Seagen Inc (SGEN) 2014 Q2 法說會逐字稿

Good day and welcome to the Seattle Genetics second quarter 2014 financial results conference call. Today's conference is being recorded. We will have a question and answer session at the end of today's presentation. (Operator Instructions). I'd like to turn the conference over to Ms. Peggy Pinkston, Senior Director of Corporate Communications. Please, are go ahead, ma'am

Thank you, operator and good afternoon everyone. I'd like to welcome all of you to Seattle Genetics second quarter 2014 conference call. With me today are Clay Siegall, President and Chief Executive Officer; Todd Simpson, Chief Financial Officer; Eric Dobmeier, Chief Operating Officer; Jonathan Drachman, Chief Medical Officer and Executive Vice President Research and Development, and Chris Boerner, Executive Vice President Commercial. Following our prepared remarks today, we will open the line for questions. If you -- if we are unable to get to all of your questions we will be available after the conclusion of the call. Today's conference call will include forward-looking statements based on current expectations. Such statements are only predictions; 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. At this point, I'll turn the call over to Clay.

Thanks, Peg, and good afternoon everyone. Thank you for joining us today. Our strong second quarter performance was driven by execution on our commercial and clinical priorities ADCETRIS, as well as continued progress with our pipeline of ADC product candidates. We reported record ADCETRIS sales in Q2, and our clinical development efforts remain directed at establishing ADCETRIS as the foundation of therapy for CE30-positive lymphoma. Our research, clinical and development teams are also advancing innovative programs and new technologies with the potential to address the unmet needs of patients with many types of cancer.

ADCETRIS net sales in the US and Canada in the second quarter were $44.8 million, and were $83.5 million for the year to date. This represents a 16% increase compared to the first quarter of 2014, and a 20% increase compared to the first six months of 2013. Based on our strong first half 2014 results, we are increasing our total 2014 net sales expectation for ADCETRIS in the US and Canada to a range of $160 million to $170 million, up slightly from our prior guidance. Our market research suggests that in addition to continued strong penetration in our labeled indications of relapsed [Hodgkins lymphoma and ALCL, some patients are also receiving ADCETRIS outside of these areas.

For example, there is evidence of use in PTCL following the addition of ADCETRIS to treatment guidelines and Compendia earlier this year. While we do not promote outside of the label, this growth represents physician interest in utilizing ADCETRIS in other areas of unmet patient need. Our global ADCETRIS partner, Takeda, has made strong progress in securing additional approvals for ADCETRIS in its territory. ADCETRIS is now approved in more than 40 countries, worldwide, and we expect this number to keep growing. And as we continue to advance our pipeline, which includes five ADCs in Phase 1 Clinical Trials. We presented interim data from our Phase 1 Trial of SGN-CD19A, in non-Hodgkin lymphoma, at the ASCO Annual Meeting. In this dose escalation study SGN-CD19A induced objective responses including multiple complete remissions in heavily pretreated patients with aggressive B-cell lymphoma.

The safety profile has been manageable, which could be an advantage for combination approaches. Looking ahead, we are entering the second half of the year with strong momentum, and are preparing for several upcoming milestones. With ADCETRIS, we are conducting four ongoing Phase 3 Trials. We expect to announce top line data by October of this year from the first of these trials called AETHERA. As a reminder, the AETHERA trial is evaluating whether ADCETRIS can extend progression free survival or PFS in a consolidation setting for Hodgkin lymphoma patients at risk of relapse following autologous transplant. This study fulfills an FDA post approval safety requirement, though it is not designated as a confirmatory trial and is not being conducted under a special protocol assessment. If the data are positive, we are intend to submit a supplemental BLA to the FDA in the first half of 2015.

After AETHERA, the next Phase 3 Trial from which we anticipate data is ALCANZA, which is designed to support registration in relapsed CD30-positive cutaneous T-cell lymphoma. We are enthusiastic about the data reported in patients with CTCL, and look forward to completing enrollment next year. Importantly, we are conducting two Phase 3 Clinical Trials, ECHELON-1 and ECHELON-2, designed to redefine front line therapy for Hodgkin lymphoma and CD30-positive mature T-cell lymphoma's, respectively. These studies continue to enroll on a global basis and have a primary endpoint of PFS. As previously described, based on strong evolving Phase 1 data evaluating the addition of ADCETRIS to components of standard frontline chemotherapy regimen, as well as a slower than anticipated PFS events in our Phase 3 AETHERA. We and Takeda are evaluating the potential that event rates may be slower than expected in both ECHELON trials.

Our review is not based on any actual data from the ECHELON trials, as both we and Takeda remain blinded, but, rather, our positive experience with the efficacy and tolerability of ADCETRIS when combined with chemotherapy in multiple settings. We have aligned with Takeda on a strategy for these trials, and have begun to engage with regulatory agencies in both the United States and Europe. We will continue to keep you updated on future calls. There are also several important milestones, upcoming milestones, with our ADC product pipeline. We expect to report data from the SDN-CD33A Phase 1 Clinical Trial and AML later this year. In addition, we plan to advance a six ADC Program, SGN-CD70A, enter clinic this quarter for CD70-positive renal cell carcinoma and non-Hodgkin lymphoma. Both SGN-CD33A and SGN-CD70A, utilize our newest ADC technology with a potent cytotoxic agent called a PBD-dimer, and a novel, site-specific, conjugation approach.

This proprietary technology illustrates our continued leadership in the field of ADCs. I'm excited about our pipeline programs, and the clinical potential our ADCs may demonstrate. Beyond our internal programs, our collaborators are developing more than 15 ADCs in clinical trials utilizing our technology, and, importantly, continue to generate data and advance these programs and to later stages of development. At this point, I'll turn the call over to Chris Boerner, who will talk about our ADCETRIS commercial efforts. Then Todd Simpson will discuss our second quarter financial results. Next, Jonathan Drachman will cover ADCETRIS clinical development highlights and updates from our product pipeline and ADC technology. Then we'll open the line for questions. Chris?

Thanks, Clay. As Clay mentioned, US and Canada net sales increased 16% over the first quarter. The results for the quarter were largely driven by market share increases in Hodgkin lymphoma and [sustended anaplastic large-cell lymphoma, as well as utilization in other CD30 expressing diseases. With respect to market share, we continue to see an increase in utilization across multiple lines of therapy in both Hodgkin lymphoma and relapse systemic ALCL.

Our market research indicates that approximately 80% of patients who relapse after first line therapy for Hodgkin lymphoma will receive ADCETRIS in at least one line of therapy. The largest increase in market share during the quarter was in the transplant-eligible salvage setting. While ADCETRIS is not currently indicated for this population, nor do we promote outside our labeled indications, it is increasingly used as salvage therapy to enable patients to receive an autologous stem cell transplant. This is further evidence of ADCETRIS becoming the backbone of therapy in [relapsed Hodgkin lymphoma. Market share also remains strong in relapsed ALCL. Beyond the relapse refractory HL and ALCL settings, we continue to see increased utilization of ADCETRIS in front line Hodgkin lymphoma and other CD30-expressing lymphomas. As Clay noted, ADCETRIS was granted inclusion in NCCN Compendia for CD30-positive PTCL earlier in the second quarter.

Physician interest in using ADCETRIS continues to expand reflecting the breadth of data that are emerging for ADCETRIS across a range of CD30-expressing diseases. Overall, we are pleased with our results during the second quarter. Although we anticipate some variance in future quarter to quarter sales, we believe we are on track to meet our updated guidance for the year. The commercial focus for the remainder of 2014 continues to be on keeping ADCETRIS the standard of care, while increasing market share and duration within our approved indications. With that, I'll now turn the call over to Todd.

Great. Thanks, Chris and thanks everyone for joining us on the call this afternoon. Our financial results in the second quarter of 2014 were strong, and we ended the quarter with nearly $350 million in cash and investments. Our strong cash position reflects the positive impact of several factors, including increasing ADCETRIS sales, strong royalty revenues and continued collaboration activities, which combined have generated more than $130 million year to date. Total revenues were $68.3 million for the second quarter of 2014, which included ADCETRIS net sales up $44.8 million.

For the year to date, total revenues were $136.6 million, including ADCETRIS net sales of $83.5 million. As Clay mentioned, we are increasing our 2014 ADCETRIS net sales guidance to a range of $160 million to $170 million. Revenues in 2014 also included royalties of $7.3 million in the second quarter, and $20 million for the year to date, primarily reflecting royalties on ADCETRIS sales by Takeda in its territory. As a reminder, royalties in the first quarter of 2014 included a $5 million sales milestone triggered by Takeda surpassing $100 [billion in ADCETRIS net sales during 2013. Exceeding $100 million in annual sales, also resulted in an increase in the royalty rate we receive from Takeda from the mid teens to the high teens above this threshold.

We report royalty revenues one quarter in arrears, and the royalty rate resets annually. Collaboration revenues were $16.2 million and $33.1 million for the second quarter in year to date in 2014. This compares to $34.3 million and $55.3 million for the comparable periods in 2013. These higher amounts in 2013 are primarily attributable to new and extended ADC collaborations, specifically, including the new Bayer collaboration in the second quarter of last year. R&D expenses were $53.7 million and $108.2 million for the quarter and year to date in 2014.

These are increases from the same periods last year, primarily driven by investment in our ADC pipeline and expanded ADCETRIS clinical development costs. While we continue to make significant progress in our research efforts, R&D expenses so far this year have been trending towards the lower end of our expectations. And as a result, we are making a modest reduction in our R&D expense guidance to now be in the range of $235 million to $250 million for the year.

SG&A expenses were up modestly year over year. Non-cash share based compensation costs for the first half of 2014 was $18.7 million compared to $13.4 million for the first half of 2013. We remain well positioned to continue investing in our priorities of expanding ADCETRIS, advancing our product pipeline and maintaining our leadership position in the field of ADCs. And with that I'll now turn the call over to Jonathan

Thanks, Todd. I'd like to begin today by spending a few moments discussing the significance of the AETHERA clinical trials that will be unblinded by October. For patients with Hodgkin lymphoma who have failed front line curative therapy there's a high risk that they will relapse and eventually die from disease recurrence despite advances made in salvage regimens and autologous stem cell transplantation. Many of these patients are young, often in their 20s and 30s, who should have the opportunity to live a long and productive life. AETHERA was designed to test the hypothesis that residual Hodgkin lymphoma might be best treated in the immediate post transplant setting to delay progression and potentially cure more patients.

This trial will provide important information regarding the tolerability of ADCETRIS immediately post transplant, and the potential to extend PFS in patients with Hodgkin lymphoma. Next, I'd like to address the ECHELON-1 and Echelon-2 trials studying the incorporation of ADCETRIS into novel frontline regimens for Hodgkin lymphoma and mature key cell lymphoma, respectively. When these large global trials were designed, we knew that the combination regimens were tolerable and active based on high complete response rates. While we still have no information from the ongoing Phase-three trials, the duration of responses from the Phase 1B combination trials are encouraging.

As Clay mentioned, we have reevaluated our assumptions and have aligned with Takeda to make sure that these trials deliver robust answers to redefine frontline therapy and improve outcomes for patients. During the quarter, we saw strong enrollment to both our frontline trials. In addition to our ongoing Phase 3 trials, we continue to evaluate ADCETRIS in earlier lines of therapy for Hodgkin lymphoma, including in combination with -- in the salvage setting and as a single agent or in combination with the bendamustine in the salvage setting, and as a single agent or in combination with decarbazine in elderly frontline patients. We are enthusiastic about both of these trials and look forward to presenting additional data later this year.

Similarly, there's substantial clinical evaluation of ADCETRIS in both corporate and investigator-sponsored trials in other therapeutic areas. For example in relapse DLBCL, we're broadly evaluating ADCETRIS as a single agent for patients who express CD30, as well as for patients with undetectable CD30 by immunohistochemistry, and in combination with Rituxan. We are also evaluating ADCETRIS plus (inaudible) in the front line DLBCL setting. Enrollment is ongoing in all of these areas. We plan to report data later in 2014, which will inform our future plans for ADCETRIS in DLBCL. Physicians are also eager to explore new potential therapeutic indications in combinations with ADCETRIS, as demonstrated in a number of investigator-sponsored trials. For example, several of the ongoing IFTs include trials in graph versus host disease, acute myeloid leukemia and in novel frontline regimens. There's also a ECOG trial combining ADCETRIS with the immuno oncology check point inhibiter, ipilimumab.

It's encouraging to see the broad interests in expanded clinical use of ADCETRIS. Beyond ADCETRIS, we are advancing a strong pipeline of ADCs in multiple ongoing trials that are accruing well. We reported interim data from the SGN-CD19A, at ASCO, as Clay described. The activity observed thus far is promising, although we are still early in clinical development. We believe that superficial corneal toxicities observed with SGN-CD19A are manageable and reversible. We are further refining the use of SGN-CD19A, including alternative doses and schedules and the use of prophylactic steroid eye drops.

We are actively considering combination trials taking advantage of the anti-tumor activity and limited bone marrow toxicity and neuropathy that has been observed with SGN-CD19A. We plan to report additional data from our Phase 1 Trials, later this year. We also expect to report interim data from our Phase 1 Trial of SGN-CD33A, a CD33-targeted ADC for acute myeloid leukemia later in 2014. AML represents a significant unmet medical need. This is the first clinical trial of an ADC that utilizes our proprietary highly potent cell-killing agent, a PBD-dimer and our site-specific conjugation technology. Our third wholly owned ADC in clinical trials is SGN-LIV1A. This ADC is targeted to LIV1, which is expressed on more than 90% of breast cancers. Our ongoing Phase 1 Trial is in multiple subtypes of metastatic breast cancer including triple negative disease.

We anticipate data interest this ADC in 2015. We plan to advance a sixth ADC, SGN-CD70A, into clinical trial this quarter. This ADC utilizes the same PBD-based ADC technology as SGN-CD33A. CD70 is an attractive ADC target given its expression profile in hematologic malignancies and renal cell carcinoma, but limited expression in normal tissue. SGN-CD70A has shown impressive activity in pre-clinical models, and we look forward to initiating the Phase 1 study. Our ADC technology is also being evaluated, broadly, by collaborators. More than 60% of the, roughly, 40 ADCs in clinical development utilize Seattle Genetics technology. Some recent highlights include Genentech-Roche reported interim data at ASCO from four programs using our technology, including ADCs targeted to CD22, CD79B, NaPi2b and mesolthelin.

Genentech also initiated clinical trials with two new ADCs using Seattle Genetics technology. (Inaudible) reported clinical data at ADCO on its EGFR-targeted ADC for glioblastoma, and we achieved a milestone under our Bayer collaboration upon initiation of a Phase 1 trial of an ADC for solid tumors. It's an exciting time for ADCs, with new programs both by Seattle Genetics and our collaborators advancing in the clinic. We believe this approach will continue to change the way cancers treated, and that we are well positioned to continue our leadership of the ADC field. At this point, I'll turn the call back over to Clay.

Thanks, Jonathan. Before we open the call to questions, I'd like to summarize our key upcoming milestones. Reporting data from multiple (inaudible) clinical trials, notably, topline data from the Phase 3 ATHERA trial by October. Reporting data later this year from our SGN-CD33A trial in (inaudible), and additional data from our SGN-CD19A trials in hematologic malignancies, advancing our six clinical stage ADC, SGN-CD70A, into a Phase 1 clinical trial in the third quarter. And, in collaboration with Takeda, obtaining approvals for ADCETRIS in additional countries worldwide. We anticipate a busy remainder of 2014, and look forward to keeping you updated on our progress. At this point, we will open the line for Q&A. Operator, please open the call for questions.

Yes, sir. (Operator Instructions). And we'll take our first question from Jason Kantor of Credit Suisse. Please, go ahead.

Okay. Good afternoon. This is Jeremiah for Jason. Regarding the AETHERA data come you mentioned you had the data available in October. Could we see that data at ASH, potentially?

You know, we normally don't comment on exactly what we're going to be presenting at ASH. It is too early to speculate that. You have to submit, and then ASH has to respond to you, but that is the type of conference that we would want to present the AETHERA data at.

And you mentioned that there's growth in other indications outside of the approved indications for ADCETRIS, but as regarding the duration, have you seen any material impact into the duration since, ever since the restriction to 15 or less cycles on the labels been removed?

We don't make completely specific comments on duration at each quarter. You know, we generally have not seen any large moves in duration in general. And you know, maybe I could turn the question over to Chris Boemer from commercial to see if he wants to add any more color to that. Chris?

Thanks, Clay. Jeremiah, duration has largely remained unchanged. It's averaging around six cycles. It continues to vary by settings, and that number will vary on average over time, quarter to quarter. From a commercial standpoint, we still believe there's opportunities to continue to grow on label, and part of that story is duration will continue to message that treating patients consistent with our label is in the best interest of the patient, and that means treating to progression or unacceptable toxicity. And, clearly, the removal of the 16 cycle cap helped in that story. So, that's what we'll be focused on from a commercial standpoint.

Okay. And the last question, regarding the SGN-LIV1 program, and that the first release of data, you mentioned that we might see data this year or maybe next year. But, regarding, is it possible we might see it at the San Antonio Breast Conference symposium later this year?

You know, we really don't talk about data before abstracts are out, and say where we would be presenting the data. I think when you look at the LIV1 program, the type of places we would present it at are probably ASCO conferences or San Antonio Tech conferences. But at this point, we are not going to make any specific comments on that.

Okay. All right. Thank you for taking the questions.

We'll take our next question from Matt Roden with UBS.

Great. Good afternoon, guys, and nice quarter. As usual, I have one commercial question and one pipeline question. So on the commercial side, you know, you have a nice step up in sales here, and I'm trying to understand whether or not you think that number is above the demand line or if it's on the demand line. So I was wondering, Chris, if you could talk about whether or not there's anything special one-timish that you saw this quarte, r or whether or not there's any inventory in that number. And whether or not we should use this number as sort of a new basis to forecast off of.

Thanks, Matt. First the easiest question is there is no inventory baked into that number. As for what's going on with the business and how it portends to the future, I think what happened this quarter is really a nice assessment of where the business is, and what you saw is really sort of three things. First, very strong interest in continued use of ADCETRIS in our current on-label indications. We also saw continued interest in utilizing ADCETRIS in earlier lines of therapy, and, notably, I highlighted the growth we saw in the salvage HL setting. And then also we continue to see interest amongst customers in exploring the use of ADCETRIS in other CD30-expressing disease areas, and I think those are the three trends that we saw in the quarter, and you're likely to see some amount of those things happening going forward. Where the business goes from here I think we can expect to see sales fluctuate quarter-over-quarter, but we believe there's still opportunities to grow the business in our labels indications. Clearly, there's interest in using ADCETRIS in other areas, but net-net, we see opportunity for continued growth throughout the rest of the year, and we're very comfortable with the revised guidance that we provide.

Got it. Thanks. And then on the pipeline side, the question on the ECHELON-1, and where we are with that. So experts that we spoke with have been supportive of the AETHERA protocol change moving the endpoint to a landmark analysis because the -- according to them virtually all of the relapses will happen within the first two years, so landmark kind of makes sense post transplant. But in the frontline setting that you have your early relapsers and then your late relapsers and you still want to be able to compare these data to historical data set. So, you know, can you tell us where you are on that, and you referred to the harmonization between you and your partner. You know, is this just a matter of upsizing the trial rather than changing an end point, and maybe if you can just let us know what the process is that you go through with respect to your partners and the experts in the FDA. Thanks.`

Matt, we are making progress on our -- our work here on the ECHELON trials. We are aligned, as you pointed out and we pointed out in our prepared remarks, with Takeda on a regulatory strategy. We have begun working with regulators. We plan to keep you updated as we make progress. There are a number of options to look at here, but it is really not appropriate to comment while we are working with regulators. You know, the -- beyond that, you know, the enrollment in our ECHELON-1, and ECHELON 2, programs is strong, and I can say that there are lots of interest across the globe in redefining front line therapy in Hodgkin lymphoma, as well as in T-cell lymphoma.

Okay. And then just related, you mentioned you don't -- you're not working off of specific data from the trial in terms of the event rate. But even on a blinded basis, shouldn't you be able to see the events accrue and does that factor into your decision making at all?

You know, Matt, I have seen no data on this. It doesn't factor into our decision at all. It's just -- it's just not at all. This is based on other factors that we mentioned in our prepared remarks

Okay. Thanks very much.

We'll take our next question from Adnan Butt with RBC Capital Markets. Please, go ahead.

Hello, and congrats on a solid ADCETRIS number. First, on ADCETRIS, if possible, could you break out the traditional label versus non label sale, s and if it's mostly assumed still to be in the US, and Canada is incremental, if you can give that detail. And then secondly, on the pipeline question on LIV1 did I hear you say it's expressed broadly across all breast cancer, including triple negative, and then does expression vary by the type of breast cancer and does it matter? Thanks.

Okay. First of all, on ADCETRIS sales, we do not break out label versus non label. And we also are not, at least at this point, breaking out US and Canada. You know, we're really pleased with the quarter. We had 16% increase, you know, in a quarter to quarter growth. If you actually look a year back, you know, with the quarter-over-quarter, we had a 25% increase from the same quarter a year before. And because of that, we increased our guidance, and we're really focused with ADCETRIS to complete our Phase 3 trials. We're going to report one later this year, complete, and get data from other malignancies. So, we're very happy with the position interest in ADCETRIS. Now, turning it over to LIV1, it is expressed broadly on a number of different -- across breast cancer, and, Jonathan, do you want to comment anything more on LIV1?

Yes. So LIV1 is a really promising target and breast cancer, and as far as we've seen all of the subtypes express it. Overall, more than 90% of metastatic breast cancer patients have LIV1 on the tumor, so, that makes it very exciting for the broad indication. Also, we mentioned, and specifically have included, triple negative breast cancer because it's a very high unmet need for patients. You also asked doesn't matter? I don't know. Well, we are conducting the clinical trial where we look forward to, hopefully, presenting data next year, and we hope that then we'll understand more about the subgroups of breast cancer and LIV1 expression.

Okay. Thanks.

(Operator Instructions).We'll take our next question from Thomas Wei with Jefferies.

Thanks. Just a couple of questions on Hodgkin lymphoma and then AML. On ADCETRIS, I'm curious how you think we should contextualize the data for PD-1 in Hodgkin lymphoma if the data for nivolumab looks good later this year. How should we think about the treatment paradigm and how ADCETRIS would fit in? And then my question on AML is just an understanding of what we should expect from that data. The protocol, the mix of naive patients who are ineligible for chemotherapy, and then relapsed patients who achieve a complete response in the first line setting. And I'm just trying to understand what is the right Benchmark for judging efficacy in each of those populations. Thanks

Thanks, Thomas. As far as all the different P-1 programs, nivolumab, we are absolutely pleased that there are new drugs to treat cancer out there. I mean we're a patient-focused company, so that is really great. You know, the goal we have for ADCETRIS is to be the backbone of therapy for Hodgkin lymphoma. And you know, currently, we're the backbone for relapsed Hodgkin lymphoma, and working very hard to invest in earlier lines of therapy. But please keep in mind when you refer to the PD-1s, that CD30 is and has been for many years the defining marker for Hodgkin lymphoma, and a very important receptor for Hodgkin lymphoma. So, we continue to really focus and invest strongly on earlier lines of treatment. Concerning AML and expectations, you know, that's a hard question early on in Phase 1 when you're really learning about, you know, the safety profile, and you're learning about dose and schedule and the different patient types. So, I don't want to give you too much of specifics of what you exactly will be looking for in here and any specific benchmarks. Keep in mind important benchmarks with AML are really survival, and that's something that you get in larger studies and randomized studies and certainly that's what the FDA expects for approval for AML-type drugs. And Jonathan, would you like to make any remarks on AML?

I just agree with what Clay said. We're learning -- we're going to be learning a lot about a new chemo type in this trial, the PBD-dimer, and learning about tolerability, activity and toxicities. As far as the AML goes, it's a terrible disease. There really haven't been any successful advances for decades. And in the two populations that we're looking at, nothing really works. There's -- you've got older patients who can't get intensive therapy with curative intent at all, so they get palliative therapy at best, and then you've got patients who have failed their best chance of cure in frontline and relapse. So, it's hard to say what the benchmarks are in a Phase 1 population, and I think you'll have to judge from the data when you see it.

Operator, we'll take the next question.

Next question is from Navdeep Singh with Goldman Sachs. Please go ahead

Hi. This is Lisa in for Navdeep. Thanks for taking the question. So going back to the PD-1 for HL, you mentioned you're interested in developing ADCETRIS as a backbone in earlier settings for HL, but now that the nivo study is also enrolling both ADCETRIS treated and ADCETRIS naive HL patients, what do you foresee as like the potential impact, and how do you think (inaudible) would position nivo given ADCETRIS is already on the market?

You know, it is really not something we're going to do, which is try to speculate as to what Bristol-Meyers Squibb is going to do with nivo. That would not be appropriate for us to do that. Like I said, we're very pleased that there's other therapies available for any types of cancers, and we think that the ADCETRIS data is strong and stands for itself, and with our investment in earlier lines of therapies in big broad Phase 3 studies, we're going to be getting some very exciting data in the years to come and hopefully we'll redefine frontline therapy in this disease

Just to follow up on that, I think you've previously expressed interest in evaluating ADCETRIS with nivo, so kind of where do you stand on that now?

You know, any discussion of what we're doing in trials that we have not announced, and had what we would do in the future in combination with any of the PD-1 or PDL-1 type molecules out there would not be appropriate to make any comments about things may or may not come.

Okay. And then one last question. So, I saw you took a 4% price increase on June 30th for ADCETRIS. So how much of your updated guidance for ADCETRIS of the $160 [million], $170 [million], factors and this price increase, and do you think ADCETRIS consensus 2015 of around $220 million is achievable? Thank you.

So first of all, we already had that planned in our guidance, a price increase. So when we came up with our guidance earlier this year, that was contemplated. So the new guidance was based on what's happening now with sales, not based on this price increase. The second of all is you've quoted a number as to whether we're comfortable or not in 2015. That is not something that we make comments on right now. Todd, do you want to add anything to that

Yes. Lisa, this is Todd. I'll just maybe add one more thought to this. Clay's right. We'll provide our sales guidance for 2015 next year when we give our guidance for everything. But I would also point out on the price increases, keep in mind that there's a significant portion of our business that is government pay. About 40% of our business gets covered through either PHS or other government programs where the price increase is capped by inflation. So while we did see about a 3.9% price increase, that's primarily going to apply to the commercial pay part of the business, 60%, about all of it.

All right. Great. Thank you, again.

We'll take our next question from Howard Liang with Leerink Partners.

Hi this is Rich Goss, calling in for Howard. Thanks for taking my question. Regarding the trial looking at the combination (inaudible) ADCETRIS, can you talk a bit about what pre-clinical data there are to indicate the two compounds are combinable, and that ADCETRIS doesn't interfere with immune activation. And also how do we know from this study that ADCETRIS and a checkpoint inhibiter are additive? Thanks.

Jonathan, would you like to make any comments on that?

Sure. So just to remind that you that that study is being conducted by the Eastern Cooperative Oncology Group and not a Seattle Genetics trial, there are not public data in terms of looking at the checkpoint inhibiters with ADCETRIS or other ADCs that I'm aware of. There is a little bit of data that was presented from some German physicians looking at the impact of giving ADCETRIS in patients who had relapsed after allogenic transplant, and they did not see an impact on -- a negative impact on the immune system. In fact, there was some suggestions that it might be positive. But really, the data will come from the clinic in this case.

Okay. Great. Thank you.

Our next question is from Stephen Byrne with Bank of America.

Yeah. I was wondering if you've seen any change in the support from payors on either pricing, or any push back on pricing or any resistance to use in the transplant-eligible patients that that would be off label?

Chris, would you like to make a comment on that?

Sure. The reimbursement environment for ADCETRIS across the board continues to be very favorable. That includes in all of the settings that we've seen utilization in Hodgkin lymphoma and ALCS

And in with respect to this increase you've seen in use and transplant-eligible, I was just wondering if patients that had received ADCETRIS, you know, pre-transplant, could there have been any of those patients in the AETHERA study or were they excluded?

So the patients that I referenced when we talked about patients getting ADCETRIS in the salvage setting, all of those patients would have been patients pre-transplant and, thus, before they would have been in the AETHERA patient population. Those are patients who are being salvaged to enable a transplant. Jonathan, do you want to provide any additional perspective on it?

Yeah. They were excluded from the AETHERA trial.

Okay. I think so ? I thought so. And just on the ECHELON studies, can you provide any of the statistical design specs, such as level of powering and what level of PFFs (inaudible) they were designed to show?

Thanks for the question, Steve, but we don't provide -- we're not at a position where we are choosing to provide all the statistical analysis and powers for our pivotal trials.

Okay. Thank you.

Next question is from Cory Kasimov with JPMorgan.

Hi guys this is Brittany in for Corey. Just a quick question on ADCETRIS. What are your expectations of the commercial impact for this drug when AETHERA data comes out and if the data's positive?

So thank you for the question. Let's see. So as far as market potential for AETHERA, you know, in transplants, our goal in Hodgkin lymphoma, you know, post transplant, is to push up the patients into long term survival, so we're clearly focused on that. And, you know, Chris, do you want to comment on the patient population?

Sure. The commercial opportunity for AETHERA is if you think about that, think about the fact that there are probably approximately 1000 to 1500 transplants performed, annually, in the United States. And in the AETHERA setting we provide an opportunity for those patients to get ADCETRIS as a consolidation with potential use for up to a year of therapy. We know from all of the market research we've done thus far that if the study is positive we believe there will be significant interest in utilizing ADCETRIS for these patients and for utilizing it consistent with the trial protocol.

So, we think that, you know, with AETHERA, we have a strong opportunity to, potentially, cure some patients and really -- and help people. But as far as the market potential, please keep in mind that we're defining a new treatment paradigm here. There is no such -- there is no treatment today in this post transplant setting, so it does make it somewhat cumbersome to exactly define and say what the market opportunity is

Great. Thank you.

And our next question is follow-up from Matt Roden with UBS.

Hi, can you hear me?

Yes.

Okay. Sorry about that. (Inaudible). All right. I was just wondering if you could go back to CD70. Jonathan, you referred to the expression pattern for CD70. I was wondering if you can talk a little bit more about clinical validation, and sort of what your expectation on how that can address renal cell and Hodgkin.

Sure. So CD70 is a target we're quite familiar with. It's very -- it's a very clean target. It's expressed on the majority of patients with aggressive lymphoma, and the majority of patients with clear cell renal cell carcinoma, as well as some other subtypes of renal cell carcinoma. I think these are very different opportunities and quite interesting. In lymphoma, clearly, ADCs work. We, at least, know that ADCETRIS works very well, and SGN-CD19A works well in our Phase 1 trial. So we're very encouraged to test out the new PBD-dimer in this setting. So that's one area where we have some confidence that the expression, the good behavior of that target, in terms of internalization and delivering target should give us an opportunity to see activity. And then with renal cell cancer, that's tougher. This has been a disease that, traditionally, has been very difficult for chemotherapy or cytotoxic agents to have much of an effect on.

So if this worked well in that setting, it would really be groundbreaking in terms of bringing in a new therapeutic opportunity to renal cell where there are a lot of things that people are using, whether they're a tyrosine kinase inhibiters or checkpoint inhibiters, but there isn't anything that's cytotoxic that's active. So we're looking forward to seeing how that works. It's a target that we're excited about.

Okay. And then should we assume you're going to go into just straight dose escalation PKPD type of Phase 1 studies, and then move on from there into a standard Phase 2 program?

Well, we'll have to -- of course we'll have to do a standard dose escalation trial to get to the right dosing schedule and then we'll see where we are

Okay. Thank you. So we haven't gone into all the details about that, but as you know, we are looking at prophylactic steroid eye drops and we look forward to presenting more data hopefully later this year from that.

Our next question is from Mara Goldstein with Cantor Fitzgerald

Oh, thanks much for taking my question; I have two. The first is (inaudible), and I'm just curious as to what your thoughts are on how the positioning of the ADCETRIS will change, assuming that it's such a label is changed to include AETHERA. And, then, secondarily, you mentioned some novel dosing schedule to reduce potentially (inaudible) toxicity. Can you talk a little bit about what that might be?

Yes. So as far as AETHERA in the label would do, I'm trying to totally figured your question out. But we will look at the data with AETHERA, and if the data are supportive of it, we will certainly submit to, you know, our data to the agency. And so that's something -- so, commenting on specific ADCETRIS label's tough. Chris, would you like to make any comments on it?

See, the only thing I would add is that, you know, our vision with ADCETRIS is to continue to explore opportunities to move ADCETRIS into earlier lines of therapy. This is an important first step in that regard, and it's always a nice opportunity with it an agent to potentially improve upon the cure rate for patients who really, at this point, it's their last, best opportunity for a cure and Hodgkin lymphoma following a transplant. So, I think those will all be parts of how we position the drug if we are fortunate to get a label in the setting.

And your second question is on one of our development products CD19A, I believe. And, Jonathan, would you like to make any comments?

Sure. So given the promising activity, and the fact that there really isn't much in the way of (inaudible) toxicity and neuropathy with SGN-CD19A, we are looking at ways to have the -- take advantage of this -- of these properties, and using several ways of dosing the drug that would give, perhaps, a little bit less of the ocular toxicity, the superficial corneal changes that have been seen. So, we haven't gone into all the details about that, but, as you know, we are looking at prophylactic steroid eyedrops. And we look forward to presenting more data, hopefully, later this year on that.

Okay. Thank you.

That does conclude our question and answer session. I'll hand things over to Peggy Pinkston for closing remarks

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

As a reminder to our phone audience, that does conclude today's conference. We appreciate your participation.