Seagen Inc (SGEN) 2009 Q3 法說會逐字稿

Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the Seattle Genetics third quarter 2009 financial results conference call. During today's presentation all parties will be in listen-only mode. Following the presentation, the conference will be open for questions. (OPERATOR INSTRUCTIONS)

This conference is being recorded today, Thursday, October 22, 2009. I will now like to turn the conference over to Ms. Peggy Pinkston, Director of Corporate Communications. Please go ahead ma'am.

Thank you, operator. I'd like to welcome all of you to Seattle Genetics third quarter 2009 conference call. With me today are Clay Siegall, President and Chief Executive Officer, Todd Simpson, Chief Financial Officer, Eric Dobmeier, Chief Business Officer and Tom Reynolds, Chief Medical Officer.

This afternoon Clay will provide an update on our programs including recent highlights and upcoming activities. Eric will overview our assessment of the market potential for Brentuximab Vedotin and Todd will discuss our third quarter and year-to-date financial results. After that we'll open the call for your questions.

Today's conference call will include forward-looking statements based on current expectations. Such statements are only predictions and actual results may vary materially from those projected. Please refer to the documents that we file from time to time with the SEC and which are available on our website for information concerning the factors that could affect the Company.

And I'd now like to turn the call over to Clay.

Thanks Peg and thank you all for joining us this afternoon. It's been a very productive past few months. We completed enrollment to our pivotal trial of Brentuximab Vedotin, strengthened our financial position with a public offering and continue to prepare the Company for commercial launch of our first product in 2011.

We recently submitted an IND for our next proprietary ADC, SGN-75, and received several milestone payments from ADC collaborators as they advanced programs into the clinic.

The Company is well positioned with a robust product pipeline, multiple ongoing clinical trials, industry leading ADC technology and a strong balance sheet.

I'll begin with an update on our lead program, Brentuximab Vedotin or SGN-35. B-Vedotin is an antibody drug conjugate or ADC targeting CD30. In August we announced the completion of accrual to our pivotal trial for relapsed and refractory Hodgkin lymphoma. We reached our target enrollment of 100 patients six months ahead of schedule.

The pivotal trial of B-Vedotin is being conducted under a Special Protocol Assessment from the FDA. Patients receive treatment every three weeks for up to a year. The primary endpoint of this study is objective response rate assessed by independent review.

We are also evaluating complete response rate, duration of responses, progression free survival, overall survival and safety. We continue to expect data from the pivotal trial in the second half of 2010.

If the results are positive, we plan to submit a New Drug Application or NDA to the FDA under the Accelerated Approval Regulations in the first half of 2011. We also plan to submit a Conditional Marketing Authorization application with the European Medicines Agency, or EMEA.

Our goal is US commercial launch of B-Vedotin in the second half of 2011 with European launch to follow as soon as possible thereafter.

The pivotal trial design is based on our phase I study evaluating B-Vedotin administered every three weeks for relapsed or refractory Hodgkin lymphoma and systemic anaplastic large cell lymphoma or ALCL.

In patients treated at doses of 1.2 mg/kg and higher, a 54% objective response rate was demonstrated, of which 39% were complete responses.

B-Vedotin has been generally well tolerated. The majority of adverse events have been grade one and two with the most common being fatigue, fever, peripheral neuropathy, neutropenia, diarrhea and nausea.

We recently completed patient followup in this phase I trial and locked our database. Notably at our final analysis the median duration of response had increased to approximately 10 months, nearly three months longer than we previously reported.

At the time of database lock, six of seven patients with response durations of greater than one year had ongoing responses as of the last patient followup. We believe that these durable objective responses are an important outcome for patients in the relapsed and refractory settings.

We're also evaluating a more frequent dosing regimen in a separate phase I dose escalation trial of B-Vedotin administered weekly. We reported interim data from this trial at the American Society of Clinical Oncology annual meeting in June demonstrating response rates and a safety profile similar to our every three week study. We recently completed accrual to this trial and plan to report additional data at the 2009 American Society of Hematology or ASH annual meeting in December.

Our other ongoing trials with B-Vedotin include a phase II trial in system ALCL. This trial is enrolling ahead of schedule and we expect to complete enrollment -- complete accrual in 2010.

Based on the high response rate in ALCL from phase I, we're optimistic about the potential of B-Vedotin in this indication. Data from the ongoing trial may provide an additional registration pathway for B-Vedotin.

We're also conducting a phase II retreatment clinical trial to assess a second course of therapy in patients who have relapsed after previously responding to B-Vedotin. Use of B-Vedotin in the retreatment study could further address the unmet need in this population.

From a regulatory perspective, we have had productive discussion with both the FDA and EMEA on a global registration strategy for relapsed and refractory Hodgkin's lymphoma that includes a phase III study designed to support full approval in both the US and the EU. The trial will enroll approximately 325 patients at high risk of residual Hodgkin's lymphoma following autologous stem cell transplant with a primary endpoint of progression free survival.

We intend to provide additional details as we approach the trial initiation planned for the first half of 2010.

In addition to activities directed toward our initial registration pathway, we are actively pursuing strategies to broaden the potential application of B-Vedotin including moving it into front line therapy for the treatment of Hodgkin lymphoma. We are planning a phase I trial in approximately 40 patients to evaluate B-Vedotin in combination with the standard front line chemotherapy regimen ABVD.

The primary purpose of the trial will be to evaluate safety of the combination. We expect to initiate the trial in the first half of 2010. There is a great deal of enthusiasm for B-Vedotin and we believe that there is a meaningful commercial opportunity.

I'll now turn the call over to Eric Dobmeier to provide details regarding our assessment of the market potential.

Thanks. As Clay said, we believe B-Vedotin has the potential to be an important new therapy for lymphoma patients. One of the challenges in explaining our commercial assessment of B-Vedotin is that Hodgkin lymphoma and ALCL are not well understood markets. There have been no new drugs approved for these types of lymphoma in many years and there's a misperception that almost everyone with these diseases is cured with front line combination chemotherapy.

In fact, although front line treatments for Hodgkin lymphoma and ALCL result in a high percentage of durable remissions and cures, a significant number of patients are refractory or relapsed and require additional therapies.

We've conducted extensive primary and secondary market research into therapeutic paradigms and outcomes for patients with Hodgkin lymphoma and ALCL and have utilized this information to build a combined incidence/prevalence patient flow for these diseases.

Let me start with Hodgkin lymphoma and walk you through our high level assessments and assumptions for the US market. The US incidence of HL is approximately 8,500 patients per year, almost all of whom are initially treated with the ABVD combination chemotherapy regimen.

Roughly 80% to 90% of patients treated with ABVD achieve complete responses, but approximately 30% of responding patients will relapse, usually within the first two years. Overall, approximately 25% of patients diagnosed with HL are not cured with ABVD and require additional therapy.

In second line HL patients are generally treated with salvage chemotherapy with a goal of going on to receive an autologous stem cell transplant. For patients who are ineligible for transplant or who relapse after receiving a transplant, there is no generally accepted standard of care and patients receive various salvage or palliative treatment including chemotherapy, mini allogeneic transplant, investigational agents, radiotherapy or supportive care.

Median survival for these patients is approximately two to three years during which they often cycle through multiple treatments that provide transient clinical benefit.

When applying our patient flow model to HL, we estimate there's a prevalence flow of approximately 4,000 to 5,000 patients in the US living with relapsed or refractory HL who have either failed or are ineligible for autologous stem cell transplant and who require additional therapies. We believe there are an additional 2,000 patients who are newly relapsed or refractory each year and flow into this prevalence pool.

When the prevalence and incidence of relapsed and refractory ALCL are added, we estimate that the size of the current US relapsed and refractory patient population is approximately 8,000 to 9,000 individuals.

Incidence numbers for HL and ALCL in the European Union are slightly higher than the US and treatment paradigms are similar, although German oncologists tend to prefer BEACOPPchemotherapy in front line HL, which has a slightly higher response rate but more associated toxicity. This leads to a relapsed and refractory patient pool in Europe that is roughly equivalent to the US.

Applying a price of $50,000 per patient year for modeling purposes, we estimate the worldwide annual peak sales potential of B-Vedotin in relapsed and refractory HL and ALCL to be $300 million to $400 million, which is based on treating 6,000 to 8,000 per year. Notably we believe our pricing estimate is conservative and may contain upside potential for an improved therapy in orphan indications.

Two additional key factors in our projections are the potential for maintenance and retreatment therapy with B-Vedotin. We have early indications from our clinical trials that patients may receive prolonged B-Vedotin treatment as well as evidence that patients who initially respond to B-Vedotin and later relapse when off therapy may experience additional antitumor activity if retreated with B-Vedotin.

If patients remain on B-Vedotin maintenance therapy for greater than one year or can be retreated, this expands the commercial potential in future years. We are further evaluating treatment durability and retreatment in our ongoing clinical trials, including our phase II retreatment trial.

We are also actively exploring B-Vedotin's potential in front line therapy for HL. We have generated preclinical data demonstrating that B-Vedotin combined with ABVD results in improved efficacy including in models with high tumor burden. As Clay said, our phase I ABVD combination study should begin in the first half of 2010 to evaluate the tolerability of combining B-Vedotin with ABVD. Contingent on positive data from this study, we intend to work with cooperative groups in the US and Europe to design trials of B-Vedotin as part of front line combination chemotherapy regimens.

In addition to combination strategies, we also believe there are single agent treatment approaches for front line HL and ALCL, in particular there are unmet needs in both high risk and older patients for front line therapy that can increase response rates, improve progression free and overall survival and reduce long term toxicities. By moving B-Vedotin into front line treatment regimens we believe we may be able to improve patient outcomes and expand its commercial potential.

Finally there are some interesting opportunities for B-Vedotin in other hematologic malignancies such as peripheral T cell lymphomas, cutaneous lymphomas and subsets of B cell lymphomas that express CD30. We believe B-Vedotin has the potential to become an important therapy for multiple types of CD30 positive cancers.

I'll now turn the call back over to Clay.

Thanks Eric. Next I'd like to discuss Lintuzumab or SGN-33, an antibody targeting CD33. Our key clinical trial with Lintuzumab is a phase IIb trial, [110] patients with acute myeloid leukemia or AML, age 60 or older. This is a randomized, double blind, placebo controlled trial designed to compare overall survival of patients receiving a low dose cytarabine plus Lintuzumab to those receiving low dose cytarabine alone.

Multiple safety analyses have been conducted by an Independent Data Monitoring Committee or IDMC. The Committee had not identified any safety concerns that would justify study delay or revision. There are no further planned interim safety analyses and the study does not include any interim analysis for futility or efficacy.

We expect that top line data will be available in the first half of 2010 based on our projections for when we will reach 186 events that trigger for unblinding the data.

We believe that our phase IIb trial is well designed, which has been reinforced by comments made at the ODAC meeting last month regarding studies in AML. The randomization and overall survival endpoint of this trial are consistent with ODAC's statements regarding required AML trial designs. The use of a placebo comparator arm further strengthens the integrity of the study. Strong data from this trial could lead to discussions with the FDA regarding regulatory approval.

Next, Dacetuzumab or SGN-40, which is a humanized antibody targeting CD40 that we are developing in collaboration with Genentech, a wholly owned member of the Roche group. We announced earlier this month that we discontinued the SeaGen MARINER trial which was a randomized double blind trial evaluating Rituxan and ICE chemotherapy plus or minus Dacetuzumab in second line diffused large B cell lymphoma or DLBCL.

The trial was stopped based on a determination by the IDMC that it was unlikely to meet its primary endpoint of a statistically superior complete response rate in the Dacetuzumab arm. This was an unexpected outcome and disappointing not only for us but for patients as well. Of note, there were no unexpected safety signals identified by the IDMC. We're working with Genentech to further analyze the data.

The outcome of the MARINER trial does not impact our four continuing phase Ib combination trials of Dacetuzumab for non-Hodgkin lymphoma and multiple myeloma. One of these trials combining Dacetuzumab with Rituxan and GEMZAR for patients with DLBCL will be the subject of an oral presentation at ASH on Monday, December 7.

Data will also be reported during a poster presentation at ASH from the phase Ib trial of Dacetuzumab in combination with Revlimid in patients with multiple myeloma.

In addition, we expect that further retrospective data on a diagnostic gene signature that correlates with sensitivity to treatment with single agent Dacetuzumab in patients with DLBCL will be presented at ASH by Genentech.

Two other phase Ib trials are ongoing, including a trial of Dacetuzumab in combination with Rituxan for indolent non-Hodgkin's lymphoma and a trial of Dacetuzumab in combination with Velcade for multiple myeloma. Data from these studies are expected during 2010.

Our fourth clinical stage program is SGN-70, an antibody targeted to CD70. CD70 is highly expressed on activated T and B cells but not resting lymphocytes, which may allow for targeted therapy that does not significantly suppress the patient's immune system. We are conducting a phase I clinical trial in both healthy volunteers and patients with autoimmune disease to assess the tolerability and pharmacokinetics of SGN-70 in these patients as well as to evaluate biomarker activity.

We are also advancing SGN-75, an ADC targeting CD70. We have recently submitted an investigational New Drug Application for a phase I clinical trial in patients with CD70 positive non-Hodgkin's lymphoma or renal cell carcinoma. We have strong preclinical data on the activity and tolerability of SGN-75.

Further, the broad expression profile of CD70 in both solid tumors and hematologic malignancies provides for multiple therapeutic opportunities. We expect to treat the first patient on our phase I study by the end of the year, ahead of our previous expectations, making it our second proprietary ADC to advance into the clinic.

Our industry leading proprietary ADC technology is the foundation of multiple internal and collaborative programs. During the third quarter we received milestone payments from MedImmune and Bayer as each of these companies advanced ADCs using our technology into clinical trials.

MedImmune is developing an EphA2 targeted ADC for solid tumors including ovarian and breast cancer. Bayer is developing an MN targeted ADC for solid tumors. In addition, we are advancing ASG-5ME under our collaboration with Agensys, a subsidiary of Astellas. This ADC is being developed for solid tumors and the goal is to submit the IND in the first half of 2010.

Our research group is focused on continuing to fill our pipeline with novel ADCs for the treatment of cancer. We expect that this work will lead to future IND candidates. In addition, our research team recently introduced our SEA Technology, a novel approach to empowering antibodies through enhancement of antibody dependent cellular cytotoxicity. This technology is powerful, simple and less expensive compared to similar technologies that augment effector function. We intend to utilize this technology internally as well as consider licensing it to other companies developing antibody based therapies.

Having multiple approaches to power antibodies provides us with the ability to determine the most suitable technology based on the antibody, disease state and expression profile of the target.

Finally, finally I'd like to welcome Bruce Seeley who recently joined our executive -- our team as Executive Vice President, Commercial. Bruce brings a deep understanding and extensive experience in the marketing and sales of oncology therapies from his previous positions at Genentech and Aventis where he played a major role in commercial development activities for Herceptin, T-DM1 and Taxotere. He will build and lead our commercial team in preparation for the B-Vedotin launch planned for 2011.

Bruce will also be a key contributor across the Company and a member of the Executive Committee. I'm pleased that he has joined Seattle Genetics and look forward to introducing him to you in the future.

Before I turn the call over to Todd, let me review our key upcoming activities. For B-Vedotin, we plan to report weekly dosing data at ASH, initiate a front line combination safety trial in Hodgkin lymphoma in the first half of 2010, initiate a trial designed to support full regulatory approval requirements in the US and Europe in the first half of 2010 and advance our pivotal trial in order to report top line data in the second half of 2010.

For Lintuzumabwe plan to complete treatment and patient followup in the phase IIb trial in preparation for data that are expected in the first half of 2010.

For Dacetuzumabwe will report phase Ib combination clinical trial data at ASH.

For SGN-70 we will continue enrollment of autoimmune disease patients in a phase I trial.

For SGN-75 we will initiate the phase I trial for CD70 positive non-Hodgkin's lymphoma and renal cell carcinoma before the end of 2009 and for ASG-5ME, we will continue to pre-IND activities towards a planned IND in the first half of 2010.

We are excited by the potential of our broad pipeline continued advancement of promising therapies by us and our collaborators using our ADC technology. We look forward to keeping you updated on our progress.

I'd now like to turn the call over to Todd to discuss financial results.

All right, thanks Clay and thanks everyone for joining us on the call this afternoon. From a financial and operational perspective, we had a successful third quarter. We strengthened our balance sheet considerably and our ADC collaborators made progress that resulted in substantial milestone payments to us.

Importantly, we continued to position B-Vedotin for launch, including advancing our clinical trials and furthering our manufacturing activities to not only supply drug for our trials but to take us to launch scale.

While we are well positioned financially, we continue to be careful with our resources. Today I'd like to highlight our financial results as well as provide an update for the remainder of 2009 as it relates to our year end cash position, which we expect to be higher than previously anticipated.

Revenues in the third quarter of 2009 were $11.6 million and were $30.2 million for the year-to-date. These represent 44% and 20% increases over the third quarter and year-to-date in 2008.

Revenues continue to reflect our Dacetuzumab collaboration with Genentech as well as amounts earned under our ADC collaborations.

Revenues in the third quarter of 2009 increased largely as a result of milestones achieved by our MedImmune and Bayer collaborations.

Operating expenses for the third quarter of 2009 increased to $32.2 million. This is up slightly from $31.4 million in 2008. For the first nine months of 2009 total operating expenses were $102.4 million, up from $85.1 million in 2008. The planned increase in year-to-date expenses reflects higher R&D expenses which were $90.2 million in 2009 compared to $73.4 million in 2008.

R&D expenses in 2009 continue to be driven by clinical development and manufacturing activities for B-Vedotin. These include several ongoing clinical trials, most notably the pivotal trial that completed accrual in August and the phase II trial in systemic ALCL where patient accrual has been strong.

We also made significant progress in our manufacturing and CMC activities related to clinical drug supply but importantly to support our planned regulatory submissions and ultimately product launch.

Total operating expenses including non-cash, share-based compensation expense of $8.5 million for the year-to-date in 2009 compared to $7.4 million in 2008.

I'll conclude with a few comments on our 2009 and 2010 guidance. We continue to project that 2009 operating expenses will be near the top end of our guidance range, which was $125 million to $140 million.

Because of the timing of vendor invoicing and payment, we expect that our operating cash burn for 2009 will be at the low end of our guidance range, which was $80 million to $90 million.

Based on our current cash position of $306 million, which includes net proceeds of $128 million from our public offering in August, we expect to end 2009 with a cash position of around $270 million, thus we are well positioned to continue advancing our product pipeline.

We plan to provide our 2010 guidance during our next call in early February and we will give more details at that time. Until then though, you can expect that we will continue to increase our investment in B-Vedotin toward the goal of product approval in 2011 and in pursuing additional commercial opportunities.

With that I'll stop and turn the call back over to Clay.

Thanks Todd. Operator, at this point we would like to open the call for questions.

Thank you sir. We will now begin the question and answer session. (OPERATOR INSTRUCTIONS) And our first question comes from the line of Mark Monane with Needham & Company. Please go ahead.

Thank you very much and thank you for reviewing the events of the last quarter. Greetings from New York City where we're having summer and fall with the temperatures in the high 70s.

Speaking of summer, we saw some excellent data at the ASCO meeting concerning the opportunity in ALCL and I guess I would be interested in finding out if there's any followup of that data that we saw there and how Eric and the team is positioning the ALCL indication versus the HL indication in terms of both the time to registration as well as the market opportunities.

Thanks Mark. This is Clay and we're jealous of your wonderful weather in New York. We -- indeed we did discuss some exciting data with, although preliminary, with ALCL and we're involved in a phase II trial right now. Perhaps Tom can make a few more comments concerning that trial and what our thoughts are with ALCL.

Yes, so Mark, as you're aware our primary focus is on our Hodgkin lymphoma market opportunity. We expect from the data from that study to be available in the second half of 2010 and we're really, that is our number one priority.

We have been very pleased by the brisk enrollment into the ALCL trial. In large part, that appears to be driven from the exciting data that we did talk about last spring. We expect to complete accrual in the ALCL study in 2010. It's very similar to the Hodgkin lymphoma study in that patients can be treated for up to a year so final data won't come out for some period of time.

We're not -- we don't really have many additional details about exactly when the data's going to come out but we do think ALCL is another registration opportunity for B-Vedotin and we'd like to find a way to realize that as soon as we have the data to manage it.

Got it. Got it. Now, do you -- in terms of modeling the front line and the second line indication, are you modeling your approach after other chemotherapies, for example Tarceva, which started potentially in second line and has moved up? Is it possible that a patient could get the drug in first line and then again in second line? How are you thinking about a potential collaboration versus competition for the drug?

Sure, well first of all we definitely are starting new patients in the relapsed/refractory setting and we look to move toward front line as we go forward. And perhaps, Tom, do you want to comment a little bit on the collaboration and competition he's talking about?

Yes, so from a clinical trials perspective, our initial studies are obviously in relapsed/refractory disease. Clay just talked a little bit about our phase III study that we're teeing up to start next year, which will be effectively second line immediately post transplant in high risk patients.

And we also have mentioned that we're going to be starting a front line study to determine the safety of combining B-Vedotin with AVBD standard chemotherapy for front line. Eric also mentioned that we've got a number of other front line opportunities where potentially B-Vedotin could be used as a single agent or with other combinations either in high risk patients or in elderly patients.

So we're exploring all of those. We expect this to be used at multiple lines of therapy and as Clay mentioned earlier, we expect continued accrual into our retreatment study, which we hope will confirm the ability of administering courses of B-Vedotin more than once to a patient to really give them an opportunity to benefit.

And then speaking of -- well, I guess one trial I didn't hear about, maybe I missed it, was patients that fail front line therapy and then may be candidates for B-Vedotin before -- as a bridge to transplant or potential to clear up the bone marrow in order to make the patient eligible. Did you talk about that? Is that a treatment --

I did not talk about that. I will say we have had quite a bit of interest from the academic community in finding a way to incorporate B-Vedotin in the salvage regimens. It is something that we intend to explore in the future but right now our priorities are getting the drug approved for relapse/refractory, ensuring that we start a phase III study that could be a confirmatory study for full approval and starting to explore front line.

We think those are the best places to use our resources today but really expect to be working in the second line of salvage regimens in the years to come.

And then for Todd, how many people, please, at the Seattle Genetics and what's the optimal number going forward?

Yes, so we're at about 280 people right now. We continue to grow this year. We expect some limited growth over the next three to nine months. We'll give perhaps a little bit more color on our year-end call but the areas where we look to be growing over the next three to six months will be in our clinical and regulatory teams and then now with Bruce Seeley on board we look forward to starting to build out our commercial infrastructure.

Thanks for the added information and looking forward to the December presentation.

Thank you. And our next question comes from the line of Bret Holley with Oppenheimer Company. Please go ahead.

Yes, hi, thanks for taking the question. I'm wondering now that you have the final phase I data for B-Vedotin what the duration of treatment did, how that might impact the time line for the phase III, because your median duration was 10 months but presumably you had some outliers in that group as well, and are you going to have to wait until the stragglers kind of come in on the phase III to really get the final duration there, and how that might affect the time line?

Yes, we have rules within our SPA. Todd, do you want to give some details?

Yes, Bret, just to refresh our memories, for the pivotal study that's ongoing now, we have set this up so patients can be treated for up to a year on B-Vedotin. We've had patients in the phase I experiences that have had that length of treatment. Given the rapid enrollment, we think a substantive fraction of the patients may complete full year, some may go off earlier, but a substantive fraction will.

So we think that really is going to drive when the data comes out in the second half of 2010, those completing treatment. We think should a substantive number of patients complete full year that obviously will -- has potential to push out our durability of responses as that goes forward.

So we think that we're optimistic about the way the phase II study has been enrolling and how physicians have been working with their patients. We're optimistic that that will have a good impact on durability from the pivotal.

But the time line, going back to that, the time lines are, the guidance that we've given is that we are going to be observing the patients for a year, that within our SPA and we announced the completion of our accrual in August of this year. So keep that in mind and we also need some time at the end of that to get all the data together for the independent assessment of the scans. So that's really the (inaudible) to us putting out the top line data.

And just to follow up on that then, if there is a handful of patients or some significant portion of patients that actually make it out to a year dosing, presumably that would be August of 2010, and then those patients won't be essentially kind of left to kind of wait until they actually progress, to actually collect the data on those patients or the actual observation will be at 12 months for all patients?

Yes, the observation will be at 12 months for all.

So --

Go ahead Tom.

I'm sorry.

No, go ahead.

So an alternative -- so definitely the way to think about this is we will close the data on all patients once every patient has completed treatment. Some patients will have been followed on the study longer, some shorter, but everybody will have been followed at least 12 months if they remain on study.

We know we announced the opening of the trial in February so the longest we will have followed someone is roughly 18 months and the shortest time we will have followed anyone is roughly 12 months.

When we do that cut, that won't be the end of the study. We will continue to follow patients for longer periods of time for progression and overall survival and report on that data in the future, but that would be the top line cut that we would look at in the second half of next year.

Exactly. That's what I was trying to refer to the top line cut. Thank you.

Okay, so the top line cut though, this is the last question on this, the top line cut, you'll announce obviously the top line data but for the regulatory purposes you will have to follow the patients out until they're progression and for overall survival, correct?

We are -- secondary endpoints include overall survival.

Right, so you will have to follow those patients out so if a patient is, came into the trial in August of this year, go to that August of next year and he's been on therapy, continues doing well, that patient, that outlier kind of patient will have to be kind of followed out to a logical stream, correct?

So Bret, from a regulatory perspective, we expect to do a data cut in the second half of next year.

Okay.

Primary endpoint, which is objective response rate by independent review. We will then continue to collect supplemental data that can be filed later to our NDA and published and presented publicly as durability and PFS data become available, but that's not a requirement that we wait until every patient relapses.

Great, that's exactly what I wanted to clarify. Thanks very much.

Thank you. And our next question comes from the line of John Sonnier with William Blair. Please go ahead.

Thanks for taking the question and Clay, thanks for a very informative and helpful call. I'm intrigued by the front line strategy with B-Vedotin. I guess, do you guys know enough from your current experience with that agent's form how many doses you will get? Presumably you will go ABVD plus or minus B-Vedotin or maybe single agent as you alluded to in high risk patients, but how do you know how long to dose patients if the goal is cure, like improving cure rates?

So John, this is Tom Reynolds. Our initial thinking is just to simply provide combination safety data that you can give patients a full course of ABVD, for example six cycles, and throughout that entire course you can provide B-Vedotin as part of each ABVD therapy administration.

So we would expect to show that you can combine that safely and understand what the best dose would be to do that. We're still a little bit aways about how you would do a large front line study to show that it improves outcomes and we have some ideas about that. We have a lot of interest from cooperative groups all over the world but we have not defined that study as of yet.

Is it possible that with six cycles you could actually see a difference between the two groups even in the exploratory safety study?

We just know. The purpose of it is the exploratory safety aspect of it and I think that statistically that would be a small population to be able to see that.

Okay. And maybe you guys can talk, maybe Eric can talk a little bit about what that would do to reshape thinking. I mean, you guys have frequently used the $300 million to $400 million market size. What happens if you are successful in the front line setting?

So that's a great question, John. So as I said before, the incidence of Hodgkin's is about 8,500 patients a year in the US and ALCL is somewhere around 2,000, maybe 3,000 patients. When you compare the incidence of front line versus the incidence of relapsed/refractory, it's about four times higher or so.

Now we wouldn't assume we could get all patients into the front line setting because really what we would be targeting, as Tom said, is high risk or elderly patients. I think the low risk younger patients are very well served with ABVD with cure rates that approach 90%, so that's probably not somewhere we would initially look to go.

But if you take the high risk populations or elderly, you can capture half of the front line market. Now the assumptions you make on if you're going to be curing more patients, there's going to be fewer patients in the relapsed/refractory setting so we haven't figured out all of the way this would flow through but it definitely has the potential to increase the market size quite substantially. I'd hate to give you specific numbers at this stage though.

No, that's fine. I appreciate it's early days. One final question I guess for Clay is can you talk a little bit about how you'd envision monetizing the new SEA technology platform? Will that be a similar -- so think about it like you monetized ADC or is it a different approach from the standpoint of collaborative thinking?

Yes, thanks for the question on our SEA technology. We're excited with the technology. It enhances effector function. It's very similar in a sense to technologies that are out there from companies such as BioWa or Glycart. Glycart's now been acquired by Roche as you know, and in the way that you can empower antibodies through effector function enhancement.

Our technology we believe is simpler because it's chemical. You don't need to modify the cell line and you could screen with it and screen panels of antibodies. And as far as monetizing it, we are just starting now to speak with other companies about this and we would like -- would offer the technology for license to other companies for -- similar to our ADC technology, up front payment, milestones, royalties.

We also intend to utilize the SEA technology internally and so when we get new antibodies in to our research pipeline, we will evaluate antibodies as SEAs. We will evaluate them as ADCs of course and we will select the best product with the best therapeutic window to go forward in our future pipeline.

That's terrific. Well congrats on all the success there. Thanks.

Thank you. And our next question comes from the line of David Miller with Biotech Stock. Please go ahead.

Hi, good afternoon. Thanks for taking my question. Just -- most of them have been answered so just a couple of quick ones. Eric, can you talk about your thoughts of partnering 35 for EU sales or are you going to try to handle that on your own?

Hey David. As we've been saying pretty consistently over the last several quarters, our goal is to build oncology focused commercial infrastructure here in the US but we are pursuing rest of the world partnerships. There's a good level of interest now and we're in active discussions so things are moving along well on that front but that said, we've got a good financial position.

We can keep moving this program and our other programs forward and so we're not pressed to do a partnership unless it makes sense strategically. And what I mean by that is it needs to be financially the right deal and we also need to find a partner that can accelerate and execute on rest of the world activities to help us maximize the value of the program.

So it's pretty much the same status as at last quarter but the discussions are moving along well and we've got -- we'll have some decisions to make on the strategy for partnerships coming up here in the future.

Okay, thanks. On the MARINER trial, as you kind of debrief from that, are you working on doing a retrospective match up with the gene scan that Genentech found?

Sure, Tom, do you want to take that?

Yes, so we are working with Genentech. They have access to samples from that study and are conducting the gene signature analysis. We expect to have that over some period of time and hope to use that to glean some more findings out of the study about how to take the program forward most effectively together.

Are you planning or is Genentech planning on releasing data, publishing data or presenting those data at any point?

It's still under discussion with Genentech. Their -- we have quite a bit of dialogue with them on this and their teams and our teams are actively involved with looking at the data and figuring out how to best move forward together.

Okay. Has there been any alternations in any other SGN-40 trials so far? Is there anything you've learned from the MARINER trial?

There has not been.

Okay. Too early or just to know what you might alter or --?

The other trials are different. They're different --

Right.

They're different combinations and in some cases different diseases, a different disease being multiple myeloma, so we did not see any safety signals so to alter any of those trials based on a specific combination trial in a specific disease did not appear to make sense at this time point so nothing has been altered.

Okay. Great, thanks for the questions, or the answers.

Thank you. And our next question comes from the line of Cory Kasimov with JP Morgan. Please go ahead.

Hey, good afternoon guys. Thanks for taking the questions. First question on SGN-33, can you just remind us of the powering assumptions built into this trial and also what the P value is that you'd have to hit to deem this successful?

So, hey Cory, this is Tom. So great question. This is a phase IIb study so it's not exactly the same as a phase III in that we have not done preliminary work with this combination in these patients to be able to power that so we make some assumptions.

And the assumption that we've made is that what we want to look for is an analysis by hazard ratio of overall survival, which is the primary endpoint. What we think we need to see and where we are with FDA is that hazard ratios of about .7, which gets us close to a two or three month survival improvement over the baseline of five and a half months, would be something that would yield a P value of about .01 and that could be useful as a registration study, as a single registration study, if it were that powerful.

So we need to be able to move that hazard ratio down to about .7, which is about 30% improvement in survival.

Okay, great. That's very helpful. And then quickly on B-Vedotin, I guess just an update on your thinking on how you may go ahead and kind of balance the once weekly versus the once every three week dosing. And I know Clay you've spoken in the past about potentially having or exploring an induction maintenance regimen with the two. Any updated thoughts there?

Sure. We really are excited about doing the work to learn about every -- about weekly dosing and the data that we've presented already and will talk about more at ASH really details that this drug is active. We think it's very important that we tested the drug every third week and showed it was active and we tested it weekly and showed it was active and almost -- it's very similar in the activity with the small size of this studies that we have done, we really don't want to make too much out of those as to whether one is more or less active.

And also given -- getting some data weekly versus every third week helps us as we think about front line therapy because ABVD is given every second week and so that might be the way we need to use B-Vedotin most effectively is to do it with what is standard of care.

So we sort of racketed that, learning about weekly, learning about every third week and I think that going forward we'll continue to consider using weekly dosing but for now we think the weekly and every third week give us pretty similar data and strong data in both regards and we're going forward for approval with our SPA with every third week and we're pleased that we're doing that.

Great, thanks for taking the questions.

Thank you and our next question comes from the line of Robyn Karnauskas with Deutsche Bank. Please go ahead.

Hi guys. Thanks for taking my question. So I guess just a follow up with that regarding the dosing schedule, so in your conversations with the EMEA and FDA, has there been some agreements as far as is one dosing schedule three weekly, would that be sufficient for accelerated approval or will the phase III trial have to look at the different dosing regimens?

No, actually -- thank you for the question, Robyn. No, we're sticking with our every third week dosing and that's what our focus is for our SPA pivotal trial as well as for our phase III trial.

Okay, great. And then I guess then regarding the cost of these trials, can you give us any sense on whether or not you'd expect these to be significantly expensive trials? You're starting multiple trials now in 2010 for SGN-40 first line setting, actually it's 35, sorry, in the first line setting. Can you help us get a sense of how do we expect that, the spending to go up or --?

Certainly as we go forward with B-Vedotin, SGN-35, in further clinical trials, we certainly are going to be investing in that program. We think it's an excellent drug and a great program to invest in.

Looking at the front line trial, you asked a couple of questions there so I'll break it down. Looking at the front line trial, the first trial is a rather small trial so it's not a very large financial investment because the first thing you need to do is determine the safety of ABVD plus B-Vedotin. And so that is, I think Tom mentioned 40 patients or so that we would be looking at or perhaps I mentioned that.

But, so that's not a very large ticket item, that initial study. A larger patient population will be in our phase III study. We've not yet put out our guidance for finances for 2010. That will be done early next year but you can I think safely assume that we're going to spend more next year than we did this year as we get closer to approval or to filing for approval for SGN-35 or B-Vedotin.

So our spend will go up and we will be guiding on that.

One thing I wanted to add Robyn, this is Eric, is that we're evaluating our front line strategies and looking at which trials will be corporate sponsored, which could be done through cooperative groups and also investigator sponsored studies so we're going to have some combination of those types of trials that moving forward and obviously corporate sponsored studies are more expensive than if you're utilizing investigators or cooperative groups.

That's helpful. And then I guess my last question is you mentioned that you had conversations with Roche since the MARINER study and can you give us any comfort at all that around Roche's commitment to continuing to develop SGN-40?

Yes, I mean we've had some very strong, good conversations with them through our joint steering committee and directly with different folks and they have -- they continue to have a very strong commitment for the program. We see no loss or diminution of any commitment for the program to date.

Clearly we were disappointed with the discontinuation of the MARINER trial but the other four trials move along. We have two that we're presenting data on at ASH and not withstanding the MARINER trial, business as usual on the program.

Great, well congrats on the progress.

Thank you.

Thank you. (OPERATOR INSTRUCTIONS) And our next question comes from the line of Howard Liang with Leerink Swann & Company. Please go ahead.

Thanks very much. Do you have -- have you done market research on what percent of the newly diagnosed Hodgkin's lymphoma patients who are intolerant to chemotherapy?

Hi Howard, this is Eric. When you say intolerant, do you mean that aren't able to receive the full treatment course or that are refractory to front line?

Intolerant, not able to receive would be appropriate for SGN-35.

I see. So it depends on the age group. Older patients, there are a significant portion. If you're getting up into the 55 to 65 and above range, there's a significant portion that may not be able to receive the full six cycles of ABVD. I don't have the number in front of me. I do believe that the median number of cycles for the older patients that they get is about four and a half or so, but it's very dependent on a number of factors. Age isn't the only one.

Tom, do you have anything to add?

Yes, so the other thing that happens with older folks is they tend to have a higher incidence of comorbidities, cardiac problems, so they shouldn't get the A. They could pulmonary problems, they shouldn't get the B, so they tend to drop out pieces of the regimen and then it gets less effective. So we think there's clearly a need in older folks to have some alternatives especially those with multiple comorbidities.

We have had a lot of interest from the clinical and academic community in mounting those types of trials. We're evaluating some options now and we'll be talking about those in the next year or so.

Great. And then regarding your retreatment trial, what will be considered a success? Are you going to look at response rate or is it a certain duration of response that needs to be achieved?

So Howard, we're looking at both response rate, quality of response and durability of response. And probably the model that we're trying to follow when we think about this is how Rituxan did a relatively small study of about 50 patients for retreatment showed a nice increase in response in second go-round and leveraged that into a label which accounts for a good fraction of their market share at this point in the oncology space.

So we're hoping to follow that model and see if we can have data that justifies using this drug as a retreatment strategy.

Thanks very much.

Thank you. And our next question comes from the line of Mike King with Merriman. Please go ahead.

Good afternoon, guys. Thanks for taking the question. I just had a basic question about this study design for Lintuzumab, AML study. Could you just walk me through the protocol? Is it -- which AML population is it in? Is it on the background of other meds, etcetera? Thanks.

Yes, so Mike, just a refresher course here. We're focused on elderly AML in the setting where they are not eligible or refuse chemotherapy. And because it's a randomized, double blind, placebo controlled study, we feel that that's a good way to go forward, even though it doesn't -- we don't clearly define strict criteria. We think the patients will segregate equally the way we've set it up so that patients that really can't tolerate this therapy can go on to the trial.

The other issue, the other thing that you asked about is what other meds are being used. This is in combination with low dose Ara-C. It's an outpatient regimen. It's the only regimen that's been shown to extend survival in older patients unfit for high dose chemotherapy.

So the structure of the study is placebo plus low dose Ara-C versus Lintuzumab plus low dose Ara-C and then the primary endpoint is overall survival.

Okay, great. And the only -- there is no strict definition though of high risk?

So the patients that are ineligible or refuse high dose chemotherapy.

Ineligible, why? (Inaudible) involvement or some other criteria?

It's usually from comorbidities, is that they're thought that they're going to have such a high treatment related mortality that it's really not the best choice for that patient.

Okay.

And the thing that we're -- we will be talking about obviously when we have the results is to avoid the situation that other companies have found themselves on where they say these are patients that shouldn't get high dose chemotherapy, they go through the protocol, they go off the protocol and then they get high dose chemotherapy.

Right.

We'll be talking about that. We think we've had good investigators and we don't think that's going to be a big challenge for us.

Okay. Thanks very much.

You're welcome.

Thank you. And our next question comes from the line of [Adnan Bhat] with RBC Capital Markets. Please go ahead.

This Adnan on Jason Kantor's behalf. Just a quick question, did you say if the phase III trial for (inaudible) would be the same design as the ongoing phase II pivotal trial?

Design meaning dosing schedule?

Dosing schedule, single agent.

Yes. Yes, all of the above is yes.

Okay, and then you discussed that with the FDA and EMEA at this time?

Go ahead Tom.

Yes, so we've had multiple meetings with both FDA and EMEA to get closure on patient population, study design, dosing regimen, endpoint, and just to kind of reiterate what Clay went over on the call is we're going to be looking at the immediate post transplant patients. These are all patients that are a subgroup who are at high risk for relapse and there are very well documented criteria of how you pick out those high risk patients that have been explored in over 12 refereed clinical trials. So we have a pretty good idea of who's high risk.

If you're high risk, you have a very high rate of relapsing following transplant. It's about 60%, so we think we can improve that markedly. The way we're going to structure this is typically when a patient gets salvage chemotherapy and transplant, the next thing that happens is watchful waiting. There's no other therapy one can apply.

We're -- what we will be doing is adding either Rituximab Vedotin or placebo in the post transplant period on the Q3 week schedule and then following patients out until they progress. So it's a PFS primary endpoint.

Okay, thanks for the clarification.

Thank you. There are no further questions at this time. I'll turn it back over to management for any closing comments.

Okay, thank you operator. That's all we have. Thanks everybody for joining us this afternoon and have a good evening.

Thank you. Ladies and gentlemen, that does conclude today's Seattle Genetics third quarter 2009 financial results conference call. If you would like to listen to a replay of today's call, please dial 303-590-3030 or 1-800-406-7325. Enter the passcode 4172548.

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