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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 2004.
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.

2100 Powell Street

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ     No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes þ     No o

      The aggregate market value of the voting stock held by nonaffiliates of the Registrant based upon the last trade price of the common stock reported on the Nasdaq National Market on June 30, 2004 was approximately $1,024,551,154.*

      The number of shares of common stock outstanding as of March 8, 2005 was 35,275,388.

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DOCUMENTS INCORPORATED BY REFERENCE

      Portions of Onyx’s Definitive Proxy Statement filed with the Commission pursuant to Regulation 14A in connection with the 2005 Annual Meeting are incorporated herein by reference into Part III of this report.

*

Excludes 10,690,616 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 such persons 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 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 listed under “Additional Business Risks” and elsewhere in this Annual Report.

      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 to conform these statements to actual results, unless required by law.

Overview

      We are a biopharmaceutical company dedicated to developing innovative therapies that target the molecular mechanisms that cause cancer. With our collaborators, we are developing small molecule, orally available drugs with the goal of changing the way cancer is treated.^TM A common feature of cancer cells is the excessive activation of signaling pathways that cause abnormal cell proliferation. In addition, tumors require oxygen and nutrients from newly formed blood vessels to support their growth. The formation of these new blood vessels is a process called angiogenesis. We are applying our expertise to develop oral anticancer therapies designed to prevent cancer cell proliferation and angiogenesis by inhibiting proteins that signal or support tumor growth. By exploiting the genetic differences between cancer cells and normal cells, we aim to create novel anticancer agents that minimize damage to healthy tissue.

      Our lead drug candidate, sorafenib (formerly known as BAY 43-9006), is currently in Phase III clinical development with our collaborator, Bayer Pharmaceuticals Corporation. Sorafenib is a novel, orally available signal transduction inhibitor and is one of a new class of anticancer treatments that target growth signaling in cancer. Signal transduction inhibitors are designed to block the transmission of certain chemical signals implicated in cell division and other cellular processes. Sorafenib operates through dual mechanisms of action by inhibiting proliferation of cancer cells and inhibiting angiogenesis. Several drugs developed and owned by others, and approved by the U.S. Food and Drug Administration, or FDA, validate this treatment approach. However, sorafenib is the first small molecule agent to enter clinical trials directed against the enzyme RAF kinase to inhibit tumor cell proliferation. In addition, sorafenib inhibits VEGFR-2 and PDGFR-ß, two key proteins involved in angiogenesis, as well as other proteins that may be implicated in cancer.

      We and Bayer are developing and will market sorafenib under our collaboration agreement. Together with Bayer, we are conducting multiple clinical trials of sorafenib. To date, we have treated approximately 2,000 patients. In October 2003, we announced the initiation of a pivotal Phase III clinical trial after reaching written agreement via a Special Protocol Assessment, or SPA, with the FDA, in patients with advanced renal cell carcinoma, also known as kidney cancer. In October 2004, we and Bayer announced that we intend to pursue registration of sorafenib based on pending results from this Phase III trial and that the data from our Phase II randomized discontinuation trial, completed in October 2004, will be used to support the Phase III trial results. At the same time, we also announced that, subject to positive trial results and FDA approval, we anticipate a U.S. product launch for sorafenib in 2006 if the Phase III analysis of disease progression is positive, and we are able to file for FDA approval based on these results. We and Bayer have also announced that we plan to initiate Phase III clinical trials in two additional tumor types — malignant melanoma and

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      We and Bayer are sponsoring multiple Phase II clinical trials of sorafenib for the treatment of breast, non-small cell lung and other cancers, as well as ten Phase Ib trials evaluating its use in combination with other anticancer agents. Two single-agent Phase II trials of sorafenib in patients with kidney cancer and in patients with liver cancer were completed in 2004. To date, we and Bayer have also reported results from eight studies combining sorafenib with a range of chemotherapeutic agents. There are also multiple studies underway being conducted by the Cancer Therapy Evaluation Program, or CTEP, of the National Cancer Institute, or NCI.

      In a previous collaboration with Warner-Lambert Company, now a subsidiary of Pfizer Inc, we identified a number of lead compounds that modulate the activity of key enzymes that regulate the process whereby a single cell replicates itself and divides into two identical new cells, a process known as the cell cycle. Mutations in genes that regulate the cell cycle are present in a majority of human cancers. Warner-Lambert is currently advancing a lead candidate from that collaboration, PD 332991, a small molecule cell cycle inhibitor targeting a cyclin-dependent kinase, or CDK. In September 2004, we announced that Pfizer initiated Phase I clinical testing of this CDK4 inhibitor.

Our Product Candidates

      The trials of our product candidates, sponsored by either Onyx or our collaborators, are listed below. In addition as mentioned above, we have a number of studies underway under the sponsorship of the CTEP of the NCI.

      Sorafenib operates through dual mechanisms of action by inhibiting proliferation of cancer cells and inhibiting angiogenesis.

      The RAS gene and its related biochemical pathway, the RAS signaling pathway, play a key role in cell proliferation. In normal cell proliferation, when the RAS signaling pathway is activated, or turned “on,” it sends a signal telling the cell to grow and divide. When a gene in the RAS signaling pathway is mutated, the

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      RAF kinase is an enzyme in the pathway that RAS activates to signal cell growth. Other kinases in this part of the growth signaling pathway include MEK and ERK. The RAS pathway is believed to be abnormally activated in many human cancers by various mechanisms. In approximately 20 percent of human cancers, a RAS gene is activated by mutation. One form of the enzyme RAF, BRAF, is activated by mutations in two thirds of melanomas and is also involved in several other cancers. Sorafenib is an orally active agent designed to block inappropriate growth signaling in cancer by inhibiting RAF kinase.

      Sorafenib also inhibits angiogenesis. VEGFR-2 and PDGFR-ß are key receptors of Vascular Endothelial Growth Factor, or VEGF, and Platelet-Derived Growth Factor, or PDGF, both of which play a role in angiogenesis. Sorafenib inhibits the signaling activities of these receptors. In addition, the inhibition of RAF kinase has also been shown to have antiangiogenic effects. Sorafenib also inhibits other kinases involved in cancer, such as c-KIT + FLT-3.

      Under our collaboration agreement with Bayer, we are conducting multiple clinical trials of sorafenib. In addition, we and Bayer are jointly developing and intend to commercialize sorafenib outside of Japan. In Japan, Bayer is responsible for funding and conducting all product development activities and will pay us a royalty on any sales.

      Phase III in Kidney Cancer. In October 2003, we and Bayer announced the initiation of an international, placebo-controlled, multicenter Phase III clinical trial to further evaluate the safety and efficacy of sorafenib in the treatment of advanced renal cell carcinoma, also referred to as RCC, or kidney cancer. The objective of the randomized study is to establish the activity of sorafenib in kidney cancer in a large Phase III clinical trial with difference in overall survival as the primary endpoint. The study also will assess disease progression, overall response rate, safety, quality of life, and the pharmacokinetics of sorafenib, or how concentrations of sorafenib in the body change over time. Before the trial is complete, an analysis of disease progression will be conducted by an independent data monitoring committee to see if an accelerated filing on this surrogate endpoint is feasible. More than 800 people will participate in the Phase III study at sites worldwide. To be eligible for the study, individuals with unresectable and/or metastatic disease must have failed a previous systemic therapy. We and Bayer also reported in October 2003 that the FDA had completed and agreed upon an SPA for the pivotal Phase III trial. An SPA is a written agreement with the FDA on the design and size of clinical trials intended to form the basis of a New Drug Application, or NDA. We initiated our Phase III clinical trial based on interim investigator-reported data from our Phase II randomized discontinuation trial, which was completed in October 2004. In March 2005, enrollment in the Phase III renal trial was concluded.

      In April 2004, we and Bayer announced that sorafenib had been granted Fast Track status for advanced kidney cancer by the FDA. The Fast Track program is designed to expedite the review of drug compounds for the treatment of patients with serious or life-threatening diseases where there is an unmet medical need for new therapeutic approaches. Having a Fast Track designation allows a company to file an NDA on a rolling basis as data becomes available. This permits the FDA to review the filing as it is received, rather than waiting for the entire document prior to commencing the review process.

      Subsequently, we and Bayer announced that sorafenib had been granted orphan drug status for the treatment of renal cell carcinoma, by the Committee for Orphan Medicinal Products, or COMP, of the European Medicines Agency, or EMEA, in August 2004, and in October 2004, by the FDA. Orphan Drug designation provides incentives to companies that develop drugs for diseases affecting small numbers of patients.

      Phase II in Multiple Tumor Types. We and Bayer initiated two single-agent Phase II clinical trials of sorafenib in the third quarter of 2002. Since our preclinical data demonstrated that sorafenib works primarily

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      Analysis of the Phase II randomized discontinuation trial of sorafenib administered as a single agent showed activity in patients with advanced kidney cancer. Of the 502 patients enrolled in the study, 202 had kidney cancer. As assessed by investigators, approximately 70 percent or 144 of the 202 study participants with kidney cancer had either tumor shrinkage of at least 25 percent (79 patients) or disease stabilization (65 patients) after 12 weeks of treatment with sorafenib. After this initial 12-week period, those 79 patients who had at least 25 percent tumor shrinkage remained on sorafenib, while those 65 participants determined to have stable disease were randomized to receive, in a blinded fashion, either placebo or sorafenib. After a second 12-week treatment period, the blind was broken on the randomized group of 65 patients. The study achieved its primary endpoint, as there was a statistically significantly higher percentage of participants whose disease did not progress in the sorafenib group as compared to those who were randomly assigned to receive placebo. This finding suggests that tumor stabilization was due to sorafenib treatment. In addition, all 202 kidney cancer patients were assessed for time-to-tumor progression, which was shown to be approximately five months for the entire group, including the placebo patients. Time-to-disease progression of approximately two to three months has been reported for control groups in other studies with similar patient populations. As noted previously, a delay in disease progression for those advanced renal cancer patients receiving sorafenib will be the basis for one of the formal analyses in our ongoing Phase III study.

      Almost all the patients with kidney cancer in the Phase II trial had failed at least one prior systemic treatment and had progressive disease on study entry. The most commonly reported drug-related adverse events in the kidney cancer population included skin reactions such as hand-foot syndrome and rash, diarrhea, fatigue, weight loss and hypertension, which were shown to be manageable and reversible.

      A second Phase II clinical trial included only patients with liver cancer. This trial is now completed and, in September 2004, the data were presented at the 16th American Association for Cancer Research-National Cancer Institute-European Organization for Research and Treatment of Cancer, or AACR-NCI-EORTC, meeting in Geneva, Switzerland. Of 137 patients enrolled in the study, investigators reported seven patients with partial responses (tumor shrinkage of 50 percent or greater), five with minor responses (tumor shrinkage of 25 to 50 percent) and 59 with stable disease for at least four months as their best response. Median overall survival for all patients was 9.2 months and median time-to-tumor progression was 4.2 months. In the study, safety data generated showed that sorafenib was well tolerated, and side effects were predictable and manageable. The most common grade 3/4 drug-related toxicities, all less than ten percent, were fatigue, diarrhea and hand-foot skin reaction.

      Bayer and Onyx began a single-agent Phase III study in patients with advanced liver cancer in March 2005. In addition, the two companies plan to conduct a Phase II trial evaluating sorafenib in this disease in combination with doxorubicin, a chemotherapy agent sometimes used to treat liver cancer.

      Phase Ib in Combination with Chemotherapies in Multiple Tumor Types. Together with Bayer, we are conducting multiple Phase Ib clinical trials evaluating sorafenib in combination with a range of standard chemotherapies. To date, we have reported results from eight of these trials, specifically for the use of sorafenib in combination with paclitaxel/carboplatin, gemcitabine, oxaliplatin, doxorubicin, irinotecan, 5- FU/leucovorin, capecitabine and taxotere. Additional combination trials are planned and decisions about future randomized Phase II trials are pending.

      Data from one of these Phase Ib combination trials, evaluating sorafenib administered in combination with paclitaxel and carboplatin to melanoma patients, were updated in September 2004. At that time, the investigator reported on the first 54 melanoma patients enrolled in the trial. Of these patients, 31 had received prior treatment and 37 had advanced metastatic disease, meaning that their cancer had spread to their internal organs, such as the liver, bladder or intestines. Partial responses were observed in 20 patients and disease

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      Phase I. We have reported on 182 patients with advanced cancers treated in Phase I clinical trials conducted in Germany, Belgium, Canada and the United States. We presented the data from these trials at several scientific meetings, including final data at the 2003 annual meeting of the American Society of Clinical Oncology, or ASCO.

      The objective of the Phase I studies was to test sorafenib for safety, pharmacokinetics and pharmacodynamics, which is how the compound acts on the body over a period of time when administered orally at various doses and schedules.

      Treated patients had advanced cancers including colorectal, liver, kidney, breast, lung, ovarian and other cancers. At the recommended Phase II dose of 400 mg twice daily, toxicities were generally mild to moderate, and included skin reactions, anorexia, fatigue and diarrhea. Patients enrolled in these trials achieved serum levels of sorafenib equivalent to the levels at which antitumor activity was seen in preclinical studies.

      In June 2003, we reported that in an analysis of 118 patients with advanced malignancies who received sorafenib in initial doses of 200 mg or more twice daily, 29 patients, or 25 percent, remained on sorafenib for more than six months, and nine of these patients remained in treatment for more than one year. In addition, we reported early signs of antitumor activity, including partial responses in one liver cancer patient and one kidney cancer patient. Most of the dose-limiting toxicities were seen at dose levels of 600 mg twice daily or greater and included diarrhea and skin toxicity, including hand-foot syndrome. Based on these results, we selected a dose of 400 mg twice daily to use in our Phase II clinical trials. After additional experience treating several hundred patients at this dose in the Phase II program, the same dose is now being used in the Phase III clinical trial.

      In collaboration with Warner-Lambert, we identified a number of lead compounds that modulate the activity of key enzymes that regulate the process whereby a single cell replicates itself and divides into two identical new cells, a process known as the cell cycle. Mutations in genes that regulate the cell cycle are present in a majority of human cancers. Our small molecule discovery collaboration with Warner-Lambert ended in August 2001. However, Warner-Lambert, now a subsidiary of Pfizer, is currently advancing a lead candidate from that collaboration, PD 332991, a small molecule cell cycle inhibitor targeting cyclin-dependent kinase 4. Pfizer entered Phase I clinical testing with this candidate in 2004.

      Prior to June 2003, in addition to our small molecule program, we were developing therapeutic viruses that selectively replicate in cells with cancer-causing genetic mutations. In June 2003, we announced that we were discontinuing this program as part of a business realignment that placed an increased priority on the development of sorafenib. Effective January 2005, Onyx licensed exclusive rights to our p53-selective virus, ONYX-015, to Shanghai Sunway Biotech Co. Ltd. headquartered in Shanghai, People’s Republic of China.

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Collaborations

      Effective February 1994, we established a research and development collaboration agreement with Bayer to discover, develop and market compounds that inhibit the function, or modulate the activity, of the RAS signaling pathway to treat cancer and other diseases. Together with Bayer, we concluded collaborative research under this agreement in 1999, and based on this research, a product development candidate, sorafenib, was identified.

      Bayer paid all the costs of research and preclinical development of sorafenib until the Investigational New Drug application, or IND, was filed in May 2000. Under our agreement with Bayer, we are currently funding 50 percent of mutually agreed development costs worldwide, excluding Japan. Bayer is funding 100 percent of development costs in Japan and will pay us a royalty on any sales in Japan. We currently intend to copromote in the United States and, if we continue to cofund development and copromote in the United States, we will share equally in profits or losses, if any, in the United States. If we continue to cofund but do not copromote in the United States, Bayer would first receive a portion of the product revenues to repay Bayer for its commercialization infrastructure, before determining our share of profits and losses. As we do not have the right to copromote sorafenib outside the United States, Bayer would also receive this preferential distribution in all other parts of the world, except Japan where we would receive a royalty on any sales.

      Our agreement with Bayer calls for creditable milestone-based payments. These amounts are interest-free and will be repayable to Bayer from a portion of any of our future profits and royalties. We received $5.0 million in the third quarter of 2002 upon initiation of Phase II clinical studies and $15.0 million in the fourth quarter of 2003 based upon the initiation of a Phase III study. In addition, Bayer will advance Onyx $10.0 million when an NDA is filed and a further $10.0 million following the approval of sorafenib in any one of the following countries: the United States, France, Germany, Italy, Spain or the United Kingdom. At any time during product development, either company may terminate its participation in development costs, in which case the terminating party would retain rights to the product on a royalty-bearing basis. If we do not continue to bear 50 percent of product development costs, Bayer would retain exclusive, worldwide rights to this product candidate and would pay royalties to us based on net sales.

      In May 1995, we entered into a research and development collaboration agreement with Warner-Lambert, now a subsidiary of Pfizer, to discover and commercialize small molecule drugs that restore control of, or otherwise intervene in, the misregulated cell cycle in tumor cells. Under this agreement, we developed screening tests, or assays, for jointly selected targets, and transferred these assays to Warner-Lambert for screening of their compound library to identify active compounds. The discovery research term under the agreement ended in August 2001. Warner-Lambert is responsible for subsequent medicinal chemistry and preclinical investigations on the active compounds. In addition, Warner-Lambert is obligated to conduct and fund all clinical development, make regulatory filings and manufacture for sale any approved collaboration compounds. We will receive milestone payments on clinical development and registration of any resulting products and would receive royalties on worldwide sales of the products. Warner-Lambert has identified a small molecule lead compound, PD 332991, an inhibitor of cyclin-dependent kinase 4, and began clinical testing with this drug candidate in 2004.

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Research and Development

      The majority of our operating expenses to date have been related to research and development, or R&D. In 2004, R&D expenses consisted of costs associated with collaborative R&D as Onyx does not have internal research capabilities and has only a limited development staff. We anticipate that a majority of our operating expenses will continue to be related to R&D in 2005, specifically the clinical development of sorafenib.

Marketing and Sales

      We currently have no significant marketing, sales, or distribution capabilities, but we plan to build these capabilities in the United States. Since our first product candidate, sorafenib, is currently in the latter stages of product development, and because we have retained U.S. copromotion rights, Onyx has started creating a U.S.-based sales and marketing organization in preparation for the potential approval and launch of this compound.

Manufacturing

      At this time, we do not have any internal manufacturing capability for any of our product candidates, and we rely on others to provide manufacturing services. To manufacture our product candidates for clinical trials or on a commercial scale, if we are required to or choose to do so, we would have to build or gain access to a manufacturing facility, which will require significant funds.

      Under our collaboration agreement with Bayer, Bayer has the manufacturing responsibility to supply sorafenib for clinical trials and to support any commercial requirements. To date, Bayer has manufactured sufficient drug supply to support the current needs of clinical trials in progress. We believe that Bayer has the capability to meet all future drug supply needs and meet the FDA and other regulatory agency requirements for commercialization. However, Bayer may, for reasons beyond our control, become unable or unwilling to provide sufficient future drug supply or to meet these regulatory requirements. If this were to happen, we would be forced to incur additional expenses to pay for the manufacture of sorafenib or to develop our own manufacturing capabilities. Under our collaboration agreement with Warner-Lambert, Warner-Lambert is obligated to manufacture all small molecule drugs for clinical development and commercialization.

Patents and Proprietary Rights

      We believe that patent and trade secret protection is crucial to our business and that our future will depend in part on our ability to obtain patents, maintain trade secret protection and operate without infringing the proprietary rights of others, both in the United States and other countries. The patent applications covering sorafenib are owned by Bayer, but licensed to us in conjunction with our collaboration agreement with Bayer. At present, it is anticipated that, if issued, the United States patent related to sorafenib will expire in 2022, subject to possible patent-term extension, the entitlement to which and the term of which cannot be presently calculated. Patent applications for sorafenib are also pending throughout the world. As of December 31, 2004, we owned or had licensed rights to 51 United States patents and 34 United States patent applications, and generally, foreign counterparts of these filings. Most of these patents or patent applications cover protein targets used to identify product candidates during the research phase of our collaborative agreements with Warner-Lambert or Bayer, or aspects of our now discontinued therapeutic virus program.

      Generally, patent applications in the United States are maintained in secrecy for a period of 18 months or more. Since publication of discoveries in the scientific or patent literature often lag behind actual discoveries, we are not certain that we were the first to make the inventions covered by each of our pending patent applications or that we were the first to file those patent applications. The patent positions of biotechnology and pharmaceutical companies are highly uncertain and involve complex legal and factual questions. Therefore, we cannot predict the breadth of claims allowed in biotechnology and pharmaceutical patents, or their enforceability. To date, there has been no consistent policy regarding the breadth of claims allowed in biotechnology patents. Third parties or competitors may challenge or circumvent our patents or patent applications, if issued. Because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that before we commercialize any of our products, any related patent may

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      If patents are issued to others containing preclusive or conflicting claims and these claims are ultimately determined to be valid, we may be required to obtain licenses to these patents or to develop or obtain alternative technology. Our breach of an existing license or failure to obtain a license to technology required to commercialize our products may seriously harm our business. We also may need to commence litigation to enforce any patents issued to us or to determine the scope and validity of third-party proprietary rights. Litigation would create substantial costs. If our competitors prepare and file patent applications in the United States that claim technology also claimed by us, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office to determine priority of invention, which could result in substantial cost, even if the eventual outcome is favorable to us. An adverse outcome in litigation could subject us to significant liabilities to third parties and require us to seek licenses of the disputed rights from third parties or to cease using the technology if such licenses are unavailable.

      Together with our licensors, we also rely on trade secrets to protect our combined technology especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants and collaborators. These parties may breach these agreements, and we may not have adequate remedies for any breach. Our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that we or our consultants or collaborators use intellectual property owned by others in their work for us, we may have disputes with them or other third parties as to the rights in related or resulting know-how and inventions.

Government Regulation

      Regulation by government authorities in the United States and other countries will be a significant factor in the manufacturing and marketing of any products that may be discovered or developed by us, or that may arise out of our research. We must obtain the requisite regulatory approvals by government agencies prior to commercialization of any product. We anticipate that any product candidate will be subject to rigorous preclinical and clinical testing and premarket approval procedures by the FDA and similar health authorities in foreign countries. Various federal statutes and regulations also govern or influence the manufacturing, testing, labeling, storage, record-keeping, marketing and promotion of products and product candidates.

      The steps ordinarily required before a drug or biological product may be marketed in the United States include:

	•	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.

      Preclinical trials involve laboratory evaluation of product candidate chemistry, formulation and stability, as well as animal studies to assess the potential safety and efficacy of each product candidate. Preclinical safety trials must be conducted by laboratories that comply with FDA regulations regarding Good Laboratory Practice. The results of the preclinical trials are submitted to the FDA as part of an IND and are reviewed by the FDA before the commencement of clinical trials. Unless the FDA objects to an IND, the IND will become effective 30 days following its receipt by the FDA. Submission of an IND may not result in FDA clearance to commence clinical trials, and the FDA’s failure to object to an IND does not guarantee FDA approval of a marketing application.

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      Clinical trials involve the administration of the product candidate to humans under the supervision of a qualified principal investigator. In the United States, clinical trials must be conducted in accordance with Good Clinical Practices under protocols submitted to the FDA as part of the IND. In addition, each clinical trial must be approved and conducted under the auspices of an Institutional Review Board, or IRB, and with the patient’s informed consent. The IRB will consider, among other things, ethical factors, the safety of human subjects and the possible liability of the institution conducting the clinical trial. The United Kingdom and many other European and Asian countries have similar regulations.

      The goal of Phase I clinical trials is to establish initial data about safety and tolerability of the product candidate in humans. The goal of Phase II clinical trials is to provide evidence about the desired therapeutic efficacy of the product candidate in limited studies with small numbers of carefully selected subjects. The investigators seek to evaluate the effects of various dosages and to establish an optimal dosage level and dosage schedule. Investigators also gather additional safety data from these studies. Phase III clinical trials consist of expanded, large-scale, multicenter studies in the target patient population. This phase further tests the product’s effectiveness, monitors side effects, and, in some cases, compares the product’s effects to a standard treatment, if one is already available.

      We would need to submit all data obtained from this comprehensive development program as an NDA to the FDA, and to the corresponding agencies in other countries for review and approval, before marketing product candidates. These regulations define not only the form and content of the development of safety and efficacy data regarding the proposed product, but also impose specific requirements regarding:

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

      The process of obtaining FDA approval can be costly, time consuming and subject to unanticipated delays. The FDA may refuse to approve an application if it believes that applicable regulatory criteria are not satisfied. The FDA may also require additional testing for safety and efficacy of the product candidate. In some instances, regulatory approval may be granted with the condition that confirmatory Phase IV clinical trials are carried out. If these Phase IV clinical trials do not confirm the results of previous studies, regulatory approval for marketing may be withdrawn. Moreover, if regulatory approval of a product is granted, the approval will be limited to specific indications. Approvals of our proposed products, processes, or facilities may not be granted on a timely basis, if at all. Any failure to obtain, or delay in obtaining, such approvals would seriously harm our business, financial condition and results of operations. Facilities used to manufacture drugs are subject to periodic inspection by the FDA and other authorities where applicable, and must comply with the FDA’s current Good Manufacturing Practice, or cGMP, regulations. Failure to comply with the statutory and regulatory requirements subjects the manufacturer to possible legal action, such as suspension of manufacturing, seizure of product or voluntary recall of a product. Adverse experiences with the product must be reported to the FDA and could result in the imposition of market restrictions through labeling changes or in product removal. Product approvals may be withdrawn if compliance with regulatory requirements is not

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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.

      Whether or not we obtain FDA approval, approval of a product candidate by comparable regulatory authorities will be necessary in foreign countries prior to the commencement of marketing of the product candidate in these countries. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ from that required for FDA approval. Although there is now a centralized European Union approval mechanism in place, each European country may nonetheless impose its own procedures and requirements, many of which are time consuming and expensive. Thus, there can be substantial delays in obtaining required approvals from both the FDA and foreign regulatory authorities after the relevant applications are filed. We expect to rely on our collaborators and licensees, along with our own expertise, to obtain governmental approval in foreign countries of product candidates discovered by us or arising from our programs.

Competition

      We are engaged in a rapidly changing and highly competitive field. We are seeking to develop and market product candidates that will compete with other products and therapies that currently exist or are being developed. Many other companies are actively seeking to develop products that have disease targets similar to those we are pursuing. Some of these competitive product candidates are in clinical trials, and others are approved. Competitors that target the same tumor types as our sorafenib program and that have commercial products or product candidates in clinical development, include Pfizer, Novartis, AstraZeneca PLC, OSI Pharmaceuticals, Inc., Genentech, Inc. and Abgenix, Inc., among others. Pfizer, Novartis and others have small molecule compounds targeting VEGF receptor tyrosine kinases and other enzymes in clinical development for advanced kidney cancer. In February 2005, Pfizer reported that its Phase III trial of the investigational agent SU11248 in patients with gastrointestinal stromal tumors, or GIST, who had grown resistant to the drug Gleevec, was stopped ahead of schedule because an independent monitoring committee found SU11248 to be safe and effective. At the same time, Pfizer announced that it will seek formal approval for the drug from federal regulators sometime this year. SU11248 is also being tested in other tumor types, including kidney cancer. In addition, potential competition may come from agents that target Epidermal Growth Factor, or EGF, receptors and Vascular Endothelial Growth Factor, or VEGF, receptors. These agents include antibodies and small molecules. We believe that several companies also have small molecule compounds in clinical and preclinical development that target MEK, an enzyme that is also involved in the RAS signaling pathway. In addition, many other pharmaceutical companies are developing novel cancer therapies that, if successful, would also provide competition for or be used in combination with sorafenib. We believe that other companies also have kinase inhibitors in preclinical and clinical development that could be potential competitors.

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Partial List of Potentially Competing Agents

      We compete with alternative therapies based on a variety of factors, including:

	•	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

      As of December 31, 2004, we had 30 full-time employees of whom five hold Ph.D. or M.D. degrees. Of our employees, seven are in research and development, four are in sales and marketing and 19 are in corporate development, finance and administration. No employee of ours is represented by a labor union.

Available Information

      We were incorporated in California in February 1992 and reincorporated in Delaware in May 1996.

      We file electronically with the Securities and Exchange Commission, or SEC, our annual reports on Form 10-K, quarterly interim reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. We maintain a site on the worldwide web at www.onyx-pharm.com; however, information found on our website is not incorporated by reference into this report. We make available free of charge on or through our website our SEC filings, including our annual report on Form 10-K, quarterly interim reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Further, a copy of this Annual Report on Form 10-K is located at the Securities and Exchange Commission’s Public Reference Room at 450 Fifth Street, N.W., Washington, D. C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a website that contains reports, proxy and information statements and other information regarding our filings at http://www.sec.gov.

      In 2003, we adopted a code of ethics that applies to our principal officers, directors and employees. We have posted the text of our code of ethics on our website at www.onyx-pharm.com in connection with “Investors” materials. In addition, we intend to promptly disclose (1) the nature of any amendment to our

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      We occupy 23,000 square feet of office space in our primary facility in Emeryville, California, which we began occupying in December 2004. The lease expires in February 2010 with an option to extend the lease for an additional three years. Previously we occupied approximately 50,000 square feet of office and laboratory space in Richmond, California. The lease for that facility expires in April 2005.

      We also lease an additional 9,000 square feet of space in a secondary facility in Richmond, California. The lease for this facility expires in September 2010 with renewal options at the end of the lease for two subsequent five-year terms. We are currently subleasing this facility. Please refer to Note 6 of the accompanying financial statements for further information regarding our lease obligations.

      We are not a party to any material legal proceedings.

      No matters were submitted to a vote of the Company’s stockholders during the quarter ended December 31, 2004.

ADDITIONAL BUSINESS RISKS

      In addition to the risks discussed in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our business is subject to the risks set forth below.

      Sorafenib is our only product candidate in Phase II and Phase III clinical development. In June 2003, following an unsuccessful search for new collaboration partners for our therapeutic virus product candidates, including ONYX-015 and ONYX-411, we announced that we were discontinuing the development of all therapeutic virus product candidates, eliminating all employee positions related to these candidates and terminating all related research and manufacturing capabilities. As a result, we do not have internal research and preclinical development capabilities. Our remaining scientific and administrative employees are dedicated to managing our relationship with Bayer, and the development of sorafenib, but are not actively discovering or developing new product candidates. As a result of the termination of our therapeutic virus program and drug discovery programs, we do not have a clinical development pipeline beyond sorafenib. If sorafenib is not successful in clinical trials, does not receive marketing approval or is not successfully commercialized, we may be unable to identify and promote alternative product candidates to clinical development, which would cause our business to fail.

      In collaboration with Bayer, we are conducting multiple clinical trials of sorafenib. We have completed Phase I single-agent clinical trials of sorafenib. We are currently conducting a number of Phase Ib clinical trials of sorafenib in combination with standard chemotherapeutic agents. Phase I trials are not designed to test the efficacy of a drug candidate but rather to test safety; to study pharmacokinetics, or how drug

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      With Bayer, we have completed Phase II clinical trials of sorafenib in kidney and liver cancer and are currently conducting Phase II clinical trials in breast, non-small cell lung and other cancers. Phase II trials are designed to explore the efficacy of a product candidate in several different types of cancers and are normally randomized and double-blinded to ensure that the results are due to the effects of the drug. We and Bayer have initiated a Phase III clinical trial to treat patients with advanced kidney cancer without conventional randomized Phase II clinical trial data. In October 2004, we and Bayer announced that we will pursue registration utilizing results from this Phase III trial if the Phase III analysis of disease progression is positive and suitable for accelerated filing and FDA approval. If this happens, we would anticipate a United States launch as early as 2006. However, we may not be able to make an accelerated filing, or if we do make an accelerated filing, but do not receive FDA approval, we will not be able to forecast the timing of a commercial launch.

      We believe that any clinical trial designed to test the efficacy of sorafenib, whether Phase II or Phase III, will involve a large number of patients to achieve statistical significance and will be expensive. We may conduct a lengthy and expensive clinical trial of sorafenib only to learn that this drug candidate is not an effective treatment. Historically, many companies have failed to demonstrate the effectiveness of pharmaceutical product candidates in Phase III clinical trials notwithstanding favorable results in Phase I or Phase II clinical trials. In addition, we may observe previously unforeseen adverse side effects.

      If efficacy of sorafenib is not demonstrated, or if previously unforeseen and unacceptable side effects are observed, we may not proceed with further clinical trials of sorafenib. If we do not proceed with additional clinical trials of sorafenib, we cannot seek regulatory approval of sorafenib with the FDA, which may cause our business to fail.

      In our clinical trials, we treat patients who have failed conventional treatments and who are in advanced stages of cancer. During the course of treatment, these patients may die or suffer adverse medical effects for reasons unrelated to sorafenib. These adverse effects may impact the interpretation of clinical trial results, which could lead to an erroneous conclusion regarding the toxicity or efficacy of sorafenib.

      Our strategy for developing, manufacturing and commercializing sorafenib and obtaining regulatory approval depends in large part upon our relationship with Bayer. If we are unable to maintain our collaborative relationship with Bayer, we would need to undertake development, manufacturing and marketing activities at our own expense, which would significantly increase our capital requirements and limit the indications we are able to pursue and could prevent us from commercializing sorafenib.

      Under the terms of the collaboration agreement, we and Bayer are conducting multiple clinical trials of sorafenib. We and Bayer must agree on the development plan for sorafenib. If we and Bayer cannot agree, clinical trial progress could be significantly delayed or halted.

      Under our agreement with Bayer, we have the opportunity to fund 50 percent of clinical development costs worldwide except in Japan, where Bayer will fund 100 percent of development costs and pay us a royalty on net sales. We are currently funding 50 percent of development costs for sorafenib, and depend on Bayer to fund the balance of these costs. Our collaboration agreement with Bayer does not, however, create an obligation for either us or Bayer to fund the development of sorafenib, or any other product candidate. If a party declines to fund development or ceases to fund development of a product candidate under the collaboration agreement, then that party will be entitled to receive a royalty on any product that is ultimately commercialized, but not to share in profits. Bayer could, upon 60 days notice, elect at any time to terminate its

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      Bayer has been the sponsor for all regulatory filings with the FDA. As a result, we have been dependent on Bayer’s experience in filing and pursuing applications necessary to gain regulatory approvals. Bayer has limited experience in developing drugs for the treatment of cancer.

      Our collaboration agreement with Bayer calls for Bayer to advance us creditable milestone-based payments. To date, Bayer has advanced us $20 million for achievement of specific milestones. Any funds advanced under the agreement are repayable out of a portion of our future profits and royalties, if any, from any of our products.

      Our collaboration agreement with Bayer terminates when patents expire that were issued in connection with product candidates discovered under that agreement, or upon the time when neither we nor Bayer are entitled to profit sharing under that agreement, whichever is later. Bayer holds the global patent applications related to sorafenib. At present, it is anticipated that, if issued, the United States patent related to sorafenib will expire in 2022, subject to possible patent-term extension, the entitlement to which and the term of which cannot presently be calculated.

      We are subject to a number of additional risks associated with our dependence on our collaborative relationship with Bayer, including:

	•	the amount and timing of expenditure of resources 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.

      Due to these factors and other possible disagreements with Bayer, we may be delayed or prevented from developing or commercializing sorafenib, or we may become involved in litigation or arbitration, which would be time consuming and expensive.

      Bayer may change its business strategy. A change in Bayer’s business strategy may adversely affect activities under its collaboration agreement with us, which could cause significant delays and funding shortfalls impacting the activities under the collaboration and seriously harming our business.

      Our collaboration agreement with Bayer provides that, if Onyx is acquired by another entity by reason of merger, consolidation or sale of all or substantially all of our assets, and Bayer does not consent to the transaction, then for 60 days following the transaction, Bayer may elect to terminate Onyx’s codevelopment and copromotion rights under the collaboration agreement. If Bayer were to exercise this right, Bayer would gain exclusive development and marketing rights to the product candidates being developed under the collaboration agreement, including sorafenib. If this happened, Onyx, or the successor to Onyx, would receive a royalty based on any sales of sorafenib and other collaboration products, rather than a share of any profits. In this case, Onyx or its successor would be permitted to continue cofunding development, and the royalty rate would be adjusted to reflect this continued risk-sharing by Onyx or its successor. These provisions of our

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      Although for planning purposes we project the commencement, continuation and completion of clinical trials for sorafenib, the actual timing of these events may be subject to significant delays relating to various causes, including actions by Bayer, scheduling conflicts with participating clinicians and clinical institutions, difficulties in identifying and enrolling patients who meet trial eligibility criteria, and shortages of available drug supply. We may not complete clinical trials involving sorafenib as projected or at all.

      We rely on Bayer, academic institutions or clinical research organizations to conduct, supervise or monitor clinical trials involving sorafenib. We will have less control over the timing and other aspects of these clinical trials than if we conducted them entirely on our own.

      In addition, we expect to directly supervise and monitor certain planned Phase II and Phase III clinical trials of sorafenib for the treatment of malignant melanoma. Onyx has not conducted a clinical trial that has led to an NDA filing. Consequently, we may not have the necessary capabilities to successfully execute and complete these planned clinical trials in a way that leads to approval of sorafenib for the target indication. Failure to commence or complete, or delays in, any of our planned clinical trials would prevent us from commercializing sorafenib, and thus seriously harm our business.

      We will require substantial additional funds to conduct the costly and time-consuming clinical trials necessary to develop sorafenib, pursue regulatory approval and commercialize this product candidate. Our future capital requirements will depend upon a number of factors, including:

	•	the size and complexity of our sorafenib program;
	•	decisions made by Bayer and Onyx to alter the size, scope and schedule of clinical development;
	•	our receipt of milestone-based payments;
	•	the ability to manufacture sufficient drug supply to complete clinical trials;
	•	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 or additional products;
	•	competing technological and market developments; and
	•	product commercialization activities.

      We may not be able to raise additional financing on favorable terms, or at all. If we are unable to obtain additional funds, we may not be able to fund our share of clinical trials. We may also have to curtail operations or obtain funds through collaborative and licensing arrangements that may require us to relinquish commercial rights or potential markets or grant licenses that are unfavorable to us.

      We believe that our existing capital resources and interest thereon will be sufficient to fund our current development plans through mid-2007. However, if we change our development plans, we may need additional funds sooner than we expect. In addition, we anticipate that our codevelopment costs for the sorafenib program will increase over the next several years as the Phase III clinical trial program advances, and new trials are initiated. While these costs are unknown at the current time, we expect that we will need to raise substantial additional capital to continue the cofunding of the sorafenib program in future periods. We may have to curtail our funding of sorafenib if we cannot raise sufficient capital. If we do not cofund development

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      Our net loss for the year ended December 31, 2002 was $45.8 million, for the year ended December 31, 2003 was $45.0 million, and for the year ended December 31, 2004 was $46.8 million. As of December 31, 2004, we had an accumulated deficit of approximately $250.6 million. We have incurred these losses principally from costs incurred in our research and development programs and from our general and administrative costs. We derived no revenues from product sales or royalties. We expect to incur significant and increasing operating losses over the next several years as we expand our clinical trial activities. We expect our operating losses to increase with our cofunding of ongoing sorafenib clinical trial costs under our collaboration agreement with Bayer.

      We do not expect to generate revenues from the sale of products for the foreseeable future, and we must repay the milestone-based advances we receive from Bayer from our future profits and royalties, if any. Our ability to achieve profitability depends upon success by us and Bayer in completing development of sorafenib, obtaining required regulatory approvals and manufacturing and marketing the approved product.

      Under our collaboration agreement with Bayer, Bayer has the manufacturing responsibility to supply sorafenib for clinical trials and to support any commercial requirements. However, should Bayer give up its right to codevelop sorafenib, we would have to manufacture sorafenib. We lack the resources, experience and capabilities to manufacture sorafenib or any future product candidates on our own. We would require substantial funds to establish these capabilities. Consequently, we are dependent on third parties to manufacture our product candidates and products, if any. These parties may encounter difficulties in production scale-up, including problems involving production yields, quality control and quality assurance and shortage of qualified personnel. These third parties may not perform as agreed or may not continue to manufacture our products for the time required by us to successfully market our products. These third parties may fail to deliver the required quantities of our products, if any, or product candidates on a timely basis and at commercially reasonable prices. Failure by these third parties could delay our clinical trials and our applications for regulatory approval. If these third parties do not adequately perform, we may be forced to incur additional expenses to pay for the manufacture of products or to develop our own manufacturing capabilities.

      We have the right under our collaboration agreement with Bayer to copromote sorafenib in the United States in conjunction with Bayer. In order to copromote sorafenib, we will need to further develop marketing and sales capabilities. We may not successfully establish marketing and sales capabilities or have sufficient resources to do so. If we do not develop marketing and sales capabilities, we may not meet our copromotion obligations under our collaboration agreement, which could result in our losing these copromotion rights. If we do develop such capabilities, we will compete with other companies that have experienced and well-funded marketing and sales operations, and we will incur additional expenses.

      Our future success will depend in large part on the continued services of our management personnel, including Hollings C. Renton, our Chairman, President and Chief Executive Officer, and each of our other executive officers. The loss of the services of one or more of our key employees could have an adverse impact on our business. We do not maintain key person life insurance on any of our officers, employees or consultants,

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      In 2003, we restructured our operations to reflect an increased priority on the development of sorafenib and discontinued our therapeutic virus program. As a result of the restructuring, we eliminated approximately 75 positions, including our entire scientific team associated with the therapeutic virus program. Our remaining scientific and administrative employees are engaged in managing our collaboration with Bayer to develop sorafenib, but are not actively involved in new product candidate discovery. If we resume our research and development of other product candidates, we will need to hire individuals with the appropriate scientific skills. If we cannot hire these individuals in a timely fashion, we will be unable to engage in new product candidate discovery activities.

      Even if our product development efforts are successful and even if the requisite regulatory approvals are obtained, sorafenib or any future product candidates that we may develop may not gain market acceptance among physicians, patients, healthcare payers and the medical community. One factor that may affect market acceptance of our product candidates is the availability of third-party reimbursement. Our commercial success may depend, in part, on the availability of adequate reimbursement for patients from third party health care payors, such as government and private health insurers and managed care organizations. Third-party payors are increasingly challenging the pricing of medical products and services and their reimbursement practices may affect the price levels for our product candidates. In addition, the market for our product candidates may be limited by third-party payors who establish lists of approved products and do not provide reimbursement for products not listed. If our product candidates are not on the approved lists, the sales of our product candidates may suffer.

      A number of additional factors may limit the market acceptance of products including the following:

	•	rate of adoption by healthcare practitioners;
	•	types of cancer for which the product is approved;
	•	rate of 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.

      If sorafenib or any future product candidates that we may develop do not achieve market acceptance, we may lose our investment in that product candidate, which may cause our stock price to decline.

      We are engaged in a rapidly changing and highly competitive field. We are seeking to develop and market product candidates that will compete with other products and therapies that currently exist or are being developed. Many other companies are actively seeking to develop products that have disease targets similar to those we are pursuing. Some of these competitive product candidates are in clinical trials, and others are approved. Competitors that target the same tumor types as our sorafenib program and that have commercial products or product candidates in clinical development include Pfizer, Novartis, AstraZeneca PLC, OSI Pharmaceuticals, Inc., Genentech, Inc., and Abgenix, Inc., among others. Novartis, Pfizer and others have in

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