Seattle Genetics takes step closer with FDA review of lymphoma drug

U.S. drug reviewers might limit the use of a Seattle Genetics Inc experimental blood cancer drug due to the narrow scope of its clinical trials, sending the company's shares down 3.6 percent.

In documents released on Tuesday the Food and Drug Administration asked an advisory panel to consider the drug, under the proposed trade name Adcetris, for use in previously treated patients with Hodgkin's lymphoma and anaplastic large cell lymphoma (ALCL). About 9,000 Americans a year are diagnosed with Hodgkin's lymphoma and 3,000 with ALCL.

The reviewers suggested the labeling for Hodgkin's should focus on a smaller patient group than expected, limiting potential sales. According to the FDA documents, the drug should be considered for patients who had already been given a stem cell transplant, rather than on all treated patients as suggested by the company.

The FDA advisory panel votes on the drug on Thursday.

Wall Street analysts noted the FDA reviewers had not raised any unusual concerns about the drug's safety or effectiveness.

Cory Kasimov, a JPMorgan analyst, sees an 85 percent chance the drug will be approved for both diseases.

"That said, we still believe that expansion in earlier stages of disease with larger patient markets is critical to the stock's future valuation," he said in a research note.

Howard Liang, an analyst at Leerink Swann, sees U.S. sales at over $400 million for both types of cancer in 2015.

Seattle Genetics has a shot, not only at its first FDA-approved drug, but also at bringing to market the first of a class of armed antibody drugs. What makes the drugs potentially powerful weapons against cancer is that they combine the binding properties of antibodies with the killer punch of toxins. While armed antibodies offer a potential way to precisely target cancer cells, the FDA showed last year with its decision not to approve a similar type of drug, Roche's T-DM1, the technological wonders aren't immune to additional regulatory hurdles.

In its pursuit of approval of the drug, Seattle Genetics will be relying heavily on two single arm studies. Yet both studies have produced some stellar results, with its Hodgkin lymphoma trial showing the drug wiped out visible signs of disease in 34% of 102 patients, and with similar success in just over half of 58 patients with forms of anaplastic large cell lymphomas, to mention some of the key data.

While Seattle Genetics clearly has the most at stake in brentuximab vedotin's success, a regulatory win would also be a victory for its partner for commericializing the drug outside of North America, Millennium: The Takeda Oncology Company. It could also bode well for others with a stake in the armed antibody game such as developer ImmunoGen ($IMGN), which provides the linking technology for Roche's T-DM1 and has its own pipeline of such drugs.