Seattle Genetics' CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.11.14 | About: Seattle Genetics, (SGEN)

Seattle Genetics Inc. (NASDAQ:SGEN)

Q4 2013 Results Earnings Conference Call

February 11, 2014 4:30 PM ET

Executives

Peggy Pinkston - Senior Director, Corporate Communications

Clay Siegall - President and CEO

Todd Simpson - Chief Financial Officer

Eric Dobmeier - Chief Operating Officer

Jonathan Drachman - Chief Medical Officer and EVP, Research and Development

Chris Boerner - Executive Vice President, Commercial

Analysts

Thomas Wei - Jefferies & Company

Jason Kantor - Credit Suisse

Matt Roden - UBS

Cory Kasimov - JPMorgan

John Sonnier - William Blair

Adnan Butt - RBC

Richard Newitter - Leerink Partners

Bret Holley - Guggenheim Securities

Navdeep Singh - Goldman Sachs

Chad Messer - Needham and Company

Mara Goldstein - Cantor Fitzgerald

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Seattle Genetics Fourth Quarter and Year 2013 Financial Results Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions)

This conference is being recorded today, Tuesday the 11 of February 2014. I would now like to turn the conference over to Peggy Pinkston, Senior Director of Corporate Communications. Please go ahead, ma'am.

Peggy Pinkston

Thank you, Operator, and good afternoon, everyone. I’d like to welcome all of you to Seattle Genetics fourth quarter and year 2013 conference call. With me today are Clay Siegall, President and Chief Executive Officer; Todd Simpson, Chief Financial Officer; Eric Dobmeier, Chief Operating Officer; Jonathan Drachman, Chief Medical Officer and Executive Vice President, Research and Development; and Chris Boerner, Executive Vice President, Commercial. Following our prepared remarks today, we will open the line for questions, if we are unable to get to all of your questions, we will be available after the conclusion of the call.

Today's conference call will include forward-looking statements based on current expectations. Such statements are only predictions 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.

With that, I'll turn the call over to Clay.

Clay Siegall

Thanks, Peg, and good afternoon, everyone. Thank you for joining us today. 2013 was a strong year for Seattle Genetics and we are looking forward to making substantial progress again in 2014.

Our top three corporate priorities are, one, building ADCETRIS into a major global ramp, two, advancing our ADC product pipeline and three, enhancing our leadership position in the field of ADCs.

In the past year we have achieved milestones across each of these areas, including, first, ADCETRIS now have approval for marketing authorization in 39 countries, most recently, Japan, Australia and Singapore.

In 2013, global net sales of ADCETRIS were more than $250 million. This reflects growth in United States and Canada, as well as product launches by our collaborator Takeda in the rest of world.

We recently achieved our first sales milestone under the collaboration and we anticipate additional global approvals and continued ADCETRIS revenue growth in 2014. We expect to report data from multiple trials of ADCETRIS, notably from the Phase III AETHERA study in the second half of this year.

Second, during 2013 we advanced four new ADCs into clinical trial, SGN-CD19A, SGN-CD33A, SGN-LIV1A and in collaboration with Agensys, Astellas ASG-15ME. We plan to report additional data in the first two of these programs during 2014 and to advance two more programs into clinical development this year.

Our ADC collaborators are also making substantial progress. There are currently 15 collaborator ADCs in the clinic using our technology. Our ADC deal generated approximately $59 million during 2013.

And third, we continue to demonstrate our leadership in the field of ADCs by capitalizing on our proven technology through both internal and collaborator progress and also by developing innovative new approaches to empowering antibodies.

For example, we developed a novel ADC using a PBD dimmer, SGN-CD33A, which is now in a Phase I trial for acute myeloid leukemia. We are pleased that multiple collaborators are developing ADCs using our technology, including several in later stage trials. And at the AACR meeting in April, we will present our novel research in the field of ADCs.

We ended 2013 in a strong financial position, with $374 million in cash and investments, an increase of $10 million from where we started the year. We are well-positioned to continue building our ADCETRIS business and advance our pipeline and ADC technology.

Today, Chris Boerner will talk about our ADCETRIS commercial effort, then Jonathan Drachman will cover our ADCETRIS clinical development program and highlight from our product pipeline. After Jonathan, Todd Simpson will discuss our fourth quarter and year 2013 financial results and give 2014 guidance. Then we will open the line for questions. Chris?

Chris Boerner

Thanks, Clay. The ADCETRIS business remained strong in the U.S. ADCETRIS net sales for 2013 were $144.7 million, including $38.5 million in the fourth quarter. These results reflect both commercial execution and continued position demand in proscribing ADCETRIS for patients we can benefit.

Our commercial focus on patient identification and duration of therapy delivered solid results in the quarter. ADCETRIS is well-established as a standard of care in our approved indications of relapsed post-transplant Hodgkin lymphoma, transplant in eligible Hodgkin lymphoma and relapsed systemic ALCL, with market share of approximately 70% across all of our on-label segments.

While we do not promote outside of our labeled indication, anecdotal evidence and market research suggest continued interest by physicians in using ADCETRIS for other CD30 mediated diseases.

Regarding duration of therapy, based on our review of patient charts over the last year, the average number of ADCETRIS doses varies by line of therapy but average is approximately six to seven doses across all-on label segments.

As you recall in the later half of 2013, the FDA removed the 16 cycle limitation in our U.S. label to reflect a dose to progression or unacceptable toxicity claim. This enabled our sales force to engage physicians on the label update and reinforce the benefits of dosing to progression. We continue to see areas of opportunity and duration, and it remains our most important driver of near-term on-label opportunity.

Now turning to Canada, we have made significant progress for gaining coverage and reimbursement. We have completed negotiation with Canada’s reimbursement review committee, the Pan-Canadian Pricing Alliance, which recommends provincial funding for ADCETRIS in key provinces and territories.

We expect individual provinces to implement funding over the next several weeks. The province that put back has a separate review in funding process where we continue active discussion and negotiations.

Our commercial efforts in 2014 will continue to focus on patient identification and duration of therapy. We will also continue commercial preparation for potential AETHERA label update in 2015.

Now I would like to turn the call over to Jon.

Jonathan Drachman

Thanks, Chris. I'm pleased to update you today on our clinical development activities both for ADCETRIS and our product pipeline. As Clay highlighted 2013 was a year of strong execution of our ambitious plan and in 2014 we anticipate being able to report key trial results across multiple program.

There are more than 30 ongoing clinical trials with ADCETRIS including both corporate and investigators sponsored studies. These include four Phase III trials being jointly conducted Seattle Genetics and partner Takeda.

The first of these Phase III trials that we will report data is the AETHERA trial in which we are evaluating whether ADCETRIS can extend progression free survival in a consolidation or maintenance-type setting. In this trial, 329 Hodgkin lymphoma patients at high risk of disease progression after autologous stem cell transplant were randomized to receive ADCETRIS or placebo.

Based on the current rate of progression, reaching the targeted number of event, it is projected to extend well beyond 2015. In January, we announced that we have reached alignment with Takeda as well as U.S. and European regulatory agencies on a plan to unblind the trial in the second half of 2014.

The AETHERA study fulfills an FDA post approval safety requirement but is not designated as a confirmatory trial and was not conducted under a special protocol assessment. If the data are positive, we intend to submit a supplemental BLA in the first half of 2015.

After AETHERA, the next Phase III trial in which we anticipate data is ALCANZA which is intended to support registration in relapsed CD30-positive cutaneous T-cell lymphoma. This study is enrolling approximately 124 patients to evaluate single agent ADCETRIS versus physician's choice of methotrexate or bexarotene. The primary endpoint is objective response rate with duration of at least four months. We anticipate reporting data from ALCANZA in 2015.

We are also conducting two large Phase III trials in the frontline setting. The ECHELON-1 trial is designed to determine if ADCETRIS plus ABD is superior to standard ABVD therapy in front-line advanced Hodgkin lymphoma, and in front-line mature T-cell lymphoma, the ECHELON-2 trial is ongoing to compare ADCETRIS plus CHP to the current standard regimen CHOP.

Next I’d like to mention some of the other key therapeutic areas in which we are evaluating ADCETRIS. First is non-Hodgkin lymphoma, notably diffuse large B-cell lymphoma. At the ASH meeting in December, we reported an encouraging objective response rate and manageable safety profile among advanced highly refractory DLBCL patients.

The trial was expanded to access activity and safety of the combination of ADCETRIS plus Rituxan and to evaluate ADCETRIS in patients whose tumors do not express detectable CD30 using standard immunohistochemistry method.

During 2013, we also initiated a Phase II trial in DLBCL to evaluate ADCETRIS plus RCHOP in the frontline setting. We recently received orphan drug designation from the FDA for ADCETRIS in DLBCL. We plan to report additional data from these clinical trials during 2014 and expect to be in a position to define our next step in DLBCL later this year.

Another area of ADCETRIS clinical development is front-line treatment of Hodgkin lymphoma patients aged 60 and older. The interim Phase II data highlighted at ASH from single agent ADCETRIS in the setting were in process.

We recently added an arm to the trial to evaluate ADCETRIS plus dacarbazine to see if the combination could further enhance the CR rate. We expect to report additional data from this trial during 2014.

Finally I want to point out that we will report data from a Phase I/II trial of ADCETRIS combined with bendamustine in first salvage for Hodgkin lymphoma on February 26 during the bone marrow transplant and the meeting. The goal of this trial is to evaluate safety as a combination and the ability to induce a high rate of complete remission to enable patient that go on to transplant.

One last note, ADCETRIS was recently added to NCCN guidelines for relapsed CD30-postive PTCL. We believe this represents a growing awareness of the potential clinical benefit that ADCETRIS could provide across all CD30-positive lymphomas.

Now I'd like to mention a few highlights from our clinical stage product pipeline, which includes three proprietary program and two programs, we are co-developing with Agensys. At ASH, we reported early interim data from our SGN-CD19A program. This is an anti-CD19 ADC that’s in two Phase I trial, one for acute lymphoblastic leukemia and one progressive B-cell non-Hodgkin lymphoma.

The Phase I ALL trial demonstrated encouraging early antitumor activity and a generally well-tolerated safety profile among heavily pretreated patients. In addition, multiple complete remissions have been under care in the NHL trial. Dose escalation is ongoing in both Phase I studies and we plan to report additional data later this year.

We also plan to report data during 2014 from the SGN-CD33A, a CD33 targeted ADC that is currently in Phase I testing for acute myeloid leukemia. This ADC utilizes an innovative new technology consisting of a highly protein cell-killing agent called the PBD dimer, a novel linker and a proprietary site-specific conjugation technology known as EC-mAb.

During the fourth quarter of 2013, we started a Phase I trial of SGN-LIV1A for patients with metastatic breast cancer. And in collaboration with Agensys, Astellas, we initiated a Phase I trial of ASG-15ME for advanced bladder cancer.

We are on track to submit INDs for two additional programs during 2014, including SGN-CD70A, an ADC targeted to CD70, that utilizes the same PBD based ADC technology as SGN-CD33A. 2014 will be an important year for Seattle Genetics, and I look forward to sharing data and milestone achievements across ADCETRIS and our product pipeline.

At this point, I will turn the call over to Todd to discuss our financial results. Todd?

Todd Simpson

Great. Thanks, Jonathan and thanks to everyone for joining us on the call this afternoon. We ended 2013 in a strong financial position with more than $374 million in cash and investments. This was driven by record high total revenues including ADCETRIS sales and royalties. And it means that we are well-positioned to execute on the activities that Jonathan highlighted for ADCETRIS and our pipeline.

Today, I'll highlight our financial results for the fourth quarter and year-end 2013. I will also provide a financial outlook for 2014. Total revenues were $67.4 million for the fourth quarter and $269.3 million for the year-end 2013. This included ADCETRIS net sales of $38.5 million for the quarter and $144.7 million for the year.

We also recorded ADCETRIS royalty revenues of $6.6 million in the fourth quarter and $17.8 million for the year-end 2013, as our partner Takeda continued its progress with approvals and launches of ADCETRIS throughout the world.

Collaboration revenues totaled $22.3 million in the fourth quarter and $106.8 million for the year-end 2013. Contributing to collaboration revenues in 2013 was the earned portion of upfront payments received under the new ADC deal with Bayer and the expansion of our ADC deal with AbbVie.

Collaboration revenues also included ADCETRIS drug supplies sold to Takeda throughout the years that established its commercial and clinical inventory of product. We believe that these sales have now largely been completed and they illustrate the progress that Takeda is making in its territory.

R&D expenses were $50.8 million in the fourth quarter and $218.6 million for the year-end 2013, compared to $47.7 million and $170.3 million for the same periods in [2002] (sic) 2012. These planned increases reflected ADCETRIS development activities and increased investment in our ADC pipeline that now includes five other clinical stage programs.

SG&A expenses were up modestly year-over-year primarily attributable to increased staffing. Non-cash share-based compensation costs for 2013 was $31.4 million compared to $25.3 million in 2012.

Regarding financial guidance for 2014, we anticipate ADCETRIS’ net sales will be in the range of $155 million to $165 million. Our guidance includes a small amount of sales outside of the label as well as in Canada.

We expect 2014 revenues from collaboration and license agreements to be in the range of $55 million to $65 million, driven by amounts earned under our existing ADC collaborations and the ADCETRIS collaboration with Takeda.

This guidance reflects a decrease from 2013, which included a confluence of revenue-generating events totaling approximately $40 million. This came from two things, assumptions for which are not included in our 2014 guidance.

First, the new Bayer-ADC collaboration and the expanded AbbVie collaboration, that’s happened late in the year. And second, the impact of ADCETRIS’ drug supply to Takeda that is now substantially complete.

In addition, Takeda is the operational lead for certain clinical development activities under the collaboration, including two of the four ongoing Phase III trials. The net reimbursement payment we make to Takeda for these trials offsets collaboration revenue.

At this time we are not providing guidance for royalties. However, recall that we are entitled to receive royalties based on a percentage of net sales of ADCETRIS by Takeda ranging from the mid-teens to the mid-20s. As Clay described, ADCETRIS is now approved in 39 countries and we anticipate additional global approvals and launches that will drive royalty revenues going forward.

We recently reported that Takeda surpassed $100 million in annual sales of ADCETRIS during 2013. This triggered a one-time milestone payment of $5 million that will be recorded as royalty revenue in the first quarter of 2014.

Exceeding the annual $100 million threshold also resulted in an increase in the royalty rate from the mid-teens to high-teens on sales above that amount during 2013. As a reminder, we report royalty amounts one quarter in arrears upon those amounts being reported to us.

We expect R&D expenses to be in the range of $245 million to $265 million and SG&A expenses to be in the range of $100 million to $110 million. ADCETRIS related activities will continue to be the primary driver of our expenses, including clinical trials and commercial activities.

The planned increase in R&D expenses also reflects investment in our ADC pipeline, including our five clinical stage programs and two additional programs expected to advance in the clinical development this year. We expect the cost of sales as a percent of sales during 2014 will be in the range of 10% to 12%.

Expenses include non-cash amounts projected to be $50 million, approximately $40 million of which relates to share-based compensation expense. Our guidance for share-based compensation expenses based on several factors including share price and is therefore subject to change. We anticipate non-cash expense to be evenly allocated between SG&A and R&D.

So we ended 2013 in a strong financial position. With planned cash receipts from ADCETRIS sales and royalties as well as payments under our ADC collaborations, we expect to end 2014 with more $250 million in cash and investments and we continue to be well positioned to execute on our growth plans.

With that, I'll turn the call back over to Clay.

Clay Siegall

Thanks, Todd. Before we open the call to questions, I'd like to summarize our expected 2014 milestones. For ADCETRIS these include reporting data from the Phase III AETHERA trial in the second half of the year, reporting data from several corporate and investigator sponsored trials including the bendamustine combination in salvage Hodgkin lymphoma and the front-line Hodgkin lymphoma patients aged 60 and above, reporting data from our clinical trials in DLBCL and in collaboration with Takeda obtaining approvals for ADCETRIS in additional countries worldwide.

Across our pipeline the upcoming milestones include reporting data from our SGN-CD19A trial for B-cell non-Hodgkin lymphoma and ALL, reporting data from our SGN-CD33A trial in AML and advancing two new programs into clinical development, including SGN-CD70A.

At this point we will open the line for Q&A. We ask that you limit yourself to one to two questions, unless you want to ask questions about the Super Bowl Champion Seattle Seahawks then the floor is yours. Operator, please open the call for questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) The first question comes from the line of Thomas Wei with Jefferies & Company. Please go ahead.

Thomas Wei - Jefferies & Company

Thanks. I had a couple of questions. The first was on AETHERA and the second one is on diffuse large B-cell. So for AETHERA, I just wanted to get a little bit more of your sense around overall survival data and how long it might take to actually be able to have the question of whether or not that approach will lead to an overall survival benefit in patients, what might we see at the end of the year in that regard. And then in diffuse large B-cell lymphoma, in the non-CD30 over-expressing patients, how do you think we should think about a bar for efficacy there that would cause you to move forward in an unselected population, what do you want to see in order to call that a success? Thanks.

Clay Siegall

Thanks, Thomas. We'll take the questions one at a time. We'll start with AETHERA. As you know our endpoints, PSS, it's not overall survival. So at this point I don't want to make any promises for what we'll see at the end of this year, in the second half of this year we've alluding to look at the data. We follow people for OS, that's certainly something that we will but keep in mind that patients that get placebo can bridge over to cross over I should say to AETHERA which could found a little bit, the overall survival data which is why it's not the primary endpoint.

Now, concerning DLBCL, and non-CD30 expression patients we have an arm of our trial and we reported data in the low 40% response rate with roughly half of them being CRs, I don't remember the exact number but it was a strong data and very heavily pre-treated patients. As far as in the non-CD30 expressing, we call them undetectable, because using different types of technology we really detect CD30 in most if not all of these patients, so I wouldn't call them non-CD30 expressing, it's just really below the histology comfort zone.

And so I don't know what the efficacy bar is, I don't want to address the question, I don't want to put a line in the sand, but certainly we'd like to see something that is a fairly decent which really provides patients benefits there, in order for us to consider any changes in what we're doing whether we'd use just the histology CD30 positive or use completely unselected in the future. Jonathan, do you have anything you want to add to that?

Jonathan Drachman

I'd just add that in the data that were presented at ASH we didn't see a difference in the response rate in the patients who had very low CD30 expression versus higher CD30 expression. So that's why we're studying the patients who are even below the level of detectability using immunohistochemistry and to see what that shows.

Operator

Thank you. Our next question is from the line of Jason Kantor with Credit Suisse. Please go ahead.

Jason Kantor - Credit Suisse

Chris and Clay congratulations on your Seahawks that was unwatched. Two questions, if you work to six or seven doses on average on the last medication. And how much do you think that are already incorporates the due (inaudible) sources of the fund

Clay Siegall

Jason it's really hard -- Jason you're breaking up a little bit, I heard a little bit of that.

Jason Kantor - Credit Suisse

All right, let me try one more time and if it doesn't work, you just move on. Just wondering if the six to seven average doses if that's really -- if that's the front end of what would be expected to be a growing trend in terms of the new label that you have? And also when we say that you're going to make a decisions on the next steps for DLBCL in 2014, are you talking about a Phase 3 go, no-go or is there some scenario where you'd have to run another Phase 2 for that program? Thanks.

Clay Siegall

Let me take the second question first, on the decisions on DLBCL, we've not outlined the specific program that we want to do. So I don't want to write here today explaining a specific Phase 3 or Phase 2 program, we're going to sometime this year, we're going to make decisions on DLBCL and we certainly will explain that and make sure it's transparent and clear and there's good scientific and clinical rationale behind whatever make. So I appreciate your question on that we're not ready to address that and provide specific information yet.

We are excited about DLBCL, you know, that we've discussed this, but specifics will remain to the future. And as far as the 6 to 7 doses Chris, would you like to address that?

Chris Boerner

Sure, thanks for the question, Jason, certainly the six or seven doses have been we've been aided by the update to the label that we had new recall that we remove six new cycles last year and that certainly has enabled us t get in and talk to physicians about the importance of treating the progression or unacceptable toxicity consistent with our label. In terms of where that business in terms of the longer term view on where duration is going. I think there are several challenges to you driving duration in the setting, the first of which is that you have a limited history of treating to progression in this particular setting.

Second, you see responses with ADCETRIS very quickly and in many cases patients are getting CRs with just a handful of cycles and that, of course, leads physicians to consider giving treatment holidays.

And then, finally, very rarely you see duration of therapy exceed that what you saw in clinical trial, so in some ways that does an upward bound. Nevertheless, we continue our commercial efforts here. We think there are some opportunity to continue to grow duration of therapy and that’s our focus for 2014.

Operator

Thank you. Our next question is from the line of Matt Roden with UBS. Please go ahead.

Matt Roden - UBS

Thanks very much for taking the question and congrats to the Seahawks (inaudible). I want to ask about the AETHERA study, it sounds like you are moving away from an event based PFS analysis to what maybe as a one or two-year landmark analysis? Can you just comment a little bit on the protocol what you are looking at?

And then, I guess, can you just talk about the rational for reading it out early versus letting it run out further for events and how confident you are that you are not increasing the risk of failure of the study?

Clay Siegall

Sure, Matt. I will start with an answer and then I will turn it off -- turn over to Jonathan to talk about the protocol and the landmark bench of it. But as far as reading out early, we have been updating quarter-by-quarter this trial for quite some time now, and initially we thought it read out it would have, quite frankly, we already had read out.

And then we updated on the quarter and status looking later and looking later and looking later on successive quarters, to the point where when you have satiation taking a look at the number of events, PFS events, it looks like it’s many years out if it will ever even hit it.

And so it gets to a point where it, there is no rational to actually keep it going indefinitely and so we are excited by this. But as you know data has -- data is speak louder than anybody can speak and so the important thing is to get the data and not try to read too much into a study that’s going on a lot longer than one would take.

So I think there is a lot of rationale for reading this out early and as a company we have talked about whether this has risk or not and we feel that that is the right thing to do, it’s a right thing to do for the company for the patient, for the drug. Jonathan, would you like to talk a little bit about why we are doing the two year analysis?

Jonathan Drachman

Yeah. I think, Clay, really covered most of the issues, remember that the trial was designed many years ago using the best data that we had available at the time to try to predict what would be appropriate end point.

The time point that we are choosing to read it out is not random, it takes the last patient on who was enrolled allow that patient to complete therapy and then be followed up until the last planned scan.

So all patients was within off drug and followed from times of enrollment for a minimum of two years and we believe that that provides a very good opportunity to see a mature PFS curve. So that’s the rational for us.

Matt Roden - UBS

Okay. And then may be just a commercial question with respect to the ADCETRIS sales guidance, if I take the 4Q sales number annualize that and then basically affected for the price that you have already taken assuming no further price increases I get through the above the top end of the range? So I was wondering if you could talk about what you are seeing in the market that would lead us to expect that there is actually a volume decrease on a year-over-year basis then again also for the annualized 4Q numbers? Just trying to get a sense for what you are seeing, what is in the guidance because it occurs me that on label, Hodgkin ALCL it has now companion CTCL, is there anything else in there and what you assume for price? Thanks.

Clay Siegall

Matt thanks. We have tried to be historical careful with our sales guidance and I think that that is something that we are -- we pride ourselves in that we are happy with and I don’t think you should read too much into some of the statements that you are making. We’re basically projecting net sales growth. Keep in mind that, there is lot of differences that happens on gross to net and try to build through that and that contributes to sum up this. And Todd maybe you want to jump in a little bit and mention a few points.

Todd Simpson

Yeah. So Matt keep in mind that while we did have a price increase that affects about 60% of our business, I think we talked on earlier calls that about 40% of our business is reimbursed through government payers. And the ability to increase the price of a drug is limited in those situations, typically to inflation. So we haven’t seen the same level of price increases hitting the kind of a government piece of our business.

But if you look at our guidance for this year, it does project an increase for this year. As we talked about in prior calls, our strategy is to grow ADCETRIS sales incrementally until we get label expansions. And we’ve got as you heard four Phase III studies that are underway that we hope will generate the data that supports label expansion. AETHERA is the first of those coming up this, but the next year we look to data out of the ALCANZA trial and then falling that will be the obviously large front-line trials. So that’s the overall plan and strategy for growing ADCETRIS and we feel like this will be an important year for the drug.

Matt Roden - UBS

Thanks very much.

Operator

Thank you. Our next question is from the line of Cory Kasimov with JPMorgan. Please go ahead.

Cory Kasimov - JPMorgan

Hey, good afternoon, guys. Thanks for taking the questions. So, Clay, if you can throw an extra Seahawks question and I guess, I'm wondering, if you’ve offered Richard Sherman a job on your commercial team. Imagine if that -- he’d be been even bigger hit in your legal antibody?

Clay Siegall

We actually offered Richard Sherman a job, but I think he really has one, so he turned this down.

Cory Kasimov - JPMorgan

Better stay with what you’re doing now. Any way can you say whether you submitted placeholders for either CD19A or 33A to ASCO or if you are waiting for more mature data at ASH?

Clay Siegall

We normally don't like to speak too much about what we haven’t get in, confirm that we are going to be presenting at a conference. So it's something that we are load to do. I think that on the 33A front, just to give you a little foreshadowing, that's something that we are going to be more excited to present at an ASH type of conference, but the CD19 is potentially ASCO.

Cory Kasimov - JPMorgan

Okay. And then not sure if you're able to answer this one or not yet either on CD19A, but do you have any early feedback at this point on how the prophylactic steroid eye drops are helping to alleviate the ocular effects that you reported at ASH?

Clay Siegall

It’s a very, very good question, and we are collecting data and that’s something that would be subject to a presentation at an appropriate conference, but you could be sure we’re staring at that closely.

Cory Kasimov - JPMorgan

Okay, great. Thank you.

Operator

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

John Sonnier - William Blair

Hey, thanks for taking the question. Chris just thinking about duration, I guess the other way to increase patients cycle exposures re-treatments. Back in July, you kind of signaled that you wouldn’t get label, but you also indicated that you would file for a compendia listing. Just update us on where you are in that process? Do you see interest in re-treatment and once compendia list, if it is already, should that cover you from a reimbursement perspective? Thanks.

Clay Siegall

John, thank you for the question. I’ll start and then turn it over to Chris for more comments. As far as compendia and strategy and specific interactions, that’s something that we really don't want to make specific comments on, so I hope you appreciate that. As far as re-treatments and what’s going on in the world of re-treatment, especially now with our 16 cycle cap removed, Chris can comment on.

Chris Boerner

Sure and thanks for the question, John. We are seeing a modest amount of re-treatment, real world now. It’s still limited and that’s not terribly surprising given the time that ADCETRIS has been on the market, but we are starting to see more re-treatment show up in patient first that we review periodically.

We are also starting to see patient being treated with ADCETRIS in multiple lines of therapy, which is another way that you can grow duration of the time. For example, a patient like a treated pre-transplant and then post-transplanted as, he or she builds the transplant. Again, that’s very limited at this point. But you would expect to see that potentially increase overtime.

And then finally, we know from the market research we have conducted that we continue to see the majority of physicians over 90% of them saying that they would be willing to retreat with ADCETRIS, which is obviously a very good time to look forward.

John Sonnier - William Blair

Okay. Thank you.

Operator

Thank you. Our next question is from the line with Adnan Butt with RBC. Please go ahead.

Adnan Butt - RBC

Hey, Clay. Do you expect the Seahawks to sort of keep doing next year?

Clay Siegall

We are very bullish on the Seahawks -- we are very bullish on Seattle Genetics and the Seattle Seahawks.

Adnan Butt - RBC

Okay. So now for the questions, first on the pipeline, so are you able to say at this time that the promising response rates you expected from the CD19A, so essentially there was some guidance as the response rates been higher in NHL versus ALL. Can you comment some more on that and then secondly from a commercial standpoint, right, so, do you need to make any infrastructure commitments to Canada and are you seeing actual sales there now at this time? Thanks.

Clay Siegall

Okay. Good questions. First of all, on the CD19A, we presented data at ASH on our ALL trial at the very beginning of the trial and so as interim data. And we were just seeing dose escalations. And we show that we had multiple responses. We also mentioned as part of that presentation as well as in our press release surrounding ASH that we've also seen multiple CRs in NHL. We did not say whether it’s higher, lower or whatever, we just said we've seen CRs in both ALO and in NHL. So, clearly the CD19A program is the molecules and active molecules. And as Cory brought up earlier, we've seen some ocular toxicity and we're evaluating that and taking a look at that doses and schedules and prophylactic steroids and other things we're looking at.

For any more information on CD19, we really going to have to wait till our future conference, where we present the data in context by the investigators, so that -- it’s a very strong package. But we are excited with this program so. But that be clear. Now, on the commercial side, you ask the question about infrastructure in Canada and we are just getting close reimbursement in Canada. It has been slow and Chris, you could talk about that, yeah. So, today, there really has been very limited sales just because we still don’t have full reimbursement.

Chris Boerner

Yeah, that’s correct. Adnan, ADCETRIS has been approved in Canada for about a year now. We are seeing some sales but as Clay mentioned, we would expect to see those sales increase as coverage and reimbursement comes online. We do have both NHLs on the medical sides as well as reps who are covering all of the key major institutions for that treat Hodgkin and ALCL in Canada now. And then as coverage and reimbursement comes online, we'll of course reevaluate any additional infrastructure need.

Clay Siegall

Adnan, just one more point on infrastructure, we have build the distribution and logistical pieces for Canada, so that’s all in place. We did it with a very efficient model very similar to what we did in the U.S. that’s very scalable and expandable.

Adnan Butt - RBC

Thanks.

Operator

Thank you. Our next question is from the line of Howard Liang with Leerink Partners. Please go ahead.

Richard Newitter - Leerink Partners

Hi, this is Richard calling for Howard. Thanks for taking my question. I was wondering if you had any update on the rates of pancreatitis things, et cetera. So, I believe you previously state the instances about 1 and 600, is that still the case?

Clay Siegall

Thanks for the question, Rich. With pancreatitis, we've previously given a rate. We have set us a relatively where occurrences in our label and at this point, we have no update.

Richard Newitter - Leerink Partners

Okay. Thank you.

Operator

Thank you. Our next question is from the line of Bret Holley with Guggenheim Securities. Please go ahead.

Bret Holley - Guggenheim Securities

Hey. You got my name (inaudible). I was wondering -- just wondering, if you currently had an estimate of what percentage of elderly Hodgkin patients are poor candidates for ABVD. What is your market research value in both the U.S. and potentially outside of the U.S.?

Clay Siegall

Brett, thanks for the question about the elderly Hodgkin patients. Jonathan, can you address that?

Jonathan Drachman

Yeah. So it’s not been a very well studied population in general but we believe that its about 10% to 20% of the total Hodgkin lymphoma population would be over 60 and not very good candidate for standard ABVD. If you look at historically the outcomes for patients over 60 who are treated with standard therapy, it is much worse than for the younger patients.

Bret Holley - Guggenheim Securities

And is that much worse on efficacy or on side effects or both?

Jonathan Drachman

It’s both, the tolerability and the outcomes.

Bret Holley - Guggenheim Securities

Okay, thank you.

Operator

Thank you. Our next question is come from the line of Navdeep Singh with Goldman Sachs. Please go ahead.

Navdeep Singh - Goldman Sachs

Hey guys and thanks for taking my questions. I know it’s still pretty early but I was hoping you can provide an update on how you are working through the dosing regimen for SGN-CD19, given the (inaudible) and just may be discuss the available options?

Clay Siegall

Thank you for the question. That certainly going to be subject of the presentation that we will do and we will talk about it as you, I am sure, are aware we have a weekly dosing that was going on in the ALL trial and every third week dosing that was in our NHL trial. And we’ve really not recorded any data in any substantive way at all. The NHL trial, I accept to say we have seen multiple CRs. In the ALL trial, we only put out a little bit of data from the dose escalation that was ongoing with ALL. So to make any comments on this call is not really appropriate but you can give be sure that we are taking a look at the dose schedule and prophylaxis and things like that.

Navdeep Singh - Goldman Sachs

Okay. Thanks Clay. And then a quick financial question, I noticed that there was a material ramp in R&D or material ramp projected in R&D for 2014, should we be thinking of similar ramp in 2015?

Clay Siegall

Todd, would you like to address that?

Todd Simpson

Yeah. Hi. So just to be clear, our guidance was for 2014. We haven’t guided 2015 yet but sort of stepping back from it, you know what you have heard us talk about is how we plan to continue to invest in the trial that we hope eventually expand the ADCETRIS label that’s the top priority. But also we’ve got five, soon to be seven additional ADC candidates in the pipeline and Jonathan’s group has pretty significant undertaking to underway that continue to position us for additional R&D.

So we feel like we are in a very strong financial position and we are trying to build ADCETRIS into a big global brand and find the next ADCETRIS-like drug in our pipeline and we are going to continue to invest in building that future for the company.

Clay Siegall

On top of what Todd says and thank you Todd, it was well stated. Couple of years back, before ADCETRIS was approved, probably within the year before it was approved, we made a corporate decision to file up what we call our IND engine. And -- but the goal was to use our technology, our ADC technology to see if we could more broadly help patients with different targets, new antibodies to a variety of different hematologic malignancies and solid tumors.

So we press the gas pedal down on our IND engine. And you are seeing the results, we have four molecules going to clinic that’s a record for Seattle Genetics since 2013. We really have a couple more this year, couple more next year, couple more after that. We are going to continue to pump out new exciting IND candidates. And when you look at the field wherein there is a lot of attrition for molecule despite the best research that you could do, cancer is tough to treat.

And so we are even trying our best to make a difference in patients’ lives. We’ve really done that with ADCETRIS. We have 30 trials with ADCETRIS to broaden it out but the time is right now to invest in trying to find additional drug and with our exciting technology. And so we are doing that now and certainly will increase our R&D spend while our goal as a company is we are about 45 billion or whatever we are market capital as they build a very strong company with a $10 billion, $15 billion, $20 billion, $25 billion, keep growing the market cap and the size of the company so that we could benefit more patients. That takes effort and that takes investments and so that’s what we’re doing now with our IND engine.

Navdeep Singh - Goldman Sachs

Okay. Thanks a lot. I appreciate the color.

Operator

Thank you. Our next question is from the line of Chad Messer with Needham and Company. Please go ahead.

Chad Messer - Needham and Company

Great. Thanks for taking my question. So recently, we paid up a decision chunk of change to get some of the newer advances that you put forward in your ADC technology with the PBDs of the site specific conjugation. First, am I correct in assuming that other partners would also have to pay up for similar advances?

And then second, maybe a little more broadly, how much conversation do you have with existing or potential partners about new advances in your ADC technology that might benefit them. Is that priority to you at all or is the folks a lot more on the internal pipeline going forward?

Clay Siegall

Chad, thanks for the questions. First and foremost, Seattle Genetics is a drug company that we make our own drug but the part of our business is our ADC technology work with partners and I’m going to turn it over to Eric Dobmeier to discuss this.

Eric Dobmeier

Hey, Chad. So your specific question about do our partners have access to the PBDs and their existing deals. It still is a little bit different but in general term, our collaborators would need to expand their deals to get PBD access for the majority of the partnership and that's something we do have pretty regular meetings with our collaborators.

As you know, the ADC deals are structured so we receive these milestones and royalties and our partners are responsible for all the development work, at on their own time but we generally have meetings with them periodically, quarterly or annually to talk about how the programs are going and talk about if there are new technology improvements that they might be interested in. We do have those conversations. So we are very aware with what they're doing but again the programs are there and of course, that our main focus is on our own pipeline.

Chad Messer - Needham and Company

Great. Thanks and congratulations on the progress during the year.

Operator

Thank you. Our next question is from the line of Mara Goldstein with Cantor Fitzgerald. Please go ahead.

Mara Goldstein - Cantor Fitzgerald

Thanks very much. Just another follow-up question on the dosing and treatment holiday and retreatment because it seems like you are seeing some movement in the market. And I’m wondering if you can just shed some light on what the drug holidays that you think that you are seeing in the market place that patient is getting. So the duration of that and is that really considered by physicians, is it a retreatment or is it really a drug holiday?

Clay Siegall

Thank you for the question, Mara. I’ll turn over to Chris.

Chris Boerner

Yeah. So the question around duration and has it really drug holidays. The reason that physician consider drug holidays for patients with Hodgkin lymphoma and the reason is that somewhat limiting on duration is that with ADCETRIS you tend to get for many patients, response is early. So patients may given into a PR or a CR after a handful of cycles.

And so the question comes up, should the physician be willing to take the patient off of therapy, give them some time away from therapy, knowing that if the patient relapses, they can come back and retreat them. In fact, we had presented data previously with ADCETRIS showing pretty and process retreatment data.

So that’s the issue. We are seeing some of that. It is one of the reasons that patients come up off of therapy as to the exact percentage. Drug holidays that we are getting, we don’t have a lot of specific information that I can share with you on the call.

Mara Goldstein - Cantor Fitzgerald

Okay. Thank you.

Operator

Thank you. There are no additional questions at this time. I’d like to pass the call back to management for closing remarks.

Peggy Pinkston

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

Operator

Ladies and gentlemen, this does conclude the Seattle Genetics fourth quarter and year 2013 financial results conference call. If you would like to listen to a replay of today’s conference, please dial 1-800-406-7325, or internationally 303-590-3030 and enter pass code 4661963. We like to thank you for your participation. You may now disconnect.

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Seattle Genetics, Inc. (SGEN): Q4 EPS of $-0.13 beats by $0.11. Revenue of $67.4M (+5.5% Y/Y) beats by $8.13M.