Seagen Inc (SGEN) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Seattle Genetics second quarter 2010 financial results conference call. During today's presentation all parties will be in a listen-only mode. And following the presentation the conference will be open for questions. (Operator Instructions). As a reminder this conference is being recorded today, Tuesday the 27th of July, 2010. Now, I will hand the conference over to the Director of Corporate Communications, Ms. Peggy Pinkston. Please go ahead, ma'am.

Thank you, operator.

I would like to welcome all of you to Seattle Genetics second quarter 2010 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, Executive Vice President, Commercial. This afternoon, Clay will provide an update on our programs, including recent highlights and upcoming activities, and Todd will discuss our second quarter and year-to-date 2010 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.

I will now turn the call over to Clay.

Thanks, Peg.

And thank you all for joining us this afternoon.

Our progress over the past few months has positioned Seattle Genetics for several important milestones over the remainder of 2010 and into 2011. We expect data from our two late stage programs, brentuximab vedotin and lintuzumab later this year. We are also making progress on several other clinical stage programs including SGN-75 and ASG-5ME, and our antibody drug conjugates, or ADC, technology is continuing to generate value both financially and from a pipeline perspective.

Today I will summarize our recent accomplishments and planned milestones. I will start with an update on our lead product candidate, brentuximab vedotin, also known as SGM-35. This is an ADC targeting CD- 30 the defining marker for Hodgkin lymphoma and a target also highly expressed on several T-cell lymphomas, including anaplastic large-cell lymphoma, or ALCL. We expect to report top-line data from our pivotal trial in relapsed and refractory Hodgkin lymphoma in the late September to October time frame. This trial is designed to provide the basis for an NDA in the United States under the accelerated approval regulations and an MAA in Europe both in the first half of 2011.

This single agent's pivotal trial in 100 patients is being conducted under a special protocol assessment with the FDA. Key end points include objective response rate assessed by independent review, complete response rate, duration of response, and safety.

We also expect to report interim top-line data from our Phase 2 systemic ALCL trial in the late September to October time frame. There is a substantial need for new therapies for ALCL, an aggressive type of T-cell non-Hodgkin lymphoma.

During the second quarter, we achieved our targeted enrollment of 55 patients to the study. The ALCL trial has a design similar to our pivotal Hodgkin lymphoma trial, with a primary endpoint of objective response rate assessed by independent review. We believe that ALCL may provide an additional registration pathway for brentuximab vedotin.

At the American Society of Clinical Oncology meeting in June, we presented clinical data from our experience in the retreatment of patients who relapsed after previously responding to brentuximab vedotin. We reported that tumor reduction was observed in 10 out of 11 retreatment experiences, 7 of which were objective responses. Brentuximab vedotin was well tolerated in the retreatment setting. Treatment related adverse events for all grade one or two with peripheral neuropathy, alopecia, joint pain and injection site irritation the most commonly reported.

We are continuing to evaluate the retreatment of patients with brentuximab vedotin through our ongoing Phase 2 clinical trial. Data from that trial will identify if retreatment could be an additional option for managing relapsed Hodgkin lymphoma and other CD-30 positive malignancies.

The other two ongoing clinical trials with brentuximab vedotin include first, the Phase 3 Aethera trial which is designed to globally enroll 322 post otologous transplant Hodgkin lymphoma patients who are at a high risk for residual disease. This study is evaluating whether brentuximab vedotin can extend progression-free survival in these patients. In addition, the Aethera trial is intended to fulfill regulatory requirements for full approval in the United States and Europe. And second, a Phase I clinical trial of brentuximab vedotin in combination with chemo therapy for the treatment of frontline Hodgkin lymphoma patients. We are assessing its safety in combination with ABVD, a standard chemotherapy regimen for frontline Hodgkin lymphoma. The trial will enroll approximately 40 newly diagnosed patients. Both the Aethera trial and the frontline combination trial also highlight that we are looking beyond our initial focus of relapsed refractory Hodgkin lymphoma and ALCL towards the potential of brentuximab vedotin in earlier lines of therapies. We are also considering trials in other CD-30 positive malignancies.

In addition to our clinical trials, we have substantial manufacturing and regulatory efforts ongoing and are continuing to build the sales and marketing infrastructure necessary for commercialization. These activities are all supportive of our ultimate goal of aggressively driving this program forward for patients with limited treatment options.

The second program form which we expect data this year is lintuzumab or SGN-33, an antibody targeting CD-33. The key trial in our lintuzumab program is a randomized double-blind study designed to enroll 210 patients age 60 or older with acute myeloid leukemia. Patients received low dose cytarabine plus lintuzumab or low dose cytarabine plus placebo. Low-dose cytarabine is a commonly used treatment approach for older patients with AML who are unable to tolerate high dose induction chemotherapy. The primary end point of the trial is overall survival.

We completed enrollment to this trial in February of 2009 and patients received treatment for up to a year. We have not yet reached the target number of 186 events in this trial, which is the trigger for unblinding the data. Based on our current projections we now expect the top-line data will be reported in the late August to October time frame.

In addition to our progress with these late stage clinical programs, we are advancing SGN-75 in a Phase I clinical trial. SGN-75 targets CD-70, which has a broad expression profile on solid tumors and hematologic malignancies. This provides for substantial and diverse therapeutic opportunities. We are conducting a Phase 1 dose escalation trial of SGN-75 in non-Hodgkin lymphoma and renal cell carcinoma.

This month we advanced our third internal ADC into the clinic, ASG-5ME. We are co-developing this program with Agensys an affiliate of Astellas. ASG-5ME is an ADC targeted to the SLC44A4 antigen, which belongs to a solute carrier protein family that is highly expressed on many solid tumors. Our first trial with this program is a Phase I study in pancreatic cancer is which has among the worst prognosis of all cancers with a five year survival rate of just 6%. It is the fourth leading cause of cancer related death for both men and women. Our goal for ASG-5ME is to provide a new therapeutic option to treat this aggressive disease.

We and Agensys also plan to initiate a Phase I trial with ASG-5ME for patients with advanced prostate cancer this year. We are excited to be making strong progress with this program.

In addition to the impact that our ADC technology has on our internal product pipeline, it continues to provide financial benefit for the company through technology licensing. In total, our ADC technology collaborations have generated more than $120 million. There are now 7 ADCs using our technology in clinical trials including brentuximab vedotin, SGN-75 and ASG-5ME as well as four ADCs from our collaborators. We expect that additional collaborator programs will advance into the clinic over the next year, driving further value from our ADC technology.

At this point I would like to turn the call over to Todd to discuss our financials.

Thanks Clay. And thanks, everyone, for joining us on the call this afternoon.

We continue to be in a strong financial position as we entered the second half of 2010. This positions us to report top-line data from our two late stage programs and to prepare for the planned NDA submission for brentuximab vedotin in the first half of next year.

Our revenues in 2010 were $36.9 million for the second quarter and $83.3 million for the year-to-date, increases from $9.4 million in the second quarter of 2009 and $18.6 million for the first half of 2009. The increases in 2010 revenues reflects approximately $40 million recorded in the first quarter and $30 million recorded in the second quarter under the dacetuzumab collaboration with Genentech that ended in June. Revenues in the second half of the year are expected to decrease and will be driven by our ongoing ADC collaborations as well as by our brentuximab vedotin collaboration with Millennium.

Operating expenses in 2010 were $45.8 million for the second quarter and $81.3 million for the year-to-date. This compares to $32.7 million and $70.1 million in 2009. The increases in 2010 expenses were expected and driven by brentuximab vedotin clinical development and manufacturing activities. These increases were partially offset, though, by lower costs for the dacetuzumab and lintuzumab programs. Brentuximab vedotin-related activities will continue to drive our financial results, and are expected to increase later in the year as we continue with our manufacturing validation runs and position for our preapproval inspection campaigns in 2011.

And just as a reminder 50% of joint development costs for brentuximab vedotin are funded by Millennium. Development activities performed by us are charged to R&D expense as incurred. Development funding, along with the upfront payment and other payments, are amortized into revenue over the development period of the collaboration.

And lastly, non-cash share based compensation expense for the year-to-date in 2010 was $6.4 million compared to $5.4 million in 2009.

We ended the second quarter in a strong financial position with approximately $325 million in cash and investments, a net increase of more than $37 million for the year so far. This increase reflects $60 million upfront payment received in the first quarter as well as reimbursement payments from Millennium under the brentuximab vedotin collaboration. This increase also includes amounts received under our ADC collaborations, including a $12 million upfront payment from GlaxoSmithKline and $9.5 million collaboration extension payment received from Genentech Roche.

Across all of our deals, we have received more than $100 million in cash payments to date in 2010. And, as a result, we expect an operating cash burn this year of less than $20 million. We continue to project that we will end the year with more than $265 million in cash and investments. This positions us well to advance our programs and we look forward to keeping you updated on our progress over the remainder of the year.

Clay?

Thanks, Todd.

Before we open for questions, I would quickly -- I will quickly recap our key upcoming activities. For brentuximab vedotin, we expect to report top-line data from our pivotal Hodgkin lymphoma trial and interim top-line data from our Phase 2 ALCL trial in the late September to October time frame and position the program for an NDA submission in the first half of 2011. For lintuzumab we anticipate reporting top-line date from the Phase 2-B study in the late August to October time frame. For SGN-75 we are advancing the ongoing Phase 1 trial for CD-70 positive non-Hodgkin lymphoma and renal cell carcinoma. And for ASG-5ME, we and Agensys are advancing the recently initiated Phase 1 clinical trial for pancreatic cancer and also plan to initiate a Phase I trial for prostate cancer during 2010.

Operator we would like to open the call for questions.

Yes, sir. (Operator Instructions) Our first question comes from the line of Cory Kasimov with JPMorgan. Please go ahead.

Good afternoon, guys. Thanks for taking the questions. I have a few for you. One on SGN-33 and then two on 35.

First on 33 or lintuzumab, the potential timing of results here seems to have been pushed back a number of times now and I'm trying to figure out how much can be read into this. Given that the study enrolled about I think 210 patients and you are waiting on 186 events to trigger the analysis, how much might a small handful of patients living meaningfully longer than expected impact the timing overall? And then I will up follow up with the 35 question.

Cory, this is Clay. Thank you for the question.

You know, it's an event driven study. It is blinded. It is controlled. It is really not possible at this point to determine trends like you are asking either in placebo or treatment arm. And we believe the trial is well-designed. Clearly lintuzumab is well-tolerated and has demonstrated anti-leukemic activity in Phase I trials. I don't know how much more granular we can get than that.

Okay. Fair enough.

And then on 35, first question there is considering the international symposium on Hodgkin lymphoma is taking place in October, when would you need top-line data by to present at that meeting or at this point do you plan on waiting for ASH?

You know, I would -- I compliment you on your interesting questions. I think that it is -- we don't normally commit to specific conferences. We are very aware of the international Hodgkin lymphoma conference and it is only held once every three years and we are thrilled that it is held this year so, you know, we can certainly attend and be part of it. But we as far as committing to specific dates, when we are going to release data, it is -- you know, it is hard to say. What we have said here is late September to October time frame for data on brentuximab vedotin and the conference I believe is being held in late October. So, you know, it is possible but that is not something we want to commit to right now.

Okay. And then lastly regarding your Phase 1 dose escalation study evaluating SGN-35 in combo with ABVD, are you able to comment on the starting dose and how many cohorts you have gone through at this point?

We are really not giving exact information on Phase I studies. We normally don't do that but perhaps Tom Reynolds, Chief Medical Officer, would want to comment a little bit on that trial and the design.

It is a dose escalation study in combination with ABVD. The primary focus of the study is to determine the safety of that combination. We have a number of dose escalation cohorts. We have modeled this off of the good pharmacokinetics we have determined from both Q3 week and the weekly dosing. As you know, ABVD is every other week dosing schedule and the dosing for brentuximab vedotin is also every other week. We have modeled that and we are in active dose escalation and we feel the trial is going very well, and there has been a keen amount of interest from sites and soon as cohorts for escalation have opened they have filled pretty quickly. We are hopeful that we will get through the dose escalation and pick a good dose and then move into the expansion phase of the study to get a better idea of the safety profile of that combination.

Okay. That is helpful. Thanks for taking the questions.

Thank you. Our next question comes from the line of Mark Monane from Needham & Company. Please go ahead.

Thank you. Good afternoon and greetings from the east. It is a very bright and sunny day here with about 80 to 90% sun and 10% clouds.

Thank you for the weather report. We always look forward to it.

Pleasure. And my pleasure and that leads nicely I think into Todd's question.

You can be the judge of that which is the 50/50 collaboration you have with Takeda. Can you comment on how the monies are actually recognized? I had a question about in the 50/50 deal, I would assume that what is yours is yours and what is Takeda is Takeda, but it seems there might be reimbursement issues coming in that are recognized through revenue. Could you go over that for us, Todd?

Sure, the mechanism for the collaboration is that there is a global joint development plan. We and Millennium agree on what development activities will be covered by the plan as well as who will conduct the activities, and that will include both clinical trials as well as manufacturing activities.

For all of the activities that we perform, we will receive 50% reimbursement funding for those activities and costs. Like wise, any activities that Millennium performs under the plan we co-fund 50%. The initial joint development plan is heavily weighted towards activities that Seattle Genetics performs, so right now the lion's share of the reimbursements are coming to the west not the east. And when we initiated this collaboration we had talked about expected funding to Seattle Genetics over the initial three years of the deal being approximately $75 million. So, that's $75 million coming our way.

I would point out, though, that this includes the development activities, not the commercial activities. We are both responsible for solely funding all of the commercial activities that each company incurs in their respective territories. So it is only the development costs that are co-funded not the commercial.

And then the second part of your question had to do with how those payments are recognized as revenue. And the GAAP accounting for that is that the cash -- all cash payments received under the collaboration, that includes milestone payments, the upfront payment, $60 million upfront payment, as well as the reimbursement payments are deferred on our balance sheet and recognized into revenue over the development term of the collaboration which initially is eight years.

Mark, this is Clay. I would like to point out one thing just from nomenclature.

The deal that we have with Millennium/Takeda on SGN-35 is not a 50/50 deal. We own the territories of U.S. and Canada and we get milestones and royalties outside of those territories. It is a co-funded development deal if that is what you meant, which it probably is. But I just wanted to be clear with that.

Yes, no, thank you, that was helpful. I was looking at the 50/50 for the reimbursement revenues for the joint development costs but that is helpful in thinking about the revenue. So thank you.

And then I have a follow-up question, please, on 35. And that is, is there a potential for the -- given the fact that ALCL data will be very proximal to the HL data, is it possible that you could submit for not one but two indications at the same time in the first half 2011 time period?

Mark, thank you very much for the question. You know, we are really excited with both our datasets, Hodgkin lymphoma and ALCL and maybe Tom Reynolds could give a little more color on the possible opportunities with ALCL.

Yes, Mark, we are excited based on what we have seen in Phase I where as you recall six out of seven patients achieved CRs. We are looking forward to the data in late September, October time frame.

We are really considering what our options are for a registration pathway. The study is designed very similarly to the Hodgkin lymphoma study in terms of endpoints and definition of patients. So, it is possible that this could be something FDA would be able to work with us on.

We do think it is a potential additional registration pathway and we haven't clarified the timing. Obviously we would need some discussions with the agency on that, but we are awaiting our data to really understand that a little bit better. But we are optimistic that this could provide an additional registration pathway.

Thanks for the added information and we look forward to the upcoming events.

Thanks, Mark.

Thank you. And our next question from the line of Jeff Elliott with UBS Securities. Please go ahead.

Thanks.

Tom, I guess when we were talking about earlier when Cory asked about the sort of what to read into the delay, I guess what I'm trying to get my head around is, you know, the data that you modeled the trial on you said it is a well designed trial, you know, when you look at that 5.5 or 6 months of median survival, what is the distribution around that from that historical data? I mean is there a reason to think there will be a long tail on one side which could potentially skew the placebo and the drug arm?

Jeff, you are aware we did model this off of Alan Burnett's data using low dose cytarabine as a single agent and modeled it after his experience.

As you look at those data, what you will see is that half of the patients succumb to their disease within about the first four or five months, five, six months, kind of that time frame but then the tail extends out and there is a very small handful of patients that live up to two years. We are now about 30 months post-inception of the study when we first started enrollment so the first patients enrolled would be if they were alive two and a half years out and the most recent patient was enrolled some where about 17 or 18 months ago. So we are pretty far out on the curve for those that are still alive. And it does have a long tail.

It is hard to know with event-driven studies that have the majority of the patients having events before you close the study of exactly what the shape of the tail is and with a few patients at the very back end we could see some heterogeneity there. We are not reading anything into the moving out of this in terms of being able to call this pro-efficacy for our agent. We just don't know and we expect to see it when we announce the data in the next few months.

Sure. And were the patients enrolling into that trial were they more back end loaded in terms of timing?

We have not commented on exactly how enrollment went.

As with most studies, we are getting sites up at the beginning and so enrollment usually starts off and then ramps up. We were very pleased with the enthusiasm about our sites and we have taken that into consideration, the actual enrollment rate when we have done the modeling. We have used the actual enrollment to do the modeling and we think that has been helpful.

Perfect. And then if the trial is positive how long would it take you guys to file, assuming it is something that you think you could file on?

We have not provided guidance on when we would submit the timing of any submission for regulatory approval pending our data at this point. You know, we have, you know, a number of discussions about that internally. We are looking at the different options provided that our data would support such a submission. But, we are not in a position right now to make any comments on it.

I would like to make a comment on something else that we have been very clear that the brentuximab vedotin submission will come first regardless of which dataset comes first and that we have said many times.

Yes.

Okay. And then just one last question. In terms of the 35 in potentially a Phase I for frontline ALCL what is the expected timing on that? Would you want to see the ABVD and HL first or is that something you are going forward with?

No, we are looking forward to seeing our data with reporting or reporting our data for top-line, the ALCL trial later this year and certainly we are interested in the opportunity for frontline in ALCL much like we are interested in and actually working in a trial in frontline for Hodgkin lymphoma. We have not yet provided any guidance of when that could start but that is something we are looking at very closely.

Great, thanks very much, guys.

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

Thanks for taking the question and congrats on a lot of good progress.

Clay, I think potentially by your Q3 earnings call you will have a lot of formative data points. And you and Eric have been pretty helpful in talking about the opportunity for B. vedotin. But talk a little bit about the AML market -- where you potentially see lintuzumab fitting in and what size market opportunity you believe that is?

You know, we haven't really given a lot of information on the AML market to date. There is about 13,000 patients diagnosed with AML annually in the US and about the same amount in Europe. Two thirds of the patients are over 60 years old. And that is really the population that we are looking at with our Phase 2 B trial. There is clearly an unmet medical need. There is no new drugs that have been approved in this setting. The standard of care, you know, there is really nothing better than (inaudible) standard of care and many people believe that is standard of care. The overall survival is certainly less than six months. There is no reports of it over that we have seen. And so we feel there is a great opportunity here. We haven't given any specific guidance.

Yes, this is Eric. I think that's right.

We haven't given specific guidance on it but, you know, it is an incidence population of patients so it is a little bit easier than brentuximab vedotin in the sense that these are patients who could receive, you know, where you are looking at a frontline population potentially of elderly patients. If you take the population of 13,000 and look at two thirds of that you can pretty easily do the math to figure out how many patients could potentially be in this market.

And I think this is Bruce. I think that the only thing I would add is that the trial design is also very helpful from a medical perspective given that it does compare to what the standard of care is. So we are looking forward to seeing the data.

Perfect. That's helpful. Thank you.

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

Thanks. All my questions have been answered.

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

Hi. It's actually Matt Lowe in for Bret today.

Just thinking about are you tracking the use of subsequent therapies in the Phase 2 B trial for lintuzumab? I'm just talking meaning once patients have come off study -- just is that something you are tracking?

So, what we are doing is these are all patients that are not candidates for high dose induction therapy. We are tracking what the -- when the patients go off of treatment, what the physicians and patients intend to do next. But we are not capturing every subsequent therapy until the patient dies. So we are going to have some of those data but not all of the data that you suggest.

Okay. That's great, thank you.

Thank you. Our next question comes from the line of Ling Wang with Brean Murray and Company. Please go ahead.

Good afternoon. Thank you for taking my questions.

I was wondering whether you could comment on the relative timing for lintuzumab versus SGN-35, I mean give guidance one for late September to October and one is for late August to October. I was wondering whether we can read into that, you know, the lintuzumab data is to come earlier than SGN-35?

I think -- thank you for the question, first of all. But I think that what we are guiding is that there is overlap in the guidances and we like to be careful with our guidance and make sure that we are covering all possibilities.

So, keep in mind that brentuximab vedotin is a timed study. So it is certainly easier for us to provide guidance -- whereas lintuzumab is an event driven study so it is not -- it has not been as exact and they are never going to be as exact if they are event driven.

There is overlapping guidance. I don't think you should read too much into anything there for timing.

Okay. Thank you.

Thank you. And our next question is a follow-up question from the line of Mark Monane with Needham & Company. Please go ahead.

Thank you. Thank you again for taking my follow-up question.

We are about 100-yards from the hole there, we have a 9 iron and maybe a pitching wedge and in Immunogen and Roche chose I think the BLA applications for their conjugated antibody but you actually said in the beginning you were looking for an NDA application. Could you talk about the different regulatory strategies and how that might affect the process going forward?

Sure.

And, you know, first of all, we are very aware of the TDM 1-BLA submission and we are certainly have been and continue to work and plan on working more with the FDA on the appropriate submission pathway for brentuximab vedotin. In either case, whether BLA or an NDA, our guidance is that we don't expect to affect timing of the submission, nor do we expect that it would affect the substance of the submission. And so, really it is work that we will be doing with the FDA to figure out the most appropriate pathway forward.

So, but thank you for the question. And I think maybe what are we an 8 iron away?

A, 8, okay. I appreciate it.

Thank you. And I'm showing no further questions in the queue. I will hand it back over to Ms. Pinkston for any further remarks.

Thank you, operator. Thanks everybody for joining us this afternoon. Have a good evening.

Ladies and gentlemen, that does conclude the Seattle Genetics second quarter 2010 financial results conference call. If you would like to listen to a replay of today's conference, you may dial 303-590-3030 or 1-800-406-7325 and enter the access code of 4330461. Thank you for your participation. You may now disconnect.