Seagen Inc. - Quarter Report: 2021 June (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-32405

SEAGEN INC.

(Exact name of registrant as specified in its charter)


Delaware						91-1874389
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

21823 30th Drive SE

Bothell, Washington 98021

(Address of principal executive offices, including zip code)

(Registrant’s telephone number, including area code): (425) 527-4000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001	SGEN	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 26, 2021, there were 181,934,500 shares of the registrant’s common stock outstanding.

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Seagen Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2021

INDEX


		Page
PART I. FINANCIAL INFORMATION (Unaudited)
Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Comprehensive Loss	4
	Condensed Consolidated Statements of Stockholders' Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32

Item 6.	Exhibits	73

SIGNATURE		74

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Seagen Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except par value)


	June 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	413,434	$	558,424
Short-term investments	2,038,178		2,000,996
Accounts receivable, net	379,740		324,988
Inventories	163,184		116,136
Prepaid expenses and other current assets	103,976		61,840
Total current assets	3,098,512		3,062,384
Property and equipment, net	203,146		196,700
Operating lease right-of-use assets	62,264		61,480
Long-term investments	—		100,830
Intangible assets, net	272,229		283,680

Goodwill	274,671		274,671
Other non-current assets	41,336		21,161
Total assets	$	3,952,158	$	4,000,906
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	102,403	$	78,067
Accrued liabilities and other	331,431		310,071

Total current liabilities	433,834		388,138
Long-term liabilities:

Operating lease liabilities, long-term	61,925		61,884
Other long-term liabilities	65,125		62,784
Total long-term liabilities	127,050		124,668
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; none issued	—		—
Common stock, $0.001 par value, 250,000 shares authorized; 181,866 shares issued and outstanding at June 30, 2021 and 180,902 shares issued and outstanding at December 31, 2020	182		181
Additional paid-in capital	4,465,864		4,356,922
Accumulated other comprehensive income	792		565
Accumulated deficit	(1,075,564)		(869,568)
Total stockholders’ equity	3,391,274		3,488,100
Total liabilities and stockholders’ equity	$	3,952,158	$	4,000,906

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Seagen Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues:
Net product sales	$	347,338	$	240,465	$	649,926	$	438,979
Royalty revenues	36,296		31,235		63,514		51,595
Collaboration and license agreement revenues	4,844		6,298		7,020		21,938
Total revenues	388,478		277,998		720,460		512,512
Costs and expenses:
Cost of sales	78,090		48,244		142,225		77,665

Research and development	234,861		198,077		465,286		393,276
Selling, general and administrative	165,130		125,642		324,972		247,891
Total costs and expenses	478,081		371,963		932,483		718,832
Loss from operations	(89,603)		(93,965)		(212,023)		(206,320)
Investment and other income, net	5,027		72,775		6,027		16,728


Net loss	$	(84,576)	$	(21,190)	$	(205,996)	$	(189,592)
Net loss per share - basic and diluted	$	(0.47)	$	(0.12)	$	(1.14)	$	(1.10)

Shares used in computation of per share amounts - basic and diluted	181,628		173,406		181,390		172,878


Comprehensive loss:
Net loss	$	(84,576)	$	(21,190)	$	(205,996)	$	(189,592)
Other comprehensive income (loss):
Unrealized (loss) gain on securities available-for-sale, net of tax	(213)		(2,042)		(47)		1,231
Foreign currency translation gain	511		32		274		8
Total other comprehensive income (loss)	298		(2,010)		227		1,239
Comprehensive loss	$	(84,278)	$	(23,200)	$	(205,769)	$	(188,353)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Seagen Inc.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

(In thousands)


	Common stock
	Shares	Amount		Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total stockholders' equity
Balances as of December 31, 2019	171,994	$	172	$	3,359,124	$	229	$	(1,483,238)	$	1,876,287
Net loss	—	—		—		—		(168,402)		(168,402)
Other comprehensive income	—	—		—		3,249		—		3,249

Issuance of common stock for stock option exercises and employee stock purchase plan	575	1		21,785		—		—		21,786

Restricted stock vested during the period, net	67	—		—		—		—		—

Share-based compensation	—	—		32,698		—		—		32,698
Balances as of March 31, 2020	172,636	173		3,413,607		3,478		(1,651,640)		1,765,618
Net loss	—	—		—		—		(21,190)		(21,190)
Other comprehensive loss	—	—		—		(2,010)		—		(2,010)

Issuance of common stock for stock option exercises and employee stock purchase plan	858	1		31,484		—		—		31,485

Restricted stock vested during the period, net	371	—		—		—		—		—

Share-based compensation	—	—		40,174		—		—		40,174
Balances as of June 30, 2020	173,865	$	174	$	3,485,265	$	1,468	$	(1,672,830)	$	1,814,077



















Balances as of December 31, 2020	180,902	$	181	$	4,356,922	$	565	$	(869,568)	$	3,488,100
Net loss	—	—		—		—		(121,420)		(121,420)
Other comprehensive loss	—	—		—		(71)		—		(71)

Issuance of common stock for stock option exercises and employee stock purchase plan	341	—		19,791		—		—		19,791

Restricted stock vested during the period, net	80	—		—		—		—		—

Share-based compensation	—	—		38,224		—		—		38,224
Balances as of March 31, 2021	181,323	181		4,414,937		494		(990,988)		3,424,624
Net loss	—	—		—		—		(84,576)		(84,576)
Other comprehensive income	—	—		—		298		—		298

Issuance of common stock for stock option exercises and employee stock purchase plan	359	1		13,200		—		—		13,201

Restricted stock vested during the period, net	184	—		—		—		—		—

Share-based compensation	—	—		37,727		—		—		37,727
Balances as of June 30, 2021	181,866	$	182	$	4,465,864	$	792	$	(1,075,564)	$	3,391,274

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Seagen Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2021		2020
Operating activities:
Net loss	$	(205,996)	$	(189,592)
Adjustments to reconcile net loss to net cash used by operating activities
Share-based compensation	75,951		68,406
Depreciation	19,603		16,571
Amortization of intangible assets	11,451		4,736
Amortization of right-of-use assets	6,356		5,114
Amortization of premiums, accretion of discounts, and (gains) losses on debt securities	11,802		(645)
Gains on equity securities	(4,929)		(11,604)



Changes in operating assets and liabilities
Accounts receivable, net	(54,752)		(54,073)
Inventories	(47,048)		(4,070)
Prepaid expenses and other assets	(46,122)		(13,623)
Lease liability	(7,481)		(5,900)

Other liabilities	43,395		29,337
Net cash used by operating activities	(197,770)		(155,343)
Investing activities:
Purchases of securities	(1,788,967)		(574,700)
Proceeds from maturities of securities	1,831,500		372,000
Proceeds from sales of securities	—		194,733
Purchases of property and equipment	(22,403)		(47,146)


Net cash provided (used) by investing activities	20,130		(55,113)
Financing activities:

Proceeds from exercise of stock options and employee stock purchase plan	32,992		53,271
Net cash provided by financing activities	32,992		53,271
Effect of exchange rate changes on cash and cash equivalents	(342)		(57)
Net decrease in cash and cash equivalents	(144,990)		(157,242)
Cash and cash equivalents at beginning of period	558,424		274,562
Cash and cash equivalents at end of period	$	413,434	$	117,320

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Seagen Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Summary of significant accounting policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements reflect the accounts of Seagen Inc. and its wholly-owned subsidiaries (collectively “Seagen,” “we,” “our,” or “us”). All intercompany transactions and balances have been eliminated. Management has determined that we operate in one segment: the development and sale of pharmaceutical products on our own behalf or in collaboration with others. Substantially all of our assets and revenues are related to operations in the U.S.; however, we have multiple subsidiaries in foreign jurisdictions, including several subsidiaries in Europe.

The condensed consolidated balance sheet data as of December 31, 2020 were derived from audited financial statements not included in this quarterly report on Form 10-Q. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC, and generally accepted accounting principles in the United States of America, or GAAP, for unaudited condensed consolidated financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments that, in the opinion of management, are necessary for a fair statement of our financial position and results of our operations as of and for the periods presented.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC.

The preparation of financial statements in accordance with GAAP requires us to make estimates, assumptions, and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of our operations for the three and six month periods ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year or any other interim period.

Non-cash activities

We had $9.6 million and $6.0 million of accrued capital expenditures as of June 30, 2021 and December 31, 2020, respectively. Accrued capital expenditures are treated as a non-cash investing activity and, accordingly, have not been included in the condensed consolidated statement of cash flows until such amounts have been paid in cash. During the six months ended June 30, 2021 and 2020, we recorded $7.1 million and $1.5 million, respectively, of right-of-use assets in exchange for lease liabilities, which are treated as a non-cash operating activity. See Note 3 for additional information.

Investments

We hold certain equity securities which are reported at estimated fair value based on quoted market prices. Changes in the fair value of equity securities are recorded in income or loss. The cost of equity securities for purposes of computing gains and losses is based on the specific identification method.

We invest our available cash primarily in debt securities. These debt securities are classified as available-for-sale, which are reported at estimated fair value with unrealized gains and losses included in accumulated other comprehensive income (loss) in stockholders’ equity. Realized gains, realized losses and declines in the value of debt securities judged to be other-than-temporary are included in investment and other income, net. The cost of debt securities for purposes of computing realized and unrealized gains and losses is based on the specific identification method. Amortization of premiums and accretion of discounts on debt securities are included in investment and other income, net. Interest and dividends earned are included in investment and other income, net. Accrued interest receivable as of June 30, 2021, was $3.4 million, and was included in prepaid expenses and other current assets. We classify investments in debt securities maturing within one year of the reporting date, or where management’s intent is to use the investments to fund current operations or to make them available for current operations, as short-term investments.

If the estimated fair value of a debt security is below its carrying value, we evaluate whether it is more likely than not that we will sell the security before its anticipated recovery in market value and whether evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. We also evaluate whether or not we intend to sell the investment. If the impairment is considered to be other-than-temporary, the security is written down to its estimated fair value. In addition, we consider whether credit losses exist for any securities. A credit loss exists if the present value of cash flows expected to be collected is less than the amortized cost basis of the security. Other-than-temporary declines in estimated fair value and credit losses are included in investment and other income, net.

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Intangible assets, net

Our intangible assets are primarily comprised of acquired TUKYSA technology. The following table presents the balances of our finite-lived intangible assets for the periods presented:


(dollars in thousands)	June 30, 2021		December 31, 2020
Gross carrying value	$	305,650	$	305,650

Less: accumulated amortization	(33,421)		(21,970)
Total	$	272,229	$	283,680

The following table presents our amortization expense related to acquired TUKYSA technology costs, included in cost of sales in our condensed consolidated statements of comprehensive income (loss), for the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	2021		2020		2021		2020
Amortization expense	$	5,757	$	4,732	$	11,451	$	4,736

The weighted average remaining useful life of our finite-lived intangible assets was 12 years as of June 30, 2021, and estimated future amortization expense related to acquired TUKYSA is $11.6 million for the six months ending December 31, 2021, and TUKYSA technology costs is $23.1 million for each of the years ending December 31, 2022 through December 31, 2026.

Revenue recognition - Net product sales

We sell ADCETRIS, PADCEV and TUKYSA primarily through a limited number of specialty distributors and specialty pharmacies in the U.S. We and our collaboration partner Astellas Pharma, Inc., or Astellas, jointly promote PADCEV in the U.S. Under the joint promotion in the U.S., we record net sales of PADCEV and are responsible for all distribution through a limited number of specialty distributors. The delivery of our products represents a single performance obligation for these transactions and we record net product sales at the point in time when title and risk of loss pass. The transaction price for net product sales represents the amount we expect to receive, which is net of estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns, and other deductions. Accruals are established for these deductions, and actual amounts incurred are offset against applicable accruals. We reflect these accruals as either a reduction in the related account receivable from the distributor or as an accrued liability, depending on the nature of the sales deduction. Sales deductions are based on management’s estimates that consider payor mix in target markets and experience to-date. These estimates involve a substantial degree of judgment. We have applied a portfolio approach as a practical expedient for estimating net product sales.

Outside of the U.S., the transaction price for net product sales represents the amount we expect to receive, which is net of estimated discounts, estimated government mandated rebates, distribution fees, estimated product returns, and other deductions. Accruals are established for these deductions, and actual amounts incurred are offset against applicable accruals. These estimates involve judgment in estimating net product sales.

Government-mandated rebates and chargebacks: We have entered into a Medicaid Drug Rebate Agreement, or MDRA, with the Centers for Medicare & Medicaid Services. This agreement provides for a rebate based on covered purchases of our products. Medicaid rebates are invoiced to us by the various state Medicaid programs. We estimate Medicaid rebates using the expected value approach, based on a variety of factors, including payor mix and our experience to-date.

We have a Federal Supply Schedule, or FSS, agreement under which certain U.S. government purchasers receive a discount on eligible purchases of our products. In addition, we have entered into a Pharmaceutical Pricing Agreement with the Secretary of Health and Human Services, which enables certain entities that qualify for government pricing under the Public Health Services Act, or PHS, to receive discounts on their qualified purchases of our products. Under these agreements, distributors process a chargeback to us for the difference between wholesale acquisition cost and the applicable discounted price. We estimate expected chargebacks for FSS and PHS purchases based on the expected value of each entity’s eligibility for the FSS and PHS programs. We also review historical rebate and chargeback information to further refine these estimates.

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Distribution fees, product returns and other deductions: Our distributors charge a volume-based fee for distribution services that they perform for us. We allow for the return of product that is within a specified number of days of its expiration date or that is damaged. We estimate product returns based on our experience to-date using the expected value approach. We provide financial assistance to qualifying patients that are underinsured or cannot cover the cost of commercial coinsurance amounts through our patient support programs. Estimated contributions for commercial coinsurance under SeaGen Secure are deducted from gross sales and are based on an analysis of expected plan utilization. These estimates are adjusted as necessary to reflect our actual experience.

Revenue recognition - Royalty revenues

Royalty revenues primarily reflect amounts earned under the ADCETRIS collaboration with Takeda Pharmaceutical Company Limited, or Takeda. These royalties include commercial sales-based milestones and sales royalties that relate predominantly to the license of intellectual property. Sales royalties are based on a percentage of Takeda’s net sales of ADCETRIS, with rates that range from the mid-teens to the mid-twenties based on annual net sales tiers. Takeda bears a portion of low single digit third-party royalty costs owed on its sales of ADCETRIS. This amount is included in royalty revenues. Amounts owed to our third-party licensors related to Takeda’s sales of ADCETRIS are recorded in cost of sales. These amounts are recognized in the period in which the related sales by Takeda occur. Royalty revenues also reflect amounts from Genentech, Inc., a member of the Roche Group, or Genentech, earned on net sales of Polivy, and amounts from GlaxoSmithKline earned on net sales of Blenrep.

Revenue recognition - Collaboration and license agreement revenues

We have collaboration and license agreements for our technology with a number of biotechnology and pharmaceutical companies. Under these agreements, we typically receive or are entitled to receive upfront cash payments and progress- and sales-dependent milestones for the achievement by our licensees of certain events, and annual maintenance fees and support fees for research and development services and materials provided under the agreements. We also are entitled to receive royalties on net sales of any resulting products incorporating our technology. Generally, our licensees are solely responsible for research, product development, manufacturing and commercialization of any product candidates under these collaborations, which includes the achievement of the potential milestones. Since we may not take a substantive role or control the research, development or commercialization of any products generated by some of our licensees, we may not be able to reasonably estimate when, if at all, any potential future milestone payments or royalties may be payable to us by our licensees. As such, the potential future milestone payments associated with certain of our collaboration and license agreements involve a substantial degree of uncertainty.

Collaboration and license agreements are initially evaluated as to whether the intellectual property licenses granted by us represent distinct performance obligations. If they are determined to be distinct, the value of the intellectual property licenses would be recognized up-front while the research and development service fees would be recognized as the performance obligations are satisfied. Variable consideration is assessed at each reporting period as to whether it is not subject to future reversal of cumulative revenue and, therefore, should be included in the transaction price. Assessing the recognition of variable consideration requires significant judgment. If a contract includes a fixed or minimum amount of research and development support, this also would be included in the transaction price. Changes to collaboration and license agreements, such as the extensions of the research term or increasing the number of targets or technology covered under an existing agreement, are assessed for whether they represent a modification or should be accounted for as a new contract.

We have concluded that the license of intellectual property in certain collaboration and license agreements is not distinct from the perspective of our customers at the time of initial transfer, since we often do not license intellectual property without related technology transfer and research and development support services. Such evaluation requires significant judgment since it is made from the customer's perspective. Our performance obligations under our collaborations may include such things as providing intellectual property licenses, performing technology transfer, performing research and development consulting services, providing reagents, ADCs, and other materials, and notifying the customer of any enhancements to licensed technology or new technology that we discover, among others. We determined our performance obligations under certain collaboration and license agreements as evaluated at contract inception were not distinct and represented a single performance obligation. For those agreements, revenue is recognized using a proportional performance model, representing the transfer of goods or services as activities are performed over the term of the agreement. Upfront payments are also amortized to revenue over the performance period. Upfront payment contract liabilities resulting from our collaborations do not represent a financing component as the payment is not financing the transfer of goods or services, and the technology underlying the licenses granted reflects research and development expenses already incurred by us. For agreements beyond the initial performance period, we have no remaining performance obligations. We may receive license maintenance fees and potential milestones and royalties based on collaborator development and regulatory progress, which are recorded in the period achieved in the case of milestones, and during the period of the related sales for royalties.

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When no performance obligations are required of us, or following the completion of the performance obligation period, such amounts are recognized upon transfer of control of the goods or services to the customer. Generally, all amounts received or due other than sales-based milestones and royalties are classified as collaboration and license agreement revenues. Sales-based milestones and royalties are recognized as royalty revenue in the period the related sale occurred.

We generally invoice our collaborators and licensees on a monthly or quarterly basis, or upon the completion of the effort or achievement of a milestone, based on the terms of each agreement. Deferred revenue arises from amounts received in advance of the culmination of the earnings process and is recognized as revenue in future periods as performance obligations are satisfied. Deferred revenue expected to be recognized within the next twelve months is classified as a current liability.

Recent accounting pronouncements adopted

In December 2019, the Financial Accounting Standards Board, or FASB, issued “ASU 2019-12, Simplifying the Accounting for Income Taxes.” The objective of the standard is to improve areas of GAAP by removing certain exceptions permitted by ASC Topic 740-- Income Taxes and clarifying existing guidance to facilitate consistent application. We adopted the standard on January 1, 2021. The adoption of this ASU does not have a material impact on our financial condition, results of operations, cash flows, or financial statement disclosures.

2. Revenue from contracts with customers

Substantially all of our product revenues are recorded in the U.S. Royalty revenues primarily reflect royalties earned under the ADCETRIS collaboration with Takeda.

The following table presents our disaggregated revenue for the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	2021		2020		2021		2020
ADCETRIS	$	181,912	$	167,535	$	344,484	$	331,588
PADCEV	82,405		57,175		152,163		91,636
TUKYSA	83,021		15,755		153,279		15,755
Net product sales	$	347,338	$	240,465	$	649,926	$	438,979
Royalty revenues	$	36,296	$	31,235	$	63,514	$	51,595

Takeda	—		5,598		1,851		15,913





Other	4,844		700		5,169		6,025
Collaboration and license agreement revenues	$	4,844	$	6,298	$	7,020	$	21,938
Total revenues	$	388,478	$	277,998	$	720,460	$	512,512

We estimate an allowance for doubtful accounts based on our assessment of the collectability of customer accounts. We regularly review the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. We did not recognize any bad debt expense during any of the periods presented.

3. Leases

Our current operating leases for our office and laboratory facilities with terms that expire from 2022 through 2029. During the six months ended June 30, 2021 and 2020, we recorded $7.1 million and $1.5 million of right-of-use assets in exchange for lease liabilities, respectively. All of our significant leases include options for us to extend the lease term. None of our options to extend the rental term of any existing leases were considered reasonably certain as of June 30, 2021.

In June 2021, we entered into a lease agreement for an approximately 258,000 square feet building complex to be constructed by the landlord on approximately 20.5 acres of land in Everett, Washington. We intend to use the building for future manufacturing, laboratory, and office space. Under the terms of the lease, base rent is payable at an initial rate of $4.0 million per year, subject to annual escalations of 3% during the initial term of 20 years. The lease commences on the date when construction and delivery of the building shell and related improvements by the landlord have been substantially completed. We will record a lease liability and right-of-use assets on our condensed consolidated balance sheet on the lease commencement date. We have an option to renew the lease for two additional terms of ten years each. In addition, we have an option to purchase the premises in the future.

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Supplemental information for lease amounts recognized in our condensed consolidated financial statements was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	2021		2020		2021			2020
Operating lease cost	$	4,063	$	3,589	$	8,077		$	7,135
Variable lease cost	1,151		1,072		2,138			1,974
Total lease cost	$	5,214	$	4,661	$	10,215		$	9,109
Cash paid for amounts included in measurement of lease liabilities	$	4,199	$	3,560	$	8,057		$	6,896

					As of June 30,
					2021			2020
Weighted average remaining lease term					6.3 years			6.7 years
Weighted average discount rate					5.1		%	5.3		%

Lease liabilities were recorded in the following captions of our condensed consolidated balance sheet as follows:


(dollars in thousands)	June 30, 2021		December 31, 2020
Accrued liabilities and other	$	13,555	$	12,749
Operating lease liabilities, long-term	61,925		61,884
Total	$	75,480	$	74,633

4. Net loss per share

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares include incremental common shares issuable upon the vesting of unvested restricted stock units and the exercise of outstanding stock options, calculated using the treasury stock method.

For the three and six months ended June 30, 2021 and 2020, we excluded all restricted stock units and stock options from the per share calculations as such securities were anti-dilutive. The weighted average number of restricted stock units and stock options that were excluded totaled approximately 9,992,000 and 11,663,000 for the three months ended June 30, 2021 and 2020, respectively. The weighted average number of restricted stock units and stock options that were excluded totaled approximately 10,229,000 and 12,154,000 for the six months ended June 30, 2021 and 2020, respectively.

5. Fair value

We have certain assets that are measured at fair value on a recurring basis according to a fair value hierarchy that prioritizes the inputs, assumptions and valuation techniques used to measure fair value. The three levels of the fair value hierarchy are:


Level 1:						Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2:						Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3:						Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The determination of a financial instrument’s level within the fair value hierarchy is based on an assessment of the lowest level of any input that is significant to the fair value measurement. We consider observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

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The fair value hierarchy of assets carried at fair value and measured on a recurring basis was as follows:


	Fair value measurement using:
(dollars in thousands)	Quoted prices in active markets for identical assets (Level 1)		Other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
June 30, 2021
Short-term investments—U.S. Treasury securities	$	2,038,178	$	—	$	—	$	2,038,178

Other non-current assets—equity securities	14,195		—		—		14,195
Total	$	2,052,373	$	—	$	—	$	2,052,373
December 31, 2020
Short-term investments—U.S. Treasury securities	$	2,000,996	$	—	$	—	$	2,000,996
Long-term investments—U.S. Treasury securities	100,830		—		—		100,830

Total	$	2,101,826	$	—	$	—	$	2,101,826

Our short- and long-term debt investments portfolio only contains investments in U.S. Treasury and other U.S. government-backed securities. We review our portfolio based on the underlying risk profile of the securities and have a zero loss expectation for these investments. We also regularly review the securities in an unrealized loss position and evaluate the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions. During the three and six months ended June 30, 2021 and 2020, we recognized no year-to-date credit loss related to our short- and long-term investments, and had no allowance for credit loss recorded as of June 30, 2021 or December 31, 2020.

Our debt securities consisted of the following:


(dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
June 30, 2021
U.S. Treasury securities	$	2,038,200	$	80	$	(102)	$	2,038,178
Contractual maturities (at date of purchase):
Due in one year or less	$	1,836,848					$	1,836,787
Due in one to two years	201,352						201,391
Total	$	2,038,200					$	2,038,178
December 31, 2020
U.S. Treasury securities	$	2,101,801	$	259	$	(234)	$	2,101,826
Contractual maturities (at date of purchase):
Due in one year or less	$	1,791,399					$	1,791,239
Due in one to two years	310,402						310,587
Total	$	2,101,801					$	2,101,826

6. Investment and other income, net

Investment and other income, net consisted of the following:


	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	2021		2020		2021		2020
Gain on equity securities	$	4,670	$	70,683	$	4,929	$	11,604

Investment and other income, net	357		2,092		1,098		5,124
Total investment and other income, net	$	5,027	$	72,775	$	6,027	$	16,728

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Gain on equity securities includes the realized and unrealized holding gains and losses on our equity securities. In April 2020, we sold our Immunomedics common stock holdings, and, accordingly, recognized the associated realized gain in our condensed consolidated statements of comprehensive loss for the three and six months ended June 30, 2020. Prior to the sale, our holdings in the securities were marked to market each period, which resulted in a net investment loss during the three months ended March 31, 2020.

7. Inventories

Inventories consisted of the following:


(dollars in thousands)	June 30, 2021		December 31, 2020
Raw materials	$	129,732	$	99,049

Finished goods	33,452		17,087
Total	$	163,184	$	116,136

We capitalize our commercial inventory costs. Inventory that is deployed into clinical, research or development use is charged to research and development expense when it is no longer available for use in commercial sales.

8. Share-based compensation

The following table presents our total share-based compensation expense, including expense associated with our long-term incentive plans, or LTIPs, for the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	2021		2020		2021		2020
Research and development	$	17,232	$	16,478	$	34,196	$	34,151
Selling, general and administrative	20,495		18,311		41,755		34,255
Total share-based compensation expense	$	37,727	$	34,789	$	75,951	$	68,406

As of June 30, 2021, there was $140.3 million of unrecognized compensation cost related to unvested options and restricted stock unit awards, excluding our LTIPs and performance-based awards, net of forfeitures. The estimated unrecognized compensation expense related to our LTIPs and performance-based awards was approximately $65 million as of June 30, 2021. The total estimate of unrecognized compensation expense could change in the future for several reasons, including the addition or termination of employees, the recognition of LTIP compensation expense, or the addition, termination, or modification of an LTIP.

9. Legal matters

We are engaged in multiple legal disputes with Daiichi Sankyo Co. Ltd., or Daiichi Sankyo.

Dispute over ownership of intellectual property

We are in a dispute with Daiichi Sankyo regarding the ownership of certain technology used by Daiichi Sankyo in its cancer drug ENHERTU and certain product candidates. We believe that the linker and other ADC technology used in ENHERTU and these drug candidates are improvements to our ADC technology, the ownership of which we contend was assigned to us under the terms of a 2008 collaboration agreement between us and Daiichi Sankyo. On November 12, 2019, we submitted an arbitration demand to the American Arbitration Association seeking, among other remedies, a declaration that we are the owner of the intellectual property rights under dispute, monetary damages, and a running royalty. On April 27, 2020, the arbitrator confirmed the dispute should be resolved in arbitration. The arbitration hearing was conducted in June 2021, and a decision is expected later this year.

On November 4, 2019, Daiichi Sankyo filed a declaratory judgment action in the United States District Court for the District of Delaware, alleging that we are not entitled to the intellectual property rights under dispute, in an attempt to have the dispute adjudicated in federal court. The case has been stayed and administratively closed by court order.

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Patent infringement

On October 19, 2020, we filed a complaint in the United States District Court for the Eastern District of Texas to commence an action for infringement of our U.S. Patent No. 10,808,039, or the '039 Patent, by Daiichi Sankyo’s importation into, offer for sale, sale, and use in the United States of the cancer drug ENHERTU. This action is seeking, among other remedies, a judgment that Daiichi Sankyo infringed one or more valid and enforceable claims of the '039 Patent, monetary damages and a running royalty. Daiichi Sankyo (as well as Daiichi Sankyo, Inc. and AstraZeneca Pharmaceuticals, LP, or AstraZeneca) subsequently filed an action on November 13, 2020 in the U.S. District Court for the District of Delaware seeking a declaratory judgment that ENHERTU does not infringe the ‘039 Patent. The Delaware action has been stayed by court order. Daiichi Sankyo, Inc. and AstraZeneca also filed two Petitions for Post-Grant Review on December 23, 2020 and January 22, 2021 with the U.S. Patent Office seeking to have claims of the ‘039 Patent cancelled as unpatentable. On June 24, 2021, the U.S. Patent Office issued a decision denying both Petitions for Post-Grant Review. The trial in the patent infringement case in Texas is scheduled to begin on April 4, 2022.

As a result of these disputes, we have incurred and will continue to incur litigation expenses. In addition, from time to time, we may become involved in other lawsuits, claims and proceedings relating to the conduct of our business, including those pertaining to the defense and enforcement of our patent or other intellectual property rights and our contractual rights. These proceedings are costly and time consuming, and they may subject us to claims which may result in liabilities or require us to take or refrain from certain actions. Additionally, successful challenges to our patent or other intellectual property rights through these proceedings could result in a loss of rights in the relevant jurisdiction and may allow third parties to use our proprietary technologies without a license from us or our collaborators.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q, including the following discussion of our financial condition and results of operations, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions, including those relating to future events or our future financial performance and financial guidance. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “project,” “believe,” “estimate,” “predict,” “potential,” “intend” or “continue,” the negative of terms like these or other comparable terminology, and other words or terms of similar meaning in connection with any discussion of future operating or financial performance. These statements are only predictions. All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements except as required by law. Any or all of our forward-looking statements in this document may turn out to be wrong. Actual events or results may differ materially. Our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks, uncertainties and other factors. We discuss many of these risks, uncertainties and other factors in this Quarterly Report on Form 10-Q in greater detail under the heading “Part II Item 1A—Risk Factors.” We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

Overview

Seagen is a biotechnology company that develops and commercializes targeted therapies to treat cancer. We are commercializing ADCETRIS®, or brentuximab vedotin, for the treatment of certain CD30-expressing lymphomas, PADCEV®, or enfortumab vedotin-ejfv, for the treatment of certain metastatic urothelial cancers, and TUKYSA®, or tucatinib, for the treatment of certain metastatic HER2-positive breast cancers. We are also advancing a pipeline of novel therapies for solid tumors and blood-related cancers designed to address unmet medical needs and improve treatment outcomes for patients. Many of our programs, including ADCETRIS and PADCEV, are based on our antibody-drug conjugate, or ADC, technology that utilizes the targeting ability of monoclonal antibodies to deliver cell-killing agents directly to cancer cells.

Second quarter 2021 highlights and recent developments

Corporate

•Achieved 44% growth in net product sales for the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020. Generated record quarterly net product sales across all commercial brands.

•Continued to make strategic investments in our pipeline, commercial launches, infrastructure, and headcount to support our future growth.

ADCETRIS

•Published the five-year update of the phase 3 ECHELON-1 clinical trial in frontline advanced Hodgkin lymphoma in the Lancet Haematology.

PADCEV

•U.S. Food and Drug Administration, or FDA:

◦converted PADCEV's accelerated approval to regular approval; and

◦approved a new indication for PADCEV in the treatment of patients with locally advanced or metastatic urothelial cancer who are ineligible for cisplatin-containing chemotherapy and have previously received one or more prior lines of therapy.

•Published results from the second cohort of the EV-201 trial for patients with locally advanced or metastatic urothelial cancer that received prior treatment with an immunotherapy but had not received a platinum-containing chemotherapy and were ineligible for cisplatin chemotherapy in The Lancet Oncology.

TUKYSA

•Presented long-term results for HER2CLIMB trial at the 2021 American Society of Clinical Oncology, or ASCO, annual meeting demonstrating median survival for the TUKYSA arm extended to two years with benefit maintained across all prespecified patient subgroups.

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Pipeline

•Biologics License Application, or BLA, accepted for Priority Review of tisotumab vedotin for patients with recurrent or metastatic cervical cancer with disease progression on or after chemotherapy. FDA set a Prescription Drug User Fee Act, or PDUFA, target action date of October 10, 2021.

•Published the results of the innovaTV 204 pivotal phase 2 trial in The Lancet Oncology in April 2021.

Our Medicines

Our approved medicines include the following:


Product*	Therapeutic Area	U.S. Approved Indication
	Hodgkin Lymphoma	Previously untreated Stage III/IV classical Hodgkin lymphoma, or cHL, in combination with doxorubicin, vinblastine and dacarbazine
		cHL at high risk of relapse or progression as post-autologous hematopoietic stem cell transplantation, or auto-HSCT, consolidation
		cHL after failure of auto-HSCT or after failure of at least two prior multi-agent chemotherapy regimens in patients who are not auto-HSCT candidates
	T-cell Lymphoma	Previously untreated systemic anaplastic large cell lymphoma, or sALCL, or other CD30-expressing peripheral T-cell lymphoma, or PTCL, including angioimmunoblastic T-cell lymphoma and PTCL not otherwise specified, in combination with cyclophosphamide, doxorubicin and prednisone
		sALCL after failure of at least one prior multi-agent chemotherapy regimen
		Primary cutaneous anaplastic large cell lymphoma, or pcALCL, or CD30-expressing mycosis fungoides who have received prior systemic therapy
	Urothelial Cancer	Locally advanced or metastatic urothelial cancer for patients who: •have previously received a programmed death receptor-1 (PD-1) or programmed death-ligand 1 (PD-L1) inhibitor and platinum-containing chemotherapy, or •are ineligible for cisplatin-containing chemotherapy and have previously received one or more prior lines of therapy.
	Breast Cancer	In combination with trastuzumab and capecitabine for the treatment of adult patients with advanced unresectable or metastatic HER2-positive breast cancer, including patients with brain metastases, who have received one or more prior anti-HER2-based regimens in the metastatic setting.
•*ADCETRIS, PADCEV and TUKYSA are only indicated for use in adults. u

ADCETRIS®

ADCETRIS is an ADC targeting CD30, which is a protein located on the surface of cells and highly expressed in Hodgkin lymphoma, certain T-cell lymphomas as well as other cancers. ADCETRIS first received FDA approval in 2011 and is now approved in a total of six indications to treat Hodgkin lymphoma and certain T-cell lymphomas in various settings including as frontline therapy.

ADCETRIS is commercially available in more than 75 countries worldwide. We commercialize ADCETRIS in the U.S. and its territories and in Canada, and we collaborate with Takeda Pharmaceutical Company Limited, or Takeda, to develop and commercialize ADCETRIS on a global basis. Under this collaboration, Takeda has commercial rights in the rest of the world and pays us a royalty. Takeda has received regulatory approvals for ADCETRIS as monotherapy or in combination with other agents in various settings for the treatment of patients with Hodgkin lymphoma or CD30-positive T-cell lymphomas in Europe and many countries throughout the rest of the world and is pursuing additional regulatory approvals.

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PADCEV®

PADCEV is an ADC targeting Nectin-4, a protein expressed on the surface of cells and highly expressed in bladder cancer as well as other cancers. PADCEV was granted accelerated approval by the FDA in December 2019 for the treatment of adult patients with locally advanced or metastatic urothelial cancer who have previously received a PD-1 or PD-L1 inhibitor and a platinum-containing chemotherapy before (neoadjuvant) or after (adjuvant) surgery in the locally advanced or metastatic setting. FDA approval of PADCEV was supported by data from a single-arm pivotal phase 2 clinical trial called EV-201.

In July 2021, the FDA converted PADCEV's accelerated approval to regular approval in the U.S., in addition to granting regular approval for a new indication for adult patients with locally advanced or metastatic urothelial cancer, who are ineligible for cisplatin-containing chemotherapy and have previously received one or more prior lines of therapy. The conversion to regular approval was supported by the pivotal phase 3 trial called EV-301 and the expanded indication was supported by data from the second cohort in the EV-201 trial. The FDA reviewed the application for regular approval under the Oncology Center of Excellence's, or OCE's, Real Time Oncology Review, or RTOR, pilot program.

PADCEV, is being co-developed and jointly commercialized with Astellas Pharma, Inc., or Astellas. In the U.S., we and Astellas are jointly promoting PADCEV. In the U.S., we record net sales of PADCEV and are responsible for all distribution activities. We and Astellas each bear the costs of our own sales organizations in the U.S., equally share certain other costs associated with commercializing PADCEV in the U.S., and equally share in any profits realized in the U.S.

TUKYSA®

TUKYSA is an oral, small molecule tyrosine kinase inhibitor, or TKI, that is highly selective for HER2, a growth factor receptor overexpressed in many cancers. HER2 mediates cell growth, differentiation and survival. Tumors that over-express HER2 are generally more aggressive and historically have been associated with poor overall survival, compared with HER2-negative cancers. In April 2020, TUKYSA received approval from the FDA in combination with trastuzumab and capecitabine for the treatment of adult patients with advanced unresectable or metastatic HER2-positive breast cancer, including patients with brain metastases, who have received one or more prior anti-HER2-based regimens in the metastatic setting. FDA approval of TUKYSA was supported by data from the HER2CLIMB trial.

The application for approval was reviewed under the FDA's RTOR pilot program. We also participated in the Project Orbis initiative of the FDA OCE which provides a framework for concurrent submission and review of oncology products among international partners. Under this program we have received approval in the U.S., Canada, Australia, Singapore, and Switzerland. In February 2021, the EC granted marketing authorization for TUKYSA in combination with trastuzumab and capecitabine for the treatment of adult patients with HER2-positive locally advanced or metastatic breast cancer who have received at least two prior anti-HER2 treatment regimens. This approval is valid in all countries of the European Union as well as Norway, Liechtenstein, Iceland and Northern Ireland. In March 2021, we began marketing TUKYSA in Austria, France and Germany. Additionally, in February 2021, the UK Medicines and Healthcare products Regulatory Agency, or MHRA, granted a Great Britain marketing authorization for TUKYSA.

We are responsible for commercializing TUKYSA in the U.S., Canada and Europe. In September 2020, we entered into a license and collaboration agreement, or the TUKYSA Agreement, with a subsidiary of Merck & Co., Inc., or Merck, pursuant to which we granted exclusive rights to Merck to commercialize TUKYSA in Asia, the Middle East and Latin America and other regions outside of the U.S., Canada and Europe. The collaboration is intended to accelerate global availability of TUKYSA.

Clinical Development and Regulatory Status

ADCETRIS (brentuximab vedotin)

Beyond our current labeled indications, we are evaluating ADCETRIS as monotherapy and in combination with other agents in ongoing trials, including several potential registration-enabling trials such as the ECHELON-3 phase 3 trial in relapsed or refractory diffuse large B-cell lymphoma. In addition to our corporate-sponsored trials there are numerous investigator-sponsored trials of ADCETRIS in the United States. The investigator-sponsored trials include the use of ADCETRIS in a number of malignant hematologic indications and in solid tumors.

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PADCEV (enfortumab vedotin-ejfv)

In collaboration with Astellas we are conducting or planning to conduct clinical trials across the spectrum of bladder cancer including ongoing trials in frontline metastatic urothelial cancer and muscle invasive bladder cancer. We are planning to conduct a trial in non-muscle invasive bladder cancer. In addition, we are conducting a trial in a range of other solid tumors.

In September 2020, we announced that the EV-301 trial, which compared PADCEV to chemotherapy in adult patients with locally advanced or metastatic urothelial cancer who were previously treated with platinum-based chemotherapy and a PD-1/L1 inhibitor, met its primary endpoint of overall survival, or OS, compared to chemotherapy. For patients in the PADCEV arm of the trial, rash, fatigue, and decreased neutrophil count were the most frequent Grade 3 or greater treatment-related adverse events occurring in more than 5 percent of patients. In July 2021, the FDA converted PADCEV's accelerated approval to regular approval based on data from the EV-301 trial.

In March 2021, the European Medicines Agency, or EMA, accepted for review a Marketing Authorization Application, or MAA, for PADCEV based on the EV-301 trial. In addition, applications have been submitted for PADCEV approval in Australia and Canada, under the FDA's Project Orbis program, as well as in Japan, Singapore, Brazil and Switzerland.

In October 2020, we announced positive topline results from the second cohort of patients in the pivotal phase 2 EV-201 trial. The cohort is evaluating PADCEV for patients with locally advanced or metastatic urothelial cancer who have been previously treated with a PD-1/L1 inhibitor and have not received a platinum-containing chemotherapy and are ineligible for cisplatin. In May 2021 the primary results of the cohort were published in the Lancet Oncology.

In May 2021, we reported updated analysis of the second cohort at the 2021 ASCO annual meeting. With a median follow-up of 16 months, 51 percent of patients who received PADCEV had a confirmed objective response [95% Confidence Interval, or CI: 39.8, 61.3] per blinded independent central review (the primary endpoint), with 22 percent of patients experiencing a complete response, or CR. Median duration of response, or DOR, was 13.8 months [95% CI: 6.4, not reached]. Patients lived a median of 6.7 months without cancer progression [progression-free survival, or PFS (95% CI: 5.0-8.3)] and had a median OS of 16.1 months (95% CI: 11.3, 24.1). The most common all-grade treatment-related adverse events, or TRAEs, were alopecia (51%), peripheral sensory neuropathy (49%) and fatigue (34%), and the most common Grade 3 or greater TRAEs were neutropenia (9%), maculopapular rash (8%) and fatigue (7%). Grade 3 or greater TRAEs of special interest included skin reactions (17%), peripheral neuropathy (8%) and hyperglycemia (6%). Four deaths were previously reported as treatment-related by investigators in patients age 75 years and older with multiple comorbidities.

In July 2021, the FDA granted regular approval for a new indication for adult patients with locally advanced or metastatic urothelial cancer who are ineligible for cisplatin-containing chemotherapy and have previously received one or more prior lines of therapy. The approval was based on data from the second cohort of the EV-201 trial.

PADCEV is also being investigated in first-line metastatic urothelial cancer and earlier stages of bladder cancer. We and Astellas are conducting a phase 1b/2 clinical trial, called EV-103, that is a multi-cohort, open-label trial of PADCEV alone or in combination with the anti-PD-1 therapy pembrolizumab. The trial is evaluating safety, tolerability and activity in locally advanced and first- and second-line metastatic urothelial cancer, and was expanded to include muscle invasive bladder cancer, or MIBC.

In February 2020, based on the positive initial results of the dose-escalation cohort and the expansion Cohort A of the EV-103 trial, the FDA granted Breakthrough Therapy designation for PADCEV in combination with pembrolizumab for the treatment of patients with unresectable locally advanced or metastatic urothelial cancer who are unable to receive cisplatin-based chemotherapy in the first-line setting. In April 2020, we announced that, based on discussions with the FDA, data from the randomized cohort K in the EV-103 trial, along with other data from the EV-103 trial, could potentially support registration under the FDA's accelerated approval pathway. The primary outcome measures are objective response rate and duration of response. We expect to complete enrollment in cohort K by the end of 2021.

In May 2021, we presented updated results of the dose-escalation cohort and the expansion Cohort A of the EV-103 trial at the 2021 ASCO annual meeting. As previously reported, results demonstrated an objective response rate of 73.3 percent (95% CI: 58.1, 85.4) per investigator assessment, with 15.6 percent of patients experiencing a CR. The median PFS was 12.3 months (95% CI: 8.0, not reached). The updated data after a median follow-up of two years showed a median DOR of 25.6 months (95% CI: 8.3, not reached) and median OS of 26.1 months (95% CI: 15.7, not reached). The longer-term analysis demonstrated a safety profile generally consistent with previous findings. The most common TRAEs were peripheral sensory neuropathy (55.6%), fatigue (51.1%) and alopecia (48.9%), and the most common Grade 3 or greater TRAEs were increased lipase (17.8%), maculopapular rash (11.1%) and fatigue (11.1%). Grade 3 or greater TRAEs of interest included skin reactions (20%), hyperglycemia (8.9%) and peripheral neuropathy (4.4%). There was one death previously reported as possibly related to study treatment (multiple organ dysfunction syndrome).

In addition to the potential accelerated approval pathway based on the EV-103 trial, we are conducting a global, registrational phase 3 trial, called EV-302, in frontline metastatic urothelial cancer in collaboration with Astellas and a

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subsidiary of Merck. We, Astellas and Merck are jointly funding EV-302 and the trial is being led by us. EV-302 is an open-label, randomized phase 3 clinical trial evaluating the combination of PADCEV and pembrolizumab versus chemotherapy alone in patients with previously untreated locally advanced or metastatic urothelial cancer. The trial includes metastatic urothelial cancer patients who are either eligible or ineligible for cisplatin-based chemotherapy. The trial has dual primary endpoints of PFS and OS and is intended to support global regulatory submissions and potentially serve as a confirmatory trial if accelerated approval is granted based on EV-103.

In April 2020, we and Astellas entered into an agreement with Merck to evaluate PADCEV in MIBC. Merck has amended its ongoing phase 3 KEYNOTE-905/EV-303 registrational trial in cisplatin-ineligible patients with MIBC to include an arm evaluating PADCEV in combination with pembrolizumab. In October 2020, we and Astellas entered into an agreement with Merck to evaluate PADCEV in combination with pembrolizumab in a phase 3 trial, called KEYNOTE-B15/EV-304, to be conducted by Merck in cisplatin-eligible patients with MIBC. This trial was initiated in the first quarter of 2021.

In January 2020, we and Astellas also initiated a phase 2 clinical trial, called EV-202, to evaluate PADCEV monotherapy in solid tumors that have high-levels of Nectin-4 expression, including non-small cell lung, head and neck, gastric/esophageal and breast cancers.

TUKYSA (tucatinib)

We are conducting a broad clinical development program of TUKYSA including ongoing and planned trials in earlier lines of breast cancer and in other HER2-positive cancers. The positive results of the HER2CLIMB trial served as the basis for approval in the U.S., Canada, the European Union as well as other countries. Merck is co-funding a portion of the TUKYSA global development plan.

In October 2019, we initiated a phase 3 randomized trial, called HER2CLIMB-02, evaluating TUKYSA versus placebo, each in combination with T-DM1, for patients with unresectable locally advanced or metastatic HER2-positive breast cancer, including those with brain metastases, who have had prior treatment with a taxane and trastuzumab.

We are supporting a U.S. cooperative group, the Alliance for Clinical Trials in Oncology, that is conducting a phase 3 randomized trial, called CompassHER2 RD, which is evaluating TUKYSA in combination with T-DM1 in the adjuvant setting for patients with high-risk, HER2-positive breast cancer.

We are also conducting a phase 2 trial, called HER2CLIMB-04, evaluating TUKYSA in combination with trastuzumab deruxtecan in previously treated locally-advanced or metastatic HER2-positive breast cancer.

We are conducting a phase 2 trial, called MOUNTAINEER, evaluating TUKYSA in combination with trastuzumab in patients with HER2-positive, RAS wild-type metastatic colorectal cancer after treatment with first- and second-line standard-of-care therapies. Initial results from 23 patients were presented at the ESMO 2019 Congress that demonstrated encouraging antitumor activity. We expect to complete enrollment by the end of 2021. We believe the trial could potentially support an application for accelerated approval in the U.S.

We are conducting a phase 2/3 trial, called MOUNTAINEER-02, in combination with trastuzumab, ramucirumab and paclitaxel in second-line HER2-positive metastatic gastroesophageal cancer. We have also initiated a phase 1b trial evaluating TUKYSA in combination with trastuzumab and oxaliplatin based chemotherapy in first-line HER2-positive unresectable or metastatic colorectal, gastric, esophageal and gallbladder cancers.

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Tisotumab Vedotin

In collaboration with Genmab we are developing tisotumab vedotin for metastatic cervical cancer and are evaluating it for other solid tumors.

We and Genmab are conducting a pivotal phase 2 trial, called innovaTV 204, evaluating single-agent tisotumab vedotin for patients with recurrent or metastatic cervical cancer who have relapsed or progressed after standard of care treatment. In September 2020, data from the innovaTV 204 trial were presented at the European Society for Medical Oncology, or ESMO, Virtual Congress 2020 and in April 2021 were published in The Lancet Oncology. Results from the trial showed a 24 percent confirmed objective response rate, or ORR, by independent central review with a median DOR of 8.3 months. The most common treatment-related adverse events (greater than or equal to 20 percent) included alopecia, epistaxis (nose bleeds), nausea, conjunctivitis, fatigue and dry eye.

In April 2021, the FDA accepted for Priority Review the BLA seeking accelerated approval for tisotumab vedotin. This BLA requests FDA approval of tisotumab vedotin for the treatment of patients with recurrent or metastatic cervical cancer with disease progression on or after chemotherapy. The FDA has set a PDUFA target action date of October 10, 2021.

In January 2021, we and Genmab initiated a phase 3 clinical trial, called innovaTV 301, to evaluate tisotumab vedotin compared to chemotherapy in patients with recurrent or metastatic cervical cancer who have received one or two prior lines of therapy. innovaTV 301 is intended to support global regulatory applications for potential approvals in regions where innovaTV 204 does not support approval and to potentially serve as a confirmatory trial in the U.S. if we are able to obtain accelerated approval based on the innovaTV 204 trial.

We are also conducting a phase 2 clinical trial, called innovaTV 205, evaluating tisotumab vedotin as monotherapy and in combination with certain other anti-cancer agents for first- and second-line treatment of patients with recurrent or advanced cervical cancer.

Additionally, we are conducting a phase 2 clinical trial, called innovaTV 207, for patients with relapsed, locally advanced or metastatic solid tumors and a phase 2 clinical trial, called innovaTV 208, for patients with platinum-resistant ovarian cancer.

Ladiratuzumab Vedotin

We are developing ladiratuzumab vedotin, or LV, an ADC targeting LIV-1, which is currently being evaluated in phase 1 and phase 2 clinical trials both as monotherapy and in combination with other agents for patients with metastatic breast cancer and select solid tumors with high LIV-1 expression. In September 2020, we and a subsidiary of Merck entered into a license and collaboration agreement, or the LV Agreement, under which the companies will jointly develop and share future costs and profits worldwide for LV.

Other clinical and early-stage product candidates

We are advancing a pipeline of early-stage clinical candidates as well as multiple preclinical and research-stage programs that employ our proprietary technologies. We advanced several product candidates into clinical development in 2020 and we plan to submit additional investigational new drug applications, or INDs, to the FDA in 2021.

Antibody-Drug Conjugate technology license agreements

We have active technology license agreements for our ADC technology with a number of biotechnology and pharmaceutical companies, including AbbVie Biotechnology Ltd., or AbbVie; Genentech, Inc., a member of the Roche Group, or Genentech; and GlaxoSmithKline LLC, or GSK, as well as collaboration agreements with Astellas and Genmab. Genentech and GSK have received approval for ADC drugs that utilize our technology, Polivy® (polatuzumab vedotin-piic) and Blenrep™ (belantamab mafodotin-blmf), respectively, in the U.S., European Union and other countries. Under our ADC license agreements with Genentech and GSK, we are entitled to receive royalties on net sales of Polivy and Blenrep worldwide.

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COVID-19

We are continuing to closely monitor the impact of the evolving effects of the COVID-19 pandemic on our business. We are continuing to take proactive steps designed to protect the health and safety of our workforce, patients and healthcare professionals, to continue our business operations and to advance our goal of bringing important medicines to patients as rapidly as possible. Earlier in the pandemic, we instituted a mandatory work-from-home policy for employees who could perform their jobs offsite, and we have continued our essential research, manufacturing, and laboratory activities on site. Recently, we began to allow additional U.S. office-based employees who have been fully vaccinated to return to the office on a voluntary and limited basis. We maintain a number of precautionary measures designed to protect our on-site employees, such as enhanced facilities cleaning, lower concentrations of staff, contact tracing and making testing available. In addition, in accordance with guidelines from government authorities, we have additional precautionary measures for facilities with essential research, manufacturing and laboratory staff, who may not all be fully vaccinated, including temperature checks, screening protocols, masks and social distancing. After pausing most in-person customer interactions in healthcare settings earlier in the pandemic, our field-based personnel are now engaging in an increasing number of in-person interactions where state and local laws and regulations allow, the institution or office is accepting in-person interactions and our field-based personnel are comfortable engaging in-person with healthcare providers. They are also using electronic communications to continue to support healthcare professionals and patients when they cannot meet with healthcare providers face-to-face. We believe that the measures we have implemented are appropriate and are helping to reduce transmission of COVID-19, and we will continue to monitor conditions and related guidance from governmental authorities and adjust our activities as appropriate.

Outlook

We recognize revenue from ADCETRIS product sales in the U.S. and Canada. While we anticipate that sales of ADCETRIS will increase modestly in 2021 as compared to 2020, we have experienced and expect continued impacts associated with the COVID-19 pandemic, which appear to have led to a reduction in the rate of Hodgkin lymphoma diagnoses and may further adversely affect the rate of Hodgkin lymphoma diagnoses in the future. We have also experienced an increase in gross-to-net deductions that we believe is due to a shift in the locations where ADCETRIS is administered, which has increased the proportion of ADCETRIS sales through the federal 340B drug discount program. We may also experience additional shifts from commercial payor coverage to government payor coverage in the U.S., which would further increase gross-to-net deductions. We also expect that our ability to maintain or continue to grow our ADCETRIS sales, if at all, will depend on our ability to establish or demonstrate to the medical community the value of ADCETRIS and its potential advantages compared to existing and future therapeutics in its approved indications, including in the frontline Hodgkin lymphoma indication, and the extent to which physicians make prescribing decisions with respect to ADCETRIS. Other important factors affecting our ADCETRIS sales include the incidence flow of patients eligible for treatment in ADCETRIS’ approved indications, the extent to which coverage and adequate levels of reimbursement for ADCETRIS are available from governments and other third-party payors, the impact of any healthcare reform measures that may be upheld, or adopted in the future, including measures that could result in more rigorous coverage criteria or reduce the price that we receive for ADCETRIS, increasing competition from competing therapies including pembrolizumab in multiple indications, including in the relapsed or refractory classical Hodgkin lymphoma indication, continuing impacts resulting from the evolving effects of the COVID-19 pandemic including potential further impacts from lower diagnosis rates, and the potential future approval of ADCETRIS in any additional indications. For these reasons, we cannot assure you that ADCETRIS sales will continue to grow or that we can maintain sales of ADCETRIS at or near current levels. In addition, as a result of these and other factors, our future ADCETRIS product sales can be difficult to accurately predict from period to period.

We recognize revenue from PADCEV product sales in the U.S. Our ability to realize the anticipated benefits from our investment in PADCEV is subject to a number of risks and uncertainties, including our and Astellas’ ability to successfully jointly market and commercialize PADCEV in the U.S. in its approved indications, the extent to which we and Astellas are able to obtain regulatory approvals of PADCEV in additional indications in the U.S., including in the frontline metastatic urothelial cancer setting, and in territories outside the U.S., the acceptance of PADCEV by the medical community and patients, the extent to which physicians make prescribing decisions with respect to PADCEV, the incidence flow of patients eligible for treatment in PADCEV’s approved indications, the duration of therapy for patients receiving PADCEV, the extent to which coverage and adequate levels of reimbursement for PADCEV are available from governments and other third-party payors, the impact of any healthcare reform measures that may be adopted in the future, including measures that could potentially result in more rigorous coverage criteria and additional downward pressure on the price that we receive for PADCEV, potential competition from competing therapies, the impact of conducting launch activities virtually during the COVID-19 pandemic and other impacts resulting from the evolving effects of the COVID-19 pandemic including potential negative impacts of reduced cancer diagnosis rates. In addition, as a result of these and other factors, including the lack of significant historical sales data, PADCEV sales are currently difficult to predict from period to period.

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We recognize revenue from TUKYSA product sales in the U.S., Europe, and Canada. Our ability to realize the anticipated benefits of our investment in TUKYSA is subject to a number of risks and uncertainties, including our and Merck’s ability to successfully launch, market and commercialize TUKYSA in our respective territories in its approved indication, the extent to which we and Merck are able to obtain regulatory and other required governmental and pricing and reimbursement approvals of TUKYSA in additional territories, the extent to which we and Merck are able to obtain regulatory approvals of TUKYSA in additional indications, including earlier lines of breast cancer and other HER2-positive cancers, the acceptance of TUKYSA by the medical community and patients, competition from other therapies, our and Merck’s ability to accurately predict and supply product demand, the extent to which coverage and adequate levels of reimbursement will be available from governments and other third-party payors, the impact of any healthcare reform measures that may be adopted in the future, including measures that could potentially result in more rigorous coverage criteria and additional downward pressure on the price that we receive for TUKYSA, our ability to effectively commercialize a product outside of the U.S., the impact of conducting launch activities virtually during the COVID-19 pandemic and other impacts resulting from the evolving effects of the COVID-19 pandemic including potential negative impacts of reduced cancer diagnosis rates. In addition, as a result of these and other factors, including the lack of significant historical sales data, TUKYSA sales are currently difficult to predict from period to period.

The biopharmaceutical industry and the markets in which we operate are intensely competitive. Many of our competitors are working to develop or have commercialized products similar to those we market or are developing. Drug prices are under significant scrutiny and we expect drug pricing and other health care costs to continue to be subject to intense political and societal pressures on a global basis. For example, in July 2021, the Biden administration announced an Executive Order that includes initiatives aimed at lowering prescription drug costs and implementing Canadian drug importation. In addition to pricing actions and other measures being taken worldwide designed to reduce healthcare costs and limit the overall level of government expenditures, our sales and operations could also be affected by other risks of doing business internationally.

We expect that amounts received from our collaboration agreements, including royalties, will continue to be an important source of our revenues and cash flows. These revenues and cash flows will be impacted by future development funding and the achievement of development, clinical and commercial success by our collaborators under our existing collaboration and license agreements, as well as by entering into potential new collaboration and license agreements.

Our ongoing research, development, manufacturing and commercial activities will require substantial amounts of capital and may not ultimately be successful. We expect that we will incur substantial expenses, and we will require significant financial resources and additional personnel in order to advance the development of, to pursue, obtain and maintain regulatory approvals for, and to commercialize our products and product candidates, and expand our pipeline. In addition, we may pursue new operations or continue the expansion of our existing operations, including with respect to the continued development of our commercial infrastructure in Europe and our plans to otherwise continue to expand our operations internationally. As a result, we may need to raise additional capital, and our operating expenses may fluctuate as a result of such activities. We may also incur milestone payment obligations to certain of our licensors as our product candidates progress through clinical trials towards potential commercialization.

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We are closely evaluating the impacts of the evolving effects of the COVID-19 pandemic on our ability and the ability of our collaborators to effectively market, sell and distribute our products and to develop our products and product candidates. Our field-based personnel are using a mix of in-person interactions and electronic communications, such as emails, phone calls and video conferences, to support healthcare providers and patients. Many healthcare professionals that we normally call on are working a greater proportion of their working schedule from home and are facing additional demands on their time during the ongoing COVID-19 pandemic. We are continuing to experience increased competition for virtual appointments with healthcare professionals and a significant reduction in the number of interactions our sales personnel are having with physicians. We expect the different quality of electronic interactions as compared with in-person interactions, as well as the reduced quantity of interactions during the COVID-19 pandemic, to reduce the effectiveness of our sales personnel, as well as those of our collaborators, which could negatively affect our product sales and those of our collaborators, as well as physician awareness of our products. In this regard, we believe that the need to conduct some of our activities virtually is negatively impacting our ability to connect with key customers, including those familiar with competitive products, and our ability to conduct payor engagements. We face a number of challenges that will limit our ability to fully resume in-person interactions for the foreseeable future, including increasing COVID-19 infection rates due to coronavirus mutations and/or low vaccination rates or otherwise, the need to navigate varying restrictions for entering healthcare facilities and the pandemic's impacts on employee childcare arrangements. In addition, the effects of the COVID-19 pandemic continue to evolve rapidly, and we may subsequently be forced to, or subsequently determine that we should, resume a more restrictive remote work model, whether as a result of further spikes or surges in COVID-19 infection or hospitalization rates or otherwise. Moreover, the long-term effects of the COVID-19 pandemic are also unknown and it is possible that following the pandemic, healthcare institutions could alter their policies with respect to in person visits by pharmaceutical company representatives. COVID-19 related restrictions could also present product distribution challenges as we utilize recently initiated distribution channels for TUKYSA. We also expect that the conversion of medical conferences to a virtual format may reduce our ability to effectively disseminate scientific information about our products, which may result in decreased physician awareness of our products, their approved indications and their efficacy and safety. The evolving effects of the COVID-19 pandemic appear to have negatively affected and may continue to negatively affect our product sales due to challenges in patient access to healthcare settings, significant increases in unemployment and the resulting loss of individual health insurance coverage, and inability to access government healthcare programs due to backlogs, some or all of which appear to have negatively affected diagnosis rates, may affect side effect management and course of treatment and may increase enrollment in our patient support programs. With respect to ADCETRIS specifically, impacts associated with the COVID-19 pandemic appear to have led to a reduction in the rate of Hodgkin lymphoma diagnoses and may further adversely affect the rate of Hodgkin lymphoma diagnoses in the future. In addition, we have experienced lower than expected levels of our research and development spending, in part as a result of the COVID-19 pandemic. This includes some delays in clinical trial enrollment as well as reduced travel due to the conversion of medical and scientific meetings to virtual formats. While we do not at this time anticipate the need to revise our publicly reported projected clinical milestone dates as a result of the effects of the COVID-19 pandemic, there may be some impacts to our clinical study timelines, which, depending upon the duration and severity of the evolving effects of the COVID-19 pandemic, could ultimately delay data availability. In addition, many of our non-essential on-site research activities are currently significantly reduced as a result of the COVID-19 pandemic, which may negatively impact the number of IND candidates entering our clinical pipeline in future years. The extent to which the risks and evolving effects of the COVID-19 pandemic impact our business, our ability to generate sales of and revenues from our approved products, and our clinical development and regulatory efforts will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate duration and severity of the pandemic, government actions, such as travel restrictions, quarantines and social distancing requirements in the U.S. and in other countries, business closures or business disruptions and the effectiveness of actions taken in the U.S. and in other countries to contain and treat the disease, including the effectiveness and timing of vaccine programs in the U.S. and worldwide. For more information on the risks and uncertainties associated with the evolving effects of the COVID-19 pandemic on our business, our ability to generate sales of and revenues from our approved products, and our clinical development and regulatory efforts, see “Part II Item 1A—Risk Factors.”

Because of the above and other factors, our results of operations may vary substantially from year to year and from quarter to quarter and, as a result, we believe that period to period comparisons of our operating results may not be meaningful and should not be relied upon as being indicative of our future performance.

Financial summary

For the six months ended June 30, 2021, our total revenues increased to $720.5 million, compared to $512.5 million for the same period in 2020. This growth was primarily driven by the U.S. launch of TUKYSA in April 2020 and higher PADCEV net product sales.

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For the six months ended June 30, 2021, total costs and expenses increased to $932.5 million, compared to $718.8 million for the same period in 2020. This reflected higher selling, general and administrative expenses, research and development expenses, and cost of sales.

As of June 30, 2021, we had $2.5 billion in cash, cash equivalents and investments and $3.4 billion in total stockholders’ equity.

Results of operations

Net product sales


	Three months ended June 30,						Six months ended June 30,
(dollars in thousands)	2021		2020		% Change		2021		2020		% Change
ADCETRIS	$	181,912	$	167,535	9	%	$	344,484	$	331,588	4	%
PADCEV	82,405		57,175		44	%	152,163		91,636		66	%
TUKYSA	83,021		15,755		427	%	153,279		15,755		873	%
Net product sales	$	347,338	$	240,465	44	%	$	649,926	$	438,979	48	%

Our net product sales grew 44% and 48% during the three and six months ended June 30, 2021, as compared to the comparable periods in 2020, primarily driven by increased sales volumes following the launch of TUKYSA in April 2020 and higher PADCEV net product sales. PADCEV net product sales grew primarily due to higher volumes, driven by increased utilization in its initial approved indication for the 2021 periods, following the U.S. launch in December 2019. ADCETRIS net product sales increased during the three and six months ended June 30, 2021, as compared to the comparable periods in 2020, primarily due to higher volumes of vials sold.

We expect growth in net product sales in 2021 from 2020 to be primarily driven by sales growth of TUKYSA and PADCEV, and to a lesser extent, ADCETRIS. Refer to “Overview—Outlook” above for additional information.

Gross-to-net deductions, net of related payments and credits, were as follows:


(in thousands)	Rebates and chargebacks		Distribution fees, product returns and other		Total
Balance as of December 31, 2020	$	44,193	$	15,689	$	59,882
Provision related to current period sales	236,039		20,232		256,271
Adjustment for prior period sales	(2,687)		(613)		(3,300)
Payments/credits for current period sales	(197,286)		(13,961)		(211,247)
Payments/credits for prior period sales	(26,949)		(6,073)		(33,022)
Balance as of June 30, 2021	$	53,310	$	15,274	$	68,584

Government-mandated rebates and chargebacks are the most significant component of our total gross-to-net deductions and the discount percentage has been increasing. These discount percentages increased during the six months ended June 30, 2021 as a result of price increases for ADCETRIS that we instituted that exceeded the rate of inflation. The most significant portion of our gross-to-net accrual balances as of June 30, 2021 and 2020 was for ADCETRIS Medicaid rebates. We expect future gross-to-net deductions to fluctuate based on the volume of purchases eligible for government mandated discounts and rebates, as well as changes in the discount percentage which is impacted by potential future price increases, the rate of inflation, and other factors. We expect gross-to-net deductions to increase in 2021 as compared to 2020, driven by anticipated growth in our gross product sales.

Royalty revenues

Royalty revenues primarily reflect royalties earned under the ADCETRIS collaboration with Takeda. These royalties include commercial sales-based milestones and sales royalties. Sales royalties are based on a percentage of Takeda’s net sales of ADCETRIS, with rates that range from the mid-teens to the mid-twenties based on annual net sales tiers. Takeda bears third-party royalty costs owed on its sales of ADCETRIS. This amount is included in royalty revenues. Royalty revenues also reflect, to a lesser extent, amounts from Genentech earned on net sales of Polivy beginning in 2019, and amounts from GlaxoSmithKline earned on net sales of Blenrep beginning in 2020, both of which utilizes technology that we have licensed to them.

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	Three months ended June 30,						Six months ended June 30,
(dollars in thousands)	2021		2020		% Change		2021		2020		% Change
Royalty revenues	$	36,296	$	31,235	16	%	$	63,514	$	51,595	23	%

Royalty revenues increased for the three and six months ended June 30, 2021 from the comparable periods in 2020, primarily due to growth in Takeda net sales of ADCETRIS in its territories, as well as higher royalties earned on net sales of Blenrep and Polivy by our other licensees.

We expect that royalty revenues will increase in 2021 as compared to 2020 primarily due to higher royalties from anticipated growth in ADCETRIS sales volume by Takeda, as well as anticipated growth of our other licensees' net product sales.

Collaboration and license agreement revenues

Collaboration and license agreement revenues reflect amounts earned under certain of our license and collaboration agreements. These revenues reflect license fees, payments received by us for technology access and maintenance fees, sales of drug supply to our collaborators, milestone payments, and reimbursement payments for research and development support that we provide to our collaborators.

Collaboration and license agreement revenues by collaborator were as follows:


	Three months ended June 30,						Six months ended June 30,
(dollars in thousands)	2021		2020		% Change		2021		2020		% Change

Takeda	$	—	$	5,598	(100)	%	1,851		15,913		(88)	%





Other	4,844		700		592	%	5,169		6,025		(14)	%
Total collaboration and license agreement revenues	$	4,844	$	6,298	(23)	%	$	7,020	$	21,938	(68)	%

Collaboration revenues from Takeda for the three and six months ended June 30, 2021 declined primarily due to a decrease in ADCETRIS drug supply sold to Takeda.

Other collaboration revenues increased for the three months ended June 30, 2021 as compared to the comparable period in 2020 primarily due to drug supply sold to a collaborator in the 2021 period. Other collaboration revenues were relatively consistent for the three months ended June 30, 2021, as compared to the comparable period.

We expect our collaboration and license agreement revenues in 2021 to significantly decrease compared to 2020, driven by the amounts recognized related to the agreements with Merck in the third and fourth quarters of 2020. Our collaboration and license agreement revenues are impacted by the term and duration of those agreements and by progress-dependent milestones, annual maintenance fees, and reimbursement of materials and support services. Collaboration and license agreement revenues may vary substantially from year to year and quarter to quarter depending on the progress made by our collaborators with their product candidates, amount of drug supplied to our collaborators, the level of support we provide to our collaborators, specifically to Takeda under our ADCETRIS collaboration, the timing of milestones achieved, and our ability to enter into potential additional collaboration and license agreements.

Collaboration agreements

Takeda ADCETRIS collaboration

We have an agreement with Takeda for the global co-development of ADCETRIS and the commercialization of ADCETRIS by Takeda in its territory. We recognize payments from Takeda, including progress-dependent development and regulatory milestone payments, reimbursement for drug supplied, and net development cost reimbursement payments, as collaboration and license agreement revenues upon transfer of control of the goods or services over the development period. When the performance of development activities under the collaboration results in us making a reimbursement payment to Takeda, that payment reduces collaboration and license agreement revenues. We also recognize royalty revenues based on a percentage of Takeda's net sales of ADCETRIS in its territories, ranging from the mid-teens to the mid-twenties based on annual net sales tiers, as well as sales-based milestones. Takeda bears a portion of third-party royalty costs owed on its sales of ADCETRIS, which is included in royalty revenues.

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Astellas PADCEV collaboration

We have a collaboration agreement with Agensys, Inc., which subsequently became an affiliate of Astellas, to jointly research, develop and commercialize ADCs for the treatment of several types of cancer. Under this collaboration, we and Astellas are equally co-funding all development and certain commercialization costs for PADCEV. In the U.S., we and Astellas jointly promote PADCEV. We record sales of PADCEV in the U.S. and are responsible for all U.S. distribution activities. The companies each bear the costs of their own sales organizations in the U.S., equally share certain other costs associated with commercializing PADCEV in the U.S., and equally share in any profits realized in the U.S. Gross profit share payments owed to Astellas in the U.S. under the joint commercialization agreement are recorded in cost of sales. Outside the U.S., we have commercialization rights in all countries in North and South America, and Astellas has commercialization rights in the rest of the world, including Europe, Asia, Australia and Africa.

Astellas or its affiliates are responsible for manufacturing PADCEV for development and commercial use. However, we are responsible for packaging and labeling in countries in which we sell PADCEV. In addition, if the parties determine that a second source is required, we will be responsible for establishing such second source whether internally or through a third party.

Genmab tisotumab vedotin collaboration

We have an agreement with Genmab to develop and commercialize ADCs for the treatment of several types of cancer, under which we previously exercised a co-development option for tisotumab vedotin. Under this collaboration, we and Genmab are co-funding all development costs for tisotumab vedotin.

In 2020, we and Genmab entered into a joint commercialization agreement to govern the global commercialization of tisotumab vedotin, if we are successful in obtaining any regulatory approvals of tisotumab vedotin:

•In the U.S., we and Genmab will co-promote tisotumab vedotin. We will record sales of tisotumab vedotin in the U.S. and are responsible for leading U.S. distribution activities. The companies will each hire and maintain 50% of the sales representatives and medical science liaisons, equally share those and certain other costs associated with commercializing tisotumab vedotin in the U.S., individually bear the costs of certain other personnel in the U.S., and equally share in any profits realized in the U.S. In February 2021, a BLA for tisotumab vedotin was submitted to the FDA seeking accelerated approval for the treatment of patients with recurrent or metastatic cervical cancer with disease progression on or after chemotherapy, and in April 2021, FDA accepted the BLA for Priority Review, and set target action date of October 10, 2021.

•Outside the U.S., we have commercialization rights in the rest of the world except for Japan, where Genmab has commercialization rights. In Europe, China, and Japan, we and Genmab equally share 50% of the costs associated with commercializing tisotumab vedotin as well as any profits realized in these markets. In markets outside the U.S. other than Europe, China, and Japan, aside from certain costs specified in the agreement, we are solely responsible for all costs associated with commercializing tisotumab vedotin and will pay Genmab a royalty based on a percentage of aggregate net sales ranging from the mid-teens to mid-twenties.

Merck LV collaboration

In September 2020, we entered into the LV Agreement with a subsidiary of Merck. We are pursuing a broad joint development program evaluating LV as monotherapy and in combination setting, including with Merck’s anti-PD-1 therapy KEYTRUDA® (pembrolizumab) in triple-negative breast cancer, hormone receptor-positive breast cancer and other LIV-1-expressing solid tumors. Under the terms of the LV Agreement, we granted Merck a co-exclusive worldwide development and commercialization license for LV, and agreed to jointly develop and commercialize LV on a worldwide basis. We received an upfront cash payment of $600.0 million, and we are eligible to receive up to $850.0 million in milestone payments upon the initiation of certain clinical trials and regulatory approval in certain major markets, and up to an additional $1.8 billion in milestone payments upon the achievement of specified annual global net sales thresholds of LV. Each company is responsible for 50% of global costs to develop and commercialize LV and will receive 50% of potential future profits. In connection with the LV Agreement, we entered into a stock purchase agreement with Merck in September 2020, pursuant to which we agreed to issue and sell, and Merck agreed to purchase 5,000,000 newly-issued shares of our common stock, at a purchase price of $200 per share, for an aggregate purchase price of $1.0 billion, referred to as the Purchase Agreement. We closed the Purchase Agreement in October 2020.

We recognized license revenue of $850.1 million during 2020 associated with the LV Agreement and Purchase Agreement, and we recognize such cost sharing proportionately with the performance of the underlying activities, while recording Merck’s reimbursement of our expenses as a reduction of research and development expenses.

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Merck TUKYSA collaboration

In September 2020, we entered into the TUKYSA Agreement with a subsidiary of Merck. We granted exclusive rights to commercialize TUKYSA in Asia, the Middle East and Latin America and other regions outside of the U.S., Canada and Europe. Under the terms of the TUKYSA Agreement, Merck is responsible for marketing applications for approval in its territory, supported by the positive results from the HER2CLIMB clinical trial. We retained commercial rights in, and will record sales in, the U.S., Canada and Europe. Merck is also co-funding a portion of the TUKYSA global development plan, which encompasses several ongoing and planned trials across HER2-positive cancers. We will continue to lead ongoing TUKYSA global development operational execution. Merck will solely fund and conduct country-specific clinical trials necessary to support anticipated regulatory applications in its territories. We received an upfront cash payment from Merck of $125.0 million and also received $85.0 million in prepaid research and development funding to be applied to Merck’s global development cost sharing obligations. We are eligible to receive progress-dependent milestone payments of up to $65.0 million, and are entitled to receive tiered royalties on sales of TUKYSA by Merck that begin in the low twenty percent range and escalate based sales volume by Merck in its territory.

We recognized license revenue of $125.0 million during 2020 associated with the TUKYSA Agreement, and we recognize such cost sharing proportionately with the performance of the underlying activities, while recording Merck’s reimbursement of our expenses as a reduction of research and development expenses. Sales of TUKYSA drug product supplied is included in collaboration and license agreement revenues. The prepayment received for global development cost-sharing was recorded as a co-development liability in accrued liabilities and other or other long-term liabilities on our condensed consolidated balance sheet as of June 30, 2021. As joint development expenses are incurred, we recognize the portion of Merck’s prepayment as a reduction of our research and development expenses on our condensed consolidated statements of comprehensive loss. As of June 30, 2021 and December 30, 2020, $70.3 million and $80.9 million was recorded as the remaining co-development liability, respectively.

Other technology collaboration and license agreements

We have other collaboration and license agreements for our ADC technology with a number of biotechnology and pharmaceutical companies. We typically receive upfront cash payments and progress- and sales-dependent milestones for the achievement by our licensees of certain events, and annual maintenance fees and support fees for research and development services and materials provided under the agreements. These amounts are recognized as revenue over the performance obligation period if the license is determined not to be distinct from other goods and services provided, or, if there is no performance obligation, upon transfer of control of the goods or services to the customer.

Cost of sales

Cost of sales includes manufacturing and distribution costs of product sold, gross profit share with Astellas pursuant to our PADCEV collaboration, amortization of acquired technology license costs, royalties owed on our PADCEV net product sales and global ADCETRIS and TUKYSA net product sales.


	Three months ended June 30,						Six months ended June 30,
(dollars in thousands)	2021		2020		% Change		2021		2020		% Change




Cost of sales	$	78,090	$	48,244	62	%	$	142,225	$	77,665	83	%

Cost of sales increased for the three and six months ended June 30, 2021 from the comparable periods in 2020, driven by the Astellas gross profit share related to PADCEV net product sales, amortization expense associated with acquired TUKYSA technology costs, and in-licensing royalties owed on PADCEV and TUKYSA net product sales. The gross profit share with Astellas totaled $38.6 million and $71.1 million for the three and six months ended June 30, 2021, respectively, as compared to $27.1 million and $43.5 million for the comparable periods in 2020. We recorded amortization expense of $11.5 million for acquired TUKYSA technology costs during the six months ended June 30, 2021, as compared to $4.7 million during the six months ended June 30, 2020.

We expect cost of sales to increase in 2021 as compared to 2020 as a result of the net product sales growth of our marketed products, contributing to higher anticipated manufacturing and distribution costs for goods sold and increased royalties owed on certain net sales of our products. This growth also includes higher anticipated gross profit share with Astellas under our PADCEV collaboration, and the full-year 2021 amortization of acquired TUKYSA technology costs.

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Research and development


	Three months ended June 30,						Six months ended June 30,
(dollars in thousands)	2021		2020		% Change		2021		2020		% Change
Research and clinical development	$	164,869	$	137,158	20	%	$	338,873	$	270,387	25	%
Process sciences and manufacturing	69,992		60,919		15	%	126,413		122,889		3	%
Total research and development	$	234,861	$	198,077	19	%	$	465,286	$	393,276	18	%

Research and clinical development expenses include personnel, occupancy and laboratory expenses, technology access fees, preclinical translational biology and in vitro and in vivo studies, IND-enabling pharmacology and toxicology studies, and external clinical trial costs including costs for clinical sites, clinical research organizations, contractors and regulatory activities associated with conducting human clinical trials. The increase for the three and six months ended June 30, 2021 from the comparable periods in 2020 primarily reflected higher employee-related costs and external development costs mainly to support our early- and late-stage pipeline of product candidates.

Process sciences and manufacturing expenses include personnel and occupancy expenses, manufacturing costs for the scale-up and pre-approval manufacturing of product candidates used in research and our clinical trials, and costs for drug product supplied to our collaborators. Process sciences and manufacturing expenses also include quality control and assurance activities, and storage and shipment of our product candidates. The increase for the three and six months ended June 30, 2021 from the comparable period in 2020 primarily reflected the timing of our manufacturing of product candidates for use in clinical trials, as well as increased manufacturing of our approved products.

We utilize our employee and infrastructure resources across multiple research and development projects. We track human resource efforts expended on many of our programs for purposes of billing our collaborators for time incurred at agreed upon rates and for resource planning. We do not account for actual costs on a project basis as it relates to our infrastructure, facility, employee and other indirect costs; however, we do separately track significant third-party costs including clinical trial costs, manufacturing costs and other contracted service costs on a project basis. To that end, the following table shows third-party costs incurred for research, contract manufacturing of our product candidates and clinical and regulatory services, as well as development milestone payments for in-licensed technology for our products and certain of our clinical-stage product candidates. The table also presents other costs and overhead consisting of third-party costs for our preclinical stage programs, personnel, facilities, manufacturing, and other indirect costs not directly charged to development programs, as well as cost reimbursements received from or payments made to collaborators related to our product candidates.


	Three months ended June 30,				Six months ended June 30,
(dollars in thousands)	2021		2020		2021		2020
ADCETRIS (brentuximab vedotin)	$	10,990	$	11,396	$	22,869	$	22,962
TUKYSA (tucatinib)	28,781		15,444		56,903		37,970
PADCEV (enfortumab vedotin-ejfv)	15,966		5,877		26,952		14,006
Tisotumab vedotin	9,384		3,868		21,388		7,443
Ladiratuzumab vedotin	6,955		4,592		11,800		8,960
Other clinical stage programs	11,567		16,197		32,163		22,743
Total third-party costs for clinical stage programs	83,643		57,374		172,075		114,084
Other costs, overhead, and net cost-sharing with collaborators	151,218		140,703		293,211		279,192
Total research and development	$	234,861	$	198,077	$	465,286	$	393,276

Third-party costs for ADCETRIS were consistent for three and six months ended June 30, 2021 as compared to the 2020 periods. Third-party costs for TUKYSA, PADCEV, tisotumab vedotin, and ladiratuzumab vedotin increased for the three and six months ended June 30, 2021 as compared to the 2020 periods, due to higher clinical trial costs.

Third-party costs for other clinical stage programs decreased for the three months ended June 30, 2021, as compared to the 2020 period, due to lower manufacturing costs, and increased for the six months ended June 30, 2021 as compared to the 2020 period, primarily due to an in-license development milestone payment made in the first quarter of 2021 related to one of our clinical pipeline programs.

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Other costs, overhead, and net cost-sharing with collaborators include third-party costs of our preclinical programs and costs associated with personnel and facilities. In total, these net costs were relatively consistent for the three and six months ended June 30, 2021 from the comparable periods in 2020. During the three months ended June 30, 2021 and 2020, net cost-sharing reimbursements from and payments made to collaborators were $19.0 million and $0.8 million, respectively. During the six months ended June 30, 2021 and 2020, net cost-sharing reimbursements from and payments made to collaborators were $40.3 million and $5.7 million, respectively.

In order to advance our product candidates toward commercialization, the product candidates are tested in numerous preclinical safety, toxicology and efficacy studies. We then conduct clinical trials for those product candidates that take several years or more to complete. The length of time varies substantially based upon the type, complexity, novelty and intended use of a product candidate. We will also need to conduct additional clinical trials in order to expand labeled indications of use for our commercial products. The outcome of our clinical trials is uncertain. The cost of clinical trials may vary significantly as a result of a variety of factors, including the number of patients enrolled, patient site costs, quantity and source of drug supply required, safety and efficacy of the product candidate, and extent of regulatory efforts, among others.

We anticipate that our total research and development expenses in 2021 will increase compared to 2020, primarily due to higher costs for the continued development of our approved products and product candidates.

The risks and uncertainties associated with our research and development projects are discussed more fully in “Part II Item 1A—Risk Factors.” As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects, anticipated completion dates, or when and to what extent we will receive cash inflows from the commercialization and sale of our products in any additional approved indications or of any of our product candidates.

Selling, general and administrative


	Three months ended June 30,						Six months ended June 30,
(dollars in thousands)	2021		2020		% Change		2021		2020		% Change
Selling, general and administrative	$	165,130	$	125,642	31	%	$	324,972	$	247,891	31	%

Selling, general and administrative expenses increased for the three and six months ended June 30, 2021 from the comparable periods in 2020, reflecting investments to support European TUKYSA launches and our continued growth in the U.S. and Europe.

We anticipate that selling, general and administrative expenses will increase in 2021 as compared to 2020 as we continue our commercial activities in support of product launches, and invest in infrastructure to support our continued growth in the U.S. and Europe.

Investment and other income, net


	Three months ended June 30,						Six months ended June 30,
(dollars in thousands)	2021		2020		% Change		2021		2020		% Change
Gain on equity securities	$	4,670	$	70,683	(93)	%	$	4,929	$	11,604	(58)	%

Investment and other income, net	357		2,092		(83)	%	1,098		5,124		(79)	%
Total investment and other income, net	$	5,027	$	72,775	(93)	%	$	6,027	$	16,728	(64)	%

Investment and other income, net includes other non-operating income and loss, such as unrealized holding gains and losses on equity securities, realized gains and losses on equity and debt securities, and amounts earned on our investments in U.S. Treasury securities.

Investment income decreased for the three months ended June 30, 2021 as compared to the comparable period in 2020 primarily driven by a $70.7 million gain from the sale of certain equity securities in April 2020. The decrease for the six months ended June 30, 2021 as compared to the comparable period in 2020 was also impacted by a $59.1 million decline in the fair value of our equity securities during the first quarter of 2020. Our investment portfolio experienced lower average yields during the three and six months ended June 30, 2021 as compared to the 2020 periods.

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Liquidity and capital resources


(in thousands)	June 30, 2021		December 31, 2020
Cash, cash equivalents, and investments	$	2,451,612	$	2,660,250
Working capital	2,664,678		2,674,246
Stockholders’ equity	3,391,274		3,488,100


	Six months ended June 30,
(in thousands)	2021		2020
Cash provided (used) by:
Operating activities	$	(197,770)	$	(155,343)
Investing activities	20,130		(55,113)
Financing activities	32,992		53,271

The change in net cash from operating activities was primarily related to the change in our net loss, working capital fluctuations and changes in our non-cash expenses, all of which are highly variable. The change in net cash from investing activities reflected differences between the proceeds received from sale and maturity of our investments, proceeds from sales of securities, and amounts reinvested. The change in net cash from financing activities was driven by differences in proceeds from stock option exercises and our employee stock purchase plan.

We primarily have financed our operations through the issuance of our common stock, collections from commercial sales of our products, amounts received pursuant to license and collaboration agreements, and royalty revenues. To a lesser degree, we also have financed our operations through investment income. These financing and revenue sources have allowed us to maintain adequate levels of cash and investments.

Our cash, cash equivalents, and investments are held in a variety of non-interest bearing bank accounts and interest-bearing instruments subject to investment guidelines allowing for holdings in U.S. government and agency securities, corporate securities, taxable municipal bonds, commercial paper and money market accounts. Our investment portfolio is structured to provide for investment maturities and access to cash to fund our anticipated working capital needs. However, if our liquidity needs should be accelerated for any reason in the near term, or investments do not pay at maturity, we may be required to sell investment securities in our portfolio prior to their scheduled maturities, which may result in a loss. As of June 30, 2021, we had $2.5 billion held in cash, cash equivalents and investments.

At our currently planned spending rates, we believe that our existing financial resources, together with product and royalty revenues, and the fees. milestone payments and reimbursements we expect to receive under our existing collaboration and license agreements, will be sufficient to fund our operations for at least the next twelve months.

We expect to make additional capital outlays and to increase operating expenditures over the next several years as we hire additional employees, and support our development, commercialization, invest in our facilities, and expand globally, which may require us to raise additional capital. Further, we actively evaluate various strategic transactions on an ongoing basis, including licensing or otherwise acquiring complementary products, technologies or businesses, and we may require significant additional capital in order to complete or otherwise provide funding for such transactions. We may seek additional capital through some or all of the following methods: corporate collaborations, licensing arrangements, and public or private debt or equity financings. We do not know whether additional capital will be available when needed, or that, if available, we will obtain financing on terms favorable to us or our stockholders. If we are unable to raise additional funds when we need them, our business and operations may be adversely affected.

Commitments

Our future minimum contractual commitments were reported in our Annual Report on Form 10-K for the year ended December 31, 2020.

In June 2021, we entered into we entered into a lease agreement for an approximately 258,000 square feet building complex to be constructed by the landlord on approximately 20.5 acres of land in Everett, Washington. We expect to make a significant capital investment in the facility and intend to use the building for future manufacturing, laboratory, and office space. Under the terms of the lease, base rent is payable at an initial rate of $4.0 million per year, subject to annual escalations of 3% during the initial term of 20 years. The lease commences on the date when construction and delivery of the building shell and related improvements by the landlord have been substantially completed. We have an option to renew the lease for two additional terms of ten years each. In addition, we have an option to purchase the premises in the future.

Excluding the lease agreement described above, our future minimum contractual commitments have not changed materially from the amounts previously reported.

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Critical accounting policies

The preparation of financial statements in accordance with generally accepted accounting principles, or GAAP, requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We believe the following critical accounting policies describe the more significant judgments and estimates used in the preparation of our financial statements.

We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from those estimates. Our critical accounting policies, those with the more significant judgments and estimates, used in the preparation of our financial statements for the six months ended June 30, 2021 were consistent with those in Part II Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020.

Recent accounting pronouncements

Refer to “Part I Item 1 Note 1–-Summary of significant accounting policies” for a discussion on recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risk disclosures as set forth in Part II Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2020.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended) prior to the filing of this quarterly report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures were, in design and operation, effective at the reasonable assurance level.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.

(b) Changes in internal control over financial reporting. There have not been any changes in our internal control over financial reporting during the quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

The information required to be set forth under this Item 1 is incorporated by reference to “Note 9. Legal matters” of the Notes to Condensed Consolidated Financial Statements included in Part 1 Item 1 of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

You should carefully consider the following risk factors, in addition to the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes. If any of the events described in the following risk factors occurs, our business, operating results and financial condition could be seriously harmed. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this Quarterly Report on Form 10-Q.

Risk Factor Summary

Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks that we face, follows this summary. This summary is qualified in its entirety by that more complete discussion of such risks and uncertainties.

• Our success depends on our ability to effectively commercialize our products. If we and our collaborators are unable to effectively commercialize our products and to expand their utilization, our ability to generate significant revenue and our prospects for profitability will be adversely affected.

• Our success also depends on our ability to obtain regulatory approvals for our product candidates and for our current products in additional territories, as well as our ability to expand the labeled indications of use for our current products, and, if the requisite approvals are obtained, our ability to successfully launch and commercialize our products in their approved indications. Our inability to do so could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

• Reports of adverse events or safety concerns involving our products or product candidates could delay or prevent us from obtaining or maintaining regulatory approvals or could negatively impact sales of our products or the prospects for our product candidates.

• Clinical trials are expensive and time consuming, may take longer than we expect or may not be completed at all, and their outcome is uncertain.

• The successful commercialization of our products and our product candidates will depend on a variety of factors, including the extent to which governmental authorities and health insurers establish adequate coverage and reimbursement levels and pricing policies, and the acceptance of our products by the medical community and patients.

• Our product candidates are in various stages of development, and it is possible that none of our product candidates will ever become commercial products.

• Any failures or setbacks in our ADC development program or our other platform technologies could negatively affect our business and financial position.

• We face intense competition and rapid technological change, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.

• Even if we and our collaborators obtain regulatory approvals to market our current and any future approved products, we and our collaborators will remain subject to extensive ongoing regulatory obligations and oversight, including post-approval requirements, that could result in significant additional expense and could negatively impact our and our collaborators’ ability to commercialize our current and any future approved products.

• Healthcare law and policy changes may negatively impact our business, including by decreasing the prices that we and our collaborators receive for our products.

• We are subject to various state, federal and international laws and regulations, including healthcare laws and regulations, that may impact our business and could subject us to significant fines and penalties or other negative consequences.

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• We depend on collaborative relationships with other companies to assist in the development and commercialization of our products and some of our product candidates and for the development and commercialization of other product candidates utilizing or incorporating our technologies. If we are not able to locate suitable collaborators or if our collaborators do not perform as expected, this may negatively affect our ability to commercialize our products, develop and commercialize our product candidates and/or generate revenues through technology licensing, or may otherwise negatively affect our business.

• We currently rely on third-party manufacturers and other third parties for production of our drug products and our dependence on these manufacturers may impair the continued development and commercialization of our products and product candidates.

• If we are unable to enforce our intellectual property rights or if we fail to sustain and further procure additional intellectual property rights, we may not be able to successfully commercialize our products or any future products and competitors may be able to develop competing therapies.

• We have been and may in the future be subject to litigation, which could result in substantial damages and may divert management’s time and attention from our business.

• We and our collaborators rely on license agreements for certain aspects of our products and product candidates and technologies such as our ADC technology. Failure to maintain these license agreements or to secure any required new licenses could prevent us from continuing to develop and commercialize our products and product candidates.

• The evolving effects of the COVID-19 pandemic and global economic slowdown could have further adverse effects on our business, including our commercialization efforts, supply chain, regulatory activities, clinical development activities and other business operations.

• If we are unable to manage our growth, our business, financial condition, results of operations and prospects may be adversely affected.

• Risks associated with our expanding operations in countries outside the U.S. could materially adversely affect our business.

• Our operating results are difficult to predict and may fluctuate. If our operating results are below the expectations of securities analysts or investors, the trading price of our stock could decline.

• We have a history of net losses. We expect to continue to incur net losses and may not achieve future sustained profitability for some time, if at all.

• Our stock price is volatile and our shares may suffer a decline in value.

• Our existing stockholders have significant control of our management and affairs.

Risks Related to Our Products, Product Candidates and Research and Development

Our success depends on our ability to effectively commercialize our products. If we and our collaborators are unable to effectively commercialize our products and to expand their utilization, our ability to generate significant revenue and our prospects for profitability will be adversely affected.

Our three marketed products are ADCETRIS®, or brentuximab vedotin, PADCEV®, or enfortumab vedotin-ejfv, and TUKYSA®, or tucatinib. Our ability to generate revenue from product sales and our prospects for profitability are substantially dependent on our and our collaborators’ ability to effectively commercialize ADCETRIS, PADCEV and TUKYSA and expand their utilization. We may not be able to fully realize the commercial potential of our products, or commercial sales of our products may be lower than our projections, for a number of reasons, including:

•we and our collaborators may be unable to effectively commercialize our products, including in any new markets or in any new indications for which we receive marketing approval;

•we may not be able to establish or demonstrate in the medical community the safety, efficacy or value of our products and their potential advantages compared to existing and future therapeutics in their approved indications;

•we and our collaborators may not be able to obtain and maintain regulatory and other required governmental approvals to market our products for their currently approved indications in any additional territories or for any additional indications, including any additional approvals for PADCEV or TUKYSA, which would limit the sales and commercial potential of the applicable product;

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•new competitive therapies in ADCETRIS’ approved indications, including immuno-oncology agents such as PD-1 inhibitors (e.g., pembrolizumab and nivolumab) and other novel agents (e.g., mogamulizumab), in PADCEV’s approved indications, including antibody drug conjugates (e.g., sacituzumab govitecan) and other targeted agents (e.g., erdafitinib for patients with select fibroblast growth factor receptor, or FGFR, genetic alterations), and in TUKYSA’s approved indication, including HER2-targeting agents (e.g., fam-trastuzumab deruxtecan-nxki, neratinib, margetuximab and SYD985), have been approved by regulatory authorities or may be submitted in the near term to regulatory authorities for approval, and these competitive products could negatively impact commercial sales of ADCETRIS, PADCEV or TUKYSA, respectively;

•there may be changes to the labeling for our products, including ADCETRIS, PADCEV or TUKYSA, that further restrict how we market and sell our products, including as a result of data collected from any of the clinical trials that we and our collaborators are conducting or may in the future conduct for our products, or from investigator-sponsored studies of our products, and/or as a result of the use of our products in their approved indications;

•the estimated incidence rate of new patients or the duration of therapy in the approved indications for our products may be lower than our projections;

•there may continue to be adverse results or events reported in connection with the use of our products or product candidates, including in any of the clinical trials that we or our collaborators are conducting, or may conduct in the future, for our products or product candidates;

•the negative impacts to our commercialization efforts, and those of our collaborators, resulting from the risks and evolving effects of the COVID-19 pandemic may increase or become more severe;

•in the case of PADCEV, our joint commercialization efforts in the U.S. under our collaboration with an affiliate of Astellas Pharma Inc., or Astellas, may be unsuccessful or we may encounter challenges in joint decision making and joint execution that adversely affect PADCEV product sales;

•our products may be impacted by adverse reimbursement and coverage policies from government and private payors such as Medicare, Medicaid, insurance companies, health maintenance organizations and other plan administrators, or may be subject to pricing pressures enacted by industry organizations or state and federal governments, including as a result of increased scrutiny over pharmaceutical pricing or otherwise;

•the relative price of our products may be higher than alternative treatment options, and therefore their reimbursement may be limited by private and governmental insurers;

•physicians may be reluctant to prescribe our products due to side effects associated with their use or until longer term efficacy and safety data exist;

•there may be changed or increased regulatory restrictions;

•we may not have adequate financial or other resources to effectively commercialize our products; and

•we may not be able to obtain adequate commercial supplies of our products to meet demand or at an acceptable cost.

In addition, the success of our product collaborations and the activities of our collaborators will significantly impact the development and commercialization of our products. We cannot control the amount and timing of resources that our collaborators dedicate to the development and commercialization of ADCETRIS, PADCEV or TUKYSA, or to their marketing and distribution. Our ability to generate royalty revenues from ADCETRIS product sales by Takeda Pharmaceutical Company Limited, or Takeda, and TUKYSA product sales by our collaborator, a subsidiary of Merck & Co., Inc., or Merck, depends on their respective abilities to obtain regulatory approvals for ADCETRIS and TUKYSA in their territories, and to achieve market acceptance of, and to otherwise effectively market, ADCETRIS and TUKYSA in their territories. Our ability to generate revenues from PADCEV product sales in the U.S. and in Astellas’ territories depends on our and Astellas’ ability to effectively jointly commercialize PADCEV in the U.S., and on Astellas’ ability to obtain regulatory approvals for, achieve market acceptance of, and otherwise effectively market, PADCEV in Astellas’ territories. Moreover, international sales of our products could be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions or barriers and changes in tariffs, global trade and political tensions, the evolving effects of the COVID-19 pandemic or otherwise.

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We are closely evaluating the impacts of the evolving effects of the COVID-19 pandemic on our ability and the ability of our collaborators to effectively market, sell and distribute our products and to develop our products and product candidates. Our field-based personnel are using a mix of in-person interactions and electronic communications, such as emails, phone calls and video conferences, to support healthcare providers and patients. Many healthcare professionals that we normally call on are working a greater proportion of their working schedule from home and are facing additional demands on their time during the ongoing COVID-19 pandemic. We are continuing to experience increased competition for virtual appointments with healthcare professionals and a significant reduction in the number of interactions our sales personnel are having with physicians. We expect the different quality of electronic interactions as compared with in-person interactions, as well as the reduced quantity of interactions during the COVID-19 pandemic, to reduce the effectiveness of our sales personnel, as well as those of our collaborators, which could negatively affect our product sales and those of our collaborators, as well as physician awareness of our products. In this regard, we believe that the need to conduct some of our activities virtually is negatively impacting our ability to connect with key customers, including those familiar with competitive products, and our ability to conduct payor engagements. We face a number of challenges that will limit our ability to fully resume in-person interactions for the foreseeable future, including increasing COVID-19 infection rates due to coronavirus mutations and/or low vaccination rates or otherwise, the need to navigate varying restrictions for entering healthcare facilities and the pandemic's impacts on employee childcare arrangements. In addition, the effects of the COVID-19 pandemic continue to evolve rapidly, and we may subsequently be forced to, or subsequently determine that we should, resume a more restrictive remote work model, whether as a result of further spikes or surges in COVID-19 infection or hospitalization rates or otherwise. Moreover, the long-term effects of the COVID-19 pandemic are also unknown and it is possible that following the pandemic, healthcare institutions could alter their policies with respect to in person visits by pharmaceutical company representatives. COVID-19 related restrictions could also present product distribution challenges as we utilize recently initiated distribution channels for TUKYSA. We also expect that the conversion of medical conferences to a virtual format may reduce our ability to effectively disseminate scientific information about our products, which may result in decreased physician awareness of our products, their approved indications and their efficacy and safety. The evolving effects of the COVID-19 pandemic appear to have negatively affected and may continue to negatively affect our product sales due to challenges in patient access to healthcare settings, significant increases in unemployment and the resulting loss of individual health insurance coverage, and inability to access government healthcare programs due to backlogs, some or all of which appear to have negatively affected diagnosis rates, may affect side effect management and course of treatment and may increase enrollment in our patient support programs. With respect to ADCETRIS specifically, impacts associated with the COVID-19 pandemic appear to have led to a reduction in the rate of Hodgkin lymphoma diagnoses and may further adversely affect the rate of Hodgkin lymphoma diagnoses in the future. In addition, we have experienced lower than expected levels of our research and development spending, in part as a result of the COVID-19 pandemic. This includes some delays in clinical trial enrollment as well as reduced travel due to the conversion of medical and scientific meetings to virtual formats. While we do not at this time anticipate the need to revise our publicly reported projected clinical milestone dates as a result of the effects of the COVID-19 pandemic, there may be some impacts to our clinical study timelines, which, depending upon the duration and severity of the evolving effects of the COVID-19 pandemic, could ultimately delay data availability. In addition, many of our non-essential on-site research activities are currently significantly reduced as a result of the COVID-19 pandemic, which may negatively impact the number of investigational new drug application, or IND, candidates entering our clinical pipeline in future years. The extent to which the risks and evolving effects of the COVID-19 pandemic impact our business, our ability to generate sales of and revenues from our approved products, and our clinical development and regulatory efforts will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate duration and severity of the pandemic, government actions, such as travel restrictions, quarantines and social distancing requirements in the U.S. and in other countries, business closures or business disruptions and the effectiveness of actions taken in the U.S. and in other countries to contain and treat the disease, including the effectiveness and timing of vaccine programs in the U.S. and worldwide.

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While we anticipate that sales of ADCETRIS will increase modestly in 2021 as compared to 2020, we have experienced and expect continued impacts associated with the COVID-19 pandemic, which impacts appear to have led to a reduction in the rate of Hodgkin lymphoma diagnoses and may further adversely affect the rate of Hodgkin lymphoma diagnoses in the future. We have also experienced an increase in gross-to-net deductions that we believe is due to a shift in the locations where ADCETRIS is administered, which has increased the proportion of ADCETRIS sales through the federal 340B drug discount program. We may also experience additional shifts from commercial payor coverage to government payor coverage in the U.S., which would further increase gross-to-net deductions. We also expect that our ability to maintain or continue to grow our ADCETRIS sales, if at all, will depend on our ability to establish or demonstrate to the medical community the value of ADCETRIS and its potential advantages compared to existing and future therapeutics in its approved indications, including in the frontline Hodgkin lymphoma indication, and the extent to which physicians make prescribing decisions with respect to ADCETRIS. Other important factors affecting our ADCETRIS sales include the incidence flow of patients eligible for treatment in ADCETRIS’ approved indications, the extent to which coverage and adequate levels of reimbursement for ADCETRIS are available from governments and other third-party payors, the impact of any healthcare reform measures that may be upheld, or adopted in the future, including measures that could result in more rigorous coverage criteria or reduce the price that we receive for ADCETRIS, increasing competition from competing therapies including pembrolizumab in multiple indications, including in the relapsed or refractory classical Hodgkin lymphoma indication, continuing impacts resulting from the evolving effects of the COVID-19 pandemic including potential further impacts from lower diagnosis rates, and the potential future approval of ADCETRIS in any additional indications. For these reasons, we cannot assure you that ADCETRIS sales will continue to grow or that we can maintain sales of ADCETRIS at or near current levels. In addition, as a result of these and other factors, our future ADCETRIS product sales can be difficult to accurately predict from period to period.

Our ability to realize the anticipated benefits from our investment in PADCEV is subject to a number of risks and uncertainties, including our and Astellas’ ability to successfully jointly market and commercialize PADCEV in the U.S. in its approved indications, the extent to which we and Astellas are able to obtain regulatory approvals of PADCEV in additional indications in the U.S., including in the frontline metastatic urothelial cancer setting, and in territories outside the U.S., the acceptance of PADCEV by the medical community and patients, the extent to which physicians make prescribing decisions with respect to PADCEV, the incidence flow of patients eligible for treatment in PADCEV’s approved indications, the duration of therapy for patients receiving PADCEV, the extent to which coverage and adequate levels of reimbursement for PADCEV are available from governments and other third-party payors, the impact of any healthcare reform measures that may be adopted in the future, including measures that could potentially result in more rigorous coverage criteria and additional downward pressure on the price that we receive for PADCEV, potential competition from competing therapies, the impact of conducting launch activities virtually during the COVID-19 pandemic and other impacts resulting from the evolving effects of the COVID-19 pandemic including potential negative impacts of reduced cancer diagnosis rates. In addition, as a result of these and other factors, including the lack of significant historical sales data, PADCEV sales are currently difficult to predict from period to period.

Our ability to realize the anticipated benefits of our investment in TUKYSA is subject to a number of risks and uncertainties, including our and Merck’s ability to successfully launch, market and commercialize TUKYSA in our respective territories in its approved indication, the extent to which we and Merck are able to obtain regulatory and other required governmental and pricing and reimbursement approvals of TUKYSA in additional territories, the extent to which we and Merck are able to obtain regulatory approvals of TUKYSA in additional indications, including earlier lines of breast cancer and other HER2-positive cancers, the acceptance of TUKYSA by the medical community and patients, competition from other therapies, our and Merck’s ability to accurately predict and supply product demand, the extent to which coverage and adequate levels of reimbursement will be available from governments and other third-party payors, the impact of any healthcare reform measures that may be adopted in the future, including measures that could potentially result in more rigorous coverage criteria and additional downward pressure on the price that we receive for TUKYSA, our ability to effectively commercialize a product outside of the U.S., the impact of conducting launch activities virtually during the COVID-19 pandemic and other impacts resulting from the evolving effects of the COVID-19 pandemic including potential negative impacts of reduced cancer diagnosis rates. In addition, as a result of these and other factors, including the lack of significant historical sales data, TUKYSA sales are currently difficult to predict from period to period.

Our ability to grow our product sales in future periods is also dependent on price increases, and we periodically increase the price of our products. Price increases on our products and negative publicity regarding drug pricing and price increases generally, whether on our products or products distributed by other pharmaceutical companies, could negatively affect market acceptance of, and sales of, our products. In any event, we cannot assure you that price increases we have taken or may take in the future will not in the future negatively affect our product sales.

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Our success also depends on our ability to obtain regulatory approvals for our product candidates and for our current products in additional territories, as well as our ability to expand the labeled indications of use for our current products, and, if the requisite approvals are obtained, our ability to successfully launch and commercialize our products in their approved indications. Our inability to do so could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Neither we nor our collaborators are permitted to market our product candidates in the U.S. or other countries until we obtain marketing approvals from the FDA and other applicable regulatory authorities, and we or our collaborators may never receive regulatory approval for the commercial sale of any of our product candidates. Likewise, we and our collaborators are required to obtain marketing approvals from applicable regulatory authorities in order to market our products in additional territories and to expand the labeled indications of use for our current products.

We have made and are continuing to make significant investments in a number of product candidates, including tisotumab vedotin and ladiratuzumab vedotin, and in seeking additional regulatory approvals for ADCETRIS, PADCEV and TUKYSA. However, obtaining marketing approval is a lengthy, expensive and uncertain process, approval is never assured, and we have limited experience in preparing and submitting the applications necessary to gain regulatory approvals. As an organization, we have limited experience applying for regulatory approvals in jurisdictions outside the U.S. and Canada. Further, the FDA and other regulatory agencies have substantial discretion in the approval process and determining when or whether regulatory approval will be obtained for our products and product candidates, including any regulatory approvals for ADCETRIS, PADCEV or TUKYSA in additional indications or in additional territories. In this regard, even if we believe the data collected from preclinical studies or clinical trials of our products and product candidates are promising, the FDA or any other regulatory authority or their respective advisors may disagree with our interpretations of this data. For example, although applications for approval of PADCEV were submitted in Australia and Canada under the FDA's Project Orbis program, as well as in Japan, Singapore, Brazil and Switzerland, based on results from the EV-201 and EV-301 trials, regulatory authorities or their advisors may disagree with our interpretation of the data from these trials and/or may otherwise determine not to approve these applications in a timely manner or at all. In addition, although the FDA granted Breakthrough Therapy designation to PADCEV in combination with pembrolizumab, for treatment of patients with unresectable locally advanced or metastatic urothelial cancer who are unable to receive cisplatin-based chemotherapy in the first-line setting, this Breakthrough Therapy designation does not increase the likelihood that PADCEV will receive marketing approval in this indication or will otherwise receive any additional marketing approvals. Likewise, although we and Genmab A/S, or Genmab, submitted a Biologics License Application, or BLA, to the FDA seeking accelerated approval for tisotumab vedotin based on the results of the innovaTV 204 trial, we cannot be certain that the data from the innovaTV 204 trial will be sufficient to support accelerated approval. We cannot predict whether the BLA that we and Genmab submitted for tisotumab vedotin will be approved in a timely manner or at all. Although the FDA accepted the BLA we and Genmab submitted for tisotumab vedotin for Priority Review, the Priority Review designation does not increase the likelihood that it will be approved. We also cannot assure you that any of our product candidates will receive any marketing approvals. In fact, it is possible that none of our product candidates will ever become commercial products. As a result, we may not realize the anticipated benefits of our investments in our product candidates.

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Similarly, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our products in any additional indications or territories, or of any future approved product. Regulatory agencies also may approve a product for fewer or narrower indications than requested, or with a label that includes only subtypes of a particular indication rather than a more general disease classification. In addition, our products and product candidates could take a significantly longer time to gain new or initial regulatory approvals than we expect or may never gain new or initial regulatory approvals, which could delay or eliminate any potential product revenue from sales of our product candidates or of our products in any additional indications or territories and significantly delay or prevent us from achieving profitability. In this regard, part of our growth strategy is to continue to explore the use of ADCETRIS in different CD30-expressing lymphomas, to seek approval for PADCEV in our territories outside the U.S., and to continue to explore the use of PADCEV and TUKYSA in additional indications. However, we and/or our collaborators may be unable to obtain any regulatory approvals for the commercial sale of any of our products in any additional indications or territories in a timely manner or at all. For example, as part of the Prescription Drug User Fee Act, or PDUFA, the FDA has a goal to review and act on a percentage of all regulatory submissions in a given time frame. However, the FDA does not always meet its PDUFA target action dates, and if the FDA were to fail to meet its PDUFA target action date in the future for any of our current or future regulatory applications, including the BLA that we and Genmab submitted for tisotumab vedotin, the commercialization of the affected product candidate, or of the affected product in any additional indications, could be delayed or impaired. In addition, while regulatory authorities have not to date notified us of any delays in their review of our regulatory applications and we have not yet experienced any obvious delays as a result of the effects of the COVID-19 pandemic, it is possible that we could experience delays in the timing of regulatory review and/or our interactions with regulatory authorities due to reduced working hours of governmental employees or by the diversion of authorities’ efforts and attention to approval of other therapeutics or other activities related to COVID-19, which could delay any approval decisions with respect to our or Merck’s regulatory applications for TUKYSA outside of the U.S., or our progress in advancing our development efforts with respect to other products and product candidates. Our interactions with regulatory authorities in other jurisdictions and across multiple products and product candidates continue but we cannot rule out the possibility of negative impacts on such interactions in the future as the effects of the pandemic continue to evolve.

Even if approved for commercial sale, our ability to realize the anticipated benefits from our investments in our product candidates and our efforts to expand the labeled indications of use and territories for our current products is subject to a number of risks and uncertainties, including our and our collaborators’ ability to successfully launch, market and commercialize our products, our reliance, in the case of PADCEV and tisotumab vedotin, on Astellas and Genmab, respectively, to effectively jointly launch and commercialize PADCEV and any potential future approved tisotumab vedotin product with us, our and our collaborators’ ability to successfully comply with rigorous post-marketing requirements, the acceptance of our approved products by the medical community and patients, and the extent to which coverage and reimbursement for our products will be available from government and health administration authorities, private health insurers and other third-party payors. For example, the commercialization of PADCEV and TUKYSA are at an early stage and may not be successful. In addition, the impacts of the evolving effects of the COVID-19 pandemic, including potential negative impacts of reduced cancer diagnosis rates, could limit our and our collaborators' abilities to effectively commercialize PADCEV and TUKYSA. Restrictions on in-person interactions with healthcare providers will likely negatively impact our ability to connect with key customers, including those familiar with competitive products, and our ability to conduct payor engagements. If we and our collaborators are unable to successfully commercialize our products, our growth prospects and our prospects for profitability would be adversely affected. Likewise, prior to TUKYSA, we had no prior experience as an organization launching or commercializing a product outside the U.S. and Canada, which could adversely affect our ability to maximize the commercial potential of TUKYSA. Further, while our TUKYSA collaboration with Merck is intended to accelerate global availability of TUKYSA, we are wholly reliant on Merck’s ability to effectively launch and commercialize TUKYSA in territories outside of the U.S., Canada and Europe, and we have limited control of Merck’s actions. In addition, in many countries, including many countries in Europe, the proposed pricing for a drug must be approved before it may be lawfully marketed, and in some cases there are additional individual country requirements, which will delay entry of a product into a market or, if pricing is not approved, will prevent us from selling a product in a country where we have received regulatory approval. The launch of a newly approved product or of an existing product in a new market, including the launch of TUKYSA in countries in Europe where TUKYSA has not yet launched, could be delayed due to a variety of factors, including supply constraints, delays in arranging a commercial infrastructure, delays in obtaining pricing and reimbursement approvals or other factors, any of which risks could be heightened by the risks and the evolving effects of the COVID-19 pandemic. If we or Merck experience delays or unforeseen difficulties due to any of these factors, planned launches in the countries in question would be delayed, which could negatively impact anticipated revenue from TUKYSA. In addition, if we or Merck are unable to obtain favorable pricing and reimbursement approvals in territories that represent significant potential markets, our anticipated revenue from and growth prospects for TUKYSA in Europe and other regions could be negatively affected.

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If we or our collaborators are unable to obtain and maintain necessary or desirable regulatory approvals for our products and product candidates, including for ADCETRIS, PADCEV and TUKYSA, in a timely manner, if at all, if the FDA or other regulatory authorities do not approve product labeling that is necessary or desirable for the successful commercialization of an approved product, or if sales of an approved product do not reach the levels we expect, then our anticipated revenue from our products and product candidates and our prospects for profitability would be adversely affected, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Reports of adverse events or safety concerns involving our products or product candidates could delay or prevent us from obtaining or maintaining regulatory approvals or could negatively impact sales of our products or the prospects for our product candidates.

Reports of adverse events or safety concerns involving our products could interrupt, delay or halt clinical trials of our products, including the post-approval confirmatory studies that regulatory agencies have required us or our collaborators to complete. In addition, reports of adverse events or safety concerns involving our products could result in regulatory authorities requiring that we update the applicable product’s prescribing information, or limiting, denying or withdrawing approval of our products for any or all indications, including previously approved indications. There are no assurances that patients receiving our products will not experience serious adverse events, including fatal events, in the future, whether the serious adverse events are disclosed in the prescribing information or are newly reported. Further, there are no assurances that patients receiving our products with co-morbid diseases not previously studied, such as autoimmune diseases, will not experience new or different serious adverse events in the future.

The prescribing information for ADCETRIS, PADCEV and TUKYSA includes warnings and precautions for various toxicities and reactions, including certain fatal reactions. The prescribing information for ADCETRIS also includes a boxed warning related to the risk that JC virus infection resulting in progressive multifocal leukoencephalopathy and death can occur in patients receiving ADCETRIS. The prescribing information for PADCEV also includes a boxed warning related to the risk that severe and fatal cutaneous adverse reactions, including Stevens-Johnson syndrome and toxic epidermal necrolysis, may occur in patients receiving PADCEV. We may be required to update the prescribing information for our products, including boxed warnings, limitations of use, contraindications, warnings and precautions, and adverse reactions, based on reports of adverse events or safety concerns, or implement a Risk Evaluation and Mitigation Strategy, or REMS. Side effects and toxicities associated with our products could affect the willingness of physicians to prescribe, and patients to utilize, our products and thus harm commercial sales of our products. Implementation of a REMS could advantage products that compete with ours or make it more difficult or expensive for us to distribute our products.

Likewise, reports of adverse events or safety concerns involving our product candidates could interrupt, delay or halt clinical trials of our product candidates, or could result in our or our collaborators’ inability to obtain regulatory approvals of our product candidates. Although we announced positive results from the innovaTV 204 trial, data continues to be generated in this trial and in other tisotumab vedotin trials. There may still be important new or evolving facts about the safety, efficacy, and risk versus benefit of each of our product candidates, including tisotumab vedotin, which may negatively impact our ability to develop and commercialize these product candidates. For example, in response to prior safety events observed in our clinical trials of PADCEV and tisotumab vedotin, including serious side effects and patient deaths, we have in the past, and may in the future, institute additional precautionary safety measures such as dosing caps and delays, enhanced monitoring for side effects, and modified patient inclusion and exclusion criteria. Additional and/or unexpected safety events could be observed in these or other trials that could delay or prevent us from advancing the clinical development of, or obtaining regulatory approvals for, our products and product candidates or require us to alter the approved labeling of our products, and may adversely affect our business, results of operations and prospects.

Concerns regarding the safety of our products or product candidates as a result of undesirable side effects identified during clinical testing or otherwise could cause the FDA to order us to cease further development or commercialization of our products or the product candidates. Undesirable side effects caused by our products or product candidates could also result in denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications, the requirement of additional trials, implementation of a REMS or the inclusion of unfavorable information in our product labeling, and in turn delay or prevent us from commercializing the applicable product or product candidate. In addition, actual or potential drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete a trial for our products or product candidates or result in potential product liability claims. Any of these events could prevent us from developing or commercializing the applicable product or product candidate, and could significantly harm our business, results of operations and prospects.

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Clinical trials are expensive and time consuming, may take longer than we expect or may not be completed at all, and their outcome is uncertain.

We and our collaborators are currently conducting multiple clinical trials for our products and product candidates and plan to commence additional trials of our products and product candidates in the future. Many of these trials, including pivotal trials, were initiated based on only limited clinical data and we cannot be certain that the design or conduct of, or data collected from, these trials will be sufficient to support FDA or any regulatory approvals outside the U.S.

Each of our clinical trials requires the investment of substantial expense and time and the outcome of these trials is uncertain. Later-stage clinical trials may differ in significant ways from earlier stage clinical trials and may have different outcomes. Differences in earlier- and later-stage clinical trials may include changes to inclusion and exclusion criteria, efficacy endpoints and statistical design. In this regard, despite the positive initial results we and Astellas reported from the EV-103 trial, we cannot be certain that PADCEV will demonstrate sufficient efficacy in other trials, including in the EV-302 trial, other cohorts of the EV-103 trial or any future trials or cohorts. Moreover, despite the positive initial data from the EV-103 trial, PADCEV may not demonstrate sufficient efficacy in any other clinical trials in a frontline setting and may never be approved for use in any frontline setting, which would significantly delay or prevent us from achieving profitability. Likewise, despite the positive results we reported from the HER2CLIMB trial, we cannot be certain that TUKYSA will demonstrate sufficient efficacy in other trials, including the HER2CLIMB-02 trial, and, despite the positive results we reported from the innovaTV 204 trial, we cannot be certain that tisotumab vedotin will demonstrate sufficient efficacy in other trials or will ever be approved for commercial sale. In addition, there may still be important facts about the safety, efficacy, and risk versus benefit of PADCEV, TUKYSA and tisotumab vedotin that are not known to us at this time which may negatively impact our ability to develop and commercialize PADCEV, TUKYSA or tisotumab vedotin as single agents or in combination with other agents. In this regard, there have been serious side effects and, in some cases, deaths in clinical trials for our products and product candidates that were deemed to be treatment-related by the investigators in those trials. In addition, in response to prior safety events observed in our clinical trials of PADCEV and tisotumab vedotin, including serious side effects and patient deaths, we have in the past, and may in the future, institute additional precautionary safety measures such as dosing caps and delays, enhanced monitoring for side effects, and modified patient inclusion and exclusion criteria. Additional and/or unexpected safety events or our failure to generate additional efficacy data in our clinical trials that support registration could significantly impact the value of PADCEV, TUKYSA and tisotumab vedotin to our business. Many companies in the pharmaceutical and biotechnology industries, including us, have suffered significant setbacks in late-stage clinical trials after achieving encouraging or positive results in early-stage development. We cannot be certain that we will not face similar setbacks in our ongoing or planned clinical trials, including in the ongoing pivotal trials for PADCEV and TUKYSA. If we or our collaborators fail to produce positive results in our ongoing or planned clinical trials of PADCEV, TUKYSA, tisotumab vedotin or any of our other product candidates, the development timeline and regulatory approval and commercialization prospects for PADCEV, TUKYSA, tisotumab vedotin and our other product candidates, and, correspondingly, our business, financial condition, results of operations and growth prospects, would be materially adversely affected.

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The timing of the commencement, continuation and completion of each of our clinical trials may continue to be subject to delays relating to various causes, including scheduling conflicts with participating clinicians and clinical institutions, difficulties in identifying and enrolling patients who meet trial eligibility criteria, failure of patients to complete the clinical trial, delays in accumulating the required number of clinical events for data analyses, delay or failure to obtain institutional review board, or IRB, approval to conduct a clinical trial at a prospective site, and shortages of available drug supply. Some of the sites participating in our clinical trials are affected by site closings, reduced capacity or other effects of the COVID-19 pandemic. We are actively monitoring all clinical activities and currently are experiencing impacts to our ability to monitor patients, activate sites, screen and enroll patients, complete site monitoring and manage samples. The extent of the impact of these factors on a particular clinical trial depends on the current stage of activities at a given site, for example, study start up versus post-enrollment, and the impact on a clinical trial depends on the number of impacted sites participating in that clinical trial. In addition, impacts associated with the COVID-19 pandemic appear to have led to a reduction in the rate of Hodgkin lymphoma diagnoses and may continue to affect the rate of Hodgkin lymphoma diagnoses in the future, and rates of other cancer diagnoses may also be lower than they would otherwise be as a result of the impacts of the COVID-19 pandemic, all of which may also negatively impact enrollment. While we do not at this time anticipate the need to revise our publicly reported projected clinical milestone dates as a result of the effects of the COVID-19 pandemic, there may be some impacts to our clinical study timelines, which, depending upon the duration and severity of the evolving effects of the COVID-19 pandemic, could ultimately delay data availability. In addition, our ability to recruit and retain principal investigators and site staff could be adversely impacted by the risks of exposure to COVID-19 and by the conversion of medical conferences to virtual formats. Further, due to the suspension of data monitoring activities at sites that do not currently allow remote monitoring, as well as impacts on the ability to monitor patients, maintain patient treatment according to the trial protocols and to manage samples, there is also the potential of negative impacts on data quality. While we are actively utilizing digital monitoring measures and other mitigations designed to prevent negative data quality impacts, if there were in fact a negative impact on data quality, we or our collaborators could be required to repeat, extend the duration of, or increase the size of clinical trials, which could significantly delay potential commercialization and require greater expenditures. We expect that similar factors will impact clinical studies operationalized by our collaborators. We cannot at this time fully forecast the scope of impacts that the evolving effects of the COVID-19 pandemic may have on our ability to initiate trial sites, enroll and assess patients, handle the operational aspects of trials such as drug and sample management, run studies in accordance with the protocol and best practices and report trial results.

Additionally, beyond impacts related to the evolving effects of the COVID-19 pandemic, patient enrollment is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the existence of competing clinical trials, perceived side effects and the availability of alternative or new treatments. From time to time we have experienced enrollment-related delays in clinical trials, including in connection with the COVID-19 pandemic, and we will likely continue to experience similar delays in our current and future trials.

Many of our future and ongoing clinical trials are being or will be coordinated or conducted with Takeda, Astellas, Merck, Genmab, Bristol-Myers-Squibb Company, or BMS, and other collaborators, which may delay the commencement or adversely affect the continuation or completion of these trials. In addition, our collaborators have operational control over some of the studies we conduct jointly and we do not have full visibility into these studies run by our collaborators. We also depend on medical institutions to conduct our clinical trials in compliance with Good Clinical Practice, or GCP, and to the extent they fail to enroll patients for our clinical trials, fail to conduct our trials in accordance with GCP, or are delayed for a significant time in achieving full enrollment, whether due to the risks and evolving effects of the COVID-19 pandemic or otherwise, our clinical trials and regulatory filings regarding our products and product candidates may be negatively impacted including possible changes to data, results, or conclusions, increased costs, and delays to regulatory timelines, which may harm our reputation and business. In addition, we conduct clinical trials in countries outside the U.S. which may subject us to further delays and expenses as a result of increased drug shipment costs and additional regulatory requirements, as well as expose us to risks associated with different standards of medical care, and currency transactions insofar as changes in the relative value of the U.S. dollar to the local currency where the trial is being conducted may impact our actual costs. In addition, conducting clinical trials in countries that are experiencing heightened impact from the evolving effects of the COVID-19 pandemic may exacerbate these risks.

Clinical trials must be conducted in accordance with FDA or other applicable government guidelines and are subject to oversight by the FDA, other governmental agencies, including data protection authorities, the data safety monitoring boards for such trials and the IRBs or Ethics Committees for the institutions in which such trials are being conducted. In addition, clinical trials must be conducted with supplies of our products or product candidates produced under cGMP and other requirements in the country in which the trial is being conducted, and may require large numbers of test patients. We or our collaborators, the FDA, other governmental agencies or the applicable data safety monitoring boards, IRBs and Ethics Committees could delay, suspend, halt or modify our clinical trials of our products or any of our product candidates, for numerous reasons, including:

•ADCETRIS, PADCEV, TUKYSA or the applicable product candidate may have unforeseen safety issues or adverse side effects, including fatalities, or a determination may be made that a clinical trial presents unacceptable health risks;

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•deficiencies in the conduct of the clinical trial, including failure to conduct the clinical trial in accordance with regulatory requirements, GCP, clinical protocols or regulations relating to data protection;

•problems, errors or other deficiencies with respect to data collection, data processing and analysis;

•deficiencies in the clinical trial operations or trial sites resulting in the imposition of a clinical hold;

•the time required to determine whether ADCETRIS, PADCEV, TUKYSA or the applicable product candidate is effective may be longer than expected;

•fatalities or other adverse events arising during a clinical trial due to medical problems that may not be related to clinical trial treatments;

•ADCETRIS, PADCEV, TUKYSA or the applicable product candidate may not appear to be more effective than current therapies;

•the quality or stability of ADCETRIS, PADCEV, TUKYSA or the applicable product candidate may fall below acceptable standards;

•our inability and the inability of our collaborators to produce or obtain sufficient quantities of ADCETRIS, PADCEV, TUKYSA or the applicable product candidate to complete the trials;

•our inability and the inability of our collaborators to reach agreement on acceptable terms with prospective trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different trial sites;

•our inability and the inability of our collaborators to obtain IRB or Ethics Committee approval to conduct a clinical trial at a prospective site;

•changes in governmental regulations or administrative actions that adversely affect our ability and the ability of our collaborators to continue to conduct or to complete clinical trials;

•lack of adequate funding to continue the clinical trial, including the incurrence of unforeseen costs due to enrollment delays, requirements to conduct additional trials and studies and increased expenses associated with the services of our clinical research organizations and other third parties;

•our inability and the inability of our collaborators to recruit and enroll patients to participate in clinical trials for reasons including competition from other clinical trial programs for the same or similar indications;

•our inability and the inability of our collaborators to retain patients who have initiated a clinical trial but may be prone to withdraw due to side effects from the therapy, lack of efficacy or personal issues, or who are lost to further follow-up;

•our inability and the inability of our collaborators to ensure adequate statistical power to detect statistically significant treatment effects, whether through our inability to enroll or retain patients in trials or because the specified number of events designated for a completed trial have not occurred; or

•the risks and evolving effects of the COVID-19 pandemic.

In addition, we or our collaborators may experience significant setbacks in advanced clinical trials, even after promising results in earlier trials, including unexpected adverse events that may occur when our product candidates are combined with other therapies.

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Negative or inconclusive clinical trial results could adversely affect our ability and the ability of our collaborators to obtain regulatory approvals of our product candidates, including tisotumab vedotin, or to market ADCETRIS, PADCEV or TUKYSA and/or expand ADCETRIS, PADCEV or TUKYSA into additional indications and territories. In addition, clinical trial results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. For example, although applications for approval of PADCEV were submitted in Australia and Canada under the FDA's Project Orbis program, as well as in Japan, Singapore, Brazil and Switzerland, based on results from the EV-201 and EV-301 trials, regulatory authorities or their advisors may disagree with our interpretation of the data from these trials and/or may otherwise determine not to approve these applications in a timely manner or at all. Further, although we announced positive results from the innovaTV 204 trial, the FDA, or its advisors, may disagree with our interpretation of the data from the innovaTV 204 trial and/or may otherwise determine not to approve the BLA that we and Genmab submitted for tisotumab vedotin in a timely manner or at all. Moreover, adverse medical events during a clinical trial, including patient fatalities, could cause a trial to be redone or terminated, require us to cease development of a product candidate or the further development or commercialization of ADCETRIS, PADCEV or TUKYSA, result in our failure to expand ADCETRIS, PADCEV or TUKYSA into additional indications and territories, adversely affect our ability to market ADCETRIS, PADCEV or TUKYSA, and may result in other negative consequences to us, including the inclusion of unfavorable information in our product labeling. Further, some of our clinical trials are overseen by an independent data monitoring committee, or IDMC, and an IDMC may determine to delay or suspend one or more of these trials due to safety or futility findings based on events occurring during a clinical trial. In addition, we may be required to implement additional risk mitigation measures that could require us to suspend our clinical trials if certain safety events occur.

The successful commercialization of our products will depend on a variety of factors, including the extent to which governmental authorities and health insurers establish adequate coverage and reimbursement levels and pricing policies, and the acceptance of our products by the medical community and patients.

Successful sales of our current and any future approved products will depend, in part, on the extent to which coverage and reimbursement for our products will be available from government and health administration authorities, private health insurers and other third-party payors. To manage healthcare costs, many governments and third-party payors increasingly scrutinize the pricing of new products and require increasing levels of evidence of favorable clinical outcomes and cost-effectiveness before extending coverage. In light of this pricing scrutiny, we cannot be sure that we and our collaborators will achieve and maintain coverage for our products and any product candidates that we or our collaborators commercialize and, if available, that the reimbursement rates will be adequate and grant access to all eligible patients. If we or our collaborators are unable to obtain and maintain coverage and adequate levels of reimbursement for our current and any future approved products that we or our collaborators commercialize, their marketability will be negatively and materially impacted. For example, we cannot be certain that third-party payors will continue to provide coverage and adequate reimbursement for ADCETRIS in the frontline Hodgkin lymphoma indication based on the relative price and perceived benefit of ADCETRIS as compared to alternative treatment options, which may materially harm our ability to maintain or increase sales of ADCETRIS or may otherwise negatively affect future ADCETRIS sales. Similarly, we cannot be certain that third-party payors will provide coverage and adequate reimbursement for PADCEV or TUKYSA based on their relative price and perceived benefits as compared to alternative treatment options or otherwise, which may materially harm our and our collaborators’ ability to successfully commercialize PADCEV and TUKYSA in our respective designated territories. In addition, we have experienced an increase in gross-to-net deductions that we believe is due to a shift in the locations where ADCETRIS is administered, which has increased the proportion of ADCETRIS sales through the federal 340B drug discount program. We may also experience additional shifts from commercial payor coverage to government payor coverage in the U.S., which would further increase gross-to-net deductions.

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In many jurisdictions, including in Europe, the proposed pricing for a drug must be approved in an individual country before it may be lawfully marketed, which could delay entry of a product into a market or, if pricing is not approved, may prevent us or our collaborators from selling a product in a country where we or our collaborators have received regulatory approval. In European countries where we have obtained regulatory approval of TUKYSA, we will seek pricing and reimbursement agreements for TUKYSA in accordance with local timelines. As an organization, we did not have any experience applying for pricing and reimbursement approvals in jurisdictions outside the U.S. and Canada prior to our applications with respect to TUKYSA. Further, authorities in Europe have substantial discretion in the pricing and reimbursement approval process and in determining when or whether coverage will be obtained for our products or product candidates, including any approvals for our medicines in initial and additional indications or in additional territories. In addition, in some cases, they may lower the price for a medicine after the price has been established. The launch of TUKYSA in additional markets, including countries in Europe where TUKYSA has not yet launched, could be delayed due to a variety of factors, including supply constraints, delays in arranging a commercial infrastructure, delays encountered by our collaborator, Merck, delays in obtaining pricing and reimbursement approvals or other delays related to regulatory requirements. If we or Merck experience delays or unforeseen difficulties due to any of these factors, planned launches in the countries in question would be delayed, which could negatively impact anticipated revenue from TUKYSA. In addition, if we or Merck are unable to obtain favorable pricing and reimbursement approvals in the countries that represent significant potential markets, our anticipated revenue from and growth prospects for TUKYSA in Europe and other regions could be negatively affected.

Eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that captures the value delivered to patients, payers and the overall healthcare system, allows for continued investment in innovative treatments for cancer patients or that covers our costs, including research, development, manufacture, sale and distribution. In addition, obtaining and maintaining adequate coverage and reimbursement status is time-consuming and costly. Third-party payors may deny coverage and reimbursement status altogether of a given drug product, or cover the product but may also establish prices at levels that are too low to enable us to realize an appropriate return on our investment in product development or limit access to select patient populations reducing revenue potential. Further, in the U.S., there is no uniform policy of coverage and reimbursement among third-party payors. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided is made on a payor-by-payor basis. One payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Because the rules and regulations regarding coverage and reimbursement change frequently, in some cases at short notice, even when there is favorable coverage and reimbursement, future changes may occur that adversely impact the favorable status.

The unavailability or inadequacy of third-party coverage and reimbursement could have a material adverse effect on the market acceptance of our current and any future approved products and the future revenues we may expect to receive from those products. In addition, we are unable to predict what additional legislation or regulation relating to the healthcare industry or third-party coverage and reimbursement may be upheld or enacted in the future, or what effect such legislation or regulation would have on our business. Continuing negative publicity regarding pharmaceutical pricing practices and ongoing governmental and societal scrutiny create significant uncertainty regarding regulation of the healthcare industry and third-party coverage and reimbursement in the U.S. and other jurisdictions. If additional healthcare policies or reforms intended to curb healthcare costs are implemented or if we experience negative publicity with respect to pricing of our products or the pricing of pharmaceutical products generally, the prices that we charge for our current and any future approved products may be limited, and our revenues from sales of our current and any future approved products may be negatively impacted. In addition, in the current climate, price increases on our products and negative publicity regarding drug pricing and price increases generally, whether on our products or those of other pharmaceutical companies, could negatively affect market acceptance of, and sales of, our products.

The degree of market acceptance among patients, physicians, and third-party payors is also important to our ability to successfully commercialize our current and any future approved products. The degree of acceptance will depend on a number of factors including the clinical benefits of our products, effectiveness of our marketing, sales and distribution strategy and operations, the acceptance of our product by patients, physicians and third-party payors, the perceived advantages and relative cost, safety and efficacy of alternative treatments, and the acceptance and degree of adoption of our products by institutional treatment pathways and institutional, local, and national clinical guidelines such as the National Comprehensive Cancer Networks® Clinical Practice Guidelines in Oncology, or the NCCN Guidelines, or other country-specific guidelines. In the U.S., many oncology practices and healthcare providers rely on the NCCN Guidelines or other institutional practice pathways in decisions related to treatment of patients and utilization of medicines. To the extent that our current or any future approved products are not included or positioned favorably in such treatment guidelines and pathways, the full utilization potential of our products may not be reached, which may harm our ability to successfully commercialize our current or any future approved products.

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Our product candidates are in various stages of development, and it is possible that none of our product candidates will ever become commercial products.

Although we announced positive results from the innovaTV 204 trial of our late-stage product candidate, tisotumab vedotin and we and Genmab submitted a BLA to the FDA seeking accelerated approval for tisotumab vedotin, we cannot be certain that the data from the innovaTV 204 trial will be sufficient to support accelerated approval. We cannot predict whether the BLA that we and Genmab submitted for tisotumab vedotin will be approved in a timely manner or at all. Our clinical pipeline also includes ladiratuzumab vedotin, which is in phase 2 clinical development, and other product candidates that are in phase 1 clinical development. In addition, we have multiple preclinical and research-stage programs that employ our proprietary technologies. We will require significant financial resources and additional personnel in order to continue to advance the development of, pursue, potentially obtain and maintain regulatory approvals for, and potentially commercialize tisotumab vedotin and our other product candidates, if we are able to do so at all.

If a product candidate fails at any stage of development or fails to receive regulatory approval, or we or our collaborators otherwise determine to discontinue development of that product candidate, we will not have the anticipated revenues from that product candidate to fund our operations, and we may not receive any return on our investment in that product candidate. Preclinical studies and any encouraging or positive preliminary and interim data from our clinical trials of our product candidates may not be predictive of the results of ongoing or later clinical trials. Even if we or our collaborators are able to complete our planned clinical trials of our product candidates according to our current development timeline, any encouraging or positive results from clinical trials of our product candidates in earlier stage trials may not be replicated in subsequent later-stage trials. For example, although we reported positive results from the innovaTV 204 trial of tisotumab vedotin, we cannot be certain that tisotumab vedotin will demonstrate sufficient efficacy in other trials. In addition, we are developing products and product candidates in indications in which competition is intense, and it is possible that a clinical trial we run may meet its safety and efficacy endpoints but we may choose not to advance the development and commercialization of a product or product candidate in one or more indications due to changes in the competitive environment and the rapid evolution of the standard of care. As a result, we and our collaborators may conduct lengthy and expensive clinical trials of our products and product candidates only to learn that a product or product candidate is not an effective treatment or is not superior to existing approved therapies in the applicable indication, or has an unacceptable safety profile. Any of these results could prevent or significantly delay regulatory approval for the applicable product in any additional indications or of the applicable product candidate or could cause us to discontinue or limit the further development of such product or product candidate. If we or our collaborators fail to produce positive results in our ongoing or planned clinical trials of tisotumab vedotin or any of our other product candidates, the development timeline and regulatory approval and commercialization prospects for that product candidate, and our ability to recoup our investment in that product candidate, would be materially adversely affected.

Due to the uncertain and time-consuming clinical development and regulatory approval process, we may not successfully develop any of our product candidates, or we may choose to discontinue the development of product candidates for a variety of reasons such as safety, risk versus benefit profile, exclusivity, competitive landscape, or prioritization of our resources. It is possible that none of our product candidates will ever become commercial products. In addition, we have to make decisions about which clinical stage and pre-clinical product candidates to develop and advance, and we may not have the resources to invest in certain product candidates, or clinical data and other development considerations may not support the advancement of one or more product candidates. Decision-making about which product candidates to prioritize involves inherent uncertainty, and our development program decision-making and resource prioritization decisions may not improve our results of operations or prospects or enhance the value of our common stock. Our failure to effectively advance our development programs could have a material adverse effect on our business and prospects, and cause the price of our common stock to decline. In addition, many of our non-essential on-site research activities are currently significantly reduced as a result of the COVID-19 pandemic, which may negatively impact the number of IND candidates entering our clinical pipeline in future years.

Any failures or setbacks in our ADC development program or our other platform technologies could negatively affect our business and financial position.

ADCETRIS, PADCEV and our tisotumab vedotin and ladiratuzumab vedotin product candidates are all based on our antibody-drug conjugate, or ADC, technology, which utilizes proprietary stable linkers and potent cell-killing synthetic agents. Our ADC technology is also the basis of our license agreements with AbbVie Biotechnology Ltd., or AbbVie, Astellas, Genentech, Inc., a member of the Roche Group, or Genentech, and GlaxoSmithKline LLC, or GSK, and our collaboration agreements with Takeda, Astellas, Genmab and Merck. Any failures or setbacks in our ADC development program or with respect to our additional proprietary technologies, including adverse effects resulting from the use of this technology in human clinical trials and/or the imposition of clinical holds on our trials of our product candidates, could have a detrimental impact on the continued commercialization of our products in their current or any potential future approved indications and on our product candidate pipeline, as well as our ability to maintain and/or enter into new corporate collaborations regarding our ADC technology, which would negatively affect our business and financial position.

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We face intense competition and rapid technological change, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.

The biotechnology and biopharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. Many third parties compete with us in developing various approaches to treating cancer. They include pharmaceutical companies, biotechnology companies, academic institutions and other research organizations.

Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approval and marketing than we do. In addition, many of these competitors are active in seeking patent protection and licensing arrangements in anticipation of collecting royalties for use of technology that they have developed. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, as well as in acquiring technologies complementary to our programs.

With respect to ADCETRIS, there are several other FDA approved drugs for its approved indications. BMS’s nivolumab and Merck’s pembrolizumab are approved for the treatment of certain patients with relapsed or refractory classical Hodgkin lymphoma, and Celgene’s romidepsin and Acrotech Biopharma’s pralatrexate and belinostat are approved for relapsed or refractory systemic anaplastic large cell lymphoma, or sALCL, among other T-cell lymphomas. Kyowa Kirin’s mogamulizumab is approved for adult patients with relapsed or refractory mycosis fungoides or Sézary syndrome. The competition ADCETRIS faces from these and other therapies is intensifying. Additionally, Merck is conducting a phase 3 clinical trial in relapsed or refractory classical Hodgkin lymphoma comparing pembrolizumab to ADCETRIS. An interim analysis of this clinical trial demonstrated a statistically significant improvement in progression-free survival for pembrolizumab compared with ADCETRIS, resulting in a label expansion to an earlier line of therapy, and we expect increased competition from pembrolizumab in this indication. We are also aware of multiple investigational agents currently being studied that, if successful, may compete with ADCETRIS in the future. Data have also been presented on several developing technologies, including bispecific antibodies and CAR modified T-cell therapies that may compete with ADCETRIS in the future. Further, there are many competing approaches used in the treatment of patients in ADCETRIS’ approved indications, including autologous hematopoietic stem cell transplant, allogeneic hematopoietic stem cell transplant and chemotherapy, in addition to clinical trials with experimental agents.

With respect to PADCEV, other treatments in pretreated metastatic urothelial cancer include sacituzumab govitecan (a Trop-2-directed antibody and topoisomerase inhibitor conjugate), checkpoint inhibitor monotherapy, generic chemotherapy and, for patients with select FGFR genetic alterations, Janssen’s erdafitinib. Front line metastatic urothelial cancer has traditionally been treated with chemotherapy alone but is evolving to include checkpoint inhibitors for cisplatin-ineligible patients with high PD-L1 expression in addition to patients who are ineligible for platinum therapy. Several trials of investigational agents in combination with chemotherapy or other novel agents are ongoing. Continued development of PD-(L)1 targeted therapies across early stage bladder cancer and in metastatic bladder cancer in frontline combinations with chemotherapy, in frontline maintenance with the recent approval of avelumab, and in pretreated disease, could potentially impact PADCEV usage and enrollment to PADCEV clinical trials.

With respect to TUKYSA, there are multiple marketed products which target HER2, including the antibodies trastuzumab and pertuzumab and the antibody drug conjugate T-DM1. In addition, lapatinib is an EGFR/HER2 oral kinase inhibitor for the treatment of metastatic breast cancer, and neratinib is an irreversible pan-HER kinase inhibitor indicated for extended adjuvant treatment and has been recently approved for patients who have received two or more prior anti-HER2-based regimens in the metastatic setting. Daiichi Sankyo and AstraZeneca have fam-trastuzumab deruxtecan-nxki which was recently approved by the FDA for patients who have received two or more prior anti-HER2-based regimens in the metastatic breast cancer setting and in HER2 positive gastric cancer. The agent was also granted conditional marketing authorization by the EMA for the treatment of adult patients with unresectable or metastatic HER2-positive breast cancer who have received two or more prior anti-HER2-based regiments. MacroGenics has a HER2 targeted, Fc-optimized antibody, margetuximab, which was recently approved by the FDA in patients who have received at least two previous anti-HER1 regimens. Additionally, Byondis has an antibody drug conjugate, SYD985, in a pivotal study in this patient population.

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With respect to tisotumab vedotin, in June 2018, Merck’s pembrolizumab was approved for the treatment of recurrent or metastatic cervical cancer with disease progression on or after chemotherapy in patients whose tumors express PD-L1. We are also aware of other companies that currently have products in development for the treatment of late-stage cervical cancer which could be competitive with tisotumab vedotin, including Agenus, BMS, Iovance Biotherapeutics, Merck, Regeneron Pharmaceuticals, Sanofi-Aventis and Roche. In March 2021, Sanofi-Aventis and Regeneron Pharmaceuticals announced positive overall survival data from the phase 3 EMPOWER Cervical-01 trial evaluating cemiplimab monotherapy in previously chemotherapy-treated recurrent or metastatic cervical cancer patients. In June 2021, Merck announced that the phase 3 KEYNOTE-826 trial evaluating first-line treatment with pembrolizumab plus chemotherapy with or without bevacizumab met both of its primary endpoints regardless of PD-L1 status. In addition, Agenus announced FDA acceptance and priority review of a balstilimab BLA for the treatment of patients with recurrent or metastatic cervical cancer with disease progression on or after chemotherapy.

Many other pharmaceutical and biotechnology companies are developing and/or marketing therapies for the same types of cancer that our product candidates are designed and being developed to treat. For example, we believe that companies including AbbVie, ADC Therapeutics, Affimed, Agios, Amgen, Astellas, Bayer, Biogen, BMS, Celgene, Daiichi Sankyo, Eisai, Genentech, GSK, Gilead, ImmunoGen, Infinity, Janssen, Karyopharm, MacroGenics, MedImmune, MEI Pharma, Merck, Novartis, Pfizer, Puma Biotech, Sanofi-Aventis, Spectrum Pharmaceuticals, Takeda, Teva, and Xencor are developing and/or marketing products or technologies that may compete with ours. In addition, our ADC collaborators may develop compounds utilizing our technology that may compete with product candidates that we are developing.

We are aware of other companies that have technologies that may be competitive with ours, including AbbVie, ADC Therapeutics, Astellas, AstraZeneca, BMS, Daiichi Sankyo, Gilead, ImmunoGen, Janssen, MedImmune, Merck, Mersana, Pfizer, Roche, Sutro, and Zymeworks, all of which have ADC technology. ImmunoGen has several ADCs in development that may compete with our product candidates. ImmunoGen has also established partnerships with other pharmaceutical and biotechnology companies to allow those other companies to utilize ImmunoGen’s technology, including Sanofi-Aventis, Genentech, Novartis, Takeda and Lilly. We are also aware of a number of companies developing monoclonal antibodies directed at the same antigen targets or for the treatment of the same diseases as our product candidates.

In addition, in the U.S., the Biologics Price Competition and Innovation Act of 2009 created an abbreviated approval pathway for biological products that are demonstrated to be “highly similar” or “biosimilar” to or “interchangeable” with an FDA approved biological product. This pathway allows competitors to reference the FDA’s prior approvals regarding innovative biological products and data submitted with a BLA to obtain approval of a biosimilar application 12 years after the time of approval of the innovative biological product. The 12-year exclusivity period runs from the initial approval of the innovator product and not from approval of a new indication. In addition, the 12-year exclusivity period does not prevent another company from independently developing a product that is highly similar to the innovative product, generating all the data necessary for a full BLA and seeking approval. Exclusivity only assures that another company cannot rely on the FDA’s prior approvals in approving a BLA for an innovator’s biological product to support the biosimilar product’s approval. Further, under the FDA’s current interpretation, it is possible that a biosimilar applicant could obtain approval for one or more of the indications approved for the innovator product by extrapolating clinical data from one indication to support approval for other indications. In the EU, the EC has granted marketing authorizations for biosimilars pursuant to a set of general and product class-specific guidelines. We are aware of many pharmaceutical and biotechnology and other companies that are actively engaged in research and development of biosimilars or interchangeable products.

It is possible that our competitors will succeed in developing technologies that are more effective than ADCETRIS, PADCEV, TUKYSA, tisotumab vedotin or our other product candidates or that would render our technology obsolete or noncompetitive, or will succeed in developing biosimilar, interchangeable or generic products for ADCETRIS, PADCEV, TUKYSA, tisotumab vedotin or our other product candidates. We anticipate that we will continue to face increasing competition in the future as new companies enter our market and scientific developments surrounding biosimilars and other cancer therapies continue to accelerate. We cannot predict to what extent the entry of biosimilars or other competing products will impact potential future sales of ADCETRIS, PADCEV, TUKYSA, tisotumab vedotin or our other product candidates.

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Risks Related to Regulatory Approval and Oversight, and Other Legal Compliance Matters

Even if we and our collaborators obtain regulatory approvals to market our current and any future approved products, we and our collaborators will remain subject to extensive ongoing regulatory obligations and oversight, including post-approval requirements, that could result in significant additional expense and could negatively impact our and our collaborators’ ability to commercialize our current and any future approved products.

We are subject to extensive ongoing obligations and continued regulatory review from applicable regulatory agencies with respect to any product for which we have obtained regulatory approval, including ADCETRIS, PADCEV and TUKYSA in each of their approved indications, such as continued adverse event reporting requirements and the requirement to have some of our promotional materials pre-cleared by the FDA. These post-marketing obligations may result in significant expense and limit our and our collaborators’ ability to commercialize our current and any future approved products. In addition, the use of any of our products may uncover additional adverse events that require us to update the product’s prescribing information, limit or prevent that product’s widespread use or that result in the withdrawal of that product from the market. Any problems with a product or any violation of ongoing regulatory obligations could result in restrictions on the applicable product, including the withdrawal of the applicable product from the market.

ADCETRIS is approved under conditional marketing authorization in relapsed Hodgkin lymphoma, relapsed cutaneous T-cell lymphoma, and in both relapsed and frontline sALCL in the EU under regulations which allow for approval of products for cancer or other serious or life threatening illnesses based on a surrogate endpoint or on a clinical endpoint other than survival or irreversible morbidity. Takeda is subject to certain post-approval requirements, including the requirement to conduct clinical trials to confirm clinical benefit. Takeda’s failure to provide these additional clinical data from confirmatory studies could result in the European Commission, or EC, withdrawing approval of ADCETRIS in the EU for certain indications, which would negatively impact anticipated royalty revenue from ADCETRIS sales by Takeda in the EU and could adversely affect our results of operations. The FDA’s approval of ADCETRIS in combination with chemotherapy for patients with previously untreated CD30-expressing peripheral T-cell lymphoma, or the frontline PTCL indication, included a post-marketing commitment to develop a clinically validated in-vitro diagnostic device for the selection of patients with CD30-expressing PTCL, not including sALCL, for treatment with ADCETRIS in this indication. We and Takeda have a collaboration with Ventana Medical Systems, Inc., or Ventana, under which Ventana is working to develop, manufacture and commercialize a companion diagnostic test to measure CD30 expression levels in tissue specimens. If Ventana develops an in-vitro diagnostic device that we are able to clinically validate, the FDA or another regulatory authority may revise our label for the frontline PTCL indication or in connection with any future approvals to require the use of the in-vitro test as a companion diagnostic. This may limit our ability to commercialize ADCETRIS in the applicable treatment setting due to potential label requirements, prescriber practices, constraints on availability of the diagnostic, or other factors. If Ventana is unable to successfully develop the CD30 in-vitro diagnostic, or experiences delays in doing so, or we experience delays in clinical validation of the diagnostic, we will likely need to renegotiate the timing or content of our post-marketing commitment regarding the in-vitro diagnostic device with the FDA.

We and the manufacturers of our current and any future approved products are also required, or will be required, to comply with current Good Manufacturing Practices, or cGMP, regulations, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Further, regulatory agencies must approve these manufacturing facilities before they can be used to manufacture our products and product candidates, and these facilities are subject to ongoing regulatory inspections. In addition, regulatory agencies subject an approved product, its manufacturer and the manufacturer’s facilities to continual review and inspections, including periodic unannounced inspections. The subsequent discovery of previously unknown problems with our current or any future approved products, including adverse events of unanticipated severity or frequency, or problems with the facilities where our current or any future approved products are manufactured, including potential staffing shortages, production slowdowns and the extensive reliance on virtual oversight of third-party manufacturing in connection with the COVID-19 pandemic, may result in restrictions on the marketing of our current or any such future approved products, up to and including withdrawal of the affected product from the market. If our manufacturing facilities, our collaborators’ manufacturing facilities, or those of our respective suppliers, fail to comply with applicable regulatory requirements, such noncompliance could result in regulatory action, delays in regulatory timelines and additional costs to us.

Failure to comply with applicable FDA and other regulatory requirements may subject us to administrative or judicially imposed sanctions, including:

•issuance of Form FDA 483 notices or Warning Letters by the FDA or other regulatory agencies;

•imposition of fines and other civil penalties;

•criminal prosecutions;

•injunctions, suspensions or revocations of regulatory approvals;

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•suspension of any ongoing clinical trials;

•total or partial suspension of manufacturing;

•delays in commercialization;

•refusal by the FDA to approve pending applications or supplements to approved applications submitted by us;

•refusals to permit drugs to be imported into or exported from the U.S.;

•restrictions on operations, including costly new manufacturing requirements; and

•product recalls or seizures.

The policies of the FDA and other regulatory agencies may change and additional government regulations may be enacted that could prevent or delay regulatory approval of our product candidates or of ADCETRIS, PADCEV or TUKYSA in any additional indications or territories, or further restrict or regulate post-approval activities. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the U.S. or abroad. If we are not able to maintain regulatory compliance, we or our collaborators might not be permitted to market our current or any future approved products and our business would suffer.

Healthcare law and policy changes may negatively impact our business, including by decreasing the prices that we and our collaborators receive for our products.

In recent years, there have been a number of legislative and regulatory actions and executive orders that have made reforms to the U.S. healthcare system. The implementation of certain of these policy changes has decreased our revenues and increased our costs, and federal and state legislatures, health agencies and third-party payors continue to focus on containing the cost of health care. Further legislative and regulatory changes, and increasing pressure from social sources, are likely to further influence the manner in which our products are priced, reimbursed, prescribed and purchased. Such additional reforms could result in further reductions in coverage and levels of reimbursement for our products, expansion of U.S. government rebate and discount programs, increases in the rebates and discounts payable under these programs, requests for additional or supplemental rebates, and additional downward pressure on the prices that we and our collaborators receive for our products.

The federal government has implemented reforms to government healthcare programs in the U.S., including changes to the methods for, and amounts of, Medicare reimbursement and changes to the Medicaid Drug Rebate Program. For example, in November 2020, the Centers for Medicare & Medicaid Services issued an interim final rule that would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries. While the implementation of the interim final rule is currently enjoined, the Biden administration will continue to pursue and implement measures similarly aimed at reducing pharmaceutical drug pricing. On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. The Biden administration recently announced an Executive Order that includes initiatives to support the implementation of Canadian drug importation and reduce drug prices.

Some states are also considering legislation, or have passed laws, that would control the prices and coverage and reimbursement levels of drugs, including laws to allow importation of pharmaceutical products from lower cost jurisdictions outside the U.S. and laws intended to impose price controls on state drug purchases.

In addition, governments in countries outside the U.S. control the costs of pharmaceuticals. Many European countries and Canada have established pricing and reimbursement policies that contain costs by referencing the price of the same or similar products in other countries. In these instances, if coverage or the level of reimbursement is reduced, limited or eliminated in one or more countries, we may be unable to obtain or maintain anticipated pricing or reimbursement in other countries or in new markets. This may create the opportunity for third-party cross-border trade or may influence our decision whether to sell a product in one or more countries, thus adversely affecting our geographic expansion plans.

It is also possible that governments may take additional action to reform the healthcare system in response to the evolving effects of the COVID-19 pandemic.

We cannot assure you as to the ultimate content, timing, or effect of future healthcare law and policy changes, nor is it possible at this time to estimate the impact of any such potential changes; however, such changes or the ultimate impact of changes could materially and adversely affect our revenue or sales of our current and or potential future products, as well as those of our collaborators.

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We are subject to various state, federal and international laws and regulations, including healthcare laws and regulations, that may impact our business and could subject us to significant fines and penalties or other negative consequences.

Our operations may be directly or indirectly subject to various healthcare laws, including, without limitation, the federal Anti-Kickback Statute, federal civil and criminal false claims laws, regulations prohibiting off-label promotions and federal transparency requirements. These laws may impact, among other things, the sales, marketing and education programs for ADCETRIS, PADCEV, TUKYSA and any future approved products.

The federal Anti-Kickback Statute prohibits, among other things, knowingly and willingly soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as the Medicare and Medicaid programs. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration not intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. In addition, a criminal conviction for violation of the federal Anti-Kickback Statute requires mandatory exclusion from participation in federal healthcare programs.

The federal civil and criminal false claims laws, including the civil False Claims Act, prohibit, among other things, persons or entities from knowingly presenting, or causing to be presented, a false claim to, or the knowing use of false statements to obtain payment from or approval by the federal government, including the Medicare and Medicaid programs, or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim or to avoid, decrease, or conceal an obligation to pay money to the federal government. Many pharmaceutical and other healthcare companies have been investigated and have reached substantial financial settlements with the federal government under the civil False Claims Act for a variety of alleged improper marketing, promotion or other activities.

The FDA and other governmental authorities also actively investigate allegations of off-label promotion activities in order to enforce regulations prohibiting these types of activities. In recent years, private whistleblowers have also pursued False Claims Act cases against a number of pharmaceutical companies for causing false claims to be submitted as a result of off-label promotion. If we are found to have promoted an approved product for off-label uses, we may be subject to significant liability, including significant civil and administrative financial penalties and other remedies as well as criminal penalties and other sanctions. Even when a company is not determined to have engaged in off-label promotion, the allegation from government authorities or market participants that a company has engaged in such activities could have a significant impact on the company’s sales, business and financial condition. The U.S. government has also required companies to enter into complex corporate integrity agreements, deferred prosecution agreements and/or non-prosecution agreements that impose significant reporting and other burdens on the affected companies.

The federal transparency requirements under the Physician Payments Sunshine Act require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to annually report information related to certain payments or other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals, and to report annually certain ownership and investment interests held by physicians and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report information related to payments and other transfers of value made during the previous year to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants and certified nurse midwives. Failure to submit timely, accurately and completely the required information for all payments, transfers of value and ownership or investment interests may result in civil monetary penalties of up to an aggregate of $150,000 per year plus up to an aggregate of $1 million per year for “knowing failures,” as adjusted for inflation.

Other healthcare laws and regulations that may affect our ability to operate include, among others, the federal civil monetary penalties statute and the healthcare fraud provisions of the federal Health Insurance Portability and Accountability Act, or HIPAA. In addition, many states and jurisdictions outside the U.S. have similar laws and regulations, such as anti-kickback, anti-bribery and corruption, false claims and transparency, to which we are currently and/or may in the future, be subject. Additional information about these requirements is provided under “Government Regulation – Healthcare Regulation” in our Annual Report on Form 10-K filed with the SEC on February 12, 2021. In addition, the number and complexity of healthcare laws and regulations applicable to our business continue to increase.

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We are also subject to numerous other laws and regulations that while not specific to the healthcare industry, do apply to the healthcare industry in important ways. For instance, the U.S. Foreign Corrupt Practices Act, or FCPA, generally prohibits paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, governmental staff members, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. In Europe, national anti-corruption laws prohibit giving, offering, or promising bribes to any person, including foreign government officials and private persons, as well as requesting, agreeing to receive, or accepting bribes from any person. Various European anti-corruption laws have broad extraterritorial reach and therefore we may be subject to those laws even if we do not have an established entity in those countries and we may be held liable for bribes given, offered or promised to any person, including private persons, by employees and persons associated with us in order to obtain or retain business or a business advantage. As we expand our footprint and activities outside of the U.S. and Canada, our exposure to compliance risks under the FCPA and other similar laws will likewise increase.

In an effort to comply with these laws and regulations, we have implemented a compliance program designed to actively identify, prevent and mitigate risk through the implementation of compliance policies and systems and by promoting a culture of compliance. We also actively work to revise and evolve our compliance program in an effort to keep pace with evolving compliance risks and the growing scale of our business. Although we take our obligation to maintain our compliance with these various laws and regulations seriously and our compliance program is designed to detect and prevent the violation of these laws and regulations, we cannot guarantee that our compliance program will be sufficient or effective, that we will be able to integrate the operations of newly formed affiliates or acquired businesses into our compliance program on a timely basis, that our employees will comply with our policies and that our employees will notify us of any violation of our policies, that we will have the ability to take appropriate and timely corrective action in response to any such violation, or that we will make decisions and take actions that will necessarily limit or avoid liability for whistleblower claims that individuals, such as employees or former employees, may bring against us or that governmental authorities may prosecute against us based on information provided by individuals. If we are found to be in violation of any of the laws and regulations described above or other applicable state and federal healthcare laws, we may be subject to penalties, including significant civil, criminal and administrative penalties, damages, fines, disgorgement, contractual damages, reputational harm, administrative burdens, imprisonment, diminished profits and future earnings, exclusion from government healthcare reimbursement programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and/or the curtailment or restructuring of our operations, any of which could have a material adverse effect on our business, results of operations and growth prospects. Any action against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal, state and healthcare laws outside the U.S. is costly and time-consuming for our management.

We are subject to evolving privacy and security laws, and our failure to comply could result in penalties and reputational damage.

We are subject to numerous privacy and data protection laws and regulations governing healthcare and other information. The U.S. federal government, individual U.S. states, EU member countries and other jurisdictions, including Switzerland and Canada, have adopted data protection laws and regulations which impose significant compliance obligations. For example, the use and international transfer of personal data collected in the EU is governed by the provisions of the EU General Data Protection Regulation, or the GDPR. The GDPR, which is wide-ranging in scope, imposes several requirements relating to the control over personal data by individuals to whom the personal data relates, the information provided to the individuals, the documentation we must maintain, the security and confidentiality of the personal data, data breach notification and the use of third-party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU, provides an enforcement authority and authorizes the imposition of large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of the non-compliant company, whichever is greater. The GDPR requirements apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information. The GDPR has increased our responsibility and potential liability in relation to all types of personal data that we process, including in clinical trials, and we may be required to put in place additional mechanisms to ensure compliance with the GDPR, which could divert management’s attention and increase our cost of doing business. However, despite our ongoing efforts to bring our practices into compliance with the GDPR, we may not be successful either due to various factors within our control or other factors outside our control. Local data protection authorities can also have different interpretations of the GDPR, leading to potential inconsistencies amongst various EU member states.

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Moreover, one of the primary safeguards enabling U.S. companies to import personal information from Europe had been certification to the EU-U.S. Privacy Shield and Swiss-U.S. Privacy Shield frameworks administered by the U.S. Department of Commerce. However, the Court of Justice of the EU, or the CJEU, invalidated the EU-U.S. Privacy Shield. The same decision also raised questions about whether one of the primary alternatives to the EU-U.S. Privacy Shield, namely, the EC’s Standard Contractual Clauses, provide sufficient protection for personal data transferred from Europe to the U.S. or most other countries without analyzing each transfer and implementing supplementary measures to protect the data. Following recommendations from the European Data Protection Board, we are undertaking a review of personal data transfers from the EU and will assess the impact of the CJEU decision on our operations. At present, there are few, if any, viable alternatives to the Standard Contractual Clauses. Where appropriate, we rely on individuals’ explicit consent to transfer their personal information from Europe to the U.S. and other countries. In addition, we rely on inter-company Standard Contractual Clauses to provide appropriate safeguards for such transfers. The EC published new Standard Contractual Clauses in June 2021. Companies relying on Standard Contractual Clauses for transfers have until December 2022 to implement the new clauses. Authorities in Switzerland, whose data protection laws are similar to those of the EU, also invalidated use of the Swiss-U.S. Privacy Shield. Authorities in the United Kingdom, or U.K., may similarly invalidate use of the EU-U.S. Privacy Shield. The U.K.'s departure from the EU, known as Brexit, has created additional uncertainty with regard to data protection regulation in the U.K., as it is unclear whether the U.K. and EU will be able to negotiate a mutually agreeable data protection agreement that regulates data transfers between the U.K. and EU and what impact this will have on our business. If we are unable to rely on explicit consent to transfer individuals’ personal information from Europe, which can be revoked, or if, upon review by authorities, our existing compliance solutions are found to be insufficient, we will face increased exposure to substantial fines under European data protection laws as well as injunctions against processing personal information from persons resident in Europe. The inability to import personal information from the European Economic Area, U.K. or Switzerland could restrict our clinical trial activities in Europe, limit our ability to collaborate with contract research organizations, service providers, contractors and other companies subject to European data protection laws, interfere with our ability to hire employees in Europe and require us to increase our data processing capabilities in Europe at significant expense.

In addition, in the U.S., HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, governs certain types of individuals and entities with respect to the conduct of certain electronic healthcare transactions and imposes certain obligations on covered entities, including certain healthcare providers, health plans, and healthcare clearinghouses, as well as their respective business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, and their subcontractors that use, disclose, access, or otherwise process individually identifiable health information, with respect to the security, privacy and transmission of individually identifiable health information. HIPAA applies to certain aspects of our business and failure to comply with its requirements could result in the imposition of significant fines and penalties, and additional negative consequences.

In any event, our failure or alleged failure (including as a result of deficiencies in our policies, procedures or measures relating to privacy, data protection, marketing or communications) to comply with laws, regulations, policies, legal or contractual obligations, industry standards or regulatory guidance relating to privacy or data protection, may result in governmental investigations and enforcement actions, litigation, fines and penalties or adverse publicity. In addition, new regulation, legislative actions or changes in interpretation of existing laws or regulations regarding privacy and data protection, together with applicable industry standards, may increase our costs of doing business. In this regard, we expect that there will continue to be new laws, regulations and industry standards relating to privacy and data protection in the U.S., the EU and other jurisdictions, and we cannot determine the impact such new laws, regulations and standards may have on our business. Recently enacted laws include the California Privacy Rights Act of 2020 and the Colorado Privacy Act, which have been characterized as “GDPR-like” privacy laws.

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As we continue to expand our operations internationally, we are subject to an increased risk of conducting activities in a manner that violates applicable anti-bribery or anti-corruption laws. We are also subject to laws and regulations covering data privacy and the protection of health-related and other personal information. These laws and regulations could create liability for us or increase our cost of doing business, any of which could have a material adverse effect on our business, results of operations and growth prospects.

We are continuing to expand our operations internationally. For example, we recently launched TUKYSA in certain countries in Europe and are continuing to build our commercial infrastructure in Europe. In this regard, we currently have multiple subsidiaries in jurisdictions outside the U.S., including a number of subsidiaries in Europe, and plan in the future to have subsidiaries in additional jurisdictions. Our business activities outside of the U.S. are and will continue to be subject to the FCPA, which is described above, and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we currently and may in the future operate, including the recently established French Anti-corruption Law on Transparency, Fight against Corruption and the Modernization of the Economy, referred to as Sapin II. In Europe, national anti-corruption laws prohibit giving, offering, or promising bribes to any person, including foreign government officials and private persons, as well as requesting, agreeing to receive, or accepting bribes from any person. Various European anti-corruption laws have broad extraterritorial reach and therefore we may be subject to those laws even if we do not have an established entity in those countries and we may be held liable for bribes given, offered or promised to any person, including private persons, by employees and persons associated with us in order to obtain or retain business or a business advantage. In the course of conducting operations internationally, we have established, and will need to continue to establish and expand, business relationships with various third parties, such as independent contractors, distributors, vendors, and advocacy groups. We also interact with physicians, which are generally considered foreign officials in Europe, as well as with regulatory authorities who may be deemed to be foreign officials under the FCPA or similar laws of other countries that may govern our activities. Any interactions with any such third parties that are found to be in violation of such laws could result in substantial fines and penalties and could materially harm our business. Furthermore, any finding of a violation under one country’s laws may increase the likelihood that we will be prosecuted and be found to have violated another country’s laws. If our business practices outside the U.S. are found to be in violation of the FCPA, the Sapin II or other similar laws, we may be subject to significant civil and criminal penalties which could have a material adverse effect on our business, results of operations and growth prospects. We are also subject to laws and regulations covering data privacy and the protection of health-related and other personal information. In this regard, EU member states and other jurisdictions outside the U.S., including Switzerland, have adopted data protection laws and regulations, such as the GDPR, which impose significant compliance obligations. Failure to comply with these laws could lead to government enforcement actions and significant penalties against us, which could have a material adverse effect on our business, results of operations and growth prospects.

Enhanced governmental and private scrutiny over, or investigations or litigation involving, pharmaceutical manufacturer patient assistance programs may require us to modify our patient assistance program and could negatively impact our business practices, harm our reputation, divert the attention of management and increase our expenses.

We have a patient assistance program that provides reimbursement support offerings and free products to financially needy patients. These types of programs, designed to assist patients in affording pharmaceuticals, continue to be the subject of scrutiny by the U.S. government. In recent years, some pharmaceutical manufacturers were named in class action lawsuits challenging the legality of their patient assistance programs and support of independent charitable patient support foundations under a variety of federal and state laws. Our patient assistance program could become the target of similar litigation. At least one insurer also has directed its network pharmacies to no longer accept manufacturer co-payment coupons for certain specialty drugs the insurer identified. In addition, certain state and federal enforcement authorities and members of Congress have initiated inquiries about co-pay assistance programs. Some state legislatures have also been considering proposals that would restrict or ban co-pay coupons.

If we or our vendors are deemed to fail to comply with laws or regulations in the operation of these programs, we could be subject to damages, fines, penalties or other criminal, civil or administrative sanctions or enforcement actions. Further, numerous organizations, including pharmaceutical manufacturers, have received subpoenas from the U.S. Department of Justice and other enforcement authorities seeking information related to their patient assistance programs and support, and certain of these organizations have entered into significant civil settlements with applicable enforcement authorities. In connection with these civil settlements, the U.S. government has and may in the future require the affected companies to enter into complex corporate integrity agreements that impose significant reporting and other requirements on those companies. We cannot ensure that our compliance controls, policies and procedures will be sufficient to protect against acts of our employees, business partners or vendors that may violate the laws or regulations of the jurisdictions in which we operate. Regardless of whether we have complied with the law, a government investigation could negatively impact our business practices, harm our reputation, divert the attention of management and increase our expenses.

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Product liability and product recalls could harm our business, and we may not be able to obtain adequate insurance to protect us against product liability losses.

The current and future use of our products and product candidates by us and our corporate collaborators in clinical trials and the sale of our products, expose us to product liability claims. These claims have and may in the future be made directly by patients or healthcare providers or indirectly by pharmaceutical companies, our corporate collaborators or others selling such products. Additionally, in connection with our acquisition of the manufacturing facility from BMS, we agreed to enter into certain transitional services agreements under which we manufactured certain clinical drug product components for BMS for a period of time. As a result, it is possible that we may be named as a defendant in product liability suits that may allege that drug products we manufactured for BMS have resulted in injury to patients. We may experience substantial financial losses in the future due to product liability claims. We have obtained product liability coverage, including coverage for human clinical trials and product sold commercially. However, such insurance is subject to coverage limits and exclusions, as well as significant deductibles. In addition, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against all losses. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured amounts, our assets may not be sufficient to cover such claims and our business operations could be impaired.

Product recalls may be issued at our discretion, or at the discretion of government agencies and other entities that have regulatory authority for pharmaceutical sales. Any recall of our products could materially adversely affect our business by rendering us unable to sell our products for some time and by adversely affecting our reputation.

Our operations involve hazardous materials and are subject to environmental, health and safety controls and regulations.

We are subject to environmental, health and safety laws and regulations, including those governing the use of hazardous materials, and we spend considerable time complying with such laws and regulations. Our business activities involve the controlled use of hazardous materials and although we take precautions to prevent accidental contamination or injury from these materials, we cannot completely eliminate the risk of using these materials. In addition, with respect to our manufacturing facility, we may incur substantial costs to comply with environmental laws and regulations and may become subject to the risk of accidental contamination or injury from the use of hazardous materials in our manufacturing process. It is also possible that our manufacturing facility may expose us to environmental liabilities associated with historical site conditions that we are not currently aware of and did not cause. In this regard, some environmental laws impose liability for contamination on current owners and operators of affected sites, regardless of fault. In the event of an accident or environmental discharge, or new or previously unknown contamination is discovered or new cleanup obligations are otherwise imposed in connection with any of our currently or previously owned or operated facilities, we may be held liable for any resulting damages, which may materially harm our business, financial condition and results of operations.

Changes in funding for the FDA, the SEC and other government agencies, or reduced working hours of governmental employees or by the diversion of the efforts and attention of governmental agencies to approval of other therapeutics or other activities related to the COVID-19 pandemic, could prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the FDA, the U.S. Securities and Exchange Commission, or SEC, and other government agencies on which our operations may rely is inherently fluid and unpredictable. With respect to the COVID-19 pandemic, it is possible that we could experience delays in the timing of regulatory review and/or our interactions with regulatory authorities due to reduced working hours or absenteeism of governmental employees or by the diversion of authorities’ efforts and attention to approval of other therapeutics or other activities related to COVID-19, which could delay any approval decision with respect to the regulatory applications we and our collaborators submitted for PADCEV and tisotumab vedotin, or our progress in advancing our development efforts with respect to other products and product candidates. Our interactions with regulatory authorities in other jurisdictions and across multiple products and product candidates continue but we cannot rule out the possibility of negative impacts on such interactions in the future as the pandemic continues to evolve.

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Disruptions at the FDA and other agencies may slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could potentially impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Risks Related to Our Reliance on Third Parties

We depend on collaborative relationships with other companies to assist in the development and commercialization of our products and some of our product candidates and for the development and commercialization of other product candidates utilizing or incorporating our technologies. If we are not able to locate suitable collaborators or if our collaborators do not perform as expected, this may negatively affect our ability to commercialize our products, develop and commercialize our product candidates and/or generate revenues through technology licensing, or may otherwise negatively affect our business.

We have established collaborations with third parties to develop and market each of our products and some of our current and future product candidates. Because control of development and commercialization is shared with our collaborators under these collaborations, we do not have sole discretion and control over the development and commercialization of the applicable products and product candidates. For example, we entered into a collaboration agreement with Takeda in December 2009 that granted Takeda rights to develop and commercialize ADCETRIS outside of the U.S. and Canada, and we entered into a collaboration agreement with Merck in September 2020 that granted Merck rights to develop and commercialize TUKYSA outside of the U.S., Canada and Europe. In addition, we have entered into collaborations with Astellas for the development and commercialization of PADCEV, with Genmab for the development and commercialization of tisotumab vedotin, and with Merck for the development and commercialization of ladiratuzumab vedotin. Our collaborations also include clinical trial collaborations to develop, in combination, our product or product candidates and the products or product candidates of one or more third parties. For example, we have clinical trial collaborations with BMS to evaluate the combination of nivolumab with ADCETRIS in various settings and with Merck to evaluate the combination of pembrolizumab in combination with PADCEV in various settings.

We also have ADC license agreements with AbbVie, Astellas, Genentech, Genmab and GSK to allow them to use our proprietary ADC technology, and our ADC licensees conduct all research, product development, manufacturing and commercialization of any product candidates under these agreements.

Our dependence on collaborative arrangements to assist in the development and commercialization of our products and some of our product candidates and on license arrangements for the development and commercialization of other product candidates utilizing or incorporating our technologies subjects us to a number of risks, including:

•we are not able to control the amount and timing of resources that our collaborators and licensees devote to the development or commercialization of products and product candidates under a collaboration or license agreement, including ADCETRIS, PADCEV, TUKYSA and tisotumab vedotin;

•disputes may arise between us and our collaborators or licensees that result in the delay or termination of the research, development or commercialization of the applicable products and product candidates or that result in costly litigation or arbitration that diverts management’s attention and resources;

•with respect to collaborations under which we have an active role, we may have differing opinions, processes or priorities than our collaborators, or we may encounter challenges in joint decision making and joint execution, including with respect to any joint development or commercialization plans or co-promotion activities, which may delay or otherwise harm the research, development, launch or commercialization of the applicable products and product candidates, including ADCETRIS, PADCEV, TUKYSA and tisotumab vedotin;

•our current and potential future collaborators and licensees may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials, use standards or processes for conducting clinical trials that differ from ours or require a new formulation of a product candidate for clinical testing;

•significant delays in the development of product candidates by current and potential collaborators and licensees could allow competitors to bring products to market before product candidates utilizing or incorporating our technologies are approved and impair the ability of current and potential future collaborators and licensees to effectively commercialize these product candidates;

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•our relationships with our collaborators and licensees may divert significant time and effort of our scientific staff and management team and require the effective allocation of our resources to multiple internal collaborative projects;

•our current and potential future collaborators and licensees may not pursue regulatory approvals in a timely manner, may not be successful in their efforts to obtain regulatory approvals, or may not launch or commercialize a product in their territories in a timely manner;

•our current and potential future collaborators and licensees may receive regulatory sanctions relating to other aspects of their business, or could take actions with respect to our jointly-developed product, that could adversely affect the development, approval or commercialization of the applicable products or product candidates or our reputation with regulatory agencies;

•our current and potential future collaborators and licensees may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our proprietary information or expose us to potential litigation;

•business combinations or significant changes in a collaborator’s or licensee’s business strategy may adversely affect such party’s willingness or ability to complete its obligations under any arrangement;

•a collaborator or licensee could independently move forward with competing products, therapeutic approaches or technologies to develop treatments for the diseases targeted by us or our collaborators that are developed by such collaborator or licensee either independently or in collaboration with others, including our competitors;

•our current and potential future collaborators and licensees may experience financial difficulties; and

•our collaboration or license agreements may be terminated, breached or allowed to expire, or our collaborators or licensees may reduce the scope of our agreements with them, which could have a material adverse effect on our financial position by reducing or eliminating the potential for us to receive technology access and license fees, milestones and royalties, and/or reimbursement of development costs, and which could require us to devote additional efforts and to incur the additional costs associated with pursuing internal development and commercialization of the applicable products and product candidates.

If our collaborative and license arrangements are not successful as a result of any of the above factors, or any other factors, then our ability to advance the development and commercialization of the applicable products and product candidates and to otherwise generate revenue from these arrangements and to become profitable will be adversely affected, and our business and business prospects may be materially harmed. In particular, if Takeda or Merck were to terminate the ADCETRIS collaboration or the TUKYSA collaboration, respectively, which they may do for any reason upon prior written notice to us, we would not receive milestone payments, co-funded development payments or royalties for the sale of ADCETRIS outside the U.S. and Canada or for TUKYSA outside the U.S., Canada and Europe. As a result of any such termination, we may have to engage another collaborator to complete the ADCETRIS or TUKYSA development process and to commercialize ADCETRIS or TUKYSA in our collaborators’ current territories, or to complete the development process and undertake commercializing ADCETRIS or TUKYSA in our collaborators’ current territories ourselves, either of which could significantly delay the continued development and commercialization of ADCETRIS or TUKYSA and increase our costs. Similarly, Astellas, Genmab and Merck each have the right to opt out of their co-development obligations relating to PADCEV, tisotumab vedotin and ladiratuzumab vedotin, respectively. If Astellas, Genmab or Merck were to opt out of their co-development collaborations with us, this would significantly delay the commercialization and development of PADCEV or the development of tisotumab vedotin or ladiratuzumab vedotin, as applicable, and increase our costs. Any of these events could significantly harm our financial position, adversely affect our stock price and require us to incur all the costs of developing and commercializing the applicable product or product candidate, which would otherwise be co-funded by our collaboration partners. Moreover, in the case of PADCEV and tisotumab vedotin, the success of PADCEV and any approved tisotumab vedotin product will depend, in part, on our ability to effectively jointly commercialize PADCEV and tisotumab vedotin with Astellas and Genmab, respectively, in accordance with our joint commercialization obligations and joint commercialization plans. The success, if any, of our joint commercialization efforts with Astellas and Genmab, as well as the activities of Astellas and Genmab, will significantly impact the commercialization of PADCEV and the potential future commercialization of an approved tisotumab vedotin product, respectively. The product candidates being developed under our collaboration and license agreements are in various stages of development and we cannot guarantee that any of the product candidates under our collaborations will be successful. In this regard, certain of our ADC licensees have advanced product candidates utilizing or incorporating our ADC technology to later stage clinical trials that were not successful. In the future, we may not be able to locate third-party collaborators to assist in commercializing any future products in regions outside the U.S., and we may lack the capital and resources necessary to market these products in certain regions outside the Unites States alone.

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We currently rely on third-party manufacturers and other third parties for production of our drug products and our dependence on these manufacturers may impair the continued development and commercialization of our products and product candidates.

We own a biologics manufacturing facility located in Bothell, Washington, which we use to support our clinical supply needs, and we are investing in the facility infrastructure to enable it to support some of our commercial supply needs. However, we rely and expect to continue to rely on corporate collaborators and contract manufacturing organizations to supply drug product for both clinical and commercial programs.

For the monoclonal antibody used in ADCETRIS, we have contracted with AbbVie for clinical and commercial supplies. For the drug linker used in ADCETRIS, we have contracted with Millipore Sigma, an affiliate of Merck KGaA, for clinical and commercial supplies. We have multiple contract manufacturers for conjugating the drug linker to the antibody and producing the ADCETRIS product. We rely on Astellas to supply PADCEV for our clinical trials and for commercial sale, and Astellas oversees the manufacturing supply chain for PADCEV. With respect to TUKYSA, we rely on multiple contract manufacturers and other third parties to perform manufacturing services for us including Sterling Pharma Solutions Limited for production of the starting materials for TUKYSA, Esteve Quimica to produce the active pharmaceutical ingredient, Hovione to complete spray drying and Corden Plankstadt to produce the tablets for TUKYSA. For the foreseeable future, we expect to continue to rely on contract manufacturers and other third parties to produce and store sufficient quantities of ADCETRIS and TUKYSA, and on Astellas and other third parties to produce and store sufficient quantities of PADCEV, for use in our clinical trials and for commercial sale. If our contract manufacturers, collaborators or other third parties fail to deliver our products for clinical use or sale on a timely basis, with sufficient quality, and at commercially reasonable prices, and we fail to find replacement manufacturers or to develop our own manufacturing capabilities, we may bear costly losses or be required to delay or suspend clinical trials or otherwise delay or discontinue development, production and sale of our products. With respect to TUKYSA specifically, we have limited prior experience as an organization manufacturing TUKYSA and small molecule drug products generally, and have relatively new working relationships with many of the third-party manufacturers involved in TUKYSA manufacture. These factors increase the chance that we could encounter manufacturing challenges that could increase our costs, cause delays or otherwise negatively impact our business. Moreover, there are a limited number of facilities in which each of our products can be produced, and any interruption of the operation of those facilities due to the risks and evolving effects of the COVID-19 pandemic or other events such as equipment malfunction or failure or damage to the facility by natural disasters or as the result of regulatory actions or contractual disputes could result in the cancellation of shipments, loss of product in the manufacturing process, a shortfall in product supply, or limit our or our collaborators’ ability to sell our products. Further, we and our collaborators depend on outside vendors for the supply of raw materials used to produce our products. If the third-party suppliers were to cease production or otherwise fail to supply us or our collaborators with quality raw materials and we or our collaborators were unable to contract on acceptable terms for these raw materials with alternative suppliers, our ability to have our products manufactured to meet clinical and commercial requirements would be adversely affected. While we believe that the existing supplies of PADCEV and Astellas’ contract manufacturing relationships will be sufficient to accommodate current clinical and commercial needs, we or Astellas may need to obtain additional manufacturing arrangements or increase manufacturing capability to meet potential future commercial needs with respect to PADCEV, which could require additional capital investment by us or cause us potential delays if Astellas encounters challenges in negotiating commercially reasonable arrangements with these manufacturers. While we believe that the existing supplies of TUKYSA will be sufficient to accommodate current clinical and forecasted commercial needs at this time, we may need to put in place additional manufacturing arrangements or expand our current manufacturing arrangements with third-party manufacturers to meet potential future commercial needs and we cannot assure you that we can enter into such arrangements on commercially reasonable terms or at all. Forecasting demand for a new product can be challenging and in the event demand for TUKYSA exceeds our estimates or in the event that our commercial manufacturers of TUKYSA encounter unexpected failures or setbacks in completing manufacturing services in accordance with applicable quality standards, our commercialization of TUKYSA could be negatively impacted by short-term product supply challenges, which would adversely impact our TUKYSA revenues and could negatively affect our relationships with patients and healthcare professionals. In addition, any failures or delays in manufacturing adequate product supplies and in putting in place or expanding our manufacturing and supply infrastructure could delay or impede our and Merck’s ability to launch and commercialize TUKYSA in additional markets where TUKYSA has obtained regulatory approval and any other markets where it may obtain regulatory approval, if any. While we do not currently anticipate disruptions to the supply of our products due to the evolving effects of the COVID-19 pandemic, if the COVID-19 pandemic continues for an extended period of time or the effects of the COVID-19 pandemic become more severe, or any of the parties in our supply chain are adversely impacted by the evolving effects of the COVID-19 pandemic, such as staffing shortages, productions slowdowns and/or disruptions in delivery systems, then there could be disruptions to our supply chain and operations, and associated delays in the manufacturing and supply of our products. Any supply disruptions would adversely impact our ability to generate sales of and revenues from our products, and our business, financial condition, results of operations and growth prospects could be materially adversely affected. Further, in connection with the COVID-19 pandemic and in an effort to increase the wider availability of needed medical and other supplies and products, we and our third-party suppliers may elect to or governments may require us or our third-party suppliers to allocate raw materials used in

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manufacturing or manufacturing capacity (for example pursuant to the U.S. Defense Production Act) in a way that adversely affects our ability to have our products manufactured to meet clinical and commercial requirements.

For the clinical supply of our product candidates, we rely, and expect for the foreseeable future to continue to rely, on multiple contract manufacturers and other third parties to perform manufacturing services for us. If these third-party manufacturers cease or interrupt production, fail to supply satisfactory materials, products or services for any reason or experience performance delays or quality concerns, or if materials or products are lost in transit or in the manufacturing process, such challenges or interruptions could substantially impact clinical trial drug supply, with the potential for additional costs, delays and an adverse effect on our business. With respect to tisotumab vedotin, we currently rely on drug product supply provided by Genmab. Under the commercialization agreement we entered into with Genmab in October 2020, we will be responsible for overseeing the clinical and commercial manufacturing supply chain of tisotumab vedotin following a transition period. We will need to obtain appropriate manufacturing arrangements and increase manufacturing capability to meet potential future commercial needs, and could experience potential delays if we encounter challenges in negotiating commercially reasonable arrangements with manufacturers or in transitioning oversight of the manufacturing process from Genmab to us.

In order to obtain regulatory approval of any product candidate or regulatory approval for any product in a new jurisdiction, we or our supplier or suppliers for that product or product candidate must obtain approval to manufacture and supply product, in some cases based on qualification data provided as part of a BLA, a New Drug Application, or NDA, or another application for regulatory approval. In addition, the manufacturing facilities utilized to manufacture the product or product candidate will be subject to pre-approval regulatory inspections. Any delay in generating, or failure to generate, data required in connection with submission of the chemistry, manufacturing and controls, or CMC, portions of any BLA, NDA or other application for regulatory approval, or challenges in the regulatory inspection process, could negatively impact our ability to meet our anticipated submission dates, result in delay in any approval decisions and/or negatively affect our ability to obtain regulatory approval at all. Any failure of us, our collaborators or a manufacturer to obtain approval from a regulatory authority to manufacture and supply product or any delay in obtaining and distributing adequate supplies of a newly-approved product, including PADCEV and TUKYSA, on a timely basis or in accordance with applicable specifications and local requirements could negatively impact our ability to successfully launch and commercialize the applicable product or product candidate and to generate sales of that product or product candidate at the levels we expect. We or our collaborators may also encounter difficulties in meeting the regulatory requirements applicable to the manufacturing process for these agents, in managing the additional complexity of manufacturing for a number of markets outside the U.S. or in responding to changes in the amount or timing of supply needs. Any failures or delays to meet these requirements could substantially delay or impede our ability to obtain regulatory approvals for and to market these agents, which could negatively impact our operating results and adversely affect our business.

To date, we have depended on a small number of collaborators for a substantial portion of our revenue. The loss of any one of these collaborators or changes in their product development or business strategy could result in a material decline in our revenue.

We have collaborations with a limited number of companies. To date, a substantial portion of our revenue has resulted from payments made under agreements with our corporate collaborators, and although ADCETRIS sales currently comprise a greater proportion of our revenue, we expect that a portion of our revenue will continue to come from corporate collaborations. Even though we market ADCETRIS in the U.S. and Canada, our revenues still depend in part on Takeda’s ability to market ADCETRIS outside of the U.S. and Canada. Likewise, even though we market TUKYSA in the U.S., our revenues will still depend in part on Merck’s ability and willingness to market TUKYSA outside of the U.S., Canada and Europe. In addition, under our agreements with Astellas, we and Astellas bear the costs of their own sales organizations in the U.S., equally share certain other costs associated with commercializing PADCEV in the U.S. and equally share in any profits realized in the U.S. The loss of our collaborators, especially Takeda or Astellas, changes in product development or business strategies of our collaborators, or the failure of our collaborators to perform their obligations under their agreements with us for any reason, including paying license or technology fees, milestone payments, royalties or reimbursements, could have a material adverse effect on our financial performance. Payments under our existing and potential future collaboration agreements are also subject to significant fluctuations in both timing and amount, which could cause our revenue to fall below the expectations of securities analysts and investors and cause a decrease in our stock price.

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We are dependent upon a small number of distributors for a significant portion of our net sales, and the loss of, or significant reduction or cancellation in sales to, any one of these distributors could adversely affect our operations and financial condition.

We sell ADCETRIS and PADCEV through a limited number of specialty distributors. Healthcare providers order ADCETRIS and PADCEV through these distributors. We receive orders from distributors and generally ship product directly to the healthcare provider. We sell TUKYSA through a distribution network of specialty pharmacies, integrated delivery network hospitals and practices that dispense in the office. These distributors and distribution network partners do not set or determine demand for our products; however, our ability to effectively commercialize our products will depend, in part, on their performance. Although we believe we can find alternative distributors and partners on relatively short notice, the loss of a major distributor or partner could materially and adversely affect our results of operations and financial condition. In addition, business disruptions arising from the COVID-19 pandemic could negatively affect the ability of some of our distributors or distribution network partners to pay amounts owed to us in a timely manner or at all.

Risks Related to Our Intellectual Property

If we are unable to enforce our intellectual property rights or if we fail to sustain and further procure additional intellectual property rights, we may not be able to successfully commercialize our products or any future products and competitors may be able to develop competing therapies.

Our success depends, in part, on obtaining and maintaining patent protection and successfully enforcing these patents and defending them against third-party challenges in the U.S. and other countries. We own multiple U.S. and foreign patents and pending patent applications for our technologies. We also have rights to issued U.S. patents, patent applications, and their foreign counterparts, relating to our monoclonal antibody, linker and drug-based technologies. Our rights to these patents and patent applications are derived in part from worldwide licenses from third parties. In addition, we have licensed certain of our U.S. and foreign patents and patent applications to third parties.

The standards that the U.S. Patent and Trademark Office, or USPTO, and foreign patent offices use to grant patents are not always applied predictably or uniformly and can change. Consequently, our pending patent applications may not be allowed and, if allowed, may not contain the type and extent of patent claims that will be adequate to conduct our business as planned. Additionally, any issued patents we currently own or obtain in the future may have a shorter patent term than expected or may not contain claims that will permit us to stop competitors from using our technology or similar technology or from copying our products. Similarly, the standards that courts use to interpret patents are not always applied predictably or uniformly and may evolve, particularly as new technologies develop. In addition, changes to patent laws in the U.S. or other countries may be applied retroactively to affect the validity, enforceability, or term of our patent. For example, the U.S. Supreme Court has modified some legal standards applied by the USPTO in examination of U.S. patent applications, which may decrease the likelihood that we will be able to obtain patents and may increase the likelihood of challenges to patents we obtain or license. In addition, changes to the U.S. patent system have come into force under the Leahy-Smith America Invents Act, or the America Invents Act, including changes from a “first-to-invent” system to a “first to file” system, changes to examination of U.S. patent applications and changes to the processes for challenging issued patents. These changes include provisions that affect the way patent applications are being filed, prosecuted and litigated. For example, the America Invents Act enacted proceedings involving post-issuance patent review procedures, such as inter partes review, or IPR, and post-grant review and covered business methods. These proceedings are conducted before the Patent Trial and Appeal Board, or PTAB, of the USPTO. Each proceeding has different eligibility criteria and different patentability challenges that can be raised. In this regard, the IPR process permits any person (except a party who has been litigating the patent for more than a year) to challenge the validity of some patents on the grounds that it was anticipated or made obvious by prior art. As a result, non-practicing entities associated with hedge funds, pharmaceutical companies who may be our competitors and others have challenged certain valuable pharmaceutical U.S. patents based on prior art through the IPR process. A decision in such a proceeding adverse to our interests could result in the loss of valuable patent rights which would have a material adverse effect on our business, financial condition, results of operations and growth prospects. In any event, the America Invents Act and any other potential future changes to the U.S. patent system could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. In addition, we rely on external agents to perform certain activities to maintain our patents. Although we carefully select and oversee these agents, the failure of an agent to properly perform these maintenance activities, whether through mistake or otherwise, could adversely affect our intellectual property rights.

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We rely on trade secrets and other proprietary information where we believe patent protection is not appropriate or obtainable. However, trade secrets and other proprietary information are difficult to protect. We have taken measures to protect our unpatented trade secrets and know-how, including the use of confidentiality and assignment of inventions agreements with our employees, consultants and certain contractors. It is possible, however, that these persons may breach the agreements or that our competitors may independently develop or otherwise discover our trade secrets or other proprietary information. Our research collaborators may publish confidential data or other restricted information to which we have rights. If we cannot maintain the confidentiality of our technology and other confidential information in connection with our collaborations, then our ability to receive patent protection or protect our proprietary information may be impaired.

We have been and may in the future be subject to litigation, which could result in substantial damages and may divert management’s time and attention from our business.

We are engaged in multiple legal disputes with Daiichi Sankyo Co. Ltd., or Daiichi Sankyo. We are in a dispute with Daiichi Sankyo regarding the ownership of certain technology used by Daiichi Sankyo in its cancer drug ENHERTU and certain product candidates. An arbitration hearing relating to the dispute was conducted in June 2021, and a decision is expected later this year. In addition, we filed a complaint in the U.S. District Court for the Eastern District of Texas to commence an action for infringement of our U.S. Patent No. 10,808,039, or the ‘039 Patent, by Daiichi Sankyo’s importation into, offer for sale, sale, and use in the U.S. of ENHERTU. Daiichi Sankyo (as well as Daiichi Sankyo, Inc. and AstraZeneca Pharmaceuticals, LP, or AstraZeneca) subsequently filed an action in the U.S. District Court for the District of Delaware seeking a declaratory judgment that ENHERTU does not infringe the ‘039 Patent. The Delaware action has been stayed by court order. Daiichi Sankyo, Inc. and AstraZeneca also filed two Petitions for Post-Grant Review with the U.S. Patent Office seeking to have claims of the ‘039 Patent cancelled as unpatentable. On June 24, 2021, the U.S. Patent Office issued a decision denying both Petitions for Post-Grant Review. The trial in the patent infringement case in Texas is scheduled to begin on April 4, 2022. As a result of these disputes, we have incurred and will continue to incur litigation expenses. In addition, from time to time, we may become involved in other lawsuits, claims and proceedings relating to the conduct of our business, including but not limited to those pertaining to the defense and enforcement of our patent or other intellectual property rights and our contractual rights.

These and other potential future litigations are subject to inherent uncertainties, and the actual costs to be incurred relating to litigations may be impacted by unknown factors. The outcome of litigation is necessarily uncertain, and we could be forced to expend significant resources in the course of these and potential future litigations, we may be subject to additional claims and counterclaims that may result in liabilities or require us to take or refrain from certain actions, and we may not prevail. Monitoring, defending against and pursuing legal actions can be time-consuming for our management and detract from our ability to fully focus our internal resources on our business activities, which could result in delays of our clinical trials or our development and commercialization efforts. In addition, we may incur substantial legal fees and costs in connection with these and potential future litigations. Decisions adverse to our interests in these and potential future litigations could result in the payment of substantial damages, or possibly fines, or affect our intellectual property rights and could have a material adverse effect on our cash flow, results of operations and financial position. Successful challenges to our patent or other intellectual property rights could result in a loss of rights in the relevant jurisdiction and may allow third parties to use our proprietary technologies without a license from us or our collaborators. In addition, the uncertainty associated with litigation could lead to increased volatility in our stock price.

We and our collaborators rely on license agreements for certain aspects of our products and product candidates and technologies such as our ADC technology. Failure to maintain these license agreements or to secure any required new licenses could prevent us from continuing to develop and commercialize our products and product candidates.

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We have entered into agreements with third-party commercial and academic institutions to license technology for use in ADCETRIS, TUKYSA, our product candidates and technologies such as our ADC technology. Currently, we have license agreements with BMS, the University of Miami and Array BioPharma, Inc., among others. In addition to royalty provisions and other payment obligations, some of these license agreements contain diligence and milestone-based termination provisions, in which case our failure to meet any agreed upon royalty or diligence requirements or milestones may allow the licensor to terminate the agreement. Many of our license agreements grant us exclusive licenses to the underlying technologies. In addition, Astellas has agreements to license technology for use in PADCEV. We rely on Astellas to maintain these license agreements. If Astellas fails to maintain these license agreements, if our licensors terminate our license agreements or if we or our collaborators are unable to maintain the exclusivity of our exclusive license agreements, we may be unable to continue to develop and commercialize our products or product candidates. Further, we have had in the past, and we or our collaborators may in the future have, disputes with our licensors, which may impact our ability to develop and commercialize our products or product candidates or require us to enter into additional licenses. An adverse result in potential future disputes with our or our collaborators’ licensors may impact our ability to develop and commercialize our products and product candidates, or may require us to enter into additional licenses or to incur additional costs in litigation or settlement. In addition, continued development and commercialization of our products and product candidates will likely require us to secure licenses to additional technologies. We may not be able to secure these licenses on commercially reasonable terms, if at all.

We may incur substantial costs and lose important rights or may not be able to continue to commercialize our products or to commercialize any of our product candidates that may be approved for commercial sale as a result of litigation or other proceedings relating to patent and other intellectual property rights, and we may be required to obtain patent and other intellectual property rights from others.

We may face potential lawsuits by companies, academic institutions or others alleging infringement of their intellectual property. Because patent applications can take a few years to publish, there may be currently pending applications of which we are unaware that may later result in issued patents that adversely affect the continued commercialization of our products or future commercialization of our product candidates. In addition, we are monitoring the progress of multiple pending patent applications of other organizations that, if granted, may require us to license or challenge their enforceability in order to continue commercializing our products or to commercialize our product candidates that may be approved for commercial sale. Our challenges to patents of other organizations may not be successful, which may affect our ability to commercialize our products or product candidates. As a result of the patent infringement lawsuits that have been filed or may be filed against us in the future by third parties alleging infringement by us of patent or other intellectual property rights, we may be required to pay substantial damages, including lost profits, royalties, treble damages, attorneys’ fees and costs, for past infringement if it is ultimately determined that our products infringe a third-party’s intellectual property rights. Even if infringement claims against us are without merit, the results may be unpredictable. In addition, defending lawsuits takes significant time, may be expensive and may divert management’s attention from other business concerns. Further, we may be stopped from developing, manufacturing or selling our products until we obtain a license from the owner of the relevant technology or other intellectual property rights, or be forced to undertake costly design-arounds, if feasible. If such a license is available at all, it may require us to pay substantial royalties or other fees.

We are or may be from time to time involved in the defense and enforcement of our patent or other intellectual property rights in a court of law, USPTO interference, IPR, post-grant review or reexamination proceeding, foreign opposition proceeding or related legal and administrative proceeding in the U.S. and elsewhere. In addition, if we choose to go to court to stop a third party from infringing our patents, that third party has the right to ask the court to rule that these patents are invalid, not infringed and/or should not be enforced. Under the America Invents Act, a third party may also have the option to challenge the validity of certain patents at the PTAB, whether they are accused of infringing our patents or not, and certain entities associated with hedge funds, pharmaceutical companies and other entities have challenged valuable pharmaceutical patents through the IPR process. These lawsuits and administrative proceedings are expensive and consume time and other resources, and we may not be successful in these proceedings or in stopping infringement. In addition, there is a risk that a court will decide that these patents are not valid or not infringed or otherwise not enforceable, or that the PTAB will decide that certain patents are not valid, and that we do not have the right to stop a third party from using the patented subject matter. Successful challenges to our patent or other intellectual property rights through these proceedings could result in a loss of rights in the relevant jurisdiction and may allow third parties to use our proprietary technologies without a license from us or our collaborators, which may also result in loss of future royalty payments. Furthermore, if such challenges to our rights are not resolved promptly in our favor, our existing business relationships may be jeopardized and we could be delayed or prevented from entering into new collaborations or from commercializing potential products, which could adversely affect our business and results of operations. In addition, we may challenge the patent or other intellectual property rights of third parties and if we are unsuccessful in actions we bring against the rights of such parties, through litigation or otherwise, and it is determined that we infringe the intellectual property rights of such parties, we may be prevented from commercializing potential products in the relevant jurisdiction, or may be required to obtain licenses to those rights or develop or obtain alternative technologies, any of which could harm our business.

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Risks Related to Our Operations, Managing Our Growth and Other Risks

The evolving effects of the COVID-19 pandemic and global economic slowdown could have further adverse effects on our business, including our commercialization efforts, supply chain, regulatory activities, clinical development activities and other business operations.

Our business is currently being adversely affected and could be materially and adversely affected in the future by the evolving effects of the COVID-19 pandemic. In accordance with guidance issued by the Centers for Disease Control and Prevention, the World Health Organization and local authorities, beginning in March 2020, we implemented a mandatory work-from-home policy for employees who can perform their jobs offsite. We continued our essential research, manufacturing and laboratory activities onsite, and we recently began to allow additional U.S. office-based employees who have been fully vaccinated to return to the office on a voluntary and limited basis. We maintain a number of precautionary measures designed to protect our on-site employees, such as enhanced facilities cleaning, lower concentrations of staff, contact tracing and making testing available. In addition, in accordance with guidelines from government authorities, we have additional precautionary measures for facilities with essential research, manufacturing and laboratory staff, who may not all be fully vaccinated, including temperature checks, screening protocols, masks and social distancing. However, if we are unable to obtain adequate supplies of personal protective equipment due to shortages or encounter other challenges related to the evolving COVID-19 pandemic, we may have to place or may experience additional limitations on our in person activities. In addition, our ongoing increased reliance on personnel working from home may present operational and workplace culture challenges, negatively impact productivity or disrupt, delay or otherwise adversely impact our business. This could also increase our cybersecurity risk, create data accessibility concerns and make us more susceptible to communication disruptions, any of which could adversely impact our business operations. In addition, our oversight of third-party manufacturers is currently being conducted by virtual means, which may increase the chance of a manufacturing quality issue. Impacts related to the COVID-19 pandemic could materially and adversely affect our business, our ability to generate sales of and revenues from our approved products, and our ability to advance the development of our products and product candidates, as described elsewhere in this “Risk Factors” section. The magnitude of such impacts will depend, in large part, on the ultimate duration and severity of the evolving effects of the COVID-19 pandemic.

The effects of the COVID-19 pandemic continue to rapidly evolve. These effects have increased market volatility and could result in a significant long-term disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, the current recession or additional market corrections resulting from the effects of the COVID-19 pandemic could materially affect our business and the value of our common stock. The extent to which the evolving effects of the COVID-19 pandemic impact our business, our ability to generate sales of and revenues from our approved products, and our clinical development and regulatory efforts will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate duration and severity of the pandemic, government actions, such as travel restrictions, quarantines and social distancing requirements in the U.S. and in other countries, business closures or business disruptions and the effectiveness of actions taken in the U.S. and in other countries to contain and treat the disease, including the effectiveness and timing of vaccination programs in the U.S. and worldwide. Accordingly, we do not yet know the full extent of potential delays or impacts on our business, sales of our products, our clinical and regulatory activities, our research programs, healthcare systems or the global economy as a whole. However, these effects could materially and adversely affect our business, financial condition, results of operations and growth prospects. In addition, to the extent the evolving effects of the COVID-19 pandemic adversely affect our business, financial condition, results of operations and growth prospects, they may also have the effect of heightening many of the other risks and uncertainties described elsewhere in this “Risk Factors” section. It is also possible that future global pandemics could also occur and also materially and adversely affect our business, financial condition, results of operations and growth prospects.

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If we are unable to manage our growth, our business, financial condition, results of operations and prospects may be adversely affected.

We have experienced and expect to continue to experience significant growth in the number of our employees and in the scope of our operations, including in connection with our transition into a multi-product oncology company, our operation of a manufacturing facility and our continuing international expansion. In this regard, the anticipated continued growth of ADCETRIS, the continued commercialization of PADCEV and TUKYSA, and the potential launch and commercialization of any other future approved products may require expansion of our sales force and commercial organization. We may need to commit significant additional funds, management time and other resources to the growth of our commercial organization. In addition, our expansion in Europe will continue to require the expansion of other functions, including clinical development, drug safety, quality, finance and compliance. We may not be able to achieve any necessary growth in a timely or cost-effective manner or realize a positive return on our investment, and we may not have the financial resources to achieve the necessary growth in a timely manner or at all. Any of these factors could negatively impact our ability to successfully launch and commercialize TUKYSA in Europe or to successfully launch and commercialize any future newly-approved product and could harm the commercial potential of our current and any future approved products. In any event, this rapid growth and additional complexity places significant demands on our management, operational and financial resources, and our current and planned personnel, systems, procedures and controls may not be adequate to support our growth. In particular, we are using new distribution channels for TUKYSA that require us to implement additional control systems to monitor inventory that has been purchased by specialty pharmacies and not yet dispensed to patients. A failure to correctly implement and monitor these new control systems could result in a control failure or error in our financial accounting. In addition, this growth places significant demands on our third party suppliers and they may not have the resources and personnel to adequately support our commercial plans and launch needs, including in regions outside the U.S. To effectively manage our growth, we must continue to improve existing, and implement new, operational and financial systems, procedures and controls and must expand, train and manage our growing employee base, and there can be no assurance that we will effectively manage our growth without experiencing operating inefficiencies, control deficiencies, compliance issues or other problems. We expect that we may need to increase our management personnel to oversee our expanding operations, and recruiting and retaining qualified individuals is difficult. Likewise, we could experience limitations on our ability to recruit, hire and retain personnel at all levels of the organization as a result of the COVID-19 pandemic, and without reductions in the pace, scale or complexity of our business, this could result in strain on our staff, loss of talent, failure to capitalize fully on opportunities, control deficiencies and other challenges, which could adversely affect our business, financial condition, results of operations and prospects. In addition, the physical expansion of our operations may lead to significant costs and may divert our management and capital resources. If we are unable to manage our growth effectively, or are unsuccessful in recruiting and retaining qualified management personnel, our business, financial condition, results of operations and prospects may be adversely affected.

Risks associated with our expanding operations in countries outside the U.S. could materially adversely affect our business.

We are expanding our operations internationally. We have an expanding number of subsidiaries in jurisdictions outside the U.S., including multiple subsidiaries in Europe, we are continuing to build our commercial infrastructure in Europe and we are expanding our commercial infrastructure in Canada. Consequently, we are, and will increasingly be, subject to risks related to operating internationally. Risks associated with conducting operations internationally include:

•the increased complexity and costs inherent in managing international operations, including in geographically disparate locations;

•diverse regulatory, drug safety, drug supply, financial and legal requirements, and any future changes to such requirements, in one or more countries where we are located or do business;

•differing payor reimbursement regimes, governmental payors or patient self-pay systems and price controls;

•adverse tax consequences, including changes in applicable tax laws and regulations;

•applicable trade laws, tariffs, export quotas, custom duties or other trade restrictions, and any changes to them;

•economic weakness, including inflation, or political or economic instability in particular economies and markets outside the U.S.;

•compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

•currency fluctuations, which could result in increased operating expenses or reduced revenues, and other obligations incident to doing business or operating in another country;

•liabilities for activities of, or related to, our international operations;

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•challenges inherent in efficiently managing employees in diverse geographies, including the need to adapt systems, policies, benefits and compliance programs to differing labor and other regulations and different languages;

•reliance on vendors who are located far from our headquarters and with whom we have not worked previously;

•workforce uncertainty in countries where labor unrest is more common than in the U.S.; and

•laws and regulations relating to data security and the unauthorized use of, or access to, commercial and personal information.

As a result of our expanding international operations, including our expanding commercial presence in Europe and Canada, our business and corporate structure has and will become substantially more complex. In addition, as a business, we do not have significant experience conducting operations outside of the U.S. and Canada. There can be no assurance that we will effectively manage the increased complexity and broader scope of our operations without experiencing operating inefficiencies, delays, control deficiencies, compliance issues or other problems. Significant management time and effort will be required to effectively manage the increasing complexity and broader scope of our operations, and our failure to successfully do so could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Further, since a portion of the regulatory framework in the U.K. is derived from EU directives and regulations, Brexit, has had, and will continue to have, an impact upon the regulatory regime applicable to potential future marketing authorizations for ADCETRIS, PADCEV, TUKYSA and our product candidates. In particular, Great Britain is no longer covered by the centralized procedures for obtaining EU-wide marketing authorization from the European Medicines Agency, and a separate marketing authorization will be required to market our product candidates in Great Britain. In addition, it is unclear what additional financial, trade, regulatory and legal implications the withdrawal of the U.K. from the EU. may have on us. These and other risks described elsewhere in these risk factors associated with expanding our international operations could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

We have engaged in, and may in the future engage in, strategic transactions that increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities and subject us to other risks.

We actively evaluate various strategic transactions on an ongoing basis, including licensing or otherwise acquiring complementary products, technologies or businesses. Any potential future acquisitions or in-licensing transactions entail numerous risks, including but not limited to:

•risks associated with satisfying the closing conditions relating to such transactions and realizing their anticipated benefits;

•increased operating expenses and cash requirements;

•difficulty integrating acquired technologies, products, operations, and personnel with our existing business;

•the potential disruption of our historical core business;

•diversion of management’s attention in connection with both negotiating the acquisition or license and integrating the business, technology or product;

•retention of key employees;

•difficulties in assimilating employees and corporate cultures of any acquired companies;

•uncertainties in our ability to maintain key business relationships of any acquired companies;

•strain on managerial and operational resources;

•difficulty implementing and maintaining effective internal control over financial reporting at businesses that we acquire, particularly if they are not located near our existing operations;

•exposure to unanticipated liabilities of acquired companies or companies in which we invest;

•the potential need to write down assets or recognize impairment charges; and

•potential costly and time-consuming litigation, including stockholder lawsuits.

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As a result of these or other problems and risks, businesses, technologies or products we acquire or invest in or obtain licenses to may not produce the revenues, earnings or business synergies that we anticipated, acquired or licensed product candidates or technologies may not result in regulatory approvals, and acquired or licensed products may not perform as expected. As a result, we may incur higher costs and realize lower revenues than we had anticipated. We cannot assure you that any acquisitions or investments we have made or may make in the future will be completed or that, if completed, the acquired business, licenses, investments, products, or technologies will generate sufficient revenue to offset the negative costs or other negative effects on our business. Failure to manage effectively our growth through acquisitions or in-licensing transactions could adversely affect our growth prospects, business, results of operations, financial condition, and cash flow.

In addition, we may spend significant amounts, issue dilutive securities, assume or incur significant debt obligations, incur large one-time expenses and acquire intangible assets or goodwill in connection with acquisitions and in-licensing transactions that could result in significant future amortization expense and write-offs. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business. Other pharmaceutical companies, many of which may have substantially greater financial, marketing and sales resources, compete with us for these opportunities. Even if appropriate opportunities are available, we may not be able to successfully identify them or we may not have the financial resources necessary to pursue them, and if pursued, we may be unable to structure and execute transactions in the anticipated timeframe, or at all.

Even if we are able to successfully identify and acquire complementary products, technologies or businesses, we cannot assure you that we will be able to successfully manage the risks associated with integrating acquired products, technologies or businesses or the risks arising from anticipated and unanticipated problems in connection with an acquisition or in-licensing transaction. Further, while we seek to mitigate risks and liabilities of potential acquisitions and in-licensing transactions through, among other things, due diligence, there may be risks and liabilities that such due diligence efforts fail to discover, that are not disclosed to us, or that we inadequately assess. Any failure in identifying and managing these risks, liabilities and uncertainties effectively could have a material adverse effect on our business and adversely affect our results of operations and financial condition. Additionally, we may not realize the anticipated benefits of such transactions, including the possibility that expected synergies and accretion will not be realized or will not be realized within the expected time frame.

If we lose our key personnel or are unable to attract and retain additional qualified personnel, our future growth and ability to compete would suffer.

We are highly dependent on the efforts and abilities of the principal members of our senior management. Additionally, we have scientific personnel with significant and unique expertise in monoclonal antibodies, ADCs and related technologies, and TUKYSA. The loss of the services of any one of the principal members of our managerial or scientific staff may prevent us from achieving our business objectives.

In addition, the competition for qualified personnel in the biotechnology field is intense, and our future success depends upon our ability to attract, retain and motivate highly skilled scientific, technical and managerial employees. In order to continue to commercialize our products, and advance the development and commercialization of our additional product candidates, we will be required to expand our workforce, particularly in the areas of manufacturing, clinical trials management, regulatory affairs, business development, sales and marketing, both in the U.S. and in Europe. We continue to face intense competition for qualified individuals from numerous pharmaceutical and biotechnology companies, as well as academic and other research institutions, and with increasing reliance on remote work arrangements, the geographic market in which we compete for talent is expanding. Our ability to attract and retain talent in this competitive environment may be further complicated by evolving employment trends arising from the COVID-19 pandemic, including an increased preference for remote, alternative or flexible work arrangements. Our failure to compete effectively in this area could negatively affect our sales of our current and any future approved products. To the extent we are not able to retain these individuals on favorable terms or attract any additional personnel that may be required, our business may be harmed. For example, we may not be successful in attracting or retaining key personnel necessary to effectively commercialize PADCEV and TUKYSA, to continue to build and operate our commercial infrastructure in Europe or to support the potential launch and commercialization of our product candidates, alone or jointly with our collaborators, if we receive regulatory approval. If our commercial organization is not appropriately sized or equipped to adequately market our current and any future approved products, the commercial potential of our current and any future approved products may be diminished, and our business and prospects for profitability may be adversely affected.

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If we experience a significant disruption in our information technology systems or breaches of data security, our business could be adversely affected.

We rely on information technology systems to keep financial records, capture laboratory data, maintain clinical trial data, commercial sales data and corporate records, communicate with staff and external parties and operate other critical functions. The effects of the COVID-19 pandemic have intensified our dependence on information technology systems as many of our critical business activities are currently being conducted remotely and our increased reliance on personnel working from home could increase our cybersecurity risk. Our information technology systems are potentially vulnerable to disruption due to breakdown, malicious intrusion and computer viruses or other disruptive events including but not limited to natural disaster. If we were to experience a prolonged system disruption in our information technology systems or those of certain of our vendors, it could delay or negatively impact the development and commercialization of our products and product candidates, which could adversely impact our business. Although we maintain offsite back-ups of our data, if operations at our facilities were disrupted, it may cause a material disruption in our business if we are not capable of restoring function on an acceptable timeframe. In addition, our information technology systems are potentially vulnerable to data security breaches, whether by employees or others, which may expose sensitive or personal data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of personal information (including sensitive personal information) of our employees, patients in our clinical trials, customers and others, any of which could have a material adverse effect on our business, financial condition and results of operations. Moreover, a security breach or privacy violation that leads to destruction, loss, alteration, unauthorized use or access, disclosure or modification of, personally identifiable information or personal data, could harm our reputation, compel us to comply with federal, state and/or international breach notification laws, subject us to mandatory corrective or regulatory action, require us to verify the correctness of database contents and otherwise subject us to liability under laws and regulations that protect personal data, including the GDPR, which could disrupt our business, result in increased costs or loss of revenue, and/or result in significant legal and financial exposure. In addition, a data security breach could result in loss of clinical trial data or damage to the integrity of that data. If we are unable to implement and maintain adequate organizational and technical measures to prevent such security breaches or privacy violations, or to respond adequately in the event of a breach, our operations could be disrupted, and we may suffer loss of reputation, problems with regulatory authorities, financial loss and other negative consequences. Moreover, failure to maintain effective internal accounting controls related to data security breaches and cybersecurity in general could impact our ability to produce timely and accurate financial statements and could subject us to regulatory scrutiny. In addition, security breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above.

Risks Related to Our Financial Condition and Capital Requirements

Our operating results are difficult to predict and may fluctuate. If our operating results are below the expectations of securities analysts or investors, the trading price of our stock could decline.

Our operating results are difficult to predict and may fluctuate significantly from quarter to quarter and year to year. As a result, although we provide product sales guidance from time to time, you should not rely on product sales results in any period as being indicative of future performance. In addition, such guidance is based on assumptions that may be incorrect or that may change from quarter to quarter, and it may be particularly difficult to correctly forecast product sales for newly-approved products or in indications for existing products for which we have recently received marketing approval. Moreover, our product sales have, on occasion, been below the expectations of securities analysts and investors and have been below prior period sales, and our sales in the future may also be below prior period sales, our own guidance and/or the expectations of securities analysts and investors. To the extent that we again do not meet our guidance or the expectations of analysts or investors, our stock price may be adversely impacted, perhaps significantly. We believe that our quarterly and annual results of operations may be affected by a variety of factors, including:

•customer ordering patterns for our products, which may vary significantly from period to period;

•the overall level of demand for our products, including the impact of any competitive or biosimilar products and the duration of therapy for patients treated with our products;

•the extent to which coverage and reimbursement for our products is available from government and health administration authorities, private health insurers, managed care programs and other third-party payors;

•our ability to establish or demonstrate in the medical community the safety, efficacy or value of our products and their potential advantages compared to existing and future therapies in their approved indications;

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•changes in the amount of deductions from gross sales, including government-mandated rebates, chargebacks and discounts that can vary because of changes to the government discount percentage, including increases in the government discount percentage resulting from price increases we have taken or may take in the future, or due to different levels of utilization by entities entitled to government rebates and discounts and changes in patient demographics;

•increases in the scope of eligibility for customers to purchase our products at the discounted government price or to obtain government-mandated rebates on purchases of our products;

•changes in our cost of sales due to potential new product launches, royalties owed under technology license agreements or write-offs of inventory;

•the incidence rate of new patients in the approved indications for our products;

•the evolving effects of the COVID-19 pandemic, including those leading to current and potential future reductions in the rate of cancer diagnoses;

•the timing, cost and level of investment in our sales and marketing efforts to support our products sales;

•the timing, cost and level of investment in our research and development, pre-commercialization and other activities involving ADCETRIS, PADCEV, TUKYSA, tisotumab vedotin and our other product candidates by us or our collaborators; and

•expenditures we will or may incur to develop and/or commercialize any additional products, product candidates, or technologies that we may develop, in-license, or acquire.

In addition, even if we and/or our collaborators are able to obtain regulatory approvals for our product candidates, due to the lack of any historical sales data from the commercialization of any of our product candidates, sales of a newly-approved product such as PADCEV or TUKYSA will be difficult to predict from period to period. As a result, sales results or trends for PADCEV, TUKYSA or any of our future approved products in any period may not necessarily be indicative of future performance. In any event, if we are unable to obtain and maintain necessary or desirable regulatory approvals for our products and product candidates, including for ADCETRIS, PADCEV and TUKYSA, in a timely manner, if at all, if the FDA or other regulatory authorities do not approve product labeling that is necessary or desirable for the successful commercialization of an approved product, if we are unable to obtain favorable pricing and reimbursement approvals in countries that represent significant markets or if sales of an approved product do not reach the levels we expect, our anticipated revenue from our products and product candidates and our prospects for profitability would be adversely affected, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Moreover, we have entered into collaboration and license agreements with other companies that include development funding and milestone and royalty payments to us, and we expect that amounts earned from our collaboration agreements will continue to be an important source of our revenues. Accordingly, our revenues will also depend on development funding and the achievement of development and clinical milestones under our existing collaboration and license agreements, including, in particular, our ADCETRIS collaboration with Takeda, our PADCEV collaboration with Astellas and our ladiratuzumab vedotin and TUKYSA collaborations with Merck, as well as entering into potential new collaboration and license agreements. These upfront and milestone payments may vary significantly from quarter to quarter and any such variance could cause a significant fluctuation in our operating results from one quarter to the next.

Further, changes in our operations, such as increased development, manufacturing and clinical trial expenses in connection with our expanding pipeline programs, or our undertaking of additional programs, or business activities, or entry into strategic transactions, including potential future acquisitions of products, technologies or businesses may also cause significant fluctuations in our expenses. In addition, we measure compensation cost for stock-based awards made to employees at the grant date of the award, based on the fair value of the award, and recognize the cost as an expense over the employee’s requisite service period. As the variables that we use as a basis for valuing these awards change over time, including our underlying stock price, the magnitude of the expense that we must recognize may vary significantly. Additionally, we have implemented long-term incentive plans for our employees, and the incentives provided under these plans are contingent upon the achievement of certain regulatory milestones. Costs of performance-based compensation under our long-term incentive plans are not recorded as an expense until the achievement of the applicable milestones is deemed probable of being met, which may result in large fluctuations to the expense we must recognize in any particular period.

For these and other reasons, it is difficult for us to accurately forecast future sales of our current or any future approved products, collaboration and license agreement revenues, royalty revenues, operating expenses or future profits or losses. As a result, our operating results in future periods could be below our guidance or the expectations of securities analysts or investors, which could cause the trading price of our common stock to decline, perhaps substantially.

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We have a history of net losses. We expect to continue to incur net losses and may not achieve future sustained profitability for some time, if at all.

We have incurred substantial net losses in each of our years of operation, other than the year ended December 31, 2020. We have incurred these losses principally from costs incurred in our research and development programs and from our selling, general and administrative expenses. We expect to continue to spend substantial amounts on research and development, including amounts for conducting clinical trials of our products and product candidates as well as commercializing our products for the treatment of patients in their approved indications. In addition, we expect to make substantial expenditures to further develop and potentially commercialize tisotumab vedotin and our other product candidates. We may also pursue new operations or continue the expansion of our existing operations, including with respect to the continued development of our commercial infrastructure in Europe and our plans to otherwise continue to expand our operations internationally. Accordingly, even though we reported net income for the year ended December 31, 2020 due to the collaboration and license agreement revenues related to the agreements we entered into with Merck during 2020, we nonetheless expect to incur net losses in the future and may not achieve sustained profitability for some time, if at all. Although we recognize revenue from product sales and we continue to earn amounts under our collaboration agreements, our revenue and profit potential is unproven and our future operating results are difficult to predict. Even if we do achieve profitability in the future, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline.

We may need to raise additional capital that may not be available to us.

We expect to make additional capital outlays and to increase operating expenditures over the next several years as we hire additional employees, and support our development, manufacturing, commercialization, and planned global expansion, which may require us to raise additional capital. In addition, we may pursue new operations or continue the expansion of our existing operations, including with respect to the continued development of our commercial infrastructure in Europe and our plans to otherwise continue to expand our operations internationally. Our commitment of resources to the continuing development, regulatory and commercialization activities for our products, the research, continued development and manufacturing of our product candidates, our pursuit of regulatory approvals for and preparing to potentially launch and commercialize our product candidates, and the anticipated expansion of our pipeline and operations may require us to raise additional capital. Further, we actively evaluate various strategic transactions on an ongoing basis, including licensing or otherwise acquiring complementary products, technologies or businesses, and we may require significant additional capital in order to complete or otherwise provide funding for such transactions. We may seek additional funding through some or all of the following methods: corporate collaborations, licensing arrangements and public or private debt or equity financings. We do not know whether additional capital will be available when needed, or that, if available, we will obtain financing on terms favorable to us or our stockholders. If we are unable to raise additional funds when we need them, we may be required to delay, reduce the scope of, or eliminate one or more of our development programs, which may adversely affect our business and operations. Our future capital requirements will depend upon a number of factors, including:

•the level of sales and market acceptance of ADCETRIS, PADCEV, TUKYSA or of any future approved products;

•the time and costs involved in obtaining regulatory approvals of our products in additional indications or territories, if any, and potentially of any of our other product candidates;

•the size, complexity, timing, progress and number of our clinical programs and our collaborations;

•the timing, receipt and amount of milestone-based payments or other revenue from our collaborations or license arrangements, including royalty revenue generated from commercial sales of ADCETRIS by Takeda, revenue generated under our collaboration with Astellas and anticipated royalty revenue generated by commercial sales of TUKYSA by Merck;

•the cost of establishing and maintaining clinical supplies of our products and product candidates and commercial supplies of our current and any future approved products;

•the extent of our investment in development, manufacturing and commercialization outside the U.S.;

•the costs associated with acquisitions or licenses of additional technologies, products, or companies as well as licenses we may need to commercialize our current or any future approved products;

•the terms and timing of any future collaborative, licensing and other arrangements that we may establish;

•expenses associated with future securities class action or derivative lawsuits, as well as any other potential litigation;

•the potential costs associated with international, state and federal taxes; and

•competing technological and market developments.

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In addition, changes in our spending rate may occur that would consume available capital resources sooner, such as increased development, manufacturing and clinical trial expenses in connection with our expanding pipeline programs or our undertaking of additional programs, business activities or entry into additional strategic transactions, including potential future acquisitions of products, technologies or businesses. Moreover, we may choose to raise additional capital due to market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. To the extent that we raise additional funds through collaboration and licensing arrangements, we may be required to relinquish some rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us.

During the past several years, domestic and international financial markets have experienced extreme disruption from time to time, including, among other things, high volatility and significant declines in stock prices and severely diminished liquidity and credit availability for both borrowers and investors. Such adverse capital and credit market conditions could make it more difficult to obtain additional capital on favorable terms, or at all, which could have a material adverse effect on our business and growth prospects. For example, our ability to raise additional capital may be adversely impacted by deteriorating global economic conditions and the disruptions to and volatility in the credit and financial markets in the U.S. and worldwide resulting from the evolving effects of the COVID-19 pandemic.

The potential future impairment of intangible assets and goodwill may negatively affect our results of operations and financial position.

As of June 30, 2021, we recorded $546.9 million of intangible assets, net and goodwill on our condensed consolidated balance sheet. Our intangible assets and goodwill are subject to an impairment analysis whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Additionally, goodwill and indefinite-lived assets are subject to an impairment test at least annually. Events giving rise to impairment are an inherent risk in the pharmaceutical industry and cannot be predicted. Our results of operations and financial position in future periods could be negatively impacted should future impairments of intangible assets or goodwill occur.

Risks Related to Our Common Stock

Our stock price is volatile and our shares may suffer a decline in value.

The market price of our stock has in the past been, and is likely to continue in the future to be, very volatile. During the six months ended June 30, 2021, our closing stock price fluctuated between $135.08 and $190.80 per share. As a result of fluctuations in the price of our common stock, you may be unable to sell your shares at or above the price you paid for them. The market price of our common stock may be subject to substantial volatility in response to many risk factors listed in this section, and others beyond our control, including:

•the levels of ADCETRIS, PADCEV and TUKYSA product sales;

•announcements of FDA or other regulatory approval or non-approval of our products or any of our product candidates or specific label indications for or restrictions, warnings or limitations in its use, or delays in the regulatory review or approval process;

•announcements regarding the results of discovery efforts and preclinical, clinical and commercial activities by us, or those of our competitors;

•announcements regarding the results of the clinical trials we and our collaborators are conducting or may in the future conduct for our products and product candidates;

•announcements regarding, or negative publicity concerning, adverse events or safety concerns associated with the use of ADCETRIS, PADCEV, TUKYSA or our product candidates;

•issuance of new or changed analysts’ reports and recommendations regarding us or our competitors;

•termination of or changes in our existing collaborations or licensing arrangements, or establishment of new collaborations or licensing arrangements;

•our failure to achieve the perceived benefits of our strategic transactions as rapidly or to the extent anticipated by financial analysts or investors;

•our entry into additional material strategic transactions including licensing or acquisition of products, businesses or technologies;

•actions taken by regulatory authorities with respect to our product candidates, our clinical trials or our regulatory filings;

•our raising of additional capital and the terms upon which we may raise any additional capital;

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•market conditions for equity investments in general, or the biotechnology or pharmaceutical industries in particular;

•developments or disputes concerning our proprietary rights, including with respect to our disputes with Daiichi Sankyo;

•developments regarding any future purported securities class action lawsuits, as well as any other potential litigation;

•share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

•changes in government regulations; and

•economic or other external factors.

The stock markets in general, and the markets for biotechnology and pharmaceutical stocks in particular, have historically experienced significant volatility that has often been unrelated or disproportionate to the operating performance of particular companies, including in connection with the COVID-19 pandemic, which has resulted in decreased market prices, notwithstanding the lack of a fundamental change in the underlying business models or prospects of those companies. In this regard as a result of the risks and evolving effects of the COVID-19 pandemic, Brexit and/or significant changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing trade and healthcare spending and delivery outside the U.S., the financial markets could experience significant volatility that could also negatively impact the markets for biotechnology and pharmaceutical stocks. These broad market fluctuations have adversely affected and may in the future adversely affect the market price of our common stock. In this regard, worsening economic conditions and other adverse impacts or developments relating to the evolving effects of the COVID-19 pandemic may negatively affect the market price of our common stock, regardless of our actual operating performance.

In the past, class action or derivative litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. In this regard, we have become, and may in the future again become, subject to claims and litigation alleging violations of the securities laws or other related claims, which could harm our business and require us to incur significant costs. Lawsuits brought against us could result in substantial costs, which would hurt our financial condition and results of operations and divert management’s attention and resources, which could result in delays of our clinical trials or our development and commercialization efforts.

Substantial future sales of shares of our common stock or equity-related securities could cause the market price of our common stock to decline.

Sales of a substantial number of shares of our common stock into the public market, including sales by members of our management or board of directors or entities affiliated with such members, could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock and could impair our ability to raise capital through the sale of additional equity or equity-related securities. We are unable to predict the effect that such sales may have on the prevailing market price of our common stock. As of June 30, 2021, we had 181,866,079 shares of common stock outstanding, all of which shares are eligible for sale in the public market, subject in some cases to the volume limitations and manner of sale and other requirements under Rule 144. In addition, we may issue a substantial number of shares of our common stock or equity-related securities, including convertible debt, to meet our capital needs, including in connection with funding potential future acquisition or licensing opportunities, capital expenditures or product development costs, which issuances could be substantially dilutive and could adversely affect the market price of our common stock. Likewise, future issuances by us of our common stock upon the exercise, conversion or settlement of equity-based awards or other equity-related securities would dilute existing stockholders’ ownership interest in our company and any sales in the public market of these shares, or the perception that these sales might occur, could also adversely affect the market price of our common stock.

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Moreover, we have in the past and may in the future grant rights to some of our stockholders that require us to register the resale of our common stock or other securities on behalf of these stockholders and/or facilitate public offerings of our securities held by these stockholders, including in connection with potential future acquisition or capital-raising transactions. For example, in connection with our September 2015 public offering of common stock, we entered into a registration rights agreement with entities affiliated with Baker Bros. Advisors LP, or the Baker Entities, that together, based on information available to us as of June 30, 2021, collectively beneficially owned approximately 26% of our common stock. Under the registration rights agreement, if at any time and from time to time the Baker Entities demand that we register their shares of our common stock for resale under the Securities Act of 1933, as amended, or the Securities Act, we would be obligated to effect such registration. In December 2020, pursuant to the registration rights agreement, we registered for resale, from time to time, up to 47,366,602 shares of our common stock held by the Baker Entities. Our registration obligations under the registration rights agreement cover all shares now held or hereafter acquired by the Baker Entities, will continue in effect for up to ten years, and include our obligation to facilitate certain underwritten public offerings of our common stock by the Baker Entities in the future. Accordingly, we expect to register additional shares held by the Baker Entities for resale from time to time, including in certain cases, shares that we have previously registered for resale by the Baker Entities, whether in connection with the expiration of registration statements that we previously filed with the SEC or otherwise. If the Baker Entities, by exercise of these registration and/or underwriting rights and our registration of shares held by the Baker Entities for resale from time to time, or otherwise, sell a large number of our shares, or the market perceives that the Baker Entities intend to sell a large number of our shares, including in connection with our registrations of shares held by the Baker Entities for resale, this could adversely affect the market price of our common stock. We have also filed registration statements to register the sale of our common stock reserved for issuance under our equity incentive and employee stock purchase plans. Accordingly, these shares will be able to be freely sold in the public market upon issuance as permitted by any applicable vesting requirements.

Our existing stockholders have significant control of our management and affairs.

Based solely on the most recent Schedules 13G and 13D filed with the SEC, reports filed with the SEC under Section 16 of the Exchange Act, and our outstanding shares of common stock as of June 30, 2021, our executive officers and directors and holders of greater than five percent of our outstanding common stock beneficially owned approximately 52% of our voting power as of June 30, 2021. As a result, these stockholders, acting together, are able to control our management and affairs and matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership may have the effect of delaying, deferring or preventing a change in control, including a merger, consolidation, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control, which might affect the market price of our common stock.

Anti-takeover provisions could make it more difficult for a third party to acquire us.

Our Board of Directors has the authority to issue up to 5,000,000 shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by the stockholders, which authority could be used to adopt a “poison pill” that could act to prevent a change of control of Seagen that has not been approved by our Board of Directors. The rights of the holders of common stock may be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control of Seagen without further action by the stockholders and may adversely affect the voting and other rights of the holders of common stock. Further, certain provisions of our charter documents, including provisions eliminating the ability of stockholders to take action by written consent and limiting the ability of stockholders to raise matters at a meeting of stockholders without giving advance notice, may have the effect of delaying or preventing changes in control or management of Seagen, which could have an adverse effect on the market price of our stock. In addition, our charter documents provide for a classified board, which may make it more difficult for a third party to gain control of our Board of Directors. Similarly, state anti-takeover laws in Delaware and Washington related to corporate takeovers may prevent or delay a change of control of Seagen.

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General Risk Factors

Changes in tax laws or regulations may have a material adverse effect on our business, cash flow, financial condition or results of operations.

New tax laws, statutes, rules, regulations or ordinances could be enacted at any time, including as a result of the recent change in U.S. presidential administration, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. In addition, as we continue to expand our operations internationally, we may become increasingly subject to taxation in additional jurisdictions. Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses could have a material impact on the value of our deferred tax assets, result in significant one-time charges, increase our future tax expense or otherwise have a material adverse effect on our business, cash flow, financial condition or results of operations.

If any of our facilities are damaged or our clinical, research and development or other business processes are interrupted, our business could be seriously harmed.

We conduct most of our business in a limited number of facilities. Damage or extended periods of interruption to our corporate, development or research facilities due to fire, natural disaster, power loss, communications failure, unauthorized entry or other events could cause us to cease or delay development of some or all of our product candidates or interrupt the sales process for our products. Although we maintain property damage and business interruption insurance coverage on these facilities, our insurance might not cover all losses under such circumstances and our business may be seriously harmed by such delays and interruption.

Increasing use of social media could give rise to liability.

We are increasingly relying on social media tools as a means of communications. To the extent that we continue to use these tools as a means to communicate about our products and product candidates or about the diseases that our products and our product candidates are intended to treat, there are significant uncertainties as to either the rules that apply to such communications, or as to the interpretations that health authorities will apply to the rules that exist. As a result, despite our efforts to comply with applicable rules, there is a significant risk that our use of social media for such purposes may cause us to nonetheless be found in violation of them. Such uses of social media could have a material adverse effect on our business, financial condition and results of operations.

Legislative actions and new accounting pronouncements are likely to impact our future financial position or results of operations.

Future changes in financial accounting standards may cause adverse, unexpected revenue fluctuations and affect our financial position or results of operations. New pronouncements and varying interpretations of pronouncements have occurred with frequency in the past and are expected to occur again in the future and as a result we may be required to make changes in our accounting policies. Those changes could adversely affect our reported revenues and expenses, future profitability or financial position. Compliance with new regulations regarding corporate governance and public disclosure may result in additional expenses.

The application of existing or future financial accounting standards, particularly those relating to the way we account for revenues and costs, could have a significant impact on our reported results. In addition, compliance with new regulations regarding corporate governance and public disclosure may result in additional expenses. As a result, we intend to invest all reasonably necessary resources to comply with evolving standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from science and business activities to compliance activities.

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Item 6. Exhibits


Exhibit		Incorporation By Reference
Number	Exhibit Description	Form	SEC File No.	Exhibit	Filing Date
3.1	Fourth Amended and Restated Certificate of Incorporation of Seagen Inc. (f/k/a Seattle Genetics, Inc.).	10-Q	000-32405	3.1	11/7/2008
3.2	Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation of Seagen Inc. (f/k/a Seattle Genetics, Inc.).	8-K	000-32405	3.3	5/26/2011
3.3	Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation of Seagen Inc. (f/k/a Seattle Genetics, Inc.).	8-K	000-32405	3.1	10/8/2020
3.4	Amended and Restated Bylaws of Seagen Inc. (f/k/a Seattle Genetics, Inc.).	8-K	000-32405	3.1	1/16/2020
4.1	Specimen Stock Certificate.	10-K	000-32405	4.2	2/12/2021
4.2	Investor Rights Agreement dated July 8, 2003 among Seagen Inc. (f/k/a Seattle Genetics, Inc.) and certain of its stockholders.	10-Q	000-32405	4.3	11/7/2008
4.3	Registration Rights Agreement dated September 10, 2015 between Seagen Inc. (f/k/a Seattle Genetics, Inc.) and the persons listed on Schedule A attached thereto.	8-K	000-32405	10.1	9/11/2015
10.1+†	Amendment to Joint Commercialization Agreement between Seagen Inc. and Agensys, Inc. effective January 1, 2020.	—	—	—	—
10.2+†	Letter Agreement Regarding Royalty between the University of Miami and Seagen Inc. (f/k/a Seattle Genetics, Inc.) dated April 11, 2016.	—	—	—	—
10.3+†	Lease Agreement dated June 21, 2021 between Seagen Inc. and DPIF2 WA 7 Mountain View, LLC.	—	—	—	—
31.1+	Certification of Chief Executive Officer pursuant to Rule 13a-14(a).	—	—	—	—
31.2+	Certification of Chief Financial Officer pursuant to Rule 13a-14(a).	—	—	—	—
32.1+	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.	—	—	—	—
32.2+	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.	—	—	—	—
101	The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Loss, (iii) Condensed Consolidated Statements of Stockholders' Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.	—	—	—	—
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).	—	—	—	—


+			Filed herewith.
†			Certain confidential information contained in this Exhibit, marked by brackets in the Exhibit, has been omitted, because it is both not material and is the type that the registrant treats as private or confidential.

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SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


SEAGEN INC.

By:						/s/ Todd E. Simpson
						Todd E. Simpson
						Duly Authorized and Chief Financial Officer
						(Principal Financial and Accounting Officer)

Date:						July 29, 2021