Seagen Inc

F:SGT

Earnings Call Transcript 2019-Q1

[Operator]

Good day, and welcome to the Seattle Genetics First Quarter 2019 Financial Results. Today's conference is being recorded. At this time, I would like to turn the conference over to Peggy Pinkston, Vice President, Investor Relations. Please go ahead sir ma'am.

[Peggy Pinkston, VP, IR]

Thank you, operator and good afternoon everyone. I'd like to welcome all of you to Seattle Genetics First Quarter 2019 Conference Call. With me today are Clay Siegall, President and Chief Executive Officer; Todd Simpson, Chief Financial Officer; and Roger Dansey, Chief Medical Officer. Accompanying today's conference call are supporting slides which are available on our website in the Investor's section under the Events & Presentations page. And following our prepared remarks today we'll open the line for questions.

Today's conference call will include forward-looking statements regarding future events or the future financial and operating performance of the company such as those among others relating to the company's 2019 financial outlook, including anticipated 2019 ADCETRIS sales and future revenues, cost and expenses; and the company's potential and anticipated timing to achieve future clinical and regulatory milestones including data readouts, regulatory submission and approvals. Actual results or developments may differ materially from those projected or implied in these forward-looking statements. Among the factors that may cause such a difference includes the difficulty in forecasting sales, revenues and expenses, and the uncertainty associated with the pharmaceutical development and 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 report filed with the Securities and Exchange Commission including the company's Annual Report on Form 10-K for the year ended December 31, 2018.

Now I'll turn the call over to Clay.

[Clay Siegall, President & CEO]

Thanks, Peg and good afternoon, everyone. During the first quarter of 2019 we further positioned Seattle Genetics to become a multi-product oncology company. This was illustrated by the remarkable top line data we reported from the enfortumab vedotin pivotal trial in metastatic urothelial cancer which puts EV on the path to becoming our next marketed drug. We have also reached the targeted patient enrollment in pivotal trials of our two other late-stage programs; tucatinib and HER2 positive metastatic breast cancer, and tisotumab vedotin in metastatic cervical cancer.

These late-stage pipeline milestone are in addition to continued ADCETRIS sales growth. ADCETRIS's net sales in U.S. and Canada were $135 million in the first quarter. ADCETRIS sales are typically lower in the first quarter and grow throughout the year. Ordering patterns in January were light compared to December but we have seen growth month over month since that including a strong April to-date. Sales in the first quarter of 2019 increased by 42% over the first quarter of 2018, and we are maintaining our guidance of full year 2019 ADCETRIS net sales in the range of $610 million to $640 million. We expect ADCETRIS sales will continue to grow in the U.S. and Canada, driven primarily by our two frontline approvals in 2018.

First, Stage III and IV classical Hodgkin lymphoma in March, and more recently, CD30 expressing PTCL in November. This brings a number of approved indications to six since initial launch in 2011. One key dynamic in frontline Hodgkin lymphoma is the NCCN guidelines which are more restrictive than our labeled indication; these guidelines are translated into treatment pathways. Importantly, there was a recent update to NCCN guidelines for ADCETRIS in a number of clinical settings. In frontline Stage III and IV Hodgkin lymphoma the guidelines are now less restrictive towards utilization of the E1 regiments. Notably, the compendia listing now includes a 2A recommendation for patients with no known neuropathy. This provides an opportunity for our commercial and medical affairs teams to update physicians and work with pathways words towards more closely aligning use of ADCETRIS with the approved frontline indication. Roger will speak to other recent changes to the NCCN guidelines.

We are intensifying our efforts to increase Hodgkin lymphoma patient awareness notably through digital patient outreach. Upon diagnosis, we know that many patients spend a significant amount of time online researching the disease and treatment options. This information allows patients to understand the role that ADCETRIS could have as they discuss treatment options with their physician. We believe raising awareness among patients is important because many physicians see only a few Hodgkin lymphoma patients per year.

I'll now turn to our most recent frontline approval in PTCL. While still relatively early in the launch we're hearing positive reactions to the E2 data, especially to the overall survival advantage that showed a 34% reduction in the risk of death. The efficacy advantage of the ADCETRIS plus CHP regimen demonstrated by the E2 trial resulted in it's rapid inclusion in the NCCN guidelines and treatment pathways that are consistent with the label. There is a significant unmet need in frontline PTCL and our goal is to establish ADCETRIS plus CHP as a new standard-of-care for CD30 expressing PTCL patients in the U.S. We and our partner, Takeda, have also made progress outside the U.S. with frontline approvals.

In frontline Hodgkin lymphoma, ADCETRIS was approved in Japan in September and in Europe in February. These approvals triggered a combined $40 million in milestone payments to us. In Canada, we also expect an approval decision in frontline Hodgkin lymphoma in the near-term and we recently submitted an application for approval in frontline PTCL. Takeda plans to submit E2 data to the EMA and other health authorities this year for frontline PTCL.

I'll move on now to enfortumab vedotin or EV which we're developing in collaboration with Astellas. In late March, we reported positive top line data from the pivotal Phase II trial EV-201 in patients who had received both, a platinum containing regimen and a PD-1 or PDL-1 inhibitor. The EV-201 data will be presented in an oral fashion at the American Society of Clinical Oncology annual meeting in early June. The pivotal trial also forms the basis of the Biologics license application that we plan to submit to the FDA this year under it's accelerated approval mechanism. We believe the activity and safety profile will be well received by the physician community and may lead to a new standard-of-care for these patients. This is a transformational period for Seattle Genetics as we expand from hematologic malignancies into a multi-product company with drugs that also target solid tumors.

In addition to EV, we're are advancing tucatinib in HER2 positive metastatic breast cancer, as well as tisotumab vedotin in metastatic cervical cancer. Both of these programs are in pivotal trials. These are followed by a number of earlier stage programs including both, ADCs and novel agents. Our portfolio is strongly positioned to address the significant unmet medical needs of cancer patients. Antibody-drug conjugates are playing an increasingly important role in cancer therapy; this is demonstrated by ourselves with EV, the positive impact ADCETRIS is having globally in the treatment of lymphoma and progress by other companies.

We also have several collaborator ADCs in late-stage developments. These include polatuzumab vedotin from Genentech/Roche which has received priority review in the U.S. for relapsed diffuse large B-cell lymphoma and a PDUFA date in August 2019. An approval application was also filed in Europe. GSK is advancing in ADC for multiple myeloma in several ongoing trials and is planning a regulatory submission in the second half of 2019. And AbbVie has an ADC in a Phase III clinical trial for glioblastoma with data expected in 2019. It's an exciting time in the field of ADCs.

Now I'll turn the call over to Todd who will discuss our first quarter financial results. And then Roger will provide additional comments on our clinical development activities. Todd?

[Todd Simpson, CFO]

Great. Thanks, Clay and thanks everyone for joining us on the call this afternoon. Today I'll summarize our first quarter 2019 financial results and provide a few updates to our guidance for the year.

Total revenues in the first quarter of 2019 were $195 million, this included ADCETRIS net sales in the U.S. and Canada of $135 million. This was a 42% increase over the first quarter of 2018 and reflects the 2-label expansions in frontline Hodgkin lymphoma and PTCL. Takeda sales increased meaningfully over the first quarter of 2018, however, royalty revenues in the first quarter of 2018 included additional amounts attributable to Takeda's portion of third-party royalty obligations some of which expired in 2018. Therefore despite the increase in sales by Takeda, royalty revenues in the first quarter of 2019 were comparable and the cost of royalty revenues decreased.

Collaboration revenues were $45 million in the first quarter of 2019, primarily driven by amounts earned under our ADCETRIS collaboration with Takeda and our ADC deals. This includes the earned portion of a $30 million milestone payment from Takeda related to ADCETRIS approval in Europe for frontline Hodgkin lymphoma.

Turning now to expenses. R&D expenses were $158 million in the first quarter of 2019 compared to $153 million in the first quarter of 2018. Expenses in 2019 primarily reflect investment across our pipeline, notably our late-stage programs; EV, tucatinib and TV. SG&A expenses increased to $80 million in the first quarter of 2019 compared to $66 million in the first quarter of 2018; this increase reflects commercial efforts to support ADCETRIS in the new frontline indications, as well as costs related to our late-stage pipeline programs. We ended the first quarter with $418 million in cash and investments; this is in addition to approximately $148 million in common stock holdings in Immunomedics at the end of the quarter. As a reminder, these shares are mark-to-market and that resulted in a non-cash investment gain of $38 million for the first quarter.

Regarding our 2019 financial guidance; last quarter I mentioned that we expect to provide an updates based on progress with our late-stage programs including pivotal trials outcome. One of those trials was EV-201 and based on the positive results we are increasing our expectations for expenses. We now expect 2019 R&D expenses to be in the range of $650 million to $700 million, and that SG&A expenses for the year will be in the range of $300 million to $335 million. These increases reflect the clinical development activities for EV, as well as launch preparation activities of our late-stage assets. Our other guidance remains unchanged.

Now I'll turn the call over to Roger.

[Roger Dansey, Chief Medical Officer]

Thanks, Todd and good afternoon, everyone. As Clay indicated exciting results from the EV-201 trial in previously treated metastatic urothelial cancer patients support our plans to submit a BLA this year. Amongst patients who'd receive both the platinum regiment and a PD-1 or PD-L1 inhibitor, the confirmed objective response rate was 44%, and duration of the response was consistent with that recently reported from the Phase I trial.

From a safety perspective the most common treatment related adverse events included fatigue, alopteisa [ph], decreased appetite, rash and peripheral neuropathy. The BLA submission is a priority and our clinical development and regulatory teams are working together with our partners Astellas to rapidly achieve this important objective. We continue to work on expanding the clinical development plans for this highly active ADC in urothelial cancer. We are still enrolling the second cohort of the EV-201 trial of metastatic urothelial cancer patients who'd received a PD-1 or PD-L1 treatment, but are platinum naive and ineligible to platinum. This is also a population with a high unmet need. In addition, the confirmatory trial EV-301 is enrolling in the same population as the EV-201 cohort one and is well-underway. Importantly, we are also conducting the EV-103 trial, which combines EV with Pembrolizumab and/or platinum chemotherapy in the first line metastatic setting. The positive EV-201 topline data have also opened the door to other opportunities for EV that we in Seattle are considering for further development, including in other solid tumors.

Next, I will turn to ADCETRIS. We continue to work on ensuring that the medical community is educated on the E-1 study, including the updated data presented at ASH in 2018. This data showed that with extended follow-up, the PSF benefit for ADCETRIS plus AVD was maintained and the peripheral neuropathy continue to resolve. We are communicating the outcomes of E-1 by interim pet [ph] status as we think this is also important information for oncologists. ABVD is frequently modified in clinical practice using an in the cycle to approach to either reduce the potential for lung injury from exposure to bleomycin or escalate the intensity of chemotherapy if needed due to lack of response. The ADCETRIS plus AVD regimen E-1 did not contain bleomycin and was not adapted by pet [ph] status. While cross-trial comparisons have their limitations, the data from E-1 appear to be better in similar patient population than, for example, the pet-adapted [indiscernible] trial. Related to the NCC and Hodgkin lymphoma guidelines, ADCETRIS combined with bendamustine or with Opdivo is now listed as specific regimens in the second line setting. The availability of these combination regimens are important for patients as they provide well-tolerated and effective options for outpatient-based salvage therapy.

Another update to the guidelines is in frontline Hodgkin lymphoma, where ADCETRIS combined with the [indiscernible] is now listed as a treatment option for patients over the age of 60 with either Stage I or II unfavorable disease and for all Stage III and IV patients. We believe this is also an important addition as it recognizes the value of ADCETRIS in a frail and difficult to treat population that is traditionally associated with poor outcomes. Another area of our focus for the ADCETRIS is this potential for the new development opportunities. ADCETRIS as part of various combination regimen, has been shown to be highly active in a number of settings in Hodgkin lymphoma and diffuse large B-cell lymphoma. We are now evaluating several trial designs that could support ADCETRIS label expansion and/or result in practice informing datasets. We'll keep you posted as these plans mature.

I'll now move on to our two pivotal stage programs, tucatinib and tisotumab vedotin. Tucatinib is an oral tyrosene kinase inhibitor that targets HER2. The primary focus of this program is the randomized pivotal trial called HER2CLIMB in HER2+ metastatic breast cancer including patients with brain metastases. We announced earlier this year that we've enrolled 480 patients in HER2CLIMB, which will support analysis of the PFS primary endpoint. Today we announced the target enrollment of 600 patients for HER2CLIMB has been reached. As a reminder, the increased trial size strengthens the analysis of the key secondary endpoints which are overall survival in the entire study and PFS in patients with brain metastases. These will be important additional endpoints in assessing how tucatinib may help patients in need. We believe to tucatinib has the potential to be a best in class HER2 Ki. HER2CLIMB to climb has rapidly advanced and we are looking forward to reporting data later this year.

Tisotumab vedotin or TV is and ADC that we are developing in partnership with Genmab. We are conducting a pivotal Phase 2 single-arm single-agent trial for women with recurrent or metastatic cervical cancer which has recently completed enrollment and is designed to support a regular submission under the FDA's accelerated approval mechanism. The primary endpoint of this trial is confirmed objective response rate by independent review. Updated data from the Phase 1 trial were recently reported at the Society of Gynecologic Oncology annual meeting showing a 22% confirmed objective response rate by independent review with a median duration of response of six months. The safety profile of TV was as previously reported. We remain encouraged by the data in the setting where there is no standard of care and outcomes are poor. We and Genmab are also evaluating TV in combination with other agents to inform our strategy of moving TV into earlier lines of cervical cancer. Further, we are enrolling patients in trials of TV with other solid tumors.

Beyond our late stage portfolio, we are advancing several other targeted therapies for cancer. This includes the ladiratuzumab vedotin, which is in multiple trials for triple-negative breast cancer, including in combination with Pembrolizumab. In addition, we expect to submit several more INDs during 2019 and 2020 other agents. For example, at AACR earlier this month, we presented preclinical data on SGNCD228A on novel or stem-based ADC for solid tumors. The data showed antitumor activity in several models including melanoma and non-small cell lung cancer. We expect to initiate the first Phase 1 trial of this agent in 2019 after IND approval.

With that, I'll turn the call back over to Clay.

[Clay Siegall, President & CEO]

Thanks, Roger. Before we open the line for questions, I'll recap the key upcoming activities across our portfolio. First, continue establishing ADCETRIS as the stairs of care in frontline Hodgkin's lymphoma and frontline PTCL. Second, report pull results from EV pivotal trial in Europe deal on cancer at ASCO in June and submit a BLA to FDA this year. Third, report topline data from the tucatinib pivotal trial HER2CLIMB in 2019. And lastly, advance the pivotal trial of TV and cervical cancer, which is now fully enrolled.

At this point, we'll open the line for Q&A. Operator, please open the call for questions.

[Operator]

[Operator Instructions] And our first question will come from Michael Schmidt with Guggenheim.

[Michael Schmidt, Guggenheim]

Hey, thanks for taking my questions. Clay, could you maybe comment a little bit more on the ADCETRIS sales in the first quarter and through the dynamics relative to the fourth quarter, figure in terms of organic growth and contribution of wiring patterns. Can you just help us to understand those dynamics a little bit better?

[Clay Siegall, President & CEO]

Well, sure, I can comment on this. Let me start by saying that ADCETRIS is a remarkable drug that patients and doctors really depend on. First of all, there is a typical softness in sales in the first quarter and we've seen this pretty much every year. And you see it in other oncology products as well. But what I can say is in January, the sales were lower and higher in February and higher in March and we've had a really strong April. So, I think when you look at month-to-month-to month, we're really feeling good about where it's going through time. Second of all, please note that as we've mentioned many times that ADCETRIS is in front line, is coming up against entrenched standards of care that have been around for 40 years. So it does take time. And the third thing that I'll mention, maybe you didn't ask, we also discussed the very recent NCCN changes and these we think will be important going forward.

[Michael Schmidt, Guggenheim]

Okay. Thanks for clarifying that. And then could you -- a question on HER2CLIMB, you mentioned the study is now fully enrolled. Just a question on potentially filing timelines here. Would you anticipate filing potentially bears on the initial PFS data set and then submitting the OS analysis later on or would you potentially have to wait for the full data set to read out, including secondary endpoints for potential filing, assuming success obviously?

[Clay Siegall, President & CEO]

These are really, really good questions that we talk about internally. I mean, some of what you asked is confidential to what we're doing, but I'll turn it over to Roger to give you a little bit of color on how we're thinking about HER2CLIMB with the caveat that we can't answer all of what you're saying at this point, Michael.

[Roger Dansey, Chief Medical Officer]

Sure. Thanks, Clay. So, as you pointed out, the primary endpoint PFS is on the entire population and we have two key secondary endpoints, PFS in patients with brain metastases and overall survival. I mean, in general, in the clinical trial circumstance, the primary endpoint is the key focus of a trial. And so, readouts and plans that are -- that one would make around if a trial is positive, what would a finding approach look like is focused primarily on the primary endpoint. Although, the secondary endpoints are obviously very important to have as well. So, without giving any specifics around what we are doing, that sort of general guidance, hopefully it's of some help.

[Operator]

Our next question comes from Kennen MacKay with RBC Capital Markets.

[Kennen MacKay, RBC Capital Markets]

Hi, thanks for taking the question. And another one on ADCETRIS and the guidance, I guess just looking at the guidance, it seems like throughout the rest of 2019 we're going to need quarter-over-quarter growth, somewhere from 5% to 10% or 11% to reach the low and high end of guidance respectively. And I guess thinking about the quarter-over-quarter growth we saw from Q4 to Q1, can you help us understand sort of where this is going to come from? I guess it's hard for me to really conceptualize how much of Q1 was just sort of order timing impact, especially when there was the price benefit came throughout the quarter. And then beyond that I was wondering if you could help us understand what is sort of going on in the relapse refractory Hodgkin setting with the NCC and guideline changes mid-year in last year. It seemed like there was potential for some clinicians to sequence checkpoints in front of ADCETRIS. Is that something that is sort of taking place? Obviously, standard of care, they're going to change within the next couple of years, but any color as the commercially what's happening would be super helpful. Thank you.

[Clay Siegall, President & CEO]

Sure. It's a bunch of questions here. I'll try to take them as I heard them. So, as far as the sales and our guidance, look, we feel that this quarter-over-quarter -- I mean, excuse me, month-over-month, change in the sales has been very important and it does match a lot of history and matches, a lot of other cancer drugs, which they have some seasonality to right after the holiday. So, I wouldn't get too wrapped up in it. I mean, we did not provide quarterly guidance. We provided an annual guidance that we feel that we can hit and we feel that the growth is tracking well. The E-2 launch is going well, we hear from a lot of docs it is, but we're only one quarter out into that. So it's early. We have more data coming out of ASCO on watching E-1 age and the data is strong. And so, all of that is something that we really feel is good.

But going to the guidelines, the NCC and guidelines initially were more restrictive than label. But the committee of doctors has literally a couple of weeks ago has made changes that can open the previous limitations that were there for some doctors and some pathways to write prescriptions because it now more closely matches the label, which is what the case is for E-2. But for E-1 had never really match the label. But now it's much closer as of a few weeks ago. So, we think that that's something that's very important to get out there talking to doctors and talking to pathways. So, that's a complete new thing for us to work on. But we're really excited with what we see as the growth of the product with doctors and their happiness in using it and helping patients. As far as the price specifics you mentioned, I'll turn that over to Todd to talk a little bit about the price benefited, some specifics. And then Todd, you could turn it back to me to talk about the last question.

[Todd Simpson, CFO]

Great. Thanks, Clay. Kennen, good question. So, I did want to give a little bit more color on the price increase. We did have a price increase in January, but when you look at growth in the quarter, it was predominantly all volume-based. And while that may sound a little bit unusual, maybe I can give a little bit more color around that point. A substantial part of ADCETRIS is business is covered under PHS pricing. When we do a price increase, the PHS price is limited to the rate of inflation. So, we actually see very little of the price increase come through into net sales as it relates to the PHS part of business. What we saw in Q1 was a little bit of a shift in the mix of business, a little bit more PHS ordering in the quarter. So, while we did have a price increase, we didn't see a lot of that come through in the form of a sales driver. And again, most of the increase for the quarter and, in fact, the vast majority of the increase was all volume-based. And we think that bodes well for how we're doing with the drug.

[Clay Siegall, President & CEO]

Thanks, Todd. And going to your setting about -- this question's about relapsed refractory Hodgkin lymphoma and checkpoints, and it was a conglomeration of a question, what I can tell you in the new guidelines, which really are important, you have ADCETRIS plus Nivolumab, which is for the first time only a few weeks ago, is now listed in guidelines. And, in fact, previously the guidelines called out ADCETRIS plus chemotherapy, but it was a little fuzzy. And in the newest guidelines of a few weeks ago, it specifically states, ADCETRIS plus bendamustine. And let me just remind you, ADCETRIS plus bendamustine in a relapsed patient has an overall response rate of 93% with a CR rate of 74%. Really truly amazing data. And ADCETRIS plus CHP [ph] has also an overall response rate of 93% and a CR rate of 80% and better tolerated than any bendamustine regimen. So, you have two choices to use and it kind of takes the whole concept of, well do you use a single agent there and you sequence them and how does it work to be, why not get the highest response rate in the highest CR rate that you can get? And with ORRs at 93%, it's certainly makes sense for doctors to take a look at that. And now, just recently, it's in the guidelines. And so, that's something that's really important for the relapsed refractory patient to consider.

[Kennen MacKay, RBC Capital Markets]

Thank you. Super helpful. One ultra-quick follow-up. I'm just wondering on the EV filing in bladder cancer, I'm just wondering if you could help us understand what the gating factor is for filing here and at what point we might have a little bit more precision on when we might expect a fine line here? Thanks so much. And looking forward to that data [ph].

[Clay Siegall, President & CEO]

We are working really hard on EV. I will tell you something. EV is a very important drug for us. And it's the real deal. This is a special drug and can really help patients. The number of doctors that contact us is a lot. They want to -- all the doctors want to be involved with this drug. And so, we're working really hard on EV-201 to get that submitted. It is the first time this will be submitted so it's not a second or third label. So, all of the CMC and the manufacturing needs to be included in this one in a way that's different when you have a fourth or fifth or third label or whatever that we've had with ADCETRIS. So, this one takes a little longer to put together, but we are working really hard on it. We're very confident with what we're doing and at the same time, have a very big development plan with EV that's going on. So, this year is what we're saying -- we're submitting.

[Operator]

Our next question comes from Cory Kasimov with JP Morgan.

[Cory Kasimov, JP Morgan]

Hey, guys, this is Matthew on for Cory. Thanks for taking my questions. First, on ADCETRIS, I'm curious how you would characterize what you're seeing in terms of physicians prescribing that versus reaching out to more physicians on over Q1.

[Clay Siegall, President & CEO]

You know what, it was a little fuzzy. The question. Can you state it one more time? You're asking about ADCETRIS prescribing -- I didn't hear that.

[Cory Kasimov, JP Morgan]

Yes. Just wondering how you would characterize physician prescribing depth versus reaching more physicians in Q1.

[Clay Siegall, President & CEO]

Okay. I will say that we keep on seeing more docs prescribing here, so we have not yet had every hematologist prescribe ADCETRIS. It's kind of even though it's been out there for a few years, some docs refer out the late stage patients and so we're seeing more and more docs come in that you treat in the front line. So, it's really great to continue to see the depth of doctors using ADCETRIS growing. And that's something we're excited about that we've seen in Q1 and have seen in every quarter since the data come out.

[Cory Kasimov, JP Morgan]

Got it. And then just quickly on EV, you mentioned that docs have been calling you and have been pretty positive on the top line data, but what are they looking to see the full data presentation at ASCO?

[Clay Siegall, President & CEO]

Well, I thank you for the question. So, we have to reserve a lot of data for the principal investigators that worked on EV to present their data at ASCO. And it was important also for the conference for them to have a lot of data. So, there will be a substantial amount of data that is released. And I think that while the top line data of the 44% is out there, there is substantial other data that you can look at, that includes other efficacies and CR rates and waterfall plots and safety parameters and all sorts of things that you'll see in the data. So, I really would encourage you to listen. And we got an oral presentation in the big section for the appropriate diseases. We're really thrilled with where ASCO put us. And you looking forward also to making sure we get the publication of these data out in a peer review journal. So, I'm very pleased with what's going on with EV-201. And I just may add that we look forward to later this year also putting out data of the combination of EV with checkpoint inhibitors. And that's something we're really very keen on and you'll hear more about that.

[Operator]

Thank you. Our next question comes from Geoff Meacham with Barclays.

[Geoffrey Meacham]

Thanks a lot. Thanks for taking the question. I've just got a couple. Clay, you mentioned seeing good month-over-month growth trends. Can you talk a little bit about where you are, PTCL versus Hodgkin's, just with respect to sequential growth? And beyond guidelines, are there any other external effects that you think could help impact the ADCETRIS trajectory for the balance of the year. And I won't follow-up on what's happening.

[Clay Siegall, President & CEO]

So, we don't really break out the Hodgkin's from PTCL, if that's what you're asking. I do understand that we look at it internally, but that's not something we report. But we continue to see growth in both areas and expect that growth will continue there. I think the guidelines is quite important to us. We certainly have provided a lot of data and information to guidelines committees there. And to get the guidelines to be more closely matching the label is something that we have certainly been aspiring to work toward. And this just happened recently. We're very pleased with that. We think it's the right thing for docs and the right thing for patients that the guidelines more closely mimic the label. And so, we think that that is really good as far as, you asked a question, should we expect more for the rest of the year? The committee meets once a year and they're going to meet later this year. And I can't speculate at whether the committee will do anything more. The committees sometimes for these kinds of things, they ask us to provide them data and we provide them with data. I think that the aging of E-1 is only to the benefit and we continue to present that as it gets longer and longer. And the last time I looked at the data and we presented some data at ASH, you saw the Kaplan-Meier curves get even better when you look out over longer time period. And so, I think our data as it's maturing is improving. And that's a really important factor here because as you know, with E-2, we had OS but with E-1, we have not reached OS yet. So, as our data matures, doctors will look at this, and I've heard them say this is important for them because Hodgkin lymphoma is a potentially curable disease in a pretty substantial quantity of patients that get chemotherapy. And to have a longer time and seeing how the Kaplan-Meiers are improving for the ADCETRIS containing regimen really gives doctors a lot of comfort to use it more and more in their patients. So, we see that, we feel that and we're working on that and presenting the data.

[Geoffrey Meacham]

Thanks. That's helpful. And then [indiscernible] and clearly, you're making progress in breast cancer with enrollment, but I just want to get your updated view outside of graphs. I think Cascadian originally it had some data and colon or perhaps other HER2 tumors, but I wasn't sure where you were with that.

[Clay Siegall, President & CEO]

Indeed, we do. Roger, do you want to touch on that?

[Roger Dansey, Chief Medical Officer]

Sure, Clay. Thanks. You're correct. The whole HER2 signaling pathway is of relevance. Where HER2 is overexpressed including diseases like CRC and gastric cancer and we're obviously very interested in exploring the role of tucatinib and tisotumab vedotin diseases. So, there is investigator-initiated trial ongoing looking at CRC. There's the possibility that we may have data available sometime later this year, which we think will be important in order to understand what else tucatinib may be able to do. And we're looking carefully at gastric cancer and thinking about what a development plan could potentially look like in that disease. Beyond that, even is the whole question of HER2 mutants. So there are a lot of opportunities for us to explore tucatinib further.

[Operator]

Thank you. Our next question comes from Salveen Richter with Goldman Sachs.

[Salveen Richter, Goldman Sachs]

Great. Thanks. This is Andrea on for Salveen. Thanks for taking our questions. Maybe first with regards to the sales force that you're envisioning for EV as you launch, can you provide some additional color on how you think that build up Meier progress as you move from when it's traditionally been indications in blood cancers to solid tumors and then I have a follow-up.

[Clay Siegall, President & CEO]

Thank you very much for the question. So, EV, as I mentioned before, it's a very important drug to us and for us. And the data is just strong. And so, it's really -- It's remarkable. I mean, it's better data when you look at what other drugs have been used for patients that have seen, that are relapsed or refractory patients. The 44% objective response rate is way above anything else. So, it's really unprecedented data in the relapse setting in that area. So, based on that, we are going full force on building the sales force for EV. We have a lead person that's in charge of that salesforce that reports into our top commercial person. And that buildup is happening now. We're going to bring in fantastic people like we've done with ADCETRIS, and we're going to really grow and build this salesforce so that by the time we're ready to launch this product, we will have all of the boots on the ground and we'll be cranking forward. And I'll remind you, this is a collaboration with Astellas and we are working very closely with them on all of the commercial aspects as well. And just in case you were wondering, to remind everyone, this drug is a 50/50 around the globe with Astellas. Todd, would you like to add something?

[Todd Simpson, CFO]

Yes, maybe just to give a little bit more color and how we're thinking about commercialization there, as I mentioned in the guidance update there some preparatory activities that we have underway. We think that the commercial infrastructure that we've built for ADCETRIS can be leveraged to a large degree as far as things like distribution and just leadership, that type of thing. But with respect to a salesforce, we do envision it being a completely separate salesforce. We want to leave the ADCETRIS team solely devoted to ADCETRIS and then build a separate sales team for EV. And I think with respect to timing, what you should expect in the way we're thinking about it is once we see what the BLA submission timeline looks like and get some insights into what kind of a paducah [ph] date might look like, then we'll start to become more active on the broader build on the sales team. Clay was right. We're doing some of the leadership pieces now, but the real boots on the ground would be pending more of a clear look at the submission timeline.

[Salveen Richter, Goldman Sachs]

Great. Thanks. And then just one on tucatinib, can you help us think about the opportunity there just in the context of a number of other competitive agents that also target HER2 having shown positive benefits?

[Roger Dansey, Chief Medical Officer]

Sure. Yes, thanks for the question. It's Roger here. So, bear in mind, tucatinib is an oral small molecule TKI inhibitor and it's taken obviously orally. The competitors that you're referring to, I think are the other TKIs, neuratinib/lepatinib [ph], we do think we have a best in class HER2 TKI. So, depending on how HER2CLIMB players off, we may be able to make that argument very clearly. Other molecules such as modutaxinib [ph] we will see some data at ASCO is essentially a better form of Trastuzumab. And so, from a sort of direct competitive perspective, we would see it more as a potential combination approach rather than a direct competitor.

[Operator]

Thank you. Our next question comes from Andrew Berens with SVB.

[Andrew Berens, SVB]

Thanks, guys. Appreciate it. Just another question on the guidelines, when I look at the revised guidelines relative to the previous ones, one of the issues I thought with the previous guidelines was a really didn't recognize that ADCETRIS substitution on the front line had an efficacy benefit. And I'm looking at this revision and still with the ABVD regimen has preferred and the other regimens including backup and the AAVD regimen is useful in certain circumstances. So, I still just don't get that sense at the doctors are going to see this as potential to get better efficacy to mimic what you guys saw in ECHELON-1. So, I just was wondering how you can get the message to the doctors at this is not just the drug to use in patients that have lung disease or don't have [indiscernible] and get it seen as the preferred regimen.

[Clay Siegall, President & CEO]

Roger, do you want to comment on that?

[Roger Dansey, Chief Medical Officer]

Sure. So, the wording has changed and it's pretty clear that the description in the earlier in the prior version was a definition of what patients represent category 2A. And the wording was such that it appeared as though you had to have multiple conditions in place in order to be considered a 2A. So, had to have non-neuropathy plus IPS greater than four or bleomycin contrary indicator. The wording now is much clearer. It states that category 2A in select patients for example, no non-neuropathy or IPS greater than four or bleomycin contrary indicated. So, the wording really is just the definition of category 2A more clearly into there's no non-neuropathy group. And, of course, patients with Hodgkin lymphoma are generally younger people and at diagnosis in an untreated state or unlikely to have neuropathy. So, it obviously is a subtlety around the difference between category 2B and 2A. Nevertheless, it's a very important difference in regard to the guidelines indicating unanimous agreement around the recommendation.

[Clay Siegall, President & CEO]

And I will add that there's a lot of patients with Hodgkin lymphoma under groups that prescribe to certain pathways. And when you look at certain pathways, if you're not a 2A then a lot of pathways discourage use for a variety of reasons. And so, doctors are hesitant to use it when it is not a 2A. And this opens up the vast majority of patients now for 2A. And so, it's a big difference from what we've had. And this is within two weeks old. And so, we're just now to get out there and it really has a potential to impact the pathways and the log jam that we had there with various groups.

[Andrew Berens, SVB]

Right. Well, I mean it's definitely an improvement, but what's going to take to get it to the preferred treatment for it to reflect that actually an efficacy benefit if you substitute AVD? I just wonder when I look at this, the preferred regimen is ABVD, the two cycles and then you restage and then there's three branches, which could include AVB for sports cycles or the other two options, chemotherapy. And I just wonder if the reasons that the guidelines are not recognizing the full benefit [indiscernible] is because it wasn't compared to one of these other branches and the tree.

[Clay Siegall, President & CEO]

You're asking some really good questions and over time, guidelines can change. And we just saw a change in guidelines. We remain very excited about our data. There is no doubt that ADCETRIS AVD is a better regimen for patients. And you get -- you don't have the bleomycin toxicity and you get a higher efficacy. And as we track this longer and longer, you get even better efficacy. So, there's no doubt to us that ADCETRIS AVD is the best regimen. What we're talking about is entrenched 40-year regiments by doctors who a lot of these people making the rules are the same doctors that did these trials and put it together. And so, it is up against something that when we started and said we're going to improve frontline Hodgkins lymphoma and get a higher cure rate without the depths and toxicity associated with bleomycin, there were some folks who said, "Why are you doing this Hodgkin lymphoma carried in everybody?" Which is not true. There are a lot of patients where it's not carried in. A lot of patients suffer the side effects. Some patients die from the side effects and the more docs we get out there, the more docs are convinced to use ADCETRIS AVD. So, we are working along this entrenched pathway and making really good progress.

[Andrew Berens, SVB]

Okay. Is there any plans to expand the sales force to reach the community docs more and what percentage of the docs have been detailed [indiscernible] results?

[Clay Siegall, President & CEO]

Thank you for the question. We actually expanded our sales force when we went in and got frontline approvals. So, we added another 50% to the sales force. We think that our sales force now, with our enhanced sales force is the right size. We feel that we are detailing the community docs and the academic docs as much as possible. As you know, there's a lot of roadblocks to detailing with docs these days. It's just not as easy as it used to be to get out in their office, get their time, get their attention. We've been doing a lot of different things. One of the things that's pretty done effective is hosting regional dinners with key opinion leaders coming to give talks about what the data are with Hodgkin lymphoma and when docs here, key opinion leaders talk about the data and they talk about the benefits of ADCETRIS containing regimen, we see improved ordering because they're helping patients.

So, we need to continue doing the best we can do to get out into the field with the appropriate and compliant ways of doing it in 2019 and beyond because these compliance rules are talking about change all the time and they make it really tough to talk to docs in a way that we used to. But we're getting through that. We have a lot of great things going on. And the other thing that we've been working really hard is the whole digital approach. We're increasing our focus on digital because patients come in and especially these young people, which is a big chunk of Hodgkin lymphoma and they go right to the Internet. They want to know what's going on. And so, we're increasing our focus on banner ads and social media advertisement and media placements to get the people that go online to go on and see the data and look at the data. And those people, they talk to their docs about this. And we hear from the docs, they like that. They like when a patient takes some activity and looks at the data. And they like to have that discussion with patients when patients are informed of the newest data. So, this is something that we're really adding a lot of focus to.

[Operator]

Thank you. Our next question comes from Tazeen Ahmad with Bank of America.

[Tazeen Ahmad, Bank of America]

Hi, good afternoon. Thanks for taking my questions. Clay, a couple for you. You said at the beginning of the call that the beginning of the year was impacted by seasonality. I was wondering if you could provide a little bit more color on what the drivers of that seasonality might be. And then to follow-up on your comments about the collaborations and upcoming data with some of your partners, including GSK, for example, could you give us a sense, based on what you know about the indications being studied about which of them could potentially have the most impact in terms of payments to [indiscernible] overtime and then I have a follow-up for Todd on financial?

[Clay Siegall, President & CEO]

So, we see the seasonality events happening pretty much every year. Hodgkin lymphoma is not a super fast-moving disease like some diseases are. And if you're not feeling well and you have night sweats or fever and you go to your doc, you don't know necessarily of Hodgkin lymphoma or if you're just diagnosed with Hodgkin lymphoma, you may decide to delay treatment until after the holiday. So, you first start coming in perhaps sometime in January for even your first dose. So, it can delay your treatment and that way you could spend the holidays with your family. And it's just something you could see in a more slow-moving tumor than some of the more rapid ones where you got to hop on at that minute. So, we do see the seasonality. It's something we see over and over and over from year to year. So, it was not surprising to us to see February be better than January and March better than February and April being very strong. So, we're really happy with what we're seeing right now.

Onto the collaborations, you brought up GSK. GSK has some fantastic data in multiple myeloma with the BCMA antibody drug conjugate. And what we hear from them is they're planning to submit in the second half of this year. And we're delighted through the impact in multiple myeloma. That is a potential large market. And they also are doing many other trials, including frontline. And so, that potentially could be a really big drug for GSK and really beneficial to patients and to Seattle genetics. The other two collaborator drugs that we pointed out in our prepared remarks included Genentech Roche with polatuzomab or non-Hodgkin lymphoma. And that is likely, to me, likely to get approved this year. Their PDUFA date is August, their data that they have is fantastic and I was very impressive with the data. And they're also doing front line trials. So, both GSK and Genentech are looking toward getting there first approvals in the relapse setting, but then moving into frontline with ongoing trials. So, it's not just a hand waving. It's very exciting to see what these two drug conjugates can do with patients. And lastly AbbVie, they have a glioblastoma drug, they put out their numbers this morning and on their conference call talked about this drug for glioblastoma and their excitement level with it. So that's something that you should definitely keep on the lookout for when AbbVie releases data from their Phase III trial.

[Tazeen Ahmad, Bank of America]

And then Todd, to talk about the changes that you expect for expenses heading into the rest of the year with regards to R&D can you directionally give us a sense on what proportion of your spend in R&D is going to be for your late-stage trials versus your earlier pipeline expirations? And then, can you just give us a sense of what the cash runway is based on where you are today?

[Todd Simpson, CFO]

Sure. So with respect to late versus early, I think probably you would expect the late-stage programs have advanced quite nicely with multiple drugs in pivotal studies. So without getting into a specific allocation of what gets spent by program, you can rest assure that the lion share of the investment is in late-stage programs. ADCETRIS continues to actually be fairly significant area of spent for us, EV I think will be cranking up now with the very positive results we saw from the 201 study, tucatinib has been a big program and will continue throughout the year, and then drugs like RV and TV are cranking along as well. TV, we just recently announced that the pivotal study has been fully enrolled. So we're very focused in the late-stage pipeline but I think as we've talked about before, there is also a deep pipeline of other assets in technology that we continue to look at. So, we don't only invest in late-stage, we're trying to keep the pipeline full as well.

And then with respect to cash runway; the company continues to be in a really strong position. ADCETRIS is a strong base of business for us through not only our sales in the U.S. and Canada but through the royalties that we receive from Takeda. So that continues to really provide a lot of fuel for the engine so to speak, and we have a strong cash position. We ended the quarter with about $420 million on the balance sheet, that doesn't include obviously the investment we have in Immunomedics which is about another $140 million to $150 million. So we feel really good about where we are even with the added burn and feel that we're well positioned to continue really aggressively pushing all of our programs forward.

[Operator]

Our next question comes from Steven Wiley with Stifel.

[Steven Wiley, Stifel]

I know it's early in terms of PTCL which is kind of wondering if you could maybe characterize some of the initial commercial dynamics you're seeing there, specifically with respect to utilization in some of those subtypes beyond ALCL? And then I have a follow-up.

[Clay Siegall, President & CEO]

Yes, thanks for the question. We hear really good things about the use of ADCETRIS to the E2 regiment in all the different subtypes, we're not hearing that docs are not using it in certain areas. that's just not what we're hearing. I do want to say that for the E2 regiment and we've previously said this, that the number of cycles that a patient gets is a little less than E1 regiment, and they are just based on how they are treated and in our protocol there was always less cycle. So the standard patient with E2 is less financial -- less of a payment for the drug than it is for E1; so that's something -- it's about 20 or so percent less, something like that for patient but it depends certainly on their size.

So that is something just to point out that they are not exactly equivalent. And you have another question?

[Steven Wiley, Stifel]

Yes. I know retreatment with ADCETRIS appears to be fairly well-accepted concept within the realm of Hodgkin's but just wondering if you think this is a phenomenon that we'll see play out overtime in PTCL? And I guess how you are thinking about the legacy relapse refractory cells you're generating in ALCL? Thanks.

[Clay Siegall, President & CEO]

Re-treatment with ADCETRIS works really well. I mean, we have data early on we had data that showed 70% treatment re-response rate and that was in Hodgkin lymphoma. And I hear from docs that they comfortable using ADCETRIS in re-treatment. One of the things that happened was when we first got approval, we had a cap of how many cycles of ADCETRIS could be used in a patient and that was in 2011. But when as when we provided more data to regulators, only a few years after that they removed the cap. So I think that was 2013 or 2014, they removed the cap on the use of ADCETRIS, so it's not Capital-201 one year of potential use, you can now use ADCETRIS as you see as the doctor sees fit. Much like how they use rituxin, they treat with rituxin and then they come with another regiment, and coming with another regiment, and we've shown that that can be very valuable for patients.

So feel very good about retreatment. And you had another I forget the second part of your question.

[Steven Wiley, Stifel]

No, that was it.

[Operator]

Thank you. Our next question comes from Shanshan Xu with Berenberg Capital Markets.

[Shanshan Xu, Berenberg Capital Markets]

I think you have talked about the North American subgroup analysis of which you should quite a bit in the past. I'm just curious that you published another subgroup analysis on . And lesson in young adult patients in which actually the risk reduction for the traditional official PFS is 40% and that was in from 18 ash. This is a very impressive data. I'm wondering if there is any ongoing effort to promote a data in the medical community given that the younger patients will probably tolerate butter and there is a financial survival benefits from it. And could this become another tailwind for ADCETRIS?

[Clay Siegall, President & CEO]

So first of all, thank you for seeing our data. We really are excited with our data with E1 and proves over and over every time we look every every time we area looking at the North American region looking at the young folks the E1 regiment definitely outperforms ABVD every which way we look at it. And so but showing the data in populations is not necessarily something you can promote to. So it's really good for us to get out the publications and put them in great journals. And doctors can see what we're trying and the power of ADCETRIS containing frontline regiments.

[Shanshan Xu, Berenberg Capital Markets]

Another forming is that I would like to touch briefly upon EV-103. So this is a combination trial in the first time you see with or . So given that EV is essentially chemotherapy actually with obviously with the GPS with the navigation how should we think about the tolerability and toxicity profile for the combination of chemotherapy together with EV? And thanks for squeezing me in.

[Clay Siegall, President & CEO]

So first of all when you think about EV-103 it has a couple of different groups in there. First of all and probably the most important of the groups in EV-103 is EV plus or as it's called. And that's subgroup is the one we have been focused on the most. And that's the subgroup where we think that we've been collecting a lot of data in our certain amount of patients. and its a decent chance we will present those data later this year. So stay tuned for the group of EV-103 arguably the most important with EV and pembrolizumab. In that the same trial there is also an arm that's EV plus a platinum. And that's something that we wanted to look at largely to look at what the safeties because we doesn't really put those two together. And the reason is we also look or also contemplated in EV-103 is putting the platinum regiment plus a checkpoint plus EV together in a triplet. So that's also contemplated in that in EV-103. And that is because there are quite a few companies now doing trials in the frontline combining checkpoints with platinum regiments.

And so we wanted to be prepared for which ever way this goes our first approval doing to be what we are submitting for EV-201 is in patients that have been exposed to both a platinum and a checkpoint. And so that's initially. But as we go towards frontline it is really important to know all the parameters all the components what the components bring forward and then we can make the best choice for frontline. But I'm really jazzed up about our options in frontline in the future. And Roger has a comment.

[Roger Dansey, Chief Medical Officer]

Sure. the point of combining agents just bear in mind when you look at for example ADCETRIS which has the same component as the EV molecule when combined ADCETRIS actually quite well every for example some blasting in the E1 program. There is some early data with a trend looking at a platinum containing regimen and we believe they were tolerable. So the obviously we had to pass the safety and report our safety and make sure the sorts of combination with chemotherapy are indeed tolerable and safe. But it may well be that we can get significant additive benefits combining with these agents. As Clay indicated I think our focus is heavily weighted towards the PD-1 but we do need to understand what EV looks like both from a safety and then from an efficacy perspective when we look at the other agents that are commonly used in blood cancer research that if any particular combination looks particularly favorable and has an acceptable safety profile that's something we can take forward.

[Operator]

Our next question comes from Silvan Tuerkcan with Oppenheimer.

[Silvan Tuerkcan, Oppenheimer]

You are a strong treatment option in breast cancer a bit but I want to talk about the sales been renewed interest in HER2 to targeting a disease I think Roche is working on one. And there was a deal between and . Could you just let us know what potential differentiators are there between the different ADCs targeting HER2 plus?

[Clay Siegall, President & CEO]

Well that sort of a person outside a little bit of Seattle Genetics if you will. and what I would tell you is PD-L1 seems to be a very important work and to help a lot of patients. And if used in patients with HER2-positive breast cancer along with I mean trastuzumab or same with or and same with the PD-L1. So there's really a suit that Genentech/Roche and HER2 targeted agents I think that that tai chi ATL one looks very interesting. I think it can really help patients. And that's a drug that I think you should keep an eyes for. And roaches constantly looking at HER2. So I can't comment on what you have in your pipeline.

[Operator]

Our next question comes from Andy [ph] with William Blair.

[Unidentified Analyst]

Just have a question on the second line physician adoption. So probably for a Roger. In terms of the plus Astellas plus or added to the NCCN Guidelines do think that these regimens are mostly for ABVD upfront or be a cop upfront? Or do you think given I think Steve's question earlier about retreatment you can actually get a lot of patients from the E1 regiment to go on these two combinations?

[Roger Dansey, Chief Medical Officer]

Yes, I think the point was made earlier that the treatment with ADCETRIS appears to be very in Hodgkin lymphoma. So in the circumstance of having initial therapies and the reasonable gap between individual therapy and following treatment et cetera as monotherapy is acceptable. The ADCETRIS as Clay indicated earlier Nebo both of those outcomes there is a smaller site but they are very encouraging results and then obviously we sit wherever governance committee has considered them worthy of recommendations. So the idea of someone for example getting E1 in the frontline and then having a relapse and then getting very exposed to a ADCETRIS again I think it's an entirely reasonable concept. If that's what you're. I think you would expect that the regiment should be tolerable.

[Unidentified Company Representative]

And also you also emphasize the CR rates. Is that in the context of bringing these patients to transplant eventually?

[Roger Dansey, Chief Medical Officer]

Exactly. I think as you heard in the prepared remarks. ADCETRIS is a tolerable agent and a ADCETRIS present Novella mob is a tolerable agent with remarkable results and high CRAs which is exactly circumstance patients need to be in as they head into transplantation. So providing obviously you need to have an outpatient salvage which lines you up for a good outcome post-transplant is what we think the statement may offer patients.

[Clay Siegall, President & CEO]

Andy, if you are a Hodgkin lymphoma patient what you want most is to get at your with your first treatment regiment. And what ADCETRIS offers upfront is a higher long-term disease-free survival rate than what ABVD offered. And then in that small population that's remaining they also want to have another bite at the apple for a cure. And what you want to do is evaluate a patient into a CR and do a transplant if you need to go that direction. And this year it's that we have with ADCETRIS and when the or ADCETRIS are extraordinarily high. So there are really two different ways you can get to cure with Hodgkin lymphoma. And if you're patient with Hodgkin lymphoma you have options to get a substantial amount of these people into long-term disease-free survival. And ultimately a lot of these patients could be cured meaning they don't die of the Hodgkin lymphoma in the last time.And so could we all die of something. And so it is really exciting to me to see how ADCETRIS has redefined the landscape of how you treat Hodgkin lymphoma and I believe we'll end up curing a lot more patients.

[Unidentified Company Representative]

And just one thing; am I correct in thinking about the manufacturing issue that was brought up during this Q4 call that completely resolved.

[Clay Siegall, President & CEO]

I would call it a many figuring issue. We reported that we had to remake one batch of drug. And am I will tell you that manufactured and supplied ADCETRIS to 72 countries since 2011 without any failure to do so and working with regulators around the globe. We're pretty good at this. Todd do you have any comments?

[Todd Simpson, CFO]

There wasn't a manufacturing issue there was a quality release threshold that we didn't meet on a few batches. We let them go. But took place when we have never had a supply interruption and that doesn't happen in Q4 didn't even put us closer to that. And we have now substantially reestablished all that inventory. So we're in good shape.

[Operator]

And we have no further questions in the queue at this time. Around like to turn the conference back to our presenters for any closing remarks.

[Clay Siegall, President & CEO]

Okay. Thank you Peter, and thanks everybody for joining us this afternoon. Have a good evening.

[Operator]

Ladies and gentlemen this concludes today's conference call you may now disconnect.