Analyst Conference Summary

Seattle Genetics

conference date: February 10, 2015 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2014 (fourth quarter, Q4)

Forward-looking statements

Overview: Revenue flattening while awaiting label expansion and other pipeline development. Guiding moderate revenue growth in 2015.

Basic data (GAAP):

Revenue was $74.3 million, down 2% sequentially from $75.9 million, and up 10% from $67.4 million in the year-earlier quarter.

Net income was negative $26.7 million, down sequentially from negative $15.6 million, and down from negative $15.7 year-earlier.

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


Adcetris net product revenue range $200 to $210 million for the full year 2015. Collaboration and license revenue $60 to $70 million. R&D expense between $250 and $275 million. SG&A expense $105 to $115 million. Cost of sales between 10% and 12% of net product sales. Non-cash costs $55 to $60 million, including about $40 million for share-based compensation. Believes will end the year with more than $180 million in cash.

Conference Highlights:

A supplemental BLA for Phase 3 AETHERA Hodgkin Lymphoma (HL) Adcetris data to be submitted this quarter. A priority in 2015 is expanding the Adcetris label and advancing other pipeline products.

Adcetris (brentuximab vedotin) sales for CD30-positive malignancies (currently relapsed HL and relapsed systemic ALCL) in the quarter were $46.5 million, up 21% from $38.5 million year-earlier. Has about 70% of the market in its on-label settings.

Collaboration and license revenue was $16.0 million, down 28% from $22.3 million year-earlier. Revenue decreased Takeda reimbursements.

Royalty revenue increased to $11.9 million from $6.6 million year-earlier. Royalties mainly reflect Adcetris sales by Takeda in 50 non-U.S. territories.

Adcetris for frontline Hodgkin Lymphoma Phase 3 trial continues, supported by new long-term survival data from the Phase 1 trial.

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.

Positive data was presented from a number of Adcetris and other agent trials at the ASH (American Society of Hematology) annual meeting held December 6-9:

SGN-CD33A for AML (acute myeloid leukemia) phase 1 results showed 44 percent of patients had blast clearance and 21% had complete remission (including those with incomplete recovery). Also started 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).

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

See also Seattle Genetics pipeline.

Revenue included milestone payments from AbbVie, Agensys, Bayer, and Genentech.

Cash ended at $313.4 million, down sequentially from $339.6 million. There was no debt.

Share-based compensation expense for full 2014 was $40.6 million.

Total costs and expenses were $102.1 million, consisting of: cost of sales $5.0 million; cost of royalty revenue $3.5 million, R&D $64.0 million; selling, general and administrative expense $29.4 million. Resulting in a loss from operations of $27.7 million. Other income 1.0 million.


Compendia and reimbursement? The listing gives up spontaneous use, looking at the level of evidence for a particular setting. It is hard to predict how it will play out in the marketplace.

Adcetris for DLBCL monotherapy does well for CD30 positive patients. 50% objective response rate. We will look at the Phase 2 results before determining the next steps and combination therapies.

Timeline for AETHERA trial results? We are interacting with the FDA, strong PFS statistical advantage. The review type, and timeline, is up to the FDA.

Compendia effect on guidance? There is a small component assumes outside of current label for ALCL and Hodgkin's in the guidance. We rely on trend lines and market research. If we get new labels from AETHERA and other trials, revenues will expand.

PD-1 combo trial design? We are excited to work with Opdivo, which has not been approved for use with HL. The design is under discussion. The focus is to help patients. Adcetris goal is getting to frontline therapy for HL for CD30 positive patients, which we believe will set a very high bar.

Immuno-oncology agent SEA-CD40 going to clinical, color? We have not said which solid tumor types, but ones you might expect to immune therapies. We will present preclinical data later this year. We are thinking about both monotherapy and in combinations. It works on antigen-presenting cells.

AETHERA filings outside the U.S.? Takeda would answer that.

Our AML product (SGN-CD33A) targets a different molecule, CD33, than other AML therapies. We believe we have a tremendous drug. Also targets MDS.

Is revenue guidance exclusive of royalties? Yes.

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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 2015 William P. Meyers