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Seattle Genetics Strengthens Its Foothold Within Genentech (At The Expense Of Immunogen?)

 February 15, 2011 12:28 PM

In its earnings release last week, Seattle Genetics (SGEN) did not surprise anyone with the financial guidance and expected timelines for approval of its lead agent, SGN-35. However, on the business development front, the release did include an intriguing announcement that did not receive the attention it deserved. The company announced that Genentech recently advanced 3 new antibody drug conjugates (ADC) based on Seattle Genetics' technology to phase I, this is in addition to the CD22 ADC already in clinical testing.

The announcement has several important implications for Seattle Genetics. First, the number of clinical programs in its partnered pipeline instantly jumped 50% from 6 to 9. By definition, this provides Seattle Genetics with more shots on goal and increases chances of substantial milestones and royalties down the road. More importantly, it establishes Seattle Genetics' technology as Genentech's preferred ADC platform, an attractive position given Genentech's dominance in oncology and ADCs in particular.

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Genentech's decision is a serious blow to Immunogen, but it does not mean that Genentech will not use its technology at all. Genentech still has licenses for 4 targets from Immunogen based on deals from 2005 and 2008. The fact that until now no clinical program has resulted from these deals is a bad indication but it does not completely rule out this option.

Genentech's growing ADC pipeline

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When Genentech started developing antibody drug conjugates it worked with technologies from both Immunogen (IMGN) and Seattle Genetics. The first ADC it advanced to clinical testing was T-DM1, based on Immunogen's technology. From the initial phase I, T-DM1 has demonstrated remarkable activity and a surprisingly benign safety profile. It is probably the success of this agent which ignited the excitement around ADCs and led to an industry-wide shift towards this field.

In parallel to T-DM1, Seattle Genetics was developing its own ADC, SGN-35 for Hodgkin's Lymphoma, where the agent demonstrated strong efficacy with an excellent safety profile. Based on the clinical validation of both technologies and the fact Genentech had access to them, it seemed plausible that it would use both platforms in future projects. If anything, one could expect that T-DM1's remarkable performance and the aggressive development plan Genentech is pursuing for this agent would make it lean towards Immunogen rather than Seattle Genetics.

But this was not the case. In June 2008, Genentech advanced a second ADC to phase I, which was based on Seattle Genetics' technology, but the program was discontinued shortly afterwards, probably due to safety issues. This was followed by two follow-on licensing deals with Seattle Genetics for additional targets during 2010. The deals included $21.5M in upfront payments and probably over $1B in potential milestone payments.

Since then, Genentech advanced 4 additional ADCs to phase I, all of which employ Seattle Genetics' technology. This brings the number of Seattle Genetics-based programs to 5 versus only one using Immunogen's technology (T-DM1). Genentech disclosed the identity of only one of the 5 candidates, a CD22 ADC for the treatment of blood cancers (discussed here). The rest of the programs (the discontinued plus three new programs) are still undisclosed. The discontinued program was probably a MUC16 ADC whereas two of the active programs could be ADCs targeting CD79b (lymphoma) and TENB2 (prostate cancer).

Not all deals are created equal

In the past 2 years, Seattle Genetics managed to bring more deals, generating more cash and opportunities compared to Immunogen. It is unclear whether this reflects a real preference in the industry or simply Immunogen's decision to be more selective in the deal it signs. During 2009-2010, Seattle reported rich deals with GSK (GSK), Astellas and Daiichi Sankyo in contrast to Immunogen, who signed a meaningful deal only recently with Novartis (NVS).

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