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Seattle Genetics, Inc. (SGEN)

May 21, 2013 11:30 am ET


Clay B. Siegall - Co-Founder, Chairman, Chief Executive Officer and President

Unknown Analyst

Good morning, everyone. Thank you for coming to Day 2 of the UBS Healthcare Conference. My name is David Suki [ph]. I'm with the Healthcare Investment Banking team at UBS here in New York. It's my pleasure to introduce our next speaker, Clay Siegall, President and CEO, Seattle Genetics. There will be a breakout session room, Liberty 3 down the hall afterwards. Thanks. Clay?

Clay B. Siegall

Good morning, almost afternoon. I'm delighted to be here to tell you a little bit about Seattle Genetics. Before I get started, let's see if this works, I'll mention that I will be making forward-looking statements. Please refer to our SEC filing for more information.

So first and foremost about Seattle Genetics, I'll start with our 3 main value drivers. Building the ADCETRIS franchise is key to the company. It's a big part of our focus. ADCETRIS is now a global brand. We have approval in over 30 countries, including the U.S., the 27-member EU countries, 3 other countries that acknowledge the EU standard, Canada and more recently, Switzerland.

Secondly, we're very important -- it's very important that we have a broad development program to expand ADCETRIS into earlier lines of therapy and other CD30-positive malignancies to help as many patients as we can. This is an exciting drug. It really makes a difference in the life of patients, and we're trying to make sure we can identify every patient that really could benefit from ADCETRIS.

The second major value driver is advancing our ADC pipeline and our technology. And our pipeline is very full. We have more than 15 different molecules that are being developed using our technology, between our internal programs and our collaborated programs. I think the number's over 18 now, actually, that are being developed. So quite a number of products using our ADC technology. And we are putting more and more products into the pipeline. We have an IND engine that's very strong. And this year, we'll file 2 INDs. We've already filed one, and we have a second one a little later this year. I'll mention it briefly in a few slides from now, but we are continuing to move forward and put new INDs in clinic every year to take advantage and capitalize all this technology.

Lastly, we have a very strong financial position. We just reported numbers. I'll go through that late in the talk, but we have strong finances, no debt and that enables us to really fund our robust activities in ADCETRIS, our pipeline, our clinical development -- our preclinical development for the future. And in addition to sales of ADCETRIS, we also get royalties from ADCETRIS from Takeda sales globally, as well as from our ADC collaborations. And I'll define those toward the end of the talk.

Now I'm going to start off by just talking about our pipeline, and I'm not going to go through each and every one of these lines because it's a busy slide, but what you could see is that our landscape is dominated by ADCETRIS. It's approved for 2 indications. We have 4 Phase IIIs. We have quite a number of Phase IIs. Not listed on here are the more than 10 investigator-sponsored trials, and that number is just rising literally every month. And so we're excited to take ADCETRIS and put it into more patients as it is on the way to what we think in the future will be a blockbuster drug. We have a big pipeline as well, and I'll briefly mention those on a slide in the future and not on this slide.

Now ADC technology is really come of age. This is a technology where you take monoclonal antibodies and you empower them. You make antibodies able to kill cells better. Antibodies are fantastic at finding targets on tumor cells. But the vast majority of antibodies are not powerful enough to really impact the tumor cells. There are a few, like Rituxan, that are really special antibodies that can impact tumors on their own, but most antibodies just don't have that kind of activity. And so a drug conjugate is a very simple proposition. It's taking a drug and attaching it -- or a few drugs and attaching it to each antibody unit. And that's been thought about for decades. Lots of scientists have looked and lots of companies have looked at making drug conjugates work. But while it's a simple concept, it was not easy to put it in to practice. And the reason why it was so difficult is the linkage system. That's the most complicated part, because the linkage system has to have 2 opposing forces, if you will. We call it a bifunctional linker. One part of that linker has to hold the drugs stably onto that antibody in the bloodstream, and not let it go. And the other force that it has to have is once that antibody-drug conjugate is inside of a tumor cell, it has to release the drug, because if it doesn't release the drug, it's not active. So you have to develop a linker that has 2 opposite activities, stability and the ability to let go of the drug. And that's what took decades to try to figure out to do it well. And for years, companies, and including Seattle Genetics, when we first started the company, I cofounded the company 15 years ago, one of our first products into the clinical trials was an antibody-drug conjugate, that you don't hear about anymore because the program is not active, SGN-15. It had a linker that was not very stable. And we knew from that trial that we had to make a better linker, and we made a linker that's based on an enzyme. So in the bloodstream, it's safe, and it stays together and it's stable. And inside the tumor cell, it sees cathepsin and releases the drug. And that's really what's in ADCETRIS and that's what the big advances, one of our advances, that Seattle Genetics made.

So we have -- and we use a highly potent synthetic drug to make manufacturing readily done and a -- at a very low cost of goods. And ADCETRIS really helps patients. This is the real deal. It's not an incremental drug. It makes a difference in the life of patients. And getting the patient testimonials that we hear regularly about how we've affected people's lives, reminds us everyday of why we do what we do.

Now of course, we have a very broad IP portfolio for our technology, and we continue to build on that. We're the leaders in antibody-drug conjugate technology and we have newer and newer technologies all the time. In fact, our newest IND utilizes a completely new technology, I'll mention it to the end, that we're very excited to put in humans, but it is the first time it's going into humans.

Now ADCETRIS targets CD30. We at Seattle Genetics own all the rights for U.S. and Canada, and we market and sell it in the U.S. and Canada. Millennium/Takeda is our partner internationally, and so it is a global brand. We first got approval in 2001. Millennium, under Millennium/Takeda's leadership, we -- they got approval in the EMA in 2012, and then Canada and Switzerland came along, 2013. So we're excited with that. Now there are regulatory submissions in countries around the globe that are underway by Takeda and Takeda's lead, and so in the future at our quarterly calls, we'll probably be announcing more, as we go forward, more and more countries where ADCETRIS is approved.

And like I said before, we have a very broad clinical program headlined by our 4 Phase III trials.

Our commercial launch has been over 18 months now. We've sold over $215 million of ADCETRIS. Our last quarter were $33.9 million that we announced. We now have about 1,400 accounts out of a possibility of about 2,000 accounts in the U.S. that we -- could order, and the ones that we haven't yet had orders from are really very small community accounts that might see only a few patients a year that have the diseases that could -- that are approved for ADCETRIS. So we really have hit the big academic centers and big community centers for sure. But we're still -- more and more accounts every month, we will get, and we've been seeing that every month. It's been increasing with the number of accounts that are ordering ADCETRIS.

We've done a lot of surveys to make sure doctors are very aware of this, and we have a 97% survey awareness of ADCETRIS. So we're very pleased with that. We had a permanent J-code in January of this year, which made it even simpler to get reimbursement. And we initially, when we first got approval, we had an incident base and we were building up the number of users, and we had a prevalent space. And over the first 18 months, we've largely treated most of the patients that were the pent-up demand in the prevalent. So where we are now is largely an incident base that we're treating, so it's new patients coming in not the prevalent, which is were totally expected when we launched this.

Now our priorities, from a commercial standpoint at this point, are to make sure that patients are getting the right duration of therapy. So in our clinical trials, we had a median of about 8 cycles of ADCETRIS. And that's a data that we have that's so powerful and really, great for the patients. And when doctors got a hold of ADCETRIS on the commercial front, initially, and we've been talking about this, they were using less of a duration. And part of this is because ADCETRIS works fast. I mean, you use it on patients and you really get these regressions fast, and doctors aren't used to seeing something that is as safe and works so fast, and a lot of patients were taken off drug probably prematurely, because we certainly don't have data that shows that you can treat for short duration or shorter than our average of 8 cycles. And we just don't know what will happen with those patients. We don't have data on that and how durable those responses will be. So we've been encouraging doctors to follow the data that we have, because it really benefits patients. So we were working on assistant doctors to look at the duration of therapy, to pick which patients are right based on CD30. And so that's something that we've been really working on. And based on our analysis, it's been helping, and we've been continually helping patients and trying to train doctors in how best to use ADCETRIS.

Now building the franchise of ADCETRIS is something that's very exciting. We're just tipping the iceberg -- the tip of the iceberg here with relapse Hodgkin lymphoma and relapse anaplastic lymphoma. Those were our first approvals that we got on the market with just Phase II trials because it was so overwhelming with activity. And -- but now we're looking at CTCL and our AETHERA trial, which is a maintenance trial, and then other CD30-positive lymphoma, such as diffuse large B-cell, where we now have strong data, as well as the biggest markets in the front-line Hodgkin and front-line T-cell lymphomas, where we're really trying to redefine how the front-line therapy is being done. So developing ADCETRIS is different for the different diseases, and so I highlighted it on this slide. So in Hodgkin lymphoma, we have, ongoing, we have a Phase III AETHERA trial. Now the enrollment, 329 patients is complete. The primary endpoint is PFS. You may have heard, if you listened to our conference calls, that we recently delayed the time point, our estimate time point, for hitting the endpoint. And so that's something now, we're into 2015, we're guiding for that. But we also talked about the possibilities of taking a look early and then working when the agency has the appropriate endpoint, as this trial becomes delayed. And delaying, meaning not a delay in enrollment, enrollment is complete, but a delay in getting to the endpoint. And so we're excited to work with the U.S. FDA, as well as the EMA, and our partners at Takeda, to try to decide how best to take a look at AETHERA as we go forward, so that we don't just let this go a long period of time. And we're looking for the best patient benefit in this -- in the maintenance setting.

Now in front-line Hodgkin lymphoma, we did a trial of ADCETRIS plus AVD. Now many of you probably know that front-line Hodgkin lymphoma for 36 years now is ABVD, adriamycin, bleomycin, vinblastine, dacarbazine. B is bleomycin. It's very toxic. It causes pulmonary or lung lesions. And it's one -- and because of Hodgkin lymphoma being a disease largely in younger people, you really want to get away from these lung lesions. And doctors, been long, are trying to get rid of bleomycin. In the advanced Hodgkin lymphoma patients with ABVD, you got an 80% CR rate, pretty darn good. It's a success for cyanotoxins. However, you have a lot of toxicity. So we took out bleomycin, we added in ADCETRIS, and we got a 96% CR rate. 96% instead of 80%, and 0% lung toxicity, pulmonary toxicity. So we're very excited with that lead-in trial. It led us to the Phase III ECHELON-1 trial, which is in over 1,000 patients, 1,040, to be exact. ADCETRIS plus AVD versus ABVD, 520 an arm, and that's in rolling now. It's under a SPA with the FDA. We have advice from the European Medical Agency. And the primary endpoint is PFS, and that's going to take a number of years to enroll and to read out. But our goal is to not just take front-line therapy of ABVD and stick something on top. Our goal is after 36 years of no changing to redefine front-line therapy, and make it more effective and less toxic.

Now with mature T-cell lymphomas, similar. If you had a friend that was diagnosed with a T-cell lymphoma tomorrow, they're going to get CHOP, chemotherapy, not R-CHOP. R-CHOP, Rituxan-CHOP, is used in B-cell lymphoma. But in T-cell lymphoma, they're just going CHOP, standard of care worldwide. It wasn't even developed for T-cell lymphoma. It was developed for B-cell lymphoma and adopted for T-cell lymphoma. This CR rate for CHOP is about 45%, it's actually pretty good, better than a lot of other alternatives. But on one hand, it's only 45%. And there is -- it's a pretty toxic regimen. So what we've done is we did a lead-in trial with CHP. We dropped out Oncovin, or vincristine, which has a lot of neurotoxicity. We dropped that out, and we looked at the response rate. We had an 88% CR rate versus what you would expect in 45%. So we almost doubled the CR rate. And in fact, the other 12% of patients were PRs. And I've been doing cancer work for 25 years. Not everyday do you look at your data and get 100% response rate in the trial. So it's really great when you see that, to know that you're helping patients, and everybody's benefiting and getting shrinking tumors. But an 88% CR rate, and the CRs are critical here, we're very excited with, and the safety profile looked good. It's good dropping out Oncovin. So we set up the ECHELON-2 front-line trial to redefine, for the next few decades, what's been done with CHOP, it's been 3 decades now, to try to redefine front-line therapy in T-cell lymphomas of ADCETRIS plus CHP. And that's enrolling 300 patients, 150 per arm and primarily endpoint PFS, and we have a SPA fast-track designation, and this trial is being done in the U.S., also in concert with the European Medical Agency. We're doing this in Europe and in Japan. So we're very excited for our trial in mature T-cell lymphomas.

The last on this slide is continuous T-cell lymphomas. Now we have 2 ISTs that we have done with investigators, prominent investigators. Both trials showed about a 70% objective response rate, with a manageable safety profile. Now this compares to the standard of care drugs that one uses and has approved for relapse CTCL. Those are methotrexate, bexarotene or ISTODAX. These drugs give you about a 30% to 35% objective response rate. So we about doubled the objective response rate here. And that led us to a Phase III trial, we call the ALCANZA trial. And that's ADCETRIS versus a doctor's choice of bexarotene or methotrexate, it's enrolling about 124 patients, with the primary endpoint of objective response rate. And that's also under a SPA. And the objective response rate has to have a duration that the FDA put in there of at least 4 months.

So we're excited with all those Phase III trials. Now in -- we already talked about this Hodgkin lymphoma trial that we have the CRs at 95% or 96% without any pulmonary toxicity. So I'll skip this slide. And I already mentioned the data with ADCETRIS for the mature T-cell lymphomas with 100% response rate, with 88% CR rate and 12% PR rate. So I already mentioned these data, so I'll skip these slides. And I'm sorry that the pictures of the patients are not showing up. I'm not sure why. They were there earlier, but this slide shows the data in the ISTs for CTCL, and the pictures are very graphic. And while you can't see them, it really shows in skin disease with cutaneous lymphomas. It's very graphic. It's not like something you could see inside with a scan. But we're very pleased with the 70% overall response rate.

Now skipping to a different disease, we've been focusing on a trial in Phase II that allows different types of lymphomas that are -- were not -- that are outside of what we're approved for. So we excluded Hodgkin lymphoma, we're already approved there in relapsed setting. We excluded anaplastic lymphoma, and we excluded cutaneous lymphoma, since it's really separate doctors, either the dermatology, oncologist. So it's all the other types of CD30-positive lymphomas. And what we found is some interesting data, especially in DLBCL and AITL, angioimmunoblastic T-cell lymphoma, diffused large B-cell lymphoma. And we found that we have some very nice response rates, with about half of our responses being CRs. Now in diffuse large B-cell lymphoma, front-line therapy is R-CHOP. Second-line therapy is Rituxan-ICE. Third-line therapy is one of many things, but includes Rituxan regimens, Rituxan-Bendamustine and other things. So you get Rituxan and regimens many, many times. And once you failed all those, and failed other experimental drugs, we get these type of patients in these trials, and having a 44% response rate with half of them BCRs is impressive, at the level of patients that we're getting that have failed a lot. So we're very excited with this and looking forward to ways where we can expand in front-line DLBCL. And that's something that we'll announce going forward at the specifics of how we're doing that and how we're thinking about a plan in DLBCL.

Some other key trials are our Phase II retreatment trial. Now this is a trial where we have shown data, of a -- with a 70% re-response rate after retreatment. And the retreatment is well tolerated. Now we did -- we submitted an sPLA and recently, we announced the FDA filed it, which we were pleased at and gave us an action date of September 14. On or before September 14, is the official way they word it. So we're very happy with the retreatment. Front-line HL, we are in a study of patients aged 60 and over with Hodgkin lymphoma that don't want to get or can't get the combination front-line therapy. A lot of times, in the older population, they're too frail, too brittle. They just can't get ABVD. And so they generally get a lot of different things that doctors try to give them, but we wanted to give them an opportunity, if they're frail and brittle, to get single-agent ADCETRIS in newly diagnosed patients. So that trial's open, enrolling well. And potential data from this Phase II trial, I would say late this year, the types of meetings that we like presenting at, these types of datas are more like ASH conferences. So it's very exciting to try to help this population of patients.

And then we also have the Phase II data in the non-lymphomas, and that includes solid tumors. And what we have found, that there's a number of different type of solid tumors where we found CD30 expressed, including mesothelioma and triple-negative breast-cancer and some ovarian cancers. So we're treating these patients. We're -- it's a screening treatment trial. We're screening to find out what solid tumors have CD30 and it's not many. I mean, there's -- most solid tumors do not have CD30. It's largely a hematologic marker, but it's on a few solid tumors and we're trying to hone that and figure out where we could possibly use this.

Now to maximize the global potential of ADCETRIS, we work with our partners, the Millennium/Takeda Oncology Company, and like I said, we at Seattle Genetics sell to a market that's in the U.S. and Canada, and they do the rest of the world. The financial terms for our deals, they'll be cut a number of years ago, we're strong. We have over $230 million in milestones. We've been receiving milestones, we'll continue to receive a lot of milestones, and the royalties are double-digit. They start in the mid-teens and they go to the mid-20s, based on sales in the rest of world.

Now in Europe, we have approval there in the 27-member countries. But then you have to go through reimbursement approval, which is all second level, and we -- countries are coming on board and reimbursement one by one by one, so you don't get them all at the same time. And then there are submissions underway in many other countries. For example, in the first quarter of this year, the submission was made in Japan to gain approval for ADCETRIS.

And our pipeline is rich and continues to grow. We have a number of different drugs, SGN-75 targets CD70 for renal cell cancer. We have 2 products targeting solid tumor antigens that are partnered to ASG products, ASG-5ME and ASG-22ME are partnered with 50-50 with Astellas, and so we're excited about those 2 programs. And then we have our most recent drug that entered clinical trials, our CD19 drug conjugate. And that's in 2 Phase I trials, in ALL and B-cell lymphoma. So that was -- that IND was filed late in 2012 and entered clinic this year. And then we have our 2 INDs for this year, the CD33 drug conjugate, which we already filed the IND and we announced that about 6 weeks ago. And the next trial for LIV-1, which is for breast cancer. It's expressed -- LIV-1, or LIV-1, is expressed on 90% of breast-cancer tumors. So it's very high expression. We like that a lot, and that's planned for an IND later this year.

Now going back into talking about the CD33 drug conjugate for a moment, this uses a new technology that we've never put in humans. It uses a PBD drug, benzodiazepine dimer. It's about 250x more potent than auristatin, which is the drug we use in ADCETRIS. We developed a new antibody engineering technology, we call EC engineered cysteine maps. We developed a new linker. So it's completely brand-new technology. The preclinical package in AML cells is extraordinary. I really like it, but we haven't treated a patient yet. That will start this year. Within the next few months, we've been treating patients, and I really hope that we can make an impact on AML. AML is one of the most devastating of cancers. It's the hematologic equivalent of pancreatic cancer for solid tumors, patients die in it, the therapies are not good, and we really need to do better for those patients. And a drug conjugate could be just, really, make a difference in patients. And so that's why we spent about 6 years developing this new technology, with new antibody engineering and new linker systems, and we're very excited to put it in humans. And I think you'll see this new technology in some other drug conjugates going forward. But we're also developing other new technologies I'm not here to talk about. So we are the leaders in drug conjugates, as I said, but to stay the leaders, we have to continue to innovate, and we are doing that.

Now our collaborators really have a number of products that are in clinic. Of the 30 or so that molecules are in clinical trial, more than 1/2 of them utilize our technology. And I think it's 17 or 18 of them, that are in clinic right now, use our technology. Now the ADC collaborations have generated us payments and milestones and upfront fees of more than $200 million to date. We have the potential for almost $4 billion in potential milestone payments. Clearly, no one ever receives all the milestone payments, but even if you discount this highly, it's still a big number. And we've been receiving regular milestone payments on a lot of progress that our partners have made, and it's exciting. Now of the many that are in clinical trial, 8 or 9 of them are Genentech alone. And Genentech now has 2 products that have now hit Phase II using our technology, and quite a number in Phase I. And so we're very pleased with the robustness, that Genentech has employed our technology in drug conjugates. There are quite a number of other companies that use our technology in drug conjugates, and we look forward to seeing these arrows going from left to right, as we go forward, and more drugs entering clinic from our partners. So very exciting to see their work in cancer, and a lot of space, a lot of open space to make a difference in the life of cancer patients, and a lot of room for a lot of companies to make impact.

Financially, I mentioned already our net sales of almost $44 million in the first quarter. Total revenue for the first quarter were $57 million. So the rest of the revenues come from our partnering and our royalties. We reported cash of investments of $344 million, again in our first quarter. No debt, and we reported some estimated sales of ADCETRIS and estimated collaboration revenues through the year. You can see that on the slide, and as well as our expense line, we've also given guidance to that.

Our upcoming milestones to look for are regulatory actions, September 14 on or before, our date for our sPLA, to hear from the FDA on retreatment, as well as extended duration of treatment past 16 cycles or 1 year of therapy. So it's really 2 parts to the sPLA that was filed recently. Then our cynical trial initiations, we're starting a study later this year, Phase I/II study in salvage Hodgkin lymphoma of ADCETRIS plus Bendamustine, or TriEnza. We have a Phase IIa trial that's going to start in front-line DLBCL, which we haven't totally outlined, but we will outline and that should start this year, and a number of investigator-sponsored trials. And data this year, we'll put out data later this year on non-Hodgkin lymphoma front-line, age 60 and older lymphoma, as well as a number of ISTs datas and publications. We'll have our first full year of royalties for ADCETRIS outside of U.S. and Canada, from Takeda, and a lot of progress with our pipeline, including our 2 INDs this year and 2 clinical trials, starting with CD33 for AML and LIV-1 for breast cancer.

And with that, I will close and go over to Liberty 3 for breakout session.

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Source: Seattle Genetics Inc. Presents at UBS Global Healthcare Conference, May-21-2013 11:30 AM
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