Editor

Check the six-month stock chart for Seattle Genetics Inc. It's a zig-zag pattern that shows the company's shares dipping as low as near $4.50 and well above $5.50. Late last week SGI was trading around $4.70.

Analyst opinion varies widely, but some feel that the firm, though nothing in its pipeline has advanced beyond Phase II, deserves a closer look.

SGI works with monoclonal antibodies and antibody-conjugate technology known as ADC. Farthest along in the pipeline is SGN-30, targeting the CD30 antigen, in Phase II for systemic anaplastic large-cell lymphoma (ALCL), cutaneous ALCL and Hodgkin's disease. The firm also has SGN-40, a monoclonal antibody targeting the CD40 antigen, in Phase I studies for non-Hodgkin's lymphoma (NHL) and multiple myeloma (MM) and in Phase I/II for chronic lymphocytic leukemia (CLL).

In the clinic, as well, is SGN-33, taking aim at the CD33 antigen, undergoing Phase I trials in acute myeloid leukemia (AML) and myelodysplastic syndromes (MDS). Near the end of April, SGI and Laureate Pharma Inc. entered an agreement for the manufacture of SGN-33 and SGN-70.

Wyeth's marketed Mylotarg (gemtuzumab ozogamicin) for AML goes after the same target as SGN-33. Medarex Inc. has an anti-CD30 antibody in the works that might be competitive with SGN-30, and anti-CD40 antibodies are moving through the pipelines of Novartis AG and Pfizer Inc.

SGI, however, forges onward and has signed deals with the likes of Bristol-Myers Squibb Co., Genentech Inc., and CuraGen Corp. Last week, the firm reported a first-quarter net loss of $8.7 million, or 21 cents per share, compared to $7.6 million in the same period last year. SGI listed less revenue, $2.1 million for the quarter compared to $2.6 million last year's, and noted that operating expenses rose from $10.8 million to $11.6 million.

An offering near the end of March netted SGI $37.2 million from the sale of 7.3 million shares, leaving SGI with about $107 million in cash and marketable securities. Mark Monane, analyst with Needham & Co., estimated the burn rate at about $39 million this year and predicted the current cash levels will see SGI through 2006.

What's ahead? Monane in a research report cited "a number of catalysts" that will perk up investors during the next three months to six months, including data with SGN-30 in cutaneous ALCL to be presented at the Society for Investigative Dermatology meeting in Philadelphia later this week, along with Phase I data from the SGN-40 trials in MM and NHL at the American Society of Clinical Oncology meeting in June in Atlanta. Also due at ASCO are data from the Phase I studies with SGN-33 in AML and MDS.

Genentech's decision not to go ahead with the HER2 antibody being developed under its ADC deal with SGI amounts to a setback, but "collaborations with Genentech on other drug targets are still ongoing and may represent future clinical development opportunities," Monane wrote, and reiterated his "buy" rating. SGI is expecting $9 million to $11 million in revenues this year, with operating costs ranging between $50 million and $55 million.

Clay Siegall, SGI's president and CEO, told investors during the earnings conference call that he was "not in a position to discuss [Genentech's] data with the HER2 antibody" and had not seen much of it. But Genentech was using a "one-off target using a one-off drug linker that's not going forward," he said, noting that the drug linker is not used in other development programs with other companies, including Genentech itself. "They're an excellent partner. They're very strong. We work closely with them on many different targets," he said.

Bret Holley, analyst with CIBC World Markets, calls SGI a "sector performer." He believes the best way to get lead product SGN-30 on the market is in relapsed and refractory systemic ALCL, for which full data are expected at the American Society of Hematology meeting in Orlando, Fla., near the end of the year. Holley noted in a research report that SGI plans to meet with regulators later this year to discuss strategy.

"Though relapsed/refractory systemic ALCL is a relatively small market, we believe there is interest in utilizing SGN-30 in front-line systemic [disease]," Holley wrote. It could be deployed off label in that indication, Holley said, citing a Phase II trial sponsored by the National Cancer Institute to begin in the second half of this year using SGN-30 in combination with the CHOP (cyclophosphamide, doxorubicin, vincristine and prednisone) regimen.

At last year's ASH meeting, SGI offered updated Phase II results with SGN-30 in systemic ALCL, showing the first 20 evaluable patients had clinical responses and tolerated the drug well at the 6 mg/kg, dose. That prompted SGI to escalate dosing to 12 mg/kg, with the idea that the response rate at that level, along with duration of response, could help in the design of a Phase III study in that indication.

Also at ASH in 2005, SGI disclosed encouraging interim results with SGN-30 for cutaneous ALCL and since has expanded the study's protocol to include CD-30 positive transformed mycosis fungoides and lymphomatoid papulosis. As for Hodgkin's disease, Holley expects SGI to conduct another Phase II trial in collaboration with the NCI combining SGN-30 with chemotherapy.

SGN-30, though, so far is unpartnered, and its only efficacy data come from a pair of ongoing Phase II, single-agent trials, and everything hinges on the pivotal Phase III study under way. Furthermore, while the manufacturing deal with Laureate takes care of SGN-33 and SGN-70, SGI has made only the lead product candidate for trials, and has no experience with commercial-scale quantities, Holley noted.

His phrase for Seattle Genetics seemed to sum up the cautiously favorable outlook held by observers of the firm: "Steady progress with a growing pipeline."