Seattle Genetics Defies Gravity With Biotech’s First Underwritten Stock Sale in Six Months

2/5/09Follow @xconomy

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a bit since the deal was announced to $10.35 at yesterday’s close. Siegall credits this with the type of investors who bought in to this deal. He wouldn’t name names, but he says the firms who bought aren’t quick-flipping hedge funds. Fewer investors than expected have chosen to pocket a quick profit, choosing to hold for better days, Siegall says. The company already had a respectable roster of investors, with Baker Brothers, Fidelity, JP Morgan Chase, Oppenheimer Funds, Barclays Global Investors, and the Bill & Melinda Gates Foundation among its largest shareholders before the deal, according to SEC filings compiled by Yahoo Finance.

“Most of it was ‘sticky’ money, from real blue blood funds,” Siegall says. “They are investing for the long haul.”

So how on earth did Seattle Genetics do this? For one thing, the last time it sold stock a year ago it was $9, and this time it was well over $9, so investors are still in positive territory as opposed to what the rest of their portfolio probably looks like. For another thing, everybody is scouring through the SGN-35 clinical trial data that was reported last December at the American Society of Hematology.

“Data speaks louder than words,” Siegall says. “There is investor demand for strong data.”

One other thing that investors liked is that Seattle Genetics doesn’t have any complex derivatives in its balance sheet, or booby traps like convertible debt deals that could suffocate the company in debt if it stumbles in later clinical trials.

What this means to Seattle Genetics is it has the resources to move full throttle ahead on multiple fronts this year. It already gets Genentech to pick up the full tab for its SGN-40 drug development program. Seattle Genetics still owns the full commercial rights to SGN-35. The company also has a large mid-stage clinical trial of SGN-33 ongoing, which will give the biotech a strong sense of whether that drug prolongs lives of patients with acute myeloid leukemia, a deadly blood cancer. The company will also be able to advance a fourth candidate, SGN-70 through an early clinical trial for autoimmune disease, and introduce a fifth clinical candidate, SGN-75 this year.

Plenty could still derail the company—it is only now embarking on its first Phase III clinical trial after more than a decade in business—and Siegall concedes the company is not yet successful but is “aspiring to be successful.” But he has big dreams. More than a year ago, he told me he can envision changing the company name to Seagen, kind of like Amgen, as an enduring biotech powerhouse in the Northwest. That’s still possible someday, he says, as Seattle Genetics matures from the R&D phase to a more integrated commercial company in the mold of a Celgene, Genzyme, or Gilead Sciences.

“Our goal is to be a profitable, strong biotech company with products on the market that help people who are dying of cancer,” Siegall says. “For us to do that, it’s imperative that we become a commercial organization. The really successful ones in this industry are commercial organizations.”

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