Analyst Conference Summary

Seattle Genetics

conference date: July 26, 2016 @ 1:30 PM Pacific Time
for quarter ending: June 30, 2016 (second quarter, Q2)

Forward-looking statements

Overview: Adcetris sales were up, but royalty revenue was down more, resulting in a sequential revenue drop. Important data readouts are on the horizon.

Basic data (GAAP):

Revenue was $95.4 million, down 14% sequentially from $111.2 million, and up 24% from $77.1 million in the year-earlier quarter.

Net income was negative $32.7 million, down sequentially from negative $20.5 million, and up from negative $47.5 year-earlier.

EPS (earnings per share, diluted) were negative $0.23, down sequentially from negative $0.15 and up from negative $0.38 year-earlier.



Conference Highlights:

Clay Siegall, CEO commented "To expand on the ADCETRIS opportunity, we are executing on three ongoing phase 3 clinical trials that are approaching data, starting with ALCANZA top-line results this quarter. We advanced 33A into a phase 3 trial for acute myeloid leukemia (AML) and reported encouraging phase 1 data from two ADCs for urothelial cancer, ASG-15ME and enfortumab vedotin (ASG-22ME). We anticipate advancing several new programs and generating additional data from our pipeline over the remainder of 2016.”

Adcetris (brentuximab vedotin) sales for CD30-positive malignancies (relapsed HL and relapsed systemic ALCL) in the quarter were $66.2 million, up 13% sequentially from $58.6 million, and up 20% from $55.1 million year-earlier. The EU approved Adcetris for CD30+ Hodgkin lymphoma following stem cell transplants, giving it 3 approved indications in Europe.

Collaboration and license revenue was $20.0 million, down 1% sequentially from $20.2 million, and up 39% from $14.4 million year-earlier.

Royalty revenue was $9.2 million, down 72% sequentially from $32.3 million, and up 21% from $7.6 million year-earlier. Royalties mainly reflect Adcetris sales by Takeda in 65 non-U.S. nations. In Q1 they included a $20 million milestone payment.

ECHELON-1 (frontline HL) and ECHELON-2 (mature T-cell lymphoma) Adcetris Phase 3 trials are now under an amended SPA from the FDA, with possible data readout for E-1, which is fully enrolled, in late 2017 to mid 2018. E-2 enrollment for MTCL should complete in 2016, with data readouts in 2017 and 2018.

ALCANZA Phase 3 trial, for patients with CD30-expressing cutaneous T-cell lymphoma (CTCL) who have received prior systemic therapy top line data is expected in Q3 2016. Plans for commercial sales are being made. Working on a test for CD30.

In collaboration with Bristol-Myers Squibb, a Phase 1 / 2 trial to test Adcetris with checkpoint inhibitor Opdivo (nivolumab) in relapsed or refractory HL and in B-cell and T-cell non-Hodgkin lymphomas continued to enroll patients.

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

SGN-CD33A (Vadastuximab Talirine) for AML (acute myeloid leukemia) continued a phase 1b trial for newly diagnosed AML, with additional data due out later this year. In Q4 a Phase 1/2 trial started for 33A as monotherapy for AML as a pre-conditioning regimen prior to stem cell transplants and for maintenance after the transplants. The Phase 3 CASCADE trial for AML has started. And other trials in patient subsets are ongoing or planned, including for MDS.

SGN-CD19A for second line DLBCL Phase 2 trial started in Q4, using Rituxan with or without CD19A. Another SGN-CD19A phase 2 trial for relapses or refractory DLBCL in combination with a salvage treatment continued. A Phase 2 frontline DLBCL trial is also planned for 2016.

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

SGN-LIV1A interim Phase 1 data demonstrated activity in heavily pretreated patients with triple negative breast cancer. Additional patients are being enrolled. Positive preclinical data was reported at AACR.

ASG15ME and ASG22ME programs presented Phase 1 data at ASCO. These are a 50% co-ownership with Astellas and target solid cancers. The data so far is mainly in bladder cancer, for a substantial number of patients. More data should be presented in October.

Two additional compounds should move to clinical trials in 2016.

Seattle Genetics also expanded its linker molecules to enable ADCs to be engineered with previously inaccessible cytotoxic payloads.

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

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

Has some preclinical data showing ADCs may work well in combination with checkpoint inhibitors.

See also Seattle Genetics pipeline.

Cash ended at $659.5 million, down sequentially from $691.7 million. There was no debt.

Total costs and expenses were $128.8 million, consisting of: cost of sales $6.9 million; cost of royalty revenue $3.1 million, R&D $85.6 million; selling, general and administrative expense $33.3 million. Resulting in a loss from operations of $33.4 million. Other income $0.7 million.


We are seeing more transplant centers integrating Adcetris into their processes. Our field force is executing on making it the standard of care.

Submission for 5-year data for Hodgkin's? We are proud of the impact we have had on patients. We are keeping our submission plans confidential.

Most Adcetris sales are on label. We know about the Bleomycin shortage, but do not promote off-label use of Adcetris. But we want to get rid of Bleomycin from frontline use.

We are excited about our Phase 1 AML data. We are focused on enrolling the 500 patients in the Phase 3 trial. We will present more OS data from the Phase 1 trial as it becomes available. The 55 total patients, their data is immature at this point.

Bladder cancer has been difficult to treat once it became relapsed or refractory. Most patients are not getting durable responses from checkpoint inhibitors. We have treated a few patients who had already been treated with checkpoint inhibitors, and we have seen responses by them.

Will you need a larger sales force if you get the expanded labels? Yes, about a thousand CTCL CD30+ patients in the U.S. We are already in use guidelines, despite being off label, so use will jump, but not from 0 to 1000. We will adjust the size of the field force appropriately.

ABVD comparator is very inexpensive. What results are needed to compete? Doctors are excited, they don't like the current therapy's Bleomycin pulmonary toxicity. We hope to gain on both efficacy and safety. The consequences of not being cured is expensive, and the pulmonary consequences are expensive. We are talking to payers, and they seem open to its value proposition.

CASCADE AML trial timeline? It will take three to four years.

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Adcetris is being used prior to Opdivo. We do not have combination study data yet, but will present it at the soonest opportunity. Our data stacks up well against nivolumab. Our 34% CR rate is much better than the single-digit rate you will see with Opdivo.

ECHELON-1 stopping rules? There is a fixed number of progression free survival events. A third party will determine the stopping point.

We are seeing about 6 cycles in relapsed-refractory, which has been stable for a couple of years. For ATHERA setting it will clearly be more than 6, but the trend is not clear yet.

We are hopeful to present NHL study results by year end, but are not promising.

The intention of frontline therapy is PET-negative CR, which is very similar to PFS.

Adcetris revenue, inventory, price? No, just vial demand.

Adcetris royalties in Europe? Takata does not give us a lot of detail.

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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 2016 William P. Meyers