Onyx Pharmaceuticals Inc 10-k (annual Reports) 2009-02-25

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

Form 10-K ˛ o

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008. TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . Commission File No. 0-28298

Onyx Pharmaceuticals, Inc. (Exact nam e of registrant as specified in its charter)

Delaware

94-3154463

(State or other jurisdiction of Incorporation or Organization)

(I.R.S. Em ployer Identification No.)

2100 Powell Street Emeryville, California 94608 (510) 597-6500 (Address, including zip code, and telephone num ber, including area code, of registrant’s principal executive offices) S e cu ritie s Re giste re d Pu rsuan t to Se ction 12(b) of th e Act: Title of Each C lass

Nam e of Each Exch an ge on W h ich Re giste re d

Common Stock $0.001 par value

NASDAQ Global Market

Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ˛ No o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ˛ 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 ˛ 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. ˛ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ˛ Accelerated filer o (Do not check if a smaller reporting company)

Non-accelerated filer o

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No ˛ 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 Global Market on June 30, 2008 was approximately $1,503,106,048.* The number of shares of common stock outstanding as of February 20, 2009 was 56,715,793.

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DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s Definitive Proxy Statement for its 2009 Annual Meeting of Shareholders, which will be filed with the Commission within 120 days of December 31, 2008, are incorporated herein by reference into Part III items 10-14 of this Annual Report on Form 10-K. * Excludes 13,599,261 shares of Common Stock held by directors, officers and stockholders whose beneficial ownership exceeds 5% of the Registrant’s Common Stock outstanding. The number of shares owned by stockholders whose beneficial ownership exceeds 5% was determined based upon information supplied by such persons and upon Schedules 13D and 13G, if any, filed with the SEC. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the Registrant, that such person is controlled by or under common control with the Registrant, or that such persons are affiliates for any other purpose.

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TABLE OF CONTENTS PART I. Item 1. Business Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Securities Holders PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Item 6. Selected Financial Data Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 7A.Quantitative and Qualitative Disclosures about Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other information PART III. Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services PART IV. Item 15. Exhibits, Financial Statement Schedules SIGNATURES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM BALANCE SHEETS STATEMENTS OF OPERATIONS STATEMENT OF STOCKHOLDERS’ EQUITY STATEMENTS OF CASH FLOWS NOTES TO FINANCIAL STATEMENTS Exhibits EX-10.27 EX-23.1 EX-31.1 EX-31.2 EX-32.1

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PART I. This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s results, levels of activity, or achievements to differ significantly and materially from that expressed or implied by such forward-looking statements. These factors include, among others, those set forth in Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievements. We do not assume responsibility for the accuracy and completeness of the forward-looking statements. We do not intend to update any of the forward-looking statements after the date of this Annual Report on Form 10-K to conform these statements to actual results, unless required by law. Unless the context otherwise requires, all references to “the Company,” “Onyx,” “we,” “our,” and “us” in this Annual Report on Form 10-K refer to Onyx Pharmaceuticals, Inc. Item 1. Business Overview We are a biopharmaceutical company dedicated to developing innovative therapies that target the molecular mechanisms that cause cancer. With our collaborators, we are developing anticancer therapies with the goal of changing the way cancer is treatedTM. We are applying our expertise to develop and commercialize therapies designed to exploit the genetic differences between cancer cells and normal cells. Our first commercially available product, Nexavar® (sorafenib) tablets, being developed with our collaborator, Bayer HealthCare Pharmaceuticals Inc., or Bayer, is approved by the United States Food and Drug Administration, or FDA, for the treatment of patients with advanced kidney cancer and liver cancer. Nexavar is a novel, orally available kinase inhibitor and is one of a new class of anticancer treatments that target both cancer cell proliferation and tumor growth through the inhibition of key signaling pathways. In December 2005, Nexavar became the first newly approved drug for patients with advanced kidney cancer in over a decade. In November 2007, Nexavar was approved as the first and is currently the only systemic therapy for the treatment of patients with liver cancer. Nexavar is now approved in more than 70 countries for the treatment of advanced kidney cancer and in more than 60 countries for the treatment of liver cancer. We and Bayer are also conducting clinical trials of Nexavar in several important cancer types in addition to advanced kidney cancer and liver cancer, including lung, melanoma, breast, ovarian and colon cancers. We have expanded our development pipeline through the acquisition of rights to development-stage, novel anticancer agents. In November 2008, we entered into an agreement to license worldwide development and commercialization rights to ONX 0801, previously known as BGC 945, from BTG International Limited, or BTG, a London-based specialty pharmaceuticals company. ONX 0801 is in preclinical development and is believed to work by combining two proven approaches to improve outcomes for cancer patients, selectively targeting tumor cells through the alpha-folate receptor, which is overexpressed in a number of tumor types, and inhibiting thymidylate synthase, a key enzyme responsible for cell growth and division. In December 2008, we acquired options to license SB1518 (designated by Onyx as ONX 0803) and SB1578 (designated by Onyx as ONX 0805), which are both Janus Kinase 2, or JAK2, inhibitors, from S*BIO Pte Ltd, or S*BIO, a Singapore-based company. The activation of JAK2 stimulates blood cell production, and the JAK2 pathway is known to play a critical role in the proliferation of certain types of cancer cells and in the anti-inflammatory pathway. ONX 0803 is in multiple Phase 1 studies and ONX 0805 is in preclinical development.

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Products Nexavar Nexavar is an orally active agent designed to operate through dual mechanisms of action by inhibiting angiogenesis and the proliferation of cancer cells. 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. Nexavar inhibits the signaling of VEGFR-1, VEGFR-2, VEGFR-3 and PDGFR-ß, key receptors of Vascular Endothelial Growth Factor, or VEGF, and PlateletDerived Growth Factor, or PDGF. Both receptors play a role in angiogenesis. Nexavar also inhibits RAF kinase, an enzyme in the RAS signaling pathway that has been shown in preclinical models to be important 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 signal may not turn “off” as it should, causing the cell to continuously reproduce. The RAS signaling pathway plays an integral role in the growth of some tumor types such as liver cancer, melanoma and lung cancer, and we believe that inhibiting this pathway could have an effect on tumor growth. Nexavar also inhibits other kinases involved in cancer, such as KIT, FLT-3 and RET. The following is a listing of the Nexavar development status for select indications. C u rre n t S tatu s

Indication

Liver Cancer • Advanced, First line, single-agent

Approved: United States, European Union and other territories worldwide Phase 3 Phase 2 Phase 2

• Adjuvant therapy • Advanced, First line, doxorubicin +/• Loco-regional therapy Kidney Cancer • Advanced, single-agent

Approved: United States, European Union and other territories worldwide Phase 3 Phase 2 Phase 2

• Adjuvant therapy • Dose escalation • Combinations Advanced, Non-Small Cell Lung Cancer • First line, gemcitabine, cisplatin +/• Second line, pemetrexed +/• Second line, erlotinib +/Advanced, Metastatic Melanoma • First line, carboplatin/paclitaxel +/Advanced, Breast Cancer • First line, paclitaxel +/• First line, docetaxel or letrozole +/• First/second line, capecitabine +/• First line, gemcitabine +/Ovarian Cancer • Maintenance therapy Advanced, Colorectal Cancer • First line, combination

Phase 3 Phase 2 Phase 2 Phase 3 Phase 2 Phase 2 Phase 2 Phase 2 Phase 2 Phase 2

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Commercialization Status We and Bayer are commercializing Nexavar for the treatment of patients with advanced kidney cancer and liver cancer. Nexavar has been approved and is marketed for these indications in the United States and in the European Union, as well as other territories worldwide. Nexavar was approved for the treatment of patients with advanced kidney cancer by the FDA in December 2005 and by authorities in Japan in January 2008. It was approved by the European Union in July 2006 for the treatment of patients with advanced kidney cancer who have failed prior therapy or are considered unsuitable for other therapies. Nexavar has been approved in more than 70 countries worldwide for advanced kidney cancer. In the fourth quarter of 2007, Nexavar was approved in the European Union and United States for the treatment of patients with liver cancer. Nexavar is now approved in more than 60 countries for this indication. In the United States, we co-promote Nexavar with Bayer. Outside of the United States, Bayer manages all commercialization activities. In 2008, worldwide sales of Nexavar, as recorded by Bayer, totaled $677.8 million. Development Strategy We and Bayer are executing the Nexavar development strategy with three primary areas of focus. First, we have several ongoing and planned clinical trials that are designed to expand Nexavar’s position in the two approved indications, liver cancer and advanced kidney cancer. These include studies in the adjuvant setting, at varying doses and in combination with other anti-cancer agents. Secondly, we have several ongoing and planned Phase 3 registration studies in cancer types and settings for which we believe Nexavar’s unique features and established evidence of activity support accelerated development. Finally, we are conducting several Phase 1 and Phase 2 studies, including a portfolio of large randomized Phase 2 studies, designed to generate signals in a variety of cancer types, lines of therapy and in combination with other anti-cancer agents. We believe Nexavar’s unique features, including its efficacy, oral availability and tolerability, may be important attributes that could differentiate it from other anti-cancer agents and enable it to be used broadly in the treatment of cancer. In addition to conducting company-sponsored clinical trials, we plan to expand our collaborations with government agencies, cooperative groups, and individual investigators. Our goal is to maximize Nexavar’s commercial and clinical potential by simultaneously running multiple studies to produce the clinical evidence necessary to demonstrate that Nexavar can benefit patients with many different types of cancers. Additionally, because it is difficult to predict the success of clinical trials, running multiple trials may mitigate the risk of failure of any single clinical trial. Clinical Trials Under our collaboration agreement, we and Bayer are jointly developing Nexavar internationally, with the exception of Japan. The following is a summary of our significant clinical trials. Liver Cancer Program Phase 3 Trial. In March 2005, we and Bayer initiated an international, randomized, double-blind, placebo-controlled Phase 3 clinical trial of Nexavar administered as a single agent in patients with advanced hepatocellular carcinoma, or HCC, also known as liver cancer. The Phase 3 study was designed to measure differences in overall survival, time to symptom progression and time to tumor progression of Nexavar versus placebo in patients with advanced liver cancer. Patients with advanced liver cancer, who had not received previous systemic treatment for their disease, were randomized to receive Nexavar or placebo. In February 2007, we and Bayer announced that an independent data monitoring committee, or DMC, had reviewed the data from the trial at a planned interim analysis and concluded that the trial met its primary endpoint resulting in superior overall survival in those patients receiving Nexavar. The DMC also noted no demonstrated difference in the serious adverse event rates between Nexavar and placebo. Subsequently, we and Bayer made the decision to stop the trial early and allowed all patients in the trial to be offered access to Nexavar, enabling them to “crossover” to Nexavar treatment. Phase 3 Trial. We and Bayer conducted a double-blind, randomized, placebo-controlled Phase 3 trial in the Asia Pacific region designed to evaluate Nexavar in patients with liver cancer who had no prior systemic therapy. The primary objectives of the study were to compare overall survival, time to progression and

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progression-free survival, or PFS, in patients administered Nexavar versus patients administered placebo. In August 2007, we and Bayer announced that a planned review by a DMC found that Nexavar significantly improved overall survival, PFS and time to progression. Based on the DMC’s recommendation, the trial was stopped early to allow all patients to receive treatment with Nexavar. Phase 3 Trial. We and Bayer have initiated an international, randomized, placebo-controlled Phase 3 clinical trial evaluating Nexavar as an adjuvant therapy for patients with liver cancer who have undergone resection or locoregional treatment with curative intent. The study will evaluate Nexavar in over 1,000 patients. Enrollment for this study began in the fourth quarter of 2008. Phase 2 Trial. The data from this trial showed that of 137 patients enrolled in the trial, investigators reported median overall survival for all patients was 9.2 months and median time-to-tumor progression was 4.2 months (or 5.7 months in patients with good hepatic function). In the trial, safety data generated in February 2008 showed that Nexavar’s side effect profile was generally well tolerated and predictable. Phase 2 Trial. In 2005, we and Bayer initiated a 100-patient randomized Phase 2 study comparing Nexavar plus doxorubicin to doxorubicin alone for the treatment of patients with advanced liver cancer. In February 2007, we and Bayer accepted the recommendation of an independent DMC to stop this study early because patients receiving chemotherapy alone were thought to be at a considerable disadvantage. In September 2007, data from this study was presented. The data showed that Nexavar plus doxorubicin doubled overall survival to 14 months as compared to 7 months for those patients taking doxorubicin alone. There were no major differences in the rate of serious adverse events between the two arms. Kidney Cancer Program Phase 3 Trial. In March 2005 enrollment completed in a placebo-controlled, randomized Phase 3 trial of more than 900 patients evaluating the safety and efficacy of Nexavar in the treatment of advanced renal cell carcinoma, or advanced kidney cancer. In the first quarter of 2005, we and Bayer announced that an independent DMC had reviewed the data from the trial and concluded that Nexavar significantly prolonged PFS. Subsequently, we and Bayer allowed all patients in the Phase 3 kidney cancer trial to be offered access to Nexavar, enabling them to “crossover” to Nexavar treatment. Phase 3 Trial. We and Bayer have initiated an international, randomized, placebo-controlled Phase 3 clinical trial evaluating Nexavar as an adjuvant therapy for patients with advanced kidney cancer, who are at high or intermediate risk of relapse, with the primary objective of comparing disease-free survival. Phase 2 Trial. In June 2007, results were presented from a Phase 2 clinical trial comparing Nexavar to interferon, or IFN, in patients who had no prior systemic therapy. The 189 patient study indicated PFS was comparable for patients who received either Nexavar or IFN. Median PFS was 5.6 months and 5.7 months, respectively, for IFN- and Nexavartreated patients. Non-Small Cell Lung Cancer Program Phase 3 Trial. A pivotal trial of approximately 900 patients with non-small cell lung cancer, or NSCLC, is ongoing primarily in Europe using a chemotherapy doublet that is more commonly used in Europe than the United States. In this trial, patients are receiving gemcitabine and cisplatin plus Nexavar or gemcitabine and cisplatin plus placebo. The study has a primary endpoint of overall survival. In February 2008, the criteria for patient enrollment were changed so that patients with non-squamous cell NSCLC only are being enrolled. Phase 3 Trial. In February 2006, we and Bayer initiated a randomized, double-blind, placebo-controlled pivotal clinical trial, called Evaluation of Sorafenib, Carboplatin And Paclitaxel Efficacy, or ESCAPE, studying Nexavar administered in combination with the chemotherapeutic agents carboplatin and paclitaxel in patients with NSCLC. This multicenter study of approximately 900 patients compared Nexavar administered in combination with these two agents to treatment with just the two agents alone. In February 2008, this clinical trial was stopped early following a planned interim analysis when an independent DMC concluded that the study would not meet its primary endpoint of improved overall survival. Safety events were generally consistent with those previously reported. However, higher mortality was observed in the subset of patients

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with squamous cell carcinoma of the lung treated with sorafenib and carboplatin and paclitaxel than in the subset treated with carboplatin and paclitaxel alone. Phase 1/Phase 2 Trials. We and Bayer conducted a 54-patient, single-agent Nexavar trial in second- or third-line NSCLC patients. The median PFS in this refractory population was approximately three months. We and Bayer also obtained additional data from a subset of 14 evaluable NSCLC first-line patients enrolled in a single-arm Phase 1 study administering the combination of carboplatin, paclitaxel and Nexavar. For the lung cancer patients on the combination therapy, the investigator reported an overall median PFS of approximately eight months. As this investigator-initiated analysis was not reviewed by the sponsors, the results are subject to change until the database is finalized. Metastatic Melanoma Program Phase 3 Trial. In 2005, a Phase 3 study administering Nexavar in combination with carboplatin and paclitaxel was initiated under the sponsorship of the Eastern Cooperative Oncology Group, or ECOG. Patients, who had not received prior chemotherapy, were randomized to receive Nexavar plus the chemotherapeutic agents paclitaxel and carboplatin or placebo plus paclitaxel and carboplatin. This trial has overall survival as its primary endpoint. This study has completed enrollment and incorporates an event driven series of interim analyses. Phase 3 Trial. In May 2005, we and Bayer commenced a randomized, double-blind Phase 3 trial administering Nexavar in combination with the chemotherapeutic agents carboplatin and paclitaxel in patients with advanced metastatic melanoma who had failed one prior treatment. The 270-patient trial had PFS as its primary endpoint. Participating patients failed one previous systemic chemotherapeutic treatment with either dacarbazine, also known as DTIC, or temozolomide. Patients were randomized to receive Nexavar or matching placebo, in addition to a standard dosing schedule of carboplatin and paclitaxel. In December 2006, Bayer and Onyx announced that this study did not meet its primary endpoint of improving PFS, noting that the treatment effect was comparable in each arm. Phase 2 Trial. In addition, we conducted a randomized, double-blind, placebo-controlled, multicenter, Phase 2 study administering Nexavar in combination with DTIC that had PFS as its primary endpoint. Approximately 100 patients with advanced melanoma, who had not received prior chemotherapy, were randomized to receive Nexavar in combination with DTIC or placebo in combination with DTIC. In June 2007, we reported that there was a trend toward improved PFS in patients in the Nexavar arm versus patients in the placebo arm. However, overall survival was not improved in this study. At this time we are not planning further studies administering Nexavar and DTIC in melanoma patients, pending the outcome of the ongoing Phase 3 study sponsored by ECOG. Breast Cancer Program In 2007, we and Bayer launched a broad, multinational Phase 2 program in advanced breast cancer. These trials are screening studies intended to provide information that will be used to design a Phase 3 program. The current program involves a number of different drug combinations with Nexavar and encompasses various treatment settings. Phase 2 Studies. We have several ongoing combination studies in breast cancer. All of the studies are randomized, double-blind, placebo-controlled trials that are designed to assess PFS as the primary endpoint. They are designed to compare Nexavar in combination with other agents to the other agents and placebo. The two most advanced trials, which have completed enrollment, are evaluating Nexavar in combination with capecitibine and Nexavar in combination with paclitaxel. Early Stage Clinical Development With Bayer, we have multiple ongoing and planned Phase 1b and Phase 2 studies evaluating Nexavar as a single agent and in combination with other anti-cancer agents in tumors such as ovarian, colorectal and other

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cancers. As these studies are completed, we intend to present data at scientific meetings. In addition, based on the results of these ongoing trials, we plan to identify additional potential registration paths for Nexavar. Product Candidates ONX 0801 In November 2008, we entered into a development and license agreement with BTG pursuant to which we licensed from BTG worldwide product development and commercialization rights to ONX 0801. ONX 0801 is a novel targeted oncology compound in preclinical development that is designed to combine two proven approaches to improve outcomes for cancer patients, by selectively targeting tumor cells through the alpha-folate receptor, which is overexpressed in a number of tumor types, and inhibiting thymidylate synthase, a key enzyme responsible for cell growth and division. ONX 0801 targets malignant cells that overexpress the alpha-folate receptor, which is located on the cell’s surface. Once ONX 0801 enters the cell via this receptor, the compound inhibits, or switches off, thymidylate synthase (TS). ONX 0801 differs from currently marketed TS inhibitors due to its selective tumor cell-specific uptake by the alpha-folate receptor. The alpha-folate receptor is overexpressed in a number of tumor types, including ovarian cancer, lung cancer, breast cancer, and colorectal cancer. In the United States, ONX 0801 is covered by United States Patent No. 7297701B2. The corresponding European patent application is pending. The United States patent expires in 2023, and the European patent application, if granted, would also expire in 2023. Both may be entitled to term extensions. ONX 0803 and ONX 0805 In December 2008, we entered into a development collaboration, option and license agreement with S*BIO pursuant to which we acquired options to license rights to each of ONX 0803 and ONX 0805. ONX 0803 is an orally available, potent and selective inhibitor of JAK2 that has been designed to suppress the overactivity of mutant JAK2. Currently, S*BIO is conducting trials for ONX 0803 in multiple Phase 1 studies and is working on ONX 0805, a JAK2 inhibitor in preclinical development. Under normal circumstances, activation of JAK2 stimulates blood cell production. Genetic mutations in the JAK2 enzyme result in up-regulated activity and are implicated in myeloproliferative diseases, conditions characterized by an overproduction of blood cells in the bone marrow. The conditions where JAK2 mutations are most common include polycythemia vera, essential thrombocytopenia, and primary myelofibrosis. The JAK2 signaling pathway has been shown to play a critical role in the proliferation of certain types of cancer cells and in the anti-inflammatory pathway, suggesting JAK2 inhibitors may be able to play a role in the treatment of solid tumors and other diseases such as rheumatoid arthritis. There are patent applications pending in the United States and European Union that cover ONX 0803 and ONX 0805 and, if granted, will expire in 2026. Both may be entitled to term extensions. Cell Cycle Program In May 1995, we entered into a research and development collaboration agreement with Warner-Lambert, now a subsidiary of Pfizer, Inc., 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 are entitled to receive payments upon achievement of certain clinical development milestones and upon registration of any resulting products and are entitled to receive royalties on all 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 September 2004. To date, we have received one $500,000 milestone payment from Warner-Lambert.

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Collaboration with Bayer Effective February 1994, we established a 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, Nexavar, was identified. Bayer paid all the costs of research and preclinical development of Nexavar until the Investigational New Drug application, or IND, was filed in May 2000. Under our collaboration agreement with Bayer, we are currently funding 50% of mutually agreed development costs worldwide, excluding Japan. Bayer is funding 100% of development costs in Japan and pays us a royalty on sales in Japan. 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% 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 March 2006, we and Bayer entered into a co-promotion agreement to co-promote Nexavar in the United States. The copromotion agreement amends and generally supersedes those provisions of the 1994 collaboration agreement that relate to the co-promotion of Nexavar in the United States. Outside of the United States, the terms of the collaboration agreement continue to govern. Under the terms of the co-promotion agreement and consistent with the collaboration agreement, we and Bayer share equally in the profits or losses of Nexavar, if any, in the United States. If for any reason we do not continue to co-promote in the United States, but continue to co-fund development worldwide (excluding Japan), 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 in the United States. The collaboration agreement called for creditable, interest-free milestone-based payments from Bayer to us. As a result of the development of Nexavar, including marketing approval of Nexavar, we have received $40 million in creditable milestone advance payments. These advances are repayable to Bayer from a portion of our share of any quarterly collaboration profits and royalties after deducting certain contractually agreed upon expenditures and any of our future profits and royalties. As of December 31, 2008, $16.6 million of the advance repayable to Bayer is outstanding. Licensing Agreement with BTG In November 2008, we licensed a novel targeted oncology compound, ONX 0801, from BTG. Under the terms of the agreement, we obtained a worldwide license for ONX 0801 and all of its related patents. We also received exclusive worldwide marketing rights and are responsible for all product development and commercialization activities. We paid BTG a $13 million upfront payment and may be required to make payments of up to $72 million upon the attainment of certain global development and regulatory milestones, plus additional milestone payments upon the achievement of certain marketing approvals and commercial milestones. We will also pay royalties to BTG on any future product sales. Option Agreement with S*BIO In December 2008, we entered into a development collaboration, option and license agreement with S*BIO pursuant to which we acquired options to license rights to each of ONX 0803 and ONX 0805. Under the terms of the agreement, we have obtained options which, if we exercise them, would give us rights to exclusively develop and commercialize ONX 0803 and ONX 0805 for all potential indications in the United States, Canada and Europe. If we exercise our options to license the rights to ONX 0803 and/or ONX 0805, S*BIO will retain responsibility for all development costs prior to the option exercise, after which we are required to assume development costs for the U.S., Canada, and Europe subject to S*BIO’s option to fund a portion of the development costs in return for enhanced royalties on any future product sales. Upon the exercise of our option of either compound, S*BIO is entitled to receive a one-time fee, milestone payments upon achievement of certain development and sales levels and royalties on any future product sales. Under the terms of the agreement, in December 2008 we made a $25 million payment to S*BIO, including an up-front payment and an equity investment.

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Research and Development A significant portion of our operating expenses relate to the development of Nexavar through our collaboration with Bayer. We and Bayer share development expenses for Nexavar, except in Japan where Bayer is responsible for the development of Nexavar. We do not have internal research capabilities and our development staff is primarily focused on the clinical development of Nexavar and ONX 0801. We expect to continue to make significant product development investments, primarily for the clinical development of Nexavar and for the development of ONX 0801. In addition, if we exercise our option for either ONX 0803 or ONX 0805, we will be required to fund a portion or all of the related development activities, subject to S*BIO’s option to fund a portion of the development activities. For the years ended December 31, 2008, 2007, and 2006, our research and development costs were $123.7 million, $83.3 million and $84.2 million, respectively, and are included in our research and development line item for the years ended December 31, 2008, 2007 and 2006. Marketing and Sales Under our collaboration agreement with Bayer, we have co-promotion rights for Nexavar in the United States, where we and Bayer each have sales, marketing and medical affairs capabilities with particular expertise in commercializing oncology products. We and Bayer each provide one-half of the field-based sales and medical affairs staffing in the United States. Individuals hired into this organization have significant experience relevant to the field of pharmaceuticals in general and to the specialty of oncology in particular. In addition, since the approval of Nexavar for liver cancer, we and Bayer have added sales and medical staff that have experience in hepatology. We and Bayer have also established comprehensive patient support services to maximize access to Nexavar. This includes Resources for Expert Assistance and Care Hotline, or REACH, which provides a single point-of-contact for most patients. In addition, REACH helps link patients to specialty pharmacies for direct product distribution. Bayer currently has contacts with multiple specialty pharmacies that ship Nexavar directly to patients. NexConnect, another support program also established by Onyx and Bayer, provides valuable patient education materials on Nexavar and helps patients take an active role in their treatment. Under the collaboration agreement, outside the United States, Bayer is responsible for all commercial activities relating to Nexavar. Manufacturing Under our collaboration agreement with Bayer, Bayer has the manufacturing responsibility to supply Nexavar for commercial requirements and to support any clinical trials. To date, Bayer has manufactured sufficient drug supply to support the current needs of commercial activity and 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. Under our license agreement with BTG, we are responsible for manufacturing ONX 0801. Upon exercise of our options under our agreement with S*BIO, we would obtain rights to commercialization of ONX 0803 and ONX 0805 for the United States, Canada and Europe. At this time, we do not have internal manufacturing capabilities. To manufacture our product candidates for clinical trials or on a commercial scale, if it becomes necessary or if we choose to do so, we would have to build or gain access to manufacturing capabilities, which could require significant funds. For risks associated with manufacturing, refer to “We do not have 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” under “Risk Factors” below in Part I, Item 1A of this Form 10-K. 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 on the proprietary rights of others, both in the United States and other countries. The patents and patent applications covering Nexavar are owned by Bayer, and are licensed to us in conjunction with our collaboration agreement with Bayer. Bayer has United States patents that cover Nexavar and pharmaceutical compositions of Nexavar, which will expire in 2020 and 2022,

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respectively. Bayer also has a European patent that covers Nexavar, which will expire in 2020. Bayer has other patents/patent applications pending worldwide that cover Nexavar alone or in combination with other drugs for treating cancer. Certain of these patents may be subject to possible patent-term extension, the entitlement to and the term of which cannot presently be calculated. As of December 31, 2008, we owned or had licensed rights to 60 United States patents and 24 United States patent applications and, generally, the 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 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. Additionally, as a result of the recent U.S. Supreme Court’s ruling in KSR International v. Teleflex, it has become more difficult for U.S. patent applicants to predict whether or not they will succeed and rebut an obvious rejection from the United States Patent and Trademark Office, or USPTO, or if they are successful whether or not the opinion will be upheld on appeal. 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 expire, or remain in existence for only a short period following commercialization, thus reducing any advantage of the patent. 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. For example, certain of our products may ultimately be used in combination with products covered by a patent owned by a third party. Use of a third party product may require us to obtain a license from the third party. 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 USPTO 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 developed by us. We must obtain the requisite regulatory approvals by government agencies prior to commercialization of any product. This is true internationally and for additional indications, if any. We anticipate that any product candidate will be subject to rigorous preclinical and clinical testing and pre-market 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.

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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;

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the submission of a New Drug Application, or NDA, to the FDA; and

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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. Next, 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. 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 United Kingdom and many other European and Asian countries have similar regulations. The goal of Phase 1 clinical trials is to establish initial data about safety and tolerability of the product candidate in humans. The goal of Phase 2 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 3 clinical trials consist of expanded, large-scale, multi-center 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. Submission of 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 is needed 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 certain specific requirements. 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 4 clinical trials are carried out. If these Phase 4 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. Companies, including Onyx, are subject to various federal and state laws pertaining to healthcare “fraud and abuse,” including anti-kickback and false claims laws. The federal Anti-Kickback Law makes it illegal for any person, including a prescription drug manufacturer, or a party acting on its behalf, to knowingly and willfully solicit, offer, receive or pay any remuneration, directly or indirectly, in exchange for, or to induce, the referral of business, including the purchase, order or prescription of a particular drug, for which payment may be made under federal healthcare programs such as Medicare and Medicaid. Some of the state prohibitions apply to referral of patients for healthcare services reimbursed by any source, not only the Medicare and Medicaid programs. In the course of practicing medicine, physicians may legally prescribe FDA approved drugs for an indication that has not been approved by the FDA and which, therefore, is not described in the product’s approved labeling — so-called “off-label use.” The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA and other governmental agencies do, however, restrict communications on the subject of off-label use by a

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manufacturer or those acting on behalf of a manufacturer. Companies may not promote FDA-approved drugs for off-label uses. The FDA has not approved the use of Nexavar for the treatment of any diseases other than advanced kidney cancer and liver cancer, and neither we nor Bayer market Nexavar for the treatment of any diseases other than advanced kidney cancer and liver cancer. The FDA and other governmental agencies do permit a manufacturer (and those acting on its behalf) to engage in some limited, non-misleading, non-promotional exchanges of scientific information regarding unapproved indications. For risks associated with government regulation, refer to “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” and “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” under “Risk Factors” below in Part I, Item 1A of this Form 10-K. 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. Currently, three other novel agents besides Nexavar have been approved for the treatment of advanced kidney cancer — Sutent, Torisel and Avastin. Sutent, a multi-kinase inhibitor, was approved by the FDA in January 2006 to treat advanced kidney cancer patients. In July 2006, Sutent was approved by European regulators to treat advanced kidney cancer patients who had failed a cytokine-based regimen. In January 2007, European regulators approved Sutent as a first-line treatment for advanced kidney cancer patients. Torisel, an mTOR inhibitor, was approved by the FDA in May 2007 to treat advanced kidney cancer patients. European regulators approved Torisel in November 2007 for poor-risk advanced kidney cancer patients. In December 2007 Avastin was approved by European regulators for the first-line treatment of patients with advanced kidney cancer in combination with interferon. In the third quarter of 2008, a Supplemental Biologics Application for Avastin was filed with the FDA. Products in development for advanced kidney cancer include Novartis’s everolimus, an mTOR inhibitor, and GlaxoSmithKline’s pazopanib, a multi-kinase inhibitor, among others. There are many existing approaches used in the treatment of liver cancer including alcohol injection, radiofrequency ablation, chemoembolization, cryoablation and radiation therapy. While Nexavar is the first systemic therapy to demonstrate a survival benefit for liver cancer, several other therapies are in development, including Pfizer’s Sutent, a multi-kinase inhibitor. For risks associated with competition, refer to “There are several competing therapies approved and in development for the treatment of advanced kidney cancer. If Nexavar is unable to successfully compete against existing and future therapies in advanced kidney cancer, our business would be harmed,” “There are several existing approaches and several therapies in development for the treatment of liver cancer. If Nexavar is unable to successfully compete against existing and future therapies in liver cancer, our business would be harmed,” and “We face intense competition and rapid technological change, and many of our competitors have substantially greater resources than we have” under “Risk Factors” below in Part I, Item 1A of this Form 10-K. Employees As of December 31, 2008, we had 197 full-time employees, of whom 29 hold Ph.D., M.D. or Pharm.D. degrees. Of our employees, 52 are in research and development, 77 are in sales and marketing and 68 are in corporate development, finance and administration. No employee is represented by a labor union. Company Information We were incorporated in California in February 1992 and reincorporated in Delaware in May 1996. Our principal office is located at 2100 Powell Street, Emeryville, California 94608 and our telephone number is (510) 597-6500. Our website is located at http://www.onyx-pharm.com. However, information found on our website is not incorporated by reference into this report.

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Available Information We make our SEC filings available free of charge on or through our website, 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 Rooms at 100 F Street, N.E., 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-SEC0330. 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. Code of Ethics 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 http://www.onyx-pharm.com in connection with “Investors” materials. However, information found on our website is not incorporated by reference into this report. In addition, we intend to promptly disclose (1) the nature of any amendment to our code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions and (2) the nature of any waiver, including an implicit waiver, from a provision of our code of ethics that is granted to one of these specified officers, the name of such person who is granted the waiver and the date of the waiver on our website in the future. 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. 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. Nexavar® (sorafenib) tablets is our only approved product. If Nexavar fails and we are unable to develop and commercialize alternative product candidates our business would fail. Nexavar is our only approved product. Although we recently acquired rights to develop and commercialize ONX 0801 and options to license ONX 0803 and ONX 0805 in the United States, Canada and Europe, these compounds are in very early stages of development and we may be unable to successfully develop and commercialize these or other product candidates. If Nexavar ceases to be commercially successful and we are unable to develop and commercialize any other products, our business would fail. There are several competing therapies approved and in development for the treatment of advanced kidney cancer. If Nexavar is unable to successfully compete against existing and future therapies in advanced kidney cancer, our business would be harmed. There are several competing therapies approved for the treatment of kidney cancer, including Sutent, a multi-kinase inhibitor marketed in the United States, the European Union and other countries by Pfizer; Torisel, an mTOR inhibitor marketed in the United States, the European Union and other countries by Wyeth; and Avastin, an angiogenesis inhibitor approved for the treatment of advanced kidney cancer in the European Union and marketed by Genentech and Roche globally. Nexavar’s market share in advanced kidney cancer has decreased following the introduction of these products into the market. A demonstrated survival benefit is an important element in determining standard of care. While we did not demonstrate a statistically significant overall survival benefit for patients treated with Nexavar in our Phase 3 kidney cancer trial, we believe the outcome was impacted by the cross over of patients from placebo to Nexavar during the conduct of our pivotal clinical trial. Competitors with statistically significant overall survival data could be preferred in the marketplace, which could impair our ability to successfully market Nexavar. Furthermore, the use of any particular therapy may limit the use of a competing therapy with a similar mechanism of action. The FDA

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approval of Nexavar permits Nexavar to be used as an initial, or first-line, therapy for the treatment of advanced kidney cancer, but some other approvals do not. For example, the European Union approval indicates Nexavar only for advanced kidney cancer patients that have failed prior therapy or whose physicians deem alternate therapies inappropriate. We expect competition to increase as additional products are approved to treat advanced kidney cancer. Products in development for advanced kidney cancer include Novartis’s everolimus, an mTOR inhibitor, and GlaxoSmithKline’s pazopanib, a multi-kinase inhibitor, among others. Everolimus is currently pending FDA review. The successful introduction of other new therapies to treat advanced kidney cancer could significantly reduce the potential market for Nexavar in this indication. There are several existing approaches and several therapies in development for the treatment of liver cancer. If Nexavar is unable to successfully compete against existing and future therapies in liver cancer, our business would be harmed. There are many existing approaches used in the treatment of liver cancer including alcohol injection, radiofrequency ablation, chemoembolization, cryoablation and radiation therapy. While Nexavar is the first systemic therapy to demonstrate a survival benefit for liver cancer, several other therapies are in development, including Pfizer’s Sutent, a multi-kinase inhibitor. If Nexavar is unable to compete successfully with existing approaches or if new therapies are developed for liver cancer, our business would be harmed. Although Nexavar has been approved in the United States, the European Union and other territories for the treatment of patients with liver cancer, adoption may be slow or limited for a variety of reasons including the geographic distribution of the patient population, the current treatment paradigm for 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 liver cancer, our business would be harmed. Nexavar has been approved in the United States, the European Union and many other countries as the first systemic treatment for liver cancer. The rate of adoption and the ultimate market size will be dependent on several factors including educating treating physicians on the appropriate use of Nexavar and the management of patients who are receiving Nexavar. This may be difficult as liver cancer patients typically have underlying liver disease and other comorbidities and can be treated by a variety of medical specialists. In addition, screening, diagnostic and treatment practices can vary significantly by region. Further, liver cancer is common in many regions in the developing world where the healthcare systems are limited and reimbursement for Nexavar is limited or unavailable, which will likely limit or slow adoption. If we are unable to change the treatment paradigms for this disease, we may be unable to successfully achieve the market potential of Nexavar in this indication, which could harm our business. While we and Bayer have received marketing approval for Nexavar in the United States, the European Union and other territories to treat liver cancer, some regulatory authorities have not completed their review of the submissions and any review may not result in marketing approval by these other authorities in this indication. In addition, although Nexavar is approved for the treatment of patients with liver cancer in the European Union and elsewhere, certain countries require pricing to be established before reimbursement for this indication may be obtained. We may not receive or maintain pricing approvals at favorable levels or at all, which could harm our ability to broadly market Nexavar. 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. In collaboration with Bayer, we are conducting multiple clinical trials of Nexavar. We are currently conducting a number of clinical trials of Nexavar alone or in combination with other anticancer agents in kidney, liver, non-small cell lung, breast, melanoma, and other cancers including a number of Phase 3 clinical trials. Phase 3 trials are designed to more rigorously test the efficacy of a product candidate and are normally randomized and double-blinded. Phase 3 trials are typically monitored by independent data monitoring committees, or DMC, which periodically review data as a trial progresses. A DMC may recommend that a trial be stopped before completion for a number of reasons including safety concerns, patient benefit or futility. Our clinical trials may fail

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to demonstrate that Nexavar is safe and effective, and Nexavar may not gain additional regulatory approval, which would limit the potential market for the product causing our business to fail. Nexavar has not been approved in cancer types other than advanced kidney and liver cancers. Success in one or even several cancer types does not indicate that Nexavar would be approved or have successful clinical trials in other cancer types. For example, Bayer and Onyx have conducted Phase 3 trials in melanoma and non-small cell lung cancer that were not successful. In addition, in the non-small cell lung cancer Phase 3 trial, higher mortality was observed in the subset of patients with squamous cell carcinoma of the lung treated with Nexavar and carboplatin and paclitaxel than in the subset of patients treated with carboplatin and paclitaxel alone. Based on this observation, further enrollment of squamous cell carcinoma of the lung has been suspended from other NSCLC trials sponsored by us. Other cancer types with a histology similar to squamous cell carcinoma of the lung may yield a similar adverse treatment outcome. If so, patients having this histology may be excluded from ongoing and future clinical trials, which could potentially delay clinical trial enrollment and would reduce the number of patients that could potentially receive Nexavar. Many companies have failed to demonstrate the effectiveness of pharmaceutical product candidates in Phase 3 clinical trials notwithstanding favorable results in Phase 1 or Phase 2 clinical trials. We are conducting clinical trials of Nexavar in a variety of cancer types, stages of disease and in combination with a variety of therapies and therapeutic agents. If previously unforeseen and unacceptable side effects are observed, we may not proceed with further clinical trials of Nexavar in that cancer type, stage of disease or combination. In our clinical trials, we may treat patients with Nexavar as a single agent or in combination with other therapies, 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 Nexavar. These adverse effects may impact the interpretation of clinical trial results, which could lead to an erroneous conclusion regarding the toxicity or efficacy of Nexavar. 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. Our strategy for developing, manufacturing and commercializing Nexavar 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. This would significantly increase our capital and infrastructure requirements, may limit the indications we are able to pursue and could prevent us from effectively developing and commercializing Nexavar. We are subject to a number of risks associated with our dependence on our collaborative relationship with Bayer, including: •

adverse decisions by Bayer regarding the amount and timing of resource expenditures for the development and commercialization of Nexavar;

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possible disagreements as to development plans, including clinical trials or regulatory approval strategy;

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the right of Bayer to terminate its collaboration agreement with us on limited notice and for reasons outside our control;

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loss of significant rights if we fail to meet our obligations under the collaboration agreement;

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withdrawal of support by Bayer following the development or acquisition by it of competing products;

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adverse regulatory or legal action against Bayer resulting from failure to meet healthcare industry compliance requirements in the promotion, sale, or federal and state reporting of Nexavar;

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changes in key management personnel at Bayer that are members of the collaboration’s executive team; and

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possible disagreements with Bayer regarding the collaboration agreement or ownership of proprietary rights.

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Due to these factors and other possible disagreements with Bayer, we may be delayed or prevented from further developing, manufacturing or commercializing Nexavar, or we may become involved in litigation or arbitration, which would be time consuming and expensive. 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 Nexavar. The patents and patent applications covering Nexavar are owned by Bayer, but licensed to us through our collaboration agreement with Bayer. Bayer has United States patents that cover Nexavar and pharmaceutical compositions of Nexavar, which will expire in 2020 and 2022, respectively. Bayer also has a European patent that covers Nexavar which will expire in 2020. Bayer has other patents/patent applications that are pending worldwide that cover Nexavar alone or in combination with other drugs for treating cancer. We face intense competition and rapid technological change, and many of our competitors have substantially greater resources than we have. We are engaged in a rapidly changing and highly competitive field. We are seeking to develop and market Nexavar to 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 Nexavar program and that have commercial products or product candidates at various stages of clinical development include Pfizer, Genentech, Inc., Wyeth, Novartis International AG, Amgen, AstraZeneca PLC, OSI Pharmaceuticals, Inc., GlaxoSmithKline, Eli Lilly and several others. A number of companies have agents such as small molecules or antibodies targeting Vascular Endothelial Growth Factor, or VEGF; VEGF receptors; Epidermal Growth Factor, or EGF; EGF receptors; and other enzymes. In addition, many other pharmaceutical companies are developing novel cancer therapies that, if successful, would also provide competition for Nexavar. Many of our competitors, either alone or together with collaborators, have substantially greater financial resources and research and development staffs. In addition, many of these competitors, either alone or together with their collaborators, have significantly greater experience than we do in: •

developing products;

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undertaking preclinical testing and human clinical trials;

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obtaining FDA and other regulatory approvals of products; and

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manufacturing and marketing products.

Accordingly, our competitors may succeed in obtaining patent protection, receiving FDA approval or commercializing product candidates before we do. We will compete with companies with greater marketing and manufacturing capabilities, areas in which we have limited or no experience. We also face, and will continue to face, competition from academic institutions, government agencies and research institutions. Further, we face numerous competitors working on product candidates to treat each of the diseases for which we are seeking to develop therapeutic products. In addition, our product candidates, if approved, may compete with existing therapies that have long histories of safe and effective use. We may also face competition from other drug development technologies and methods of preventing or reducing the incidence of disease and other classes of therapeutic agents. Developments by competitors may render our product candidates obsolete or noncompetitive. We face and will continue to face intense competition from other companies for collaborations with pharmaceutical and biotechnology companies, for establishing relationships with academic and research institutions, and for licenses to proprietary technology. These competitors, either alone or with collaborative parties, may succeed with technologies or products that are more effective than ours. We anticipate that we will face increased competition in the future as new companies enter our markets and as scientific developments surrounding other cancer therapies continue to accelerate. We have made significant expenditures toward the development of Nexavar and the establishment of a commercialization infrastructure. If

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Nexavar cannot compete effectively in the marketplace, we may be unable to realize sufficient revenue from Nexavar to offset our expenditures toward its development and commercialization, and our business will suffer. ONX 0801 may not be developed successfully, which would adversely affect our prospects for future revenue growth and our stock price. ONX 0801 is in the pre-clinical stage of development. Successful development of this compound is highly uncertain and depends on a number of factors, many of which are beyond our control. Compounds that appear promising in research or development may be delayed or fail to reach later stages of development or the market for a variety of reasons including: •

preclinical tests may show the product to be toxic or lack efficacy in animal models;

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clinical trial results may show the product to be less effective than desired or to have harmful or problematic side effects;

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the necessary 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 the IND, discussions with regulatory authorities, requests from regulatory authorities for additional pre-clinical or clinical data, analyses or changes to study design, or unexpected safety, efficacy or manufacturing issues;

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difficulties formulating the product, scaling the manufacturing process or in getting approval for manufacturing;

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manufacturing costs, pricing or reimbursement issues, or other factors may make the product uneconomical;

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the proprietary rights of others and their competing products and technologies may prevent the product from being developed or commercialized; and

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the contractual rights of our collaborators or others may prevent the product from being developed or commercialized.

If this compound is not developed successfully, our prospects for future revenue growth and our stock price would be harmed. Our operating results are unpredictable and may fluctuate. If our operating results are below the expectations of securities analysts or investors, the trading price of our stock could decline. Our operating results will likely fluctuate from quarter to quarter and from year to year, and are difficult to predict. Due to a highly competitive environment in kidney cancer and launches throughout the world, as well as the treatment paradigm in liver cancer, Nexavar sales will be difficult to predict from period to period. Our operating expenses are highly dependent on expenses incurred by Bayer and are largely independent of Nexavar sales in any particular period. In addition, we expect to incur significant operating expenses associated with the development activities with ONX 0801. If we exercise our option right related to ONX 0803 and ONX 0805, we will be required to pay significant license fees and we also expect to incur significant operating expenses for development of ONX 0803 and ONX 0805. We believe that our quarterly and annual results of operations may be negatively affected by a variety of factors. These factors include, but are not limited to, the level of patient demand for Nexavar, the timing and level of investments in sales and marketing efforts to support the sales of Nexavar, the timing and level of investments in the research and development of Nexavar, the ability of Bayer’s distribution network to process and ship Nexavar on a timely basis, fluctuations in foreign currency exchange rates and expenditures we may incur to acquire or develop additional products. In addition, as a result of our adoption of SFAS 123(R), we must measure compensation cost for stock-based awards made to employees at the grant date of the award, based on the fair value of the award, and recognize the cost as an expense over the employee’s requisite service period. As the variables that we use as a basis for valuing these awards change over time, the magnitude of the expense that we must recognize may vary significantly. Any such variance from one period to the next could cause a significant fluctuation in our operating results.

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It is, therefore, difficult for us to accurately forecast profits or losses. As a result, it is possible that in some quarters our operating results could be below the expectations of securities analysts or investors, which could cause the trading price of our common stock to decline, perhaps substantially. The market may not accept our products and pharmaceutical pricing and reimbursement pressures may reduce profitability. Nexavar or future product candidates that we may develop may not gain market acceptance among physicians, patients, healthcare payors and/or the medical community or the market may not be as large as forecasted. One factor that may affect market acceptance of Nexavar or future products we may develop 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 healthcare 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, especially in global markets, and their reimbursement practices may affect the price levels for Nexavar or future products. In addition, the market for our products may be limited by third-party payors who establish lists of approved products and do not provide reimbursement for products not listed. If our products are not on the approved lists, our sales may suffer. Changes in government legislation or regulation, such as the Medicare Act in the United States, including Medicare Part D, or changes in private third-party payors’ policies towards reimbursement for our products may reduce reimbursement of our product costs and increase the amounts that patients have to pay themselves. Non-government organizations can influence the use of Nexavar and reimbursement decisions for Nexavar in the United States and elsewhere. For example, the National Comprehensive Cancer Network, or NCCN, a not-forprofit alliance of cancer centers, has issued guidelines for the use of Nexavar in the treatment of advanced kidney cancer and unresectable liver cancer. These guidelines may affect treating physicians’ use of Nexavar in treatment-naïve advanced kidney and liver cancer patients. Nexavar’s success in Europe and other regions will also depend largely on obtaining and maintaining government reimbursement. For example, in Europe and in many other international markets, most patients will not use prescription drugs that are not reimbursed by their governments. Negotiating prices with governmental authorities can delay commercialization by twelve months or more. Even if reimbursement is available, reimbursement policies may adversely affect our ability to sell our products on a profitable basis. For example, in Europe and in many international markets, governments control the prices of prescription pharmaceuticals and expect prices of prescription pharmaceuticals to decline over the life of the product or as volumes increase. Further reimbursement policies are subject to change due to economic, political or competitive factors. We believe that this will continue into the foreseeable future as governments struggle with escalating health care spending. A number of additional factors may limit the market acceptance of products, including the following: •

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 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 Nexavar or any future product candidates that we may develop do not achieve market acceptance, we may not realize sufficient revenues from product sales, which may cause our stock price to decline.

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Our clinical trials could take longer to complete than we project or may not be completed at all. Although for planning purposes we project the commencement, continuation and completion of ongoing clinical trials, 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 Nexavar as projected or at all. We and Bayer are launching a broad, multinational Phase 2 program in advanced breast and other cancers. We may not have the necessary capabilities to successfully manage the execution and completion of these planned clinical trials in a way that leads to approval of Nexavar for the target indications. In addition, we rely on Bayer, academic institutions, cooperative oncology organizations and clinical research organizations to conduct, supervise or monitor the majority of clinical trials involving Nexavar. We have less control over the timing and other aspects of these clinical trials than if we conducted them entirely on our own. Failure to commence or complete, or delays in our planned clinical trials would prevent us from commercializing Nexavar in indications other than kidney cancer and liver cancer, and thus seriously harm our business. 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. The FDA-approved package insert for Nexavar for the treatment of patients with advanced kidney cancer and unresectable liver cancer includes several warnings relating to observed adverse reactions. These include, but are not limited to, cardiac ischemia and/or infarction; incidence of bleeding; hypertension which may occur early in the therapy; hand-foot skin reaction and rash; and some instances of gastrointestinal perforations. Other treatment-emergent adverse reactions observed in patients taking Nexavar include, but are not limited to, diarrhea, fatigue, abdominal pain, weight loss, anorexia, alopecia, nausea and vomiting. With continued and potentially expanded commercial use of Nexavar and additional clinical trials of Nexavar, we and Bayer anticipate we will routinely update adverse reactions listed in the package insert to reflect current information. For example, subsequent to the initial FDA approval, we and Bayer updated the package insert to include additional information on new adverse reactions reported by physicians using Nexavar. If additional adverse reactions emerge, or a pattern of severe or persistent previously observed side effects is observed in the Nexavar patient population, the FDA or other international regulatory agencies could modify or revoke approval of Nexavar or we may choose to withdraw it from the market. If this were to occur, we may be unable to obtain approval of Nexavar in additional indications and foreign regulatory agencies may decline to approve Nexavar for use in any indication. Any of these outcomes would have a material adverse impact on our business. In addition, if patients receiving Nexavar were to suffer harm as a result of their use of Nexavar, these patients or their representatives may bring claims against us. These claims, or the mere threat of these claims, could have a material adverse effect on our business and results of operations. 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. Drug candidates under development and approved for marketing are subject to extensive and rigorous domestic and foreign regulation, including the FDA’s requirements covering research and development, testing, manufacturing, quality control, labeling and promotion of drugs for human use. We have received regulatory approval for the use of Nexavar in the treatment of advanced kidney and liver cancer in the United States, in the European Union and a number of foreign markets, and we are developing Nexavar for several additional indications. Any compounds or product candidates that we may develop, including ONX 0801, ONX 0803 and ONX 0805, cannot be marketed in the U.S. until they have been approved by the FDA, and then they can only be marketed for the indications and claims approved by the FDA. For Nexavar, we rely on Bayer to manage communications with regulatory agencies, including filing new drug applications, submission of promotional materials and generally directing the regulatory processes for Nexavar. We also rely on Bayer to complete the necessary government reporting obligations such as price calculation reporting and clinical study disclosures to federal and state regulatory agencies. We and Bayer may not obtain necessary additional approvals from the FDA or other regulatory authorities. If we fail to obtain required governmental

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approvals, we will experience delays in or be precluded from marketing Nexavar in particular indications or countries. The FDA or other regulatory authorities may approve only limited label information for the product. The label information describes the indications and methods of use for which the product is authorized, and if overly restrictive, may limit our and Bayer’s ability to successfully market any approved product. If we have disagreements as to ownership of clinical trial results or regulatory approvals, and the FDA refuses to recognize us as holding, or having access to, the regulatory approvals necessary to commercialize Nexavar, we may experience delays in or be precluded from marketing products. For any compounds or product candidates that we may further develop, we cannot be sure that we will be able to receive necessary regulatory approvals on a timely basis, if at all. Delays in obtaining approvals could prevent us from marketing any potential products and would adversely affect our business. The regulatory review and approval process takes many years, requires the expenditure of substantial resources, involves post-marketing surveillance and may involve ongoing requirements for post-marketing studies. Additional or more rigorous governmental regulations may be promulgated that could delay regulatory approval of our products or product candidates. Delays in obtaining regulatory approvals would adversely affect the successful commercialization of our products or product candidates. After Nexavar and any other products we may develop are marketed, the products and their manufacturers are subject to continual review. Later discovery of previously unknown problems with Nexavar or any other products we may develop and manufacturing and production by Bayer or other third parties may result in restrictions on our products or product candidates, including withdrawal from the market. In addition, problems or failures with the products of others, before or after regulatory approval, including our competitors, could have an adverse effect on our ability to obtain or maintain regulatory approval. Increased industry trends in U.S. regulatory scrutiny of promotional activity by the FDA, Department of Justice, Office of Inspector General and Offices of State Attorney Generals resulting from healthcare fraud and abuse, including, but not limited to, violations of the Food, Drug and Cosmetic Act, False Claims Act and federal anti-kickback statute, have led to significant penalties for those pharmaceutical companies alleged of non-compliance. If we or Bayer fail to comply with applicable regulatory requirements, including strict regulation of marketing and sales activities, we could be subject to penalties, including fines, suspensions of regulatory approval, product recall, seizure of products and criminal prosecution. We are dependent on the efforts of Bayer to market and promote Nexavar. Under our collaboration and co-promotion agreements with Bayer, we and Bayer are co-promoting Nexavar in the United States. We do not have the right to co-promote Nexavar in any country outside the United States, and we are dependent solely on Bayer to promote Nexavar in foreign countries where Nexavar is approved. In all foreign countries, except Japan, Bayer will first receive a portion of the product revenues to repay Bayer for its foreign commercialization infrastructure, before determining our share of profits and losses. In Japan, we receive a single-digit royalty on any sales of Nexavar. We have limited ability to direct Bayer in its promotion of Nexavar in foreign countries where Nexavar is approved. Bayer may not have sufficient experience to promote oncology products in foreign countries and may fail to devote appropriate resources to this task. If Bayer fails to adequately promote Nexavar in foreign countries, we may be unable to obtain any remedy against Bayer. If this were to happen, sales of Nexavar in any foreign countries where Nexavar is approved may be harmed, which would negatively impact our business. Similarly, Bayer may establish a sales and marketing infrastructure for Nexavar outside the United States that is too large and expensive in view of the magnitude of the Nexavar sales opportunity or establish this infrastructure too early in view of the ultimate timing of potential regulatory approvals. Since we share in the profits and losses arising from sales of Nexavar outside of the United States, rather than receiving a royalty (except in Japan), we are at risk with respect to the success or failure of Bayer’s commercial decisions related to Nexavar as well as the extent to which Bayer succeeds in the execution of its strategy.

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We are dependent on the efforts of and funding by Bayer for the development of Nexavar. Under the terms of the collaboration agreement, we and Bayer must agree on the development plan for Nexavar. If we and Bayer cannot agree, clinical trial progress could be significantly delayed or halted. Further, if we or Bayer cease funding development of Nexavar under the collaboration agreement, then that party will be entitled to receive a royalty, but not to share in profits. Bayer could, upon 60 days notice, elect at any time to terminate its co-funding of the development of Nexavar. If Bayer terminates its co-funding of Nexavar development, we may be unable to fund the development costs on our own and may be unable to find a new collaborator, which could cause our business to fail. 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. Under our collaboration agreement with Bayer, Bayer has the manufacturing responsibility to supply Nexavar for clinical trials and to support our commercial requirements. However, should Bayer give up its right to co-develop Nexavar, we would have to manufacture Nexavar, or contract with another third party to do so for us. Additionally, under our agreement with BTG we are responsible for all product development and commercialization activities of ONX 0801. Under our agreement with S*BIO, if we exercise our options and if S*BIO fails to supply us inventory through manufacturing, or other specified events occur, we have co-exclusive rights (with S*BIO) to make and have made ONX 0803 and ONX 0805 for use and sale in the United States, Canada and Europe. We lack the resources, experience and capabilities to manufacture Nexavar, ONX 0801 and, if required, ONX 0803 and ONX 0805 or any future product candidates on our own and would require substantial funds to establish these capabilities. Consequently, we are, and expect to remain, dependent on third parties to manufacture our product candidates and products. These parties may encounter difficulties in production scale-up, including problems involving production yields, quality control and quality assurance and shortage of qualified personnel. These third parties may not perform as agreed or may not continue to manufacture our products for the time required by us to successfully market our products. These third parties may fail to deliver the required quantities of our products or product candidates on a timely basis and at commercially reasonable prices. Failure by these third parties could impair our ability to meet the market demand for Nexavar, and could delay our ongoing 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. If Bayer’s business strategy changes, it may adversely affect our collaborative relationship. Bayer may change its business strategy. Decisions by Bayer to either reduce or eliminate its participation in the oncology field, or to add competitive agents to its portfolio, could reduce its financial incentive to promote Nexavar. 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. We have a history of losses, and we may continue to incur losses. Although we achieved profitability for the year ended December 31, 2008 of $1.9 million of net income, we have incurred net losses for the years ended December 31, 2007 and 2006 of $34.2 million and $92.7 million, respectively. As of December 31, 2008, we had an accumulated deficit of approximately $470.7 million. We have incurred these losses principally from costs incurred in our research and development programs, from our general and administrative costs and the development of our commercialization infrastructure. We may continue to incur operating losses as we expand our development and commercial activities for our products, compounds and product candidates. We have made, and plan to continue to make, significant expenditures towards the development and commercialization of Nexavar. We may never realize sufficient product sales to offset these expenditures. In addition, we will require significant funds for the research and development activities for ONX 0801. Upon the attainment of specified milestones, we are required to make milestone payments to BTG, which would also require significant funds. Exercising our option right under our agreement with S*BIO will also cause us to incur additional operating

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expenses that would require significant funds. Our ability to achieve and maintain consistent profitability depends upon success by us and Bayer in marketing Nexavar in approved indications and the successful development and regulatory approvals of Nexavar in additional indications. If we lose our key employees or are unable to attract or retain qualified personnel, our business could suffer. The loss of the services of key employees may have an adverse impact on our business unless or until we hire a suitably qualified replacement. We do not maintain key person life insurance on any of our officers, employees or consultants. Any of our key personnel could terminate their employment with us at any time and without notice. We depend on our continued ability to attract, retain and motivate highly qualified personnel. We face competition for qualified individuals from numerous pharmaceutical and biotechnology companies, universities and other research institutions. Following our licensing of ONX 0801, we are now conducting our own research and development of product candidates other than Nexavar, and 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. We may need additional funds, and our future access to capital is uncertain. We may need additional funds to conduct the costly and time-consuming activities related to the development and commercialization of Nexavar, ONX 0801 and, if we exercise our option right, ONX 0803 and ONX 0805, including manufacturing, clinical trials and regulatory approval. Also, we may need funds to acquire rights to additional product candidates. Our future capital requirements will depend upon a number of factors, including: •

revenue from our product sales;

•

global product development and commercialization activities;

•

the cost involved in enforcing patent claims against third parties and defending claims by third parties;

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the costs associated with acquisitions or licenses of additional products;

•

competing technological and market developments;

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repayment of our of milestone-based advances to Bayer, and

•

future fee and milestone payments to BTG and S*BIO.

We may not be able to raise additional capital on favorable terms, or at all. Beginning in 2008, the public equity and debt markets, historically our primary source of capital, have become difficult or impossible for many companies, including those in our industry, to access. If we are unable to obtain additional funds, we may not be able to fund our share of commercialization expenses and 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 on terms that are unfavorable to us. We believe that our existing capital resources and interest thereon will be sufficient to fund our current development plans beyond 2010. However, if we change our development plans, acquire rights to or license additional products, or if Nexavar is not accepted in the marketplace, we may need additional funds sooner than we expect. In addition, we anticipate that our expenses related to the development of ONX 0801 and our share of expenses under our collaboration with Bayer will increase over the next several years as we begin activities to develop ONX 0801 and continue our share of funding for the Nexavar clinical development program and expansion of commercial activities for Nexavar throughout the world. While these costs are unknown at the current time, we may need to raise additional capital to begin developing ONX 0801 beyond the pre-clinical stage and to continue the co-funding of the Nexavar program through and beyond 2010, and may be unable to do so. If the specialty pharmacies and distributors that we and Bayer rely upon to sell Nexavar fail to perform, our business may be adversely affected. Our success depends on the continued customer support efforts of our network of specialty pharmacies and distributors. A specialty pharmacy is a pharmacy that specializes in the dispensing of medications for complex or chronic conditions, which often require a high level of patient education and ongoing management. The use of

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specialty pharmacies and distributors involves certain risks, including, but not limited to, risks that these specialty pharmacies and distributors will: •

not provide us with accurate or timely information regarding their inventories, the number of patients who are using Nexavar or complaints about Nexavar;

•

not effectively sell or support Nexavar;

•

reduce their efforts or discontinue to sell or support Nexavar;

•

not devote the resources necessary to sell Nexavar in the volumes and within the time frames that we expect;

•

be unable to satisfy financial obligations to us or others; and

•

cease operations.

Any such failure may result in decreased Nexavar sales and profits, which would harm our business. We or Bayer may not be able to protect our intellectual property, which gives us the power to exclude third parties from using Nexavar, or we may not be able to operate our business without infringing upon the intellectual property rights of others. We can protect our technology from unauthorized use by others only to the extent that our technology is covered by valid and enforceable patents or effectively maintained as trade secrets. As a result, we depend in part on our ability to: •

obtain patents;

•

license technology rights from others;

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protect trade secrets;

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operate without infringing upon the proprietary rights of others; and

•

prevent others from infringing on our proprietary rights, particularly generic drug manufacturers in certain developing countries such as India.

In the case of Nexavar, the global patent applications related to this product candidate are held by Bayer, and are licensed to us in conjunction with our collaboration agreement with Bayer. Bayer has United States patents that cover Nexavar and pharmaceutical compositions of Nexavar, which will expire in 2020 and 2022, respectively. Based on a review of the public patent databases, Bayer also has a European patent that covers Nexavar, which will expire in 2020. Bayer has other patents/patent applications pending worldwide that cover Nexavar alone or in combination with other drugs for treating cancer. Certain of these patents may be subject to possible patent-term extensions, either in the U.S. or abroad, the entitlement to and the term of which cannot presently be calculated, in part because Bayer does not share with us information related to its Nexavar patent portfolio. As of December 31, 2008, we owned or had licensed rights to 60 United States patents and 24 United States patent applications and, generally, the 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 Company, now Pfizer, or Bayer, or aspects of our now discontinued virus program. Additionally, we have corresponding patents or patent applications pending or granted in certain foreign jurisdictions. The patent positions of biotechnology and pharmaceutical companies are highly uncertain and involve complex legal and factual questions. Our patents, or patents that we license from others, may not provide us with proprietary protection or competitive advantages against competitors with similar technologies. Competitors may challenge or circumvent our patents or patent applications. Courts may find our patents invalid. Due to the extensive time required for development, testing and regulatory review of our potential products, our patents may expire or remain in existence for only a short period following commercialization, which would reduce or eliminate any advantage the patents may give us.

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We may not have been the first to make the inventions covered by each of our issued or pending patent applications, or we may not have been the first to file patent applications for these inventions. Competitors may have independently developed technologies similar to ours. We may need to license the right to use third-party patents and intellectual property to develop and market our product candidates. We may not acquire required licenses on acceptable terms, if at all. If we do not obtain these required licenses, we may need to design around other parties’ patents, or we may not be able to proceed with the development, manufacture or, if approved, sale of our product candidates. We may face litigation to defend against claims of infringement, assert claims of infringement, enforce our patents, protect our trade secrets or know-how, or determine the scope and validity of others’ proprietary rights. In addition, we may require interference proceedings declared by the United States Patent and Trademark Office to determine the priority of inventions relating to our patent applications. These activities, especially patent litigation, are costly. Bayer may have rights to publish data and information in which we have rights. In addition, we sometimes engage individuals, entities or consultants to conduct research that may be relevant to our business. The ability of these individuals, entities or consultants to publish or otherwise publicly disclose data and other information generated during the course of their research is subject to certain contractual limitations. The nature of the limitations depends on various factors, including the type of research being conducted, the ownership of the data and information and the nature of the individual, entity or consultant. In most cases, these individuals, entities or consultants are, at the least, precluded from publicly disclosing our confidential information and are only allowed to disclose other data or information generated during the course of the research after we have been afforded an opportunity to consider whether patent and/or other proprietary protection should be sought. If we do not apply for patent protection prior to publication or if we cannot otherwise maintain the confidentiality of our technology and other confidential information, then our ability to receive patent protection or protect our proprietary information will be harmed. Limited foreign intellectual property protection and compulsory licensing could limit our revenue opportunities. The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Some companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions. Many countries, including certain countries in Europe and developing countries, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, Bayer, the owner of the Nexavar patent estate, may have limited remedies if the Nexavar patents are infringed or if Bayer is compelled to grant a license of Nexavar to a third party, which could materially diminish the value of those patents that cover Nexavar. If compulsory licenses were extended to include Nexavar, this could limit our potential revenue opportunities. Moreover, the legal systems of certain countries, particularly certain developing countries, do not favor the aggressive enforcement of patent and other intellectual property protection, which may make it difficult to stop infringement. Many countries limit the enforceability of patents against government agencies or government contractors. These factors could also negatively affect our revenue opportunities in those countries. 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. Physicians may prescribe drug products for uses that are not described in the product’s labeling and that differ from those approved by the FDA or other applicable regulatory agencies. Off-label uses are common across medical specialties. Physicians may prescribe Nexavar for the treatment of cancers other than advanced kidney cancer or liver cancer, although neither we nor Bayer are permitted to promote Nexavar for the treatment of any indication other than advanced kidney cancer or liver cancer. The FDA and other regulatory agencies have not approved the use of Nexavar for any other indications. Although the FDA and other regulatory agencies do not regulate a physician’s choice of treatments, the FDA and other regulatory agencies do restrict communications on the subject of off-label use. Companies may not promote drugs for off-label uses. Accordingly, prior to approval of Nexavar for use in any indications other than advanced kidney cancer or liver cancer, we may not promote Nexavar for these indications. The FDA and other regulatory agencies actively enforce regulations prohibiting promotion of off-label uses and the promotion of products for which marketing clearance has not been obtained. A company that is found to have improperly promoted off-label uses may be subject to significant liability, including civil and administrative remedies as well as criminal sanctions.

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Notwithstanding the regulatory restrictions on off-label promotion, the FDA and other regulatory authorities allow companies to engage in truthful, non-misleading, and non-promotional speech concerning their products. We engage in the support of medical education activities and communicate with investigators and potential investigators regarding our clinical trials. Although we believe that all of our communications regarding Nexavar are in compliance with the relevant regulatory requirements, the FDA or another regulatory authority may disagree, and we may be subject to significant liability, including civil and administrative remedies as well as criminal sanctions. We face product liability risks and may not be able to obtain adequate insurance. The sale of Nexavar and its and other products’ use in clinical trials exposes us to liability claims. Although we are not aware of any historical or anticipated product liability claims against us, if we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of Nexavar. We believe that we have obtained reasonably adequate product liability insurance coverage that includes the commercial sale of Nexavar and our clinical trials. However, the cost of insurance coverage is rising. We may not be able to maintain insurance coverage at a reasonable cost. We may not be able to obtain additional insurance coverage that will be adequate to cover product liability risks that may arise should a future product candidate receive marketing approval. Regardless of merit or eventual outcome, product liability claims may result in: • • • •

decreased demand for a product; injury to our reputation; withdrawal of clinical trial volunteers; and loss of revenues.

Thus, whether or not we are insured, a product liability claim or product recall may result in significant losses. 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. Due to our collaboration with Bayer, we are highly dependent on Bayer for timely and accurate information regarding any revenues realized from sales of Nexavar and the costs incurred in developing and selling it, in order to accurately report our results of operations. If we do not receive timely and accurate information or incorrectly estimate activity levels associated with the co-promotion and development of Nexavar at a given point in time, we could be required to record adjustments in future periods and may be required to restate our results for prior periods. Such inaccuracies or restatements could cause a loss of investor confidence in our financial reporting or lead to claims against us, resulting in a decrease in the trading price of shares of our common stock. Provisions in our collaboration agreement with Bayer may prevent or delay a change in control. Our collaboration agreement with Bayer provides that if we are 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 our co-development and co-promotion rights under the collaboration agreement. If Bayer were to exercise this right, Bayer would gain exclusive development and marketing rights to the product candidates developed under the collaboration agreement, including Nexavar. If this happens, we, or our successor, would receive a royalty based on any sales of Nexavar and other collaboration products, rather than a share of any profits, which could substantially reduce the economic value derived from the sales of Nexavar to us or our successor. These provisions of our collaboration agreement with Bayer may have the effect of delaying or preventing a change in control, or a sale of all or substantially all of our assets, or may reduce the number of companies interested in acquiring us. Our stock price is volatile. Our stock price is volatile and is likely to continue to be volatile. In the period beginning January 1, 2006 and ending December 31, 2008, our stock price ranged from a high of $59.50 and a low of $10.44. A variety of factors may have a significant effect on our stock price, including: •

fluctuations in our results of operations;

•

interim or final results of, or speculation about, clinical trials of Nexavar;

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•

development progress of our early stage compounds;

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decisions by regulatory agencies, or changes in regulatory requirements;

•

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;

•

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.

Unstable market and economic conditions may have serious adverse consequences on our business. Our general business strategy may be adversely affected by the recent economic downturn and volatile business environment and continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate further, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. We believe we are well positioned with significant capital resources to meet our current working capital and capital expenditure requirements. However, a prolonged or profound economic downturn may result in adverse changes to product reimbursement, pricing or sales levels, which would harm our operating results. There is a risk that one or more of our current service providers, manufacturers and other partners may not survive these difficult economic times, which would directly affect our ability to attain our operating goals on schedule and on budget. Further dislocations in the credit market may adversely impact the value and/or liquidity of marketable securities owned by the Company. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans or plans to acquire additional technology. There is a possibility that our stock price may decline, due in part to the volatility of the stock market and the general economic downturn, such that we would lose our status as a Well-Known Seasoned Issuer, which allows us to more rapidly and more cheaply raise funds in the public markets. Existing stockholders have significant influence over us. Our executive officers, directors and 5% stockholders own, in the aggregate, approximately 39% of our outstanding common stock. As a result, these stockholders will be able to exercise substantial influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This could have the effect of delaying or preventing a change in control of our company and will make some transactions difficult or impossible to accomplish without the support of these stockholders. Bayer, a collaborative party, has the right, which it is not currently exercising, to have its nominee elected to our board of directors as long as we continue to collaborate on the development of a compound. Because of these rights, ownership and voting arrangements, our officers, directors, principal stockholders and collaborator may be able to effectively control the election of all members of the board of directors and determine all corporate actions. 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. A portion of our investment portfolio is invested in auction rate securities. The underlying assets of these securities are student loans substantially backed by the federal government. Due to adverse developments in the credit

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markets, beginning in February 2008, these securities have experienced failures in the auction process. When an auction fails for amounts we have invested, the security becomes illiquid. In the event of an auction failure, we are not able to access these funds until a future auction on these securities is successful. We have reclassified these securities from current to non-current marketable securities, and if the issuer is unable to successfully close future auctions and their credit rating deteriorates, we may be required to adjust the carrying value of the marketable securities through an impairment charge to earnings. We are at risk of securities class action litigation due to our expected stock price volatility. In the past, stockholders have often brought securities class action litigation against a company following a decline in the market price of its securities. This risk is especially acute for us, because biotechnology companies have experienced greater than average stock price volatility in recent years and, as a result, have been subject to, on average, a greater number of securities class action claims than companies in other industries. In December 2006, following our announcement that a Phase 3 trial administering Nexavar or placebo tablets in combination with the chemotherapeutic agents carboplatin and paclitaxel in patients with advanced melanoma did not meet its primary endpoint, our stock price declined significantly. Similarly, following our announcement in February 2008 that one of our Phase 3 trials for non-small cell lung cancer had been stopped because an independent DMC analysis concluded that it did not meet its primary endpoint of improved overall survival, our stock price declined significantly. We may in the future be the target of securities class action litigation. Securities litigation could result in substantial costs, could divert management’s attention and resources, and could seriously harm our business, financial condition and 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. A majority of Nexavar sales are generated outside of the United States, and a significant percentage of Nexavar commercial and development expenses are incurred outside of the United States. Fluctuations in foreign currency exchange rates affect our operating results. Changes in exchange rates between these foreign currencies and the U.S. Dollar will affect the recorded levels of our assets and liabilities as foreign assets and liabilities are translated into U.S. dollars for presentation in our financial statements, as well as our net sales, cost of goods sold, and operating margins. The primary foreign currency in which we have exchange rate fluctuation exposure is the European Union euro. As we expand, we could be exposed to exchange rate fluctuation in other currencies. Exchange rates between these currencies and U.S. dollars have fluctuated significantly in recent years and may do so in the future. Hedging foreign currencies can be difficult, especially if the currency is not freely traded. We cannot predict the impact of future exchange rate fluctuations on our operating results. We currently do not hedge any foreign currencies. Provisions in Delaware law, our charter and executive change of control agreements we have entered into may prevent or delay a change of control. We are subject to the Delaware anti-takeover laws regulating corporate takeovers. These anti-takeover laws prevent a Delaware corporation from engaging in a merger or sale of more than 10% of its assets with any stockholder, including all affiliates and associates of the stockholder, who owns 15% or more of the corporation’s outstanding voting stock, for three years following the date that the stockholder acquired 15% or more of the corporation’s stock unless: •

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.

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As such, these laws could prohibit or delay mergers or a change of control of us and may discourage attempts by other companies to acquire us. Our certificate of incorporation and bylaws include a number of provisions that may deter or impede hostile takeovers or changes of control or management. These provisions include: •

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.

These provisions may have the effect of delaying or preventing a change in control, even at stock prices higher than the then current stock price. We have entered into change in control severance agreements with each of our executive officers. These agreements provide for the payment of severance benefits and the acceleration of stock option vesting if the executive officer’s employment is terminated within 24 months of a change in control. The change in control severance agreements may have the effect of preventing a change in control. Item 1B. Unresolved Staff Comments None Item 2. Properties We occupy a total 60,000 square feet of office space in our primary facility in Emeryville, California, which we began occupying in December 2004. In 2004, we entered into an operating lease for 23,000 square feet of office space at this location and, subsequently in December 2006, we amended the existing lease to occupy an additional 14,000 square feet of office space. This lease expires in March 2013. In 2008, we entered into another operating lease for an additional 23,000 square feet of office space in Emeryville, California. This lease expires in November 2013. 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 8 of the accompanying financial statements for further information regarding our lease obligations. Item 3. Legal Proceedings We are not a party to any material legal proceedings. Item 4. Submission of Matters to a Vote of Securities Holders No matters were submitted to a vote of our stockholders during the quarter ended December 31, 2008.

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PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Global Market (NASDAQ) under the symbol “ONXX.” We commenced trading on NASDAQ on May 9, 1996. The following table presents the high and low closing sales prices per share of our common stock reported on NASDAQ. C om m on S tock 2008

First Quarter Second Quarter Third Quarter Fourth Quarter

2007

High

Low

High

Low

$ 57.98 37.94 44.79 35.93

$ 25.05 30.82 36.13 22.40

$ 29.03 33.93 44.73 59.50

$ 10.74 25.25 26.77 41.55

On February 20, 2009, the last reported sales price of our common stock on NASDAQ was $28.10 per share. Stock Performance Graph The following performance graph is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference in any filing by us under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. The stock price performance shown on the graph is not necessarily indicative of future price performance. (PERFORMANCE GRAPH)

Holders There were approximately 174 holders of record of our common stock as of February 20, 2009.

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Dividends We have not paid cash dividends on our common stock and do not plan to pay any cash dividends in the foreseeable future. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities For the year ended December 31, 2008, we issued 72,551 shares of restricted stock awards, of which 20,106 shares were withheld for taxes. Item 6. Selected Financial Data This section presents our selected historical financial data. You should carefully read the financial statements and the notes thereto included in this report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Statement of Operations data for the years ended December 31, 2008, 2007 and 2006 and the Balance Sheet data as of December 31, 2008 and 2007 has been derived from our audited financial statements included elsewhere in this report. The Statement of Operations data for the years ended December 31, 2005 and 2004 and the Balance Sheet data as of December 31, 2006, 2005 and 2004 has been derived from our audited financial statements that are not included in this report. Historical results are not necessarily indicative of future results. See the Notes to Financial Statements for an explanation of the method used to determine the number of shares used in computing basic and diluted net income (loss) per share. 2008

Statement of Operations Data: Revenue: Revenue from collaboration agreement(1) License fee revenue Operating expenses: Research and development(1) Selling, general and administrative Restructuring Loss from operations Investment income, net Provision for income taxes Net income (loss)

Ye ar En de d De ce m be r 31, 2007 2006 2005 (In thou san ds, e xce pt pe r sh are data)

$194,343 -

$ 90,429 -

$ 29,274 250

$

123,749 80,994 (10,400) 12,695 347 $ 1,948

83,306 60,546 (53,423) 19,256 $(34,167)

84,169 50,019 (104,664) 11,983 $ (92,681)

63,120 39,671 (101,791) 6,617 $ (95,174)

35,846 14,316 258 (49,920) 3,164 $(46,756)

$

0.03

$ (0.67)

$

$

(2.64)

$ (1.36)

Shares used in computing basic net income (loss) per share

55,915

51,177

42,170

36,039

34,342

Shares used in computing diluted net income (loss) per share

56,765

51,177

42,170

36,039

34,342

Basic net income (loss) per share

31

(2.20)

1,000

2004

$

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Balance Sheet Data: Cash, cash equivalents, and current and non-current marketable securities Total assets Working capital Advance from collaboration partner, non-current Accumulated deficit Total stockholders’ equity

2008

2007

De ce m be r 31, 2006 (In thou san ds)

2005

2004

$ 458,046 $ 509,767 428,755 (470,710) $ 475,200

$ 469,650 484,083 469,215 39,234 (472,658) $ 432,237

$ 271,403 286,246 256,699 40,000 (438,491) $ 222,780

$ 284,680 294,665 241,678 30,000 (345,810) $ 223,240

$ 209,624 215,546 197,873 20,000 (250,636) $ 179,988

(1) As a result of the adoption of new accounting literature, Emerging Issues Task Force, 07-1, or EITF 07-1, Accounting for Collaborative Arrangements, the Company’s statement of operations has a new presentation. These specific line items have been impacted by the new presentation. Refer to Note 1 in the Notes to Financial Statements for additional information. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. We use words such as “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “predict,” “potential,” “believe,” “should” and similar expressions to identify forward-looking statements. These statements appearing throughout our 10-K are statements regarding our intent, belief, or current expectations, primarily regarding our operations. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Annual Report on Form 10-K. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including those set forth under “Business” Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Overview We are a biopharmaceutical company dedicated to developing innovative therapies that target the molecular mechanisms that cause cancer. With our collaborators, we are developing anticancer therapies with the goal of changing the way cancer is treatedTM. We are applying our expertise to develop and commercialize therapies designed to exploit the genetic differences between cancer cells and normal cells. Our first commercially available product, Nexavar® (sorafenib) tablets, being developed with our collaborator, Bayer HealthCare Pharmaceuticals Inc., or Bayer, is approved by the United States Food and Drug Administration, or FDA, for the treatment of patients with advanced kidney cancer and liver cancer. Nexavar is a novel, orally available kinase inhibitor and is one of a new class of anticancer treatments that target both cancer cell proliferation and tumor growth through the inhibition of key signaling pathways. In December 2005, Nexavar became the first newly approved drug for patients with advanced kidney cancer in over a decade. In November 2007, Nexavar was approved as the first and is currently the only systemic therapy for the treatment of patients with liver cancer. Nexavar is now approved in more than 70 countries for the treatment of advanced kidney cancer and in more than 60 countries for the treatment of liver cancer. We and Bayer are also conducting clinical trials of Nexavar in several important cancer types in addition to advanced kidney cancer and liver cancer, including lung, melanoma, breast, ovarian and colon cancers. We and Bayer are commercializing Nexavar, for the treatment of patients with advanced kidney cancer and liver cancer. Nexavar has been approved and is marketed for these indications in the United States and in the European Union, as well as other territories worldwide. In the United States, we co-promote Nexavar with Bayer. Outside of the United States, Bayer manages all commercialization activities. In 2008, worldwide net sales of Nexavar as recorded by Bayer were $677.8 million. 32

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In collaboration with Bayer, we initially focused on demonstrating Nexavar’s ability to benefit patients suffering from a cancer for which there were no or few established therapies. With the approval of Nexavar for the treatment of advanced kidney cancer and liver cancer, the two companies have established the Nexavar brand and created a global commercial oncology presence. In order to benefit as many patients as possible, we and Bayer are investigating the administration of Nexavar with previously approved anticancer therapies in more common cancers, with the objective of enhancing the antitumor activity of existing therapies through combination with Nexavar. We and Bayer are developing and marketing Nexavar under our collaboration and co-promotion agreements. We fund 50% of the development costs for Nexavar worldwide, excluding Japan. With Bayer, we co-promote Nexavar in the United States and share equally in any profits or losses. Outside of the United States, excluding Japan, Bayer has exclusive marketing rights and we share profits equally. In Japan, Bayer funds all product development, and we will receive a royalty on any sales. Our agreements with Bayer also provide that we receive creditable milestone-based payments totaling $40 million, all of which have been received. These payments are repayable by us to Bayer from a portion of our share of any quarterly collaboration profits and royalties after deducting certain contractually agreed upon expenditures. As of December 31, 2008, $23.4 million of this amount was paid back to Bayer based on the profitability of the collaboration thus far. We have expanded our development pipeline through the acquisition of rights to development-stage novel anticancer agents. In November 2008, we entered into an agreement to license worldwide development and commercialization rights to ONX 0801, previously known as BGC 945, from BTG International Limited, or BTG, a London-based specialty pharmaceuticals company. ONX 0801 is in preclinical development and is believed to work by combining two established approaches to improve outcomes for cancer patients, selectively targeting tumor cells through the alpha-folate receptor, which is overexpressed in a number of tumor types, and inhibiting thymidylate synthase, a key enzyme responsible for cell growth and division. In December 2008, we acquired options to license SB1518 (designated by Onyx as ONX 0803) and SB1578 (designated by Onyx as ONX 0805), which are both Janus Kinase 2, or JAK2, inhibitors, from S*BIO Pte Ltd, or S*BIO, a Singapore-based company. The activation of JAK2 stimulates blood cell production and the JAK2 pathway is known to play a critical role in the proliferation of certain types of cancer cells and in the anti-inflammatory pathway. ONX 0803 is in multiple Phase 1 studies and ONX 0805 is in preclinical development. With the exception of the year ended December 31, 2008, we have incurred net losses since our inception. Our ability to achieve continued and sustainable profitability is uncertain and is dependent on a number of factors. These factors include, but are not limited to, the level of patient demand for Nexavar, the ability of Bayer’s distribution network to process and ship product on a timely basis, investments in sales and marketing efforts to support the sales of Nexavar, Bayer and our investments in the research and development of Nexavar, fluctuations in foreign exchange rates and expenditures we may incur to acquire or develop and commercialize additional products. Our operating results will likely fluctuate from quarter to quarter and from year to year, and are difficult to predict. Since inception, we have relied on public and private financings, combined with milestone payments from our collaborators, to fund our operations and may continue to do so in future periods. As of December 31, 2008, our accumulated deficit was approximately $470.7 million. Our business is subject to significant risks, including the risks inherent in our development efforts, the results of the Nexavar clinical trials, the marketing of Nexavar as a treatment for patients in approved indications, our dependence on collaborative parties, uncertainties associated with obtaining and enforcing patents, the lengthy and expensive regulatory approval process and competition from other products. For a discussion of these and some of the other risks and uncertainties affecting our business, see Item 1A “Risk Factors” of this Annual Report on Form 10-K. Critical Accounting Policies and the Use of Estimates The accompanying discussion and analysis of our financial condition and results of operations are based upon our financial statements and the related disclosures, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the amounts reported in our financial statements and accompanying notes. These estimates form the basis for making judgments about the carrying values of assets and liabilities. We consider

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certain accounting policies related to revenue from collaboration agreement, fair value of marketable securities, stock-based compensation, research and development expenses and the use of estimates to be critical policies. We base our estimates and judgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Significant estimates used in 2008 included assumptions used in the determination of the fair value of marketable securities, stock-based compensation related to stock options granted, revenue from collaboration agreement and research and development expenses. Actual results could differ materially from these estimates. We believe the following policies to be the most critical to understanding our financial condition and results of operations, because they require us to make estimates, assumptions and judgments about matters that are inherently uncertain. Revenue from Collaboration Agreement: On December 12, 2007, the Financial Accounting Standards Board or FASB, ratified Emerging Issues Task Force 07-1, or EITF 07-1, Accounting for Collaborative Arrangements. EITF 07-1 is effective for fiscal years beginning after December 15, 2008 and shall be applied retrospectively for all collaborative arrangements existing as of the effective date. We have elected to early adopt EITF 07-1, as a result, effective January 1, 2006, our statement of operations for all periods presented have been reclassified to conform to the new presentation. As the commercial sales of Nexavar began in late December 2005, there is no impact to periods prior to January 1, 2006. This new presentation impacts the classification of amounts included in specific line items, but has no impact on net income (loss) or net income (loss) per share. As a result of this new presentation, the statement of operations now includes the line item “Revenue from collaboration agreement.” This line item consists of our share of the pre-tax commercial profit generated from the collaboration with Bayer, reimbursement of our shared marketing costs related to Nexavar and royalty revenue. Our portion of shared collaboration research and development expenses is not included in the line item “Revenue from collaboration agreement,” but is reflected under operating expenses. According to the terms of the collaboration agreement, the companies share all research and development, marketing, and non-U.S. sales expenses. We and Bayer each bear our own U.S. sales force and medical science liaison expenses. These costs related to our U.S. sales force and medical science liaisons are recorded in our selling, general and administrative expenses. Bayer recognizes all revenue under the Nexavar collaboration and incurs the majority of expenses relating to the development and marketing of Nexavar. We are highly dependent on Bayer for timely and accurate information regarding any revenues realized from sales of Nexavar and the costs incurred in developing and selling it, in order to accurately report our results of operations. If we do not receive timely and accurate information or incorrectly estimate activity levels associated with the collaboration of Nexavar at a given point in time, we could be required to record adjustments in future periods and may be required to restate our results for prior periods. See Note 1 of the accompanying footnotes to the financial statements for the effect of the adoption of EITF 07-1 for all periods presented. Fair Value of Marketable Securities: Effective January 1, 2008, we adopted the provisions of Statements of Financial Accounting Standards No. 157, Fair Value Measurements, or SFAS No. 157, which defines fair value and provides guidance for using fair value to measure assets and liabilities. In accordance with SFAS No. 157 and FAS Staff Position 1572, “Effective Date of FASB Statement No. 157,” we adopted SFAS No. 157 with regard to all financial assets and liabilities in our financial statements in the first quarter of 2008 and have elected to delay the adoption of SFAS No. 157 for non-financial assets and non-financial liabilities until the first quarter of 2009. SFAS No. 157 is applicable whenever other standards require or permit assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. Accordingly, the carrying amounts of certain of our financial instruments, including cash equivalents and marketable securities, continue to be valued at fair value on a recurring basis. As defined in SFAS No. 157, fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. We utilize market data or assumptions that we believe market participants would use in pricing assets, including assumptions about risk and the risks inherent in the inputs to the valuation technique.

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SFAS No. 157 describes three levels of inputs that may be used to measure fair value, as follows: •

Level 1 — Quoted prices in active markets for identical assets or liabilities.

•

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

SFAS No. 157 introduced new disclosures about how we value certain assets. Much of the disclosure focuses on the inputs used to measure fair value, particularly in instances in which the measurement uses significant unobservable inputs. Stock Based-Compensation: Effective January 1, 2006, we adopted the Statement of Financial Accounting Standards, or SFAS, “Share-Based Payment,” or SFAS 123(R), which requires the measurement and recognition of compensation expense for all stock-based payments made to employees and directors including employee stock option awards and employee stock purchases made under our Employee Stock Purchase Plan, or ESPP, based on estimated fair value. We previously applied the provisions of Accounting Principles Board Opinion, or APB, “Accounting for Stock Issued to Employees,” or APB No. 25 and related Interpretations and provided the required pro forma disclosures under SFAS 123, “Accounting for StockBased Compensation,” or SFAS 123. We adopted SFAS 123(R) using the modified prospective transition method beginning January 1, 2006. Accordingly, during the year ended December 31, 2006, we recorded stock-based compensation expense for awards granted prior to but not yet vested as of January 1, 2006 as if the fair value method required for pro forma disclosure under SFAS 123 were in effect for expense recognition purposes adjusted for estimated forfeitures. For these awards, the Company has continued to recognize compensation expense using the accelerated amortization method under FASB Interpretation No. 28, “Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans.” For stock-based awards granted after January 1, 2006, we recognized compensation expense based on the estimated grant date fair value method required under SFAS 123(R). The compensation expense for these awards was recognized using a straight-line amortization method. The net income for the year ended December 31, 2008 includes employee stock-based compensation expense of $18.8 million, or $0.33 per diluted share. The net loss for the years ended December 31, 2007 and 2006 includes employee stock-based compensation expense of $14.1 million, or $0.28 per diluted share, and $14.0 million, or $0.33 per diluted share, respectively. As of December 31, 2008, the total unrecorded stock-based compensation expense for unvested stock options, net of expected forfeitures, was $36.6 million, which is expected to be amortized over a weighted-average period of 2.6 years. On November 10, 2005, the FASB, issued FASB Staff Position No. FAS 123(R)-3, “Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards.” We have elected to adopt the alternative transition method provided in the FASB Staff Position for calculating the tax effects, if any, of stock-based compensation expense pursuant to SFAS 123(R). The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of employee stock-based compensation, and to determine the subsequent impact to the APIC pool and the consolidated statements of operations and cash flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of SFAS 123(R). While fair value may be readily determinable for awards of stock, market quotes are not available for long-term, nontransferable stock options because these instruments are not traded. We currently use the Black-Scholes option-pricing model to estimate the fair value of stock options. Option valuation models require the input of highly subjective assumptions, including, but not limited to, stock price volatility and stock option exercise behavior. We expect to continue to use the Black-Scholes model for valuing our stock-based compensation expense. However, our estimate of future stockbased compensation expense will be affected by a number of items including our stock price, the number of stock options our board of directors may grant in future periods, as well as a number of complex and subjective valuation adjustments and the related tax effect. These valuation assumptions include, but are not limited to, the volatility of our stock price, expected life and stock option exercise behaviors. Actual results could differ materially from these estimates.

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Research and Development Expense: In accordance with FASB Statement of Financial Accounting Standards, or FAS, No. 2, “Accounting for Research and Development Costs,” research and development costs are charged to expense when incurred. The major components of research and development costs include clinical manufacturing costs, clinical trial expenses, non-refundable upfront payments, consulting and other third-party costs, salaries and employee benefits, stockbased compensation expense, supplies and materials and allocations of various overhead and occupancy costs. Nonrefundable option payments, including those made under our agreement with S*BIO, that do not have any future alternative use are recorded as research and development expense. Not all research and development costs are incurred by us. A significant portion of our research and development expenses, approximately 55% in 2008, 82% in 2007 and 79% in 2006, relates to our cost sharing arrangement with Bayer and represents our share of the research and development costs incurred by Bayer. As a result of the cost sharing arrangement between us and Bayer, there was a net reimbursable amount of $50.7 million, $57.9 million and $53.2 million to Bayer for the years ended December 31, 2008, 2007 and 2006, respectively. Such amounts were recorded based on invoices and estimates we receive from Bayer. When such invoices have not been received, we must estimate the amounts owed to Bayer based on discussions with Bayer. If we underestimate or overestimate the amounts owed to Bayer, we may need to adjust these amounts in a future period, which could have an effect on earnings in the period of adjustment. In instances where we enter into agreements with third parties for clinical trials and other consulting activities, costs are expensed upon the earlier of when non-refundable amounts are due or as services are performed. Amounts due under such arrangements may be either fixed fee or fee for service, and may include upfront payments, monthly payments, and payments upon the completion of milestones or receipt of deliverables. Our cost accruals for clinical trials are based on estimates of the services received and efforts expended pursuant to contracts with numerous clinical trial sites, cooperative groups and clinical research organizations. In the normal course of business we contract with third parties to perform various clinical trial activities in the on-going development of potential products. The financial terms of these agreements are subject to negotiation and variation from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events, the successful enrollment of patients, and the completion of portions of the clinical trial or similar conditions. The objective of our accrual policy is to match the recording of expenses in our financial statements to the actual services received and efforts expended. As such, expense accruals related to clinical trials are recognized based on our estimate of the degree of completion of the event or events specified in the specific clinical study or trial contract. We monitor service provider activities to the extent possible; however, if we underestimate activity levels associated with various studies at a given point in time, we could be required to record significant additional research and development expenses in future periods. Income Taxes: We use the asset and liability method to account for income taxes as required by FAS No. 109, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In July 2006, the Financial Accounting Standards Board, or FASB, issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109,” or FIN 48, which clarifies the criteria that must be met prior to recognition of the financial statement benefit of a position taken in a tax return. FIN 48 provides a benefit recognition model with a two-step approach consisting of a “more-likely-than-not” recognition criteria, and a measurement attribute that measures a given tax position as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. FIN 48 also requires the recognition of liabilities created by differences between tax positions taken in a tax return and amounts recognized in the financial statements. FIN 48 is effective as of the beginning of the first annual period beginning after December 15, 2006, and became effective for us on January 1, 2007. The adoption of FIN 48 had no impact on our financial condition, results of operations, or cash flows for the year ended December 31, 2008, as the we had no unrecognized tax benefits.

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We have accumulated approximately $722.1 million in net operating losses, which equates to approximately $144.3 million in deferred tax assets, relating to U.S. federal and state income taxes through December 31, 2008. The federal net operating losses, which we can use to offset future federal taxable income, expire between the years 2010 and 2027, and the state net operating loss, which we can use to offset future state taxable income expire between the years 2014 and 2029. However, utilization of the net operating losses may be limited under U.S. Internal Revenue Code Section 382 and our ability to generate net income before they expire. We have also accumulated approximately an additional $68.9 million in other deferred tax assets based on temporary differences between book and tax reporting. We continue to fully reserve our net operating losses and other deferred tax assets despite achieving full year profitability in 2008, since we have had a history of losses since inception. We will consider reversing a significant portion of the valuation reserve once we have demonstrated sustained profitability and our internal forecasts support the utilization of the net operating losses prior to their expiration. If we determine that the reversal of a significant portion of the valuation reserve is appropriate, a significant one-time benefit will be recognized against our income tax provision in the period of the reversal. In addition, as of December 31, 2008, approximately $56.0 million of the deferred tax assets related to our net operating losses consists of deductions for employee stock options for which the tax benefit will be credited to additional paid-in capital if and when realized. We assess the appropriateness of the valuation allowance at the end of each reporting period. Results of Operations Years Ended December 31, 2008, 2007 and 2006 Revenue. Nexavar, our only marketed product, was approved in the United States in December 2005. In accordance with our collaboration agreement with Bayer, Bayer recognizes all revenue from the sale of Nexavar. As such, for the years ended December 31, 2008, 2007 and 2006, we reported no revenue related to Nexavar. Nexavar net sales as recorded by Bayer were $677.8 million, $371.7 million and $165.0 million for the years ended December 31, 2008, 2007 and 2006, respectively, primarily from sales in the United States and the European Union. Revenue from Collaboration Agreement. Nexavar is currently marketed and sold in more than 70 countries for the treatment of advanced kidney cancer and in more than 60 countries for the treatment of liver cancer. We co-promote Nexavar in the United States with Bayer under collaboration and co-promotion agreements. In March 2006, we and Bayer entered into a copromotion agreement to co-promote Nexavar in the United States. This agreement amends the collaboration agreement and supersedes the provisions of that agreement that relate to the co-promotion of Nexavar in the United States. Outside of the United States, the terms of the collaboration agreement continue to govern. Under the terms of the co-promotion agreement and consistent with the collaboration agreement, we and Bayer share equally in the profits or losses of Nexavar, if any, in the United States, subject only to our continued co-funding of the development costs of Nexavar worldwide outside of Japan and our continued co-promotion of Nexavar in the United States. The collaboration was created through a contractual arrangement, not through a joint venture or other legal entity. Outside of the United States, excluding Japan, Bayer incurs all of the sales and marketing expenditures, and we reimburse Bayer for half of those expenditures. In addition, for sales generated outside of the United States, excluding Japan, we reimburse Bayer a fixed percentage of sales for their marketing infrastructure. Research and development expenditures on a worldwide basis, excluding Japan, are equally shared by both companies regardless of whether we or Bayer incurs the expense. In Japan, Bayer is responsible for all development and marketing costs and we receive a royalty on net sales of Nexavar. In the United Sates, Bayer provides all product distribution and all marketing support services for Nexavar, including managed care, customer service, order entry and billing. We compensate Bayer for distribution expenses based on a fixed percentage of gross sales of Nexavar in the United States. We reimburse Bayer for half of its expenses for marketing services provided by Bayer for the sale of Nexavar in the United States. We and Bayer share equally in any other out-ofpocket marketing expenses (other than expenses for sales force and medical science liaisons) that we and Bayer incur in connection with the marketing and promotion of Nexavar in the United States. Bayer manufactures all Nexavar sold and is reimbursed at an agreed transfer price per unit for the cost of goods sold in the United States.

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In the United States, we contribute half of the overall number of sales force personnel required to market and promote Nexavar and half of the medical science liaisons to support Nexavar. We and Bayer each bear our own sales force and medical science liaison expenses. These expenses are not included in the calculation of the profits or losses of the collaboration. Revenue from collaboration agreement consists of our share of the pre-tax commercial profit generated from our collaboration with Bayer, reimbursement of our shared marketing costs related to Nexavar and royalty revenue. Under the collaboration, Bayer recognizes all sales of Nexavar worldwide. We record revenue from collaboration agreement on a quarterly basis. Revenue from collaboration agreement is derived by calculating net sales of Nexavar to third-party customers and deducting the cost of goods sold, distribution costs, marketing costs (including without limitation, advertising and education expenses, selling and promotion expenses, marketing personnel expenses, and Bayer marketing services expenses), Phase 4 clinical trial costs and allocable overhead costs. Reimbursement by Bayer of our shared marketing costs related to Nexavar and royalty revenue are also included in the “Revenue from collaboration agreement” line item. Our portion of shared collaboration research and development expenses is not included in this line item, but is reflected under operating expenses. According to the terms of the collaboration agreement, the companies share all research and development, marketing and non-US sales expenses. United States sales force and medical science liaison expenditures incurred by both companies are borne by each company separately and are not included in the calculation. Some of the revenue and expenses recorded to derive the revenue from collaboration agreement during the period presented are estimates of both parties and are subject to further adjustment based on each party’s final review should actual results differ from these estimates. If we do not receive timely and accurate information or incorrectly estimate activity levels associated with the collaboration of Nexavar at a given point in time, we could be required to record adjustments in future periods and may be required to restate our results for prior periods. Revenue from collaboration agreement increases with increased Nexavar net revenue, or decreases with decreased Nexavar net revenue, over and above the associated cost of goods sold, distribution, selling and general administrative expenses. Increases to the associated costs of goods sold, distribution, selling and general and administrative expenses will decrease revenue from collaboration agreement and decreases to these costs will increase revenue from collaboration agreement. We expect Nexavar sales and Bayer’s and our shared cost of goods sold, distribution, selling and general administrative expense to increase with the approval of liver cancer and as Bayer continues to expand Nexavar marketing and sales activities outside of the United States. Revenue from collaboration agreement was $194.3 million, $90.4 million and $29.3 million for the years ended December 31, 2008, 2007 and 2006, respectively. The increase in revenue from collaboration agreement is primarily a result of increased net product revenue on sales of Nexavar as recorded by Bayer of $677.8 million for the year ended December 31, 2008 as compared to $371.7 million for the year ended December 31, 2007 and $165.0 million for the year ended December 31, 2006. The increase in net product revenue was offset by increased costs to sell, distribute and market in countries around the world. Revenue from collaboration agreement is calculated as follows: 2008

Nexavar product revenue, net (as recorded by Bayer) Revenue subject to profit sharing (as recorded by Bayer) Combined cost of goods sold, distribution, selling, general and administrative Combined collaboration commercial profit Onyx’s share of collaboration commercial profit Reimbursement of Onyx’s shared marketing expenses Royalty income Revenue from collaboration agreement

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$

$

Ye ar En de d De ce m be r 31, 2007 (In thou san ds)

677,806 637,459 298,792 338,667 169,334 22,185 2,824 194,343

$

$

371,736 371,736 223,682 148,054 74,027 16,402 90,429

$

$

2006

164,994 164,994 123,004 41,990 20,995 8,279 29,274

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License Revenue. License revenue was zero in 2008 and 2007 and $250,000 in 2006. License revenue in 2006 represents $100,000 recognized for selling the rights to certain viruses from our now discontinued therapeutic virus program to Shanghai Sunway Biotech Co. Ltd and $150,000 recognized for licensing rights to certain cytopathic viruses for therapy and prophylaxis of neoplasia to DNAtriX. We have no ongoing performance obligations under these agreements. Research and Development Expenses. Research and development expenses were $123.7 million, including stock-based compensation of $2.7 million, in 2008, an increase of $40.4 million, or 48%, from $83.3 million, including stock-based compensation expense of $4.2 million, in 2007. The increase in research and development was primarily due to $33.8 million of upfront payments related to our development and license agreement with BTG and development collaboration, option and license agreement with S*BIO and costs related to the Phase 2 breast trials. We expect that Bayer and we will continue to expand our investment in the development of Nexavar by conducting clinical trials to test Nexavar’s efficacy in more prevalent tumor types in future periods. Additionally, we expect our research and development activities to also include developing ONX 0801 further. Research and development expenses were $83.3 million, including stock-based compensation expense of $4.2 million, in 2007, a net decrease of $0.9 million, or 1%, from $84.2 million, including stock-based compensation expense of $2.6 million, in 2006. The decrease in research and development was due to offsetting factors. The 2007 costs include increased costs for the startup of the Phase 2 breast trials. Offsetting this increase for a net decrease in research and development expenses is reduced costs in melanoma spending as patients come off study from this program. A significant portion of our research and development expenses, approximately 55% in 2008, 82% in 2007 and 79% in 2006, relates to our cost sharing arrangement with Bayer and represents our share of the research and development costs incurred by Bayer. As a result of the cost sharing arrangement between us and Bayer, there was a net reimbursable amount of $50.7 million, $57.9 million and $53.2 million to Bayer for the years ended December 31, 2008, 2007 and 2006, respectively. Such amounts were recorded based on invoices and estimates we receive from Bayer. When such invoices have not been received, we must estimate the amounts owed to Bayer based on discussions with Bayer. If we underestimate or overestimate the amounts owed to Bayer, we may need to adjust these amounts in a future period, which could have an effect on earnings in the period of adjustment. The major components of research and development costs include clinical manufacturing costs, clinical trial expenses, nonrefundable upfront payments, consulting and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials and allocations of various overhead and occupancy costs. The scope and magnitude of future research and development expenses are difficult to predict at this time given the number of studies that will need to be conducted for any of our potential product candidates. In general, biopharmaceutical development involves a series of steps beginning with identification of a potential target and includes proof of concept in animals and Phase 1, 2 and 3 clinical studies in humans, each of which is typically more expensive than the previous step. The following table summarizes our principal product development initiatives, including the related stages of development for each product in development and the research and development expenses recognized in connection with each product. The information in the column labeled “Phase of Development - Estimated Completion” is only our estimate of the timing of completion of the current in-process development phases based on current information. The actual timing of completion of those phases could differ materially from the estimates provided in the table. We cannot reasonably estimate the timing of completion of each clinical phase of our development programs due to the risks and uncertainties associated with developing pharmaceutical product candidates. The clinical development portion of these programs may span as many as seven to ten years, and estimation of completion dates or costs to complete would be highly speculative and subjective due to the numerous risks and uncertainties associated with developing biopharmaceutical products, including significant and changing government regulation, the uncertainty of future preclinical and clinical study results and uncertainties associated with process development and

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manufacturing as well as marketing. For a discussion of the risks and uncertainties associated with the timing and cost of completing a product development phase, see Item 1A “Risk Factors” of this Annual Report on Form 10-K.

Products/ Product Candidates

Collaborator

Description

Nexavar Small molecule inhibitor (sorafenib) Tablets(1) of tumor cell proliferation and angiogenesis, targeting RAF, VEGFR-2, PDGFR- ß, KIT, FLT3, and RET ONX 0801 Compound targeting apha-folate receptor and inhibiting thymidylate synthase ONX 0803, ONX Janus Kinase 2 0805 Inhibitors

Phase of Development — Estimated Completion

Bayer

Phase 1 — 2004 Phase 2 — Unknown Phase 3 — Unknown

BTG

Pre-clinical

S*BIO

Phase 1 — unknown Pre-clinical

Research and Development Expenses For the Year Ended December 31, 2008

$ 89.8(2)

2007 (In millions)

$

13.1(3)

Total research and development expenses

83.3(2)

$84.2(2)

-

20.8(4) $123.7

2006

$

-

-

-

83.3

$ 84.2

(1) Aggregate research and development costs to-date through December 31, 2008 incurred by us since fiscal year 2000 for the Nexavar project is $392.1 million. (2) Costs reflected include our share of product development costs incurred by Bayer for Nexavar. (3) Costs refer to the upfront payment made to BTG under our development and license agreement. (4) Costs refer to the upfront payment made to S*BIO under our development collaboration, option and license agreement. Selling, General and Administrative Expenses. Selling, general and administrative expenses were $81.0 million, including stock-based compensation expense of $17.8 million, in 2008, a net increase of $20.5 million, or 34%, from $60.5 million, including stock-based compensation expense of $11.4 million, in 2007. The increase in selling, general and administrative expenses is primarily due to us incurring more of the shared marketing expenses in the United States and an increase in headcount in our commercial and administrative functions, including executive and corporate development, needed to support our growth and other salary related expenses, including bonuses. Additionally, the twelve months ended December 31, 2008 included non-recurring employee related expenses consisting of $2.3 million for modifications of previously granted stock-based awards to employees and $2.0 million for compensation, search fees and other expenses related to the transition of the chief executive officer. Selling, general and administrative expenses were $60.5 million in 2007, including stock-based compensation expense of $11.4 million, a net increase of $10.5 million, or 21%, from $50.0 million, including stock-based compensation expense of $11.8 million, in 2006. The increase was primarily due to us incurring more of the shared marketing expenses in the United States and a planned increase in personnel in our commercial and administrative functions needed to support our growth and other salary related expenses, including bonuses. Selling, general and administrative expenses consist primarily of salaries, employee benefits, stock-based compensation expense, selling and promotions, consulting, other third party costs, corporate functional expenses and allocations for overhead and occupancy costs. Investment Income. We had investment income of $12.7 million in 2008, a decrease of $6.6 million from 2007, primarily due to lower interest rates from the change in the asset allocation of our investment portfolio. We had investment income of $19.3 million in 2007, an increase of $7.3 million from 2006, primarily due to higher average cash balances in 2007 compared to 2006. Our average cash balances in 2007 benefited from our June 2007 sale

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of equity securities from which we received approximately $174.2 million in net cash proceeds, and our April 2007 sale of equity securities to Azimuth Opportunity Ltd., or Azimuth, from which we received approximately $30.8 million. Income Taxes With the exception of the year ended December 31, 2008, we have incurred significant losses since our inception and, as a result, we have not recorded a provision for income taxes for any of the periods presented prior to December 31, 2007. For the year ended December 31, 2008 we recorded a provision for income taxes of $0.3 million related to continuing operations. Our tax expense was related primarily to federal alternative minimum tax and state income taxes. As of December 31, 2008, our net operating loss carryforwards for federal and state income tax purposes were approximately $407.8 million and $314.2 million, respectively. We also had federal and state research and development tax credit and orphan drug credit carryforwards of approximately $37.9 million and $4.0 million, respectively. Realization of these deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. If not utilized, the net operating loss and credit carryforwards will begin to expire in 2010 and 2009, respectively. Additionally, utilization of net operating losses and credits may be subject to substantial annual limitations due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations may result in the expiration of our net operating loss and credit carryforwards before they can be used. Please refer to Note 13 of the accompanying financial statements for further information regarding income taxes. Related Party Transactions We have a loan receivable from an employee of which $170,000 was outstanding at December 31, 2008. This loan is due in five annual payments, beginning in 2009, and bears interest at 2.85% per annum. We had a loan with a former employee of which approximately $228,000 was outstanding at December 31, 2006. This loan bore interest at 4.82% per annum. In 2007, $87,000 of principal and interest was forgiven and the remaining loan balance of $152,000 was repaid in October 2007 in accordance with the terms of the loan agreement. Liquidity and Capital Resources Since our inception, we have incurred significant losses, and we have relied primarily on public and private financing, combined with milestone payments we have received from our collaborators, to fund our operations. At December 31, 2008, we had cash, cash equivalents, and current and non-current marketable securities of $458.0 million, compared to $469.7 million at December 31, 2007 and $271.4 million at December 31, 2006. The $11.7 million decrease in cash, cash equivalents, and marketable securities in 2008 is primarily due to $38.0 million of upfront payments related to our development and license agreement with BTG and development collaboration, option and license agreement with S*BIO partially offset by the remaining cash provided by operations and net cash proceeds from the exercise of stock options for the year ended December 31, 2008. The increase in cash, cash equivalents, and marketable securities in 2007 of $198.3 million is primarily due to our public offering completed in June 2007, which raised cash proceeds, net of underwriting discounts and commissions, of $174.2 million, our April 2007 sale of equity securities to Azimuth from which we received approximately $30.8 million in net cash proceeds and the exercise of stock options during the twelve-month period ended December 31, 2007 from which we received $21.9 million. This increase was partially offset by $26.4 million of cash used to fund our operations. Our cash used in operations was $8.4 million in 2008, $26.4 million in 2007 and $100.2 million in 2006. In 2008 and 2007, the cash used in operations primarily related to net losses for the 2008 and 2007 year-ends, respectively. Expenditures for capital equipment amounted to approximately $1.6 million in 2008, $2.7 million in 2007 and $619,000 in 2006. Capital expenditures in 2008 and 2007 were primarily for equipment to accommodate our employee growth. In September 2006, we secured a commitment for up to $150 million in a common stock purchase agreement with Azimuth. During the two-year term of the commitment, we were able to sell, at our discretion, registered shares of our common stock to Azimuth at a discount to the market price ranging from 3.30% to 5.05%. Under this

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commitment, Azimuth purchased an aggregate of 5,573,010 shares of our common stock, or $106 million. In April 2007, Azimuth purchased 1,246,912 shares of our common stock for a purchase price of $31.0 million resulting in approximately $30.8 million in net cash proceeds received by us. In October and November 2006, Azimuth purchased an aggregate of 4,326,098 shares of our common stock under the purchase agreement for an aggregate purchase price of $75.0 million, resulting in approximately $74.4 million in net cash proceeds received by us. Our investment portfolio includes $45.0 million of AAA rated securities with an auction reset feature (“auction rate securities”) collateralized by student loans. Since February 2008, securities of this type have experienced failures in the auction process. As a result of the auction failures, interest rates on these securities reset at penalty rates linked to Libor or Treasury bill rates. The penalty rates are generally higher than interest rates set at auction. Based on the overall failure rate of these auctions, the frequency of the failures, the underlying maturities of the securities, a portion of which are greater than 30 years, and our belief that the market for these student loan collateralized instruments may take in excess of twelve months to fully recover, we have classified $39.6 million of these auction rate securities as non-current marketable securities on the accompanying balance sheet. We have reduced the carrying value of these marketable securities by $5.4 million through accumulated other comprehensive income or loss instead of earnings, which we believe reflects a temporary decline in fair value of these securities. Further adverse developments in the credit market could result in an impairment charge through earnings in the future. Of the $45.0 million invested in failed auction rate securities, we estimate the fair value to be $39.6 million, which is based on a discounted cash flow model. The discounted cash flow model used to value these securities is based on a specific term and liquidity assumptions. An increase in either of these assumptions could result in a $1.0 million decrease in value. Alternatively, a decrease in either of the assumptions could result in a $1.1 million increase in value. Currently, we believe the marketable securities classified as non-current are not other-than-temporarily impaired as all of them are substantially backed by the federal government, but it is not clear in what period of time they will be settled. We believe that, even after reclassifying these securities to non-current and the possible requirement to hold all such securities for an indefinite period of time, our remaining cash and cash equivalents and current marketable securities will be sufficient to meet our anticipated cash needs for at least the next twelve months. We believe that our existing capital resources and interest thereon will be sufficient to fund our current and planned operations beyond 2010. However, if we change our development plans, including acquiring or developing additional product candidates or complementary businesses, we may need additional funds sooner than we expect. We anticipate that our co-development costs for the Nexavar program may increase over the next several years as we continue to fund our share of the clinical development program and prepare for the potential product launches throughout the world. In addition, we anticipate that we will incur expenses for the development of ONX 0801 and, if we exercise one or both of our options, ONX 0803 and ONX 0805, we will be required to pay significant license fees and will incur development expenses. While these costs are unknown at the current time, we may need to raise additional capital to continue the co-funding of the program in future periods beyond 2010. We intend to seek any required additional funding through collaborations, public and private equity or debt financings, capital lease transactions or other available financing sources. Additional financing may not be available on acceptable terms, if at all. If additional funds are raised by issuing equity securities, substantial dilution to existing stockholders may result. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate one or more of our development programs or to obtain funds through collaborations with others that are on unfavorable terms or that may require us to relinquish rights to certain of our technologies, product candidates or products that we would otherwise seek to develop on our own. Contractual Obligations and Commitments Our contractual obligations for the next five years and thereafter are as follows:

C on tractu al O bligation s

Operating leases, net of sublease income Advance from collaboration partner

Total

$ 8,769 $16,633

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Paym e n ts Due by Pe riod Le ss th an 1-3 1 Ye ar Ye ars (In thou san ds)

$ 1,819 $16,633

$3,924 $ 0

3-5 Ye ars

Afte r 5 Ye ars

$3,026 $ 0

$0 $0

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In 2006, we amended our existing operating lease to occupy 14,000 square feet of office space in addition to the 23,000 square feet already occupied in Emeryville, California, which serves as our corporate headquarters. The lease expires on March 31, 2013. In 2008, we entered into another operating lease to occupy an additional 23,000 square feet of office space in Emeryville, California. This lease expires on November 30, 2013. We also have a lease for 9,000 square feet of space in a secondary facility in Richmond, California, which we are currently subleasing through September 2010. We previously received $40.0 million in development payments from Bayer pursuant to the collaboration agreement. These development payments contain no provision for interest and are repayable to Bayer from a portion of our share of collaboration profits after deducting certain contractually agreed upon expenditures. As of December 31, 2008, $23.4 million of these development payments have been repaid to Bayer leaving a remaining balance of $16.6 million, which has been reclassified as a current liability on the accompanying balance sheet. Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate and Market Risk The primary objective of our investment activities is to preserve principal while at the same time maximize the income we receive from our investments without significantly increasing risk. Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. This means that a change in prevailing interest rates may cause the principal amount of the investments to fluctuate. By policy, we minimize risk by placing our investments with high quality debt security issuers, limit the amount of credit exposure to any one issuer, limit duration by restricting the term and hold investments to maturity except under rare circumstances. We maintain our portfolio of cash equivalents and marketable securities in a variety of securities, including commercial paper, money market funds, auction rate notes, investment grade government and non-government debt securities. Through our money managers, we maintain risk management control systems to monitor interest rate risk. The risk management control systems use analytical techniques, including sensitivity analysis. If market interest rates were to increase by 100 basis points, or 1%, as of December 31, 2008, the fair value of our portfolio would decline by approximately $893,000. The table below presents the amounts and related weighted interest rates of our cash equivalents and marketable securities at December 31: 2008

Maturity

Cash equivalents, fixed rate Marketable securities, fixed rate

2007 Fair Value ($ in millions)

Average Interest Rate

Maturity

Fair Value ($ in millions)

Average Interest Rate

0 — 3 months

$ 233.8

0.53%

0 — 2 months

$ 160.0

4.79%

0 — 12 months

$ 222.9

0.87%

0 — 12 months

$ 308.0

4.75%

Our investment portfolio includes $45.0 million of AAA rated securities with an auction reset feature (“auction rate securities”) collateralized by student loans. Since February 2008, securities of this type have experienced failures in the auction process. As a result of the auction failures, interest rates on these securities reset at penalty rates linked to Libor or Treasury bill rates. The penalty rates are generally higher than interest rates set at auction. Based on the overall failure rate of these auctions, the frequency of the failures, the underlying maturities of the securities, and our belief that the market for these student loan collateralized instruments may take in excess of twelve months to fully recover, we have classified $39.6 million of these auction rate securities as non-current marketable securities on the accompanying balance sheet. We have reduced the carrying value of these marketable securities by $5.4 million through accumulated other comprehensive income or loss instead of earnings, which we believe reflects a temporary decline in fair value of these securities. A majority of Nexavar sales are generated outside of the United States, and a significant percentage of Nexavar commercial and development expenses are incurred outside of the United States. Fluctuations in foreign currency exchange rates affect our operating results. Changes in exchange rates between these foreign currencies and the U.S. Dollar will affect the recorded levels of our assets and liabilities as foreign assets and liabilities are translated into U.S. dollars for presentation in our financial statements, as well as our net sales, cost of goods sold, and operating margins. The primary foreign currency in which we have exchange rate fluctuation exposure is the European Union euro. As we expand, we could be exposed to exchange rate fluctuation in other currencies. Exchange rates between these currencies and U.S. dollars have fluctuated significantly in recent years and may do so in the future. We did not

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hold any derivative instruments as of December 31, 2008, and we have not held derivative instruments in the past. However, our investment policy does allow us to use derivative financial instruments for the purposes of hedging foreign currency denominated obligations. Our cash flows are denominated in United States dollars. Item 8. Financial Statements and Supplementary Data Our Financial Statements and notes thereto appear on pages 53 to 78 of this Annual Report on Form 10-K. Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure Not applicable. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures: The Company’s chief executive officer and principal financial officer reviewed and evaluated the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on that evaluation, the Company’s chief executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2008 to ensure the information required to be disclosed by the Company in this Annual Report on Form 10-K is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Management’s Report on Internal Control over Financial Reporting: The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Under the supervision and with the participation of the Company’s management, including the chief executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. The Company’s management has concluded that, as of December 31, 2008, the Company’s internal control over financial reporting is effective based on these criteria. The effectiveness of our internal control over financial reporting as of December 31, 2008 has been audited by Ernst & Young LLP, our independent registered public accounting firm, as stated in their attestation report, which is included herein. Changes in Internal Control over Financial Reporting: There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting. Inherent Limitations on Effectiveness of Controls: Internal control over financial reporting may not prevent or detect all errors and all fraud. Also, projections of any evaluation of effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders Onyx Pharmaceuticals, Inc. We have audited Onyx Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Onyx Pharmaceuticals, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Onyx Pharmaceuticals, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets of Onyx Pharmaceuticals, Inc. as of December 31, 2008 and 2007 and the related statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2008 of Onyx Pharmaceuticals, Inc. and our report dated February 24, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP Palo Alto, California February 24, 2009

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Item 9B. Other information Not applicable. PART III. Certain information required by Part III is omitted from this Annual Report on Form 10-K because the registrant will file with the U.S. Securities and Exchange Commission a definitive proxy statement pursuant to Regulation 14A in connection with the solicitation of proxies for the Company’s Annual Meeting of Stockholders to be held on May 26, 2009 (the “2009 Definitive Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and certain information included therein is incorporated herein by reference. Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item 10 is incorporated by reference from our 2009 Definitive Proxy Statement. Item 11. Executive Compensation The information required under this Item 11 is incorporated by reference from our 2009 Definitive Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required under this Item 12 with respect to security ownership of certain beneficial owners and management is incorporated by reference from our 2009 Definitive Proxy Statement. Securities Authorized for Issuance Under Equity Compensation Plans as of December 31, 2008

Plan C ate gory(1)

Nu m be r of se cu ritie s to be issu e d u pon e xe rcise of ou tstan ding options, warran ts an d righ ts C olum n a

Equity compensation plans approved by security holders

4,575,937

W e ighte d-ave rage e xe rcise price of ou tstan ding option s, warran ts and righ ts C olum n b

$

28.72

Nu m be r of se cu ritie s re m aining available for future issu an ce u n de r e qu ity com pe n sation plan s (e xcluding se cu ritie s re fle cte d in colum n a) C olum n c

4,671,008(2)

(1) We have no equity compensation plans not approved by security holders. (2) This amount includes 479,762 shares that remain available for purchase under our Employee Stock Purchase Plan. Under the 2005 Equity Incentive Plan, shares available for issuance should be reduced by one and three tenths (1.3) shares for each share of common stock available for issuance pursuant to a stock purchase award, stock bonus award, stock unit award or other stock award granted. With this adjustment, the total amount available for future issuance would be reduced to 3,703,797 shares. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required under this Item 13 is incorporated by reference from our 2009 Definitive Proxy Statement. Item 14. Principal Accounting Fees and Services The information required under this Item 14 is incorporated by reference from our 2009 Definitive Proxy Statement. Consistent with Section 10A (i)(2) of the Securities Exchange Act of 1934, as added by Section 202 of the Sarbanes-Oxley Act of 2002, we are responsible for listing the non-audit services approved by our Audit Committee to be performed by Ernst & Young LLP, our external auditor. Non-audit services are defined as services other than those provided in connection with an audit or a review of our financial statements. Ernst & Young LLP did not provide any non-audit services related to the year ended December 31, 2008.

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PART IV. Item 15. Exhibits, Financial Statement Schedules (a) Documents filed as part of this report. (1) Index to Financial Statements The Financial Statements required by this item are submitted in a separate section beginning on page 52 of this Report. Report of Independent Registered Public Accounting Firm Balance Sheets Statements of Operations Statement of Stockholders’ Equity Statements of Cash Flows Notes to Financial Statements (2) Financial Statement Schedules Financial statement schedules have been omitted because the information required to be set forth therein is not applicable. Exhibits Exh ibit Nu m be r

De scription of Docu m e n t

3.1(1) 3.2(2) 3.3(3) 3.4(4) 4.1 4.2(1) 10.1(i)(5)*

Restated Certificate of Incorporation of the Company. Amended and Restated Bylaws of the Company. Certificate of Amendment to Amended and Restated Certificate of Incorporation. Certificate of Amendment to Amended and Restated Certificate of Incorporation. Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4. Specimen Stock Certificate. Collaboration Agreement between Bayer Corporation (formerly Miles, Inc.) and the Company dated April 22, 1994. 10.1(ii)(5)* Amendment to Collaboration Agreement between Bayer Corporation and the Company dated April 24, 1996. 10.1(iii)(5)* Amendment to Collaboration Agreement between Bayer Corporation and the Company dated February 1, 1999. 10.2(i)(5)* Amended and Restated Research, Development and Marketing Collaboration Agreement dated May 2, 1995 between the Company and Warner-Lambert Company. 10.2(ii)(6)* Research, Development and Marketing Collaboration Agreement dated July 31, 1997 between the Company and Warner-Lambert Company. 10.2(iii)(6)* Amendment to the Amended and Restated Research, Development and Marketing Collaboration Agreement, dated December 15, 1997, between the Company and Warner-Lambert Company. 10.2(iv)(6)* Second Amendment to the Amended and Restated Research, Development and Marketing Agreement between Warner-Lambert and the Company dated May 2, 1995. 10.2(v)(6)* Second Amendment to Research, Development and Marketing Collaboration Agreement between Warner-Lambert and the Company dated July 31, 1997. 10.2(vi)(7)* Amendment #3 to the Research, Development and Marketing Collaboration Agreement between the Company and Warner-Lambert dated August 6, 2001.

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Exh ibit Nu m be r

De scription of Docu m e n t

10.2(vii)(8)*

Amendment #3 to the Amended and Restated Research, Development and Marketing Collaboration Agreement between the Company and Warner-Lambert dated August 6, 2001. 10.3(9)* Technology Transfer Agreement dated April 24, 1992 between Chiron Corporation and the Company, as amended in the Chiron Onyx HPV Addendum dated December 2, 1992, in the Amendment dated February 1, 1994, in the Letter Agreement dated May 20, 1994 and in the Letter Agreement dated March 29, 1996. 10.4(1)+ Letter Agreement between Dr. Gregory Giotta and the Company dated May 26, 1995. 10.5(1)+ 1996 Equity Incentive Plan. 10.6(1)+ 1996 Non-Employee Directors’ Stock Option Plan. 10.7(10)+ 1996 Employee Stock Purchase Plan. 10.8(1)+ Form of Indemnity Agreement to be signed by executive officers and directors of the Company. 10.9(11)+ Form of Executive Change in Control Severance Benefits Agreement. 10.10(i)(12)* Collaboration Agreement between the Company and Warner-Lambert Company dated October 13, 1999. 10.10(ii)(7)* Amendment #1 to the Collaboration Agreement between the Company and Warner-Lambert dated August 6, 2001. 10.10(ii)(13)* Second Amendment to the Collaboration Agreement between the Company and Warner-Lambert Company dated September 16, 2002. 10.11(14) Stock and Warrant Purchase Agreement between the Company and the investors dated May 6, 2002. 10.12(i)(15) Sublease between the Company and Siebel Systems dated August 5, 2004. 10.12(ii)(16) First Amendment to Sublease between the Company and Oracle USA Inc., dated November 3, 2006. 10.13(i)(17)+ 2005 Equity Incentive Plan. 10.13(ii)(16)+ Form of Stock Option Agreement pursuant to the 2005 Equity Incentive Plan. 10.13(iii)(16)+ Form of Stock Option Agreement pursuant to the 2005 Equity Incentive Plan and the NonDiscretionary Grant Program for Directors. 10.13(iv)(18)+ Form of Stock Bonus Award Grant Notice and Agreement between the Company and certain award recipients. 10.14(5)* United States Co-Promotion Agreement by and between the Company and Bayer Pharmaceuticals Corporation, dated March 6, 2006. 10.15(19)+ Letter Agreement between Laura A. Brege and the Company, dated May 19, 2006. 10.16(18)+ Letter Agreement between Gregory W. Schafer and the Company, dated July 7, 2006. 10.17(20) Common Stock Purchase Agreement between the Company and Azimuth Opportunity Ltd., dated September 29, 2006. 10.18(21)+ Retirement Agreement between the Company and Edward F. Kenney, dated April 13, 2007. 10.19(22)+ Bonuses for Fiscal Year 2007 and Base Salaries for Fiscal Year 2008 for Named Executive Officers. 10.20(23)+ Employment Agreement between the Company and N. Anthony Coles, M.D., dated as of February 22, 2008. 10.21(23)+ Executive Change in Control Severance Benefits Agreement between the Company and N. Anthony Coles, M.D., dated as of February 22, 2008. 10.22(23)+ Retirement Agreement between the Company and Hollings C. Renton, dated as of February 22, 2008. 10.23(24)+ Separation Agreement between the Company and Henry J. Fuchs, M.D., dated December 1, 2008. 10.24(i)(25)+ Separation and Consulting Agreement between the Company and Gregory W. Schafer, dated June 23, 2008. 48

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Exh ibit Nu m be r

De scription of Docu m e n t

10.24(ii)(2)+ Amendment to Separation and Consulting Agreement between the Company and Gregory W. Schafer, dated December 5, 2008. 10.25(2)+ Onyx Pharmaceuticals, Inc. Executive Severance Benefit Plan. 10.26(26)+ Letter Agreement between the Company and Matthew K. Fust, dated December 12, 2008. 10.27** Development and License Agreement between the Company and BTG International Limited, dated as of November 6, 2008. 23.1 Consent of Independent Registered Public Accounting Firm. 24.1 Power of Attorney. Reference is made to the signature page. 31.1 Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). 31.2 Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). 32.1 Certifications required by Rule 13a-14(b) or Rule 15d-14(b)and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350). * ** + (1) (2) (3) (4) (5)

(6)

(7) (8)

(9)

(10) (11) (12) (13) (14)

Confidential treatment has been received for portions of this document. Confidential treatment has been sought for portions of this document. Indicates management contract or compensatory plan or arrangement. Filed as an exhibit to Onyx’s Registration Statement on Form SB-2 (No. 333-3176-LA). Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on December 5, 2008. Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000. Filed as an exhibit to the Company’s Registration Statement on Form S-3 (No. 333-134565) filed on May 30, 2006. Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006. The redactions to this agreement have been amended since its original filing in accordance with a request for extension of confidential treatment filed separately by the Company with the Securities and Exchange Commission. Filed as an exhibit to Onyx’s Annual Report on Form 10-K for the year ended December 31, 2002. The redactions to this agreement have been amended since its original filing in accordance with a request for extension of confidential treatment filed separately by the Company with the Securities and Exchange Commission. Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006. The redactions to this agreement have been amended since its original filing in accordance with a request for extension of confidential treatment filed separately by the Company with the Securities and Exchange Commission. Filed as an exhibit to Onyx’s Annual Report on Form 10-K for the year ended December 31, 2001. The redactions to this agreement have been amended since its original filing in accordance with a request for extension of confidential treatment filed separately by the Company with the Securities and Exchange Commission. Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on May 25, 2007. Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on June 10, 2008. Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on March 1, 2000. Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002. Filed as an exhibit to Onyx’s Registration Statement on Form S-3 filed on June 5, 2002 (No. 333-89850). 49

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(15) (16) (17) (18) (19) (20) (21) (22) (23) (24) (25) (26)

Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004. Filed as an exhibit to Onyx’s Annual Report on Form 10-K for the year ended December 31, 2006. Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on May 15, 2008 Filed as an exhibit to the registrant’s Current Report on Form 8-K filed on July 12, 2006. Filed as an exhibit to the registrant’s Current Report on Form 8-K filed on June 12, 2006. Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on September 29, 2006. Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007. Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on February 8, 2008. Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on February 26, 2008. Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on December 1, 2008. Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on June 23, 2008. Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on December 23, 2008.

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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Emeryville, County of Alameda, State of California, on the 25th day of February, 2009.

ONYX PHARMACEUTICALS, INC. By:

/s/ N. ANTHONY COLES N. Anthony Coles President and Chief Executive Officer

POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints N. Anthony Coles and Matthew K. Fust or either of them, his or her attorney-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. In accordance with the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates stated. S ignature

Title

Date

/s/ N. ANTHONY COLES

President and Chief Executive Officer (Principal Executive Officer)

February 25, 2009

February 25, 2009

Matthew K. Fust

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

/s/ PAUL GODDARD

Director

February 25, 2009

Director

February 25, 2009

Director

February 25, 2009

Director

February 25, 2009

Director

February 25, 2009

Director

February 25, 2009

N. Anthony Coles /s/ MATTHEW K. FUST

Paul Goddard, Ph.D. /s/ ANTONIO GRILLO-LOPEZ Antonio Grillo-Lopez, M.D. /s/ MAGNUS LUNDBERG Magnus Lundberg /s/ CORINNE H. LYLE Corinne H. Lyle /s/ WENDELL WIERENGA Wendell Wierenga, Ph.D. /s/ THOMAS G. WIGGANS Thomas G. Wiggans

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders Onyx Pharmaceuticals, Inc. We have audited the accompanying balance sheets of Onyx Pharmaceuticals, Inc. as of December 31, 2008 and 2007, and the related statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of Onyx Pharmaceuticals, Inc.’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Onyx Pharmaceuticals, Inc. at December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Onyx Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP Palo Alto, California February 24, 2009

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ONYX PHARMACEUTICALS, INC. BALANCE SHEETS De ce m be r 31, 2008 2007 (In thou san ds, e xce pt sh are an d pe r sh are am ou n ts)

ASSETS Current assets: Cash and cash equivalents Marketable securities Receivable from collaboration partner Prepaid expenses and other current assets Total current assets Marketable securities, non-current Property and equipment, net Other assets Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable Advance from collaboration partner Accrued liabilities Accrued clinical trials and related expenses Accrued compensation Total current liabilities Advance from collaboration partner, non-current Deferred rent and lease incentives Commitments and contingencies (Notes 8 and 14) Stockholders’ equity: Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued and outstanding Common stock, $0.001 par value; 100,000,000 shares authorized; 56,560,244 and 55,324,887 shares issued and outstanding as of December 31, 2008 and 2007, respectively Additional paid-in capital Receivable from option exercises Accumulated other comprehensive gain (loss) Accumulated deficit Total stockholders’ equity Total liabilities and stockholders’ equity See accompanying notes.

53

$ 235,152 183,272 35,836 7,799 462,059 39,622 3,363 4,723 $ 509,767

$ 161,653 307,997 4,702 6,304 480,656 3,146 281 $ 484,083

$

$

93 16,633 4,523 6,041 6,014 33,304 1,263

271 2,065 3,323 5,782 11,441 39,234 1,171

-

-

57 950,628 (455) (4,320) (470,710) 475,200 $ 509,767

56 904,506 (23) 356 (472,658) 432,237 $ 484,083

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ONYX PHARMACEUTICALS, INC. STATEMENTS OF OPERATIONS Ye ar En de d De ce m be r 31, 2008 2007 2006 ( In thou san ds, e xce pt pe r sh are am ou n ts )

Revenue: Revenue from collaboration agreement License fee revenue Total operating revenue Operating Expenses: Research and development Selling, general and administrative Total operating expenses Loss from operations Investment income, net Provision for income taxes Net income (loss)

$194,343 194,343

$ 90,429 90,429

$ 29,274 250 29,524

123,749 80,994 204,743 (10,400) 12,695 347 $ 1,948

83,306 60,546 143,852 (53,423) 19,256 $ (34,167)

84,169 50,019 134,188 (104,664) 11,983 $ (92,681)

Basic net income (loss) per share

$

0.03

$

(0.67)

$

Diluted net income (loss) per share

$

0.03

$

(0.67)

$

(2.20) (2.20)

Shares used in computing basic net income (loss) per share

55,915

51,177

42,170

Shares used in computing diluted net income (loss) per share

56,765

51,177

42,170

See accompanying notes.

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ONYX PHARMACEUTICALS, INC. STATEMENT OF STOCKHOLDERS’ EQUITY Receivable Accumulated From Other Additional Stock Comprehensive Common Stock Paid-In Option Income Accumulated Shares Amount Capital Exercises (Loss) Deficit (In thousands, except shares and per share amounts)

Balances at December 31, 2005 Exercise of stock options Issuance of common stock in connection with Azimuth common stock purchase agreement Stock-based compensation, related to stock option grants Issuance of common stock pursuant to employee stock purchase plan Vesting of restricted stock awards Comprehensive loss: Change in unrealized gain (loss) on investments Net loss

41,210,734 347,287

$

$

(24) $ 24

41 -

$569,800 2,520

(767) $ (345,810) $ 223,240 2,544

4,326,098

5

74,353

-

-

-

74,358

-

-

13,957

-

-

-

13,957

22,584 6,667

-

602 170

-

-

-

602 170

-

-

-

-

590 -

(92,681)

590 (92,681)

45,913,370 1,477,661

46 1

661,402 21,909

(177) -

(438,491) -

222,780 21,887

1,246,912

2

30,754

-

-

-

30,756

6,600,000

7

174,149

-

-

-

174,156

-

-

14,073

-

-

-

14,073

73,611 13,333

-

954 1,265

-

-

-

954 1,265

-

-

-

-

533 -

Comprehensive loss Balances at December 31, 2006 Exercise of stock options Issuance of common stock in connection with Azimuth common stock purchase agreement Issuance of common stock in connection with follow-on public offering Stock-based compensation, related to stock option grants Issuance of common stock pursuant to employee stock purchase plan Vesting of restricted stock awards Comprehensive loss: Change in unrealized gain (loss) on investments Net loss

(92,091) (23)

(34,167)

Comprehensive loss Balances at December 31, 2007 Exercise of stock options Stock-based compensation, related to stock option grants Tax benefit associated with stock options Issuance of common stock pursuant to employee stock purchase plan Vesting of restricted stock awards Repurchase of restricted stock awards Comprehensive loss: Change in unrealized gain (loss) on investments Net income

533 (34,167) (33,634)

55,324,887 1,145,281

56 1

904,506 25,060

-

-

16,779 112

37,631 72,551 (20,106)

-

-

-

(23) (432)

1,386 3,362 (577)

-

356 -

(472,658) -

432,237 24,629

-

-

-

-

-

-

1,386 3,362 (577)

1,948

(4,676) 1,948

-

Comprehensive loss Balances at December 31, 2008

Total Stockholders’ Equity

(4,676) -

16,779 112

(2,728) 56,560,244

$

57

$950,628

See accompanying notes.

55

$

(455) $

(4,320) $ (470,710) $ 475,200

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ONYX PHARMACEUTICALS, INC. STATEMENTS OF CASH FLOWS Ye ar En de d De ce m be r 31, 2008 2007 2006 (In thou san ds)

Cash flows from operating activities: Net income (loss) Adjustments to reconcile net income (loss) to net cash used in operating activities: Realized gains on sale of marketable securities Depreciation and amortization Forgiveness of note receivable Stock-based compensation Excess tax benefit from share-based awards Changes in operating assets and liabilities: Receivable from collaboration partner Prepaid expenses and other current assets Other assets Accounts payable Payable to collaboration partner Accrued liabilities Accrued clinical trials and related expenses Accrued compensation Deferred rent and lease incentives Net cash provided by (used in) operating activities Cash flows from investing activities: Purchases of marketable securities Sales of marketable securities Maturities of marketable securities Capital expenditures Notes receivable from related parties Net cash provided by (used in) investing activities Cash flows from financing activities: Purchases of treasury stock Advance from (payment to) collaboration partner Net proceeds from issuances of common stock Excess tax benefit from stock-based awards Net cash provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental cash flow data Cash paid during the year for income taxes See accompanying notes.

56

$

1,948

$ (34,167)

$ (92,681)

(483) 1,333 20,506 (112)

1,030 (87) 15,624 -

758 14,406 -

(31,134) (1,383) (4,442) (178) 2,458 2,718 232 92 (8,445)

4,579 (2,710) 144 (26) (8,391) (862) (4,940) 2,461 904 (26,441)

(4,931) 352 (190) (284) (22,432) 1,851 2,696 210 (100,245)

(420,344) 96,839 404,415 (1,550) 79,360

(499,470) 368,996 (2,698) 152 (133,020)

(360,272) 422,488 (619) (228) 61,369

(577) (22,601) 25,650 112 2,584 73,499 161,653 $ 235,152

(766) 227,467 226,701 67,240 94,413 $ 161,653

10,000 77,225 87,225 48,349 46,064 $ 94,413

$

$

$

641

-

-

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ONYX PHARMACEUTICALS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2008 Note 1. Summary of Significant Accounting Policies The Company Onyx Pharmaceuticals, Inc. (“Onyx” or “the Company”) was incorporated in California in February 1992 and reincorporated in Delaware in May 1996. Onyx is a biopharmaceutical company dedicated to developing innovative therapies that target the molecular mechanisms that cause cancer. With the Company’s collaborators, the Company is developing anticancer therapies with the goal of changing the way cancer is treated TM. The Company is applying its expertise to develop and commercialize therapies designed to exploit the genetic differences between cancer cells and normal cells. The Company’s first commercially available product, Nexavar® (sorafenib) tablets, being developed with the Company’s collaborator Bayer HealthCare Pharmaceuticals, Inc., or Bayer, is approved by the United States Food and Drug Administration, or FDA, for the treatment of patients with advanced kidney cancer and liver cancer. The Company has expanded its development pipeline through the acquisition of rights to development-stage, novel anticancer agents. In November 2008, the Company entered into an agreement to license worldwide development and commercialization rights to ONX 0801, previously known as BGC 945, from BTG International Limited, or BTG, a Londonbased specialty pharmaceuticals company. In December 2008, the Company acquired options to license SB1518 (designated by the Company as ONX 0803) and SB1578 (designated by the Company as ONX 0805), which are both Janus Kinase 2, or JAK2, inhibitors, from S*BIO Pte Ltd, or S*BIO, a Singapore-based company. Change in Accounting Principle On December 12, 2007, the Financial Accounting Standards Board, or FASB, ratified Emerging Issues Task Force, 07-1, or EITF 07-1, Accounting for Collaborative Arrangements. EITF 07-1 is effective for fiscal years beginning after December 15, 2008 and shall be applied retrospectively for all collaborative arrangements existing as of the effective date. The Company has elected to early adopt EITF 07-1, as a result, effective January 1, 2006, the Company’s statement of operations for all periods presented have been reclassified to conform to the new presentation. As the commercial sales of Nexavar began in late December 2005, there is no impact to periods prior to January 1, 2006. This new presentation impacts the classification of amounts included in specific line items, but has no impact on net income (loss) or net income (loss) per share. As a result of this new presentation, the statement of operations now includes the line item “Revenue from collaboration agreement.” This line item consists of the Company’s share of the pre-tax commercial profit generated from the collaboration with Bayer, reimbursement of the Company’s shared marketing costs related to Nexavar and royalty revenue. The Company’s portion of shared collaboration research and development expenses is not included in the line item “Revenue from collaboration agreement,” but is reflected under operating expenses. According to the terms of the collaboration agreement, the companies share all research and development, marketing, and non-U.S. sales expenses. The Company and Bayer each bear its own U.S. sales force and medical science liaison expenses. These costs related to the Company’s U.S. sales force and medical science liaisons are recorded in the Company’s selling, general and administrative expenses. Bayer recognizes all revenue under the Nexavar collaboration and incurs the majority of expenses relating to the development and marketing of Nexavar. If the Company does not receive timely and accurate information or incorrectly estimates activity levels associated with the collaboration of Nexavar at a given point in time, the Company could be required to record adjustments in future periods and may be

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required to restate its results for prior periods. The following table illustrates the effect of adopting EITF 07-1 on the Company’s previously reported statements of operations for the years ended December 31, 2007 and 2006.

Revenue: Revenue from collaboration agreement License revenue Net revenue (expense) from unconsolidated joint business Operating expenses: Research and development Selling, general and administrative Loss from operations Investment income, net Net loss Basic net loss per share

2007 As Pre viously Re porte d

Ye ars En de d De ce m be r 31, 2006 2007 As Pre viously As Re vise d Re porte d

2006 As Re vise d

$

$

$

-

90,429 -

$

250

29,274 250

32,536

-

(23,915)

-

$

25,413 60,546 (53,423) 19,256 (34,167)

83,306 60,546 (53,423) 19,256 $ (34,167)

$

30,980 50,019 (104,664) 11,983 (92,681)

84,169 50,019 (104,664) 11,983 $ (92,681)

$

(0.67)

$

$

(2.20)

Shares used in computing basic net loss per share

51,177

(0.67) 51,177

42,170

$

(2.20) 42,170

Revenue Recognition Revenue is recognized when the related costs are incurred and the four basic criteria of revenue recognition are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the nature of the fee charged for products or services delivered and the collectability of those fees. Contract Revenue from Collaborations. Revenue from nonrefundable, up-front license or technology access payments under license and collaboration agreements that are not dependent on any future performance by the Company under the arrangements is recognized when such amounts are received. If the Company has continuing obligations to perform, such fees are recognized over the period of continuing performance obligation. Creditable milestone-based payments that the Company received from its collaboration with Bayer were not recorded as revenue. These amounts are interest-free and are repayable to Bayer from a portion of any of the Company’s quarterly future profits and royalties after deducting certain contractually agreed upon expenditures and were recorded in the caption “Advance from collaboration partner” on the Company’s accompanying balance sheet. Revenue from Collaboration Agreement As a result of the adoption of EITF 07-1, the Company’s statement of operations for all periods presented have been reclassified to conform to the new presentation and now include the line item “Revenue from collaboration agreement.” Revenue from collaboration agreement consists of the Company’s share of the pre-tax commercial profit generated from the collaboration with Bayer, reimbursement of the Company’s shared marketing costs related to Nexavar and royalty revenue. Under the terms of the collaboration, Bayer recognizes all revenue from the sale of Nexavar and both companies share all research and development, marketing, and non-U.S. sales expenses, excluding Japan. Some of the revenue and expenses recorded to derive revenue from collaboration agreement during the period presented are estimates of both parties and are subject to further adjustment based on each party’s final review should actual results differ materially from these estimates. If the Company does not receive timely and accurate information or incorrectly estimates activity levels associated with the collaboration of Nexavar at a given point in time, the Company could be required to record adjustments in future periods and may be required to restate its results for prior periods.

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Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Research and Development In accordance with FASB Statement of Financial Accounting Standards, or FAS, No. 2, “Accounting for Research and Development Costs,” research and development costs are charged to expense when incurred. The major components of research and development costs include clinical manufacturing costs, clinical trial expenses, non-refundable upfront payments, consulting and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials, and allocations of various overhead and occupancy costs. Non-refundable option payments, including those made under our agreement with S*BIO, that do not have any future alternative use are recorded as research and development expense. Not all research and development costs are incurred by the Company. A significant portion of the Company’s research and development expenses, approximately 55% in 2008, 82% in 2007 and 79% in 2006, relates to the Company’s cost sharing arrangement with Bayer and represents the Company’s share of the research and development costs incurred by Bayer. As a result of the cost sharing arrangement between the Company and Bayer, there was a net reimbursable amount of $50.7 million, $57.9 million and $53.2 million to Bayer for the years ended December 31, 2008, 2007 and 2006, respectively. Such amounts were recorded based on invoices and estimates the Company receives from Bayer. When such invoices have not been received, the Company must estimate the amounts owed to Bayer based on discussions with Bayer. If the Company underestimates or overestimates the amounts owed to Bayer, the Company may need to adjust these amounts in a future period, which could have an effect on earnings in the period of adjustment. In instances where the Company enters into agreements with third parties for clinical trials and other consulting activities, costs are expensed upon the earlier of when non-refundable amounts are due or as services are performed. Amounts due under such arrangements may be either fixed fee or fee for service and may include upfront payments, monthly payments, and payments upon the completion of milestones or receipt of deliverables. The Company’s cost accruals for clinical trials are based on estimates of the services received and efforts expended pursuant to contracts with numerous clinical trial sites, cooperative groups and clinical research organizations. In the normal course of business the Company contracts with third parties to perform various clinical trial activities in the ongoing development of potential products. The financial terms of these agreements are subject to negotiation and variation from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events, the successful enrollment of patients, and the completion of portions of the clinical trial or similar conditions. The objective of the Company’s accrual policy is to match the recording of expenses in its financial statements to the actual services received and efforts expended. As such, expense accruals related to clinical trials are recognized based on the Company’s estimate of the degree of completion of the event or events specified in the specific clinical study or trial contract. The Company monitors service provider activities to the extent possible; however, if the Company underestimates activity levels associated with various studies at a given point in time, the Company could be required to record significant additional research and development expenses in future periods. Cash Equivalents and Marketable Securities The Company considers all highly liquid investments with a maturity from the date of purchase of three months or less to be cash equivalents. All other liquid investments are classified as marketable securities. These instruments consist primarily of corporate debt securities, corporate commercial paper, debt securities of United States government agencies, auction rate notes and money market funds. Concentration of risk is limited by diversifying investments among a variety of industries and issuers. Management determines the appropriate classification of securities at the time of purchase. The Company classifies its investments as available-for-sale securities, as defined by SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities, or SFAS No. 115. Available-for-sale securities are carried at fair value based on quoted market prices, with any unrealized gains and losses reported in accumulated other comprehensive income (loss). Unrealized losses are charged against “investment income” when a decline in fair value is determined to be

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other-than-temporary. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include but are not limited to: (i) the extent to which the fair value is less than cost and the cause for the fair value decline, (ii) the financial condition and near-term prospects of the issuer, (iii) the length of time a security is in an unrealized loss position and (iv) the Company’s ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. Available-for-sale securities with remaining maturities of greater than one year are classified as longterm. The amortized cost of securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. The cost of securities sold or the amount reclassified out of accumulated other comprehensive income into earnings is based on the specific identification method. Realized gains and losses and declines in value judged to be other than temporary are included in the statements of operations. There was a realized gain of $483,000 for the year ended December 31, 2008 and no realized gains or losses in each of the years ended December 31, 2007 and 2006. Interest and dividends on securities classified as available-for-sale are included in investment income. Fair Values of Financial Instruments Effective January 1, 2008, the Company adopted the provisions of Statements of Financial Accounting Standards No. 157, Fair Value Measurements, or SFAS No. 157, which defines fair value and provides guidance for using fair value to measure assets and liabilities. In accordance with SFAS No. 157 and FAS Staff Position 157-2, “Effective Date of FASB Statement No. 157,” the Company adopted SFAS No. 157 with regard to all financial assets and liabilities in its financial statements in the first quarter of 2008 and has elected to delay the adoption of SFAS No. 157 for non-financial assets and non-financial liabilities until the first quarter of 2009. SFAS No. 157 is applicable whenever other standards require or permit assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. Accordingly, the carrying amounts of certain financial instruments of the Company, including cash equivalents and marketable securities, continue to be valued at fair value on a recurring basis. SFAS No. 157 introduced new disclosures about how the Company values certain assets. Much of the disclosure focuses on the inputs used to measure fair value, particularly in instances in which the measurement uses significant unobservable inputs. The fair value estimates presented in this report reflect the information available to the Company as of December 31, 2008. See Note 4, “Marketable Securities.” Other Long-Term Assets In December 2008 the Company entered into an options agreement with S*BIO, for which the Company made a $25 million payment to S*BIO, comprised of an up-front payment and an equity investment in ordinary shares of S*BIO. As a result, for the year ended December 31, 2008, other long-term assets included $4.3 million in this long-term private equity investment. This investment is accounted for using the cost method of accounting. Property and Equipment Property and equipment are stated on the basis of cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets, generally two to five years. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful lives of the related assets, generally five to six years. Impairment of Long-Lived Assets In accordance with SFAS No. 144, “Accounting for the Impairment and for Long-Lived Assets,” or SFAS No. 144, impairment of long-lived assets is measured or assessed when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written down to their estimated fair values. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. There were no write-downs in 2008, 2007 and 2006.

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Stock-Based Compensation Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards, or SFAS, “Share-Based Payment,” or SFAS No. 123(R) using the modified prospective transition method, which requires the measurement and recognition of compensation expense for all stock-based payments made to employees and directors including employee stock option awards and employee stock purchases made under the Employee Stock Purchase Plan, or ESPP, based on estimated fair value. The Company previously applied the provisions of Accounting Principles Board Opinion, or APB, “Accounting for Stock Issued to Employees,” or APB No. 25, and related Interpretations and provided the required pro forma disclosures under SFAS 123, “Accounting for Stock-Based Compensation,” or SFAS 123. The net income for the year ended December 31, 2008 includes employee stock-based compensation expense of $18.8 million, or $0.33 per diluted share. The net loss for the years ended December 31, 2007 and 2006 includes employee stock-based compensation expense of $14.1 million, or $0.28 per diluted share, and $14.0 million, or $0.33 per diluted share, respectively. As of December 31, 2008, the total unrecorded stock-based compensation expense for unvested stock options, net of expected forfeitures, was $36.6 million, which is expected to be amortized over a weighted-average period of 2.6 years. All stock option awards to non-employees are accounted for at the fair value of the consideration received or the fair value of the equity instrument issued, as calculated using the Black-Scholes model, in accordance with SFAS 123 and Emerging Issues Task Force Consensus No. 96-18, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” The option arrangements are subject to periodic remeasurement over their vesting terms. The Company recorded compensation expense related to option grants to nonemployees of $1.7 million, $1.5 million and $365,000 for the years ended December 31, 2008, 2007 and 2006, respectively. Net Income (Loss) Per Share Basic and diluted net income (loss) per share is presented in conformance with SFAS No. 128, “Earnings Per Share.” Basic net income (loss) per share has been computed using the weighted-average number of shares of common stock outstanding during each period. Diluted net income (loss) per share has been computed using the weighted-average number of shares of common stock outstanding during each period and other dilutive securities. The following is a reconciliation of the numerators and denominators of basic and diluted net income (loss) per share: Ye ar En de d De ce m be r 31, 2008 2007 2006 (In thou san ds)

Numerator Net income (loss) Denominator Weighted average shares outstanding used to compute basic net income (loss) per share Effect of dilutive stock options, stock awards and warrants Weighted average shares outstanding used to compute diluted net income (loss) per share

$ 1,948

$ (34,167)

$ (92,681)

55,915 850

51,177 -

42,170 -

56,765

51,177

42,170

Diluted net income per share does not include the effect of 1.8 million, 4.6 million and 5.4 million stock-based awards that were outstanding during the year ended December 31, 2008, 2007 and 2006. These stock-based awards were not included in the computation of diluted net income per share because the proceeds received, if any, from such stock-based awards combined with the average unamortized compensation costs were greater than the average market price of our common stock, and, therefore, their effect would have been antidilutive.

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Comprehensive Loss Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) is comprised of unrealized holding gains and losses on the Company’s available-for-sale securities that are excluded from net income (loss) and reported separately in stockholders’ equity. Comprehensive income (loss) and its components are as follows: Ye ar En de d De ce m be r 31, 2008 2007 2006 (In thou san ds)

Net income (loss) Other comprehensive income (loss): Change in unrealized gain (loss) on available-for-sale securities Comprehensive income (loss)

$ 1,948

$ (34,167)

$ (92,681)

(4,676) $ (2,728)

533 $ (33,634)

590 $ (92,091)

The activities in other comprehensive income (loss) are as follows: Ye ar En de d De ce m be r 31, 2008 2007 2006 (In thou san ds)

Increase (decrease) in unrealized gain (loss) on available-for-sale securities Reclassification adjustment for net gains on available-for-sale securities included in net income Change in unrealized gain (loss) on available-for-sale securities

$(5,159) 483 $(4,676)

$

533

$590

$

533

$590

Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash equivalents and marketable securities. The Company invests cash that is not required for immediate operating needs principally in money market funds and corporate securities. As of December 31, 2008, the Company’s investment portfolio included $45.0 million of AAA rated securities with an auction reset feature (“auction rate securities”) collateralized by student loans. Since February 2008, securities of this type have experienced failures in the auction process. As a result of the auction failures, interest rates on these securities reset at penalty rates linked to Libor or Treasury bill rates. The penalty rates are generally higher than interest rates set at auction. Based on the overall failure rate of these auctions, the frequency of the failures, the underlying maturities of the securities, and the Company’s belief that the market for these student loan collateralized instruments may take in excess of twelve months to fully recover, the Company has classified $39.6 million of these auction rate securities as non-current marketable securities on the accompanying balance sheet. The Company has reduced the carrying value of these marketable securities by $5.4 million through accumulated other comprehensive income or loss instead of earnings, which the Company believes reflects a temporary decline in fair value of these securities. Further adverse developments in the credit market could result in an impairment charge through earnings in the future. Income Taxes The Company uses the asset and liability method to account for income taxes as required by FAS No. 109, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In July 2006, the FASB issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109,” or FIN 48, which clarifies the criteria that must be met prior to

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recognition of the financial statement benefit of a position taken in a tax return. FIN 48 provides a benefit recognition model with a two-step approach consisting of a “more-likely-than-not” recognition criteria, and a measurement attribute that measures a given tax position as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. FIN 48 also requires the recognition of liabilities created by differences between tax positions taken in a tax return and amounts recognized in the financial statements. FIN 48 is effective as of the beginning of the first annual period beginning after December 15, 2006, and became effective for the Company on January 1, 2007. The adoption of FIN 48 had no impact on the Company’s financial condition, results of operations, or cash flows for the year ended December 31, 2008, as the Company has no unrecognized tax benefits. Segment Reporting The Company operates in only one segment — the discovery and development of novel cancer therapies. Note 2. Agreements with Other Companies Bayer Pharmaceuticals Corporation Effective February 1994, the Company established a 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, the Company concluded collaborative research under this agreement in 1999, and based on this research, a product development candidate, Nexavar, was identified. Bayer paid all the costs of research and preclinical development of Nexavar until the Investigational New Drug application, or IND, was filed in May 2000. Under the Company’s collaboration agreement with Bayer, the Company is currently funding 50% of mutually agreed development costs worldwide, excluding Japan. Bayer is funding 100% of development costs in Japan and pays the Company a royalty on sales in Japan. 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 the Company does not continue to bear 50% of product development costs, Bayer would retain exclusive, worldwide rights to this product candidate and would pay royalties to the Company based on net sales. In March 2006, the Company and Bayer entered into a co-promotion agreement to co-promote Nexavar in the United States. This agreement amends and generally supersedes those provisions of the collaboration agreement that relate to the copromotion of Nexavar in the United States. Outside of the United States, the terms of the collaboration agreement continue to govern. Under the terms of the co-promotion agreement and consistent with the collaboration agreement, the Company and Bayer share equally in the profits or losses of Nexavar, if any, in the United States. If for any reason the Company does not continue to co-promote in the United States, but continue to co-fund development worldwide (excluding Japan), Bayer would first receive a portion of the product revenues to repay Bayer for its commercialization infrastructure, before determining the Company’s share of profits and losses in the United States. Warner-Lambert Company In May 1995, the Company entered into a research and development collaboration agreement with Warner-Lambert, now a subsidiary of Pfizer, Inc., 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, the Company 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. The Company is entitled to receive payments upon achievement of certain clinical development milestones and upon registration of any resulting products, and is entitled to receive royalties on worldwide sales of the products. Warner-Lambert has identified a small molecule lead compound, PD 332991, an inhibitor of cyclin-dependent

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kinase 4, and began clinical testing with this drug candidate in 2004. To date the Company has received one $500,000 milestone payment from Warner-Lambert. BTG In November 2008, the Company licensed a novel targeted oncology compound, ONX 0801, from BTG. Under the terms of the agreement, the Company obtained a worldwide license for ONX 0801 and all of its related patents. The Company received exclusive worldwide marketing rights and is responsible for all product development and commercialization activities. The Company paid BTG a $13 million upfront payment and may be required to make payments of up to $72 million upon the attainment of certain global development and regulatory milestones, plus additional milestone payments upon the achievement of certain marketing approvals and commercial milestones. The Company will also pay royalties to BTG on any future product sales. S*BIO In December 2008, the Company entered into a development collaboration, option and license agreement with S*BIO pursuant to which the Company acquired options to license rights to each of ONX 0803 and ONX 0805. Under the terms of the agreement, the Company has obtained options, which if the Company exercises, would give it rights to exclusively develop and commercialize ONX 0803 and ONX 0805 for all potential indications in the United States, Canada and Europe. S*BIO will retain responsibility for all development costs prior to the option exercise, after which the Company will assume development costs for the U.S., Canada, and Europe subject to S*BIO’s option to fund a portion of the development costs in return for enhanced royalties on any future product sales. Upon the exercise of the Company’s option of either compound, S*BIO is entitled to receive a one-time fee, milestones upon achievement of certain development and sales levels and royalties on future product sales. Under the terms of the agreement, in December 2008 the Company made a $25 million payment to S*BIO, including an up-front payment and an equity investment. Note 3. Revenue from Collaboration Agreement Nexavar is currently marketed and sold primarily in the United States and the European Union for the treatment of advanced kidney cancer and liver cancer. Nexavar also has regulatory applications pending in other territories internationally. The Company co-promotes Nexavar in the United States with Bayer Healthcare Pharmaceuticals Corporation Inc., or Bayer, under collaboration and co-promotion agreements. In March 2006, the Company and Bayer entered into a co-promotion agreement to co-promote Nexavar in the United States. This agreement amends the collaboration agreement and supersedes the provisions of that agreement that relate to the co-promotion of Nexavar in the United States. Outside of the United States, the terms of the collaboration agreement continue to govern. Under the terms of the co-promotion agreement and consistent with the collaboration agreement, the Company and Bayer share equally in the profits or losses of Nexavar, if any, in the United States, subject only to the Company’s continued co-funding of the development costs of Nexavar worldwide outside of Japan and the Company’s continued co-promotion of Nexavar in the United States. The collaboration was created through a contractual arrangement, not through a joint venture or other legal entity. Outside of the United States, excluding Japan, Bayer incurs all of the sales and marketing expenditures, and the Company reimburses Bayer for half of those expenditures. In addition, for sales generated outside of the United States, excluding Japan, the Company reimburses Bayer a fixed percentage of sales for their marketing infrastructure. Research and development expenditures on a worldwide basis, excluding Japan, are equally shared by both companies regardless of whether the Company or Bayer incurs the expense. In Japan, Bayer is responsible for all development and marketing costs, and the Company receives a royalty on net sales of Nexavar. In the United States, Bayer provides all product distribution and all marketing support services for Nexavar, including managed care, customer service, order entry and billing. Bayer is compensated for distribution expenses based on a fixed percent of gross sales of Nexavar in the United States. Bayer is reimbursed for half of its expenses for marketing services provided by Bayer for the sale of Nexavar in the United States. The companies share equally in any other out-of-pocket marketing expenses (other than expenses for sales force and medical science liaisons) that the Company and Bayer incur in connection with the marketing and promotion of Nexavar in the United States.

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Bayer manufactures all Nexavar sold in the United States and is reimbursed at an agreed transfer price per unit for the cost of goods sold. In the United States, the Company contributes half of the overall number of sales force personnel required to market and promote Nexavar and half of the medical science liaisons to support Nexavar. The Company and Bayer each bears its own sales force and medical science liaison expenses. These expenses are not included in the calculation of the profits or losses of the collaboration. Revenue from collaboration agreement consists of the Company’s share of the pre-tax commercial profit generated from its collaboration with Bayer, reimbursement of the Company’s shared marketing costs related to Nexavar and royalty revenue. Under the collaboration, Bayer recognizes all sales of Nexavar worldwide. The Company records revenue from collaboration agreement on a quarterly basis. Revenue from collaboration agreement is derived by calculating net sales of Nexavar to third-party customers and deducting the cost of goods sold, distribution costs, marketing costs (including without limitation, advertising and education expenses, selling and promotion expenses, marketing personnel expenses, and Bayer marketing services expenses), Phase 4 clinical trial costs and allocable overhead costs. Reimbursement by Bayer of the Company’s shared marketing costs related to Nexavar and royalty revenue are also included in the revenue from collaboration agreement line item. The Company’s portion of shared collaboration research and development expenses is not included in this line item, but is reflected under operating expenses. According to the terms of the collaboration agreement, the companies share all research and development, marketing and non-US sales expenses. United States sales force and medical science liaison expenditures incurred by both companies are borne by each company separately and are not included in the calculation. Some of the revenue and expenses recorded to derive the revenue from collaboration agreement during the period presented are estimates of both parties and are subject to further adjustment based on each party’s final review should actual results differ from these estimates. Revenue from collaboration agreement was $194.3 million, $90.4 million and $29.3 million for the years ended December 31, 2008, 2007 and 2006, respectively, calculated as follows: Ye ar En de d De ce m be r 31, 2008 2007 2006 (in thou san ds)

Onyx’s share of collaboration commercial profit Reimbursement of Onyx’s shared marketing expenses Royalty income Revenue from collaboration agreement

$169,334 22,185 2,824 $194,343

$74,027 16,402 $90,429

$20,995 8,279 $29,274

As of December 31, 2008, 2007 and 2006, the Company has invested $392.1 million, $302.3 million and $219.0 million, respectively, in the development of Nexavar, representing its share of the costs incurred to date under the collaboration. Note 4. Marketable Securities Investments that are subject to concentration of credit risk are marketable securities. To mitigate this risk, the Company invests in marketable debt securities, primarily United States government securities, agency bonds and corporate bonds and notes, with investment grade ratings. The Company limits the amount of investment exposure as to institution, maturity, and investment type. The weighted average maturity of the Company’s marketable securities as of December 31, 2008 was four months. There was a realized gain of $483,000 for the year ended December 31, 2008 and no realized gains or losses in each of the years ended December 31, 2007 and 2006.

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Available-for-sale marketable securities consisted of the following at December 31: Adjuste d C ost

Agency bond investments: Current Total agency bond investments Corporate debt investments: Current Non-current Total corporate investments Total available-for-sale marketable securities

$132,319 132,319 49,903 45,000 94,903 $227,222

Adjuste d C ost

Agency bond investments: Current Total agency bond investments Corporate debt investments: Current Total corporate investments Total available-for-sale marketable securities

$143,896 143,896 163,745 163,745 $307,641

2008 Un re aliz e d Un re aliz e d Gain s Losse s (In thou san ds)

$

$

1,054 1,054 1,054

$

$

(4) (4)

$ 133,369 133,369

(5,378) (5,378) (5,382)

49,903 39,622 89,525 $ 222,894

2007 Un re aliz e d Un re aliz e d Gain s Losse s (In thou san ds)

$

$

354 354 16 16 370

Estim ate d Fair Value

$

$

Estim ate d Fair Value

(13) (13)

$ 144,237 144,237

(1) (1) (14)

163,760 163,760 $ 307,997

As of December 31, 2008, the Company’s fair value hierarchies for its financial assets, which require fair value measurement on a recurring basis under SFAS 157, are as follows: Le ve l 1

Money market funds Commercial paper Auction rate securities U.S. government agencies U.S. treasury bills Total

$113,832 49,993 $163,825

Le ve l 2 Le ve l 3 (In thou san ds)

$

109,866 143,376 $253,242

$

39,622 $39,622

Total

$113,832 109,866 39,622 143,376 49,993 $456,689

Level 3 assets consist of securities with an auction reset feature (“auction rate securities”), which are classified as available for sale securities and reflected at fair value. In February 2008, auctions began to fail for these securities and each auction for the majority of these securities since then has failed. As of December 31, 2008 the fair values of

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these securities are estimated utilizing a discounted cash flow analysis. The following table provides a summary of changes in fair value of the Company’s Level 3 financial assets as of December 31, 2008: Au ction Rate S e cu ritie s (In thou san ds)

Balance at December 31, 2007 Unrealized loss: In other comprehensive income In earnings Purchases, issuances, settlements Balance at December 31, 2008

$

50,000

$

(5,378) (5,000) 39,622

As a result of the decline in fair value of the Company’s auction rate securities, which the Company believes is temporary and attributes to liquidity rather than credit issues, the Company has recorded an unrealized loss of $5.4 million included in the accumulated other comprehensive income (loss) line of stockholders’ equity. All of the auction rate securities held by the Company at December 31, 2008, consist of securities collateralized by student loan portfolios, which are substantially guaranteed by the United States government. Any future fluctuation in fair value related to the non-current marketable securities that the Company deems to be temporary, including any recoveries of previous write-downs, will be recorded in accumulated other comprehensive income (loss). If the Company determines that any decline in fair value is other than temporary, it will record a charge to earnings as appropriate. The contractual terms of the Company’s investments in United States government investments, agency bond investments and corporate debt instruments, do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. It is the Company’s intention and within its ability to hold its marketable securities in an unrealized loss position for a period of time sufficient to allow for an anticipated recovery of fair value up to (or greater than) the cost of the securities, and, therefore, the impairments noted are not other-than-temporary. Note 5. Property and Equipment Property and equipment consist of the following: De ce m be r 31, 2008 2007 (In thou san ds)

Computers, machinery and equipment Furniture and fixtures Leasehold improvements Construction in progress

$ 4,352 620 1,934 816 7,722 (4,359) $ 3,363

Less accumulated depreciation and amortization

$ 3,684 620 1,868 6,172 (3,026) $ 3,146

Depreciation expense was $1.3 million, $1.0 million and $758,000 for the years ended December 31, 2008, 2007 and 2006, respectively. Note 6. Other Long-Term Assets In December 2008 the Company entered into a development collaboration, option and license agreement with S*BIO. Under the terms of the agreement, in December 2008, the Company made a $25 million payment to S*BIO, of which the Company recognized an up-front payment of $20.7 million and an equity investment of $4.3 million. As a result, for the year ended December 31, 2008, other long-term assets included $4.3 million in this long-term private equity investment. The equity investment is accounted for using the cost method of accounting. Under FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” issued in

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January 2003, or FIN 46(R), S*BIO qualifies as a variable interest entity, or VIE, but as the Company is not its primary beneficiary, consolidation is not required. Note 7. Advance from Collaboration Partner In January 2006, the Company received the fourth and final development payment from Bayer for $10.0 million under its collaboration agreement in connection with the approval of Nexavar by the Federal Drug Administration (FDA). In July 2005, the Company received a $10.0 million development payment from Bayer as a result of the NDA filing for Nexavar. In December 2003, the Company received a $15.0 million development payment from Bayer for the initiation of Phase 3 clinical trials of Nexavar. In August 2002, the Company received a $5.0 million development payment from Bayer for the initiation of Phase 2 clinical trials of Nexavar. Pursuant to its collaboration agreement, these amounts are repayable to Bayer from a portion of the Company’s share of any quarterly collaboration profits and royalties after deducting certain contractually agreed upon expenditures. These development payments contain no provision for interest. As of December 31, 2008, the Company had repaid $23.4 million to Bayer. The remaining balances as of December 31, 2008 and 2007 of $16.6 million and $39.2 million, respectively, are included in the caption “Advance from collaboration partner” in the accompanying balance sheets. Note 8. Facility Leases In 2004, the Company entered into an operating lease for 23,000 square feet of office space in Emeryville, California, which serves as the Company’s corporate headquarters. In 2006, the Company amended its existing operating lease to occupy an additional 14,000 square feet of office space in addition to the 23,000 square feet already occupied in Emeryville, California. The lease expires on March 31, 2013. In 2008, the Company entered into another operating lease for an additional 23,000 square feet of office space in Emeryville, California. This lease expires on November 30, 2013. The lease provides for fixed increases in minimum annual rental payments, as well as rent free periods. The total amount of rental payments due over the lease term is being charged to rent expense on the straight-line method over the term of the lease. The difference between rent expense recorded and the amount paid is credited or charged to “deferred rent and lease incentives,” which is included in the accompanying balance sheets. The Company also has a lease for 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. In September 2002, the Company entered into a sublease agreement for this space through September 2010. Minimum annual rental commitments, net of sublease income, under all operating leases at December 31, 2008 are as follows (in thousands): Year ending December 31: 2009 2010 2011 2012 2013

1,819 1,957 1,967 2,002 1,024 $8,769

Rent expense, net of sublease income and restructuring, for the years ended December 31, 2008, 2007 and 2006 was approximately $1.0 million, $1.1 million and $587,000, respectively. Sublease income was $72,000, $88,000 and $62,000 for the years ended December 31, 2008, 2007 and 2006, respectively. Note 9. Related Party Transactions At December 31, 2008, the Company had a loan with an employee of which $170,000 is outstanding. This loan bears interest at 2.85% per annum and is payable in five annual payments beginning in 2009. The Company had a

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loan with a former employee of which approximately $228,000 was outstanding at December 31, 2006. This loan bore interest at 4.82% per annum. In 2007, $87,000 of principal and interest was forgiven and the remaining loan balance of $152,000 was repaid in October 2007 in accordance with the terms of the loan agreement. Note 10. 401(k) Plan The Company has a 401(k) Plan that covers substantially all of its employees. Under the 401(k) Plan, eligible employees may contribute up to $15,500 of their eligible compensation, subject to certain Internal Revenue Service restrictions. Historically, the Company did not match employee contributions in the 401(k) Plan. Beginning in fiscal year 2008, Onyx provided a discretionary company match to employee contributions of $0.50 per dollar contributed, up to a maximum match of $3,500 in any calendar year. In 2008, the Company incurred a total expense of $548,000 related to 401(k) contribution matching. Note 11. Stockholders’ Equity Stock Options and Employee Stock Purchase Plan The Company has one stock option plan from which it is able to grant new awards, the 2005 Equity Incentive Plan, or the “2005 Plan”. Prior to adoption of the 2005 Plan, the Company had two stock option plans, the 1996 Equity Incentive Plan and the 1996 Non-Employee Directors’ Stock Option Plan. Following is a brief description of the prior plans: 1) The 1996 Equity Incentive Plan, or the “1996 Plan”, which amended and restated the 1992 Incentive Stock Plan in March 1996. The Company’s Board of Directors reserved 1,725,000 shares of common stock for issuance under the 1996 Plan. At the Company’s annual meetings of stockholders in subsequent years, stockholders approved reserving an additional 4,100,000 shares of common stock for issuance under the 1996 Plan. The 1996 Plan provides for grants to employees of either nonqualified or incentive options and provides for the grant to consultants of the Company of nonqualified options. 2) The 1996 Non-Employee Directors’ Stock Option Plan, or the “Directors’ Plan,” which was approved in March 1996 and reserved 175,000 shares for issuance to provide for the automatic grant of nonqualified options to purchase shares of common stock to non-employee Directors of the Company. At the Company’s annual meetings of stockholders in subsequent years, stockholders approved reserving an additional 250,000 shares of common stock for issuance under the Directors’ Plan. The 2005 Plan was approved at the Company’s annual meeting of stockholders to supersede and replace both the 1996 Plan and the Directors’ Plan and reserved 7,560,045 shares of common stock for issuance under the Plan, consisting of (a) the number of shares remaining available for grant under the Incentive Plan and the Directors’ Plan, including shares subject to outstanding stock awards under those plans, and (b) an additional 3,990,000 shares. Any shares subject to outstanding stock awards under the 1996 Plan and the Directors’ Plan that expire or terminate for any reason prior to exercise or settlement are added to the share reserve under the 2005 Plan. All outstanding stock awards granted under the two prior plans remain subject to the terms of those plans. Subsequently, at annual meetings of stockholders, a total of 4,700,000 shares were approved to be added to the 2005 Plan reserve for a total of 12,260,045 shares available for issuance. In March 1996, the Board of Directors adopted the Employee Stock Purchase Plan (ESPP). The number of shares available for issuance over the term of the ESPP was limited to 400,000 shares. At the May 2007 Annual Meeting of Stockholders an additional 500,000 shares were added to the ESPP for a total of 900,000 shares available for issuance over the term of the ESPP. The ESPP is designed to allow eligible employees of the Company to purchase shares of common stock through periodic payroll deductions. The price of common stock purchased under the ESPP will be equal to 85% of the lower of the fair market value of the common stock on the commencement date of each offering period or the specified purchase date. Purchases of common stock shares made under the ESPP were 37,631 shares in 2008, 73,611 shares in 2007 and 22,584 shares in 2006. Since inception, a total of 420,238 shares have been issued under the ESPP, leaving a total of 479,762 shares available for issuance.

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In December 2008, stock options were exercised that were not settled prior to December 31, 2008. The Company recorded a receivable from stock option exercises of $455,000 at December 31, 2008 related to these stock options. This is included in the caption “Receivable from stock option exercises” in the accompanying balance sheet and Statement of Stockholders’ Equity as of December 31, 2008. The Company recorded a receivable from stock option exercises of $23,000 at December 31, 2007, related to stock options exercised that had not settled prior to December 31, 2007. Preferred Stock The Company’s amended and restated certificate of incorporation provides that the Company’s Board of Directors has the authority, without further action by the stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, without further vote or action by the stockholders. As of December 31, 2008, the Company had 5,000,000 shares of preferred stock authorized at $0.001 par value, and no shares were issued or outstanding. Warrants A total of 743,229 warrants for the purchase of common stock were issued in connection with a private placement financing in May 2002. The exercise price of these warrants is $9.59 per share. The $4.4 million fair value of the warrants was estimated on the date of grant using the Black-Scholes option valuation model with the following assumptions: a weighted-average risk-free interest rate of 4.29%, a contractual life of seven years, a volatility of 0.94 and no dividend yield, and accounted for as a stock issuance cost. Any of the outstanding warrants may be exercised by applying the value of a portion of the warrant, which is equal to the number of shares issuable under the warrant being exercised multiplied by the fair market value of the security receivable upon the exercise of the warrant, less the per share price, in lieu of payment of the exercise price per share. In 2004, the Company issued 553,835 shares of the Company’s common stock upon the exercise of 703,689 warrants, on both a cash and net exercise basis. The Company received approximately $355,000 in net cash proceeds from the exercise of warrants in 2004. In 2005, the Company issued 29,550 shares of the Company’s common stock upon the exercise of 30,277 warrants, on both a cash and net exercise basis. The Company received approximately $266,000 in net cash proceeds from the exercise of warrants in 2005. There were no warrants issued or exercised in 2006, 2007 and 2008. As of December 31, 2008 there are outstanding warrants to purchase an aggregate of 9,263 shares of the Company’s common stock, which will expire in May 2009, unless earlier exercised. The Company has reserved 9,263 common shares for future issuance for these warrants. Note 12. Stock-Based Compensation Effective January 1, 2006, the Company adopted SFAS No. 123(R), which requires the measurement and recognition of compensation expense for all stock-based payments made to employees and directors including employee stock option awards and employee stock purchases made under the ESPP based on estimated fair value. The Company previously applied the provisions of Accounting Principles Board Opinion, or APB, “Accounting for Stock Issued to Employees,” or APB No. 25 and related Interpretations and provided the required pro forma disclosures under SFAS 123, “Accounting for Stock-Based Compensation”, or SFAS 123. All stock option awards to non-employees are accounted for at the fair value of the consideration received or the fair value of the equity instrument issued, as calculated using the Black-Scholes model, in accordance with SFAS 123(R) and Emerging Issues Task Force Consensus No. 96-18, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” The option arrangements are subject to periodic remeasurement over their vesting terms.

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Impact of the Adoption of FAS 123(R) The Company adopted SFAS 123(R) using the modified prospective transition method beginning January 1, 2006. Employee stock-based compensation for the years ended December 31, 2008, 2007 and 2006, were as follows: Ye ar En de d De ce m be r 31, 2008 2007 2006 (In thou san ds e xce pt pe r sh are data)

Research and development Selling, general and administrative Total share-based compensation expense

$ 3,166 15,630 $18,796

$ 2,897 11,230 $14,127

$ 2,545 11,496 $14,041

Impact on basic net loss per share

$ 0.34

$ (0.28)

$ (0.33)

Impact on diluted net loss per share

$ 0.33

$ (0.28)

$ (0.33)

All stock option awards to non-employees are accounted for at the fair value of the consideration received or the fair value of the equity instrument issued, as calculated using the Black-Scholes model, in accordance with SFAS 123 and Emerging Issues Task Force Consensus No. 96-18, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” The option arrangements are subject to periodic remeasurement over their vesting terms. The Company recorded compensation expense related to option grants to nonemployees of $1.7 million, $1.5 million and $365,000 for the years ended December 31, 2008, 2007 and 2006, respectively. As of December 31, 2008, the total unrecorded stock-based compensation expense for unvested stock options shares, net of expected forfeitures, was $36.6 million, which is expected to be amortized over a weighted-average period of 2.6 years. As of December 31, 2008, the total unrecorded stock-based compensation expense for unvested stock bonus awards, net of expected forfeitures, was $6.1 million, which is expected to be amortized over a weighted-average period of 1.9 years. Cash received during the year ended December 31, 2008, for stock options exercised under all stock-based compensation arrangements was $25.7 million. For the years ended December 31, 2008, 2007 and 2006, the total fair value of stock bonus awards vested was $1.8 million, $281,000 and $140,000, respectively, based on a weighted average grant date fair value of $24.89 for the year ended December 31, 2008 and $21.04 for the years ended December 31, 2007 and 2006.

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Valuation Assumptions As of December 31, 2008, 2007 and 2006, the fair value of stock-based awards for employee stock option awards, stock bonus awards and employee stock purchases made under the ESPP was estimated using the Black-Scholes option pricing model. The following weighted average assumptions were used: 2008

Stock Option Plans: Risk-free interest rate Expected life Expected volatility Expected dividends Weighted average option fair value Stock bonus awards: Expected life Expected dividends Weighted average fair value per share ESPP: Risk-free interest rate Expected life Expected volatility Expected dividends Weighted average fair value per share

Ye ar En de d De ce m be r 31, 2007 2006

2.86% 4.4 years 64% None $17.32

4.66% 4.3 years 64% None $15.41

4.68% 4.2 years 59% None $11.00

3 years None $30.80

3 years None $24.84

3 years None $21.04

2.69% 6 months 59% None $13.56

5.11% 6 months 57% None $3.78

4.33% 6 months 59% None $8.65

The Black-Scholes fair value model requires the use of highly subjective and complex assumptions, including the option’s expected life and the price volatility of the underlying stock. Beginning January 1, 2006, the expected stock price volatility assumption was determined using a combination of historical and implied volatility for our stock. Prior to the adoption of FAS 123(R), we used the historical volatility in deriving our expected volatility assumption. We have determined that the combined method of determining volatility is more reflective of market conditions and a better indicator of expected volatility than historical volatility. We consider several factors in estimating the expected life of our options granted, including the expected lives used by a peer group of companies and the historical option exercise behavior of our employees, which we believe are representative of future behavior.

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Stock-Based Payment Award Activity The following table summarizes stock option and award activity under all option plans for the years ended December 31, 2008, 2007 and 2006:

Employee stock options: Balance at December 31, 2005 Granted Exercised Expired Forfeited Balance at December 31, 2006 Shares authorized Granted Exercised Expired Forfeited Balance at December 31, 2007 Shares authorized Granted Exercised Expired Forfeited Balance at December 31, 2008

Shares Available for Grant

Number of Shares Outstanding

3,610,461 (1,987,950) 19,058 93,209 1,734,778 1,600,000 (1,167,701) 156,458 430,153 2,753,688 3,100,000 (1,624,036) 13,642 336,345 4,579,639

3,806,081 1,987,950 (347,287) (19,058) (93,209) 5,334,477 1,167,701 (1,477,661) (156,458) (430,153) 4,437,906 1,624,036 (1,145,281) (13,642) (336,345) 4,566,674

Stock bonus awards:

Shares

Balance at December 31, 2005 Granted Vested Cancelled Balance at December 31, 2006

40,000 (6,667) 33,333

Granted Vested Cancelled Balance at December 31, 2007 Granted Vested Cancelled Balance at December 31, 2008

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Weighted Average Grant Date Fair Value

$

21.04 21.04 21.04

166,747 (13,333) (6,724) 180,023

$ $ $ $

24.84 21.04 24.84 24.42

223,015 (72,551) (34,645) 295,842

$ $ $ $

30.72 24.89 26.51 28.81

$ $

Weighted Average Exercise Price $ 21.17 $ 21.60 $ 7.26 $ 37.83 $ 28.73 $ 22.05 $ 28.55 $ 14.83 $ 25.88 $ 33.47 $ 25.39 $ 32.81 $ 21.90 $ 35.71 $ 26.88 $ 28.76

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The options outstanding and exercisable for stock-based payment awards as of December 31, 2008 were in the following exercise price ranges:

Ran ge of Exe rcise Price s

$4.20 - $24.15 $24.36 - $28.62 $28.75 - $29.70 $30.00 - $41.55 $41.68 - $56.21 Total

O ptions O u tstan ding W e ighte d Ave rage C on tractu al Life Nu m be r Re m aining O u tstan ding ( In ye ars)

942,170 1,355,034 926,234 913,212 430,024 4,566,674

7.0 7.1 9.1 7.5 8.3 7.7

W e ighte d Ave rage Exe rcise Price

$ $ $ $ $ $

17.11 26.69 29.04 35.28 46.34 28.76

O ptions Exe rcisable W e ighte d Ave rage Nu m be r Exe rcise Exe rcisable Price

501,135 706,262 121,567 467,680 160,070 1,956,714

$ $ $ $ $ $

17.51 27.00 29.05 35.91 43.79 28.20

As of December 31, 2007, 1,883,043 outstanding options were exercisable, at a weighted average price of $25.96. As of December 31, 2006, 2,276,129 outstanding options were exercisable, at a weighted average price of $20.37. As of December 31, 2008, weighted average contractual life remaining for exercisable shares is 6.4 years. The total number of in-the-money options exercisable as of December 31, 2008 was 1,956,714 shares. The aggregate intrinsic values of options exercised were $18.9 million and $27.9 million for the years ended December 31, 2008 and 2007, respectively. The aggregate intrinsic values of in-the-money outstanding and exercisable options were $31.8 million and $14.4 million, respectively as of December 31, 2008. The aggregate intrinsic value of options represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $34.16 at December 31, 2008, which would have been received by option holders had all option holders exercised their options that were in-the-money as of that date. Note 13. Income Taxes For the year ended December 31, 2008, the Company recorded a provision for income taxes of $347,000 related to income from continuing operations. The components of the provision for income tax expense as of December 31, 2008 are as follows: Ye ar En de d De ce m be r 31, 2008 2007 2006

Current: Federal State Total current Deferred: Federal State Total deferred

$226 121 $347

-

-

-

-

-

Based on the Company’s ability to fully offset current taxable income by its net operating loss carryforwards, the Company’s tax expense in 2008 is principally related to U.S. alternative minimum tax and state taxes. There is no provision (benefit) for federal or state income taxes for the years ended December 31, 2007 and 2006 because the Company incurred operating losses and established a valuation allowance equal to the net deferred tax assets.

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A reconciliation between the Company’s effective tax rate and the U.S. statutory tax rate for the year ended December 31, 2008, 2007 and 2006 is as follows: Ye ar En de d De ce m be r 31, 2008 2007 2006

Federal income tax at statutory rate State income tax, net of federal benefit Federal minimum tax Stock compensation expense Research credits expense add-back Non-deductible meals and entertainment expense Other non-deductible expenses Change in valuation allowance Income tax expense

34% 3% 10% 55% 51% 17% 6% (161)% 15%

(34)% 0% 0% 3% 12% 1% 0% 18% 0%

(34)% 0% 0% 2% 2% 0% 0% 30% 0%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2008 and 2007 are as follows: De ce m be r 31, 2008 2007 (In thou san ds)

Deferred Tax Assets: Net operating loss carryforwards Tax credit carryforwards Capitalized research and development Deferred revenue Stock options Intangible assets Other long-term assets Other Total deferred tax assets Valuation allowance Net deferred tax assets

$ 144,267 42,388 767 3,841 7,763 10,060 2,811 1,246 213,143 (213,143) $ -

$ 154,928 39,158 2,415 15,628 6,511 72 1,263 219,975 (219,975) $ -

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and the amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance decreased by $6.8 million in 2008 and increased by $12.8 million and $43.9 million in 2007 and 2006, respectively. At December 31, 2008, the Company has net operating loss carryforwards for federal and state income tax purposes of approximately $407.8 million and $314.3 million, respectively. These net operating losses can be utilized to reduce future taxable income, if any. Approximately $28.8 million of the federal and $27.2 million of the state valuation allowance for deferred tax assets related to net operating loss carryforwards represents the stock option deduction arising from activity under the Company’s stock option plan, the benefit of which will increase additional paid in capital when realized. The federal net operating loss carryforwards expire beginning in 2010 through 2027, and the state net operating loss carryforwards begin to expire in 2014 through 2029 and may be subject to certain limitations. As of December 31, 2008, the Company has research and development credit and orphan drug credit carryforwards of approximately $37.9 million for federal income

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tax purposes that expire beginning in 2009 through 2028 and $4.0 million for California income tax purposes, which do not expire. Utilization of the net operating loss and tax credit carryforwards may be subject to substantial annual limitations due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations may result in the expiration of net operating loss and tax credit carryforwards before utilization. The Company continues to fully reserve its net operating loss carryforwards and other deferred tax assets despite achieving full-year profitability in 2008 and its expectation for continued future profitability, since, up until 2008, the Company has had a history of annual losses since inception. On a quarterly basis, the Company reassesses its valuation allowance for deferred income taxes. The Company will consider reducing the valuation reserve upon assessment of certain factors, including: (i) a demonstration of sustained profitability; (ii) the support of internal financial forecasts demonstrating the utilization of the net operating losses prior to their expiration; and (iii) the Company’s reassessment of tax benefits recognition under FIN 48. If the Company determines that the reversal of a portion or all of the valuation reserve is appropriate, the benefit would be recognized as a reduction of the Company’s tax provision in the period of the reversal. The Company adopted the provisions of Financial Accounting Standards, or FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109,” or FIN 48, on January 1, 2007. As of December 31, 2008 and 2007, the Company has no unrecognized income tax benefits. The Company is in process of completing an analysis of its tax credit carryforwards. Any uncertain tax positions identified in the course of this analysis will not impact its financial statements due to the full valuation allowance. The Company’s policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such items as tax expense. No interest or penalties have been recorded during the years ended December 31, 2008, 2007 and 2006. The tax years from 1993 and forward remain open to examination by federal and California authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities. Note 14. Guarantees, Indemnifications and Contingencies Guarantees and Indemnifications The Company has entered into indemnity agreements with certain of its officers and directors, which provide for indemnification to the fullest extent authorized and permitted by Delaware law and the Company’s Bylaws. The agreements also provide that the Company will indemnify, subject to certain limitations, the officer or director for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings to which he or she is or may be a party to because such person is or was a director, officer or other agent of the Company. The term of the indemnification is for so long as the officer or director is subject to any possible claim, or threatened, pending or completed action or proceeding, by reason of the fact that such officer or director was serving the Company as a director, officer or other agent. The rights conferred on the officer or director shall continue after such person has ceased to be an officer or director as provided in the indemnity agreement. The maximum amount of potential future indemnification is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and may enable it to recover a portion of any future amounts paid under the indemnity agreements. The Company has not recorded any amounts as liabilities as of December 31, 2008 as the value of the indemnification obligations, if any, is not estimable. Contingencies From time to time, the Company may become involved in claims and other legal matters arising in the ordinary course of business. Management is not currently aware of any matters that could have a material adverse affect on the financial position, results of operations or cash flows of the Company.

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Note 15. Quarterly Financial Data (Unaudited) The following table presents unaudited quarterly financial data of the Company. The Company’s quarterly results of operations for these periods are not necessarily indicative of future results of operations. As of December 31, 2008, the Company adopted EITF 07-1. As a result, effective January 1, 2006, the Company’s statement of operations for all periods presented have been reclassified to conform to the new presentation. This new presentation impacts the classification of amounts included in specific line items, but has no impact on net income (loss) or net income (loss) per share. See Note 1 of the accompanying footnotes to the financial statements for more information on the effect of the adoption of EITF 07-01 for all periods presented. 2008 Q u arte r En de d De ce m be r 31 S e pte m be r 30 Ju n e 30 March 31 (In thou san ds, e xce pt pe r sh are data)

Revenue: Revenue from collaboration agreement Operating expenses: Research and development expenses Selling, general and administrative expenses Net operating profit (loss) Investment income, net Provision (benefit) for income taxes Net income (loss)

$

50,766

$ 45,072

$ 48,855

59,905 22,008 (32,263) 1,999 (77) (30,187)

21,792 19,319 9,655 2,763 175 12,243

23,498 19,822 1,752 2,662 (60) 4,474

18,555 19,844 10,456 5,271 309 15,418

Basic net income (loss) per share

(0.53)

0.22

0.08

0.28

Diluted net income (loss) per share

(0.53)

0.21

0.08

0.27

Revenue: Revenue from collaboration agreement Operating expenses: Research and development expenses Selling, general and administrative expenses Net operating profit (loss) Investment income, net Net income (loss) Basic and diluted net income (loss) per share

77

49,650

$

2007 Q u arte r En de d De ce m be r 31 S e pte m be r 30 Ju n e 30 (In thou san ds, e xce pt pe r sh are data)

March 31

$

26,101

$

29,738

$ 19,576

$ 15,014

27,226 16,406 (17,531) 5,829 (11,702)

20,004 15,245 (5,511) 6,066 555

18,554 15,712 (14,690) 3,864 (10,826)

17,523 13,183 (15,692) 3,497 (12,195)

(0.21)

0.01

(0.22)

(0.26)

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Revenue: Revenue from collaboration agreement License revenue Operating expenses: Research and development expenses Selling, general and administrative expenses Net operating profit (loss) Investment income, net Net loss Basic and diluted net loss per share 78

2006 Q u arte r En de d De ce m be r 31 S e pte m be r 30 Ju n e 30 (In thou san ds, e xce pt pe r sh are data)

March 31

$

$

10,497 -

$

9,943 100

$ 4,574 150

4,260 -

21,121 13,075 (23,699) 2,992 (20,707)

21,170 11,900 (23,027) 2,879 (20,148)

25,716 13,421 (34,413) 2,939 (31,474)

16,162 11,623 (23,525) 3,173 (20,352)

(0.47)

(0.49)

(0.76)

(0.49)

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Exhibits Exh ibit Nu m be r

De scription of Docu m e n t

3.1(1) 3.2(2) 3.3(3) 3.4(4) 4.1 4.2(1) 10.1(i)(5)*

Restated Certificate of Incorporation of the Company. Amended and Restated Bylaws of the Company. Certificate of Amendment to Amended and Restated Certificate of Incorporation. Certificate of Amendment to Amended and Restated Certificate of Incorporation. Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4. Specimen Stock Certificate. Collaboration Agreement between Bayer Corporation (formerly Miles, Inc.) and the Company dated April 22, 1994. 10.1(ii)(5)* Amendment to Collaboration Agreement between Bayer Corporation and the Company dated April 24, 1996. 10.1(iii)(5)* Amendment to Collaboration Agreement between Bayer Corporation and the Company dated February 1, 1999. 10.2(i)(5)* Amended and Restated Research, Development and Marketing Collaboration Agreement dated May 2, 1995 between the Company and Warner-Lambert Company. 10.2(ii)(6)* Research, Development and Marketing Collaboration Agreement dated July 31, 1997 between the Company and Warner-Lambert Company. 10.2(iii)(6)* Amendment to the Amended and Restated Research, Development and Marketing Collaboration Agreement, dated December 15, 1997, between the Company and Warner-Lambert Company. 10.2(iv)(6)* Second Amendment to the Amended and Restated Research, Development and Marketing Agreement between Warner-Lambert and the Company dated May 2, 1995. 10.2(v)(6)* Second Amendment to Research, Development and Marketing Collaboration Agreement between Warner-Lambert and the Company dated July 31, 1997. 10.2(vi)(7)* Amendment #3 to the Research, Development and Marketing Collaboration Agreement between the Company and Warner-Lambert dated August 6, 2001. 10.2(vii)(8)* Amendment #3 to the Amended and Restated Research, Development and Marketing Collaboration Agreement between the Company and Warner-Lambert dated August 6, 2001. 10.3(9)* Technology Transfer Agreement dated April 24, 1992 between Chiron Corporation and the Company, as amended in the Chiron Onyx HPV Addendum dated December 2, 1992, in the Amendment dated February 1, 1994, in the Letter Agreement dated May 20, 1994 and in the Letter Agreement dated March 29, 1996. 10.4(1)+ Letter Agreement between Dr. Gregory Giotta and the Company dated May 26, 1995. 10.5(1)+ 1996 Equity Incentive Plan. 10.6(1)+ 1996 Non-Employee Directors’ Stock Option Plan. 10.7(10)+ 1996 Employee Stock Purchase Plan. 10.8(1)+ Form of Indemnity Agreement to be signed by executive officers and directors of the Company. 10.9(11)+ Form of Executive Change in Control Severance Benefits Agreement. 10.10(i)(12)* Collaboration Agreement between the Company and Warner-Lambert Company dated October 13, 1999. 10.10(ii)(7)* Amendment #1 to the Collaboration Agreement between the Company and Warner-Lambert dated August 6, 2001. 10.10(ii)(13)* Second Amendment to the Collaboration Agreement between the Company and Warner-Lambert Company dated September 16, 2002. 10.11(14) Stock and Warrant Purchase Agreement between the Company and the investors dated May 6, 2002. 10.12(i)(15) Sublease between the Company and Siebel Systems dated August 5, 2004. 10.12(ii)(16) First Amendment to Sublease between the Company and Oracle USA Inc., dated November 3, 2006.

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Table of Contents

Exh ibit Nu m be r

De scription of Docu m e n t

10.13(i)(17)+ 10.13(ii)(16)+ 10.13(iii)(16)+

2005 Equity Incentive Plan. Form of Stock Option Agreement pursuant to the 2005 Equity Incentive Plan. Form of Stock Option Agreement pursuant to the 2005 Equity Incentive Plan and the NonDiscretionary Grant Program for Directors. 10.13(iv)(18)+ Form of Stock Bonus Award Grant Notice and Agreement between the Company and certain award recipients. 10.14(5)* United States Co-Promotion Agreement by and between the Company and Bayer Pharmaceuticals Corporation, dated March 6, 2006. 10.15(19)+ Letter Agreement between Laura A. Brege and the Company, dated May 19, 2006. 10.16(18)+ Letter Agreement between Gregory W. Schafer and the Company, dated July 7, 2006. 10.17(20) Common Stock Purchase Agreement between the Company and Azimuth Opportunity Ltd., dated September 29, 2006. 10.18(21)+ Retirement Agreement between the Company and Edward F. Kenney, dated April 13, 2007. 10.19(22)+ Bonuses for Fiscal Year 2007 and Base Salaries for Fiscal Year 2008 for Named Executive Officers. 10.20(23)+ Employment Agreement between the Company and N. Anthony Coles, M.D., dated as of February 22, 2008. 10.21(23)+ Executive Change in Control Severance Benefits Agreement between the Company and N. Anthony Coles, M.D., dated as of February 22, 2008. 10.22(23)+ Retirement Agreement between the Company and Hollings C. Renton, dated as of February 22, 2008. 10.23(24)+ Separation Agreement between the Company and Henry J. Fuchs, M.D., dated December 1, 2008. 10.24(i)(25)+ Separation and Consulting Agreement between the Company and Gregory W. Schafer, dated June 23, 2008. 10.24(ii)(2)+ Amendment to Separation and Consulting Agreement between the Company and Gregory W. Schafer, dated December 5, 2008. 10.25(2)+ Onyx Pharmaceuticals, Inc. Executive Severance Benefit Plan. 10.26(26)+ Letter Agreement between the Company and Matthew K. Fust, dated December 12, 2008. 10.27** Development and License Agreement between the Company and BTG International Limited, dated as of November 6, 2008. 23.1 Consent of Independent Registered Public Accounting Firm. 24.1 Power of Attorney. Reference is made to the signature page. 31.1 Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). 31.2 Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). 32.1 Certifications required by Rule 13a-14(b) or Rule 15d-14(b)and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350). * ** + (1) (2) (3) (4)

Confidential treatment has been received for portions of this document. Confidential treatment has been sought for portions of this document. Indicates management contract or compensatory plan or arrangement. Filed as an exhibit to Onyx’s Registration Statement on Form SB-2 (No. 333-3176-LA). Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on December 5, 2008. Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000. Filed as an exhibit to the Company’s Registration Statement on Form S-3 (No. 333-134565) filed on May 30, 2006. 80

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Table of Contents

(5) Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006. The redactions to this agreement have been amended since its original filing in accordance with a request for extension of confidential treatment filed separately by the Company with the Securities and Exchange Commission. (6) Filed as an exhibit to Onyx’s Annual Report on Form 10-K for the year ended December 31, 2002. The redactions to this agreement have been amended since its original filing in accordance with a request for extension of confidential treatment filed separately by the Company with the Securities and Exchange Commission. (7) Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001. (8) Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006. The redactions to this agreement have been amended since its original filing in accordance with a request for extension of confidential treatment filed separately by the Company with the Securities and Exchange Commission. (9) Filed as an exhibit to Onyx’s Annual Report on Form 10-K for the year ended December 31, 2001. The redactions to this agreement have been amended since its original filing in accordance with a request for extension of confidential treatment filed separately by the Company with the Securities and Exchange Commission. (10) Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on May 25, 2007. (11) Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on June 10, 2008. (12) Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on March 1, 2000. (13) Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002. (14) Filed as an exhibit to Onyx’s Registration Statement on Form S-3 filed on June 5, 2002 (No. 333-89850). (15) Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004. (16) Filed as an exhibit to Onyx’s Annual Report on Form 10-K for the year ended December 31, 2006. (17) Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on May 15, 2008 (18) Filed as an exhibit to the registrant’s Current Report on Form 8-K filed on July 12, 2006. (19) Filed as an exhibit to the registrant’s Current Report on Form 8-K filed on June 12, 2006. (20) Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on September 29, 2006. (21) Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007. (22) Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on February 8, 2008. (23) Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on February 26, 2008. (24) Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on December 1, 2008. (25) Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on June 23, 2008. (26) Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on December 23, 2008.

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Exhibit 10.27 [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. DATED 6 NOVEMBER 2008 (1) BTG International Limited - and (2) Onyx Pharmaceuticals Inc.

Development and Licence Agreement

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THIS AGREEMENT is made the 6th day of November 2008 BETWEEN:(1) BTG International Limited a company incorporated under the laws of England with company registration number 02664412 and whose registered office is at 10 Fleet Place, Limeburner Lane, London EC4M 7SB (“BTG”); and (2) Onyx Pharmaceuticals Inc. a corporation incorporated under the laws of the State of Delaware whose principal office is at 2100 Powell Street, Emeryville, CA 94608 (“Onyx”). BACKGROUND:(A) BTG has acquired and commenced the development of a technology comprising a product known as BGC-0945 which, subject to further development, is intended to be used in the field of oncology. (B) Onyx is in the business of developing and commercializing anticancer therapies. (C) BTG is willing to grant to Onyx, and Onyx wishes to receive, a worldwide, sub-licensable, royalty-bearing, licence to develop, make, have made, use, import, sell, distribute, have sold and offer for sale products in accordance with and subject to the provisions set out in this Agreement. THE PARTIES AGREE AS FOLLOWS:1. DEFINITIONS In this Agreement the following words and expressions shall have the following meanings:1.1

“Affiliate”

any entity that directly or indirectly controls, is controlled by, or is under common control with another entity, for so long as such control exists. In the case of companies and corporations “control” and “controlled” means beneficial ownership of more than fifty percent of the voting stock, shares, interest or equity in an entity. In the case of any other legal entity, “control” and “controlled” shall exist through the ability to directly or indirectly control the management and/or business of the legal entity;

1.2

“BGC-0945”

[ * ] (the structure of which is shown in Schedule 6) or any salts, esters, racemates, stereoisomers, crystalline polymorphs, hydrates, solvates, or other acids thereof.

1.3

“Combination Product”

shall have the meaning given to it in Clause 1.33;

1.4

“Commencement Date”

the date first above written;

1.5

“Commercially Reasonable Endeavours”

[ * ];

1.6

“Confidential Material”

shall have the meaning given to it in Clauses 11.1 and 11.2;

[*]

= Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 1

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1.7

“Damages”

shall have the meaning given to it in Clause 16.6;

1.8

“Deductions”

shall have the meaning given to it in Clause 1.33;

1.9

“Detailed Development Plan”

the detailed development plan to be prepared by Onyx pursuant to Clause 9.3;

1.10 “Disclosing Party”

shall have the meaning given to it in Clause 11.1;

1.11 “EU”

member states of the European Union as it is constituted from time to time;

1.12 “FDA”

United States Food and Drug Administration, or any successor entity thereto;

1.13 “ICR”

shall have the meaning given to it in Clause 11.9;

1.14 “IND”

investigational new drug application as defined by FDA;

1.15 “Infringement”

any infringement of any of the Licensed Rights;

1.16 “Infringer”

a third party that commits, or is alleged to have committed, an Infringement;

1.17 “International Accounting Standards”

the international accounting standards within the meaning of Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002, adopted from time to time by the European Commission in accordance with the Regulation;

1.18 “Licensed Know-How”

the know-how, data, trade secrets, manufacturing processes and proprietary information that is owned or controlled by BTG as of the Commencement Date as set out in Schedule 2;

1.19 “Licensed Patents”

means:(a) the Patent Applications; (b) any patents granted in respect of the Patent Applications; (c) the granted patents listed in Schedule 1; and (d) in relation to any patents falling within (b) or (c) above, any re-issues, renewals, re-examinations, extensions, confirmations, continuations, continuations-in-part or divisionals thereof, and any Patent Term Extensions granted in connection with such patents; and (e) any foreign counterparts of the foregoing patents and patent applications.

1.20 “Licensed Products”

BGC-0945 and any other product, the research, development, manufacture, import, marketing, use, sale or supply of which would (a) use or incorporate (or has used or incorporated) any Licensed Know-How; or (b) but for the Licence, would infringe the Licensed Patents;

1.21 “Licensed Rights”

the Licensed Patents and the Licensed Know-How;

1.22 “Licensed Technology”

the technology claimed by the Licensed Patents and/or included in the Licensed Know-How;

[*]

= Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 2

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1.23 “Licences”

the licences granted under Clause 2.1;

1.24 “Major European Country”

the [ * ];

1.25 “Major Markets”

the [ * ];

1.26 “Materials”

the quantities of bulk intermediates, active pharmaceutical ingredients and formulated Licensed Products, listed in Schedule 3;

1.27 “Materials Payment”

shall have the meaning given to it in Clause 5.2;

1.28 “MHRA”

Medicines and Healthcare products Regulations Agency (or any successor entity thereto);

1.29 “Milestone Events”

the milestone events set out in Clause 5.3;

1.30 “Milestone Payments”

the milestone payments set out in Clause 5.3;

1.31 “NDA”

shall mean a new drug application (as more fully defined in 21 Code of Federal Regulations section 314.5 et seq);

1.32 “Net Receipts”

(a) all royalties, profit shares or other amounts received by Onyx or any Affiliate of Onyx from a Sub-licensee or its Affiliates (other than an Affiliate of Onyx), or any subsequent sub-licensees thereof, relating to sales of Licensed Products (it being understood that this definition excludes [ * ], but includes [ * ]) and (b) solely in the event that the commercialization of the Licensed Products in [ * ] is being carried out or is to be carried out by a Non-Affiliate Sub-licensee, any milestones or other payments received by Onyx or any Affiliate of Onyx from such Sub-licensee as a result of (i) the [ * ] or (ii) the [ * ];

1.33 “Net Sales Value”

the amount billed or invoiced by Onyx Suppliers to third parties in respect of supplies of the Licensed Products (in fully formulated, final form packed for ultimate consumer use) less the following items as indicated on the relevant invoice (but only to the extent relating to the Licensed Product and actually paid or allowed and not reimbursed by any third party and provided that no deductions shall be allowed for any advertising, promotional or sales force expenses): (i) tariffs, duties, excises and sales taxes, (ii) costs of delivery, including transportation and insurance charges, (iii) customary trade or quantity discounts actually granted, (iv) amounts actually repaid or credited by reason of rejections, defects, recalls or returns or because of adjustments, billing errors, or trial prescriptions, (vi) amounts that are recorded in the sellers audited accounts as written off as bad debts, uncollectible in accordance with the applicable seller’s accounting policies for the general provision of doubtful debts, as consistently applied and as allowed by United States Generally Accepted Accounting Principles or International Accounting Standards (as the case may be), (vii)

[*]

= Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 3

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allowances or credits to customers on account of price reductions affecting the Licensed Products, and (viii) rebates and discounts actually paid or credited to any governmental agency (or branch of government) (the “Deductions”); provided that where: (a) the Licensed Products are sold other than in an arm’s-length sale; or (b) the consideration for the Licensed Product includes any non-cash element other than customary rights that are typically granted to customers in contracts with cash customers (for the avoidance of doubt such customary rights shall not include equity, stock or any other form of securities or any loan arrangement otherwise than on normal commercial terms); or (c) the Licensed Product is transferred in any manner other than an invoiced order, the Net Sales Value applicable to such transaction shall be deemed to be the amount billed or invoiced by Onyx Suppliers to independent third parties in respect of supplies of the Licensed Products (in fully formulated, final form packed for ultimate consumer use) that would have been billed or invoiced for that Licensed Product in the country where the transaction was effective had (a), (b) and/or (c) not been the case, less the Deductions (where such Deductions relate to the Licensed Product and are actually paid or allowed and not reimbursed by any third party and provided that no Deductions shall be allowed for any advertising, promotional or sales force expenses) that would have been applicable for that Licensed Product in the country where the transaction was effective had (a), (b) and/or (c) not been the case. Such hypothetical Net Sales Value shall be agreed by the parties acting in good faith or, failing such agreement, as determined by a reputable independent auditor appointed by agreement between the parties (or failing such agreement, the Chairman for the time being of the Institute of Chartered Accountants of England and Wales), with the decision of such auditor being final and binding on the parties and with the auditor acting as an expert and not an arbitrator. If the price determined by the auditor is equal to or lower than that proposed by Onyx then BTG shall be responsible for the costs of the appointment of the auditor. If the price determined by the auditor is greater than that proposed by Onyx then Onyx shall be responsible for the costs of such appointment; provided, further that if a Licensed Product is sold in the form of a combination product containing both a Licensed Product and one or more active pharmaceutical ingredients or devices that are not Licensed Products (for the purpose of this Agreement, a “Combination Product”), the Net Sales Value of such Licensed Product for the purpose of calculating royalties owed by Onyx under this Agreement for sales of such Licensed Product, shall be determined as follows: first, Onyx shall determine the actual [*]

= Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 4

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Net Sales Value of such Combination Product (using the above provisions) and then such amount shall be multiplied by the fraction A/(A+B), where A is the invoice price of the Licensed Product, if sold separately, and B is the total invoice price of any other active pharmaceutical ingredient or device in the combination if sold separately. If, the other active pharmaceutical ingredient or device in the combination are not sold separately, Net Sales Value of the Licensed Product in question shall be calculated by multiplying actual Net Sales Value of such Combination Product (calculated using the above provisions) by a fraction A/C where A is the invoice price of the Licensed Product if sold separately, and C is the invoice price of the Combination Product where the maximum value of the fraction A/C equals one (1). If, neither the Licensed Product nor the other active pharmaceutical ingredient or device in the Combination Product is sold separately, the adjustment to Net Sales Value shall be determined by the parties in good faith to reasonably reflect the fair value of the contribution of the Licensed Product in the Combination Product to the total market value of such product; 1.34 Non-Affiliate Sublicensee

a Sublicensee that is not also an Affiliate of Onyx;

1.35 “Onyx Suppliers”

Onyx, its Affiliates, its Sub-licensees and the Affiliates of the Sub-licensees;

1.36 “Outline Development Plan”

the outline development plan relating to the development and commercialisation of Licensed Products as agreed between the parties and set out in Schedule 5;

1.37 “Patent Applications”

the patent applications listed in Schedule 1 and any continuation applications, continuation-in-part applications, divisional applications, national or international patent applications anywhere in the world in each case that claim priority solely from the patent applications listed in Schedule 1 and/or any of their priority filings;

1.38 “Patent Term Extension”

any patent term extensions, including extensions granted under the US Drug Price Competition and Patent Term Restoration Act 1984 and the EC Supplementary Protection Certificate Regulation (Council Regulation (EEC) No. 1768/92) and any legislation, amending, replacing or implementing the foregoing;

1.39 “Personnel”

officers, employees, consultants, agents, representatives, contractors and advisers;

1.40 “Phase I Clinical Trial

“a human clinical trial, the principal purpose of which is to determine the metabolic and pharmacologic actions of a drug and its safety, the side effects associated with increasing doses and, if possible, to gain early evidence of its effectiveness;

1.41 “Phase II Clinical Trial”

a human clinical trial, the principal purpose of which is to evaluate the effectiveness of a drug for a particular indication in patients with a disease and to determine the common short-term side effects and risks associated with the drug;

[*]

= Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 5

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1.42 “Phase III Clinical Trial”

an expanded controlled or uncontrolled human clinical trial of a drug in a randomized study (with endpoints agreed upon by a regulatory body for Product Approval for example, without limitation, as evidenced in the minutes of an end of Phase II Clinical meeting with a competent regulatory authority in the United States of America or the EU) which is intended to gather the additional information about effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of such drug and to provide an adequate basis for physician labelling;

1.43 “Product Approval”

in relation to a country, the grant of all governmental, regulatory and pricing approvals required to sell a Licensed Product in that country;

1.44 “Quarter”

the quarterly periods in each Year of the Term ending 31 March, 30 June, 30 September and 31 December with the exception of the first Quarter of this Agreement, which shall be the period of time from the Commencement Date to 31 December 2008;

1.45 “Reasonable Revisions”

such revisions by Onyx as may be reasonably necessary (in good faith and having regard to Onyx’s obligations in Clause 9) after the Commencement Date to adjust development of Licensed Products in response to changed external circumstances comprising material [ * ] problems arising regarding the Licensed Product but not [ * ];

1.46 “Receiving Party”

shall have the meaning given to it in Clause 11.1;

1.47 “Revocation Proceedings”

“any proceedings where the validity of any of the Licensed Patents is at issue including opposition proceedings in respect of European patents and interference proceedings in respect of US patents;

1.48 “Signing Fee”

shall have the meaning given to it in Clause 5.1

1.49 “Sub-licence Agreement”

any agreement between Onyx and a Sub-licensee relating to this Agreement or any of the Licensed Rights;

1.50 “Sub-licensee”

a third party (including an Affiliate of Onyx) to whom Onyx and/or any of its Affiliates has sublicensed, sub-contracted or otherwise transferred any of Onyx’s rights and/or obligations under this Agreement including, a third party with whom Onyx and/or any of its Affiliates has agreed not to assert the Licensed Rights and/or has otherwise waived the Licensed Rights (unless such waiver or non-assert has been given with the prior written consent of BTG), it being understood that a failure to bring or maintain an infringement suit against an alleged infringer shall not, by itself, constitute a waiver for the purpose of this definition unless Onyx and/or any of its Affiliates are receiving consideration of any form from, or otherwise supplying a Licensed Product to, the alleged infringer or its Affiliates;

1.51 “Term”

shall have the meaning given to it in Clause 18.1;

[*]

= Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 6

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1.52 “Termination Milestone”

Shall have the meaning given to it in Clause 19.3;

1.53 “Third Party Claims”

shall have the meaning given to it in Clause 5.11;

1.54 “Third Party Royalty”

shall have the meaning given to it in Clause 5.11;

1.55 “United States Generally Accepted means the generally accepted accounting principles as established by the United States of America Accounting Standards” Financial Accounting Standards Board from time to time; 1.56 “Valid Claim”

an issued claim of any unexpired patent or claim of any pending patent application, which has not been held unenforceable, unpatentable or invalid by a court or governmental body of competent jurisdiction, unappealable through disclaimer or otherwise, and which has not been lost through an interference proceeding or abandoned; provided, however, that if a claim of a pending patent application has been pending for more than [ * ] years from the Commencement Date or, if applied for after the Commencement Date, has been pending for more than [ * ] years from its application date, such claim will not constitute a Valid Claim for the purposes of this Agreement from the end of that [ * ] period (as applicable) unless and until such claim issues and otherwise satisfies the above requirements at which time the claim shall be deemed a Valid Claim [ * ] for the purposes of, inter alia, calculating any royalty obligation from Onyx to BTG (subject to Clause 5.7); and

1.57 “Year”

a calendar year;

2. GRANT OF LICENCES 2.1. With effect from the Commencement Date and subject to the provisions of this Agreement, BTG grants to Onyx, an exclusive, worldwide, sub-licensable, royalty-bearing, licence under the Licensed Rights to develop, make, have made, use, import, sell, distribute, have sold and offer for sale Licensed Products for all applications and for all uses. 2.2. Promptly following the Commencement Date (but in any event no later than thirty (30) days thereafter), BTG shall transfer to Onyx all Licensed Know-How, to the extent such Licensed Know-How is not already in Onyx’s possession. All costs and expenses of any such transfer by BTG shall be borne by BTG. Subject to Clause 19.2.2 all media supplied by BTG to Onyx in which Licensed Know-How is recorded shall be thereafter owned by Onyx. 2.3. If, following the Commencement Date, BTG discovers know-how or information that was in the possession of, and owned or controlled by, BTG prior to the Commencement Date that is necessary or (in [ * ]’s opinion) reasonably useful for the development, manufacture, or commercialization of BGC-0945 or any other molecule claimed in the Licensed Patents and that [ * ] from BTG’s development of BGC-0945 prior to the Commencement Date, which is not set out in Schedule 2, BTG shall, upon discovery, subject to [ * ], provide such know-how or information to Onyx. Such know-how or information shall become, for the purposes of this Agreement, Licensed Know-How provided that [ * ]. [*]

= Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 7

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2.4.

If, following the Commencement Date, BTG discovers patent(s) or patent application(s) that were in the possession of, and owned or controlled by, BTG prior to the Commencement Date that are necessary or (in [ * ]’s opinion) reasonably useful for the development, manufacture, or commercialization of BGC-0945 or any other molecule claimed in the Licensed Patents (as defined on the Commencement Date without regard to the rest of this Section 2.4) and that [ * ] from BTG’s development of BGC-0945 prior to the Commencement Date, which is not set out in Schedule 1, BTG shall, upon discovery, subject to [ * ], provide such patent(s) and/or patent application(s) to Onyx. Such patent(s) and/or patent application(s) shall become, for the purposes of this Agreement, Licensed Patents (and shall be deemed to be included on Schedule 1), provided that [ * ].

2.5.

In no event shall Onyx be responsible for any payments owed by BTG or its Affiliates under any agreements between a third party and BTG or its Affiliates related to the Licensed Products or Licensed Technology, as a result of the grant of the Licences or the exploitation of the Licences by Onyx, its Affiliates, or its Sub-licensees.

2.6.

In no event shall BTG be responsible for any payments owed by Onyx or its Sub-licensees or their respective Affiliates under any agreements between a third party and Onyx or its Sub-licensees or their respective Affiliates related to the Licensed Products or Licensed Technology, as a result of the grant of the Licenses or the exploitation of the Licenses by Onyx, its Affiliates, or its Sublicensees or their Affiliates. For the avoidance of doubt, this Clause 2.6 shall not affect the operation of the royalty reduction provision in Clause 5.11.

3.

DURATION OF THE LICENCES

3.1

Unless terminated earlier in accordance with Clause 18 of this Agreement, the Licences shall commence on the Commencement Date and shall automatically expire on a country by country basis on the last to occur of the following:3.1.1

the date on which no Valid Claim of a Licensed Patent remains in force in the country concerned; or

3.1.2

ten (10) years from the date of the first commercial sale of the relevant Licensed Product in the country concerned.

3.2

Following expiry of the Licences in a country, Onyx’s obligation to pay further royalties pursuant to Clause 5.5 and 5.6 in respect of Net Sales Value of Licensed Products in such country (unless the Licensed Products sold in such country are manufactured in a country where a Valid Claim subsists) shall terminate and Onyx shall have a fully paid up, royalty-free (subject to Onyx’s obligation to pay royalties on Net Sales Value of Licensed Products sold in such country but manufactured in a country where a Valid Claim subsists), perpetual, exclusive licence under the Licensed Know-How to make, have made, use, import, promote, distribute, sell, offer for sale and otherwise exploit the Licensed Products in that country.

4.

SUBLICENSING AND SUBCONTRACTING

4.1

Onyx may sub-licence and/or subcontract its rights under this Agreement provided it complies with this Clause 4.

[*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 8

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4.2

[*] =

Onyx shall enter into a written agreement with each Sub-licensee (provided that this obligation to enter into a written agreement shall not apply where, and for so long as, the Sub-licensee is an Affiliate) and shall ensure that:4.2.1

the provisions of the Sub-licence Agreement are entirely consistent with the provisions of this Agreement;

4.2.2

the Sub-licence Agreement is [ * ] and [ * ] the [ * ] from [ * ] the [ * ] without the prior written consent of BTG, not to be unreasonably withheld;

4.2.3

the Sub-licence Agreement prohibits the Sub-licensee and its Affiliates from [ * ] or otherwise [ * ] in each case without the prior written consent of BTG, not to be unreasonably withheld;

4.2.4

the Sub-licence Agreement sets out all the terms agreed between the parties including, in particular, all terms as to remuneration;

4.2.5

the Sub-licence Agreement imposes obligations of confidentiality on the Sub-licensee in respect of any Confidential Material disclosed by BTG and/or its Affiliates which are no less onerous than those set out in Clause 11;

4.2.6

the Sub-licence Agreement shall terminate automatically if (1) this Agreement expires or is terminated (subject to Clause 4.7) or (2) the Sub-licensee or its Affiliates [ * ] or otherwise assist any third party to [ * ], the [ * ] of any of the [ * ] including the [ * ] of any of the [ * ] of the [ * ];

4.2.7

the Sub-licence Agreement imposes an obligation on the Sub-licensee to (a) keep and provide financial statements and other such information as is reasonably required to allow Onyx to document and verify payments required to be made to BTG under this Agreement and otherwise to comply with all of its obligations under this Agreement (including, without limitation, the provision of the royalty statement as set out in Schedule 4), and on Onyx’s request, (b) allow an independent professional accountant appointed by Onyx to be given access to and be permitted to examine and copy the books, accounts and records of the Sub-licensee (and the Sub-licensee’s Affiliates, to the extent relevant) upon [ * ] days notice having been given by Onyx and at all reasonable times on business days for the purpose of certifying to Onyx that the monies calculated by the Sublicensee as being due to Onyx under the relevant Sub-licence Agreement during any Year and the sale of Licensed Products in any Year were each correctly calculated, true and accurate; and (c) oblige the Sub-licensee to make available its Personnel on [ * ] days advance notice and during normal business working hours, to answer queries on all accounts, books and records required for the purpose of the above certification;

4.2.8

the Sub-licence Agreement imposes an obligation on the Sub-licensee to, on termination of the Sub-licence Agreement (but, for the avoidance of doubt, excluding any expiration of the Sub-license Agreement following which the Sub-licensee retains the right to sell and distribute the Product), transfer to Onyx all Product Approvals for the Licensed Products that are owned by the applicable Sub-licensee or its Affiliates as well as all technical information or data generated by or on behalf of the Sub-licensee or its Affiliates pursuant to activities conducted under the Sub- license Agreement, including without limitation, market research so generated to support the sale and distribution of the Licensed Product; and Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 9

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4.2.9

the Sub-licensee shall be required by the Sub-license Agreement to include on the packaging of each Licensed Product and in the information leaflet supplied with each Licensed Product the notice set out at Clause 10.2 (subject to any limitations imposed by applicable law).

4.3

Onyx shall procure that each Sub-licensee complies fully at all times with the provisions of its Sub-licence Agreement.

4.4

Any acts and omissions of a Sub-licensee that, if committed by Onyx, would constitute a breach of any of the provisions of this Agreement, shall be deemed to be a breach of this Agreement by Onyx.

4.5

Onyx shall promptly notify BTG of the details of any material breach of a Sub-licensee of which it becomes aware to the extent that such material breach would reasonably be expected to cause Onyx to be in breach of its obligations under this Agreement.

4.6

Onyx shall provide BTG with a true and complete copy of any Sub-licence Agreement promptly following its execution; provided, however, that Onyx may redact any portions of such Sub-licence Agreement that are confidential or proprietary (other than any portions relating to payments or other consideration payable by Sub-licensees with respect to the Licensed Products and any other provisions that are necessary for BTG to verify Onyx’s compliance with the terms of this Agreement).

4.7

At Onyx’s request and on a case-by-case basis, unless termination is due to acts or omissions of a Sub-licensee or the relevant Sublicensee is otherwise in breach of the terms of the Sub-licence, BTG shall in good faith consider amending this Agreement to allow the rights granted by Onyx to a particular Sub-licensee to continue (i.e., as a direct licence from BTG) following termination of this Agreement.

5.

PAYMENTS

Signing Fee 5.1

Onyx shall pay to BTG on the Commencement Date a one-time, non-refundable signing fee of [ * ] (the “Signing Fee”).

Payment for the Materials 5.2

Onyx shall pay to BTG on the Commencement Date a non-refundable payment of [ * ] in respect of the transfer of the Materials (the “Materials Payment”).

Milestone Payments 5.3

[*] =

Onyx shall pay to BTG the following non-refundable Milestone Payments on the attainment of the corresponding Milestone Event by an Onyx Supplier: Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 10

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Mile stone Eve n t

Mile stone Paym e n ts

Development Milestone Event [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] Sales Milestone Event [*] [*] [*] [*] 5.4

Development Milestone Payment US$[ * ] US$[ * ] US$[ * ] US$[ * ] US$[ * ] US$[ * ] US$[ * ] US$[ * ] US$[ * ] US$[ * ] Sales Milestone Payment US$[ * ] US$[ * ] US$[ * ] US$[ * ]

No Milestone Payments shall be payable more than once and all Milestone Payments are non-refundable in any circumstances.

Royalties Sales by Onyx and its Affiliates 5.5

Onyx shall pay to BTG a royalty at the applicable incremental rate(s) set out below on the Net Sales Value of all Licensed Products sold by Onyx and/or its Affiliates and manufactured or sold in a country where there exists, at the time of manufacture or sale, one or more Valid Claims of the Licensed Patents that, but for the Licence, would be infringed by such manufacture or sale:

Tie r

Portion of C u m u lative W orldwide Ne t Sale s Value of Lice n se d Produ cts S u pplie d Du rin g th e Ye ar

Royalty Rate

Tier 1 Tier 2 Tier 3

US$[ * ] US$[ * ] US$[ * ] and over

[ * ]% [ * ]% [ * ]%

For the avoidance of doubt, each of the royalty rates set forth in this Clause 5.5 shall apply only to that portion of the Net Sales Value during a Year that falls within the applicable range for such royalty rate. For example, [ * ]. 5.6

[*] =

Onyx shall pay to BTG a royalty at the applicable rate set out below on the Net Sales Value of all Licensed Products sold by Onyx and/or its Affiliates where such Licensed Product was manufactured in a country and sold in a country where, at the time of manufacture and at the time of sale, no Valid Claim of a Licensed Patent exists in such country/countries that, but for the Licence, would be infringed by such manufacture or sale (as applicable), provided that at least one of the following is true: Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 11

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5.6.1

had the Licensed Product concerned been [ * ] (as applicable) in [ * ] in which a Valid Claim of a Licensed Patent exists that, but for the Licence, would be infringed by such [ * ] (as applicable), such [ * ] would have infringed that Valid Claim;

5.6.2

had such Licensed Product concerned been [ * ] (as applicable) [ * ] in the county/countries in which it was [ * ], such [ * ] would have infringed a Valid Claim of a Licensed Patent which, but for the Licence, would have been infringed by such [ * ] (as applicable);

5.6.3

the Licensed Product is [ * ]; or

5.6.4

such Licensed Product [ * ] (or has [ * ] or [ * ], or the Product Approval for such Licensed Product was [ * ], in each case [ * ], [ * ].

Tie r

C u lm u lative W orldwide Ne t Sale s Value of Lice n se d Produ cts S u pplie d Du rin g th e Ye ar

Royalty Rate

Tier 1 Tier 2 Tier 3

US$[ * ] US$[ * ] US$[ * ] and over

[ * ]% [ * ]% [ * ]%

For the avoidance of doubt, each of the royalty rates set forth in this Clause 5.6 shall apply only to that portion of the Net Sales Value during a Year that falls within the applicable range for such royalty rate. Additionally, if in a particular Quarter there are sales of a Licensed Product in a country to which Clause 5.5 applies and sales of a Licensed Product in a country to which Clause 5.6 applies, then the royalties shall be calculated by determining the percentage of the total Net Sales Value in such Quarter to which Clause 5.5 or Clause 5.6 applies and multiplying that percentage to each royalty tier to determine which portion of such amount should bear royalties at rates set forth in Clause 5.5 or Clause 5.6, respectively. By way of example, [ * ]. 5.7

[ * ].

Sales by Sub-licensees 5.8

Onyx shall pay to BTG whichever is the greater of (i) [ * ]% of all Net Receipts received by Onyx or its Affiliates from any Sub-licensee or its Affiliates; or (ii) a royalty of [ * ]% of the Net Sales Value of all Licensed Products sold by Non-Affiliate Sub-licensees or their Affiliates or any subsequent sub-licensee thereof.

5.9

In the event that the royalty payment calculated by a Non-Affiliate Sub-licensee of Onyx or a Sub-licensee of any Affiliate of Onyx, or any subsequent sub-licensees thereof, as being due to Onyx under the relevant Sub-licence Agreement during any Year prove, following verification carried out by Onyx or an independent professional accountant appointed by

[*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 12

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Onyx for the purpose of calculating that the monies paid to Onyx were correctly calculated and accurate, to be inaccurate (and, therefore, the monies paid to BTG in accordance with Clause 5.8 are inaccurate) Onyx shall either (as applicable):

5.10

5.9.1

within [ * ] days of the end of the month in which such verification was carried out, pay to BTG the balance of the monies due; or

5.9.2

within [ * ] days of receipt of written notification from Onyx that Onyx has paid more than was due, BTG shall reimburse Onyx for such sum. Such notification shall include sufficient evidence to enable BTG to verify the accuracy of such notification.

Onyx’s obligations to pay royalties in accordance with Clauses 5.5 and 5.6 shall terminate in accordance with the provisions of Clause 3.2. Onyx’s obligations to make payments under Clause 5.8 shall terminate at the end of the Term.

Infringement of Third Party Patents 5.11

If it is not reasonably possible to sell and/or have sold a Licensed Product, or to manufacture a Licensed Product for sale, in one or more countries without infringing one or more Valid Claims of third party patents that apply to or cover the inventions claimed in the Licensed Patents in such countries (“Third Party Claims”) and as a consequence Onyx is required to make and does make royalty payments or licence fees to a non-Affiliate independent third party in respect of such one or more Third Party Claims in order to sell a Licensed Product, or to manufacture a Licensed Product for sale, in such countries then, subject to the provisions of Clause 5.12, Onyx may deduct from the royalties that are otherwise due to BTG as provided in Clause 5.5 and 5.6 in respect of the Licensed Product that is sold or manufactured (as the case may be) in the countries covered by the Third Party Claims, [ * ]% of the royalty payments or license fees paid by Onyx to Third Parties in respect of that Licensed Product in the countries covered by the Third Party Claims (“Third Party Royalty”). For the avoidance of doubt, Onyx may only make deductions from royalties pursuant to this Clause 5.11 to the extent that the royalty payments or licence fees made to the third party concerned relate solely to Third Party Claims applying to or covering the inventions claimed in the Licensed Patents.

5.12

In the event that Onyx is unable to deduct from a particular royalty payment the full deduction in respect of Third Party Royalties that is permitted by Section 5.11, the unrealized portion such deduction will be carried over to subsequent royalty payments.

5.13

In no circumstances shall any provisions of this Agreement (including Clauses 5.11, 5.12 and the provision in Clause 1.33 setting out the manner in which Net Sales Value shall be calculated where a Licensed Product is sold as a Combination Product) operate to reduce the effective royalty on Net Sales Value payable by Onyx under Clause 5.5 to less than [ * ]% or under Clause 5.6 to less than [ * ]%.

5.14

The provisions of (a) Clauses 5.11 and 5.12 and the provisions of (c) Clause 1.33 which sets out the manner in which Net Sales Value shall be calculated where a Licensed Product is sold as a Combination Product, cannot both be applied to the same sale of a Licensed Product.

[*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 13

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5.15

For the avoidance of doubt, Clause 5.11 and 5.12 shall not apply to payments under Clause 5.8.

6.

PAYMENT TERMS

6.1

Onyx shall notify BTG within [ * ] days of any of the Milestone Events being reached.

6.2

Once a Milestone Event has been reached Onyx shall pay to BTG the relevant Milestone Payment within [ * ] days of reaching the Milestone Event. After receipt of such Milestone Payment, BTG shall issue to Onyx a receipted invoice for such Milestone Payment.

6.3

Within [ * ] days of the end of each Quarter, Onyx shall provide BTG with a royalty statement for that Quarter setting out the information listed in Schedule 4.

6.4

Onyx shall pay to BTG the royalties due under Clauses 5.5 and 5.6 in respect of the Net Sales Values generated during any Quarter, within [ * ] days of the end of such Quarter. After receipt of such royalties, BTG shall issue to Onyx a receipted invoice for such royalties. Onyx shall pay to BTG the sums due under Clause 5.8 in respect of Net Receipts received by Onyx and its Affiliates during any Quarter, within [ * ] days of the end of such Quarter. After receipt of such sums, BTG shall issue to Onyx a receipted invoice for such sums.

6.5

All sums payable under this Agreement:6.5.1

shall be paid in United States dollars to the credit of the following bank account of BTG (or to such other account as BTG may, from time to time, notify to Onyx):

National Westminster Bank plc Westminster Branch P.O. Box 3038 57 Victoria Street London SW1H 0HN US Dollar payments: Account number: [ * ] Sort Code: [ * ] IBAN BIC [ * ] 6.5.2

shall be paid in full without any deductions or withholdings (including deductions or withholdings in respect of items such as income tax, corporation tax, or other taxes, charges or duties) except insofar as Onyx is required by law to deduct withholding tax from sums payable to BTG in which case Onyx shall: 6.5.2.1 ensure that the deduction or withholding does not exceed the minimum amount legally required;

[*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 14

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6.5.2.2 account to the relevant taxation or other authorities within the period for payment permitted by the applicable law the full amount of the deduction or withholding; and 6.5.2.3 provide to BTG within the period for payment permitted by the relevant law either an official receipt of the relevant taxation authorities involved in respect of all amounts so deducted or withheld or if such receipts are not issued by the taxation authorities concerned a certificate of deduction or equivalent evidence of the relevant deduction or withholding sufficient to establish the fact that such amount was remitted to such taxation authorities, for the purpose of enabling BTG to obtain credit for the tax deducted or to claim relief from double taxation under any relevant double taxation treaty; 6.5.3

shall be paid by the due date for payment as specified in this Agreement. If Onyx fails to pay any sum due under this Agreement in whole or part, any outstanding royalties or other payments due under this Agreement shall bear interest (calculated on a daily basis) from the date on which they fell due until payment at a per annum rate of [ * ] and [ * ], following such failure to pay. The payment of such interest shall be made in United States dollars. It shall not foreclose BTG from exercising any other right it may have as a consequence of the failure of Onyx to make any payment when due.

6.6

The parties shall co-operate to ensure that all sums payable under this Agreement can be lawfully paid without deduction of withholding tax, where this is reasonably possible under the laws of the relevant jurisdiction. Such co-operation shall include, at the reasonable request of a party, the provision by the other party of any information required to enable payments to be made without deduction of tax pursuant to section 911 of the Income Tax Act 2007 (or to any equivalent provision under the laws of the United States of America or any other relevant jurisdiction) and the prompt completion and filing of any relevant forms and other documents with the relevant tax authorities.

6.7

If Licensed Products are sold or supplied by Onyx or its Sub-licensees in a currency other than United States dollars, the royalties payable in respect of such sales under this Agreement shall be first determined in the currency of the country in which such sales took place and then converted into United States dollars at the rate of exchange as shown in the Financial Times (www.ft.com) on the last business day of the Quarter in which such sales took place.

6.8

If the Net Receipts received by Onyx or its Affiliates are in a currency other than United States dollars, the monies payable in respect of such Net Receipts under this Agreement shall be converted into United States dollars at the rate of exchange shown in the Financial Times (www.ft.com) on the last business day of the Quarter in which the Net Receipts were received by Onyx or its Affiliates.

7.

RECORDS, INSPECTIONS AND STATEMENTS

Maintenance of Records [*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 15

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7.1

During the term of this Agreement and for a period of [ * ] years thereafter, Onyx shall, and shall procure that Onyx’s Affiliates shall, keep at their normal place of business detailed, accurate and up to date records and books of account showing the quantity, description and value of all Licensed Products supplied by Onyx Supplier in each country, all sums paid to Onyx Supplier in connection with such supply, and all Net Receipts, in each case during the previous [ * ] years. Onyx shall ensure that such records and books of accounts are sufficiently complete and detailed to permit the verification of the royalties due to BTG under this Agreement.

Inspections 7.2

Onyx shall, and shall procure that Onyx’s Affiliates shall, make available the records and books described in Clause 7.1 for inspection during normal business hours by a qualified accountant of BTG for the purpose of verifying the accuracy of any statement provided by Onyx to BTG pursuant to Clause 6.3. BTG’s accountant shall be entitled to obtain such records and books solely for the purposes of carrying out the verification.

7.3

BTG shall be entitled to have inspections carried out pursuant to Clause 7.2 no more frequently than once every Year (and once following termination or expiry of this Agreement) on giving Onyx or its Affiliates [ * ] days’ written notice prior to each inspection. BTG shall not be permitted to have such inspections carried out more than once with respect to books and records covering a particular time period unless such re-inspection is reasonably necessary in order to resolve a discrepancy or concern that [ * ].

7.4

BTG shall bear the cost of carrying out the inspections referred to in Clause 7.2 unless such inspection identifies an underpayment of more than [ * ]% across the period being inspected in which case, within [ * ] days of receiving notice from BTG of the results of the inspection, Onyx shall pay to BTG the costs of making the relevant inspection. If BTG’s inspection shows that Onyx has paid more than the amounts properly due under this Agreement, then Onyx shall be entitled to deduct such excess from any future sums payable to BTG under this Agreement. If BTG’s inspection reveals a deficit then, without prejudice to any other right or remedy available to BTG, Onyx shall (a) promptly make good the deficit and (b) pay interest on the deficit pursuant to Clause 6.5.3 from the date upon which the deficit arose to the date upon which the deficit was paid.

8.

SALE OF MATERIALS All right, title, and interest in and to, and risk of loss with respect to, the Materials shall transfer to Onyx on receipt by BTG of the Materials Payment. BTG hereby agrees that it shall use all commercially reasonable endeavours to assign or procure that its Affiliate BTG International, Inc. uses all commercially reasonable endeavours to assign (as applicable) to Onyx all of its future rights and obligations under those contracts or arrangements for the ongoing storage of the Materials at their current locations as in existence at the Commencement Date or, where this is not possible, to use commercially reasonable endeavours to assist Onyx, at Onyx’s cost, in transferring the Materials to another location reasonably acceptable to Onyx. The contracts specifying BTG’s future rights and obligations are identified in Schedule 7.

[*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 16

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9.

ONYX’S OBLIGATIONS TO EXPLOIT

9.1

Subject to Clause 9.2, with effect from the Commencement Date, Onyx shall be responsible, at its sole cost, for all research into and the development, manufacture and commercialization of Licensed Products. Onyx shall be responsible for assuming the costs of all necessary clinical trials and studies after the Commencement Date that may be required to obtain Product Approval for Licensed Products, all costs and expenses incurred after the Commencement Date in relation to all applications for and the acquisition of Product Approval for the Licensed Product and all future costs relating thereto including, without limitation, for renewals, amendments or other correspondence.

9.2

Onyx (either by itself or through Onyx’s Suppliers) shall use all Commercially Reasonable Endeavours to comply with the Outline Development Plan and, once drafted and approved by Onyx, the Detailed Development Plan. Subject to receipt of any applicable Product Approvals, Onyx shall use all Commercially Reasonable Endeavours to promote, market, sell and otherwise commercialize at least one Licensed Product (either through itself or Onyx’s Suppliers) in each of the Major Markets.

9.3

Within [ * ] of the Commencement Date, Onyx shall provide to BTG a detailed development plan which shall be consistent with the Outline Development Plan (but subject to Reasonable Revisions) and shall include [ * ] (the “Detailed Development Plan”).

9.4

Within [ * ] of [ * ], Onyx shall provide BTG with a written report summarizing the progress achieved since the previous report (or since the Commencement Date if the first report) against the Outline Development Plan (or the Detailed Development Plan). Such report shall include, without limitation, [ * ].

9.5

In addition to Clause 9.4, Onyx shall (a) provide BTG with verbal updates including such material details of the development and marketing of the Licensed Products as BTG may from time to time reasonably request but no more frequently than twice yearly; and (b) on the request of BTG but not more than [ * ], arrange for an appropriate representative to meet with a representative of BTG at a mutually agreeable location, to discuss both the progress achieved and anticipated progress against the Outline Development Plan (or the Detailed Development Plan).

10.

PRODUCT APPROVALS AND NOTIFICATION OF PATENTS ON PRODUCT APPROVALS

10.1

Onyx shall be the owner of all Product Approvals obtained in relation to the Licensed Products and shall have sole responsibility to communicate with the applicable regulatory authorities regarding the Product Approval for the Licensed Products and shall be solely responsible for maintaining Product Approvals over the Licensed Products.

10.2

Except as otherwise instructed by BTG from time to time, Onyx shall procure that the following notice is included on the packaging of each Licensed Product and in the information leaflet supplied with each Licensed Product in a reasonably clear, readable and conspicuous manner (subject to any limitations imposed by applicable law):“This product has been developed using technology licensed from BTG International Limited and is protected by the following patents [Onyx to insert the registration numbers of the relevant granted Licensed Patents covering the country of sale].”

[*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 17

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11.

CONFIDENTIALITY

11.1

In this Agreement, “Confidential Material” shall, subject to Clause 11.2, mean:11.1.1 any and all data, results, know-how (including the Licensed Know-How), show-how, software, algorithms, inventions, designs, trade secrets, plans, forecasts, analyses, evaluations, research, technical information, business information, financial information, business plans, strategies, customer lists, marketing plans, or other information whether oral, in writing, in electronic form, or in any other form; and 11.1.2 any physical items, compounds, components, samples or other materials; disclosed by one party or any of its Affiliates (the “Disclosing Party”) to the other or any of its Affiliates (the “Receiving Party”) before, on or after the Commencement Date. Notwithstanding the foregoing, the Licensed Know-How shall be deemed to be the Confidential Information of both parties.

11.2

In this Agreement, “Confidential Material” shall not include any information or materials which the Receiving Party can prove:11.2.1 is or becomes public knowledge through no improper conduct on the part of the Receiving Party, its Affiliates and/or their respective Personnel; 11.2.2 is already lawfully possessed by the Receiving Party and/or its Affiliates without any obligations of confidentiality or restrictions on use prior to first receiving it from the Disclosing Party; 11.2.3 is obtained subsequently by the Receiving Party and/or its Affiliates from a Third Party without any obligations of confidentiality and such third party is in lawful possession of such information or materials and not in violation of any contractual or legal obligation to maintain the confidentiality of such information or materials; and/or 11.2.4 is developed independently by the Receiving Party and/or its Affiliates without use or knowledge of the Confidential Material provided by the Disclosing Party.

11.3

The Receiving Party shall treat all Confidential Material as secret and confidential and shall not use, copy or disclose to any third party any Confidential Material received from the Disclosing Party (whether before, on or after the date of this Agreement) except as set out in Clause 11.4 below.

11.4

The Receiving Party may:11.4.1 use and disclose Confidential Material received from the Disclosing Party to the extent necessary or useful to enable the Receiving Party to exploit the rights granted under this Agreement (including rights granted to Onyx under the Licence) and/or to perform its obligations under this Agreement provided that the Receiving Party shall (1) only disclose Confidential Material to third parties that

[*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 18

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have entered into appropriate and legally binding confidentiality and non-use obligations in respect of the Confidential Material disclosed; and (2) use reasonable commercial endeavours to ensure that such third parties do not further disclose or use Confidential Material; 11.4.2 disclose Confidential Material received from the Disclosing Party to those of its Personnel to whom such disclosure is necessary or useful (and only disclose that part of the Confidential Material which is necessary or useful) to enable the Receiving Party to exploit the rights granted under this Agreement and/or to perform its obligations under this Agreement and provided that the Receiving Party shall remain responsible for procuring that its Personnel do not further disclose and/or use the Confidential Material for any other purpose; and/or 11.4.3 after giving written notice to the Disclosing Party, disclose any part of the Confidential Material received from the Disclosing Party solely to the extent that it is legally required to do so pursuant to an order of a court of competent jurisdiction or governmental authority provided that the Receiving Party shall use its best endeavours to limit such disclosure and, to the extent practicable, shall provide the Disclosing Party with an opportunity to make representations to the relevant court or governmental authority. 11.5

Except as set forth in Clauses 2.2 and 8, all documents, materials and other items (including items in electronic form), and any intellectual property rights therein, provided by the Disclosing Party to the Receiving Party containing Confidential Material shall remain the absolute property of the Disclosing Party.

11.6

The Receiving Party shall at all times maintain documents, materials and other items (including items in electronic form) containing Confidential Material received from the Disclosing Party and any copies thereof, in a secure fashion by taking reasonable measures to protect them from theft and unauthorised copying and disclosure.

11.7

The Receiving Party shall notify the Disclosing Party immediately if the Receiving Party becomes aware of any unauthorised use or disclosure of, or any unauthorised access to or of any theft or loss of any copies of any Confidential Material received from the Disclosing Party.

11.8

The provisions of this Clause 11 shall commence on the Commencement Date and shall continue until [ * ] years after termination or expiry of this Agreement.

11.9

BTG shall have the right to disclose to [ * ] and its assigns the Confidential Material disclosed by Onyx or any of its Affiliates to BTG or any of its Affiliates and the Licensed Know-How. BTG shall ensure that [ * ] is bound by appropriate confidentiality obligations in respect of the Confidential Material of Onyx that is disclosed to [ * ] by BTG.

12.

WARRANTIES

Warranties Given 12.1 [*] =

BTG warrants to Onyx that at the Commencement Date that:Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 19

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12.1.1

BTG is in rightful possession of all Licensed Know-How and owns all right, title, and interest in the Licensed Patents existing as at the Commencement Date free of any mortgages, pledges, liens, security interests, encumbrances, charges, or claims of any kind;

12.1.2

BTG has the right to grant the Licences as purported to be granted herein;

12.1.3

BTG has not made any commitments to third parties inconsistent with or in derogation of its obligations under this Agreement and is not subject to any obligations which would prevent it from entering into or carrying out its obligations under this Agreement;

12.1.4

BTG owns the Materials, free of any mortgages, pledges, liens, security interests, encumbrances, charges, or claims of any kind;

12.1.5

As of the Commencement Date, it has not received any written notice from any third party asserting or alleging that any research or development of any Licensed Product (including BCG-0945) by BTG prior to the Commencement Date infringed or misappropriated the intellectual property rights of such third party;

12.1.6

As of the Commencement Date, there are no pending or, to BTG’s knowledge, threatened, actions, suits or proceedings against BTG involving the Licensed Technology or any Licensed Product (including BCG-0945).

12.1.7

To BTG’s knowledge, there is no unauthorized use, infringement or misappropriation of any of Licensed Technology by any employee or former employee of BTG, or any other third party;

12.1.8

The Licensed Patents existing on the Commencement Date are subsisting and are not the subject of any litigation procedure or discovery process or to BTG’s knowledge, interference, reissue, reexamination, opposition, appeal proceedings or any other legal dispute;

12.1.9

The Licensed Patents listed on Schedule 1 constitute all patent rights owned or controlled by BTG as of the Commencement Date that are directly related to, or, to BTG’s knowledge, are necessary for, the research, development, manufacture, use or commercialization of BCG-0945;

12.1.10 The Licensed Know-How constitute all know-how owned or controlled by BTG as of the Commencement Date that are directly related to, or, to BTG’s knowledge, are necessary for, the research, development, manufacture, use or commercialization of BCG-0945; 12.1.11 To BTG’s knowledge, as of the Commencement Date, no third party has filed, pursued or maintained or threatened in writing to file, pursue or maintain any claim, lawsuit, charge, complaint or other action alleging that any Licensed Patent is invalid or unenforceable; 12.1.12 BTG owns all rights in any intellectual property made, discovered or developed by its employees (or those of its Affiliates) who have performed any activities on its behalf in connection with research regarding BGC-0945 and, to BTG’s knowledge, no third party has any rights to any such intellectual property; and [*] =

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12.1.13 BTG is not aware of any third party patents or patent applications (other than the Licensed Patents that are owned by third parties or any other patent which has been expressly disclosed to Onyx in writing) that apply to or cover the inventions claimed in the Licensed Patents in any country in the world. 12.2

Onyx warrants to BTG that at the Commencement Date, Onyx has not made any commitments to third parties inconsistent with or in derogation of its obligations under this Agreement and is not subject to any obligations which would prevent it from entering into or carrying out its obligations under this Agreement.

Exclusion of Implied Warranties 12.3

Except for the representations (other than fraudulent misrepresentations) and warranties set out in this Agreement, each party hereby disclaims any and all representations and warranties, including any implied by statute, common law or otherwise, to the maximum extent permissible by law.

12.4

Without prejudice to the generality of Clause 12.3, BTG excludes any terms and conditions implied by statute, common law or otherwise in relation to the Licensed Technology and/or the Materials and does not give any warranty, representation or undertaking (except for those set out in this Agreement):12.4.1 as to the efficacy, usefulness, fitness for purpose, quality, content, safety or commercial or technical viability of the Licensed Technology and/or Materials and/or any products made or processes carried out using the Licensed Technology and/or the Materials; 12.4.2 as to the volumes or quality of the Licensed Products which may be manufactured through the use of the Licensed Technology; 12.4.3 that any of the granted Licensed Patents are or will be valid or that any of the Patent Applications will proceed to grant; 12.4.4 that the Licensed Technology can be freely exploited in all or any parts of the world; 12.4.5 that the Licensed Technology will not infringe the intellectual property rights or other rights of any third party; and/or 12.4.6 that all or any part of the Licensed Know-How is confidential and is not otherwise available to the public.

12.5

No provision of this Agreement shall operate to:12.5.1 exclude any provision implied into this Agreement by English law and which may not be excluded by English law; or

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12.5.2 limit or exclude any liability, right or remedy to a greater extent than is permissible under English law including in relation to (1) death or personal injury caused by the negligence of a party to this Agreement or (2) fraudulent misrepresentation or deceit. 13.

LIABILITY AND INDEMNITY

13.1

BTG, its Affiliates and their Personnel, shall have no liability to Onyx whether in contract, tort, negligence or otherwise for any loss or damage arising out of and/or in connection with:13.1.1 any research, development, manufacture, use, commercialization, distribution, supply or sale of the Licensed Products by Onyx and/or Onyx’s Suppliers; and/or 13.1.2 any possession or use by a third party of the Materials and/or Licensed Products manufactured and/or supplied by or on behalf of Onyx or Onyx’s Suppliers.

13.2

For the avoidance of doubt, nothing in Clause 13.1 shall exclude BTG’s liability to Onyx for (a) the negligence or wilful and intentional misconduct of BTG, its Affiliates or any of their respective Personnel; and/or (b) the breach of this Agreement (including any breach of any representation in Clause 12.1) by BTG.

13.3

Onyx shall fully indemnify, and at all times keep BTG, its Affiliates and their respective Personnel fully indemnified, against any and all liability, damages, or expenses (including legal expenses and expert’s fees) arising out of or in connection with suits, claims, proceedings (collectively, “Claims”) brought by third parties, to the extent resulting from:13.3.1 any exercise of the Licensed Rights by Onyx and/or its Sub-licensees or their respective Affiliates, including any research, development, manufacture, commercialization, use, distribution, marketing, supply or sale of the Licensed Products and/or Materials; and/or 13.3.2 any possession or use by a third party of the Licensed Products manufactured and/or supplied by or on behalf of Onyx or Onyx’s Suppliers. Notwithstanding the foregoing, Onyx shall not be liable under the indemnity set out in Clause 13.3 to the extent that a Claim is judicially determined to have resulted solely from (a) the gross negligence or wilful and intentional misconduct of BTG, its Affiliates or any their respective Personnel; and/or (b) the breach of this Agreement (including the breach of any representation in Clause 12.1) by BTG.

13.4

[*] =

Any entity entitled to indemnification under this Clause 13 shall give written notice to the indemnifying party of any Claims that may be subject to indemnification, promptly after learning of such Claim. Within a reasonable time after receiving such notice, the indemnifying party shall assume the defence of such Claims with counsel reasonably satisfactory to the indemnified party. The indemnified party shall cooperate with the indemnifying party in such defence. The indemnified party may, at its option and expense, be represented by counsel of its choice in any action or proceeding with respect to such Claim. The indemnifying party shall not be liable for any litigation costs or expenses incurred by the indemnified party without the indemnifying party’s written consent, such Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 22

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consent not to be unreasonably withheld. The indemnifying party shall not settle any such Claim if such settlement (a) does not fully and unconditionally release the indemnified party from all liability relating thereto, or (b) adversely impacts the rights granted to the indemnified party under this Agreement, unless the indemnified party otherwise agrees in writing. 13.5

Onyx shall effect and maintain at its own expense comprehensive general commercial liability insurance with insurers rated A- or better by A.M. Best (including completed operations (clinical trial) and product liability coverage for the Licensed Products), in the sum of not less than US $[ * ] per claim.

13.6

The insurance required under Clauses 13.5 shall be effected and maintained for the term of this Agreement and for a period of not less than [ * ] following termination or expiry of this Agreement.

13.7

As and when requested by BTG, Onyx shall promptly provide to BTG a certificate of insurance which demonstrates that the insurance coverage required under Clause 13.5 is in effect. If Onyx fails to comply with its obligations under Clause 13.5 or this Clause 13.7 then BTG may obtain any such insurance and Onyx shall pay BTG the cost thereof on demand. BTG shall provide to Onyx thirty (30) days notice of its intention to obtain any such insurance and shall obtain the same only if Onyx continues to fail to do so within such thirty (30) day notice period.

14.

PROSECUTION OF THE PATENT APPLICATIONS

14.1

Subject to Clause 14.2, BTG shall use commercially reasonable diligent efforts, at its own cost, to prepare, file, prosecute, obtain and maintain the Licensed Patents throughout the world, seeking the broadest claim scope reasonably available for such Licensed Patents consistent with maintaining the validity of such claims.

14.2

BTG shall consult with Onyx in relation to the prosecution of the Patent Applications. BTG shall, on an ongoing basis, keep Onyx reasonably informed of its filing, prosecution and maintenance activities and shall promptly, following receipt by BTG, provide Onyx with copies of all prosecution documents. BTG shall give Onyx reasonable opportunities to comment and propose modifications (and where given such opportunity by BTG, Onyx must respond to BTG within [ * ] of the provision of the same) and BTG shall give due consideration to, and except as provided in the following sentence, shall incorporate, all reasonable comments or suggestions made by Onyx with respect to such filing, prosecution, and maintenance. Where BTG is of the good faith opinion that the comment or suggestion made by Onyx would have no reasonable benefit to such filing, prosecution or maintenance (as applicable) and Onyx continues to, in its reasonable opinion, disagree, BTG shall obtain the advice of an independent patent attorney, who shall be chosen by BTG and shall be reasonably acceptable to Onyx, and who shall be asked to resolve the disagreement. The cost of obtaining the advice of such independent legal advisor shall be borne equally by the parties. Onyx shall have the right, in conjunction with BTG, to communicate directly with the patent counsel responsible for prosecuting the Patent Applications, although such counsel shall take its ultimate instruction from BTG. BTG shall not abandon or agree to any narrowing of any claim in the Patent Applications except with Onyx’s consent, which consent shall not be unreasonably withheld or delayed.

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14.3

BTG shall notify Onyx if BTG decides not to proceed with a Patent Application in any country.

14.4

Onyx shall promptly notify BTG if it wishes to proceed with the prosecution of any Patent Application notified to Onyx pursuant to Clause 14.3.

14.5

Onyx shall have the right to prosecute Patent Applications in countries notified to Onyx pursuant to Clause 14.3, in BTG’s name, at Onyx’s own cost and expense, in which case the relevant Patent Application shall be deemed to be a “Licensee Prosecuted Patent Application” and shall be excluded from the definition of Patent Applications for the purposes of Clauses 14.1 and from the definition of Licensed Patents for the purposes of the payment of royalties in accordance with Clause 5.5. For the avoidance of doubt, all Licensee Prosecuted Patent Applications and any patents issuing therefrom shall continue to be licensed to Onyx pursuant to the Licence.

14.6

All patents granted pursuant to a Licensee Prosecuted Patent Application shall be owned exclusively by BTG.

14.7

Onyx shall decide on the prosecution strategy for Licensee Prosecuted Patent Applications but shall keep BTG informed of such prosecution strategy and provide copies of all proposed responses to official actions during the prosecution of a Licensee Prosecution Patent Application and shall take account of any reasonable views expressed by BTG concerning prosecution strategy and the proposed responses to official actions during the prosecution provided that Onyx shall have the final decision on such matters.

14.8

If Onyx for whatever reason decides not to proceed with the prosecution of a Licensee Prosecuted Patent Application in any country then Onyx shall promptly notify BTG to this effect and [ * ] shall have [ * ] to [ * ] at [ * ] and [ * ], in which case the relevant Patent Application shall [ * ] and shall, [ * ], be [ * ].

14.9

Onyx shall: 14.9.1 keep BTG informed in relation to the anticipated timing for receipt of any Product Approval in a Major Territory; and 14.9.2 promptly (and in any event within [ * ] days of receipt) notify BTG in writing of full details of each Product Approval in any country including providing BTG with a copy of the relevant Summary of Product Characteristics (or equivalent).

14.10 In the event that BTG wishes to make any application for a Patent Term Extension in respect of Licensed Products, at BTG’s reasonable request, Onyx shall promptly take all necessary steps to facilitate such application. In particular, but without limitation, Onyx shall, at BTG’s reasonable request promptly and free of charge provide to BTG: 14.10.1 a copy of every authorisation fulfilling the requirements of Article 8.1(b) of the EC Supplementary Protection Certificate Regulation (and of any additional applicable requirements imposed by relevant national law) in respect of all Licensed Products; [*] =

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14.10.2 additional information fulfilling the requirements the regulation referred to in Clause 14.10.1 and a copy of the notice publishing the authorisation in the appropriate official publication (and information and documents fulfilling any additional requirements imposed by relevant national law); and 14.10.3 permit use of documents and information provided pursuant to this clause for the purpose of such application for Patent Term Extensions. 14.11 BTG shall be entitled to disclose any Product Approval or any part thereof to any relevant authorities for the purposes of obtaining any Patent Term Extension in respect of Licensed Products. 14.12 BTG shall notify Onyx in a timely manner of the grant of any Patent Term Extension in respect of Licensed Product. 14.13 BTG shall not be obliged to apply for grant of any Patent Term Extension. 14.14 Onyx shall not be entitled to make an application for or participate in negotiations for grant of any Patent Term Extensions in respect of the Licensed Patents or Licensed Products. Notwithstanding the foregoing, in the event that a Patent Term Extension becomes available in respect of a Licensed Product in a country, and BTG does not provide Onyx with written notice of its intention to apply for a Patent Term Extension in respect of such Licensed Product in such country within [ * ] after Onyx notifies BTG of the Product Approval for such Licensed Product in such country pursuant to Section 14.9.2, Onyx may apply for such Patent Term Extension in BTG’s name, and BTG shall provide all such reasonable assistance at the cost of Onyx as Onyx may require to obtain such Patent Term Extension. 15.

MAINTENANCE OF THE PATENTS

15.1

Subject to Clause 15.2, BTG shall pay all renewal fees payable in respect of the granted Licensed Patents as and when such renewal fees become due (subject to BTG’s right to make use of grace periods where available and if necessary).

15.2

If BTG does not wish to continue to pay the renewal fees in respect of a granted Licensed Patent then BTG shall notify Onyx of its intention to allow the specified granted Licensed Patent to lapse at least [ * ] before the next renewal fee is due. Onyx shall have the right to pay the renewal fees in respect of such granted Licensed Patent. If Onyx does not notify BTG of its intention to exercise its rights under this Clause 15.2 within [ * ] of BTG’s notice then BTG shall have the right to allow the granted Licensed Patent to lapse.

15.3

Onyx shall have the right to pay the renewal fees in respect of granted Licensed Patents notified to Onyx pursuant to Clause 15.2 at Onyx’s own cost and expense, in which case the relevant granted Licensed Patent shall be deemed to be a “Licensee Granted Patent” and shall be excluded from the definition of Licensed Patents for the purposes of Clause 15.1 and for the purposes of the payment of royalties in accordance with Clause 5.5.

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15.4

If Onyx for whatever reason decides not to continue to pay renewal fees in respect of Licensee Granted Patents then Onyx shall promptly notify BTG to this effect and [ * ] shall have [ * ] to [ * ] at [ * ] and [ * ], in which case the granted Licensed Patent shall [ * ] and shall, [ * ], be [ * ].

16.

INFRINGEMENT OF THE LICENSED RIGHTS

16.1

Each party shall promptly notify the other with such details as it has in its possession of all Infringements as and when it becomes aware of an Infringement.

16.2

Onyx shall have the first right, but not the obligation, to prevent or abate Infringements, including conducting infringement proceedings in its own name and at its own cost (although BTG shall have the right, at its request, to be joined in any such infringement proceedings).

16.3

BTG shall provide Onyx with such assistance as Onyx may reasonably request in connection with any proceedings against Infringers. Onyx shall pay BTG’s reasonable out-of-pocket expenses properly incurred in providing the requested assistance and, where suing in BTG’s name, indemnify and hold BTG harmless against BTG’s liabilities, costs, expenses and losses properly incurred in providing the requested assistance.

16.4

Onyx shall keep BTG fully informed of and consult with BTG with respect to the progress of and developments in any proceedings against Infringers including any settlement discussions with the defendants or potential defendants of such proceedings and shall provide to BTG copies of all claims, statements of case, counter-claims and defences prepared in relation to any proceeding against Infringers.

16.5

Onyx may negotiate settlements with Infringers but shall not conclude any settlement without having received BTG’s prior written approval of terms of the settlement, such approval not to be unreasonably withheld.

16.6

Any damages, proceeds, settlement sums or awards received by Onyx in relation to any Infringement (together referred to as “Damages”) shall be deemed to be Net Sales Value or Net Receipts, whichever would result in the greater payment to BTG. Accordingly, Onyx shall pay to BTG the payment set out in Clause 5.5 or 5.8 (which ever is the greater) on any Damages received after deduction from the Damages of Onyx’s legal fees incurred in taking action in respect of the Infringement and any of BTG’s costs or expenses that are paid by Onyx.

16.7

If for any reason Onyx fails to initiate or prosecute proceedings against any Infringer then BTG may at its absolute discretion and at its own cost and expense take proceedings (or continue any existing proceedings commenced by Onyx) against such Infringer. Onyx shall provide such assistance as BTG may from time to time reasonably request in connection with such proceedings including making available to BTG such records, information and evidence in Onyx’s possession or control which may be of assistance to BTG. Any damages, proceeds, settlement sums or awards received by BTG in relation to any Infringement shall be the sole property of BTG.

16.8

If an Infringer against whom Onyx has initiated infringement proceedings files counterclaims for revocation of any of the granted Licensed Patents, then Onyx shall

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promptly notify BTG of such counterclaims and shall, notwithstanding Clause 17, have the right to defend, in collaboration with BTG, such counterclaims. 17.

REVOCATION PROCEEDINGS

17.1

BTG shall notify Onyx of the commencement of any Revocation Proceedings.

17.2

Except as set forth in Clause 16.8, BTG shall have the first right but not the obligation to defend the Revocation Proceedings.

17.3

If BTG does not wish to defend or continue to defend Revocation Proceedings then BTG shall promptly notify Onyx and Onyx may at Onyx’s own cost and expense defend or continue to defend the Revocation Proceedings referred to in BTG’s notice provided that, where such Revocation Proceedings are being defended or continued in BTG’s name, Onyx shall indemnify and hold harmless BTG against any and all liability, damage, costs and expenses (including awards of costs and damages) incurred by BTG arising out of Onyx’s continuation of such Revocation Proceedings.

17.4

Subject to the availability of suitably qualified staff, each party shall provide the other party with such assistance as the other party shall reasonably request in connection with any Revocation Proceedings. The party requesting such assistance shall pay the other party’s reasonable out-of-pocket expenses properly incurred in providing the requested assistance.

17.5

For the avoidance of doubt, in no circumstances shall BTG be required to refund any payments made under this Agreement and in accordance with its terms, including in the case where a Licensed Patent is wholly or partly revoked, cancelled or otherwise ceases to be in force.

18.

COMMENCEMENT, EXPIRY AND TERMINATION

Commencement and Expiry 18.1

This Agreement shall come into force on the Commencement Date and unless terminated earlier in accordance with its provisions, this Agreement shall expire when the last of the Licences expires pursuant to Clause 3.1 (the “Term”).

Termination by Onyx 18.2

Onyx may terminate this Agreement at any time without cause by giving BTG [ * ] written notice of termination.

Termination by Either Party 18.3

[*] =

Either party may terminate this Agreement forthwith by giving the other party immediate written notice of termination if the nonterminating party commits a material breach of this Agreement which is capable of remedy and, having been notified of such breach, fails to remedy it within thirty (30) days of notification. For the purpose of determining whether a party has committed a “material breach” of this Agreement, the parties intend that, only (a) a [ * ]; (b) [ * ]; or (c) [ * ], shall constitute a “material breach”. Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 27

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Termination by BTG 18.4

This Agreement may be terminated by BTG forthwith by notice in writing to Onyx if:18.4.1 Onyx fails to pay in full any payments due under this Agreement within thirty (30) days of receiving notice from BTG demanding such payment; 18.4.2 Onyx and/or Onyx Affiliates challenge, petitions to revoke, opposes or otherwise disputes, or knowingly finances, aids or otherwise assists any third party to challenge, petition to revoke, oppose or otherwise dispute, the ownership, validity, patentability, priority, enforceability and/or scope of any of the Licensed Rights including the validity of any of the claims of the Licensed Patents; 18.4.3 Onyx (i) fails to conduct any material development activity in relation to a Licensed Product for a period of [ * ]; or (ii) has decided to cease the development of Licensed Products; 18.4.4 any of the following events occur:18.4.4.1 an order is made or a resolution passed for the winding up of Onyx (other than for the purpose of a solvent scheme of reconstruction or amalgamation); 18.4.4.2 a liquidator, administrative receiver, receiver or trustee is appointed in respect of a material part of Onyx’s assets or business; 18.4.4.3 as a consequence of financial difficulties Onyx makes any voluntary arrangement with its creditors; or 18.4.4.4 Onyx ceases to continue its business; 18.4.4.5 Onyx becomes unable to pay its undisputed debts and remains unable to pay its undisputed debts as and when they fall due for a period of ninety (90) days; or 18.4.4.6 as a consequence of debt and/or maladministration, Onyx takes or suffers any similar or analogous action to those listed in Clauses 18.4.4.1 to 18.4.4.5 above.

19.

CONSEQUENCES OF EXPIRY OR TERMINATION

Consequences of Expiry or Termination 19.1

On expiry or termination of this Agreement for any reason:19.1.1 Onyx shall within [ * ] of the date of termination or expiry pay to BTG all sums due to it under this Agreement in respect of the period up to and including the date of termination including any royalties payable on Licensed Products supplied prior to or on the date of termination; provided, however, that Onyx shall not owe

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any Development Milestone Payments under Clause 5.3 if the corresponding Milestone Event occurs after the date on which a termination notice is delivered. 19.1.2 Onyx shall continue to pay Sales Milestone Payments where the corresponding Sales Milestone Events are achieved, and royalties on any amounts earned, as a result of on-going sales of residual inventory of Licensed Products as permitted under Clause 19.1.3; 19.1.3 Onyx shall, at BTG’s option: (a) destroy (and procure that its Affiliates and Sub-licensees destroy) any Licensed Products held in inventory by Onyx (or its Affiliates or Sub-licensees); (b) continue selling all Licensed Products held in inventory subject to all royalty payments under Clause 5.5 and 5.6 (and, subject to all royalty payments under Clause 5.8, inform its Affiliates and Sub-licensees that they may do the same) and the payment of all Sales Milestones pursuant to Clause 5.3 in the event that such on-going sales of Licensed Products results in a Sales Milestone Event being attained; or (c) transfer (and procure that its Affiliates or Sub-licensees transfer) such Licensed Products to BTG at a price to be negotiated in good faith between the Parties; 19.1.4 any rights or remedies of each of the parties arising from any breach of this Agreement shall continue to be enforceable; and 19.1.5 the following provisions shall continue in full force and effect: Clause 1, Clause 4.4 in respect of acts and/or omissions by Sublicensees on or prior to termination of this Agreement, Clauses 5 and 6 in respect of royalties and Milestones Payments payable pursuant to Clause 19.1.3, Clause 7, Clauses 11 and 12, Clauses 13.1 — 13.6 in respect of acts and/or omissions on or prior to the date of termination or expiry and insurance, Clause 19 and Clause 20. 19.2

On termination of this Agreement for any reason:19.2.1 the Licences shall terminate automatically and Onyx shall, and, subject to Clause 4.7, shall procure that the Onyx Suppliers shall, forthwith cease all activities requiring a licence under this Agreement; 19.2.2 Subject to any applicable regulatory requirements, Onyx shall promptly return to BTG all Confidential Material and any copies thereof disclosed to Onyx by BTG whether in the possession or control of Onyx Suppliers. Onyx shall provide a signed statement from a duly authorised officer of Onyx that Onyx’s obligations under this Clause 19.2.2 have been complied with; and 19.2.3 Subject to any applicable regulatory requirements, Onyx shall transfer promptly and in good faith to BTG all Product Approvals for the Licensed Products as well as all technical information or data (including, without limitation, all clinical and pre-clinical data and documents and regulatory filings) generated by Onyx pursuant to activities conducted under this Agreement (or generated by Onyx Suppliers pursuant to activities conducted under this Agreement), including without limitation market research so generated to support the sale and distribution of the Licensed Product.

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19.3

If termination of this Agreement occurs as a result of breach by an Onyx Supplier and at the date of termination an Onyx Supplier has treated the last patient in the first Phase II Clinical Trial (the “Termination Milestone”) then BTG shall pay to Onyx in consideration of the transfer set out in Clause 19.2.3, [ * ] of future net receipts, if any, by BTG from the sale of Licensed Products (calculated in a manner parallel to the calculation of Net Receipts) after deduction of all amounts payable by BTG to ICR in respect of such net receipts.

19.4

If termination of this Agreement occurs as a result of breach by an Onyx Supplier and the Termination Milestone has not been met as at the date of termination, no sums shall be payable by BTG to Onyx in consideration of the transfer set out in Clause 19.2.3.

19.5

In all instances where neither Clause 19.3 nor Clause 19.4 applies, BTG shall pay to Onyx in consideration of the transfer set out in Clause 19.2.3, [ * ] of net receipts by BTG from the sale of Licensed Products (calculated in a manner parallel to the calculation of Net Receipts) after deduction of all amounts payable by BTG to ICR in respect of such net receipts.

20.

GENERAL

20.1

In this Agreement:20.1.1 any phrase introduced by the terms “including”, “include” and “in particular” or any similar expression shall be construed as illustrative only and shall not limit the sense of the words preceding these terms; 20.1.2 the headings are for convenience only and shall not affect the interpretation of this Agreement; 20.1.3 all references to Clauses or Schedules are references to clauses or schedules of this Agreement; and 20.1.4 references to legislation shall be construed as a reference to that legislation as amended, re-enacted or replaced whether in whole or in part.

20.2

The schedules attached to this Agreement shall form part of this Agreement.

Notices 20.3

Any notice or other communication given under this Agreement shall be in writing in the English language and shall be:20.3.1 delivered by hand; or 20.3.2 sent by pre-paid airmail or by a reputable international delivery service; or 20.3.3 sent by fax (confirmed by pre-paid airmail placed in the post on or on the day after the date of transmission);

to the address or fax number set out below or to such other address or fax number as may from time to time be notified to the other party in writing. [*] =

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20.4

BTG International Limited 10 Fleet Place Limeburner Lane London EC4M 7SB UK

Onyx Pharmaceuticals Inc. 2100 Powell Street Emeryville California 94608 USA

Fax: [ * ]

Fax: [ * ] Email: [ * ]

Any notice given under Clause 20.3 shall be deemed to have been received:20.4.1 on the date of delivery if delivered by hand or by a reputable international delivery service prior to 5:00 pm on a business day, otherwise on the next business day following the date of delivery; 20.4.2 on the tenth business day from and including the day of posting in the case of pre-paid airmail; or 20.4.3 on the next business day following the day of transmission in the case of facsimile (confirmed by pre-paid first class post/airmail or by a reputable international delivery service as provided above).

20.5

In Clause 20.4, business day shall mean a day that is not Saturday, Sunday and/or a public holiday in the country (or sub-division thereof) to which the notice is sent.

Severability 20.6

If any provision of this Agreement is declared void or otherwise unenforceable then the provision shall be omitted and the remaining provisions of this Agreement shall continue in full force and effect.

Waiver 20.7

Failure or delay by either party to exercise any right or remedy under this Agreement shall not be deemed to be a waiver of that right or remedy, or prevent the party from exercising that or any other right or remedy on any occasion. Entire Agreement and Amendments

20.8

This Agreement together with the non-disclosure agreement dated 29 April 2008 between the parties constitutes the entire agreement and understanding of the parties relating to the subject matter of this Agreement and supersedes all prior oral or written agreements, representations, understandings or arrangements between the parties relating to the subject matter of this Agreement.

20.9

Except as expressly set forth in this Agreement, neither party grants to the other by implication, estoppel or otherwise, any right, title, licence or interest in any intellectual property right.

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20.10 The parties acknowledge that they are not relying on any understanding, arrangement, statement, representation, warranty, condition, term, custom, course of dealing or provision which is not set out in this Agreement. 20.11 To the fullest extent permitted by law, the parties irrevocably and unconditionally waive any rights they may have to rescind this Agreement in respect of any misrepresentation other than one which is expressly stated in this Agreement or which was made fraudulently. 20.12 No change shall be made to this Agreement except in writing signed by the duly authorised representatives of both parties. Relationship of the Parties 20.13 Nothing in this Agreement shall create, evidence or imply any agency, partnership, joint venture or employment relationship between the parties. 20.14 Neither party shall act or describe itself as the agent of the other party nor shall either party have or represent that it has any authority to make commitments on behalf of the other. Assignment and Sub-contracting 20.15 Subject to Clause 4 and Clause 20.16, neither party shall without the prior written consent of the other party assign, sub-contract or otherwise deal with this Agreement or any rights and obligations under this Agreement. Any such purported assignment, sub-contract or dealing with this Agreement or any rights and obligations under this Agreement without the prior written consent of the other party shall be void. If a party assigns or sub-contracts any of its obligations under this Agreement to any Affiliate or any third party, the party assigning or sub-contracting shall be fully responsible to the other party for the proper performance of those obligations and for any act or omission of the Affiliate or third party in relation thereto. 20.16 Either party shall be entitled (without the consent of the other party) to assign this Agreement (or any of its rights or obligations under this Agreement) to any of its Affiliates. Such assignment shall not be [ * ]. In addition, Onyx shall be entitled (without the consent of the other party) to assign the entirety of this Agreement (but not part only of its rights and obligations under this Agreement) to its successor in interest in connection with a merger, acquisition or similar transaction transferring a controlling interest in Onyx or a sale of all or substantially all of Onyx’s assets to which this Agreement relates, provided that the assignee of this Agreement shall be obliged to fulfil all of Onyx’s obligations under the Agreement. BTG shall be entitled to assign any Licensed Patents or Licensed KnowHow to a third party but, for the avoidance of doubt, any such assignment shall be made expressly subject to the terms of this Agreement. Publicity & Non-disclosure 20.17 The parties shall not, and shall procure that their respective Personnel, their respective Affiliates and the Personnel of their respective Affiliates shall not, make any public announcement, or publicly comment upon, or originate any publicity, or otherwise disclose any information to the public concerning this Agreement including but not limited to, the [*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 32

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existence of this Agreement, the terms of this Agreement, any dispute or disagreement relating to this Agreement and/or, subject to Clause 20.17.3 below, the performance of this Agreement where such performance concerns the commercialisation and/or development of a Licensed Product, without the prior consent of the other party, such consent not to be unreasonably withheld or delayed provided that:20.17.1 if a party is required by law, regulation or the rules of a stock market upon which its stocks or shares are traded to make any disclosure concerning this Agreement then such disclosure may be made without the consent of the other party on condition that:20.17.1.1 the party making the disclosure will notify the other party of the full text of the disclosure as soon as practicable prior to its release so that the other party will have an opportunity to comment upon the disclosure; and 20.17.1.2 any such disclosure shall be factual and as brief as practicable (subject to any requirements imposed by applicable law); 20.17.2 each party shall be entitled disclose the provisions of this Agreement to a third party that intends to acquire substantially all of the relevant business of that party (whether by merger, acquisition, sale of assets, or otherwise) on condition that such third party has executed a legally binding confidentiality agreement under which it agrees not to further disclose the provisions of this Agreement; 20.17.3 subject to Clause 20.17.5, Onyx shall be entitled to make a public announcement, or publicly comment upon, or originate any publicity, or otherwise disclose any information to the public concerning the performance of this Agreement where such performance concerns the commercialisation and/or development of a Licensed Product on the condition that it has provided to BTG at least [ * ] notice (or longer if reasonably practicable) of the content of such publicity/disclosure, and following such disclosure by Onyx, BTG shall be entitled to make a public announcement in relation to the same matter on the condition that it has provided to Onyx at least [ * ] notice (or longer if reasonably practicable) of the content of such announcement; 20.17.4 each party shall be entitled to make their own press release in relation to the execution of this Agreement, subject to the content and timing for release being agreed in advance with the other party; and 20.17.5 each party shall be entitled to disclose a press release (and all necessary information contained therein) publicising the achievement by Onyx or an Onyx Supplier of a Milestone Event provided that:20.17.5.1 the party making the disclosure will notify the other party of the full text of the disclosure as soon as possible prior to its release so that the other party will have an opportunity to comment upon the disclosure; and 20.17.5.2 any such disclosure shall be factual and as brief as possible. [*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 33

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Further Assurances 20.18 Each party shall, as and when requested by the other party, do all acts and execute all documents as may be reasonably necessary to give effect to the provisions of this Agreement. 20.19 The parties shall execute, at the cost of Onyx, such formal licences as Onyx may consider necessary or reasonably appropriate for registration of the licences granted under this Agreement with the patent offices and trade mark offices and/or other relevant authorities in each of the countries in which the Licensed Patents are granted. Any such formal licence shall operate subject to the terms of this Agreement and, in the event of any conflict, the terms of this Agreement shall prevail wherever possible. Third Party Rights 20.20 The Contracts (Rights of Third Parties) Act 1999 and any legislation amending or replacing this Act shall not apply in relation to this Agreement and nothing in this Agreement shall confer on any third party the right to enforce any provision of this Agreement. Onyx Affiliates 20.21 Onyx shall procure that its Affiliates comply with the provisions of this Agreement as if they were party to this Agreement. 20.22 Onyx shall be responsible for, and liable to, BTG for all acts and/or omissions of the Affiliates of Onyx as if such acts or omissions had been made by Onyx. 20.23 Onyx shall procure that any rights of an Affiliate of Onyx granted under this Agreement shall terminate automatically if it ceases to be an Affiliate of Onyx within the definition specified in Clause 1.1. Authority and Governmental Approvals 20.24 Each party represents and warrants to the other that:20.24.1 it is, in the case of BTG, a limited liability company, duly incorporated and validly existing under the laws of, in the case of BTG, England and Wales or, in the case of Onyx, a corporation, duly incorporated and validly existing under the laws of the state of Delaware, United States of America; 20.24.2 it has the full corporate power and authority to enter into and perform this Agreement without obtaining the consent of any third party and has taken all necessary corporate action to authorise the execution, delivery and performance of this Agreement; and 20.24.3 it has duly executed and delivered this Agreement and it is a legally valid and binding obligation on it. Law and Jurisdiction [*] =

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20.25 English law shall govern the validity, interpretation and performance of this Agreement and the parties submit irrevocably to the nonexclusive jurisdiction of the English Courts in respect thereof. Counterparts 20.26 This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall constitute an original of this agreement, but all the counterparts shall together constitute the same agreement. If this Agreement is executed in counterparts, it shall not be effective unless and until each party has executed and delivered a counterpart to each of the other parties. [*] =

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Schedule 1 Licensed Patents [*] [*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. 1

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Schedule 2 Know-How [*] [*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Schedule 3 Materials [*] [*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Schedule 4 Royalty Statements 1.

2.

3. [*] =

In respect of each country where Licensed Products were supplied during that Quarter:1.1

the Net Sales Value of each type of Licensed Product supplied expressed both in local currency and in United States dollars together with conversion rates used;

1.2

the royalty rate applicable to each type of Licensed Product supplied in that country;

1.3

the calculation of the royalties payable in respect of each type of Licensed Product; and

1.4

the total amount of royalties payable in respect of that country;

For the world as a whole:2.1

the total amount of royalties payable under Clause 5.5 and 5.6; and

2.2

the amount of any withholding tax deducted pursuant to Clause 6.5.2.

The total amount of Net Receipts pursuant to Clause 5.8. Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Schedule 5 Outline Development Plan [*] [*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Schedule 6 Structure of BGC-0945 [*] [*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Schedule 7 Contracts regarding ongoing storage of the Materials [*] [*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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AGREED by the parties through their duly authorised representatives on the date written at the start of this Agreement:For and on behalf of BTG International Limited:-

For and on behalf of Onyx Pharmaceuticals Inc.:-

Signed /s/ Christine Helen Soden Full Name Christine Helen Soden Title Chief Financial Officer

Signed /s/ N. Anthony Coles, M.D. Full Name N. Anthony Coles, M.D. Title President and CEO

[*] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements: (1)

Registration Statement (Form S-3 No. 333-143825) of Onyx Pharmaceuticals, Inc.,

(2)

Registration Statement (Form S-3 No. 333-134565) of Onyx Pharmaceuticals, Inc.,

(3)

Registration Statement (Form S-3 No. 333-33322) of Onyx Pharmaceuticals, Inc.,

(4)

Registration Statement (Form S-8 No. 333-150928) pertaining to the 2005 Equity Incentive Plan of Onyx Pharmaceuticals, Inc.,

(5)

Registration Statement (Form S-8 No. 333-143309) pertaining to the 2005 Equity Incentive Plan and the 1996 Employee Stock Purchase Plan of Onyx Pharmaceuticals, Inc.,

(6)

Registration Statement (Form S-8 No. 333-134567) pertaining to the 1996 Employee Stock Purchase Plan of Onyx Pharmaceuticals, Inc.,

(7)

Registration Statement (Form S-8 No. 333-126089) pertaining to the 2005 Equity Incentive Plan, 1996 Equity Incentive Plan, and the 1996 Non-Employee Directors’ Stock Option Plan of Onyx Pharmaceuticals, Inc.,

(8)

Registration Statement (Form S-8 No. 333-120324) pertaining to the 1996 Equity Incentive Plan of Onyx Pharmaceuticals, Inc.,

(9)

Registration Statement (Form S-8 No. 333-110469) pertaining to the 1996 Equity Incentive Plan and the 1996 Non-Employee Directors’ Plan of Onyx Pharmaceuticals, Inc.,

(10)

Registration Statement (Form S-8 No. 333-96895) pertaining to the 1996 Equity Incentive Plan and the 1996 Employee Stock Purchase Plan of Onyx Pharmaceuticals, Inc.,

(11)

Registration Statement (Form S-8 No. 333-64706) pertaining to the 1996 Equity Incentive Plan and the 1996 Non-Employee Directors’ Stock Option Plan of Onyx Pharmaceuticals, Inc.,

(12)

Registration Statement (Form S-8 No. 333-48146) pertaining to the 1996 Equity Incentive Plan, the 1996 Non-Employee Directors’ Stock Option Plan and the Employee Stock Purchase Plan of Onyx Pharmaceuticals, Inc.,

(13)

Registration Statement (Form S-8 No. 333-84113) pertaining to the 1996 Equity Incentive Plan of Onyx Pharmaceuticals, Inc.,

(14)

Registration Statement (Form S-8 No. 333-60805) pertaining to the 1996 Equity Incentive Plan and the 1996 Employee Stock Purchase Plan of Onyx Pharmaceuticals, Inc.,

(15)

Registration Statement (Form S-8 No. 333-34681) pertaining to the 1996 Equity Incentive Plan, as amended, of Onyx Pharmaceuticals, Inc., and

(16)

Registration Statement (Form S-8 No. 333-04839) pertaining to the 1996 Equity Incentive Plan, the 1996 Employee Stock Purchase Plan, and the 1996 Non-Employee Directors’ Stock Option Plan of Onyx Pharmaceuticals, Inc.

of our reports dated February 24, 2009, with respect to the financial statements of Onyx Pharmaceuticals, Inc., and the effectiveness of internal control over financial reporting of Onyx Pharmaceuticals, Inc., included in this Annual Report (Form 10-K) for the year ended December 31,

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2008.

/s/ Ernst & Young LLP Palo Alto, California February 24, 2009

Exhibit 31.1 CERTIFICATION I, N. Anthony Coles, President and Chief Executive Officer of Onyx Pharmaceuticals, Inc., certify that: 1. I have reviewed this Annual Report on Form 10-K of Onyx Pharmaceuticals, Inc. (the “registrant”); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d-15(f)) for the registrant and have: a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 25, 2009

/s/ N. Anthony Coles N. Anthony Coles President and Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2 CERTIFICATION I, Matthew K. Fust, Executive Vice President and Chief Financial Officer of Onyx Pharmaceuticals, Inc., certify that:

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1. I have reviewed this Annual Report on Form 10-K of Onyx Pharmaceuticals, Inc. (the “registrant”); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d-15(f)) for the registrant and have: a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 25, 2009

/s/ Matthew K. Fust Matthew K. Fust Executive Vice President and Chief Financial Officer (Principal Financial Officer)

EXHIBIT 32.1 CERTIFICATION Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), N. Anthony Coles, President and Chief Executive Officer of Onyx Pharmaceuticals, Inc. (the “Company”), and Matthew K. Fust, Executive Vice President and Chief Financial Officer of the Company, each hereby certify that, to the best of his knowledge: 1.

The Company’s Annual Report on Form 10-K for the period ended December 31, 2008, to which this Certification is attached as Exhibit 32.1 (the “Annual Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

2.

The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 25, 2009

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/s/ N. Anthony Coles N. Anthony Coles President and Chief Executive Officer (Principal Executive Officer)

/s/ Matthew K Fust Matthew K. Fust Executive Vice President and Chief Financial Officer (Principal Financial Officer) A signed original of this written statement required by Rule 13(a)-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350) has been provided to Onyx Pharmaceuticals, Inc. and will be retained by Onyx Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. “This certification accompanies the Form 10-K 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 Form 10-K), irrespective of any general incorporation language contained in such filing.”