Seattle Genetics (SGEN +0.00%) is a biotech company focused on the development of monoclonal antibody-based treatments for cancer. The company's antibody-drug conjugate, or ADC, technology treats cancer by sending in an antibody and an attached drug, which bind with cancer cells and stops cell division from the inside. The company currently has one drug, Adcertis, available for sale.
The company has a small field of competitors in the ADC realm. Leading that pack is ImmunoGen (IMGN +0.00%) with a targeted antibody payload, or TAP, technology that works similarly to ADC technology, and has led to the company striking several large partnerships to license it. Pfizer (PFE 1.51%) is in the early stages of developing its own ADC technology, even as it works on other drugs created with Seattle Genetics' technology that could become competitors for Adcertis. Medarex, a subsidiary of Bristol-Myers Squibb (BMY 1.08%), has ADC technology and is developing monoclonal antibody drugs that could compete with Adcertis.
Here are three ways Seattle Genetics is working to expand its revenues past the currently narrow definitions of its sole drug on the market.
Geographic expansion
Adcetris is a treatment that's been approved by the Food and Drug Administration for resistant forms of Hodgkin lymphoma and systemic anaplastic large cell lymphoma. The drug was approved last summer, but revenues have failed to ramp up sharply due in part to the domestic limitation of the drug.
Geographic expansion could be just around the corner. A European Commission decision is expected any day now, following a July committee recommendation , which would make the treatment available in 27 countries. Canadian approval is following right behind. Health Canada accepted the New Drug Submission for Adcetris back in May, and a decision is expected in early 2013.
Adcetris is a partnership between Seattle Genetics and Millennium, an oncology subsidiary of Takeda. The partnership grants Seattle Genetics the drug rights in the U.S. and Canada, and requires Millennium to pay up to $230 million in milestone payments plus a double-digit percentage of net sales from its global markets.
Expanded use
Expanding the approved indications for Adcetris would also boost its revenues. Seattle Genetics' pipeline is half full of trials for new indications. There are two phase 3 trials that deserve closer attention.
The AETHERA trial tests Adcetris versus a placebo in patients at risk for residual Hodgkin lymphoma after an autologous stem-cell transplant. The study has a primary endpoint of progression-free survival, and secondary endpoints include overall survivability and safety. Data is expected in late 2013 or early 2014.
The ALCANZA trial compares Adcetris to methotrexate or bexarotene in patients with specific mature type of t-cell lymphoma. This trial is still enrolling, so its data will come in behind ATHERA, which finished enrollment in late September.
There are also Adcetris trials in earlier stages. The potential indications include front-line HL when used in conjunction with chemotherapy, front-line HL in elderly populations, and non-lymphoma malignancies.
Partnership pipeline
Seattle Genetics does have more going for it than Adcetris. The company has a robust pipeline of licensed and co-development drugs through deals with nearly a dozen other companies. It has more deals in place than ImmunoGen, though there are some companies using both ADC and TAP technologies, including Roche (OTC:RHHBY) subsidiary Genentech.
Genentech is Seattle Genetics' strongest partner, with a whopping nine ADC drugs in development. The phase 2 advancement of two of Genentech's lymphoma treatments recently triggered undisclosed milestone paymentsl.
That's the beauty of these agreements: They just keep giving. Licenses give Seattle Genetics an upfront payment, progression-based milestone payments, and royalty payments should the drug make it to market. The co-development deals, covering four drugs from Agensys and Genmab, also give Seattle Genetics the option to step in for a 50/50 split of development costs and profits, if the company likes what it sees.
Foolish bottom line
Seattle Genetics finished October up about 50% year-to-date and trading about 15% below its 52-week highs. The Adcetris approvals abroad are likely already priced in at this point, so the next catalysts to watch will be the results of the phase 3 indication expansion trials and the potential approvals of Genentech's late stage ADC treatments.
