Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Peggy Pinkston - Director of Corporate Communications

Clay Siegall - President and CEO

Todd Simpson - CFO

Tom Reynolds - CMO

Eric Dobmeier - CBO

Analysts

Mona Ashiya - JPMorgan

Mark Monane - Needham & Company

Bret Holley - Oppenheimer

George Farmer - Canaccord Adams

David Miller - Biotech Stock Research

Jason Kantor - RBC Capital Markets

John Sonnier - William Blair

Cory Kasimov - JPMorgan

Seattle Genetics Inc. (SGEN) Q2 2009 Earnings Call July 23, 2009 5:00 PM ET

Operator

Presentation

Welcome to the Seattle Genetics Second Quarter 2009 Financial Results Conference Call. (Operator Instructions).

This conference is being recorded today, Thursday, July 23 of 2009. I would now like to turn the conference over to Ms. Peggy Pinkston. Please go ahead, ma'am.

Peggy Pinkston

Thank you, operator. I'd like to welcome all of you to Seattle Genetics second quarter 2009 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 upcoming activities. Next Todd will discuss our second quarter and year-to-date financial results, and then we will open the call for your questions.

Today's conference call will include forward-looking statements based on current expectations. Such statements are only predictions, and actual results may vary materially from those projected. Please refer to the documents that we file from time-to-time with the SEC and which are available on our website for information concerning the factors that could affect the company.

I'd now like to turn the call over to Clay.

Clay Siegall

Thanks Peg, and thank you all for joining us this afternoon. Today I'll update you on the progress we have made over the past quarter. And also review our upcoming milestones. Highlights of the second quarter include our oral presentation on SGN-35 at the American Society of Clinical Oncology or ASCO Annual Meeting and the European Hematology Association or EHA, congress which was held in June.

In addition, our ongoing pivotal trial with SGN-35 in Hodgkin's lymphoma has been accruing rapidly and we expect to complete enrolment this quarter. We believe that this demonstrates the substantial unmet medical need for patients with relapsed or refectory Hodgkin's lymphoma.

We have also made strong progress on our Lintuzumab and Dacetuzumab programs, as well as on positioning our next two ADCs to start clinical trials over the next 12 months. We have considerable positive momentum and are well positioned financially to move our pipeline forward.

I'll begin with an update on our lead program SGN-35 an antibody-drug conjugate or ADC targeting CD30. As you may have seen in our press release this afternoon, we have obtained a non-proprietary or USAN name for SGN-35 brentuximab vedotin.

For the sake of simplicity I'll use a condensed version B-vedotin. Our initial development focus for the B-vedotin is in relapsed and refractory Hodgkin's lymphoma and systemic anaplastic large cell lymphoma or ALCL. Our ongoing pivotal trial in 100 Hodgkin's lymphoma patients, which is being conducted under a special protocol assessment, is enrolling ahead of our expectations.

Patients receive treatments every three weeks to up to a year. The primary efficacy endpoint of this study is objective response rate assessed by independent review. We are also evaluating complete response rate, duration of responses, progression free and overall survival and tolerability.

We're encouraged by the rapid pace of enrollment and as a result we have accelerated our timeline. We anticipate completing accrual in the second quarter, I mean, in the third quarter of this year. This will position us to report data, from the pivotal trial in the second half of 2010.

After we've had sufficient time to follow patients for objective responses, duration of responses, safety and other data. If the pivotal trial results are positive, we plan to submit a new drug application or NDA for B-vedotin in the first half of 2011 under the accelerated approval regulations. Our goal is commercial launch of B-vedotin in the second half of 2011.

These timelines are approximately six months ahead of our previous guidance. We’ve also accelerated our manufacturing activities to align with the revised timeline to submission. Todd will discuss the financial impact of the acceleration later.

The pivotal trial design is based on our Phase I study evaluating B-vedotin administered every three weeks in patients with relapsed or refractory Hodgkin's lymphoma or ALCL.

At EHA in June we reported that the overall response rate for patients treated at doses of 1.2 milligrams per kilogram and higher every three weeks was 54% response rate based on investigator assessment and 57% response rate based on independent review. We are pleased to see this high level of concordance between the two assessments, reinforcing our confidence in the high response rate observed in the trial.

We also reported that the medium duration of response in this trial have lengthened to 7.3 months with multiple patients in ongoing response. Duration of response is an important factor for relapsed and refractory patients and so it is encouraging that this data point continues to lengthen.

We are also conducting a phase I trial of B-vedotin administered weekly. At ASCO, we reported that out of 20 patients treated at doses of 0.8 mg per kilogram and higher, 60% achieved an objective response, including 50% with complete responses. These interim data reaffirm the response rate and tolerability profile from our every third week phase I trial.

The weekly dosing trial is ongoing and we expect to report additional data later in 2009. In our Phase I trials, B-vedotin has been generally well-tolerated, the majority of adverse events have been Grade 1 and 2, with few dose reductions or dose delays. The most common events have been fatigue, fever, peripheral neuropathy, neutropenia, diarrhea and nausea.

In addition to Hodgkin's lymphoma we believe that ALCL may provide another registration pass like for B-vedotin. Across both of our phase I clinical trials, six out of seven systemic ALCL patients treated with B-vedotin achieved a complete response. Based on these compelling data we recently initiated a phase II trial of B-vedotin for relapsed or refractory systemic ALCL to further evaluate its potential in this setting.

We also recently opened a retreatment clinical trial to assess a second course of treatment in patients who previously responded to B-vedotin. Today we treated our first patient. We have seen early evidence from our phase I clinical trials suggesting that patients who initially responded to B-vedotin, but who relapsed once discontinuing treatment may have further tumor shrinkage with an additional B-vedotin therapy.

The purpose of this trial is to evaluate response rate, quality and durability of an additional course of B-vedotin in patients with relapsed or refectory CD30 positive lymphoma.

Based on our market research, we believe there is a substantial commercial opportunity for B-vedotin, although problem line chemotherapy for Hodgkin's lymphoma and ALCL results in high durable response rates and cures, we estimate that there are currently more than 8,000 people in the US with relapsed or refectory disease, who would be eligible for treatment with B-vedotin. There are slightly more eligible patients in Europe.

Our projected worldwide sales potential for B-vedotin is $300 million to $400 million annually in the relapsed and refectory setting.

Beyond these indications we believe there is substantial upside potential, including the use of B-vedotin in retreatment and maintenance settings in front line lymphoma for relapse prevention following stem cell transplants or chemotherapy and in other CD30 positive malignancies.

We are planning additional trails of B-vedotin as a single agent and in combination with chemotherapy to expand its market potential. We believe that B-vedotin could be an important new treatment for patients with Hodgkin's and T-cell lymphomas and a significant commercial opportunity for Seattle Genetics.

We are investing substantial resources to rapidly execute on the clinical regulatory and CMC activities necessary to bring this program towards our goal of regulatory submissions in the first half of 2011.

Our next proprietary clinical program is Lintuzumab or SGN-33 an antibody targeting CD33. At the EHA meeting in June, we presented final data from our phase I single-agent dose-escalation trail of lintuzumab for acute myeloid leukemia or AML. In Myelodysplastic Syndromes or MDS.

In this trail which enrolled 82 patients, we observed multiple objective responses at well tolerated doses. The majority of adverse events for Grade 1 and 2 with the most common being chills and nausea. Notably across all dose levels 47% of AML patients experienced reductions in tumor blasts compared to baseline.

The activity and tolerability profile of single-agent lintuzumab are encouraging and suggest that it may combine well with other therapies. We continue to believe that the most promising path forward with lintuzumab will be as a combination agent and that is the primary focus of our clinical development activities.

Specifically in the first quarter of 2009 we completed enrollment of 210 patients with AML age 60 or older in a phase IIb randomized double blind placebo controlled trail. This study is designed to compare overall survival of patients receiving a low dose cytarabine plus lintuzumab to those receiving, low-dose cytarabine alone. We expect that data will be available in the first half of 2010.

If the trail demonstrates that the addition of lintuzumab results in a meaningful overall survival advantage in older AML patients it would represent an important advance in therapeutic options for these patients who currently have a medium survival of less than six months. Strong data would lead to substantive discussions with the FDA and trigger the manufacturing activities necessary to support a regulatory submission.

We are also evaluation lintuzumab in combination trials for MDS. We have completed enrollment of the phase I trial in combination with Revlimid. In addition we expect that an investigator sponsored phase II trial to evaluate lintuzumab in combination Vidaza for MDS will be underway by the end of 2009.

Next I’ll talk about Dacetuzumab or SGN-40, which is an antibody targeting CD40 that we are developing in collaboration with Genentch, a wholly-owned member of the Roche Group. We and Genentech are advancing five trials in combination with standard treatments for non-Hodgkin's lymphoma and multiple myeloma.

The largest of these trials is the SeaGen MARINER study which is a randomized double-blind trial evaluating Rituxan and ICE Chemotherapy plus or minus Dacetuzumab in 220 patients with second line diffuse large B-cell lymphoma. The data are expected in 2010, in addition we expect that data from our four ongoing Phase Ib trials will be reported beginning later in 2009 and in 2010.

In addition to our broad ongoing clinical development plan for Dacetuzumab, there is exciting research being conducted under the collaboration. At ASCO, Genentech described a diagnostic gene signature that correlated with sensitivity to treatment with Dacetuzumab in patients with diffuse large B-cell lymphoma.

The gene signature is being retrospectively analyzed in patient samples from both completed and ongoing clinical trials of Dacetuzumab. This research may ultimately lead to a diagnostic test that can predict which patients are most likely to respond to Dacetuzumab therapy.

Our fourth clinical stage program is SGN-70, and antibody targeted to CD70. CD70 is highly expressed on activated T- and B-cells but not resting lymphocytes. By selectively targeting activated immune cells SGN-70 may provide a new therapeutic option for autoimmune disease that may avoid globally suppressing the patient's immune system.

We have completed the healthy volunteer portion of our phase I trial and recently expand to patients with autoimmune disease. We are assessing the tolerability and pharmacokinetics of SGN-70 in these patients, as well as evaluating by our marker activity. This trial will serve as a foundation for our future clinical development efforts with SGN-70.

The next program, we are positioning for clinical trails is SGN-75 an ADC targeting CD70. Our preclinical data with this program are encouraging. As we remain on track to submit an IND later this year. The phase I trail will be for patients with CD70 positive hematologic malignancies and solid tumors.

In addition, we are advancing ASG-5ME, formerly referred to as AGS-5 ADC under our collaboration with Agensys a subsidiary of Astellas. This ADC is being developed for solid tumors and the goal is to submit an IND in the first half of 2010.

Beyond our three lead ADC programs, B-vedotin, SGN-75, and ASG-5ME a number of our collaborators are also advancing programs utilizing our technology. CuraGen, Progenics, and Genentech have entered the clinic and we expect additional ADCs will follow as a potential of empowered antibodies continues to emerge.

The excitement around ADCs has also drawn continued interest in the technology from other companies, including our most recent collaboration with Millennium, the Takeda Oncology Company. We received an upfront fee of $4 million for access to our ADC technology for a single solid tumor antigen. We are also entitled to receive fees, progress dependent milestone payments and mid-single digit royalties on net sales of any resulting products using our ADC technology.

Before I turn the call over to Todd, let me summarize our key upcoming activities. For B-vedotin, we plan to complete enrolment to our pivotal trial, finalize our US and European regulatory strategies for initial approval and report additional data later this year.

For Dacetuzumab, we'll advance the five ongoing combination clinical trials for non-Hodgkin's lymphoma and multiple myeloma under our collaboration with Genentech and plan to report data beginning later this year.

For Lintuzumab, we plan to complete treatment and follow-up in the phase IIb trial and initiate a combination trial with Vidaza in MDS patients.

For SGN-70 we'll continue enrollment of autoimmune disease patients in the phase I trial. For SGN-75, we plan to submit an IND for a phase I trial the CD70-positive malignancies. And for ASG-5ME we'll continue the pre-IND activities for a planned IND in the first half of 2010.

We are excited by the potential of our broad pipeline and I look forward to keeping you updated on our progress.

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

Todd Simpson

All right thanks Clay and thank you everyone for joining us on the call this afternoon. Today I'm going to highlight our financial results for the second quarter and year-to-date as well as provide an update for the remainder of 2009.

Our 2009 financial results continue to be in line with our expectations and reflect the investments being made in our product pipeline, as Clay described. Most notably around the B-vedotin program that is gaining momentum.

Revenues were $9.4 million in the second quarter of 2009 and $18.6 million for the year-to-date. Revenues continue to primarily be driven by our Dacetuzumab collaboration with Genentech, but also reflect amount earned under our ADC collaborations that now total eight, including our newest collaboration with Millennium Takeda.

Revenues were down slightly in the second quarter of 2009 from a year ago, reflecting the earned portion of ADC milestones achieved in 2008. Otherwise, year-to-date revenues in 2009 increased by approximately 9%, driven by the dacetuzumab collaboration.

Operating expenses for the second quarter of 2009 increased to 32.7 from $27.6 million in 2008. For the first six months of 2009, total operating expenses were $70.1 million, up from $53.7 million in 2008. These increases reflect higher R&D expenses, which were $62 million for the first six months of 2009, compared to $45.7 million for the first six months of 2008.

The increases in 2009 expenses are as planned, and driven by clinical development and manufacturing activities of B-vedotin. These include the ongoing pivotal trial that has been accruing rapidly, manufacturing of clinical material and commercial CMC activities in preparation for regulatory submissions and launch. The goal of our CMC activities is to lock down our commercial scale manufacturing operations and to begin the conformance campaigns later this year.

Total operating expenses also include non-cash share-based comp expense of $5.4 million for the year-to-date in 2009, compared to $5 million in 2008. We ended the second quarter of 2009 in strong financial position, with approximately $190 million in cash and investments.

This is down only slightly during the quarter and reflects the $4 million upfront payment from Millennium, as well as $11.5 billion in proceeds from a private placement of common stock to Baker Brothers, which was approved by our stockholders at your annual meeting in May.

As Clay mentioned, patient accrual into the B-vedotin pivotal trial has been robust, exceeding our expectations. We now expect to complete patient accrual in the third quarter of this year, and approximately six months ahead of our initial timeline. To align our clinical and manufacturing timelines, we have accelerated several CMC activities.

This is expected to result in an acceleration of cost for this program into 2009 that were previously slated to occur in 2010. As a result, we now expect that our 2009 expenses will be near the top end of our guidance range, which was previously set at 125 to $140 million.

We had previously guided to a year-end cash position of more than $120 million. As a result of the Baker Brothers placement in the Millennium ADC collaboration payment, partially offset by the higher spending on the B-vedotin program that I described, we now expect that our year-end cash position will be greater than $130 million.

To wrap up, the quarter has been strong, both in terms of progress on our key products, as well as our financial performance. We continue to be focused on rapidly advancing our pipeline, in particular driving B-vedotin towards commercial launch, while at the same time continuing to be very careful with our resources.

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

Clay Siegall

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

Question-and-Answer Session

Operator

(Operator Instructions).

Our first question comes from the line of Cory Kasimov with JPMorgan. Please go ahead.

Mona Ashiya - JPMorgan

Hi, good afternoon. This is actually Mona for Cory. Congratulations on the progress. I had a couple of questions. One is, now that the enrolment with SGN-35 is accelerate -- is going to be complete in 3Q and you will have data in the first half, I’m wondering how this influences your partnering plans for the ex-U.S. opportunity with the data coming earlier than you had expected. Is a partnership something that we can expect maybe after that, or how do you think about this?

Clay Siegall

Mona, thank you. This is Clay. Thank you for the question. First, I want to clarify one point. What we said on the call was that the enrolment indeed you got was correct, the enrolment will be completed in third quarter of this year. But we said that we will provide – the data is expected in the second half of 2010, not the first.

Mona Ashiya - JPMorgan

Okay. Sorry. Yeah.

Clay Siegall

Okay. And as far as partnering, I think that we have previously stated that we are evaluating partnerships, especially looking outside North America and that continues.

Mona Ashiya - JPMorgan

Okay.

Clay Siegall

Eric, perhaps you want to add something to that?

Eric Dobmeier

Sure, yeah. I mean, as we’ve said before, we’ve got discussions ongoing for ex-U.S. deals. There is a lot interest from potential partners and our focus is to build a U.S. based sales and commercial infrastructure in oncology. So an ex-U.S. deal could make a lot of sense for that strategy.

In terms of timing, it’s going to depend on what type of deal we can get. We’re not pressed to do deals sooner than we want to. We’ve got – we’re well capitalized and we’re not giving any set timing on deals. But we are in discussions and if the deal terms are right with a strong partner who can actually help us to execute on getting this drug launched outside the U.S. well and quickly and ramping up well, then that’s something we would certainly consider.

Mona Ashiya - JPMorgan

Okay. Great. And then I just had some additional questions on SGN-35, the additional opportunities here. So on the retreatment study, is it the same dose and schedule that will be tested in these patients?

Clay Siegall

I think, Tom, that will be a great question for you.

Tom Reynolds

Yeah, Mona, we’re testing treating patients with 1.8 milligrams per kilogram for three weeks, which is our pivotal trial dose.

Mona Ashiya - JPMorgan

Okay. And then what are your thoughts, I know you haven’t disclosed the details, but in terms of further going of to other opportunities such as in the front-line setting have you narrowed – have you selected a patient population etiquette? In the past, you talked about the elderly subset or – maybe I should just stop there.

Tom Reynolds

So, Mona, we’ve been looking at a lot of opportunities and we’re actually trying to hone on exactly what we are going to execute. We believe B-vedotin will be useful in all sorts of front-line patients, whether they be elderly or just combination with ABVD, and we're really working on a strategy of how to best execute those trials to get the drug out to patients.

We're also looking at some other opportunities including other aggressive T-Cell lymphomas and the patient population that is not eligible for transplant but continues to require therapy after failing front-line.

So, we think there are lot of ways to evaluate extending the market opportunity beyond simply Hodgkin's lymphoma. We also are cognizant of the fact that this drug could be active in autoimmune disease, we are exploring ways to bring that to fruition as well.

Mona Ashiya - JPMorgan

Yes. And are these opportunities that you mentioned, are these trials that you would embark on later this year or down the line?

Clay Siegall

We are still finalizing, that we will be providing more guidance on that later this year and I will say we have had a lot of interest both from individual investigators and international and national cooperative groups in conducting some of the larger studies. So, stay tuned for that later this year.

Operator

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

Mark Monane - Needham & Company

Hi, good afternoon from New York City, where it's quite cloudy here. It looks like the sun is setting early and indeed this is consistent with the B-vedotin trial, which seems to be setting. The sun is setting on that trial early as well.

I guess another alternative would be to see length the trial or having more patients on the trial. Could you discuss how many patients you expect to be in the trial at the end, when information will be available, when you open up the trial results at the end of next year?

Clay Siegall

Well, Mark, what we've said previously and we'll stay to get into the trial, it's a 100 patients trial that being done under an SPA and I think you have mentioned something about more patients or you speculated on that. This is being done under an SPA, that was negotiated with the regulators at the FDA and that’s not something that we are eager to change. So we are going to keep it at the 100 patients and fulfill that as our SPA.

Now, we do understand there are a lot of different, as Tom said there is a lot of physicians that are looking for using this agent in different settings. We are excited about the front-line opportunity as Mona asked the question that’s something that we plan on doing in the future, we are not giving the specifics today, but we are excited about it.

So we are going down that pathway and we intend to offer this as opportunity for more patients in different ways and different diseases and clearly, we are trying to get this to be a marketed product as soon as possible to help the most amounts of patients.

Tom, I don’t know if you want to expand on that.

Tom Reynolds

Yes. I think just to go back to the pivotal study. We believe that 100 patients will be as part of an NDA package as the pivotal study will be sufficient the way we have designed it and work with FDA to provide compelling activity efficacy data as well as an appropriate safety population to command approval. So, we think we are moving in the right direction on that. And, we don’t think we'll need any additional patients.

Mark Monane - Needham & Company

That sounds good, then. And how about the duration of response, you reported the median, did you report a little bit about some landmark analysis about how many patients might have been responding a year or longer?

Tom Reynolds

Mark, we've reported simply the median duration. We also have reported and showed some data on PFS as that continues to evolve. Those numbers do continue to revolve, we do have a number of patients that have been on therapy for up to a year, and we have patients that have been in response for up to a year or more.

We will, might hope that we will as you know, we finished that first phase 1 study, I'll be turning that into manuscript form and getting really the final data out there, which would include those kind of landmark analysis.

Mark Monane - Needham & Company

Right, good. And it seems like B-vedotin is a drug that can be used every three weeks and potentially be used every week. How do you think about the different strategies in terms of either the Rituxan Hodgkin's patient or first-line. How do you think about that?

Unidentified Company's Representative

So at this point, the weekly data is still emerging and I know we have said that for now several times. And what we think is really important is to really understand how best to use this drug is to have some data that’s a bit more mature than we have. We have had exceedingly good enrollment on that weekly dosing study. We are very pleased with the data that we shared at ASCO. We expect to share more data latter this year on B-vedotin.

We believe that one possibility maybe to think about an induction maintenance approach, where you push patients into very good or complete remissions very quickly, and then maintain them on a two or three week schedule, we’re evaluating how we might look at that.

Operator

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

Bret Holley - Oppenheimer

My question concerns the EU approach with B-vedotin. You had substantive conversations with the EMEA on the potential approvability of the 100 patient trial?

Clay Siegall

Brett, we are in active discussions with the Europeans as well as the US regulators absolutely. And we expect to have more specifics later in 2009 on that. Our goal is that the approach to our pivotal study is going to work both in the US and in EU, and we’re working hard on that and we’re confident and working hard on that, but we’ll be updating more specifics a little later.

Bret Holley - Oppenheimer

Okay. And could I just ask, I mean what is the precedence for approval on small open label trials in Europe versus United States? Obviously there is a clear precedence for approval in US on these type of studies. I’m just wondering if you have any historical information on approvals on the open label trials in the EMEA?

Tom Reynolds

Yes Brett, this is Tom Reynolds. There is two processes you can use in Europe. One is something called exceptional circumstances. There have been a number of oncology drugs that have been approved under those, usually in fairly orphan populations. A newer process that’s been put into place in the last few years is called conditional medical authorization, which is very similar to accelerated approval here.

There have been very few drugs that have had an opportunity to go through that process, but it is a process the EMEA is willing to consider for this type of drug in this type of population with the trials we’ve designed. And as Clay said, we will tell you more about that later on this year as discussions continue.

Bret Holley - Oppenheimer

In the exceptional circumstance clause, I’m just wondering if there is any, are there any therapies that are commonly in use in Europe that aren’t in use in the United States? It might argue that for a relapsed or refractory populations and Hodgkin's disease, it’s not quite as unmet of a medical need in Europe as it is in the United States?

Clay Siegall

No.

Tom Reynolds

Not that we are aware of.

Clay Siegall

The work we’ve done and how patients are treated with Hodgkin’s in Europe versus the US is pretty consistent. The one difference is that upfront patients in Germany often receive BEACOPP instead of ABVD, which is a more intensive regimen. But in the salvaged therapy area, they are treated with Gemzar and various other chemotherapy agents similar to how they are treated in the US.

Operator

The next question comes from the line of George Farmer with Canaccord Adams. Please go ahead.

George Farmer - Canaccord Adams

I have a couple, actually. Regarding your registration strategy for B-vedotin, why you’re filing under the NDA process instead of BLA? Is there some nuance there, and is that to your advantage, do you think? Or doesn’t really matter?

Tom Reynolds

So George, this is Tom. The FDA requested, we asked them whether we could do this under BLA, and they actually asked that this be done under an NDA, because there is a small molecule component. On the CMC side, the biologic guys that we are used to dealing with on antibodies are very involved in evaluating the antibody part of the drug, but it appears that ADCs will be handled by FDA going forward under the drug laws.

George Farmer - Canaccord Adams

And a question about the peripheral neuropathy, actually that you saw. I don’t know if that was the Q3 weekly or the Q1. What grade neuropathy was that and do you think that could be a concern?

Clay Siegall

Sure. In the Q3 weekly study, virtually all of the neuropathy has been Grade 1or 2 with a single case of Grade 3. That patient ultimately went off study and my understanding is that patient’s neuropathy has resolved back down to phase 1 point Grade 1.

George Farmer - Canaccord Adams

Okay. Regarding lintuzumab and AML, what do you think is a meaningful magnitude of effect in that study?

Tom Reynolds

The study is sized to see a clinically significant effect, which is a move from a median survival of 5.5 months, which is modeled on Alan Burnett’s low-dose Ara-C data, to 7.5 months. We think that that’s clinically meaningful to see a 30% improvement in survival.

George Farmer - Canaccord Adams

Okay. What if you see 6.5 months?

Tom Reynolds

We would need to look at the quality of the data there, George. One of the issues is do we have a tail of patients who actually survive for a very long periods of time even if that’s only 10% or 20%, that could well be worth filing on. But we will have to wait and see the data.

George Farmer - Canaccord Adams

Okay. Regarding the MARINER study, you got it at 2010 day report. Has that guidance moved up from previous guidance?

Clay Siegall

No, I believe that is what we’ve been saying for quite some time now. This is going to be 2010.

George Farmer - Canaccord Adams

Are you thinking back-half or front half?

Clay Siegall

Second half.

George Farmer - Canaccord Adams

Second half. Okay. And Regarding SGN-70, the outcome of your phase I trial with (inaudible) did you hit a DLT and what was it?

Tom Reynolds

We now reported the data on SGN-70, clinical data

Clay Siegall

That’s correct.

George Farmer - Canaccord Adams

Will you be?

Tom Reynolds

An appropriate time, absolutely.

George Farmer - Canaccord Adams

Okay. But can you say if you did hit a DLT?

Clay Siegall

We’ve really not reported the data at this point, George. We'd rather not discuss it.

George Farmer - Canaccord Adams

Okay. Great. Thanks very much.

Clay Siegall

It’s really appropriate to report clinical data on new products in the right way, and doing with the investigators that are doing the trials and not just do it on quarterly calls.

George Farmer - Canaccord Adams

But you’re moving forward into effective patients then?

Clay Siegall

We are.

George Farmer - Canaccord Adams

Okay. So you’re happy with what you saw then in that healthy volunteer study?

Clay Siegall

Yes.

Operator

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

David Miller - Biotech Stock Research

You were talking about B-vedotin about a $300 million to $400 million annual revenue and I was having technical difficulties on my side. So can you walk through that again on how many indications that $300 million to $400 million represents?

Eric Dobmeier

David, this is Eric. That represents relapsed and refractory Hodgkin's lymphoma and ALCL. As we were talking about -- we talk about $300 million to $400 million. And as Clay said during the call, the additional indications we could move into include front-line therapy, other CD30 positive lymphoma, such as PTCL and subsets of some B-cell lymphocytes that have CD30 on them. As well as some other settings like relapse prevention post transplant or post chemotherapy.

So our initial market is really, what we’re describing for $300 million to $400 million is really peg to the trials that we’re running now for approval that’s in the Hodgkin’s trial and the ALCL trial.

David Miller - Biotech Stock Research

Okay. Because I’ve asked this every conference call for a several now. Just a question on, if you’re seeing any differences in the SGN-40 is terms of commitment or time that you are getting since the Genentech acquisition?

Clay Siegall

Since the acquisition has happened, there has certainly been some changing of some of the chairs there with some of the employees as you know, but the commitment and the spending on the program and all the trials are still going full force.

David Miller - Biotech Stock Research

Okay. And so nothing in the way of timing while they do a re-evaluation that they have talked about?

Clay Siegall

Nothing that we are aware off. I mean, it's going full force with our five clinical programs and we’re planning on releasing data from our trials in late 2009 as well as in 2010.

David Miller - Biotech Stock Research

Okay. And last question I have is you talked about doing CMC activities and locking down and studying [different] formats. Can you talk about where you are in terms of the current scale up as compared to where you want to be for production for the commercial scale targets?

Clay Siegall

Yes. Well, I'd like to tell you is without all the specifics, which would take hours, we are manufacturing at the scale for commercial presently. Things are going well. There is still more to do. We’re not done with everything. We think the timeline for our clinical as well as our CMC are coming together very nicely. But we are at the commercial scale right now and feel confident that we will be able to commercialize this product with the manufacturing supply chain and activities that are going on right now.

David Miller - Biotech Stock Research

Okay. And have you used the lots in the commercial scale up yet in the clinic?

Clay Siegall

That’s something we haven’t really discussed at length.

David Miller - Biotech Stock Research

Okay.

Clay Siegall

I think that, we’ll be giving more guidance out in the future, but I think, what I could say is, we’re spending a lot of time and effort on that aspect. We’ve hired some incredible talent that have gotten other products approved and I think we are in great shape there.

David Miller - Biotech Stock Research

Okay. Are you doing the manufacturing yourself or are you working with a contractor?

Clay Siegall

We are working with a few different contractors on our supply chain. We create the salines, we create the methods both biology and chemistry methods for conjugation. And we use many different contractors in our supply chain and I could give you an example of one just for discussion purposes. The antibody is manufactured at Abbot, at their facility in Worcester, Massachusetts, where we launched (inaudible) so it's an FDA approved launch facility.

David Miller - Biotech Stock Research

Right.

Clay Siegall

And we have every contractor that we are using in here, whether it’s making the antibody or full finish, they are all very strong approved types of contactors. So we are not taking risk there by not using really strong contractors.

David Miller - Biotech Stock Research

And so all those contactors, are they actually all launch facilities?

Clay Siegall

Yes.

Operator

The next question comes from the line of Jason Kantor with RBC Capital Markets. Please go ahead.

Jason Kantor - RBC Capital Markets

Great. Thanks. And good news on the enrolment timelines. A lot of my questions have been answered, but could you walk us through how responses are accessed in the pivotal SGN-35 trial that is out frequently to patients going for scans and is there a point in time where you say, if the patient hasn’t responded by certain date, where does it just go on. Rather I mean, what is the drop dead date for getting data once the patient started treatment?

Tom Reynolds

Yes. So Jason, this is Tom. It’s a fairly complex schedule of assessments that involves both CTs and PET-scans at a number of different intervals. The scanning frequency is weighted more heavily at the beginning, where a large number of responses are seen. However, in our phase I data, what we have seen is that responses mature overtime, we have patients with FT that then become PR or CR and we have a number of patients who have gone from PR to CR.

We’ve seen that occur both early in the study as well as at latter points in the study. So we are expecting to follow patients through and till they stop receiving treatment and their last scan, where we could capture additional efficacy is at that end of treatment visit.

So what that means is all patients can receive therapy for up to a year and the last opportunity to see the best response is at that end of treatment visit. And we think that given what we’ve seen in phase I. There are a number of responses that occur relatively late in the game and that we want to capture those as well as to maximize our ability to discern how the durability is doing.

Jason Kantor - RBC Capital Markets

Tom, let me understand this in terms of the timing of the data. If the last patient enrolled in the study is in stable disease on drug, 11.5 months into the study, you’re going to wait until that patient has been on drug for a year before you can call the results of the study?

Tom Reynolds

So the way this is going to work is because it is an independent review, is we're going to wait till all patients complete their end of treatment visit. Scans were being read, although we won’t have access to them in batch mode as the trial progresses and then as those last patients come off and as you can imagine, it’s probably not just one. We have lot of enrollment, and 100 patients in five or six months. There is quite a few coming at the end.

All of those patients at the end will go to the, the scans will go to the independent review facility. They will be read. The other data will be cleaned, locked and loaded and then, so I think we are very much on target as Clay said have data in the second half of 2010.

Jason Kantor - RBC Capital Markets

Now most of the responses come early with this drug. I mean, if you have 60% of your patients responded six months into the study, the trial will still go for a full year before we've done the results?

Tom Reynolds

That’s correct. We have no access to the independent review facility data until the database is locked. We don’t have the data.

Jason Kantor - RBC Capital Markets

The only way the data could come in the earlier is that if every patient has either had a response or progressed as long as there is at least a stable disease that could turn into PR.

Tom Reynolds

The only way the data can come earlier, is if patients have complete treatment earlier, because patients can go from stable disease to a response after the last dose of drug.

Jason Kantor - RBC Capital Markets

Okay. And then, one last question, Clay. Nobody knows the inner workings of the ADC thinking at Bristol as you do, they just bought Medarex today. They cited ADC technology as a reason for doing that. You guys actually spun out of Bristol. Any thoughts on why they would decide to go with the Medarex technology?

Clay Siegall

I think you’re asking a lot of questions built into that. If you’re getting at that, they prefer the Medarex technology versus …

Jason Kantor - RBC Capital Markets

No. I don’t think they do. I was just wondering what your thoughts are?

Clay Siegall

I think that when you look at Medarex they are a great company. I think this was a great deal for Medarex. They have a phase III program that Bristol own half of. They have some substantial royalties coming in from drugs including Symphony that are very valuable. They have one of the best ways to make the human antibodies, there is.

On the market it’s still an exciting technology while still no more new, it’s still a great system to make fully human antibodies. And then Medarex has certainly come out and they've talked a little bit about their drug conjugate technology. There is not a huge amount of data, there’s no clinical data out there. We have an enormous amount of data out there.

So it’s hard for us to fully assess their ADC technology, but I can’t imagine that that was a large driving force of the deal. I think it was other reasons and I think that they just had the, the technology was there. But I think Bristol is doing the right thing.

Bristol is getting more heavily involved in antibodies and we believe that antibody therapy is something that could strongly help patients. So I think Bristol made a good move to diversify their pipeline and add more antibodies into it. So for us looking at it is great move.

Jason Kantor - RBC Capital Markets

Yes. I think it’s great to the whole field and good for you guys too. Terrific. Thanks a lot for answering the questions.

Operator

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

John Sonnier - William Blair

Hi Clay, congrats on a lot of good progress and I’ll really do appreciate all the details on your development program. Mine was also really more of a platform question. I do think that the Medarex transaction kind of draws attention to the enabling platforms including yours.

So talk a little bit about how we should think about the future of your ADC deals. Obviously the technology itself has been validated, I think to a large extent and is arguably more valuable. And may be overlay on that a discussion about how we should think about the evolution of the ADC platforms at Seattle Genetics.

Clay Siegall

Sure. We think about these deals and we’ve generated more than 75 million to-date which keeps our cost to capital down. It's the working with other companies on these deals have been helpful because we do learn something from other companies. Everyone has a different way of looking and developing different drugs and even if you are using the same technology. So our relationships have been excellent with these other companies and so that’s been really good for Seattle Genetics as we’ve gone forward.

Now when you think about our strategy for partnering, we have never gone out to try to partner this over and over and over, that’s never been our main focus. Our main focus has been to develop products. So that’s our main focus products in our pipeline.

Our Drug Conjugate Technology has been a secondary focus partnering that. Now having said that, we are in discussions with companies about doing some drug conjugate deals. And they could represent the kind of deals where as one or two targets, but it could be a deal that’s a little broader.

So both types of these are being discussed. It’s not our main focus like I said. Our main focus is getting SGN-35 approved getting SGN-33 pushed along et cetera. But we’re exited with our platform and maybe your last part of that question was the evolution of the Drug Conjugate Technology within Seattle Genetics and perhaps within the field.

If you look back at the beginning of Seattle Genetics 11 years ago, we had a Drug Conjugate that we developed in clinic called SGN-15 that we closed as a clinicals development program many years ago.

What we learnt from SGN-15 and that was targeted to solid tumors. What we learned with SD linker with a hydrozone and it wasn’t very stable. And we were using a drug attached to it, which at the time was doxorubicin, which was potent but not highly potent. And what we really took away from the trial is that we knew we needed a more stable linker and we knew we wanted a more potent drug and we knew we did not want to use a natural product drug. We wanted to use a synthetic drug so that we can make it really simply in two steps, conjugating an antibody to a drug linker unit rather than conjugating with a separate linker, a separate natural product drug, and a separate antibody.

So we knew we wanted to have a more stable linker an easier way to manufacture, fully synthetic with a more potent drug than doxorubicin. And we’ve accomplished all that. And I think the evolution is that, we’ve accomplished and built a system with auristatin as our anti-mitotic drug and with stable linkers is ready for prime time. It’s showing with SGN-35 that our gain is excellent.

We have two additional new drug conjugates that will start in clinic within the next 12 months. So we’re putting our money mouth is to move forward on those conjugates both in hematologic and in solid tumors.

And we’re working with our partners, and as far as research labs, we continue to stare at our drug conjugate technology and try to improve, improve, improve anything we possibly can. So we feel we’re in a leadership position in this field and we’re investing to be the leader and to stay as leadership position in the field.

Operator

We have a follow-up question from the line of Cory Kasimov with JPMorgan. Please go ahead.

Cory Kasimov - JPMorgan

A follow up, just one quick one. I am wondering if you’re getting the phase II lintuzumab data in the first half of 2010. Is there any possibility that you could file later in 2010 or essentially having put the filing in before the SGN-35? Or you constrained by the CMC aspect, which you have to get through?

Clay Siegall

Yes. I think you’ve touched on what's critical there with the CMC aspect. So that’s appropriate, very appropriate question. Thank you.

Cory Kasimov - JPMorgan

And how long would that take?

Clay Siegall

Well, at our last conference call, we discussed this. So we didn’t discuss it a lot today because we did emphasis it at our last one, and what we said was we made a corporate decision since both datasets were not that far apart. We talked about with our resources and our team that it would be difficult for us to go far with two CMC parallel development pass. So we decided to do them in sequence rather than at the same time. And we made a corporate decision to do the SGN-35 first and make the SGN-33 CMC guided based on our data.

So we have not come out with timelines that are specific for it. We certainly are working and looking, we’re looking at that very closely to try to find, identify the most rapid path that we can take towards getting SGN-33 approved, pending the data looking appropriate for filing. So we are working on that, but we’ve not given guidance on that yet, except to say that SGN-35 is in the lead in our CMC organization.

Operator

The next question is a follow-up from George Farmer, Canaccord Adams. Please go ahead.

George Farmer - Canaccord Adams

Thanks. Clay, just want to follow up on some comments that have just made regarding the ADCC technology. While the response rates in your Hodgkin’s disease trial certainly are excellent not everyone is responding. Why do you think that is, is it due to a level of antigen expression or is there something about the technology that you think could be improved upon kind of getting back to that point where you're saying that you're constantly thinking about improving upon the technology. What could be done to make it better at this point do you think?

Clay Siegall

Well, it’s a good question. We’ve been trying to improve this technology now for two years and haven’t been able to simply improve it. So I would say that that is something that we’re working hard on, but I don’t have an easy answer of how to improve it. It's pretty good you know when you make something that works very well. It’s hard to prove in the laboratory setting, that you make some a lot better.

We are working it , what you could say if you look at alternative chemotypes to see if there is other chemotypes that could look good or other linkers or things like that. That certainly is, you know we are working on that but we've not come up with something that is obviously better than the [statin drug linker] we have now.

Going back to your first part of your question about Hodgkin's lymphoma, let me make sure that it's clear that less than 10% of the cells are Reed-Sternberg cells in a Hodgkin tumor. And those Reed-Sternberg cells express CD30 in high density, but the infiltrating lymphocytes associated with such a tumor, that are not necessarily tumor, but they’re part of the nodule those don’t necessarily express CD30.

So we’re targeting a disease population, which has a very heterogeneous expression profile, very heterogeneous. And when we look at T-cell lymphoma. T-cell lymphoma have a very homogeneous expression profile and what we've said so far is that six out of seven patients had complete responses, which may be a reflection of its histology.

So I think that schools a little out, we’re not fully there, we don’t have all the data. But it might be reflected in this histology and it might suggest, which I think we knew based on research in the laboratory was that, one of the important aspects of having a targeted therapy work is the expression level. And I think this correlates well with it.

Operator

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

Mark Monane - Needham & Company

Follow-up question Todd, how many people at the Seattle Genetics now and what’s the appropriate number for 2009, 2010 going forward?

Todd Simpson

Good question. We are at about 275, right now. Most of those are in our clinical and development teams, kind of the right size we think over the next 12 months would have us adding 20 to 30 people. And that would get us also starting with some of our commercial activities.

Mark Monane - Needham & Company

Very helpful. And speaking of commercial, maybe you could have opine, the team can opine a little bit about any changes in healthcare reforming. How they can effect the choice of target as well as the combination drug. I mean, clearly, some of the drugs that you’re combining with in examples to the lender lintuzumab proactive generic drug.

So that would be much less expensive than the Dacetuzumab study, which is a antibody with Rituxan. Are you thinking about these considerations of these points. And at this point, what are your thoughts there?

Clay Siegall

Absolutely we are thinking about these strongly. I think that the most important thing is getting strong patient benefit, added survival, great responses in patients. And I think that having great drugs at our targeted therapies with what we’re doing is critical to it. I think that that great data with targeted therapy where you could select patient populations will get you reimbursements under any of that health proposals that we’ve seen.

So we think that that’s where we need to focus on. As far as the commercial team, I want to assure you that we are doing a tremendous amount of precommercial activities already, including market research, branding, we’re working with key opinion leaders and developing them.

We are looking at initial reimbursement assessments and so all of these things are underway, we brought in a lot of expertise from outside to help Seattle Genetics and we are currently recruiting to head of commercial operations to be an internal person and we have started to interview a number of people and when we do hire that person we will certainly announce it.

Operator

I’m showing there’s no further questions in the queue. I’ll turn it back over to the management for any closing comments.

Peggy Pinkston

Okay. Thank you, operator and thanks everybody for joining us this afternoon. Please have a good evening. Good night

Operator

Thank you. Ladies and gentlemen, that does concludes today’s Seattle Genetics Second Quarter 2009 Financial Results Conference Call. If you like to listen to replay, please dial 303-590-3030 or 1-800-406-7325, enter the passcode 4114066. Thank you for your participation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Seattle Genetics Inc. Q2 2009 Earnings Call Transcript
This Transcript
All Transcripts