Seagen Inc (SGEN) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Seattle Genetics fourth quarter 2009 financial results conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation the conference will be open for questions. (Operator Instructions). This conference is being recorded today, Tuesday, February 9, 2010. I would now like to turn the conference over to Peggy Pinkston, Director of Corporate Communications. Please go ahead ma'am.

Thank you Operator. I would like to welcome all of you to Seattle Genetics' fourth quarter and year 2009 conference call. With me today are Clay Siegall, President and Chief Executive Officer, Todd Simpson, Chief Financial Officer, Eric Dobmeier, Chief Business Officer, Tom Reynolds, Chief Medical Officer, and Bruce Seeley, EVP of Commercial. This afternoon Clay will provide an update on our programs, including recent highlights and upcoming activities, and Todd will discuss our fourth quarter and year 2009 financial results, as well as provide a financial outlook for 2010. After that, we will 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. I will now turn the call over to Clay.

Thanks, Peg. Thank you all for joining us this afternoon. I am delighted to share with you today our recent progress and key upcoming activities for 2010. Seattle Genetics is on the cusp of obtaining key data from our lead programs that we anticipate will bring us closer to our vision of providing innovative therapies to patients in need. Highlights of our pipeline progress over the past 12 months include the following, for brentuximab vedotin we initiated and completed enrollment to a Hodgkin lymphoma pivotal trial, that is being conducted under a Special Protocol Assessment, received Fast Track designation from the FDA for Brentuximab vedotin in Hodgkin lymphoma, and initiated five additional trials. We also entered into an ex-US and Canada collaboration with Millennium, the Takeda oncology company that we believe will enable us to rapidly bring this promising new therapy to patients worldwide. For lintuzumab, we completed enrollment to a Phase 2b clinical trial for older patients with acute myeloid leukemia, or AML and expect to report data in the second quarter of this year.

For SGN-75 we initiated a Phase 1 clinical trial for renal cell carcinoma and non-Hodgkin lymphoma making this our second propriety Antibody Drug Conjugate, or ADC, to advance into the clinic. And for ASG-5ME, we continued our successful collaboration with Agensys, an affiliate of Astellas Pharma, to position this new ADC for clinical trials during 2010. In addition to these accomplishments, Seattle Genetics is in the strongest financial position in its history. During 2009 we raised net proceeds of more than $190 million through equity financings, and we generated more than $120 million from collaboration activities, including ADC deals that are commanding increasingly valuable terms.

I would like to take a few moments to discuss where we are with each of our development programs, and provide you with our planned milestones for 2010. I will begin with an update on our lead program, brentuximab vedotin which is an ADC targeting CD30, that is expressed in Hodgkin lymphoma and several T-cell lymphomas. Our enthusiasm for the therapeutic potential of brentuximab vedotin is based on the encouraging data from our Phase 1 experience in relapsed and refractory Hodgkin lymphoma, and systemic anaplastic large cell lymphoma, or ALCL.

Across two Phase 1 trials we treated nearly 90 patients. In these studies brentuximab vedotin was generally well tolerated, with adverse events being mainly grade 1 and 2. The most common included fatigue, fever, peripheral neuropathy, neutropenia, diarrhea, and nausea. Brentuximab vedotin induced an objective response in over 50% of the patients including more than 30% with complete remissions. Median duration of response from the every 3-week Phase 1 trial was at least 10 months, and there was high concordance between investigator and independent assessment of responses. In December we entered into a collaboration with Millennium Takeda for the development and commercialization of brentuximab vedotin. Under the agreement we retain commercial rights in the United States and Canada, while Millennium has rights in the rest of the world.

Millennium is ideally suited to be our strategic collaborator given its strong global presence, commercial experience, and commitment to oncology. Together we intend to aggressively advance brentuximab vedotin through a broad clinical development program in relapsed and refractory Hodgkin lymphoma, as well as an additional indication in earlier stage disease. Our initial registration pathway for brentuximab vedotin is focused on a single agent pivotal trial in 100 relapsed or refractory Hodgkin lymphoma patients being conducted under an SPA. We completed enrollment to this trial in August 2009, and patients may receive treatment every three weeks for up to a year.

The endpoints of this study include objective response rate assessed by independent review, complete response rate, and duration of response. 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 to the FDA under the accelerated approval regulations in the first half of 2011. Assuming priority review, this positions us for potential approval in the second half of 2011. Brentuximab vedotin is also being evaluated in a Phase 2 systemic ALCL trial that was initiated in June 2009. The trial is enrolling rapidly, and we expect to complete our target accrual of 55 patients by mid-2010. ALCL may provide an additional registration pathway for brentuximab vedotin.

As announced last week we have also initiated a Phase 1 clinical trial of brentuximab vedotin in combination with chemotherapy for the treatment of newly-diagnosed Hodgkin lymphoma patients. The purpose of this trial is to determine the safety of administering brentuximab vedotin in combination with ABVD, a standard chemotherapy regimen for front line Hodgkin lymphoma. The trial will enroll approximately 40 patients and is designed to advance the development of brentuximab vedotin in this setting.

We are also conducting a Phase 2 retreatment trial to assess the therapeutic potential of an additional year of therapy in patients who have relapsed after previously responding to brentuximab vedotin. We believe the use of brentuximab vedotin in the retreatment setting could further address the unmet medical need in Hodgkin lymphoma and systemic ALCL. In the first half of this year, we plan to initiate a Phase 3 relapse prevention trial in approximately 325 post-autologous transplant Hodgkin lymphoma patients, who are at high risk for residual disease.

The primary endpoint is progression free survival. This trial is designed to evaluate the potential of brentuximab vedotin to provide clinical benefit in an earlier line of therapy, and to support its full approval in the US and Europe. We are pleased to be collaborating with Millennium to maximize the global potential of brentuximab vedotin and bring this novel therapy to patients in need.

We are also expecting key data during 2010 from the lintuzumab program. Lintuzumab, or SGN-33, is an antibody targeting CD33 found on leukemic blasts. Our primary focus with lintuzumab is a Phase 2b trial of 210 patients with AML, aged 60 or older. This is a randomized double-blind, placebo controlled trial comparing overall survival of patients receiving low-dose cytarabine plus lintuzumab, to those receiving low-dose cytarabine alone. We expect top line data to be available in the second quarter of 2010, based on our projections for when we will reach 186 events, the trigger for unblinding the data. We believe our Phase 2b trial is well designed to inform our next steps. The randomization and overall survival end point of this trial are consistent with ODAC statements regarding AML trial designs, and 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 a registration pathway for approval.

In addition to our efforts in AML, the first patient was treated last week in an investigator-sponsored Phase 2 trial evaluating the safety and activity of lintuzumab plus Vidaza for patients with myelodysplastic syndromes, or MDS. In our Phase I single agent trial of lintuzumab, MDS patients showed evidence of anti-tumor activity. By combining a targeted antibody such as lintuzumab with Vidaza, an important MDS therapy, our goal is to improve the clinical outcome for these patients.

Next is dacetuzumab, or SGN-40, which is a humanized antibody targeting CD40. In December, Genentech notified us that it decided to return the program to Seattle Genetics as of June 2010. We completed enrollment in two Phase 1b trials during 2009, and recently discontinued patient enrollment in the other two Phase 1b trials. CD40 is an interesting target, and we believe that the tolerability profile and activity observed in both single agent and combination trials with dacetuzumab suggest that this antibody has therapeutic potential in the treatment of cancer. We are evaluating clinical and pre-clinical data and considering our next steps for this program.

Our fourth clinical stage program is SGN-70, and antibody targeted to CD70. We are conducting a Phase 1 clinical trial in patients with autoimmune disease to assess the tolerability and pharmacokinetics of SGN-70, as well as to evaluate the effectiveness agent on biomarkers of disease activity. We expect to complete enrollment to this trial during 2010. In November, we advanced our fifth clinical stage program SGN-75 into a Phase 1 dose escalation clinical trial. SGN-75 is an ADC targeting CD70, and the trial is being conducted in both non-Hodgkin lymphoma and renal cell carcinoma. CD70 is also expressed on a variety of other malignancies, including pancreatic, ovarian, and lung cancers, glioblastoma, multiple myeloma, and several types of lymphoma. This provides for substantial and diverse therapeutic opportunities. The Phase 1 trial is designed to evaluate the safety profile, dosing schedule, and potential anti-tumor activity of SGN-75.

Our next ADC to enter clinical trials is expected to be ASG-5ME under our collaboration with Agensys, an affiliate of Astellas. This ADC has applications in cancer that include prostate, pancreatic, and gastric. Our goal is to initiate clinical trials with ASG-5ME during 2010 for both prostate and pancreatic cancer. Our ADC technology is also generating substantial collaborator activity, including two deals in the fourth quarter of 2009 with the strongest financial terms to date.

In November we expanded our existing collaboration with Agensys. We received a $12 million up front payment, and are eligible to receive up to an additional $350 million in milestones and mid-single digit royalties. Agensys received rights to our technology for use against several antigens, and we received an option to co-develop an additional program. Across our Agensys collaboration, we are advancing ASG-5ME and have an option to jointly develop and commercialize two other ADC programs at the time of IND submission. In December we announced a new ADC collaboration with GlaxoSmithKline. We received a $12 million up front payment for access to our technology against multiple antigens.

In addition we are eligible to receive up to $390 million in potential milestones, as well as mid-single digit royalties. Our 9 ADC collaborators are advancing programs in clinical and pre-clinical development, and these deals are creating significant value to the Company. We generated approximately $40 million in 2009 from new and ongoing ADC deals, a record for Seattle Genetics. Across all of our ADC collaborations, we are eligible to receive more than $1.8 billion in progress-dependent milestones, plus single-digit royalties on net sales. I will now turn the call over to Todd to discuss our financials.

Alright, thanks Clay, and thanks to everyone for joining us on the call this afternoon. 2009 was a year of exceptional progress for the Company. We advanced our key programs and we strengthened our financial position, through both equity offerings and collaboration activities that have generated more than $300 million in cash to the Company. Our balance sheet is strong and we are well-positioned to execute development plans across our product pipeline. Most importantly, the planned NDA submission for brentuximab vedotin.

Today I will highlight our 2009 financial results as well as provide our financial guidance for 2010. Revenues in the fourth quarter of 2009 were $21.8 million, and were $52 million for the year. This compares to $10.1 million in the fourth quarter, and $35.2 million for the year in 2008. Our revenues reflect amounts earned under our product and ADC collaborations. Revenue growth in 2009 was primarily driven by amounts earned under our dacetuzumab collaboration with Genentech. As we announced last quarter, this collaboration will end in June of this year. Cash amounts previously received and deferred are being amortized into revenue over the 6-month wind-down period of the collaboration. We recognized approximately $15 million of revenue from this collaboration in the fourth quarter of 2009, and expect to recognize approximately $70 million in additional revenue in 2010.

Operating expenses for the fourth quarter of 2009 were $34.5 million, down from $41.9 million in the fourth quarter of 2008. The decrease in 2009 expenses primarily reflects lower manufacturing activities for dacetuzumab and brentuximab vedotin compared with the same period in 2008. 2008 expenses also reflected higher lintuzumab clinical costs related to the Phase 2b trial, which completed enrollment in early 2009.

For the year end 2009, total operating expenses were $136.8 million, compared to $127 million in 2008. This planned increase is in-line with our guidance range, and was driven by brentuximab vedotin clinical activities, including our pivotal trial in Hodgkin lymphoma, and our Phase 2 trial in systemic ALCL, as well as manufacturing initiatives to support our drug supply needs, and to move us to launch scale. Lastly I will point out that total operating expenses include noncash share based compensation expense of $11.8 million for the full year in 2009, compared to $10.4 million in 2008. We ended 2009 in a strong financial position, with more than $287 million in cash and investments.

Late in the fourth quarter of 2009 we announced our collaboration with Millennium for the development and commercialization of brentuximab vedotin. Under this agreement we received a $60 million upfront payment, and Millennium is funding 50% of the costs under a joint global product development plan. Development funding from Millennium over the next three years is expected to be more than $75 million. Our 2009 year end cash position of $287 million does not reflect the up front payment of $60 million from Millennium, or the $12 million up front payment from our recent ADC deal with GSK. Both of which were received in January of this year. As we look into 2010, these payments along with expected funding under the Millennium collaboration and our ADC collaborations will significantly reduce our burn.

We expect that net cash used to fund our operating activities in 2010 will be less than $20 million, and that we will end the year with more than $265 million in cash and investments. We anticipate 2010 revenues to be in the range of $95 million to $105 million. As I mentioned, this reflects the approximately $70 million related to the dacetuzumab collaboration with Genentech which will be primarily recognized in the first half of the year.

2010 revenues will also reflect amounts earned under our Millennium collaboration, as well as our ADC collaborations. Total operating expenses in 2010 are expected to be in the range of $160 million to $180 million, approximately 25% higher than in 2009. This increase is primarily driven by brentuximab vedotin-related expenses, including manufacturing and CMC activities, as we prepare for the NDA submission and for our US launch. Brentuximab vedotin expenses will also reflect the ongoing pivotal retreatment and front line trials in Hodgkin lymphoma and our Phase 2 trial in systemic ALCL. Additionally, 2010 expenses will include our planned Phase 3 relapse prevention trial for brentuximab vedotin, as well as clinical trials and manufacturing for SGN-75, ASG-5ME, and lintuzumab.

We continue to be highly focused on our development programs, and as a result R&D expenses are expected to represent approximately 85% of total operating expenses. 2010 expense guidance includes noncash amounts projected to be in the range of $17 million to $20 million, the majority of which relates to share based compensation expense. This estimate is based on a number of assumptions, including future stock prices, and the number and timing of option grants, and therefore may change. We are looking forward to a very active and productive year, and believe that we have the financial and operating resources needed to aggressively advance our programs. So with that, I will stop and turn the call back over to Clay.

Thanks, Todd. Before we open for questions, I would like to review our key activities for the year across our development stage programs. For brentuximab vedotin, we plan to initiate a Phase 3 relapse prevention trial in the first half of 2010, designed to support full regulatory approval requirements in the United States and Europe. Complete enrollment to the Phase 2 trial in systemic ALCL by midyear, advance our Hodgkin lymphoma pivotal trial in order to report top line data in the second half of 2010, position the program for an NDA in the first half of 2011, and prepare for commercial launch. For Lintuzumab, we anticipate reporting top line data from the Phase 2b study in the second quarter of 2010. For Dacetuzumab we will wrap up our collaboration with Genentech, and are currently assessing next steps for the program.

For SGN-70 we will complete enrollment of autoimmune disease patients in the Phase I trial. For SGN-75, we will advance the ongoing Phase I trial for SGN-70 positive non-Hodgkin lymphoma and renal cell carcinoma. And for ASG-5ME, we and Agensys plan to initiate clinical trials for pancreatic and prostate cancer. Seattle Genetics has aggressive goals for 2010 and is in a strong financial position. We look forward to keeping you updated on our progress. Operator, at this point, we would like to open the call for questions.

Thank you sir. (Operator Instructions). Our first question comes from the line of Mark Monane, Needham & Company, please go ahead.

Thank you very much, and greetings from New York City. Thanks for the review. We are preparing for a big snow storm here and the question is, how big will it be? And now we move to B-vedotin, and the question is, how big can B-vedotin be now? We talked, we heard from you recently about market projections, but that was I think in the second line Hodgkin lymphoma. As you have been thinking about it with your partner Millennium, can you comment on how big the market size is potentially for this drug?

Sure Mark, thank you very much for the question. I hope you are doing well in New York, and the storm doesn't hit so hard. We are very bullish on brentuximab vedotin. We think it is a product that really can have a positive impact on patients in a multitude of different indications, most notably Hodgkin lymphoma and T-cell lymphomas, and a number of different types of T-cell lymphomas within that. Eric, do you want to add any comments on some specific market projections that we would like to portray?

Hi Mark, it is Eric. So I think what we have previously guided to as you mentioned is the market for brentuximab vedotin in the relapsed and refractory setting, which is where our initial registration strategy is based. And what we have previously said is that we think that there is a prevalence pool of roughly 8,000 to 9,000 patients in the US, that could be eligible for treatment with SGN-35, and based on some penetration and pricing assumptions, we think that the market size worldwide for relapse and refractory lymphoma is $300 million to $400 million. We are working closely with Millennium to refine these assumptions, and these do not include any sales in front line lymphoma, or other CD30 positive malignancies, like CTCL or PTCL. So those provide upside potential. We haven't guided to any specifics on that, but as you know the incidence of Hodgkin lymphoma in the front line setting is more like 8,000 to 9,000 patients. If we can move it into that line of therapy there are certainly more patients we could address.

That was helpful. Then when you think about the full approval, does that sound like, it sounds to me that is a European strategy as well looking at a full Phase 3 in the relapsed, I guess that would be the controlled trial as well. Do you have any more details you could talk about with that, in terms of thinking about that in a number of patients you talked about, potential timeline?

Well, Mark, that is exactly what you said, which is our strategy for both the US and for Europe. And as far as the trial itself, maybe Tom Reynolds would like to make a comment on the trial.

Hi, Mark. There are just a couple of things. So as we said 325 patients. It is a primary endpoint of PFS. It is a controlled trial with brentuximab vedotin administered to half of the patients. Half of the patients will get a placebo. All in the setting of immediate post-autologous stem cell transplants. We anticipate the trial will take several years to accrue, and then to read out to a PFS endpoint, and we are anticipating starting that trial in the first half of this year.

And then for Todd, I am familiar with the fact that B-vedotin, as well as 75 is a complex molecule, in terms of the linker and the toxin, and the payload and getting it all together. Can you talk about how many people now at the Seattle Genetics, and how are you going to address manufacturing of this complex molecule?

Sure, good question. So if you look across our development teams, I would say the largest groups within the Company clearly are our manufacturing development folks, and our clinical folks. With respect to the manufacturing of brentuximab vedotin itself, we have used an outsource model. We use contract manufacturing organizations. What we have worked on over the past year or so is to really put in place all of the pieces that are necessary to support our commercial launch. So we are right now manufacturing at our commercial stage, and with our commercial vendors, and the lion's share of the activities for this year is really going to be on validation of our manufacturing, and positioning us for the NDA submission next year and then about that time also embarking on the pre-approval inspection manufacturing runs.

Thanks for the added information. It looks like we are going to hear a lot from you this year. We look forward to the progress.

Your next question is from the line of Bret Holley with Oppenheimer, please go ahead.

Thanks for taking the question. I was wondering in the last prevention trial, how are you thinking about powering this study, given the lack of prior data for people that have been in the relapse prevention setting? Obviously with the PFS endpoint that can be kind of a tricky thing. I am just wondering how generally you are thinking about that.

Bret, that is a great question. We have looked at a bunch of aggregated data on what happens to patients that are high risk for relapse following transplant. What is fairly clear to us is if you look at the roughly 7 studies that have been published, as well as some rolled up data that Sandra Horning talked about, is that most of the patients at high risk for relapse probably about 60% plus will relapse, and most of them will relapse within the first 12 months. And their overall survival following relapses is a pretty dismal prognosis, which is about 2.5 years.

We've looked at that and come up with some estimates that probably in the placebo arm, that we would expect roughly about 60% of those patients to relapse in about a year or so. And then we have modeled what we think may happen with brentuximab vedotin, extrapolating a bit from our Phase 1 data and the amount of time that patients have stayed on a drug, which has been anywhere from six months to a year. We think we can meaningfully improve the PFS well beyond the year, that we expect the placebo arm to have for median PFS.

That is great color. I am wondering about the definition of high risk patients, and I guess how flexible that has been in the prior trials, and what kind of internal controls can you build into the trial to make sure that you are adequately selecting the patient population correctly?

Yes. That is a really good question. We have spent quite a bit of time working with regulatory agencies both in Europe, and in the US, to nail down the design of the study, so that if we conduct it appropriately that it could serve as a confirmatory trial. The prognostic indicators that we think are well-validated in the literature include a history of refractory HL. So those are people on front line therapy that don't get a complete response. Those patients that relapse within 12 months of front line therapy, or those patients at the time of their relapse from front line have extranodal disease. Those are the three biggest prognostic factors that define the high risk population, and we have worked with regulatory agencies on both sides of the Atlantic to make sure that would be acceptable for this type of confirmatory study, potentially confirmatory.

Thanks. My final question is, Clay, regarding your comments on SGN-33, I am just wondering, is there any kind of change in your stance there? You said the positive data from the trial could lead to a discussion of a regulatory pathway with the FDA, and I think maybe you've been maybe a little stronger on the possibility of licensure based on this data?

Thanks for the question, Bret. No, I really think my comments have been the same. We were just trying to be clear and transparent that if the data were strong, that we could consider discussions with the Agency considering licensure in the future, when the data come out. We have no, it is a blinded study. There is no rationale for us any more past what we have said in the past, to look at the data in any more positive light at this point, since it is blinded.

Okay. Thanks a lot, guys.

Your next question is from the line of Jessica Lee with Goldman Sachs. Please go ahead.

Thank you for taking my questions. First on SGN-33, what would you regard or what do you think would constitute a strong data that would prompt you to initiate dialogue with the FDA? And also just assuming best case scenario, if the data are strong based on your definition, can you comment on the potential regulatory timelines, and how it relates to the SGN-35?

Yes, there are a couple of questions within there. I will start this out, and then I will turn it over to Tom for some more thoughts. First of all let's start on your second question which is timelines. We have been very clear, and we started discussing this at conference calls a number of quarters back, that SGN-35 would be in the lead, and would be our first product that we take forward for registration approval, regardless of whether 33 data were unblinded before we had the 35 data. And that is because of the very strong CMC efforts that we have put on to brentuximab vedotin or SGN-35. And we put those on. Now we are -- we do have manufacturing initiatives on lintuzumab, or SGN-33, but they are not at the level that we have been working on with brentuximab vedotin.

So it is not possible to file for regulatory approval with lintuzumab prior to brentuximab vedotin, so I want to just make sure that that is heard loud and clear. We have also not commented on any specific timeline toward any potential registrational filings for lintuzumab at this point. Right now we are first going to get our data before we make any comments on that, and then once the data come, we would provide some very clear guidance on that at that point. Going back to your beginning, or the question which is really talking about the trial and what we are looking for, what would constitute success, I could answer that, but Tom can answer that even better than I can.

Thanks, Clay. You are aware, Jessica, that these older patients with AML are a real unmet need. There is really no good therapy for those patients that can't get high dose induction therapy. So this is really where we are positioning lintuzumab in combination with low dose Ara-C. When we look at the design of the trial, I think which is really set up as a Phase 2b screening study, to look for a survival difference, what we anticipate is that if we were to see a P-value of less than 0.01, which is a hazard ratio of about 0.7 in the difference between the two survival curves, we would anticipate that we could make the case quite straightforwardly to FDA, that they could consider this for approval based on the one single trial, which is well controlled, randomized, and survival is an end point.

As you are also aware, for many of these type of studies, having two trials with the power of both showing statistical significance of P 0.05 are often considered adequate for approval. So we think that a positive result is anywhere in those ranges, and we would anticipate should we see a positive result like this, that we would have discussions quite quickly with FDA in determining the appropriate regulatory path, considering both the efficacy that we might observe, as well as the tolerability profile, which in the Phase 1 data that we presented has been quite good.

Thank you. Can you just quickly comment on your development plans for the combo study of B-vedotin plus chemo in the newly-diagnosed Hodgkin lymphoma? I was just wondering what kind of study design and endpoint size and powering of the study that you are thinking about, given the fact that patients, the newly-diagnosed Hodgkin lymphoma patients live quite long, and ABVD has been working very well in these patients.

Right. So that is a great question, Jessica. So as you are aware, ABVD therapy is often seen as a really big advance in the treatment of Hodgkin lymphoma from the 20th century. What we know is that roughly 10% to 15% of patients will not respond to ABVD right up front. An additional 20% to 30% will relapse sometimes after receiving front line. So we think there is an unmet need here that we should be addressing.

What we have done in the Phase 1 is to ask a very simple question, can we add brentuximab vedotin to ABVD? Can we do it safely? Can we get patients through a full course of therapy, which is about six months? Really the primary endpoint of this study is safety. It is a dose escalation study. We have three dose cohorts where we are co-administering brentuximab vedotin with standard front line ABVD. We are going to do this carefully. We want to make sure all of those patients do well on this, given that it is potentially curative as ABVD.

Following assessment of those dose cohorts, we will do an expansion to better define the tolerability and safety profile of the drug, as well as to get some evidence of where we are in efficacy. Given that efficacy can be quite strong for the ABVD combination or the ABVD on its own, we anticipate we are not likely to see a discriminatory signal with respect to efficacy out of the Phase I. Where we really see this as positioning us for future studies that would allow us to compare the combination of ABVD with brentuximab vedotin, to other therapeutic approaches in front line, and show that this is superior combination.

Thank you.

Your next question is from the line of George Farmer with Canaccord Adams. Please go ahead.

Hi, thanks for taking my question. Todd, some questions for you. Your cash burn guidance, does that include any potential milestones from Takeda, related to B-vedotin development?

Most of the milestones in deals like this are tied to regulatory submissions, and if you look at our expectations for regulatory submissions, those come next year both in the US and ex-US, so those milestones should start to hit in the 2011 timeframe, not this year.

Okay. And are you amortizing the GSK up front payment?

Yes. So the accounting for the GSK deal is very similar to all of our other ADC deals, where the payments are being amortized over a research term, which typically ranges from 2 to 4 years, based on the specific relationship.

And how are you recording R&D reimbursements for Millennium?

They are charged to expenses incurred.

Okay. And any CapEx guidance for this year?

Fairly modest as it has been in past years, sort of in the $3 million to $5 million range. No significant facilities expansions at this point envisioned, but perhaps next year.

Okay. Thanks very much.

The next question is from the line of David Miller with Biotech Stock Research. Please go ahead.

Hi. Good afternoon and thanks for taking my questions. You are going to be starting a confirmatory Phase 3 trial in B-vedotin really before you see data from your pivotal trial. Are you going to start out at full pedal, 100% for enrollment in the confirmatory, or will you go a little slowly until the pivotal data are available?

David, thanks for the question. This is Clay. We are going to go full out in our confirmatory trial. We are excited to get it going, and feel it has a great chance for success. We are going full out with it.

Okay. This is a bit of a follow-up. Do you have any B-vedotin data in hand for patients that are similar or exactly the same as you are going to be enrolling in this Phase 3 pivotal?

So yes, David, this is Tom. We have a number of patients from the Phase 1 studies that were treated following transplant probably within a few months of their transplant, where their disease came back quite quickly post transplant. We have seen good affect in those patients, and so we think there is a good rationale for this, not withstanding the fact that post transplant patients are usually in the minimal residual disease setting. And we think that we may really be able to prolong their remissions prior to relapse, or provide really longstanding remissions using this approach.

Would those patients that you did have in Phase 1, would you consider them having minimal residual disease at that point, or are they a little bit more advanced?

They are more advanced. Once in Phase 1, they had to have actively growing tumor to be enrolled, and measurable disease. So they are clearly not minimal in the patients that we treated, but we did see good responses in that group.

Okay. The press release for the GSK deal, if memory serves, talked about annual license payments that were material. Can you talk a little bit, did I remember that correctly? And can you give us a little bit more color on that?

Yes, I will turn that over to Eric. Eric, do you want to comment on that?

Sure, hi, David. The way our ADC deals are set up is there is an up front payment. Often there is an exercise and an exclusive license exercise fee that generally happens at the end of the research term, which as Tom mentioned is to 2 to 4 years. And then there are often maintenance fees, progress dependent milestones, some of which are based on development events and some of which are based on sales, and then royalties on top of that. There are in our deal with GSK, some maintenance and license exercise fees that come into play over the next 2 to 4 years.

Okay, and then my last question is do you need any kind of a manufacturing bridging study for B-vedotin?

We think that where we sit right now we do not, and we feel we are in very strong shape on the CMC front.

Okay, great. Congratulations on a great 2009. Look forward to 2010.

Thanks.

Your next question is from the line of [Umer Raffat] with Deutsche Bank. Go ahead.

This is Umer with Mark Schoenebaum. A quick question on sales force reps starting next year. Should we be expecting around 50 to 75 reps toward the latter half of 2010?

Thanks Umer for the question. This is Clay. I am going to turn the question over to Bruce Seeley, our EVP of Commercial to address your question.

Hi, Umer, that is a great question. We are now just beginning to build our commercial team by concentrating on hiring our senior marketing and sales folks. The majority of, as you mentioned, of our sales force will follow in 2011. We are going to concentrate this year on a lot of the pre-commercial activities, including the market research, the branding, key opinion leader development, and initial reimbursement and payer assessments. All those are well under way. As we do get closer to our planned launch, we are going to be sharing more specifics with you about our activities. When it comes to field force sizing, we have not done a formal sizing study right now, and ultimately that sizing is going to be based on our target product profile, which is going to obviously be based on the data. Right now for planning purposes our estimation is that we can effectively cover the US market and the Canadian market with a relatively modest sales force somewhere to the tune of 50 to 75 reps.

Right. So essentially that is in 2011?

That is correct.

Okay. And a quick follow-up. 85% of your OpEx guidance for 2010 -- sorry, 15% of the OpEx guidance for 2010 implies around a $24 million to $27 million SG&A, which is roughly $2 million to $5 million more than Q4 SG&A annualized. Is it safe to assume that extra spend is pre-launch activity related?

This is Todd, I will handle that. You are on the right path. We will continue to be very leveraged on our R&D activities. About 85% of the total spend. But you are correct. We will start to see our G&A expenses starting to trickle up this year, and it is largely related to beginning to build out our commercial infrastructure under Bruce's leadership.

Great. Thank you very much.

The next question is from the line of Howard Liang with Leerink Swann. Please go ahead.

Thanks very much. For ALCL, assuming the data are positive, would the filing be at the same time as the Hodgkin filing, or would that be a separate filing?

Howard, thank you very much for the question. We are really excited about brentuximab vedotin, and we are excited about using it in ALCL. We are really considering our options at this point. We are focused on enrolling, getting these patients on the study as soon as possible. It is really too early to comment on whether it could be at the same time. It is certainly possible. ALCL certainly could represent an additional registration pathway, and we are really pleased that the accrual is so rapid. And that is definitely driven by the investigator enthusiasm for this product. But it is a little too early to give you straightforward guidance on that, but I think it is a good question.

Just a follow-up. So is there a, I think it is a response rate study. Is there a response rate that you are looking for, and can you remind us whether there is an SPA on this trial?

There is not an SPA on this trial. We are doing the trial very much in the format that we are using for the SPA in Hodgkin lymphoma. So we learned a lot going through the SPA process with the FDA. We are applying what we learned to this trial, but it is not under a formal SPA.

And what data updates should we expect at ASCO this year?

At ASCO, we expect at ASCO that we will have some updates on some of our programs, but we have not yet been specific as to what the abstracts cover at this point. It is too early to discuss that.

Okay. And it looks like you are doing [for] a pivotal [then you are looking] doing a QTc study. Is that just a standard check the box type of study, or is there anything, is it as a result of any signal?

We have not seen any cardiac signal in any of the studies we done to date. This is very much a standard study that FDA requests for most new molecules. We have worked closely with them in designing that, and we are confident that is going to execute well, and provide not only great data about the lack of impact of brentuximab vedotin on QT intervals, but also provides access for patients to the drug during this time period.

Great. Thanks very much.

The next question is from the line of Adnan Butt from RBC Capital Markets. Please go ahead.

Hi, this is Adnan Butt on Jason Kantor's behalf. Just a couple of questions. First off, would you know or can you tell us how many events have taken place in the SGN-33 study? And secondly, is there anything that could happen during the course of the year that might help you tighten the SGN-35 timeline further? Like you did for SGN-33?

First of all, on SGN-33 we have not reported anything as to the progress of the number of events. We appreciate your question and your interest there, but it is just not appropriate at this point to discuss specifics. The second question was on SGN-35, or brentuximab vedotin, and tightening timeline. Keep in mind as part of our SPA trial we had to follow patients for a year for durability of responses. It is hard to tighten timelines when you are following patients for a year. Tom, do you want to comment further on that?

Yes, so what we try to guide people with is that we enrolled that trial over about six months last year, finishing up in August. And that given that we are going to be treating patients for a year and assessing durability, that those data, we would be finishing the end of that treatment period in August of this year. At that point it is pretty clear we need to finish cleaning the data. As you are aware there is an independent review of the radiology findings, to get to the primary end point, so we would hope to move that through quickly, and have data to be able to be released top line in the second half of the year. We don't anticipate that to be too long after we complete therapy for all patients.

So we are on track for what we have been projecting the second half of the year, and we will certainly try to make it as soon as we can in the second half. But we have to follow the patients, and then do the independent assessment, as Tom said. So there are things that we need to get done.

Sure. That is very helpful. A follow-up on housekeeping on SGN-40, which two Phase 1 trials were discontinued?

We've completed enrollment in the dacetuzumab trial in combination with Revlimid, and the dacetuzumab trial in combination with Rituxan Gemzar. The two trials that are continuing to treat patients but are closed to enrollment are dacetuzumab with Rituxan, and dacetuzumab with bortezomib.

Last question. It is a financial question. Do you figure there is enough cash at hand now to see the SGN-35 through to commercialization, or might more deals or financing be needed?

Generally, let's just, clearly we are in a very strong financial position, $287 million in cash on the balance sheet at the end of last year, and only a $20 million operating burn planned for this year. So we feel that we are in an excellent position to really drive the pipeline forward, and importantly driving brentuximab vedotin to the NDA. We are confident that we have got cash at least into 2012, and within that timeframe we would expect to not only file the NDA, but to seek our regulatory approval for brentuximab vedotin.

Okay. Thank you.

(Operator Instructions). We do have a follow-up from the line of David Miller from Biotech Stock Research. Please go ahead.

Just a quick question on the Genentech deal with SGN-40. Did it cover an ADC targeted to CD40?

We haven't been specific on exactly what it covered (inaudible). It certainly covered the unmodified but otherwise humanized antibody. I can tell you now that the product is ours. We can, if we so choose develop any kind of empowered antibody, and that could be using ADC technology, that could be using our SEA, or sugar engineered antibody technology, or any other empowered antibody technology we would like to use on that. That is certainly something that we are looking at in our research labs, of considering how one possibility of looking forward with our SGN-40, or CD40 targeted antibody program.

Okay. Thanks.

I am showing that there are no further questions at this time.

Okay, thank you, operator, and thanks everybody for joining us this afternoon. Have a good evening.

Ladies and gentlemen, this concludes the Seattle Genetics fourth quarter 2009 financial results conference call. If you would like to listen to a replay of today's conference, please dial 1-800-406-7325 or 1-303-590-3030, and entering in the access code of 4206600. This replay will be available until February 16th of 2010. ACT would like to thank you for your participation. You may now disconnect.