From Pharm to Market at Seattle Genetics

When you climb the hill at Bothells Cascade Business Park to the world headquarters of Seattle Genetics, the cluster of beige buildings doesnt scream edgy science. But in the lobby of Building Three, youll see a green triangular sculpture that might win the company some geek cred. The sculpture, seemingly made of Lego bricks, is a simplified model of a human antibody.

Human antibodies lie at the heart of what Seattle Genetics has been studying, manipulating and, ultimately, packaging into drugs since its founding in 1998. Just as with Lego bricks, the power of the companys antibodies resides in their ability to connect to something else a therapy. The antibody delivers a toxic payload into a cancer cell to destroy it from the inside.

Its a strategy that could catapult Seattle Genetics into the big leagues. Big enough, many hope, for it to become the pharmaceutical company Seattles biotech community has long sought to anchor it through the up and down cycles that have plagued the sector. And, ideally, not decamp from Seattle the way Immunex did after it was acquired by Amgen.

Boasting a market value of nearly $10 billion and a roster of 900 employees, Seattle Genetics already ranks as the largest biotech in Washington. With grand ambitions to be among the handful of companies that graduate from biotech to big pharma, it invests heavily in research and marketing and expects to add 200 more employees this year.

Adcetris, the companys flagship drug, treats Hodgkin lymphoma, a cancer of the lymph system that can spread to other organs. If expansive tests now underway prove positive, its sales could take off.

We are an emerging global, multiproduct, oncology company, declares Clay Siegall, the chairman, president, CEO and cofounder of Seattle Genetics. He points to the long list of drugs in its pipeline as evidence of his desire to build a great company rather than simply sell to a larger company as so many biotech firms do.

Siegalls ambitions are also evident in his desire to move beyond the biotechs more typical focus on drug development toward handling all the complexities of international marketing of its newer drugs. This is an interesting reversal of what it did in its early years when it sold international commercial rights to Takeda Oncology to raise capital for research on Adcetris. After learning about global markets through its partnership with Takeda, Siegall recently opened an office in Switzerland to allow Seattle Genetics to do its own international marketing.

In another sign of its commitment to the global market, Siegall made a bid in February to spend $2 billion to acquire the worldwide rights to commercialize a cancer drug developed by New Jersey-based Immunomedics. Siegall withdrew the offer in May after a judge ruled the deal couldnt close because of an unrelated struggle for control over Immunomedics board. Nevertheless, the effort signaled Seattle Genetics commitment to use its own deep knowledge of the business of oncology to acquire rights to new drugs and take them to global markets.

Seattle genetics is already on a steep growth trajectory. In 2016, it had sales of about $418 million, up 46 percent from 2014. In the past five years, its stock price has more than tripled, from $20 a share to $66 as of mid-May. Although the 18-year-old company has yet to make a profit, recent successes have enhanced its valuation by more than 50 percent in the past year alone.

Some analysts believe the rising valuation reflects a bet on a future buyout, while others insist the companys heavy investment in research on several promising drugs justifies the appraisal. Reflecting its ambitions, the company boosted research spending last year to $376 million, up 64 percent from 2014.

Seattle Genetics has focused mostly on a type of drug known as an antibody-drug conjugate, or ADC. These drugs target antigens protein molecules that cause an immune system to produce antibodies. They attach to the outside of cancer cells in Hodgkin lymphoma and other diseases and deliver a toxin inside those cells to kill them. Scientists make a common analogy to smart bombs because ADCs deliver a payload to kill cancer cells while not harming normal tissue. This approach typically reduces sharply the collateral damage that can occur in healthy cells during traditional chemotherapy and radiation.

Of the 11 drugs in the Seattle Genetics pipeline, Siegall says four possess big potential for the most immediate sales.

The first is Adcetris, now approved by the Food and Drug Administration (FDA) as a second- or third-line drug for Hodgkin lymphoma, to be used when patients dont get enough response from the first or second drugs they take. If Adcetris proves itself in research that compares it favorably to the front-line therapy, it would become a first drug of choice by oncologists for this diagnosis. Designation as first therapy would result in annual sales that Siegall predicts could reach as high $1 billion.

Investment journalist Adam Feuerstein of The Street says Adcetris has been a moderate success, but not yet a blockbuster. They are approaching a fork in the road, he says. Another strategy for the company is studying Adcetris as a combination therapy with one of the newer immunotherapies, a checkpoint inhibitor known as Opdivo. Feuerstein sees combination as a way Seattle Genetics might build new markets.

A jump into front-line therapy hinges on results from a clinical study known as Echelon 1, which compares the drug with standard therapy in newly diagnosed patients. The study results for Adcetris are expected this year. If the tests show a dramatic result, it could convince the nations oncologists to adopt Adcetris as a first therapy.

But the price of new drugs has been a political hot potato this year, and nobody can predict how that will play out for the oncology market. In 2016, the average cost of a patients annual treatment with Adcetris was between $230,000 and $330,000, according to the Association of Health Insurance Plans report from April 2016.

The second drug of the four potential stars is known by the number 33A. It targets acute myeloid leukemia or AML, which has been a dire diagnosis for decades. There arent many treatments for this form of blood cancer. In December, the FDA halted one of Seattle Genetics studies of 33A because of four patient deaths. However, the company reopened the studies in March after deciding there was no relationship between the drug being studied and the four deaths.

The third drug is 22ME, aimed at bladder cancer and other urothelial cancers. The fourth is LIV1, aimed at breast cancer.

The spotlight placed on this pipeline and the companys size reflects favorably on the biotech ecosystem in Washington state, says Leslie Alexandre, director of Life Science Washington, an advocacy group for the biotechnology and biomedicine industries.

Bigger companies serve to give confidence to the region and the sector, she says, demonstrating to skeptical investors and potential employees that companies here are succeeding. Alexandre adds it isnt easy to recruit specialized scientists to Seattle when they think the pond isnt big enough for them to find a second or a third job if the first one goes sour.

While the economy and political climate may be confusing, Siegall remains steadfast and philosophical. Hes bullish on his company and on continued progress against cancer. I love making drugs. But its not easy. It has never been easy, says Siegall. I see the goal but try not to get caught in the ups and downs.

Part of Siegalls early strategy for becoming a sturdy entrepreneur included admiring and imitating some of the moves he saw Art Levinson make with the biotech Genentech. Levinson, who was one of the founders of Genentech and is now the chairman of Apple Inc., is widely admired. Siegall paid attention to how Genentech was structured and to its internal committees, and modeled some in his own company after those, and also decided not to place all his bets on one or two drugs, an approach more typical of most biotech companies.

When asked to explain his success as an entrepreneur working against tough odds, Siegall remembers a long-ago mentor in a laboratory who told him: You do not take no for an answer. Early in his efforts to nurture his young company, many investors turned him down, but he persevered. Says Siegall: Theres a Wayne Gretzky quote that I like: You miss 100 percent of the shots you dont take.