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

Overview

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

Third quarter 2022 highlights and recent developments

Business Highlights



•Reported increases across all components of revenue for the third quarter and
year-to-date in 2022 as compared to the prior year periods, including 17% and
22% growth in net product sales for the periods, respectively.

•Entered into a corporate transaction for an innovative bispecific technology
candidate that is directed toward a target not readily addressable by an ADC,
adding to our portfolio of targeted drug therapies.

•Extended the geographic reach of TIVDAK with a new partnership for the development and commercialization in mainland China, Hong Kong, Macau, and Taiwan.



•Presented positive results for PADCEV and TUKYSA pivotal clinical trials that
supported supplemental applications to the U.S. Food and Drug Administration, or
FDA, for potential label expansion. We also submitted a supplemental application
for ADCETRIS based on data demonstrating an overall survival benefit in advanced
Hodgkin lymphoma for inclusion in the label.

•Opened an Investigational New Drug, or IND, application for an immuno-oncology product candidate.

•Published annual Corporate Responsibility Report.

Details on these and other accomplishments are as follows:

Corporate Development



•In September 2022, we entered into an agreement with LAVA Therapeutics to
develop and commercialize LAVA-1223, a preclinical gamma delta bispecific T-cell
engager for EGFR-expressing solid tumors. We received an exclusive global
license for LAVA-1223 and the opportunity to exclusively negotiate rights to
apply LAVA's proprietary Gammabody™ platform on up to two additional tumor
targets, for an upfront payment of $50.0 million and potential milestones and
royalties.

• In September 2022, we announced an exclusive collaboration and license agreement with Zai Lab for the development and commercialization of TIVDAK in mainland China, Hong Kong, Macau, and Taiwan.


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Product and Pipeline Highlights

PADCEV



•In September 2022, we, Astellas and Merck announced the presentation of data
from the phase 1b/2 EV-103 clinical trial (also known as KEYNOTE-869) Cohort K
evaluating PADCEV in combination with Merck's anti-PD-1 therapy KEYTRUDA as
first-line treatment in patients with unresectable locally advanced or
metastatic urothelial cancer who are ineligible to receive cisplatin-based
chemotherapy at the European Society for Medical Oncology Congress. The results
for the combination demonstrated an encouraging overall response rate of 64.5%
and a manageable safety profile. The median duration of response was not
reached. The results served as the basis for a supplemental Biologics License
Application, or sBLA, submitted to the FDA, in October 2022 under the FDA's
Accelerated Approval Program.

TUKYSA

•In July 2022, we presented positive results from the pivotal phase 2 MOUNTAINEER trial evaluating TUKYSA in combination with trastuzumab in patients with previously treated HER2-positive metastatic colorectal cancer at the American Society of Clinical Oncology Gastrointestinal Cancer Symposium.



•In July 2022, the FDA granted TUKYSA Breakthrough Therapy designation for use
in combination with trastuzumab for the treatment of adult patients with
unresectable or metastatic HER2-positive colorectal cancer who have previously
received fluoropyrimidine-, oxaliplatin-, and irinotecan-containing
chemotherapy. The designation is based on results of the MOUNTAINEER trial.

•In September 2022, the FDA accepted for Priority Review the supplemental New
Drug Application, or sNDA, seeking accelerated approval for TUKYSA in
combination with trastuzumab for adult patients with HER2-positive colorectal
cancer who have received at least one prior treatment regimen for unresectable
or metastatic disease. The sNDA submission is based on the results of the
pivotal phase 2 MOUNTAINEER trial, and the FDA target action date under the
Prescription Drug User Fee Act, or PDUFA, is January 19, 2023.

ADCETRIS



•In September 2022, longer-term follow-up data from the phase 3 ECHELON-1
clinical trial demonstrating that ADCETRIS in combination with chemotherapy
resulted in a 41% reduction in risk of death versus standard of care in patients
with previously untreated advanced Hodgkin lymphoma were submitted in an sBLA to
the FDA for inclusion in the label.

•In September 2022, based on the overall survival benefit of ADCETRIS in
combination with chemotherapy that was demonstrated in the ECHELON-1 trial, the
National Comprehensive Cancer Network®, or NCCN, Clinical Practice Guidelines in
Oncology, or NCCN Guidelines®, for Hodgkin lymphoma were updated elevating the
ADCETRIS combination to Category 1, Preferred treatment option for adults with
previously untreated Stage III or IV Hodgkin lymphoma with no known neuropathy.
Category 1, Preferred is the highest recommendation by NCCN, indicating that
based upon high-level evidence, there is uniform NCCN consensus that the
intervention is appropriate.

Earlier-Stage Programs



•In November 2022, we plan to present initial phase 1 clinical data on SGN-B6A,
a novel ADC in development for solid tumors as well as preclinical research from
several other early-stage programs, including SGN-BB228, an Anticalin®-based
bispecific antibody, at the Society for Immunotherapy of Cancer 37th Annual
Meeting. Recently, we opened an IND for SGN-BB228 to enable a phase 1 clinical
trial.

Corporate Responsibility Report



•In October 2022, we published our second annual Corporate Responsibility Report
providing an update on our environmental, social, and governance, or ESG,
efforts, achievements and future commitments. Notable accomplishments in the
report include:

•Increasing our focus on diversity, equity and inclusion by launching allyship
training and implementing self-reporting for LGBTQIA+ populations in our
engagement surveys. Our global workforce is comprised of 58% women as of
December 31, 2021, and we aim to increase women in leadership roles as well as
improve the percentage of underrepresented people in U.S. roles.

•Implementing initiatives in our clinical trials aimed at improving diversity to better reflect real-world patient populations and advance inclusion.


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•Enhancing our environmental practices at our U.S. facilities through recycling and waste management. In 2022, the King County Industrial Waste Rewards and Recognition Program awarded us a "Gold Award" for our North Creek facility industrial wastewater program.



•Enhancing our governance and compliance programs across areas such as ethics
and compliance, data privacy, and information security, with the aim of
supporting our growth and the expansion of our operations into international
markets.

Our Medicines

Our approved medicines include the following:


                   Product*                         Therapeutic Area                       U.S. Approved Indication
                                                                           

Previously untreated Stage III/IV classical Hodgkin

lymphoma, or cHL, in combination with doxorubicin,

vinblastine and dacarbazine

cHL at high risk of relapse or progression as


                                                    Hodgkin Lymphoma       

post-autologous hematopoietic stem cell transplantation,

or auto-HSCT, consolidation

cHL after failure of auto-HSCT or after failure of at

least two prior multi-agent chemotherapy regimens in

patients who are not auto-HSCT candidates


   [[Image Removed: sgen-20220930_g1.jpg]]                                 

Previously untreated systemic anaplastic large cell

lymphoma, or sALCL, or other CD30-expressing peripheral

T-cell lymphoma, or PTCL, including angioimmunoblastic

T-cell lymphoma and PTCL not otherwise specified, in

combination with cyclophosphamide, doxorubicin and


                                                     T-cell Lymphoma       

prednisone

sALCL after failure of at least one prior multi-agent

chemotherapy regimen

Primary cutaneous anaplastic large cell lymphoma, or

pcALCL, or CD30-expressing mycosis fungoides who have

received prior systemic therapy

Locally advanced or metastatic urothelial cancer for

patients who:

•have previously received a programmed death receptor-1

[[Image Removed: sgen-20220930_g2.jpg]] Urothelial Cancer (or PD-1) or a programmed death-ligand 1 (or PD-L1)

inhibitor and platinum-containing chemotherapy, or

•are ineligible for cisplatin-containing chemotherapy and

have previously received one or more prior lines of

therapy.

In combination with trastuzumab and capecitabine for the

treatment of adult patients with advanced unresectable or


   [[Image Removed: sgen-20220930_g3.jpg]]            Breast Cancer        

metastatic HER2-positive breast cancer, including

patients with brain metastases, who have received one or

more prior anti-HER2-based regimens in the metastatic

setting.


   [[Image Removed: sgen-20220930_g4.jpg]]           Cervical Cancer       

Recurrent or metastatic cervical cancer with disease


                                                                           progression on or after chemotherapy.
*ADCETRIS, PADCEV, TUKYSA and TIVDAK are only indicated for use in adults.



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ADCETRIS®



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

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

PADCEV®



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

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

In April 2022, the European Commission, or EC, approved PADCEV as monotherapy
for the treatment of adult patients with locally advanced or metastatic
urothelial cancer who have previously received a platinum-containing
chemotherapy and a PD-1/L1 inhibitor. The approval is applicable in the European
Union member states, as well as Iceland, Norway and Liechtenstein.

PADCEV is also approved in other countries including Brazil, Canada, Japan, Great Britain and Switzerland in previously treated metastatic urothelial cancer.



PADCEV is being co-developed and jointly commercialized with Astellas Pharma,
Inc., or Astellas. In the U.S., we and Astellas are jointly promoting PADCEV. We
record net sales of PADCEV in the U.S. and are responsible for all U.S.
distribution activities. We and Astellas each bear the costs of our own sales
organizations in the U.S., equally share certain other costs associated with
commercializing PADCEV in the U.S., and equally share in any profits realized in
the U.S. Outside the U.S., we have commercialization rights in all other
countries in North and South America, and Astellas has commercialization rights
in the rest of the world, including Europe, Asia, Australia and Africa. The
agreement is intended to provide that we and Astellas will effectively equally
share in costs incurred and any profits realized in all of these markets. Cost
and profit sharing in Canada, the United Kingdom, Germany, France, Spain and
Italy will be based on product sales and costs of commercialization. In the
remaining markets, the commercializing party will bear costs and will pay the
other party a royalty rate applied to net sales of the product based on a rate
intended to approximate an equal profit share for both parties.

TUKYSA®



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

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

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

TIVDAK®



TIVDAK is an ADC targeting tissue factor, a protein expressed on the surface of
cells that has increased levels of expression on multiple solid tumors. The FDA
granted accelerated approval of TIVDAK in September 2021 for the treatment of
adult patients with recurrent or metastatic cervical cancer with disease
progression on or after chemotherapy. FDA approval was supported by data from
the innovaTV 204 trial where it was evaluated in patients with recurrent or
metastatic cervical cancer who had received no more than two prior systemic
regimens in the recurrent or metastatic setting, including at least one prior
platinum-based chemotherapy regimen. Continued approval may be contingent upon
verification and description of clinical benefit in confirmatory trials.

TIVDAK is being co-developed with Genmab A/S, or Genmab, under an agreement in
which the companies share all costs and profits for the product on a 50:50
basis. Under a joint commercialization agreement, we and Genmab co-promote
TIVDAK in the U.S. and we record net sales of TIVDAK in the U.S. and are
responsible for leading U.S. distribution activities. The companies will each
maintain 50% of the sales representatives and medical science liaisons, equally
share those and certain other costs associated with commercializing TIVDAK in
the U.S., and equally share in any profits realized in the U.S. Outside the
U.S., we have commercialization rights in the rest of the world except for
Japan, where Genmab has commercialization rights. In Europe, China, and Japan,
we and Genmab will equally share 50% of the costs associated with
commercializing TIVDAK as well as any profits realized in these markets. In
markets outside the U.S. other than Europe, China, and Japan, aside from certain
costs specified in the agreement, we will be solely responsible for all costs
associated with commercializing TIVDAK, and will pay Genmab a royalty based on a
percentage of aggregate net sales.

In September 2022, we announced an exclusive collaboration and license agreement
with Zai Lab for the development and commercialization of TIVDAK in mainland
China, Hong Kong, Macau, and Taiwan. Under the terms of the agreement, we
received an upfront fee of $30 million in October 2022, and are entitled to
receive potential development, regulatory, and commercial milestone payments,
and tiered royalties on net sales of TIVDAK in the Zai Lab territory. Based on
our existing collaboration with Genmab, the upfront payment, milestone payments,
and royalties will be shared on a 50:50 basis with Genmab.

Clinical Development and Regulatory Status

ADCETRIS (brentuximab vedotin)



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

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In February 2022, we announced that the phase 3 ECHELON-1 clinical trial
demonstrated a statistically significant improvement in overall survival, or OS,
(p=0.009) in patients with previously untreated advanced Hodgkin lymphoma
following treatment with ADCETRIS in combination with chemotherapy. With
approximately six years median follow up, patients receiving ADCETRIS plus
doxorubicin, vinblastine, and dacarbazine (A+AVD) in the frontline setting had a
41 percent reduction in the risk of death (HR 0.59; [95% CI: 0.396 to 0.879])
compared with patients receiving doxorubicin, bleomycin, vinblastine, and
dacarbazine (ABVD). The safety profile of ADCETRIS was consistent with previous
studies and no new safety events were observed. In July 2022, these results were
published in the New England Journal of Medicine. In September 2022, based on
these data, we submitted an sBLA to the FDA for review. Also in September 2022,
based on the overall survival benefit of ADCETRIS in combination with
chemotherapy that was demonstrated in the ECHELON-1 trial, the NCCN Guidelines
were updated elevating the ADCETRIS combination to Category 1, Preferred
treatment option for adults with previously untreated Stage III or IV Hodgkin
lymphoma with no known neuropathy. Category 1, Preferred is the highest
recommendation by NCCN, indicating that based upon high-level evidence, there is
uniform NCCN consensus that the intervention is appropriate.

In June 2022, we announced results from a phase 3 Children's Oncology Group
study trial evaluating ADCETRIS in children and young adults with high-risk,
previously untreated classical Hodgkin lymphoma. The trial showed ADCETRIS in
combination with standard of care showed a clinically meaningful and
statistically significant 59% reduction in the risk of disease progression or
relapse, second malignancy or death and achieved superior event-free survival
compared to the current standard of care. Based on these data, we submitted an
sBLA to the FDA for review. The sBLA was granted Priority Review with a PDUFA
target action date of November 16, 2022.

PADCEV (enfortumab vedotin-ejfv)



In addition to jurisdictions where PADCEV is currently approved, applications
are under review for approval in the previously treated metastatic urothelial
cancer setting in Australia, under the FDA's Project Orbis program, as well as
in Singapore, Brazil and other countries. In collaboration with Astellas we are
conducting or planning to conduct clinical trials across the spectrum of bladder
cancer including ongoing trials in frontline metastatic urothelial cancer and
muscle invasive bladder cancer. We are planning to conduct a trial in non-muscle
invasive bladder cancer. In addition, we are conducting a trial in a range of
other solid tumors.

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

In February 2020, based on the positive initial results of the dose-escalation
cohort and the expansion Cohort A of the EV-103 trial, the FDA granted
Breakthrough Therapy designation for PADCEV in combination with Merck's
anti-PD-1 therapy pembrolizumab for the treatment of patients with unresectable
locally advanced or metastatic urothelial cancer who are unable to receive
cisplatin-based chemotherapy in the first-line setting. In April 2020, we
announced that, based on discussions with the FDA, data from the randomized
Cohort K in the EV-103 trial, along with other data from the EV-103 trial, could
potentially support registration under the FDA's accelerated approval pathway.
The primary endpoint is confirmed objective response rate. In October 2021, we
completed enrollment in Cohort K.

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In July 2022, we and Astellas announced positive topline results from the phase
1b/2 EV-103 clinical trial Cohort K evaluating PADCEV in combination with
pembrolizumab as first-line treatment in patients with unresectable locally
advanced or metastatic urothelial cancer who are ineligible to receive
cisplatin-based chemotherapy. In September 2022, the data were presented at the
European Society for Medical Oncology Congress. In patients treated with PADCEV
and pembrolizumab, results demonstrated a 64.5% confirmed objective response
rate, or ORR, (95% CI: 52.7 to 75.1) per blinded independent central review, or
BICR, the primary endpoint of Cohort K, with 10.5% of patients experiencing a
complete response and 53.9% of patients experiencing a partial response. The
median duration of response, or DOR, per BICR was not reached (95% CI: 10.25
months to NR). All-grade treatment-related adverse events, or TRAEs, of special
interest for PADCEV in combination with pembrolizumab were skin reactions
(67.1%), peripheral neuropathy (60.5%), ocular disorders (dry eye, blurred
vision, and corneal disorders) (26.3%), hyperglycemia (14.5%), and
infusion-related reactions (3.9%). Pembrolizumab adverse events of special
interest were consistent with previously observed safety data from monotherapy
with the exception of severe skin reactions. Cohort K also included a
monotherapy arm in which patients were treated with PADCEV alone (n=73), though
this study was not designed to support a formal comparison between the two arms.
Results showed a 45.2% confirmed ORR (95% CI: 33.5 to 57.3) per RECIST v1.1 by
BICR, with 4.1% of patients experiencing a complete response and 41.1% of
patients experiencing a partial response. The median DOR was 13.2 months (95%
CI: 6.14 to 15.97) per RECIST v1.1 by BICR. All-grade TRAEs of special interest
for PADCEV were peripheral neuropathy (54.8%), skin reactions (45.2%), ocular
disorders (dry eye, blurred vision, and corneal disorders) (28.8%),
hyperglycemia (11.0%), and infusion-related reactions (5.5%). Additional
secondary endpoints in the EV-103 Cohort K trial included progression-free
survival, or PFS, and overall survival, or OS. Among patients treated with
PADCEV and pembrolizumab, median PFS was not reached (95% CI: 8.31 months to
NR). Median OS was 22.3 months (95% CI: 19.09 to NR). Among patients treated
with PADCEV, median PFS was 8.0 months (95% CI: 6.05 to 10.35) and median OS was
21.7 months (95% CI: 15.21 to NR). TRAEs of any grade that occurred in more than
20% of patients treated with PADCEV alone or in combination with pembrolizumab
were fatigue, peripheral sensory neuropathy, alopecia, rash maculo-papular,
pruritus, dysgeusia, weight decreased, diarrhea, decreased appetite, nausea, and
dry eye. Overall, the results are generally consistent with previously reported
efficacy and safety results of EV-103 dose escalation and expansion Cohort A. In
October 2022, an sBLA based on the data was submitted under the FDA's
Accelerated Approval Program.

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

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

In January 2022, we enrolled the first patient in a phase 1 trial, called EV-104, evaluating PADCEV in patients with BCG unresponsive non-muscle invasive bladder cancer.



In January 2020, we and Astellas also initiated a phase 2 clinical trial, called
EV-202, to evaluate PADCEV monotherapy in solid tumors that have high-levels of
Nectin-4 expression, including non-small cell lung, head and neck,
gastric/esophageal and breast cancers. Astellas is conducting the trial and has
obtained topline results in some cohorts. We and Astellas will be reviewing the
results and discussing future direction.

TUKYSA (tucatinib)

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


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In December 2021, we presented new data at the San Antonio Breast Cancer
Symposium from exploratory analyses from the pivotal HER2CLIMB trial showing
that improvement in OS was maintained after an additional 15.6 months of
follow-up when TUKYSA was combined with trastuzumab and capecitabine in patients
with HER2-positive metastatic breast cancer who had stable or active brain
metastases. After a median follow-up of 29.6 months, the TUKYSA regimen improved
OS for patients with brain metastases by 9.1 months compared to trastuzumab and
capecitabine alone (21.6 months vs. 12.5 months) (HR: 0.60; [95% CI: 0.44,
0.81]). The benefit extended to patients with active or stable brain metastases.

In October 2019, we initiated a phase 3 randomized trial, called HER2CLIMB-02,
evaluating TUKYSA versus placebo, each in combination with T-DM1, for patients
with unresectable locally advanced or metastatic HER2-positive breast cancer,
including those with brain metastases, who have had prior treatment with a
taxane and trastuzumab. In June 2022, we completed enrollment in the
HER2CLIMB-02 trial.

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

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



We have also initiated a phase 3 trial, called HER2CLIMB-05, evaluating TUKYSA
compared to placebo in combination with trastuzumab and pertuzumab in the
frontline maintenance setting for patients with metastatic HER2-positive breast
cancer.

We are conducting a phase 2 trial, called MOUNTAINEER, evaluating TUKYSA in
combination with trastuzumab in patients with HER2-positive, RAS wild-type
metastatic colorectal cancer after treatment with first- and second-line
standard-of-care therapies. In July 2022, we presented positive results from the
pivotal phase 2 MOUNTAINEER trial investigating TUKYSA in combination with
trastuzumab in patients with previously treated HER2-positive metastatic
colorectal cancer at the European Society for Medical Oncology World Congress on
Gastrointestinal Cancer. The combination of TUKYSA and trastuzumab was generally
well-tolerated with durable responses in patients assigned to receive the
combination demonstrating a 38.1% confirmed response rate after a median
duration of follow-up of 20.7 months. In these patients, the median DOR was 12.4
months. Median progression-free survival was 8.2 months, and median overall
survival was 24.1 months. The most common (greater than or equal to 20%)
treatment-emergent adverse events, or TEAEs, in patients assigned to receive
tucatinib and trastuzumab were diarrhea (Grade 1 or 2: 60.5%, Grade 3: 3.5%),
fatigue (Grade 1 or 2: 41.9%, Grade 3: 2.3%), nausea (Grade 1 or 2: 34.9%) and
infusion-related reaction (Grade 1 or 2: 20.9%). We believe the trial could
potentially support an application for accelerated approval in the U.S. In July
2022, an sNDA was submitted to the FDA under the Accelerated Approval Program.
The sNDA was granted Priority Review with a PDUFA target action date of January
19, 2023.

In July 2022, the FDA granted TUKYSA Breakthrough Therapy designation for use in
combination with trastuzumab for the treatment of adult patients with
unresectable or metastatic HER2-positive colorectal cancer who have previously
received fluoropyrimidine-, oxaliplatin-, and irinotecan-containing
chemotherapy. The designation is based on results of the MOUNTAINEER trial.

We are conducting a phase 2/3 trial, called MOUNTAINEER-02, in combination with
trastuzumab, ramucirumab and paclitaxel in second-line HER2-positive metastatic
gastroesophageal cancer. In addition, we have initiated a phase 3 trial, called
MOUNTAINEER-03, in combination with trastuzumab and mFOLFOX6 in first-line
HER2-positive metastatic colorectal cancer. We have also initiated a phase 1b
trial evaluating TUKYSA in combination with trastuzumab and oxaliplatin based
chemotherapy in first-line HER2-positive unresectable or metastatic colorectal,
gastric, esophageal and gallbladder cancers.

TIVDAK (tisotumab vedotin-tftv)

In collaboration with Genmab, we are developing TIVDAK for metastatic cervical cancer and are evaluating it as a potential therapy in other solid tumors.



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

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We are also conducting a phase 2 clinical trial, called innovaTV 205, evaluating
TIVDAK as monotherapy and in combination with certain other anti-cancer agents
for first- and second-line treatment of patients with recurrent or advanced
cervical cancer. In September 2021, interim results were presented at the
European Society for Medical Oncology Annual Congress from two cohorts of the
phase 1b/2 innovaTV 205 trial, evaluating TIVDAK as combination therapy for
recurrent or metastatic cervical cancer. Both combinations showed encouraging,
durable anti-tumor activity and demonstrated a manageable and acceptable safety
profile. Additionally, in June 2022, we announced interim data from the innovaTV
205 trial, which included data evaluating TIVDAK in combination with
pembrolizumab in patients with recurrent or metastatic cervical cancer who have
not received prior systemic therapy. This combination cohort enrolled 33
patients with recurrent or metastatic cervical cancer who had not received any
prior systemic therapy. At the time of data cutoff, the confirmed objective
response rate among 32 evaluable patients was 41% with 16% of patients achieving
complete responses and 25% of patients achieving partial responses. Median DOR
was not reached with median follow-up of 18.8 months. Median progression-free
survival was 5.3 months. In this cohort, the most common TEAEs were alopecia
(61%), diarrhea (55%), epistaxis (49%), conjunctivitis (45%), and nausea (46%).

We are conducting a phase 2 clinical trial, called innovaTV 207, for patients
with relapsed, locally advanced or metastatic solid tumors. In February 2022,
initial data from the innovaTV 207 phase 2 trial of TIVDAK in solid tumors was
presented at the Multidisciplinary Head and Neck Cancers Symposium. The results
demonstrated a manageable safety profile and promising preliminary antitumor
activity in patients with squamous cell carcinoma of the head and neck with 16
percent of patients (95% CI: 5.5 to 33.7) achieving the primary endpoint of
confirmed objective response rate per investigator.

Disitamab vedotin



In September 2021, we and RemeGen entered into an exclusive license agreement to
develop and commercialize disitamab vedotin, a novel HER2-targeted ADC, which
has shown anti-tumor activity in several solid tumor types across a spectrum of
HER2 levels, including urothelial, gastric and breast cancer, in all countries
outside of RemeGen's territory of Asia, excluding Japan and Singapore. We have a
broad clinical development program planned including an ongoing phase 2 trial
evaluating disitamab vedotin as monotherapy in previously treated
HER2-expressing metastatic urothelial cancer.

Ladiratuzumab vedotin



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

Other clinical and early-stage product candidates



We are advancing a pipeline of early-stage clinical candidates as well as
multiple preclinical and research-stage programs that employ our proprietary
technologies. We advanced several product candidates into clinical development
since the beginning of 2021, and we plan to submit additional IND applications
to the FDA in the remainder of 2022 and 2023.

In September 2022, we entered into an agreement with LAVA Therapeutics to
develop and commercialize LAVA-1223, a preclinical gamma delta bispecific T-cell
engager for EGFR-expressing solid tumors. We received an exclusive global
license for LAVA-1223 and the opportunity to exclusively negotiate rights to
apply LAVA's proprietary Gammabody™ platform on up to two additional tumor
targets. We paid LAVA a $50 million upfront fee in October 2022 and have also
agreed to pay LAVA up to approximately $650 million in potential development,
regulatory and commercial milestones, as well as royalties ranging from the
single digits to the mid-teens on future sales of any licensed products.

Antibody-Drug Conjugate technology license agreements



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

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COVID-19



We are continuing to closely monitor the impact of the evolving effects of the
COVID-19 pandemic on our business. We are continuing to take proactive steps
designed to protect the health and safety of our workforce, patients and
healthcare professionals, to continue our business operations and to advance our
goal of bringing important medicines to patients as rapidly as possible. Earlier
in the pandemic, we instituted a mandatory work-from-home policy for employees
who could perform their jobs offsite, but continued our essential research,
manufacturing, and laboratory activities on site. We have since allowed
additional U.S. office-based employees who have been fully vaccinated to return
to the office. We maintain a number of precautionary measures designed to
protect our on-site employees, such as enhanced facilities cleaning, lower
concentrations of staff, contact tracing and making testing available. After
pausing most in-person customer interactions in healthcare settings earlier in
the pandemic, our field-based personnel are now using a mix of in-person
interactions and electronic communications, such as emails, phone calls and
video conferences, to support healthcare professionals and patients. We believe
that the measures we have implemented are appropriate and are helping to reduce
transmission of COVID-19, and we will continue to monitor conditions and related
guidance from governmental authorities and adjust our activities as appropriate.

Outlook



We recognize product sales revenue from ADCETRIS in the U.S. and Canada, from
PADCEV and TIVDAK in the U.S., and from TUKYSA in the U.S., Europe and Canada.
We expect growth in net product sales of our portfolio to be primarily supported
by sales volume growth. Recently, we have experienced a favorable effect on
gross-to-net deductions in the U.S. market associated with high inflation, but
it is not possible to predict how inflation will develop going forward and
affect gross-to-net deductions in future periods. In addition, we experienced a
reduction in the rate of frontline Hodgkin lymphoma diagnoses earlier in the
COVID-19 pandemic; however, recently, we have seen diagnosis rates increase
towards pre-pandemic levels. We cannot predict how the rate of Hodgkin lymphoma
diagnoses will trend in the future. We anticipate that the rate of growth of
PADCEV and TUKYSA sales will decelerate in 2022 compared to 2021 as we expect to
continue to more fully penetrate the markets for their currently approved labels
within the U.S. Additionally, while growth in PADCEV sales has been primarily
driven by use of checkpoint inhibitors as frontline maintenance therapy, uptake
of checkpoint inhibitors in that setting has flattened, which has been limiting
PADCEV's near-term growth in its current indications.

Our ability to maintain or continue to grow net product sales and to realize the
anticipated benefits of our investments in our products depends on a number of
factors including:

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



•the extent to which we and our collaborators are able to obtain regulatory and
other approvals of our products in additional territories and/or in additional
indications, including any accelerated approval from the FDA based on the
results of the EV-103 trial or any other approvals for PADCEV in the frontline
metastatic urothelial cancer setting and any approvals for TUKYSA in earlier
lines of breast cancer and/or other HER2-positive cancers such as the
MOUNTAINEER treatment setting;

•our and our collaborators' ability to successfully launch, market and
commercialize our products in any new markets or new indications, if regulatory
approval is obtained, including Astellas' ability to successfully launch, market
and commercialize PADCEV in the European Union and its other markets;

•competition from other therapies and changing market dynamics, as further
described in "Business-Competition" in Part I of our Annual Report on Form 10-K
for the year ended December 31, 2021; for example, the approval of ENHERTU for
second-line HER2-positive metastatic breast cancer has resulted and is expected
to continue to result in increased competition for TUKYSA;

•the extent to which we are able to successfully work with Astellas to jointly
market and commercialize PADCEV in the U.S., and with Genmab to jointly market
and commercialize TIVDAK in the U.S.;

•our ability to successfully market and commercialize TUKYSA in our territories outside the U.S.;

•the extent to which coverage and adequate levels of reimbursement for our products are available from governments and other third-party payors;

•the extent to which we and our collaborators are able to obtain required pricing and reimbursement approvals of our products in additional territories, most notably with respect to TUKYSA and PADCEV;



•the impact of current and future healthcare reform measures, including measures
that could result in more rigorous coverage criteria or reduce the price that we
receive for our products;

•the incidence flow of patients eligible for treatment in our products' approved indications;


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•our and our collaborators' ability to accurately predict and supply product demand;

•duration of therapy for patients receiving our products;



•our and our collaborators' ability to successfully comply with rigorous
post-marketing requirements, including requirements related to a confirmatory
trial as a result of TIVDAK's accelerated approval by the FDA, and to convert
TIVDAK's accelerated approval to regular approval in the U.S.;

•with respect to TIVDAK, the acceptance of TIVDAK and its required eye care by the medical community and patients; and



•impacts related to the COVID-19 pandemic, including potential further adverse
effects on the rate of Hodgkin lymphoma diagnoses and potential adverse impacts
on diagnosis rates for other cancers.

As a result of these and other factors, our future net product sales for each of
our products can be difficult to accurately predict from period to period. We
cannot assure you that sales of any of our products will continue to grow or
that we can maintain sales of any of our products at or near current levels.

The biopharmaceutical industry and the markets in which we operate are intensely
competitive. Many of our competitors are working to develop or have
commercialized products similar to those we market or are developing. Drug
prices are under significant scrutiny and we expect drug pricing and other
healthcare costs to continue to be subject to intense political and societal
pressures on a global basis. For example, in July 2021, the Biden administration
announced an Executive Order that includes initiatives aimed at lowering
prescription drug costs and implementing Canadian drug importation, and in
response to President Biden's Executive Order, in September 2021, the U.S.
Department of Health and Human Services, or HHS, released a Comprehensive Plan
for Addressing High Drug Prices that outlines principles for drug pricing reform
and sets out a variety of potential legislative policies that Congress could
pursue to advance these principles. Further, on August 16, 2022, President Biden
signed the Inflation Reduction Act of 2022, or IRA, into law, which, among other
things, (i) directs HHS to negotiate the price of certain high-expenditure,
single-source drugs and biologics covered under Medicare, and subjects drug
manufacturers to civil monetary penalties and a potential excise tax for
offering a price that is not equal to or less than the negotiated "maximum fair
price" under the law, and (ii) imposes rebates under Medicare Part B and
Medicare Part D to penalize price increases that outpace inflation. In addition
to pricing actions and other measures being taken worldwide designed to reduce
healthcare costs and limit the overall level of government expenditures, our
sales and operations could also be affected by other risks of doing business
internationally.

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

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

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We are closely evaluating the impacts of the evolving effects of the COVID-19
pandemic on our ability and the ability of our collaborators to effectively
market, sell and distribute our products and to develop our products and product
candidates. Our field-based personnel are using a mix of in-person interactions
and electronic communications, such as emails, phone calls and video
conferences, to support healthcare providers and patients. Many healthcare
professionals continue to face additional demands on their time during the
ongoing COVID-19 pandemic. We expect the different quality of electronic
interactions as compared with in-person interactions, as well as the reduced
quantity of interactions during the COVID-19 pandemic, to reduce the
effectiveness of our sales personnel, as well as those of our collaborators,
which could negatively affect our product sales and those of our collaborators,
as well as physician awareness of our products. In this regard, we believe that
the need to conduct some of our activities virtually is negatively impacting our
ability to connect with key customers, including those familiar with competitive
products, and our ability to conduct payor engagements. We face a number of
challenges that will limit our ability to fully resume in-person interactions,
including the potential for increasing COVID-19 infection rates, COVID-19
variants, low vaccination rates or low booster uptake in different areas, and
the need to navigate varying restrictions for entering healthcare facilities. In
addition, we may subsequently decide or be forced to resume a more restrictive
remote work model, whether as a result of further spikes or surges in COVID-19
infection or hospitalization rates or otherwise. Moreover, the long-term effects
of the COVID-19 pandemic are also unknown and it is possible that following the
pandemic, healthcare institutions could alter their policies with respect to in
person visits by pharmaceutical company representatives. Future COVID-19 related
restrictions could also present product distribution challenges. The evolving
effects of the COVID-19 pandemic appear to have negatively affected and may
continue to negatively affect our product sales due to challenges in patient
access to healthcare settings, loss of individual health insurance coverage, and
inability to access government healthcare programs due to backlogs, some or all
of which appear to have negatively affected diagnosis rates, may affect side
effect management and course of treatment and may increase enrollment in our
patient support programs. In this regard, impacts associated with the COVID-19
pandemic appear to have led to a reduction in the rate of Hodgkin lymphoma
diagnoses, may have adversely affected diagnosis rates of other cancers, and may
further adversely affect rates of cancer diagnoses in the future. We also expect
that the conversion of medical conferences to a virtual format may reduce our
ability to effectively disseminate scientific information about our products,
which may result in decreased physician awareness of our products, their
approved indications and their efficacy and safety.

Some of the sites participating in our clinical trials are affected by site
closings, reduced capacity, staffing shortages, or other effects of the COVID-19
pandemic. At some sites, we are experiencing impacts to our ability to monitor
patients, activate sites, screen and enroll patients, complete site monitoring
and manage samples. The extent of the impact on a particular clinical trial
depends on the current stage of activities at a given site, for example study
start up versus post-enrollment, and the number of impacted sites participating
in that trial. Impacts on diagnosis rates associated with the COVID-19 pandemic
may also negatively impact enrollment. While we do not at this time anticipate
the need to revise our publicly reported projected clinical milestone dates as a
result of the effects of the COVID-19 pandemic, there may continue to be adverse
impacts to our clinical study timelines, which, depending upon the duration and
severity of the evolving effects of the COVID-19 pandemic, could ultimately
delay data availability. Due to the suspension of data monitoring activities at
sites that do not currently allow remote monitoring, as well as impacts on the
ability to monitor patients, maintain patient treatment according to the trial
protocols and manage samples, there is also the potential for negative impacts
on data quality. While we are actively utilizing digital monitoring measures and
other mitigations designed to prevent negative data quality impacts, if there
were in fact a negative impact on data quality, we or our collaborators could be
required to repeat, extend the duration of, or increase the size of clinical
trials, which could significantly delay potential commercialization and require
greater expenditures. We expect that similar factors will impact clinical
studies operationalized by our collaborators.

The extent to which the evolving effects of the COVID-19 pandemic impact our
business will depend on future developments that are highly uncertain, such as
coronavirus variants that may prove to be especially contagious or virulent, the
ultimate duration and severity of the pandemic, government actions, such as
travel restrictions, quarantines and social distancing requirements in the U.S.
and in other countries, business closures or business disruptions and the
effectiveness of vaccine programs and other actions taken to contain and treat
the disease. For more information on the risks and uncertainties associated with
the evolving effects of the COVID-19 pandemic on our business, our ability to
generate sales of and revenues from our approved products, and our clinical
development and regulatory efforts, see "Part II Item 1A-Risk Factors."

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


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Financial summary



For the nine months ended September 30, 2022, our total revenues increased to
$1.4 billion, compared to $1.1 billion for the same period in 2021. This
increase was primarily driven by $227 million or 22% higher net product sales,
due to growth from each of our approved medicines, and to a lesser extent,
higher collaboration and license agreement revenues, and higher royalty
revenues.

For the nine months ended September 30, 2022, total costs and expenses increased
to $1.9 billion, compared to $1.7 billion for the same period in 2021. The
increase was due mainly to higher sales, general, and administrative expenses,
and to a lesser extent, higher cost of sales, and higher research and
development expenses.

As of September 30, 2022, we had $1.8 billion in cash, cash equivalents and investments and $2.8 billion in total stockholders' equity.




Results of operations

Net product sales

                                                       Three months ended September 30,                                 Nine months ended September 30,
(dollars in thousands)                          2022                2021              % Change                  2022                    2021               % Change
ADCETRIS                                    $  218,521          $ 184,791                    18  %       $        601,449          $   529,275                    14  %
PADCEV                                         105,330             95,031                    11  %                329,114              247,194                    33  %
TUKYSA                                          87,771             86,571                     1  %                267,235              239,850                    11  %
TIVDAK                                          16,467                 66                       NM                 45,091                   66                       NM
Net product sales                           $  428,089          $ 366,459                    17  %       $      1,242,889          $ 1,016,385                    22  %
NM: No amount in comparable period or not a meaningful comparison.


Our net product sales increased during the three and nine months ended September
30, 2022 as compared to the comparable periods in 2021, driven by growth from
each of our marketed products.

ADCETRIS net product sales grew due to higher volumes of vials sold driven by
higher diagnosis rates of Hodgkin lymphoma as well as incremental market share
gains in frontline Hodgkin lymphoma, and higher net selling prices driven by
favorable pricing dynamics in the 2022 periods. PADCEV net product sales grew
primarily due to higher sales volume as a result of additional eligible patients
in second line post checkpoint maintenance during the 2022 periods. TUKYSA net
product sales grew due to increased sales volume in our European markets
following its commercial launches commencing in 2021 and higher net selling
prices in the U.S., offset in part by lower net selling prices and negative
impact of foreign exchange in our European markets. We began commercializing
TIVDAK in the U.S. following FDA approval in September 2021.

We expect growth in net product sales in 2022 as compared to 2021 to be primarily driven by higher sales of each of our approved products. Refer to "Overview-Outlook" above for additional information.



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

                                                                                    Distribution fees,
                                                              Rebates and            product returns
(in thousands)                                                chargebacks               and other                 Total
Balance as of December 31, 2021                             $     74,889          $            16,818          $  91,707
Provision related to current period sales                        440,416                       35,146            475,562
Adjustment for prior period sales                                 (9,898)                      (1,201)           (11,099)
Payments/credits for current period sales                       (367,900)                     (26,919)          (394,819)
Payments/credits for prior period sales                          (43,732)                      (4,034)           (47,766)
Balance as of September 30, 2022                            $     93,775          $            19,810          $ 113,585


Government-mandated rebates and chargebacks are the most significant component
of our total gross-to-net deductions and the discount changes over time. The
most significant portion of our gross-to-net accrual balances as of
September 30, 2022 and 2021 was for ADCETRIS Medicaid rebates. We expect future
gross-to-net deductions to fluctuate based on the volume of purchases eligible
for government mandated discounts and rebates, as well as changes in the
discount percentage which is impacted by potential future price increases, the
rate of inflation, and other factors. We expect gross-to-net deductions to
increase in 2022 as compared to 2021, driven by anticipated growth in our gross
product sales.


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Royalty revenues



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

                                                      Three months ended September 30,                            Nine months ended September 30,
(dollars in thousands)                          2022              2021              % Change               2022                2021              % Change
Royalty revenues                            $  43,904          $ 41,028                     7  %       $  111,194          $ 104,542                     6  %


Royalty revenues increased slightly for the three and nine months ended
September 30, 2022 from the comparable periods in 2021, due mainly to higher net
product sales by our licensees in their territories. Takeda's net sales growth
of ADCETRIS in local currencies during the 2022 periods was offset by recent
strengthening of the U.S. dollar in 2022 as compared to certain foreign
currencies.

We expect that royalty revenues will increase in 2022 as compared to 2021 primarily due to higher royalties from anticipated growth of licensees' net product sales, including growth in ADCETRIS sales volume by Takeda.

Collaboration and license agreement revenues

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



                                                         Three months ended September 30,                           Nine months ended September 30,
(dollars in thousands)                             2022              2021              % Change               2022              2021              % Change

Collaboration and license agreement
revenues                                       $  38,307          $ 16,573                   131  %       $  80,179          $ 23,593                   240  %


Collaboration and license agreement revenues increased for the three months
ended September 30, 2022 compared to the prior period, due primarily to the Zai
Lab upfront license payment of $30.0 million in September 2022, offset in part
by a milestone payment received from GSK during the three months ended September
30, 2021. The increase in collaboration and license agreement revenues for the
nine months ended September 30, 2022 compared to the prior period was also due
to a milestone payment received from AbbVie and an upfront payment received from
Sanofi during the 2022 period.

Our collaboration and license agreement revenues are impacted by the term and
duration of those agreements and by progress-dependent milestones, annual
maintenance fees, and reimbursement of materials and support services.
Collaboration and license agreement revenues may vary substantially from year to
year and quarter to quarter depending on the progress made by our collaborators
with their product candidates and the timing of milestones achieved, the amount
of drug supplied to our collaborators, and whether we enter into potential
additional collaboration and license agreements.


Collaboration and license agreements

Takeda ADCETRIS collaboration



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

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Astellas PADCEV collaboration



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

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

TIVDAK collaborations



We have an agreement with Genmab to develop and commercialize ADCs for the
treatment of several types of cancer, under which we previously exercised a
co-development option for TIVDAK. Under this collaboration, we and Genmab are
co-funding all development costs for TIVDAK. In the U.S., we and Genmab
co-promote TIVDAK. We record sales of TIVDAK in the U.S. and are responsible for
leading U.S. distribution activities. The companies will each maintain 50% of
the sales representatives and medical science liaisons, equally share those and
certain other costs associated with commercializing TIVDAK in the U.S.,
individually bear the costs of certain other personnel in the U.S., and equally
share in any profits realized in the U.S. Outside the U.S., we have
commercialization rights in the rest of the world except for Japan, where Genmab
has commercialization rights. In Europe, China, and Japan, we and Genmab equally
share 50% of the costs associated with commercializing TIVDAK as well as any
profits realized in these markets. In markets outside the U.S. other than
Europe, China, and Japan, aside from certain costs specified in the agreement,
we are solely responsible for all costs associated with commercializing TIVDAK
and will pay Genmab a royalty based on a percentage of aggregate net sales
ranging from the mid-teens to mid-twenties. In September 2022, we announced an
exclusive collaboration and license agreement with Zai Lab for the development
and commercialization of TIVDAK in mainland China, Hong Kong, Macau, and Taiwan.
Under the terms of the agreement, we received an upfront payment of $30.0
million in October 2022, and are entitled to receive potential future
development, regulatory, and commercial milestone payments, and tiered royalties
on net sales of TIVDAK in the Zai Lab territory. Based on our existing
collaboration with Genmab, the upfront payment, milestone payments, and
royalties will be shared on a 50:50 basis with Genmab.

Merck LV collaboration



In 2020, we entered into the LV Agreement with a subsidiary of Merck. We are
pursuing a broad joint development program evaluating LV as monotherapy and in
combination setting, including with Merck's anti-PD-1 therapy KEYTRUDA®
(pembrolizumab) in triple-negative breast cancer, hormone receptor-positive
breast cancer and other LIV-1-expressing solid tumors. Under the terms of the LV
Agreement, we granted Merck a co-exclusive worldwide development and
commercialization license for LV, and agreed to jointly develop and
commercialize LV on a worldwide basis. We received an upfront cash payment, and
we are eligible to receive milestone payments upon the initiation of certain
clinical trials, regulatory approval in certain major markets and 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.

We recognize such cost sharing proportionately with the performance of the underlying activities, while recording Merck's reimbursement of our expenses as a reduction of research and development expenses.


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Merck TUKYSA collaboration



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

We recognize such cost sharing proportionately with the performance of the
underlying activities, while recording Merck's reimbursement of our expenses as
a reduction of research and development expenses. Sales of TUKYSA drug product
supplied is included in collaboration and license agreement revenues. The
$85.0 million prepayment received for global development cost-sharing was
recorded as a co-development liability in accrued liabilities and other or other
long-term liabilities on our condensed consolidated balance sheet as of
September 30, 2022. As joint development expenses are incurred, we recognize the
portion of Merck's prepayment as a reduction of our research and development
expenses on our condensed consolidated statements of comprehensive loss. As of
September 30, 2022 and December 31, 2021, $26.1 million and $55.3 million was
recorded as the remaining co-development liability, respectively.

RemeGen disitamab vedotin license agreement



Effective in September 2021, we and RemeGen entered into an exclusive worldwide
licensing agreement to develop and commercialize disitamab vedotin, a novel
HER2-targeted ADC. Disitamab vedotin combines the drug-linker technology
originally developed by us with RemeGen's novel HER2 antibody. Disitamab vedotin
received FDA Breakthrough Therapy designation in 2020 for use in second-line
treatment of patients with HER2-expressing, locally advanced or metastatic
urothelial cancer who have previously received platinum-containing chemotherapy.
Also in 2020, RemeGen announced FDA's clearance of an IND application for a
phase II clinical trial in locally advanced or metastatic urothelial cancer.
Disitamab vedotin is conditionally approved for treating locally advanced
metastatic gastric cancer in China, and in July 2021 the National Medical
Products Administration of China also accepted an NDA for disitamab vedotin in
locally advanced or metastatic urothelial cancer.

Under the terms of the agreement, we made a $200.0 million upfront payment to
obtain exclusive license rights to disitamab vedotin for global development and
commercialization, outside of RemeGen's territory. RemeGen retains development
and commercialization rights for Asia, excluding Japan and Singapore. We will
lead global development and RemeGen will fund and operationalize the portion of
global clinical trials attributable to its territory. RemeGen will also be
responsible for all clinical development and regulatory submissions specific to
its territory. We will pay RemeGen up to $195.0 million in potential milestone
payments across multiple indications and products based upon the achievement of
specified development goals, and up to $2.2 billion in potential milestone
payments based on the achievement of specified regulatory and commercialization
goals. RemeGen will be entitled to a tiered, high single digit to mid-teen
percentage royalty based on net sales of disitamab vedotin in our territory.

Other technology collaboration and license agreements



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


Cost of sales



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

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                                                      Three months ended September 30,                             Nine months ended September 30,
(dollars in thousands)                          2022               2021              % Change               2022                2021              % Change

Cost of sales                               $  108,122          $ 82,650                    31  %       $  301,848          $ 224,875                    34  %


Cost of sales increased for the three and nine months ended September 30, 2022
from the comparable periods in 2021, driven by higher sales of our medicines
resulting in higher gross profit sharing owed to our collaboration partners, and
to a lesser extent, higher product costs from sales volume increases. The gross
profit share owed to collaborators totaled $71.0 million and $189.4 million for
the three and nine months ended September 30, 2022, respectively, as compared to
$44.7 million and $115.8 million for the comparable periods in 2021. Included in
the gross profit share owed to Genmab during the three and nine months ended
September 30, 2022 was $14.6 million related to the Zai Lab upfront licensing
payment.

We expect cost of sales to increase in 2022 as compared to 2021 as a result of
the net product sales growth of our marketed products, contributing to higher
anticipated gross profit sharing with our collaborators and higher manufacturing
costs for products sold.


Research and development

                                                          Three months ended September 30,                             Nine months ended September 30,
(dollars in thousands)                             2022                2021              % Change               2022                2021              % Change
Research and clinical development              $  304,263          $ 393,809                   (23) %       $  766,591          $ 732,682                     5  %
Process sciences and manufacturing                 80,342             65,283                    23  %          219,927            191,696                    15  %
Total research and development                 $  384,605          $ 459,092                   (16) %       $  986,518          $ 924,378                     7  %


Research and clinical development expenses include personnel, occupancy and
laboratory expenses, technology access fees, preclinical translational biology
and in vitro and in vivo studies, IND-enabling pharmacology and toxicology
studies, and external clinical trial costs including costs for clinical sites,
clinical research organizations, contractors and regulatory activities
associated with conducting human clinical trials. Research and clinical
development expenses for the three and nine months ended September 30, 2021,
were impacted by the $200.0 million RemeGen upfront license payment made in
2021. Other research and clinical development costs grew during the three and
nine months ended September 30, 2022 from the comparable periods in 2021, driven
by higher employee-related costs and clinical trial costs to support our early-
and late-stage pipeline of product candidates, as well as the $50.0 million
upfront payment to LAVA Therapeutics.

Process sciences and manufacturing expenses include personnel and occupancy
expenses, manufacturing costs for the scale-up and pre-approval manufacturing of
product candidates used in research and our clinical trials, and costs for drug
product supplied to our collaborators. Process sciences and manufacturing
expenses also include quality control and assurance activities, and storage and
shipment of our product candidates. The increases for the three and nine months
ended September 30, 2022 from the comparable period in 2021 primarily reflected
higher employee-related costs and the timing of manufacturing costs of our
product candidates for use in clinical trials.

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

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                                                  Three months ended September 30,            Nine months ended September 30,
(dollars in thousands)                                2022                2021                   2022                   2021

TUKYSA (tucatinib)                               $    61,090          $   

44,645 $ 153,633 $ 106,879 PADCEV (enfortumab vedotin-ejfv)

                      22,911              22,287                    65,517              57,787
ADCETRIS (brentuximab vedotin)                        22,249              15,138                    61,116              49,051
TIVDAK (tisotumab vedotin)                            12,773              12,129                    31,463              33,517
Ladiratuzumab vedotin                                  3,463               4,238                    11,206              16,038
Disitamab vedotin                                      9,616                   -                    27,495                   -
Other clinical stage programs                         17,017              13,727                    62,042              48,658
Total third-party costs for clinical stage
programs                                             149,119             112,164                   412,472             311,930

Other costs, overhead, and net
cost-sharing with collaborators                      235,486             346,928                   574,046             612,448
Total research and development                   $   384,605          $  

459,092 $ 986,518 $ 924,378

Third-party costs for TUKYSA increased for the three and nine months ended September 30, 2022 as compared to the 2021 periods, due primarily to higher clinical trials expenses.

Third-party costs for PADCEV increased for the three and nine months ended September 30, 2022 as compared to the 2021 periods, due to the timing of clinical trials expenses and manufacturing costs.

Third-party costs for ADCETRIS increased for the three and nine months ended September 30, 2022 as compared to the 2021 periods, due primarily to higher manufacturing and clinical trials expenses.



Third-party costs for TIVDAK increased for the three months ended September 30,
2022 as compared to the 2021 period, and decreased for the nine months ended
September 30, 2022 as compared to the 2021 period, due to the timing of clinical
trials expenses.

Third-party costs for ladiratuzumab vedotin decreased for the three and nine
months ended September 30, 2022 as compared to the 2021 periods, due primarily
to lower clinical trials expenses.

Third-party expenses for disitamab vedotin increased for the three and nine months ended September 30, 2022 as compared to the 2021 periods as we obtained exclusive license rights to disitamab vedotin for global development and commercialization outside of RemeGen's territory in September 2021.

Third-party costs for other clinical stage programs increased for the three and nine months ended September 30, 2022 as compared to the 2021 periods due to higher clinical trial expenses.



Other costs, overhead, and net cost-sharing reimbursements from or payments made
to collaborators decreased for the three and nine months ended September 30,
2022 from the comparable periods in 2021, due to the $200.0 million RemeGen
upfront license payment in the 2021 periods, offset in part by higher
employee-related costs and the $50.0 million upfront license payment made to
LAVA Therapeutics. During the three months ended September 30, 2022 and 2021,
net cost-sharing reimbursements from collaborators were $32.8 million and
$22.6 million, respectively. During the nine months ended September 30, 2022 and
2021, net cost-sharing reimbursements from collaborators were $77.1 million and
$62.9 million, respectively.

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

We anticipate that our total research and development expenses in 2022 will increase compared to 2021 primarily due to higher costs for the continued development of our approved products and product candidates, offset in part by the $200.0 million RemeGen upfront license payment in 2021.


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


Selling, general and administrative



                                                           Three months ended September 30,                             Nine months ended September 30,
(dollars in thousands)                              2022                2021              % Change               2022                2021              % Change
Selling, general and administrative             $  210,378          $ 180,281                    17  %       $  604,862          $ 505,253                    20  %


Selling, general and administrative expenses increased for the three and nine
months ended September 30, 2022 from the comparable periods in 2021, reflecting
higher legal expenses primarily associated with the Daiichi Sankyo legal
proceedings, and higher investments to support our ongoing European TUKYSA
launches and the U.S. commercial launch of TIVDAK.

We anticipate that selling, general and administrative expenses will increase in
2022 as compared to 2021 due to higher legal expenses and as we continue our
commercial activities in support of our product launches, and invest in
infrastructure to support our continued growth in the U.S. and Europe.


Investment and other income, net



                                                     Three months ended September 30,                           Nine months ended September 30,
(dollars in thousands)                          2022              2021             % Change               2022              2021              % Change
(Loss) gain on equity securities            $  (2,669)         $ 4,966                  (154) %       $  (9,747)         $  9,895

(199) %



Investment and other income, net                6,947              262                 2,552  %          10,226             1,360                   652 

%


Total investment and other income,
net                                         $   4,278          $ 5,228                   (18) %       $     479          $ 11,255                   (96) %


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

The loss on equity securities for the three and nine months ended September 30,
2022 was due to unrealized holding losses resulting from a decline in the share
price of securities held during the respective periods. Investment and other
income, net increased for the three and nine months ended September 30, 2022 due
to higher yields on our debt securities investments for the 2022 periods.


Provision for income taxes



Our provision for income taxes was $2.3 million and $3.6 million for the three
and nine months ended September 30, 2022, respectively, compared with
$1.1 million for the three and nine months ended September 30, 2021. The
provision for income taxes in the 2022 periods primarily related to taxable
profits in the U.S. as a result of amendments to IRC Section 174, which took
effect January 1, 2022 pursuant to the 2017 Tax Cuts and Jobs Act. We had
existing federal tax carryforwards sufficient to offset any federal liability;
however, there were limitations on the use of existing state tax carryforwards.
Our income tax provision also reflected taxable profits in foreign jurisdictions
partially offset by a foreign valuation allowance release.

Liquidity and capital resources



(in thousands)                                September 30, 2022       December 31, 2021
Cash, cash equivalents, and investments      $         1,763,702      $        2,160,036
Working capital                                        2,033,621               2,300,340
Stockholders' equity                                   2,821,811               3,065,139


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                                     Nine months ended September 30,
(in thousands)                            2022                     2021
Cash provided (used) by:
Operating activities          $       (374,311)                $ (215,624)
Investing activities                   264,727                    287,902
Financing activities                    60,013                     55,432

The change in net cash from operating activities for the nine months ended September 30, 2022 as compared to the comparable period in 2021 was primarily related to an increase in net loss and increases in net working capital.



The change in net cash from investing activities for the nine months ended
September 30, 2022 as compared to the comparable period in 2021 reflected
differences between the amounts used for purchases of securities and proceeds
from maturities of securities, and the difference for purchases of property,
plant, and equipment.

The change in net cash from financing activities for the nine months ended September 30, 2022 as compared to the comparable period in 2021 was driven by the higher proceeds from the exercise of stock options and employee stock purchase plan.



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

Our cash, cash equivalents, and investments are held in a variety of
non-interest bearing bank accounts and interest-bearing instruments subject to
investment guidelines allowing for holdings in U.S. government and agency
securities, corporate securities, taxable municipal bonds, commercial paper and
money market accounts. Our investment portfolio is structured to provide for
investment maturities and access to cash to fund our anticipated working capital
needs. However, if our liquidity needs should be accelerated for any reason in
the near term, or investments do not pay at maturity, we may be required to sell
investment securities in our portfolio prior to their scheduled maturities,
which may result in a loss. As of September 30, 2022, we had $1.8 billion held
in cash, cash equivalents and investments.

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

We expect to make additional capital outlays and to increase operating
expenditures over the next several years as we hire additional employees, and
support our development, commercialization, invest in our facilities, and expand
globally, which may require us to raise additional capital. In addition, we may
pursue new operations or continue the expansion of our existing operations,
including with respect to the continued development of our commercial
infrastructure in Europe and our plans to otherwise continue to expand our
operations internationally. Our commitment of resources to the continuing
development, regulatory and commercialization activities for our products, the
continued research, development and manufacturing of our product candidates, our
pursuit of regulatory approvals for and preparing to potentially launch and
commercialize our product candidates, and the anticipated expansion of our
pipeline and operations may require us to raise additional capital. Further, we
actively evaluate various strategic transactions on an ongoing basis, including
licensing or otherwise acquiring complementary products, technologies or
businesses, and we may require significant additional capital in order to
complete or otherwise provide funding for such transactions. We may seek
additional capital through some or all of the following methods: corporate
collaborations, licensing arrangements, and public or private debt or equity
financings. We have no committed sources of funding and do not know whether
additional capital will be available when needed, or that, if available, we will
obtain financing on terms favorable to us or our stockholders. If we are unable
to raise additional funds when we need them, we may be required to scale back
our operations, delay, reduce the scope of, or eliminate development programs
enter into collaboration or license agreements on terms that are not favorable
to us, sell or relinquish rights to certain assets, proprietary technologies or
product candidates or forego strategic opportunities.

Material Cash Requirements



Our material cash requirements in the short- and long-term consist of the
following operational, capital, and manufacturing expenditures, a portion of
which contain contractual or other obligations. We plan to fund our material
cash requirements with our current financial resources together with our
anticipated receipts of accounts receivable, product sales and royalty revenues,
and reimbursements we expect to receive under our existing collaboration and
license agreements.

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Operating expenditures. Our primary uses of cash and operating expenses relate
to paying employees and consultants, administering clinical trials, marketing
our products, and providing technology and facility infrastructure to support
our operations. Our research and development expenses for the nine months ended
September 30, 2022 were $986.5 million and we expect to increase our investment
in research and development expenses in 2022 as compared to 2021. Our sales,
general and administrative expenses were $604.9 million for the nine months
ended September 30, 2022, and we expect to increase our sales, general, and
administrative expenses to support our business growth in 2022 as compared to
2021. On a long-term basis, we manage future cash requirements relative to our
long-term business plans.

Operating costs also relate to our building leases for our office and laboratory
facilities expiring in 2023 through 2029 that contain rate escalations and
options for us to extend the leases. Our future minimum lease payments as of
September 30, 2022 totaled $16.6 million related to short-term lease
liabilities, and $53.1 million related to long-term lease liabilities. We signed
a 20-year lease in June 2021 for a building complex in Everett, Washington that
has not commenced as of September 30, 2022, and therefore rent payments are not
included in lease liability balances as of September 30, 2022. Refer to Note 3
in the Notes to Financial Statements in Item 1 for further detail of our lease
obligations.

Capital expenditures. We make investments in our office, laboratory, and
manufacturing facilities to enable continued expansion of our business. These
include leasehold and building improvements at our approximately 1 million
square feet of leased and owned properties, installation of laboratory and
manufacturing equipment, computers, software, and office equipment. Our
purchases for property and equipment for the nine months ended September 30,
2022 were $48.1 million, and we anticipate these investments to grow in 2022 as
compared to 2021 to support our anticipated business growth and long-term
facility needs, including a significant multi-year investment in a building
complex being constructed in Everett, Washington, which is expected to provide
us additional manufacturing, laboratory, and office space in the future. We
expect our capital expenditures for this Everett facility to be approximately
$350 million to $400 million through 2024.

Manufacturing costs, and supply agreements. Some of our inventory components and
products require long lead times to manufacture. Therefore, we make substantial
and often long-term investments in our supply chain in order to ensure we have
enough drug product to meet current and future revenue forecasts, as well as
clinical trial needs. Supply agreements primarily include non-cancelable
obligations under our manufacturing, license and collaboration, and technology
agreements. Further, a substantial portion of those non-cancelable obligations
include minimum payments related to manufacturing our product candidates for use
in our clinical trials and for commercial operations in the case of ADCETRIS.
There have been no material changes related to our future minimum contractual
commitments under these arrangements as disclosed in our Annual Report on Form
10-K for the year ended December 31, 2021 filed February 9, 2022.

Royalties, milestones and profit-sharing associated with our licensed technology
and collaboration agreements. Some of our license and collaboration agreements
provide for periodic maintenance fees over specified time periods, profit share
payments, and/or payments by us upon the achievement of development and
regulatory milestones. Some of our licensing agreements also obligate us to pay
royalties based on net sales of products utilizing licensed technology. Such
royalties and profit share payments are dependent on future product sales and
are contingent on events that have not yet occurred. Royalties and profit share
payments totaled $189.4 million for the nine months ended September 30, 2022 and
are expected to increase in future periods. Milestone payments generally become
due and payable upon the achievement of certain events. There have been no
material changes related to our future milestone payments potentially owed
related to in-licensed technology as disclosed in our Annual Report on Form 10-K
for the year ended December 31, 2021 filed February 9, 2022.

Critical accounting policies



The preparation of financial statements in accordance with GAAP requires us to
make estimates, assumptions, and judgments that affect the amounts reported in
our financial statements and accompanying notes. We evaluate our estimates on an
ongoing basis. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances, the
results of which form our basis for making judgments about the carrying values
of assets and liabilities and the reported amounts of revenues and expenses that
are not readily apparent from other sources. Actual results may differ from
those estimates. Our critical accounting policies, those with the more
significant judgments and estimates, used in the preparation of our financial
statements for the nine months ended September 30, 2022 were consistent with
those in Part II Item 7 of our Annual Report on Form 10-K for the year ended
December 31, 2021.

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