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

Executives

Clay Siegall - President and Chief Executive Officer

Todd Simpson - Chief Financial Officer

Eric Dobmeier - Chief Business Officer

Tom Reynolds - Chief Medical Officer

Analysts

George Farmer - Wachovia Securities

Mark Monane - Needham and Company

William Sargent - Banc of America Securities

John Sonnier - William Blair

Bret Holley - CIBC World Markets

David Garrett - Fortis Securities

Dhesh Govender - Hardt & Company

Douglas Chow - Caris and Company

Jason Kantor - RBC

Seattle Genetics (SGEN) Q3 2007 Earnings Call October 23, 2007 2:30 PM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the 2007 Seattle Genetics Third Quarter Financial and Business Update Conference Call. At this time, all participants are in a listen-only mode. And later, we will conduct a question-and-answer session. Instructions will be given at that time (Operator Instructions). As a reminder, this conference is being recorded today, Tuesday, October 23, 2007.

I would now like to hand the conference over to Ms. Peggy Pinkston, Associate Director of Corporate Communications. Please go ahead, ma'am.

Peggy Pinkston

Thank you. I'd like to welcome all of you to Seattle Genetics third quarter 2007 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.

The press release of our financial results is available on our web site. 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 web site for information concerning the factors that could affect the Company.

I will now turn the call over to Clay.

Clay Siegall

Thanks, Peg, and thank you all for joining us this afternoon. We are making substantial progress in advancing our pipeline of antibody-based cancer therapies focused in particular on initiating multiple clinical trials with SGN-40, SGN-33 and SGN-35 over the remainder of 2007 and into early 2008.

We're also reporting clinical data on SGN-33 and SGN-35 this quarter while continuing to advance our preclinical pipeline, notably SGN-70, which is on track to enter clinical trials in 2008.

We ended the third quarter in a strong financial position, enabling us to execute and deliver on our goals. Today, I will discuss the progress we're making on our pipeline and then Todd will go over the financial details for the third quarter and the first nine months of 2007 as well as our expectations for the rest of this year. Then, we will open the line for questions.

SGN-40 is a humanized antibody targeted to CD40 that we're developing under a worldwide collaboration agreement with Genentech. Within the next six months, our joint development plan includes initiating five clerical trials in non-Hodgkin's lymphoma and multiple myeloma through a combination of standard regimens in addition to advancing the ongoing single-agent trial in diffused large B-cell lymphoma.

We and our collaborator Genentech expect to initiate three of these trials before the end of this year, each of which will trigger a milestone payment from Genentech. The first is a Phase Ib combination trial of SGN-40 plus Revlimid and dexamethasone for relapse or refractory multiple myeloma.

This trial is expected to enroll up to 40 multiple myeloma patients to evaluate safety, preliminary activity and pharmacokinetics of the combination. The second is a Phase Ib trial to evaluate safety and preliminary activity of the combination of SGN-40 plus Rituxan in relapse follicular and marginal zone B-cell lymphoma.

And the third is Phase IIb trial of RITUXAN ICE, or R-ICE, plus or minus SGN-40 in diffuse large B-cell lymphoma patients. The study will be the randomized, double-blind and placebo-controlled in approximately 200 second-line patients. This international trial will assess safety and potential efficacy of adding SGN-40 to standard second-line therapy.

There is strong rationale for this trial based on a reported single-agent antitumor activity in SGN-40, as well as preclinical data demonstrating enhanced efficacy of SGN-40 in combination quarter chemotherapy.

We are presenting data tomorrow at the joint AACR-EORTC meeting in San Francisco, preclinical data that illustrates two mechanisms of action of SGN-40 in models of non-Hodgkin's lymphoma.

The data show that SGN-40 depletes an important survival signal for cancer cells, while also increasing the level of another protein thought to enhance susceptibility of tumor cells to chemotherapy.

We believe that this is the first report of a therapeutic antibody able to modulate both of these pathways. At the American Society of Hematology, or ASH, annual meeting in December, we will present further data on preclinical drug combinations with SGN-40.

In the first quarter of 2008, we plan to initiate two additional Phase Ib combination trials with SGN-40, one in combination with Rituxan and Gemzar in patients with relapse diffuse large B-cell lymphoma, who are not eligible for intensive therapy, and a second in combination VELCADE for relapsed multiple myeloma.

These Phase Ib trials will assess the safety and activity of SGN-40 in combination with regimens commonly used in the treatment of non-Hodgkin's lymphoma and multiple myeloma.

Over the next few quarters, we are focused on new trial initiations, many of which will trigger milestone payments to Seattle Genetics and on advancing this product candidate in important indications with unmet medical needs.

I will move on now to SGN-33, our humanized antibody targeting CD33. During the third quarter, we completed dose escalation in our Phase Ia study for patients with acute myeloid leukemia, or AML, and myelodysplastic syndrome, MDS.

I am pleased to say that our abstract with these data was accepted for oral presentation on Monday, December 10th during ASH. This is our first substantive presentation of data from this trial, which was designed to assess safety, pharmacokinetics and efficacy of escalating doses of SGN-33.

Meanwhile, based on the promising data, we have observed during Phase Ia, we're enrolling patients into Phase Ib. This study will further define the single-agent response rate of SGN-33 in up to 50 AML and MDS patients treated at the top dose. We expect to complete enrollment in this study during 2008.

Before the end of this year, we are also planning to initiate two combination studies of SGN-33 in AML and MDS. The first of these trials is a Phase IIb randomized double-blind placebo-controlled study of low-dose cytarabine, plus or minus SGN-33 in approximately 220 AML patients 60 years of age or older.

Older AML patients have limited treatment options, particularly because many of them can’t tolerate the side effects of intensive chemotherapy regimens. Their median survival from diagnosis is less than six months, clear evidence that there is an unmet medical need for therapies in this patient population. Therefore, the primary endpoint of our Phase IIb trial is overall survival.

The other combination study is a Phase I trial of SGN-33 plus Revlimid in intermediate and high-risk MDS patients. In this study, which is open for enrollment, we are evaluating the tolerability, pharmacokinetic profile and antitumor activity of increasing doses of SGN-33 when combined with Revlimid.

At ASH, we will present preclinical data showing the ability of Revlimid to augment the effect or functions of SGN-33, which represent important mechanisms of action for this antibody. The trial will allow us to evaluate this combination in the clinical setting and assess potential benefits for this underserved patient population.

Our third clinical program is SGN-35, a proprietary antibody drug conjugate that is in a Phase I clinical trial for patients with Hodgkin's lymphoma, or CD30 positive T-cell lymphoma. We're evaluating safety, antitumor activity and pharmacokinetics in cohorts of patients receiving escalating doses of SGN-35.

Multiple objective responses have been observed at well-tolerated doses of SGN-35 in heavily pretreated relapse patients. The study is progressing rapidly and dose escalation continues. We plan to report these exciting interim data at the International symposium on Hodgkin's Lymphoma, a biannual meeting of top oncologists from around the world being held November 4 through 7 in Cologne, Germany.

We had originally planned to present these data at ASH, but were surprised that our abstract was not accepted for presentation. The Cologne meeting is a unique opportunity to highlight our SGN-35 data. Our presentation will take place on Monday, November 5. We plan to issue a press release and make the presentation available on our website that morning.

We and our collaborators are also advancing multiple other ADC programs. Tomorrow at the EORTC meeting, we will present for the first time preclinical data on our AFX anti-CD19 ADC program. The CD19 antigen is a pan-B-cell marker expressed on many hematologic malignancies, including non-Hodgkin's lymphoma, chronic lymphocytic leukemia and acute lymphoblastic leukemia.

Our anti-CD19 ADC induces durable tumor regressions at low doses in multiple cancer models. This poster will be available on our website tomorrow. Several of our ADC collaborators, including CuraGen and MedImmune, are also presenting this week on their own ADC program utilizing our technology.

With SGN-35 showing objective responses in Phase I, progress with our preclinical ADC programs and momentum by our collaborators, our ADC technology is demonstrating its significant potential to impact the way cancer is treated.

Lastly, we continue to make progress with our anti-CD70 programs. SGN-70, a humanized antibody targeted to CD70; and SGN-75, an anti-CD70 ADC. CD70 targeted therapies have potential for the treatment of hematologic malignancies in solid tumors, as well as autoimmune disease based on preclinical data demonstrating their ability to selectively deplete activated but not resting T-cells. We're planning an IND for SGN-70 in 2008 followed by SGN-75 in 2009.

In summary, we have a robust clinical pipeline, increasingly exciting data with our ADC technology and a number of milestones planned across our portfolio for the rest of 2007 and into 2008.

For SGN-40, we and Genentech are initiating five combination trials in non-Hodgkin's lymphoma and multiple myeloma, triggering substantial milestone payments to Seattle Genetics. For SGN-33, we have advanced into Phase Ib single-agent trial and are initiating two combination studies in AML and MDS.

In addition, we look forward to the oral presentation of the promising data from our Phase Ia dose escalation study at ASH in December. For SGN-35, we're continuing dose escalation in our Phase I clinical trial and report data from our ongoing study at the International Symposium on Hodgkin's lymphoma in early November.

For SGN-70, we're preparing to initiate a Phase I trial in 2008, and we will present preclinical SGN-40 findings as well as our data on our anti-CD19 ADC program tomorrow at the EORTC meeting. Several of our collaborators are also presenting data from their own ADC programs.

Finally, I wanted to mention that we plan to host an R&D day in New York on December 12, the day after ASH ends. The primary purposes of the meeting are to review our SGN-35 data from the Cologne Hodgkin's lymphoma meeting and our SGN-33 data from ASH.

We will also discuss our SGN-40 development program and provide an opportunity for our investigators to speak about their experience in treating patients and with these three product candidates. The event will be web cast and we will provide additional information as it gets closer. Now I will turn the call over to Todd to discuss financial results.

Todd Simpson

All right. Thanks, Clay, and thanks everyone for joining on the call this afternoon. Today, I'll highlight our 2007 third quarter and year-to-date financial results. I'll also provide an update on our financial outlook for the remainder of the year.

Our 2007 revenues have nearly doubled over 2006, coming in at $4.6 million in the third quarter and $14.6 million for the year-to-date. As with last quarter, these increases are primarily the result of amounts earned under our SGN-40 collaboration with Genentech.

Our operating expenses reflect the substantial progress being made in our pipeline development programs that Clay highlighted. Specifically, research and development expense in the third quarter of 2007 was $17.7 million, up from $9.8 million for the third quarter in 2006, and was $44.7 million for the year-to-date in 2007 compared to $29.1 million for the same period in 2006.

To put this in context, the increases in 2007 operating expenses were primarily driven by higher clinical development activities, the largest portion of which relates to SGN-40. These and other SGN-40 development costs are reflected in our expenses but are funded by Genentech under the collaboration.

These reimbursements, along with the $60 million up-front payment and expected milestone payments, are amortized into revenue over the six-year development period of the collaboration.

Clinical trial costs for SGN-40 and SGN-33 increased both quarter over quarter and year over year in 2007, reflecting progress made towards initiating two international Phase IIb studies.

During the quarter, we entered into agreements with clinical research organizations and began site initiation for both the SGN-40 R-ICE combination trial and the SGN-33 cytarabine combination trial. Also contributing to increased expenses in 2007 were manufacturing campaigns for SGN-33 and SGN-70 to provide clinical supply for upcoming trials.

Non-cash stock-based compensation expense for the year-to-date in 2007 was $5.4 million, compared to $3.2 million for the same period in 2006. This reflects new hires as well as an increase in our stock price this year, which increases the per-share cost of each stock option grant.

To wrap up, we're increasing our clinical development activities, specifically for SGN-40 and SGN-33. We have also been successful in recruiting additional talent to further build our clinical and development teams. Because of this, we expect higher than previously planned clinical development expenses as well as employee costs, the majority of which though relates to non-cash stock-based compensation expense.

To reflect this, we're increasing our operating expense guidance by approximately $10 million, bringing our outlook to the $70 to $80 million range for the year. However, since much of this increase is either non-cash or relates to SGN-40 development that is funded by Genentech, we're not changing our cash guidance.

We ended the quarter with just over $124 million in cash and investments and continue to expect to be cash flow positive for the year. Cash provided from operating activities should continue to be in the $35 to $45 million range for the year and we should end 2007 with more than $120 million in cash and investments.

And with that, I'm going to turn the call back over to Clay.

Clay Siegall

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

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will conduct the question-and-answer session (Operator Instructions). Our first question comes from the line of George Farmer with Wachovia Securities.

George Farmer - Wachovia Securities

Hi. Thanks for taking my question. Clay, can you talk about what you saw in Phase Ia trial with SGN-33 that necessitates a Phase 1b study, or maybe elaborate a little bit on the differences between the two trials?

Clay Siegall

Well, the Phase Ia data will be presented at ASH, so we have not really presented or discussed the specific data. We said that we are excited about the promising data, and that will be presented at ASH later.

One can imagine that if you have cohorts of three, four patients in a cohort, it's very hard to get any specific information. I'm looking at any value of response rate. So you have to -- the study we said is a 50-patient study, Phase Ib, and we'll be discussing that in more detail at our R&D day.

George Farmer - Wachovia Securities

Okay. And Todd, can you talk about the share count at the end of the quarter? Was there a major equity purchase? Was that by Genentech, or did something else go on?

Todd Simpson

No. There was no equity purchase by Genentech. We ended the quarter at about $67 million shares. That's up a little bit during the quarter because of the conversion that we made of all the preferred stock into common.

George Farmer - Wachovia Securities

Okay.

Todd Simpson

At the beginning of the quarter that was about $9 million shares.

George Farmer - Wachovia Securities

And has all of the preferred stock been converted?

Todd Simpson

Yes.

George Farmer - Wachovia Securities

Okay. Thanks.

Operator

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

Mark Monane - Needham and Company

Good afternoon and thanks for taking my question. Greetings from the AACR meeting, all activity I look forward to your poster tomorrow. Could you outline the strategy on the rollout for the SGN-40 project? Does it reflect confidence in the programs and how should we evaluate the data as they come out, in terms of predicting the success of the molecule -- SGN-35 clinical trials?

Clay Siegall

So what I can tell you on SGN-40 is, we are actually very confident with the data. The data that we presented at last year's ASH was single-agent data and we showed objective response rate with single-agent SGN-40.

And when you look at most antibodies that are used in cancer therapy, the way that they are really used is in combination with chemotherapy. And working together with our partner Genentech who has really the premiere experience in the world developing cancer antibodies, we have come up with a plan to go after two diseases initially, and that's non-Hodgkin's lymphoma B-cell, non-Hodgkin's lymphoma; and multiple myeloma.

And the best way to go after these diseases in a robust fashion, in a fashion that we could not have done for say, by ourselves, which is why we did this deal to expand the program is to initiate five trials in a short time period.

Keep in mind, we announced our deal in January, we went through HSR clearance, so we really didn't start working with Genentech until February. And then, it takes a number of -- it took a number of months to plan everything out, organize it, get the protocols ready, go file with the agency, get IRBs and contracts and everything.

So the fruits of all of the work we have done throughout 2007 are becoming apparent very soon as we start announcing trial after trial after trial. That way, really what's happening is within the next six months, we're going to have five trials initiations. I think that is a very strong sign of confidence in the program by us and Genentech in the amount of effort and the amount of dollars being spent on the program.

Tom Reynolds

Yes. And this is Tom Reynolds. I will just second that and say that we're looking for a couple of things out of these trials. One is to really understand what the tolerability profile is going to be, and what our flexibility is to use the antibody with multiple different chemotherapeutic regimens, both in second-line and in third-line.

And the second is, we've got a very large commitment with Genentech to the study of R-ICE, plus and minus SGN-40. We think that's really going to be, lay the basis for potential approval pathway, although in and of itself, it's not designed as a registration study. So we are pleased that both we and Genentech are committed to this.

Mark Monane - Needham and Company

That was helpful. And lastly, in terms of the milestone payment, maybe Todd can comment -- when will milestone from the programs be recognized, as the programs will allow first patient? How should we think about that in terms of understanding the financial statement?

Todd Simpson

Yes. Most clinical trial initiation milestones are based on first patient treatment. So as those occur, we will certainly announce initiation of the clinical trials, and to the extent we can, the amount of the milestones. And those will start to happen over the next quarter.

Mark Monane - Needham and Company

Will they be amortized, spread over the life of the contract or will they be one-time payments?

Todd Simpson

The cash payment is obviously one-time. They get amortized into revenue over the development period.

Mark Monane - Needham and Company

Okay.

Todd Simpson

Six years.

Mark Monane - Needham and Company

Six years. Thank you. Thanks for that information and congratulations on your progress.

Todd Simpson

Thanks.

Operator

Our next question comes from the line William Sargent, Banc of America. Please go ahead.

William Sargent - Banc of America Securities

Clay, thank you for taking my question. Clay, I was wondering if you could comment on why you think perhaps that the SGN-35 abstract wasn't accepted at ASH, and if you could talk to any DLPs or any safety signals you see at this point.

Clay Siegall

Sure. Actually, I'd rather have, maybe Tom, you want to comment on ASH and policies and things like that.

Tom Reynolds

Yes. So we submitted the abstract to ASH. We were, as Clay said, pretty surprised that it wasn't accepted and as were our investigators because they think the data is pretty compelling. And we are glad to scoop ASH and take it earlier out to you at Cologne. So we feel good about that.

ASH has policy really if you read their abstract submission guideline, saying they don't want to accept data from studies that are in progress or interim in presenting preliminary data. That's clearly where we are. We have not even hit an MTD yet. So it's consistent with that policy. They are known to make exceptions. We don't know exactly who the review group is, but we have talked with ASH and we know that their policies were followed.

So we are comfortable and we're very pleased that we can take this to Cologne. We're going to be detailing not only the multiple objective responses when the Cologne meeting happens, but what we start seeing in terms of toxicities.

And suffice it to say, we have not seen toxicities that precluded us continuing to do dose escalation. So we have not yet hit an MTD. And it's a pretty standard design in terms of 3 plus 3 for DLTs, we're not at a point, where we have reached that maximum tolerated dose.

William Sargent - Banc of America Securities

And you have an estimate as to when you -- never mind, hopefully longer is better. And then, do you have any plans at this point.

Can you talk about any plans with the 2 ADC programs, or 3 ADC programs, going on at EORTC about next steps on any of those programs?

Clay Siegall

At EORTC, we’re talking about some of our pre-clinical program like our CD19 program. Is that what you're referring to?

William Sargent - Banc of America Securities

I meant, I guess there is some, it looks like some collaborative work with Genentech being presented, as well as the CuraGen and MedImmune molecules. You could comment on any next steps with those programs?

Clay Siegall

Well, I can't make any specific comments about our collaborators' programs. Certainly, there will be presentations, like you say, from Genentech, CuraGen and MedImmune. And we're delighted with our relationship with them.

We support the efforts that we're doing, that they're doing, and we look forward to some of our collaborators taking their products into clinical trials. And we think, that that should happen going forward, and based on how much effort and work they are doing on those programs. But I can't give you any specific on those.

William Sargent - Banc of America Securities

Do you have any anticipation for milestones from those programs in the fourth quarter?

Eric Dobmeier

This is Eric. What our partners have said publicly, Progenics has said that they're going to file an IND for their PSMA targeted ADC, before the end of this year.

And there are a number of other collaborators, including Bayer, MedImmune and Genentech that are looking at getting into the clinic within roughly the next year to 18 months. So we’re expecting milestones over that period of time.

We haven't given any specific guidance, and it's really -- it's up to our collaborators when they decide to make move to advance these programs forward.

William Sargent - Banc of America Securities

Okay. Great, thanks for taking my question.

Operator

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

John Sonnier - William Blair

Thanks for taking the question. Just a couple of, Clay. Talk about the spectrum of SGN-40 and 33 studies, I guess with respect to -- what are the possibilities in 2008?

It’s clear you have a lot of trials starting and some that have been started. But what are the real possibilities for insights into clinical activity with SGN-40; which of the trials is it the IIb R-ICE study, or something other? And then, with 33, what might we look for over the next, say, four to five quarters?

Clay Siegall

Sure. There's a lot of questions built into that, and so maybe we will try to answer between myself and Tom Reynolds, our CMO, we'll try to address that on SGN-40 and SGN-33.

Maybe we can start with 33 since, we have a Phase Ib study we have talked about. Tom, do you want to…

Tom Reynolds

Yes. So let’s talking -- starting out with 33, what’s really key to us is our open-label Ib study, which is accruing and accruing rapidly at this point. We're trying to get a much more precise estimate of what our objective response rate is in both AML and MDS, which will really help us further define and refine our registration strategy.

And we’re expecting that to accrue rapidly, and for us to get data throughout the year. We maybe in a position to report data late in the year or early in 2009 from that study, but that‘s moving well.

For our other two studies, the one is simply a dose escalation study in combination with Revlimid and MDS truly to provide a safety margin for us and to let us know one of the possible pathways for us in moving forward into this big market that's still pretty unmet from a survival perspective.

The other issue is for the 33 study, plus minus ARC, that study is going to -- is a blinded study, it's randomized. And we are anticipating that that's about a two-year study to run. So we won't be having any real insight into that study anytime soon. So I think that may answer the 33 perspective.

John Sonnier - William Blair

Okay. So Ib possibly late 2008 early '09 and then the dose escalation with Rev, do we get insights into that data next year?

Clay Siegall

We may have some. We would certainly like to report preliminary data, if we're in the opportunity. Part of this depends on how far we go up in the dose escalation. We would expect to be able to do that.

John Sonnier - William Blair

All right. And 40?

Tom Reynolds

So 40, next year is really all about execution for 40. We’ve got studies starting late this year, early next year. For the large part, they were dose escalation and they are in a pretty competitive landscape. So it is unlikely that we would have some stand-up data to report, although we may have some things late in the year.

The R-ICE study is clearly a randomized and blinded study, and that's about, again, a two-year study to get that done. So we would not anticipate any news from that study next year.

John Sonnier - William Blair

Okay.

Clay Siegall

We also have the single-agent Phase II study that we are in progress with, and that is an opportunity for presentation in 2008.

Tom Reynolds

Yes. Clay, and I would agree. We’re well on track in accruing that study. We've said, we expect to complete enrollment and we'll be following the patients next year. And then, we would like to be able to present data late in the year on that study as well. So, there will be some visibility into SGN-40.

John Sonnier - William Blair

Okay. That’s helpful. And then with 35 as the strategy to first identify the maximum tolerated dose before you move into a broader cohort, or do you know enough now about activity that you might start that study before you would identify the maximum tolerated dose?

Tom Reynolds

Given this is an antibody drug conjugate, and given this is one of the few that’s ever been in the clinic and probably one of the first with our technology itself, we would really like to see where this goes in terms of MTD.

John Sonnier - William Blair

Okay.

Tom Reynolds

We're very pleased that we've been able to push the dose up as high as we have, which is it's better tolerated than we had anticipated. And where we think there's going to be a nice therapeutic margin. We'd like to know what that is.

We’ve also been doing a lot of modeling preclinically to help try to identify what the best regimen is going to be to take forward into later-stage studies that can lead to approval, and we're looking at both strategies where we could use this as a more intensive chemo-type regimen, as well as in a maintenance therapy for different aspects of Hodgkin's disease and other 30-positive malignancies.

So we're doing a lot of the initial work, which we think will lead to a very clear registration strategy, and we're spending a good bit of time with key opinion leaders hammering out what is our fastest route to market with this product.

John Sonnier - William Blair

Okay. That’s helpful. I appreciate it.

Tom Reynolds

You’re welcome.

Operator

The next question comes from the line Bret Holley with CIBC World Markets. Please go ahead.

Bret Holley - CIBC World Markets

Yeah. Hi, thanks for taking my question, guys. I have one question about SGN-40. It seems like the single-agent data for the Phase II. I guess, Clay, you said, you know, maybe later in the year in 2008. Has that trial progressed a little bit slower than your expectations?

Clay Siegall

Not really. I think it's a competitive landscape and it’s been progressing maybe a little bit at the beginning, a little slower, but the accrual rate has picked up a lot on that. So I think that we're pretty much on track.

Tom Reynolds

Yeah. The only other comment I would make is, often we see in these studies, you kind of go through the dog days in the summer, and we definitely hit some of those. We have now seen a really nice blast of accrual this fall and we are anticipating that we will be finished enrollment in the first half of 2008.

Bret Holley - CIBC World Markets

Okay. And then on SGN-33, what I'm wondering there is, is your relative level of enthusiasm for NHL versus -- for AML, sorry -- versus MDS, I mean is it fair to say, since you're moving so aggressively forward with Phase IIb Combo or a C trial, that you're I guess more pleased with the results that you have gotten, the early results in AML versus MDS?

Clay Siegall

So I think the thing to say is we're very enthusiastic about 33 and AML, and we're particularly enthusiastic with elderly AML who have very few treatment options, cannot tolerate high-dose chemotherapy. And where we think the antibody due to its tolerability and responses that we are seeing is going to be a real winner there in elderly AML.

And we think it's the fastest path to market. MDS is a little bit more complex. It's a little bit more competitive.

We think there is some interesting data that's going to be coming out at ASH for a number of other compounds, and those are things that could easily be combinable with 33. And we look forward to that data which will help us craft our strategy in MDS that we'll then be able to share with you.

Bret Holley - CIBC World Markets

And I guess my final question is, would you expect additive or somewhat synergistic activity with ARC in the AML trial? What has your preclinical work kind of told you on that front?

Clay Siegall

Our preclinical work says, the two are easily combinable. We believe they work by very different mechanisms of action. And we think -- you know, if you think about how IRC is working, it's directly killing tumor burden.

And we think that what we have seen so far in 33 may lead us to believe that what it's able to do is wipe out those residual cells. So I'm not sure that we can clearly call it synergistic or simply additive at this point, but we think those two will work by different mechanisms to give us a superior result to either alone.

Bret Holley - CIBC World Markets

Okay. Thank you very much.

Clay Siegall

You're welcome.

Operator

Our next question comes from the line of David Garrett with Fortis Securities. Please go ahead.

David Garrett - Fortis Securities

Good afternoon. I just have a question about SGN-33. Acknowledging that we haven't seen the Phase Ia data yet, excuse me, could you just talk about the rationale for the study that you decided to conduct?

And what I'm really getting at is, you probably have a limited set of data from the Phase Ia. You know, why not do a smaller Phase II trial that's probably cheaper and much faster to enroll and get data or versus doing just a full fledged Phase III. Why this Phase IIb trial, if you could just give us some background on that? Thanks.

Tom Reynolds

So we are really targeting moving quickly toward registration in elderly AML. We think that SGN-33 is easily combinable with low-dose chemotherapy. If there is anything that is standard-of-care in this difficult arena, it's low-dose ARC, which is one of the few things that can work and has been shown to extend survival in patients.

And so we think it's an extremely logical way to go forward, and we think it has less regulatory risk than other pathways that you might imagine. We also think that doing a smaller study, while it might be interesting, might not give us definitive data as to whether to move forward, and if so, how.

I think the clinical trials arena is fraught with small studies which yield interesting data that are not definitive enough and don't really move a company forward. We are willing to place a bet on 33 in AML. We think it's a good drug for the indication.

David Garrett - Fortis Securities

What kind of separation are you expecting then?

Tom Reynolds

Separation and survival?

David Garrett - Fortis Securities

Yes.

Tom Reynolds

We're thinking that we're going to see a substantive increase in survival, and that's what we need to see in the study to move things forward. One of the things that -- the reason we do this as a Phase II and not as a Phase III is the size of the study, of the pivotal study, really needs to be based on some data for survival. And it's too early in our Phase I study, which is a single-arm study, to really know exactly what that looks like.

So we've done some modeling. We know that the average survival in the ARC group is somewhere between five to six months. We think a reasonable hypothesis is that we could be able to extent that at least two months beyond that.

If we were to see something like that, our conversations with the FDA indicate that things could get very interesting with that moving quickly. Should we not see something that's several months longer, it means that we may need to do a second study to confirm the survival benefit.

In addition, there may be some differences in the shape of the curve as to whether we actually keep a smaller but real fraction of patients disease free for a long period of time. So a lot will depend on the data from the study, and we're very bullish about how this may come out.

David Garrett - Fortis Securities

And if I could ask a quick follow-up, how many patients will we see in Germany for SGN-35 in November?

Tom Reynolds

I believe it's 23 patients worth of data.

David Garrett - Fortis Securities

Thanks.

Operator

Our next question comes from the line of Dhesh Govender with Hardt & Company. Please go ahead.

Dhesh Govender - Hardt & Company

Yes. Thanks for taking my question. Could you remind us then on the SGN-35 trial if there is a loading dose and if you're dosing once a week? As well as a follow-on, what would you expect, in terms of response rates in this patient population, what would get the oncology community kind of excited?

Tom Reynolds

So -- this is Tom again. So just to remind you about the trial, the trial is dosing every three weeks and patients get two doses, two cycles of three weeks each. Then, they are evaluated for response. If they have a CR, a PR or a stable disease and some evidence of clinical benefit, they can get additional cycles and continue this on for quite some period of time.

We will be showing data on longevity of treatment, which we've been very pleased about. So I think that answers one facet of your question. And can you remind me of the second facet?

Dhesh Govender - Hardt & Company

There is no leading dose then?

Tom Reynolds

There is no leading dose required here. And we just go straight in with the dose and have not seen anything that would make us change that.

Dhesh Govender - Hardt & Company

And this patient population, in terms of response rates, what would get people excited? You know, it's…

Tom Reynolds

So what we have heard from our KOLs is people will get interested at a response rate of 20% or better. And -- because the patient population we're targeting are relapsed and refractory Hodgkin's disease.

They have really failed all approved therapies and have no other options. Some patients have transient responses in the 20% to 30% range to GEM or other agents, but become refractory and can't move on.

So if we have patients who have failed all those things and we're seeing a 20% to 30% response rate of things that are durable and we're in good shape.

Dhesh Govender - Hardt & Company

And then, you will expect to finish enrollment sometime in the first half of '08?

Tom Reynolds

It depends on how high we go in the dose, but I think that is a very reasonable expectation. For the dose escalation, we plan to enroll some additional patients at MTD to further define the response rate at MTD, but I still believe we would have that done by the first half of 2008. I think that's very reasonable.

Dhesh Govender - Hardt & Company

Great. And then final question, Todd. Since you have five SGN-40 trials, partner with Genentech, and then also the one, Revlimid, what type of milestones, and when do they trigger? Is it upon the first patient enrollment, or the actual okay by the IRBs?

Todd Simpson

As I said before, they are typically triggered off the first patient treated into the study.

Dhesh Govender - Hardt & Company

Thank you.

Operator

Our next question comes from the line of Douglas Chow, Caris and Company. Please go ahead.

Douglas Chow - Caris and Company

Hi. Thank you. I'm just wondering with the SGN-40 trials, you got several of them, the Phase Ib’s, would you have the number of patients you're expecting for the one in combination with bortezomib and standard chemotherapy?

Clay Siegall

Yes, those are all new kind of standard Phase I designs where we have got anywhere between 30 to 40 patients per study. Part of it depends on how the dose escalation goes, and then they almost all have expansion cohorts at the top dose. It's really better to find the response rate and survival benefit.

Douglas Chow - Caris and Company

Okay. And so the primary endpoint for these will be response rates, or are you just looking --?

Clay Siegall

The primary response -- the primary endpoint for these studies is safety and the identification of MTD. We're looking at response rate and we'll continue to follow patients out the way you do in oncology for looking at how that impacts progression-free survival and survival. But those are clearly secondaries.

Douglas Chow - Caris and Company

Okay. Great. Thanks a lot.

Operator

Our next question comes from line of Jason Kantor with RBC. Please go ahead.

Jason Kantor - RBC

Hi. Thank you for taking my call. A question about the CD19 program. Can you help us understand how your molecule may be differentiated? Do you think it is relative to other CD19 programs out there? It's a pretty hot target and there are some others either in the clinic or approaching the clinic.

Clay Siegall

Right. Well, we've been interested in CD19 for some time now. We have developed an antibody that has high affinity that we're excited with. The antibody that we have has some interesting properties and the drug conjugate has some interesting properties.

We think that, when we look at our drug linker technology that’s built into this ADC, it is outside of MDR, multidrug resistance, and we think that's unique. We also have a very stable linker system. So we think that the stability of the linker system is going to be important.

We also have a synthetic drug linker system, so from a manufacturing standpoint, it's very robust. And, we have -- our antibody is unique in that it cross-reacts with humans and non-human primates, and that's very rare for a CD19 antibody.

And so it enables us to really understand this molecule more and test it in a way that you can't otherwise test it. So there's a variety of properties of this agent that we like. It's very active, and we think that it could become an important molecule going forward.

Jason Kantor - RBC

Yes. Excellent.

Clay Siegall

Go ahead.

Jason Kantor - RBC

I was going to say, are these all the same technologies in terms linker and drug that are in your SGN-35 as well?

Clay Siegall

Not necessarily.

Jason Kantor - RBC

Do you want to expand?

Clay Siegall

The SGN-35 product uses what we call VCE that you are aware of, and the SGN-19 product uses MCF. So, it's a slightly different drug linker.

Jason Kantor - RBC

Okay. Then my other question is about partnering strategy on some of these earlier stage drugs, the CD19, CD70, CD75. You know, it seems that you're going to be moving a bunch of these other programs into later-stage development. It's going to begin to cost.

Are you thinking towards earlier partnering or later partnering or no partnering at all for some of these earlier assets?

Clay Siegall

I'm going to let Eric take that.

Eric Dobmeier

Hey, Jason.

Jason Kantor - RBC

Hi.

Eric Dobmeier

It's a good question. There certainly is the potential that we could do some partnering deals on our earlier-staged assets. Obviously, there are trade-offs you get less value when something is earlier on before you have clinical proof of concept. Our focus in partnering is actually to look for potential ex-U.S. partnerships for 33 and 35.

We have not reported the data yet, but there has been a good amount of interest in those programs, and that is an area where we could leverage the resources of a partner either through retaining U.S. rights and having them do ex-U.S., rest of world development or some sort of co-development relationship in the U.S. with the partner bearing the load ex-U.S.

So that is actually where we're focusing our efforts. And in the short term, I wouldn't rule out an earlier-stage partnership. The good news is, we have a strong financial position and the resources to keep moving these programs forward and building additional value. So we're not pressed to do partnerships unless the terms are attractive.

Jason Kantor - RBC

Great. Thanks. Thanks for the answers.

Operator

I'm showing no further questions at this time. I would like to turn it back to Peggy Pinkston for closing remarks.

Peggy Pinkston

Okay. Thank you, operator. That concludes our call. Thank you all for joining us this afternoon.

Operator

Ladies and gentlemen, that does conclude today's Seattle Genetics third quarter 2007 financial and business update. 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 Q3 2007 Earnings Call Transcript
This Transcript
All Transcripts