Analyst Conference Summary

Biotechnology

conference date: July 27, 2017 @ 1:30 PM Pacific Time
for quarter ending: June 30, 2017 (second quarter, Q2)

Forward-looking statements

Overview: main take is the positive data for frontline Hodgkin lymphoma

Basic data (GAAP):

Revenue was $108.2 million, down 1% sequentially from $109.1 million, but up 13% from $95.4 million in the year-earlier quarter.

Net income was negative $56.4 million, up sequentially from negative $60.0 million, and down from negative $32.7 year-earlier.

EPS (earnings per share, diluted) were negative $0.39, up sequentially from negative $0.42 and down from negative $0.23 year-earlier.

Guidance:

Increased full year 2017 revenue estimate for Adcetris product sales to $290 to $310 million. [Does not include royalties outside the US and Canada]

Conference Highlights:

Clay Siegall, CEO said "During the second quarter, we delivered record ADCETRIS revenues and achieved three key development milestones for the program: reporting positive top-line data from the ECHELON-1 trial in frontline advanced classical Hodgkin lymphoma, submitting an application for approval to the FDA for cutaneous T-cell lymphoma, and entering into a clinical collaboration agreement with Bristol-Myers Squibb for an additional pivotal trial in relapsed/refractory Hodgkin lymphoma."

Adcetris (brentuximab vedotin) sales for CD30-positive malignancies (relapsed HL and relapsed systemic ALCL) in the quarter were $74.3 million, up sequentially from $70.3 million, and up 12% from $66.2 million year-earlier. Preparing for commercial expansion of label to CTCL, but it is a rare disease.

Collaboration and license revenue was $21.5 million, down sequentially from $21.8 million, and up from $20.0 million year-earlier.

Royalty revenue was $12.4 million, down sequentially from $17.0 million, and up from $9.2 million year-earlier. Royalties mainly reflect Adcetris sales by Takeda in 65 non-U.S. nations.

Share-based compensation was $17 million.

ECHELON-1 (frontline Hodgkin Lymphoma) Adcetris Phase 3 trial reported positive results. Full results will be reported at ASH. A supplemental BLA could be submitted before the end of 2017.

E-2 (ECHELON-2) enrollment for MTCL (mature T-cell lymphoma) should have data readouts in 2018.

A Supplemental Biologics License Application was submitted to the FDA in June based on the Adcetris ALCANZA Phase 3 trial, for patients with CD30-expressing cutaneous T-cell lymphoma (CTCL) positive results. See CTCL BLA press release.

In collaboration with Bristol-Myers Squibb, a Phase 3 trial to test Adcetris with checkpoint inhibitor Opdivo (nivolumab) in relapsed or refractory HL (Hodgkin lymphoma) was initiated.

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 a metastaic urothelial cancer trial, in combination with checkpoint inhibitors.

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

SGN-CD33A (Vadastuximab Talirine) for AML (acute myeloid leukemia) Phase 3 CASCADE trial for AML was discontinued, as were all other trials using the therapy.

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. Also plans a combination with tecentriq for triple-negative breast cancer, conducted by Roche.

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. Planning a trial in combination with a checkpoint inhibitor.

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 $473.0 million, down sequentially from $536.4 million. There was no debt.

Total costs and expenses were $167.5 million, consisting of: cost of sales $8.0 million; cost of royalty revenue $4.3 million, R&D $114.4 million; selling, general and administrative expense $40.7 million. Resulting in a loss from operations of $59.3 million. Other income $2.9 million.

Q&A:

Echelon 2 trial powering? We said we have seen a lower rate of events. We will work with the FDA. We believe there will be a solution, perhaps a landmark date for unblinding. We still believe the data will be mature in 2018. Enrollment completed in 2016.

CTCL revenue opportunity? We saw 12 cycles in the trial, but in commercial setting could see less cycles. It is a relatively small opportunity, and we already selling to it. It has about 2,000 patients per year, and a current prevalence of 20,000. Not all are appropriate to switch to Adcetris.

Triple negative breast cancer plan? We do remain interested in the monotherapy, as well as the combination therapy. We had a 37% response rate across all dose levels with a monotherapy. Checkpoint therapies have seen some, but not great, response in breast cancer. So both opportunities are exciting for LIV1A.

Adcetris plus ABD data, once approved, will be used, and doctors will get better with it in time, just like they did with the prior chemotherapy. We had 92% five-year failure free survival when at sites with the best doctors.

Modified PFS is patient at the end of completion of frontline therapy do not have a CR and require additional therapy. That tends to be a small number of patiens who would otherwise progress quickly. There will be a lot of data presented at ASH.

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