Seattle Genetics, Inc. (SGEN): A Billion-Dollar Anticancer Technology in the Making

Anticancer drugs typically damage normal cells as well as cancer cells. Using a breakthrough technology, a midsize biotech company is developing a process to deliver anticancer drugs right inside a cancerous cell, selectively destroying it while sparing healthy cells. If successful, this will become a technology worth billions of dollars.

Monoclonal antibodies vs. conjugated antibodies

Monoclonal antibodies, or mAbs, block specific proteins that help cancer cells to grow. They may also boost the immune system of patients to fight against cancer cells. However, at present, they may not be as effective against large tumors as anticancer drugs.

Anticancer drugs, on the other hand, are very effective against large tumors. However, they have too much collateral damage. They destroy not just the disease, but also the patient, because they do not work in a targeted manner.

ADC technology

The new technology being developed by Seattle Genetics, Inc. (NASDAQ:SGEN) among others, combines an mAb with an anticancer agent to create an entity called an antibody drug conjugate, or ADC. This combination selectively targets the protein found in cancer cells. In this manner, called the multiplier effect, it limits the damage done by an anticancer drug only to its real target, the cancer cell.

Seattle Genetics, Inc. (NASDAQ:SGEN) has developed Adcetris using this technology. It’s the only product approved by the FDA for treatment of patients with Hodgkin’s lymphoma and anaplastic large cell lymphoma (ALCL). The same molecule is going through nine other development programs for different cancer diseases. In addition, the company has four other ADC programs in the pipeline for targeting other forms of cancer.

Partnerships

Recently, Seattle Genetics signed a $520 million agreement with Bayer AG for its ADC technology. Under this contract, Seattle Genetics, Inc. (NASDAQ:SGEN) will receive $20 million as upfront payment for global rights to its technology, and $500 million as milestone and royalties on sales of its technology for several cancer diseases. Bayer will be responsible for R&D, manufacturing, and marketing of all products under the agreement.

Apart from Bayer, Seattle Genetics, Inc. (NASDAQ:SGEN) already has strong partnerships with leading pharma companies to support most of its pipeline products. Going forward, the company is expected to generate more than $3.5 billion in milestones and royalties from strategic alliances.

Prospective market

The overall oncology market is dominated by mAb therapies. The global mAb market is currently growing at a CAGR of 12% and likely to reach $32 billion by 2017, according to GBI Research. In the coming years, the ADC technology is expected to dominate the market, thanks to its enhanced efficiency and reduced side effects.