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Seattle Genetics, Inc. (NASDAQ:SGEN)

Q4 2008 Earnings Call Transcript

February 5, 2009 5:00 pm ET

Executives

Peggy Pinkston – Director, Corporate Communications

Clay Siegall – President and CEO

Todd Simpson – CFO

Tom Reynolds – Chief Medical Officer

Eric Dobmeier – Chief Business Officer

Analysts

Mona Ashiya – JPMorgan

Mark Monane – Needham & Company

Bret Holley – Oppenheimer & Company

Hon Lee – Stanford Group

David Miller – Biotech Stock Research

Michael Yee – RBC Capital Markets

Operator

Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the Seattle Genetics fourth quarter and year-end 2008 financial results conference call.

During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator instructions) This conference call is being recorded today, Thursday, February 5, 2009.

I would now like to turn the conference over to Peggy Pinkston, Director of Corporate Communications. Please go ahead, ma’am.

Peggy Pinkston

Great, thank you, operator. I would like to welcome all of you to Seattle Genetics fourth quarter and year 2008 conference call. With me today are Clay Siegall, President and Chief Executive Officer; Todd Simpson, Chief Financial Officer; Eric Dobmeier, Chief Business Officer; and Tom Reynolds, Chief Medical Officer.

This afternoon, Clay will provide an update on our programs, including recent highlights and our 2009 goals; next, Todd will discuss our 2008 financial results and provide 2009 guidance; and then we will open the call for 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.

Clay Siegall

Thanks, Peg; and thank you all for joining us today. Seattle Genetics had a fantastic 2008 and we are off to a strong start in 2009. Highlights of the past year include the following.

We have reported compelling clinical data with SGN-35, an antibody drug conjugate or ADC using our proprietary technology. This led to a special protocol assessment from the FDA for a pivotal trial of SGN-35 in Hodgkin lymphoma, set to begin this quarter. In collaboration with Genentech, we moved forward five combination trials of dacetuzumab for non-Hodgkin lymphoma and multiple myeloma. We completed more than 90% of the target enrollment in our lintuzumab Phase IIb trial. We are on track to complete accrual this quarter and report data in the first half of 2010. We initiated a clinical trial with SGN-70 for autoimmune disease. We entered into an ADC deal with Daiichi Sankyo on substantially higher financial terms than previously achieved, reflecting the increasing value of our technologies. This new deal and progress by our other ADC collaborators generated more than $9 million during 2008. And, this week, we strengthened our financial position by successfully completing a $55 million public offering at a strong price in a very difficult market.

I will start our program update with our lead product candidate, SGN-35, an ADC targeting CD30. Our development activities with SGN-35 are focused initially on relapsed and refractory Hodgkin lymphoma and anaplastic large-cell lymphoma or ALCL, a type of T-cell lymphoma, where there are no clear standards of care and therapeutic options are limited. SGN-35 has the potential to address the high unmet medical need for patients in these settings.

At the American Society of Hematology annual meeting or ASH in December, we reported data for our Phase I dose escalation trial, showing that our doses of 1.2 mg per kilogram and higher administered every three weeks, 54% of patients achieved objective response, including 32% with a complete response. These data are striking and exceeded our expectations to telling us to advance a program rapidly. As we announced in January, we have secured a special protocol assessment or SPA from the FDA for a pivotal trial in Hodgkin lymphoma that we plan to initiate this quarter. This is a significant accomplishment for Seattle Genetics and an important for our SGN-35 program. The pivotal single arm trial will enroll 100 relapsed or refractory Hodgkin lymphoma patients. The primary endpoint will be objective response rate assessed by an independent radiologic facility. The pivotal trial of SGN-35 will be an important milestone for Seattle Genetics and it could support the company's first New Drug Application. Our goal is to submit an NDA for SGN-35 in 2011, under the accelerated approval regulations with potential commercial launch in 2012.

In parallel, we also plan to initiate a single agent Phase II trial of SGN-35 for ALCL by the end of March. In our Phase I trial with SGN-35, five out of six ALCL patients treated to date have achieved a complete response. These data provide strong evidence of the therapeutic potential for SGN-35 in this indication. We believe that ALCL may provide an additional registrational pathway for SGN-35.

We are also conducting a Phase I trial of SGN-35 administered weekly. Dose escalation is ongoing, and we look forward to reporting data from this trial in 2009. SGN-35 has demonstrated substantial therapeutic promise with a potentially rapid pathway to regulatory approval. We are aligning our clinical development and financial resources behind it accordingly.

Dacetuzumab, otherwise known as SGN-40, is an antibody targeting CD40 that we are developing in collaboration with Genentech. At ASH, we reported data from the single agent Phase II trial in diffuse large B-cell lymphoma in a heavily pretreated population of patients, with a median of four prior therapies. Dacetuzumab achieved objective responses at well-tolerated doses. The trial confirmed the single agent anti-tumor activity of dacetuzumab and is supportive of our ongoing development activities focused on combination regimens. We and Genentech are advancing five trials for non-Hodgkin's lymphoma and multiple myeloma in combination with standard treatments for these diseases.

The largest of our dacetuzumab trials is a Phase IIb randomized trial in combination with Rituxan and chemotherapy for second line DLBCL, named the SeaGen MARINER trial. Recently, an independent data monitoring committee completed a pre-specified safety review of data from this trial and recommended that it continue as planned. We anticipate data from the SeaGen MARINER trial will be available in 2010.

Some of the novel research underway with dacetuzumab was also presented at ASH. Notably, preclinical data was shown on a gene signature designed to identify non-Hodgkins lymphoma patients more likely to respond to dacetuzumab therapy. This tool is being correlated with clinical findings from our studies of dacetuzumab for lymphoma. And we plan to submit the data for presentation at a medical meeting in 2009. We and Genentech have made meaningful progress in the development of dacetuzumab by advancing the program in a number of therapeutic settings.

Our third drug in clinical trials is lintuzumab or SGN-33, an antibody targeting CD33. The majority of our development efforts on this program are focused on a large Phase IIb study in patients 60 years of age and older with acute myeloid leukemia or AML. This global trial is advancing rapidly. We have enrolled more than 90% of the planned 210 patients and expect to complete accrual this quarter. 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.

An independent data monitoring committee for this trial recently conducted a safety review of the data and concluded the study should continue as planned. Our goal with the Phase IIb clinical trial is to demonstrate that the addition of lintuzumab leads to a meaningful survival advantage for these older patients who have limited therapeutic options. This trial will be unblinded upon reaching 186 events, and our expectation is that the data will be available in the first half of 2010.

In addition to the Phase IIb trials, we have completed accrual to a single agent Phase I trial in AML and myelodysplastic syndrome or MDS and plan to report data in 2009. We will also expect to report data from the Phase I trial of lintuzumab plus Revelmid in patients with MDS in the second half of this year.

Our fourth clinical phase program is SGN-70, an antibody targeting CD70. In a Phase I trial, we are assessing safety and pharmacokinetics of SGN-70 in healthy subjects. We have completed enrollment to the dose escalation portion of the trial and plan to expand into patients with autoimmune disease mid year.

We are also developing SGN-75, an ADC targeted to CD70, which is expressed on both hematologic malignancies and solid tumors. We are on track to submit an IND in the second half of this year. Given the promising data with our lead ADC, SGN-35 and our compelling preclinical data with SGN-75, we are eager to advance this program into the clinic.

In addition to our internal ADC programs, we are co-developing AGS-5 ADC with Agensys, a subsidiary of Astellas for solid tumors. We also have collaborations with six companies that have licensed our ADC technology to empower their own antibodies. Three of these collaborators, CuraGen, Progenics, and Genentech have entered the clinic with ADCs utilizing our technology and we expect additional ADCs from our collaborators to follow.

To summarize, our key milestones planned in 2009 are for SGN-35, initiate the pivotal trial in Hodgkin lymphoma and the Phase II trial in ALCL, report data from the weekly dosing trials, advance our commercial CMC activities and further refine our US and European registration and life cycle management strategies.

For dacetuzumab, advance five ongoing combination clinical trials in collaboration with Genentech and report data.

For lintuzumab, complete accrual in the Phase IIb trial in older AML patients and report data from both the Phase I single agent trial and the Phase I trial in combination with Revelmid.

For SGN-70, complete the healthy volunteer portion of the Phase I trial and expand into patients with autoimmune disease.

And for SGN-75, submit an IND for a Phase I trial in CD70-positive malignancies.

With proceeds from our recent offerings, we are well positioned financially. We are also mindful of the need to be fiscally prudent. Our approach is to strategically invest in our pipeline, while using our financial resources widely, especially given the current economic climate. We are focused on the essential activities and staff necessary to take our products forward and generate key clinical data. We take a pragmatic approach to funding our business, through a combination of product partnering, technology licensing, and equity financing. Maintaining a strong balance sheet with no debt has allowed us to continue to advance our own pipeline as well as negotiate potential partnerships from a position of strength.

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

Todd Simpson

All right. Thanks, Clay and thanks to everyone for joining us on the call this afternoon. As you have just heard, 2008 was a year of exceptional progress for the company and that progress is reflected in our financial results. This afternoon, we will report our financial results for 2008, which included record quarterly and annual revenues for the company.

While accomplishing a lot with our pipeline programs, we also carefully managed our expenses in 2008, which came in at the low end of our guidance. Cash used to fund our operating activities was approximately $63 million and we ended the year with a cash position of approximately $161 million, which is higher than previously projected.

Today, I will highlight our financial results as well as provide guidance for 2009.

For the fourth quarter of 2008, revenues increased 28% over 2007 to $10.1 million and revenues increased 57% for the year in 2008 to $35.2 million. These revenues were slightly above our guidance and primarily reflect amounts earned under our dacetuzumab collaboration with Genentech, which increased both in the quarter and year-over-year in 2008.

Our ADC collaborations also contributed to revenues in 2008, including multiple clinical and preclinical milestones and other payments received under our collaborations with Genentech, Progenics, Bayer, and CuraGen as each of these collaborators advanced products using our ADC technology. ADC collaboration revenue in 2008 also reflects the earned portion of the $4 billion upfront payment received from Daiichi Sankyo in July.

Operating expenses for the fourth quarter of 2008 increased $41.9 million and to $127 million for the year-to-date. This compares to $24.4 million for the fourth quarter and $78.1 million for the year in 2007. These planned increases reflect higher R&D expenses, which were $110.9 million for the year in 2008 compared to $64.8 million for the year in 2007.

Fourth quarter 2008 R&D expenses increased over both the fourth quarter 2007 as well as each of the previous quarters in 2008. This reflects manufacturing campaigns for SGN-35, which we will complete in the first part of 2009, as well as campaigns for dacetuzumab, which have been completed. Otherwise, the principal drivers of increased expenses in 2008 are consistent with previous discussions and reflect expanded clinical development activities for lintuzumab, SGN-35, and dacetuzumab, and increased employee cost driven by growth in our clinical and development groups.

I will also note that total operating expenses include non-cash share-based compensation expense of $10.4 million for the year in 2008 compared to $7.9 million for the year in 2007. And as a reminder, dacetuzumab collaboration costs incurred by us including the manufacturing and clinical trial costs that I described are included in our operating expenses that are fully reimbursed by Genentech under the collaboration.

We ended 2008 with $160.7 million in cash and investments. This does not include approximately $52.6 million in net proceeds received this week from our common stock financing. Additionally, we have the potential to receive $11.5 million from a planned common stock sale to Baker Brothers Life Sciences, which is committed to purchasing these shares in a private placement at the same price paid by investors in the public offering. As Baker Brothers is represented on our Board of Directors, this offering is subject to stockholder approval at our annual meeting planned in May.

As for financial guidance for 2009, we expect revenues to be in the range of $35 million to $40 million. These revenues will continue to reflect amounts earned under our dacetuzumab collaboration with Genentech as well as our ADC collaborations. Total operating expenses in 2009 are expected to be in the range of $125 million to $140 million, which is the same range as in 2008.

Investment in our development programs will be focused on the following. For SGN-35, we will execute on key development activities, including initiation of our planned trial in Hodgkin lymphoma in the first quarter and continued manufacturing and CMC activities to prepare us for an NDA submission in 2011. We will also initiate a Phase II clinical trial for SGN-35 in ALCL patients.

For dacetuzumab, we will continue the multiple clinical trials with Genentech, evaluating this antibody in combination with other agents. And for lintuzumab, we will continue the Phase IIb clinical trial in combination with low-dose cytarabine and complete the ongoing Phase I trials. We expect that research and development expenses will comprise approximately 85% to 90% of our total expenses, and because of the timing of manufacturing activities for SGN-35, these expenses should be higher in the first part of the year.

2009 expense guidance includes non-cash amounts projected to be in the $15 million to $17 million range, 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.

Lastly, we expect that net cash used to fund our operating activities in 2009 will be in the range of $80 million to $90 million. We expect to end the year in a strong financial position with more than $120 million in cash and investments. This does not include the $11.5 million in proceeds from the proposed sale of common stock to Baker Brothers in the second quarter.

So with that, I'll stop and turn the call back over to Clay.

Clay Siegall

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

Question-and-Answer Session

Operator

(Operator instructions) And our first question comes from the line of Cory Kasimov with JPMorgan. Please go ahead.

Mona Ashiya – JPMorgan

Good afternoon. Actually, this is Mona for Cory. A couple of questions. One relates to SGN-35 and I wonder if you could speak a bit more on how we should think about the hurdles for approval there in terms of response rate, is that something you could share?

Clay Siegall

We could share as much information as would be appropriate. And what I will do, this is Clay, and I will turn it over to Tom Reynolds, Chief Medical Officer, to talk a little bit about the SPA and some guidance we can give.

Tom Reynolds

Yes. So as you are aware, the planned pivotal study which should initiate this quarter is in 100 patients with Hodgkin lymphoma following transplant. The primary endpoint would be objective response rate. We know that the FDA is thinking that there is three things that are important for this study. One is objective response rate, second is the percentage of complete responses, and then third is durability. And I think we have been able to report so far is that meaningful doses, we have got a 50% objective response rate, 32% CR rate and a durability that is now going out six months and beyond. We think if we are able to mirror these types of data in the pivotal trial that this will easily put us over the bar to an accelerated approval. That is our perspective. How low the bar is or how high the bar is, is a little bit less clear. We do not have actual numbers in our SPA about these and it is clearly a refute issue with the FDA, but we are very confident with the data that we have seen and our evolving data from the weekly dosing study that we should be able to clear the bar and get this drug on the market to help patients quickly.

Mona Ashiya – JPMorgan

That is very helpful. And then just a second question, this one I guess more for Eric, but you know you have spoken about partnering the (inaudible) for SGN-35 and 33 and just wondering what your current thoughts are there. Any update on when we might see a deal or anything – any thoughts on the timing there?

Eric Dobmeier

Hi, Mona. Yes, there is definitely a lot of interest in both programs, and particularly in SGN-35 as the data continues to evolve and get better and be reported out there through medical conferences. So we are in some active discussions, but I think we have been pretty clear over the last several quarters that we have a strong financial position and especially with the proceeds our financing work, we have the resources to take these programs forward ourselves and build additional value. So we're not pressed to do deals unless the terms are attractive and they make strategic sense for Seattle Genetics. So it is a good position to be in, we feel like – with SGN-35 in particular, this is a drug that we can commercialize in the US and it is something we could probably commercialize outside the US if we chose to go that route, but we are going to evaluate all our options and see what makes the most sense for the program and company.

Mona Ashiya – JPMorgan

Thanks. Actually can you just remind me what you have said about what size of a sales force you would need to commercialize SGN-35 in the US?

Eric Dobmeier

We haven't talked much about it. You know, our internal projections are somewhere around 50 to 75 sales reps in the US to cover the hemoc market, it would be a reasonable size. So it is not a huge sales force.

Mona Ashiya – JPMorgan

Great. Thanks so much.

Operator

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

Mark Monane – Needham & Company

Good afternoon from New York City. It is getting dark here but thank you for sharing the light with us on all of your accomplishments in 2008. First question to start off, couple of questions more on some things that Mona talked about. Dacetuzumab, can we talk about that Phase IIb trial please?

Clay Siegall

Dacetuzumab, you said right? Dacetuzumab or lintuzumab.

Mark Monane – Needham & Company

I called it dacetuzumab Phase IIb trial, can you talk about please. Is that a pivotal trial in your opinion when we get the results, would that be good enough for filing?

Tom Reynolds

Hey, Mark. This is Tom Reynolds. That is a good question. The trial was initially conceived as a Phase IIb study, really designed to evaluate the difference between adding dacetuzumab to Rituxan ICE as compared to Rituxan ICE alone. In our thinking about this, what it is designed to do is enable patients to get to a CR and then go on to transplant. So it is not a classical pivotal trial, but we believe that if the results are strong and we see a significant improvement on the ability to get to CR and to get to a successful transplant, that it could be part of a registration package. And I think it depends on how strong those results are as to whether we could move forward immediately to a filing with that or whether additional trials should be warranted.

Mark Monane – Needham & Company

That was helpful. And sticking with the same compound, I noticed that you are developing the drug, as you know, you and Genentech are developing the drug with Velcade in multiple myeloma and then I believe there is another trial with Revelmid in multiple myeloma. There is no antibodies in multiple myeloma now to the best of my knowledge. Where do you think this fits best in the treatment regimens, we're talking front line or second line where the patients may be somewhat impaired and a relatively safe antibody might do some good in terms of combination, how are you thinking about positioning here?

Tom Reynolds

So Mark, this is Tom, again. Our initial thoughts are that we are taking a pretty classical approach in starting in patients that have failed multiple lines of therapy. We are trying to see if the combinations are tolerable, which we would expect they would be and we hope to be able to share data with you later this year. And we are also looking for signals for efficacy. Although there are good drugs out there for myeloma right now, patients aren’t being cured and myeloma is becoming more chronic, but better therapies are needed because a significant percentage still die every year. We think we would start toward the back end, but there is no reason not to believe that dacetuzumab couldn’t take on a Rituxan-like profile and move up to change the frontline. I mean it is something that we believe could be very tolerated and easy to add to the inventory and it keeps evolving.

Mark Monane – Needham & Company

Very helpful. When I think of lintuzumab and the low-dose ara-c I recall the ara-c low-dose is pretty popular in Europe, although in the US, it doesn't seem to be all the rage yet. Is that a correct assessment and what do you get, Eric, Tom, and Clay, when you think about low-dose ara-c in the US?

Tom Reynolds

Sure, there clearly are physicians that are using low-dose ara-c in the US. I would agree with your take on this that it is definitely more popular in Europe and that US physicians use a variety of things. But it is one of the few therapies for older AML that aren't really fit for intensive chemo that has been shown actually effect survival in a positive way. So, in fact, it is really the only drug at this point for this population that have solid survival data. Now, the landscape is going to continue to change, we have seen that the days of data, which includes a small percentage of AML patients, but is encouraging. We think ara-c is a good standard of care, we think lintuzumab is going to combine well with that. The trial is going quite well and as Clay said, we are almost over the goal line with enrollment and we are looking forward to seeing that survival data in the first half of next year.

Clay Siegall

And Mark, from our market research, you are right. There is really no good true standard of care for elderly AML, there is not any therapies that are particularly effective there. Patients can’t tolerate the more intensive chemotherapy, so – but ara-c did come across as the most commonly used therapy, and like Tom said, we think that a number of the other drugs that are in development could also be combined with lintuzumab in the longer run. So we thought this was a good regulatory strategy and look forward to having those results in 2010.

Mark Monane – Needham & Company

And last question is for Todd. How many people please at the Seattle Genetics, what is the optimal number of people going forward, and how does the ADCs potential partnering strategies affect your thoughts about expenses going forward?

Todd Simpson

So we ended the year at about 250 or 260 people. We think that the resources needed to push our programs forward, at least in 2009 would involve another 10 to 20 people, primarily in our development groups to support the CMC and manufacturing activities for programs like SGN-35, and also in the clinical teams. So that is about the right size we think for 2009 and I think the last part of your question, I think really depends on the type of partnership, if we in fact do a partnership and how that would impact the work that we do internally versus a partner might do.

Mark Monane – Needham & Company

Thanks very much for the added information. Congratulations on 2008. Looking forward to 2009.

Operator

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

Bret Holley – Oppenheimer & Company

Hi. Thanks for taking my question. I was actually wondering – I was kind of pondering the pivotal trial for SGN-35 and I was wondering how the data broke down from the Phase I in patients with prior transplants versus patients who didn't receive transplants. I think 72% of the patients got transplants in the Phase I and I am just trying to get a beat on what the kind of the expectations for the Phase II would be because they're all transplants, correct?

Tom Reynolds

Correct. So Bret, this is Tom. You are right, about three quarters of the patients were post-transplant, one quarter pre-transplant. The data – the numbers are all small, but there was no real big discrepancy in terms of response rate or durability in the pre- and post-transplant setting. And many of the patients who had not gotten a transplant were people who are not eligible for transplant. For example, we had an 87-year-old who had other co-morbidities wasn’t eligible for transplant, but did very nicely with SGN-35. So, it is not only patients that have had earlier lines of therapy, but also patients that are unable to ever get a transplant.

Bret Holley – Oppenheimer & Company

And how might the Phase II pivotal population vary from the Phase I population, because obviously you are getting a lot of deep salvaged patients – is the patient population that you envisioned very close in the pivotal trial versus the Phase I?

Tom Reynolds

So I think the way we see the pivotal population is quite similar. We expect there to be a fairly strong representation of patients, who have – this is their first failure following transplant but also a substandard number of patients who have seen other therapies and have not really benefited well from them and have gone on to relapse. So we think it will be a good mix of both of those populations as we go forward.

Bret Holley – Oppenheimer & Company

I am sorry. Just so I understand, so it is not required that they have prior transplant in the pivotal trial?

Tom Reynolds

It is required, but some will be first relapse following transplant and others maybe patients who have relapsed a year ago or so and have received other therapies prior to 35.

Bret Holley – Oppenheimer & Company

Okay. And then another question I had is what has your thinking developed along the lines of additional trials for SGN-35? Obviously, it would be an accelerated approval based on the Phase II. So it seems like you should have other trials up and running and kind of in your back pocket or at least projected to kind of report out once and if the drug is approved on an accelerated basis.

Tom Reynolds

That is a wonderful question and this is an area that is taking a lot of our energy right now in addition to starting up the pivotals. We have quite a number of things, we have got more ideas than we can actually do and we are trying to winnow them through. But there are some themes that I think that are important. One is, we won't be doing the pivotal in Hodgkin and in parallel, we will be running a Phase II in ALCL. The data so far that we have shared, the five out of six with complete responses we think is exciting, we are hoping to extend those data in the Phase II and it may be an additional regulatory pathway we can pursue in parallel or following the Hodgkin approval. We are also interested in moving this closer to frontline.

Frontline is not a completely unmet need with ABVD but there are some significant challenges with folks that have refractory or relapse to ABVD, folks that are unable to tolerate all of ABVD, like the elderly population that can't really get full six cycles of ABVD, high-risk patients that although they respond initially relapse quickly with ABVD, those are all areas that we are interested in just trying to move up to frontline and really benefit that large segment of the patients.

In addition, there are other CD30 positive and malignant populations, either cutaneous lymphoma, there is a subset of diffuse large B-cell lymphoma that is CD30 positive and other lymphomas that we think we can extend laterally into and we have a lot of interest both from individual investigators, cooperative groups, and NCI itself in terms of what studies we might all do together and have a leveraged both our corporate dollars and those of other organizations to move this forward. Now we would anticipate on further discussions with regulatory agencies in Europe and the US this year and would hope to be able to share with you later this year a bit more about our strategy beyond the accelerated approval here in the US and the potential conditional marketing authorization in Europe.

Bret Holley – Oppenheimer & Company

Okay. And I guess the last question is, does your 2009 guidance envision any additional trials or is this more of a 2010 kind of group referrals we are going to start for 35?

Eric Dobmeier

Most of those trials will start in 2010 although our assumptions do include some planning activities during 2009.

Bret Holley – Oppenheimer & Company

Okay, thanks very much guys.

Operator

Thank you. Our next question comes from the line of Hon Lee with Stanford Group. Please go ahead.

Hon Lee – Stanford Group

Yes. Thanks for taking my questions. On SGN-33 or lintuzumab, are the Phase IIb elderly patients with AML, this is like 210 patients study survival endpoint. Is this study powered for registration or can you file on a single phase of the study if positive?

Tom Reynolds

Yes. This is Tom Reynolds again. First, our plan is we originally configured this as a Phase IIb screening study that was designed to really evaluate what kind of treatment effect we might see with lintuzumab added to low-dose ara-c. After designing the trial and working that through and discussing this with the FDA, we are running it with the rigor of a pivotal study and should we see a significant improvement in survival. Right now, the largest study done to date was single agent low-dose ara-c shows roughly 5 1/2 months survival. Should we show a survival benefit of eight weeks or greater, we would have statistical significance of a key less than 0.01 and our discussions with FDA, which we have documented really are very clear that that would be enough for this to be considered for approval based on the single study alone. So yes, it is a potentially registration study and we are working hard to make sure that it gets done quickly and appropriately to support registration.

Hon Lee – Stanford Group

Okay. You are expecting this in the first half of 2010?

Tom Reynolds

That is correct.

Hon Lee – Stanford Group

Okay, so this could be the first antibody drug to reach the market?

Clay Siegall

This is Clay. You mean the first antibody from Seattle Genetics to hit the market?

Hon Lee – Stanford Group

Yes, yes.

Clay Siegall

We believe that SGN-35 is the first drug that will reach the market. In addition to clinical trials and all the work that goes associated with trials, there is also a preponderance of CMC activities that goes along with it. And we are positioning the CMC activities of SGN-35 moving forward very rapidly right now and SGN-33 would –we are unable to position both at the same time moving forward. And we have chosen to put the SGN-35 CMC activities on a rapid path but we will be very close behind with SGN-33.

Hon Lee – Stanford Group

Okay, let me get this straight. For lintuzumab, if you have data in the first half of 2010, if it is positive, you can file on a single Phase IIb study.

Tom Reynolds

We would be able to file based on the clinical data. We would need the rest of the filing package including full CMC to do the filing.

Hon Lee – Stanford Group

In 2010 or 2011?

Tom Reynolds

Well, we have not provided a guidance on that. We have not provided a specific date on that at this point.

Hon Lee – Stanford Group

I see. Okay, and on the SGN-35, I am thinking you mentioned that the – your projected timeline from NDA filing is 2011. This is a conjugate antibody. Can you comment on why the NDA not PLA, any additional regulatory requirement for the conjugate antibody for approval?

Tom Reynolds

Yes, we believe – so FDA has two choices for which review division to take this, either the Biologics or Drugs. Because it is an antibody drug conjugate with an active cytotoxic moity, they have decided that class of drugs going forward will be regulated within Drugs and because it has got an antibody component, they bring in some expertise from the Biologics Division to help with the review, but the review division is the Drugs Division, so it will be an NDA.

Hon Lee – Stanford Group

Got it. Thank you.

Operator

(Operator instructions) And our next question comes from the line of David Miller with Biotech Stock Research. Please go ahead.

David Miller – Biotech Stock Research

Thanks for taking my question. Congratulations everybody on doing the deal, breaking the six-month drought that we had. The first question I have is, can you give me some details on the size of the ALCL trial for SGN-35?

Tom Reynolds

Sure, it is going to be a Phase II study, it will be single arm and it will be 55 patients.

David Miller – Biotech Stock Research

Okay. Clay, you talked a little bit about the gene signature that Genentech's R&D folks have found for SGN-40. Can you talk little bit about how you two together are looking at this gene signature in terms of the MARINER trial?

Clay Siegall

Yes, the gene signature is not part of the MARINER trial; it is not a specific part of the trial at this point.

Tom Reynolds

So, David, just some more color on this. So we have done retrospective analyses on our two single arm studies or single agent studies that the Phase I and the Phase II and Genentech will be presenting data on that we hope later this year. That is the plan. We do have the provision to be able to use samples from the MARINER trial retrospectively to see if that holds up and to do some further validation work, but that is not a prospective analysis, I think that is what Clay has been alluding to and it is not being used to screen or select patients or stratify them at all, it would be completely retrospective.

David Miller – Biotech Stock Research

Right. Did you – okay. The next question is – a couple of other companies are doing or at least one other company is doing a conjugate targeted at CD70 and specifically CD30. We have talked before in previous conference calls about your IP position and CD30 for a non-conjugated antibody. Can you talk a little bit about it for SGN-35?

Eric Dobmeier

Hi, David, it is Eric. We are not aware of any other company developing a CD30 conjugate. There are other naked antibody CD30 programs that are in development, that is one point. But on the IP side, we have patents that cover our antibody and the way it behaves in terms of its signaling activity and the way it chokes tumor cells and then we have a whole separate ticket sense of IP that covers our antibody drug conjugate technologies and methods to be using that to treat cancer. So we have got strong IP that goes well out into the 2020s that would cover SGN-35 and any other conjugates that use similar type of ADC technology.

David Miller – Biotech Stock Research

Okay, great. The rest of my questions were answered. So thank you very much.

Operator

Thanks. Our next question comes from the line of Michael Yee with RBC Capital Markets. Please go ahead.

Michael Yee – RBC Capital Markets

Hey, good afternoon, guys. Quick question regarding milestones and guidance. How much of the revenue guidance is Genentech-based or Genentech-type reimbursement; and then in terms of guidance, are there any milestones that are included in there, and any milestones from Genentech that could come in 2009?

Todd Simpson

First of all, we don't give specific guidance on that. What I can tell you is that in 2008, about 80% of our revenue comes from our dacetuzumab collaboration as well and our ADC collaboration with Genentech. We have two collaborations with Genentech. On a go-forward basis, we do expect that a big chunk of our revenue is going to continue to relate to the dacetuzumab collaboration with Genentech, but haven't really given any specifics beyond that. With respect to milestones, we do assume a modest level of milestone activity from our ADC collaborators. On the dacetuzumab collaboration, the next milestones really would be based on the initiation of subsequent clinical trials that will happen pending the review of the ongoing studies. So it is a little hard to predict with a lot of certainty as to when those might happen.

Michael Yee – RBC Capital Markets

And when they happen are these are kind of 8-K’d or is there some sort of announcement to it or some sort of disclosure on your part?

Todd Simpson

Yes, typically, we would issue 8-Ks or press releases on milestones like that.

Michael Yee – RBC Capital Markets

Okay, thanks.

Operator

Thank you. And there are no further questions. Ms. Pinkston, I will turn it back over to you for closing comments.

Peggy Pinkston

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

Operator

Thank you, ladies and gentlemen. That will conclude today's teleconference. We do thank you again and at this time you may disconnect.

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