Analyst Conference Summary

Seattle Genetics

conference date: October 30, 2014 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2014 (third quarter, Q3)

Forward-looking statements

Overview: Revenues continue to climb, but nowhere near profitability yet.

Basic data (GAAP):

Revenue was $75.9 million, up 11% sequentially from $68.3 million, and up 7% from $71.0 million in the year-earlier quarter.

Net income was negative $15.6 million, up sequentially from negative $17.6 million, and up from negative $23.7 year-earlier.

EPS (earnings per share, diluted) were negative $0.13, up sequentially from negative $0.14 and up from negative $0.19 year-earlier.


Increased full-year 2014 Adcetris sales estimate to $172 to $177 million. Increased full year collaboration revenue estimate to $64 to $68 million.

Conference Highlights:

Adcetris (brentuximab vedotin) sales in the quarter at $48.2 million, up 8% sequentially from $44.8 million, and up 32% from $36.5 million in the year-earlier quarter.

Collaboration and license revenue decreased to $19.5 million from $29.2 million year-earlier. The decrease was due to a $12 million payment from Bayer in Q3 2013.

Royalty revenue increased to $8.1 million from $5.3 million year-earlier. Royalties mainly reflect Adcetris sales by Takeda in its territories. Takeda obtained marketing authorization in Brazil and Taiwan, bringing the total to 47 countries.

Adcetris for Hodgkin Lymphoma as consolidation therapy following an autologous stem cell transplantation Phase III trial had positive top line results reported in September in the AETHERA trial. The full data set will be presented at ASH. A supplemental BLA could be submitted to the FDA in the first half of 2015. It is too early to get meaningful overall survival data; the data is for progression-free survival.

A phase 1 trial of SGN-CD70A was for initiated in Q3 2014 for CD70-positive cancers.

Four Phase 3 trials and four Phase 2 trials continued.

Data will be presented from a number of Adcetris trials at the ASH (American Society of Hematology) annual meeting held December 6-9.

Plans for remainder of 2014 include initiating a Phase 1b trial of SGN-CD33A for frontline AML (leukemia) and submitting an IND to the FDA for a Phase I trial of SEA-CD40 in solid tumors. SEA-CD40 is not an ADC.

See also Seattle Genetics pipeline.

In Q3 an ADC collaboration agreement was reached with Genmab for the target AXL on solid tumors. Upfront fee was $11 million, with $200 million in potential milestone payments and royalties.

Milestone payments for ADCs (antibody-drug conjugates) were received from GlaxoSmithKline, Takeda, and Bayer upon the initiation of various clinical trials.

Cash ended at $339.6 million, down sequentially from $349.2 million. There was no debt.

Share-based compensation expense ytd was near $29 million.

Total costs and expenses were $91.5 million, consisting of: cost of sales $4.7 million; cost of royalty revenue $2.9 million, R&D $58.5 million; selling, general and administrative expense $25.3 million. Resulting in a loss from operations of $15.6 million.


Immuno-oncology and ADCs? There is an excitement to the products out there. Our goal is to use Adcetris to redefine frontline therapy in HL. If an immuno-oncology agent could be combined with ADCs, that would be wonderful.

SGN-CD33A combination studies? We are excited about CD33A as a single agent. We would like to extend it to other lines and indications.

Did you imply that Adcetris on label is steady, and gains are from off-label use? We are happy with Q3 results. We see robust use on label, and drive incremental growth there and duration of therapy. We see a trend to physicians using it in earlier lines of HL and HLCL. We also see interest in other CD40 positive malignancies.

Does top end of guidance imply a Q4 stall, and why? We are looking to grow Adcetris into a very important, big product, with a strong global brand. You should not draw any conclusions about Q4 sales from anything we say, but holidays and other fluctuations can come into play on a q/q basis.

We believe SEA-CD40 will be an immuno-oncology drug that activates T-cells. We think it could be very complimentary and exciting. We will present preclinical data next year.

Adcetris for DLBCL? We got over 40% response rate with 16% complete response. We will present a lot of data at ASH and then present a plan.

Any reason Adcetris would not be synergistic with a PD1 antibody? There is no evidence against using Adcetris with a checkpoint inhibitor. We just don't have anything specific to say today. The Yervoy plus Adcetris is accumulating patients; it is not a corporate trial. Many doctors and investigators are interested in combining Adcetris with CPMs.

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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. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2014 William P. Meyers