Seagen Inc.

Good afternoon and welcome to the CGEN third quarter 2021 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. 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.

Thank you, Operator, and good afternoon, everyone. I'm pleased to welcome you to CIGIN's first 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 investor section events and presentations page. Speakers on today's call will be Clay Segal, President and Chief Executive Officer, Todd Simpson, Chief Financial Officer, Chip Romp, Executive Vice President, Commercial U.S., and Roger Danzy, Chief Medical Officer. Following our prepared remarks, we'll open the line for questions. We aim to keep this call to one hour and so ask that you limit yourself to one 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 CGEN 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.

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 Tisodimab-vidodin or TIDDAC, a tissue factor targeted antibody drug conjugate, which we are co-developing with our partner, GenMab. TIDDAC 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, TIVDAC became CGEN'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 TIVDAC's future potential and support global regulatory applications. Although the initial indication represents a modest market, we have already presented promising data investigating TIDDAC in combination with other therapies in earlier lines of cervical cancer, which may represent important clinical advancements and much larger market opportunities. Tucaisa, our best in class HER2 tyrosine kinase inhibitor, has become an important option for the treatment of second and later line HER2 positive breast cancer patients with and without brain metastasis. Tucaisa is approved in 36 countries, and in addition to the U.S., we have commercially launched in Germany, France, Switzerland, and Austria. A year and a half after U.S. approval, we are pleased with Tucaisa's uptake healthcare provider feedback, and inclusion in key treatment guidelines. We continue to engage with European authorities to secure broader reimbursement for TUKAISA, which could take up to two years, depending on the country. Our strategic collaboration with Merck will help further accelerate TUKAISA's global reach in regions outside of the U.S., Canada, and Europe. We believe Teqiza has broad potential in HER2 cancers, and to that end, we recently completed enrollment in the Phase II Mountaineer Trial in advanced HER2-positive metastatic colorectal cancer, which could potentially support registration under FDA's Accelerated Approval Pathway. Tukeise's broad clinical development program also includes evaluation in HER2-positive breast cancer, gastric cancer, and other HER2-amplified or mutant tumors. PADSEV is a first-in-class ADC that has quickly become standard of care in previously treated metastatic urothelial cancer. Earlier this year, FDA granted PADSEV a second indication, making it the first and only FDA-approved therapy for patients with locally advanced or metastatic urothelial cancer who have received immunotherapy and cannot receive cisplatin. PADSF also received regular U.S. approval, enabling us to promote to the impressive overall survival data, a key benefit. We have also been able to leverage with etcetris and tukaiza. Outside of the U.S., PADSEV recently received approval in Japan, and we and our partner, Astellas, continue to make progress with global regulatory submissions across Europe, Asia Pacific, and the Americas. We have positioned PADSEV strategically to benefit from changing urethelial cancer market dynamics, and we are advancing a robust clinical development program. Notably, we recently completed enrollment in cohort K of the EV103 trial, evaluating PADSAB in combination with Keytruda as first-line treatment in patients with metastatic urothelial cancer who are unable to receive cisplatin-based chemotherapy. The results of this cohort could potentially support registration under FDA's Accelerated Approval Pathways. Lastly, at Cetris, the foundation of care in multiple CD30-expressing lymphomas is commercially available in 76 countries, along with our partner, Takeda, and is a key part of our core business. A decade after approval, Cetris maintained solid performance with record quarterly sales and will be featured in multiple abstracts at ASH in December. We continue to progress a comprehensive clinical development program to maximize etc. potential to benefit patients. Our second strategic priority is to advance our programs towards securing approvals for new products. In August, we added a late-stage asset to our pipeline through an important license agreement with Remagen for Decidimab-Bedotin, or DV, outside of Remagen's territory of Asia, excluding Japan and Singapore. DV is 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. TB 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, and our expanded global infrastructure. These elements will help to maximize DV's potential value and global reach. We believe DV 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 development, and strategic partnerships. Importantly, we are submitting at least two INDs for additional ADCs, including those targeting B7H4 and PD-L1, further bolstering our early-stage pipelines. 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'll 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? 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 and 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 a growth in product sales across our portfolio. In addition, third quarter results for PADSEV included $7 million in sales to another company for a 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 PABSEP sales growth this quarter. Lastly, TIBDEC was launched late in the quarter, bringing a fourth product to our commercial year-to-date in 2021. Growth over 2020 reflected increasing sales of Etcetera by Takeda, as well as higher royalties on sales of PolarV by Roche and BlendRep 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 PADSEV gross profit share to Astellas, and non-cash amortization of acquired technology costs for Takaiza. 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 up front payment due to Remagen for the licensing of Bacitimab-Bidotin, 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 Ticaida launches across Europe and, more recently, the launch of TIVDAC 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 three brands. Etc. sales are now expected to be in the range of $700 to $710 million, PADSA in the range of $330 to $335 million, and Takaiza in the range of $315 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 to $150 million, primarily reflecting stronger sales of etc. 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 the result of the $200 billion 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 PADSEVs. 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 in business, and we're pleased with the progress so far this year. Now I'll turn the call over to Chip for an overview of our commercial performance. Thank you, Todd. Performance across the commercial portfolio was strong in Q3. Etcetera, PADSEP, and Tecasa all delivered growth in the quarter, and we are pleased with the approval and launch of TIDDAC, our fourth product. Etcetera's third quarter sales were $185 million, a 13% increase over Q3 2020. we continue to focus on the landmark five-year Echelon 1 progression-free survival data in frontline Hodgkin lymphoma. These are meaningful data to physicians and patients and solidify the et cetera regimen as the best option for frontline stage 3 or 4 patients. August marked the 10-year anniversary of the first et cetera's approval, and I would like to thank the dedicated commercial teams that work diligently to ensure this important product gets to appropriate patients. Moving on to PADSEV. Third quarter sales were $95 million, a 54% increase over the third quarter of 2020. Physician adoption of checkpoint inhibitors for post-platinum maintenance continues to increase, and this has generated more addressable patients for PADSEV. We are also promoting to the additional indication for therapy and continue to see incremental uptake.