Market Overview

Seattle Genetics Reports Second Quarter 2018 Financial Results

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-Record ADCETRIS® (Brentuximab Vedotin) Net
Sales in U.S. and Canada of $122.4 Million in the Second Quarter-

-ADCETRIS ECHELON-2 Top-line Results Expected in Early Fourth Quarter
2018-

-Enrollment Completed in Pivotal Trial Cohort of Enfortumab Vedotin
in Metastatic Urothelial Cancer; EV Top-line Results Expected in First
Half of 2019-

-Conference Call Today at 4:30 p.m. ET-

Seattle Genetics, Inc. (NASDAQ:SGEN) today reported financial results
for the second quarter and six months ended June 30, 2018. The company
also highlighted ADCETRIS (brentuximab vedotin) commercialization and
clinical development accomplishments and progress with its late-stage
clinical programs for cancer.

"Our ADCETRIS sales growth in the first full quarter following FDA
approval in frontline Stage III or IV classical Hodgkin lymphoma
demonstrates a strong reception from the oncology community and our
ability to bring the first new treatment option to patients after more
than 40 years," said Clay Siegall, Ph.D., President and Chief Executive
Officer of Seattle Genetics. "Looking ahead, we expect to report
top-line results from the ADCETRIS phase 3 ECHELON-2 trial in frontline
CD30-expressing mature T-cell lymphomas early in the fourth quarter that
could be another driver of future growth. Our late-stage clinical
pipeline comprises three programs in ongoing pivotal trials, including
enfortumab vedotin which is positioned for top-line data in the first
half of 2019 in metastatic urothelial cancer. Our recent accomplishments
and expected near-term milestones highlight our progress toward the goal
of becoming a multi-product global oncology company."

ADCETRIS Program Activities

  • ECHELON-2 Phase 3 Trial: Seattle Genetics has
    narrowed its guidance and now expects to report top-line data early
    in the fourth quarter of 2018 from the phase 3 ECHELON-2 clinical
    trial in frontline CD30-expressing mature T-cell lymphoma, also known
    as peripheral T-cell lymphoma (PTCL).
  • ECHELON-1 Data: Multiple posters featuring additional
    analyses from the ECHELON-1 trial in the treatment of patients with
    Stage III or IV classical Hodgkin lymphoma (HL) were presented at the
    2018 American Society of Clinical Oncology Annual Meeting held in
    June. These analyses continued to demonstrate the clinical benefit of
    the ADCETRIS combination when compared with standard chemotherapy. In
    March 2018, the U.S. Food and Drug Administration (FDA) approved
    ADCETRIS in combination with chemotherapy for the treatment of adult
    patients with previously untreated Stage III or IV classical HL based
    on the positive results of the phase 3 ECHELON-1 clinical trial.

ADCETRIS is not currently approved for use in frontline PTCL.

Enfortumab Vedotin (EV) Program Activities

  • EV-201 Pivotal Trial Cohort Enrollment Completed: Seattle
    Genetics and Astellas completed enrollment in the first cohort of the
    EV-201 pivotal trial in patients with locally advanced or metastatic
    urothelial cancer who previously received both a checkpoint inhibitor
    (PD-1/PD-L1) and a platinum-containing regimen. The companies expect
    to report top-line data from this cohort in the first half of 2019.
    Positive data in this cohort could potentially support registration
    under the FDA's accelerated approval pathway.
  • EV-301 Phase 3 Trial Initiated: Seattle Genetics and
    Astellas initiated a global randomized phase 3 clinical trial
    called EV-301 for patients with locally advanced or metastatic
    urothelial cancer who were previously treated with a checkpoint
    inhibitor (PD-1/PD-L1) and a platinum-containing regimen. EV-301,
    which is expected to enroll 550 patients, is intended to support
    global regulatory submissions for approval and serve as a confirmatory
    trial in the United States.

Tucatinib Program Activities

  • HER2CLIMB Pivotal Trial: Enrollment is ongoing in the tucatinib
    HER2CLIMB randomized pivotal trial for patients with HER2-positive
    (HER2+) metastatic breast cancer who have been previously treated with
    HER2-targeted agents, including patients with or without brain
    metastases. Results from a phase 1b trial that support the HER2CLIMB
    trial were recently published in The Lancet Oncology. The
    company continues to expect to complete enrollment of HER2CLIMB in
    2019.
  • Expansion of Tucatinib Clinical Program: Seattle Genetics is
    evaluating opportunities to expand the development of tucatinib in
    earlier lines of HER2+ metastatic breast cancer based on the results
    of a separate phase 1b clinical trial of tucatinib that were recently
    published in JAMA Oncology. The company is also considering
    development opportunities for tucatinib in the treatment of other
    HER2+ solid tumors such as colorectal and gastric cancer.

Tisotumab Vedotin (TV) Program Activities

  • Metastatic Cervical Cancer Trial Initiated: Seattle Genetics
    and Genmab initiated a phase 2 trial called innovaTV 204 in patients
    with recurrent and/or metastatic cervical cancer who have relapsed or
    progressed after standard of care treatment. The trial will enroll
    approximately 100 patients and is intended to potentially support
    registration under the FDA's accelerated approval pathway.
  • Solid Tumor Trial Initiated: Seattle Genetics and Genmab
    initiated a phase 2 clinical trial called innovaTV 207 in several
    types of solid tumors. The trial is intended to inform a potential
    broad development program.

Other Recent Activities

  • ADC Collaborator Milestones: Seattle Genetics earned milestone
    payments totaling $17.0 million under its antibody-drug conjugate
    (ADC) technology collaborations with AbbVie, Genmab and
    GlaxoSmithKline, triggered by clinical progress with programs using
    its technology.
  • Roger Dansey, M.D., Appointed Chief Medical Officer: Dr. Dansey
    has extensive experience in cancer drug development, most recently at
    Merck Inc. where he was Therapeutic Area Head for Late Stage Oncology,
    and led the registration efforts for KEYTRUDA® (pembrolizumab)
    across multiple tumor types.

Second Quarter and Six Months 2018 Financial Results

Total revenues in the second quarter and six month periods ended
June 30, 2018 increased to $170.2 million and $310.8 million,
respectively, compared to $108.2 million and $217.4 million for the same
periods in 2017. Revenues included:

  • ADCETRIS net sales for the U.S. and Canada in the second quarter of
    $122.4 million, a 65 percent increase over net sales of $74.3 million
    in the second quarter of 2017. ADCETRIS net sales for the U.S. and
    Canada were $217.8 million for the year-to-date in 2018, a 51 percent
    increase over net sales of $144.7 million for the same period in 2017.
    Growth over 2017 reflects recent ADCETRIS label expansions, including
    cutaneous T-cell lymphoma subtypes in November 2017 and frontline
    Stage III or IV Hodgkin lymphoma in March 2018.
  • Royalty revenues in the second quarter of $20.6 million, compared to
    $12.4 million in the second quarter of 2017. Royalty revenues were
    $36.2 million for the year-to-date in 2018, compared to $29.4 million
    for the same period in 2017. Royalty revenues are primarily driven by
    sales of ADCETRIS outside the U.S. and Canada by Takeda.
  • Amounts earned under the company's ADCETRIS and ADC collaborations
    totaling $27.2 million in the second quarter and $56.7 million for the
    first six months of 2018, compared to $21.5 million and $43.3 million,
    respectively, for the same periods in 2017. Collaboration revenues for
    the second quarter included $17.0 million in product development
    milestones achieved under the company's ADC collaborations.

Total costs and expenses for the second quarter of 2018 were $200.5
million, compared to $167.5 million for the second quarter of 2017. For
the first six months of 2018, total costs and expenses were $434.9
million, compared to $335.9 million for the same period in 2017. Costs
and expenses included:

  • Research and development expenses in the second quarter of $122.9
    million, compared to $114.4 million in the second quarter of 2017.
    Research and development expenses were $275.4 million for the
    year-to-date in 2018, compared to $232.6 million for the same period
    in 2017. The increase for the year-to-date period reflects $35.0
    million in upfront costs in the first quarter of 2018 related to
    technology licensing agreements in addition to increased investment in
    the company's pipeline programs.
  • Selling, general and administrative expenses in the second quarter of
    $58.3 million, compared to $40.7 million in the second quarter of
    2017. Selling, general and administrative expenses were $124.5 million
    for the year-to-date in 2018, compared to $79.1 million for the same
    period 2017. The increase for the year-to-date period was primarily
    due to transaction costs associated with the acquisition of Cascadian
    Therapeutics and costs to support the launch of ADCETRIS in frontline
    Hodgkin lymphoma.

Non-cash, share-based compensation cost for the first six months of 2018
was $32.4 million, compared to $32.0 million for the same period in 2017.

Net income for the second quarter of 2018 was $76.3 million, or $0.47
per diluted share, compared to a net loss of $56.4 million, or $0.39 per
diluted share, for the second quarter of 2017. Net income in the second
quarter of 2018 includes a net gain of $105.5 million primarily
associated with Seattle Genetics' common stock holdings in Immunomedics.
For the six months ended June 30, 2018, net loss was $35.4 million, or
$0.23 per share, compared to a net loss of $116.4 million, or $0.82 per
share, for the six months ended June 30, 2017. Net loss for the
year-to-date in 2018 includes a net gain of $86.6 million primarily
associated with Seattle Genetics' common stock holdings in Immunomedics.

As of June 30, 2018, Seattle Genetics had $457.8 million in cash and
investments. In addition, the company held stock in Immunomedics and
Unum valued at $208.0 million.

2018 Financial Outlook

For the third quarter of 2018, Seattle Genetics expects sales of
ADCETRIS to be in the range of $130 million to $135 million. In
addition, as a result of milestone achievements and other items that
occurred in the first half of 2018, the company is increasing
collaboration revenue guidance for the full year in 2018 to a range of
$65 million to $75 million, compared to its previous guidance of $55
million to $65 million.

Conference Call Details

Seattle Genetics' management will host a conference call and webcast to
discuss its second quarter financial results and provide an update on
business activities. The event will be held today at 1:30 p.m. Pacific
Time (PT); 4:30 p.m. Eastern Time (ET). The live event will be available
from the Seattle Genetics website at www.seattlegenetics.com,
under the Investors section, or by calling 877-260-1479 (domestic)
or 334-323-0522 (international). The conference ID is 6908320. A replay
of the discussion will be available on July 26, 2018 from the Seattle
Genetics website or by calling 888-203-1112 (domestic)
or 719-457-0820 (international), using conference ID 6908320. The
telephone replay will be available until 5:00 p.m. PT on Monday,
July 30, 2018.

About Seattle Genetics

Seattle Genetics, Inc. is an emerging multi-product, global
biotechnology company that develops and commercializes transformative
therapies targeting cancer to make a meaningful difference in people's
lives. ADCETRIS® (brentuximab vedotin) utilizes the company's
industry-leading antibody-drug conjugate (ADC) technology and is
currently approved for the treatment of multiple CD30-expressing
lymphomas. Beyond ADCETRIS, the company has established a pipeline of
novel targeted therapies at various stages of clinical testing,
including three in ongoing pivotal trials for solid tumors. Enfortumab
vedotin for metastatic urothelial cancer and tisotumab vedotin for
metastatic cervical cancer utilize our proprietary ADC technology.
Tucatinib, a small molecule tyrosine kinase inhibitor, is in a pivotal
trial for HER2-positive metastatic breast cancer. In addition, we are
leveraging our expertise in empowered antibodies to build a portfolio of
proprietary immuno-oncology agents in clinical trials targeting
hematologic malignancies and solid tumors. The company is headquartered
in Bothell, Washington, and has a European office in Switzerland. For
more information on our robust pipeline, visit www.seattlegenetics.com
and follow @SeattleGenetics on Twitter.

Forward-Looking Statements

Certain of the statements made in this press release are forward
looking, such as those, among others, relating to the company's 2018
outlook, including anticipated third quarter ADCETRIS net sales and full
year 2018 collaboration revenues; the company's potential to achieve the
noted development and regulatory milestones in 2018 and in future
periods and to otherwise offer multiple transformative therapies;
anticipated activities related to the company's planned and ongoing
clinical trials, including clinical trial initiation, enrollment and
data availability and the expected timing thereof, including with
respect to ECHELON-2, EV-201, HER2CLIMB and other clinical trials; the
potential for the company's clinical trials to support further
development, regulatory submissions and potential marketing approvals;
the opportunities for, and the therapeutic and commercial potential of
ADCETRIS, enfortumab vedotin, tucatinib, and tisotumab vedotin and the
company's other product candidates and those of its licensees and
collaborators; as well as other statements that are not historical
facts. Actual results or developments may differ materially from those
projected or implied in these forward-looking statements. Factors that
may cause such a difference include the risks that the company's third
quarter ADCETRIS net sales, full year 2018 collaboration revenue and
other financial guidance may not be as expected, as well as risks and
uncertainties associated with maintaining or increasing sales of
ADCETRIS particularly in light of the company's lack of
commercialization experience in additional indications for which
ADCETRIS has recently and may in the future be approved for marketing.
The company may also be delayed in its planned clinical trial
initiations, the enrollment in and conduct of its clinical trials,
obtaining data from clinical trials, planned regulatory submissions, and
regulatory approvals in each case for a variety of reasons including the
difficulty and uncertainty of pharmaceutical product development,
unexpected adverse events or regulatory discussions or actions and the
inherent uncertainty associated with the regulatory approval process.
The company may also be unable to expand ADCETRIS' labeled indications
due to unexpected, negative or delayed data from ECHELON-2 or regulatory
action, and that any supplemental BLA submission based on ECHELON-2 may
not be accepted for filing by, or ultimately approved by, the FDA in a
timely manner or at all or with the requested label, and the company may
be unable to complete the development of, and obtain regulatory approval
for, any of its product candidates. More information about the risks and
uncertainties faced by Seattle Genetics is contained under the caption
"Risk Factors" included in the company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 2018 filed with the
Securities and Exchange Commission. Seattle Genetics disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise except as required by applicable law.

   
Seattle Genetics, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
 
Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
Revenues:
Net product sales $ 122,443 $ 74,343 $ 217,800 $ 144,664
Collaboration and license agreement revenues 27,179 21,505 56,738 43,335
Royalty revenues 20,551   12,375   36,225   29,355  
Total revenues 170,173 108,223 310,763 217,354
Costs and expenses:
Cost of sales 13,157 8,055 23,515 15,536
Cost of royalty revenues 6,148 4,324 11,525 8,704
Research and development 122,860 114,406 275,362 232,590
Selling, general and administrative 58,292   40,712   124,474   79,116  
Total costs and expenses 200,457   167,497   434,876   335,946  
Loss from operations (30,284 ) (59,274 ) (124,113 ) (118,592 )
Investment and other income, net 106,557   2,914   88,671   2,242  
Net income (loss) $ 76,273   $ (56,360 ) $ (35,442 ) $ (116,350 )
Net income (loss) per share - basic $ 0.48 $ (0.39 ) $ (0.23 ) $ (0.82 )
Net income (loss) per share - diluted $ 0.47 $ (0.39 ) $ (0.23 ) $ (0.82 )
Shares used in computation of per share amounts - basic 158,381 142,802 155,525 142,631
Shares used in computation of per share amounts - diluted 163,382 142,802 155,525 142,631
 
   
Seattle Genetics, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
June 30, 2018 December 31, 2017
Assets
Cash, cash equivalents and investments $ 457,834 $ 413,171
Other assets 1,123,083   464,778
Total assets $ 1,580,917   $ 877,949
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities $ 145,189 $ 132,672
Deferred revenue and long-term liabilities 53,289 67,708
Stockholders' equity 1,382,439   677,569
Total liabilities and stockholders' equity $ 1,580,917   $ 877,949

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