Analyst Conference Summary

Seattle Genetics

conference date: October 27, 2016 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2016 (third quarter, Q3)

Forward-looking statements

Overview: Revenue is rising fast, but so is R&D expense, so still a good ways from profitability.

Basic data (GAAP):

Revenue was $106.3 million, up 11% sequentially from $95.4 million, and up 26% from $84.1 million in the year-earlier quarter.

Net income was negative $31.8 million, up sequentially from negative $32.7 million, and down from negative $26.4 year-earlier.

EPS (earnings per share, diluted) were negative $0.23, flat sequentially from negative $0.23 and down from negative $0.21 year-earlier.

Note weighted diluted shares were 141 million, up 10% from 128 million year-earlier.


for the full year 2016 the range was tightened: Adcetris net sales is expected between $260 and $270 million. R&D expense expected between $370 and $390 million.

Conference Highlights:

Clay Siegall, CEO commented “Seattle Genetics is transitioning into a global, multi-product oncology company, demonstrated by our substantial progress with Adcetris both commercially and clinically, our advancing vadastuximab talirine phase 3 Cascade pivotal trial and the promising data recently presented on enfortumab vedotin for urothelial cancer,”

Adcetris (brentuximab vedotin) sales for CD30-positive malignancies (relapsed HL and relapsed systemic ALCL) in the quarter were $70.1 million, up 6% sequentially from $66.2 million, and up 19% from $59.1 million year-earlier. Preparing for commercial expansion of label to CTCL, but it is a rare disease.

Collaboration and license revenue was $24.0 million, up 20% sequentially from $20.0 million, and up 57% from $15.3 million year-earlier.

Royalty revenue was $12.2 million, up 33% sequentially from $9.2 million, and up 26% from $9.7 million year-earlier. Royalties mainly reflect Adcetris sales by Takeda in 65 non-U.S. nations.

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. E-2 enrollment for MTCL should complete in 2016, with data readouts in 2017 to 2018. The goal is to change the standard of care in both indications.

Adcetris ALCANZA Phase 3 trial, for patients with CD30-expressing cutaneous T-cell lymphoma (CTCL) who have received prior systemic therapy data will be presented at ASH in December. The trial met its primary endpoint. An application to expand the label to CTCL will be made in 2017.

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. Relationship was expanded to evaluate the combination in frontline older patient Hodgkin Lymphoma, relapsed/refractory mediastinal B-cell lymphoma, and mediastinal gray zone lymphoma.

Enfortumab Vedotin (ASG-22ME) and ASG-15ME, in collaboration with Agensys/Astellas, demonstrated a 59% objective response rate in previously treated urothelial cancer patients in a Phase 1 trial. Astellas and SGEN are considering options for later stage trials. Current therapies have limited benefits, and checkpoint inhibitors only help about 20% of patients. Goal is to move forward rapidly with 22ME, possibly to registrational trials.

A Phase 1 trial of SEA-CD40 for solid tumors continues, with first clinical data to be presented at SITC in November.

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. A Phase 1/2 trial continued 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 continued. And other trials in patient subsets are ongoing or planned, including for MDS. Four oral presentations will be made at ASH.

SGN-CD19A or Denintuzumab Mafodotin: "Seattle Genetics recently initiated a phase 2 trial of denintuzumab mafodotin in frontline diffuse large B-cell lymphoma (DLBCL). The trial will assess the activity and tolerability of adding denintuzumab mafodotin to the standard frontline regimen, R-CHOP, as well as a modified regimen, R-CHP. Denintuzumab mafodotin is also being evaluated in an ongoing phase 2 trial in relapsed DLBCL."

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

SGN-LIV1A Phase 1 data will be presented in December for triple-negative breast cancer.

SEA-CD40 Phase 1 data will be reported at SITC in November. "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."

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

SGN-CD70A development is being discontinued based on Phase 1 data, even though there were objective responses.

Three preclinical programs were highlighted: SGN-CD352A; SGN-2FF; and GSN-CD48A.

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

See also Seattle Genetics pipeline.

Cash ended at $632 million, down sequentially from $659.5 million. There was no debt.

Total costs and expenses were $138.7 million, consisting of: cost of sales $7.4 million; cost of royalty revenue $3.7 million, R&D $92.7 million; selling, general and administrative expense $34.8 million. Resulting in a loss from operations of $32.4 million. Other income $0.7 million.

Increased R&D expense is for adcetris and growing pipeline.


22ME path to market? Astellas partnership, excited by data. 15ME data was exciting, but 22ME is the priority. We have expanded into patients previously exposed to immuno-oncology. But 80% don't respond to that.

Echelon 1 trial, label reflection of patient population? It is data dependent, and on regulators. It could say stage 3 and 4, or it could just say advanced HL.

CTCL growth? We are excited about the data set. Currently CTCL gets treated by oncologists in large centers.

Low end of guidance could indicate a sequential Adcetris revenue decline? We are still in our target guidance range. There are quarter specific issues [WPM: like holidays]. In any case it will be strong y/y growth.

We added 300 patients to the original 1000 patients, which enabled us to tighten the timeline to 2017 from 2017 to 2018.

Opdivo in Hodgkin's, lack of patients? We are doing the combination trial with BMS, and expanded it. We expect to present first data at ASH, also an investigator presentation. For frontline HL we see Adcetris plus ABD, where we hope the cure rate will go up substantially. Those patients who fail could go to Adcetris plus Opdivo.

[Many questions were asked where the answer was basically: we will release that at the ASH meeting]

AML is a tough disease. It may take many drugs to treat all of the patients. "ADCs make extraordinary regimen partners with other drugs."

Adcetris price vs. volume? Majority driven by volume.

Our market penetration is about 50% for the post transplant setting, so there is some room to grow.

Bristol-Myers thinking? Frontline elderly is an important unmet need. That is our perspective, can't speak for Bristol-Myers.

We have not seen any negative impact on Adcetris from checkpoint inhibitors. There label says they are to be used after Adcetris.

Adverse events from earlier in 22ME trial? 15ME had a 50% objective response rate. Both were well tolerated. The occular AE events were seen in the 15ME trial. 22ME is being prioritized because is had higher efficacy plus lower AEs.

SGN-LIV1A just triple negative breast cancer data? We have 2 cohorts, the second cohort is HER2+ with Herceptin, but the data to be released does not include the newer, second cohorts. We already reported there are objective responses. At ASH you will get more details.

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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