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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 0-32405 
SEAGEN INC.
(Exact name of registrant as specified in its charter) 
Delaware 91-1874389
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
21823 30th Drive SE
Bothell, Washington 98021
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code): (425527-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001SGENThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer   Accelerated filer 
Non-accelerated filer ☐   Smaller reporting company 
Emerging growth company    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No  
As of April 25, 2022, there were 184,075,643 shares of the registrant’s common stock outstanding.


Seagen Inc.
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2022
INDEX
2

PART I. FINANCIAL INFORMATION
Item 1.    Condensed Consolidated Financial Statements
Seagen Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except par value)
March 31, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$260,996 $424,834 
Short-term investments1,690,097 1,735,202 
Accounts receivable, net401,009 389,256 
Inventories275,747 200,663 
Prepaid expenses and other current assets143,406 119,239 
Total current assets2,771,255 2,869,194 
Property and equipment, net214,379 210,073 
Operating lease right-of-use assets54,937 57,889 
Intangible assets, net254,902 260,593 
Goodwill274,671 274,671 
Other non-current assets46,549 47,184 
Total assets$3,616,693 $3,719,604 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$87,228 $114,824 
Accrued liabilities and other444,066 454,030 
Total current liabilities531,294 568,854 
Long-term liabilities:
Operating lease liabilities, long-term53,552 56,665 
Other long-term liabilities33,380 28,946 
Total long-term liabilities86,932 85,611 
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; none issued
  
Common stock, $0.001 par value, 250,000 shares authorized; 183,892 shares issued and outstanding at March 31, 2022 and 183,381 shares issued and outstanding at December 31, 2021
184 183 
Additional paid-in capital4,678,392 4,607,816 
Accumulated other comprehensive income424 1,179 
Accumulated deficit(1,680,533)(1,544,039)
Total stockholders’ equity2,998,467 3,065,139 
Total liabilities and stockholders’ equity$3,616,693 $3,719,604 
The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Seagen Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(In thousands, except per share amounts)
 Three Months Ended March 31,
20222021
Revenues:
Net product sales$383,086 $302,588 
Royalty revenues28,181 27,219 
Collaboration and license agreement revenues15,193 2,176 
Total revenues426,460 331,983 
Costs and expenses:
Cost of sales87,626 64,135 
Research and development297,659 230,426 
Selling, general and administrative174,225 159,842 
Total costs and expenses559,510 454,403 
Loss from operations(133,050)(122,420)
Investment and other (loss) income , net(2,190)1,000 
Loss before income taxes(135,240)(121,420)
Provision for income taxes1,254  
Net loss$(136,494)$(121,420)
Net loss per share - basic and diluted$(0.74)$(0.67)
Shares used in computation of per share amounts - basic and diluted183,647 181,150 
Comprehensive loss:
Net loss$(136,494)$(121,420)
Other comprehensive loss:
Unrealized (loss) gain on securities available-for-sale, net of tax(861)166 
Foreign currency translation gain (loss)106 (237)
Total other comprehensive loss(755)(71)
Comprehensive loss$(137,249)$(121,491)
The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Seagen Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(In thousands)
Common stock
SharesAmountAdditional
paid-in capital
Accumulated other comprehensive incomeAccumulated deficitTotal stockholders' equity
Balances as of December 31, 2020180,902 $181 $4,356,922 $565 $(869,568)$3,488,100 
Net loss— — — — (121,420)(121,420)
Other comprehensive loss— — — (71)— (71)
Issuance of common stock for stock option exercises and employee stock purchase plan341 — 19,791 — — 19,791 
Restricted stock vested during the period, net
80 — — — — — 
Share-based compensation— — 38,224 — — 38,224 
Balances as of March 31, 2021181,323 181 4,414,937 494 (990,988)3,424,624 
Balances as of December 31, 2021183,381 $183 $4,607,816 $1,179 $(1,544,039)$3,065,139 
Net loss— — — — (136,494)(136,494)
Other comprehensive loss— — — (755)— (755)
Issuance of common stock for stock option exercises and employee stock purchase plan463 1 26,663 — — 26,664 
Restricted stock vested during the period, net
48 — — — — — 
Share-based compensation— — 43,913 — — 43,913 
Balances as of March 31, 2022183,892 $184 $4,678,392 $424 $(1,680,533)$2,998,467 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Seagen Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 Three Months Ended March 31,
 20222021
Operating activities:
Net loss$(136,494)$(121,420)
Adjustments to reconcile net loss to net cash used by operating activities
Share-based compensation43,913 38,224 
Depreciation11,402 9,583 
Amortization of intangible assets5,691 5,694 
Amortization of right-of-use assets
2,952 3,356 
Amortization of premiums, accretion of discounts, and (gains) losses on debt securities
184 6,482 
Losses (gains) on equity securities2,779 (259)
Deferred income taxes155  
Changes in operating assets and liabilities
Accounts receivable, net(11,753)(10,840)
Inventories(75,084)(30,455)
Prepaid expenses and other assets(24,523)(27,763)
Lease liability(5,158)(4,239)
Other liabilities(30,876)6,311 
Net cash used by operating activities(216,812)(125,326)
Investing activities:
Purchases of securities(655,940)(703,200)
Proceeds from maturities of securities700,000 632,000 
Purchases of property and equipment(17,397)(7,515)
Net cash provided (used) by investing activities26,663 (78,715)
Financing activities:
Proceeds from exercise of stock options and employee stock purchase plan26,664 19,791 
Net cash provided by financing activities26,664 19,791 
Effect of exchange rate changes on cash and cash equivalents(353)(462)
Net decrease in cash and cash equivalents(163,838)(184,712)
Cash and cash equivalents at beginning of period424,834 558,424 
Cash and cash equivalents at end of period$260,996 $373,712 
The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Seagen Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Summary of significant accounting policies
Basis of presentation
The accompanying unaudited condensed consolidated financial statements reflect the accounts of Seagen Inc. and its wholly-owned subsidiaries (collectively “Seagen,” “we,” “our,” or “us”). All intercompany transactions and balances have been eliminated. Management has determined that we operate in one segment: the development and sale of pharmaceutical products on our own behalf or in collaboration with others. Substantially all of our assets and revenues are related to operations in the U.S.; however, we have multiple subsidiaries in foreign jurisdictions, including several subsidiaries in Europe.
The condensed consolidated balance sheet data as of December 31, 2021 were derived from audited financial statements not included in this quarterly report on Form 10-Q. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC, and generally accepted accounting principles in the United States of America, or GAAP, for unaudited condensed consolidated financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments that, in the opinion of management, are necessary for a fair statement of our financial position and results of our operations as of and for the periods presented.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC.
The preparation of financial statements in accordance with GAAP requires us to make estimates, assumptions, and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of our operations for the three month period ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year or any other interim period.
Non-cash activities
We had $8.2 million and $9.9 million of accrued capital expenditures as of March 31, 2022 and December 31, 2021, respectively. Accrued capital expenditures are treated as a non-cash investing activity and, accordingly, have not been included in the condensed consolidated statement of cash flows until such amounts have been paid in cash.
Investments
We hold certain equity securities which are reported at estimated fair value based on quoted market prices. Changes in the fair value of equity securities are recorded in income or loss. The cost of equity securities for purposes of computing gains and losses is based on the specific identification method.
We invest our available cash primarily in debt securities. These debt securities are classified as available-for-sale, which are reported at estimated fair value with unrealized gains and losses included in accumulated other comprehensive income (loss) in stockholders’ equity. Realized gains, realized losses and declines in the value of debt securities judged to be other-than-temporary are included in investment and other income (loss), net. The cost of debt securities for purposes of computing realized and unrealized gains and losses is based on the specific identification method. Amortization of premiums and accretion of discounts on debt securities are included in investment and other income (loss), net. Interest and dividends earned are included in investment and other income (loss), net. Accrued interest receivable as of March 31, 2022 and December 31, 2021, were $0.6 million and $0.4 million, respectively, and were included in prepaid expenses and other current assets. We classify investments in debt securities maturing within one year of the reporting date, or where management’s intent is to use the investments to fund current operations or to make them available for current operations, as short-term investments.
If the estimated fair value of a debt security is below its carrying value, we evaluate whether it is more likely than not that we will sell the security before its anticipated recovery in market value and whether evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. We also evaluate whether or not we intend to sell the investment. If the impairment is considered to be other-than-temporary, the security is written down to its estimated fair value. In addition, we consider whether credit losses exist for any securities. A credit loss exists if the present value of cash flows expected to be collected is less than the amortized cost basis of the security. Other-than-temporary declines in estimated fair value and credit losses are included in investment and other income (loss), net.
7

Intangible assets, net
Our intangible assets are primarily comprised of acquired TUKYSA technology. The following table presents the balances of our finite-lived intangible assets for the periods presented:
(dollars in thousands)March 31, 2022December 31, 2021
Gross carrying value$305,650 $305,650 
Less: accumulated amortization(50,748)(45,057)
Total$254,902 $260,593 
The following table presents our amortization expense related to acquired TUKYSA technology costs, included in cost of sales in our condensed consolidated statements of comprehensive income (loss), for the periods presented:
Three Months Ended March 31,
(dollars in thousands)20222021
Amortization expense$5,691 $5,694 
The weighted average remaining useful life of our finite-lived intangible assets was approximately 11 years as of March 31, 2022, and estimated future amortization expense related to acquired TUKYSA is $17.4 million for the nine months ending December 31, 2022, and TUKYSA technology costs is $23.1 million for each of the years ending December 31, 2023 through December 31, 2027.
Revenue recognition - Net product sales
We sell our products primarily through a limited number of specialty distributors and specialty pharmacies in the U.S, and to a lesser extent, internationally. The delivery of our products represents a single performance obligation for these transactions and we record net product sales at the point in time when control is transferred to the customer, which generally occurs upon receipt by the customer. The transaction price for net product sales represents the amount we expect to receive, which is net of estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns, and other deductions. Accruals are established for these deductions, and actual amounts incurred are offset against applicable accruals. We reflect these accruals as either a reduction in the related account receivable from the distributor or as an accrued liability, depending on the nature of the sales deduction. Sales deductions are based on management’s estimates that consider payor mix in target markets and experience to-date. These estimates involve a substantial degree of judgment.
Outside of the U.S., the transaction price for net product sales represents the amount we expect to receive, which is net of estimated discounts, estimated government mandated rebates, distribution fees, estimated product returns, and other deductions. Accruals are established for these deductions, and actual amounts incurred are offset against applicable accruals. These estimates involve judgment in estimating net product sales.
U.S. government-mandated rebates and chargebacks: We have entered into a Medicaid Drug Rebate Agreement, or MDRA, with the Centers for Medicare & Medicaid Services. This agreement provides for a rebate based on covered purchases of our products. Medicaid rebates are invoiced to us by the various state Medicaid programs. We estimate Medicaid rebates using the expected value approach, based on a variety of factors, including payor mix and our experience to-date.
We have a Federal Supply Schedule, or FSS, agreement under which certain U.S. government purchasers receive a discount on eligible purchases of our products. In addition, we have entered into a Pharmaceutical Pricing Agreement with the Secretary of Health and Human Services, which enables certain entities that qualify for government pricing under the Public Health Services Act, or PHS, to receive discounts on their qualified purchases of our products. Under these agreements, eligible customers receive an applicable discount which is processed through the distributor as a chargeback. We estimate expected chargebacks for FSS and PHS purchases based on the expected value of each entity’s eligibility for the FSS and PHS programs. We also review historical rebate and chargeback information to further refine these estimates.
8

Distribution fees, product returns and other deductions: Our distributors charge a volume-based fee for distribution services that they perform for us. We allow for the return of product that is within a specified number of days of its expiration date or that is damaged. We estimate product returns based on our experience to-date using the expected value approach. We provide financial assistance to qualifying patients that are underinsured or cannot cover the cost of commercial coinsurance amounts through our patient support programs. Estimated contributions for commercial coinsurance under Seagen Secure are deducted from gross sales and are based on an analysis of expected plan utilization. These estimates are adjusted as necessary to reflect our actual experience.
Revenue recognition - Royalty revenues
Royalty revenues primarily reflect amounts earned under the ADCETRIS collaboration with Takeda Pharmaceutical Company Limited, or Takeda. These royalties include commercial sales-based milestones and sales royalties that relate predominantly to the license of intellectual property. Sales royalties are based on a percentage of Takeda’s net sales of ADCETRIS, with rates that range from the mid-teens to the mid-twenties based on annual net sales tiers. Takeda bears a portion of low single digit third-party royalty costs owed on its sales of ADCETRIS. This amount is included in royalty revenues. Amounts owed to our third-party licensors related to Takeda’s sales of ADCETRIS are recorded in cost of sales. These amounts are recognized in the period in which the related sales by Takeda occur. Royalty revenues also reflect amounts from Genentech, Inc., a member of the Roche Group, or Genentech, earned on net sales of Polivy, and amounts from GlaxoSmithKline earned on net sales of Blenrep.
Revenue recognition - Collaboration and license agreement revenues
We have collaboration and license agreements for our technology with a number of biotechnology and pharmaceutical companies. Under these agreements, we typically receive or are entitled to receive upfront cash payments and progress- and sales-dependent milestones for the achievement by our licensees of certain events, and annual maintenance fees and support fees for research and development services and materials provided under the agreements. We also are entitled to receive royalties on net sales of any resulting products incorporating our technology. Generally, our licensees are solely responsible for research, product development, manufacturing and commercialization of any product candidates under these collaborations, which includes the achievement of the potential milestones. Since we may not take a substantive role or control the research, development or commercialization of any products generated by some of our licensees, we may not be able to reasonably estimate when, if at all, any potential future milestone payments or royalties may be payable to us by our licensees. As such, the potential future milestone payments associated with certain of our collaboration and license agreements involve a substantial degree of uncertainty and risk that they may never be received.
Collaboration and license agreements are initially evaluated as to whether the intellectual property licenses granted by us represent distinct performance obligations. If they are determined to be distinct, the value of the intellectual property licenses would be recognized up-front while the research and development service fees would be recognized as the performance obligations are satisfied. Variable consideration is assessed at each reporting period as to whether it is not subject to future reversal of cumulative revenue and, therefore, should be included in the transaction price. Assessing the recognition of variable consideration requires significant judgment. If a contract includes a fixed or minimum amount of research and development support, this also would be included in the transaction price. Changes to collaboration and license agreements, such as the extensions of the research term or increasing the number of targets or technology covered under an existing agreement, are assessed for whether they represent a modification or should be accounted for as a new contract.
We have concluded that the license of intellectual property in certain collaboration and license agreements is not distinct from the perspective of our customers at the time of initial transfer, since we often do not license intellectual property without related technology transfer and research and development support services. Such evaluation requires significant judgment since it is made from the customer's perspective. Our performance obligations under our collaborations may include such things as providing intellectual property licenses, performing technology transfer, performing research and development consulting services, providing reagents, ADCs, and other materials, and notifying the customer of any enhancements to licensed technology or new technology that we discover, among others. We determined our performance obligations under certain collaboration and license agreements as evaluated at contract inception were not distinct and represented a single performance obligation. Upfront payments are amortized to revenue over the performance period. Upfront payment contract liabilities resulting from our collaborations do not represent a financing component as the payment is not financing the transfer of goods or services, and the technology underlying the licenses granted reflects research and development expenses already incurred by us. For agreements beyond the initial performance period, we have no remaining performance obligations. We may receive license maintenance fees and potential milestones and royalties based on collaborator development and regulatory progress, which are recorded in the period achieved in the case of milestones, and during the period of the related sales for royalties.
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When no performance obligations are required of us, or following the completion of the performance obligation period, such amounts are recognized upon transfer of control of the goods or services to the customer. Generally, all amounts received or due other than sales-based milestones and royalties are classified as collaboration and license agreement revenues. Sales-based milestones and royalties are recognized as royalty revenue in the period the related sale occurred.
We generally invoice our collaborators and licensees on a monthly or quarterly basis, or upon the completion of the effort or achievement of a milestone, based on the terms of each agreement. Deferred revenue arises from amounts received in advance of the culmination of the earnings process and is recognized as revenue in future periods as performance obligations are satisfied. Deferred revenue expected to be recognized within the next twelve months is classified as a current liability.

2. Revenue from contracts with customers
The following table presents our disaggregated revenue for the periods presented.
Three Months Ended March 31,
(dollars in thousands)20222021
ADCETRIS$180,989 $162,573 
PADCEV100,207 69,758 
TUKYSA90,475 70,257 
TIVDAK11,415  
Net product sales$383,086 $302,588 
Royalty revenues$28,181 $27,219 
Collaboration and license agreement revenues$15,193 $2,176 
Total revenues$426,460 $331,983 

3. Leases
We have operating leases for our office and laboratory facilities with terms that expire from 2022 through 2029. We did not record any right-of-use assets in exchange for lease liabilities during the three months ended March 31, 2022 and 2021. All of our significant leases include options for us to extend the lease term. None of our options to extend the rental term of any existing leases were considered reasonably certain as of March 31, 2022.
In June 2021, we entered into a lease agreement for an approximately 258,000 square feet building complex to be constructed by the landlord on approximately 20.5 acres of land in Everett, Washington. We intend to use the building for future manufacturing, laboratory, and office space. Under the terms of the lease, base rent is payable at an initial rate of $4.0 million per year, subject to annual escalations of 3% during the initial term of 20 years. The lease commences on the date when construction and delivery of the building shell and related improvements by the landlord have been substantially completed. We will record a lease liability and right-of-use assets on our condensed consolidated balance sheet on the lease commencement date, which has not commenced as of March 31, 2022. We have an option to renew the lease for two additional terms of ten years each. In addition, we have an option to purchase the premises in the future.
Supplemental operating lease information was as follows:
Three Months Ended March 31,
(dollars in thousands)20222021
Operating lease cost$4,195 $4,014 
Variable lease cost1,072 987 
Total lease cost$5,267 $5,001 
Cash paid for amounts included in measurement of lease liabilities$4,553 $3,858 
As of March 31,
20222021
Weighted average remaining lease term5.7 years6.0 years
Weighted average discount rate5.0 %5.2 %
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Operating lease liabilities were recorded in the following captions of our condensed consolidated balance sheet as follows:
(dollars in thousands)March 31, 2022December 31, 2021
Accrued liabilities and other$13,721 $13,905 
Operating lease liabilities, long-term53,552 56,665 
Total$67,273 $70,570 

4. Net loss per share
Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of common shares and dilutive potential common shares outstanding during the period. Potentially dilutive common shares include incremental common shares issuable upon the vesting of unvested restricted stock units and the exercise of outstanding stock options, calculated using the treasury stock method.
We excluded the potential shares of common stock from the computation of diluted net income (loss) per share because their effect would have been antidilutive. The following table presents the weighted average number of shares that have been excluded for all periods presented:
Three Months Ended March 31,
(in thousands)20222021
Stock options and RSUs10,333 10,468 

5. Fair value
We have certain assets that are measured at fair value on a recurring basis according to a fair value hierarchy that prioritizes the inputs, assumptions and valuation techniques used to measure fair value. The three levels of the fair value hierarchy are:
Level 1:  Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2:  Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3:  Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
The determination of a financial instrument’s level within the fair value hierarchy is based on an assessment of the lowest level of any input that is significant to the fair value measurement. We consider observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The fair value hierarchy of assets carried at fair value and measured on a recurring basis was as follows: 
 Fair value measurement using:
(dollars in thousands)Quoted prices
in active
markets for
identical assets
(Level 1)
Other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Total
March 31, 2022
Short-term investments—U.S. Treasury securities$1,690,097 $ $ $1,690,097 
Other non-current assets—equity securities11,230   11,230 
Total$1,701,327 $ $ $1,701,327 
December 31, 2021
Short-term investments—U.S. Treasury securities$1,735,202 $ $ $1,735,202 
Other non-current assets—equity securities14,009   14,009 
Total$1,749,211 $ $ $1,749,211 
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Our short-term debt investments portfolio only contains investments in U.S. Treasury and other U.S. government-backed securities. We review our portfolio based on the underlying risk profile of the securities and have a zero loss expectation for these investments. We also regularly review the securities in an unrealized loss position and evaluate the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions. During the three months ended March 31, 2022 and 2021, we recognized no year-to-date credit loss related to our short- and long-term investments, and had no allowance for credit loss recorded as of March 31, 2022 or December 31, 2021.
Our debt securities consisted of the following:
(dollars in thousands)Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
March 31, 2022
U.S. Treasury securities$1,691,144 $1 $(1,048)$1,690,097 
Contractual maturities (at date of purchase):
Due in one year or less$1,691,144 $1,690,097 
December 31, 2021
U.S. Treasury securities$1,735,388 $12 $(198)$1,735,202 
Contractual maturities (at date of purchase):
Due in one year or less$1,635,307 $1,635,118 
Due in one to two years100,081 100,084 
Total$1,735,388 $1,735,202 

6. Investment and other income (loss), net
Investment and other income (loss), net consisted of the following:
Three Months Ended March 31,
(dollars in thousands)20222021
(Loss) gain on equity securities$(2,779)$259 
Investment and other income, net589 741 
Total investment and other (loss) income, net$(2,190)$1,000 
(Loss) gain on equity securities includes the realized and unrealized holding gains and losses on our equity securities. At times, we hold equity investments in certain companies acquired in relation to a strategic partnership. Shares held at the end of reporting periods are marked to market in our condensed consolidated financial statements, which can result in unrealized gains and losses.

7. Inventories
Inventories consisted of the following:
(dollars in thousands)March 31, 2022December 31, 2021
Raw materials$13,491 $12,181 
Work in process216,663 152,635 
Finished goods45,593 35,847 
Total$275,747 $200,663 
We capitalize our commercial inventory costs. Inventory that is deployed into clinical, research or development use is charged to research and development expense when it is no longer available for use in commercial sales.

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8. Accrued liabilities
Accrued liabilities consisted of the following: 
(dollars in thousands)March 31, 2022December 31, 2021
Employee compensation and benefits$83,389 $139,052 
Clinical trial and related costs146,985 122,468 
Contract manufacturing27,147 21,867 
Gross-to-net deductions and third-party royalties88,973 81,316 
Other 97,572 89,327 
Total$444,066 $454,030 

9. Share-based compensation
The following table presents our total share-based compensation expense for the periods presented:
Three Months Ended March 31,
(dollars in thousands)20222021
Research and development$23,076 $16,964 
Selling, general and administrative20,837 21,260 
Total share-based compensation expense$43,913 $38,224 
As of March 31, 2022, there was $137.3 million of unrecognized compensation cost related to unvested options and restricted stock unit awards, excluding our LTIPs and performance-based awards, net of forfeitures. The estimated unrecognized compensation expense related to our performance-based LTIPs was approximately $79 million as of March 31, 2022.

10. Income taxes
For the three months ended March 31, 2022, we had taxable profits in the U.S. as a result of amendments to IRC Section 174, which took effect January 1, 2022 pursuant to the 2017 Tax Cuts and Jobs Act. We recorded an income tax provision of $1.3 million, primarily related to estimated state tax liabilities for which there were limitations on the use of existing state tax carryforwards. We had existing federal tax carryforwards sufficient to offset any federal liability. Our income tax provision also reflected taxable profits in foreign jurisdictions. Our effective tax rate of approximately 0.9% differed from the federal statutory rate primarily because we have provided a valuation allowance against substantially all our deferred tax assets.
For the three months ended March 31, 2021, we did not record any income tax provision.

11. Legal matters
We are engaged in multiple legal disputes with Daiichi Sankyo Co. Ltd., or Daiichi Sankyo.
Dispute over ownership of intellectual property
We are in a dispute with Daiichi Sankyo regarding the ownership of certain technology used by Daiichi Sankyo in its cancer drug ENHERTU and certain product candidates. We believe that the linker and other ADC technology used in ENHERTU and these drug candidates are improvements to our ADC technology, the ownership of which we contend was assigned to us under the terms of a 2008 collaboration agreement between us and Daiichi Sankyo. On November 12, 2019, we submitted an arbitration demand to the American Arbitration Association seeking, among other remedies, a declaration that we are the owner of the intellectual property rights under dispute, monetary damages, and a running royalty. On April 27, 2020, the arbitrator confirmed the dispute should be resolved in arbitration. The arbitration hearing was conducted in June 2021. Recently, the arbitration hearing record was reopened by the arbitrator to consider additional evidence. A decision in the arbitration case is expected in mid-2022.
On November 4, 2019, Daiichi Sankyo filed a declaratory judgment action in the United States District Court for the District of Delaware, alleging that we are not entitled to the intellectual property rights under dispute, in an attempt to have the dispute adjudicated in federal court. The case has been stayed and administratively closed by court order.
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Patent infringement
On October 19, 2020, we filed a complaint in the United States District Court for the Eastern District of Texas to commence an action for infringement of our U.S. Patent No. 10,808,039, or the '039 Patent, by Daiichi Sankyo’s importation into, offer for sale, sale, and use in the United States of the cancer drug ENHERTU. The remedies sought in this action include, among other remedies, a judgment that Daiichi Sankyo infringed one or more valid and enforceable claims of the '039 Patent, monetary damages and a running royalty.
Daiichi Sankyo (as well as Daiichi Sankyo, Inc. and AstraZeneca Pharmaceuticals, LP, or AstraZeneca) subsequently filed an action on November 13, 2020 in the U.S. District Court for the District of Delaware seeking a declaratory judgment that ENHERTU does not infringe the ‘039 Patent. The Delaware action has been stayed by court order.
Daiichi Sankyo, Inc. and AstraZeneca also filed two petitions for post-grant review on December 23, 2020 and January 22, 2021 with the U.S. Patent and Trademark Office, or USPTO, seeking to have claims of the ‘039 Patent cancelled as unpatentable. On June 24, 2021, the USPTO issued a decision denying both petitions for post-grant review. On April 7, 2022, the Patent Trial and Appeal Board of the USPTO granted a request on rehearing and instituted two post-grant review proceedings.
On April 8, 2022, a jury in the United States District Court for the Eastern District of Texas found that Daiichi Sankyo willfully infringed the asserted claims of the '039 Patent with its ENHERTU product, and also found that the asserted claims were not invalid. The jury further awarded damages of $41.8 million for infringement from October 20, 2020 through March 31, 2022. We will record an amount of awarded damages in our condensed consolidated financial statements when we have determined the payment to be realized or realizable under ASC 450. We intend to request a royalty on Daiichi Sankyo's future sales of ENHERTU in the United States through November 5, 2024, as well as enhanced damages, attorney fees and costs.
As a result of these disputes, we have incurred and will continue to incur litigation expenses. In addition, from time to time, we may become involved in other lawsuits, claims and proceedings relating to the conduct of our business, including those pertaining to the defense and enforcement of our patent or other intellectual property rights and our contractual rights. These proceedings are costly and time consuming, and they may subject us to claims which may result in liabilities or require us to take or refrain from certain actions. Additionally, successful challenges to our patent or other intellectual property rights through these proceedings could result in a loss of rights in the relevant jurisdiction and may allow third parties to use our proprietary technologies without a license from us or our collaborators.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q, including the following discussion of our financial condition and results of operations, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions, including those relating to future events or our future financial performance and financial guidance. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “project,” “believe,” “estimate,” “predict,” “potential,” “intend” or “continue,” the negative of terms like these or other comparable terminology, and other words or terms of similar meaning in connection with any discussion of future operating or financial performance. These statements are only predictions. All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements except as required by law. Any or all of our forward-looking statements in this document may turn out to be wrong. Actual events or results may differ materially. Our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks, uncertainties and other factors. We discuss many of these risks, uncertainties and other factors in this Quarterly Report on Form 10-Q in greater detail under the heading “Part II Item 1A—Risk Factors.” We caution investors that our business and financial performance are subject to substantial risks and uncertainties.
Overview
Seagen is a biotechnology company that develops and commercializes targeted therapies to treat cancer. We are commercializing ADCETRIS®, or brentuximab vedotin, for the treatment of certain CD30-expressing lymphomas, PADCEV®, or enfortumab vedotin-ejfv, for the treatment of certain metastatic urothelial cancers, TUKYSA®, or tucatinib, for the treatment of certain metastatic HER2-positive breast cancers, and TIVDAK®, or tisotumab vedotin-tftv, for the treatment of certain metastatic cervical cancers. We are also advancing a pipeline of novel therapies for solid tumors and blood-related cancers designed to address unmet medical needs and improve treatment outcomes for patients. Many of our programs, including ADCETRIS, PADCEV and TIVDAK, are based on our ADC technology that utilizes the targeting ability of monoclonal antibodies to deliver cell-killing agents directly to cancer cells.
First quarter 2022 highlights and recent developments
Corporate
Achieved 27% growth in net product sales for the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021.
Entered into a collaboration with Sanofi to develop and potentially commercialize multiple novel ADCs. The agreement is an exclusive collaboration that will utilize Sanofi’s proprietary monoclonal antibody technology and our proprietary ADC technology for up to three cancer targets. Under the terms of the collaboration, Seagen and Sanofi will co-fund global development activities and share equally in any future profits. In the first quarter of 2022, the first, of up to three potential targets under the collaboration, was designated, for which Sanofi paid a license fee.
Announced that a jury found that Daiichi Sankyo willfully infringed our U.S. Patent No. 10,808,039 by selling in the U.S. its ENHERTU® product (trastuzumab deruxtecan; DS-8201). We were awarded damages of $41.8 million for past infringement of the patent. In addition, we intend to request a royalty on future sales of ENHERTU in the United States through November 5, 2024, as well as enhanced damages, attorney fees and costs.

PADCEV
Announced the European Commission approved PADCEV as monotherapy for the treatment of adult patients with locally advanced or metastatic urothelial cancer who have previously received a platinum-containing chemotherapy and a PD-1/L1 inhibitor in April 2022.
The UK Medicines and Healthcare products Regulatory Agency (MHRA) granted marketing authorization in Great Britain for previously treated metastatic urothelial cancer in April 2022.
Reported initial results in patients with muscle-invasive bladder cancer, or MIBC, at the American Society of Clinical Oncology Genitourinary Cancers Symposium, or ASCO GU, in February 2022 demonstrating encouraging activity and tolerability.

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ADCETRIS
Announced that the phase 3 ECHELON-1 clinical trial demonstrated a statistically significant improvement in OS in patients with advanced Hodgkin lymphoma following treatment with ADCETRIS in combination with chemotherapy. With approximately six years median follow up, patients receiving ADCETRIS plus chemotherapy in the frontline setting had a 41 percent reduction in the risk of death compared to those receiving chemotherapy alone.

TUKYSA
Treated first patient in the Phase 3 HER2CLIMB-05 trial in the frontline maintenance setting for patients with metastatic HER2-positive breast cancer.

TIVDAK
Reported initial data from the innovaTV 207 phase 2 trial of TIVDAK in solid tumors at the Multidisciplinary Head and Neck Cancers Symposium in February 2022. The results demonstrated a manageable safety profile and promising preliminary antitumor activity in patients with squamous cell carcinoma of the head and neck.

Pipeline
The pivotal phase 2 trial of disitamab vedotin began enrolling patients with previously treated HER2-expressing metastatic urothelial cancer in April 2022.
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Our Medicines
Our approved medicines include the following:
Product*
Therapeutic AreaU.S. Approved Indication
sgen-20220331_g1.jpg
Hodgkin LymphomaPreviously untreated Stage III/IV classical Hodgkin lymphoma, or cHL, in combination with doxorubicin, vinblastine and dacarbazine
cHL at high risk of relapse or progression as post-autologous hematopoietic stem cell transplantation, or auto-HSCT, consolidation
cHL after failure of auto-HSCT or after failure of at least two prior multi-agent chemotherapy regimens in patients who are not auto-HSCT candidates
T-cell LymphomaPreviously untreated systemic anaplastic large cell lymphoma, or sALCL, or other CD30-expressing peripheral T-cell lymphoma, or PTCL, including angioimmunoblastic T-cell lymphoma and PTCL not otherwise specified, in combination with cyclophosphamide, doxorubicin and prednisone
sALCL after failure of at least one prior multi-agent chemotherapy regimen
Primary cutaneous anaplastic large cell lymphoma, or pcALCL, or CD30-expressing mycosis fungoides who have received prior systemic therapy
sgen-20220331_g2.jpg
Urothelial Cancer
Locally advanced or metastatic urothelial cancer for patients who:
have previously received a programmed death receptor-1 (PD-1) or programmed death-ligand 1 (PD-L1) inhibitor and platinum-containing chemotherapy, or
are ineligible for cisplatin-containing chemotherapy and have previously received one or more prior lines of therapy.
sgen-20220331_g3.jpg
Breast Cancer
In combination with trastuzumab and capecitabine for the treatment of adult patients with advanced unresectable or metastatic HER2-positive breast cancer, including patients with brain metastases, who have received one or more prior anti-HER2-based regimens in the metastatic setting.
sgen-20220331_g4.jpg
Cervical CancerRecurrent or metastatic cervical cancer with disease progression on or after chemotherapy.
*ADCETRIS, PADCEV, TUKYSA and TIVDAK are only indicated for use in adults.

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ADCETRIS®
ADCETRIS is an ADC targeting CD30, which is a protein located on the surface of cells and highly expressed in Hodgkin lymphoma, certain T-cell lymphomas as well as other cancers. ADCETRIS first received U.S. Food and Drug Administration, or FDA, approval in 2011 and is now approved in a total of six indications to treat Hodgkin lymphoma and certain T-cell lymphomas in various settings including as frontline therapy.
ADCETRIS has received approval in more than 75 countries worldwide. We commercialize ADCETRIS in the U.S. and its territories and in Canada, and we collaborate with Takeda Pharmaceutical Company Limited, or Takeda, to develop and commercialize ADCETRIS on a global basis. Under this collaboration, Takeda has commercial rights in the rest of the world and pays us a royalty. Takeda has received regulatory approvals for ADCETRIS as monotherapy or in combination with other agents in various settings for the treatment of patients with Hodgkin lymphoma or CD30-positive T-cell lymphomas in Europe and many countries throughout the rest of the world and is pursuing additional regulatory approvals.

PADCEV®
PADCEV is an ADC targeting Nectin-4, a protein expressed on the surface of cells and highly expressed in bladder cancer as well as other cancers. PADCEV was granted accelerated approval by the FDA in December 2019 for the treatment of adult patients with locally advanced or metastatic urothelial cancer who have previously received a PD-1 or PD-L1 inhibitor and a platinum-containing chemotherapy before (neoadjuvant) or after (adjuvant) surgery in the locally advanced or metastatic setting. FDA approval of PADCEV was supported by data from a single-arm pivotal phase 2 clinical trial called EV-201.
In July 2021, the FDA converted PADCEV's accelerated approval to regular approval in the U.S., in addition to granting regular approval for a new indication for adult patients with locally advanced or metastatic urothelial cancer who are ineligible for cisplatin-containing chemotherapy and have previously received one or more prior lines of therapy. The conversion to regular approval was supported by the pivotal phase 3 clinical trial called EV-301, and the expanded indication was supported by data from the second cohort in the EV-201 trial. The FDA reviewed the application for regular approval under the Oncology Center of Excellence's, or OCE's, Real Time Oncology Review, or RTOR, pilot program.
In April 2022 the European Commission approved PADCEV as monotherapy for the treatment of adult patients with locally advanced or metastatic urothelial cancer who have previously received a platinum-containing chemotherapy and a PD-1/L1 inhibitor. The approval is applicable in the European Union member states, as well as Iceland, Norway and Liechtenstein.
PADCEV is also approved in Canada, Israel, Japan, Great Britain and Switzerland in previously treated metastatic urothelial cancer.
PADCEV is being co-developed and jointly commercialized with Astellas Pharma, Inc., or Astellas. In the U.S., we and Astellas are jointly promoting PADCEV. We record net sales of PADCEV in the U.S. and are responsible for all U.S. distribution activities. We and Astellas each bear the costs of our own sales organizations in the U.S., equally share certain other costs associated with commercializing PADCEV in the U.S., and equally share in any profits realized in the U.S. Outside the U.S., we have commercialization rights in all other countries in North and South America, and Astellas has commercialization rights in the rest of the world, including Europe, Asia, Australia and Africa. The agreement is intended to provide that we and Astellas will effectively equally share in costs incurred and any profits realized in all of these markets. Cost and profit sharing in Canada, the United Kingdom, Germany, France, Spain and Italy will be based on product sales and costs of commercialization. In the remaining markets, the commercializing party will bear costs and will pay the other party a royalty rate applied to net sales of the product based on a rate intended to approximate an equal profit share for both parties.
TUKYSA®
TUKYSA is an oral, small molecule tyrosine kinase inhibitor, or TKI, that is highly selective for HER2, a growth factor receptor overexpressed in certain cancers. HER2 mediates cell growth, differentiation and survival. Tumors that over-express HER2 are generally more aggressive and historically have been associated with poor overall survival, compared with HER2-negative cancers. In April 2020, TUKYSA received approval from the FDA in combination with trastuzumab and capecitabine for the treatment of adult patients with advanced unresectable or metastatic HER2-positive breast cancer, including patients with brain metastases, who have received one or more prior anti-HER2-based regimens in the metastatic setting. FDA approval of TUKYSA was supported by data from the HER2CLIMB trial.
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The application for approval was reviewed under the FDA's RTOR pilot program. We also participated in the Project Orbis initiative of the FDA OCE which provides a framework for concurrent submission and review of oncology products among international partners. Under this program we have received approval in the U.S., Canada, Australia, Singapore, and Switzerland. In February 2021, the EC granted marketing authorization for TUKYSA in combination with trastuzumab and capecitabine for the treatment of adult patients with HER2-positive locally advanced or metastatic breast cancer who have received at least two prior anti-HER2 treatment regimens. This approval is valid in all countries of the European Union as well as Norway, Liechtenstein, Iceland and Northern Ireland. In Europe, we have begun marketing TUKYSA in Austria, France, Germany and Switzerland. Additionally, in February 2021, the UK Medicines and Healthcare products Regulatory Agency, or MHRA, granted a Great Britain marketing authorization for TUKYSA.
We are responsible for commercializing TUKYSA in the U.S., Canada and Europe. In September 2020, we entered into a license and collaboration agreement, or the TUKYSA Agreement, with Merck & Co., Inc., or Merck, pursuant to which we granted exclusive rights to Merck to commercialize TUKYSA in Asia, the Middle East and Latin America and other regions outside of the U.S., Canada and Europe. The collaboration is intended to accelerate global availability of TUKYSA.
TIVDAK®
TIVDAK is an ADC targeting tissue factor, a protein expressed on the surface of cells that has increased levels of expression on multiple solid tumors. The FDA granted accelerated approval of TIVDAK in September 2021 for the treatment of adult patients with recurrent or metastatic cervical cancer with disease progression on or after chemotherapy. FDA approval was supported by data from the innovaTV 204 trial where it was evaluated in patients with recurrent or metastatic cervical cancer who had received no more than two prior systemic regimens in the recurrent or metastatic setting, including at least one prior platinum-based chemotherapy regimen. Continued approval may be contingent upon verification and description of clinical benefit in confirmatory trials.
TIVDAK is being co-developed with Genmab A/S, or Genmab, under an agreement in which the companies share all costs and profits for the product on a 50:50 basis. Under a joint commercialization agreement, we and Genmab co-promote TIVDAK in the U.S. and we record net sales of TIVDAK in the U.S. and are responsible for leading U.S. distribution activities. The companies will each maintain 50% of the sales representatives and medical science liaisons, equally share those and certain other costs associated with commercializing TIVDAK in the U.S., and equally share in any profits realized in the U.S. Outside the U.S., we have commercialization rights in the rest of the world except for Japan, where Genmab has commercialization rights. In Europe, China, and Japan, we and Genmab will equally share 50% of the costs associated with commercializing TIVDAK as well as any profits realized in these markets. In markets outside the U.S. other than Europe, China, and Japan, aside from certain costs specified in the agreement, we will be solely responsible for all costs associated with commercializing TIVDAK, and will pay Genmab a royalty based on a percentage of aggregate net sales.
Clinical Development and Regulatory Status
ADCETRIS (brentuximab vedotin)
Beyond our current labeled indications, we are evaluating ADCETRIS as monotherapy and in combination with other agents in ongoing trials, including several potential registration-enabling trials such as the phase 3 ECHELON-3 clinical trial in relapsed or refractory diffuse large B-cell lymphoma. In addition to our corporate-sponsored trials there are numerous investigator-sponsored trials of ADCETRIS in the United States. The investigator-sponsored trials include the use of ADCETRIS in a number of malignant hematologic indications and in solid tumors.
In February 2022, we announced that the phase 3 ECHELON-1 clinical trial demonstrated a statistically significant improvement in overall survival, or OS, (p=0.009) in patients with advanced Hodgkin lymphoma following treatment with ADCETRIS in combination with chemotherapy. With approximately six years median follow up, patients receiving ADCETRIS plus doxorubicin, vinblastine, and dacarbazine (A+AVD) in the frontline setting had a 41 percent reduction in the risk of death (HR 0.59; [95% CI: 0.396 to 0.879]) compared with patients receiving doxorubicin, bleomycin, vinblastine, and dacarbazine (ABVD). The safety profile of ADCETRIS was consistent with previous studies and no new safety events were observed.
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PADCEV (enfortumab vedotin-ejfv)
In addition to jurisdictions where PADCEV is currently approved, applications are under review for approval in the previously treated metastatic urothelial cancer setting in Australia, under the FDA's Project Orbis program, as well as in Singapore, Brazil and other countries. In collaboration with Astellas we are conducting or planning to conduct clinical trials across the spectrum of bladder cancer including ongoing trials in frontline metastatic urothelial cancer and muscle invasive bladder cancer. We are planning to conduct a trial in non-muscle invasive bladder cancer. In addition, we are conducting a trial in a range of other solid tumors.
PADCEV is being investigated in first-line metastatic urothelial cancer and earlier stages of bladder cancer. We and Astellas are conducting a phase 1b/2 clinical trial, called EV-103, that is a multi-cohort, open-label trial of PADCEV alone or in combination with other agents. The trial is evaluating safety, tolerability and activity in locally advanced and first- and second-line metastatic urothelial cancer, and was expanded to include muscle invasive bladder cancer, or MIBC.
In February 2020, based on the positive initial results of the dose-escalation cohort and the expansion Cohort A of the EV-103 trial, the FDA granted Breakthrough Therapy designation for PADCEV in combination with pembrolizumab for the treatment of patients with unresectable locally advanced or metastatic urothelial cancer who are unable to receive cisplatin-based chemotherapy in the first-line setting. In April 2020, we announced that, based on discussions with the FDA, data from the randomized cohort K in the EV-103 trial, along with other data from the EV-103 trial, could potentially support registration under the FDA's accelerated approval pathway. The primary outcome measures are objective response rate and duration of response, or DOR. In October 2021, we completed enrollment in cohort K.
In addition to the potential accelerated approval pathway based on the EV-103 trial, we are conducting a global, registrational phase 3 trial, called EV-302, in frontline metastatic urothelial cancer in collaboration with Astellas and Merck. We, Astellas and Merck are jointly funding EV-302 and the trial is being conducted by us. EV-302 is an open-label, randomized phase 3 clinical trial evaluating the combination of PADCEV and pembrolizumab versus chemotherapy alone in patients with previously untreated locally advanced or metastatic urothelial cancer. The trial includes metastatic urothelial cancer patients who are either eligible or ineligible for cisplatin-based chemotherapy. The trial has dual primary endpoints of progression free survival and OS and is intended to support global regulatory submissions and potentially serve as a confirmatory trial if accelerated approval is granted based on EV-103.
In April 2020, we and Astellas entered into an agreement with Merck to evaluate PADCEV in MIBC. Merck has amended its ongoing phase 3 KEYNOTE-905/EV-303 registrational trial in cisplatin-ineligible patients with MIBC to include an arm evaluating PADCEV in combination with pembrolizumab. In October 2020, we and Astellas entered into an agreement with Merck to evaluate PADCEV in combination with pembrolizumab in a phase 3 trial, called KEYNOTE-B15/EV-304, to be conducted by Merck in cisplatin-eligible patients with MIBC. This trial was initiated in the first quarter of 2021.
In January 2022, we enrolled the first patient in a phase 1 trial, called EV-104, evaluating PADCEV in patients with BCG unresponsive non-muscle invasive bladder cancer.
In January 2020, we and Astellas also initiated a phase 2 clinical trial, called EV-202, to evaluate PADCEV monotherapy in solid tumors that have high-levels of Nectin-4 expression, including non-small cell lung, head and neck, gastric/esophageal and breast cancers.
TUKYSA (tucatinib)
We are conducting a broad clinical development program for TUKYSA including ongoing and planned trials in earlier lines of breast cancer and in other HER2-positive cancers. The positive results of the HER2CLIMB trial served as the basis for approval in the U.S., Canada, the European Union as well as other countries. Merck is co-funding a portion of the TUKYSA global development plan.
In December 2021, we presented new data at the San Antonio Breast Cancer Symposium from exploratory analyses from the pivotal HER2CLIMB trial showing that improvement in OS was maintained after an additional 15.6 months of follow-up when TUKYSA was combined with trastuzumab and capecitabine in patients with HER2-positive metastatic breast cancer who had stable or active brain metastases. After a median follow-up of 29.6 months, the TUKYSA regimen improved OS for patients with brain metastases by 9.1 months compared to trastuzumab and capecitabine alone (21.6 months vs. 12.5 months) (HR: 0.60; [95% CI: 0.44, 0.81]). The benefit extended to patients with active or stable brain metastases.
In October 2019, we initiated a phase 3 randomized trial, called HER2CLIMB-02, evaluating TUKYSA versus placebo, each in combination with T-DM1, for patients with unresectable locally advanced or metastatic HER2-positive breast cancer, including those with brain metastases, who have had prior treatment with a taxane and trastuzumab.
We are supporting a U.S. cooperative group, the Alliance for Clinical Trials in Oncology, that is conducting a phase 3 randomized trial, called CompassHER2 RD, which is evaluating TUKYSA in combination with T-DM1 in the adjuvant setting for patients with high-risk, HER2-positive breast cancer.
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We are also conducting a phase 2 trial, called HER2CLIMB-04, evaluating TUKYSA in combination with trastuzumab deruxtecan in previously treated locally-advanced or metastatic HER2-positive breast cancer.
We have also initiated a phase 3 trial, called HER2CLIMB-05, evaluating TUKYSA compared to placebo in combination with trastuzumab and pertuzumab in the frontline maintenance setting for patients with metastatic HER2-positive breast cancer.
We are conducting a phase 2 trial, called MOUNTAINEER, evaluating TUKYSA in combination with trastuzumab in patients with HER2-positive, RAS wild-type metastatic colorectal cancer after treatment with first- and second-line standard-of-care therapies. Initial results from 23 patients were presented at the ESMO 2019 Congress that demonstrated encouraging antitumor activity. In September 2021, we completed enrollment in the trial. We believe the trial could potentially support an application for accelerated approval in the U.S.
We are conducting a phase 2/3 trial, called MOUNTAINEER-02, in combination with trastuzumab, ramucirumab and paclitaxel in second-line HER2-positive metastatic gastroesophageal cancer. In addition, we have initiated a phase 3 trial, called MOUNTAINEER-03, in combination with trastuzumab and mFOLFOX6 in first-line HER2-positive metastatic colorectal cancer. We have also initiated a phase 1b trial evaluating TUKYSA in combination with trastuzumab and oxaliplatin based chemotherapy in first-line HER2-positive unresectable or metastatic colorectal, gastric, esophageal and gallbladder cancers.
TIVDAK (tisotumab vedotin-tftv)
In collaboration with Genmab, we are developing TIVDAK for metastatic cervical cancer and are evaluating it as a potential therapy in other solid tumors.
In January 2021, we and Genmab initiated a phase 3 clinical trial, called innovaTV 301, to evaluate TIVDAK compared to chemotherapy in patients with recurrent or metastatic cervical cancer who have received one or two prior lines of therapy. innovaTV 301 is intended to support global regulatory applications for potential approvals in regions where innovaTV 204 does not support approval and to serve as a confirmatory trial in the U.S.
We are also conducting a phase 2 clinical trial, called innovaTV 205, evaluating TIVDAK as monotherapy and in combination with certain other anti-cancer agents for first- and second-line treatment of patients with recurrent or advanced cervical cancer. In September 2021, interim results were presented at the European Society for Medical Oncology Annual Congress from two cohorts of the phase 1b/2 innovaTV 205 trial, evaluating TIVDAK as combination therapy for recurrent or metastatic cervical cancer. Both combinations showed encouraging, durable anti-tumor activity and demonstrated a manageable and acceptable safety profile.
We are conducting a phase 2 clinical trial, called innovaTV 207, for patients with relapsed, locally advanced or metastatic solid tumors. In February 2022, initial data from the innovaTV 207 phase 2 trial of TIVDAK in solid tumors was presented at the Multidisciplinary Head and Neck Cancers Symposium. The results demonstrated a manageable safety profile and promising preliminary antitumor activity in patients with squamous cell carcinoma of the head and neck with 16 percent of patients (95% CI: 5.5 to 33.7) achieving the primary endpoint of confirmed objective response rate per investigator.
Additionally, we are conducting a phase 2 clinical trial, called innovaTV 208, for patients with platinum-resistant ovarian cancer.
Disitamab vedotin
In September 2021, we and RemeGen entered into an exclusive license agreement to develop and commercialize disitamab vedotin, a novel HER2-targeted ADC, which has shown anti-tumor activity in several solid tumor types across a spectrum of HER2 levels, including urothelial, gastric and breast cancer, in all countries outside of RemeGen’s territory of Asia, excluding Japan and Singapore. We have a broad clinical development program planned including an ongoing phase 2 trial evaluating disitamab vedotin as monotherapy in previously treated HER2-expressing metastatic urothelial cancer.
Ladiratuzumab vedotin
We are developing ladiratuzumab vedotin, or LV, an ADC targeting LIV-1, which is currently being evaluated in phase 1 and phase 2 clinical trials both as monotherapy and in combination with other agents for patients with metastatic breast cancer and select solid tumors with high LIV-1 expression. In September 2020, we and Merck entered into a license and collaboration agreement, or the LV Agreement, under which the companies will jointly develop and share future costs and profits worldwide for LV.
Other clinical and early-stage product candidates
We are advancing a pipeline of early-stage clinical candidates as well as multiple preclinical and research-stage programs that employ our proprietary technologies. We advanced several product candidates into clinical development in 2021, and we plan to submit additional Investigational New Drug applications to the FDA in 2022.
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Antibody-Drug Conjugate technology license agreements
We have active technology license agreements for our ADC technology with a number of biotechnology and pharmaceutical companies, including AbbVie Biotechnology Ltd., or AbbVie; Genentech, Inc., a member of the Roche Group, or Genentech; and GlaxoSmithKline LLC, or GSK, as well as collaboration agreements with Astellas and Genmab. Genentech and GSK have received approval for ADC drugs that utilize our technology, Polivy® (polatuzumab vedotin-piic) and Blenrep® (belantamab mafodotin-blmf), respectively, in the U.S., European Union and other countries. Under our ADC license agreements with Genentech and GSK, we are entitled to receive royalties on net sales of Polivy and Blenrep worldwide.
COVID-19
We are continuing to closely monitor the impact of the evolving effects of the COVID-19 pandemic on our business. We are continuing to take proactive steps designed to protect the health and safety of our workforce, patients and healthcare professionals, to continue our business operations and to advance our goal of bringing important medicines to patients as rapidly as possible. Earlier in the pandemic, we instituted a mandatory work-from-home policy for employees who could perform their jobs offsite, but continued our essential research, manufacturing, and laboratory activities on site. More recently, we began to allow additional U.S. office-based employees who have been fully vaccinated to return to the office on a voluntary and limited basis. We maintain a number of precautionary measures designed to protect our on-site employees, such as enhanced facilities cleaning, lower concentrations of staff, contact tracing and making testing available. After pausing most in-person customer interactions in healthcare settings earlier in the pandemic, our field-based personnel are now using a mix of in-person interactions and electronic communications, such as emails, phone calls and video conferences, to support healthcare professionals and patients. We believe that the measures we have implemented are appropriate and are helping to reduce transmission of COVID-19, and we will continue to monitor conditions and related guidance from governmental authorities and adjust our activities as appropriate.
Outlook
We recognize product sales revenue from ADCETRIS in the U.S. and Canada, from PADCEV and TIVDAK in the U.S., and from TUKYSA in the U.S., Europe and Canada. We expect growth in net product sales in 2022 from 2021 to be primarily driven by sales growth of PADCEV and, to a lesser extent, TIVDAK and ADCETRIS. While we anticipate that sales of ADCETRIS will increase modestly in 2022 as compared to 2021, we have experienced continued impacts associated with the COVID-19 pandemic, which appear to have led to a reduction in the rate of Hodgkin lymphoma diagnoses and may further adversely affect the rate of Hodgkin lymphoma diagnoses in the future. We have also experienced an increase in gross-to-net deductions for ADCETRIS since the beginning of the pandemic, which has been driven by the proportion of ADCETRIS sales subject to discounts through the federal 340B drug discount program, as well as increases in discount rates. We believe that the increase in gross-to-net deductions is, in part, due to a shift in the locations where ADCETRIS is administered. We may further experience additional increases in gross-to-net deductions for ADCETRIS and the rest of our portfolio in the future based on market and site-of-care dynamics. Subject to potentially securing additional labels, we anticipate that the rate of growth of PADCEV and TUKYSA sales will decelerate in 2022 compared to 2021 as we expect to continue to more fully penetrate the markets for their currently approved labels within the U.S.
Our ability to maintain or continue to grow net product sales and to realize the anticipated benefits of our investments in our products depends on a number of factors including:
our and our collaborators’ ability to demonstrate to the medical community the efficacy, safety and value of our products and their potential advantages compared to existing and future therapeutics in their approved indications;
the extent to which we and our collaborators are able to obtain regulatory and other approvals of our products in additional territories and/or in additional indications, including any approvals for PADCEV in the frontline metastatic urothelial cancer setting and any approvals for TUKYSA in earlier lines of breast cancer and/or other HER2-positive cancers;
our and our collaborators’ ability to successfully launch, market and commercialize our products in any new markets or new indications, if regulatory approval is obtained, including Astellas' ability to successfully launch, market and commercialize PADCEV in the European Union and its other markets;
competition from other therapies and changing market dynamics, as further described in "Business—Competition" in Part I of our Annual Report on Form 10-K for the year ended December 31, 2021; for example, the potential approval of ENHERTU for second-line HER2-positive metastatic breast cancer is expected to pose increased competition for TUKYSA;
the extent to which we are able to successfully work with Astellas to jointly market and commercialize PADCEV in the U.S., and with Genmab to jointly market and commercialize TIVDAK in the U.S.;
our ability to successfully market and commercialize TUKYSA in our territories outside the U.S.;
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the extent to which coverage and adequate levels of reimbursement for our products are available from governments and other third-party payors;
the extent to which we and our collaborators are able to obtain required pricing and reimbursement approvals of our products in additional territories, most notably with respect to TUKYSA and PADCEV;
the impact of current and future healthcare reform measures, including measures that could result in more rigorous coverage criteria or reduce the price that we receive for our products;
the incidence flow of patients eligible for treatment in our products’ approved indications;
our and our collaborators’ ability to accurately predict and supply product demand;
duration of therapy for patients receiving our products;
our and our collaborators' ability to successfully comply with rigorous post-marketing requirements, including requirements related to a confirmatory trial as a result of TIVDAK’s accelerated approval by the FDA, and to convert TIVDAK's accelerated approval to regular approval in the U.S.;
with respect to TIVDAK, the acceptance of TIVDAK and its required eye care by the medical community and patients; and
impacts related to the COVID-19 pandemic, including potential further adverse effects on the rate of Hodgkin lymphoma diagnoses and potential adverse impacts on diagnosis rates for other cancers.
As a result of these and other factors, our future net product sales for each of our products can be difficult to accurately predict from period to period. We cannot assure you that sales of any of our products will continue to grow or that we can maintain sales of any of our products at or near current levels.
The biopharmaceutical industry and the markets in which we operate are intensely competitive. Many of our competitors are working to develop or have commercialized products similar to those we market or are developing. Drug prices are under significant scrutiny and we expect drug pricing and other healthcare costs to continue to be subject to intense political and societal pressures on a global basis. For example, in July 2021, the Biden administration announced an Executive Order that includes initiatives aimed at lowering prescription drug costs and implementing Canadian drug importation, and in response to President Biden’s Executive Order, in September 2021, the U.S. Department of Health and Human Services released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue to advance these principles. In addition to pricing actions and other measures being taken worldwide designed to reduce healthcare costs and limit the overall level of government expenditures, our sales and operations could also be affected by other risks of doing business internationally.
We expect that amounts received from our collaboration agreements, including royalties, will continue to be an important source of our revenues and cash flows. These revenues and cash flows will be impacted by future development funding and the achievement of development, clinical and commercial success by our collaborators under our existing collaboration and license agreements, as well as by entering into potential new collaboration and license agreements.
Our ongoing research, development, manufacturing and commercial activities will require substantial amounts of capital and may not ultimately be successful. We expect that we will incur substantial expenses, and we will require significant financial resources and additional personnel in order to advance the development of, to pursue, obtain and maintain regulatory approvals for, and to commercialize our products and product candidates, and expand our pipeline. In addition, we may pursue new operations or continue the expansion of our existing operations, including with respect to the continued development of our commercial infrastructure in Europe and our plans to otherwise continue to expand our operations internationally. As a result, we may need to raise additional capital, and our operating expenses may fluctuate as a result of such activities. We may also incur substantial milestone payment obligations to certain of our licensors, including RemeGen, as our product candidates progress through clinical trials towards potential commercialization.
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We are closely evaluating the impacts of the evolving effects of the COVID-19 pandemic on our ability and the ability of our collaborators to effectively market, sell and distribute our products and to develop our products and product candidates. Our field-based personnel are using a mix of in-person interactions and electronic communications, such as emails, phone calls and video conferences, to support healthcare providers and patients. Many healthcare professionals are facing additional demands on their time during the ongoing COVID-19 pandemic. We expect the different quality of electronic interactions as compared with in-person interactions, as well as the reduced quantity of interactions during the COVID-19 pandemic, to reduce the effectiveness of our sales personnel, as well as those of our collaborators, which could negatively affect our product sales and those of our collaborators, as well as physician awareness of our products. In this regard, we believe that the need to conduct some of our activities virtually is negatively impacting our ability to connect with key customers, including those familiar with competitive products, and our ability to conduct payor engagements. We face a number of challenges that will limit our ability to fully resume in-person interactions, including increasing COVID-19 infection rates due to coronavirus mutations and/or low vaccination rates in different areas or otherwise, the need to navigate varying restrictions for entering healthcare facilities and the pandemic's impacts on employee childcare arrangements. In addition, we may subsequently decide or be forced to resume a more restrictive remote work model, whether as a result of further spikes or surges in COVID-19 infection or hospitalization rates or otherwise. Moreover, the long-term effects of the COVID-19 pandemic are also unknown and it is possible that following the pandemic, healthcare institutions could alter their policies with respect to in person visits by pharmaceutical company representatives. Future COVID-19 related restrictions could also present product distribution challenges. The evolving effects of the COVID-19 pandemic appear to have negatively affected and may continue to negatively affect our product sales due to challenges in patient access to healthcare settings, loss of individual health insurance coverage, and inability to access government healthcare programs due to backlogs, some or all of which appear to have negatively affected diagnosis rates, may affect side effect management and course of treatment and may increase enrollment in our patient support programs. In this regard, impacts associated with the COVID-19 pandemic appear to have led to a reduction in the rate of Hodgkin lymphoma diagnoses, may have adversely affected diagnosis rates of other cancers, and may further adversely affect rates of cancer diagnoses in the future. We also expect that the conversion of medical conferences to a virtual format may reduce our ability to effectively disseminate scientific information about our products, which may result in decreased physician awareness of our products, their approved indications and their efficacy and safety.
Some of the sites participating in our clinical trials are affected by site closings, reduced capacity, staffing shortages, or other effects of the COVID-19 pandemic. At some sites, we are experiencing impacts to our ability to monitor patients, activate sites, screen and enroll patients, complete site monitoring and manage samples. The extent of the impact on a particular clinical trial depends on the current stage of activities at a given site, for example study start up versus post-enrollment, and the number of impacted sites participating in that trial. Impacts on diagnosis rates associated with the COVID-19 pandemic may also negatively impact enrollment. While we do not at this time anticipate the need to revise our publicly reported projected clinical milestone dates as a result of the effects of the COVID-19 pandemic, there may continue to be adverse impacts to our clinical study timelines, which, depending upon the duration and severity of the evolving effects of the COVID-19 pandemic, could ultimately delay data availability. Due to the suspension of data monitoring activities at sites that do not currently allow remote monitoring, as well as impacts on the ability to monitor patients, maintain patient treatment according to the trial protocols and manage samples, there is also the potential for negative impacts on data quality. While we are actively utilizing digital monitoring measures and other mitigations designed to prevent negative data quality impacts, if there were in fact a negative impact on data quality, we or our collaborators could be required to repeat, extend the duration of, or increase the size of clinical trials, which could significantly delay potential commercialization and require greater expenditures. We expect that similar factors will impact clinical studies operationalized by our collaborators. In addition, many of our non-essential on-site research activities are currently significantly reduced as a result of the COVID-19 pandemic, which may negatively impact the number of investigational new drug application, or IND, candidates entering our clinical pipeline in future years.
The extent to which the evolving effects of the COVID-19 pandemic impact our business will depend on future developments that are highly uncertain, such as coronavirus variants that may prove to be especially contagious or virulent, the ultimate duration and severity of the pandemic, government actions, such as travel restrictions, quarantines and social distancing requirements in the U.S. and in other countries, business closures or business disruptions and the effectiveness of vaccine programs and other actions taken to contain and treat the disease. For more information on the risks and uncertainties associated with the evolving effects of the COVID-19 pandemic on our business, our ability to generate sales of and revenues from our approved products, and our clinical development and regulatory efforts, see “Part II Item 1A—Risk Factors.”
Because of the above and other factors, our results of operations may vary substantially from year to year and from quarter to quarter and, as a result, we believe that period to period comparisons of our operating results may not be meaningful and should not be relied upon as being indicative of our future performance.


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Financial summary
For the three months ended March 31, 2022, our total revenues increased to $426.5 million, compared to $332.0 million for the same period in 2021. This increase was primarily driven by $80.5 million or 27% higher net product sales, due to growth from each of our approved medicines, and to a lesser extent, higher collaboration and license agreement revenues, and higher royalty revenues.
For the three months ended March 31, 2022, total costs and expenses increased to $559.5 million, compared to $454.4 million for the same period in 2021. The increase was primarily driven by higher research and development expenses, and to a lesser extent, higher cost of sales, and higher sales, general, and administrative expenses.
As of March 31, 2022, we had $2.0 billion in cash, cash equivalents and investments and $3.0 billion in total stockholders’ equity.

Results of operations
Net product sales
 Three months ended March 31,
(dollars in thousands)20222021% Change
ADCETRIS$180,989 $162,573 11 %
PADCEV100,207 69,758 44 %
TUKYSA90,475 70,257 29 %
TIVDAK11,415 — NM
Net product sales$383,086 $302,588 27 %
NM: No amount in comparable period or not a meaningful comparison.
Our net product sales increased 27% during the three months ended March 31, 2022, as compared to the comparable period in 2021, driven by growth from each of our marketed products.
PADCEV net product sales grew primarily due to higher penetration in its approved indications, and to a lesser extent, higher sales in the current period of drug product to another company for use in its clinical trials in the current period. TUKYSA net product sales grew due to increased sales volume in our European markets and higher net product sales in the U.S. due to continued penetration in its current indication. ADCETRIS net product sales grew primarily due to higher net selling prices, and to a lesser extent, growth in volumes of vials sold. We began commercializing TIVDAK in the U.S. following FDA approval in September 2021.
We expect growth in net product sales in 2022 as compared to 2021 to be primarily driven by sales growth of PADCEV, and to a lesser extent, TIVDAK and ADCETRIS. Refer to “Overview—Outlook” above for additional information.
Gross-to-net deductions, net of related payments and credits, were as follows:
(in thousands)Rebates and
chargebacks
Distribution fees,
product returns
and other
Total
Balance as of December 31, 2021$74,889 $16,818 $91,707 
Provision related to current period sales129,506 10,864 140,370 
Adjustment for prior period sales(1,774)(231)(2,005)
Payments/credits for current period sales(93,172)(5,995)(99,167)
Payments/credits for prior period sales(26,359)(4,151)(30,510)
Balance as of March 31, 2022$83,090 $17,305 $100,395 
Government-mandated rebates and chargebacks are the most significant component of our total gross-to-net deductions and the discount percentage has been increasing. These discount percentages increased during the three months ended March 31, 2022 as a result of price increases for ADCETRIS that we instituted that exceeded the rate of inflation. The most significant portion of our gross-to-net accrual balances as of March 31, 2022 and 2021 was for ADCETRIS Medicaid rebates. We expect future gross-to-net deductions to fluctuate based on the volume of purchases eligible for government mandated discounts and rebates, as well as changes in the discount percentage which is impacted by potential future price increases, the rate of inflation, and other factors. We expect gross-to-net deductions to increase in 2022 as compared to 2021, driven by anticipated growth in our gross product sales.
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Royalty revenues
Royalty revenues primarily reflect royalties earned under the ADCETRIS collaboration with Takeda. These royalties include commercial sales-based milestones and sales royalties. Sales royalties are based on a percentage of Takeda’s net sales of ADCETRIS, with rates that range from the mid-teens to the mid-twenties based on annual net sales tiers. Takeda bears third-party royalty costs owed on its sales of ADCETRIS. This amount is included in royalty revenues. Royalty revenues also reflect, to a lesser extent, amounts from Genentech earned on net sales of Polivy beginning in 2019 and amounts from GlaxoSmithKline earned on net sales of Blenrep beginning in 2020, both of which utilizes technology that we have licensed to them, as well as royalties on TUKYSA sales by Merck in its territory, and royalties on disitamab vedotin sales by RemeGen in its territory.
 Three months ended March 31,
(dollars in thousands)20222021% Change
Royalty revenues$28,181 $27,219 %
Royalty revenues increased slightly for the three months ended March 31, 2022 from the comparable period in 2021, primarily due to higher royalties earned on net sales of Polivy by Genentech.
We expect that royalty revenues will increase in 2022 as compared to 2021 primarily due to higher royalties from anticipated growth in ADCETRIS sales volume by Takeda, and to a lesser extent, anticipated growth of our other licensees' net product sales.

Collaboration and license agreement revenues
Collaboration and license agreement revenues reflect amounts earned under certain of our license and collaboration agreements. These revenues reflect license fees, payments received by us for technology access and maintenance fees, sales of drug supply to our collaborators, milestone payments, and reimbursement payments for research and development support that we provide to our collaborators.
 Three months ended March 31,
(dollars in thousands)20222021% Change
Collaboration and license agreement revenues$15,193 $2,176 NM
NM: No amount in comparable period or not a meaningful comparison.
Collaboration and license agreement revenues increased for the three months ended March 31, 2022 compared to the prior period primarily due to an upfront license payment received from Sanofi during 2022. Growth also was driven by higher amounts received from Astellas profit sharing, primarily driven by sales of PADCEV in Japan, and from drug product supplied to a collaborator.
We expect that collaboration and license agreements revenues will decline slightly in 2022 as compared to 2021. Our collaboration and license agreement revenues are impacted by the term and duration of those agreements and by progress-dependent milestones, annual maintenance fees, and reimbursement of materials and support services. Collaboration and license agreement revenues may vary substantially from year to year and quarter to quarter depending on the progress made by our collaborators with their product candidates and the timing of milestones achieved, the amount of drug supplied to our collaborators, and whether we enter into potential additional collaboration and license agreements.

Collaboration and license agreements
Takeda ADCETRIS collaboration
We have an agreement with Takeda for the global co-development of ADCETRIS and the commercialization of ADCETRIS by Takeda in its territory. We recognize payments from Takeda, including progress-dependent development and regulatory milestone payments, reimbursement for drug supplied, and net development cost reimbursement payments, as collaboration and license agreement revenues upon transfer of control of the goods or services over the development period. When the performance of development activities under the collaboration results in us making a reimbursement payment to Takeda, that payment reduces collaboration and license agreement revenues. We also recognize royalty revenues based on a percentage of Takeda's net sales of ADCETRIS in its territories, ranging from the mid-teens to the mid-twenties based on annual net sales tiers, as well as sales-based milestones. Takeda bears a portion of third-party royalty costs owed on its sales of ADCETRIS, which is included in royalty revenues.
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Astellas PADCEV collaboration
We have a collaboration agreement with Agensys, Inc., which subsequently became an affiliate of Astellas, to jointly research, develop and commercialize ADCs for the treatment of several types of cancer. Under this collaboration, we and Astellas are equally co-funding all development and certain commercialization costs for PADCEV. In the U.S., we and Astellas jointly promote PADCEV. We record sales of PADCEV in the U.S. and are responsible for all U.S. distribution activities. The companies each bear the costs of their own sales organizations in the U.S., equally share certain other costs associated with commercializing PADCEV in the U.S., and equally share in any profits realized in the U.S. Gross profit share payments owed to Astellas in the U.S. under the joint commercialization agreement are recorded in cost of sales. Outside the U.S., we have commercialization rights in all countries in North and South America, and Astellas has commercialization rights in the rest of the world, including Europe, Asia, Australia and Africa.
Astellas or its affiliates are responsible for manufacturing PADCEV for development and commercial use. However, we are responsible for packaging and labeling in countries in which we sell PADCEV. In addition, if the parties determine that a second source is required, we will be responsible for establishing such second source whether internally or through a third party.
Genmab TIVDAK collaboration
We have an agreement with Genmab to develop and commercialize ADCs for the treatment of several types of cancer, under which we previously exercised a co-development option for TIVDAK. Under this collaboration, we and Genmab are co-funding all development costs for TIVDAK. In the U.S., we and Genmab co-promote TIVDAK. We record sales of TIVDAK in the U.S. and are responsible for leading U.S. distribution activities. The companies will each maintain 50% of the sales representatives and medical science liaisons, equally share those and certain other costs associated with commercializing TIVDAK in the U.S., individually bear the costs of certain other personnel in the U.S., and equally share in any profits realized in the U.S. Outside the U.S., we have commercialization rights in the rest of the world except for Japan, where Genmab has commercialization rights. In Europe, China, and Japan, we and Genmab equally share 50% of the costs associated with commercializing TIVDAK as well as any profits realized in these markets. In markets outside the U.S. other than Europe, China, and Japan, aside from certain costs specified in the agreement, we are solely responsible for all costs associated with commercializing TIVDAK and will pay Genmab a royalty based on a percentage of aggregate net sales ranging from the mid-teens to mid-twenties.
Merck LV collaboration
In 2020, we entered into the LV Agreement with a subsidiary of Merck. We are pursuing a broad joint development program evaluating LV as monotherapy and in combination setting, including with Merck’s anti-PD-1 therapy KEYTRUDA® (pembrolizumab) in triple-negative breast cancer, hormone receptor-positive breast cancer and other LIV-1-expressing solid tumors. Under the terms of the LV Agreement, we granted Merck a co-exclusive worldwide development and commercialization license for LV, and agreed to jointly develop and commercialize LV on a worldwide basis. We received an upfront cash payment, and we are eligible to receive milestone payments upon the initiation of certain clinical trials, regulatory approval in certain major markets and achievement of specified annual global net sales thresholds of LV. Each company is responsible for 50% of global costs to develop and commercialize LV and will receive 50% of potential future profits.
We recognize such cost sharing proportionately with the performance of the underlying activities, while recording Merck’s reimbursement of our expenses as a reduction of research and development expenses.
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Merck TUKYSA collaboration
In 2020, we entered into the TUKYSA Agreement with a subsidiary of Merck. We granted exclusive rights to commercialize TUKYSA in Asia, the Middle East and Latin America and other regions outside of the U.S., Canada and Europe. Under the terms of the TUKYSA Agreement, Merck is responsible for marketing applications for approval in its territory, supported by the positive results from the HER2CLIMB clinical trial. We retained commercial rights in, and will record sales in, the U.S., Canada and Europe. Merck is also co-funding a portion of the TUKYSA global development plan, which encompasses several ongoing and planned trials across HER2-positive cancers. We will continue to lead ongoing TUKYSA global development operational execution. Merck will solely fund and conduct country-specific clinical trials necessary to support anticipated regulatory applications in its territories. We are eligible to receive progress-dependent milestone payments, and are entitled to receive tiered royalties on sales of TUKYSA by Merck that begin in the low twenty percent range and escalate based sales volume by Merck in its territory.
We recognize such cost sharing proportionately with the performance of the underlying activities, while recording Merck’s reimbursement of our expenses as a reduction of research and development expenses. Sales of TUKYSA drug product supplied is included in collaboration and license agreement revenues. The $85.0 million prepayment received for global development cost-sharing was recorded as a co-development liability in accrued liabilities and other or other long-term liabilities on our condensed consolidated balance sheet as of March 31, 2022. As joint development expenses are incurred, we recognize the portion of Merck’s prepayment as a reduction of our research and development expenses on our condensed consolidated statements of comprehensive loss. As of March 31, 2022 and December 31, 2021, $48.4 million and $55.3 million was recorded as the remaining co-development liability, respectively.
RemeGen disitamab vedotin license agreement
Effective in September 2021, we and RemeGen entered into an exclusive worldwide licensing agreement to develop and commercialize disitamab vedotin, a novel HER2-targeted ADC. Disitamab vedotin combines the drug-linker technology originally developed by Seagen with RemeGen’s novel HER2 antibody. Disitamab vedotin received FDA Breakthrough Therapy designation in 2020 for use in second-line treatment of patients with HER2-expressing, locally advanced or metastatic urothelial cancer who have previously received platinum-containing chemotherapy. Also in 2020, RemeGen announced FDA’s clearance of an IND application for a phase II clinical trial in locally advanced or metastatic urothelial cancer. Disitamab vedotin is conditionally approved for treating locally advanced metastatic gastric cancer in China, and in July 2021 the National Medical Products Administration of China also accepted a NDA for disitamab vedotin in locally advanced or metastatic urothelial cancer.
Under the terms of the agreement, we made a $200.0 million upfront payment to obtain exclusive license rights to disitamab vedotin for global development and commercialization, outside of RemeGen’s territory. RemeGen retains development and commercialization rights for Asia, excluding Japan and Singapore. We will lead global development and RemeGen will fund and operationalize the portion of global clinical trials attributable to its territory. RemeGen will also be responsible for all clinical development and regulatory submissions specific to its territory. We will pay RemeGen up to $195.0 million in potential milestone payments across multiple indications and products based upon the achievement of specified development goals, and up to $2.2 billion in potential milestone payments based on the achievement of specified regulatory and commercialization goals. RemeGen will be entitled to a tiered, high single digit to mid-teen percentage royalty based on net sales of disitamab vedotin in our territory.
Other technology collaboration and license agreements
We have other collaboration and license agreements for our ADC technology with a number of biotechnology and pharmaceutical companies. We typically receive upfront cash payments and progress- and sales-dependent milestones for the achievement by our licensees of certain events, and annual maintenance fees and support fees for research and development services and materials provided under the agreements. These amounts are recognized as revenue over the performance obligation period if the license is determined not to be distinct from other goods and services provided, or, if there is no performance obligation, upon transfer of control of the goods or services to the customer.

Cost of sales
Cost of sales includes manufacturing and distribution costs of product sold, gross profit share with Astellas and Genmab pursuant to those respective collaborations, amortization of acquired technology license costs, royalties owed on our PADCEV net product sales, and royalties owed on global ADCETRIS, TUKYSA, and TIVDAK net product sales.
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 Three months ended March 31,
(dollars in thousands)20222021% Change
Cost of sales$87,626 $64,135 37 %
Cost of sales increased for the three months ended March 31, 2022 from the comparable period in 2021, driven by higher gross profit sharing owed to our collaboration partners, and to a lesser extent, higher product costs from sales volume increases. The gross profit share owed to collaborators totaled $52.8 million for the three months ended March 31, 2022, as compared to $32.5 million for the comparable period in 2021.
We expect cost of sales to increase in 2022 as compared to 2021 as a result of the net product sales growth of our marketed products, contributing to higher anticipated gross profit sharing with our collaborators, higher manufacturing costs for products sold, and increased royalties owed on certain net sales of our products.

Research and development
 Three months ended March 31,
(dollars in thousands)20222021% Change
Research and clinical development$229,649 $174,005 32 %
Process sciences and manufacturing68,010 56,421 21 %
Total research and development$297,659 $230,426 29 %
Research and clinical development expenses include personnel, occupancy and laboratory expenses, technology access fees, preclinical translational biology and in vitro and in vivo studies, IND-enabling pharmacology and toxicology studies, and external clinical trial costs including costs for clinical sites, clinical research organizations, contractors and regulatory activities associated with conducting human clinical trials. The increase for the three months ended March 31, 2022 from the comparable period in 2021 was due mainly to higher employee-related costs and clinical trial costs mainly to support our early- and late-stage pipeline of product candidates.
Process sciences and manufacturing expenses include personnel and occupancy expenses, manufacturing costs for the scale-up and pre-approval manufacturing of product candidates used in research and our clinical trials, and costs for drug product supplied to our collaborators. Process sciences and manufacturing expenses also include quality control and assurance activities, and storage and shipment of our product candidates. The increase for the three months ended March 31, 2022 from the comparable period in 2021 primarily reflected higher manufacturing costs of our product candidates for use in clinical trials.
We utilize our employee and infrastructure resources across multiple research and development projects. We track human resource efforts expended on many of our programs for purposes of billing our collaborators for time incurred at agreed upon rates and for resource planning. We do not account for actual costs on a project basis as it relates to our infrastructure, facility, employee and other indirect costs; however, we do separately track significant third-party costs including clinical trial costs, manufacturing costs and other contracted service costs on a project basis. To that end, the following table shows third-party costs incurred for research, contract manufacturing of our product candidates and clinical and regulatory services, as well as development milestone payments for in-licensed technology for our products and certain of our clinical-stage product candidates. The table also presents other costs and overhead consisting of third-party costs for our preclinical stage programs, personnel, facilities, manufacturing, and other indirect costs not directly charged to development programs, as well as cost reimbursements received from or payments made to collaborators related to our product candidates.
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 Three months ended March 31,
(dollars in thousands)20222021
TUKYSA (tucatinib)$43,595 $29,993 
PADCEV (enfortumab vedotin-ejfv)24,769 16,288 
ADCETRIS (brentuximab vedotin)13,852 17,076 
TIVDAK (tisotumab vedotin)7,932 12,004 
Ladiratuzumab vedotin3,259 4,845 
Disitamab vedotin
10,380 — 
Other clinical stage programs20,533 21,596 
Total third-party costs for clinical stage programs124,320 101,802 
Other costs, overhead, and net cost-sharing with collaborators173,339 128,624 
Total research and development$297,659 $230,426 

Third-party costs for PADCEV increased for the three months ended March 31, 2022 as compared to the 2021 period, due primarily to higher clinical trials expenses.
Third-party costs for TUKYSA increased for the three months ended March 31, 2022 as compared to the 2021 period, due primarily to higher manufacturing costs as well as higher clinical trials expenses.
Third-party costs for ADCETRIS, TIVDAK, and ladiratuzumab vedotin decreased for the three months ended March 31, 2022 as compared to the 2021 period, due primarily to the timing of clinical trials.
We obtained exclusive license rights to disitamab vedotin for global development and commercialization outside of RemeGen’s territory in September 2021.
Third-party costs for other clinical stage programs were consistent for the three months ended March 31, 2022 as compared to the 2021.
Other costs, overhead, and net cost-sharing with collaborators increased for the three months ended March 31, 2022 from the comparable period in 2021, due to higher employee-related costs and a payment for in-licensed technology. During the three months ended March 31, 2022 and 2021, net cost-sharing reimbursements from and payments made to collaborators were $23.3 million and $21.3 million, respectively.
In order to advance our product candidates toward commercialization, the product candidates are tested in numerous preclinical safety, toxicology and efficacy studies. We then conduct clinical trials for those product candidates that take several years or more to complete. The length of time varies substantially based upon the type, complexity, novelty and intended use of a product candidate. We will also need to conduct additional clinical trials in order to expand labeled indications of use for our commercial products. The outcome of our clinical trials is uncertain. The cost of clinical trials may vary significantly as a result of a variety of factors, including the number of patients enrolled, patient site costs, quantity and source of drug supply required, safety and efficacy of the product candidate, and extent of regulatory efforts, among others. 
We anticipate that our total research and development expenses in 2022 will increase compared to 2021 primarily due to higher costs for the continued development of our approved products and product candidates, offset in part by the $200.0 million RemeGen upfront license payment in 2021.
The risks and uncertainties associated with our research and development projects are discussed more fully in “Part II Item 1A—Risk Factors.” As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects, anticipated completion dates, or when and to what extent we will receive cash inflows from the commercialization and sale of our products in any additional approved indications or of any of our product candidates.

Selling, general and administrative 
 Three months ended March 31,
(dollars in thousands)20222021% Change
Selling, general and administrative$174,225 $159,842 %
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Selling, general and administrative expenses increased for the three months ended March 31, 2022 from the comparable period in 2021, reflecting investments to support our ongoing European TUKYSA launches and the U.S. commercial launch of TIVDAK.
We anticipate that selling, general and administrative expenses will increase in 2022 as compared to 2021 as we continue our commercial activities in support of our product launches, and invest in infrastructure to support our continued growth in the U.S. and Europe.

Investment and other (loss) income , net
 Three months ended March 31,
(dollars in thousands)20222021% Change
(Loss) gain on equity securities$(2,779)$259 NM
Investment and other income, net589 741 (21)%
Total investment and other (loss) income, net$(2,190)$1,000 (319)%
NM: No amount in comparable period or not a meaningful comparison.
Investment and other (loss) income , net includes other non-operating income and loss, such as unrealized holding gains and losses on equity securities, realized gains and losses on equity and debt securities, and amounts earned on our investments in U.S. Treasury securities.
The loss on equity securities for the three months ended March 31, 2022 was due to unrealized holding losses resulting from a decline in the share price of securities held during the period.

Provision for income taxes

Our provision for income taxes was $1.3 million for the three months ended March 31, 2022 compared with $0.0 million for the three months ended March 31, 2021. The provision for income taxes in the 2022 period primarily related to taxable profits in the U.S. as a result of amendments to IRC Section 174, which took effect January 1, 2022 pursuant to the 2017 Tax Cuts and Jobs Act. We had existing federal tax carryforwards sufficient to offset any federal liability; however, there were limitations on the use of existing state tax carryforwards. Our income tax provision also reflected taxable profits in foreign jurisdictions.
Liquidity and capital resources
(in thousands)March 31, 2022December 31, 2021
Cash, cash equivalents, and investments$1,951,093 $2,160,036 
Working capital2,239,961 2,300,340 
Stockholders’ equity2,998,467 3,065,139 
 Three months ended March 31,
(in thousands)20222021
Cash provided (used) by:
Operating activities$(216,812)$(125,326)
Investing activities26,663 (78,715)
Financing activities26,664 19,791 
The change in net cash from operating activities for the three months ended March 31, 2022 as compared to the comparable period in 2021 was primarily related to an increase in net loss and increases in net working capital.
The change in net cash from investing activities for the three months ended March 31, 2022 as compared to the comparable period in 2021 reflected differences between the proceeds received from sale and maturity of our investments and amounts reinvested and the difference for purchases of property, plant, and equipment.
The change in net cash from financing activities for the three months ended March 31, 2022 as compared to the comparable period in 2021 was driven by the higher proceeds from the exercise of stock options and employee stock purchase plan.
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We primarily have financed our operations through the issuance of our common stock, collections from commercial sales of our products, amounts received pursuant to license and collaboration agreements, and royalty revenues. To a lesser degree, we also have financed our operations through investment income. These financing and revenue sources have allowed us to maintain adequate levels of cash and investments.
Our cash, cash equivalents, and investments are held in a variety of non-interest bearing bank accounts and interest-bearing instruments subject to investment guidelines allowing for holdings in U.S. government and agency securities, corporate securities, taxable municipal bonds, commercial paper and money market accounts. Our investment portfolio is structured to provide for investment maturities and access to cash to fund our anticipated working capital needs. However, if our liquidity needs should be accelerated for any reason in the near term, or investments do not pay at maturity, we may be required to sell investment securities in our portfolio prior to their scheduled maturities, which may result in a loss. As of March 31, 2022, we had $2.0 billion held in cash, cash equivalents and investments.
At our currently planned spending rates, we believe that our existing financial resources, together with product and royalty revenues, and reimbursements and profit sharing we expect to receive under our existing collaboration and license agreements, will be sufficient to fund our operations for at least the next twelve months from the date of this filing.
We expect to make additional capital outlays and to increase operating expenditures over the next several years as we hire additional employees, and support our development, commercialization, invest in our facilities, and expand globally, which may require us to raise additional capital. In addition, we may pursue new operations or continue the expansion of our existing operations, including with respect to the continued development of our commercial infrastructure in Europe and our plans to otherwise continue to expand our operations internationally. Our commitment of resources to the continuing development, regulatory and commercialization activities for our products, the continued research, development and manufacturing of our product candidates, our pursuit of regulatory approvals for and preparing to potentially launch and commercialize our product candidates, and the anticipated expansion of our pipeline and operations may require us to raise additional capital. Further, we actively evaluate various strategic transactions on an ongoing basis, including licensing or otherwise acquiring complementary products, technologies or businesses, and we may require significant additional capital in order to complete or otherwise provide funding for such transactions. We may seek additional capital through some or all of the following methods: corporate collaborations, licensing arrangements, and public or private debt or equity financings. We have no committed sources of funding and do not know whether additional capital will be available when needed, or that, if available, we will obtain financing on terms favorable to us or our stockholders. If we are unable to raise additional funds when we need them, we may be required to scale back our operations, delay, reduce the scope of, or eliminate development programs enter into collaboration or license agreements on terms that are not favorable to us, sell or relinquish rights to certain assets, proprietary technologies or product candidates or forego strategic opportunities.
Material Cash Requirements
Our material cash requirements in the short- and long-term consist of the following operational, capital, and manufacturing expenditures, a portion of which contain contractual or other obligations. We plan to fund our material cash requirements with our current financial resources together with our anticipated receipts of accounts receivable, product sales and royalty revenues, and reimbursements we expect to receive under our existing collaboration and license agreements.
Operating expenditures. Our primary uses of cash and operating expenses relate to paying employees and consultants, administering clinical trials, marketing our products, and providing technology and facility infrastructure to support our operations. Our research and development expenses for the three months ended March 31, 2022 were $297.7 million, and we expect to increase our investment in research and development expenses in 2022 as compared to 2021. Our sales, general and administrative expenses were $174.2 million for the three months ended March 31, 2022, and we expect to increase our sales, general, and administrative expenses to support our business growth in 2022 as compared to 2021. On a long-term basis, we manage future cash requirements relative to our long-term business plans.
Operating costs also relate to our building leases for our office and laboratory facilities expiring in 2022 through 2029 that contain rate escalations and options for us to extend the leases. Our future minimum lease payments as of March 31, 2022 totaled $16.8 million related to short-term lease liabilities, and $61.1 million related to long-term lease liabilities. We signed a 20-year lease in June 2021 for a building complex in Everett, Washington that has not commenced as of March 31, 2022, and therefore rent payments are not included in lease liability balances as of March 31, 2022. Refer to Note 3 in the Notes to Financial Statements in Item 1 for further detail of our lease obligations.
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Capital expenditures. We make investments in our office, laboratory, and manufacturing facilities to enable continued expansion of our business. These include leasehold and building improvements at our approximately 1 million square feet of leased and owned properties, installation of laboratory and manufacturing equipment, computers, software, and office equipment. Our purchases for property and equipment for the three months ended March 31, 2022 were $17.4 million, and we anticipate these investments to grow in 2022 as compared to 2021 to support our anticipated business growth and long-term facility needs, including a significant multi-year investment in a building complex being constructed in Everett, Washington, which is expected to provide us additional manufacturing, laboratory, and office space in the future. We expect our capital expenditures for this Everett facility to be approximately $350 million to $400 million through 2024.
Manufacturing costs, and supply agreements. Some of our inventory components and products require long lead times to manufacture. Therefore, we make substantial and often long-term investments in our supply chain in order to ensure we have enough drug product to meet current and future revenue forecasts, as well as clinical trial needs. Supply agreements primarily include non-cancelable obligations under our manufacturing, license and collaboration, and technology agreements. Further, a substantial portion of those non-cancelable obligations include minimum payments related to manufacturing our product candidates for use in our clinical trials and for commercial operations in the case of ADCETRIS. There have been no material changes related to our future minimum contractual commitments under these arrangements as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 filed February 9, 2022.
Royalties, milestones and profit-sharing associated with our licensed technology and collaboration agreements. Some of our license and collaboration agreements provide for periodic maintenance fees over specified time periods, profit share payments, and/or payments by us upon the achievement of development and regulatory milestones. Some of our licensing agreements also obligate us to pay royalties based on net sales of products utilizing licensed technology. Such royalties and profit share payments are dependent on future product sales and are contingent on events that have not yet occurred. Royalties and profit share payments totaled $65.7 million for the three months ended March 31, 2022 and are expected to increase in future periods. Milestone payments generally become due and payable upon the achievement of certain events. There have been no material changes related to our future milestone payments potentially owed related to in-licensed technology as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 filed February 9, 2022.
Critical accounting policies
The preparation of financial statements in accordance with GAAP requires us to make estimates, assumptions, and judgments that affect the amounts reported in our financial statements and accompanying notes. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from those estimates. Our critical accounting policies, those with the more significant judgments and estimates, used in the preparation of our financial statements for the three months ended March 31, 2022 were consistent with those in Part II Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.


Item 3.    Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to our market risk disclosures as set forth in Part II Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2021.
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Item 4.    Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended) prior to the filing of this quarterly report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures were, in design and operation, effective at the reasonable assurance level.
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.
(b) Changes in internal control over financial reporting. There have not been any changes in our internal control over financial reporting during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II. Other Information
Item 1.    Legal Proceedings
The information required to be set forth under this Item 1 is incorporated by reference to “Note 11. Legal matters” of the Notes to Condensed Consolidated Financial Statements included in Part 1 Item 1 of this Quarterly Report on Form 10-Q.
Item 1A.    Risk Factors
You should carefully consider the following risk factors, in addition to the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes. If any of the events described in the following risk factors occurs, our business, operating results and financial condition could be seriously harmed. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this Quarterly Report on Form 10-Q.
Risk Factor Summary
Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks that we face, follows this summary. This summary is qualified in its entirety by that more complete discussion of such risks and uncertainties.
Our success depends on our ability to effectively commercialize our products. If we and our collaborators are unable to effectively commercialize our products and to expand their utilization, our ability to generate significant revenue and our prospects for profitability will be adversely affected.
Our success also depends on our ability to obtain regulatory approvals for our product candidates and for our current products in additional territories, as well as our ability to expand the labeled indications of use for our current products. Our inability to do so could have a material adverse effect on our business, results of operations, financial condition and growth prospects.
Reports of adverse events or safety concerns involving our products or product candidates could delay or prevent us from obtaining or maintaining regulatory approvals or could negatively impact sales of our products or the prospects for our product candidates.
Clinical trials and product development are expensive, time consuming and uncertain, may take longer than we expect and may not be successful. Our failure to effectively advance our development programs in a timely manner or at all could have a material adverse effect on our business, results of operations, financial condition and growth prospects.
The successful commercialization of our products will depend, in part, on the extent to which governmental authorities and health insurers establish adequate coverage and reimbursement levels and pricing policies.
The successful commercialization of our products will also depend in part on the acceptance of our products by the medical community, patients and third-party payors.
Any failures or setbacks in our antibody-drug conjugate, or ADC, development program or our other platform technologies could negatively affect our business and financial position.
We face intense competition and rapid technological change, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.
Our products and any future approved products remain subject to extensive ongoing regulatory obligations and oversight, including post-approval requirements, that could result in penalties and significant additional expense and could negatively impact our and our collaborators’ ability to commercialize our current and any future approved products.
Healthcare law and policy changes may negatively impact our business, including by decreasing the prices that we and our collaborators receive for our products.
We are subject to various state, federal and international laws and regulations, including healthcare, data privacy and information security laws and regulations, that may impact our business and could subject us to significant fines and penalties or other negative consequences.
Our collaborators and licensees may not perform as expected, which may negatively affect our ability to develop and commercialize our products and product candidates and/or generate revenues through technology licensing, and may otherwise negatively affect our business.
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We currently rely on third-party manufacturers and other third parties for production of our drug products, and our dependence on these third parties may impair the continued development and commercialization of our products and product candidates.
If we are unable to enforce our intellectual property rights or if we fail to sustain and further procure additional intellectual property rights, we may not be able to successfully commercialize our products or any future products and competitors may be able to develop competing therapies.
We and our collaborators rely on license agreements for certain aspects of our products and product candidates and technologies such as our ADC technology. Failure to maintain these license agreements or to secure any required new licenses could prevent us from continuing to develop and commercialize our products and product candidates.
We have been and may in the future be subject to litigation, which could result in substantial expenses and damages and may divert management’s time and attention from our business.
The evolving effects of the COVID-19 pandemic and associated global economic instability could have further adverse effects on our business, including our commercialization efforts, supply chain, regulatory activities, clinical development activities and other business operations.
If we are unable to manage our growth, our business, results of operations, financial condition and growth prospects may be adversely affected.
Risks associated with our expanding operations in countries outside the U.S. could materially adversely affect our business.
Our operating results are difficult to predict and may fluctuate. If our operating results are below the expectations of securities analysts or investors, the trading price of our stock could decline.
We have a history of net losses. We expect to continue to incur net losses and may not achieve future sustained profitability for some time, if at all.
Our stock price is volatile and our shares may suffer a decline in value.
Our existing stockholders have significant control of our management and affairs.
Risks Related to Our Products, Product Candidates and Research and Development
Our success depends on our ability to effectively commercialize our products. If we and our collaborators are unable to effectively commercialize our products and to expand their utilization, our ability to generate significant revenue and our prospects for profitability will be adversely affected.
Our ability to generate revenue from product sales and our prospects for profitability are substantially dependent on our and our collaborators’ ability to effectively commercialize our products and expand their utilization. We may not be able to fully realize the commercial potential of our products, and/or commercial sales of our products may be lower than our projections, for a number of reasons, including:
we and our collaborators may be unable to effectively launch, market and commercialize our products, including in any new markets or in any new indications;
we and our collaborators may not be able to establish or demonstrate to the medical community the efficacy, safety and value of our products and their potential advantages compared to existing and future therapeutics in their approved indications;
we and our collaborators may not be able to obtain and maintain regulatory and other required governmental approvals to market our products in any additional territories or for any additional indications;
new competitive therapies in the approved indications for our products have been approved by regulatory authorities or may be approved or submitted to regulatory authorities for approval in the near term;
there may continue to be new adverse results, adverse events or safety concerns reported in connection with the use of our products, including in clinical trials;
there may be additional changes to the labeling for our products that further restrict how we market and sell our products, including as a result of data collected from clinical trials and/or as a result of the use of our products;
the incidence rate of new patients or the duration of therapy in the approved indications for our products may be lower than our projections;
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negative impacts related to the COVID-19 pandemic, including potential further impacts on cancer diagnosis rates, may increase or become more severe;
we may encounter challenges in joint decision making and joint execution with our collaborators that adversely affect product sales;
co-promotion arrangements, such as the joint commercialization of PADCEV with Astellas in the U.S. and the joint commercialization of TIVDAK with Genmab in the U.S., may not be successful;
our products may be impacted by adverse reimbursement and coverage policies from government and private payors such as Medicare, Medicaid, insurance companies, health maintenance organizations and other plan administrators, or may be subject to pricing pressures enacted by industry organizations or state and federal governments, including as a result of increased scrutiny over pharmaceutical pricing, the cost of alternative treatment options or otherwise;
we and our collaborators may not be able to obtain favorable pricing and reimbursement approvals in additional territories in a timely manner or at all;
physicians may be reluctant to prescribe our products due to side effects associated with their use or until longer term efficacy and safety data exist;
regulatory restrictions may change or increase;
we and our collaborators may not have adequate financial or other resources to effectively commercialize our products; and
we and our collaborators may not be able to accurately predict demand for our products and obtain adequate commercial supplies of our products to meet demand at an acceptable cost.
Our ability to grow our product sales in future periods is also dependent on price increases, and we periodically increase the price of our products. Price increases on our products, as well as negative publicity regarding drug pricing and increases in drug prices generally, whether on our products or products distributed by other pharmaceutical companies, could negatively affect market acceptance of, and sales of, our products. In any event, we cannot assure you that price increases we have taken or may take in the future will not negatively affect our future product sales.
If we and our collaborators are unable to successfully commercialize our products or if sales of a product do not reach the levels we expect, then our business, results of operation, financial condition and growth prospects could be adversely affected.
Our success also depends on our ability to obtain regulatory approvals for our product candidates and for our current products in additional territories, as well as our ability to expand the labeled indications of use for our current products. Our inability to do so could have a material adverse effect on our business, results of operations, financial condition and growth prospects.
We and our collaborators are required to obtain marketing approvals from applicable regulatory authorities in order to market our products or to expand the labeled indications of use for our current marketed products. However, regulatory review is a lengthy and expensive process, and approval is highly uncertain.
The FDA and other regulatory agencies have substantial discretion in the approval process and in determining when or whether regulatory approval will be obtained. Clinical trial data are subject to differing interpretations. Even if we believe data are promising, regulatory authorities may disagree and may require additional data, limit the scope of the approval or deny approval altogether. For example, although applications for approval of PADCEV were submitted to various regulatory authorities based on results from the EV-201 and EV-301 trials, regulatory authorities may not approve these applications in a timely manner or at all. In addition, the approval of a product candidate by one regulatory agency does not mean that other regulatory agencies will also approve such product candidate.
Any approval that a product does receive may be more restricted than anticipated. For example, regulatory authorities may approve a product for fewer indications or narrower indications than requested. Further, regulatory agencies may impose safety monitoring, educational requirements or risk evaluation and mitigation strategies, or REMS. Regulatory authorities may also fail to approve the facilities or processes used to manufacture a product candidate or the dosing or delivery methods.
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The regulatory review process may also take significantly longer than expected, which may delay or eliminate any potential revenues from sales of the affected product or product candidate. Target action dates and regulatory timelines may be subject to substantial delays. Although the FDA and EMA have programs to facilitate expedited development and accelerated approval processes, these programs may not result in faster review or approval than conventional procedures and do not assure ultimate approval. In addition, although the FDA granted Breakthrough Therapy designation to each of PADCEV and disitamab vedotin in a specified treatment setting, these Breakthrough Therapy designations do not increase the likelihood that PADCEV or disitamab vedotin will receive marketing approval in the specified settings or in any other settings in a timely manner or at all. Disruptions at the FDA and other agencies due to reduced funding levels, government shutdowns, impacts associated with the COVID-19 pandemic or other factors, may also lead to delays in the regulatory review process. These disruptions may also slow our other interactions with regulatory agencies, which may slow our other product development efforts.
If a product candidate fails to receive regulatory approvals, we will not have the anticipated revenues from that product candidate to fund our operations, and we may not recoup or receive any return on our investment in that product candidate. Similarly, if regulatory authorities do not approve product labeling that is necessary or desirable for the successful commercialization of an approved product, or if they do not approve an application to expand a product’s labeled indications of use or market the product in a new territory, then our anticipated revenue from that product may be adversely affected. Any of these events could have a material adverse effect on our business, results of operations, financial condition and growth prospects.
Even if regulatory approval is achieved, the launch of a new product or of an existing product in a new indication or territory is subject to a number of risks and uncertainties and may not be successful.
Sales of a new product and sales of an existing product in a new indication or territory are subject to significant risks and uncertainties and can be particularly difficult to predict. For example, the commercialization of TIVDAK is at an early stage and may not be successful. In addition to commercialization risks described elsewhere in these "Risk Factors", impacts related to the COVID-19 pandemic, including restrictions on in-person interactions and resulting impacts on our ability to connect with key customers and conduct payor engagements, could limit our and our collaborators' abilities to effectively launch and commercialize a new product or to launch and commercialize an existing product in a new indication or territory. A proposed launch, including the launch of PADCEV and TUKYSA in countries in Europe where they have not yet launched, could also be delayed or impaired due to a variety of factors, including supply constraints, delays in arranging a commercial infrastructure, delays in obtaining or failure to obtain pricing and reimbursement approvals, or other factors. These risks could be heightened by impacts related to the COVID-19 pandemic. Delays or other difficulties due to any of these factors could negatively impact anticipated revenue from the affected product. In addition, prior to TUKYSA, we had no prior experience as an organization launching or commercializing a product outside the U.S. and Canada, which could adversely affect our ability to maximize the commercial potential of TUKYSA. If we and our collaborators are unable to successfully launch and commercialize any newly approved products and/or to successfully launch and commercialize our existing products in new indications or territories, then our business, results of operation, financial condition and growth prospects could be adversely affected.
Reports of adverse events or safety concerns involving our products or product candidates could delay or prevent us from obtaining or maintaining regulatory approvals or could negatively impact sales of our products or the prospects for our product candidates.
Reports of adverse events or safety concerns involving our products and product candidates could result in the limitation, denial or withdrawal of regulatory approval by the FDA or other regulatory authorities for any or all indications, the need to conduct additional trials, implementation of a REMS or the inclusion of unfavorable information in our product labeling and, in turn, could delay or prevent us from commercializing the applicable product or product candidate. There are no assurances that patients receiving our products will not experience serious adverse events, including fatal events, in the future, whether the serious adverse events are disclosed in the prescribing information or are newly reported. Further, there are no assurances that patients receiving our products with co-morbid diseases not previously studied, such as autoimmune diseases, will not experience new or different serious adverse events in the future.
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The prescribing information for each of our products includes warnings and precautions for various toxicities and reactions, including certain fatal reactions. The prescribing information for ADCETRIS also includes a boxed warning related to the risk that JC virus infection resulting in progressive multifocal leukoencephalopathy and death can occur in patients receiving ADCETRIS. The prescribing information for PADCEV also includes a boxed warning related to the risk that severe and fatal cutaneous adverse reactions, including Stevens-Johnson syndrome and toxic epidermal necrolysis, may occur in patients receiving PADCEV. The prescribing information for TIVDAK also includes a boxed warning related to the risk that ocular toxicity may occur in patients receiving TIVDAK, and the boxed warning includes requirements for ophthalmic exams at baseline, prior to each dose, and as clinically indicated, as well as premedication and eye care. We have updated the prescribing information for our products from time to time in the past, based on reports of adverse events or safety concerns, and we may be required to further update the prescribing information for our products, including boxed warnings, limitations of use, contraindications, warnings and precautions, and adverse reactions, or to implement a REMS in the future. Side effects and toxicities associated with our products, as well as the warnings, precautions and requirements listed in the prescribing information for our products, could affect the willingness of physicians to prescribe, and patients to utilize, our products and thus harm commercial sales of our products. Implementation of a REMS could advantage products that compete with ours or make it more difficult or expensive for us to distribute our products.
Likewise, reports of adverse events or safety concerns involving our products and product candidates could interrupt, delay or halt clinical trials of our products and product candidates, including the post-approval confirmatory studies that regulatory agencies have required us or our collaborators to complete. There have been serious side effects and, in some cases, deaths in clinical trials for our products and product candidates that were deemed to be treatment-related by the investigators in those trials, and additional and/or unexpected side effects may be observed in these or other trials in the future. In addition, in response to prior safety events observed in our clinical trials, including serious side effects and patient deaths, we have in the past, and may in the future, institute additional precautionary safety measures such as dosing caps and delays, enhanced monitoring for side effects, and modified patient inclusion and exclusion criteria. Additional and/or unexpected safety events could be observed in these or other trials that could delay or prevent us from advancing the clinical development of, or obtaining regulatory approvals for, our products and product candidates, could require us to alter the approved labeling of our products, may cause a trial to be redone or terminated, may affect patient recruitment or may affect the ability of enrolled patients to complete a trial. As a result, such safety events could adversely affect our business, results of operations, financial condition and growth prospects.
Clinical trials and product development are expensive, time consuming and uncertain, may take longer than we expect and may not be successful. Our failure to effectively advance our development programs in a timely manner or at all could have a material adverse effect on our business, results of operations, financial condition and growth prospects.
Our long-term success will depend upon the successful development of new products, as well as developing our existing products for new indications. However, only a small number of development programs result in the commercialization of a product. It is possible that none of our product candidates will ever become commercial products and that none of our existing products will obtain regulatory approval in any additional indications or territories. We and our collaborators are currently conducting multiple clinical trials for our products and product candidates, and we plan to commence additional trials in the future. Each of these trials requires the investment of substantial expense and time. However, there can be no assurance that the design or conduct of these trials, or any data collected from them, will be sufficient to support advancement to the next stage of development, any regulatory approvals or commercial viability.
Many of our clinical trials were initiated based on limited data. Encouraging preclinical, preliminary or interim data, and/or positive early-stage clinical trial results do not ensure that full, larger scale, later stage or confirmatory trials will be successful or that regulatory approval will be obtained. For example, despite the positive initial results we and Astellas reported from the dose-escalation cohort and expansion cohort A of the EV-103 trial, we cannot be certain that PADCEV will demonstrate sufficient efficacy or a favorable safety profile in other trials, including the EV-302 trial, or in other cohorts of the EV-103 trial, including cohort K. PADCEV may never be approved for use in any frontline setting or any other additional indications. Similarly, despite the encouraging antitumor activity in initial results from 23 patients in the MOUNTAINEER trial, we cannot be certain that TUKYSA will demonstrate sufficient efficacy or a favorable safety profile in the MOUNTAINEER trial or in other trials. TUKYSA may never be approved for use in the MOUNTAINEER treatment setting or in any other additional indications. Many companies in the pharmaceutical and biotechnology industries, including us, have suffered significant setbacks in late-stage clinical trials after achieving encouraging or positive results in early-stage development. We cannot be certain that we will not face similar setbacks in our ongoing or planned clinical trials, including ongoing pivotal and confirmatory trials.
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There may still be important facts about the safety, efficacy, and risk versus benefit of our products and product candidates, as single agents or in combination with other agents, that are not known to us at this time and that may negatively impact our ability to develop and commercialize them. Safety events or concerns, or negative or inconclusive trial results, could adversely affect the development timeline and the regulatory approval and commercialization prospects for our products and product candidates, or cause us to cease further development of a product or product candidate, any of which may materially and adversely affect our business, results of operations, financial condition and growth prospects. In addition, we may make a strategic decision to discontinue development if, for example, we believe commercialization will be difficult relative to the standard of care or we prefer to prioritize other opportunities in our pipeline. We also face intense competition, and it is possible that a clinical trial may meet its safety and efficacy endpoints but we may choose not to advance the development of a product or product due to changes in the competitive environment.
From time to time, the commencement, continuation and completion of our clinical trials have been subject to delays, and we are likely to experience additional delays in the future. Factors that could lead to the delay, suspension, termination or need to modify clinical trials of our products and product candidates include:
adverse medical events or side effects, including fatalities, in treated patients or other safety issues or concerns;
deficiencies in the conduct of the clinical trial, including failure to conduct the clinical trial in accordance with regulatory requirements, Good Clinical Practice, or GCP, or study protocols;
problems, errors or other deficiencies with respect to data collection, data processing and analysis;
action by competent authorities to place a clinical hold or partial clinical hold on a trial or compound;
the time required to determine efficacy may be longer than expected;
unfavorable scientific results or insufficient data to support safety and effectiveness;