Seagen Inc.
Q1 2016 Earnings Call Transcript

Published: 29 Apr 2016

[Operator:]

Good day and welcome to the Seattle Genetics' First Quarter 2016 Financial Results. Today's conference is being recorded. And at this time, I would like to turn the conference over to Ms. Peggy Pinkston, Executive Director of Investor Relations. Please go ahead, ma'am.

[Peggy Pinkston:]

Thank you, operator, and good afternoon, everyone. I'd like to welcome all of you to Seattle Genetics' first quarter 2016 conference call. With me today are Clay Siegall, President and Chief Executive Officer; Todd Simpson, Chief Financial Officer; Eric Dobmeier, Chief Operating Officer; Jonathan Drachman, Chief Medical Officer and Executive Vice President, Research and Development; and Darren Cline, Executive Vice President, Commercial. Following our prepared remarks today, we will open the line for questions. If we're unable to get to all of your questions, we will be available after the conclusion of the call. Today's conference call will include forward-looking statements regarding future events or the future financial and operating performance of the company. Such forward-looking statements are only predictions based on current expectations and actual results may vary materially from those projected. Please refer to the documents that we file from time-to-time with the SEC, including the company's Form 10-K for the year ended December 31, 2015, for information concerning the risk factors that could cause actual results to differ materially from those contained in any forward-looking statements. With that, I'll turn the call over to Clay.

[Clay B. Siegall:]

Thanks, Peg, and good afternoon, everyone. Thank you for joining us. Today, we'll review recent progress and upcoming activities across our corporate priorities; first, building ADCETRIS into a major global brand; second, advancing our pipeline, notably SGN-CD33A; and third, investing in R&D to enhance our leadership in antibody-drug conjugates. Total revenues in the first quarter were a record $111 million. This includes ADCETRIS net sales of $58.6 million, up 20% compared to the first quarter of 2015. Although there were some seasonal factors that affected Q1 sales, we're confident in our guidance for 2016 ADCETRIS net sales in the U.S. and Canada of $255 million to $275 million. Darren and Todd will provide further context on our results. Globally, our partner, Takeda, continues to make progress in its territory. ADCETRIS was recently approved in two additional countries, Russia and Egypt, and it's now commercially available in 64 countries worldwide. Ultimately, our goal is to establish ADCETRIS as the foundation of care for CD30-expressing lymphomas, which we are pursuing through three ongoing Phase 3 trials

[Darren S. Cline:]

Thanks, Clay. During the first quarter of 2016, ADCETRIS net sales were $58.6 million, which was a 20% increase compared to Q1 2015. This was a modest decrease from a strong fourth quarter. Several seasonal factors impacted our first quarter sales. Customer ordering patterns showed that some larger accounts accelerated ADCETRIS purchases in late 2015, ahead of actual patient demand. Additionally, transplant registry data indicate that fewer transplants typically occur around the end of the year, which would lead to fewer patients becoming eligible for ADCETRIS consolidation in the AETHERA setting. And lastly, as Todd will discuss, there was an increase in gross to net during the quarter. Overall, sales increased as the first quarter progressed, and we remain confident in our full-year sales guidance. Our commercial team continues to execute well on the launch of the ADCETRIS indication in the AETHERA setting for the treatment of patients with classical Hodgkin lymphoma at high risk of relapse following autologous stem cell transplant. The FDA added this indication to the label in August 2015. The share of patients receiving ADCETRIS in this setting has ramped up quickly following approval, and we continue to see upside from share growth in 2016 for post-transplant consolidation. Commercial planning is underway for a potential new ADCETRIS indication in CD30-expressing CTCL, based on results of the ALCANZA trial. This trial includes patients with primary cutaneous ALCL and mycosis fungoides. Cutaneous ALCL is closely related to systemic ALCL, while MF is more of a heterogeneous condition with varying CD30 expression. One of our ongoing strategic initiatives is to educate physicians and pathologists on CD30 and ensure CD30 testing is available. We've been working with Ventana on a companion diagnostic that has been utilized in the ALCANZA clinical trial with the intent of it being approved by FDA in parallel with approval of ADCETRIS for this indication. We've also begun planning for potential FDA approval of ADCETRIS in the frontline Hodgkin lymphoma setting in anticipation of results from the ECHELON-1 trial. Current work is focused on understanding payers' and physicians' perceptions of medical need in this setting. We're also developing the value story for ADCETRIS in the frontline and shelf setting by assessing health economic implications of preventing a relapse and avoiding toxicity of bleomycin. Additionally, we are finalizing a launch preparation plan that will guide our activities from now to the commercial launch period. I look forward to updating you on the continued progress of our commercial activities in future calls. Now, I'd like to turn the call over to Todd to discuss our financial results.

[Todd E. Simpson:]

Great. Thanks, Darren, and thanks, everyone, for joining us on the call this afternoon. We ended the first quarter with more than $690 million in cash and investments. This, along with our strong ADCETRIS franchise and our collaborations, enables us to continue executing on our strategy of extending the ADCETRIS label, broadening our 33A program, and advancing our growing pipeline. Today, I'll summarize our financial results for the first quarter of 2016. Total revenues in the first quarter were a record $111 million, up 35% from the first quarter of 2015. This includes ADCETRIS net sales of $58.6 million. One of the factors impacting Q1 net sales was an increase in gross to net discounts. We saw a higher proportion of sales at sites eligible for government discounts, primarily PHS. This occurred early in the quarter and resulted in part from account ordering patterns in late 2015, as Darren described. Royalty revenues were $32 million for the first quarter, coming primarily from Takeda's international sales of ADCETRIS. This included a one-time $20 million sales milestone triggered by Takeda surpassing $200 million in ADCETRIS sales during 2015. First quarter royalties also reflected the higher royalty tier reached at the end of last year. The royalty rate paid by Takeda begins in the mid-teens on the first $100 million in annual sales, increases to the high-teens between $100 million and $200 million, and increases again to the low-20%s above $200 million. There is also a fourth royalty tier in the mid-20%s, which we would expect to reach if we successfully expand into the frontline settings. Since the first quarter included a $20 million milestone and rates reset annually, royalty revenue will decrease in the second quarter. We continue to expect, though, that full-year royalty revenues will be in the range of $60 million to $65 million. Collaboration revenues were $20 million in the first quarter, consistent with our guidance. These revenues are driven by amounts earned under our ADCETRIS collaboration with Takeda and our ADC deals. R&D expenses were $93 million in the first quarter, in line with our expectations of $360 million to $400 million for the full year in 2016. The increase over the first quarter of 2015 primarily reflects the investment being made on ADCETRIS and expanded activities for 33A as we prepare to initiate the Phase 3 trial. SG&A expenses were $30 million for the quarter and in line with our guidance. The decrease from 2015 reflects legal costs that were incurred last year. With that, I'll now turn the call over to Jonathan.

[Jonathan Drachman:]

Thanks, Todd. Good afternoon, everyone. As Clay described, our clinical team has been very productive, with substantial effort underway on ADCETRIS, SGN-CD33A, and our extensive pipeline programs. Data from the global Phase 3 trials with ADCETRIS will be reported, starting with ALCANZA, in the third quarter of this year, followed by ECHELON-1 and ECHELON-2 readouts during 2017 or 2018. We and others continue to generate interesting data about the use of ADCETRIS in patients with CD30-positive lymphomas. Previously presented data in Hodgkin lymphoma using ADCETRIS in frontline older patients and in the second-line salvage setting led to recent additions to NCCN treatment guidelines, reflecting the clinical importance of these data. We are advancing 33A into an important Phase 3 trial for AML and conducting four additional trials to assess anti-leukemic activity and tolerability across multiple populations, including younger, fit patients and MDS patients. And we continue to show progress across our pipeline with data, trial initiations and novel programs entering the clinic. Between now and the end of 2016, we anticipate reporting data on multiple programs, including ASG-15ME and ASG-22ME under development for bladder cancer; SGN-LIV1A being developed in multiple subtypes of metastatic breast cancer, including triple negative disease; the first interim data combining ADCETRIS with the PD-1 inhibitor, nivolumab, in salvage Hodgkin lymphoma; and SEA-CD40, a novel immuno-oncology antibody in solid tumors. Next, I'm delighted to highlight the significant accomplishments of our research organization, which were showcased at the American Association for Cancer Research Annual Meeting earlier this month. Our AACR presentations fell generally into three categories

[Clay B. Siegall:]

Thanks, Jonathan. Before we open the line for questions, I'd like to recap a few of the key upcoming activities across ADCETRIS and our pipeline. For ADCETRIS, these include reporting data from the Phase 3 ALCANZA trial in CTCL in the third quarter, reporting data from the Phase 3 ECHELON-1 trial in frontline Hodgkin lymphoma in the 2017 through mid-2018 timeframe, and completing enrollment of the Phase 3 ECHELON-2 trial in frontline MTCL during 2016 and reporting data in the 2017 to 2018 timeframe. Near-term events for 33A and our other pipeline programs include initiating a Phase 3 trial with 33A plus HMAs in older patients with AML by the third quarter of 2016, reporting data at EHA from a Phase 1 trial of 33A in combination with HMAs, and reporting Phase 1 data at ASCO from ASG-15ME and ASG-22ME. We look forward to keeping you updated on our progress. At this point, we'll open the line for Q&A. Operator, please open the call for questions.

[Operator:]

Thank you so much. We'll take the first question from the line of Adnan Butt from RBC Capital Markets. Please go ahead.

[Adnan Shaukat Butt:]

Hey. Thanks. Hope you can hear me. So, first, a question on sales. In terms of ADCETRIS, post label expansion with AETHERA, have you seen any meaningful sales in that setting since then? And do you expect that – well, I'm wondering if that's partly tied to the seasonality that we've seen.

[Clay B. Siegall:]

Adnan, thanks for the question on AETHERA. That's something that we're very excited – the launch has gone great and we're building AETHERA and the market there. So we think things are going really well. As far as the ADCETRIS sales and your general question, please keep in mind we had a really strong fourth quarter in 2015. And when you look at Q1, we were 20% higher than the Q1 of 2015. So, yes, there were some seasonal factors. Darren can go through them a little bit more. But we do remain confident in the guidance that we have of the full year of $255 million to $275 million. Darren, do you want to make any comments on AETHERA or the seasonal factors?

[Darren S. Cline:]

Yeah. Adnan, the launch is going very well. We're eight months in into the AETHERA launch. Physician interest remains high. And we have a lot of headroom, we feel, in 2016. As AETHERA gets into institutional guidelines, we feel that, again, we've got a lot of headroom both on market share and then also duration. As you recall, this trial is up to 16 cycles. And we're focused commercially on our four strategic imperatives there

[Adnan Shaukat Butt:]

Then if I can get a pipeline question for vadastuximab. Is the company waiting for any more data prior to starting the Phase 3? Or is it more fixating on a design with the FDA, and then ramping up samplers (26

[Clay B. Siegall:]

We are really focused on getting the Phase 3 going for 33A. We're really encouraged with our data. We have presented, as you know, previously on 33A plus HMAs. We showed a 65% CR/CRi rate. We showed really low mortality rates at 30 days and 60 days. We showed a good safety profile. And so our planned Phase 3, as we have discussed, will be in older, newly diagnosed AML patients. And we're moving forward. We can't discuss the specifics of our discussions with the FDA and with European regulators, but we're moving forward on our plans. And it is important to note that at EHA in June, we plan to present additional data in an oral presentation. And that includes 50 patients, the first 25 patients and an additional 25 patients. And we'll present data on response rates, safety, and the durability and survivability. And so, that's something we're really excited about. And also please note that we've treated well over 200 patients with 33A. This is clearly an active drug. We have very high response rates in single-agent and combination studies. Monotherapy is very interesting. And also we're really interested in the data with 33A plus 7+3. And late this year, you should potentially see data there. And stay tuned for more information on that aspect of the frontline fit patients, as opposed to the frontline older, unfit patients where we're going to go in first in Phase 3 with 33 plus hypomethylaters.

[Adnan Shaukat Butt:]

Okay. Great. Thank you.

[Operator:]

Thank you so much. We'll take the next question from the line of Kennen Mackay. Please go ahead. Kennen Mackay - Credit Suisse Securities (USA) LLC (Broker) Hi. Thanks for taking my question. Maybe a follow-up on CD33. I wanted to see if there are plans to file for breakthrough designation. And, Clay, maybe wanted to just get your take on how the drug would be competitive with venetoclax in AML.

[Clay B. Siegall:]

Sure. So, as far as breakthrough designation, I'll start out by just saying that we're really encouraged with our data with 33A plus HMAs. We're continuing to work in our Phase 1 study and treating people and following this. We'll report that at EHA. And so stay tuned for that. But as far as the specifics on regulatory actions, it is just really something we don't comment on until we have something specific to say. So just stay tuned on our data and any further regulatory comments in the future. And so you also asked about competition. We see venetoclax, and we've seen their data at ASH, and we thought it was very interesting. We think that 33A is very competitive with that. We had a substantive amount of data. We think that as we put more data out at EHA, we think that it will go a long way to providing the rationale and all of our strength of data going forward into our Phase 3. So I encourage you to look at our presentation at EHA. Kennen Mackay - Credit Suisse Securities (USA) LLC (Broker) Thanks. Fair enough. And I look forward to seeing the durability out there (29

[Clay B. Siegall:]

Yeah. Jonathan, you go ahead. You can do this and I'll chime in if I need to.

[Jonathan Drachman:]

Okay. Great. So we're really excited with all the enthusiasm and interest in ADCs in general and we are continuing to look across broad technology in terms of payloads, linkers, targets, ways of targeting tumors. And so we are continuing to explore the broad range. We're very excited about – and as you know, we're developing multiple payloads. We have MMAE, MMAF and PBD dimmers, all in clinic right now and lots of new payloads that we're studying preclinically, some of which we presented at AACR. So we're excited about these and learning a tremendous amount about them, not just preclinically but also in clinic. I think that learning about how broadly PBD dimers will be applicable will come from these clinical explorations which are going on. And as you probably noticed, we also announced that we have another PBD dimer-based ADC drug conjugate coming soon for multiple myeloma. So I think that the story will be better understood as we get more data in patients. Kennen Mackay - Credit Suisse Securities (USA) LLC (Broker) Okay. Thank you so much for taking my questions. I really appreciate it.

[Operator:]

The next question comes from the line of Jon Eckard of Barclays. Please go ahead.

[Jonathan M. Eckard:]

Hi. Good afternoon. Thanks for taking the question. I wanted to ask a quick question about the poster at AACR on the immunological deaths of auristatin-based ADCs. And I was wondering based on what you know about how these ADCs can cause immunological cell death, is there anything that you've learned from there that you could apply to the Opdivo combo trial to try to understand if the added efficacy or any added efficacy you've seen with Opdivo is contingent on patients having immunological cell death? So I just want to try to figure out how, basically, does ADCETRIS kind of stimulate the effects of the PD-1s in these Hodgkin's lymphoma patients?

[Jonathan Drachman:]

Okay. So I think that's a great question, and a complicated one. The preclinical data clearly show that payloads, such as auristatins, that are able to cause immunogenic cell death, have the potential to be additive or synergistic with immuno-oncology checkpoint inhibitors. So we're excited about seeing what the data will be like in patients. I think it's too early to say right now that we know the answer. But that will come from patients. We know what each drug is capable of doing by itself. And so, by looking at the combination, we'll get that understanding.

[Jonathan M. Eckard:]

Well, I guess, are you...

[Clay B. Siegall:]

And I think that at some...

[Jonathan M. Eckard:]

Sorry.

[Clay B. Siegall:]

At some point in the not-too-distant future, I imagine we'll present clinical data of the combination. And while we're not promising a specific time, right now that trial is going well and it's a robust trial.

[Jonathan M. Eckard:]

Okay. So I'm just wondering if you guys are measuring things that could explore that, if it were to come in the clinical data. Is there a way to tease that out, do you think?

[Clay B. Siegall:]

We have not put out the specifics of all the things we're doing in the trial, but we will try to – we're trying to look at every parameter we can and as soon as we can report our data.

[Jonathan Drachman:]

But I will assure you that we're looking at many correlative endpoints, and to best understand the impacts on the immune system, both throughout the patient as well as in the tumor micro-environment.

[Jonathan M. Eckard:]

Right. And then I had a quick question on – or like a commercial-related question on duration. I know you said there's a lot more headroom for duration of treatment. Can I just ask what would be something that could drive duration? Is it just experience from the physician in that specific setting? Is it data? Is it something else? If you could just give us an idea of what could be a driver of that duration therapy?

[Darren S. Cline:]

Yeah. So I think it's a couple of things. One, if you look at the trial design, treatment can be given up to 16 cycles. That was both in the consolidation and also in our relapse refractory. We feel in this setting that, and our market research suggests, that physicians and patients are willing to receive ADCETRIS for that length of time. And I think that we've been on the market now approaching five years, and physician comfort is increasing. And I think we'll see with this consolidation indication a potential to increase not only in the consolidation setting, but also in the relapse refractory. So it's a little early in our launch to have a duration metric for you, but it's something that we're continuing to follow closely.

[Jonathan M. Eckard:]

Right. Well, thank you very much for taking the questions.

[Operator:]

The next question comes from the line of Cory Kasimov of JPMorgan. Please go ahead, sir.

[Brittany R. Terner:]

Hi. This is Brittany on for Cory. Thanks for taking the question. Just one on ECHELON-1. If this study is positive, what are your high-level thoughts on how big ADCETRIS could be? And how do you think the I-O therapies in development could affect this?

[Clay B. Siegall:]

So, Brittany, thanks for the question. I think that, with ECHELON-1, in Hodgkin lymphoma you have about 9,500 patients or so in the United States, and about the same amount in the EU, and another big grouping of patients if you look internationally. And so the standard of care has been around for almost 40 years now with ABVD. And, as you know, we're trying to redefine that standard of care. And so we think the opportunity is vast. And our trial is with advanced patients. And that's an appropriate way to do the trial, in agreement with the FDA and agreement with the EMA. And, as you know, we have a special protocol assessment. So we're working in the right way. So we think that, if you look at E-1 and the opportunity in frontline Hodgkin lymphoma, it's well in access of $1 billion. And so, that's important. And don't forget E-2. That's a big opportunity as well. And I think both of those, the E-2 being in the frontline T-cell lymphoma, where for decades now it's been frontline treated with CHOP chemotherapy. And we're working with CHP ADCETRIS, and getting rid of the oncovit (38

[Brittany R. Terner:]

That's helpful. Thank you.

[Operator:]

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

[Boris Peaker:]

Great. My first question is on 33A. As you try to bring on clinical sites on board and talk to physicians and trial participants, I'm wondering, do they compare it to Mylotarg? Do they see it as maybe like Mylotarg version 2.0? And do you have data to show them in terms of consistency of manufacturing, or how it maybe is different from Mylotarg so that would not stop them in any way?

[Clay B. Siegall:]

Yeah. When we started 33A, I think that some docs said, well, explain to us what this drug is – and these AML docs are all very aware of Mylotarg. And in fact, most of them were not happy that Mylotarg was taken off the market because they viewed Mylotarg as being an effective drug for a lot of patients. And so they were very disappointed that it wasn't on the market. And so a lot of them asked questions, and then as we got into this, we have a highly engineered antibody, we have two direct attachment sites, we have a novel chemo type that's outside of MDR, which calicheamicin wasn't. We have a stable linker. And maybe that's the most critical of all the pieces, that the drug and the antibody were staying together in the bloodstream until it found the tumor, where with Mylotarg it clearly had a very short half-life and it was not outside of MDR and there was a lot of side effects from Mylotarg. So, when you look at the kind of data we have and the side-effect profile we have, it's like a different drug completely. The similarity rests with the targeting of CD33, but outside of that, it's a completely different drug. And I think that we used to hear some comments about Mylotarg when we started the trial, and I don't think we hear them anymore. Now, we hear more about the drug and the data and its activity. And it's something that's – there's a lot of excitement in the oncology and in the hem/onc community of the leukemia docs treating this devastating disease. So accrual's been great with 33A. I mean, we have docs that are really working hard to try to be on our trial. So we have a lot of excitement there. Jonathan, do you want to add anything?

[Jonathan Drachman:]

I think Clay summarized it very well. This is a different drug, and I think the main way that people think about Mylotarg is really validating CD33 as an important target for AML.

[Boris Peaker:]

Got you. And I'm just curious also from the regulatory perspective, as you seek the breakthrough designation. Would the FDA think of Mylotarg as already kind of preexisting towards the same target? Would that in any way preclude you from getting breakthrough? Or is the fact that it's not on the market altogether kind of removes that overhang?

[Clay B. Siegall:]

I really think, in our interactions with the FDA, which we don't really talk about much, Mylotarg has no bearing on the drug that we are developing, 33A, at all.

[Boris Peaker:]

Got you. And my last question, and this is maybe to Jonathan, and very topical today, we receive many more (43

[Clay B. Siegall:]

Yeah. I'll start on that. So we're thrilled that there's a lot of interest in ADCs. Earlier, we had a question of the use of PBDs in solid tumors. And so what I thought about initially was a little bit about Stemcentrx. I mean, Stemcentrx has their lead drug is an antibody drug conjugate with a PBD, which is very, very similar to our PBD. They're not exact in chemical composition, but very similar. So the AbbVie acquisition of Stemcentrx we think is great for the field of ADCs. I mean, ADCs are a very interesting space. We have a big pipeline of ADC drugs. We are the ADC leader. We have the best ADC on the market with ADCETRIS. We have the most ADCs in development. We have multiple technologies, including PBD technologies. And I'm thrilled that AbbVie thought high enough about an ADC for solid tumors that they went ahead and acquired Stemcentrx. Now, we saw the data of Stemcentrx. We've been following the data of anybody with ADCs. And we saw their data a while ago, whatever they presented publicly. And it was a response rate in small-cell lung cancer, I think it was around 40% or so response rate. But it was early. They didn't have at that point a lot of durability data. So I'm eager to see what they present at this year's ASCO, and so I understand they're going to be presenting there. And I'm eager to see the data. But based on the acquisition, I would say that the data are probably going to be good. But ADCs are a hot area and we're the leaders, and we continue to innovate. And, yeah, our PBD technology is very similar. In fact, we were working on it before they were working on it, and kind of pioneered a lot of the ADC technology. And in fact, that's what's in 33A, which is starting in Phase 3 later this year. So, yes, we have a lot of technology.

[Boris Peaker:]

Very well. Thank you very much for taking my questions.

[Operator:]

The next question comes from the line of Yatin Suneja from SunTrust Robinson Humphrey. Please go ahead.

[Yatin Suneja:]

Hi, guys. Thank you for taking my question. So now that you've narrowed the timeline on ALCANZA, so maybe could you put in perspective the expectation from that trial? And if you could comment on the commercial opportunity? I mean I know there is a compendia listing for the same indication. But what do you envision once that's readout? And what sort of potential should we expect from that trial?

[Clay B. Siegall:]

Yeah. Well, thanks for asking about ALCANZA. What I can tell you is there's about 50% of CTCL patients in entirety expressed-CD30 at the kind of density that are part of our trial and would be part of what we think would be our prospective label. And that means that, in the United States, there'd be about 1,000 CD30-positive CTCL patients diagnosed every year. Also, keep in mind that there's a prevalence of CD-30 positive CTCL in the U.S. of about a little greater than 10,000 patients. But a lot of those are early-stage and they're treated with topical, so we don't think that all of those patients are the type that would come there. So there is an incident and a prevalent population that we could get with a new label here. Yes, as you point out, we are in guidelines. So we wouldn't be going from 0% to 100% right away, because we already have some patients that are being treated by docs under the guidelines that have been out there for some time now. So we think that this is an important step, an incremental step for us. Nowhere near the step, commercially, that ECHELON-1 would be, or for that matter, ECHELON-2. But nonetheless, an important step for us to actually get label and allow our commercial team to actually go out there and talk about this drug, where right now we're in guideline, so we have no commercial effort on it.

[Yatin Suneja:]

Okay. Very helpful. Just maybe one more question on the partner program on Astellas. We see you have abstract data, and the title suggests that you might see, or we might see, some form of anti-tumor activity in bladder cancer. So maybe could you put in perspective or help us preview what sort of data you are presenting there? And what are the expectations from those studies?

[Clay B. Siegall:]

Yeah. Sure. Thanks for the question. I mean, I'm really excited to actually get a question on this. These are two programs that we've been working on with Astellas. These are 50/50 worldwide collaborations. So there's no jurisdictions or anything there. It's just co-funded, co-owned. So what are the – the programs' names are ASG-22ME and ASG-15ME. And both are currently in Phase 1, and they're in there, one of them for bladder cancer, one for bladder and other cancers, under our collaboration. And we have been for some time now accumulating a significant amount of data on these programs, and mainly in bladder cancer. Now, bladder cancer is an unmet need and a promising area for new drugs. And we are very excited to present at ASCO. And like I said, this is not going to be – our first presentation here is not going to be one where we present four or six or seven patients. There's going to be substantial number of patients. You're going to see dose escalation work and expansion cohorts. And so we're really excited to come out at ASCO and really unveil these two drugs.

[Yatin Suneja:]

And then, what are you terms there with the partner? I mean, at what point you might exercise that option and co-promote it?

[Clay B. Siegall:]

Well, it's not – we don't have terms like that. Our terms are we 50/50 own the product

[Yatin Suneja:]

Got it. Thank you very much.

[Peggy Pinkston:]

Operator, do we have another question?

[Operator:]

Yep. There's the line of Salveen Richter next. Please go ahead.

[Thomas Trimarchi:]

Hi. This is Tom on for Salveen. So thanks so much for taking the question. I wanted to come back to follow up on an earlier question about potential competition from checkpoint inhibitors in HL. So I understand that long-term you're less concerned about this, given you hope to actually cure more patients upfront in the frontline setting with ADCETRIS. But more near-term, how are you just thinking about the competitive landscape, given Bristol has filed already in the relapse setting for nivolumab single-agent and I think we just saw, up on clin trials .gov, Merck is also planning to run a head-to-head study against ADCETRIS in the relapse setting.

[Clay B. Siegall:]

Yeah. So thanks for the question. Look, like I said earlier, we're happy that patients have other options when they need them in late stage. So, that's a good thing for patients. And we're all about patients and their benefit. There are quite a number of ongoing trials with checkpoint inhibitors. Some of them are in Hodgkin lymphoma as you point out. But when we've done a lot of market research, we find that at set positions they know ADCETRIS, they want to use it first, we have proven efficacy, proven safety profile, they're really using ADCETRIS. And what's the most important is really pushing forward and getting in the not-too-distant future our data from ECHELON-1. And the goal is really curing more patients in frontline, and those data are not too distant in the future. And lastly, I want to point out that we have a ongoing robust study in collaboration with Bristol-Myers Squibb combining ADCETRIS and nivolumab. In fact, it's in two corporate studies that they're doing in Hodgkin lymphoma and non-Hodgkin lymphoma. And this may be something that could be used in the future and in a big way. So we're really excited with that and we look forward to the opportunity to present some data. And I just can't guide you as to when that would be, but we'd like to do it as soon as we can.

[Thomas Trimarchi:]

Okay. Thanks. And then just in terms of expenses, I see there was a big jump in R&D from Q4 to Q1. I know you've initiated a bunch of trials, but are you kind of at the level you need to be in terms of getting ready for the AML Phase 3, or is there still more ramp needed there?

[Todd E. Simpson:]

So this is Todd. I'll take that. Yeah, you're right, there was a pretty good size jump in Q1. Again, this jump is consistent with where we were guiding, and most of the growth we saw in Q1 came from two places. The first was some work we continued to do on ADCETRIS. But you're also right, there is work that we're embarking on now to be ready to get the 33 program into pivotal trials later this year. So, pretty good uptick in spend related to that.

[Thomas Trimarchi:]

Okay. Great. Thanks for taking my questions.

[Operator:]

All right. We have a question from the line of Mara Goldstein of Cantor Fitzgerald. Please go ahead.

[Mara Goldstein:]

Oh, thanks for taking the question. Just more of an update question on CD40 candidate and where that sits now in terms of the dose escalation and then expansion both on the solid and hematologic, and how do you expect that data to come in?

[Clay B. Siegall:]

Sure. I'll start this and turn it over to Jonathan. We are excited about this program. It's an immuno-oncology program. We call it SEA-40. It is not an antibody-drug conjugate. It is an empowered antibody through our SEA or sugar-engineered antibody technology. And we recently presented data at the AACR Conference. Jonathan, do you want to talk about that and where that fits in?

[Jonathan Drachman:]

Yeah. So, Mara, the trial is ongoing and we can't really comment on exactly where we are in terms of dose escalation. But we are committed to presenting data at an appropriate conference in the not-too-distant future. The only thing that we did have at AACR was a lot of the preclinical data that supports the activation of antigen-presenting cells and the way it could work together with immuno-oncology agents. And then we did have a little bit of very early data on cytokines from patients at low doses in the Phase 1 study. So, that's really the only data that are available at this time.

[Mara Goldstein:]

And can I just ask maybe a more qualitative than anything else? But given your expectation around this sort of novel immuno-oncology agent, I guess what the registration – not registration, excuse me, but accrual process and how competitive that is versus sort of the more well-known and characterized targets right now in immuno-oncology?

[Jonathan Drachman:]

Well, I think that there's a lot of excitement about CD40 as an immuno-oncology target. And we've certainly gotten a lot of enthusiasm from investigators and the general community. So, yes, there's a lot of competition in this space, but CD40 is a nice complementary target, it's not a checkpoint inhibitor. It works well potentially in preclinical settings with checkpoint inhibitors. And so I think there's a lot of interest in it.

[Mara Goldstein:]

Okay. Thanks so much.

[Operator:]

There are no further questions at this time. Please continue, Ms. Pinkston.

[Peggy Pinkston:]

Okay. Thanks, operator, and thanks, everybody, for joining us this afternoon and have a great evening.

[Operator:]

Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your line and have a great day.