Seagen Inc (SGEN) 2004 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Seattle Genetics fourth quarter and fiscal year-end 2004 results conference call. [OPERATOR INSTRUCTIONS] I would now like to the conference over to Mr. Eric Dobmeier, vice president of Corporate Affairs. Please go ahead, sir.

Thanks for joining us today for Seattle Genetics fourth quarter and year 2004 financial results and business update conference call. With me on the call are Clay Siegall, our president and CEO, and Tim Carroll, our CFO. We'd like to take this opportunity to update you on our clinical and preclinical programs, our business development activities, and our plans for 2005. We'll also provide financial guidance for 2005 and 2006 and then open the call for questions.

Before we get started, let me point out that today's conference call will include forward-looking statements based on current expectations. Actual results may vary from those projected. Additional information concerning the factors that could cause our results to differ can be found in our SEC filings. With that, I will turn the call over to Clay.

Thanks, Eric. 2004 was a productive year for Seattle Genetics as we made substantial progress in many areas of our business. We advanced our pipeline by conducting clinical trials of three product candidates in six different diseases -- SGN-30 is in phase II studies in systemic and aplastic large-cell lymphoma, or ALCL; cutaneous ALCL; and Hodgkin's disease. SGN-15 is in phase II biomarker studies in non-small cell lung cancer, and SGN-40 is in phase I studies in multiple myeloma and non-Hodgkins lymphoma. We also advanced our preclinical programs forward during 2004 and expect to have at least two new product candidates enter clinical trials over the next two years.

Our antibody drug conjugate, or ADC technology, increases the potency of antibodies by stably linking them to cell-killing drugs. We utilize this technology in our internal pipeline as well as partner it with leading biotechnology and pharmaceutical companies. During 2004, we expanded our existing ADC collaborations with Genentech and Protein Design Labs and entered into new ADC collaborations with CuraGen and Bayer. These deals are valuable to us because they provide near-term cash flow and the opportunity to earn future milestones and royalties that can offset our internal expenses.

Also in 2004, we entered into a co-development agreement with Celera Genomics and in-licensed antibodies and associated patents from Imperial College in London. These types of deals further fuel our early-stage pipeline.

We ended 2004 in a strong financial position with roughly $106m in cash, which allows us to continue to aggressively advance our pipeline in 2005 and beyond. At our projected cash spend at have more than two years of capital without conducting any additional financing.

Next I'd like to walk through each of our lead clinical and preclinical programs in more details. First, SGN-30 -- this is an antibody targeting CD-30 that we are investigating in ongoing phase II clinical trials for both systemic and cutaneous ALCL, which are T-cell lymphomas and for Hodgkin's disease. In the systemic ALCL phase II study we have shown that SGN-30 is well tolerated and has objective anti-tumor activity. At ASH we reported that of the first six evaluable patients, two exhibited objective responses including one complete response and one partial response. In this indication, patient accrual is challenging because ALCL is a rare type of lymphoma. However, we are continuing to add patients and are expanding the study into approximately 50 sites in both the United States and Europe. We plan to report data from this ongoing study at ASCO in May as well as at ASH in December.

We are also enrolling patients in the cutaneous ALCL study, which we initiated in September. Cutaneous ALCL is a type of T-cell lymphoma that involves the skin. We are evaluating the anti-tumor activity and tolerability of SGN-30 in patients who have relapsed or are resistant to prior therapies. This phase II study is ongoing at multiple sites in the U.S.

In the Hodgkin's disease study, we have rapidly enrolled a sufficient number of patients at 12 mg/kg to reach our in-term analysis point. These are heavily pretreated patients with progressive disease who receive SGN-30 for six consecutive weeks followed by a four-week observation period. We plan to report data from the Hodgkins study at ASCO and to complete interim data analysis by midyear.

Our experience with Hodgkin's disease is that it is more difficult to treat than T-cell lymphomas due to the heterogeneous and fibrotic nature of the tumors in patients with advanced disease. We are currently exploring strategies to evaluate SGN-30 and earlier-stage disease including front-line patients. We are also looking for ways to extend our SGN-30 program into other clinical settings including combination studies chemotherapy and potentially used in immunologic disease. In preclinical models, SGN-30, in combination with conventional chemotherapeutics results in synergistic anti-tumor activity. We are planning a study of SGN-30 in combination with the chemotherapy regimen, ABBD, in Hodgkin's disease in the second half of this year. In addition, supported by the strong safety profile of SGN-30 in our oncology trials, we are looking at opportunities to conduct clinical studies in immunologic disease.

The next program that I'd like to discuss is SGN-40, a humanized antibody that targets CD-40, which is an antigen that is widely expressed on B-cell hematologic malignancies as well as several solid tumors. We recently announced that we have been awarded patents to the composition of matter and methods of using antic-CD-40 antibodies for the treatment of cancer. We are conducting two phase I studies of SGN-40 -- one in multiple myeloma, and another in non-Hodgkins lymphoma. These are both single-agent, dose-escalation studies. Cohorts of at least three patients received four weekly doses of SGN-40, and are followed for six weeks post-treatment.

We reported data from the first 10 patients in the multiple myeloma study at ASH indicating that SGN-40 was well tolerated at low doses. At enrollment, the patients have progressive or refractory disease and a median of five prior therapies. Multiple myeloma is an incurable disease for which existing therapies have significant toxicity. So a targeted therapy such as SGN-40 would be beneficial to these patients.

We treated our first non-Hodgkins lymphoma patients in late 2004. The study is evaluating SGN-40 in patients with both aggressive and indolent forms of B-cell non-Hodgkins lymphoma. Eligible patients must have relapsed or refractory disease. We are evaluating multiple lymphoma types including diffuse, large B-cell lymphoma, mantle cell, follicular, small, lymphocytic, and marginal zone lymphomas. We expect to report data from these ongoing SGN-40 studies at ASCO.

In addition, we plan to initiate a study in chronic lymphocytic leukemia, or CLL, later this year. Subject to patient accrual and tolerability, our expectation is that we will advance SGN-40 into a phase II clinical trial by late 2005 or early 2006. We are also evaluating potential studies of SGN-40 in combination with chemotherapies. Data we reported at ASH last year showing that SGN-40 combined with immune modulatory drugs such as Revimid, have synergistic anti-tumor activity. We also believe that SGN-40 may play an important role in the treatment of autoimmune disease, and we are exploring this in preclinical studies and are considering future clinical trials.

Turning now to our antibody drug conjugate, or ADC, program, I'll begin with SGN-15, which is in phase II studies for non-small-cell lung cancer. We previously reported data from a 60-patient randomized phase II study indicating that the combination of SGN-15 plus Taxotere provided a median 1.5-month survival advantage compared to Taxotere alone. While this study was not powered to demonstrate the statistical significance, these data are encouraging in the second-line lung cancer setting where treatment options are limited and incremental gains in overall survival are meaningful. Currently, we are looking at ways to further extend patient survival by modifying the dosing schedule. Our preclinical data suggests that administering SGN-15 prior to Taxotere results in greater anti-tumor activity than simultaneous dosing. By administering SGN-15 three days prior to Taxotere, we have shown that we can accelerate internalization of the antibody component of SGN-15 and maximize the release of a Doxorubicin payload inside the target tumor cell, thus increasing the anti-tumor efficacy of the subsequent dose of Taxotere. We are conducting two 30-patient phase II studies of SGN-15 in lung cancer -- one in front-line and the other in front or second-line patients.

The objective of these studies is to evaluate patient responsiveness to sequential versus simultaneous dosing of SGN-15 plus Taxotere using a biomarker measured through PET imaging. Accrual to these studies is progressing well with more than 40 patients already enrolled. We plan to report preliminary data from one of the studies at ASCO in May as well as at the World Conference on Lung Cancer in July. We expect to have a final data set for these studies by the third quarter. These data will be key in determining our future clinical development plans and potential partnering strategy for SGN-15.

I'd like to move now to our lead preclinical programs. We made significant progress during 2004 in moving these programs toward clinical developments. Our furthest along, SGN-35 utilizes our industry-leading, second-generation ADC technologies. We've designed a linker system that is stable in blood but releases active drug from the antibody once it enters the target cell. The drug payload is highly potent, and the drug linker system is synthetic, making it straightforward and cost-effective to manufacture.

SGN-35 utilizes the SGN-30 to deliver its cell-killing payload to tumor cells expressing the CD-30 antigen. We have generated extensive preclinical data demonstrating that SGN-35 is highly efficacious in regressing CD-30 positive hematologic malignancies at low doses. We plan to file an IND late this year for patients with Hodgkin's disease making it our first ADC using second-generation technology to enter clinical trials.

Our other lead preclinical programs encompasses two anti-CD-70 molecules, a humanized antibody, SGN-70, which has intrinsic cell-killing properties and an ADC, SGN-75, utilizing the same antibody with our second-generation ADC technology. CD-70 is an activation antigen expressed in high density on renal cell cancers as well as on a variety of hematologic malignancies. CD-70 has a privileged expression profile in that it is not readily observed on normal tissue. We have demonstrated anti-tumor activity of both SGN-70 and SGN 75 in two clinical cancer models. We expect to file an IND for one or both of these product candidates during 2006. SGN-70 and SGN-75 may also have application in immunologic, antiflammatory diseases due to the expression of CD-70 and recently activated T- and B-cells but not on resting cells. We have striking preclinical data demonstrating that we can selectively eliminate activated T-cells without affecting resting T-cells.

This is important in the immunologic disease setting because it may reduce the harmful effects of an immune response without causing global immunosuppresion. Diseases such as multiple sclerosis, lupus, and graft rejection may benefit from this type of therapy.

Next I'd like to briefly highlight some of our ongoing research and discovery activities. We are evaluating new classes of cell-killing drugs and novel linkage systems in order to improve the therapeutic utility of our ADC technology platform. We have also combined our ADC initiatives with our antibody technology activity to genetically engineer antibody drug linkage sites. These are exciting advances that we believe will take our ADC technology to the next generation. To complement our internal research activities, we are actively in licensing and collaboration opportunities for novel antibodies and cell surface targets.

In 2004 we initiated a co-development project with Celera Genomics, a leader in discovering and validating targets. We are also evaluating a number of antibodies, including those in-licensed last year from Imperial College in London.

In addition to our robust proprietary pipeline, we've built strong ongoing collaborations with Genentech, Protein Design Labs, UCB Pharma, formerly Celltech, CuraGen, and Bayer for our ADC technologies and with Genencor for ADEPT technology. These companies are developing product candidates using our technology. Notably, we are working with Genentech on multiple targets including [indiscernible] and CuraGen has announced that they have advanced our product candidate, CRO11, into preclinical development as a therapy for metastatic melanoma. As our collaborators move products through their development pipeline, we have the opportunity to earn milestones and royalties. Interest in our ADC technology is high, and we have discussions ongoing with a number of other potential collaborators. Since 2001 we have generated over $40m in cash flow from technology licensing, and I expect that we will complete another one to two ADC deals this year.

In summary, we have three product candidates in clinical trials with at least two others poised to enter the clinic in the next two years. With this strong pipeline and our industry-leading technologies, Seattle Genetics is well positioned for continued growth and success.

At this point, I'll turn the call over to Tim to discuss our financial outlook.

Thanks, Clay. My comments today will cover our fourth quarter and year 2004 results released this afternoon, and which are available on our website. I'll also provide our outlook for 2005 and 2006 including revenue and expense projections, capital spending, and cash position.

In 2004 revenue grew to $6.7m, up 31% from $5.1m in 2003. Our revenue is generated primarily from activities with our technology collaborators, Genentech; Protein Design Labs; UCB Pharma formerly Celltech; CuraGen; Bayer; and Genencor. The components of revenue include fees from research material supplies as well as the earned portion of technology access fees and milestones, which are required under GAAP to recognize over the research period of each collaboration, generally two to four years.

We are projecting increases of revenue generated from our collaborators in the range of $8m to $10m in 2005 and in the range of $10m to $12m in 2006. These revenue projections do not include any product partnering deals that may be completed over the next two years.

On the expense side, total operating expenses in 2004 were in line with previous guidance at $44.4m, up from $28.3m in 2003. R&D investments in our manufacturing and clinical trials activities were the primary factors in this increase. As Clay mentioned, we significantly expanded our clinical trials activity in 2004 and are now conducting studies of our three lead programs at multiple sites in the U.S. and Europe. In addition, growth and headcount and the manufacturing campaign of SGN-30 with Abbott Laboratories contributed to the R&D expense increase.

During 2005 and 2006, we are projecting modest increase in operating expenses driven by manufacturing expenses for SGN-40 as well as our SGN-35 and anti-CD-70 campaigns as we advance these programs; costs associated with continued expansion of our clinical trials including our ongoing SGN-30, SGN-40, and SGN-15 studies as well as a planned indication of SGN-35 clinical trials; and later this year we expect to begin recording a noncash stock option expense, which we expect to be around $3m in the last two quarters of 2005 and approximately $6m for the year 2006. Based on these factors, we project that total operating expenses will be in the range of $58m to $63m in each of 2005 and 2006.

In 2004 interest income was $2.2m, and we ended the year with cash and investments of $105.9m. Given this, we are estimating that interest income will be $1.5m to $2m in each of the next two years. For the year 2004, we recorded a noncash preferred stock deemed dividend of $36.6m resulting from our $41m private placement in July 2003. We completed our accounting for this charge in the third quarter of 2004. This noncash charge did not impact our net loss or cash flows.

In 2004 our capital expenditures were $5.7m driven principally by the cost of building out additional lab and office space in our existing facility. This project is complete and accordingly we expect capital expenditures in 2005 and 2006 to decrease to a range of $2m to $3m comprised mainly of lab equipment.

Factoring in capital expenditures and adjusting for noncash expenses, we expect our net cash burn to be approximately $40m in each of 2005 and 2006. With current cash and investments of close to $106m, we have a strong financial position from which to move our pipeline forward.

With that, I'll turn the call back over to Eric.

Thanks, Tim. Before we open the call to questions, I'd like to summarize some of our key activities for 2005. During the coming year we expect to advance SGN-40 by initiating a phase I study in CLL and a phase II study in multiple myeloma or non-Hodgkins lymphoma; file an IND for SGN-35 in Hodgkin's disease; extend our SGN-30 into a combination chemotherapy clinical trial; finish our phase II studies of SGN-15; complete additional corporate partnering in technology licensing transactions; and report at relevant scientific meetings including data from our three clinical programs at ASCO, the World Lung Conference, and ASH, as well as preclinical research at AACR. We expect to have a total of nine presentations from our internal researchers and our partners at AACR in April. With that, we will now open up the call for questions.

[OPERATOR INSTRUCTIONS] Our first question comes from Matthew Geller with CIBC World Markets. Please go ahead.

Hi, thanks, guys. Two questions I have for you -- the first one is are you going to be able to expand your ALCL study for SGN-40 into a pivotal study? And the second one is can you go over in as much detail as possible what papers you plan to present at the ASCO conference?

Hi, Matt, this is Clay. Two really easy questions -- with ALCL your questions are we going to be able to expand into pivotal studies, and we are in the middle of accruing patients for the first group of patients that we are planning to do in phase II, and we are not completed with that accrual yet, and so we will be presenting data at ASCO on our ongoing studies. And after we get the patients in and evaluate the responses, et cetera, we'll make a decision on pivotal study. So we're a little early to be telling you specifics on that pivotal study. But during 2005, we'll be able to make some substantial progress toward making that decision.

As far as ASCO and some of the specifics, we have submitted abstracts on all three of our clinical programs -- SGN-30, SGN-40, and SGN-15. We intend to present data on all three of the programs, and we plan on presenting as much data as we can on all of them. We'll present data on patients that have been treated with data validated. The only thing we will not present is patients that are currently getting therapy that are in the middle of their cycles that we do not have validated data on, but, other than that, we'll present everything that we have that's been validated, and we're pretty excited about the upcoming year and all the presentations we have in front of us.

Thank you, our next question comes from Jason Kantor with W.R. Hambrecht. Please go ahead.

Hi, guys, it's actually Michael Yee (ph) in for Jason -- just a couple of quick questions. Could you repeat the revenue guidance? I guess you were saying it was 10-10-12, and that didn't include new partnerships or is that not licensing deals or could you just go over that again?

Sure, Michael. What we're saying is that the guidance right now is $8m to $10m in 2005 and $10m to $12m in 2006, and that's excluding any partnering deals with our portfolio. Our cash typically is higher than that because I think, as you know, we have to capitalize that and defer that, and then we earn it over the research period.

The other question was as far as you know, there weren't any preferred shares that were converted at all?

This last year we had a small amount that was converted from preferred to common. I think it was 1.4 million shares increased into our common. So we still have the bulk of it as preferred, still obtaining as preferred.

Do you know what quarter that might have been in?

It was the third or fourth quarter. They couldn't convert until after July, so it was either in the third or fourth quarter that a small amount converted.

And the last question was in the R&D line this quarter, there's kind of a big ramp-up. Was there something that was a big contributor to that? Or is that some kind of a run rate that we can think about, at least going into the first quarter?

Well, as we said, it has mainly to do with manufacturing and clinical trials expenses, and we're giving guidance that those will continue as we increase both the trials and then the materials needed to support the trials antibody manufacturing. So it's primarily growth in those two areas.

Our next question comes from George Farmer with Wachovia Securities. Please go ahead.

Hi, good afternoon. Clay, that was quite a litany of indications that SGN-40 -- that you're going after with SGN-40. Can you talk a little bit more about the rationale for those studies?

Well, the first study is multiple myeloma that we talked about, and multiple myeloma is a disease, which is a terrible disease. CD-40 expressed on it at a high density, so we think that is a great place to start. NHL is certainly an area where there is CD-40 expression and very high density. Now, Rituxan does exist in NHL, and Rituxan is a fantastic drug. It targets CD-20, which is a different receptor from CD-40, which is what we target with SGN-40. So in the patients that we're putting into our clinical trials, all of them have already failed a Rituxan type of therapy. It's usually Rituxan in combination with CHOP chemotherapy where all the patients have previously seen Rituxan in the non-Hodgkins lymphoma trial, whereas in multiple myeloma they have not seen Rituxan, because Rituxan is not generally used to treat MM patients, because their tumor cells do not express the target for Rituxan CD-20. So, really, we're starting with MM, then go to NHL and the third disease is CLL, and that's chronic lymphocytic leukemia, which is also a disease which is difficult to treat and displays CD-40 on its cell circuits in very high density.

Those are the Big Three, and the tumor types that I talked about such as diffuse B-cell and mantle cell and follicular -- these are all classes of NHL.

Are any of those particular classes less susceptible to Rituxan that may be more susceptible to SGN-40?

Yes, that's one of the things that we are looking for very closely and Rituxan is a fantastic drug, but it doesn't work the same on all types of lymphomas. So we are certainly looking to try to see what the effect of SGN-40 will be in this setting, in the different subtypes of NHL and try to show initially if SGN-40 works in patients that have failed with Rituxan. And then once we get a handle on some of that, one can consider going earlier in the stage of disease, especially if there is a very good response rate in any of these subtypes.

And you submitted abstracts on all these studies?

We submitted abstracts on SGN-40 studies, in MM and, I believe, in NHL -- yes, two separate abstracts.

Our next question comes from Quynh Pham with Delafield Hambrecht. Please go ahead.

Hi, good afternoon. I have a question just kind of expanding on George's question. What about the multiple myeloma indication for SGN-40? Would a phase II trial be even looking at any type of new front-line therapy for this if the current trials do well?

That's a very good question, so thank you for that, Quynh. I think that, depending on what we see, we could push SGN-40 as early as possible, and we're only midway through our phase I study, so I don't want to get too far ahead of ourselves, but we are excited with our drug, and we think that it has real opportunities in MM. And there are some drugs out there that are used in MM. One was approved not that long ago -- Velcade. And what we see is that some of our patients have prior Velcade but not all of our patients, and it's actually less than half of our patients have prior Velcade, even though it's not an exclusion criteria at all. And so we see patients that have had prior therapy with Malfelin (ph). We see patients that have been on clinical trials with IMiDS, such as Thalomid or Revimid. So patients are coming in. They've had multiple prior therapies. Almost all of them have had transplants, so we pretty heavily pretreated patients currently.

Could we get closer to the front? Yes, but we have to show in phase I a good safety profile and some good response data, and that certainly excites the clinical community when we come up with that data. So we will be very interested in forwarding our program and going toward presentations at the appropriate cancer meetings and seeing that through.

And then concerning SGN-15, you mentioned you had two ongoing phase II trials with 30 patients in each trial, is that correct?

Thirty patients in the target number that we're going after for each trial, yes.

And one is front line and one is second line?

One is front line and one includes both patients that are front or second line?

One includes both patients that are front and second line, and then you're hoping to get final data by the third quarter of this year. So I'm just wondering if it -- I'm assuming it's an overall survival or a median survival. Would you have that timepoint by the third quarter, given that these are front-line cohort patients here?

Actually, we are studying the patients for survival and response and all that, but where we're looking at getting at a sooner timepoint is we have a biomarker in the study. So you're correct, there's a lot of information that we can get from these patients that takes a little bit more time, but what we're doing is, we're measuring, in a short timeframe, we're measuring FDG, flurodeoxyglucose using PETS. That's an FDG PET study. That's specifically the biomarker. So it's a labeled glucose that you're measuring, so it's a metabolism in the tumors that you measure through PET scanning, and it's actually very accurate. There are quite a number of publications on this. I could tell you that the data that's coming back already shows to me that technically this is a very accurate way to measure tumor response, and you can see that the responses in the tumors on a percentage of -- you could compare a response based on a percentage of glucose metabolism reduction in these patients done by the very accurate means of PET scanning.

So we'll have those data, and we'll be reporting some of those data at ASCO and at the Lung Congress, but we'll also be summarizing all our data and have it together probably by the third quarter, and we'll report it appropriately.

Okay, and then, finally, for SGN-30, you mentioned that the Hodgkin's disease indication, you'd be presenting interim analysis -- at ASCO or by midyear?

I believe we'll be able to present a lot of our analysis at ASCO. Now, the data that we're planning on presenting at HD in Hodgkin's disease, we started out at 6 NICS per kg, and we presented those last year, and we increased our dose to 12 mg/kg, and at the 12 mg/kg, we had shared publicly that we were going to treat 20 patients at 12 mg/kg and then that would be what we call our interim analysis toward potentially going up toward 40 patients. We'll have data -- our plans are to have data from, at a minimum, the 20 patients through to interim analysis at the 12 mg/kg dose.

Our next question comes from David Miller with "Biotech Monthly." Please go ahead.

Thank you. Just a quick question -- when you give us the final data on SGN-15 on the biomarker in Q3 is that when you will also make the go/no-go decision for the drug, going forward?

I think that the data is highly likely to impact our thoughts, going forward, and so your question is a very clear one, and I think it's likely to be that in the third quarter, based on our data, that we will be making very critical decisions in the SGN-15 program. It depends on what the data show in there, and we're optimistic that we're going to be getting data that we are quite encouraged with, but we have to get the data in the study, we have to validate the data, and then we have to present it appropriately, and we will do that, and we will then make decisions on the program. We're hoping that the data is encouraging, and using encouraging data to build on the 1.5 month survival data that we already have observed in a true survival study, we would like to take those data and consider using it as part of some of the partnering discussions that we have ongoing.

It's likely that SGN-15 would need to be in a fairly large phase III study that is statistically powered so that we can get data in the lung cancer setting in combination with Taxotere versus Taxotere alone, which is an approved drug for non-small cell lung cancer. So it's likely that we would need a substantial study with 200, 300, 400 patients per arm, and those numbers are really depending upon our response rate -- the better your response rate of the two drugs, the smaller the study you need. So it remains to be seen how large, after we do the statistical analysis, we would need to predict our phase III study if we go that direction. But you are asking a very appropriate question, which is by the third quarter will you be able to start making those decisions and I think the answer is likely yes.

[OPERATOR INSTRUCTIONS] Our next question is a follow-up question from Matthew Geller. Please go ahead.

Hi, it's Bret Holley. I've got a question on the SGN-40 phase I. You said that the patients had failed Rituxan plus CHOP or Rituxan generally in that trial. Are these pieces for labs or are they refractory to Rituxan?

This is in the NHL trial, not the MM trial.

Yes, right, in the NHL trial.

The answer, I think, is both. They can be refractory or they can be relapsed -- so there's no exclusion criteria.

Okay, so these could be patients that are entirely non-responsive to Rituxan?

That's right. They could have been non-responsive or they could have responded for some time period and then relapsed.

Okay, and then based on the mechanism of action on SGN-40, and SGN-40 does deplete B-cells, is that correct?

It does.

So then based on this mechanism of action, how do you see SGN-40 potentially moving further up in the non-Hodgkins lymphoma treatment paradigm?

Well, SGN-40 does induce ADCC powerfully, so we think that's a very good attribute. It also reduces apoptosis directly through a signaling cascade -- so we think that those are at least two of its mechanisms. There may be others, and we're looking at it, and we think that in NHL, it is really likely, the way we see it now, that we would be pushing forward with SGN-40 in the setting relapsed or refractory, and we have not yet made any definitive plans on how we would get further front-line with SGN-40. I can say that, in combination with -- in experiments in combination -- preclinical experiments, that is -- in combination with Rituxan, we see some very exciting synergy with the two drugs. But that's in preclinical models right now, and one can start thinking about opportunities to really do a double-targeting for the future. But, for now, I think our main focus in NHL is the refractory setting.

Our next question comes from Paul Latta with McAdams Wright Ragen. Please go ahead.

Tim, I'm wondering if I can just get you to repeat some of the guidance. I missed that comment you had on cash burn guidance for '05-'06.

Okay, Paul, do you just want cash burn, or would you like me to summarize revenues, expenses, cash burn?

Actually, I got the revenue and the expenses -- just the cash burn.

Okay. We're expecting cash burn of $40m in each year.

Okay, did you give an earnings-per-share guidance number as well?

No, we didn't, but I could give you share count expectations and you could figure it out.

Well, actually, the share-count number -- I'm assuming it wouldn't really change radically from where we're at, or would it?

The only thing that would change is as the preferred stock convert into common, that will change the share count and will change the EPS calculation. So we ended the year on a last-quarter basis of about 42 million common shares outstanding. You could add to that a little bit of a stock option conversion and then some assumption of how the preferred shares might convert into common.

Does the expensing of option have any impact on the share count in the later part of the year?

No, it shouldn't.

Also, I may have missed this earlier, Clay, on the timing on the combination chemotherapy trial with SGN-30, can you refresh my memory on the timing of the trial?

We didn't go into timing in great depth. We put together a protocol to look at SGN-30 in combination with ABDD, in Hodgkin's disease, and what we're looking at doing is getting that moving in the second half of 2005.

At this time I show no further questions. I'd like to turn the conference back over for any concluding comments.

Thanks again for joining us on the call today, and I look forward to speaking with all of you again soon, and I'd like to also thank Tim Carroll and Eric Dobmeier here with me at Seattle Genetics.

Thank you. Ladies and gentlemen, this concludes the Seattle Genetics fourth quarter and fiscal year-end 2004 results conference call. If you'd like to listen to the replay of today's conference, please dial 303-590-3000 or 1-800-405-2236, and you will need to enter the access code of 11021044 followed by the pound sign. Once again, thank you for participating in today's conference. At this time, you may now disconnect.