Seattle Genetics Likely to Remain Attractive

October 08, 2009 Seattle Genetics likely to remain attractive

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The 17% decline in Seattle Genetics’ share price to $10.90 in the three days since a phase IIb trial for dacetuzumab (SGN-40) in B-cell lymphoma was stopped looks overly harsh, no doubt compounded by some shareholders taking the opportunity to cash in their profits with the stock recently touching a record high of $14.80 since the company went public in 2001.

Seattle’s shares gained 66% this year to their peak on September 21 which valued the company at a very impressive $1.29bn. Without an approved product and yet to take an antibody candidate into phase III tests, the driving force behind these gains is undoubtedly Seattle’s largely unpartnered antibody technology platform, an asset for which big pharma has shown an increasingly healthy appetite for in recent times (M&A spotlight on antibody companies, July 24, 2009).

Setback but chances to recapture confidence

The phase IIb trial of dacetuzumab had to be stopped after an interim analysis revealed that the dacetuzumab combination treatment arm was unlikely to meet its primary efficacy endpoint of superior response rate compared to a placebo combination arm.

Whilst this is clearly a worrying efficacy signal for dacetuzumab, judgement on the antibody is likely to be reserved by Seattle’s partner, Roche, until the results of four ongoing phase Ib studies, in non-Hodgkin lymphoma and multiple myeloma, are revealed.

In addition, dacetuzumab was the least advanced or valuable of Seattle’s three key phase II antibody candidates. Seattle Genetics: clinical stage pipeline

Sales in Pipeline Generic Pharmacological Product Lead Indication Partner 2014 Status Name Class ($m)

Anti-CD30 MAb- brentuximab Phase II SGN-35 auristatin E Lymphoma 160 vedotin conjugate

Leukaemia, acute SGN-33 lintuzumab Anti-CD33 MAb 140 myeloid (AML)

Non-Hodgkin's SGN-40 dacetuzumab Anti-CD40 MAb Roche lymphoma (NHL)

SGN-30 - Anti-CD30 MAb Lymphoma

Anti-GPNMB MAb- CR011 - Melanoma Curagen drug conjugate

Phase Autoimmune SGN-70 - Anti-CD70 MAb I diseases

MEDI- EphA2 cancer - Breast cancer AstraZeneca 547 vaccine

Anti-PSMA MAb- PSMA Progenics - auristatin E Prostate cancer Antibody Pharmaceuticals conjugate

Source: EvaluatePharma

Seattle’s most advanced and valuable pipeline candidate is brentuximab vedotin (SGN-35), an antibody drug conjugate (ADC) in development for Hodgkin’s lymphoma (HL) and anaplastic large cell lymphoma (ALCL). Brentuximab is one of the most promising ADCs currently in development (Therapeutic focus – Antibody drug conjugates set to improve on poor track record, May 29, 2009).

A pivotal phase II trial for brentuximab in HL is ongoing although results are not due until the second half of next year. The study is being conducted under a special protocol assessment with the FDA and given the recent regulatory success of Allos Therapeutics in gaining approval for Folotyn on the basis of phase II data under a similar protocol, hopes are high that positive data could lead to a filing and approval in 2011.

Seattle’s other key pipeline candidate is lintuzumab (SGN-33). Phase IIb trials are ongoing in acute myeloid leukaemia (AML), data from which are expected in the first half of next year.

Positive results for both brentuximab and lintuzumab would certainly restore confidence in Seattle’s platform technology, with the company then in a position to decide whether to proceed with phase III trials themselves to retain as much value as possible, or bring a partner on board to take on further developmental and commercialisation costs.

Seattle raised $136m in August through the issue of 14 million shares and the stock held up pretty well and then surged to the high in September; with that level of investor confidence the company will probably be able to tap their investors for more money should they wish to proceed with phase III trials and even commercialisation of their products.

Takeover premium

Whilst the success of Seattle’s pipeline candidates is certainly important to the company’s valuation, what is clearly boosting the shares at the moment is takeover speculation given the dwindling number of antibody technology assets out there for big pharma.

Bristol-Myers Squibb’s $2.4bn acquisition of Medarex and Eli Lilly’s $6.5bn purchase of ImClone Systems is indicative of the desire of these companies to buy these capabilities to catch up with their peers.

A such, as long as there are big pharma groups out there who still lack an antibody platform and as long as the trial results for brentuximab and lintuzumab do not go the way of dacetuzumab this week, investors are likely to stick by Seattle for a while yet. More from Evaluate Vantage

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