Seattle Genetics Reports Fourth Quarter and Full Year 2018 Financial Results

-ADCETRIS® (Brentuximab Vedotin) Net Sales in U.S.
and Canada of $476.9 Million in 2018, Including $132.1 Million in the
Fourth Quarter-

-ADCETRIS Approved by FDA in Combination with Chemotherapy for
Frontline CD30-Expressing PTCL-

-Top-line Data from Enfortumab Vedotin Pivotal Trial in Metastatic
Urothelial Cancer Expected in the First Quarter of 2019-

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

BOTHELL, Wash.–(BUSINESS WIRE)–Seattle Genetics, Inc. (Nasdaq:SGEN) today reported financial results
for the fourth quarter and year ended December 31, 2018. The company
also highlighted ADCETRIS (brentuximab vedotin) commercialization and
clinical development accomplishments and progress with its late-stage
clinical programs for cancer.

“During 2018, we received FDA approval for two ADCETRIS frontline
indications, a major accomplishment that significantly expands the
number of patients eligible to benefit from treatment. These approvals
for frontline advanced Hodgkin lymphoma and CD30-expressing peripheral
T-cell lymphoma (PTCL) were based on phase 3 data showing superior
efficacy of the ADCETRIS-containing regimens compared to combination
chemotherapy agents that have been used for decades,” said Clay Siegall,
Ph.D., President and Chief Executive Officer of Seattle Genetics.
“Additionally, we made progress in 2018 with our late-stage clinical
programs, leading to important anticipated milestones this year.
Notably, we expect to report top-line data in the first quarter of 2019
from the pivotal trial of enfortumab vedotin in metastatic urothelial
cancer and to report top-line data later in the year from the pivotal
trial of tucatinib in HER2-positive metastatic breast cancer. Taken
together, we are positioned to establish ADCETRIS as the standard of
care in the frontline setting in both advanced Hodgkin lymphoma and
CD30-expressing PTCL, and realize our vision of becoming a company with
multiple oncology products addressing unmet medical needs.”

ADCETRIS Program Highlights

  • New Indication for CD30-Expressing Frontline PTCL: In
    November 2018, the U.S. Food and Drug Administration (FDA) approved
    ADCETRIS in combination with chemotherapy for adults with previously
    untreated systemic anaplastic large cell lymphoma (sALCL) or other
    CD30-expressing peripheral T-cell lymphomas (PTCL), including
    angioimmunoblastic T-cell lymphoma and PTCL not otherwise specified.
    The approval is based on the successful outcome of the ECHELON-2 phase
    3 clinical trial. The FDA granted Breakthrough Therapy Designation in
    this setting and reviewed the application under the Real-Time Oncology
    Review Pilot Program leading to approval less than two weeks after
    submission of the supplemental Biologics License Application (BLA).
  • New Indication in Canada: Health Canada approved ADCETRIS for
    the treatment of adult patients with primary cutaneous ALCL or
    CD30-expressing mycosis fungoides who have had prior systemic therapy.
  • Multiple Abstracts at ASH: In addition to the presentation
    of ECHELON-2 data, which were also simultaneously published in The
    Lancet
    , ADCETRIS was featured in more than 30 data presentations
    at the 60th American Society of Hematology (ASH) annual
    meeting from both corporate and investigator-led clinical trials. The
    trials highlighted the potential application of ADCETRIS as
    monotherapy and as part of combination regimens in a range of
    CD30-expressing lymphomas.

Enfortumab Vedotin (EV) Program Highlights

  • EV-201 Pivotal Trial Data in First Quarter 2019: Seattle
    Genetics and Astellas expect to report top-line data in the first
    quarter of 2019 from the ongoing EV-201 pivotal trial evaluating EV in
    patients with locally advanced or metastatic urothelial cancer who
    previously received both platinum chemotherapy and a checkpoint
    inhibitor (PD-1 or PD-L1). Data from this trial could serve as the
    basis for a BLA submission under the FDA’s accelerated approval
    pathway.
  • Multiple Trials Enrolling: Seattle Genetics and Astellas
    continue enrollment in the global randomized phase 3 clinical trial
    called EV-301 for patients with locally advanced or metastatic
    urothelial cancer who were previously treated with a PD-1 or PD-L1
    inhibitor and a platinum-containing regimen. EV-301 is intended to
    support global regulatory submissions for approval and serve as a
    confirmatory trial in the United States. Additionally, enrollment is
    ongoing in the phase 1 trial called EV-103 in earlier lines of locally
    advanced or metastatic urothelial cancer, including first-line,
    evaluating EV in combination with pembrolizumab and/or platinum agents.

Tucatinib Program Highlights

  • HER2CLIMB Pivotal Trial Data in 2019: Seattle Genetics achieved
    enrollment of 480 patients in the HER2CLIMB pivotal trial to enable
    analysis of the primary endpoint of PFS, with top-line data expected
    to be reported in 2019. In addition, HER2CLIMB enrollment is
    continuing up to 600 patients, to support the analyses of key
    secondary endpoints, including overall survival as well as
    progression-free survival in patients with brain metastases. The
    company anticipates completing enrollment of the additional patients
    in mid-2019.

Tisotumab Vedotin (TV) Program Highlights

  • innovaTV 204 Pivotal Trial Enrollment: Seattle Genetics and
    Genmab expect to complete enrollment by mid-2019 in the pivotal
    innovaTV 204 trial evaluating TV in patients with recurrent and/or
    metastatic cervical cancer who have relapsed or progressed after
    standard of care treatment.
  • Broad Development Program: Seattle Genetics and Genmab are
    evaluating TV in multiple ongoing or planned clinical trials,
    including trials in earlier-stage cervical cancer and in multiple
    types of other solid tumors.

Other Recent Activities

  • Initiated Phase 1 Trial of SEA-BCMA: Seattle Genetics announced
    the dosing of the first patient in a phase 1 trial evaluating the
    safety and tolerability of SEA-BCMA in relapsed or refractory multiple
    myeloma. SEA-BCMA is an empowered antibody using the company’s
    proprietary Sugar Engineered Antibody (SEA) technology designed to
    enhance antibody dependent cellular cytotoxicity.
  • ADC Collaborator Regulatory Submission: In December 2018, Roche
    submitted regulatory applications in the U.S. and the European Union
    for approval of polatuzumab vedotin to treat patients with relapsed or
    refractory diffuse large B-cell lymphoma. Polatuzumab vedotin utilizes
    Seattle Genetics’ proprietary antibody-drug conjugate (ADC) technology.

FOURTH QUARTER AND FULL YEAR 2018 FINANCIAL RESULTS

Revenues: Total revenues in the fourth quarter and year ended
December 31, 2018 increased to $174.5 million and $654.7 million,
respectively, compared to $129.6 million and $482.3 million for the same
periods in 2017. Revenues are comprised of the following three
components:

  • Product Revenues: ADCETRIS net sales in the U.S. and Canada for
    the fourth quarter were $132.1 million, a 58 percent increase over net
    sales of $83.7 million in the fourth quarter of 2017. ADCETRIS net
    sales in the U.S. and Canada were $476.9 million for the full year in
    2018, a 55 percent increase over net sales of $307.6 million for the
    same period in 2017. Growth over 2017 reflects ADCETRIS label
    expansions in 2018, most notably in frontline Stage III and IV Hodgkin
    lymphoma in March 2018 and to a lesser degree in frontline
    CD30-expressing PTCL in November 2018.
  • Royalty Revenues: Royalty revenues in the fourth quarter were
    $24.6 million, compared to $20.0 million in the fourth quarter of
    2017. Royalty revenues were $83.4 million for the full year in 2018,
    compared to $66.1 million for the same period in 2017. Royalty
    revenues are primarily driven by sales of ADCETRIS outside the U.S.
    and Canada by Takeda.
  • Collaboration and License Agreement Revenues: Amounts earned
    under the company’s ADCETRIS and ADC collaborations were $17.8 million
    in the fourth quarter and $94.4 million for the full year in 2018,
    compared to $25.9 million and $108.6 million, respectively, for the
    same periods in 2017.

Research and Development (R&D) Expenses: R&D expenses in the
fourth quarter were $149.8 million, compared to $110.5 million in the
fourth quarter of 2017. R&D expenses were $565.3 million for the full
year in 2018, compared to $456.7 million for the same period in 2017.
The increase in 2018 reflects increased investment in the company’s
late-stage pipeline and technology acquisition costs in the first
quarter of 2018.

Selling, general and administrative (SG&A) Expenses: SG&A
expenses in the fourth quarter were $79.5 million, compared to $48.5
million in the fourth quarter of 2017. The increase in SG&A expenses for
the fourth quarter of 2018 was primarily driven by the rapid approval
and launch of ADCETRIS for frontline CD30-expressing PTCL. SG&A expenses
were $261.1 million for the full year in 2018, compared to $167.2
million for the same period in 2017. The increase for the full year in
2018 was primarily related to costs to support the launch of ADCETRIS in
the frontline indications as well as transaction costs associated with
the acquisition of Cascadian Therapeutics.

Cost of Sales: Cost of sales in the fourth quarter were $30.2
million, compared to $10.2 million in the fourth quarter of 2017. Cost
of sales were $66.1 million for the year in 2018, compared to $34.8
million for the same period in 2017. The increases in 2018 reflect an
inventory write-off of $18.1 million recorded in the fourth quarter of
2018 related to in-process production that did not meet manufacturing
specifications and did not impact availability of product supply
required to meet demand for ADCETRIS.

Non-cash, share-based compensation cost for the full year in 2018 was
$78.9 million, compared to $63.8 million for the same period in 2017.

Net Loss: Net loss for the fourth quarter of 2018 was $119.8
million, or $0.75 per share, compared to a net loss of $59.2 million, or
$0.41 per share, for the fourth quarter of 2017. Net loss in the fourth
quarter of 2018 includes a net investment loss of $53.2 million
primarily associated with Seattle Genetics’ common stock holdings in
Immunomedics, which are marked-to-market. For the full year in 2018, net
loss was $222.7 million, or $1.41 per share, compared to a net loss of
$125.5 million, or $0.88 per share, for the year in 2017. Net loss for
the full year in 2018 includes net investment income of $13.7 million
primarily associated with Seattle Genetics’ common stock holdings in
Immunomedics. Net loss for both the fourth quarter and the full year in
2018 included a non-cash income tax benefit of $23.7 million related to
acquired intangible assets as part of the acquisition of Cascadian
Therapeutics.

Cash and Investments: As of December 31, 2018, Seattle Genetics
had $459.9 million in cash and investments. In addition, the company
held stock investments, primarily in Immunomedics common stock, valued
at $113.8 million.

2019 FINANCIAL OUTLOOK

Seattle Genetics anticipates 2019 total revenues to be in the range of
$790 million to $840 million, driven by the following components:

       
ADCETRIS net product sales $610 million to $640 million
Collaboration and license agreement revenues $95 million to $110 million
Royalty revenues $85 million to $90 million
 

Operating expenses and other costs are expected to be within the
following ranges for the year in 2019:

       
R&D expenses $600 million to $650 million
SG&A expenses $280 million to $310 million
Cost of sales 5 percent to 6 percent
Cost of royalty revenues

Low single digit percent on ex-US sales

Non-cash costs (primarily attributable to share based compensation) $135 million to $145 million
 

Conference Call Details

Seattle Genetics’ management will host a conference call and webcast
with supporting slides to discuss its fourth quarter and full year 2018
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 and supporting slides will be
simultaneously webcast on the Seattle Genetics website at www.seattlegenetics.com,
under the Investors section. Investors may also participate in the
conference call by calling 877-260-1479 (domestic)
or 334-323-0522 (international). The conference ID is 1660553. A replay
of the live event and supporting slides will be available starting on
February 7, 2019 on the Seattle Genetics website at www.seattlegenetics.com,
under the Investors section, for at least 30 days. A replay of the audio
only will be available by calling 888-203-1112 (domestic)
or 719-457-0820 (international), using conference ID 1660553. The
telephone replay will be available until 5:00 p.m. PT on February 11,
2019.

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 2019
outlook, including anticipated 2019 revenues, costs and expenses; the
company’s potential to achieve the noted development and regulatory
milestones in 2019 and in future periods and to establish ADCETRIS as
the standard of care in the frontline setting in both advanced Hodgkin
lymphoma and CD30-expressing PTCL and become a multi-product oncology
company; anticipated activities related to the company’s planned and
ongoing clinical trials, including clinical trial enrollment and data
availability and the expected timing thereof, including with respect
to 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 ADCETRIS net sales,
revenue, expense, and other financial guidance may not be as expected,
as well as risks and uncertainties associated with maintaining or
increasing sales of ADCETRIS due to competition, unexpected adverse
events, regulatory action, reimbursement, or market adoption by
physicians. 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, u,
negative or disappointing clinical trial results, unexpected adverse
events or regulatory discussions or actions and the inherent uncertainty
associated with the regulatory approval process. More information about
the risks and uncertainties faced by Seattle Genetics is contained under
the caption “Risk Factors” included in the company’s periodic reports
filed with the Securities and Exchange Commission, including the
company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2018 and future periodic reports filed by the company,
including the company’s Annual Report on Form 10-K for the year ended
December 31, 2018.

     
Seattle Genetics, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
 
Three Months Ended December 31, Year Ended December 31,
2018   2017 2018   2017
Revenues:
Net product sales $ 132,127 $ 83,721 $ 476,903 $ 307,562
Collaboration and license agreement revenues 17,833 25,853 94,357 108,632
Royalty revenues 24,553   20,031   83,440   66,056  
Total revenues 174,513 129,605 654,700 482,250
Costs and expenses:
Cost of sales 30,222 10,213 66,085 34,768
Cost of royalty revenues 5,363 5,450 22,208 19,350
Research and development 149,772 110,504 565,309 456,700
Selling, general and administrative 79,467   48,450   261,096   167,233  
Total costs and expenses 264,824   174,617   914,698   678,051  
Loss from operations (90,311 ) (45,012 ) (259,998 ) (195,801 )
Investment and other income (loss), net (53,180 ) (42,131 ) 13,652   36,914  
Loss before income taxes (143,491 ) (87,143 ) (246,346 ) (158,887 )
Income tax benefit 23,686   27,942   23,653   33,357  
Net loss $ (119,805 ) $ (59,201 ) $ (222,693 ) $ (125,530 )
Net loss per share – basic and diluted $ (0.75 ) $ (0.41 ) $ (1.41 ) $ (0.88 )
Shares used in computation of per share amounts – basic and diluted 160,197 144,061 157,655 143,174
 
 
Seattle Genetics, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
 
December 31,
2018   2017
Assets
Cash, cash equivalents and investments $ 459,866 $ 413,171
Other assets 1,043,463   464,778
Total assets $ 1,503,329   $ 877,949
Liabilities and Stockholders’ Equity
Accounts payable and accrued liabilities $ 191,472 $ 132,672
Deferred revenue and long-term liabilities 37,914 67,708
Stockholders’ equity 1,273,943   677,569
Total liabilities and stockholders’ equity $ 1,503,329   $ 877,949

Contacts

Investors:
Peggy Pinkston
425-527-4160
[email protected]

Media:
Monique Greer
425-527-4641
[email protected]

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