Analyst Conference Summary

conference date: April 30, 2015 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2015 (first quarter, Q1)

Forward-looking statements

Overview: Still in the red despite record revenue and good pipeline development.

Basic data (GAAP):

Revenue was $82.2 million, up 11% sequentially from $74.3 million, and up 23% from $67.4 million in the year-earlier quarter.

Net income was negative $21.7 million, up sequentially from negative $26.7 million, and down from negative $16.4 year-earlier.

EPS (earnings per share, diluted) were negative $0.17, up sequentially from negative $0.22 and down from negative $0.13 year-earlier.

Guidance:

Guidance for SG&A expense was increased to $115 to $125 million for the full year 2015.

Conference Highlights:

Working on building Adcetris into a blockbuster for CD30 positive cancers. There are 4 Phase 3 trials that could expand the Adcetris label; one has data in and an FDA PDUFA date set.

Adcetris (brentuximab vedotin) sales for CD30-positive malignancies (currently relapsed HL and relapsed systemic ALCL) in the quarter were $48.9 million, up 5% sequentially from $46.5 million, and up 26% from $38.7 million year-earlier.

Collaboration and license revenue was $22.2 million, up 39% sequentially from $16.0 million, and up 31% from $16.9 million year-earlier.

Royalty revenue was $11.1 million, down 7% sequentially from $11.9 million, and down 13% from $12.7 million year-earlier. Royalties mainly reflect Adcetris sales by Takeda in 54 non-U.S. nations.

Milestone payments for ADC collaborations were triggered when AbbVie initiated a Phase 2 trial for glioblastoma and Bayer initiated a Phase 1 trial for solid tumors.

A supplemental BLA for Phase 3 AETHERA Hodgkin Lymphoma (HL) in consolidation settings Adcetris data was submitted, with a decision date (PDUFA) of August 18, 2015.

ECHELON-1 (frontline HL) and ECHELON-2 (mature T-cell lymphoma) Phase 3 trials are now under an amended SPA from the FDA, with enrollment completion in E-1 expected this year and in E-2 in 2016, with data readouts in 2017 and 2018.

In collaboration with Bristol-Myers Squibb, SGEN is planning Phase 1 / 2 trials to test Adcetris with checkpoint inhibitor Opdivo (nivolumab) in relapsed or refractory HL and in B-cell and T-cell non-Hodgkin lymphomas.

A Phase 1 trial of SEA-CD40 for solid tumors was started. Data had been presented at AACR showing immune cell activation in preclinical tests.

SGN-CD33A for AML (acute myeloid leukemia) continued a phase 1b trial for newly diagnosed AML.

SGN-CD19A Phase 1 data from 2 ongoing trials showed "encouraging" activity in relapsed non-Hodgkin lymphoma and ALL (acute lymphoblastic leukemia). This program is being expanded; expect more details later in 2015.

Other trials to extend the Adcetris label are underway. Other ADCs (antibody-drug conjugates) are also under development, including SGN-LIV1A for breast cancer.

A combination trial with Opdivo (nivolumab) in HL and non-Hodgkin lymphoma is planned.

Seattle Genetics is now developing ADCs for immunological diseases and is also looking for further ways to expand the ADC platform.

More data will be presented in Q2 and later this year.

See also Seattle Genetics pipeline.

Cash ended at $296.0 million, down sequentially from $313.4 million. There was no debt.

Total costs and expenses were $103.9 million, consisting of: cost of sales $5.2 million; cost of royalty revenue $3.2 million, R&D $63.4 million; selling, general and administrative expense $32.1 million. Resulting in a loss from operations of $21.7 million. Other income near zero.

Expense of $7.7 million is attributable to non-cash share based compensation

Q&A:

E1 and E2 statistical analysis color? We are pleased with our FDA interactions. Adding patients is the simplest and best approach, which allowed us to keep our SPAs and timelines.

AETHERA advisory committee meeting expected? ODAC is up to the FDA. We are preparing in case they do ask for an ODAC panel, but we have not received any communication from the FDA on that.

SGEN-CD33A go/no go decisions? We are doing a number of studies with CD33A, including both single-agent and combination studies. So far the combinations include with 7+3, which is frontline for fit patients, and also in combination with hypomethylating agents for unfit patients. Both are ongoing studies. We will look at the data and decide whether to move to registrational trials.

Auto Immune diseases are a big opportunity, but it is too early for us to know whether we will pursue this. The initial study will be exploratory with a small number of lupus patients. We have heard anecdotal evidence that ADCs can decrease auto-immune symptoms.

Nivo (Opdivo) combination trial design? Two trials are planned. We would likely use the Adcetris dose already established. We would be looking for improved complete response rates, but we also need to understand the safety and tolerability of the combination.

Why start by treating lupus, rather than in the other diseases you saw positive indicators for? We are going to try several diseases, lupus just happened to be the first trial that was ready, and it has a standard measurement for efficacy.

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