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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 September 30, 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 October 24, 2022, there were 185,664,901 shares of the registrant’s common stock outstanding.


Seagen Inc.
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 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)
September 30, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$362,601 $424,834 
Short-term investments1,401,101 1,735,202 
Accounts receivable, net486,755 389,256 
Inventories364,970 200,663 
Prepaid expenses and other current assets144,192 119,239 
Total current assets2,759,619 2,869,194 
Property and equipment, net230,302 210,073 
Operating lease right-of-use assets49,308 57,889 
Intangible assets, net243,332 260,593 
Goodwill274,671 274,671 
Other non-current assets61,846 47,184 
Total assets$3,619,078 $3,719,604 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$144,499 $114,824 
Accrued liabilities and other581,499 454,030 
Total current liabilities725,998 568,854 
Long-term liabilities:
Operating lease liabilities, long-term46,703 56,665 
Other long-term liabilities24,566 28,946 
Total long-term liabilities71,269 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; 185,234 shares issued and outstanding at September 30, 2022 and 183,381 shares issued and outstanding at December 31, 2021
185 183 
Additional paid-in capital4,824,807 4,607,816 
Accumulated other comprehensive income2,995 1,179 
Accumulated deficit(2,006,176)(1,544,039)
Total stockholders’ equity2,821,811 3,065,139 
Total liabilities and stockholders’ equity$3,619,078 $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 September 30,Nine Months Ended September 30,
2022202120222021
Revenues:
Net product sales$428,089 $366,459 $1,242,889 $1,016,385 
Royalty revenues43,904 41,028 111,194 104,542 
Collaboration and license agreement revenues38,307 16,573 80,179 23,593 
Total revenues510,300 424,060 1,434,262 1,144,520 
Costs and expenses:
Cost of sales108,122 82,650 301,848 224,875 
Research and development384,605 459,092 986,518 924,378 
Selling, general and administrative210,378 180,281 604,862 505,253 
Total costs and expenses703,105 722,023 1,893,228 1,654,506 
Loss from operations(192,805)(297,963)(458,966)(509,986)
Investment and other income, net4,278 5,228 479 11,255 
Loss before income taxes(188,527)(292,735)(458,487)(498,731)
Provision for income taxes2,289 1,112 3,650 1,112 
Net loss$(190,816)$(293,847)$(462,137)$(499,843)
Net loss per share - basic and diluted$(1.03)$(1.61)$(2.51)$(2.75)
Shares used in computation of per share amounts - basic and diluted184,792 182,303 184,199 181,696 
Comprehensive loss:
Net loss$(190,816)$(293,847)$(462,137)$(499,843)
Other comprehensive income:
Unrealized (loss) gain on securities available-for-sale, net of tax(875)37 (4,472)(10)
Foreign currency translation gain (loss)3,363 (6)6,288 268 
Total other comprehensive income2,488 31 1,816 258 
Comprehensive loss$(188,328)$(293,816)$(460,321)$(499,585)
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 
Net loss— — — — (84,576)(84,576)
Other comprehensive income— — — 298 — 298 
Issuance of common stock for stock option exercises and employee stock purchase plan359 1 13,200 — — 13,201 
Restricted stock vested during the period, net
184 — — — — — 
Share-based compensation— — 37,727 — — 37,727 
Balances as of June 30, 2021181,866 $182 $4,465,864 $792 $(1,075,564)$3,391,274 
Net loss— — — — (293,847)(293,847)
Other comprehensive income— — — 31 — 31 
Issuance of common stock for stock option exercises and employee stock purchase plan384 — 22,440 — — 22,440 
Restricted stock vested during the period, net
551 1 (1)— —  
Share-based compensation— — 45,057 — — 45,057 
Balances as of September 30, 2021182,801 $183 $4,533,360 $823 $(1,369,411)$3,164,955 
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 
Net loss— — — — (134,827)(134,827)
Other comprehensive income— — — 83 — 83 
Issuance of common stock for stock option exercises and employee stock purchase plan298 — 14,960 — — 14,960 
Restricted stock vested during the period, net179 — — — — — 
Share-based compensation— — 54,129 — — 54,129 
Balances as of June 30, 2022184,369 184 4,747,481 507 (1,815,360)2,932,812 
Net loss— — — — (190,816)(190,816)
Other comprehensive income— — — 2,488 — 2,488 
Issuance of common stock for stock option exercises and employee stock purchase plan263 — 18,388 — — 18,388 
Restricted stock vested during the period, net
602 1 — — — 1 
Share-based compensation— — 58,938 — — 58,938 
Balances as of September 30, 2022185,234 $185 $4,824,807 $2,995 $(2,006,176)$2,821,811 
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)
 Nine Months Ended September 30,
 20222021
Operating activities:
Net loss$(462,137)$(499,843)
Adjustments to reconcile net loss to net cash used by operating activities
Share-based compensation156,980 121,008 
Depreciation34,642 30,404 
Amortization of intangible assets17,261 17,271 
Amortization of right-of-use assets
9,441 9,530 
Amortization of premiums, accretion of discounts, and (gains) losses on debt securities
(1,129)14,692 
Losses (gains) on equity securities9,747 (9,895)
Deferred income taxes(221) 
Changes in operating assets and liabilities
Accounts receivable, net(97,499)(62,181)
Inventories(164,307)(65,239)
Prepaid expenses and other assets(11,300)(57,903)
Lease liability(11,842)(10,906)
Other liabilities146,053 297,438 
Net cash used by operating activities(374,311)(215,624)
Investing activities:
Purchases of securities(2,060,242)(2,388,843)
Proceeds from maturities of securities2,391,000 2,715,500 
Payments for lessor-owned assets(17,936) 
Purchases of property and equipment(48,095)(38,755)
Net cash provided by investing activities264,727 287,902 
Financing activities:
Proceeds from exercise of stock options and employee stock purchase plan60,013 55,432 
Net cash provided by financing activities60,013 55,432 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(6,893)(961)
Net increase (decrease) in cash, cash equivalents, and restricted cash(56,464)126,749 
Cash, cash equivalents, and restricted cash at beginning of period424,834 558,424 
Cash, cash equivalents, and restricted cash at end of period$368,370 $685,173 
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 and nine month period ended September 30, 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 $16.6 million and $9.9 million of accrued capital expenditures as of September 30, 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, 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, net. Interest and dividends earned are included in investment and other income, net. Accrued interest receivable as of September 30, 2022 and December 31, 2021, were $4.9 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, net.
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Restricted Cash
As of September 30, 2022, we had $5.8 million cash held in escrow restricted by a contractual agreement related to our Everett, Washington building construction project. The restricted cash was recorded in prepaid expenses and other current assets in the condensed consolidated balance sheet. We determine classification based on the expected duration of the restriction.
Our total cash, cash equivalents, and restricted cash, as presented in the condensed consolidated statements of cash flows, was as follows:
(dollars in thousands)September 30, 2022December 31, 2021September 30, 2021December 31, 2020
Cash and cash equivalents$362,601 $424,834 $685,173 $558,424 
Restricted cash included in prepaid expenses and other current assets5,769    
Total cash, cash equivalents, and restricted cash as presented in the condensed consolidated statements of cash flows$368,370 $424,834 $685,173 $558,424 
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)September 30, 2022December 31, 2021
Gross carrying value$305,650 $305,650 
Less: accumulated amortization(62,318)(45,057)
Total$243,332 $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 loss, for the periods presented:
Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2022202120222021
Amortization expense$5,817 $5,819 $17,261 $17,271 
The weighted average remaining useful life of our finite-lived intangible assets was approximately 11 years as of September 30, 2022, and estimated future amortization expense related to acquired TUKYSA is $5.8 million for the three 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.
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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.
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 our patient assistance program, 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.
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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.
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 September 30,Nine Months Ended September 30,
(dollars in thousands)2022202120222021
ADCETRIS$218,521 $184,791 $601,449 $529,275 
PADCEV105,330 95,031 329,114 247,194 
TUKYSA87,771 86,571 267,235 239,850 
TIVDAK16,467 66 45,091 66 
Net product sales$428,089 $366,459 $1,242,889 $1,016,385 
Royalty revenues$43,904 $41,028 $111,194 $104,542 
Collaboration and license agreement revenues$38,307 $16,573 $80,179 $23,593 
Total revenues$510,300 $424,060 $1,434,262 $1,144,520 

3. Leases
We have operating leases for our office and laboratory facilities with terms that expire from 2023 through 2029. We recorded $0.9 million and $7.7 million right-of-use assets in exchange for lease liabilities, respectively, during the nine months ended September 30, 2022 and 2021, respectively. 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 September 30, 2022.
In June 2021, we entered into a lease agreement for an approximately 258,000 square foot 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 September 30, 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.
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Supplemental operating lease information was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2022202120222021
Operating lease cost$3,682 $4,070 $11,824 $12,147 
Variable lease cost1,039 1,052 3,360 3,190 
Total lease cost$4,721 $5,122 $15,184 $15,337 
Cash paid for amounts included in measurement of lease liabilities$4,089 $4,372 $12,838 $12,429 
As of September 30,
20222021
Weighted average remaining lease term5.4 years6.1 years
Weighted average discount rate5.0 %5.1 %
Operating lease liabilities were recorded in the following captions of our condensed consolidated balance sheet as follows:
(dollars in thousands)September 30, 2022December 31, 2021
Accrued liabilities and other$13,857 $13,905 
Operating lease liabilities, long-term46,703 56,665 
Total$60,560 $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 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 September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Stock options and RSUs9,948 10,361 10,029 10,271 

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.
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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
September 30, 2022
Short-term investments—U.S. Treasury securities$1,401,101 $ $ $1,401,101 
Other non-current assets—equity securities4,262   4,262 
Total$1,405,363 $ $ $1,405,363 
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 
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 and nine months ended September 30, 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 September 30, 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
September 30, 2022
U.S. Treasury securities$1,405,759 $9 $(4,667)$1,401,101 
Contractual maturities (at date of purchase):
Due in one year or less$1,389,962 $1,385,424 
Due in one to two years15,797 15,677 
Total$1,405,759 $1,401,101 
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, net
Investment and other income, net consisted of the following:
Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2022202120222021
(Loss) gain on equity securities$(2,669)$4,966 $(9,747)$9,895 
Investment and other income, net6,947 262 10,226 1,360 
Total investment and other income, net$4,278 $5,228 $479 $11,255 
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(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)September 30, 2022December 31, 2021
Raw materials$14,393 $12,181 
Work in process292,472 152,635 
Finished goods58,105 35,847 
Total$364,970 $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.

8. Accrued liabilities
Accrued liabilities consisted of the following: 
(dollars in thousands)September 30, 2022December 31, 2021
Employee compensation and benefits$133,880 $139,052 
Clinical trial and related costs180,570 122,468 
Technology acquisition fee50,000  
Contract manufacturing17,118 21,867 
Gross-to-net deductions and third-party royalties100,936 81,316 
Other 98,995 89,327 
Total$581,499 $454,030 
In September 2022, we entered into an agreement with LAVA Therapeutics to develop and commercialize LAVA-1223, a preclinical gamma delta bispecific T-cell engager for EGFR-expressing solid tumors. We received an exclusive global license for LAVA-1223 and the opportunity to exclusively negotiate rights to apply LAVA’s proprietary Gammabody™ platform on up to two additional tumor targets, for an upfront payment of $50.0 million and potential milestones and royalties. The upfront payment was recorded in accrued liabilities as of September 30, 2022, and was paid in October 2022.

9. Share-based compensation
The following table presents our total share-based compensation expense for the periods presented:
Three Months Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2022202120222021
Research and development$31,328 $20,991 $77,850 $55,187 
Selling, general and administrative27,610 24,066 79,130 65,821 
Total share-based compensation expense$58,938 $45,057 $156,980 $121,008 
As of September 30, 2022, there was $261.1 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 $70 million as of September 30, 2022.

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10. Income taxes
For the three and nine months ended September 30, 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 for the three and nine months ended September 30, 2022 of $2.3 million and $3.6 million, respectively, 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 partially offset by a foreign valuation allowance release. Our effective tax rate for the three and nine months ended September 30, 2022 of approximately 1.2% and 0.8%, respectively, differed from the federal statutory rate primarily because we have provided a valuation allowance against substantially all our deferred tax assets.
For the three and nine months ended September 30, 2021, we recorded an income tax provision of $1.1 million, primarily related to the generation of taxable profits in foreign jurisdictions as a result of our global expansion. For the nine months ended September 30, 2021, our effective tax rate of approximately 0.2% differed from the federal statutory rate primarily because we have provided a valuation allowance against substantially all our deferred tax assets.

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 have been in a dispute with Daiichi Sankyo regarding the ownership of certain technology used by Daiichi Sankyo in its cancer drug ENHERTU® (fam-trastuzumab deruxtecan-nxki) 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 contended, was assigned to us under the terms of a 2008 collaboration agreement between us and Daiichi Sankyo, or the Daiichi Sankyo Collaboration Agreement.
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.
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 and April 2022. On August 12, 2022, the arbitrator ruled in favor of Daiichi Sankyo, citing statute of limitations and disagreement with us on the interpretation of the contract. The Daiichi Sankyo Collaboration Agreement provides that judgment rendered by an arbitrator shall include costs of arbitration, reasonable attorneys’ fees and reasonable costs for expert and other witnesses. On September 14, 2022, Daiichi Sankyo submitted a petition for approximately $58 million for reimbursement of its legal fees and costs associated with the arbitration. We filed an opposition to Daiichi Sankyo’s request on October 12, 2022.
While we oppose any fees being awarded to Daiichi Sankyo, a liability between approximately $14-58 million is reasonably estimable. We have recorded an estimate of our liability for these fees towards the low end of the range in accrued liabilities and selling, general and administrative expenses in our condensed consolidated financial statements as of and for the period ended September 30, 2022. It is reasonably possible the arbitrator will render an award pursuant to Daiichi Sankyo’s request that is different from what we have accrued or estimated and that we will need to adjust our estimate in future periods pursuant to the arbitrator’s award.
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.
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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 USPTO granted a request on rehearing and instituted two post-grant review proceedings, but on July 15, 2022, the USPTO issued a new decision denying post-grant review of the claims asserted in the patent infringement action.
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. The U.S. District Court for the Eastern District of Texas also denied Daiichi Sankyo’s claim that the ‘039 Patent should be unenforceable under the equitable theory of prosecution laches, entered judgment in favor of us based on the jury’s verdict that Daiichi Sankyo willfully infringed the ‘039 Patent consisting of pre-trial damages in the sum of $41.8 million, and awarded us pre- and post-trial interest and costs. We have requested a royalty in the range of 10-12% on Daiichi Sankyo’s future sales of ENHERTU in the United States through November 5, 2024, the current expiration date of the ’039 Patent, as well as $12 million for reimbursement of our reasonable attorneys’ fees. Pursuant to ASC 450, awards of this nature must be either realized or realizable to be reflected in the company’s financial statements. No amounts related to these patent infringement matters have been reflected in our condensed consolidated financial statements as of September 30, 2022.
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 antibody drug conjugate, or ADC, technology that utilizes the targeting ability of monoclonal antibodies to deliver cell-killing agents directly to cancer cells.
Third quarter 2022 highlights and recent developments
Business Highlights
Reported increases across all components of revenue for the third quarter and year-to-date in 2022 as compared to the prior year periods, including 17% and 22% growth in net product sales for the periods, respectively.
Entered into a corporate transaction for an innovative bispecific technology candidate that is directed toward a target not readily addressable by an ADC, adding to our portfolio of targeted drug therapies.
Extended the geographic reach of TIVDAK with a new partnership for the development and commercialization in mainland China, Hong Kong, Macau, and Taiwan.
Presented positive results for PADCEV and TUKYSA pivotal clinical trials that supported supplemental applications to the U.S. Food and Drug Administration, or FDA, for potential label expansion. We also submitted a supplemental application for ADCETRIS based on data demonstrating an overall survival benefit in advanced Hodgkin lymphoma for inclusion in the label.
Opened an Investigational New Drug, or IND, application for an immuno-oncology product candidate.
Published annual Corporate Responsibility Report.
Details on these and other accomplishments are as follows:
Corporate Development
In September 2022, we entered into an agreement with LAVA Therapeutics to develop and commercialize LAVA-1223, a preclinical gamma delta bispecific T-cell engager for EGFR-expressing solid tumors. We received an exclusive global license for LAVA-1223 and the opportunity to exclusively negotiate rights to apply LAVA’s proprietary Gammabody™ platform on up to two additional tumor targets, for an upfront payment of $50.0 million and potential milestones and royalties.
In September 2022, we announced an exclusive collaboration and license agreement with Zai Lab for the development and commercialization of TIVDAK in mainland China, Hong Kong, Macau, and Taiwan.
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Product and Pipeline Highlights
PADCEV
In September 2022, we, Astellas and Merck announced the presentation of data from the phase 1b/2 EV-103 clinical trial (also known as KEYNOTE-869) Cohort K evaluating PADCEV in combination with Merck’s anti-PD-1 therapy KEYTRUDA as first-line treatment in patients with unresectable locally advanced or metastatic urothelial cancer who are ineligible to receive cisplatin-based chemotherapy at the European Society for Medical Oncology Congress. The results for the combination demonstrated an encouraging overall response rate of 64.5% and a manageable safety profile. The median duration of response was not reached. The results served as the basis for a supplemental Biologics License Application, or sBLA, submitted to the FDA, in October 2022 under the FDA’s Accelerated Approval Program.
TUKYSA
In July 2022, we presented positive results from the pivotal phase 2 MOUNTAINEER trial evaluating TUKYSA in combination with trastuzumab in patients with previously treated HER2-positive metastatic colorectal cancer at the American Society of Clinical Oncology Gastrointestinal Cancer Symposium.
In July 2022, the FDA granted TUKYSA Breakthrough Therapy designation for use in combination with trastuzumab for the treatment of adult patients with unresectable or metastatic HER2-positive colorectal cancer who have previously received fluoropyrimidine-, oxaliplatin-, and irinotecan-containing chemotherapy. The designation is based on results of the MOUNTAINEER trial.
In September 2022, the FDA accepted for Priority Review the supplemental New Drug Application, or sNDA, seeking accelerated approval for TUKYSA in combination with trastuzumab for adult patients with HER2-positive colorectal cancer who have received at least one prior treatment regimen for unresectable or metastatic disease. The sNDA submission is based on the results of the pivotal phase 2 MOUNTAINEER trial, and the FDA target action date under the Prescription Drug User Fee Act, or PDUFA, is January 19, 2023.
ADCETRIS
In September 2022, longer-term follow-up data from the phase 3 ECHELON-1 clinical trial demonstrating that ADCETRIS in combination with chemotherapy resulted in a 41% reduction in risk of death versus standard of care in patients with previously untreated advanced Hodgkin lymphoma were submitted in an sBLA to the FDA for inclusion in the label.
In September 2022, based on the overall survival benefit of ADCETRIS in combination with chemotherapy that was demonstrated in the ECHELON-1 trial, the National Comprehensive Cancer Network®, or NCCN, Clinical Practice Guidelines in Oncology, or NCCN Guidelines®, for Hodgkin lymphoma were updated elevating the ADCETRIS combination to Category 1, Preferred treatment option for adults with previously untreated Stage III or IV Hodgkin lymphoma with no known neuropathy. Category 1, Preferred is the highest recommendation by NCCN, indicating that based upon high-level evidence, there is uniform NCCN consensus that the intervention is appropriate.
Earlier-Stage Programs
In November 2022, we plan to present initial phase 1 clinical data on SGN-B6A, a novel ADC in development for solid tumors as well as preclinical research from several other early-stage programs, including SGN-BB228, an Anticalin®-based bispecific antibody, at the Society for Immunotherapy of Cancer 37th Annual Meeting. Recently, we opened an IND for SGN-BB228 to enable a phase 1 clinical trial.

Corporate Responsibility Report
In October 2022, we published our second annual Corporate Responsibility Report providing an update on our environmental, social, and governance, or ESG, efforts, achievements and future commitments. Notable accomplishments in the report include:
Increasing our focus on diversity, equity and inclusion by launching allyship training and implementing self-reporting for LGBTQIA+ populations in our engagement surveys. Our global workforce is comprised of 58% women as of December 31, 2021, and we aim to increase women in leadership roles as well as improve the percentage of underrepresented people in U.S. roles.
Implementing initiatives in our clinical trials aimed at improving diversity to better reflect real-world patient populations and advance inclusion.
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Enhancing our environmental practices at our U.S. facilities through recycling and waste management. In 2022, the King County Industrial Waste Rewards and Recognition Program awarded us a “Gold Award” for our North Creek facility industrial wastewater program.
Enhancing our governance and compliance programs across areas such as ethics and compliance, data privacy, and information security, with the aim of supporting our growth and the expansion of our operations into international markets.
Our Medicines
Our approved medicines include the following:
Product*
Therapeutic AreaU.S. Approved Indication
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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
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Urothelial Cancer
Locally advanced or metastatic urothelial cancer for patients who:
have previously received a programmed death receptor-1 (or PD-1) or a programmed death-ligand 1 (or 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.
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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.
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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 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 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, or EC, 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 other countries including Brazil, Canada, 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 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 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.
In September 2022, we announced an exclusive collaboration and license agreement with Zai Lab for the development and commercialization of TIVDAK in mainland China, Hong Kong, Macau, and Taiwan. Under the terms of the agreement, we received an upfront fee of $30 million in October 2022, and are entitled to receive potential development, regulatory, and commercial milestone payments, and tiered royalties on net sales of TIVDAK in the Zai Lab territory. Based on our existing collaboration with Genmab, the upfront payment, milestone payments, and royalties will be shared on a 50:50 basis with Genmab.
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 potentially 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.
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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 previously untreated 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. In July 2022, these results were published in the New England Journal of Medicine. In September 2022, based on these data, we submitted an sBLA to the FDA for review. Also in September 2022, based on the overall survival benefit of ADCETRIS in combination with chemotherapy that was demonstrated in the ECHELON-1 trial, the NCCN Guidelines were updated elevating the ADCETRIS combination to Category 1, Preferred treatment option for adults with previously untreated Stage III or IV Hodgkin lymphoma with no known neuropathy. Category 1, Preferred is the highest recommendation by NCCN, indicating that based upon high-level evidence, there is uniform NCCN consensus that the intervention is appropriate.
In June 2022, we announced results from a phase 3 Children’s Oncology Group study trial evaluating ADCETRIS in children and young adults with high-risk, previously untreated classical Hodgkin lymphoma. The trial showed ADCETRIS in combination with standard of care showed a clinically meaningful and statistically significant 59% reduction in the risk of disease progression or relapse, second malignancy or death and achieved superior event-free survival compared to the current standard of care. Based on these data, we submitted an sBLA to the FDA for review. The sBLA was granted Priority Review with a PDUFA target action date of November 16, 2022.
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.