Analyst Conference Summary

Biotechnology

conference date: April 27, 2017 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2017 (first quarter, Q1)

Forward-looking statements

Overview: Taking into account that a $20 million milestone payment was received in Q1 2016, not bad numbers. Lots of data due later this year.

Basic data (GAAP):

Revenue was $109.1 million, up 4% sequentially from $105.3 million, but down 2% from $111.2 million in the year-earlier quarter.

Net income was negative $60.0 million, down sequentially from negative $55.1 million, and down from negative $20.5 year-earlier.

EPS (earnings per share, diluted) were negative $0.42, down sequentially from negative $0.39 and down from negative $0.15 year-earlier.

Guidance:

no change. On track for Adcetris revenue.

Conference Highlights:

Clay Siegall, CEO said "Notably, we expect to report top-line data from the phase 3 ECHELON-1 trial this year. ECHELON-1 has the potential to redefine the way newly diagnosed classical Hodgkin lymphoma patients are treated for the first time in decades. In addition, we are on track to submit a supplemental BLA to the FDA in mid-2017 for Adcetris use in CTCL based on data from the ALCANZA trial,”

Adcetris (brentuximab vedotin) sales for CD30-positive malignancies (relapsed HL and relapsed systemic ALCL) in the quarter were $70.3 million, down slightly sequentially from $70.8 million, and up 20% from $58.6 million year-earlier. Preparing for commercial expansion of label to CTCL, but it is a rare disease. Frontline HL would be a much bigger revenue generator, if approval is given.

Collaboration and license revenue was $21.8 million, up sequentially from $20.8 million, and up from $20.2 million year-earlier.

Royalty revenue was $17.0 million, up sequentially from $13.7 million, and but down from $32.3 million year-earlier. Royalties mainly reflect Adcetris sales by Takeda in 65 non-U.S. nations. The y/y comparison was hit by the $20 million milestone payment received in Q1 2016.

Share-based compensation was $14.5 million, up from $12.2 million year-earlier.

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 have data readouts in 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) positive results should lead to a BLA submission for CTCL in mid-2017.

Adcetris was granted Breakthrough Therapy Designation in November for "CD30-expressing mycosis fungoides and primary cutaneous anaplastic large cell lymphoma who require systemic therapy and have received one prior systemic therapy. These represent the most common subtypes of CTCL. Based on discussions with the FDA following the BTD, the company now plans to incorporate additional data from investigator-sponsored trials into the planned supplemental Biologics License Application (BLA) to support the potential for a broader label in CTCL. As a result, submission of the supplemental BLA is now planned for mid-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.

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 planning a Phase 2, pivotal trial in metastatic urothelial cancer this year. Also planning for trials in combination with checkpoint inhibitors.

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

SGN-CD33A (Vadastuximab Talirine) for AML (acute myeloid leukemia) continued a phase 1b trial for newly diagnosed AML. Enrollment in the trials has been strong. 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. But "In December 2016, the FDA placed a full or partial clinical hold on several early-stage trials of vadastuximab talirine in AML. The clinical hold was initiated to evaluate the potential risk of hepatotoxicity in patients who were treated with vadastuximab talirine and received an allogeneic stem cell transplant. The company is working with the FDA to determine whether there is any association between hepatotoxicity and treatment with vadastuximab talirine and to resolve the clinical hold." The hold does not apply to the CASCADE trial. There is a phase 1 trial for MDS as well and a Phase 2 trial for newly diagnosed AML is planned for 2H 2017.

SGN-CD19A or Denintuzumab Mafodotin: phase 2 trial in frontline diffuse large B-cell lymphoma (DLBCL) continued.

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 triple-negative breast cancer. An expansion cohort is enrolling.

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.

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.

See also Seattle Genetics pipeline.

Cash ended at $536.4 million, down sequentially from $619 million. There was no debt.

Total costs and expenses were $168.4 million, consisting of: cost of sales $7.5 million; cost of royalty revenue $4.4 million, R&D $118.2 million; selling, general and administrative expense $38.4 million. Resulting in a loss from operations of $59.3 million. Other expense $0.7 million.

Q&A:

ASG-22ME talks with FDA? Meeting with FDA was positive. The new trial will be of modest size, single arm, on the accelerated approval pathway. There will be an oral presentation at ASCO.

Hodgkin Lymphoma second line? We have presented a lot of second line data. Combined with bendamustine had a high CR rate. Early data of opdivo combination are very good.

CTCL preparations? Trial data is remarkable. About 2000 people get therapy annually in the U.S., concentrated with a few treatment sites. We hope to have rapid uptake with the physician community.

Adcetris plus ABD long term side effects, like peripheral neuropathy? E1 is trying to get to a higher cure rate, get rid of bleomycin, and minimize use of radiation. Peripheral neuropathy caused by this class of agent is reversible.

PD1 therapies are now being used mainly after Adcetris.

SGN-CD33A, Pfizer's mylotarg? Mylotarg was a pioneering molecule, it is decades old. Despite its limitations it has a benefit for patients. Our product is differentiated, and is being tested on an older set of patients. We will do another, more comparable trial, starting later this year.

Future 33A trial design, younger patients have a transplant option, your strategy? We have thought about that a lot. Frontline treatment is for minimal residual disease, then a transplant. We have now had over 50 patients go on to transplants and have seen no extra risk. We will have an arm in the study to control for that.

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