##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _________to_________
 Commission File Number: 0-28298
 ONYX PHARMACEUTICALS, INC.
  Delaware
    
    94-3154463(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer ID Number)
 
 
  R £
  £ R £
  £ R




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##### 



INDEX
 PagePART I: FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Condensed Balance
Sheets  March 31, 2006 and December 31, 2005
    
    
    3Condensed Statements
of Operations  Three months ended March 31, 2006 and
2005
    
    
    4Condensed Statements
of Cash Flows  Three months ended March 31, 2006 and 2005
    
    
    5Notes to Condensed Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4.
    
    Controls and Procedures
    
    
    18PART II: OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    19Item 1A.
    

Risk
Factors
    
    
    19Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 3.
    
    Defaults Upon Senior Securities
    
    
    34Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    34Item 5.
    
    Other Information
    
    
    34Item 6.
    
    Exhibits
    
    
    34SIGNATURESEXHIBIT 10.1EXHIBIT 10.1(i)EXHIBIT 10.2EXHIBIT 10.12EXHIBIT 10.31EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  2




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PART I: FINANCIAL INFORMATION
 
 Item 1. Financial Statements (Unaudited)
 
 ONYX
PHARMACEUTICALS, INC.CONDENSED BALANCE SHEETS
 March 31,
    
    
    December 31,2006
    
    
    2005(Unaudited)
    
    
    (Note 1)(In thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    22,930
    
    
    $
    46,064Marketable securities
    
    
    235,378
    
    
    
    228,754Receivable from collaboration partner
    
    
    3,947
    
    
    
    4,350Other current assets
    
    
    4,742
    
    
    
    3,935Total current assets
    
    
    266,997
    
    
    
    283,103Long-term marketable securities
    
    
    
    
    
    
    9,862Property and equipment, net
    
    
    1,441
    
    
    
    1,617Other assets
    
    
    83
    
    
    
    83$
    268,521
    
    
    $
    294,665LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    237
    
    
    $
    581Payable to collaboration partner
    
    
    8,976
    
    
    
    30,823Accrued liabilities
    
    
    2,218
    
    
    
    1,343Accrued clinical trials and related expenses
    
    
    6,866
    
    
    
    5,567Accrued compensation
    
    
    2,633
    
    
    
    3,111Total current liabilities
    
    
    20,930
    
    
    
    41,425Advance from collaboration partner
    
    
    40,000
    
    
    
    30,000Commitments and contingenciesStockholders equity:Common stock
    
    
    41
    
    
    
    41Additional paid-in capital
    
    
    574,772
    
    
    
    569,800Receivable from stock option exercises
    
    
    (12
    )
    
    
    (24
    )Accumulated other comprehensive loss
    
    
    (1,048
    )
    
    
    (767
    )Accumulated deficit
    
    
    (366,162
    )
    
    
    (345,810
    )Total stockholders equity
    
    
    207,591
    
    
    
    223,240$
    268,521
    
    
    $
    294,665
  3




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ONYX PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
 Three Months EndedMarch 31,2006
    
    
    2005(In thousands, except pershare amounts)Revenue:License fee
    
    $
    
    
    
    $
    1,000Operating expenses:Net expense from unconsolidated joint business
    
    
    4,102
    
    
    
    Research and development
    
    
    7,800
    
    
    
    13,532Selling, general and administrative
    
    
    11,623
    
    
    
    4,800Total operating expenses
    
    
    23,525
    
    
    
    18,332Loss from operations
    
    
    (23,525
    )
    
    
    (17,332
    )Interest income, net
    
    
    3,173
    
    
    
    1,232Net loss
    
    $
    (20,352
    )
    
    $
    (16,100
    )Basic and diluted net loss per share
    
    $
    (0.49
    )
    
    $
    (0.46
    )Shares used in computing basic and diluted net
loss per share
    
    
    41,292
    
    
    
    35,274
  4




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ONYX PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
 Three Months EndedMarch 312006
    
    
    2005( In thousands)Cash flows from operating activities:Net loss
    
    $
    (20,352
    )
    
    $
    (16,100
    )Adjustments to reconcile net loss to net cash used
in operating activities:Depreciation and amortization
    
    
    188
    
    
    
    126Stock-based compensation
    
    
    3,753
    
    
    
    237Changes in assets and liabilities:Receivable from collaboration partner
    
    
    403
    
    
    
    (335
    )Prepaid expenses and other current assets
    
    
    (807
    )
    
    
    (65
    )Other assets
    
    
    
    
    
    
    (89
    )Accounts payable
    
    
    (344
    )
    
    
    (223
    )Accrued liabilities
    
    
    875
    
    
    
    (800
    )Accrued clinical trials and related expenses
    
    
    1,299
    
    
    
    88Payable to collaboration partner
    
    
    (21,847
    )
    
    
    2,063Accrued compensation
    
    
    (478
    )
    
    
    (381
    )Accrued restructuring
    
    
    
    
    
    
    (111
    )Net cash used in operating activities
    
    
    (37,310
    )
    
    
    (15,590
    )Cash flows from investing activities:Purchases of marketable securities
    
    
    (67,243
    )
    
    
    (53,210
    )Maturities of marketable securities
    
    
    70,200
    
    
    
    28,705Capital expenditures
    
    
    (12
    )
    
    
    (118
    )Proceeds from sale of fixed assets
    
    
    
    
    
    
    6Net cash provided by (used in) investing activities
    
    
    2,945
    
    
    
    (24,617
    )Cash flows from financing activities:Advance from collaboration partner
    
    
    10,000
    
    
    
    Net proceeds from issuances of common stock
    
    
    1,231
    
    
    
    47Net cash provided by financing activities
    
    
    11,231
    
    
    
    47Net decrease in cash and cash equivalents
    
    
    (23,134
    )
    
    
    (40,160
    )Cash and cash equivalents at beginning of period
    
    
    46,064
    
    
    
    74,243Cash and cash equivalents at end of period
    
    $
    22,930
    
    
    $
    34,083
  5




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NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
 Note 1.   Basis of Presentation
    Note 2.   Net Expense from Unconsolidated Joint Business
     6




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Three Months EndedMarch 31, 2006(in thousands)Product revenue, net (as recorded by Bayer)
    
    $
    23,747Combined cost of goods sold, distribution, selling,
general and administrative
    
    
    17,708Combined research and development
    
    
    30,031Combined collaboration loss
    
    $
    (23,992
    )Onyxs 50% share of collaboration loss
    
    $
    (11,996
    )Reimbursement of Onyxs direct development and marketing
expenses
    
    
    7,894Onyxs net expense from unconsolidated joint business
    
    $
    (4,102
    )
 Note 3.   Stock-Based Compensation
 ,
  7




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Employee Stock Plans
     Pro forma Information for Periods prior to the Adoption of FAS 123(R)
 
  Three Months EndedMarch 31, 2005(in thousands exceptper share data)Net loss, as reported
    
    $
    (16,100
    )Deduct: Total stock-based employee compensation
determined under the fair value based method for
all awards, net of related tax effects
    
    
    (2,551
    )Net loss  pro forma
    
    $
    (18,651
    )Loss per share:Basic and diluted net loss per share  as reported
    
    $
    (0.46
    )Basic and diluted net loss per share  pro forma
    
    $
    (0.53
    )
 8




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Impact of the Adoption of FAS 123(R)
  Three Months EndedMarch 31, 2006(in thousands exceptper share data)Research and development
    
    $
    686Selling, general and administrative
    
    
    2,944Total share-based compensation expense
    
    $
    3,630Impact on basic and diluted net loss per share
    
    $
    (0.09
    )
  Valuation Assumptions
  9




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Three Months EndedMarch 31,2006
    

    2005Stock Option Plans:Risk-free interest rate
    
    
    4.57
    %
    
    
    3.54
    %Expected life
    
    4.2 years
    
    3.8 yearsExpected volatility
    
    
    0.60
    
    
    
    0.77Expected dividends
    
    None
    
    NoneWeighted average option fair value
    
    $
    14.49
    
    
    $
    15.02
 Three Months EndedMarch 31,2006
    
    2005ESPP:Risk-free interest rate
    
    
    4.33
    %
    
    
    2.50
    %Expected life
    
    6 months
    
    6 monthsExpected volatility
    
    
    0.60
    
    
    
    0.80Expected dividends
    
    None
    
    NoneWeighted average shares fair value
    
    $
    9.32
    
    
    $
    16.92
 Stock-Based Payment Award Activity
  Shares
    
    
    Number of
    
    
    
    
    
   WeightedAvailable
    
    
    Shares
    
     
      
Averagefor Grant
    

    Outstanding
    
Exercise PriceBalance at December 31, 2004
    
    
    1,282,193
    
    
    
    2,296,442
    
    
    
    
    $
    17.99Granted
    
    
    (729,000
    )
    
    
    729,000
    
    
    
    

    $
    26.38Exercised
    
    
    
    
    
    
    (8,590
    )
    
    
    
    $
    5.45Cancelled/expired/forfeited
    
    
    5,000
    
    
    
    (5,000
    )
    
    
    
    $
    38.85Balance at March 31, 2005
    
    
    558,193
    
    
    
    3,011,852
    
    
    
    
    $
    20.02Balance at December 31, 2005
    
    
    3,610,461
    
    
    
    3,806,081
    
    
    
    
    $
    21.17Granted
    
    
    (918,950
    )
    
    
    918,950
    
    
    
    
    $
    28.50Exercised
    
    
    
    
    
    
    (176,885
    )
    
    
    
    $
    6.89Cancelled/expired/forfeited
    
    
    26,604
    
    
    
    (26,604
    )
    
    
    
    $
    33.14Balance at March 31, 2006
    
    
    2,718,115
    
    
    
    4,521,542
    
    
    
    
    $
    23.15
  10




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Weighted-Average Grant-Shares
    
    
    Date Fair ValueNonvested at December 31, 2005
    
    
    2,209,027
    
    
    $
    9.69Granted
    
    
    918,950
    
    
    $
    14.49Vested
    
    
    (191,565
    )
    
    $
    21.35Cancelled/expired/forfeited
    
    
    (26,604
    )
    
    $
    19.96Nonvested at March 31, 2006
    
    
    2,909,808
    
    
    $
    10.34
  Options Outstanding
    Options ExercisableWeighted AverageContractual Life
    
    Weighted Average
    
    
    
    
    
    Weighted AverageRange of Exercise Prices


Number Outstanding
    


Remaining(In years)
    

Exercise Price
    
    Number Exercisable
    
    Exercise Price$3.82 - $5.88
    
    
    538,030
    
    
    5.8
    
    
    $
    4.86
    
    
    
    453,659
    
    
    $
    4.88$6.00 - $10.88
    
    
    453,986
    
    
    4.9
    
    
    $
    8.77
    
    
    
    417,819
    
    
    $
    8.85$11.00 - $21.01
    
    
    743,025
    
    
    7.7
    
    
    $
    18.89
    
    
    
    191,588
    
    
    $
    13.92$21.56 - $25.23
    
    
    233,542
    
    
    9.3
    
    
    $
    23.43
    
    
    
    2,042
    
    
    $
    21.60$25.30
    
    
    533,055
    
    
    8.9
    
    
    $
    25.30
    
    
    
    136,770
    
    
    $
    25.30$25.44 - $28.41
    
    
    142,271
    
    
    9.5
    
    
    $
    26.76
    
    
    
    19,707
    
    
    $
    27.85$28.62
    
    
    864,450
    
    
    9.9
    
    
    $
    28.62
    
    
    
    
    
    
    $
    $28.75 - $38.08
    
    
    672,900
    
    
    8.5
    
    
    $
    34.06
    
    
    
    241,519
    
    
    $
    35.48$38.33 - $48.19
    
    
    333,950
    
    
    8.3
    
    
    $
    39.75
    
    
    
    142,297
    
    
    $
    39.65$53.37
    
    
    6,333
    
    
    8.1
    
    
    $
    53.37
    
    
    
    6,333
    
    
    $
    53.37Total
    
    
    4,521,542
    
    
    8.1
    
    
    $
    23.15
    
    
    
    1,611,734
    
    
    $
    16.86
   Note 4.   Revenue
   11




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Note 5.   Net Loss Per Share
  Note 6.   Comprehensive Loss
  Three Months EndedMarch 31,2006
    
    
    2005(In thousands)Net loss  as reported
    
    $
    (20,352
    )
    
    $
    (16,100
    )Other comprehensive loss:Change in unrealized gain (loss) on available-for-sale securities
    
    
    (281
    )
    
    
    (375
    )Comprehensive loss
    
    $
    (20,633
    )
    
    $
    (16,475
    )
 12




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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. 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 Form 10-Q 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 Form 10-Q. Our actual
results could differ materially from those anticipated in these forward-looking statements for many
reasons, including those set forth under Item 1A Risk
Factors in this Quarterly Report on Form
10-Q.
 Overview
 changing the way cancer is treated 
 ®
    13




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Critical Accounting Policies and the Use of Estimates
  Net Expense from Unconsolidated Joint Business:
 Stock-Based
Compensation:
   Results of Operations
 14




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Three months ended March 31, 2006 and 2005
 Revenue
  Net Expense from Unconsolidated Joint Business
       15




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Three Months EndedMarch 31, 2006(in thousands)Product revenue, net (as recorded by Bayer)
    
    $
    23,747Combined cost of goods sold, distribution, selling,
general and administrative
    
    
    17,708Combined research and development
    
    
    30,031Combined collaboration loss
    
    $
    (23,992
    )Onyxs 50% share of collaboration loss
    
    $
    (11,996
    )Reimbursement of Onyxs direct development and marketing
expenses
    
    
    7,894Onyxs net expense from unconsolidated joint business
    
    $
    (4,102
    )
 Research and Development Expenses
    16




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Selling, General and Administrative Expenses
  Interest Income, net
  Liquidity and Capital Resources
  .
    17




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
   March 31, 2006
    
    December 31, 2005Maturity
    
    Fair Value(In millions)
    
    AverageInterestRate
    
    Maturity
    
    Fair Value(In millions)
    
    AverageRateInterestCash equivalents, fixed rate
    
    0 -- 3 months
    
    $
    22.7
    
    
    
    4.55
    %
    
    0 -- 2 months
    
    $
    45.4
    
    
    
    3.97
    %Marketable securities,
fixed rate
    
    0 -- 22 months
    
    $
    235.4
    
    
    
    5.08
    %
    
    0 -- 23 months
    
    $
    238.6
    
    
    
    4.66
    %
  
 Item 4.    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures:
 Changes in Internal Control over Financial Reporting:
 Inherent Limitations on Effectiveness of Controls:
 18




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PART II: OTHER INFORMATION
 
 Item 1.   Legal Proceedings
 
 
 Item IA. 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.
 We
have marked with an asterisk (*) those risk factors below that
reflect substantial changes from the
risk factors included in our Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 16, 2006.
 Nexavar® (sorafenib) tablets is our only product, and we do not have any other product
candidates in Phase II or Phase III clinical development. If Nexavar is not commercially
successful, we may be unable to identify and promote alternative product candidates and our
business would fail.
  Our clinical trial of Nexavar in kidney cancer may not yield statistically significant overall
survival data, which may negatively impact the commercialization of Nexavar. í
    19




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Nexavar has received only limited approval for sale outside of the United States, and may
never receive broad foreign marketing approval. í
  .
 There is a competing therapy approved for the treatment of advanced kidney cancer, and we
expect the number of approved therapies could rapidly increase, which could harm the prospects for
Nexavar in this indication.
 20




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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.
     21




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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.
 
    
    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.
   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.
    22




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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.
  If Bayers business strategy changes, it may adversely affect our collaborative relationship.
  Provisions in our collaboration agreement with Bayer may prevent or delay a change in control.
  23




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Our clinical trials could take longer to complete than we project or may not be completed at
all.
    We face intense competition and rapid technological change, and many of our competitors have
substantially greater managerial resources than we have.
   
    
    developing products;
 
    
    undertaking preclinical testing and human clinical trials;
 
    
    obtaining FDA and other regulatory approvals of products; and
 
    
    manufacturing and marketing products.
 24




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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.*
  We will need substantial additional funds, and our future access to capital is uncertain.
  
    
    the size and complexity of our Nexavar program;
 
    
    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;
 25




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
    
    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.
   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;
    
    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.
  We have a history of losses, and we expect to continue to incur losses.
  26




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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.
  We have the right to co-promote Nexavar in the United States, but we do not have proven sales
or marketing expertise.
  We will be dependent on the efforts of Bayer to market and promote Nexavar in countries
outside the United States where Nexavar may receive approval.
   27




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If we lose our key employees and consultants or are unable to attract or retain qualified
personnel, our business could suffer.
   We have rapidly expanded our sales and marketing operations, and any difficulties managing
this growth could disrupt our operations.
  The market may not accept our products and pharmaceutical pricing and reimbursement pressures
may reduce profitability.*
  28




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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 are subject to extensive government regulation, which can be costly, time consuming and
subject us to unanticipated delays.
    29




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
    
    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.
  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 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
 30




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
    
    prevent others from infringing on our proprietary rights.
     We face product liability risks and may not be able to obtain adequate insurance.
   31




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##### Table of Contents




    
    decreased demand for a product;
 
    
    injury to our reputation;
 
    
    withdrawal of clinical trial volunteers; and
 
    
    loss of revenues.
  Our stock price is volatile.
  
    
    interim or final results of, or speculation about, clinical trials from Nexavar;
 
    
    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; and
 
    
    changes in healthcare reimbursement policies.
 Existing stockholders have significant influence over us.
   32




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We are at risk of securities class action litigation due to our expected stock price
volatility.
  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;
 
    
    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.
   33




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##### Table of Contents



Accounting pronouncements may affect our future financial position and results of
operations. í
  
 Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.   Defaults Upon Senior Securities
  
 Item 4.   Submission of Matters to a Vote of Security Holders
  
 Item 5.   Other Information
  
 Item 6.   Exhibits
 3.1(1)
    
    Restated Certificate of Incorporation of the Company.3.2(1)
    
    Bylaws of the Company.3.3(2)
    
    Certificate of Amendment to Amended and Restated Certificate of Incorporation.4.1
    
    Reference is made to Exhibits 3.1, 3.2 and 3.3.4.2(1)
    
    Specimen Stock Certificate.10.1*
    
    Collaboration Agreement by and between the Company and Bayer Corporation
(formerly Miles, Inc.) dated April 22, 199410.1(i)*
    
    Amendment to Collaboration Agreement by and between the Company and Bayer
Corporation, dated April 24, 199610.2*
    
    Research, Development and Marketing Collaboration Agreement by and between the
Company and Warner-Lambert Company dated May 2, 199510.12*
    
    Amendment to Collaboration Agreement by and between the Company and Bayer
Corporation, dated February 1, 1999
 34




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##### Table of Contents



10.31**
    
    U.S. Co-Promotion Agreement by and between the Company and Bayer
Pharmaceuticals Corporation, dated March 6, 200610.32(3)
    
    2006 Base Salaries and Bonuses for Fiscal Year 2005 for Named Executive Officers31.1(4)
    
    Certification of Chief Executive Officer as required by Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended31.2(4)
    
    Certification of Principal Financial Officer as required by Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended32.1(4)
    
    Certifications required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities
Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350).
 
 *
    
    Confidential treatment has been requested for portions of this document. 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.**
    
    Confidential treatment has been requested for portions of this document.(1)
    
    Filed as an exhibit to the registrants Registration Statement on Form SB-2 (No.
333-3176-LA).(2)
    
    Filed as an exhibit to the registrants Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.(3)
    
    Filed as an exhibit to the registrants Current Report on Form 8-K filed on March 7, 2006(4)
    
    This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is
not deemed filed with the Securities and Exchange Commission and is not to be incorporated by
reference into any filing of Onyx Pharmaceuticals, Inc. under the Securities Act of 1933, as
amended or the Securities Exchange Act of 1934, as amended (whether made before or after the
date of the Quarterly Report on Form 10-Q), irrespective of any general incorporation
language contained in such filing.
 35




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##### Table of Contents



SIGNATURES
  ONYX PHARMACEUTICALS, INC.Date: May 10, 2006
    By:
    /s/ Hollings C. RentonHollings C. RentonChairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer) Date: May 10, 2006
    By:
    /s/ Gregory W. SchaferGregory W. SchaferActing Chief Financial Officer
(Principal Financial Officer) 36




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##### Table of Contents



EXHIBIT INDEX
 3.1(1)
    
    Restated Certificate of Incorporation of the Company.3.2(1)
    
    Bylaws of the Company.3.3(2)
    
    Certificate of Amendment to Amended and Restated Certificate of Incorporation.4.1
    
    Reference is made to Exhibits 3.1, 3.2 and 3.3.4.2(1)
    
    Specimen Stock Certificate.10.1*
    
    Collaboration Agreement by and between the Company and Bayer Corporation
(formerly Miles, Inc.) dated April 22, 199410.1(i)*
    
    Amendment to Collaboration Agreement by and between the Company and Bayer
Corporation, dated April 24, 199610.2*
    
    Research, Development and Marketing Collaboration Agreement by and between the
Company and Warner-Lambert Company dated May 2, 199510.12*
    
    Amendment to Collaboration Agreement by and between the Company and Bayer
Corporation, dated February 1, 199910.31**
    
    U.S. Co-Promotion Agreement by and between the Company and Bayer
Pharmaceuticals Corporation, dated March 6, 200610.32(3)
    
    2006 Base Salaries and Bonuses for Fiscal Year 2005 for Named Executive Officers31.1(4)
    
    Certification of Chief Executive Officer as required by Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended31.2(4)
    
    Certification of Principal Financial Officer as required by Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended32.1(4)
    
    Certifications required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities
Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350).
 
 *
    Confidential treatment has been requested for portions of this document. 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.
  (1)
    
    Filed as an exhibit to the registrants Registration Statement on Form SB-2 (No.
333-3176-LA).
 (2)
    
    Filed as an exhibit to the registrants Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.
  (4)
    
    This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is
not deemed filed with the Securities and Exchange Commission and is not to be incorporated by
reference into any filing of Onyx Pharmaceuticals, Inc. under the Securities Act of 1933, as
amended or the Securities Exchange Act of 1934, as amended (whether made before or after the
date of the Quarterly Report on Form 10-Q), irrespective of any general incorporation
language contained in such filing.