ONYX Pharmaceuticals 10-K/A 2004 FY Annual report (amended)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K/A

(Amendment No. 1)

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

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                                     TO                                     .

Commission File No. 0-28298

Onyx Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware	94-3154463
(State or other jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

2100 Powell Street

Emeryville, California 94608

(510) 597-6500

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

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

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

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock $0.001 par value	Nasdaq National Market

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

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

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

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

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

*  Excludes 10,690,616 shares of Common Stock held by directors, officers and stockholders whose beneficial ownership exceeds 5% of the Registrant’s Common Stock outstanding. The number of shares owned by such persons was determined based upon information supplied by such persons and upon Schedules 13D and 13G, if any, filed with the SEC. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the Registrant, that such person is controlled by or under common control with the Registrant, or that such persons are affiliates for any other purpose.

TABLE OF CONTENTS

	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
SIGNATURES
EXHIBIT INDEX
Exhibit 31.2

EXPLANATORY NOTE

      We are filing this Amendment No. 1 to our Annual Report on Form 10-K for the year ended December 31, 2004 to correct clerical errors that appeared in the following sections of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2005:

1.	Part II, “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — General and Administrative Expenses;” and
2.	Part II, “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Income Taxes.”

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” and “Additional Business Risks,” as well as those discussed elsewhere in this Annual Report on Form 10-K.

Overview

      During 2004, Onyx had several important achievements, including a number of clinical developments for sorafenib (formerly known as BAY 43-9006) that we achieved with our collaborators at Bayer Pharmaceuticals Corporation. In the course of the year, we activated approximately 100 sites internationally in our pivotal Phase III kidney cancer trial. This trial is well underway, and we completed the patient enrollment phase of the study in March 2005. Also during 2004, we and Bayer selected two additional indications, metastatic melanoma and advanced liver cancer, for which we announced that we planned to begin Phase III clinical trials in the first half of 2005. Subsequently, in March 2005, the two companies began the liver cancer study. With Bayer, we reported final top-line Phase II results for 202 kidney cancer patients who participated in the randomized discontinuation trial. We and Bayer also reported final Phase II trial results for 137 liver cancer patients. In periodic updates throughout the year, we also reported on the combinability of sorafenib with eight different chemotherapies.

      Also in 2004, our collaborator, Warner-Lambert Company, now a subsidiary of Pfizer Inc, initiated a Phase I clinical trial administering PD 332991, a small molecule cell cycle inhibitor resulting from our collaboration that targets a cyclin-dependent kinase, or CDK. In accordance with our collaboration agreement, we received a $500,000 milestone payment from Pfizer in October 2004.

      In February 2004, we sold 4,637,000 shares of our common stock at $33.75 per share in an underwritten public offering pursuant to an effective registration statement previously filed with the Securities and Exchange Commission. Also in February 2004, the underwriters for the offering exercised their over-allotment option and purchased an additional 48,693 shares of our common stock to cover over-allotments at a price of $33.75 per share. We received aggregate net cash proceeds of approximately $148.3 million from this public offering.

      We have not been profitable since inception and expect to incur substantial and increasing losses for the foreseeable future, due to expenses associated with the continuing development and commercialization of sorafenib. We expect that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial. As of December 31, 2004, our accumulated deficit was approximately $250.6 million.

      Our business is subject to significant risks, including the risks inherent in our development efforts, the results of the sorafenib clinical trials, 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 “Additional Business Risks.” We currently have no products that have received marketing approval, and we have generated no revenues from the sale of products. We do not expect to generate revenues, if any, from the sale of proposed products until at least 2006 and expect that all of our revenues, if any, before 2006 will be generated from collaboration agreements.

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

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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 reported amounts in our financial statements and accompanying notes. These estimates form the basis for making judgments about the carrying values of assets and liabilities. 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 2004 included assumptions used in the determination of stock-based compensation related to stock options granted to non-employees. Actual results could differ materially from these estimates.

      We believe the following policies to be the most critical to an understanding of our financial condition and results of operations, because they require us to make estimates, assumptions and judgments about matters that are inherently uncertain.

     Stock based compensation: The preparation of the financial statement footnotes requires us to estimate the fair value of stock options granted to employees. 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 employee stock options. However, the Black-Scholes model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including but not limited to stock price volatility. Because our stock options have characteristics significantly different from those of traded options and changes to the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not provide a reliable single measure of the fair value of our employee stock options. We are currently evaluating our option valuation methodologies and assumptions in light of evolving accounting standards related to employee stock options.

     Research and Development Expense: In accordance with Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards, or SFAS, 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, consulting and other third-party costs, salaries and employee benefits, supplies and materials and allocations of various overhead and occupancy costs. Not all research and development costs are incurred by us. A significant portion of our research and development expenses, approximately 93 percent in 2004, relates to our cost sharing arrangement with Bayer and represents our share of the research and development costs incurred by Bayer. Such amounts are recorded based on invoices and other information we receive from Bayer. When such invoices have not been received, we must estimate the amounts owed to Bayer based on discussions with Bayer. In addition, research and development costs incurred by us and reimbursed by Bayer are recorded as a reduction to research and development expense.

Results of Operations

Years Ended December 31, 2004, 2003 and 2002

     Total Revenue. Total revenue was $500,000 in 2004, zero in 2003 and $2.7 million in 2002. Total revenue in both 2004 and 2002 included amounts received for collaboration revenue from Warner-Lambert, now a subsidiary of Pfizer. In 2004, we received a $500,000 milestone payment from Warner-Lambert when they initiated Phase I clinical testing advancing a lead candidate from our previous cell cycle kinase discovery collaboration. Our 2003 revenue was zero. Revenue of $2.7 million in 2002 reflected research funding for the therapeutic virus collaboration that concluded in 2002. Currently, we do not expect to record any revenue in 2005.

     Research and Development Expenses. Research and development expenses were $35.8 million in 2004, a net increase of $3.8 million, or 12 percent, from 2003. In 2004, the increase in research and development expense was primarily driven by a $14.0 million increase in Onyx’s share of codevelopment costs for the sorafenib program, which expanded into the Phase III kidney cancer trial in the fourth quarter of 2003. In addition, sorafenib development costs reflect multiple ongoing Phase II clinical trials in breast, non-small cell lung and other cancers and several Phase Ib clinical trials in combination with standard chemotherapies. This

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increase was partially offset by a decrease of $10.2 million of expenses from the therapeutic virus program, which was terminated in 2003. Research and development expenses were $32.1 million in 2003, a net decrease of $11.5 million, or 26 percent, from 2002. The decrease in 2003 was primarily the result of the discontinuation of our therapeutic virus program, which decreased our research and development expenses by $19.1 million from 2002 levels. Partially offsetting this decrease in 2003 was an increase of $7.5 million related to Onyx’s share of the codevelopment costs with Bayer for sorafenib. It is anticipated that research and development expenses will continue to increase in future periods as we continue with our clinical trials of sorafenib and as we add additional Phase III clinical trials of sorafenib.

      The major components of research and development costs include clinical manufacturing costs, clinical trial expenses, consulting and other third-party costs, salaries and employee benefits, 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 I, II and III 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 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 the “Additional Business Risks” section of this report.

				Research and
				Development Expenses
				for the year ended
				December 31,
		Collabo-	Phase of Development –
Product	Description	rator	Estimated Completion	2004		2003		2002
				(In millions)
Sorafenib (1)	Small Molecule Inhibitor of tumor cell proliferation and angiogenesis, targeting RAF Kinase, VEGFR-2 and PDGFR-β	Bayer	Phase I – 2004 Phase II – Unknown Phase III – Unknown	$	33.4	$	19.4	$	11.8
Therapeutic Virus Programs (2)	Programs discontinued during the second quarter of 2003. See Note 2 to our Financial Statements	—	—		2.4		12.7		31.8
Total Research and Development Expenses				$	35.8	$	32.1	$	43.6

(1)  Aggregate research and development costs-to-date through December 31, 2004 incurred by Onyx since fiscal year 2000 for the sorafenib project is $72.7 million.

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(2)  Costs in 2004 were comprised of

a.  stock-based compensation;

b.  consulting fees for consultants retained in connection with the orderly wind-down of the virus programs and preservation of related assets for potential future divestiture or commercialization;

c.  sponsored research at the University of California, San Francisco related to the preservation of the programs’ assets, and

d.  outside services related to stability testing and storage of virus product related to the programs.

     Marketing Expenses. Marketing expenses consist primarily of salaries and employee benefits, consulting and other third-party costs, and allocations for overhead and occupancy costs. We reclassified $1.4 million from research and development expenses to marketing expenses for fiscal year 2003 to conform to the current period presentation. Marketing expenses were $5.4 million in 2004, a net increase of $4.0 million, from 2003. The increase was due to third-party costs and employee-related expenses as Onyx and Bayer establish a commercial infrastructure and engage in precommercial marketing activities. It is anticipated that marketing expenses will increase in future periods as we develop our marketing capabilities in order for us to copromote sorafenib with Bayer in the United States should sorafenib receive U.S. Food and Drug Administration, or FDA, approval. Marketing expenses were $1.4 million in 2003 as compared to zero for 2002. Marketing expenses in 2003 consisted entirely of Onyx’s 50 percent share of precommercial marketing expenses incurred by Bayer for sorafenib.

     General and Administrative Expenses. General and administrative expenses consist primarily of salaries, employee benefits, and corporate functional expenses. General and administrative expenses were $8.9 million in 2004, a net increase of $2.3 million, or 36 percent, from 2003. The increase was primarily related to $700,000 of consulting expenses for information systems, increased overhead and occupancy expenses of $800,000 allocated to general and administrative expenses, and $400,000 of costs related to satisfying the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 regarding internal controls over financial reporting. General and administrative expenses were $6.6 million in 2003, an increase of $359,000, or 6 percent, from 2002. The increase was primarily due to an increase in corporate development consulting expenses and stock-based compensation expense related to consultant stock option grants. The increase to stock-based compensation expense was caused in part by the increase in our stock price in 2003 compared with 2002. We anticipate that general and administrative expenses may continue to increase moderately to support our growing infrastructure needs.

     Restructuring. Prior to June 2003, in addition to our small molecule program, we were developing therapeutic viruses that selectively replicate in cells with cancer-causing genetic mutations. In June 2003, we announced that we were discontinuing this program as part of a business realignment that placed an increased priority on the development of sorafenib. During 2003, we recorded aggregate charges of $5.5 million associated with the restructuring. These charges consist of $1.6 million related to employee severance benefits and $2.5 million related to the early termination of a process development and manufacturing agreement with XOMA (US) LLC. In addition, we incurred aggregate charges of $1.4 million related to the discontinued use of a portion of our leased facilities and the disposal of certain property and equipment. We reclassified $350,000 from property and equipment to other current assets for equipment held-for-sale at December 31, 2003. Had this equipment not been reclassified to other current assets, we would have recorded an additional $27,000 of depreciation expense in 2003.

      In 2004, we recorded an additional restructuring charge of $258,000 due to a change in estimate related to the discontinued use and inability to sublet a portion of our leased facility in Richmond, California. We expect that the remaining accrued restructuring costs of $195,000 at December 31, 2004 will be fully paid by the second quarter of 2005 when the remaining lease obligation on the facility is due. There were no restructuring expenses in fiscal year 2002.

     Interest Income and (Expense), Net. We had net interest income of $3.2 million in 2004, an increase of $2.3 million from 2003, primarily due to higher average cash and investment balances resulting from our February 2004 sale of equity securities from which we received approximately $148.3 million in net cash

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proceeds. We had net interest income of $834,000 in 2003, a decrease of $325,000 from 2002, primarily due to lower average interest rates. Interest expense was immaterial for the periods presented.

     Other Expense — Related Party. In November 2001, we sold and licensed to Syrrx, Inc. assets from our small molecules discovery program, including drug targets, related reagents and assays, compound libraries and certain intellectual property rights in exchange for preferred stock valued at $750,000. The entire amount was recorded as “Other income-related party” on the date of sale. The value of the preferred stock was initially determined based on similar sales of Syrrx preferred stock to unrelated third parties for cash. In 2002, due to a further round of financing completed by Syrrx, we recorded $100,000 as “Other expense-related party” to recognize a permanent impairment in the carrying value of the investment. In 2003, based on a further round of financing completed by Syrrx in April 2003, we recorded an additional impairment charge of $275,000 as “Other expense-related party” to reduce the carrying value of the investment. We consider the reduction in value of the Syrrx investment to be other than temporary. We did not record any write-downs in 2004. At the time of the transactions mentioned above, a member of the board of directors of Onyx was a director and officer of Syrrx. This board member is no longer an officer of Syrrx.

     Other Income. In 2002, we licensed assets from our small molecules discovery program to a third party for $235,000. This amount was recorded as “Other income.” No similar items were recorded in fiscal years 2004 and 2003.

Income Taxes

      Since our inception, we have incurred operating losses and accordingly have not recorded a provision for income taxes for any of the periods presented and since inception. As of December 31, 2004, our net operating loss carryforwards for federal income tax purposes were approximately $235.9 million and for state income tax purposes were approximately $106.2 million. We also had federal research and development tax credit carryforwards of approximately $5.6 million. 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 expire at various dates beginning in 2005. 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. The annual limitation may result in the expiration of our net operating loss and credit carryforwards before they can be used. Please read Note 11 of the Notes to the Financial Statements included in Item 8 of this Form 10-K for further information.

Related Party Transactions

      We had a loan with a former employee of which approximately $275,000 was outstanding at December 31, 2003. This loan bore interest at 5.98% per annum; however, we had forgiven $82,000 of interest over the term of the loan through August 2004. This loan was repaid in August 2004 in accordance with the terms of the loan agreement.

      In September 2004, we announced that Warner-Lambert initiated Phase I clinical trials advancing PD 332991, a lead candidate from our previous cell cycle kinase discovery collaboration. As a result, we received a $500,000 milestone payment in October 2004, which we recorded as contract revenue from a related party.

      In November 2001, we sold and licensed to Syrrx assets from our small molecules discovery program in exchange for Syrrx preferred stock valued at $750,000. We could also receive royalties on pharmaceutical products resulting from these assets. At the time of the transaction mentioned above, a member of the board of directors of Onyx was a director and officer of Syrrx. This board member is no longer an officer of Syrrx.

      In May 2002, we issued and sold 2,972,925 shares of common stock in a private placement to a current shareholder and several new investors, at a price of $6.75 per share, for gross proceeds of $20.0 million. We also issued warrants to purchase 743,229 shares of common stock at an exercise price of $9.59 per share. A

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member of our board of directors is a managing member of Domain Associates, L.L.C., one of the participants in the private placement.

Liquidity and Capital Resources

      Since our inception, our cash expenditures have substantially exceeded our revenues, and we have relied primarily on the proceeds from the sale of equity securities to fund our operations.

      At December 31, 2004, we had cash, cash equivalents, and marketable securities of $209.6 million, compared to $105.4 million at December 31, 2003 and $39.8 million at December 31, 2002. The increase in cash, cash equivalents, and marketable securities in 2004 of $104.2 million was attributable to our public offering completed in February 2004, which raised aggregate net cash proceeds of $148.3 million, as well as $4.0 million received from the exercise of stock options and warrants and $595,000 received from the sale of fixed assets of laboratory equipment associated with our restructuring in 2003. These sources of cash were partially offset by net cash used in operating activities of $46.9 million and capital expenditures of $1.6 million primarily related to the move of our office facility from Richmond to Emeryville.

      The increase in cash, cash equivalents and marketable securities of $65.6 million in 2003 was attributable to our public offering completed in July and August 2003, which raised aggregate net cash proceeds of $73.7 million; the private placement financing that we completed in February 2003, which raised net cash proceeds of $9.9 million; $4.6 million received from the exercise of stock options and the employee stock purchase plan; and $302,000 received from the sale of equipment. In addition, we received a $15.0 million creditable milestone-based payment from Bayer in December 2003 upon initiation of a Phase III clinical trial of sorafenib. This payment will be repayable to Bayer from a portion of any of Onyx’s future profits and royalties. If Onyx does not receive any profits or royalties on any products, Onyx will not have to repay Bayer any creditable milestone-based payments. These sources of cash were partially offset by cash used in operations of $37.8 million and capital expenditures of $157,000.

      Our cash used in operations was $46.9 million in 2004, $37.8 million in 2003 and $42.2 million in 2002. In 2004, the cash was used primarily for cofunding the clinical development program with Bayer for sorafenib. In 2003, the cash was used primarily for cofunding clinical development costs with Bayer for sorafenib and to fund development expenses including manufacturing and clinical trial costs for ONYX-015. Expenditures for capital equipment amounted to $1.6 million in 2004, $157,000 in 2003 and $742,000 in 2002. Capital expenditures in 2004 were primarily for upgrades to our information technology equipment and leasehold improvements and furniture related to our move in December 2004 into our new corporate headquarters. We currently expect to make expenditures for capital equipment and leasehold improvements of up to $1.0 million in 2005.

      We believe that our existing capital resources and interest thereon, together with approximately $148.3 million in net proceeds from our public offering closed in February 2004, will be sufficient to fund our current and planned operations through mid-2007. However, if we change our development plans, we may need additional funds sooner than we expect. In addition, we anticipate that our codevelopment costs for the sorafenib program will increase over the next several years as the Phase III clinical trial program advances. While these costs are unknown at the current time, we may need to raise additional capital to continue the cofunding of the program in future periods beyond mid-2007. We intend to seek this 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 research or 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.

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      Our contractual obligations for the next five years and thereafter are as follows:

	Payments Due by Period
			Less than		1-3		3-5		After
Contractual Obligations(1)	Total		1 Year		Years		Years		5 Years
	(In thousands)
Operating leases, net of sublease income	$	3,018	$	639	$	1,109	$	1,164	$	106

(1)  This table does not include any payments under research and development collaborations, as the amount and timing of such payments are not known. This table also does not include the obligation to repay the $20 million creditable milestone-based payments that we received from Bayer, because the repayment of these amounts is contingent upon Onyx generating profits or royalties on any products. Whether Onyx will ever generate any profits or royalties is not known at this time.

      In 2004, we entered into a new operating lease for 23,000 square feet of office space in Emeryville, California, which serves as our new corporate headquarters. The lease expires on February 28, 2010. When we moved into this new facility in December 2004, we vacated our 50,000 square foot facility in Richmond, California. The lease for this facility expires in April 2005, and we have no plans to renew this lease. We also have a lease for 9,000 square feet of space in a secondary facility in Richmond, California. In December 2001, we determined that we no longer required the secondary facility because of a reduction in force. In September 2002, the Company entered into a sublease agreement for this space through September 2010.

Recently Issued Accounting Standard

      In December 2004, the FASB issued SFAS 123(R), “Share-Based Payment”, which is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation”, or SFAS 123. SFAS 123(R) supersedes Accounting Principals Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and amends FASB Statement No. 95, “Statement of Cash Flows.” Generally, the approach in SFAS 123(R) is similar to the approach described in SFAS 123. However, SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options and employee stock purchase plans to be recognized in the income statement based on fair values of such instruments. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition. We would be required to implement the standard no later than the quarter that begins July 1, 2005. SFAS 123(R) permits public companies to adopt its requirements using one of two methods:

1.	A “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123(R) that remain unvested on the effective date.
2.	A “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption.

      Although we have not determined whether the adoption of SFAS 123(R) will result in amounts that are similar to the current pro forma disclosures under SFAS 123, we are evaluating the requirements under SFAS 123(R) and expect the adoption to have a significant adverse impact on our consolidated statements of operations and net loss per share.

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SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, as amended, the Registrant has duly caused this Amendment No. 1 to Annual Report on Form  10-K/A 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 24th day of March, 2005.

Onyx Pharmaceuticals, Inc.

By:  /s/Hollings C. Renton
 

Hollings C. Renton

Chairman of the Board,

President and Chief Executive Officer

      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.

Signature	Title	Date
/s/Hollings C. Renton Hollings C. Renton	Chairman of the Board, President and Chief Executive Officer (Principal Executive and Financial Officer)	March 24, 2005
/s/Marilyn E. Wortzman Marilyn E. Wortzman	Vice President, Finance and Administration (Principal Accounting Officer)	March 24, 2005
* Paul Goddard	Director	March 24, 2005
* Antonio Grillo-López	Director	March 24, 2005
* Magnus Lundberg	Director	March 24, 2005
* Nicole Vitullo	Director	March 24, 2005
* Wendell Wierenga	Director	March 24, 2005
* Thomas G. Wiggans	Director	March 24, 2005
*By:/s/Hollings C. Renton      Hollings C. Renton,      Attorney-in-fact

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EXHIBIT INDEX

Exhibit
Number			Description of Document
	3.1(1)		Restated Certificate of Incorporation of the Company.
	3.2(1)		Bylaws of the Company.
	3.3(2)		Certificate of Amendment to Amended and Restated Certificate of Incorporation.
	4.1(1)		Reference is made to Exhibits 3.1, 3.2 and 3.3.
	4.2(1)		Specimen Stock Certificate.
	4.4(1)		Amended and Restated Information and Registration Rights Agreement dated May 30, 1994 and as amended through May 16, 1995.
	10.1(1)*		Collaboration Agreement between Bayer Corporation (formerly Miles, Inc.) and the Company dated April 22, 1994.
	10.1(i)(1)	*	Amendment to Collaboration Agreement between Bayer Corporation and the Company dated April 4, 1996.
	10.2(1)*		Research, Development and Marketing Collaboration Agreement between Warner-Lambert Company and the Company, dated May 2, 1995.
	10.2(i)(1)		Waiver of Certain Rights under the Research, Development and Marketing Agreement by Warner-Lambert Company dated as of March 28, 1996.
	10.5(4)*		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.
	10.6(1)		Scientific Advisory Board Consulting Agreement between Dr. Frank McCormick and the Company, as of March 29, 1996.
	10.6(i)(1)		Letter Agreement for Consulting Services between Dr. Frank McCormick and the Company dated April 17, 1996.
	10.9(1)+		Letter Agreement between Dr. Gregory Giotta and the Company dated May 26, 1995.
	10.13(1)+		1996 Equity Incentive Plan.
	10.14(1)+		1996 Non-Employee Directors’ Stock Option Plan.
	10.15(1)+		1996 Employee Stock Purchase Plan.
	10.16(3)		Lease by and between Hall Properties, Inc. and the Company dated September 9, 1992, the First Amendment thereto dated April 21, 1993 and the Second Amendment thereto dated May 11, 1996.
	10.17(1)+		Form of Indemnity Agreement to be signed by executive officers and directors of the Company.
	10.19(5)		Letter Agreement between Dr. Allan Balmain and the Company dated August 26, 1996, as amended March 13, 1997.
	10.20(6)*		Amended and restated Research, Development and Marketing Collaboration Agreement dated May 2, 1995 between the Company and Warner-Lambert Company.
	10.21(6)*		Research, Development and Marketing Collaboration Agreement dated July 31, 1997 between the Company and Warner-Lambert Company.
	10.23(6)*		Amendment to the Amended and Restated Research, Development and Marketing Collaboration Agreement, dated December 15, 1997, between the Company and Warner-Lambert Company.
	10.24(7)*		Amendment to Collaboration Agreement between Bayer Corporation and the Company dated February 1, 1999.
	10.25(8)		Scientific Advisory Board Consulting Agreement effective September 10, 1999 between Allan Balmain and the Company including the First Amendment to Deed of Trust and Second Amended and Restated Promissory Note.
	10.26(9)*		Collaboration Agreement between the Company and Warner-Lambert Company dated October 13, 1999 and effective September 1, 1999.

Exhibit
Number		Description of Document
	10.27(9)	Stock Put and Purchase Agreement between the Company and Warner-Lambert Company dated October 13, 1999 and effective September 1, 1999.
	10.28(9)	Stock Purchase Agreement between the Company and the investors dated January 18, 2000.
	10.29(10)	Third Amendment to Lease by and between the Metcalf Family Living Trust Dated June 11, 1993 and the Company effective February 24, 2000.
	10.31(6)*	Second Amendment to the Amended and Restated Research, Development and Marketing Agreement between Warner-Lambert and the Company dated May 2, 1995.
	10.32(6)*	Second Amendment to Research, Development and Marketing Collaboration Agreement between Warner-Lambert and the Company dated July 31, 1997.
	10.33(11)+	Employment Offer Letter between Leonard E. Post, Ph.D. and the Company dated July 28, 2000.
	10.34(12)*	Process Development and Manufacturing Agreement between XOMA (US) LLC and Onyx Pharmaceuticals, Inc., dated January 29, 2001.
	10.35(13)+	Form of Executive Change in Control Severance Benefits Agreement.
	10.36(14)*	Amendment #1 to the Collaboration Agreement between the Company and Warner-Lambert dated August 6, 2001.
	10.37(14)*	Amendment #3 to the Research, Development and Marketing Collaboration Agreement between the Company and Warner-Lambert dated August 6, 2001.
	10.38(14)*	Amendment #3 to the Amended and Restated Research, Development and Marketing Collaboration Agreement between the Company and Warner-Lambert dated August 6, 2001.
	10.39(15)	Stock and Warrant Purchase Agreement between the Company and the investors dated May 6, 2002.
	10.40(16)*	Amendment No. 1 to the Process Development and Manufacturing Agreement between the Company and XOMA (US) LLC dated April 15, 2002.
	10.41(17)*	Amendment to the Collaboration Agreement between the Company and Warner-Lambert Company dated September 16, 2002.
	10.42(18)	Stock Purchase Agreement between the Company and the investors dated February 13, 2003.
	10.43(19)	Sublease between the Company and Siebel Systems dated August 5, 2004.
	23.1**	Consent of Independent Registered Public Accounting Firm.
	24.1**	Power of Attorney. Reference is made to the signature page.
	31.1**	Certification required by Rule 13a-14(a) or Rule 15d-14(a).
	31.2	Certification required by Rule 13a-14(a) or Rule 15d-14(a).
	32.1**	Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).

* Confidential treatment has been received for portions of this document.

** Previously filed.

   +  Indicates management contract or compensatory plan or arrangement.

(1)	Filed as an exhibit to Onyx’s Registration Statement on Form SB-2 (No. 333-3176-LA).
(2)	Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.
(3)	Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
(4)	Filed as an exhibit to Onyx’s Annual Report on Form 10-K for the year ended December 31, 2001.
(5)	Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
(6)	Filed as an exhibit to Onyx’s Annual Report on Form 10-K for the year ended December 31, 2002.
(7)	Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
(8)	Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
(9)	Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on March 1, 2000.

(10)  Filed as an exhibit to Onyx’s Annual Report on Form 10-K for the year ended December 31, 1999.

(11)	Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
(12)	Filed as an exhibit to Onyx’s Current Report on Form 8-K filed on February  23, 2001.
(13)	Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
(14)	Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.
(15)	Filed as an exhibit to Onyx’s Registration Statement on Form S-3 filed on June 5, 2002 (No. 333-89850).
(16)	Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
(17)	Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002.
(18)	Filed as an exhibit to Onyx’s Registration Statement on Form S-3 filed on March 25, 2003 (No. 333-104025).
(19)	Filed as an exhibit to Onyx’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.