Seattle Genetics: The Busy Season Is Set to Begin

| About: Seattle Genetics, (SGEN)

This autumn is turning out to be a busy season for Seattle Genetics (NASDAQ:SGEN). The company is expecting results from up to three clinical trials between September and October- each of which, if successful, may form the basis for the filing of an NDA.

Two trials are nearing completion for flagship compound SGN-35, or brentuximab vedotin. SGN-35 is an antibody-drug-congugate (ADC) targeted to CD30. The CD30 antigen is a marker for Hodgkin’s Lymphoma (HL), Anaplastic Large Cell Lymphoma (ALCL), as well as other T-cell lymphomas. The two pivotal trials are in refractory Hodgkin’s Lymphoma and ALCL.

All eyes are on the pivotal SGN-35 trial in refractory Hodgkin’s Lymphoma. Management has consistently said this is their top priority. Newly detected Hodgkin’s Lymphoma is highly curable; a combination of chemo drugs known as ABVD allows about 85% of patients to attain complete remission. However, over time, about one-third of all patients will become refractory to conventional treatment, and in this setting, there is no standardized care and prognosis becomes progressively worse over time.

In the Phase I dose escalating study, patients with advanced disease who were treated with at least 1.2 mg/kg of drug showed a better than 50% overall response rate and greater than 30% had complete remissions. The dose use in the pivotal trial is 1.8mg/kg. It is a single arm trial conducted under an SPA with the primary endpoint being objective response. Success in this trial is key to the success of the program.

A Phase I trial is underway to provide evidence for SGN-35 as an option for first line therapy in combination with ABVD. Another is testing the compound for use in re-treatment of patients who have already failed initial SGN-35 therapy. Promising interim results from the re-treatment trial were disclosed at ASCO. If confirmed, SGN-35 could become an agent used for long-term care in Hodgkin’s Lymphoma patients. Both studies are important in extending the use of the agent, but data will not be available until 2012. Only about 8000 new cases are diagnosed each year, but over 100,000 people are living with the disease, representing a significant market opportunity.

ALCL is another indication management has often alluded to as a possible route to regulatory approval for SGN-35. This disease is a form of T-cell non-Hodgkin’s Lymphoma and is very rare. It comes in two forms, cutaneous and systemic. While cutaneous ALCL is slow growing and may even disappear on its own, systemic ALCL is aggressive, often occurs in children, and is fatal without treatment. Standard chemotherapy typically results in remission, but few options exist for relapsed disease. SGN-35 has shown good efficacy in this setting. As I had mentioned, this is a rare disease; only about 2000 new cases are diagnosed each year. Sales in this indication will be significantly lower than in HL.

While the focus may be on SGN-35, a surprise may lie in store with its other advanced candidate, the naked antibody SGN-33 (lintuzumab). This is an antibody against CD33, an antigen primarily found on AML and MDS cancer cells. The company has downplayed this compound, maintaining that their focus is on SGN-35. Most analysts don’t give it much chance of succeeding- but there lies the upside. Phase I results for SGN-33 were not spectacular, only about 7% of patients in this single agent trial achieved a complete response, compared to 18% for cytarabine in a recent UK study in patients of a similar age. But remember, the SGN-33 results were for patients across all doses in the Phase I study.

The standard treatment for AML is high-dose daunorubicin plus cytarabine. This treatment regimen can put up to 70% of patients into remission. Unfortunately, patients over age 65 (the median age at diagnosis is 63) receive less benefit from this therapy, and often are not candidates for this type of intensive treatment. For them, cytarabine alone is the standard of care. If SGN-33 is able to provide an additional benefit on top of cytarabine, it would give many patients a much needed treatment option. If successful in AML and MDS, SGN-33 has the potential to be a highly valuable asset. Celgene’s Vidaza for treatment of AML and MDS had sales of $387 million in 2009 and is estimated to hit $500 million in 2010- and it is still growing fast.

There is also SGN-70, SGN-75 and ASG-5ME in the clinic in Phase I, but I’ll skip over them.

In December 2009, Genentech terminated its SGN-40 (dacetuzumab) collaboration with Seattle Genetics- but don’t expect the compound to disappear. SGN-40’s target, CD40 is very compelling, it is found on malignant haemopoietic cells as well as solid tumors. Genentech had big hopes for SGN-40 and ran a broad range of trials that included Multiple Myeloma and Non-Hodgkin’s Lymphoma. It showed activity in the form of objective responses, but wasn’t quite good enough.

Seattle Genetics has seen this before. The naked antibody portion of SGN-35, SGN-30, had also failed in the clinic in Hodgkin’s Lymphoma for lack of activity; but with the addition of a drug conjugate, the newly empowered antibody is now close to a regulatory filing. I fully expect an ADC empowered version of SGN-40 to appear in the near future.

Seattle Genetics signed an agreement with Genentech August 3, 2010 expanding their ADC collaboration with $12 million upfront and up to $900 million in milestones and mid-single digit worldwide royalties. This only confirms my belief in the company’s ADC technology. Seattle Genetics’ technology provides Genentech the ability to increase the potency of its antibodies without sacrificing safety. It will surely help in the life-cycle management of its large stable of drugs and works out nicely for Seattle Genetics as well, since practically all the research will be carried out by its partner. The deal compares well with that of Regeneron, a highly regarded antibody company, which extended a drug development agreement with Astellas into 2018 for total payments of $295 million and mid-single digit royalties.

In a way, Seattle Genetics story has some resemblance to that of PDLI. Both companies developed disruptive antibody technologies that were broadly licensed while at the same time working on their own internal discovery projects. Multiple marketed drugs using PDLI’s technology provided the company with a steady stream of royalty payments though it struggled with its own pipeline.

If Seattle Genetics’ licensees succeed in the future -- and there’s every reason to believe at least some of them will -- it will get a boost from its own royalty stream. For now at least, it is looking like Seattle Genetics may succeed in the drug discovery game as well.

Disclosure: Long SGEN, RHHBY.PK