On February 6, 2018 Seattle Genetics, Inc. (NASDAQ:SGEN) reported financial results for the fourth quarter and year ended December 31, 2017 (Press release, Seattle Genetics, FEB 6, 2018, View Source;p=RssLanding&cat=news&id=2330699 [SID1234523768]). The company also highlighted ADCETRIS (brentuximab vedotin) commercialization and clinical development accomplishments, enfortumab vedotin (ASG-22ME) and tisotumab vedotin clinical activities, as well as progress with its pipeline of targeted therapies for cancer.
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"During 2017, we continued to deliver on the promise of ADCETRIS as shown by growing commercial sales, FDA approval of a fourth labeled indication and, importantly, the positive outcome of our phase 3 ECHELON-1 clinical trial. We anticipate several additional ADCETRIS milestones in 2018, including its potential approval and commercial launch for use in combination with chemotherapy in frontline advanced classical Hodgkin lymphoma patients based on the ECHELON-1 trial as well as reporting data from the phase 3 ECHELON-2 trial in frontline mature T-cell lymphomas," said Clay Siegall, Ph.D., President and Chief Executive Officer of Seattle Genetics. "Our clinical pipeline is also strongly positioned, rapidly advancing our goal of becoming a multi-product oncology company. Enfortumab vedotin is in an ongoing pivotal trial for metastatic urothelial cancer and we expect to advance tisotumab vedotin into a pivotal trial for metastatic cervical cancer during the first half of this year. And recently, we entered into an agreement to acquire Cascadian Therapeutics, including global rights to its pivotal-stage program tucatinib for HER2-positive metastatic breast cancer."
ADCETRIS Program Highlights
ECHELON-1 Filing: The U.S. Food and Drug Administration (FDA) accepted for filing a supplemental Biologics License Application (BLA) for ADCETRIS in combination with chemotherapy for the frontline treatment of patients with advanced classical Hodgkin lymphoma. The FDA granted Priority Review for the application and the Prescription Drug User Fee Act (PDUFA) target action date is May 1, 2018. Previously, the FDA granted ADCETRIS Breakthrough Therapy Designation in this setting based on data from the phase 3 ECHELON-1 clinical trial.
Label Expansion in CTCL: The FDA approved ADCETRIS for the treatment of adult patients with primary cutaneous anaplastic large cell lymphoma (pcALCL) and CD30-expressing mycosis fungoides (MF) who have received prior systemic therapy. Primary cutaneous ALCL and MF are the most common subtypes of cutaneous T-cell lymphoma (CTCL).
ECHELON-1 Results: Data from the phase 3 ECHELON-1 trial in frontline Hodgkin lymphoma were presented in the plenary session at the American Society of Hematology (ASH) (Free ASH Whitepaper) annual meeting with simultaneous publication in the New England Journal of Medicine.
Broad Presence at ASH (Free ASH Whitepaper): In addition to ECHELON-1, ADCETRIS was featured in more than 20 data presentations at ASH (Free ASH Whitepaper) from both corporate and investigator clinical trials. The trials highlighted the potential application of ADCETRIS as monotherapy or as part of combination regimens in a range of CD30-expressing lymphomas.
ECHELON-2 Phase 3 Trial: ECHELON-2 is a phase 3 trial in frontline CD30-expressing mature T-cell lymphoma (MTCL), also known as peripheral T-cell lymphoma (PTCL). Data from the trial are expected in 2018. Approximately 4,000 people are diagnosed annually with CD30-expressing MTCL.
ADCETRIS is not currently approved for use in frontline Hodgkin lymphoma, frontline MTCL or as part of combination regimens in CD30-expressing lymphomas.
Enfortumab Vedotin Program Highlights
Pivotal Trial Enrolling: Seattle Genetics and Astellas continued enrollment of a pivotal phase 2 trial of single-agent enfortumab vedotin for locally advanced or metastatic urothelial cancer patients who received prior checkpoint inhibitor (CPI) therapy. The trial is intended to support regulatory submission under the FDA’s accelerated approval regulations.
CPI Combination Trial Initiated: In an effort to provide more treatment options to patients, Seattle Genetics and Astellas initiated a phase 1b trial of enfortumab vedotin in combination with the CPI pembrolizumab for first- or second-line treatment of patients with locally advanced or metastatic urothelial cancer.
ASCO GU Phase 1 Data: Updated data from a phase 1 trial of enfortumab vedotin monotherapy in metastatic urothelial cancer patients who received prior CPI will be presented at the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) 2018 Genitourinary Cancers Symposium (ASCO GU) taking place February 8-10, 2018.
Phase 3 Trial Planned: In 2018, Seattle Genetics and Astellas plan to initiate a phase 3 trial in metastatic urothelial cancer patients who received prior CPI. The phase 3 trial is intended to support global regulatory submissions for approval and serve as a potential confirmatory trial in the United States.
Tisotumab Vedotin Program Highlights
Planned Pivotal Trial: Seattle Genetics and Genmab plan to advance tisotumab vedotin into a pivotal phase 2 trial for recurrent or metastatic cervical cancer that relapses or progresses after standard of care treatment for cervical cancer. The single-arm trial is designed to enroll approximately 100 women and could support registration under the FDA’s accelerated approval regulations. The trial is expected to begin in the first half of 2018.
Expanding Clinical Development Program: Seattle Genetics and Genmab plan to initiate in 2018 a phase 2 trial of tisotumab vedotin as part of a combination regimen in women with first-line metastatic cervical cancer. In addition, a phase 2 trial is expected to begin in 2018 to evaluate tisotumab vedotin monotherapy in a range of other solid tumor types.
Cascadian Therapeutics Acquisition
Cascadian Therapeutics Merger Agreement: Seattle Genetics entered into a definitive merger agreement under which it has agreed to acquire Cascadian Therapeutics. The transaction was unanimously approved by the Boards of Directors of both companies. Under the terms of the agreement, Seattle Genetics will commence a tender offer on or about February 8, 2018 to acquire all of the outstanding shares of common stock of Cascadian Therapeutics for $10.00 per share in cash, or approximately $614 million. The tender offer is subject to customary closing conditions, including the tender of at least a majority of the outstanding shares of Cascadian Therapeutics common stock (on a fully diluted basis) and the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Tucatinib: Cascadian Therapeutics’ most advanced program is tucatinib, an investigational oral, tyrosine kinase inhibitor that is highly selective for HER2, a growth factor receptor that is overexpressed in multiple cancers, including breast, colorectal, ovarian and gastric. Tucatinib is currently being evaluated in a randomized global pivotal trial called HER2CLIMB for patients with HER2-positive (HER2+) metastatic breast cancer, including patients with or without brain metastases.
Other Recent Activities
Ladiratuzumab Vedotin (SGN-LIV1A) Clinical Development Program: Data from a phase 1 trial of ladiratuzumab vedotin monotherapy were presented at the San Antonio Breast Cancer Symposium showing an encouraging objective response rate and tolerability profile in women with heavily pretreated metastatic triple-negative breast cancer. Enrollment is ongoing at the recommended monotherapy dose. In addition, ladiratuzumab vedotin is being evaluated in ongoing and planned trials in combination with CPIs and as part of neoadjuvant treatment for breast cancer.
AACR Presence: Data from multiple research and early clinical abstracts will be featured at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) annual meeting being held April 14-18, 2018. Included will be preclinical data on SEA-BCMA, a novel empowered antibody using Seattle Genetics’ proprietary Sugar Engineered Antibody (SEA) technology. SEA-BCMA is expected to advance into a phase 1 clinical trial for multiple myeloma during 2018.
ADC Collaborator Milestone: Seattle Genetics achieved a milestone payment under its ongoing ADC collaboration with Genentech/Roche triggered by a phase 3 trial initiation of polatuzumab vedotin for patients with diffuse large B-cell lymphoma. Polatuzumab vedotin is an ADC targeting CD79b utilizing Seattle Genetics’ proprietary technology. The program has received both Breakthrough Therapy Designation from the FDA and PRIME (PRIority MEdicines) designation by the European Medicines Agency.
Fourth Quarter and Year 2017 Financial Results
Total revenues in the fourth quarter and twelve month periods ended December 31, 2017 increased to $129.6 million and $482.3 million, respectively, compared to $105.3 million and $418.1 million from the same periods in 2016. Revenues included:
ADCETRIS net sales in the fourth quarter of 2017 of $83.7 million, an 18 percent increase from net sales of $70.8 million in the fourth quarter of 2016. For the year in 2017, ADCETRIS sales were $307.6 million, compared to $265.8 million for the year in 2016, a 16 percent increase.
Royalty revenues in the fourth quarter of 2017 of $20.0 million, compared to $13.7 million in the fourth quarter of 2016. For the year in 2017, royalty revenues were $66.1 million, compared to $67.5 million for the year in 2016. Royalty revenues are primarily driven by international sales of ADCETRIS by Takeda. Royalty revenues in 2016 included a $20.0 million sales milestone payment from Takeda earned in the first quarter.
Amounts earned under the company’s ADCETRIS and ADC collaborations totaling $25.9 million in the fourth quarter of 2017 and $108.6 million for the year in 2017, compared to $20.8 million and $84.9 million, respectively, for the same periods in 2016.
Total research and development (R&D) expenses for the fourth quarter of 2017 were $110.5 million, compared to $108.2 million for the fourth quarter of 2016. For the year in 2017, total R&D expenses were $456.7 million, compared to $379.3 million for the year in 2016. The increase in 2017 R&D expenses was primarily driven by increased activities for enfortumab vedotin and ladiratuzumab vedotin, ADCETRIS drug supply provided to Takeda and the company’s pipeline programs.
Total selling, general and administrative (SG&A) expenses for the fourth quarter of 2017 were $48.5 million, compared to $41.4 million for the fourth quarter of 2016. For the year in 2017, total SG&A expenses were $167.2 million, compared to $139.2 million for the year in 2016. The increase in 2017 SG&A expenses was primarily driven by an increase in personnel to support the company’s commercial, business and operational needs.
Non-cash, share-based compensation cost for the year in 2017 was $63.8 million, compared to $52.5 million for the year in 2016.
In February 2017, Seattle Genetics purchased 3.0 million shares of Immunomedics common stock and a warrant to purchase an additional 8.7 million shares. The warrant was exercised in December, and in total, the company purchased the 11.7 million shares for $57.1 million. As of December 31, 2017, these shares were valued at $188.4 million and are reflected in Other Noncurrent Assets. During 2017, changes in the Immunomedics share price resulted in a non-cash gain in investment value of $131.3 million. The non-cash gain associated with the warrant for the year ended December 31, 2017 was $33.8 million, net of a loss in the fourth quarter of $42.9 million. The non-cash gain associated with the common stock resulted in a non-cash income tax benefit of $33.4 million that is included in Net Loss.
Net loss for the fourth quarter of 2017 was $59.2 million, or $0.41 per share, compared to a net loss of $55.1 million, or $0.39 per share, for the fourth quarter of 2016. For the year ended December 31, 2017, net loss was $125.5 million, or $0.88 per share, compared to a net loss of $140.1 million, or $1.00 per share, for the year in 2016.
As of December 31, 2017, Seattle Genetics had $413.2 million in cash, cash equivalents and investments, excluding its Immunomedics common stock investment. Cash and investments does not include gross proceeds of approximately $690.0 million, before deducting the underwriting discounts and commissions and offering expenses, from the company’s equity financing completed on February 5, 2018.
2018 Financial Outlook
Seattle Genetics anticipates 2018 total revenues to be in the range of $470 million to $505 million, driven by the following components:
ADCETRIS net product sales $340 million to $360 million
Revenues from collaboration and license agreements $55 million to $65 million
Royalty revenues
$75 million to $80 million
Operating expenses and other costs are expected to be within the following ranges for the year in 2018:
Research and development (R&D) $460 million to $500 million
Selling, general and administration (SG&A) $200 million to $220 million
Cost of sales 11 percent to 13 percent of ADCETRIS net product sales
Non-cash costs $90 million to $100 million, primarily attributable to share-based compensation distributed approximately evenly between SG&A and R&D
ADCETRIS net sales expectations for 2018 does not reflect the impact of a potential label expansion based on the ECHELON-1 trial in frontline advanced classical Hodgkin lymphoma. The PDUFA target action date is May 1, 2018. SG&A expense guidance for 2018 reflects expanded commercial activities to support the potential label expansion for ADCETRIS and includes certain transaction costs associated with the proposed acquisition of Cascadian Therapeutics. Further, expense guidance for 2018 does not include the potential impact of completing the acquisition of Cascadian Therapeutics that is subject to customary closing conditions including the successful completion of the tender offer.
Conference Call Details
Seattle Genetics’ management will host a conference call and webcast to discuss its fourth quarter and year 2017 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 888-778-9065 (domestic) or 719-325-2452 (international). The conference ID is 9278036. A replay of the discussion will be available on February 7, 2018 from the Seattle Genetics website or by calling 888-203-1112 (domestic) or 719-457-0820 (international), using conference ID 9278036. The telephone replay will be available until 5:00 p.m. PT on Friday, February 9, 2018.