##### 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 1934
 For the quarterly period ended March 31, 2010
 or
 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 Number: 0-28298
 ONYX PHARMACEUTICALS, INC.
  Delaware
    
    94-3154463(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer ID Number)
 
 
 þ o
 o o
  Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)Smaller Reporting Company 
o o þ




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##### 



INDEX
 PagePART I: FINANCIAL INFORMATION
    
    
    3Item 1.Financial Statements (Unaudited)
    
    
    3Condensed Consolidated Balance Sheets  March 31, 2010 and December 31, 2009
    
    
    3Condensed Consolidated Statements of Operations  Three months ended March 31, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Cash Flows  Three months ended March 31, 2010 and 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4.Controls and Procedures
    
    
    23PART II: OTHER INFORMATION
    
    
    24Item 1.Legal Proceedings
    
    
    24Item 1A.Risk Factors
    
    
    24Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 3.Defaults Upon Senior Securities
    
    
    41Item 4.(Removed and Reserved)
    
    
    41Item 5.Other Information
    
    
    41Item 6.Exhibits
    
    
    42SIGNATURES
    
    
    44EX-10.30EX-10.31EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I: FINANCIAL INFORMATION
 
 Item 1. Financial Statements (Unaudited)
 
 ONYX PHARMACEUTICALS, INC.  CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)
    
    
    (Note 1)(In thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    125,865
    
    
    $
    107,668Marketable securities, current
    
    
    422,000
    
    
    
    442,440Restricted cash
    
    
    27,603
    
    
    
    27,600Receivable from collaboration partner
    
    
    44,385
    
    
    
    51,418Prepaid expenses and other current assets
    
    
    11,430
    
    
    
    9,597Total current assets
    
    
    631,283
    
    
    
    638,723Marketable securities, non-current
    
    
    37,368
    
    
    
    37,174Property and equipment, net
    
    
    6,898
    
    
    
    7,473Intangible assets  in-process research and development
    
    
    438,800
    
    
    
    438,800Goodwill
    
    
    193,675
    
    
    
    193,675Other assets
    
    
    8,583
    
    
    
    8,835Total assets
    
    $
    1,316,607
    
    
    $
    1,324,680LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,264
    
    
    $
    1,363Accrued liabilities
    
    
    9,000
    
    
    
    11,852Accrued clinical trials and related expenses
    
    
    13,873
    
    
    
    13,815Accrued compensation
    
    
    6,021
    
    
    
    13,148Liability for contingent consideration, current
    
    
    40,000
    
    
    
    40,000Escrow account liability
    
    
    27,603
    
    
    
    27,600Total current liabilities
    
    
    97,761
    
    
    
    107,778Deferred rent and lease incentives
    
    
    4,871
    
    
    
    5,059Convertible senior notes due 2016
    
    
    145,826
    
    
    
    143,669Liability for contingent consideration, non-current
    
    
    163,976
    
    
    
    160,528Deferred tax liability
    
    
    157,090
    
    
    
    157,090Commitments and contingenciesStockholders equity:Common stock
    
    
    62
    
    
    
    62Receivable from stock option exercises
    
    
    (11
    )
    
    
    (5
    )Additional paid-in capital
    
    
    1,215,069
    
    
    
    1,207,010Accumulated other comprehensive loss
    
    
    (1,444
    )
    
    
    (1,962
    )Accumulated deficit
    
    
    (466,593
    )
    
    
    (454,549
    )Total stockholders equity
    
    
    747,083
    
    
    
    750,556Total liabilities and stockholders equity
    
    $
    1,316,607
    
    
    $
    1,324,680
  3




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##### Table of Contents



ONYX PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
March 31,2010
    
    
    2009(In thousands, except per share amounts)Revenue:Revenue from collaboration agreement
    
    $
    62,903
    
    
    $
    53,717Total operating revenue
    
    
    62,903
    
    
    
    53,717Operating expenses:Research and development
    
    
    43,575
    
    
    
    28,820Selling, general and administrative
    
    
    24,721
    
    
    
    21,953Contingent consideration
    
    
    3,448
    
    
    
    Total operating expenses
    
    
    71,744
    
    
    
    50,773Income (loss) from operations
    
    
    (8,841
    )
    
    
    2,944Investment income
    
    
    789
    
    
    
    1,121Interest expense
    
    
    (4,724
    )
    
    
    Income (loss) before provision (benefit) for income taxes
    
    
    (12,776
    )
    
    
    4,065Provision (benefit) for income taxes
    
    
    (732
    )
    
    
    Net income (loss)
    
    $
    (12,044
    )
    
    $
    4,065Net income (loss) per share:Basic
    
    $
    (0.19
    )
    
    $
    0.07Diluted
    
    $
    (0.19
    )
    
    $
    0.07Shares used in computing net income (loss) per share:Basic
    
    
    62,353
    
    
    
    56,715Diluted
    
    
    62,353
    
    
    
    57,197
  4




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ONYX PHARMACEUTICALS, INC.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months Ended March 31,2010
    
    
    2009(In thousands)Cash flows from operating activities:Net income (loss)
    
    $
    (12,044
    )
    
    $
    4,065Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    634
    
    
    
    385Stock-based compensation
    
    
    5,121
    
    
    
    4,456Amortization of convertible senior notes discount and debt issuance costs
    
    
    2,313
    
    
    
    Changes in fair value of liability for contingent consideration
    
    
    3,448
    
    
    
    Changes in operating assets and liabilities:Receivable from collaboration partner
    
    
    7,033
    
    
    
    (1,748
    )Restricted cash
    
    
    (3
    )
    
    
    Prepaid expenses and other current assets
    
    
    (1,833
    )
    
    
    654Other assets
    
    
    96
    
    
    
    6Accounts payable
    
    
    (99
    )
    
    
    1,100Advance payable to collaboration partner
    
    
    
    
    
    
    (6,130
    )Accrued liabilities
    
    
    (2,852
    )
    
    
    980Accrued clinical trials and related expenses
    
    
    58
    
    
    
    1,354Accrued compensation
    
    
    (7,127
    )
    
    
    (2,575
    )Escrow liability
    
    
    3
    
    
    
    Deferred rent and lease incentives
    
    
    (188
    )
    
    
    (73
    )Net cash provided by (used in) operating activities
    
    
    (5,440
    )
    
    
    2,474Cash flows from investing activities:Purchases of marketable securities
    
    
    (93,957
    )
    
    
    (165,338
    )Sales of marketable securities
    
    
    24,331
    
    
    
    20,068Maturities of marketable securities
    
    
    90,390
    
    
    
    55,000Capital expenditures
    
    
    (59
    )
    
    
    (40
    )Net cash provided by (used in) investing activities
    
    
    20,705
    
    
    
    (90,310
    )Cash flows from financing activities:Purchases of treasury stock
    
    
    (27
    )
    
    
    (18
    )Net proceeds from issuances of common stock
    
    
    2,959
    
    
    
    5,174Net cash provided by financing activities
    
    
    2,932
    
    
    
    5,156Net increase (decrease) in cash and cash equivalents
    
    
    18,197
    
    
    
    (82,680
    )Cash and cash equivalents at beginning of period
    
    
    107,668
    
    
    
    235,152Cash and cash equivalents at end of period
    
    $
    125,865
    
    
    $
    152,472Supplemental cash flow dataCash paid during the period for income taxes
    
    $
    612
    
    
    $
    Cash paid during the period for interest
    
    $
    4,677
    
    
    $
    
  5




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##### Table of Contents

nexavar

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
(Unaudited)
 Note 1. Basis of Presentation
   Note 2. Revenue from Collaboration Agreement
      6




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##### Table of Contents



Three Months Ended March 31,2010
    
    
    2009(In thousands)Onyxs share of collaboration commercial profit
    
    $
    55,084
    
    
    $
    47,547Reimbursement of Onyxs shared marketing expenses
    
    
    5,824
    
    
    
    5,393Royalty revenue
    
    
    1,995
    
    
    
    777Revenue from collaboration agreement
    
    $
    62,903
    
    
    $
    53,717
 Note 3. Acquisition of Proteolix
  Escrow Account Liability. Liability for Contingent Consideration.
 Goodwill
  Liability for Contingent Consideration
  7




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##### Table of Contents




    
    $170.0 million would be triggered by the achievement of accelerated marketing approval in
the United States for relapsed/refractory multiple myeloma;
    
    $65.0 million would be triggered by marketing approval in the European Union for
relapsed/refractory multiple myeloma;
    
    $150.0 million would be triggered by marketing approval in the United States for relapsed
multiple myeloma; and
    
    $150.0 million would be triggered by marketing approval for relapsed multiple myeloma in
the European Union.
  Escrow Account Liability
  Note 4. Fair Value Measurements
  
    
    Level 1, defined as observable inputs such as quoted prices for identical assets in
active markets;
    
    Level 2, defined as inputs other than quoted prices in active markets that are either
directly or indirectly observable; and
    
    Level 3, defined as unobservable inputs in which little or no market data exists,
therefore requiring management to develop its own assumptions based on best estimates of
what market participants would use in pricing an asset or liability at the reporting date.
  8




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##### Table of Contents



As of March 31, 2010(In thousands)As reflected on theunaudited balancesheet
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssets:Money market funds
    
    $
    19,832
    
    
    $
    19,832
    
    
    $
    
    
    
    $
    
    
    
    $
    19,832Corporate and financial institutions debt
    
    
    155,530
    
    
    
    
    
    
    
    155,530
    
    
    
    
    
    
    
    155,530Auction rate securities
    
    
    37,418
    
    
    
    
    
    
    
    50
    
    
    
    37,368
    
    
    
    37,418U.S. government agencies
    
    
    178,170
    
    
    
    
    
    
    
    178,170
    
    
    
    
    
    
    
    178,170U.S. treasury bills
    
    
    140,096
    
    
    
    140,096
    
    
    
    
    
    
    
    
    
    
    
    140,096Total
    
    $
    531,046
    
    
    $
    159,928
    
    
    $
    333,750
    
    
    $
    37,368
    
    
    $
    531,046Liabilities:Liability for contingent consideration, current and non-current
    
    $
    203,976
    
    
    $
    40,000
    
    
    $
    
    
    
    $
    163,976
    
    
    $
    203,976Convertible senior notes due 2016 (face value $230,000)
    
    
    145,826
    
    
    
    
    
    
    
    249,113
    
    
    
    
    
    
    
    249,113$
    349,802
    
    
    $
    40,000
    
    
    $
    249,113
    
    
    $
    163,976
    
    
    $
    453,089
 As of December 31, 2009(In thousands)As reflected on theunaudited balancesheet
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssets:Money market funds
    
    $
    83,115
    
    
    $
    83,115
    
    
    $
    
    
    
    $
    
    
    
    $
    83,115Corporate and financial institutions debt
    
    
    110,644
    
    
    
    
    
    
    
    110,644
    
    
    
    
    
    
    
    110,644Auction rate securities
    
    
    37,274
    
    
    
    
    
    
    
    100
    
    
    
    37,174
    
    
    
    37,274U.S. government agencies
    
    
    168,692
    
    
    
    
    
    
    
    168,692
    
    
    
    
    
    
    
    168,692U.S. treasury bills
    
    
    183,090
    
    
    
    183,090
    
    
    
    
    
    
    
    
    
    
    
    183,090Total
    
    $
    582,815
    
    
    $
    266,205
    
    
    $
    279,436
    
    
    $
    37,174
    
    
    $
    582,815Liabilities:Liability for contingent consideration, current and non-current
    
    $
    200,528
    
    
    $
    
    
    
    $
    
    
    
    $
    200,528
    
    
    $
    200,528Convertible senior notes due 2016 (face value $230,000)
    
    
    143,669
    
    
    
    
    
    
    
    242,098
    
    
    
    
    
    
    
    242,098$
    344,197
    
    
    $
    
    
    
    $
    242,098
    
    
    $
    200,528
    
    
    $
    442,626
    9




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##### Table of Contents



Auction Rate SecuritiesThree Months Ended March 31,2010
    
    
    2009(In thousands)Fair value at beginning of period
    
    $
    37,174
    
    
    $
    39,622Redemptions
    
    
    (200
    )
    
    
    Transfer to Level 2
    
    
    (50
    )
    
    
    (5,000
    )Change in valuation
    
    
    444
    
    
    
    1,834Fair value at end of period
    
    $
    37,368
    
    
    $
    36,456
   Liability for Contingent ConsiderationMarch 31, 2010(In thousands)Fair value at beginning of period
    
    $
    200,528Transfers to Level 1
    
    
    (40,000
    )Change in valuation
    
    
    3,448Fair value at end of period
    
    $
    163,976
 Liability for Contingent Consideration
 Note 5. Marketable Securities
   10




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March 31, 2010Adjusted
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Agency bond investments:Current
    
    $
    298,345
    
    
    $
    85
    
    
    $
    (63
    )
    
    $
    298,367Total agency bond investments
    
    
    298,345
    
    
    
    85
    
    
    
    (63
    )
    
    
    298,367Corporate debt investments:Current
    
    
    123,518
    
    
    
    162
    
    
    
    (47
    )
    
    
    123,633Non-current
    
    
    38,950
    
    
    
    
    
    
    
    (1,582
    )
    
    
    37,368Total corporate investments
    
    
    162,468
    
    
    
    162
    
    
    
    (1,629
    )
    
    
    161,001Total available-for-sale marketable securities
    
    $
    460,813
    
    
    $
    247
    
    
    $
    (1,692
    )
    
    $
    459,368
 December 31, 2009Adjusted
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Agency bond investments:Current
    
    $
    349,254
    
    
    $
    162
    
    
    $
    (156
    )
    
    $
    349,260Total agency bond investments
    
    
    349,254
    
    
    
    162
    
    
    
    (156
    )
    
    
    349,260Corporate debt investments:Current
    
    
    93,119
    
    
    
    92
    
    
    
    (31
    )
    
    
    93,180Non-current
    
    
    39,200
    
    
    
    
    
    
    
    (2,026
    )
    
    
    37,174Total corporate investments
    
    
    132,319
    
    
    
    92
    
    
    
    (2,057
    )
    
    
    130,354Total available-for-sale marketable securities
    
    $
    481,573
    
    
    $
    254
    
    
    $
    (2,213
    )
    
    $
    479,614
  Note 6. Other Long-Term Assets
   11




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Note 7. Convertible Senior Notes due 2016
        March 31, 2010Long-term
    
    Principal
    
    Discount
    
    Net Carrying Value(In thousands)2016 Notes  4.00%
    
    $
    230,000
    
    
    $
    (84,174
    )
    
    $
    145,826
  12




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Note 8. Stock-Based Compensation
  Valuation Assumptions
  Three Months EndedMarch 31,2010
    
    2009Stock Options:Risk-free interest rate
    
    
    2.38
    %
    
    
    1.78
    %Expected life
    
    4.4 years
    
    
    4.3 yearsExpected volatility
    
    
    54
    %
    
    
    66
    %Expected dividends
    
    None
    
    
    NoneWeighted-average option fair value
    
    $
    13.82
    
    
    $
    15.73Stock Awards:Expected life
    
    3 years
    
    
    3 yearsExpected dividends
    
    None
    
    
    NoneWeighted-average fair value per share
    
    $
    30.14
    
    
    $
    29.00ESPP:Risk-free interest rate
    
    
    0.05
    %
    
    
    0.26
    %Expected life
    
    6 months
    
    
    6 monthsExpected volatility
    
    
    47
    %
    
    
    66
    %Expected dividends
    
    None
    
    
    NoneWeighted-average shares fair value
    
    $
    7.67
    
    
    $
    10.42
 Note 9. Income Taxes
    13




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Note 10. Net Income (Loss) per Share
     Three Months EndedMarch 31,2010
    
    
    2009(In thousands, except per share amounts)Numerator:Net income (loss)  basic
    
    $
    (12,044
    )
    
    $
    4,065Add: interest and issuance costs related to convertible senior notes
    
    
    
    
    
    
    Net income (loss)  diluted
    
    $
    (12,044
    )
    
    $
    4,065Denominator:Weighted average common shares outstanding  basic
    
    
    62,353
    
    
    
    56,715Dilutive effect of convertible senior notes
    
    
    
    
    
    
    Dilutive effect of options
    
    
    
    
    
    
    482Weighted-average common shares outstanding and dilutive
potential common shares  diluted
    
    
    62,353
    
    
    
    57,197Net income (loss) per share:Basic
    
    $
    (0.19
    )
    
    $
    0.07Diluted
    
    $
    (0.19
    )
    
    $
    0.07
   14




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##### Table of Contents



Three Months EndedMarch 31,2010
    
    2009(In thousands)Potential common shares  2016 Notes
    
    
    5,801
    
    
    
    Potential common shares  equity plans
    
    
    3,893
    
    
    
    3,4472016 Notes interest and issuance expense not
added back under the if-converted method
    
    $
    4,613
    
    
    $
    
 Note 11. Comprehensive Income (Loss)
  Three Months EndedMarch 31,2010
    
    
    2009(In thousands)Net income (loss)  as reported
    
    $
    (12,044
    )
    
    $
    4,065Other comprehensive income (loss):Change in unrealized gain (loss) on available-for-sale securities
    
    
    518
    
    
    
    1,473Comprehensive income (loss)
    
    $
    (11,526
    )
    
    $
    5,538
  Three Months EndedMarch 31,2010
    
    
    2009(In thousands)Increase (decrease) in unrealized gain (loss) on available-for-sale securities
    
    $
    518
    
    
    $
    1,473Reclassification adjustment for net gains on available-for-sale securities included in net income
    
    
    
    
    
    
    Change in unrealized gain (loss) on available-for-sale securities
    
    $
    518
    
    
    $
    1,473
 Note 12. Related Party Transactions
   Note 13. Recent Accounting Pronouncements
  15




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Milestone Method of Revenue
Recognition
 Note 14. Subsequent Events
  16




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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
       17




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Critical Accounting Policies and the Use of Estimates
  Results of Operations
 Three months ended March 31, 2010 and 2009
 Revenue
  18




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Revenue from Collaboration Agreement
   Three Months EndedMarch 31,2010
    
    
    2009(In thousands)Nexavar product revenue, net (as recorded by Bayer)
    
    $
    214,361
    
    
    $
    178,069Nexavar revenue subject to profit sharing (as recorded by Bayer)
    
    $
    185,867
    
    
    $
    166,974Combined cost of goods sold, distribution, selling, general and
administrative expenses
    
    
    75,698
    
    
    
    71,879Combined collaboration commercial profit
    
    $
    110,169
    
    
    $
    95,095Onyxs share of collaboration commercial profit
    
    $
    55,084
    
    
    $
    47,547Reimbursement of Onyxs shared marketing expenses
    
    
    5,824
    
    
    
    5,393Royalty revenue
    
    
    1,995
    
    
    
    777Revenue from collaboration agreement
    
    $
    62,903
    
    
    $
    53,717
   Research and Development Expenses
  For the Three Months Ending
    
    ChangeMarch 31,
    
    2010 vs 20092010
    
    2009
    
    $
    
    %(In thousands, except percentages)Research and development
    
    $
    43,575
    
    
    $
    28,820
    
    
    $
    14,755
    
    
    
    51
    %
  19




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##### Table of Contents



Selling, General and Administrative Expenses
  For the Three Months Ending
    
    ChangeMarch 31,
    
    2010 vs 20092010
    
    2009
    
    $
    
    %(In thousands, except percentages)Selling, general and administrative
    
    $
    24,721
    
    
    $
    21,953
    
    
    $
    2,768
    
    
    
    13
    %
  Contingent Consideration Expense
  For the Three Months Ending
    
    ChangeMarch 31,
    
    2010 vs 20092010
    
    2009
    
    $
    
    %(In thousands, except percentages)Contingent consideration
    
    $
    3,448
    
    
    $
    
    
    
    $
    3,448
    
    
    
    0
    %
   20




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##### Table of Contents



Investment Income
  Interest Expense
  Liquidity and Capital Resources
       21




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##### Table of Contents



Recent Accounting Pronouncements
  Milestone Method of Revenue
Recognition
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
   March 31, 2010
    
    December 31, 2009Fair Value
    
    Average
    
    
    
    
    
    Fair Value
    
    AverageMaturity
    
    (In millions)
    
    Interest Rate
    
    Maturity
    
    (In millions)
    
    Interest RateCash equivalents, fixed rate
    
    0 - 3 months
    
    $
    71.7
    
    
    
    0.09
    %
    
    0 - 3 months
    
    $
    103.2
    
    
    
    0.11
    %Marketable securities, fixed rate
    
    0 - 12 months
    
    $
    459.4
    
    
    
    0.35
    %
    
    0 - 12 months
    
    $
    479.6
    
    
    
    0.53
    %
 Liquidity Risk
  22




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##### Table of Contents



Foreign Currency Exchange Rate Risk
   
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures:
 Changes in Internal Control over Financial Reporting:
 Inherent Limitations on Effectiveness of Controls:
 23




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##### Table of Contents



PART II: OTHER INFORMATION
 
 Item 1. Legal Proceedings.
 Onyx Pharmaceuticals, Inc.
v. Bayer Corporation and Bayer AG
 
 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.
 We have marked with an asterisk (*) those risk factors below that reflect material changes from the
risk factors included in our 2009 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on February 23, 2010.
 Nexavar ® is our only approved product. If Nexavar fails and we are unable to develop and
commercialize alternative product candidates our business would fail.
  Nexavar faces significant competition. If Nexavar is unable to successfully compete against
existing and future therapies, our business would be harmed.
    24




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##### Table of Contents



Adoption of Nexavar in certain territories for the treatment of patients with unresectable liver
cancer may be slow or limited for a variety of reasons including the geographic distribution of the
patient population, the current treatment paradigm for unresectable liver cancer patients, the
underlying liver disease present in most liver cancer patients and limited reimbursement. If
Nexavar is not broadly adopted for the treatment of unresectable liver cancer, our business would
be harmed.
   If our ongoing and planned clinical trials fail to demonstrate that Nexavar is safe and effective
or we are unable to obtain necessary regulatory approvals, we will be unable to expand the
commercial market for Nexavar and our business may fail.
   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.
  25




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##### Table of Contents



Specialty pharmacies and distributors that we and Bayer rely upon to sell Nexavar may fail to
perform.
  
    
    not provide us accurate or timely information regarding their inventories, the number of
patients who are using Nexavar or complaints about Nexavar;
    
    reduce their efforts or discontinue to sell or support or otherwise not effectively 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/or
    
    cease operations.
 We are dependent upon our collaborative relationship with Bayer to further develop, manufacture and
commercialize Nexavar. There may be circumstances that delay or prevent Bayers ability to develop,
manufacture and commercialize Nexavar.*
   
    
    decisions by Bayer regarding the amount and timing of resource expenditures for the
development and commercialization of Nexavar;
    
    possible disagreements as to development plans, clinical trials, regulatory marketing or
sales;
    
    our inability to co-promote Nexavar in any country outside the United States, which makes
us solely dependent on Bayer to promote Nexavar in foreign countries;
    
    Bayers right to terminate the collaboration agreement 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;
 26




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##### Table of Contents




    
    the development or acquisition by Bayer of competing products, including
fluoro-sorafenib;
    
    adverse regulatory or legal action against Bayer resulting from failure to meet
healthcare industry compliance requirements in the promotion and sale of Nexavar, including
federal and state reporting requirements;
    
    changes in key management personnel at Bayer, including Bayers representatives on the
collaborations executive team; and
    
    disagreements with Bayer regarding interpretation or enforcement of the collaboration
agreement.
      Nexavar may face challenges and competition from generic products.*
   27




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##### Table of Contents



The market may not accept our products and we may be subject to pharmaceutical pricing and
third-party reimbursement pressures.
    
    
    rate of adoption by healthcare practitioners;
    
    treatment guidelines issued by government and non-government agencies;
    
    types of cancer for which the product is approved;
    
    rate of a products acceptance by the target patient population;
    
    timing of market entry relative to competitive products;
    
    availability of alternative therapies;
    
    price of our product relative to alternative therapies, including generic versions of our
products, or generic versions of innovative products that compete with our products;
    
    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.
 28




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##### Table of Contents



We face intense competition and rapid technological change, and many of our competitors have
substantially greater resources than we have.
   
    
    discovering and patenting products;
 
    
    undertaking preclinical testing and human clinical trials;
 
    
    obtaining FDA and other regulatory approvals;
 
    
    manufacturing products; and
 
    
    marketing and obtaining reimbursement for products.
    If we are not successful at integrating the Proteolix organization with ours, we may not be able to
realize benefits from our acquisition.
  
    
    consolidating research and development operations;
 
    
    retaining key employees;
 29




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##### Table of Contents




    
    consolidating corporate and administrative infrastructures, including integrating and
managing information technology and other support systems and processes;
 
    
    preserving relationships with third parties, such as regulatory agencies, clinical
investigators, key opinion leaders, clinical research organizations, contract manufacturing
organizations, licensors and suppliers;
 
    
    appropriately identifying and managing the liabilities of the combined company; and
 
    
    difficulty managing new risks associated with facilities, including environmental risks
and compliance with laws regulating laboratories.
    Our clinical trials could take longer to complete than we project or may not be completed at all,
and; we may never obtain regulatory approval for carfilzomib or any other future product candidate.
    
    
    nonclinical tests may show the product to be toxic or lack efficacy in animal models;
 
    
    clinical trial results may show the product to be less effective than desired or to have
harmful or problematic side effects;
 
    
    regulatory approvals may not be received, or may be delayed due to factors such as slow
enrollment in clinical studies, extended length of time to achieve study endpoints,
additional time requirements for data analysis or preparation of an IND, discussions with
regulatory authorities, requests from regulatory authorities for additional preclinical or
clinical data, analyses or changes to study design, or unexpected safety, efficacy or
manufacturing issues;
 
    
    difficulties formulating the product, scaling the manufacturing process or in getting
approval for manufacturing;
 
    
    manufacturing costs, pricing or reimbursement issues, or other factors may make the
product uneconomical;
 30




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##### Table of Contents




    
    proprietary rights of others and their competing products and technologies may prevent
our product from being developed or commercialized or may increase the cost of doing so; and
 
    
    contractual rights of our collaborators or others may prevent our product from being
developed or commercialized or may increase the cost of doing so.
 We do not have the manufacturing expertise or capabilities for any current and future products and
are dependent on others to fulfill our manufacturing needs, which could result in lost sales and
the delay of clinical trials or regulatory approval.
   Healthcare policy changes, including recently enacted legislation, may have a material adverse effect on us.*
 
 31




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##### Table of Contents



If we lose our key employees or are unable to attract or retain qualified personnel, our business
could suffer.
  We may not be able to realize the potential financial or strategic benefits of future business
acquisitions or strategic investments, which could hurt our ability to grow our business, develop
new products or sell our products.
  
    
    difficulty in combining the products, operations or workforce, including key personnel,
of any acquired business with our business;
 
    
    difficulty in operating in a new or multiple new locations;
 
    
    disruption of our ongoing businesses or the ongoing business of the company that we
invest in or acquire;
 
    
    difficulty in realizing the potential financial or strategic benefits of the transaction;
 
    
    difficulty in maintaining uniform standards, controls, procedures and policies;
 
    
    disruption of or delays in ongoing research, clinical trials and development efforts;
 
    
    diversion of capital and other resources;
 
    
    assumption of liabilities;
 
    
    diversion of resources and unanticipated expenses resulting from litigation arising from
potential or actual business acquisitions or investments;
 
    
    difficulties in entering into new markets in which we have limited or no experience and
where competitors in such markets have stronger positions; and
 
    
    impairment of relationships with our or the acquired businesses employees and other
third parties, such as clinical research organizations, contract manufacturing
organizations, licensors, suppliers, or the loss of such relationships as a result of our
acquisition or investment.
  32




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##### Table of Contents



We face product liability risks and may not be able to obtain adequate insurance.
   
    
    decreased demand for a product;
 
    
    injury to our reputation;
 
    
    distraction of management;
 
    
    withdrawal of clinical trial volunteers; and
 
    
    loss of revenues.
 We or Bayer may not be able to protect or enforce our or their intellectual property and we may not
be able to operate our business without infringing 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, particularly generic drug
manufacturers.
   33




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##### Table of Contents



Limited foreign intellectual property protection and compulsory licensing could limit our revenue opportunities.*
  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.
   34




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##### Table of Contents



Unstable market and economic conditions may have serious adverse consequences on our business.
   We are subject to extensive government regulation, which can be costly, time consuming and subject
us to unanticipated delays. If we are unable to obtain or maintain regulatory approvals for our
products, compounds or product candidates, we will not be able to market or further develop them.
    If we use hazardous or potentially hazardous materials in a manner that causes injury or violates
applicable law, we may be liable for damages.
  Our operating results are unpredictable and may fluctuate. If our operating results fail to meet
the expectations of securities analysts or investors, the trading price of our stock could decline.
  35




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##### Table of Contents



Our stock price is volatile and we are at risk of securities litigation, including class action
litigation, due to our expected stock price volatility.
  
    
    fluctuations in our results of operations;
 
    
    interim or final results of, or speculation about, clinical trials of Nexavar;
 
    
    development progress of our early stage compounds;
 
    
    decisions by regulatory agencies, or changes in regulatory requirements;
 
    
    announcements by us regarding, or speculation about, our business development activities;
 
    
    ability to accrue patients into clinical trials;
 
    
    developments in our relationship with Bayer;
 
    
    public concern as to the safety and efficacy of our product candidates;
 
    
    changes in healthcare reimbursement policies;
 
    
    announcements by us or our competitors of technological innovations or new commercial
therapeutic products;
 
    
    government regulation;
 
    
    developments in patent or other proprietary rights or litigation brought against us;
 36




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##### Table of Contents




    
    sales by us of our common stock or debt securities;
 
    
    foreign currency fluctuations, which would affect our share of collaboration profits or
losses; and
 
    
    general market conditions.
    We have a history of losses, and we may be unable to sustain profitability.
   We incurred significant indebtedness through the sale of our 4.0% convertible senior notes due
2016, and we may incur additional indebtedness in the future. The indebtedness created by the sale
of the notes and any future indebtedness we incur exposes us to risks that could adversely affect
our business, financial condition and results of operations.
  
    
    increasing our vulnerability to adverse economic and industry conditions;
 37




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##### Table of Contents




    
    limiting our ability to obtain additional financing;
 
    
    requiring the dedication of a substantial portion of our cash flow from operations to
service our indebtedness, thereby reducing the amount of our cash flow available for other
purposes;
 
    
    limiting our flexibility in planning for, or reacting to, changes in our business; and
 
    
    placing us at a possible competitive disadvantage with less leveraged competitors and
competitors that may have better access to capital resources.
  The conditional conversion features of the 2016 Notes, if triggered, may adversely affect our
financial condition and operating results.
  We may need additional funds, and our future access to capital is uncertain.
  
    
    revenue from our product sales;
 
    
    global product development and commercialization activities;
 
    
    the cost involved in enforcing patents against third parties and defending claims by
third parties;
 
    
    the costs associated with acquisitions or licenses of additional products;
 
    
    the cost of acquiring new or complementary businesses;
 
    
    competing technological and market developments; and
 
    
    future fee and milestone payments to BTG, S*BIO and former stockholders of Proteolix.
  38




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##### Table of Contents



A portion of our investment portfolio is invested in auction rate securities, and if auctions
continue to fail for amounts we have invested, our investment will not be liquid. If the issuer of
an auction rate security that we hold is unable to successfully close future auctions and their
credit rating deteriorates, we may be required to adjust the carrying value of our investment
through an impairment charge to earnings.
  If we do not receive timely and accurate financial information from Bayer regarding the development
and sale of Nexavar, we may be unable to accurately report our results of operations.
  Our operating results could be adversely affected by product sales occurring outside the United
States and fluctuations in the value of the United States dollar against foreign currencies.
  Changes in accounting may affect our financial position and results of operations.
   39




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##### Table of Contents



Provisions in our collaboration agreement with Bayer may prevent or delay a change in control.*
  Existing stockholders have significant influence over us.
  Provisions in the indenture for the 2016 Notes may deter or prevent a business combination.
  Provisions in Delaware law, our charter and executive change of control agreements we have entered
into may prevent or delay a change of control.
  40




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##### Table of Contents




    
    the board of directors approved the transaction where the stockholder acquired 15% or
more of the corporations stock;
 
    
    after the transaction in which the stockholder acquired 15% or more of the corporations
stock, the stockholder owned at least 85% 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 10% or more of the stockholders entitled to vote at
the meeting; and
 
    
    no cumulative voting.
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. (Removed and Reserved)
 
 Item 5. Other Information.
  41




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##### Table of Contents



Item 6. Exhibits.
 2.1*(1)
    
    Agreement and Plan of Merger dated as of October 10, 2009 among Onyx Pharmaceuticals, Inc.,
Proteolix, Inc., Profiterole Acquisition Corp., and Shareholder Representative Services LLC3.1 (2)
    
    Restated Certificate of Incorporation of the Company.3.2 (3)
    
    Amended and Restated Bylaws of the Company.3.3 (4)
    
    Certificate of Amendment to Amended and Restated Certificate of Incorporation.3.4 (5)
    
    Certificate of Amendment to Amended and Restated Certificate of Incorporation.4.1
    
    Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.4.2 (2)
    
    Specimen Stock Certificate.4.3(6)
    
    Indenture dated as of August 12, 2009 between Onyx Pharmaceuticals, Inc. and Wells Fargo Bank,
National Association4.4(6)
    
    First Supplemental Indenture dated as of August 12, 2009 between Onyx Pharmaceuticals, Inc.
and Wells Fargo Bank, National Association4.5(6)
    
    Form of 4.00% Convertible Senior Note due 201610.30+
    
    Letter Agreement between the Company and Ted W. Love M.D., effective as of February 1, 2010.10.31+
    
    Letter Agreement between the Company and Michael Kauffman, M.D., effective as of April 1, 2010.31.1 (7)
    
    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 amended.31.2 (7)
    
    Certification of Chief Financial Officer as required by Rule 13a-14(a) or Rule 15d-14(a) of
the Securities Exchange Act of 1934, as amended.32.1 (7)
    
    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).
 42




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##### Table of Contents




    
    Confidential treatment requested as to certain portions, which portions were omitted and
filed separately with the Securities and Exchange Commission.*
    
    Certain schedules related to identified agreements and persons have been omitted pursuant to
Item 601(b)(2) of Regulation S-K. The Company undertakes to furnish supplemental copies of any
of the omitted schedules upon request by the Securities and Exchange Commission.+
    
    Management contract or compensatory plan.(1)
    
    Filed as an exhibit to the Companys Current Report on Form 8-K filed on October 6, 2009.(2)
    
    Filed as an exhibit to the Companys Registration Statement on Form SB-2 (No. 333-3176-LA).(3)
    
    Filed as an exhibit to Companys Current Report on Form 8-K filed on December 5, 2008.(4)
    
    Filed as an exhibit to the Companys Quarterly Report on Form 10-Q for the quarter ended June
30, 2000.(5)
    
    Filed as an exhibit to the Companys Registration Statement on Form S-3 (No. 333-134565)
filed on May 30, 2006.(6)
    
    Filed as an exhibit to Companys Current Report on Form 8-K filed on August 12, 2009.(7)
    
    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. 43




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##### Table of Contents



SIGNATURES
  ONYX PHARMACEUTICALS, INC.Date: May 4, 2010
    By:
    /s/  N. Anthony ColesN. Anthony ColesPresident and Chief Executive Officer

(Principal Executive Officer)Date: May 4, 2010
    By:
    /s/  Matthew K. FustMatthew K. FustExecutive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) 44




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##### Table of Contents



EXHIBIT INDEX
 2.1*(1)
    
    Agreement and Plan of Merger dated as of October 10, 2009 among Onyx Pharmaceuticals, Inc.,
Proteolix, Inc., Profiterole Acquisition Corp., and Shareholder Representative Services LLC3.1 (2)
    
    Restated Certificate of Incorporation of the Company.3.2 (3)
    
    Amended and Restated Bylaws of the Company.3.3 (4)
    
    Certificate of Amendment to Amended and Restated Certificate of Incorporation.3.4 (5)
    
    Certificate of Amendment to Amended and Restated Certificate of Incorporation.4.1
    
    Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.4.2 (2)
    
    Specimen Stock Certificate.4.3(6)
    
    Indenture dated as of August 12, 2009 between Onyx Pharmaceuticals, Inc. and Wells Fargo
Bank, National Association4.4(6)
    
    First Supplemental Indenture dated as of August 12, 2009 between Onyx Pharmaceuticals, Inc.
and Wells Fargo Bank, National Association4.5(6)
    
    Form of 4.00% Convertible Senior Note due 201610.30+
    
    Letter Agreement between the Company and Ted W. Love, M.D., effective as of February 1, 2010.10.31+
    
    Letter Agreement between the Company and Michael Kauffman, M.D. effective as of April 1, 2010.31.1 (7)
    
    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 amended.31.2 (7)
    
    Certification of Chief Financial Officer as required by Rule 13a-14(a) or Rule 15d-14(a) of
the Securities Exchange Act of 1934, as amended.32.1 (7)
    
    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 requested as to certain portions, which portions were omitted and
filed separately with the Securities and Exchange Commission.*
    
    Certain schedules related to identified agreements and persons have been omitted pursuant to
Item 601(b)(2) of Regulation S-K. The Company undertakes to furnish supplemental copies of any
of the omitted schedules upon request by the Securities and Exchange Commission.+
    
    Management contract or compensatory plan.(1)
    
    Filed as an exhibit to the Companys Current Report on Form 8-K filed on October 6, 2009.(2)
    
    Filed as an exhibit to the Companys Registration Statement on Form SB-2 (No. 333-3176-LA).(3)
    
    Filed as an exhibit to the Companys Current Report on Form 8-K filed on December 5, 2008.(4)
    
    Filed as an exhibit to the Companys Quarterly Report on Form 10-Q for the quarter ended June
30, 2000.(5)
    
    Filed as an exhibit to the Companys Registration Statement on Form S-3 (No. 333-134565)
filed on May 30, 2006.(6)
    
    Filed as an exhibit to Companys Current Report on Form 8-K filed on August 12, 2009.(7)
    
    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. 45