Analyst Conference Summary

Biotechnology

Seattle Genetics
SGEN

conference date: July 16, 2019 @ 1:30 PM Pacific Time
for quarter ending: June 30, 2019 (second quarter, Q2)


Forward-looking statements

Overview: Continued strong y/y revenue growth, but still not profitable due to high R&D costs.

Basic data (GAAP):

Revenue was $218.4 million up 12% sequentially from $195.2 million and up 28% from $170.2 million in the year-earlier quarter.

Net income was negative $79.2 million, down sequentially from negative $13.3 million and down from $76.3 million year-earlier.

EPS (earnings per share, diluted) were negative $0.49, down sequentially from negative $0.08, and up from $0.47 year-earlier. But the year-earlier quarter's positive results were from $106 million in other income.

Guidance:

Revised 2019 guidance. Expects Adcetris sales revenue of $610 to $640 million; collaboration and license $110 to $125 million; royalties $85 to $90 million. R&D expense $650 to $700 million. SG&A expense raised to $335 to $360 million. Cost of sales 5% to 6%. Non-cash costs $135 to $145 million.

Conference Highlights:

Clay Siegall, CEO said "In the second quarter, we achieved record Adcetris net sales in the U.S. and Canada, reflecting growth in frontline CD30-expressing peripheral T-cell lymphomas as well as frontline advanced Hodgkin lymphoma. We are also making substantial progress with our late-stage programs, delivering on several key goals. The Biologics License Application for enfortumab vedotin was submitted to the FDA for patients with locally advanced or metastatic urothelial cancer, taking us another step closer to becoming a multi-product oncology company. Additionally, we expect to report topline data from the tucatinib pivotal trial, HER2CLIMB, in HER2-positive metastatic breast cancer later this year and from the tisotumab vedotin pivotal trial, innovaTV 204, in metastatic cervical cancer in the first half of 2020."

In May Adcetris, in combination with AVD, was approved in Canada for patients with previously untreated stage IV Hodgkin lymphoma. In June 2019, Takeda received an additional approval for Adcetris in frontline HL, resulting in a $7.5 million milestone payment to Seattle Genetics.

Adcetris (brentuximab vedotin) sales for CD30-positive malignancies (Hodgkin Lymphoma and relapsed systemic ALCL) in the quarter were $159.0 million, up 18% sequentially from $135.0 million, and up 30% from $122.4 million year-earlier. PTCL launch is going well in the US, seeking approvals in other nations. Adcetris sales increase mainly due to the addition of the PTCL label.

Collaboration and license revenue was $36.1 million down from $27.2 million year-earlier.

Royalty revenue was $23.3 million, up sequentially from $15.6 million, and from $20.6 million year-earlier. Royalties mainly reflect Adcetris sales by Takeda in 67 non-U.S. nations.

Increased R&D spend reflects investment in late-stage programs EV, tucatiib and TV. Increased SG&A spend is mainly for sales efforts for Adcetris for frontline indications.

Adcetris royalties are expected to grow each quarter, partly because the Takeda royalty rate increases based on sales.

In collaboration with Bristol-Myers Squibb, a Phase 3 trial to test Adcetris with checkpoint inhibitor Opdivo (nivolumab) in relapsed or refractory HL (Hodgkin lymphoma) was ongoing. Earlier data announced was very positive.

Enfortumab Vedotin (ASG-22ME or EV): In July 2019, Seattle Genetics and Astellas submitted a BLA to the FDA for enfortumab vedotin to treat patients with locally advanced or metastatic urothelial cancer who have received a PD-1/L1 inhibitor and who have received a platinum-containing chemotherapy in the neoadjuvant/adjuvant, locally advanced or metastatic setting. The submission is based on positive results from the first cohort of the EV-201 clinical trial. We are evaluating enfortumab vedotin in several ongoing trials. These include a phase 3 randomized clinical trial (EV-301) that is intended to support global registrations. A phase 1 trial (EV-103) is also underway evaluating enfortumab vedotin in earlier lines of treatment for patients with locally advanced or metastatic urothelial cancer, including in combination with pembrolizumab and/or platinum chemotherapy in newly diagnosed patients as well as patients whose cancer progressed from earlier-stage disease. The company expects to report initial data from the EV-103 trial in 2019.

Seattle Genetics is developing tisotumab vedotin (TV) with Genmab, on a 50:50 basis. Completed enrollment in the pivotal innovaTV 204 trial evaluating TV in patients with recurrent and/or metastatic cervical cancer who have relapsed or progressed after standard of care treatment. Topline data is expected in the first half of 2020.

Tucatinib, an oral tyrosine kinase inhibitor, is in a global pivotal trial (HER2CLIMB) for HER2+ metastatic breast cancer. Seattle Genetics achieved enrollment of 480 patients with top-line data expected to be reported in 2019. Enrollment is continuing up to 600 patients, to support the analyses of key secondary endpoints, including overall survival as well as progression-free survival in patients with brain metastases. The company anticipates completing enrollment of the additional patients in mid-2019.

Depatuxizumab mafodotin (ABT-414) for glioblastoma Phase 3 data expected in 2019; collaboration with AbbVie.

A Phase 1 trial of SEA-CD40 for solid tumors continues.

Belantamib mafodotin (GSK2857916)for multiple myeloma, collaboration with GSK, regulatory submission is planned in 2H 2019.

SGN-CD19B continued a Phase 1 trial for relapsed or refractory B-cell non-Hodgkin lymphoma.

SGN-LIV1A Phase 1 data was presented in December showing antitumor activity for heavily pretreated triple-negative breast cancer. An expansion cohort is enrolling, with data to be presented in December. Plans a combination with tecentriq for triple-negative breast cancer, conducted by Roche. Added an agreement with Merck to try with Keytruda.

In June 2019, the FDA approved Polivy (polatuzumab vedotin-piiq) an antibody-drug conjugate (ADC) targeting CD79b that utilizes Seattle Genetics’ technology. Polivy was developed and will be commercialized by Genentech, a member of the Roche Group. As a result, Seattle Genetics will receive a $5.0 million milestone payment and is eligible to receive royalties on worldwide net sales.

Tisotumab Vedotin or TV started a pivotal Phase 2 trial for recurrent or metastatic cervical cancer in Q2 2018, as well as a second Phase 2 trial against several types of solid cancers. Could support accelerated approval by FDA. It is being co-developed with Genmab. Topline data expected in 1H 2020.

Ladiratuzumab Vedotin or LV continued a 1b/2 trial for first-line metastatic triple negative breast cancer.

SGN-CD352A continued a Phase 1 trail for multiple myeloma.

SEA-CD40 is a novel immuno-oncology agent targeted to CD40 utilizing Seattle Genetics proprietary sugar-engineered antibody (SEA) technology to produce a non-fucosylated antibody. Planning a trial in combination with a checkpoint inhibitor.

SGN-CD123A continued a Phase 1 trial for relapsed/refractory AML. CD123 is expressed on leukemic stem cells, which have proven difficult to kill.

SGN-2FF continued a Phase 1 trial for relapsed or refractory solid tumors.

SGN-CD228A Phase 1 trials in solid tumors should start in 2019.

See also Seattle Genetics pipeline.

Cash ended at $376 million, down sequentially from $418 million. An additonal $109 million was held as stock of Immunomedics (IMMU) and Unum. There was no debt.

Total costs and expenses were $257 million, consisting of: cost of sales $9 million; cost of royalty revenue $2 million, R&D $164 million; selling, general and administrative expense $82 million. Resulting in a loss from operations of $39 million. Other loss $79 million. Income tax benefit $0 million.

Q&A:

Decision to not increase guidance, price hike for Adcetris? It is an important, growing brand. Guidance is up 30% y/y. As accurate as we can. E1 and E2 data is good, but Q2 is typically strong, and it is hard to predict our future market share gains. We are replacing and entrenched standard of care. We saw no evidence of stocking before the price hike. Price increased 3.9%, but we only see about half of that due to discounting, gross to net.

EV sales force hiring is almost complete. It is a strong group.

International pricing index proposal? We track the issue, we believe medicines with meaningful benefits will continued to be valued by patients and payers. We are watching, no one is sure what will happen.

Tucatinib data, what would KOLs find meaningful? HER2CLIMB enrolled population has a high number of patients with brain metastices. There is no historical control, the unmet need is very high, so a PFS goal is not clear.

We think it will take a number of quarters to displace CHOP in PTCL, also E1 and E2. We had doctors complaining about limited follow up data, which we can now give them, our PFS data improves with time. The E2 standard of care was not as good as the E1, so adoption was easier for E2.

We don't have a lot of data of PTCL prevalence yet. We are focused on newly diagnosed patients, the data for that is very positive as shown by Kaplan-Meier curves. We have not seen reimbursement issues.

We think Tucatinib could be best in class, even though it is not first in class. The trial is event driven, we need to see the data before talking about the specific opportunity. The secondary endpoint of brain metastisis is important. Tucatinib was screened to different receptors than the other drugs in the class. Tolerability is important in a chronic disease like breast cancer.

Seattle Genetics main Openicon page

OpenIcon Analyst Conference Summaries Main Page

 

Search

More Analyst Conference Pages:

 AGEN
 AGIO
 ALNY
 ALXN
 AMAT
 AMGN
 BIIB
 CLDX
 CELG
 EPZM
 GILD
 GLYC
 INCY
 INO
 ISRG
 MCHP
 MYL
 PLX
 REGN
 SGEN
 TTPH
 VBLT
 VSTM
 XLNX
 XLRN

 

Disclaimer: My analyst call summaries may include both our condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. This is journalism, not financial advice.

Copyright 2019 William P. Meyers