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Seattle Genetics Inc. (NASDAQ:SGEN)

Q2 2008 Earnings Call

July 22, 2008 5:00 pm ET

Executives

Peggy Pinkston - Director of Corporate Communications

Clay Siegall - President and CEO

Todd Simpson - CFO

Eric Dobmeier - Chief Business Officer

Tom Reynolds - Chief Medical Officer

Analysts

Mark Monane - Needham

Mona Ashiya - J.P. Morgan

Jason Kantor - RBC Capital Markets

Bret Holley - Oppenheimer

David Miller - Biotech Stock Research

Katherine Kim - Banc of America Securities

Operator

Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the Seattle Genetics’ second quarter 2008 financial results conference call. (Operator instructions) This conference is being recorded today, Tuesday July 22, 2008.

I'd now like to turn the conference over to Peggy Pinkston, Director of Corporate Communications. Please go ahead ma’am.

Peggy Pinkston

Great, thank you operator. I'd like to welcome you all to Seattle Genetics' Second Quarter 2008 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.

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 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 had a great second quarter with significant progress across our product pipeline. We now have 11 ongoing clinical trials of our three lead programs; SGN-40, SGN-33, and SGN-35, and plans to move a fourth product candidate, SGN-70 into the clinic this year. We also recently announced a new Antibody Drug Conjugate deal with DAIICHI SANKYO, and we are in a strong financial position to continue advancing our pipeline.

Today, I'll update you on our clinical programs and collaborations then I'll turn the call over to Todd to discuss our financial results; after which we'll open the call for your questions.

Let me begin with an update of our SGN-40 and SGN-33 programs, which are steadily advancing. During the second quarter, we in Genentech, initiated two additional clinical trials with SGN-40. Now, all six planned SGN-40 trials for non-Hodgkin's lymphoma and multiple myeloma are ongoing. We reported final data from our Phase I SGN-40 clinical trial in non-Hodgkin lymphoma at the International Conference on Malignant Lymphoma in June, demonstrating multiple objective responses at well tolerated doses.

We also recently completed enrollment in the phase II single-agent clinical trial in the diffused large B-cell lymphoma, and plan to submit an abstract or presentation at the American Society of Hematology, or ASH, annual meeting in December.

With SGN- 33, our three ongoing trials in acute myeloid leukemia and myelodysplastic syndrome are progressing well. We’re particularly enthusiastic about the potential role of SGN-33 in the treatment of older patients with AML, where immediate survival with chemotherapies is less than six months and patients are in dire need of more effective and better tolerated treatment. This is the basis for our phase IIb randomized trial of low-dose cytarabine plus, or minus SGN-33, which is on track for data in late 2009 or the first half of 2010. We expect to complete accrual to our phase Ib single agent trial in AML and MDS this year and report data in 2009. And our Revlimid combination trail in advanced MDS is underway.

I would like to focus the bulk of my comments today on SGN-35, an antibody-drug conjugate, or ADC targeted to CD30. The positive SGN-35 data presented at the American Society of Clinical Oncology annual meeting and at the International Conference on Malignant Lymphoma conference in June, with a highlight of our second quarter.

At these conferences, we reported data on 39 patients, primarily with Hodgkin lymphoma who were treated with single agent SGN-35. Patients had received a median of three prior treatments and three quarters had received prior stem cell transplants; at doses of 1.2 milligram per kilogram and higher administered every three weeks, 45% of patients had objective responses including 23% with complete responses. SGN-35 was generally well tolerated and notably 81% of patients with at least one post base line tumor assessment and reductions in tumor volume. We recently completed enrollment to this trial and multiple patients continue on treatment.

We plan to submit an abstract of presentation of additional data at ASCO. These entrusted data support aggressively, in advancing this program to address the unmet medical need in relapsed and refractory Hodgkin lymphoma and CD30 positive T-cell lymphomas. We believe that the strong response rate, including durable CR at well-tolerated doses, or the caliber of data not often seen in Phase I clinical trials, particularly given the heavily pretreated patient population in the study.

Considering that there are limited alternative therapies in this study, we plan to advance SGN-35 as rapidly as possible towards registration. We have received orphan drug designation for SGN-35 and Hodgkin lymphoma and intend to collaborate closely with the FDA to determine our pivotal trials strategy.

We expect to provide information about our development plans for SGN-35 later this year. Meanwhile, our Phase I weekly dosing clinical trial of SGN-35 is ongoing. This study is designed to further explore the potential of our ADC technology by evaluating alternative dose and scheduled regimens.

Our near term focus with SGN-35 is on the relapsed and refractory lymphoma setting, where we believe, both a rapid registration pathway and a substantial commercial opportunity exist, although frontline therapies for Hodgkin and T-cell lymphoma can achieve cures or long-term emissions. It's important to note that a significant number of patients require additional treatment, including stem cell transplant and other chemotherapy regimens.

Based on our market research, we project worldwide sales potential for SGN-35 in relapsed or refractory Hodgkin and anaplastic large-cell lymphoma of $300 million to $400 million annually.

We also believe there is a significant upside to SGN-35's commercial opportunity in several ways. First, SGN-35 has potential in the frontline lymphoma setting in combination with, or as an alternative to chemotherapy. Conventional frontline therapy regimens expose patients to significant toxicities and can result in secondary malignancies. Consequently, oncologists are looking for new agents to supplement or decrease the intensity of these regimens to improve patient outcome.

Second, SGN-35 may have applicability in other subtypes of non-Hodgkin lymphoma where CD30 is expressed, such as some B-cell and Cutaneous lymphoma.

And third, SGN-35 may also have application in the treatment of other immune diseases, indications and graph were opposed to these through its potential, to deplete activated but not resting T-cells that are responsible for these conditions without broadly suppressing the immune system. Our future clinical development activities will examine ways to broaden the utilization of SGN-35 into these additional areas of patient need, which can further increase its market potential.

SGN-35 is an exciting program that we believe has a rapid development pathway and we look forward to updating you on our progress during 2008.

The next product candidate we plan to advance into the clinic is SGN-70, a humanized antibody targeting CD70. In our preclinical models, antibody targeting of CD70 selectively depletes activated T and B-cells and is an effective treatment for autoimmune disease at well-tolerated doses. We have completed the preclinical studies and the regulatory filings necessary to enable us to initiate a Phase I clinical trial during the second half of this year in healthy volunteers. The trial is designed to evaluate the safety and pharmacokinetics of SGN-70 in humans, and will serve as a foundation for future clinical trials in patients with autoimmune disease.

We are also advancing three pre-clinical ADC's that provide us with IED candidates over the next several years. These are; SGN-75 for CD70 positive hematologic malignancies and solid tumors; an anti-CD19 ADC for hematologic malignancies; and AGS-5 ADC for solid tumors, which we are developing in collaboration with Agensys, a subsidiary of Astellas Pharma.

Our positive SGN-35 clinical data has enhanced the value of our ADC technologies to empower antibodies. This was demonstrated by our recent ADC via the DAIICHI SANKYO, one of the largest pharmaceutical companies in Japan, and our seventh active ADC collaborator. Under the agreement, DAIICHI SANKYO paid us an upfront fee of $4 million for access to our ADC technology, to our single antigen expressed on solid tumors.

Seattle Genetics is also entitled to receive annual maintenance and research depot fees, progress dependant milestone payments and mid-single digit royalties are net sales of resulting products. The financial terms of the DAIICHI SANKYO deal are substantially higher than our past ADC license agreement, reflecting the increasing value of our technologies.

Progress by our ADC collaborators is also providing further scientific and clinical validation of the technology. For example, during the second quarter, CuraGen initiated two Phase II clinical trials with CR011 ADC for Melanoma and breast cancer. And we achieved two milestones under our ADC deal with Genentech, including one trigger by its IND filing for an ADC, utilizing our technology. We also extended the research term under our ADC collaboration with Bayer for which we received the payment of $1 million.

Over the past several years, we’ve raised a significant amount of capital. More than $65 million through ADC technology licensing deals with leading companies such as Genentech, MedImmune, Bayer, CuraGen, Progenics and now, DAIICHI SANKYO. In addition to the upward payments, these deals have the potential to generate future revenue streams from milestones in royalties as our collaborators advanced our ADC program into and through clinical trials. We attend to continue to do ADC deals that include either strong financial terms or the ability to obtain product rights through co-development or opted rights.

Looking ahead, our key milestones of the remainder of 2008 and into the first half of 2009 includes for SGN-40, reporting the Phase II single agent data from our diffused large B-cell lymphoma trial at ASH, continuing to advance our five other ongoing clinical trials and reporting additional data in 2009.

For SGN-33; completing our phase Ib single agent trial, advancing the Revlimid combination trial in MDS and moving on global Phase IIB trial in older AML patients towards completion in late 2009 over the first half of 2010.

For SGN-35, presenting additional data at ASH, finalizing our development and regulatory strategy during 2008 and planning to initiate pivotal trials in the first half of 2009. And for SGN-70, initiating a Phase I trail autoimmune disease this year.

With that I’ll turn the call over to Todd to discuss financial results.

Todd Simpson

Alright, thanks Clay, and thanks everyone for joining in on the call this afternoon. Our second quarter 2008 financial results were inline with our expectations and reflect the increases in both our revenue and our expenses resulting from the expanded activities in our pipeline that Clay just described.

For the second quarter of 2008, we posted record revenues of $10 million, 78% higher than revenues in the second quarter of 2007. Revenues for the year-to-date in 2008 were $17.1 million compared to $9.9 million for the first six months of 2007. These revenues primarily reflect amounts earned under our SGN-40 collaboration with Genentech which increased year-over-year.

Our ADC collaborations also contributed to revenues during the second quarter in a significant way including milestones achieved with CuraGen and Genentech as well as an extension of our ADC collaboration with Bayer.

Operating expenses in the second quarter of 2008, were $27.6 million and $53.7 million for the year-to-date, compared to $18 million for the quarter and $32.6 million for the year-to-date in 2007. These planned increases reflect higher R&D expenses which were $45.7 million for the year-to-date in 2008 compared to $27 million for the year-to-date in 2007.

The principal drivers at this increase were as follows. First, clinical development expenses for SGN-40, SGN-33 and SGN-35 increased, reflecting the 11 clinical trials that are now ongoing. Second, manufacturing cost for SGN-40 increased related to campaigning underway to ensure an uninterrupted supply of clinical materials for trials. Similarly, manufacturing activities are now underway and we will continue through the remainder of the year for SGN-35 and SGN-33 product supply.

Lastly, employee cost increased, driven by growth in our clinical and development groups. Total operating expenses include non-cash share based compensation expense of $5 million for the year-to-date in 2008 compared to $3.4 million for the same period in 2007. And just as a reminder, SGN-40 collaboration cost including the manufacturing and clinical cost that I mentioned are included in our expenses but are fully reimbursed by Genentech under the collaboration.

From a cash standpoint, we ended the second quarter 2008 with approximately $198 million in cash and investments to fund our development programs. For the year-to-date, we have received approximately $27 million in milestone and other repayments under our SGN-40 and ADC collaborations including the upfront payment from our recent ADC deal with DAIICHI SANKYO. These dollars represent non-diluted capital that partially offsets the investment in our pipeline. We continue to expect in 2008 with more than a $140 million in cash in investments.

And with that I will turn the call back over to Clay.

Clay Siegall

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

Question-and-Answer Session

Operator

Thank you. We will now begin the Question and Answer session. (Operator Instructions). Our first question comes from the line of Mark Monane from Needham. Please go ahead.

Mark Monane - Needham

Good afternoon and greetings from New York City. A very hot day in New York City and seventh day in a row of temperatures over 90. So let's talk about the hot SGN-35 which you seem very excited about. Is there a potential for this? Could you outline again for us the strategy in recurrent disease? Is there a sequencing event that makes 35 more likely to work in patients who have failed frontline therapy, and is there potential for moving this on a frontline therapy later?

Clay Siegall

Mark, this is Clay. We're sorry about the heat in New York. It's very, very pleasant in Seattle. Although SGN-35 is hot, I will agree with that. We'll start off by saying that, so far in our trial, we've only used patients that are relapse/refractory. It's not up that frontline file that we have. And perhaps, Tom, would you like to comment a little bit more on Mark's question?

Tom Reynolds

Yes. So, we believe that the biggest unmet need in Hodgkin Lymphoma is the unmet need of relapse/refractory lymphoma, either following transplant, or those patients who can't tolerate transplant. And we've clearly addressed that in our Phase I data and look toward that for your initial registration studies as a strong potential there. We've got lot of interest across the world from investigators and co-operative groups in moving this up toward frontline, and have a number of proposals that we're already starting to talk about, about how to do that. What's clear there, is that although frontline therapy is one of the success stories of modern medicine in treating cancer, it's not the final answer. And we see now, a lot of these patients do have late relapses; we see secondary malignancies and other core morbidities that come along with the therapy. We think 35 offers a potential for a less toxic therapy based on the data we've seen so far, and we're looking forward to moving this quickly into the frontline setting with our investigators and collaborators.

Mark Monane - Needham

And does 35 have the potential to be the first Seattle Genetics drug to the market?

Clay Siegall

Yeah, I think it does have that potential. We’re working very hard on it, we’re exited as we’ve said in the prepared remarks. You don’t often see data like this with a Phase I product. And as a result, we have put lot of attention and time to it, and are working hard right now to develop a strong pathway toward registration that we’ll update everyone on later this year.

Mark Monane - Needham

A lot of the patients with Hodgkin's lymphoma are children. Would that potentially increase the opportunity here in terms of more favorable or expedient regulatory path?

Clay Siegall

We believe there’s a number of opportunities in pediatric space, but clearly is just somewhat of a larger chunk of the market, and we believe those patients will be able to tolerate the product well and have just much a potential to respond. We also think that there are possibilities for pediatric exclusivity, these are things that we would look into, and obviously will be part of our discussions with FDA and other competent authorities.

Mark Monane - Needham

And then, Glen has a financial question for Todd.

Unidentified Analyst

Hi Todd. I had a question. Any updates on your 2008 cash burn, considering that you are ramping up research and development, and your long-term investments, what do they represents in terms of their components?

Todd Simpson

Hey, good question. First of all on burn guidance, we updated our guidance on our last quarterly call to really reflect the expanded activities, really across at portfolio, but primarily on SGN-35, are projected cash use in operations this year is in the $75 million to $85 million range, and again we expect to end the year with north of $140 million in cash and investments on the balance sheet. With respect to our investment portfolio, we have a very conservative investment policy, it's all high grade, primarily AA, AAA rated paper, no exposure in subprime debt, or anything like that, just a very high quality investment portfolio.

Unidentified Analyst

Thank you.

Mark Monane - Needham

Thanks for the added information.

Operator

Thank you. Our next question comes from Mona Ashiya from J.P. Morgan. Please go ahead.

Mona Ashiya - J.P. Morgan

Hi guys. This is for Cory Kasimov. A couple of questions. So, just following up on Mark's question, I understand that you will be sliding more details on the SGN-35 program later in the year. But even at this point, it would be great to hear your preliminary thoughts on what the trial might look like in terms of what size might be, and also, do you think you might need additional data before submitting the FDA. Any thoughts you have on that?

Clay Siegall

Mona, thank you, this is Clay. Thanks very much for the question. At this point, we don't want to be super specific on everything. A couple of things that we can tell you though, because we are in progress with working on this right now, we are trying to collaborate with the agency on coming up with an excellent plan for this exciting drug. But some of the things I am excited to share with you are, that we are interested in this drug for two different diseases, and that would be Hodgkin lymphoma and the T-cell lymphomas that are CD30 positive, most notably anaplastic large cell lymphoma.

So, one of the things that is possible is that we may go after two separate approval pathways, and that's something that is exciting for us. We also may take advantage of certain different registration pathways that the FDA offer us as far as aggressively advancing the program. And so, there is a variety of different ways that the FDA has outlined in your structure to enable companies to do that, so we are working with them to try to look at different ways to accelerate the development of this program, since we are very bullish on the program. And for now, I really believe that that is the right thing to talk about. I don’t think giving you any specifics now, while we have not yet had full agreement with the agency, it's something we are working, we are executing very hard on trying to make this reality, to push this product forward. I don’t think it's appropriate to really discuss specifics, and try to work through the FDA first before talking about specifics, is what really our plan is. Tom, do you want to add anything on top of that, or that really…

Tom Reynolds

The only other thing I'd like to amplify in the anaplastic large cell lymphoma front, is this is a clearly an orphan indication and the data that we saw first with SGM-30, where we saw a definite response rate in that sort of population, as well as with the CR that we've seen now talked about at ASCO, gives us some belief that we are going to be able to really capitalize on this as well as a pathway towards registration in parallel with Hodgkin.

Mona Ashiya - J.P. Morgan

Great. And then actually just following up on something that you talked about earlier and also in your press release, beyond the opportunities and relapse refractory Hodgkins and ALCL, can you say at all about what you are thinking of, in terms of timings about exploring SGN-35 in these other opportunities that you spoke about; and some of the B-cell and cutaneous lymphomas so on?

Clay Siegall

Well, I talked about three different opportunities, one is frontline therapy, one is other malignancies that are CD30 positive and the CD30 is expressed on by a percentage of B-cell lymphomas, so that's another opportunity for us, and then the third opportunity is within autoimmune disease indications. And we have been talking about all three of these. And we're not ready at this present time to outline a specific plan, but I could tell you that we're excited about all three opportunities, and we think that SGN-35 is a winner. And we think it's going to be a winner, it’s a good commercial opportunity, even just in our first indication where we are getting it approved in a relapse/refractory setting. We think it could be a bigger winner by expanding it in the other three areas we talked about, which is why we brought them up, and I think we're working very hard at this, and we think that the upside potential with this agent is larger than we first actually considered.

Mona Ashiya - J.P. Morgan

Great. And actually one final question, so after the SGN-35 data at ASCO, are you seeing any sort of ramp in the interest in the ADC technology? And then related to that for Todd, Todd are you still sticking with your revenue guidance?

Clay Siegall

I'll answer the first part of this. You bet, there's been a lot of interest in our technology and in SGN-35, absolutely. And I think Todd you answered the question about the revenue guidance.

Todd Simpson

Right.

Clay Siegall

But perhaps you want to touch on it again.

Todd Simpson

So our revenue guidance was $30 million to $33 million for the year. We're not changing our guidance right now, but clearly, our revenues bumped in the second quarter, again, largely the result of the SGN-40 collaboration with Genentech, but we had multiple ADC collaborators hit milestones in the quarter. And hopefully that continues, but that explains the bump in revenues in Q2.

Mona Ashiya - J.P. Morgan

Great. Actually have one final question. So, can you talk at all about the potential impact of any of the proposed acquisition of Genentech by Roche?

Clay Siegall

You know, I thank you for bringing that up certainly. We think it's premature for us to see and know whether there could be any specific impact, we fully expect to continue working with our partner Genentech on our SGN-40 program and our ADC programs and work with them in a very robust manner as we have been so we expect really no changes with that and any specific path there concerning Genentech in Russia, it's just way too premature for us to comment on at all.

Mona Ashiya - J.P. Morgan

Yes that’s enough. Thanks a lot guys.

Operator

Thank you, and your next question comes from the line Jason Kantor from RBC Capital Markets. Please go ahead.

Jason Kantor - RBC Capital Markets

Hi Clay, congratulations on a lot of good progress. I want to talk on the last question about Genentech, may be you could just review kind a depth in of that relationship and I know that they have just recently filed an IND. I wonder if you could tell us anything about that target, and also perhaps how many other targets they have next to under your ADC collaboration? Thanks.

Clay Siegall

Thanks for the question Jason, I will turn this over to Eric Dobmeier to address.

Eric Dobmeier

Hey Jason. So as you know we have two collaborations ongoing with Genentech, we have the SGN-40 deal where we have six ongoing trials, we have a joint development committee and multiple sub-teams that meets me with them very regularly. So we’re talking with them all the time about that program and I have a good collaboration ongoing there and we also have an antibody-drug conjugate deal where they have multiple targets; the specific numbers has not been disclosed. They are developing and we did recently announce that they had made their first IND filings for ADC using our technology. And again that, the identity of that target has not been disclosed. That’s something that Genentech will disclose when they determine that it's the appropriate time to do so. But again that’s an active collaboration that’s been progressing well. So we have a lot of mutual respect for each other both on the corporate and scientific side and a great relationship with them.

Jason Kantor - RBC Capital Markets

Okay thank you.

Operator

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

Bret Holley - Oppenheimer

Hey guys. I had a quick question. I guess, Clay you said you estimated that the potential fix sales of SGN-35 in Hodgkin's disease and the CD30 positive and T-cell lymphoma will be about $300 million to $400 million. I’m just struggling over what pricing might be the assumption there. In our model, we have about 10,000 or so new Hodgkin's disease patients per year, and I am assuming some high majority of those actually go on to cure to a long-term response given the 85% five year survival. So, can you just talk a little bit more about the assumptions that go beyond that saving?

Eric Dobmeier

Yeah, sure, this is Eric. I can talk to you through that. So, you are right. When you look at incidents of Hodgkin and ALCL or you looking at 10,000 or 11,000 patients per year in the US, but we've been doing a lot of market research on what the prevalence population of patients that need new therapies is, and we project that there are over 10,000 patients in the US with relapsed or refractory Hodgkin or ALCL that are in need of treatment from a prevalence point of view. And there are slightly larger numbers in the EU. So, there are about 20,000 to 25,000 patients that are in need of therapies. We use relatively conservative penetration and pricing assumptions to come up with about 6,000 to 8,000 patients per year that could be treated with SGN-35, pricing of $40,000 to $50,000 per patient year which, for an orphan indication is actually somewhat conservative, and leads to the $300 million to $400 million market potential. And as Clay went through earlier, we think there are number of ways, there is a significant upside to that by moving into other indications, either frontline other piece of malignancies or autoimmune disease.

Bret Holley - Oppenheimer

Okay. And I guess a follow-up question to that, it may be a little bit premature really to discuss this from Seattle Genetics point of view is, where do you see drug pricing going and when SGN-35 potentially comes to the market, there is going to be an acceptance over $45,000 or $50,000 a year price tag. I understand some orphan indication, I am just wondering have you started to develop some perspective on where you might kind of stand on drug pricing when you guys become a commercial entity?

Eric Dobmeier

It's a great question and a lot of people have been talking and thinking about that issue. We think it's going to depend on data. So, if you have got a therapy that has minimal efficacy and isn’t really adding a lot in terms of patient survival or quality of life span, I think there is going to be a pricing pressure. But, if you have got a therapy that's really leading to long-term remissions and cures, if you look at it from a pharmaco economic point of view, there is a strong case to be made for something like SGN-35.

Also, when you look at Hodgkin lymphoma, as was alluded to earlier, there is a bimodal distribution in diagnosis, so there are quite a few younger patients who are diagnosed with Hodgkin, as well as ALCL. And when you look at what type of increased survival you can have in younger patients and how long they can live in the productive members of the society. There is a larger impact in maybe cancers diagnosed in elderly patients.

Bret Holley - Oppenheimer

Okay. Thanks a lot. That was very helpful.

Operator

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

David Miller - Biotech Stock Research

Great. Good Afternoon. Thanks for taking my questions. I only have a couple left. The first question has to do with SGN-70. You were talking about that you were going to take this into patients, healthy patients. Is that a prep for moving SGN-70 into Phase I, and once you determined it was safe, bring SGN-75 through the process since the ADC technology may have some additional functionality?

Clay Siegall

Partially you're right. Let me try to clarify it. So SGN-70 we view as an exciting opportunity of autoimmune disease. SGN-75, we're focused on cancer.

David Miller - Biotech Stock Research

Okay.

Clay Siegall

So with SGN-70, we want to head down the autoimmune disease path. It is very commonplace with brand new drugs that have never been tested in patients to go into healthy subjects or healthy volunteers.

David Miller - Biotech Stock Research

Right.

Clay Siegall

Prior to treating autoimmune disease, because many of those therapies are not life-threatening. And so, it is -- I don't want to call it totally standard, but it's pretty standard to do this type of thing, and quickly in quite a short timeframe, a much shorter timeframe than a standard full Phase I that you would see in cancer. In a rather short timeframe, you get all your results, you get your safety parameters, you get your pharmacokinetics, and you really understand the distribution of the drug, and you really can learn everything you need. So that when you actually go into a Phase I study in autoimmune disease, it actually goes relatively quickly could you know so many of the parameters. So this is really part of the course for autoimmune disease.

Now, you asked about SGN-75. We're extremely excited about that, and at one point in the past we considered SGN-70 for cancer. What happened is, when we made the ADC and compared it head-to-head, the ADC outperformed SGN-70 in cancer, and we were also gaining data on SGN-35 at the same time in humans. So we now have human validation that our ADC technology really works well, and at well-tolerated doses. And so, with our preclinical package with SGN-75 and our clinical package with ADC's with our technology, we thought it prudent to go forward in cancer with this ADC while sticking with the antibody alone, the unmodified antibody, but humanized, I should say, antibody in autoimmune disease.

David Miller - Biotech Stock Research

Okay. You were talking about how you were engaging with the FDA and the conversations about SGN-35. Aside from the weekly dosing trial that's underway, would you expect to bring 35 into the clinic and other indications while waiting for that FDA guidance or is the next 35 trial we are going to see at the pivotal program?

Clay Siegall

You know, I think what we were probably going to do, is have a very strong focus on taking this product forward into registration trials. I think that while there are other opportunities, it's not that question or are there other opportunities and another things we can consider for SGN-35, we're absolutely looking them in the future, but right now we have laser-like focus on trying to go to registration studies.

So, at this point, with the rest of our pipeline being busy and while we're executing on all those trials with SGN-35, there is going to be nothing in our way between where we stand in registration trial. So aside from the weekly studies, I think it’s unlikely we will do anything prior to getting involved in these registration studies.

David Miller - Biotech Stock Research

Okay, and last question I have, were Roche personnel involved in SGN-40 negotiations, or they have been subsequently involved in some of the decisions about the design or indications for the trials for that program?

Clay Siegall

Right that’s a pretty easy answer, and the answer is we have been working exclusively with Genentech…

David Miller - Biotech Stock Research

Okay

Clay Siegall

…and not Roche.

David Miller - Biotech Stock Research

Alright, great. Excellent job and thank you very much.

Clay Siegall

Thanks.

Operator

(Operator Instructions). Our next question comes from the line of Katherine Kim from Banc of America Securities. Go ahead.

Katherine Kim - Banc of America Securities

Hi, can you hear me?

Clay Siegall

Yes barely go ahead.

Katherine Kim - Banc of America Securities

Okay, I have a couple of questions as well on SGN-35. Can it be a difficult environment currently with the FDA and in terms of extension with time line, are you comfortable, would be able to get through SP profits in the second half?

Tom Reynolds

Hi, this is Tom Reynolds. So, we are only beginning our collaboration with the FDA now. We've had a good dialogue with them throughout IND process and that's moved along quickly. Our discussion is so far progressing well. We are aware that some companies have had trouble with reduced the deadlines, we've not seen that yet. We are making sure that we are turning things around quickly at our end. We are making things easy and accessible for FDA and we anticipate that we will be able to move through this rather quickly. But we do know in a lot of these negotiations that they can take some time. But we are pretty confident with what we have seen far, that there is a lot of interest on our side as well as on the FDA side. I'm thinking about how to get this drug to the patients that need it. So we haven't seen any speed bumps yet. And we are hopeful we can navigate that quickly.

Katherine Kim - Banc of America Securities

So in terms of dissemination to the street, are you going to update us on, let’s say the next quarterly conference call or are you going to wait for getting referring the FDA, and then tell us like what the trial is going to look like in [all sense of]?

Clay Siegall

Alright Katherine this is Clay. Since we are doing this all in real time, we really can't answer that. We will update the street at the first appropriate opportunity that we have.

Katherine Kim - Banc of America Securities

Okay and although it's in the weekly built-in trial, is there any (inaudible) that you are rating towards that you would need before meeting with the FDA.

Clay Siegall

There is not. We are very excited with our package.

Katherine Kim - Banc of America Securities

Okay. And then my final question is partnering opportunities for SGN-35, could you make some comments?

Clay Siegall

I have another estimated comments, these are leading our efforts in potential partnering opportunities.

Eric Dobmeier

Yeah. So, we have had interest from partners, and particularly in both SGN-33 and SGN-35. And we have got some discussions ongoing. I think I have said on previous calls, our highest level of interest would be in and XUS partnership where we retain full commercial rights in the US. That said, we have got a good financial position, we have got the resources to keep these programs moving forward. So, we are not pressed to do partnerships unless they make sense for us, both financially and from the point of view of having a partner who is going to commit to and accelerate what we can do outside of the US.

Katherine Kim - Banc of America Securities

Okay, well. Thank you very much for answering the question.

Clay Siegall

Thank you, Kath.

Todd Simpson

Thank you.

Operator

Thank you. And at this time there are no further questions in the queue. I'd like to turn it back to Peggy Pinkston.

Peggy Pinkston

Great. Thank you very much, operator. And thanks everybody for joining us this afternoon. Have a good evening.

Operator

Ladies and gentlemen, this concludes the Seattle Genetics second quarter 2008 financial results conference call. You may now disconnect. Thank you for using AT&T conferencing.

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