Seagen Inc

F:SGT

Earnings Call Transcript 2021-Q3

[Operator]

Good afternoon, and welcome to the Seagen Third Quarter 2021 financial results conference call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Peggy Pinkston, Vice President of Investor Relations. Please go ahead.

[Peggy Pinkston, Vice President of Investor Relations]

Thank you, Operator. And good afternoon, everyone. I'm pleased to welcome you to Seagent's third quarter 2021 financial results conference call. This afternoon, we issued a press release with our results and the press release and supporting slides are available on our website in the Investors section, Events and Presentation page. Speakers on today's call will be Clay Siegall, President and Chief Executive Officer, Todd Simpson, Chief Financial Officer, Chip Romp, Executive Vice President-Commercial U.S., and Roger Dansey, Chief Medical Officer. Following our prepared remarks, we'll open the line for questions. We aim to keep this call to 1 hour and so ask that you limit yourselves to 1 question to give everyone an opportunity to participate in Q&A during our call today. Today's conference call will include forward-looking statements regarding future or anticipated events and results, including the Company's 2021 financial outlook, anticipated product sales, revenues, costs and expenses, and potential clinical and regulatory milestones, including data readouts, regulatory submissions, and approvals.

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 difficulty in forecasting sales revenues and expenses, impacts related to the COVID-19 pandemic, and the uncertainty associated with the pharmaceutical development and regulatory approval process. More information about the risks and uncertainties faced by Seagen is contained under the caption Risk Factors included in the Company's quarterly report on Form 10-Q for the quarter ended June 30th, 2021, filed with the Securities and Exchange Commission and the Company's subsequent reports filed with the SEC. And now, I'll turn the call over to Clay.

[Clay Siegall, President and Chief Executive Officer]

Thank you, Peg. Good afternoon, everybody. And welcome to our third quarter call. We look forward to providing updates today on recent commercial, regulatory, and clinical achievements. We reported net product sales of approximately $1 billion for the year-to-date and $366 million for the third quarter, reflecting growth across our expanded portfolio of approved medicines. We continue to demonstrate robust financial strength fueled by product sales, royalties and multiple strategic collaborations.

Our strong balance sheet allows us to advance and expand our pipeline both internally and through external business development efforts that you will hear more about shortly. Our first strategic priority is to maximize the global potential of our products through exceptional commercial execution, clinical development, and strategic partnerships. We've expanded our commercial portfolio from one product to four in less than two years, which is a remarkable achievement by our team.

Last month, FDA granted accelerated approval to Tisotumab vedotin or TIVDAK, a tissue factor targeted antibody drug conjugate, which we are co-developing with our partner Genmab. TIVDAK is the first and only FDA approved ADC for patients with recurrent or metastatic cervical cancer with disease progression on or after chemotherapy. Upon its accelerated approval in September, TIVDAK became Seagen's fourth commercial product, and marks an important milestone for women with recurrent or metastatic cervical cancer. We are focused on strong commercial execution and early launch feedback has been positive. We are also conducting a broad clinical development program intended to expand Tivdak's future potential and support global [Indiscernible]

[Operator]

Welcome to [Indiscernible]. Please hold for a conference specialist. This is the Operator. Can I have your first and last name? Josh Jackson? The Company you're with? Please hold for me again.

[Clay Siegall, President and Chief Executive Officer]

-- that has broad potential in HER-2 cancers, and to that end, we recently completed enrollment in the Phase 2 MOUNTAINEER file in advanced HER-2 positive metastatic colorectal cancer, which could potentially support registration and USDA 's accelerated approval Broad clinical development program also includes valuation [Indiscernible] HER-2 positive breast cancer faster [Indiscernible] to amplify tumor [Indiscernible]. Specific class. Quickly. Standard of care in previously treated. Bill cancer. Really. As a second indication, speaking adequately. across Europe, Asia-Pacific, and the Americas. We have positioned [Indiscernible] the market dynamics, and we are advanced [Indiscernible] chemotherapy.

Results of this cohort could potentially support registration under FDA's accelerated approval pathway. Lastly, [Indiscernible] is commercially available. [Indiscernible] maintained solid performance with record quarterly sales [Indiscernible] Ram to maximize ADCETRIS' s potential to benefit patients. Our second strategic priority is to advance our agreement with [Indiscernible] for a Tisotumab vedotin or [Indiscernible] outside of REMAGEN 's territory of Asia, excluding Japan and Singapore. TV as a novel ADC that is active across a broad range of HER2 expressing solid tumors and is being developed as monotherapy and in combination with PD-1 inhibitors.

TV has already received conditional approval in China for third-line gastric cancer, and their National Medical Products Administration accepted the supplemental Biologics License Application for second and later lines of metastatic urothelial cancer. The deal represents a strong strategic fit as it harnesses our ADC technology, expertise, development experience at our expanded global infrastructure. These elements will help to maximize TV's potential value and global reach. We believe TV is an important and differentiated asset. And Roger will go into further detail. Our third strategic priority is to expand our deep and diverse early-stage pipeline through innovation, encompassing ADCs, immuno -oncology agents, corporate developments, and strategic partnerships.

Importantly, we're submitting at least two INDs for additional ADCs including those targeting B7H4, and PD-L1 further bolstering our early-stage pipeline. Across our early and late-stage pipeline, we are advancing 13 programs in a range of solid tumors and hematologic malignancies, including four novel programs that are expected to enter the clinic next year. Next, I will turn the call over to Todd, who will discuss our financial results. Then Chip will provide an update on our commercial performance. After that, Roger will provide further detail on our clinical development activities and pipeline. Todd?

[Todd Simpson, Chief Financial Officer]

Thanks Clay, and thanks to everyone for joining us on the call this afternoon. Our financial results reflect significant advances made across the business. Today I'll summarize our financial results for the third quarter in year-to-date, and then discuss our outlook for the remainder of 2021. Total revenues were $424 million in the third quarter, and $1.145 billion for the year-to-date in 2021. Product sales totaled $366 million in the third quarter, representing 37% growth over the third quarter of last year.

This was driven by growth in product sales across our portfolio. In addition, third quarter results for PADCEV included $7 million in sales to another Company for our combination clinical trial, that they are conducting, given the growing interest in the use of our drugs in combination settings, we are pleased to see this, and wanted to highlight the impact on PADCEV sales growth this quarter. Lastly, TIVDAK was launched late in the quarter, bringing a fourth product to our commercial portfolio. Royalty revenues were $41 million in the third quarter, and $105 million for the year-to-date in 2021.

Growth over 2020 reflected increasing sales of ADCETRIS by Takeda, as well as higher royalties on sales of Polivy by Roche and BLENREP by GSK. Collaboration revenues were $17 million in the third quarter and $24 million for the year-to-date in 2021. Third quarter revenues reflect the achievement of a regulatory milestone under our ADC collaboration with GSK, as well as sale of product supply to one of our collaboration partners. Cost of sales was $83 million in the third quarter and $225 million for the year-to-date in 2021. This included product cost of sales and royalties for each of our brands, the PADCEV gross profit share to Astellas, and noncash amortization of acquired technology costs for TUKYSA R&D expenses were $459 million in the third quarter and $924 million for the year-to-date in 2021.

These are increases over 2020, as third quarter expenses included, the $200 million upfront payment due to REMAGEN for the licensing of the [Indiscernible], as well as continued investment across our early and late-stage pipeline. SG&A expenses were $180 million in the third quarter and $505 million for the year-to-date in 2021. These are increases over 2020, reflecting investments to support ongoing Takeda launches across Europe, and more recently, the launch of TIVDAK in the U.S. I'll now provide several updates to our financial outlook for the remainder of 2021, beginning with product sales.

We are increasing our 2021 product sales guidance for all 3 brands. ADCETRIS sales are now expected to be in the range of $700 million to $710 million, PADCEV of in the range of $330 million to $335 million, and TUKYSA in the range of $315 million to $325 million. Chip will provide more context on market dynamics later. We are increasing our 2021 guidance for royalty revenues to a range of $140 million to $150 million, primarily reflecting stronger sales of ADCETRIS by Takeda in its territory. And lastly, we are increasing our 2021 collaboration revenue guidance to a range of 25 to $30 million.

Turning now to expenses, we are increasing R&D expense guidance to $1.19 to $1.24 billion primarily as a result of the $200 million upfront amount due under the REMAGEN collaboration. We are also increasing our cost of sales guidance to a range of $295 to $315 million, primarily reflecting higher sales of [Indiscernible]. And lastly, we are narrowing our SG&A guidance to $675 to $725 million. Non-cash expense guidance remains unchanged. We ended the quarter with $2.4 billion in cash and investments. This does not reflect the $200 billion payment to REMAGEN made in the fourth quarter. Our financial strength allows us to continue investing in our pipeline and business, and we're pleased with the progress so far this year. Now I will turn the call over to Chip for an overview of our commercial performance.

[Chip Romp, Executive Vice President-Commercial]

Thank you Todd. Performance across the commercial portfolio was strong in Q3. ADCETRIS, PADCEV, and TUKYSA, all delivered growth in the quarter. And we are pleased with the approval and launch of TIVDAK, or fourth product. ADCETRIS third quarter sales were $185 million, a 13% increase over Q3 2020. We continue to focus on the landmark 5-year ECHELON-1 progression-free survival data in frontline Hodgkin lymphoma. These are meaningful data to physicians and patients and solidify the ADCETRIS regimen as the best option for frontline Stage 3 or 4 patients. August marked the 10-year anniversary of the ADCETRIS approval.

And I would like to thank the dedicated commercial teams that worked diligently to ensure this important product gets to appropriate patients. Moving on to PADCEV, third quarter sales were $95 million, a 54% increase over the third quarter of 2020. Position adoption of checkpoint inhibitors for post-platinum maintenance continues to increase, and this has generated more addressable patients for PADCEV. We're also promoting to the additional indication for patients who are ineligible for [Indiscernible] platinum-containing chemotherapy and continue to see incremental uptake. Transitioning to Kaiser, third quarter sales were $87 million, representing 104% increase over the third quarter of 2020. This marks our 5th consecutive quarter sequential growth, with contributions from the U.S.

and Europe. In patients with brain mets, TUKYSA is the most utilized product in second and later lines in the U.S. In Europe, we continue to be pleased with uptake that demonstrated overall survival benefit from HER2CLIMB trial, along with favorable clinical guidelines, gives us confidence as we seek reimbursement in additional European countries. Finally, we were excited that TIVDAK has launched, and we're pleased with early reaction from oncologists and we look forward to continuing to work closely with our partner Genmab.

We are utilizing our well-established support program, Seagen Secure, to help navigate TIVDAK's eye care requirements. TIVDAK provides an important new medicine for patients in the second and third line setting. Our previous options have typically offered low objective response rates and poor outcomes. I look forward to providing more details on TIVDAK as we get further into the launch. Now, I'll turn the call over to Roger.

[Roger Dansey, Chief Medical Officer]

Thank you, Chip, and good afternoon everyone. I'm happy to share recent clinical development updates for our approved medicines and our pipeline. I'll begin my remarks with TIVDAK, which is approved for the treatment of adult patients with recurrent or metastatic cervical cancer with disease progression on or after chemotherapy. Approval was based upon data from the innovative to a full trial, as well as other supportive studies. A global Phase 3 trial in cervical cancer, innovaTV 301, is currently enrolling a similar population and is intended to serve as the consumer-to-trial in the U.S., and to support global regulatory applications.

Our next goal is to bring TIVDAK into earlier lines of metastatic or recurrent cervical cancer, and for that purpose, we are conducting the innovaTV 205 trial in the first and second line saving. Combination data from innovative 205 were recently presented ESMO. The combination of TIVDAK and [Indiscernible] in the first-line saving resulted in the confirmed overall response rate of 55% for the complete response of 12% and the duration of response of 8.3 months. In the second-line, saving the combination of TIVDAK and KEYTRUDA resulted in an [Indiscernible] of 38% with a median DOR of 13.8 months. We are encouraged by these data, which will inform a TIVDAK based combination approach for frontline cervical cancer.

In addition, the recent accelerated approval KEYTRUDA in the first-line setting, further defines [Indiscernible] landscape, in which TIVDAK combination will need to be tested. Turning now to Kaiser in the evolving HER2 treatment landscape, we continue to progress our growth development program in braced NGI malignancies, as well as other solid tumors. In breast cancer, he Phase III trial HER2CLIMB-02 is evaluation to Kaiser plus KADCYLA versus KADCYLA alone in the first and second line metastatic setting. As a reminder, this trial is enrolling patients with active brain metastasis with similar eligibilities to HER2CLIMB. In high-risk adjuvant breast cancer, enrollment continues in the randomized COMPASS HER2 RD trial, which is being run by the Alliance Cooperative Group.

This study is evaluating TUKYSA KADCYLA versus KADCYLA alone. In GI cancers, as Clay mentioned, we have completed enrollment in MOUNTAINEER, which is assessing TUKYSA and to accept them as treatment for patients with advanced HER-2 positive colorectal cancer. We anticipate results next year, and if the data are compelling, MOUNTAINEER could potentially support accelerated approval in the U.S.. Additional studies, our evaluation TUKYSA in combination with PADCEV (ph) platinum-based chemotherapy in first-line GI cancers, as well as in basket trial for solid tumors with HER-2 alterations. Finally, we are conducting a study of TUKYSA in combination within HER-2 for HER-2 positive breast cancer.

I will turn now to PADCEV, where we remain focused on moving into earlier lines of urothelial cancer. In the first-line metastatic setting, we have completed enrollment of EV -103 Cohort K, which is testing the combination of PADCEV and KEYTRUDA as treatment for patients who are ineligible for Cisplatin therapy. This trial is intended to support an application for accelerated approval in the U.S., and we expect to report top-line results in 2022. We are also enrolling patients into the Phase 3, EV -302 global trial, which includes both Cisplatin eligible and ineligible patients, and is assisting PADCEV plus KEYTRUDA compared to platinum-containing chemotherapy. EV -302 is intended to be a confirmatory trial, as well as supporting global marketing applications.

In muscle invasive bladder cancer, we together with Astellas and Merck, are advancing two Phase III trials. Both of which are testing [Indiscernible] saving combination with KEYTRUDA. The KEYNOTE-B15/EV-304 trial is enrolling Cisplatin eligible patients. And KEYNOTE-905/EV-303 trial is enrolling Cisplatin ineligible patients. Additionally, we have now opened the EV-104 trial of single-agent PADCEV in non-muscle-invasive bladder cancer. In this study, PADCEV is administered intravesically in BCG non-responsive patients. Nectin-4 is highly expressed in this disease state and pre -clinical data support this as a potential opportunity for PADCEV.

We are also evaluating PADCEV in a basket trial of high net term for expressing solid tumors, including none braced head and neck gastric and esophageal cancer. This study is enrolling and we await initial data to inform our next steps. Now on to ADCETRIS. At the upcoming ASH meeting in December, we expect to have several presentations. Notably, we plan to present data for the first time from an ongoing Phase 2 study ADCETRIS in combination with Nivolumab [Indiscernible] into [Indiscernible] as front-line treatment for advanced Hodgkin lymphoma. We continue to advance our clinical development program, including ECHELON-3, the Phase 3 trial in relapsed diffuse large B-cell lymphoma, which compares ADCETRIS plus REVLIMID and RITUXAN to REVLIMID and RITUXAN.

Our newest entry into late-stage development is a Tisotumab vedotin which has already received conditional approval as monotherapy in China for gastric cancer. The antibody which has a highest synergy for HER-2 and blocked signaling also demonstrates enhanced internalization when compared to Tisotumab. This is an important characteristic for an antibody drug conjugate. The ADC also delivers our proprietary vedotin payload the same as in our 3 commercial ADC s. Initial data in metastatic urothelial cancer was impressive, and has already gone in breakthrough therapy designation from the FDA. Additionally, PD-1 inhibitor combination data were presented at ASCO this year, demonstrating high response rates, and these will also inform our clinical development plans.

We are in active discussions with FDA on our Urothelial cancer development strategy. With regard to breast cancer, our partner REMAGEN has generated initial encouraging monotherapy data in HER-2 low-risk cancer. And we are evaluating the potential here for future developments. Turning now to the [Indiscernible] LV, which is being developed with our partner Merck. At ESMO this year, we presented initial efficacy data with the weekly dosing regimen of LV in patients with triple-negative breast cancer.

Data demonstrated that weekly LV results in a confirmed [Indiscernible] of 28% in the second and third line setting. we continue to evaluate the optimal dose and schedule of LV, both as monotherapy and in combination KEYTRUDA to optimize efficacy and safety. I'd like to now briefly mention our early-stage pipeline. We are advancing 7 programs in Phase 1 clinical trials across a range of solid tumors and hematological malignancies, including the ADCs, SGN - CD228A, B6A, and SGNV. We expect R&D submissions for at least two more novel ADC programs this year, targeting B7H4, and PD-01. At [Indiscernible] in November, we will present posters on these programs which will highlight robust anti-tumor activity in preclinical models.

We also have 4r effective function enhanced antibodies utilizing our SEA technology, including ACA-CD 40, CD70, BCMA antigens. Later this year with Ash, we will be disclosing initial results of ACA BCMA in subjects with relapsed or refractory multiple myeloma. With regard to SCA CD40, as previously discussed, we completed enrollment of a cohort of patients with pancreatic cancer. We expect to report clinical data from those cohorts early next year. We have also initiated a basket trial to assess SEA - CD40 and other solid tumors, including melanoma and non-small cell lung cancer. In closing, we continue to reach important development milestones and make meaningful progress with our pipeline, and we look forward to providing you with further updates on future calls. I'll hand the call now back to Clay.

[Clay Siegall, President and Chief Executive Officer]

Thank you Roger. SGEN has a resilient core business and solid foundation which fuels our ability to continue expanding and evolving our capabilities, technology, and business. Throughout this year, we have achieved multiple important milestones. We have a strong portfolio of approved medicines and a proven commercial engine which allows us to compete in the global marketplace. We have robust clinical development capabilities and a deep pipeline of tomorrow's potential fast and best-in-class therapies. Strategic partnerships, our international infrastructure, and substantial financial power enables our ability to develop, advance and launch exceptional oncology therapies. The future for SGEN is exciting and we remain passionate and committed to improving the lives of cancer patients worldwide. Operator, please open the line for Q&A.

[Operator]

We will now begin the question-and-answer session. [Operator Instructions]. At this time, we will pause momentarily to assemble our roster. And our first question will come from Geoff Meacham of Bank of America. Please go ahead.

[Geoff Meacham, Bank of America]

Hey guys, its [Indiscernible] for Geoff, thanks for the question. Maybe one for Clay and one for Chip. First off, Clay, now that you have your fourth approved product in the portfolio, maybe talk about how you're thinking about the balance of investing and keeping that early pipeline engine running, while also moving toward a sustained profitability. And then on the Takeda launch OUS, maybe just help us understand what the reimbursement pathway looks like over the next 3 to 6months, or maybe 12 months even, as you guys secure different geographies in the EU. Thank you.

[Clay Siegall, President and Chief Executive Officer]

Thank you for the questions. Okay. First of all, we do have 4 products that we've had, 3 products approved in the last two years. We're very proud of the products we have that really make a difference in patients lives. We continue to invest strongly in our late-stage, mid-stage and early-stage product. We just submitted to INGs recently that Roger mentioned. We will continue to push forward there. We intend to be profitable. We're not giving guidance today on when we're profitable, but it's something that's important to us. And -- but it's also important to us to continue to build our pipeline for working together with our Board of Directors. the future, and a bastion of where we're going, and also working with some of our biggest investors who continue to encourage us to make great medicines and move on, and this is the time to do that.

We are investing heavily in our pipeline. So that is where it is now. But please note, we do intend to be profitable, and we could be profitable now by basically not working on our pipeline, not expanding our products. But that we don't think is the right way to build a big, profitable, self-sustaining organization that makes a huge difference in patients' lives. So we're pursuing that. As far as TIVDAK and reimbursement, Chip, do you want to talk a little bit about the initial -- sorry? TUKYSA. I thought it was TIVDAK. I'm sorry, TUKYSA. Sorry. Go ahead.

[Chip Romp, Executive Vice President-Commercial]

Sure. So as far as the ex-U.S. goes, launches continue with strong uptake in Germany and France. We're working through the slow process for the next countries that are in line. We are in price negotiations with several of them. So as we move forward, we look forward to expanding the footprint of reach for the product.

[Geoff Meacham, Bank of America]

Great. Thanks guys.

[Operator]

The next question comes from Cory Kasimov of JPMorgan. Please go ahead.

[Tom Prickett, JPMorgan]

Great. Hey, this is Thomas [Indiscernible] for Cory. Thanks for taking the question. Maybe just one on the updated revenue guide here and then there are numbers can identify sequential downturn as in product element in Q4 is that conservatism [Indiscernible] Thank you.

[Clay Siegall, President and Chief Executive Officer]

Thanks for the question. First of all, we are very pleased with our quarterly and year-to-date performance. Our net product sales were up 37% year-over-year in third quarter of '21. So that's great, we have great products that make a difference in patients lives. We have increased not only our 3 initial products, TIVDAK is too new for guidance right now, but we also increased our other revenue metrics, which is 4G LTE and partnering, so all 5 of our revenue metrics, we increased. Our focus is on the long game, making a difference in patients lives, expanding our labels, maximizing the potential and reach of our drugs, going worldwide. We're investing and going into much bigger footprint globally, help more patients. And we believe that this is going to make the Company stronger in the not-too-distant future. We're -- it take some investment to do that. And we're really excited about that. As far as thinking about the fourth quarter, Todd, you want to give a little color on to that?

[Todd Simpson, Chief Financial Officer]

You mentioned are we trying to be conservative, we're actually trying to just be as accurate as we can. We recognize that COVID continues to create a lot of just uncertainties and your growth sales fluctuate quarter-to-quarter, so with that in mind, what we've always tried to do is just do the best job we can on annual guidance, and we look forward to giving our 2022 guidance on the next quarterly call. But as Clay mentioned, we're really pleased with how the year has gone, segment third quarter in particular were very strong, and as a result, we did a modest up guide in our product sales guidance today and we're really pleased with how we're doing.

[Tom Prickett, JPMorgan]

Great. Thank you.

[Operator]

The next question comes from Salveen Richter of Goldman Sachs. Please go ahead.

[Salveen Richter, Goldman Sachs]

Good afternoon. Thanks for taking my questions. Could you just comment on any granularity of -- on the TIVDAK launch at this point and then just timeline updates or what we should expect next on the TIGIT and LV programs?

[Clay Siegall, President and Chief Executive Officer]

Sure. So we are really excited about getting TIVDAK on market. And it's early, but really good feedback. Chip, would you like to talk a little bit about what's it like out there in the fields and those commercial scene?

[Chip Romp, Executive Vice President-Commercial]

Sure. We're really pleased with the initial reactions we've had from oncologists. We're looking forward to continuing to work closely with our partner Genmab. Physicians are excited about having the option of TIVDAK. It represents the first and only FDA approved [Indiscernible] in the [Indiscernible] cervical cancer setting.

[Clay Siegall, President and Chief Executive Officer]

And then switching to your second question, so let's start with them one at a time. So TIGIT is a product we're really excited about it's in clinical trials. We think it's differentiated from the other TIGIT out there because of our SEA technology and that's in trials and LV is also in the number of trials. Roger, could you comment a little bit about TIGIT and where we are and what we're thinking and then the LV.

[Roger Dansey, Chief Medical Officer]

Sure. Thanks, Clay. So with regards to TIGIT, we understand the environment around us. There are lots of other companies working on the TIGIT program for good reason, because the early proof-of-concept is there. So we understand that time is of the essence. We also need to essentially developed TIGIT in the way that we can. If we are differentiated clinically, we'll be able to demonstrate that. I can just say we're working hard on the TIGIT program. We're not ready for primetime yet, but we are meeting along expeditiously. With regard to LV, as you know, we have presented multiple datasets now that LV is an active drug, both as a monotherapy and in combination, and we're continuing to work hard with our partners, Merck, to see if we can optimize dose and schedule, and then move in terms of a little trial. But we're not there yet. Again, stay tuned for more data as the program unfolds.

[Salveen Richter, Goldman Sachs]

Thank you.

[Operator]

The next question comes from Michael Schmidt of Guggenheim Securities. Please go ahead.

[Aiden, Guggenheim Securities]

Hi. This is Aiden. I'm for Michael. Thanks for taking our question and congratulations on the impressive results of this quarter. We have a question on [Indiscernible]. Now that [Indiscernible] HER-2 reported positive results in the second-line risk cancer. Do you think this will drive the HER2CLIMB-02 study towards enrolling more patients with brain mets, and what proportion of patients do you expect to have brain mets in that study? And perhaps a related question to this, on the Phase 2 study of [Indiscernible] plus in HER-2. What are you specifically looking at in that study and what could be the potential next step? Thank you.

[Clay Siegall, President and Chief Executive Officer]

So thanks for the questions. 2 good questions on TUKYSA. Roger, can you start with the brain mets question that they had concerning HER2 client.

[Roger Dansey, Chief Medical Officer]

Sure.

[Clay Siegall, President and Chief Executive Officer]

Yeah. And then the next one on HER2 plus TUKYSA.

[Roger Dansey, Chief Medical Officer]

Right. Inn regards to our development program, as you know, we've demonstrated remarkable, [Indiscernible], in patients with brain metastases to see such a high unmet need. And also, as we know, which is positive metastatic breast cancer, does have a high frequency of brain met up to 50% of patients will develop brain mets through that disease cause, and so it's expected that a program such as HER2CLIMB, HER2CLIMB-02, where we are allowing patients with active brain next to enroll, will, in fact, enroll a decent proportion of patients with brain metastases. We can't share with you any of the information on HER2CLIMB-02 as it is, but just in principal, a drug like TUKYSA will be attractive for patients with brain metastases. With regard to infer too, from a sort of development perspective, the most interesting drugs in the HER2 breast cancer space right now are TUKYSA and HER2.

from a neck holistic perspective, combining an ADC like in HER2 together with TUKYSA makes complete sense. As you can see in our development program, we've done that, we've had that same approach with KADCYLA. So we're looking forward. We're still in the process of enrolling. We're looking forward to what those results may produce. And of course, if those results are compelling, we will need to think through what next steps they could be. Again, we wouldn't disclose any of that at this point. We're still in the process of data generation.

[Aiden, Guggenheim Securities]

That's very helpful. Thank you.

[Operator]

The next question comes from Kennen Mackay of RBC Capital Markets. Please go ahead.

[Kennen Mackay, RBC Capital Markets]

Thank you for taking my question and congrats on the performance. I had another question on the guidance, maybe for Todd, just on the increased guide for royalty revenues. I was wondering if you could help us with where we should think about that coming from potentially, is that coming from [Indiscernible] and the label there, or whether it's something else. And then just maybe going back to the PADCEV guide after really a quite impressive quarter, 15%, quarter-over-quarter growth. Just wondering if you could help us understand what dynamics could be related to them expecting a decline in Q4 here or whether there is any seasonality. Again just trying to understand those dynamics. Thanks and congrats again on the Q3 performance.

[Todd Simpson, Chief Financial Officer]

Thanks, Kevin. Some good questions, let me start with the royalty up guide. As I think I mentioned earlier that the principal reason for that is related to Takeda 's sales of ADCETRIS, stronger than what we had thought of a year ago when we set our guidance, so we're delighted to see that ADCETRIS is doing so well in Takeda's territories. And then you mentioned Polivy and BLENREP, those two are starting to contribute to royalties, they're obviously lower in the amount than the Takeda royalties, but it's great to see the benefit that both these drugs probably pulled in particular in a way that looks like it's moving forward now, in the front wind, so we're really happy with that. And then on the PADCEV guide, I mentioned also that we had a clinical supply water from another Company.

I want to call that out in the remarks I made earlier because probably it is $7 million in -- again, not that significant to the overall picture. It, nevertheless, was a pretty meaningful driver of growth in Q3. We did see also commercial growth, so I want to point that out. And as we look into Q4, it's a situation where PADCEV has rapidly become a standard of care. We've now got both the Cohort 1 and Cohort 2 labels, and we're super happy with where we are. But there's uncertainty in quarterly fluctuations. So we just try to do the best we can, across the board, actually, been all of our guidance, but PADCEV as well.

[Kennen Mackay, RBC Capital Markets]

Thank you for that color, Todd appreciate it.

[Operator]

The next question comes from Boris Peaker of Cowen. Please go ahead.

[Boris Peaker, Cowen]

Great, my question is on Daiichi litigation, I was just wondering if you could comment specifically or maybe on the timing of the arbitration. But also, second scenario is since there's a lawsuit and a trial starting next April, just curious what the dynamic -- what would happen if you win the arbitration, but then lose the lawsuit on the patent litigation, would they still owe you royalties on [Indiscernible] HER2 in that scenario?

[Clay Siegall, President and Chief Executive Officer]

So Boris, thanks for the question on the Daiichi Sankyo legal issues. So first of all, as per our guidance, we have said that we believe there will be a -- the arbitration and the retired federal judge in their arbitration will announce the findings from that before the end of the year, and so that's something we have been public about. And you're right, there is a patent infringement case that we brought forward, which is being heard in April, so you're correct on both of those. As far as really one reading or another, that's basically something we wouldn't comment on.

The -- its inner workings have a legal system, and we have great legal team. We did -- we have a great case in both regards, both for the arbitration, which is based on our contract that we had with Daiichi Sankyo, and based on the patent infringement based on issued patent that we have on our technology. So they're different cases, they're not the same, and we feel like we have a great case for both. So we're looking forward. The most important thing for us is to develop drugs and make a difference in cancer patients' lives, and we don't go away from that. But it's also, we're -- we work with a lot of other companies, and when we work with a Company and we do deals with them, we expect to continue to -- if they're using our technology we expect to be their partner. And so that's where this is.

[Boris Peaker, Cowen]

Got it. And maybe let me ask a follow-up question not related to the litigation, but I'm just curious with the strong data that were recently so for an HER-2 versus [Indiscernible] in breast cancer. How does that impact your development strategy for the -- particularly the recently licensed HER2 ADC from REMAGEN?

[Clay Siegall, President and Chief Executive Officer]

Thanks for that. The product from REMAGEN, it's really interesting It internalizes very rapidly. Keep in mind that whether it the original HER2 ADC Keds Sila or HER2 they both use the same antibody component which is Trastuzumab, which we know as receptive. And that molecule internalizes but it's kind of middle of the road internalization. The antibody used in RC 48, which is what we licensed from REMAGEN, that was a unique antibody and was selected based on incredibly rapid internalization. And one of the things that we've been able to see based on what REMAGEN did with their data which we did a lot of diligence on, was its impact on HER-2 low patients.

And that's a big area, in fact it's bigger area than HER2 high, and so we think this rapid internalization could be something really exciting. They have data, I mean, they're approved to gastric cancer in China. We have breakthrough designation for urothelial cancer in the U.S. with the FDA. And certainly the data they have with -- in HER2 -low breast cancer and other HER2 -low tumors is very interesting. They even have data in combination with checkpoint inhibitors, which is not surprising to us since with our other ADCs that use the dose and we see very nice activity with checkpoint inhibitors such as KEYTRUDA. So we think all-in-all, we have a very nice profile there. And yes. And HER2 is a good drug. It's an important drug. We, on behalf of cancer patients, we love where we see new drugs. This is great. That's our goal, that's but my passion and goal for my whole career. I think that there's a lot of room for cancer patients have different types of therapies. Roger, do you want to add anything to that?

[Roger Dansey, Chief Medical Officer]

Yeah. I think we're in a fortunate position in that we have a highly valuable and active small molecule PKI in [Indiscernible], which is in HER-2 space. We now have a [Indiscernible] antibody with properties that we think is -- are very interesting. And we have the external environment which includes drugs like [Indiscernible] which we're combining with and then HER-2, which we're exploring in combination with [Indiscernible]. There lots of possibilities for us going forward. We're not changing [Indiscernible] development program as it is right now. But what are the next steps with regard to things like [Indiscernible] in combination with [Indiscernible] and HER2 in combination with [Indiscernible]. I think all of those things are on the table for exploration going forward.

[Boris Peaker, Cowen]

Thank you very much for answering my questions.

[Operator]

Our next question comes from Gena Wang of Barclays. Please go ahead.

[Gena Wang, Barclays]

Thank you for taking my questions. So maybe just to follow the IP of arbitration, just want to make sure Clay, so would the timing still before Hugh and how would you share that information with the investors? And then also another question regarding REMAGEN compounds, just wondering, how's the data comparison efficacy, safety, especially MC in HER2 low compared to say anchor 2 the ADC.

[Clay Siegall, President and Chief Executive Officer]

Sure. Well, I'll try to fix first part of the question about the arbitration and then I will turn it over to Roger to talk about his view of the differences in safety between RC48 Disitomab vedotin versus in HER2. On the arbitration, we feel that we're confident based on where we sit and based on hearing from our internal and external counsel, that there'll be a resolution of some type in the arbitration case, not in the patent infringement case, which starts to enable better than the arbitration case prior to the end of year. And that's something that, I think, would be shared with the investors. We've probably put out some sort of press release or something like that on it. We look forward to that once again, we think we have a strong case. We've been going at this now for some time and look forward to getting it resolved. Roger, on the safety.

[Roger Dansey, Chief Medical Officer]

Sure. With regards to the [Indiscernible] the clinical profile, the data that REMAGEN has generated [Indiscernible] looks pretty impressive. It's not that dissimilar from an HER-2 and I think we obviously, CGEN need to generate our own data with the population defines of the HER-2 low, and determine what our next steps are. But we see this as a meaningful opportunity. And it may not necessarily be limited to breast cancer. With regards to the efforts that the HER-2 low program in China has generated, we will obviously also leverage as much as possible data from China that supplements whatever efforts it make in the U.S..

[Gena Wang, Barclays]

Thank you.

[Operator]

The next question comes from Andy Hsieh of William Blair. Please go ahead.

[Andy Hsieh, William Blair]

Great. Thanks for taking my questions, and congratulations on the beat and raise quarter. I have a question about the EV-104 study that you kind of availed today. So in terms of the intravesicular administration of PADCEV, curious how you think about the dosing since we usually think about that is in a systemic sense. And also for the maintenance phase, also curious about your thinking about stopping dosing at month 10 to 11 versus a longer treatment duration. Thank you.

[Clay Siegall, President and Chief Executive Officer]

Thank you for those questions. Roger, you want to take those?

[Roger Dansey, Chief Medical Officer]

Sure. Thanks, Andy. So yeah, we're excited. The non-muscle-invasive bladder cancer opportunity for PADCEV could be very meaningful. Just to remind you, at least in our hands preclinically, when we introduce PADCEV into the bladder and not exposed systemically. We really expect that the safety profile will look more favorable than systemic therapy. Obviously, we have to generate the [Indiscernible], but the preclinical package supports that, so very little systemic exposure. With regard to dosage, it's a great question.

The trials has just begun, we are using the current commercially available PET safe imaging. We're hoping that we will be able to define an efficacious dose using that current formulation, not certainly in our plan. With regard to beyond the initial sort of induction through to maintenance. Andy, I think when we shared details of the trial itself, it seems like post to presentations, I think that will be a good time to do some of those points. But obviously we're just beginning. Understanding all the way through what our eventual trend and may look like, it's a little difficult at this point to predict.

[Peggy Pinkston, Vice President of Investor Relations]

Operator we'll take the next question.

[Operator]

The next question comes from Jay Olson of Oppenheimer. Please go ahead.

[Jay Olson, Oppenheimer]

Hey guys, congrats on the quarter and thank you for taking the question. Can you talk about your first-line combination strategy that you're planning for TIVDAK. And also, when should we expect to see some data for TIVDAK in other tumor types? Thank you.

[Clay Siegall, President and Chief Executive Officer]

Thank you for the words about our quarter. We are really excited about TIVDAK. We presented some combination data two different ways at ESMO and certainly going to earlier lines is very important for us. Roger, you want to talk a little bit about that?

[Roger Dansey, Chief Medical Officer]

Yeah. Frontline cervical cancer, whose standard of care is combination chemotherapy with or without the [Indiscernible]. The recent reveal of KEYTRUDA as an addition [Indiscernible] combination adds another layer of drug, but actually produces a much better outcome. So when you think about how to move into a frontline space and creates a regimen, that is competitive, that is potentially better than the various current standards of care, we see with TIVDAK as the sort of backbone of that regimen. We believe combining it with chemotherapy certainty based on the carboplatin TIVDAK combination we've seen will be an important element. We also believe that Pembrolizumab will be an important element, and we need -- we have shown already the doublet, we need to go further. We need to put into the clinic and test what we would consider to be the final regimen that will be included in the frontline study and that's exactly what we're doing now.

[Jay Olson, Oppenheimer]

Great, thank you. And other tumor types?

[Roger Dansey, Chief Medical Officer]

With regards to other tumor types, yes, we are working on a plan to present data publicly at an appropriate time.

[Jay Olson, Oppenheimer]

Okay, great. Thank you.

[Operator]

The next question comes from Zhi Qiang Shu of Berenberg. Please go ahead.

[Zhiqiang Shu, Berenberg]

Great. Thank you. Congrats on the quarter as well. I like to ask about the SG&A, BCMA program that you're going to present at ASH. What are we going to see at this initial data presentation? And I guess, can you comment on the market opportunity for this drug? Thank you very much.

[Clay Siegall, President and Chief Executive Officer]

Yeah. First of all, on the market opportunity, this is an area that is mainly targeted to ultra robust myeloma. It's a subset of market. There's great drugs out there like REVLIMID and Velcade and antibodies CD38 and other drugs. So there really is good different therapies out there, but the disease is certainly not cured where it said. These are therapies that have extended the life of patients, but in MM, there really is still always room for great drugs to come in, especially ones that have very low safety signals, and like what we would expect with SEA BCMA. Roger, could you talk a little bit about the drug and what was our thoughts on there. And obviously, as far as ASH first. Until we present, we're not going to -- it's not appropriate to talk about the presentation. Roger could give you a little color on it.

[Roger Dansey, Chief Medical Officer]

Sure. So the clinical trial program with the ACA BCMA has been running for a little while now, and we've been evaluating it as a monotherapy. And we've been looking at various ways of dosing it. We've been evaluating it in combination with Dexamethasone which is a essentially a almost mandatory combination drug in multiple myeloma. And so it's that type of data in late line Myeloma patients that we will be presenting and we obviously at this point, we believe that the data is mature enough and meaningful enough, that it's time for us to produce this in a public forum. We're looking forward to presenting the BCMA initial data at ASH this year.

[Zhiqiang Shu, Berenberg]

Great, thanks very much.

[Operator]

The next question comes from Ren Benjamin of JMP Securities. Please go ahead.

[Ren Benjamin, JMP Securities]

Hey, good afternoon, guys. Thanks for taking the questions and congrats on a great quarter. Clay, I guess I'd love to just learn a little bit more about the [Indiscernible] and the Urothelial data to-date. Can you just remind us of that. And how should we be thinking about the development plan of this new asset going forward. Are you guys only going to be focusing on kind of low HER2 expressing tumors or is bladder cancer, or you see a potential option and how do we think about Nectin-4 expression versus HER2 and how the two then quite ultimately work together.

[Clay Siegall, President and Chief Executive Officer]

Sure, so we have not laid out the entire plan at this point for -- Tisotumab Vedotin GB. But you're touching on a lot of the important things that we considered where we [Indiscernible] just from a put it in and now we have a very big plan that we've been hatching and building up, so I don't think you'll have to wait long to really hear everything. But clearly, we're looking at bladder cancer where there's already breakthrough designation. Clearly we're looking at HER2 low breast cancer with a big slug of data, And also we can't look past gastric cancer, I mean, it's an important cancer -- is already approved in China. So there's a lot of different possibilities for this track. And I think we're very -- which is well-positioned to take this forward and make it into a real product that could get out on a global scale, not just in China right now. Roger, do you want to comment more about the question?

[Roger Dansey, Chief Medical Officer]

Yeah. With regard to urothelial cancer, the data that's been generated by RemeGen is really impressive. Bear in mind that this was a HER2 defined population, which is something that we'll need some work in battle cancer, because it is a population that has, sort of, up to this point been really identified. But a biomarker driven population of HER2 -high expresses and perhaps the HER2 -low group in that account is the population we're interested in. And as Clay mentioned, essentially, as this drug comes into our hands, we'll look at all the opportunities for [Indiscernible] disease, whether it's traditional [Indiscernible] amplification, overexpression, or HER2 low. I think all possibilities are on the table, but our initial focus is on Urothelial cancer and on HER2 low breast cancer.

[Ren Benjamin, JMP Securities]

And just as a follow-up, Roger, do you have a sense as to the potential overlap between -- about expression of HER-2 expression with Nectin-4, or they kind of maybe a little bit exclusive?

[Roger Dansey, Chief Medical Officer]

Nectin-4 expression, we see as sort of near ubiquitous. HER-2 expression is obviously more limited. I think the epidemiology of urothelial cancer is less well-defined, and that's something that we need to work on. And I think when we have a clear and accurate view of the distribution of traditional HER2 high versus HER2 low in bladder cancer or urothelial cancer, we'll bring that forward. But it is not the whole population. Obviously, it is a biomarker, a defined groups of patients.

[Ren Benjamin, JMP Securities]

Perfect. Thanks for taking the questions, and congrats.

[Operator]

The next question comes from Joe Catanzaro of Piper Sandler. Please go ahead.

[Joe Catanzaro, Piper Sandler]

Hey, guys. Thanks so much for squeezing me in and taking my question here. Just maybe one quick one from me. So Roger, you had mentioned a new basket combination trial for CCD 40, wondering if you could elaborate a little bit on that and maybe how your experience in pancreatic cancer and the combination you are looking at there informed your decision to start this trial. Thanks.

[Roger Dansey, Chief Medical Officer]

Sure. It's a great question. I think we believe strongly in the scientific hypothesis, which is the combination of an agonist, a CCD 40 agonist together with agents that injure and kill cancer cells, and potentially also as well together with PD-1 inhibitors that relieve the exhausted T-cell population. That as a scientific construct case, we think is really interesting. Obviously, pancreatic cancer [Indiscernible] into that pancreatic cancer, as you well know, is not an easy disease to treat. It is, I guess traditionally considered to be less immune responsive than other tumors and that's why we're taking the basket trials further into diseases where in fact immunotherapy has already proven to work. So we think it makes sense to continue to test this approach in other tumors as well. So that's why we are opening up this basket trial which will include diseases like non-small cell lung cancer and melanoma.

[Joe Catanzaro, Piper Sandler]

Okay, perfect. Thanks for taking my questions.

[Operator]

This concludes our Question-and-Answer session. I would like to turn the conference back over to management for any closing remarks.

[Peggy Pinkston, Vice President of Investor Relations]

Okay. Thank you, Operator. And thanks everybody for participating in our call today. Have a good rest of your day.

[Operator]

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.