Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    Common Stock2006


2005High


Low


High


LowFirst Quarter

$
29.10


$
25.82


$
33.77


$
25.30Second Quarter


25.29



14.67



33.46



23.70Third Quarter


17.29



12.87



27.66



19.30Fourth Quarter


19.60



10.44



30.14



22.45     31




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Stock
    Performance Graph
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
  
 Dec-01


Dec-02


Dec-03


Dec-04


Dec-05


Dec-06lONYX
    PHARMACEUTICALS, INC.


$
100.00



$
113.48



$
551.37



$
632.62



$
562.50



$
206.64n NASDAQ
    STOCK MARKET (U.S.)


$
100.00



$
71.97



$
107.18



$
117.07



$
120.50



$
137.02 NASDAQ
    PHARMACEUTICAL


$
100.00



$
64.40



$
92.31



$
100.78



$
113.36



$
115.84   Holders
    Dividends
   32




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Securities
    Authorized for Issuance Under Equity Compensation Plans as of
    December 31, 2006
  Number of





Number of securitiessecurities to be





remaining available forissued upon exercise


Weighted-average


future issuance underof outstanding


exercise price of


equity compensation plansoptions, warrants


outstanding options,


(excluding securitiesPlan Category (1)

and rights


warrants and rights


reflected in column a)Column a


Column b


Column cEquity compensation plans approved
    by security holders


5,334,477


$
22.05



1,825,782
(2)     (1)
    
    We have no equity compensation plans not approved by security
    holders.(2)
    
    Of these securities, 91,004 shares remain available for
    purchase under our Employee Stock Purchase Plan.  Recent
    Sales of Unregistered Securities
    Issuer
    Purchases of Equity Securities
   33




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Item 6.
    Selected
    Financial Data      Year Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share data)Statement of Operations
    Data:Total revenue

$
250


$
1,000


$
500


$



$
2,715Operating expenses:Net expense from unconsolidated
    joint business


23,915















Research and development


30,980



63,120



35,846



32,059



43,604Selling, general and administrative


50,019



39,671



14,316



7,939



6,192Restructuring










258



5,530



Loss from operations


(104,664
)


(101,791
)


(49,920
)


(45,528
)


(47,081
)Interest and other income and
    expense, net


11,983



6,617



3,164



559



1,294Net loss

$
(92,681
)

$
(95,174
)

$
(46,756
)

$
(44,969
)

$
(45,787
)Basic and diluted net loss per
    share

$
(2.20
)

$
(2.64
)

$
(1.36
)

$
(1.73
)

$
(2.23
)Shares used in computing basic and
    diluted net loss per share


42,170



36,039



34,342



25,953



20,535   December 31,2006


2005


2004


2003


2002(In thousands)Balance Sheet Data:Cash, cash equivalents, and
    marketable securities

$
271,403


$
284,680


$
209,624


$
105,400


$
39,833Total assets


286,246



294,665



215,546



109,138



46,241Working capital


256,432



241,678



197,873



92,826



28,727Advance from collaboration partner


40,000



30,000



20,000



20,000



5,000Accumulated deficit


(438,491
)


(345,810
)


(250,636
)


(203,880
)


(158,911
)Total stockholders equity


222,780



223,240



179,988



73,519



28,784  34




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Item 7.
    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.
    We use words such as may, will,
    expect, anticipate,
    estimate, intend, plan,
    predict, potential, believe,
    should and similar expressions to identify
    forward-looking statements. These statements appearing
    throughout our
    10-K are
    statements regarding our intent, belief, or current
    expectations, primarily regarding our operations. You should not
    place undue reliance on these forward-looking statements, which
    apply only as of the date of this Annual Report on
    Form 10-K.
    Our actual results could differ materially from those
    anticipated in these forward-looking statements for many
    reasons, including those set forth under Business
    Item 1A Risk Factors and elsewhere in this
    Annual Report on
    Form 10-K.
  Overview
  changing the way cancer is
    treated tm
  ®
  Form 10-K
    Form 10-K.
 35




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Critical
    Accounting Policies and the Use of Estimates
      Net Expense from Unconsolidated Joint
    Business: non-U.S. sales
  Stock Based-Compensation:
    No. FAS 123(R)-3,
 36




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Research and Development Expense:
      Results
    of Operations
  Years
    Ended December 31, 2006, 2005 and 2004
  Revenue.
 37




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Net Expense from Unconsolidated Joint
    Business.
  out-of-pocket
       38




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Year EndedDecember 31,2006(In thousands)Product revenue, net

$
164,994Combined cost of goods sold,
    distribution, selling, general and administrative


123,004Combined research and development


161,180Combined collaboration loss

$
(119,190
)Onyxs share of collaboration
    loss

$
(59,595
)Reimbursement of Onyxs
    direct development and marketing expenses


35,680Onyxs net expense from
    unconsolidated joint business

$
(23,915
)   Research and Development Expenses.
     39




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##### Table of Contents



Form 10-K.
  Research andDevelopment ExpensesFor the Year EndedCollabo-

Phase of Development 

December 31,Product

Description

rator

Estimated Completion

2006


2005


2004(In millions)Nexavar (sorafenib)
    Tablets (1)

Small molecule inhibitor of tumor
    cell proliferation and angiogenesis, targeting RAF, VEGFR-2,
    PDGFR- ß,
    KIT, FLT-3, and RET.

Bayer

Phase 1   2004Phase 2   UnknownPhase 3   Unknown

$
84.2
(2)

$
62.1


$
33.4Therapeutic Virus
    Programs (3)

Programs discontinued during the
    second quarter of 2003.










1.0



2.4Total Research and Development
    Expenses

$
84.2


$
63.1


$
35.8     (1)
    
    Aggregate research and development
    costs-to-date
    through December 31, 2006 incurred by Onyx since fiscal
    year 2000 for the Nexavar project is $219.0 million.(2)
    
    Costs reflected in this table represent our share of
    Bayers product development costs included in net expenses
    from unconsolidated joint business and our direct research and
    development costs.(3)
    
    Costs in 2005 were comprised of:        Selling, General and Administrative
    Expenses.
 40




---



##### Table of Contents



Restructuring.
  Interest Income, Net.
  Other Income.
  Income
    Taxes
  Form 10-K
  Related
    Party Transactions
   41




---



##### Table of Contents



Liquidity
    and Capital Resources
             42




---



##### Table of Contents



Contractual
    Obligations and Commitments
    Payments Due by PeriodLess than


1-3


3-5


AfterContractual Obligations(1)

Total


1 Year


Years


Years


5 Years(In thousands)Operating leases, net of sublease
    income

$
6,520


$
1,036


$
3,130


$
2,092


$
262     (1)
    This table does not include any payments under research and
    development collaborations, as the amount and timing of such
    payments are not known. This table also does not include the
    obligation to repay the $40.0 million creditable
    milestone-based payments that we received from Bayer as of
    December 31, 2006 because the repayment of this amount is
    contingent upon Onyx generating profits or royalties on any
    products. Whether Onyx will ever generate any profits or
    royalties is not known at this time.    Recently
    Issued Accounting Standards
   43




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk  Interest
    Rate Risk
      2006


2005Average








AverageFair Value


Interest





Fair Value


InterestMaturity


($ in millions)


Rate


Maturity


($ in millions)


RateCash equivalents, fixed rate


0  2 months


$
94.1



5.34
%


0  2 months


$
45.4



3.97
%Marketable securities, fixed rate


0  13 months


$
177.0



4.91
%


0  23 months


$
238.6



4.66
%    
  Item 8.
    Financial
    Statements and Supplementary Data  Form 10-K.
 
  Item 9.
    Changes
    In and Disagreements With Accountants on Accounting and
    Financial Disclosure   
  Item 9A.
    Controls
    and Procedures  Evaluation of Disclosure Controls and
    Procedures: Rules 13a-15(e) 15d-15(e) Form 10-K
  Managements Report on Internal Control over Financial
    Reporting: Rule 13a-15(f)
 44




---



##### Table of Contents



Changes in Internal Control over Financial
    Reporting:
  Inherent Limitations on Effectiveness of
    Controls:
 45




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                 Ernst &
    Young llp
    46




---



##### Table of Contents



Item 9B.
    Other
    information   
  PART III.
 
  Item 10.
    Directors
    and Executive Officers of the Registrant   
  Item 11.
    Executive
    Compensation   
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters   
  Item 13.
    Certain
    Relationships and Related Transactions   
  Item 14.
    Principal
    Accountant Fees and Services     
  PART IV.
 
  Item 15.
    Exhibits,
    Financial Statement Schedules  (a) (1) Index to Financial Statements
       47




---



##### Table of Contents



(2) Financial Statement Schedules
    (3) Exhibits
  ExhibitNumber

Description of Document3
.1(1)

Restated Certificate of
    Incorporation of the Company.3
.2(1)

Bylaws of the Company.3
.3(3)

Certificate of Amendment to
    Amended and Restated Certificate of Incorporation.3
.4(18)

Certificate of Amendment to
    Amended and Restated Certificate of Incorporation.4
.1(1)

Reference is made to
    Exhibits 3.1, 3.2, 3.3 and 3.4.4
.2(1)

Specimen Stock Certificate.10
.1(15)*

Collaboration Agreement between
    Bayer Corporation (formerly Miles, Inc.) and the Company dated
    April 22, 1994.10
.1(i)(15)*

Amendment to Collaboration
    Agreement between Bayer Corporation and the Company dated
    April 24, 1996.10
.1(ii)(15)*

Amendment to Collaboration
    Agreement between Bayer Corporation and the Company dated
    February 1, 1999.10
.2(8)*

Amended and restated Research,
    Development and Marketing Collaboration Agreement dated
    May 2, 1995 between the Company and
    Warner-Lambert
    Company.10
.2(i)(8)*

Research, Development and
    Marketing Collaboration Agreement dated July 31, 1997
    between the Company and
    Warner-Lambert
    Company.10
.2(ii)(8)*

Amendment to the Amended and
    Restated Research, Development and Marketing Collaboration
    Agreement, dated December 15, 1997, between the Company and
    Warner-Lambert
    Company.10
.2(iii)(8)*

Second Amendment to the Amended
    and Restated Research, Development and Marketing Agreement
    between
    Warner-Lambert
    and the Company dated May 2, 1995.10
.2(iv)(8)*

Second Amendment to Research,
    Development and Marketing Collaboration Agreement between
    Warner-Lambert
    and the Company dated July 31, 1997.10
.2(v)(23)*

Amendment #3 to the Research,
    Development and Marketing Collaboration Agreement between the
    Company and
    Warner-Lambert
    dated August 6, 2001.10
.2(vi)(4)*

Amendment #3 to the Amended
    and Restated Research, Development and Marketing Collaboration
    Agreement between the Company and Warner-Lambert dated
    August 6, 2001.10
.3(5)*

Technology Transfer Agreement
    dated April 24, 1992 between Chiron Corporation and the
    Company, as amended in the Chiron Onyx HPV Addendum dated
    December 2, 1992, in the Amendment dated February 1,
    1994, in the Letter Agreement dated May 20, 1994 and in the
    Letter Agreement dated March 29, 1996.10
.4(1)+

Letter Agreement between
    Dr. Gregory Giotta and the Company dated May 26, 1995.10
.5(1)+

1996 Equity Incentive Plan.10
.6(1)+

1996 Non-Employee Directors
    Stock Option Plan.10
.7(1)+

1996 Employee Stock Purchase Plan.10
.8(1)+

Form of Indemnity Agreement to be
    signed by executive officers and directors of the Company.10
.9(11)+

Form of Executive Change in
    Control Severance Benefits Agreement.10
.10(2)*

Collaboration Agreement between
    the Company and
    Warner-Lambert
    Company dated October 13, 1999. 48




---



##### Table of Contents



ExhibitNumber

Description of Document10
.10(i)(4)*

Amendment #1 to the
    Collaboration Agreement between the Company and
    Warner-Lambert
    dated August 6, 2001.10
.10(ii)(7)*

Second Amendment to the
    Collaboration Agreement between the Company and
    Warner-Lambert
    Company dated September 16, 2002.10
.11(6)

Stock and Warrant Purchase
    Agreement between the Company and the investors dated
    May 6, 2002.10
.12(9)

Sublease between the Company and
    Siebel Systems dated August 5, 2004.10
.12(i)

First Amendment to Sublease
    between the Company and Oracle USA Inc., dated November 3,
    2006.10
.13(10)+

Onyx Pharmaceuticals, Inc. 2005
    Equity Incentive Plan.10
.13(i)+

Form of Stock Option Agreement
    pursuant to the 2005 Equity Incentive Plan.10
.13(ii)+

Form of Stock Option Agreement
    pursuant to the 2005 Equity Incentive Plan and the
    Non-Discretionary Grant Program for Directors.10
.14(12)+

Separation Agreement between Onyx
    Pharmaceuticals, Inc. and Leonard E. Post, Ph.D., dated
    December 5, 2005.10
.15(13)+

2006 Base Salaries and Bonuses for
    Fiscal Year 2005 for Named Executive Officers.10
.16(14)**

U.S. Co-Promotion Agreement
    by and between the Company and Bayer Pharmaceuticals
    Corporation, dated March 6, 2006.10
.17(16)+

Letter Agreement between Gregory
    W. Schafer and the Company, dated April 12, 2006.10
.18(17)+

Separation Agreement between the
    Company and Scott M. Freeman, M.D., dated May 3, 2006.10
.19(19)+

Letter Agreement between Laura A.
    Brege and the Company, dated May 19, 2006.10
.20(20)+

Letter Agreement between Gregory
    W. Schafer and the Company, dated July 7, 2006.10
.21(20)+

Form of Stock Bonus Award Grant
    Notice and Agreement between the Company and certain award
    recipients.10
.22(21) +

Separation Agreement between Fabio
    M. Benedetti, M.D. and the Company, dated September 6,
    2006.10
.23(22)

Common Stock Purchase Agreement
    between Onyx Pharmaceuticals, Inc. and Azimuth Opportunity Ltd.,
    dated September 29, 2006.23
.1

Consent of Independent Registered
    Public Accounting Firm.24
.1

Power of Attorney. Reference is
    made to the signature page.31
.1

Certification required by
    Rule 13a-14(a)
    or
    Rule 15d-14(a).32
.1

Certifications required by
    Rule 13a-14(b)
    or
    Rule 15d-14(b)and
    Section 1350 of Chapter 63 of Title 18 of the
    United States Code (18 U.S.C. 1350).     *
    
    Confidential treatment has been received for portions of this
    document.**
    
    Confidential treatment has been requested for portions of this
    document.+
    
    Indicates management contract or compensatory plan or
    arrangement.(1)
    
    Filed as an exhibit to Onyxs Registration Statement on
    Form SB-2
    (No.
    333-3176-LA).(2)
    
    Filed as an exhibit to Onyxs Current Report on
    Form 8-K
    filed on March 1, 2000.(3)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2000.(4)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2001.(5)
    
    Filed as an exhibit to Onyxs Annual Report on
    Form 10-K
    for the year ended December 31, 2001. The redactions to
    this agreement have been amended since its original filing in
    accordance with a request for extension of confidential
    treatment filed separately by the Company with the Securities
    and Exchange Commission.(6)
    
    Filed as an exhibit to Onyxs Registration Statement on
    Form S-3
    filed on June 5, 2002
    (No. 333-89850).(7)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2002. 49




---



##### Table of Contents



(8)
    
    Filed as an exhibit to Onyxs Annual Report on
    Form 10-K
    for the year ended December 31, 2002. The redactions to
    this agreement have been amended since its original filing in
    accordance with a request for extension of confidential
    treatment filed separately by the Company with the Securities
    and Exchange Commission.(9)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2004.(10)
    
    Filed as an exhibit to Onyxs Current Report on
    Form 8-K
    filed on June 7, 2005.(11)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2005.(12)
    
    Filed as an exhibit to Onyxs Current Report on
    Form 8-K
    filed on December 9, 2005.(13)
    
    Filed as an exhibit to the registrants Current Report on
    Form 8-K
    filed on March 7, 2006.(14)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2006.(15)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2006. The redactions to
    this agreement have been amended since its original filing in
    accordance with a request for extension of confidential
    treatment filed separately by the Company with the Securities
    and Exchange Commission.(16)
    
    Filed as an exhibit to the registrants Current Report on
    Form 8-K
    filed on April 18, 2006.(17)
    
    Filed as an exhibit to the registrants Current Report on
    Form 8-K
    filed on May 12, 2006.(18)
    
    Filed as an exhibit to Onyxs Registration Statement on
    Form S-3
    (No.
    333-134565)
    filed on May 30, 2006.(19)
    
    Filed as an exhibit to the registrants Current Report on
    Form 8-K
    filed on June 12, 2006.(20)
    
    Filed as an exhibit to the registrants Current Report on
    Form 8-K
    filed on July 12, 2006.(21)
    
    Filed as an exhibit to the registrants Current Report on
    Form 8-K
    filed on September 7, 2006.(22)
    
    Filed as an exhibit to Onyxs Current Report on
    Form 8-K
    filed on September 29, 2006.(23)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2006. The redactions to
    this agreement have been amended since its original filing in
    accordance with a request for extension of confidential
    treatment filed separately by the Company with the Securities
    and Exchange Commission. 50




---



##### Table of Contents



SIGNATURES
  Form 10-K
  Onyx Pharmaceuticals, Inc.
  By:
    /s/  Hollings
    C. Renton   Chairman of the Board,
 President and Chief Executive Officer
 
  POWER OF
    ATTORNEY
  attorney-in-fact, Form 10-K, attorneys-in-fact,
    Signature

Title

Date/s/  Hollings
    C. RentonHollings
    C. Renton

Chairman of the Board,
    President and Chief Executive Officer
    (Principal Executive Officer)

March 5, 2007/s/  Gregory
    W. SchaferGregory
    W. Schafer

Vice President and Chief Financial
    Officer
    (Principal Financial and Accounting
    Officer)

March 5, 2007/s/  Paul
    GoddardPaul
    Goddard, Ph.D.

Director

March 5, 2007/s/  Antonio
    Grillo-LópezAntonio
    Grillo-López, M.D.

Director

March 5, 2007/s/  Magnus
    LundbergMagnus
    Lundberg

Director

March 5, 2007/s/  Corinne
    LyleCorinne
    Lyle

Director

March 5, 2007/s/  Wendell
    WierengaWendell
    Wierenga, Ph.D.

Director

March 5, 2007/s/  Thomas
    G. WiggansThomas
    G. Wiggans

Director

March 5, 2007  51




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             ,
  Ernst &
    Young llp
    52




---



##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  BALANCE
    SHEETS
  December 31,2006


2005(In thousands, except share and per share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
94,413


$
46,064Short-term marketable securities


172,545



228,754Receivable from collaboration
    partner


9,281



4,350Other current assets


3,659



3,935Total current assets


279,898



283,103Long-term marketable securities


4,445



9,862Property and equipment, net


1,478



1,617Other assets


425



83Total assets

$
286,246


$
294,665LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
297


$
581Payable to collaboration partner


8,391



30,823Accrued liabilities


3,194



1,343Accrued clinical trials and
    related expenses


8,263



5,567Accrued compensation


3,321



3,111Total current liabilities


23,466



41,425Advance from collaboration partner


40,000



30,000Commitments and contingenciesStockholders 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; 45,913,370 and
    41,210,734 shares issued and outstanding as of December 31,
    2006 and 2005, respectively


46



41Additional paid-in capital


661,402



569,800Receivable from stock option
    exercises






(24
)Accumulated other comprehensive
    loss


(177
)


(767
)Accumulated deficit


(438,491
)


(345,810
)Total stockholders equity


222,780



223,240Total liabilities and
    stockholders equity

$
286,246


$
294,665    53




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  STATEMENTS OF OPERATIONS
  Year Ended December 31,2006


2005


2004( In thousands, except per share amounts )License fee revenue

$
250


$
1,000


$
500Operating expenses:Net expense from unconsolidated
    joint business


23,915







Research and development


30,980



63,120



35,846Selling, general and administrative


50,019



39,671



14,316Restructuring










258Total operating expenses


104,914



102,791



50,420Loss from operations


(104,664
)


(101,791
)


(49,920
)Interest income, net


11,983



6,242



3,164Other income






375



Net loss

$
(92,681
)

$
(95,174
)

$
(46,756
)Basic and diluted net loss per
    share

$
(2.20
)

$
(2.64
)

$
(1.36
)Shares used in computing basic and
    diluted net loss per share


42,170



36,039



34,342    54




---



##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  STATEMENT OF STOCKHOLDERS EQUITY
  Receivable


AccumulatedFrom


OtherAdditional


Stock


Comprehensive





TotalCommon Stock


Paid-In


Option


Income


Accumulated


StockholdersShares


Amount


Capital


Exercises


(Loss)


Deficit


Equity(In thousands, except share and per share amounts)Balances at December 31, 2003


29,586,022


$
30


$
277,577


$
(235
)

$
27


$
(203,880
)

$
73,519Exercise of stock options at prices
    ranging from $1.07 to $38.08 per share


424,265







3,275



235











3,510Issuance of common stock in
    connection with follow-on public offering, net of issuance costs
    of $9,837


4,685,693



5



148,301















148,306Stock-based compensation, related
    to non-employee stock option grants










1,353















1,353Issuance of common stock pursuant
    to employee stock purchase plan


16,852







105















105Exercise of warrants


553,835







355















355Comprehensive loss:Change in unrealized loss on
    investments


















(404
)






(404
)Net loss






















(46,756
)


(46,756
)Comprehensive loss


























(47,160
)Balances at December 31, 2004


35,266,667



35



430,966







(377
)


(250,636
)


179,988Exercise of stock options at prices
    ranging from $4.00 to $27.34 per share


152,093







1,177



(24
)










1,153Issuance of common stock in
    connection with follow-on public offering, net of issuance costs
    of $8,953


5,750,000



6



136,228















136,234Stock-based compensation, related
    to non-employee stock option grants










906















906Issuance of common stock pursuant
    to employee stock purchase plan


12,424







257















257Exercise of warrants


29,550







266















266Comprehensive loss:Change in unrealized loss on
    investments


















(390
)






(390
)Net loss






















(95,174
)


(95,174
)Comprehensive loss


























(95,564
)Balances at December 31, 2005


41,210,734



41



569,800



(24
)


(767
)


(345,810
)


223,240Exercise of stock options at prices
    ranging from $4.00 to $25.30 per share


347,287







2,520



24











2,544Issuance of common stock in
    connection with Azimuth common stock purchase agreement


4,326,098



5



74,353















74,358Stock-based compensation, related
    to stock option grants










13,957















13,957Issuance of common stock pursuant
    to employee stock purchase plan


22,584







602















602Issuance of restricted stock awards


6,667







170















170Comprehensive loss:Change in unrealized loss on
    investments


















590







590Net loss






















(92,681
)


(92,681
)Comprehensive loss


























(92,091
)Balances at December 31, 2006


45,913,370


$
46


$
661,402


$



$
(177
)

$
(438,491
)

$
222,780    55




---



##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  STATEMENTS
    OF CASH FLOWS
  Year Ended December 312006


2005


2004(In thousands)Cash flows from operating
    activities:Net loss

$
(92,681
)

$
(95,174
)

$
(46,756
)Adjustments to reconcile net loss
    to net cash used in operating activities:Depreciation and amortization


758



630



194Gain on investment






(375
)


Noncash restructuring charges










280Gain on sale of fixed assets






(7
)


(18
)Forgiveness of note receivable










11Stock-based compensation


14,406



906



1,353Changes in operating assets and
    liabilities:Receivable from collaboration
    partner


(4,931
)


(3,321
)


(445
)Prepaid expenses and other current
    assets


352



(1,157
)


(1,139
)Other assets


(190
)


34



(84
)Accounts payable


(284
)


(457
)


739Accrued liabilities


1,851



(552
)


1,121Accrued clinical trials and
    related expenses


2,696



5,567



(147
)Payable to collaboration partner


(22,432
)


19,303



(2,112
)Accrued compensation


210



2,201



188Accrued restructuring






(195
)


(130
)Net cash used in operating
    activities


(100,245
)


(72,597
)


(46,945
)Cash flows from investing
    activities:Purchases of marketable securities


(360,272
)


(336,645
)


(201,304
)Maturities of marketable securities


422,488



233,020



115,607Proceeds from sale of Syrxx
    Investment






750



Capital expenditures


(619
)


(624
)


(1,573
)Notes receivable from related
    parties


(228
)






Proceeds from sale of fixed assets






7



595Proceeds from repayment of note
    receivable










275Net cash provided by (used in)
    investing activities


61,369



(103,492
)


(86,400
)Cash flows from financing
    activities:Advance from collaboration partner


10,000



10,000



Net proceeds from issuances of
    common stock


77,225



137,910



152,276Net cash provided by financing
    activities


87,225



147,910



152,276Net increase (decrease) in cash
    and cash equivalents


48,349



(28,179
)


18,931Cash and cash equivalents at
    beginning of period


46,064



74,243



55,312Cash and cash equivalents at end
    of period

$
94,413


$
46,064


$
74,243    56




---



##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS
 December 31,
    2006
  Note 1.
    Summary
    of Significant Accounting Policies  The
    Company
  changing the way cancer is
    treated tm
  ®
  Revenue
    Recognition
    Contract Revenue from Collaborations.
    Use of
    Estimates
    Net
    Expense from Unconsolidated Joint Business
  non-U.S. sales
 57




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Research
    and Development
        Cash
    Equivalents and Marketable Securities
    available-for-sale. Available-for-sale
 58




---



##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  available-for-sale
  Property
    and Equipment
    Impairment
    of Long-Lived Assets
    Stock-Based
    Compensation
  ,
    No. FAS 123(R)-3,
 59




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    No. 96-18,
    Year Ended December 31,2005


2004Risk-free interest rate


3.80
%


2.92
%Expected life


3.8 years



3.7 yearsExpected volatility


0.74



0.85Expected dividends


None



NoneWeighted average fair value of
    options at date of grant

$
13.55


$
22.93     Year Ended December 31,2005


2004(In thousands, except per share amounts)Net loss  as reported

$
(95,174
)

$
(46,756
)Deduct: Total stock-based employee
    compensation determined under the fair value based method for
    all awards, net of related tax effects


(13,333
)


(6,071
)Pro forma net loss

$
(108,507
)

$
(52,827
)Loss per share:Basic and diluted net loss per
    share  as reported

$
(2.64
)

$
(1.36
)Basic and diluted net loss per
    share  pro forma

$
(3.01
)

$
(1.54
)     Net
    Loss Per Share
   60




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    December 31,2006


2005


2004(In thousands)Stock options


5,335



3,806



2,296Stock warrants


9



9



40Restricted stock awards


33







5,377



3,815



2,336   Comprehensive
    Loss
  available-for-sale
  Concentration
    of Credit Risk and Significant Research and Development
    Collaborators
      Income
    Taxes
    Segment
    Reporting
    Recently
    Issued Accounting Standards
   61




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   Note 2.
    Collaboration
    Agreements  Bayer
    Pharmaceuticals Corporation
            Warner-Lambert
    Company
   62




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Note 3.
    Net
    Expense from Unconsolidated Joint Business    out-of-pocket
       63




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
     Year EndedDecember 31,2006(In thousands)Onyxs share of collaboration
    loss

$
(59,595
)Reimbursement of Onyxs
    direct development and marketing expenses


35,680Onyxs net expense from
    unconsolidated joint business

$
(23,915
)     Note 4.
    Marketable
    Securities    Available-for-sale
  2006Adjusted


Unrealized


Unrealized


EstimatedCost


Gains


Losses


Fair Value(In thousands)U.S. government investments:Maturing within 1 year

$
15,195


$



$
(57
)

$
15,138Maturing between 1 and 2 years














Total government investments


15,195







(57
)


15,138Agency bond investments:Maturing within 1 year


41,663



1



(22
)


41,642Maturing between 1 and 2 years


9,996







(8
)


9,988Total agency bond investments


51,659



1



(30
)


51,630Corporate debt investments:Maturing within 1 year


105,853



1



(77
)


105,777Maturing between 1 and 2 years


4,460







(15
)


4,445Total corporate investments


110,313



1



(92
)


110,222Total
    available-for-sale
    marketable securities

$
177,167


$
2


$
(179
)

$
176,990   64




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  2005Adjusted


Unrealized


Unrealized


EstimatedCost


Gains


Losses


Fair Value(In thousands)U.S. government investments:Maturing within 1 year

$
7,488


$



$
(44
)

$
7,444Maturing between 1 and 2 years


15,182







(107
)


15,075Total government investments


22,670







(151
)


22,519Agency bond investments:Maturing within 1 year


12,936



1



(21
)


12,916Maturing between 1 and 2 years














Total agency bond investments


12,936



1



(21
)


12,916Corporate debt investments:Maturing within 1 year


173,460



156



(654
)


172,962Maturing between 1 and 2 years


30,317







(98
)


30,219Total corporate investments


203,777



156



(752
)


203,181Total
    available-for-sale
    marketable securities

$
239,383


$
157


$
(924
)

$
238,616   other-than-temporary.
  Note 5.
    Property
    and Equipment    December 31,2006


2005(In thousands)Computers, machinery and equipment

$
2,279


$
1,708Furniture and fixtures


446



413Leasehold improvements


734



734Construction in progress


15



3,474



2,855Less accumulated depreciation and
    amortization


(1,996
)


(1,238
)$
1,478


$
1,617    65




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
     Note 6.
    Long-Term
    Obligations    Note 7.
    Facility
    Leases          Year ending December 31:2007

$
1,0362008


1,0232009


1,0492010


1,0582011


1,046Thereafter


1,308$
6,520  66




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Note 8.
    Related
    Party Transactions    Note 9.
    401(k)
    Plan    Note 10.
    Stockholders
    Equity  Stock
    Options and Employee Stock Purchase Plan
           67




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      Preferred
    Stock
    Warrants
      Note 11.
    Stock-Based
    Compensation  ,
   68




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  No. 96-18,
  Pro forma
    Information for Periods prior to the Adoption of
    FAS 123(R)
  
    Year Ended


Year EndedDecember 31,


December 31,2005


2004(In thousands except per share data)Net loss, as reported

$
(95,174
)

$
(46,756
)Deduct: Total stock-based employee
    compensation determined under the fair value based method for
    all awards, net of related tax effects


(13,333
)


(6,071
)Net loss  pro forma

$
(108,507
)

$
(52,827
)Loss per share:Basic and diluted net loss per
    share  as reported

$
(2.64
)

$
(1.36
)Basic and diluted net loss per
    share  pro forma

$
(3.01
)

$
(1.54
)   Impact of
    the Adoption of FAS 123(R)
   69




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Year EndedDecember 31,2006(In thousands exceptper share data)Research and development

$
2,545Selling, general and administrative


11,496Total share-based compensation
    expense

$
14,041Impact on basic and diluted net
    loss per share

$
(0.33
)   No. 96-18,
  Year EndedDecember 31,2006Stock option plans:Weighted average grant date fair
    value

$
13.83Total fair value vested (in
    thousands)

$
14,460Stock bonus awards:Weighted average grant date fair
    value

$
21.04Total fair value vested (in
    thousands)

$
140    70




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   Valuation
    Assumptions
    Year EndedDecember 312006


2005


2004Stock Option Plans:Risk-free interest rate


4.68
%


3.80
%


2.92
%Expected life


4.2 years



3.8 years



3.7 yearsExpected volatility


59
%


74
%


85
%Expected dividends


None



None



NoneWeighted average option fair value

$
11.00


$
13.55


$
22.93Stock bonus awards:Expected life


3 years







Expected dividends


None







Weighted average fair value per
    share

$
21.04







ESPP:Risk-free interest rate


4.33
%


3.14
%


2.52
%Expected life


6 months



6 months



2 yearsExpected volatility


59
%


74
%


88
%Expected dividends


None



None



NoneWeighted average fair value per
    share

$
8.65


$
10.79


$
23.30    71




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   Stock-Based
    Payment Award Activity
    WeightedShares


Number


AverageAvailable


of Shares


ExerciseEmployee Stock Options:

for Grant


Outstanding


PriceBalance at December 31, 2003


1,419,216



1,983,684


$
7.65Shares authorized


600,000







Granted


(802,925
)


802,925


$
38.27Exercised






(424,265
)

$
7.72Cancelled/expired/forfeited


65,902



(65,902
)

$
19.85Balance at December 31, 2004


1,282,193



2,296,442


$
17.99Shares authorized


3,990,000







Granted


(1,718,000
)


1,718,000


$
24.52Exercised






(152,093
)

$
7.73Expired/forfeited


56,268



(56,268
)

$
29.85Balance at December 31, 2005


3,610,461



3,806,081


$
21.17Granted


(1,987,950
)


1,987,950


$
21.60Exercised






(347,287
)

$
7.26Expired


19,058



(19,058
)

$
37.83Forfeited


93,209



(93,209
)

$
28.73Balance at December 31, 2006


1,734,778



5,334,477


$
22.05   WeightedAverageGrant DateStock Bonus Awards:

Shares


Fair ValueBalance at December 31, 2005






Granted


40,000


$
21.04Vested


(6,667
)

$
21.04Cancelled






Balance at December 31, 2006


33,333


$
21.04  72




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Options Outstanding



Options ExercisableWeightedAverage


WeightedContractual Life


Average






WeightedNumber


Remaining


Exercise



Number


AverageRange of Exercise Prices

Outstanding


( In years)


Price



Exercisable


Exercise Price$ 3.82 - $15.29


1,101,389



5.1


$
7.87




927,222


$
7.20$15.36 - $20.29


1,111,271



9.1


$
16.76




121,338


$
17.98$20.40 - $25.30


1,150,555



8.4


$
23.43




436,959


$
23.69$25.44 - $29.04


1,113,330



9.0


$
28.43




257,816


$
28.49$29.39 - $48.19


857,932



7.6


$
36.95




532,794


$
37.18Total


5,334,477



7.9


$
22.05




2,276,129


$
20.37     in-the-money in-the-money in-the-money
  Note 12.
    Restructuring    Note 13.
    Income
    Taxes   73




---



##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
     December 31,2006


2005(In thousands)Net operating loss carryforwards

$
149,955


$
122,854Tax credit carryforwards


33,046



23,952Capitalized research and
    development


3,216



4,115Deferred revenue


15,934



11,950Other


5,022



399Total deferred tax assets


207,173



163,270Valuation allowance


(207,173
)


(163,270
)Net deferred tax assets

$



$
           Note 14.
    Guarantees,
    Indemnifications and Contingencies  Guarantees
    and Indemnifications
   74




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##### Table of Contents



ONYX
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Contingencies
    Note 15.
    Quarterly
    Financial Data (Unaudited)    2006 Quarter EndedDecember 31


September 30


June 30


March 31(In thousands, except per share data)Total revenues

$



$
100


$
150


$
Net loss


(20,707
)


(20,148
)


(31,474
)


(20,352
)Basic and diluted net loss per
    share


(0.47
)


(0.49
)


(0.76
)


(0.49
)   2005 Quarter EndedDecember 31


September 30


June 30


March 31(In thousands, except per share data)Total revenues

$



$



$



$
1,000Net loss


(38,352
)


(22,581
)


(18,141
)


(16,100
)Basic and diluted net loss per
    share


(1.00
)


(0.64
)


(0.51
)


(0.46
)  75




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##### Table of Contents



EXHIBIT
    INDEX
  ExhibitNumber

Description of Document3
.1(1)

Restated Certificate of
    Incorporation of the Company.3
.2(1)

Bylaws of the Company.3
.3(3)

Certificate of Amendment to
    Amended and Restated Certificate of Incorporation.3
.4(18)

Certificate of Amendment to
    Amended and Restated Certificate of Incorporation.4
.1(1)

Reference is made to
    Exhibits 3.1, 3.2, 3.3 and 3.4.4
.2(1)

Specimen Stock Certificate.10
.1(15)*

Collaboration Agreement between
    Bayer Corporation (formerly Miles, Inc.) and the Company dated
    April 22, 1994.10
.1(i)(15)*

Amendment to Collaboration
    Agreement between Bayer Corporation and the Company dated
    April 24, 1996.10
.1(ii)(15)*

Amendment to Collaboration
    Agreement between Bayer Corporation and the Company dated
    February 1, 1999.10
.2(8)*

Amended and restated Research,
    Development and Marketing Collaboration Agreement dated
    May 2, 1995 between the Company and Warner-Lambert Company.10
.2(i)(8)*

Research, Development and
    Marketing Collaboration Agreement dated July 31, 1997
    between the Company and Warner-Lambert Company.10
.2(ii)(8)*

Amendment to the Amended and
    Restated Research, Development and Marketing Collaboration
    Agreement, dated December 15, 1997, between the Company and
    Warner-Lambert Company.10
.2(iii)(8)*

Second Amendment to the Amended
    and Restated Research, Development and Marketing Agreement
    between Warner-Lambert and the Company dated May 2, 1995.10
.2(iv)(8)*

Second Amendment to Research,
    Development and Marketing Collaboration Agreement between
    Warner-Lambert and the Company dated July 31, 1997.10
.2(v)(23)*

Amendment #3 to the Research,
    Development and Marketing Collaboration Agreement between the
    Company and Warner-Lambert dated August 6, 2001.10
.2(vi)(4)*

Amendment #3 to the Amended
    and Restated Research, Development and Marketing Collaboration
    Agreement between the Company and Warner-Lambert dated
    August 6, 2001.10
.3(5)*

Technology Transfer Agreement
    dated April 24, 1992 between Chiron Corporation and the
    Company, as amended in the Chiron Onyx HPV Addendum dated
    December 2, 1992, in the Amendment dated February 1,
    1994, in the Letter Agreement dated May 20, 1994 and in the
    Letter Agreement dated March 29, 1996.10
.4(1)+

Letter Agreement between
    Dr. Gregory Giotta and the Company dated May 26, 1995.10
.5(1)+

1996 Equity Incentive Plan.10
.6(1)+

1996 Non-Employee Directors
    Stock Option Plan.10
.7(1)+

1996 Employee Stock Purchase Plan.10
.8(1)+

Form of Indemnity Agreement to be
    signed by executive officers and directors of the Company.10
.9(11)+

Form of Executive Change in
    Control Severance Benefits Agreement.10
.10(2)*

Collaboration Agreement between
    the Company and Warner-Lambert Company dated October 13,
    1999.10
.10(i)(4)*

Amendment #1 to the
    Collaboration Agreement between the Company and Warner-Lambert
    dated August 6, 2001.10
.10(ii)(7)*

Second Amendment to the
    Collaboration Agreement between the Company and Warner-Lambert
    Company dated September 16, 2002.10
.11(6)

Stock and Warrant Purchase
    Agreement between the Company and the investors dated
    May 6, 2002.10
.12(9)

Sublease between the Company and
    Siebel Systems dated August 5, 2004.10
.12(i)

First Amendment to Sublease
    between the Company and Oracle USA Inc., dated November 3,
    2006.10
.13(10)+

Onyx Pharmaceuticals, Inc. 2005
    Equity Incentive Plan.10
.13(i)+

Form of Stock Option Agreement
    pursuant to the 2005 Equity Incentive Plan.




---



##### Table of Contents



ExhibitNumber

Description of Document10
.13(ii)+

Form of Stock Option Agreement
    pursuant to the 2005 Equity Incentive Plan and the
    Non-Discretionary Grant Program for Directors.10
.14(12)+

Separation Agreement between Onyx
    Pharmaceuticals, Inc. and Leonard E. Post, Ph. D., dated
    December 5, 2005.10
.15(13)+

2006 Base Salaries and Bonuses for
    Fiscal Year 2005 for Named Executive Officers.10
.16(14)**

U.S. Co-Promotion Agreement
    by and between the Company and Bayer Pharmaceuticals
    Corporation, dated March 6, 2006.10
.17(16)+

Letter Agreement between Gregory
    W. Schafer and the Company, dated April 12, 2006.10
.18(17)+

Separation Agreement between the
    Company and Scott M. Freeman, M.D., dated May 3, 2006.10
.19(19)+

Letter Agreement between Laura A.
    Brege and the Company, dated May 19, 2006.10
.20(20)+

Letter Agreement between Gregory
    W. Schafer and the Company, dated July 7, 2006.10
.21(20)+

Form of Stock Bonus Award Grant
    Notice and Agreement between the Company and certain award
    recipients.10
.22(21)+

Separation Agreement between Fabio
    M. Benedetti, M.D. and the Company, dated September 6,
    2006.10
.23(22)

Common Stock Purchase Agreement
    between Onyx Pharmaceuticals, Inc. and Azimuth Opportunity Ltd.,
    dated September 29, 2006.23
.1

Consent of Independent Registered
    Public Accounting Firm.24
.1

Power of Attorney. Reference is
    made to the signature page.31
.1

Certification required by
    Rule 13a-14(a)
    or
    Rule 15d-14(a).32
.1

Certifications required by
    Rule 13a-14(b)
    or
    Rule 15d-14(b)and
    Section 1350 of Chapter 63 of Title 18 of the
    United States Code (18 U.S.C. 1350).     *
    
    Confidential treatment has been received for portions of this
    document.**
    
    Confidential treatment has been requested for portions of this
    document.+
    
    Indicates management contract or compensatory plan or
    arrangement.(1)
    
    Filed as an exhibit to Onyxs Registration Statement on
    Form SB-2
    (No.
    333-3176-LA).(2)
    
    Filed as an exhibit to Onyxs Current Report on
    Form 8-K
    filed on March 1, 2000.(3)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2000.(4)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2001.(5)
    
    Filed as an exhibit to Onyxs Annual Report on
    Form 10-K
    for the year ended December 31, 2001. The redactions to
    this agreement have been amended since its original filing in
    accordance with a request for extension of confidential
    treatment filed separately by the Company with the Securities
    and Exchange Commission.(6)
    
    Filed as an exhibit to Onyxs Registration Statement on
    Form S-3
    filed on June 5, 2002
    (No. 333-89850).(7)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2002.(8)
    
    Filed as an exhibit to Onyxs Annual Report on
    Form 10-K
    for the year ended December 31, 2002. The redactions to
    this agreement have been amended since its original filing in
    accordance with a request for extension of confidential
    treatment filed separately by the Company with the Securities
    and Exchange Commission.(9)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2004.(10)
    
    Filed as an exhibit to Onyxs Current Report on
    Form 8-K
    filed on June 7, 2005.(11)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2005.(12)
    
    Filed as an exhibit to Onyxs Current Report on
    Form 8-K
    filed on December 9, 2005.(13)
    
    Filed as an exhibit to the registrants Current Report on
    Form 8-K
    filed on March 7, 2006.(14)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2006.




---



##### Table of Contents



(15)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2006. The redactions to
    this agreement have been amended since its original filing in
    accordance with a request for extension of confidential
    treatment filed separately by the Company with the Securities
    and Exchange Commission.(16)
    
    Filed as an exhibit to the registrants Current Report on
    Form 8-K
    filed on April 18, 2006.(17)
    
    Filed as an exhibit to the registrants Current Report on
    Form 8-K
    filed on May 12, 2006.(18)
    
    Filed as an exhibit to Onyxs Registration Statement on
    Form S-3
    (No.
    333-134565)
    filed on May 30, 2006.(19)
    
    Filed as an exhibit to the registrants Current Report on
    Form 8-K
    filed on June 12, 2006.(20)
    
    Filed as an exhibit to the registrants Current Report on
    Form 8-K
    filed on July 12, 2006.(21)
    
    Filed as an exhibit to the registrants Current Report on
    Form 8-K
    filed on September 7, 2006.(22)
    
    Filed as an exhibit to Onyxs Current Report on
    Form 8-K
    filed on September 29, 2006.(23)
    
    Filed as an exhibit to Onyxs Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2006. The redactions to
    this agreement have been amended since its original filing in
    accordance with a request for extension of confidential
    treatment filed separately by the Company with the Securities
    and Exchange Commission.