Seattle Genetics, Inc. (NASDAQ:SGEN)
Barclays Global Healthcare Conference
March 13, 2013 3:15 pm ET
Todd E. Simpson - Chief Financial Officer and Principal Accounting Officer
Christina Zhang - Barclays Capital, Research Division
Christina Zhang - Barclays Capital, Research Division
Hi, everyone. I'm Christina Zhang, the U.S. Biotechnology team at Barclays, and I'm pleased to introduce Todd Simpson, the CFO of Seattle Genetics. With that, I'll hand over the podium.
Todd E. Simpson
Thanks. Good afternoon. Thanks for coming. It's great to be here. I understand we're competing with the Vatican a little bit right now on the new Pope. So it's great to have an opportunity to give you a quick update on all the activities that are happening at Seattle Genetics. If you're not familiar with our company, we're focused on the development of antibody-based therapies, specifically antibody-drug conjugates for the treatment of cancer.
Just one housekeeping item before I get started. I will make some forward-looking statements this afternoon, so please see our SEC filings that contain information about risks and other factors that might affect the company.
So let me start with just an overview of the key value drivers for Seattle Genetics right now. The first is continuing to build on what's been a very successful launch of a drug called ADCETRIS. This is a drug for which we received FDA approval for back in August 2011. And in October of last year, we received approval or I should say, our partner received approval in the European Union. And then just most recently, last month, the drug was approved in Canada. So the drug is truly becoming a global brand.
I'll give you a little bit of an update on how the launch has gone, but last year, we reported net sales of ADCETRIS of $138 million. It's about $180 million for the launch to date in the U.S. As you'll hear, we have a very broad development program that I'll get into in just a little bit, really intended to build upon the solid foundation that we built with the initial 2 indications. And by that, I mean, taking the drug and pushing it into earlier lines of therapy, as well as other malignancies that express CD30s, it is the antigen that's targeted by this antibody-drug conjugate.
The second value driver is our leadership in antibody-drug conjugate technology in our pipeline. If you look across the industry, there are about 30-some ADCs in clinical development, more than half of those use Seattle Genetics technology. So our collaborators are making significant progress with the technology, as are we, not only with ADCETRIS, but with 4 other clinical stage assets there currently in process with the company, as well as 2 that are poised for IND submissions later this year. And then the last value driver is our strong financial position. We reported about $135 million in cash on the balance sheet at the end of last year and what that means is that we're in a really nice position to now drive forward, not only with our ADCETRIS-related activities, but throughout the rest of our pipeline as well.
This is our development pipeline. As you can see, there's a lot going on. Nearly a dozen clinical trials, corporate-sponsored clinical trials underway with ADCETRIS. I won't go through all these, but I will highlight 4 Phase III trials that are underway. AETHERA is a post-transplant maintenance trial expected to readout some time in the first half of next year. Echelon-1 and -2 are front-line trials in Hodgkin lymphoma and mature T-cell lymphomas. And then the ALCANZA is a final Phase III study that's underway in the treatment of patients with CD30-positive cutaneous T-cell lymphomas.
Rounding out our pipeline are 4 other clinical stage assets. SGN-75 and SGN-CD19A are proprietary Seattle Genetics programs that are in Phase I development. And then 2 programs ASG-5ME and ASG-22ME that are in development with our partner, Agensys, which is now part of Astellas. And then we have 2 preclinical programs, a CD33-targeted ADC and a LIV-1-targeted ADC, both slated for IND submissions later this year.
Now if you're not familiar with ADCs, I'll just briefly describe what these are. These are empowered monoclonal antibodies. So they're antibodies that carry a very potent cytotoxic drug payload. The objective of an ADC is to use the trafficking capabilities of the antibody to target the tumor cell, and then to release the cytotoxic drug payload uniquely to the tumor cells bearing toxicity to normal cells. One of the things that -- or a couple of the things that are particularly important in ADCs is that you deliver very potent drugs and then you design linkers that hold the drug to the antibodies so that they stay attached to each other while in circulation. But then once the antibody binds to the antigen on the tumor cell, you need that drug to come off so that it can become active. And that's really where we focused in our development of ADCs.
Potent cytotoxic drugs, we use a drug called auristatin. This is a very potent class of antimitotic drugs. And then we've developed very stable linker systems with long half lives that again can hold the antibody and the drug together while in circulation, but then when the ADC is bound to its antigen on the tumor cell, the drug comes off through an enzyme cleavage and becomes active to kill the cell. We've developed what we think is proof-of-concept of this technology, clearly, with the work that we've done with ADCETRIS and have a very broad intellectual property estate around this technology. Brentuximab vedotin or ADCETRIS is the first of our internally developed ADCs that utilize this technology. This ADC targets an antigen called CD30s that is expressed on a variety of tumor cells and activated cells.
So it's a particularly nice target from a tumor-targeting perspective. I'll talk a little bit more about this but we have an x U.S., Canada collaboration with our partners at Millennium/Takeda. I mentioned they just received regulatory approvals in the EU in the fourth quarter, so this drug is truly becoming a global brand with not only approvals in the U.S. and the European Union, but most recently in Canada as well.
Now a couple of words on the launch. As I mentioned in my opening remarks, the launch continues to go well. More than $180 million in sales launch to date, $35 million in the fourth quarter and $138 million for the year 2012. Account uptake has been very good. We've seen about 1,200 accounts order drug since the launch. Physician awareness of the drug remains very high and the reimbursement environment, importantly, is very good. This was already a very good reimbursement profile for ADCETRIS with no on-label insurance denials. But in January of this year, we received our permanent J-code, which should even further streamline the reimbursement process.
We've talked about over our last couple of conference calls that we believe the launch has now predominantly shifted into more of an incidence flow of patients, where we think, again, we've built a very solid base, we believe there are opportunities to grow that base through not only increased penetration of ADCETRIS with patients that could potentially be candidates for drug, but also through driving duration of therapy that's more consistent with the duration of treatment that we saw in our pivotal studies.
Now the approvals in the U.S. and the EU, and Canada for that matter, were based on 2 pivotal studies that I've highlighted here. One in Hodgkin lymphoma, the second in systemic anaplastic large cell lymphoma or ALCL. In both of these cases, patients were heavily pre-treated. So these were difficult-to-treat patients. In the case of Hodgkin's patients, these were patients that had all failed autologous stem cell transplant. Yet despite that, you can see the response rates were quite high, 73% in the pivotal Hodgkin's study, 86% in the ALCL trial, with very high CR rates, 32% in Hodgkin's, 59% in ALCL. And we've been gratified to see that in patients, particularly, those that achieve complete remissions, the duration of response seems to be quite long with more than 20 months in the Hodgkin's study and we have not yet reached the median duration of response in the ALCL trial.
Now just to give you a little overview of how these patients are treated. In Hodgkin's lymphoma, in the front-line setting, they receive multi-agent chemotherapy called ABVD. Many patients respond to those -- or that therapy but as you can see, 20% to 30% of those patients will relapse. And then they'll go on to additional rounds of chemotherapy and ultimately, perhaps a stem cell transplant. For patients that have failed stem cell transplant or are ineligible for transplant that have failed at least 2 multi -- prior rounds of multi-agent chemotherapy, those patients would be indicated for ADCETRIS. In systemic ALCL, front-line therapy is CHOP. You can see that the response rates are a little bit lower and were indicated for use in ALCL patients for patients that have failed front-line CHOP chemotherapy.
So this is sort of how we think about the vision for the franchise. Again, we're approved over on the left-hand side in the relapse and refractory boxes for Hodgkin lymphoma and systemic ALCL. We already, as I mentioned, have 2 front-line studies that are underway that we think create significant future potential for the drug, but those trials need to enroll patients and have a readout that will take a few years. But in the meantime, we're starting to generate some very interesting data in CTCL that I'll share with you. I mentioned the AETHERA trial, which is a post-transplant maintenance setting, for which we expect to have a data readout in the first half of next year. But we've seen activity, though, in a variety of other lymphomas that express CD30, the antigen, again, that's targeted by ADCETRIS.
So if we look at each of the core development silos for the drug, I'll start with Hodgkin lymphoma, where, again, we're approved. We've got the AETHERA maintenance trial that has completed enrollment. The endpoint in this trial is progression-free survival and as I mentioned, we expect to have a data readout in the first half of next year. I'll show you some data recently presented at ASH in the front line setting, where we're trying to improve the standard of care in the front-line arena, making ABVD a better therapy, not only in terms of activity but in terms of safety and tolerability. We presented data at ASH where we have removed the bleomycin from ABVD. This is an agent that's associated with quite a bit of pulmonary toxicity, and we were able to show a very high objective response rate, 96% of patients achieving a response with very clean safety profile.
That has positioned us for now, the front-line pivotal study called ECHELON-1. In this study, we're evaluating ADCETRIS compared to -- or ADCETRIS plus AVD compared to standard front-line ABVD therapy. This is a study that will enroll just over 1,000 patients with the primary endpoint being progression-free survival. And I'll add that the trial was being conducted under a special protocol assessment with the agency.
In mature T-cell lymphomas, I'll show you some data from the Phase I study also there where we're trying to improve front-line therapy, CHOP, in this case. Here we removed the Oncovin that's associated with quite a bit of neurotoxicity and we're comparing ADCETRIS plus CHP to standard CHOP chemotherapy. That will be the ECHELON-2 study that will enroll approximately 300 patients. Again, the primary endpoint in that study is PFS, also being conducted under a SPA.
And then in the cutaneous T-cell lymphoma space, I'll show you data from 2 investigator-sponsored trials or ISTs, where we saw response rates of in excess of 65% with a good tolerability profile. And I'll add that we are now conducting a randomized Phase III study comparing ADCETRIS to physicians' choice of either bexarotene or methotrexate. This is a 124-patient trial where the endpoint is objective response lasting 4 months at least. Also being conducted under a SPA.
So these are the data that I mentioned from the front-line Hodgkin trial. This was a 2-arm study. We looked at combination therapy of ADCETRIS plus ABVD versus in addition to AVD plus ADCETRIS or again dropping the bleomycin. And what you see in both arms of the study, very high objective response rates of 95% and 96%. Very interestingly though, when we removed the bleomycin from the regimen, we were able to completely do away with the pulmonary toxicity that, again, is associated primarily with bleomycin. So again, the goal here is to try to make front-line therapy better, drive the response rates higher and improve the tolerability profile by substituting ADCETRIS in for the bleomycin.
In the mature T-cell lymphoma space, these were data from another trial that we just recently reported at ASH. Here, we looked at the combination of ADCETRIS plus CHOP chemotherapy but removing the Oncovin that's associated with quite a bit of neurotoxicity. And here, we were delighted to see a 100% response rate with an 88% CR rate. And with that, as I mentioned, we've now moved into the front-line pivotal study, Phase III study that is, that's now up and running comparing ADCETRIS plus CHP to standard CHOP chemotherapy.
In CTCL, these are some data summaries from a few investigator-sponsored studies that were reported at ASH, both in CTCL. On the left-hand side is data from an IST at Stanford that showed a 70% objective response rate. And on the right-hand side, a study at MD Anderson that generated a response rate of 67%. So these are very high response rates that currently approved agents in CTCL, generate response rates of around 30%. So we're delighted to see the activity that we're seeing here with ADCETRIS, plan to submit these data for Compendia listing but at the same time, we are running the ALCANZA trial that again, is a randomized Phase III study that can hopefully generate the data to support label.
We've also treated patients in a phase 2 CD30-positive non-Hodgkin lymphoma trial. These were also data presented at ASH. ASH was a busy year for us last year. Here, we've seen responses in both patients with B- and T-cell lymphomas. Of particular note are the patients with DLBCL, where we saw a 44% objective response rate, very encouraging tier based on this initial data. Our plan with this trial now is to expand the study to include more patients where we can continue to assess the response rate of ADCETRIS in DLBCL, importantly start to understand duration of response, but also look for safety of combination of ADDCETRIS with Rituxan so that in the event we decide to move into an earlier line of therapy where Rituxan is part of the treatment regimen, we'll be able to do that safely with ADCETRIS.
A couple of other key trials. We've presented data in the retreatment experience. Here, 70% of patients that were retreated with ADCETRIS after previously responding to ADCETRIS but going off of therapy and relapsing, responded a second or in some cases, a third time. We plan to take these data to the FDA in a supplemental BLA that we'll submit in the first half of this year.
We also have a CD30-positive screening study in non- lymphomas, where we're looking at a variety of tumor types, trying to understand where we see CD30 expression and if patients screened for CD30 expression are offered enrollment into a treatment arm of the study. To date, we've disclosed some data related to the screening aspect of this trial, where we've seen 38 patients across 17 different malignancies that had CD30 expression. What we're doing now is completing the screening part of the study and treating patients in the treatment arm with data expected to start to come out from the treatment arm sometime next year.
Now there has been a lot of interest by investigators in looking at different treatment opportunities with ADCETRIS. This summarizes what are about 12 different investigator-sponsored studies that are underway, looking again at different CD30-expressing lymphomas, different lines of therapy in the Hodgkin's treatment, even diseases such as graft-versus-host disease because again, CD30 is highly expressed on activated but not resting T-cells.
A couple of words on our collaboration with Millennium. This has been a very important deal both financially and strategically from a commercial standpoint. Under this deal, Seattle Genetics has retained all the commercial rights for ADCETRIS in the U.S. and Canada, and Millennium/Takeda has commercial rights in the rest of the world. They pay us a royalty that escalates from the mid-teens to the mid-20s on all their sales, covers all of the commercial activities in their territory and very importantly, supports all the development activities under the collaboration under a 50-50 cost-sharing standpoint.
I mentioned that in October of last year, Millennium received approval by the EMA. So they're now busy at work launching this drug throughout the EU and seeking reimbursement coverage on a country-by-country basis. They have a number of additional regulatory submissions planned throughout the rest of the world.
Just a couple of words on the rest of our pipeline. I mentioned that we have 4 ADCs in the clinic right now, SGN-75, ASG-5ME and -22ME, as well as SGN-CD19A. These are all generating Phase I data that we look forward to presenting. And then we're planning to submit 2 additional INDs, one for a CD33-targeted ADC later this year, as well as one for a LIV-1-targeted ADC later this year as well.
Collaborations have been a very important part of the Seattle Genetics story. We've licensed this ADC technology to a variety of collaborators that are shown here. We've done 2 types of deals, the traditional out-licensing of the technology, where the collaborator works with the technology and they develop their own products. They pay us upfront payments, milestone payments, that in the aggregate are about $3.8 billion if all targets make it to commercial success, in addition to royalties on their commercial sales.
We've also done though, a couple of more recent deals, where instead of financial returns, we've licensed the -- or collaborated with companies, where they take the programs to either IND submission or in some cases, the Phase I data, and then Seattle Genetics has an opportunity to opt-in to make the program a 50-50 co-development program. So a combination of both these pipeline building opportunities, as well as ones that provide financial returns for the company.
This is just a snapshot of where our collaborators are. Again, across the ADC space, there's about 30-or-so ADCs in the clinic, 15 of them utilize the Seattle Genetics technology. And this gives you a sense for the types of program that are in development by our collaborators. And you can see a number have moved now into Phase II, with a variety in Phase I and some earlier-stage programs before that. So we're very excited to watch the progress of our collaborators and look forward to data presentations that they will make over the next 1 or 2 years.
From a financial perspective, the company, as I mentioned, is very strong. We reported sales in the fourth quarter of just over $35 million, total revenues of nearly $64 million, cash position of about $364 million and guidance this year of $130 million to $140 million in ADCETRIS sales plus another $65 million to $75 million in collaboration revenues. In our R&D and G&A expense there, $210 million to $230 million for R&D and $85 million to $95 million for SG&A. It's important also to point out that the company has no debt. So a very strong cash position with no debt obligations.
So just to wrap up, I'll leave you with a few milestones to look forward for this year. This is going to be an important year for the company in terms of clinical and regulatory execution that will lead to some rather large trial readouts that will start next year, including the AETHERA trial that I mentioned. But this year, as I mentioned, we plan to submit a supplemental BLA, picking up the retreatment data that I mentioned, as well as extended duration of treatment beyond the 16 cycles that's currently included in our approved indications. We'll also be initiating a number of clinical trials, a Phase II trial in the salvage setting with ADCETRIS in combination with Bendamustine. And we expect to see 8 to 10 additional ISTs initiate this year as well.
From a data perspective, we'll plan to present some additional data from the CD30-positive non-Hodgkin lymphoma trial, as well as data from a trial that I didn't speak too much today but it's a front-line trial in patients with Hodgkin lymphoma over the age of 60. This will also be an important year for the company in terms of what our partner, Millennium/Takeda, will do. As I mentioned, they obtained their approvals last year, so this will be the first year -- full year of royalty reporting by the company based on the activities that our -- again, our partner, Millennium/Takeda, does in the rest of the world.
So with that, I think I will stop. We're just about out of time and I think there's a breakout session just across the hall and I look forward to answering any additional questions that you have there.
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