Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2020 | Oct. 27, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 0-32405 | |
Entity Registrant Name | SEAGEN INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 91-1874389 | |
Entity Address | 21823 30th Drive SE | |
Entity Address, City or Town | Bothell | |
Entity Address, State or Province | WA | |
Postal Zip Code | 98021 | |
City Area Code | 425 | |
Local Phone Number | 527-4000 | |
Title of 12(b) Security | Common Stock, par value $0.001 | |
Trading Symbol | SGEN | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 180,306,390 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0001060736 | |
Current Fiscal Year End Date | --12-31 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 919,454 | $ 274,562 |
Short-term investments | 798,921 | 536,493 |
Accounts receivable, net | 293,416 | 236,001 |
Inventories | 96,727 | 85,932 |
Prepaid expenses and other current assets | 57,521 | 43,653 |
Total current assets | 2,166,039 | 1,176,641 |
Property and equipment, net | 192,867 | 155,491 |
Operating lease right-of-use assets | 64,282 | 65,230 |
Long-term investments | 0 | 57,283 |
Intangible assets, net | 289,484 | 25 |
In-process research and development | 0 | 300,000 |
Goodwill | 274,671 | 274,671 |
Other non-current assets | 17,618 | 176,525 |
Total assets | 3,004,961 | 2,205,866 |
Current liabilities: | ||
Accounts payable | 68,650 | 52,292 |
Accrued liabilities and other | 274,038 | 207,065 |
Deferred revenue | 250,450 | 0 |
Total current liabilities | 593,138 | 259,357 |
Long-term liabilities: | ||
Operating lease liabilities, long-term | 65,003 | 67,607 |
Other long-term liabilities | 88,790 | 2,615 |
Total long-term liabilities | 153,793 | 70,222 |
Commitments and contingencies | ||
Stockholders’ equity: | ||
Preferred stock, $0.001 par value, 5,000 shares authorized; none issued | 0 | 0 |
Common stock, $0.001 par value, 250,000 shares authorized; 175,188 shares issued and outstanding at September 30, 2020 and 171,994 shares issued and outstanding at December 31, 2019 | 175 | 172 |
Additional paid-in capital | 3,293,668 | 3,359,124 |
Accumulated other comprehensive income | 850 | 229 |
Accumulated deficit | (1,036,663) | (1,483,238) |
Total stockholders’ equity | 2,258,030 | 1,876,287 |
Total liabilities and stockholders’ equity | $ 3,004,961 | $ 2,205,866 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 250,000,000 | 250,000,000 |
Common stock, shares issued (in shares) | 175,188,000 | 171,994,000 |
Common stock, shares outstanding (in shares) | 175,188,000 | 171,994,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenues: | ||||
Total revenues | $ 1,061,731 | $ 213,263 | $ 1,574,243 | $ 626,909 |
Costs and expenses: | ||||
Cost of sales | 78,296 | 10,827 | 155,962 | 32,024 |
Research and development | 217,670 | 196,119 | 610,945 | 518,313 |
Selling, general and administrative | 127,579 | 96,101 | 375,470 | 258,703 |
Total costs and expenses | 423,545 | 303,047 | 1,142,377 | 809,040 |
Income (loss) from operations | 638,186 | (89,784) | 431,866 | (182,131) |
Investment and other income (loss), net | 1,223 | (2,129) | 17,951 | (2,349) |
Income (loss) before income taxes | 639,409 | (91,913) | 449,817 | (184,480) |
Provision for income taxes | (3,242) | 0 | (3,242) | 0 |
Net income (loss) | $ 636,167 | $ (91,913) | $ 446,575 | $ (184,480) |
Net income (loss) per share - basic (in dollars per share) | $ 3.65 | $ (0.55) | $ 2.58 | $ (1.13) |
Net income (loss) per share - diluted (in dollars per share) | $ 3.50 | $ (0.55) | $ 2.47 | $ (1.13) |
Shares used in computation of per share amounts - basic (in shares) | 174,460 | 168,109 | 173,409 | 163,428 |
Shares used in computation of per share amounts - diluted (in shares) | 181,877 | 168,109 | 180,939 | 163,428 |
Comprehensive income (loss): | ||||
Net income (loss) | $ 636,167 | $ (91,913) | $ 446,575 | $ (184,480) |
Other comprehensive income (loss): | ||||
Unrealized gain (loss) on securities available-for-sale, net of tax | (790) | (177) | 441 | 297 |
Foreign currency translation gain (loss) | 172 | (7) | 180 | 45 |
Total other comprehensive income (loss) | (618) | (184) | 621 | 342 |
Comprehensive income (loss) | 635,549 | (92,097) | 447,196 | (184,138) |
Product [Member] | ||||
Revenues: | ||||
Total revenues | 267,494 | 167,582 | 706,473 | 461,563 |
Royalty [Member] | ||||
Revenues: | ||||
Total revenues | 35,924 | 27,261 | 87,520 | 66,218 |
License and Service [Member] | ||||
Revenues: | ||||
Total revenues | $ 758,313 | $ 18,420 | $ 780,250 | $ 99,128 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Accumulated Deficit [Member] |
Beginning (in shares) at Dec. 31, 2018 | 160,262 | ||||
Beginning at Dec. 31, 2018 | $ 1,273,943 | $ 160 | $ 2,598,411 | $ (40) | $ (1,324,588) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (13,329) | (13,329) | |||
Other comprehensive income (loss) | 256 | 256 | |||
Issuance of common stock for employee stock purchase plan (in shares) | 104 | ||||
Issuance of common stock for employee stock purchase plan | 6,147 | $ 0 | 6,147 | ||
Stock option exercises (in shares) | 719 | ||||
Stock option exercises | 20,679 | $ 1 | 20,678 | ||
Restricted stock vested during the period, net (in shares) | 56 | ||||
Restricted stock vested during the period, net | 0 | $ 0 | |||
Share-based compensation | 25,715 | 25,715 | |||
Ending (in shares) at Mar. 31, 2019 | 161,141 | ||||
Ending at Mar. 31, 2019 | 1,313,411 | $ 161 | 2,650,951 | 216 | (1,337,917) |
Beginning (in shares) at Dec. 31, 2018 | 160,262 | ||||
Beginning at Dec. 31, 2018 | 1,273,943 | $ 160 | 2,598,411 | (40) | (1,324,588) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (184,480) | ||||
Other comprehensive income (loss) | 342 | ||||
Ending (in shares) at Sep. 30, 2019 | 171,108 | ||||
Ending at Sep. 30, 2019 | 1,779,601 | $ 171 | 3,288,196 | 302 | (1,509,068) |
Beginning (in shares) at Mar. 31, 2019 | 161,141 | ||||
Beginning at Mar. 31, 2019 | 1,313,411 | $ 161 | 2,650,951 | 216 | (1,337,917) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (79,238) | (79,238) | |||
Other comprehensive income (loss) | 270 | 270 | |||
Stock option exercises (in shares) | 393 | ||||
Stock option exercises | 11,226 | $ 1 | 11,225 | ||
Restricted stock vested during the period, net (in shares) | 104 | ||||
Restricted stock vested during the period, net | 0 | $ 0 | |||
Share-based compensation | 26,157 | 26,157 | |||
Ending (in shares) at Jun. 30, 2019 | 161,638 | ||||
Ending at Jun. 30, 2019 | 1,271,826 | $ 162 | 2,688,333 | 486 | (1,417,155) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (91,913) | (91,913) | |||
Other comprehensive income (loss) | (184) | (184) | |||
Issuance of common stock for employee stock purchase plan (in shares) | 85 | ||||
Issuance of common stock for employee stock purchase plan | 5,452 | $ 0 | 5,452 | ||
Stock option exercises (in shares) | 513 | ||||
Stock option exercises | 17,854 | $ 0 | 17,854 | ||
Restricted stock vested during the period, net (in shares) | 658 | ||||
Restricted stock vested during the period, net | 0 | $ 1 | (1) | ||
Share-based compensation | 27,875 | 27,875 | |||
Issuance of common stock (in shares) | 8,214 | ||||
Issuance of common stock | 548,691 | $ 8 | 548,683 | ||
Ending (in shares) at Sep. 30, 2019 | 171,108 | ||||
Ending at Sep. 30, 2019 | $ 1,779,601 | $ 171 | 3,288,196 | 302 | (1,509,068) |
Beginning (in shares) at Dec. 31, 2019 | 171,994 | 171,994 | |||
Beginning at Dec. 31, 2019 | $ 1,876,287 | $ 172 | 3,359,124 | 229 | (1,483,238) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (168,402) | (168,402) | |||
Other comprehensive income (loss) | 3,249 | 3,249 | |||
Issuance of common stock for employee stock purchase plan (in shares) | 133 | ||||
Issuance of common stock for employee stock purchase plan | 8,513 | $ 0 | 8,513 | ||
Stock option exercises (in shares) | 442 | ||||
Stock option exercises | 13,273 | $ 1 | 13,272 | ||
Restricted stock vested during the period, net (in shares) | 67 | ||||
Restricted stock vested during the period, net | 0 | $ 0 | |||
Share-based compensation | 32,698 | 32,698 | |||
Ending (in shares) at Mar. 31, 2020 | 172,636 | ||||
Ending at Mar. 31, 2020 | $ 1,765,618 | $ 173 | 3,413,607 | 3,478 | (1,651,640) |
Beginning (in shares) at Dec. 31, 2019 | 171,994 | 171,994 | |||
Beginning at Dec. 31, 2019 | $ 1,876,287 | $ 172 | 3,359,124 | 229 | (1,483,238) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 446,575 | ||||
Other comprehensive income (loss) | $ 621 | ||||
Ending (in shares) at Sep. 30, 2020 | 175,188 | 175,188 | |||
Ending at Sep. 30, 2020 | $ 2,258,030 | $ 175 | 3,293,668 | 850 | (1,036,663) |
Beginning (in shares) at Mar. 31, 2020 | 172,636 | ||||
Beginning at Mar. 31, 2020 | 1,765,618 | $ 173 | 3,413,607 | 3,478 | (1,651,640) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (21,190) | (21,190) | |||
Other comprehensive income (loss) | (2,010) | (2,010) | |||
Stock option exercises (in shares) | 858 | ||||
Stock option exercises | 31,485 | $ 1 | 31,484 | ||
Restricted stock vested during the period, net (in shares) | 371 | ||||
Restricted stock vested during the period, net | 0 | $ 0 | |||
Share-based compensation | 40,174 | 40,174 | |||
Ending (in shares) at Jun. 30, 2020 | 173,865 | ||||
Ending at Jun. 30, 2020 | 1,814,077 | $ 174 | 3,485,265 | 1,468 | (1,672,830) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 636,167 | 636,167 | |||
Other comprehensive income (loss) | (618) | (618) | |||
Issuance of common stock for employee stock purchase plan (in shares) | 75 | ||||
Issuance of common stock for employee stock purchase plan | 6,948 | $ 0 | 6,948 | ||
Stock option exercises (in shares) | 352 | ||||
Stock option exercises | 12,554 | $ 0 | 12,554 | ||
Restricted stock vested during the period, net (in shares) | 896 | ||||
Restricted stock vested during the period, net | 0 | $ 1 | (1) | ||
Share-based compensation | 39,052 | 39,052 | |||
Premium for commitment to sell common stock | $ (250,150) | (250,150) | |||
Ending (in shares) at Sep. 30, 2020 | 175,188 | 175,188 | |||
Ending at Sep. 30, 2020 | $ 2,258,030 | $ 175 | $ 3,293,668 | $ 850 | $ (1,036,663) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Operating activities: | ||
Net income (loss) | $ 446,575 | $ (184,480) |
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities | ||
Share-based compensation | 107,458 | 79,747 |
Depreciation | 26,219 | 17,885 |
Amortization of intangible assets | 10,541 | 11 |
Amortization of right-of-use assets | 7,945 | 7,257 |
Amortization of premiums, accretion of discounts, and (gains) losses on debt securities | (426) | (3,750) |
(Gains) losses on equity securities | (11,604) | 10,258 |
Changes in operating assets and liabilities | ||
Accounts receivable, net | (57,166) | (44,037) |
Inventories | (10,795) | (38,795) |
Prepaid expenses and other assets | (16,792) | 3,414 |
Lease liability | (8,223) | (4,633) |
Deferred revenue | 300 | (26,572) |
Other liabilities | 173,392 | 31,809 |
Net cash provided (used) by operating activities | 667,424 | (151,886) |
Investing activities: | ||
Purchases of securities | (811,274) | (666,120) |
Proceeds from maturities of securities | 587,000 | 375,000 |
Proceeds from sales of securities | 194,733 | 0 |
Purchases of property and equipment | (65,899) | (51,763) |
Net cash used by investing activities | (95,440) | (342,883) |
Financing activities: | ||
Net proceeds from issuance of common stock | 0 | 548,691 |
Proceeds from exercise of stock options and employee stock purchase plan | 72,773 | 61,358 |
Net cash provided by financing activities | 72,773 | 610,049 |
Effect of exchange rate changes on cash and cash equivalents | 135 | 0 |
Net increase in cash and cash equivalents | 644,892 | 115,280 |
Cash and cash equivalents at beginning of period | 274,562 | 78,186 |
Cash and cash equivalents at end of period | $ 919,454 | $ 193,466 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 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”). In October 2020, we changed our corporate name from Seattle Genetics, Inc. to Seagen Inc., reflecting the global expansion of our operations. 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, 2019 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, 2019, 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 nine month periods ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year or any other interim period. Reclassification We combined cost of sales with cost of royalty revenues during the current period, and reclassified the prior year cost of royalty revenues amount on our condensed consolidated statements of comprehensive income (loss) to conform the current year presentation. This reclassification had no effect on our total costs and expenses or net income (loss) on our condensed consolidated statements of comprehensive income (loss). We reclassified the prior year amortization of premiums and accretion of discounts on debt securities on our condensed consolidated statements of cash flows to conform to our current year presentation. This reclassification had no effect on our net cash used by operating activities or our condensed consolidated statements of comprehensive income (loss). Non-cash activities We had $8.8 million and $11.1 million of accrued capital expenditures as of September 30, 2020 and December 31, 2019, 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 nine months ended September 30, 2020 and 2019, we recorded $7.0 million and $39.2 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. As of September 30, 2020, we recorded $250.1 million in deferred revenue associated with a stock purchase agreement with a subsidiary of Merck & Co., Inc, or Merck, which was treated as a non-cash operating activity and was not included in the condensed consolidated statement of cash flows. See Note 2 for additional information. Investments We held certain equity securities that we acquired in connection with strategic agreements, which were reported at estimated fair value. 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 and 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 (loss), 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 (loss), net. Interest and dividends earned are included in investment and other income (loss), net. Accrued interest receivable as of September 30, 2020, was $1.9 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 (loss), net. Leases We adopted Accounting Standards Codification, or ASC, Topic 842--Leases on January 1, 2019, resulting in a change to our accounting policy for leases. We recorded a liability to make lease payments and a right-of-use asset representing our right to use the underlying assets for the applicable lease terms in our condensed consolidated balance sheet. We used the modified retrospective method transition option. We elected the "package of practical expedients", which permitted us not to reassess our prior conclusion about lease identification, lease classification and initial direct cost. We also elected the practical expedient to not separate lease and non-lease components for our real estate leases, and elected the short-term lease recognition exemption for our short-term leases, which allows us not to recognize lease liabilities and right-of-use assets on our condensed consolidated balance sheet for leases with an original term of twelve months or less. The adoption of the standard had a material impact on our condensed consolidated balance sheet, did not have an impact on our condensed consolidated statement of comprehensive income (loss), and there was no cumulative-effect adjustment to the opening accumulated deficit in the period of adoption. See Note 3 for additional information. We determine if an arrangement is a lease at inception date. All of our leases are classified as operating leases. Operating lease liabilities and the corresponding right-of-use assets are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The operating lease right-of-use asset also excludes lease incentives and initial direct costs incurred. As our existing leases do not contain an implicit interest rate, we estimate our incremental borrowing rate based on information available at commencement date in determining the present value of future payments. We include options to extend the lease in our lease liability and right-of-use asset when it is reasonably certain that we will exercise that option. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Variable lease cost primarily includes building operating expenses as charged to us by our landlords. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. For our short-term leases, we recognize lease payments as an expense on a straight-line base over the lease term. Business combinations, including acquired in-process research and development and goodwill We account for business combinations using the acquisition method, recording the acquisition-date fair value of total consideration over the acquisition-date fair value of net assets acquired as goodwill. Fair value is typically estimated using an income approach based on the present value of future discounted cash flows. The significant estimates in the discounted cash flow model primarily include the discount rate, and rates of future revenue and expense growth and/or profitability of the acquired business. The discount rate considers the relevant risk associated with business-specific characteristics and the uncertainty related to the ability to achieve the projected cash flows. We may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period (up to one year from the acquisition date). In-process research and development assets are accounted for as indefinite-lived intangible assets and maintained on the balance sheet until either the underlying project is completed or the asset becomes impaired. If the project is completed, which generally occurs when FDA approval is obtained, the carrying value of the related intangible asset is amortized to cost of sales on a straight-line basis over the estimated useful life of the asset beginning in the period in which the project is completed. We periodically evaluate when facts or circumstances indicate that the carrying value of these assets may not be recoverable. If the asset becomes impaired or is abandoned, the carrying value of the related intangible asset is written down to its fair value and an impairment charge is recorded in the period in which the impairment occurs. We evaluate indefinite-lived intangible assets and goodwill for impairment annually, as of October 1, or more frequently when events or circumstances indicate that impairment may have occurred. As part of the impairment evaluation, we may elect to perform an assessment of qualitative factors. If this qualitative assessment indicates that it is more likely than not that the fair value of the indefinite-lived intangible asset or the reporting unit (for goodwill) is less than its carrying value, we then would proceed with the quantitative impairment test to compare the fair value to the carrying value and record an impairment charge if the carrying value exceeds the fair value. Acquisition-related costs, including banking, legal, accounting, valuation, and other similar costs, are expensed in the period in which the costs are incurred. The results of operations of the acquired business are included in the consolidated financial statements from the acquisition date. Intangible assets, net Our intangible assets are primarily comprised of acquired TUKYSA™ (tucatinib) technology from the acquisition of Cascadian Therapeutics, Inc. in 2018. Upon FDA approval and commercial launch of TUKYSA in April 2020, we reclassified in-process research and development costs related to the acquired TUKYSA technology to finite-lived intangible assets. Prior to 2020, our finite-lived intangible assets consisted of certain in-licensed ADCETRIS technology. Amortization expense of $5.8 million and $10.5 million related to acquired TUKYSA technology costs for the three and nine months ended September 30, 2020, respectively, was included in cost of sales in our condensed consolidated statements of comprehensive income (loss). The gross carrying value and accumulated amortization of our finite-lived intangible assets was $305.7 million and $16.2 million as of September 30, 2020, respectively, and $5.7 million and $5.6 million as of December 31, 2019, respectively. The weighted average useful life of our finite-lived intangible assets was 13 years as of September 30, 2020, and estimated future amortization expense related to TUKYSA is $5.8 million for the three months ending December 31, 2020, and $23.1 million for each of the years ending December 31, 2021 through December 31, 2025. Long-term incentive plans We have established Long-Term Incentive Plans, or LTIPs. The LTIPs provide eligible employees with the opportunity to receive performance-based incentive compensation, which may be comprised of cash, stock options, and/or restricted stock units, or RSUs. The payment of cash and the grant and/or vesting of equity are contingent upon the achievement of pre-determined regulatory milestones. We record compensation expense over the estimated service period for each milestone subject to the achievement of the milestone being considered probable in accordance with the provisions of Accounting Standards Codification Topic 450, Contingencies. At each reporting date, we assess whether achievement of a milestone is considered probable and, if so, record compensation expense based on the portion of the service period elapsed to date with respect to that milestone, with a cumulative catch-up, net of estimated forfeitures. We recognize compensation expense with respect to a milestone over the remaining estimated service period. In April 2020, an LTIP milestone was achieved related to FDA approval of TUKYSA based on our HER2CLIMB trial, which triggered vesting of performance-based stock awards previously granted to eligible participants, and an RSU grant to eligible participants. As of September 30, 2020, the estimated unrecognized compensation expense related to all LTIPs was approximately $58 million. 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. Revenue recognition Our revenues are comprised of ADCETRIS, PADCEV and TUKYSA net product sales, amounts earned under our collaboration and licensing agreements, and royalties. Revenue recognition occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. The period between when we transfer control of promised goods or services and when we receive payment is expected to be one year or less, and that expectation is consistent with our historical experience. As such, we do not adjust our revenues for the effects of a significant financing component. Net product sales We sell ADCETRIS, PADCEV, and TUKYSA through a limited number of specialty distributors and specialty pharmacies. 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. 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. 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 prior to or past 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 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. 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 under our ADC collaboration with Genentech. 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. 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. 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. We have several active collaboration and license agreements entered into prior to 2015. 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 do not take a substantive role or control the research, development or commercialization of any products generated by our licensees, we are not 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 our collaboration and license agreements involve a substantial degree of uncertainty and risk that they may never be received. 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 ADC 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. Each of these agreements is beyond the initial performance period, and 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. Recent accounting pronouncements adopted In June 2016, Financial Accounting Standards Board, or FASB, issued “ASU 2016-13, Financial Instruments: Credit Losses," as clarified in ASU 2019-04 and ASU 2019-05. The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date and to change how other-than-temporary impairments on investment securities are recorded. We adopted this standard on January 1, 2020 using the modified retrospective transition method. The adoption of this ASU had no impact on our current or previously reported financial condition, results of operations, cash flows, and financial statement disclosures. In August 2018, FASB issued “ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The objective of the standard is to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We adopted this standard on January 1, 2020 on a prospective basis. The adoption of this ASU did not have a material impact on our financial condition, results of operations, cash flows, and financial statement disclosures. Capitalized implementation costs are included in prepaid expenses and other current assets or other non-current assets. In November 2018, FASB issued “ASU 2018-18, Clarifying the Interaction between Topic 808 and Topic 606.” The objective of the standard is to clarify the interaction between ASC Topic 808--Collaborative Arrangements and ASC Topic 606--Revenue from Contracts with Customers. Currently, ASC Topic 808 does not provide comprehensive recognition or measurement guidance for collaborative arrangements, and the accounting for those arrangements is often based on an analogy to other accounting literature or an accounting policy election. Similarly, aspects of ASC Topic 606 have resulted in uncertainty in practice about the effect of the revenue standard on the accounting for collaborative arrangements. We adopted this standard on January 1, 2020 on a retrospective basis to contracts that were not completed. The adoption of this ASU did not change the way we previously accounted for any of our collaboration arrangements under ASC Topic 808, thus had no impact on our current or previously reported financial condition, results of operations, cash flows, and financial statement disclosures. Recent accounting pronouncements not yet adopted In December 2019, the 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. The standard will become effective for us beginning on January 1, 2021. We are currently evaluating the new standard to determine the potential impact on our financial condition, results of operations, cash flows, and financial statement disclosures. |
Revenue from Contracts with Cus
Revenue from Contracts with Customers | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contracts with Customers | 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, and, to a lesser extent, amounts from Genentech earned on net sales of Polivy. Collaboration and license agreement revenues by collaborator are summarized as follows: Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2020 2019 2020 2019 Merck $ 725,000 $ — $ 725,000 $ — Takeda 7,013 17,720 22,925 89,859 Other 26,300 700 32,325 9,269 Collaboration and license agreement revenues $ 758,313 $ 18,420 $ 780,250 $ 99,128 We recognized collaboration and license agreement revenues of $0.0 million and $27.5 million during the nine months ended September 30, 2020 and 2019, respectively, that were included in deferred revenue as of the beginning of the respective years. For the nine months ended September 30, 2019, collaboration and license agreement revenues from Takeda also included substantially all of $37.5 million for two regulatory milestones achieved, which were related to additional approvals of ADCETRIS in frontline Hodgkin lymphoma received by Takeda. 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. As of September 30, 2020, we recognized no year-to-date bad debt expense. Merck LV and TUKYSA license and collaboration agreements, and stock purchase agreement In September 2020, we entered into two license and collaboration agreements, and a stock purchase agreement, with subsidiaries of Merck. Under one of the license and collaboration agreements, referred to as the LV Agreement, we will pursue a broad joint development program evaluating ladiratuzumab vedotin, or LV, as monotherapy and in combination 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. Pursuant to the LV Agreement, we granted to 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 $1.75 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, referred to as the Purchase Agreement, 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. Under the other license and collaboration agreement, referred to as the TUKYSA Agreement, we granted Merck exclusive rights to commercialize TUKYSA in Asia, the Middle East and Latin America and other regions outside of the U.S., Canada and Europe. Pursuant to 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 the U.S., Canada and Europe, where we will record sales. 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 determined that these agreements are within the scope of ASC 808. Pursuant to ASC 808, we considered other authoritative guidance for distinct units of account related to these agreements, including ASC 606. Our performance obligations within the scope of ASC 606 consisted of the delivery of the LV license and transfer of regulatory information to enable the LV collaboration, the delivery of the TUKYSA license and transfer of regulatory materials for use by Merck in its territory, and supply of commercial TUKYSA inventory to Merck for use in its territory. The LV license and TUKYSA license are functional intellectual property and distinct from the other promises made under the contract. Since we also determined that Merck can benefit from the LV license and the TUKYSA licenses at the time of conveyance, the related performance obligations were satisfied at that point in time. Therefore, we recognized the license revenue under ASC 606 of $725.0 million in collaboration and license agreement revenues during the three and nine months ended September 30, 2020. Potential development, regulatory, and sales-based milestones, and royalties, will be accounted for as variable transaction price related to the LV or TUKYSA licenses under ASC 606. Given the uncertain nature of these payments, we determined they were fully constrained as of September 30, 2020 and not included in the transaction price. We will re-evaluate the transaction price at each reporting period and as uncertain events are resolved or other changes in circumstances occur. We and Merck will share equally in LV global development costs, and Merck is co-funding a portion of the TUKYSA global development plan. We consider the collaborative activities associated with the global development and commercialization of LV, and the global development of TUKYSA, to be units of account within the scope of ASC 808. We recognize development cost sharing proportionately with the performance of the underlying activities, and record Merck’s reimbursement of our expenses as a reduction of research and development expenses. Reimbursements from Merck for the LV Agreement and TUKYSA Agreement were not material during the three and nine months ended September 30, 2020. Merck’s prepayment of $85.0 million towards the TUKYSA global development plan was recorded as a co-development liability in other long-term liabilities on our condensed consolidated balance sheet as of September 30, 2020. 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 income (loss). As of September 30, 2020, $84.5 million was recorded as the remaining co-development liability. Sales of TUKYSA drug product supplied to Merck will be included in collaboration and license agreement revenues. The fair market value of 5,000,000 shares of our common stock was $749.9 million, based on the closing price of the last trading day prior to the Purchase Agreement being executed. We accounted for the associated premium of $250.1 million as a freestanding equity-linked instrument under ASC 815. The premium was determined to be variable consideration in the calculation of the total transaction price related to the LV license, and recorded in deferred revenue as of September 30, 2020, due to the substantive contingency associated with closing of the sale of shares under the Purchase Agreement. The closing of the sale of the shares pursuant to the Purchase Agreement occurred in October 2020. Upon closing, we recorded the fair market value of the shares issued in stockholders’ equity on our condensed consolidated balance sheet. The variable consideration restraint was removed upon the closing of the sale of shares pursuant to the Purchase Agreement, and the premium will be recognized in collaboration and license agreement revenues in the quarter and year ending December 31, 2020. |
Operating Leases
Operating Leases | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Operating Leases | Operating leases We have operating leases for our office and laboratory facilities with terms that expire from 2021 through 2029. Upon adoption of Topic 842 on January 1, 2019, we recognized $35.2 million of operating lease liabilities and $34.7 million of operating lease right-of-use assets for our existing leases on our condensed consolidated balance sheet. During the nine months ended September 30, 2020 and 2019, we recorded $7.0 million and $39.2 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 September 30, 2020. Supplemental operating lease information was as follows: Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2020 2019 2020 2019 Operating lease cost $ 3,832 $ 3,479 $ 10,967 $ 10,066 Variable lease cost 998 691 2,972 2,120 Total lease cost $ 4,830 $ 4,170 $ 13,939 $ 12,186 Cash paid for amounts included in measurement of lease liabilities $ 3,327 $ 2,732 $ 10,223 $ 7,129 As of September 30, 2020 2019 Weighted average remaining lease term 6.3 years 7.3 years Weighted average discount rate 5.2 % 5.4 % Operating lease liabilities were recorded in the following captions of our condensed consolidated balance sheet as follows: (dollars in thousands) September 30, 2020 December 31, 2019 Accrued liabilities and other $ 12,326 $ 9,445 Operating lease liabilities, long-term 65,003 67,607 Total $ 77,329 $ 77,052 |
Net Income (Loss) Per Share
Net Income (Loss) Per Share | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Net Income (Loss) Per Share | Net income (loss) per share Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (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. Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands, except per share amounts) 2020 2019 2020 2019 Net income (loss) $ 636,167 $ (91,913) $ 446,575 $ (184,480) Shares used in computation of per share amounts - basic 174,460 168,109 173,409 163,428 Dilutive potential common shares 7,417 — 7,530 — Weighted average common shares outstanding - diluted 181,877 168,109 180,939 163,428 Net income (loss) per share - basic $ 3.65 $ (0.55) $ 2.58 $ (1.13) Net income (loss) per share - diluted $ 3.50 $ (0.55) $ 2.47 $ (1.13) Potential shares of common stock excluded from the computation of diluted net income (loss) per share because their effect would have been antidilutive totaled approximately 437,000 and 12,618,000 for the three months ended September 30, 2020 and 2019, respectively, and approximately 310,000 and 12,758,000 for the nine months ended September 30, 2020 and 2019, respectively. |
Common Stock
Common Stock | 9 Months Ended |
Sep. 30, 2020 | |
Stockholders' Equity Note [Abstract] | |
Common Stock | Common stockIn July 2019, we completed an underwritten public offering of 8,214,286 shares of our common stock at a public offering price of $70.00 per share. The offering resulted in net proceeds to us of $548.7 million, after deducting underwriting discounts, commissions, and other offering expenses. The primary use of the net proceeds was to fund our ADCETRIS and PADCEV commercialization efforts and our research and development efforts, as well as general corporate purposes, including working capital. |
Fair Value
Fair Value | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value | 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. 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 Other Significant Total September 30, 2020 Short-term investments—U.S. Treasury securities $ 798,921 $ — $ — $ 798,921 December 31, 2019 Short-term investments—U.S. Treasury securities $ 536,493 $ — $ — $ 536,493 Long-term investments—U.S. Treasury securities 57,283 — — 57,283 Other non-current assets—equity securities 163,936 — — 163,936 Total $ 757,712 $ — $ — $ 757,712 Our short- and long-term 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 nine months ended September 30, 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 September 30, 2020. In April 2020, we sold our Immunomedics common stock holdings for $174.7 million, and, accordingly, recognized the associated realized gain in our condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2020. Our debt securities consisted of the following: (dollars in thousands) Amortized Gross Gross Fair September 30, 2020 U.S. Treasury securities $ 798,269 $ 670 $ (18) $ 798,921 Contractual maturities (at date of purchase): Due in one year or less $ 670,578 $ 670,663 Due in one to two years 127,691 128,258 Total $ 798,269 $ 798,921 December 31, 2019 U.S. Treasury securities $ 593,565 $ 236 $ (25) $ 593,776 Contractual maturities (at date of purchase): Due in one year or less $ 466,439 $ 466,547 Due in one to two years 127,126 127,229 Total $ 593,565 $ 593,776 |
Investment and Other Income (Lo
Investment and Other Income (Loss), Net | 9 Months Ended |
Sep. 30, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Investment and Other Income (Loss), Net | Investment and other income (loss), net Investment and other income (loss), net consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2020 2019 2020 2019 Gain (loss) on equity securities $ — $ (5,690) $ 11,604 $ (10,258) Investment and other income, net 1,223 3,561 6,347 7,909 Total investment and other income (loss), net $ 1,223 $ (2,129) $ 17,951 $ (2,349) Gain (loss) on equity securities includes the realized and unrealized holding gains and losses on our equity securities. |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories consisted of the following: (dollars in thousands) September 30, 2020 December 31, 2019 Raw materials $ 74,783 $ 78,285 Finished goods 21,944 7,647 Total $ 96,727 $ 85,932 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. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income taxes For the three and nine months ended September 30, 2020, we recorded an income tax provision of $3.2 million. Our effective tax rate of approximately 1% differed from the federal statutory rate primarily because we maintain a full valuation allowance. The income tax provision recorded is related to estimated state tax liabilities, for which there were limitations on the use of existing state carryforwards against estimated taxable income. We have existing federal tax carryforwards sufficient to offset estimated taxable income. Included in the estimated effective tax rate, we have forecasted a valuation allowance release due to expected utilization of tax attributes in 2020. It also reflected a discrete benefit of $52.1 million primarily offset by a valuation allowance release for stock-based compensation windfalls during the nine months ended September 30, 2020. We have provided a full valuation allowance against the remaining deferred tax assets because based on the weight of available evidence, it is more likely than not some or all of the deferred tax assets will not be realized in the future. |
Legal Matters
Legal Matters | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Legal Matters | Legal matters We are engaged in a dispute with Daiichi Sankyo Co. Ltd., or Daiichi Sankyo, regarding the ownership of certain technology used by Daiichi Sankyo in its metastatic breast 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 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 case heard in federal court. 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 March 25, 2020, a District of Delaware magistrate judge issued a stay of Daiichi Sankyo’s court action pending determination by the arbitrator of whether the suit should be heard in court or arbitration. On April 8, 2020, Daiichi Sankyo filed objections to the magistrate judge’s order. On October 27, 2020, the presiding District Court Judge overruled Daiichi Sankyo's objections and affirmed the magistrate judge's stay of the Daiichi Sankyo court action. On April 27, 2020, the arbitrator confirmed the dispute should be resolved in arbitration and that the arbitration process should progress. Separately from the on-going arbitration against Daiichi Sankyo described above, 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 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. 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. |
Subsequent Event
Subsequent Event | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent event | Subsequent eventOn October 27, 2020, we closed the sale of the shares pursuant to the Purchase Agreement, and issued 5,000,000 shares of our common stock to Merck at a purchase price of $200 per share, for proceeds of $1.0 billion. As a result, upon closing, we recorded $749.9 million in stockholders’ equity on our consolidated balance sheet, and will recognize the $250.1 million premium attributed to the Purchase Agreement in collaboration and license agreement revenues for the quarter and year ending December 31, 2020. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of presentation | 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”). In October 2020, we changed our corporate name from Seattle Genetics, Inc. to Seagen Inc., reflecting the global expansion of our operations. 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, 2019 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, 2019, 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 nine month periods ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year or any other interim period. |
Reclassification | Reclassification We combined cost of sales with cost of royalty revenues during the current period, and reclassified the prior year cost of royalty revenues amount on our condensed consolidated statements of comprehensive income (loss) to conform the current year presentation. This reclassification had no effect on our total costs and expenses or net income (loss) on our condensed consolidated statements of comprehensive income (loss). We reclassified the prior year amortization of premiums and accretion of discounts on debt securities on our condensed consolidated statements of cash flows to conform to our current year presentation. This reclassification had no effect on our net cash used by operating activities or our condensed consolidated statements of comprehensive income (loss). |
Non-cash activities | Non-cash activitiesWe had $8.8 million and $11.1 million of accrued capital expenditures as of September 30, 2020 and December 31, 2019, 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. |
Investments | Investments We held certain equity securities that we acquired in connection with strategic agreements, which were reported at estimated fair value. 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 and 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 (loss), 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 (loss), net. Interest and dividends earned are included in investment and other income (loss), net. Accrued interest receivable as of September 30, 2020, was $1.9 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 (loss), net. |
Leases | Leases We adopted Accounting Standards Codification, or ASC, Topic 842--Leases on January 1, 2019, resulting in a change to our accounting policy for leases. We recorded a liability to make lease payments and a right-of-use asset representing our right to use the underlying assets for the applicable lease terms in our condensed consolidated balance sheet. We used the modified retrospective method transition option. We elected the "package of practical expedients", which permitted us not to reassess our prior conclusion about lease identification, lease classification and initial direct cost. We also elected the practical expedient to not separate lease and non-lease components for our real estate leases, and elected the short-term lease recognition exemption for our short-term leases, which allows us not to recognize lease liabilities and right-of-use assets on our condensed consolidated balance sheet for leases with an original term of twelve months or less. The adoption of the standard had a material impact on our condensed consolidated balance sheet, did not have an impact on our condensed consolidated statement of comprehensive income (loss), and there was no cumulative-effect adjustment to the opening accumulated deficit in the period of adoption. See Note 3 for additional information. We determine if an arrangement is a lease at inception date. All of our leases are classified as operating leases. Operating lease liabilities and the corresponding right-of-use assets are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The operating lease right-of-use asset also excludes lease incentives and initial direct costs incurred. As our existing leases do not contain an implicit interest rate, we estimate our incremental borrowing rate based on information available at commencement date in determining the present value of future payments. We include options to extend the lease in our lease liability and right-of-use asset when it is reasonably certain that we will exercise that option. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Variable lease cost primarily includes building operating expenses as charged to us by our landlords. |
Business combinations, including acquired in-process research and development and goodwill | Business combinations, including acquired in-process research and development and goodwill We account for business combinations using the acquisition method, recording the acquisition-date fair value of total consideration over the acquisition-date fair value of net assets acquired as goodwill. Fair value is typically estimated using an income approach based on the present value of future discounted cash flows. The significant estimates in the discounted cash flow model primarily include the discount rate, and rates of future revenue and expense growth and/or profitability of the acquired business. The discount rate considers the relevant risk associated with business-specific characteristics and the uncertainty related to the ability to achieve the projected cash flows. We may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period (up to one year from the acquisition date). In-process research and development assets are accounted for as indefinite-lived intangible assets and maintained on the balance sheet until either the underlying project is completed or the asset becomes impaired. If the project is completed, which generally occurs when FDA approval is obtained, the carrying value of the related intangible asset is amortized to cost of sales on a straight-line basis over the estimated useful life of the asset beginning in the period in which the project is completed. We periodically evaluate when facts or circumstances indicate that the carrying value of these assets may not be recoverable. If the asset becomes impaired or is abandoned, the carrying value of the related intangible asset is written down to its fair value and an impairment charge is recorded in the period in which the impairment occurs. We evaluate indefinite-lived intangible assets and goodwill for impairment annually, as of October 1, or more frequently when events or circumstances indicate that impairment may have occurred. As part of the impairment evaluation, we may elect to perform an assessment of qualitative factors. If this qualitative assessment indicates that it is more likely than not that the fair value of the indefinite-lived intangible asset or the reporting unit (for goodwill) is less than its carrying value, we then would proceed with the quantitative impairment test to compare the fair value to the carrying value and record an impairment charge if the carrying value exceeds the fair value. Acquisition-related costs, including banking, legal, accounting, valuation, and other similar costs, are expensed in the period in which the costs are incurred. The results of operations of the acquired business are included in the consolidated financial statements from the acquisition date. |
Intangible assets, net | Intangible assets, netOur intangible assets are primarily comprised of acquired TUKYSA™ (tucatinib) technology from the acquisition of Cascadian Therapeutics, Inc. in 2018. Upon FDA approval and commercial launch of TUKYSA in April 2020, we reclassified in-process research and development costs related to the acquired TUKYSA technology to finite-lived intangible assets. |
Long-term incentive plans | Long-term incentive plans We have established Long-Term Incentive Plans, or LTIPs. The LTIPs provide eligible employees with the opportunity to receive performance-based incentive compensation, which may be comprised of cash, stock options, and/or restricted stock units, or RSUs. The payment of cash and the grant and/or vesting of equity are contingent upon the achievement of pre-determined regulatory milestones. We record compensation expense over the estimated service period for each milestone subject to the achievement of the milestone being considered probable in accordance with the provisions of Accounting Standards Codification Topic 450, Contingencies. At each reporting date, we assess whether achievement of a milestone is considered probable and, if so, record compensation expense based on the portion of the service period elapsed to date with respect to that milestone, with a cumulative catch-up, net of estimated forfeitures. We recognize compensation expense with respect to a milestone over the remaining estimated service period. In April 2020, an LTIP milestone was achieved related to FDA approval of TUKYSA based on our HER2CLIMB trial, which triggered vesting of performance-based stock awards previously granted to eligible participants, and an RSU grant to eligible participants. As of September 30, 2020, the estimated unrecognized compensation expense related to all LTIPs was approximately $58 million. 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. |
Revenue recognition | Revenue recognition Our revenues are comprised of ADCETRIS, PADCEV and TUKYSA net product sales, amounts earned under our collaboration and licensing agreements, and royalties. Revenue recognition occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. The period between when we transfer control of promised goods or services and when we receive payment is expected to be one year or less, and that expectation is consistent with our historical experience. As such, we do not adjust our revenues for the effects of a significant financing component. Net product sales We sell ADCETRIS, PADCEV, and TUKYSA through a limited number of specialty distributors and specialty pharmacies. 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. 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. 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 prior to or past 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 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. 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 under our ADC collaboration with Genentech. 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. 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. 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. We have several active collaboration and license agreements entered into prior to 2015. 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 do not take a substantive role or control the research, development or commercialization of any products generated by our licensees, we are not 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 our collaboration and license agreements involve a substantial degree of uncertainty and risk that they may never be received. |
Recent accounting pronouncements adopted; Recent accounting pronouncements not yet adopted | Recent accounting pronouncements adopted In June 2016, Financial Accounting Standards Board, or FASB, issued “ASU 2016-13, Financial Instruments: Credit Losses," as clarified in ASU 2019-04 and ASU 2019-05. The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date and to change how other-than-temporary impairments on investment securities are recorded. We adopted this standard on January 1, 2020 using the modified retrospective transition method. The adoption of this ASU had no impact on our current or previously reported financial condition, results of operations, cash flows, and financial statement disclosures. In August 2018, FASB issued “ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The objective of the standard is to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We adopted this standard on January 1, 2020 on a prospective basis. The adoption of this ASU did not have a material impact on our financial condition, results of operations, cash flows, and financial statement disclosures. Capitalized implementation costs are included in prepaid expenses and other current assets or other non-current assets. In November 2018, FASB issued “ASU 2018-18, Clarifying the Interaction between Topic 808 and Topic 606.” The objective of the standard is to clarify the interaction between ASC Topic 808--Collaborative Arrangements and ASC Topic 606--Revenue from Contracts with Customers. Currently, ASC Topic 808 does not provide comprehensive recognition or measurement guidance for collaborative arrangements, and the accounting for those arrangements is often based on an analogy to other accounting literature or an accounting policy election. Similarly, aspects of ASC Topic 606 have resulted in uncertainty in practice about the effect of the revenue standard on the accounting for collaborative arrangements. We adopted this standard on January 1, 2020 on a retrospective basis to contracts that were not completed. The adoption of this ASU did not change the way we previously accounted for any of our collaboration arrangements under ASC Topic 808, thus had no impact on our current or previously reported financial condition, results of operations, cash flows, and financial statement disclosures. Recent accounting pronouncements not yet adopted In December 2019, the 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. The standard will become effective for us beginning on January 1, 2021. We are currently evaluating the new standard to determine the potential impact on our financial condition, results of operations, cash flows, and financial statement disclosures. |
Revenue from Contracts with C_2
Revenue from Contracts with Customers (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Summary of Collaboration and License Agreement Revenues by Collaborator | Collaboration and license agreement revenues by collaborator are summarized as follows: Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2020 2019 2020 2019 Merck $ 725,000 $ — $ 725,000 $ — Takeda 7,013 17,720 22,925 89,859 Other 26,300 700 32,325 9,269 Collaboration and license agreement revenues $ 758,313 $ 18,420 $ 780,250 $ 99,128 |
Operating Leases (Tables)
Operating Leases (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Components of Lease Cost and Cash Flows | Supplemental operating lease information was as follows: Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2020 2019 2020 2019 Operating lease cost $ 3,832 $ 3,479 $ 10,967 $ 10,066 Variable lease cost 998 691 2,972 2,120 Total lease cost $ 4,830 $ 4,170 $ 13,939 $ 12,186 Cash paid for amounts included in measurement of lease liabilities $ 3,327 $ 2,732 $ 10,223 $ 7,129 As of September 30, 2020 2019 Weighted average remaining lease term 6.3 years 7.3 years Weighted average discount rate 5.2 % 5.4 % |
Summary of Balance Sheet Information | Operating lease liabilities were recorded in the following captions of our condensed consolidated balance sheet as follows: (dollars in thousands) September 30, 2020 December 31, 2019 Accrued liabilities and other $ 12,326 $ 9,445 Operating lease liabilities, long-term 65,003 67,607 Total $ 77,329 $ 77,052 |
Net Income (Loss) Per Share (Ta
Net Income (Loss) Per Share (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Net Income (Loss) Per Share | Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands, except per share amounts) 2020 2019 2020 2019 Net income (loss) $ 636,167 $ (91,913) $ 446,575 $ (184,480) Shares used in computation of per share amounts - basic 174,460 168,109 173,409 163,428 Dilutive potential common shares 7,417 — 7,530 — Weighted average common shares outstanding - diluted 181,877 168,109 180,939 163,428 Net income (loss) per share - basic $ 3.65 $ (0.55) $ 2.58 $ (1.13) Net income (loss) per share - diluted $ 3.50 $ (0.55) $ 2.47 $ (1.13) |
Fair Value (Tables)
Fair Value (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Summary of Fair Value Hierarchy of Assets Carried at Fair Value and Measured on a Recurring Basis | 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 Other Significant Total September 30, 2020 Short-term investments—U.S. Treasury securities $ 798,921 $ — $ — $ 798,921 December 31, 2019 Short-term investments—U.S. Treasury securities $ 536,493 $ — $ — $ 536,493 Long-term investments—U.S. Treasury securities 57,283 — — 57,283 Other non-current assets—equity securities 163,936 — — 163,936 Total $ 757,712 $ — $ — $ 757,712 |
Summary of Debt Securities | Our debt securities consisted of the following: (dollars in thousands) Amortized Gross Gross Fair September 30, 2020 U.S. Treasury securities $ 798,269 $ 670 $ (18) $ 798,921 Contractual maturities (at date of purchase): Due in one year or less $ 670,578 $ 670,663 Due in one to two years 127,691 128,258 Total $ 798,269 $ 798,921 December 31, 2019 U.S. Treasury securities $ 593,565 $ 236 $ (25) $ 593,776 Contractual maturities (at date of purchase): Due in one year or less $ 466,439 $ 466,547 Due in one to two years 127,126 127,229 Total $ 593,565 $ 593,776 |
Investment and Other Income (_2
Investment and Other Income (Loss), Net (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Summary of Investment and Other Income (Loss), Net | Investment and other income (loss), net consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2020 2019 2020 2019 Gain (loss) on equity securities $ — $ (5,690) $ 11,604 $ (10,258) Investment and other income, net 1,223 3,561 6,347 7,909 Total investment and other income (loss), net $ 1,223 $ (2,129) $ 17,951 $ (2,349) |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consisted of the following: (dollars in thousands) September 30, 2020 December 31, 2019 Raw materials $ 74,783 $ 78,285 Finished goods 21,944 7,647 Total $ 96,727 $ 85,932 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020USD ($) | Sep. 30, 2020USD ($)Segment | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | |
Summary Of Significant Accounting Policies [Line Items] | ||||
Number of reporting segments | Segment | 1 | |||
Accrued capital expenditures | $ 8,800 | $ 11,100 | ||
Right-of-use asset acquired in exchange for lease liability | 7,000 | $ 39,200 | ||
Accrued interest receivable | $ 1,900 | 1,900 | ||
Amortization of intangible assets | 5,800 | 10,541 | $ 11 | |
Intangible asset, carrying value | 305,700 | 305,700 | 5,700 | |
Intangible asset, accumulated amortization | 16,200 | 16,200 | $ 5,600 | |
Estimated future amortization expense, remainder of fiscal year | 5,800 | 5,800 | ||
Estimated future amortization expense, 2021 | 23,100 | 23,100 | ||
Estimated future amortization expense, 2022 | 23,100 | 23,100 | ||
Estimated future amortization expense, 2023 | 23,100 | 23,100 | ||
Estimated future amortization expense, 2024 | 23,100 | 23,100 | ||
Estimated future amortization expense, 2025 | 23,100 | 23,100 | ||
Purchase Agreement [Member] | Collaboration and License Agreement Revenues [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Variable consideration | $ 250,100 | $ 250,100 | ||
Weighted Average [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Intangible asset useful life | 13 years | |||
Long Term Incentive Plans [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
LTIP estimated unrecognized compensation expense | $ 58,000 |
Revenue from Contracts with C_3
Revenue from Contracts with Customers - Summary of Collaboration and License Agreement Revenues by Collaborator (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Disaggregation of Revenue [Line Items] | ||||
Collaboration and license agreement revenues | $ 1,061,731 | $ 213,263 | $ 1,574,243 | $ 626,909 |
License and Service [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Collaboration and license agreement revenues | 758,313 | 18,420 | 780,250 | 99,128 |
License and Service [Member] | Merck [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Collaboration and license agreement revenues | 725,000 | 0 | 725,000 | 0 |
License and Service [Member] | Takeda Collaboration and License Agreement [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Collaboration and license agreement revenues | 7,013 | 17,720 | 22,925 | 89,859 |
License and Service [Member] | Other Collaboration and License Agreement [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Collaboration and license agreement revenues | $ 26,300 | $ 700 | $ 32,325 | $ 9,269 |
Revenue from Contracts with C_4
Revenue from Contracts with Customers - Additional Information (Details) | Oct. 27, 2020USD ($)$ / sharesshares | Oct. 29, 2020USD ($)$ / sharesshares | Sep. 30, 2020USD ($)agreement | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) |
Revenue from Contracts with Customers [Line Items] | |||||||
Bad debt expense | $ 0 | ||||||
Number of agreements entered into | agreement | 2 | ||||||
Collaboration and license agreement revenues | $ 1,061,731,000 | $ 213,263,000 | 1,574,243,000 | $ 626,909,000 | |||
Fair value of shares issued | 548,691,000 | ||||||
License and Service [Member] | |||||||
Revenue from Contracts with Customers [Line Items] | |||||||
Collaboration and license agreement revenues | 758,313,000 | 18,420,000 | 780,250,000 | 99,128,000 | |||
Merck [Member] | License and Service [Member] | |||||||
Revenue from Contracts with Customers [Line Items] | |||||||
Collaboration and license agreement revenues | 725,000,000 | $ 0 | 725,000,000 | 0 | |||
Subsequent Event [Member] | |||||||
Revenue from Contracts with Customers [Line Items] | |||||||
Shares issued (in shares) | shares | 5,000,000 | 5,000,000 | |||||
Price per share (in dollars per share) | $ / shares | $ 200 | $ 200 | |||||
Proceeds from sale of stock | $ 1,000,000,000 | $ 1,000,000,000 | |||||
Fair value of shares issued | 749,900,000 | $ 749,900,000 | |||||
Purchase Agreement [Member] | Subsequent Event [Member] | License and Service [Member] | |||||||
Revenue from Contracts with Customers [Line Items] | |||||||
Collaboration and license agreement revenues | $ 250,100,000 | ||||||
Collaboration and License Agreement Revenues [Member] | |||||||
Revenue from Contracts with Customers [Line Items] | |||||||
Deferred revenue recognized | 0 | 27,500,000 | |||||
Collaboration and License Agreement Revenues [Member] | Takeda Collaboration and License Agreement [Member] | |||||||
Revenue from Contracts with Customers [Line Items] | |||||||
Milestone payment revenue | $ 37,500,000 | ||||||
Collaboration and License Agreement Revenues [Member] | LV Agreement [Member] | |||||||
Revenue from Contracts with Customers [Line Items] | |||||||
Upfront cash payment received | $ 600,000,000 | ||||||
Milestone payment (up to) | 850,000,000 | ||||||
Milestone payment upon achievement of annual sales threshold (up to) | $ 1,750,000,000 | ||||||
Percentage of costs entity is responsible for | 50.00% | ||||||
Percentage of profits to be received | 50.00% | ||||||
Collaboration and License Agreement Revenues [Member] | LV Agreement [Member] | Merck [Member] | License and Service [Member] | |||||||
Revenue from Contracts with Customers [Line Items] | |||||||
Collaboration and license agreement revenues | 600,000,000 | 600,000,000 | |||||
Collaboration and License Agreement Revenues [Member] | TUKYSA Agreement [Member] | |||||||
Revenue from Contracts with Customers [Line Items] | |||||||
Upfront cash payment received | $ 125,000,000 | ||||||
Milestone payment (up to) | 65,000,000 | ||||||
Prepaid research and development expense | 85,000,000 | ||||||
Remaining co-development liability | 84,500,000 | 84,500,000 | 84,500,000 | ||||
Collaboration and License Agreement Revenues [Member] | Purchase Agreement [Member] | |||||||
Revenue from Contracts with Customers [Line Items] | |||||||
Variable consideration | $ 250,100,000 | $ 250,100,000 | $ 250,100,000 |
Operating Leases - Additional I
Operating Leases - Additional Information (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Lessee, Lease, Description [Line Items] | |||
Operating lease liabilities | $ 77,329 | $ 77,052 | |
Operating lease right-of-use assets | 64,282 | 65,230 | |
Right-of-use asset acquired in exchange for lease liability | $ 7,000 | $ 39,200 | |
Cumulative Effect, Period of Adoption, Adjustment [Member] | |||
Lessee, Lease, Description [Line Items] | |||
Operating lease liabilities | 35,200 | ||
Operating lease right-of-use assets | $ 34,700 |
Operating Leases - Lease Cost (
Operating Leases - Lease Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Leases [Abstract] | ||||
Operating lease cost | $ 3,832 | $ 3,479 | $ 10,967 | $ 10,066 |
Variable lease cost | 998 | 691 | 2,972 | 2,120 |
Total lease cost | 4,830 | 4,170 | 13,939 | 12,186 |
Cash paid for amounts included in measurement of lease liabilities | $ 3,327 | $ 2,732 | $ 10,223 | $ 7,129 |
Weighted average remaining lease term | 6 years 3 months 18 days | 7 years 3 months 18 days | 6 years 3 months 18 days | 7 years 3 months 18 days |
Weighted average discount rate | 5.20% | 5.40% | 5.20% | 5.40% |
Operating Leases - Summary of B
Operating Leases - Summary of Balance Sheet Information (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Accrued liabilities and other | $ 12,326 | $ 9,445 |
Operating lease liabilities, long-term | 65,003 | 67,607 |
Total | $ 77,329 | $ 77,052 |
Net Income (Loss) Per Share - S
Net Income (Loss) Per Share - Schedule of Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Earnings Per Share [Abstract] | ||||||||
Net income (loss) | $ 636,167 | $ (21,190) | $ (168,402) | $ (91,913) | $ (79,238) | $ (13,329) | $ 446,575 | $ (184,480) |
Shares used in computation of per share amounts - basic (in shares) | 174,460 | 168,109 | 173,409 | 163,428 | ||||
Dilutive potential common shares (in shares) | 7,417 | 0 | 7,530 | 0 | ||||
Shares used in computation of per share amounts - diluted (in shares) | 181,877 | 168,109 | 180,939 | 163,428 | ||||
Net income (loss) per share - basic (in dollars per share) | $ 3.65 | $ (0.55) | $ 2.58 | $ (1.13) | ||||
Net income (loss) per share - diluted (in dollars per share) | $ 3.50 | $ (0.55) | $ 2.47 | $ (1.13) |
Net Income (Loss) Per Share - A
Net Income (Loss) Per Share - Additional Information (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Earnings Per Share [Abstract] | ||||
Weighted-average shares that have been excluded from the number of shares used to calculate basic and diluted net loss per share (in shares) | 437 | 12,618 | 310 | 12,758 |
Common Stock (Details)
Common Stock (Details) - Underwritten Public Offering [Member] $ / shares in Units, $ in Millions | 1 Months Ended |
Jul. 31, 2019USD ($)$ / sharesshares | |
Subsidiary, Sale of Stock [Line Items] | |
Issuance of common stock (in shares) | shares | 8,214,286 |
Offering price (in dollars per share) | $ / shares | $ 70 |
Net proceeds from stock offering | $ | $ 548.7 |
Fair Value - Summary of Fair Va
Fair Value - Summary of Fair Value Hierarchy of Assets Carried at Fair Value and Measured on a Recurring Basis (Details) - Fair Value Measurements Recurring [Member] - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | $ 757,712 | |
US Treasury Securities [Member] | Short-term Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | $ 798,921 | 536,493 |
US Treasury Securities [Member] | US Treasury Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 57,283 | |
Equity Securities [Member] | Other Non-current Assets [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 163,936 | |
Quoted prices in active markets for identical assets (Level 1) [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 757,712 | |
Quoted prices in active markets for identical assets (Level 1) [Member] | US Treasury Securities [Member] | Short-term Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 798,921 | 536,493 |
Quoted prices in active markets for identical assets (Level 1) [Member] | US Treasury Securities [Member] | US Treasury Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 57,283 | |
Quoted prices in active markets for identical assets (Level 1) [Member] | Equity Securities [Member] | Other Non-current Assets [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 163,936 | |
Other Observable Inputs (Level 2) [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | |
Other Observable Inputs (Level 2) [Member] | US Treasury Securities [Member] | Short-term Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Other Observable Inputs (Level 2) [Member] | US Treasury Securities [Member] | US Treasury Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | |
Other Observable Inputs (Level 2) [Member] | Equity Securities [Member] | Other Non-current Assets [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | |
Significant Unobservable Inputs (Level 3) [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | |
Significant Unobservable Inputs (Level 3) [Member] | US Treasury Securities [Member] | Short-term Investments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | $ 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | US Treasury Securities [Member] | US Treasury Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | |
Significant Unobservable Inputs (Level 3) [Member] | Equity Securities [Member] | Other Non-current Assets [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | $ 0 |
Fair Value - Additional Informa
Fair Value - Additional Information (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended |
Apr. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2020 | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |||
Credit loss | $ 0 | $ 0 | |
Allowance for credit loss | $ 0 | $ 0 | |
Equity Securities [Member] | Immunomedics Common Stock [Member] | |||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | |||
Proceeds from sale of investment | $ 174,700,000 |
Fair Value - Summary of Debt Se
Fair Value - Summary of Debt Securities (Details) - US Treasury Securities [Member] - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Debt Securities, Available-for-sale [Line Items] | ||
Amortized cost | $ 798,269 | $ 593,565 |
Gross unrealized gains | 670 | 236 |
Gross unrealized losses | (18) | (25) |
Fair value | 798,921 | 593,776 |
Debt securities, due in one year or less, amortized cost | 670,578 | 466,439 |
Debt securities, due in one year or less, fair value | 670,663 | 466,547 |
Debt securities, due in one to two years, amortized cost | 127,691 | 127,126 |
Debt securities, due in one to two years, fair value | $ 128,258 | $ 127,229 |
Investment and Other Income (_3
Investment and Other Income (Loss), Net (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Investments, Debt and Equity Securities [Abstract] | ||||
Gain (loss) on equity securities | $ 0 | $ (5,690) | $ 11,604 | $ (10,258) |
Investment and other income, net | 1,223 | 3,561 | 6,347 | 7,909 |
Total investment and other income (loss), net | $ 1,223 | $ (2,129) | $ 17,951 | $ (2,349) |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 74,783 | $ 78,285 |
Finished goods | 21,944 | 7,647 |
Total | $ 96,727 | $ 85,932 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||||
Provision for income taxes | $ 3,242 | $ 0 | $ 3,242 | $ 0 |
Effective income tax rate | 1.00% | 1.00% | ||
Discrete benefits | $ 52,100 |
Subsequent Event (Details)
Subsequent Event (Details) - USD ($) $ / shares in Units, $ in Thousands | Oct. 27, 2020 | Oct. 29, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 |
Subsequent Event [Line Items] | ||||||
Fair value of shares issued | $ 548,691 | |||||
Collaboration and license agreement revenues | $ 1,061,731 | 213,263 | $ 1,574,243 | $ 626,909 | ||
License and Service [Member] | ||||||
Subsequent Event [Line Items] | ||||||
Collaboration and license agreement revenues | $ 758,313 | $ 18,420 | $ 780,250 | $ 99,128 | ||
Subsequent Event [Member] | ||||||
Subsequent Event [Line Items] | ||||||
Shares issued (in shares) | 5,000,000 | 5,000,000 | ||||
Price per share (in dollars per share) | $ 200 | $ 200 | ||||
Proceeds from sale of stock | $ 1,000,000 | $ 1,000,000 | ||||
Fair value of shares issued | 749,900 | $ 749,900 | ||||
Subsequent Event [Member] | Purchase Agreement [Member] | License and Service [Member] | ||||||
Subsequent Event [Line Items] | ||||||
Collaboration and license agreement revenues | $ 250,100 |