UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September 30, 2017~~

March 31, 2023

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

For the transition period fromto

Commission file number 0-32405

~~SEATTLE GENETICS,~~

SEAGEN INC.

(Exact name of registrant as specified in its charter)


~~Delaware~~

~~91-1874389~~

Delaware

91-1874389

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

21823 30^th30th Drive SE

Bothell, Washington 98021

(Address of principal executive offices, including zip code)

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

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


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

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

~~Large accelerated~~Non-accelerated filer

☒☐

~~Accelerated filer~~Smaller reporting company

☐

~~Non-accelerated filer~~

~~☐ (Do not check if a smaller reporting company)~~

~~Smaller reporting company~~

☐

Emerging growth company

☐

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

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

As of ~~November 1, 2017,~~April 24, 2023, there were ~~143,928,341 shares~~187,503,979 shares of the registrant’s common stock outstanding.

~~Seattle Genetics,~~

Table of Contents

Seagen Inc.

Quarterly

Report on Form 10-Q

For the Quarter Ended ~~September 30, 2017~~

March 31, 2023

INDEX


					Page
					PART I. FINANCIAL INFORMATION (Unaudited)

Item 1.		Condensed Consolidated Financial Statements		3
			Condensed Consolidated Balance Sheets			3
			Condensed Consolidated Statements of Comprehensive Loss			4
	Condensed Consolidated Statements of Stockholders’ Equity		5
	Condensed Consolidated Statements of Cash Flows				5	6
			Notes to Condensed Consolidated Financial Statements			6	7
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			16	17
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			30	36
Item 4.			Controls and Procedures			30	36

PART II. OTHER INFORMATION
Item 1.			Legal Proceedings			31	37
Item 1A.			Risk Factors			31	37
~~Item 6.~~			~~Exhibits~~			61
~~SIGNATURES~~Item 6.	Exhibits		68
			62
SIGNATURE			70

Table of Contents

PART I. FINANCIAL INFORMATION

~~Item 1.~~

~~Condensed Consolidated Financial Statements~~

~~Seattle Genetics,~~

Item 1. Condensed Consolidated Financial Statements

Seagen Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except par value)

   September 30,
2017 December 31,
2016
Assets

Current assets

Cash and cash equivalents
   $ 128,140 $ 108,673
Short-term investments
   322,258 480,313
Accounts receivable, net
   90,432 61,928
Inventories
   60,837 68,124
Prepaid expenses and other current assets
   18,905 15,610


Total current assets
   620,572 734,648
Property and equipment, net
   82,769 62,870
Long-term investments
   19,967 29,988
Other non-current assets
   129,775 10,890


Total assets
   $ 853,083 $ 838,396


Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable and accrued liabilities
   $ 119,978 $ 120,669
Current portion of deferred revenue
   32,811 27,847


Total current liabilities
   152,789 148,516


Long-term liabilities

Deferred revenue, less current portion
   37,901 53,006
Deferred rent and other long-term liabilities
   2,685 2,787


Total long-term liabilities
   40,586 55,793


Commitments and contingencies

Stockholders’ equity

Preferred stock, $0.001 par value, 5,000 shares authorized; none issued
   0 0
Common stock, $0.001 par value, 250,000 shares authorized; 143,803 shares issued and outstanding at September 30, 2017 and 142,193 shares issued and outstanding at December 31, 2016
   144 142
Additional paid-in capital
   1,774,936 1,701,048
Accumulated other comprehensive income (loss)
   17,997 (63 )
Accumulated deficit
   (1,133,369 ) (1,067,040 )


Total stockholders’ equity
   659,708 634,087


Total liabilities and stockholders’ equity
   $ 853,083 $ 838,396


	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	335,847	$	319,940
Short-term investments	1,154,425		1,415,130
Accounts receivable, net	495,777		501,912
Inventories	477,694		427,211
Prepaid expenses and other current assets	138,168		138,340
Total current assets	2,601,911		2,802,533
Property and equipment, net	263,997		248,179
Operating lease right-of-use assets	114,960		46,738

Intangible assets, net	231,826		237,516

Goodwill	274,671		274,671
Other non-current assets	55,931		64,895
Total assets	$	3,543,296	$	3,674,532
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	141,475	$	207,851
Accrued liabilities and other	571,753		610,553

Total current liabilities	713,228		818,404
Long-term liabilities:

Operating lease liabilities, long-term	91,125		43,474
Other long-term liabilities	15,787		8,835
Total long-term liabilities	106,912		52,309
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; none issued	—		—
Common stock, $0.001 par value, 250,000 shares authorized; 187,289 shares issued and outstanding at March 31, 2023 and 186,559 shares issued and outstanding at December 31, 2022	187		187
Additional paid-in capital	5,048,345		4,954,469
Accumulated other comprehensive income	3,708		3,510
Accumulated deficit	(2,329,084)		(2,154,347)
Total stockholders’ equity	2,723,156		2,803,819
Total liabilities and stockholders’ equity	$	3,543,296	$	3,674,532

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

~~Seattle Genetics,~~

Table of Contents

Seagen Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands, except per share amounts)

Three months ended
September 30,

Nine months ended
September 30,

   2017 2016 2017 2016
Revenues

Net product sales
   $ 79,177 $ 70,117 $ 223,841 $ 194,981
Collaboration and license agreement revenues
   39,444 23,974 82,779 64,148
Royalty revenues
   16,670 12,224 46,025 53,743


Total revenues
   135,291 106,315 352,645 312,872


Costs and expenses

Cost of sales
   9,019 7,427 24,555 20,272
Cost of royalty revenues
   5,196 3,748 13,900 10,470
Research and development
   113,606 92,711 346,196 271,136
Selling, general and administrative
   39,667 34,841 118,783 97,870


Total costs and expenses
   167,488 138,727 503,434 399,748


Loss from operations
   (32,197 ) (32,412 ) (150,789 ) (86,876 )
Investment and other income, net
   82,218 660 84,460 1,903


Net income (loss)
   $ 50,021 $ (31,752 ) $ (66,329 ) $ (84,973 )


Net income (loss) per share—basic
   $ 0.35 $ (0.23 ) $ (0.46 ) $ (0.61 )
Net income (loss) per share—diluted
   $ 0.34 $ (0.23 ) $ (0.46 ) $ (0.61 )


Shares used in computation of net income (loss) per share—basic
   143,357 140,928 142,876 140,369
Shares used in computation of net income (loss) per share—diluted
   148,068 140,928 142,876 140,369


Comprehensive income (loss):

Net income (loss)
   $ 50,021 $ (31,752 ) $ (66,329 ) $ (84,973 )
Other comprehensive income:

Unrealized gain (loss) on securities available-for-sale, net of tax of $5,915, $0, 11,087, and $0, respectively
   9,627 (146 ) 18,044 891
Foreign currency translation gain (loss)
   14 (7 ) 16 7


Comprehensive income (loss)
   $ 59,662 $ (31,905 ) $ (48,269 ) $ (84,075 )


	Three Months Ended March 31,
	2023		2022
Revenues:
Net product sales	$	468,639	$	383,086
Royalty revenues	30,178		28,181
Collaboration and license agreement revenues	20,902		15,193
Total revenues	519,719		426,460
Costs and expenses:
Cost of sales	111,776		87,626

Research and development	356,015		297,659
Selling, general and administrative	236,441		174,225
Total costs and expenses	704,232		559,510
Loss from operations	(184,513)		(133,050)
Investment and other income (loss), net	14,400		(2,190)
Loss before income taxes	(170,113)		(135,240)
Provision for income taxes	4,624		1,254
Net loss	$	(174,737)	$	(136,494)
Net loss per share - basic and diluted	$	(0.93)	$	(0.74)

Shares used in computation of per share amounts - basic and diluted	186,889		183,647


Comprehensive loss:
Net loss	$	(174,737)	$	(136,494)
Other comprehensive income (loss):
Unrealized gain (loss) on securities available-for-sale, net of tax	1,370		(861)
Foreign currency translation (loss) gain	(1,172)		106
Total other comprehensive income (loss)	198		(755)
Comprehensive loss	$	(174,539)	$	(137,249)

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

~~Seattle Genetics,~~

Table of Contents

Seagen Inc.

Condensed Consolidated Statements of ~~Cash Flows~~

Stockholders’ Equity

(Unaudited)

(In thousands)

Nine months ended
September 30,

   2017 2016
Operating activities

Net loss
   $ (66,329 ) $ (84,973 )
Adjustments to reconcile net loss to net cash used in operating activities

Share-based compensation
   47,899 37,045
Depreciation and amortization
   16,393 13,270
Amortization of premiums, accretion of discounts and loss on investments
   653 4,318
Gain on Immunomedics warrant derivative
   (76,699 ) 0
Income tax benefit on unrealized gain on available-for-sale securities
   (5,415 ) 0
Deferred income taxes
   (5,672 ) 0
Deferred rent and other long-term liabilities
   (102 ) (855 )
Changes in operating assets and liabilities

Accounts receivable, net
   (28,504 ) (12,191 )
Inventories
   7,287 (14,682 )
Prepaid expenses and other assets
   (2,084 ) (4,219 )
Accounts payable and accrued liabilities
   6,208 8,367
Deferred revenue
   (10,141 ) (27,997 )


Net cash used in operating activities
   (116,506 ) (81,917 )


Investing activities

Purchases of securities available-for-sale
   (445,659 ) (443,333 )
Proceeds from maturities of securities available-for-sale
   538,200 549,500
Proceeds from sales of securities available-for-sale
   60,056 0
Purchases of property and equipment
   (42,615 ) (18,885 )


Net cash provided by investing activities
   109,982 87,282


Financing activities

Proceeds from exercise of stock options and employee stock purchase plan
   25,991 23,409


Net cash provided by financing activities
   25,991 23,409


Net increase in cash and cash equivalents
   19,467 28,774
Cash and cash equivalents at beginning of period
   108,673 102,255


Cash and cash equivalents at end of period
   $ 128,140 $ 131,029


	Common stock
	Shares	Amount		Additional paid-in capital		Accumulated other comprehensive income		Accumulated deficit		Total stockholders’ equity
Balances as of December 31, 2021	183,381	$	183	$	4,607,816	$	1,179	$	(1,544,039)	$	3,065,139
Net loss	—	—		—		—		(136,494)		(136,494)
Other comprehensive loss	—	—		—		(755)		—		(755)

Issuance of common stock for stock option exercises and employee stock purchase plan	463	1		26,663		—		—		26,664

Restricted stock vested during the period, net	48	—		—		—		—		—

Share-based compensation	—	—		43,913		—		—		43,913
Balances as of March 31, 2022	183,892	184		4,678,392		424		(1,680,533)		2,998,467




























Balances as of December 31, 2022	186,559	$	187	$	4,954,469	$	3,510	$	(2,154,347)	$	2,803,819
Net loss	—	—		—		—		(174,737)		(174,737)
Other comprehensive income	—	—		—		198		—		198

Issuance of common stock for stock option exercises and employee stock purchase plan	569	—		42,240		—		—		42,240

Restricted stock vested during the period, net	223	—		—		—		—		—

Shares withheld for tax withholdings during the period	(62)	—		(12,303)		—		—		(12,303)
Share-based compensation	—	—		63,939		—		—		63,939
Balances as of March 31, 2023	187,289	187		5,048,345		3,708		(2,329,084)		2,723,156

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

~~Seattle Genetics,~~

Table of Contents

Seagen Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Three Months Ended March 31,
2023 2022
Operating activities:
Net loss $ (174,737) $ (136,494)
Adjustments to reconcile net loss to net cash used by operating activities
Share-based compensation 63,939 43,913
Depreciation 12,423 11,402
Amortization of intangible assets 5,690 5,691
Amortization of right-of-use assets 3,979 2,952
Amortization of premiums, accretion of discounts, and (gains) losses on debt securities (11,274) 184
Losses on equity securities 237 2,779
Deferred income taxes 211 155
Changes in operating assets and liabilities
Accounts receivable, net 6,135 (11,753)
Inventories (50,483) (75,084)
Prepaid expenses and other assets 541 (24,523)
Lease liability (3,969) (5,158)
Other liabilities (102,335) (30,876)
Net cash used by operating activities (249,643) (216,812)
Investing activities:
Purchases of securities (618,151) (655,940)
Proceeds from maturities of securities 891,500 700,000
Payments for lessor-owned assets (2,358) —
Purchases of property and equipment (38,655) (17,397)
Net cash provided by investing activities 232,336 26,663
Financing activities:
Proceeds from exercise of stock options and employee stock purchase plan 42,240 26,664
Employee taxes paid related to net share settlement of stock-based awards (12,303) —
Net cash provided by financing activities 29,937 26,664
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 920 (353)
Net increase (decrease) in cash, cash equivalents, and restricted cash 13,550 (163,838)
Cash, cash equivalents, and restricted cash at beginning of period 323,486 424,834
Cash, cash equivalents, and restricted cash at end of period $ 337,036 $ 260,996

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

Table of Contents

Seagen Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. ~~Summary~~Organization and summary of significant accounting policies

Organization

We are 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, TIVDAK™, or tisotumab vedotin-tftv, for the treatment of certain metastatic cervical cancers, and TUKYSA®, or tucatinib, for treatment of certain metastatic HER2-positive breast cancers. We are also advancing a pipeline of novel therapies for solid tumors and blood-related cancers designed to address unmet medical needs and improve treatment outcomes for patients. Many of our programs, including ADCETRIS, 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.

Pending Transaction with Pfizer

In March 2023, we entered into a definitive merger agreement under which, on the terms and subject to the conditions thereof, Pfizer Inc., or Pfizer, will acquire Seagen for $229 in cash per Seagen share for a total enterprise value of $43 billion. The companies seek to accelerate the next generation of cancer breakthroughs and bring new solutions to patients by combining the power of Seagen’s ADC technology with the scale and strength of Pfizer’s capabilities and expertise. The companies expect to complete the transaction, which we refer to herein as the Pfizer Merger, in late 2023 or early 2024, subject to fulfillment of customary closing conditions, including approval of our stockholders and receipt of required regulatory approvals.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements reflect the accounts of ~~Seattle Genetics,~~Seagen Inc. and its wholly-owned subsidiaries (collectively ~~“Seattle Genetics”~~“Seagen,” “we,” “our,” or ~~the “Company”~~“us”). All intercompany transactions and balances have been eliminated. Management has determined that ~~the Company operates~~we operate in one segment: the development and sale of pharmaceutical products on ~~its~~our own behalf or in collaboration with others. Substantially all of ~~the Company’s~~our assets and revenues are related to operations in the ~~United States;~~U.S.; however, ~~the Company also has~~we have multiple subsidiaries in ~~Canada, Switzerland and the United Kingdom.~~

foreign jurisdictions, including several subsidiaries in Europe.

The condensed consolidated balance sheet data as of December 31, ~~2016~~2022 were derived from audited financial statements not included in this quarterly report on Form 10-Q. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC, and generally accepted accounting principles in the United States of America, or GAAP, for unaudited condensed consolidated financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments ~~which,~~that, in the opinion of management, are necessary for a fair statement of ~~the Company’s~~our financial position and results of ~~its~~our operations as of and for the periods presented.

~~Unless indicated otherwise, all amounts presented in financial tables are presented in thousands, except for per share and par value amounts.~~

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2022, as filed with the SEC.

The preparation of financial statements in ~~conformity~~accordance with GAAP requires ~~management~~us to make estimates, assumptions, and ~~assumptions~~judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of ~~the Company’s~~our operations for the three ~~and nine~~ month ~~periods~~period ended ~~September 30, 2017~~March 31, 2023 are not necessarily indicative of the results to be expected for the full ~~year.~~

year or any other interim period.

Non-cash ~~investing~~ activities

~~The Company~~

We had ~~$1.2~~$23.9 million and ~~$8.1~~$20.1 million of accrued capital expenditures as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, respectively. Accrued capital expenditures ~~have been~~are treated as a non-cash investing activity and, accordingly, have not been included in the condensed consolidated statement of cash flows until such amounts have been paid in cash.

We recorded $72.2 million and $0.0 million right-of-use assets during the three months ended March 31, 2023 and 2022, respectively, and lease liabilities of $49.7 million and $0.0 million during the three months ended March 31, 2023 and 2022, respectively.

Investments

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

Table of Contents

We invest our available cash ~~resources~~ primarily in debt securities. ~~In addition, as of September 30, 2017, the Company held an equity investment in the common stock of Immunomedics, Inc., or Immunomedics, as further described in Note 7.~~ These debt ~~and equity~~ securities are classified as available-for-sale, which are reported at estimated fair value with unrealized gains and losses included in accumulated other comprehensive income (loss) in stockholders’ equity. Realized gains, realized losses and declines in the value of debt securities judged to be other-than-temporary are included in investment and other income (loss), net. The cost of ~~investments~~debt securities for purposes of computing realized and unrealized gains and losses is based on the specific identification method. Amortization of premiums and accretion of discounts on debt securities are included in investment and other income (loss), net. Interest and dividends earned ~~on all securities~~ are included in investment and other income ~~net. The Company classifies~~(loss), net. Accrued interest receivable as of March 31, 2023 and December 31, 2022, were $0.8 million and $5.2 million, respectively, and were included in prepaid expenses and other current assets. We classify investments in debt securities maturing within one year of the reporting date, or where management’s intent is to use the investments to fund current operations or to make them available for current operations, as short-term investments. ~~The Company classifies its equity investment in Immunomedics in other non-current assets.~~

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

~~Derivative financial instruments~~

Restricted Cash

As of March 31, 2023, we had $1.2 million cash held in escrow restricted by a contractual agreement related to our Everett, Washington building construction project. The Company holds a warrant to purchase 8.7 million shares of Immunomedics common stock, which is accounted for as a derivative. The Company does not hold derivative instruments for trading or speculative purposes. The Company accounts for financial instruments as derivatives whenrestricted cash was recorded in prepaid expenses and other current assets in the ~~instrument includes an underlying and notional amount or payment provision, an initial net investment, and a net settlement. Derivative financial instruments are measured at fair value~~condensed consolidated balance sheet. We determine classification based on the issuance date and are revalued on each subsequent balance sheet date. The Company uses the Black-Scholes model using observable market inputs to estimate the fair value of derivatives. The changes in estimated fair value are recognized as current period income or loss.

~~Other non-current assets~~

Other non-current assets included a $5.0 million non-controlling investment in a privately-held company that is accounted for under the cost method of accounting. The Company periodically evaluates the carrying valueexpected duration of the ~~investment if significant adverse events or circumstances indicate an impairment~~restriction.

Our total cash, cash equivalents, and restricted cash, as presented in ~~value. As~~the condensed consolidated statements of ~~September 30, 2017, no impairment in value had been observed.~~

~~Long-term incentive plans~~

~~The Company has established Long-Term Incentive Plans, or LTIPs. The LTIPs provide eligible employees with the opportunity to receive performance-based incentives, which may be~~cash flows, was as follows:


(dollars in thousands)	March 31, 2023		December 31, 2022
Cash and cash equivalents	$	335,847	$	319,940
Restricted cash included in prepaid expenses and other current assets	1,189		3,546
Total cash, cash equivalents, and restricted cash as presented in the condensed consolidated statements of cash flows	$	337,036	$	323,486

Intangible assets, net

Our intangible assets are primarily comprised of ~~a cash payment, stock options, and/or restricted stock units. As~~acquired TUKYSA technology. The following table presents the balances of ~~September 30, 2017,~~our finite-lived intangible assets for the ~~estimated unrecognized compensation~~periods presented:


(dollars in thousands)	March 31, 2023		December 31, 2022
Gross carrying value	$	305,650	$	305,650

Less: accumulated amortization	(73,824)		(68,134)
Total	$	231,826	$	237,516

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


	Three Months Ended March 31,
(dollars in thousands)	2023		2022
Amortization expense	$	5,690	$	5,691

The weighted average remaining useful life of our finite-lived intangible assets was ~~$36.0 million. The total estimate~~approximately 10 years as of ~~unrecognized compensation~~March 31, 2023, and estimated future amortization expense related to acquired TUKYSA is ~~expected to change in~~$17.4 million for the ~~future~~nine months ending December 31, 2023, and TUKYSA technology costs is $23.1 million for ~~several reasons, including~~each of the ~~addition~~years ending December 31, 2024 through December 31, 2028.

Table of ~~more eligible employees, or the addition, termination, or modification of an LTIP.~~

~~Revenue recognition~~

~~The Company’s revenues are comprised of ADCETRIS~~^® ~~net product sales, amounts earned under its collaboration and licensing agreements and royalties.~~ Contents

Revenue recognition is predicated upon persuasive evidence of an agreement existing, delivery of products or services being rendered, amounts payable being fixed or determinable, and collectibility being reasonably assured.

- Net product sales

~~The Company sells ADCETRIS~~

We sell our products primarily through a limited number of ~~pharmaceutical~~specialty distributors and specialty pharmacies in the ~~U.S.~~U.S, and ~~Canada. Customers order ADCETRIS through~~to a lesser extent, internationally. The delivery of our products represents a single performance obligation for these ~~distributors~~transactions and we record net product sales at the ~~Company typically ships product directly~~point in time when control is transferred to the ~~customer. The Company records product sales when title and risk of loss pass,~~customer, which generally occurs upon ~~delivery of the product to~~receipt by the customer. ~~Product~~The transaction price for net product sales ~~are recorded~~represents the amount we expect to receive, which is net of estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns, and other deductions. Accruals are established for these deductions, and actual amounts incurred are offset against applicable accruals. ~~The Company reflects~~We reflect these accruals as either a reduction in the related account receivable from the distributor or as an accrued liability, depending on the nature of the sales deduction. Sales deductions are based on management’s estimates that consider ~~payer~~payor mix in target markets and experience ~~to date.~~to-date. These estimates involve a substantial degree of judgment.

~~Government-mandated~~

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

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

We have a Federal Supply Schedule, or FSS, agreement under which certain U.S. government purchasers receive a discount on eligible purchases of ~~ADCETRIS. The Company has~~our products. In addition, we have entered into a Pharmaceutical Pricing Agreement with the Secretary of Health and Human Services, which enables certain entities that qualify for government pricing under the Public Health Services Act, or PHS, to receive discounts on their qualified purchases of ~~ADCETRIS.~~our products. Under these agreements, ~~distributors process~~eligible customers receive an applicable discount which is processed through the distributor as a chargeback to ~~the Company~~us for the difference between wholesale acquisition cost and the applicable discounted price. ~~As a result of the Company’s direct-ship distribution model, it can determine the entities purchasing ADCETRIS and this information enables the Company to~~We estimate expected chargebacks for FSS and PHS purchases based on the expected value of each entity’s eligibility for the FSS and PHS programs. ~~The Company~~We also ~~reviews~~review historical rebate and chargeback information to further refine these estimates.

Distribution fees, product returns and other ~~deductions~~~~: The Company’s~~deductions: Our distributors charge a volume-based fee for distribution services that they perform for ~~the Company. The Company allows~~us. We allow for the return of product that is within 30a specified number of days of its expiration date or that is damaged. ~~The Company estimates~~We estimate product returns based on ~~its~~our experience ~~to date. In addition,~~to-date using the ~~Company considers its direct-ship distribution model, its belief that product is not typically held in the distribution channel, and the~~ expected

~~rapid use of the product by healthcare providers. The Company provides~~ value approach. We provide financial assistance to qualifying patients that are underinsured or cannot cover the cost of commercial coinsurance amounts through ~~SeaGen Secure. SeaGen Secure is available to patients in the U.S. and its territories who meet various financial and treatment need criteria.~~our patient support programs. Estimated contributions for commercial coinsurance under ~~SeaGen~~our patient assistance program, Seagen Secure, are deducted from gross sales and are based on an analysis of expected plan utilization. These estimates are adjusted as necessary to reflect ~~the Company’s~~our actual experience.

Revenue recognition - Royalty revenues

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

Table of Contents

Revenue recognition - Collaboration and license agreement revenues

~~The Company has developed a proprietary~~

We have collaboration and license agreements for our technology for linking cytotoxic agents to monoclonal antibodies called antibody-drug conjugates, or ADCs. This proprietary technology is the basis of ADC collaborations that the Company has entered into in the ordinary course of its business with a number of biotechnology and pharmaceutical companies. Under these ~~ADC collaboration~~ agreements, we typically receive or are entitled to receive upfront cash payments and progress- and sales-dependent milestones for the ~~Company grants its collaborators~~achievement by our licensees of certain events, and annual maintenance fees and support fees for research and ~~commercial licenses~~development services and materials provided under the agreements. We also are entitled to receive royalties on net sales of any resulting products incorporating our technology. Generally, our licensees are solely responsible for research, product development, manufacturing and commercialization of any product candidates under these collaborations, which includes the ~~Company’s technology~~achievement of the potential milestones. Since we may not take a substantive role or control the research, development or commercialization of any products generated by some of our licensees, we may not be able to reasonably estimate when, if at all, any potential future milestone payments or royalties may be payable to us by our licensees. As such, the potential future milestone payments associated with certain of our collaboration and ~~provides technology transfer services, technical advice, supplies~~license agreements involve a substantial degree of uncertainty and ~~services for a period of time.~~

~~If there are continuing performance obligations, the Company uses a time-based proportional performance model to recognize revenue over the Company’s performance period for the related agreement.~~ risk that they may never be received.

Collaboration and license agreements are initially evaluated as to ~~determine~~ whether the ~~multiple elements~~intellectual property licenses granted by us represent distinct performance obligations. If they are determined to be distinct, the value of the intellectual property licenses would be recognized up-front while the research and ~~associated deliverables can~~development service fees would be ~~considered separate units~~recognized as the performance obligations are satisfied. Variable consideration is assessed at each reporting period as to whether it is not subject to future reversal of ~~accounting. To date,~~cumulative revenue and, therefore, should be included in the ~~pre-commercial deliverables under~~transaction price. Assessing the ~~Company’s~~recognition of variable consideration requires judgment. If a contract includes a fixed or minimum amount of research and development support, this also would be included in the transaction price. Changes to collaboration and license agreements, ~~have not qualified~~such as ~~separate units~~the extensions of ~~accounting. The assessment~~the research term or increasing the number of ~~multiple element arrangements requires judgment in order to determine the appropriate point in time,~~targets or ~~period of time, that revenue~~technology covered under an existing agreement, are assessed for whether they represent a modification or should be ~~recognized. The Company believes~~accounted for as a new contract.

We have concluded that the license of intellectual property in certain collaboration and license agreements is not distinct from the perspective of our customers at the time of initial transfer, since we often do not license intellectual property without related technology transfer and research and development ~~period in each agreement~~support services. Such evaluation requires significant judgment since it is made from the customer’s perspective. Our performance obligations under our collaborations may include such things as providing intellectual property licenses, performing technology transfer, performing research and development consulting services, providing reagents, ADCs, and other materials, and notifying the customer of any enhancements to licensed technology or new technology that we discover, among others. We determined our performance obligations under certain collaboration and license agreements as evaluated at contract inception were not distinct and represented a ~~reasonable estimate of the~~single performance ~~obligation period of such agreement. Accordingly, all amounts received or due, including any upfront payments, maintenance fees, development and regulatory milestone payments and reimbursement~~obligation. Upfront payments are ~~recognized as~~amortized to revenue over the performance ~~obligation periods~~period. Upfront payment contract liabilities resulting from our collaborations do not represent a financing component as the payment is not financing the transfer of ~~each agreement. These~~goods or services, and the technology underlying the licenses granted reflects research and development expenses already incurred by us. For agreements beyond the initial performance ~~obligation periods typically range from one to three years. The agreements with Takeda Pharmaceutical Company Limited, or Takeda,~~period, we have no remaining performance obligations. We may receive license maintenance fees and ~~Genentech, Inc., a member~~potential milestones and royalties based on collaborator development and regulatory progress, which are recorded in the period achieved in the case of milestones, and during the period of the ~~Roche Group, or Genentech, have performance obligation periods of ten and seventeen years, respectively. All of the remaining performance obligation periods~~related sales for ~~active collaborations are currently expected to be completed in three years or less.~~ royalties.

When no performance obligations are required of ~~the Company,~~us, or following the completion of the performance obligation period, such amounts are recognized ~~as revenue when collectibility is reasonably assured.~~upon transfer of control of the goods or services to the customer. Generally, all amounts received or due other than sales-based milestones and royalties are classified as collaboration and license agreement ~~revenues as they are earned.~~revenues. Sales-based milestones and royalties are recognized as royalty revenue ~~as they are reported to the Company.~~

~~The Company’s collaboration and license agreements include contractual milestones. Generally, the milestone events contained~~ in the ~~Company’s collaboration and license agreements coincide with~~period the ~~progression of the collaborators’ product candidates from development, to regulatory approval and then to commercialization and fall into the following categories.~~

~~Development milestones in the Company’s collaborations may include the following types of events:~~

Designation of a product candidate or initiation of preclinical studies. The Company’s collaborators must undertake significant preclinical research and studies to make a determination of the suitability of a product candidate and the time from those studies or designation to initiation of a clinical trial may take several years.

~~Initiation of a phase 1 clinical trial. Generally, phase 1 clinical trials may take one to two years to complete.~~

~~Initiation of a phase 2 clinical trial. Generally, phase 2 clinical trials may take one to three years to complete.~~

~~Initiation of a phase 3 clinical trial. Generally, phase 3 clinical trials may take two to six years to complete.~~

~~Regulatory milestones in the Company’s collaborations may include the following types of events:~~

Filing of regulatory applications for marketing approval such as a Biologics License Application in the United States or a Marketing Authorization Application in Europe. Generally, it may take up to twelve months to prepare and submit regulatory filings.

Receiving marketing approval in a major market, such as in the United States, Europe, Japan or other significant countries. Generally, it may take up to three years after a marketing application is submitted to obtain approval for marketing and pricing from the applicable regulatory agency.

~~Commercialization milestones in the Company’s collaborations may include the following types of events:~~

~~First commercial~~related sale ~~in a particular market, such as in the United States, Europe, Japan or other significant countries.~~occurred.

Product sales in excess of a pre-specified threshold. The amount of time to achieve this type of milestone depends on several factors, including, but not limited to, the dollar amount of the threshold, the pricing of the product, market penetration of the product and the rate at which customers begin using the product.

The Company’s ADC collaborators are solely responsible for the development of their product candidates and the achievement of milestones in any of the categories identified above is based solely on the collaborators’ efforts.

In the case of the Company’s ADCETRIS collaboration with Takeda, the Company may be involved in certain development activities; however, the achievement of milestone events under the agreement is primarily based on activities undertaken by Takeda.

The process of successfully developing a product candidate, obtaining regulatory approval and ultimately commercializing a product candidate is highly uncertain and the attainment of any milestones is therefore uncertain and difficult to predict. In addition, since the Company does not take a substantive role or control the research, development or commercialization of any products generated by its ADC collaborators, the Company is not able to reasonably estimate when, if at all, any milestone payments or royalties may be payable to the Company by its ADC collaborators. As such, the milestone payments associated with its ADC collaborations involve a substantial degree of uncertainty and risk that they may never be received. Similarly, even in those collaborations where the Company may have an active role in the development of the product candidate, such as the Company’s ADCETRIS collaboration with Takeda, the attainment of a milestone is based on the collaborator’s activities and isWe generally ~~outside the direction and control of the Company.~~

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

~~Royalty revenues~~

Table of Contents

2. Revenue from contracts with customers
The following table presents our disaggregated revenue for the periods presented.
Three Months Ended March 31,
(dollars in thousands) 2023 2022
ADCETRIS $ 243,062 $ 180,989
PADCEV 118,706 100,207
TUKYSA 87,376 90,475
TIVDAK 19,495 11,415
Net product sales $ 468,639 $ 383,086
Royalty revenues $ 30,178 $ 28,181
Collaboration and license agreement revenues $ 20,902 $ 15,193
Total revenues $ 519,719 $ 426,460

3. Leases

We have operating leases for our office and ~~cost~~laboratory facilities with terms that expire from 2023 through 2042. We recorded $72.2 million and $0.0 millionright-of-use assets during the three months ended March 31, 2023 and 2022, respectively, and lease liabilities of ~~royalty revenues~~

~~Royalty revenues primarily reflect amounts earned under~~$49.7 million and $0.0 million during the ~~ADCETRIS collaboration with Takeda. These royalties~~three months ended March 31, 2023 and 2022, respectively. All of our significant leases include ~~sales royalties, which are based~~options for us to extend the lease term. None of our options to extend the rental term of any existing leases were considered reasonably certain as of March 31, 2023.

In June 2021, we entered into a lease agreement for an approximately 258,000 square foot building complex to be constructed by the landlord on approximately 20.5 acres of land in Everett, Washington. We intend to use the building for future manufacturing, laboratory, and office space. Under the terms of the lease, base rent is payable at an initial rate of $4.0 million per year, subject to annual escalations of 3% during the initial term of 20 years. The lease commenced in January 2023 when construction and delivery of the building shell and related improvements by the landlord were substantially completed. We recorded a ~~percentage~~lease liability and right-of-use assets on our condensed consolidated balance sheet as of ~~Takeda’s net sales at rates that range from~~ March 31, 2023. We have an option to renew the ~~mid-teens~~lease for two additional terms of ten years each. In addition, we have an option to purchase the ~~mid-twenties based on sales volume, and commercial sales-based milestones. Takeda bears a portion of third-party royalty costs owed on its sales of ADCETRIS. This amount is included in royalty revenue~~premises in the Company’s consolidated financial statements. Cost of royalty revenues reflects amounts owed to the Company’s third-party licensors related to Takeda’s sales of ADCETRIS. These amounts are recognized in the quarter in which Takeda reports its sales activity to the Company, which is the quarter following the related sales. Royalty revenues also include amounts earned in connection with the Company’s ADC collaborations.

~~Recent accounting pronouncements~~

In May 2014, the Financial Accounting Standards Board, or FASB, issued an Accounting Standards Update entitled “ASU 2014-09, Revenue from Contracts with Customers.” The standard requires entities to recognize revenue through an evaluation that includes identification of the contract, identification of the performance obligations, determination of the transaction price, allocation of the transaction price to the performance obligations, and recognition of revenuefuture.

Supplemental operating lease information was as the entity satisfies the performance obligations. In August 2015, FASB issued an Accounting Standards Update entitled “ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date”, which defers the effective date of ASU 2014-09 to the Company’s fiscal year beginning January 1, 2018. The FASB has continued to issue accounting standards updates to clarify and provide implementation guidance related to Revenue from Contracts with Customers, including “ASU 2016-08, Revenue from Contract with Customers: Principal versus Agent Considerations”, “ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing”, “ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients” and “ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” The Company’s preliminary assessment of this new standard is that it will generally not change the way in which the Company recognizes product revenue from sales of ADCETRIS. However, the Company expects that sales-based royalties and commercial sales-based milestones will befollows:


	Three Months Ended March 31,
(dollars in thousands)		2023			2022
Operating lease cost		$	5,432		$	4,195
Variable lease cost		1,134			1,072
Total lease cost		$	6,566		$	5,267
Cash paid for amounts included in measurement of lease liabilities		$	4,254		$	4,553

	As of March 31,
		2023			2022
Weighted average remaining lease term		12.2 years			5.7 years
Weighted average discount rate		6.6		%	5.0		%

Operating lease liabilities were recorded in the ~~period~~following captions of the related sale based on estimates, rather than recording them as reported by the customer. In addition, the Company expects that the achievement of development milestones under the Company’s collaborations will be recorded in the period their achievement becomes probable, which may result in their recognition earlier than under current accounting principles. The new standard also requires more extensive disclosures related to revenue recognition, particularly in quarterly financial statements. The Company will adopt the standard on January 1, 2018 and intends to use the modified retrospective method of adoption. The Company is continuing to evaluate the impact of the standard on all of its revenues, including those mentioned above, and its assessments may change in the future based on its ongoing evaluation.

In January 2016, FASB issued an Accounting Standards Update entitled “ASU 2016-01, Financial Instruments: Overall.” The standard addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The Company will adopt the standard on January 1, 2018 using a modified retrospective approach. The standard will require that the Company record changes in the fair value of equity securities in net income or loss. The implementation of this standard is expected to increase the volatility of net income or loss to the extent that the Company continues to hold equity securities.

~~In February 2016, FASB issued an Accounting Standards Update entitled “ASU 2016-02, Leases.” The standard requires entities to recognize in the~~our condensed consolidated balance sheet a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. The standard will become effective for the Company beginning January 1, 2019, with early adoption permitted. The Company is currently evaluating the guidance to determine the potential impact on its financial condition, resultsas follows:


(dollars in thousands)	March 31, 2023		December 31, 2022
Accrued liabilities and other	$	13,765	$	14,517
Operating lease liabilities, long-term	91,125		43,474
Total	$	104,890	$	57,991

Table of operations and cash flows, and financial statement disclosures, and expects that the adoption of the standard will increase assets and liabilities related to the Company’s operating leases in the consolidated balance sheets.

In March 2016, FASB issued an Accounting Standard Update entitled “ASU 2016-09, Compensation – Stock Compensation.” The standard is intended to simplify certain elements of accounting for share-based payment transactions, including the income tax impact, classification of awards as either equity or liabilities, and classification on the statement of cash flows. In addition, the standard allows an entity-wide accounting policy election to either estimate the number of awards that are expected to vest, as currently required, or account for forfeitures when they occur. The Company has elected to continue estimating the number of awards that are expected to vest. The Company adopted the standard as of January 1, 2017. Since the Company has incurred annual net losses since its inception and maintains a full valuation allowance on its net deferred tax assets, the adoption did not have a material impact on the Company’s financial condition, results of operations and cash flows.

In October 2016, FASB issued an Accounting Standard Update entitled “ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory.” The standard is intended to simplify the accounting for intercompany sales of assets other than inventory. Under current GAAP, the tax effects of intra-entity asset transfers are deferred until the transferred asset is sold to a third party or otherwise recovered through use. Under the new guidance, a reporting entity would recognize the tax expense from the sale of the asset in the seller’s jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The standard will become effective for the Company beginning on January 1, 2018. The Company is currently evaluating the new standard; however, since the Company has incurred annual net losses since its inception and maintains a full valuation allowance on its net deferred tax assets, the adoption is not expected to have a material impact on the Company’s financial condition, results of operations and cash flows, or financial statement disclosures.

In June 2016, FASB issued an Accounting Standard Update entitled “ASU 2016-13, Financial Instruments: Credit Losses.” The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date, and to change how other than temporary impairments on investments securities are recorded. The standard will become effective for the Company beginning on January 1, 2020 with early adoption permitted. The Company is currently evaluating the guidance to determine the potential impact on its financial condition, results of operations and cash flows, and financial statement disclosures.

In January 2017, FASB issued an Accounting Standard Update entitled, “ASU 2017-01, Business Combinations: Clarifying the Definition of a Business.” The objective of the standard is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The Company adopted this standard on a prospective basis as of January 1, 2017. The adoption of this standard did not have a material impact on the Company’s financial condition, results of operations and cash flows, or financial statement disclosures.

In May 2017, FASB issued an Accounting Standard Update entitled, “ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting.” The objective of the standard is to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The standard is applied prospectively to awards modified on or after the adoption date. The Company early adopted this standard on April 1, 2017. The adoption did not have a material impact on the Company’s financial condition, results of operations and cash flows.

2.Contents

4. Net ~~income (loss)~~loss per share

Basic net ~~income (loss)~~loss per share is computed by dividing net ~~income (loss)~~loss by the weighted average number of common shares outstanding during the period. Diluted net ~~income (loss)~~loss per share is computed by dividing net ~~income (loss)~~loss by the weighted average number of common shares ~~of our~~and dilutive potential common ~~stock outstanding and other dilutive securities~~shares outstanding during the period. ~~The potential~~Potentially dilutive common shares ~~resulting from~~include incremental common shares issuable upon the ~~assumed~~vesting of unvested restricted stock units and the exercise of outstanding stock options, ~~and the assumed vesting of restricted stock units were determined~~calculated using the treasury stock method. ~~The Company~~

We excluded ~~certain restricted stock units and options to purchase~~the potential shares of common stock from the ~~calculation~~computation of ~~diluted net income per share that would have resulted in an anti-dilutive effect for the three months ended~~

~~September 30, 2017. The Company excluded all restricted stock units and options to purchase common stock from the calculation of basic and~~ diluted net loss per share ~~as such securities were anti-dilutive for~~because their effect would have been antidilutive. The following table presents the ~~three months ended September 30, 2016, and for the nine months ended September 30, 2017, and 2016. The weighted-average~~weighted average number of ~~restricted stock units and options to purchase common stock~~shares that have been excluded ~~from the number of shares used to calculate diluted net income (loss) per share totaled 3,460,000 and 13,272,000~~ for ~~the three months ended September 30, 2017 and 2016, respectively, and 13,367,000 and 12,714,000 for the nine months ended September 30, 2017 and 2016, respectively.~~

~~The following table summarizes the computation of basic and diluted net income (loss) per share ($ in thousands, other than per share amounts):~~

   Three months ended
September 30,    Nine months ended
September 30,
   2017    2016    2017    2016
Net income (loss) – basic and diluted
   $ 50,021    $ (31,752 )    $ (66,329 )    $ (84,973 )
Weighted average shares outstanding – basic
   143,357    140,928    142,876    140,369
Effect of dilutive securities:

Dilutive effect of common shares from stock options
   3,575    0    0    0
Dilutive effect of common shares from restricted stock units
   1,136    0    0    0








Weighted average shares outstanding – diluted
   148,068    140,928    142,876    140,369








Basic net income (loss) per share
   $ 0.35    $ (0.23 )    $ (0.46 )    $ (0.61 )








Diluted net income (loss) per share
   $ 0.34    $ (0.23 )    $ (0.46 )    $ (0.61 )

~~3. Investments~~

~~Investments consisted of available-for-sale securities as follows (in thousands):~~

   Amortized
cost    Gross
unrealized
gains    Gross
unrealized
losses    Fair
value
September 30, 2017

U.S. Treasury securities
   $ 342,412    $ 1    $ (188 )    $ 342,225
Common stock investment in Immunomedics
   12,677    29,263    0    41,940








Total
   $ 355,089    $ 29,264    $ (188 )    $ 384,165








Contractual Maturities (at date of purchase)

Due in one year or less
   $ 201,836          $ 201,782
Due in one to two years
   140,576          140,443




Total
   $ 342,412          $ 342,225




   Amortized
cost    Gross
unrealized
gains    Gross
unrealized
losses    Fair
value
December 31, 2016

U.S. Treasury securities
   $ 510,356    $ 68    $ (123 )    $ 510,301








Contractual Maturities (at date of purchase)

Due in one year or less
   $ 229,856          $ 229,864
Due in one to two years
   280,500          280,437




Total
   $ 510,356          $ 510,301

~~Investments classified as available-for-sale securities are presented in the accompanying consolidated balance sheets as follows (in thousands):~~

   September 30,
2017    December 31,
2016
Short-term investments
   $ 322,258    $ 480,313
Long-term investments
   19,967    29,988
Other non-current assets—Common stock investment in Immunomedics
   41,940    0




Total
   $ 384,165    $ 510,301

~~The aggregate estimated fair value of the Company’s investments with unrealized losses was as follows (in thousands):~~

   Period of continuous unrealized loss
   12 Months or less    Greater than 12 months
   Fair
value    Gross
unrealized
losses    Fair
value    Gross
unrealized
losses
September 30, 2017

U.S. Treasury securities
   $ 282,236    $ (174 )    $ 19,993    $ (14 )








December 31, 2016

U.S. Treasury securities
   $ 200,327    $ (123 )    $ NA    $ NA

4.all periods presented:


	Three Months Ended March 31,
(in thousands)	2023	2022
Stock options and RSUs	8,292	9,632

5. Fair value

~~The Company holds short-term and long-term available-for-sale securities, and the Immunomedics common stock warrant~~

We have certain assets that are measured at fair value ~~which is determined~~ on a recurring basis according to a fair value hierarchy that prioritizes the inputs, ~~and~~ assumptions ~~used,~~ and ~~the~~ valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy ~~are described as follows:~~

are:


Level 1:						Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2:

Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Level 3:

Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

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

~~Level 1~~

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


	Fair value measurement using:
(dollars in thousands)	Quoted prices in active markets for identical assets (Level 1)		Other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
March 31, 2023
Short-term investments—U.S. Treasury securities	$	1,154,425	$	—	$	—	$	1,154,425

Other non-current assets—equity securities	3,617		—		—		3,617
Total	$	1,158,042	$	—	$	—	$	1,158,042
December 31, 2022
Short-term investments—U.S. Treasury securities	$	1,415,130	$	—	$	—	$	1,415,130

Other non-current assets—equity securities	3,854		—		—		3,854
Total	$	1,418,984	$	—	$	—	$	1,418,984

Our short-term debt investments ~~are valued~~portfolio only contains investments in U.S. Treasury and other U.S. government-backed securities. We review our portfolio based on ~~quoted~~the underlying risk profile of the securities and have a zero loss expectation for these investments. We also regularly review the securities in an unrealized loss position and evaluate the current expected credit loss by considering factors such as historical experience, market ~~prices in active markets. The Company estimates~~data, issuer-specific factors, and current economic conditions. During the ~~fair value of Level 2 instruments utilizing the Black-Scholes valuation model,~~three months ended March 31, 2023 and 2022, we recognized no year-to-date credit loss related to our short- and long-term investments, and had no allowance for ~~which all significant inputs are observable, either directly or indirectly, to estimate fair value. The Company did not hold any Level 3 investments~~credit loss recorded as of ~~September 30, 2017~~March 31, 2023 or December 31, ~~2016~~2022.

Table of Contents

Our debt securities consisted of the following:


(dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
March 31, 2023
U.S. Treasury securities	$	1,154,642	$	189	$	(406)	$	1,154,425
Contractual maturities (at date of purchase):
Due in one year or less	$	1,138,710					$	1,138,552
Due in one to two years	15,932						15,873
Total	$	1,154,642					$	1,154,425
December 31, 2022
U.S. Treasury securities	$	1,416,717	$	96	$	(1,683)	$	1,415,130
Contractual maturities (at date of purchase):
Due in one year or less	$	1,400,852					$	1,399,382
Due in one to two years	15,865						15,748
Total	$	1,416,717					$	1,415,130

6. Investment and ~~did not transfer any~~other income (loss), net

Investment and other income (loss), net consisted of the following:


	Three Months Ended March 31,
(dollars in thousands)	2023		2022
Loss on equity securities	$	(237)	$	(2,779)

Investment and other income, net	14,637		589
Total investment and other income (loss), net	$	14,400	$	(2,190)

Loss on equity securities includes the realized and unrealized holding gains and losses on our equity securities. At times, we hold equity investments ~~between Levels 1, 2~~in certain companies acquired in relation to a strategic partnership. Shares held at the end of reporting periods are marked to market in our condensed consolidated financial statements, which can result in unrealized gains and 3losses.

7. Inventories

Inventories consisted of the following:


(dollars in thousands)	March 31, 2023		December 31, 2022
Raw materials	$	13,999	$	14,916
Work in process	396,960		357,275
Finished goods	66,735		55,020
Total	$	477,694	$	427,211

We capitalize our commercial inventory costs. Work in process represents inventory at various stages of the production process, which includes costs for materials, labor, and overhead applied during the ~~nine months ended September 30, 2017.~~

~~The following table presents the Company’s debt and equity securities by level within the fair value hierarchy for the periods presented (in thousands):~~

   Fair value measurement using:
   Quoted prices
in active
markets for
identical
assets
(Level 1)    Other
observable
inputs
(Level 2)    Significant
unobservable
inputs
(Level 3)    Total
As of September 30, 2017

Short-term investments—U.S. Treasury securities
   $ 322,258    $ 0    $ 0    $ 322,258
Long-term investments—U.S. Treasury securities
   19,967    0    0    19,967
Other non-current assets – Common stock warrant in Immunomedics
   0    78,714    0    78,714
Other non-current assets—Common stock investment in Immunomedics
   41,940    0    0    41,940








Total
   $ 384,165    $ 78,714    $ 0    $ 462,879








   Fair value measurement using:
   Quoted prices
in active
markets for
identical
assets
(Level 1)    Other
observable
inputs
(Level 2)    Significant
unobservable
inputs
(Level 3)    Total
As of December 31, 2016

Short-term investments—U.S. Treasury securities
   $ 480,313    $ 0    $ 0    $ 480,313
Long-term investments—U.S. Treasury securities
   29,988    0    0    29,988








Total
   $ 510,301    $ 0    $ 0    $ 510,301

~~5. Inventories~~

~~The following table presents the Company’s inventories of ADCETRIS (in thousands):~~

   September 30,
2017    December 31,
2016
Raw materials
   $ 51,656    $ 62,516
Work in process
   0    8
Finished goods
   9,181    5,600




Total
   $ 60,837    $ 68,124

~~The Company capitalizes ADCETRIS inventory costs. ADCETRIS inventory~~production process. Inventory that is deployed into clinical, research or development use is charged to research and development expense when it is no longer available for use in commercial sales. ~~The Company does not capitalize manufacturing costs for any~~

Table of ~~its product candidates.~~

~~6. Income taxes~~

~~The Company has recorded income tax benefits~~Contents

8. Accrued liabilities

Accrued liabilities consisted of the following:


(dollars in thousands)	March 31, 2023		December 31, 2022
Clinical trial and related costs	$	193,422	$	194,006
Gross-to-net deductions and third-party royalties	127,940		119,289
Employee compensation and benefits	100,340		175,506
Acquisition related expenses	29,698		—
Contract manufacturing	22,015		21,638



Other	98,338		100,114
Total	$	571,753	$	610,553

We have incurred approximately $30 million in ~~investment and other income, net, of $2.7 million and $5.4 million for the three and nine months ended September 30, 2017, respectively,~~acquisition related expenses in connection with ~~unrealized gains on available-for-sale securities.~~ the pending merger with Pfizer.

9. Share-based compensation

The ~~Company has not recorded a provision for income tax~~following table presents our total share-based compensation expense for the ~~quarter ended September 30, 2017 as the Company expects~~periods presented:


	Three Months Ended March 31,
(dollars in thousands)	2023		2022
Research and development	$	30,067	$	23,076
Selling, general and administrative	33,872		20,837
Total share-based compensation expense	$	63,939	$	43,913

As of March 31, 2023, there was $240.2 million of unrecognized compensation cost related to ~~report a~~unvested options including options subject to market-based performance metrics, and restricted stock unit awards, excluding our performance-based RSUs, net ~~loss for the full year ending December 31, 2017, and continues~~of forfeitures. The estimated unrecognized compensation expense related to ~~maintain a full valuation allowance on the net deferred tax assets.~~

~~7. Immunomedics stock purchase agreement~~

~~In February 2017, the Company paid Immunomedics $14.7~~our performance-based RSUs was approximately $65 million for 3.0 million shares of Immunomedics common stock and a warrant to purchase an additional 8.7 million shares of Immunomedics common stock at an exercise price of $4.90 per share, pursuant to a stock purchase agreement. The consideration was allocated between the common stock and the warrant based on the relative fair values as of the purchase date, or $12.7 million and $2.0 million, respectively. The shares of common stock were classified as available-for-sale securities and carried at estimated fair value with unrealized gains and losses included in accumulated other comprehensive income (loss) in stockholders’ equity. The common stock investment was included in other non-current assets as of September 30, 2017.

~~Based on management’s assessment, the $2.0 million value allocated to the warrant was determined to be substantially impaired~~ as of March 31, ~~2017, and therefore was charged to investment and other income, net, for~~2023.

10. Income taxes

For the ~~nine~~three months ended ~~September 30, 2017. In September 2017, Immunomedics registered~~March 31, 2023, we had taxable profits in the ~~resale of the shares of Immunomedics common stock underlying the warrant under the Securities Act of 1933, as amended, and~~U.S. as a result of amendments to IRC Section 174, which took effect January 1, 2022 pursuant to the ~~warrant met the definition of a derivative under ASC 815 as of September 30, 2017. Consequently, the Company~~2017 Tax Cuts and Jobs Act. We recorded ~~a gain of $78.7 million and $76.7 million in investment and other~~an income ~~net, resulting from the change in the fair value of the warrant derivative~~tax provision for the three ~~and nine~~ months ended March 31, 2023 of $4.6 million, primarily related to estimated state tax liabilities for which there were limitations on the use of existing state tax carryforwards.We had existing federal tax carryforwards sufficient to offset most of the federal liability. Our income tax provision also reflected taxable profits in foreign jurisdictions. Our effective tax rate for the three months ended March 31, 2023 of approximately 2.7% differed from the federal statutory rate primarily because we have provided a valuation allowance against substantially all our deferred tax assets.

For the three months ended March 31, 2022, we had 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 recorded an income tax provision of $1.3 million, primarily related to estimated state tax liabilities for which there were limitations on the use of existing state tax carryforwards. We had existing federal tax carryforwards sufficient to offset any federal liability. Our income tax provision also reflected taxable profits in foreign jurisdictions. For the three months ended March 31, 2022, our effective tax rate of approximately 0.9% differed from the federal statutory rate primarily because we have provided a valuation allowance against substantially all our deferred tax assets.

11. Legal matters

From time to time, we are involved in legal matters, including the disputes below. As a result of these disputes, we have incurred and will continue to incur litigation expenses.

Table of Contents

Dispute over ownership of intellectual property

We have been in a dispute with Daiichi Sankyo Co. Ltd., or Daiichi Sankyo, regarding the ownership of certain technology used by Daiichi Sankyo in its cancer drug Enhertu® (fam-trastuzumab deruxtecan-nxki) and certain product candidates. We believe that the linker and other ADC technology used in Enhertu and these drug candidates are improvements to our ADC technology, the ownership of which, we contended, was assigned to us under the terms of a 2008 collaboration agreement between us and Daiichi Sankyo, or the Daiichi Sankyo Collaboration Agreement.

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

On November 12, 2019, we submitted an arbitration demand to the American Arbitration Association seeking, among other remedies, a declaration that we are the owner of the intellectual property rights under dispute, monetary damages, and a running royalty. On April 27, 2020, the arbitrator confirmed the dispute should be resolved in arbitration. The arbitration hearing was conducted in June 2021 and April 2022. On August 12, 2022, the arbitrator ruled in favor of Daiichi Sankyo, citing statute of limitations and disagreement with us on the interpretation of the contract. On November 10, 2022, we filed a motion to vacate the arbitration award in the U.S. District Court for the Western District of Washington.

The Daiichi Sankyo Collaboration Agreement provides that judgment rendered by an arbitrator shall include costs of arbitration, reasonable attorneys’ fees and reasonable costs for expert and other witnesses. On September ~~30, 2017, respectively.~~14, 2022, Daiichi Sankyo submitted a petition for approximately $58 million for reimbursement of its legal fees and costs associated with the arbitration. We filed an opposition to Daiichi Sankyo’s request on October 12, 2022.

While we oppose any fees being awarded to Daiichi Sankyo, a liability between approximately $14-58 million is reasonably estimable. An estimate of our liability for these fees towards the low end of the range has been accrued in liabilities in our condensed consolidated financial statements. It is reasonably possible the arbitrator will render an award pursuant to Daiichi Sankyo’s request that is different from what we have accrued or estimated and that we will need to adjust our estimate in future periods pursuant to the arbitrator’s award.

Patent infringement

On October 19, 2020, we filed a complaint in the United States District Court for the Eastern District of Texas to commence an action for infringement of our U.S. Patent No. 10,808,039, or the ’039 Patent, by Daiichi Sankyo’s importation into, offer for sale, sale, and use in the United States of the cancer drug Enhertu. The ~~warrant~~remedies sought in this action include, among other remedies, a judgment that Daiichi Sankyo infringed one or more valid and enforceable claims of the ’039 Patent, monetary damages and a running royalty.

Daiichi Sankyo (as well as Daiichi Sankyo, Inc. and AstraZeneca Pharmaceuticals, LP, or AstraZeneca) subsequently filed an action on November 13, 2020 in the U.S. District Court for the District of Delaware seeking a declaratory judgment that Enhertu does not infringe the ’039 Patent. The Delaware action has been stayed by court order.

Daiichi Sankyo, Inc. and AstraZeneca also filed two petitions for post-grant review on December 23, 2020 and January 22, 2021 with the U.S. Patent and Trademark Office, or USPTO, seeking to have claims of the ’039 Patent cancelled as unpatentable. On June 24, 2021, the USPTO issued a decision denying both petitions for post-grant review. On April 7, 2022, the USPTO granted a request on rehearing and instituted two post-grant review proceedings, but on July 15, 2022, the USPTO issued a new decision denying post-grant review of the claims asserted in the patent infringement action. On February 7, 2023, in response to Daiichi Sankyo and AstraZeneca’s second request for rehearing of the denial of the post-grant review to the USPTO and for Precedential Opinion Panel, or POP, review, the Precedential Opinion Panel issued an order denying the request for POP review but directing the USPTO panel evaluating the second rehearing request to make an explicit finding using its own discretion as to whether the post-grant review petition presents a “compelling” showing of invalidity as part of its ruling on the pending second rehearing request. The panel was ~~recorded at~~also directed to rule on the second rehearing request within two weeks from the POP order. On February 14, 2023, the panel decided to institute the post-grant review of the claims of the ’039 Patent asserted in the patent infringement action.

Table of Contents

On April 8, 2022, a jury in the United States District Court for the Eastern District of Texas found that Daiichi Sankyo willfully infringed the asserted claims of the ’039 Patent with its ~~fair value~~Enhertu product, and also found that the asserted claims were not invalid. The jury further awarded damages of ~~$78.7~~$41.8 million for infringement from October 20, 2020 through March 31, 2022. The U.S. District Court for the Eastern District of Texas also denied Daiichi Sankyo’s claim that the ’039 Patent should be unenforceable under the equitable theory of prosecution laches, entered judgment in ~~other non-current assets~~favor of us based on the jury’s verdict that Daiichi Sankyo willfully infringed the ’039 Patent consisting of pre-trial damages in the sum of $41.8 million, and awarded us pre- and post-trial interest and costs. We have requested a royalty in the range of 10-12% on Daiichi Sankyo’s future sales of Enhertu in the United States through November 5, 2024, the current expiration date of the ’039 Patent, as well as $12 million for reimbursement of our reasonable attorneys’ fees. Pursuant to ASC 450, awards of this nature must be either realized or realizable to be reflected in the company’s financial statements. No amounts related to these patent infringement matters have been reflected in our condensed consolidated financial statements as of ~~September 30, 2017, and is exercisable by the Company until December~~March 31, ~~2017.~~

~~8. Legal matters~~

2023.

PADCEV product liability litigation

On ~~January 10, 2017, the Company became~~March 14, 2023, a ~~named defendant in a securities~~purported class action ~~complaint~~was filed in the United States District Court for the ~~Western~~Central District of ~~Washington, or~~California against us, Astellas and Agensys, Inc., alleging that the ~~Court, seeking compensatory~~defendants failed to warn of side effects to the skin that can occur when taking PADCEV. The complaint alleges claims under strict liability, negligence and fraud, and seeks damages, including punitive damages, interest, attorneys’ fees and costs. We intend to vigorously defend against these claims. No amounts related to these matters have been reflected in our condensed consolidated financial statements as of ~~an undisclosed amount. On October 18, 2017,~~March 31, 2023.

Litigation related to the ~~Court granted~~Pfizer Merger

Four lawsuits have been filed by purported Seagen stockholders in connection with the ~~Company’s motion to dismiss~~Pfizer Merger. The complaints allege, among other things, that certain disclosures in the preliminary proxy statement we filed on April 14, 2023 in connection with ~~leave for plaintiff to file a second consolidated amended complaint.~~

~~On March 29, 2017, a stockholder derivative lawsuit was~~the Pfizer Merger were materially incomplete and misleading. The four actions are captioned O’Dell v. Seagen Inc., et al., No. 1:23-cv-03254 (Apr. 19, 2023), filed in ~~Washington Superior~~the United States District Court for the ~~County~~Southern District of ~~Snohomish, or~~New York, Boyd v. Seagen Inc., et al., No. 1:23-cv-03309 (Apr. 20, 2023), filed in the ~~Snohomish County Superior~~United States District Court ~~naming as defendants certain~~for the Southern District of New York, Wang v. Seagen Inc., et al., No. 1:23-cv-03302 (Apr. 20, 2023), filed in the ~~Company’s~~United States District Court for the Southern District of New York, and Ober v. Seagen Inc., et al., No. 1:23-cv-03378 (Apr. 21, 2023), filed in the United States District Court for the Southern District of New York. The complaints name us and the current ~~and former executive officers and~~ members of its board of directors. The Company is named as a nominal defendant. On October 18, 2017, in light of the granting of the Company’s motion to dismiss in the securities class action complaint, the parties in the stockholder derivative lawsuit filed a joint status report with the Snohomish County Superior Court stipulating to continue to stay the derivative lawsuit pending further developments in the securities class action.

The Company does not believe it is feasible to predict or determine the ultimate outcome or resolution of these proceedings, or to estimate the amount of, or potential range of, loss with respect to these proceedings. In addition, the timing of the final resolution of these proceedings is uncertain. As a result of these lawsuits, the Company will incur litigation expenses and may incur indemnification expenses, and potential resolutions of the lawsuits could include settlements requiring payments. Those expenses could have a material impact on the Company’s financial position, results of operations, and cash flows.

~~On February 13, 2017, the Company was named a co-defendant in a lawsuit filed by venBio Select Advisors LLC, or venBio, in the Delaware Chancery Court against the members of the~~our board of directors as defendants. The complaints allege, among other things, violations of ~~Immunomedics. On May 4, 2017,~~Sections 14(a) and 20(a) of the ~~Company~~Exchange Act, 15 U.S.C. §§ 78n(a), 78t(a), SEC Rule 14a-9, 17 C.F.R. 240.14a-9 and ~~Immunomedics agreed~~17 C.F.R. § 244.100. The complaints seek, among other relief, to ~~terminate~~enjoin us from consummating the ~~license agreement between the parties~~Pfizer Merger and to ~~amend~~be awarded rescissory damages, including reasonable attorneys’ and expert fees and expenses. We believe that the ~~term~~allegations asserted in the complaints are without merit. We are not aware of the ~~Immunomedics common stock warrant to be exercisable by~~filing of other lawsuits challenging the ~~Company only until December 31, 2017, and in connection therewith, Immunomedics and venBio agreed to fully settle, resolve and release~~Pfizer Merger or the ~~Company, and the Company agreed to fully settle, resolve and release Immunomedics and venBio, from all disputes, claims and liabilities~~proxy statement; however, additional lawsuits arising ~~from the license agreement and the transactions contemplated thereby, subject to the terms~~out of the Pfizer Merger or the related ~~termination agreement and settlement agreement. The termination agreement between Immunomedics and~~proxy statement may be filed in the ~~Company and the settlement~~future. No amounts related to these matters have been reflected in our condensed consolidated financial statements as of ~~the venBio lawsuit were effective August 25, 2017.~~

9.March 31, 2023.

12. Subsequent event

~~Closing~~

In April 2023, we granted certain employees retention awards of ~~Manufacturing Facility Acquisition~~

~~On July 30~~approximately $280 million in the form of cash (20%) and ~~July 31, 2017,~~RSUs (80%) to incentivize employees to remain employed at the ~~Company entered into certain agreements to acquire a biologics manufacturing facility located in Bothell, Washington. As part~~company during the pendency of the transaction ~~the Company~~ and Bristol Myers Squibb Company, or BMS, through BMS or its wholly-owned subsidiary, entered into an assignment and assumption agreement, or the Assignment Agreement, an asset purchase agreement, or the Asset Purchase Agreement, and agreed to enter into certain ancillary transitional service agreements effective uponfollowing the closing of the ~~transactions contemplated by~~transaction. The awards consist of 20% in the ~~Asset Purchase Agreement.~~

~~Under~~form of cash that vests on the Assignment Agreement, on July 30, 2017, BMS assigned to the Company all of its rights and obligations under a purchase agreement, or the Purchase Agreement, pursuant to which BMS agreed to purchase the manufacturing facility site location, which includes the underlying real estate and the manufacturing building, from BMR-3450 Monte Villa Parkway LLC, or BMR. The purchase price was $17.8 million, which the Company recorded in property and equipment, net as of September 30, 2017. Under the terms9-month anniversary of the ~~Purchase Agreement,~~grant, 30% in the ~~Company assumed BMR’s obligations under a lease between BMS and BMR, or~~form of RSUs that vest on the ~~Lease, under which BMS occupied the manufacturing facility site location until October 1, 2017. The Lease terminated upon the closing~~18-month anniversary of the ~~transactions contemplated by~~grant, 25% in the ~~Asset Purchase Agreement~~form of RSUs that vest on ~~October 1, 2017.~~

~~On October 1, 2017,~~ the Company completed the acquisition of certain equipment and improvements from BMS in exchange for a payment of approximately $25.5 million. In addition, the Company hired the employees who were employed by BMS at the manufacturing facility site location. The acquisition24-month anniversary of the ~~manufacturing facility~~grant, and 25% in the ~~related assets and liabilities will be accounted for as a business combination using~~form of RSUs that vest on the acquisition method. The purchase price will be allocated to the assets acquired and liabilities assumed, and the Company expects to include a preliminary determination in its consolidated financial statements for the year ending December 31, 2017.

The Company also entered into a clinical manufacturing services agreement on October 1, 2017, under which the Company agreed to manufacture certain BMS clinical product candidates in accordance with prescribed production schedules and quantities through the later of December 31, 2018 or when certain technical transfer activities have been completed, and to maintain personnel, equipment and expertise sufficient to perform the agreed upon services. BMS will compensate the Company for services rendered under the clinical manufacturing services agreement, based on an agreed upon rate for use30-month anniversary of the ~~facility and employees.~~

grant.

Table of Contents

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~Forward-Looking Statements~~

~~The~~

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

As used in this Quarterly Report on Form 10-Q, “Seagen,” “we,” “us” and “our” refer to Seagen Inc. and its wholly-owned subsidiaries. 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 ~~incorrect.~~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 ~~“Item~~“Part II Item 1A—Risk Factors.” We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

~~Overview~~

~~Seattle Genetics~~

Overview

Seagen is a biotechnology company ~~focused on the development~~that develops and ~~commercialization of~~commercializes targeted therapies ~~for the treatment of~~to treat cancer. ~~Our antibody-drug conjugate, or ADC, technology utilizes the targeting ability of antibodies to deliver cell-killing agents directly to cancer cells.~~ We are commercializing ADCETRIS®, or brentuximab vedotin, for the treatment of ~~several types~~certain CD30-expressing lymphomas, PADCEV®, or enfortumab vedotin-ejfv, for the treatment of ~~CD30-expressing lymphomas.~~certain metastatic urothelial cancers, TUKYSA®, or tucatinib, for the treatment of certain metastatic HER2-positive 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,^® ~~(brentuximab vedotin)~~

~~Our marketed~~ 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.

First quarter 2023 highlights and recent developments

Business Highlights

•We reported 22% growth for both net product ~~ADCETRIS~~^® ~~is approved~~sales and total revenue for the first quarter in 2023 as compared to the same period of the prior year.

•In March 2023, we entered into a definitive merger agreement under which, on the terms and subject to the conditions thereof, Pfizer Inc., or Pfizer, will acquire Seagen for $229 in cash per Seagen share for a total enterprise value of $43 billion. The companies seek to accelerate the next generation of cancer breakthroughs and bring new solutions to patients by combining the ~~United States~~power of Seagen’s ADC technology with the scale and strength of Pfizer’s capabilities and expertise. The companies expect to complete the transaction in late 2023 or early 2024, subject to fulfillment of customary closing conditions, including approval of our stockholders and receipt of required regulatory approvals.

Product and Pipeline Highlights

PADCEV

•In April 2023, the U.S. Food and Drug Administration, or FDA, ~~and~~granted PADCEV with pembrolizumab accelerated approval in the ~~European Commission for three indications encompassing several settings~~U.S. as a combination therapy for the treatment of ~~relapsed~~adult patients with locally advanced or metastatic urothelial cancer, or la/mUC, who are not eligible to receive cisplatin-containing chemotherapy. Continued approval for this indication is contingent upon verification and description of clinical benefit in the EV-302 confirmatory trial. It is the first treatment option combining an antibody-drug conjugate plus a programmed death receptor-1, or PD-1, inhibitor in this patient population.

•In April 2023, based on the results of the EV-103 trial, the National Comprehensive Cancer Network Clinical Practice Guidelines in Oncology, or NCCN Guidelines®, for Bladder Cancer were updated to include PADCEV with KEYTRUDA as a Preferred Regimen (Category 2A) for first-line therapy for patients with la/mUC who are not eligible to receive cisplatin-containing chemotherapy.

Table of Contents

•In March 2023, we and Astellas announced the Center for Drug Evaluation of the China National Medical Products Administration has accepted a Biologics License Application for PADCEV for the treatment of patients with la/mUC who received prior treatment with a PD-1 or programmed death-ligand 1, or PD-L1, inhibitor and platinum-based chemotherapy.

TUKYSA

•In January 2023, the FDA granted accelerated approval to TUKYSA in combination with trastuzumab for adult patients with RAS wild-type, HER2-positive unresectable or metastatic colorectal cancer that has progressed following treatment with fluoropyrimidine-, oxaliplatin- and irinotecan-based chemotherapy. This is the first FDA-approved treatment specifically for HER2-positive metastatic colorectal cancer. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials.

ADCETRIS

•ADCETRIS received Orphan Drug Exclusivity that provides seven years of market exclusivity for its recently approved indication in children with previously untreated high risk Hodgkin lymphoma. ADCETRIS received FDA approval for this indication in November 2022.

TIVDAK

•In February 2023, we and our partner Genmab completed patient enrollment in the innovaTV 301 trial evaluating TIVDAK versus investigator’s choice of chemotherapy in recurrent or metastatic cervical cancer. We have initiated an extension study in China which continues to enroll patients. The trial is intended to support global registrations and potentially serve as a confirmatory trial for the accelerated approval of TIVDAK in the U.S.

•In April 2023, at the American Association for Cancer Research, or AACR, Annual Meeting, we presented data from an interim analysis of the Part C portion of the innovaTV 207 Phase 2 clinical trial of TIVDAK given every 2 weeks in patients with recurrent or metastatic squamous cell carcinoma of the head and neck who have progressed on or after prior platinum combination chemotherapy and immunotherapy, if eligible. Results with this regimen demonstrated encouraging preliminary antitumor activity with a confirmed overall response rate of 40% and a manageable safety profile.

Earlier-Stage Programs

•In April 2023, we presented multiple abstracts at the AACR Annual Meeting, including data from our early-stage clinical, preclinical and discovery research programs. The first clinical data was presented for SEA-TGT that demonstrated a manageable and tolerable safety profile with initial monotherapy antitumor activity in solid tumors and lymphomas. In addition, we presented on multiple new ADC technologies. These included the first preclinical data from Seagen and Sanofi for a novel topoisomerase I inhibitor ADC targeting CEACAM5, showing potent antitumor activity in patient-derived colorectal cancer models.

Table of Contents

Our Medicines

Our approved medicines include the following:


Product*	Therapeutic Area	U.S. Approved Indication
	Hodgkin Lymphoma	Previously untreated Stage III/IV classical Hodgkin lymphoma, or cHL, in combination with doxorubicin, vinblastine and dacarbazine
		cHL at high risk of relapse or progression as post-autologous hematopoietic stem cell transplantation, or auto-HSCT, consolidation
		cHL after failure of auto-HSCT or after failure of at least two prior multi-agent chemotherapy regimens in patients who are not auto-HSCT candidates
		Pediatric patients 2 years and older with previously untreated high risk cHL, in combination with doxorubicin, vincristine, etoposide, prednisone, and cyclophosphamide
	T-cell Lymphoma	Previously untreated systemic anaplastic large cell lymphoma, or sALCL, or other CD30-expressing peripheral T-cell lymphoma, or PTCL, including angioimmunoblastic T-cell lymphoma and PTCL not otherwise specified, in combination with cyclophosphamide, doxorubicin and prednisone
		sALCL after failure of at least one prior multi-agent chemotherapy regimen
		Primary cutaneous anaplastic large cell lymphoma, or pcALCL, or CD30-expressing mycosis fungoides who have received prior systemic therapy
	Urothelial Cancer	Indicated: •as a single agent 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 platinum-containing chemotherapy, or •are ineligible for cisplatin-containing chemotherapy and have previously received one or more prior lines of therapy. •in combination with pembrolizumab for the treatment of adult patients with locally advanced or metastatic urothelial cancer who are not eligible for cisplatin-containing chemotherapy
	Breast Cancer	In combination with trastuzumab and capecitabine for the treatment of adult patients with advanced unresectable or metastatic HER2-positive breast cancer, including patients with brain metastases, who have received one or more prior anti-HER2-based regimens in the metastatic setting.
	Colorectal Caner	In combination with trastuzumab for adult patients with RAS wild-type, HER2-positive unresectable or metastatic colorectal cancer that has progressed following treatment with fluoropyrimidine-, oxaliplatin- and irinotecan-based chemotherapy.
	Cervical Cancer	Recurrent or metastatic cervical cancer with disease progression on or after chemotherapy.
*PADCEV, TUKYSA and TIVDAK are only indicated for use in adults.

Table of Contents

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 seven indications to treat Hodgkin lymphoma and ~~relapsed systemic anaplastic large cell~~certain T-cell lymphomas in various settings, including as frontline therapy for both adult and pediatric patients.

The most recent approval was granted in November 2022 for the treatment of pediatric patients two years and older with previously untreated high risk classical Hodgkin lymphoma, ~~or sALCL.~~in combination with doxorubicin, vincristine, etoposide, prednisone, and cyclophosphamide. The approval resulted in a grant of pediatric exclusivity, which extends the period of U.S. market exclusivity for ADCETRIS ~~is commercially available~~by an additional six months. Additionally, the FDA granted Orphan Drug Exclusivity that provides seven years of market exclusivity for its recently approved indication in 68children with previously untreated high risk Hodgkin lymphoma.

ADCETRIS has received approval in more than 75 countries ~~around the world, including~~worldwide. We commercialize ADCETRIS in the ~~United States,~~U.S. and its territories and in Canada, ~~members~~and we collaborate with an affiliate of ~~the European Union and Japan. We are collaborating with~~ Takeda Pharmaceutical Company Limited, or Takeda, to develop and commercialize ADCETRIS on a global basis. Under this collaboration, ~~Seattle Genetics retains commercial rights for ADCETRIS in the United States and its territories and in Canada, and~~ Takeda has commercial rights in the rest of the ~~world.~~

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 la/mUC 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 la/mUC 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 la/mUC 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 for previously treated la/mUC, including Brazil, Canada, Japan, Great Britain and Switzerland.

In April 2023, the FDA granted PADCEV with pembrolizumab accelerated approval in the U.S. as a combination therapy for the treatment of adult patients with la/mUC who are not eligible to receive cisplatin-containing chemotherapy. Continued approval for this indication is contingent upon verification and description of clinical benefit in the EV-302 confirmatory trial.

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 are based on product sales and costs of commercialization. In the remaining markets, the commercializing party is responsible for bearing the costs and paying 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.

Table of Contents

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.

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.

In January 2023, TUKYSA received accelerated approval from the FDA in combination with trastuzumab for adult patients with RAS wild-type, HER2-positive unresectable or metastatic colorectal cancer that has progressed following treatment with fluoropyrimidine-, oxaliplatin- and irinotecan-based chemotherapy. The approval was based on tumor response rate and durability of response from the phase 2 MOUNTAINEER clinical trial. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials.

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.

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 is 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 equally share all costs and profits for the product. 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, and certain territories where Zai Lab has commercialization rights, as further described below. 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 equally shared with Genmab.

Table of Contents

Clinical Development and Regulatory Status

ADCETRIS (brentuximab vedotin)

Beyond our current labeled indications, we ~~have a broad development strategy for~~are evaluating ADCETRIS ~~evaluating its therapeutic potential in earlier lines of therapy for patients with Hodgkin lymphoma, mature T-cell lymphoma, or MTCL, also known~~ as ~~peripheral T-cell lymphoma, or PTCL, including sALCL, as well as~~monotherapy and in combination with ~~checkpoint inhibitors. We and our partners are currently conducting four~~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 ~~as described below:~~

~~ALCANZA: In 2016, we and Takeda reported that~~in the ~~ALCANZA phase 3 trial met its primary endpoint. We submitted a supplemental Biologics License Application, or sBLA, to~~United States. The investigator-sponsored trials include the FDA in June 2017 to seek approval for a new indication in cutaneous T-cell lymphoma, or CTCL, for patients who require systemic therapy, based in part on data from the ALCANZA trial. The FDA granted Breakthrough Therapy Designation, or BTD, in November 2016 touse of ADCETRIS for the treatment of patients with CD30-expressing mycosis fungoides (MF) and primary cutaneous anaplastic large cell lymphoma (pcALCL) who require systemic therapy and have received one prior systemic therapy. In August 2017, the FDA granted Priority Review for the sBLA, and the Prescription Drug User Fee Act, or PDUFA, target action date is December 16, 2017.

ECHELON-1: In June 2017, we and Takeda announced positive top line data from the ECHELON-1 trial, a randomized, open-label, phase 3 trial investigating ADCETRIS plus AVD (adriamycin, vinblastine, dacarbazine) versus ABVD (adriamycin, bleomycin, vinblastine, dacarbazine) as frontline combination therapy in patients with previously untreated advanced classical Hodgkin lymphoma. The ECHELON-1 trial met its primary endpoint, demonstrating that treatment with ADCETRIS plus AVD resulted in a ~~statistically significant improvement~~number of malignant hematologic indications and in ~~modified progression-free survival, or PFS, versus the control arm as assessed by an independent~~solid tumors.

PADCEV (enfortumab vedotin-ejfv)

In addition to jurisdictions where PADCEV is currently approved, applications are under review ~~facility (hazard ratio=0.770; p-value=0.035). The two-year modified PFS rate~~ for ~~patients~~approval in the ~~ADCETRIS plus AVD arm was 82.1 percent compared to 77.2 percent~~previously treated metastatic urothelial cancer setting in the control arm. Interim analysis of overall survival, the key secondary endpoint, also trended in favor of the ADCETRIS plus AVD arm. The safety profile of ADCETRIS plus AVD in the ECHELON-1 trial was consistent with that known for the single-agent components of the regimen. There was an increased incidence of febrile neutropenia and peripheral

neuropathy in the ADCETRIS plus AVD arm. Febrile neutropenia was reduced through the use of prophylactic growth factors in a subset of patients, and peripheral neuropathy was managed through dose modifications. The control arm had an increased rate and severity of pulmonary toxicity as compared to the ADCETRIS plus AVD arm. In September 2017, the FDA granted BTD to ADCETRIS in combination with chemotherapy for the frontline treatment of patients with advanced classical Hodgkin lymphoma. In November 2017, we submitted an sBLA to the FDA seeking approval of ADCETRIS as part of a frontline combination chemotherapy regimen in patients with previously untreated advanced classical Hodgkin lymphoma.

ECHELON-2: In November 2016, we and Takeda completed enrollment of 452 patients in our ECHELON-2 trial for frontline MTCL. The primary endpoint of the trial is PFS per independent review facility assessment. Based on reviews of pooled, blinded data, we have observed a lower rate of reported PFS events than anticipated. We plan to discuss with the FDA the potential to unblind the trial prior to achieving the target number of PFS events specified in our Special Protocol Assessment, or SPA, agreement. Based on the length of follow-up and the slow rate at which PFS events are occurring, we believe the primary endpoint data will be mature in 2018, and continue to expect to report top-line data next year.

CHECKMATE 812: We and Bristol-Myers Squibb Company, or BMS, are conducting a pivotal phase 3 clinical trial, or the CHECKMATE 812 trial, to evaluate the combination of BMS’s immunotherapy Opdivo (nivolumab) with ADCETRIS for the treatment of relapsed/refractory or transplant-ineligible advanced classical Hodgkin lymphoma.

The ALCANZA, ECHELON-1 and ECHELON-2 trials are each being conducted under SPA agreements with the FDA and pursuant to scientific advice from the European Medicines Agency, or EMA. A SPA agreement is an agreement with the FDA regarding the design of the clinical trial, including size and clinical endpoints, to support an efficacy claim in a new drug application or a BLA submission to the FDA if the trial achieves its primary endpoint.

~~Clinical-stage product candidates~~

other countries. In collaboration with Astellas, ~~Pharma, Inc., or Astellas,~~ we are ~~developing enfortumab vedotin, formerly known asASG-22ME.~~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 continuing to be investigated in first-line metastatic urothelial cancer and earlier stages of bladder cancer. We and Astellas are conducting a ~~pivotal~~ phase 1b/2 clinical trial, ~~for~~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 April 2023, the FDA granted PADCEV with pembrolizumab accelerated approval in the U.S. as a combination therapy for the treatment of adult patients with la/mUC who are not eligible to receive cisplatin-containing chemotherapy. Continued approval for this indication is contingent upon verification and description of clinical benefit in the EV-302 confirmatory trial.

We are conducting a global, registrational phase 3 clinical 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 la/mUC. The trial includes metastatic urothelial cancer patients who are either eligible or ineligible for cisplatin-based chemotherapy. The trial has dual primary endpoints of PFS and OS and is intended to support global regulatory submissions and potentially serve as a confirmatory trial for the accelerated approval granted based on EV-103. In November 2022, we completed enrollment in the EV-302 trial, and we have ~~been previously treated~~initiated an extension study in China which continues to enroll patients. Based on study assumptions, we estimate we could report topline data by the end of 2023.

In April 2020, we and Astellas entered into an agreement with ~~checkpoint inhibitor, or CPI, therapy.~~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 clinical 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 clinical 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. We expect to report initial data from the trial in the first half of 2023.

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.

We are conducting 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 and expect to report topline data in the third quarter of 2023. For this trial, we have initiated an extension study in China which continues to enroll patients.

Table of Contents

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 ~~plan~~conducting a phase 2 clinical 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 clinical trial, called HER2CLIMB-05, evaluating TUKYSA compared to ~~initiate~~placebo in combination with trastuzumab and pertuzumab in the frontline maintenance setting for patients with metastatic HER2-positive breast cancer.

In addition, we are conducting a phase 3 clinical trial, called MOUNTAINEER-03, in combination with trastuzumab and mFOLFOX6 in first-line HER2-positive metastatic colorectal cancer, which is intended to serve as a confirmatory trial for the accelerated approval in the U.S. based on the MOUNTAINEER trial and potentially support future global regulatory submissions. We also have an ongoing 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. The FDA granted accelerated approval of ~~enfortumab~~TIVDAK in September 2021 for the treatment of adult patients with recurrent or metastatic cervical cancer with disease progression on or after chemotherapy. Continued approval is contingent upon verification and description of clinical benefit in confirmatory trials. In December 2022, the NCCN Guidelines were updated elevating TIVDAK to a Category 2A Preferred Regimen for second-line or subsequent recurrent or metastatic cervical cancer.

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. In February 2023, we completed enrollment in the innovaTV 301 trial, and we have initiated an extension study in China which continues to enroll patients.

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. In this cohort, the most common TEAEs were alopecia (61%), diarrhea (55%), epistaxis (49%), conjunctivitis (45%), and nausea (46%). We expect to report additional data in the second half of 2023.

We are conducting a phase 2 clinical trial, called innovaTV 207, for patients with relapsed, locally advanced or metastatic solid tumors. In April 2023, data was presented at the AACR Annual Meeting from an interim analysis of the Part C portion of the innovaTV 207 Phase 2 study of TIVDAK given every 2 weeks in patients with recurrent or metastatic squamous cell carcinoma of the head and neck who have progressed after prior platinum combination, immunotherapy, and targeted therapy, if eligible. Results with this regimen demonstrated encouraging preliminary antitumor activity with a confirmed overall response rate of 40% and a manageable safety profile.

Disitamab vedotin

Effective 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 clinical trial evaluating disitamab vedotin as monotherapy in previously treated HER2-expressing metastatic urothelial cancer and a phase 3 clinical trial evaluating disitamab vedotin in combination with ~~CPI therapy~~pembrolizumab in first-line treatment for HER2-expressing metastatic urothelial cancer that is expected to ~~begin late~~initiate in ~~2017~~2023.

Table of Contents

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 ~~urothelial cancer.~~

breast cancer and select solid tumors with high LIV-1 expression. We expect to report initial data in solid tumors in the second half of 2023. In September 2020, we and Merck entered into a license and collaboration ~~with Genmab A/S,~~agreement, or ~~Genmab, we~~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 ~~developing tisotumab vedotin, an ADC that targets tissue factor. We and Genmab plan to start~~advancing a ~~pivotal phase 2~~pipeline of early-stage clinical ~~trial in patients with recurrent and/or metastatic cervical cancer.~~

~~Our clinical-stage pipeline also includes five other ADC programs consisting of SGN-LIV1A, SGN-CD19A, or denintuzumab mafodotin, SGN-CD19B, SGN-CD123A, and SGN-CD352A,~~candidates as well as ~~two immuno-oncology agents, SEA-CD40, which is based on our sugar-engineered antibody, or SEA, technology, and SGN-2FF, which is a novel small molecule. In addition, we have~~ multiple preclinical and research-stage programs that employ our proprietary ~~technologies, including SGN-CD48A.~~

~~In June 2017,~~technologies. We advanced several product candidates into clinical development since the beginning of 2021, and we announced that we were discontinuing the phase 3 CASCADE clinical trial of SGN-CD33A in frontline older acute myeloid leukemia, or AML, patients, and suspending patient enrollment and treatment in all other SGN-CD33A trials. We took this action following consultation with the Independent Data Monitoring Committee, or IDMC, and after reviewing unblinded data from the CASCADE trial which indicated a higher rate of deaths, including fatal infections, in the SGN-CD33A-containing arm versus the control arm of the trial. In addition, theplan to submit additional Investigational New Drug ~~application,~~applications, or INDs, to the FDA in 2023.

In April 2023, we reported the first clinical data for SEA-TGT that demonstrated a manageable and tolerable safety profile with initial monotherapy antitumor activity in solid tumors and lymphomas at the AACR Annual Meeting.

In November 2022, we reported interim phase 1 monotherapy results for SGN-B6A at the Society for Immunotherapy of Cancer’s, or SITC’s, Annual Meeting. In the study, dose escalation cohorts enrolled 79 participants with metastatic or unresectable solid tumors, whose disease had relapsed or was refractory to standard of care therapies and had not previously received an MMAE-containing agent or agent targeting integrin beta-6. Participants had received a median of 3 lines of therapy for metastatic disease prior to enrollment in the study. SGN-B6A demonstrated a manageable and tolerable safety profile at the explored dose levels and schedules. Intermittent dosing schedules (2Q3W, 2Q4W) are being evaluated further. The initial anti-tumor activity observed in heavily pre-treated patients is encouraging and has triggered expansion cohorts in NSCLC, HNSCC, and ESCC, which are currently ongoing. We expect to report durability data in the first half of 2023.

We are also developing SGN-B7H4V, an ADC which we are evaluating in a phase 1 clinical trial in certain solid tumors including breast, endometrial and ovarian cancer. We expect to report initial data in the second half of 2023.

In September 2022, we entered into an agreement with LAVA Therapeutics N.V., or LAVA, to develop and commercialize LAVA-1223, also known as SGN-EGFRd2, a preclinical gamma delta bispecific T-cell engager for EGFR-expressing solid tumors. We received an exclusive global license for SGN-EGFRd2 and the opportunity to exclusively negotiate rights to apply LAVA’s proprietary Gammabody™ platform on up to two additional tumor targets. We are targeting filing an IND for ~~SGN-CD33A~~SGN-EGFRd2 in 2023.

In March 2022, we entered into a collaboration with Sanofi to develop and potentially commercialize multiple novel ADCs. The agreement is an exclusive collaboration that will utilize Sanofi’s proprietary monoclonal antibody technology and our proprietary ADC technology for up to three cancer targets. In April 2023, we and Sanofi presented the first preclinical data from a novel topoisomerase I inhibitor ADC targeting CEACAM5, showing potent antitumor activity in patient-derived colorectal cancer models. We are targeting filing an IND for the initial ADC in 2023.

In January 2023, the first patient was dosed in a phase 1 trial of SGN-BB228, a CD228x4-1BB bispecific molecule, in advanced melanoma and other solid tumors.

Antibody-Drug Conjugate technology license agreements

Genentech has ~~been placed on hold, and no clinical trials may resume under the IND until~~received approval from the FDA ~~lifts~~for Polivy® (polatuzumab vedotin-piic), an ADC that uses our technology, to treat patients with diffuse large B-cell lymphoma. In August 2020, GSK plc, or GSK, received accelerated approval from the FDA and conditional marketing authorization from the EC for Blenrep® (belantamab mafodotin-blmf), an ADC developed by GSK that uses our technology, for treatment of patients with relapsed or refractory multiple myeloma who have received at least four prior therapies including an anti-CD38 monoclonal antibody, a proteasome inhibitor and an immunomodulatory agent. Under our ADC license agreements with Genentech and an affiliate of GSK, these events triggered milestone payments to us and we are also entitled to receive royalties on net sales of Polivy and Blenrep worldwide. In November 2022, GSK announced that it had initiated the process for withdrawal of U.S. marketing authorization for Blenrep following a request by the FDA.

The product candidates being developed under our other ADC license agreements are at various stages of clinical ~~hold.~~ and preclinical development. Our ability to generate meaningful future revenues from our other ADC license agreements will largely depend on products that incorporate our technologies entering late-stage clinical development, and receiving marketing approval from the FDA and subsequently being commercialized, if any.

Table of Contents

COVID-19

We are continuing to ~~review data~~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 and to continue our business operations so we can advance our goal of bringing important medicines to patients. Earlier in the pandemic, we instituted a mandatory work-from-home policy for ~~the SGN-CD33A program; however, at this time, we have no plans to initiate additional clinical trials of SGN-CD33A.~~

employees who could perform their jobs offsite, but continued our essential research, manufacturing, and laboratory activities on site. We have ~~collaborations for our ADC technology with~~since allowed additional employees to return to the office. We maintain a number of ~~biotechnology~~precautionary measures designed to protect our on-site employees, such as enhanced facilities cleaning, contact tracing and ~~pharmaceutical companies, including AbbVie Biotechnology Ltd.~~making testing available. 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 in the U.S., ~~or AbbVie; Bayer Pharma AG, or Bayer; Celldex Therapeutics, Inc.~~Canada, and Latin America, from TUKYSA in the U.S., ~~or Celldex; Genentech, Inc.,~~Europe and Canada, and TIVDAK in the U.S. We expect 2023 growth in net product sales of our portfolio to be primarily supported by sales volume growth and to a ~~member of~~lesser degree price favorability. Recently, we have experienced a favorable effect on gross-to-net deductions in the ~~Roche Group, or Genentech; GlaxoSmithKline LLC, or GSK; Pfizer, Inc., or Pfizer;~~U.S. market associated with high inflation, but it is not possible to predict how inflation will develop going forward and ~~PSMA Development Company LLC, a subsidiary of Progenics Pharmaceuticals Inc., or Progenics.~~affect gross-to-net deductions in future periods. In addition, we experienced a reduction in diagnosis rates for the ADCETRIS frontline indications earlier in the COVID-19 pandemic; however, recently, we believe these diagnosis rates have returned to pre-pandemic levels. We cannot predict how these diagnosis rates will trend in the future. We expect that ADCETRIS and PADCEV will remain the largest contributors to our sales growth in 2023. We expect ADCETRIS growth to be driven by continued use across its seven indications, most notably in frontline Hodgkin lymphoma. We anticipate PADCEV growth in 2023 to be driven primarily by sales in its frontline la/mUC indication in the U.S, and that the rate of growth of PADCEV for its previously-treated la/mUC indications in the U.S. will decelerate in 2023 compared to 2022 after three full years in the market since PADCEV’s launch. 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 previously-treated la/mUC indications. We also expect that growth in TUKYSA will continue to be impacted by competitive headwinds related to Enhertu’s recent approvals and its increased use in the second line plus setting, which is expected to continue into 2023.

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 ~~collaboration with Unum Therapeutics, Inc.,~~ 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 ~~Unum,~~in additional indications, including any additional approvals for PADCEV in the frontline la/mUC setting and any approvals for TUKYSA in earlier lines of breast cancer and/or other HER2-positive cancers;

•our and our collaborators’ ability to ~~develop~~successfully launch, market and commercialize ~~novel antibody-coupled T-cell receptor,~~our products in any new markets or ~~ACTR,~~new indications, if regulatory approval is obtained, including our and Astellas’ ability to successfully launch, market and commercialize PADCEV in its frontline la/mUC indication in the U.S. and Astellas’ ability to successfully launch, market and commercialize PADCEV in the European Union and its other markets;

•competition from other therapies ~~incorporating~~and changing market dynamics, as further described in “Business—Competition” in Part I Item 1 of our ~~antibodies~~Annual Report on Form 10-K for the ~~treatment~~year ended December 31, 2022, filed with the Securities and Exchange Commission; for example, the approval of ~~cancer.~~

~~Our ongoing research, development, manufacturing~~Enhertu for second-line HER2-positive metastatic breast cancer has resulted and ~~commercial activities will require substantial amounts~~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 and Merck’s abilities to successfully market and commercialize TUKYSA in our respective territories outside the U.S.;

•the extent to which coverage and adequate levels of ~~capital~~reimbursement for our products are available from governments and ~~may not ultimately be successful. Over~~ other third-party payors;

•the ~~next several years,~~extent to which we ~~expect~~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;

•future inflation levels and their impact on mandatory discounts under U.S. government programs;

Table of Contents

•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 ~~will incur substantial expenses, primarily~~receive for our products;

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

•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 confirmatory trials as a result of ~~activities~~PADCEV’s, TUKYSA’s and TIVDAK’s accelerated approvals by the FDA, and to convert these accelerated approvals to regular approvals 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 ~~commercialization of~~COVID-19 pandemic, including potential future adverse effects on diagnosis rates for the ADCETRIS frontline indications and ~~the continued development of ADCETRIS, enfortumab vedotin, and tisotumab vedotin. Our~~potential adverse impacts on diagnosis rates for other product candidates are in relatively early stages of development. Enfortumab vedotin, tisotumab vedotin and our other product candidates will require significant further development, financial resources and personnel to pursue and obtain regulatory approval and develop into commercially viable products, if at all. Our commitment of resources to the continuing development, regulatory and commercialization activities for ADCETRIS, the research, continued development and manufacturing of our product candidates and expansion of our pipeline will likely require us to raise substantial amounts of additional capital and our operating expenses may fluctuate ascancers.

As a result of ~~such activities. In addition, we may incur significant milestone payment obligations to certain~~these and other factors, our future net product sales for each of our ~~licensors as our product candidates progress through clinical trials towards potential commercialization.~~

~~We recognize revenue from ADCETRIS product sales in the United States and Canada. Our future ADCETRIS product sales are~~products can be difficult to accurately predict from period to period. ~~In this regard,~~We cannot assure you that sales of any of our ~~product sales have varied, and may~~products will continue to ~~vary, significantly from period~~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 ~~period~~develop or have commercialized products similar to those we market or are developing. Drug prices are under significant scrutiny and ~~may~~we expect drug pricing and other healthcare costs to continue to be ~~affected by~~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 ~~factors. Such factors include~~potential legislative policies that Congress could pursue to advance these principles. Further, on August 16, 2022, President Biden signed the ~~incidence rate~~Inflation Reduction Act of ~~new patients in ADCETRIS’ approved indications, customer ordering patterns,~~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; (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation; and (iii) redesigns the Medicare Part D program, increasing manufacturer rebates within the catastrophic coverage phase. In addition to pricing actions and other measures being taken worldwide designed to reduce healthcare costs and limit the overall level of ~~demand for ADCETRIS, the duration of therapy for patients receiving ADCETRIS, and the extent to which coverage and reimbursement for ADCETRIS is available from~~ government and other third-party payers. Obtaining and maintaining appropriate coverage and reimbursement for ADCETRIS is increasingly challenging due to, among other things, the attention being paid to healthcare cost containment and other austerity measures in the U.S. and worldwide, as well as increasing legislative and enforcement interest in the United States with respect to pharmaceutical drug pricing practices. We anticipate that healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and an additional downward pressure on the price that we receive for ADCETRIS. We also anticipate that Congress, state legislatures, and third-party payors may continue to review and assess alternative healthcare delivery and payment systems and may in the future propose and adopt legislation or policy changes or implementations effecting additional fundamental changes in the healthcare delivery system, any of which could negatively affect our revenue or sales of ADCETRIS (or any future approved products). In addition, the competition ADCETRIS faces from competing therapies is intensifying, and we anticipate that we will continue to face increasing competition in the future as new companies enter our market and scientific developments surrounding biosimilars and other cancer therapies continue to accelerate. We also believe that the level of our current ADCETRIS sales in the United States has been attributable to the incidence flow of patients eligible for treatment with ADCETRIS, which can vary significantly from period to period. Moreover, we believe that the incidence rate in ADCETRIS’ approved indications is relatively low, particularly when compared to many other oncology indications. For these and other reasons, we expect that our ability to accelerate ADCETRIS sales growth, if at all, will depend primarily on our ability to continue to expand ADCETRIS’ labeled indications of use, particularly with respect to the frontline Hodgkin lymphoma and frontline MTCL indications. Our efforts to continue to expand ADCETRIS’ labeled indications of use will continue to require additional time and investment in clinical trials to complete and may not be successful. Our ability to successfully commercialize ADCETRIS and to continue to expand its labeled indications of use are subject to a number of risks and uncertainties, including those discussed in Part II, Item 1A of this Quarterly Report on Form 10-Q. In particular, although we reported positive top line data in both our ALCANZA and ECHELON-1 trials in August 2016 and June 2017, respectively, there can be no assurance that either we or Takeda will ultimately obtain regulatory approvals of ADCETRIS in either of the ALCANZA or ECHELON-1 treatment settings in our respective territories, which would limitexpenditures, our sales ~~of,~~ and the commercial potential of, ADCETRIS. In addition, negative or inconclusive results in our ECHELON-2 trial would negatively impact, or preclude altogether, our and Takeda’s ability to obtain regulatory approvals in the frontline MTCL indication in our respective territories, whichoperations could also ~~limit our sales~~be affected by other risks of ~~and the commercial potential of, ADCETRIS.~~ doing business internationally.

We ~~also~~ expect that amounts ~~earned~~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, ~~including our ADCETRIS collaboration with Takeda,~~ 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.

In connection with the pending acquisition of the Company by Pfizer, we expect to incur non-recurring acquisition and transaction fees, which include legal and advisory fees, and substantial acquisition-related costs, including employee retention expenses.

Table of Contents

We are continuing to monitor the impact 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. The evolving effects of the COVID-19 pandemic appear to have negatively affected our product sales in the past and could affect product sales in the future. In this regard, impacts associated with the COVID-19 pandemic appear to have led to a reduction in diagnosis rates for the ADCETRIS frontline indications earlier in the pandemic and, while we believe these diagnosis rates have returned to pre-pandemic levels, these impacts may have adversely affected diagnosis rates of other cancers, and may adversely affect rates of cancer diagnoses or patient access to healthcare settings in the future. As we resume more travel and in-person interactions after pauses earlier in the pandemic, 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, COVID-19 variants, government actions, restrictions at healthcare institutions, or otherwise. Future COVID-19 related restrictions could negatively impact research and development activities or sales and marketing efforts, or could present product distribution challenges.

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 (or any future pandemic) impact our business will depend on future developments that are highly uncertain, such as virus 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.

Financial summary

For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, our total revenues increased to ~~$352.6~~$519.7 million, compared to ~~$312.9~~$426.5 million for the same period in ~~2016. This~~2022. This increase was ~~driven~~ primarily drivenby $85.6 million or 22% higher ~~ADCETRIS~~ net product sales, ~~offset in part by a decline in royalty revenues, which included a one-time $20.0 million milestone payment in~~due to growth from our commercial portfolio.

For the ~~first quarter of 2016. Net product sales of ADCETRIS were $223.8 million for the nine~~three months ended ~~September 30, 2017, compared to $195.0 million for the same period in 2016. For the nine months ended September 30, 2017,~~March 31, 2023, total costs and expenses increased to ~~$503.4~~$704.2 million, compared to ~~$399.7~~$559.5 million for the same period in ~~2016. This~~2022. The increase was due primarily ~~reflected increased investment in enfortumab vedotin~~to higher sales, general, and ~~increased drug product supply activities~~administrative expenses, higher research and development expenses, and, to ~~Takeda, as well as investment in our growing pipeline~~a lesser extent, higher cost of ~~pre-clinical and clinical-stage programs.~~ sales.

As of ~~September 30, 2017,~~March 31, 2023, we had ~~$470.4 million~~$1.5 billion in cash, cash equivalents and ~~short- and long-term~~ investments and ~~$659.7 million~~$2.7 billion in total stockholders’ equity. ~~Net income (loss) for the three and nine month periods ended September 30, 2017 included a gain~~

Table of $78.7 million and $76.7 million in investment and other income, net, resulting from the change in the fair value of the Immunomedics warrant derivative for the three and nine months ended September 30, 2017, respectively. Losses from operations were $32.2 million and $150.8 million for the three and nine months ended September 30, 2017, respectively, and we otherwise expect to continue to incur net losses in future periods.

Contents

Results of operations

~~Three and nine months ended September 30, 2017 and 2016~~

Net product sales

~~We sell ADCETRIS in the U.S. and Canada.~~


	Three months ended March 31,
(dollars in thousands)	2023		2022		% Change
ADCETRIS	$	243,062	$	180,989	34	%
PADCEV	118,706		100,207		18	%
TUKYSA	87,376		90,475		(3)	%
TIVDAK	19,495		11,415		71	%
Net product sales	$	468,639	$	383,086	22	%

Our net product sales ~~were~~increased during the three months ended March 31, 2023 as ~~follows ($~~compared to the comparable period in ~~thousands):~~

   Three months ended
September 30, Nine months ended
September 30,
   2017    2016    % Change 2017    2016    % Change
Net product sales
   $ 79,177    $ 70,117    13 % $ 223,841    $ 194,981    15 %

~~The increase~~2022, driven by continued commercial execution.

ADCETRIS net product sales grew primarily due to higher volume growth driven by greater use in frontline advanced Hodgkin lymphoma and higher diagnosis rates. PADCEV net product sales grew primarily due to higher sales volume as a result of additional eligible patients in second line post checkpoint maintenance setting for metastatic urothelial cancer, driven by continued penetration of checkpoint inhibitors in the first-line setting. TUKYSA net product sales decreased slightly due to competitive dynamics in its breast cancer indication as well as early contributions from its colorectal cancer indication. TIVDAK growth reflects continued uptake in its current indication.

We expect growth in net product sales ~~for the three and nine months ended September 30, 2017 over the comparable periods~~ in ~~2016~~2023 as compared to 2022 to be primarily ~~resulted from an increase in~~supported by sales volume growth and to a lesser ~~extent, from the effect of~~degree price ~~increases instituted since the 2016 period. The increase in sales volume was primarily driven by increased use of ADCETRIS across multiple lines of therapy in Hodgkin lymphoma and~~favorability. Refer to “Overview—Outlook” above for ~~the treatment of other CD30-expressing malignancies.~~

We expect continued growth in ADCETRIS sales in 2017 as compared to 2016. Our ability to accelerate the rate of ADCETRIS sales growth in future periods, if at all, will be primarily dependent on our ability to continue to expand ADCETRIS’ labeled indications of use. Our efforts to expand ADCETRIS’ labeled indications of use will continue to require additional ~~time and investment in clinical trials to complete and may not be successful.~~

We sell ADCETRIS through a limited number of pharmaceutical distributors. Customers order ADCETRIS through these distributors and we typically ship product directly to the customer. We record product sales when title and risk of loss pass, which generally occurs upon delivery of the product to the customer. Product sales are recorded net of estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns and other deductions. These are generally referred to as gross-to-net deductions. Accruals are established for theseinformation.

Gross-to-net deductions, and actual amounts incurred are offset against applicable accruals. We reflect these accruals as either a reduction in the related account receivable from the distributor, or as an accrued liability depending on the nature of the sales deduction. Sales deductions are based on our estimates that consider payer mix in target markets and our experience to date. These estimates involve a substantial degree of judgment.

~~Government-mandated rebates and chargebacks:~~We have entered into a Medicaid Drug Rebate Agreement with the Centers for Medicare & Medicaid Services. This agreement provides for a rebate to participating states based on covered purchases of ADCETRIS. Medicaid rebates are invoiced to us by the various state Medicaid programs. We estimate Medicaid rebates based on a variety of factors, including our experience to date. We also have completed our Federal Supply Schedule, or FSS, agreement under which certain U.S. government purchasers receive a discount on eligible purchases of ADCETRIS. We have entered into a Pharmaceutical Pricing Agreement with the Secretary of Health and Human Services which enables certain entities that qualify for government pricing under the Public Health Services Act, or PHS, to receive discounts on their qualified purchases of ADCETRIS. Under these agreements, distributors process a chargeback to us for the difference between wholesale acquisition cost and the applicable discounted price. As a result of our direct-ship distribution model, we can identify the entities purchasing ADCETRIS and this information enables us to estimate expected chargebacks for FSS and PHS purchases based on each entity’s eligibility for the FSS and PHS programs. We also review actual rebate and chargeback information to further refine these estimates.

~~Distribution fees, product returns and other deductions:~~Our distributors charge a volume-based fee for distribution services that they perform for us. We allow for the return of product that is within 30 days of its expiration date or that is damaged. We estimate product returns based on our experience to date. In addition, we consider our direct-ship distribution model, our belief that product is not typically held in the distribution channel, and the expected rapid use of the product by healthcare providers. We provide financial assistance to qualifying patients that are underinsured or cannot cover the cost of commercial coinsurance amounts through SeaGen Secure. SeaGen Secure is available to patients in the U.S. and its territories who meet various financial and treatment need criteria. Estimated contributions for commercial coinsurance under SeaGen Secure are deducted from gross sales and are based on an analysis of expected plan utilization. These estimates are adjusted as necessary to reflect our actual experience.

~~Gross-to-net deduction accruals,~~ net of related payments and credits, ~~are summarized~~were as ~~follows (in thousands):~~

   Rebates and
chargebacks    Distribution fees,
product returns
and other    Total
Balance as of December 31, 2016
   $ 9,500    $ 3,198    $ 12,698
Provision related to current period sales
   75,006    5,605    80,611
Adjustment for prior period sales
   1,156    (212 )    944
Payments/credits for current period sales
   (64,756 )    (3,993 )    (68,749 )
Payments/credits for prior period sales
   (9,306 )    (1,223 )    (10,529 )






Balance as of September 30, 2017
   $ 11,600    $ 3,375    $ 14,975

~~Mandatory government discounts~~follows:


(in thousands)	Rebates and chargebacks		Distribution fees, product returns and other		Total
Balance as of December 31, 2022	$	111,251	$	21,978	$	133,229
Provision related to current period sales	179,463		15,165		194,628
Adjustment for prior period sales	(1,510)		(1,234)		(2,744)
Payments/credits for current period sales	(134,589)		(8,975)		(143,564)
Payments/credits for prior period sales	(36,704)		(5,703)		(42,407)
Balance as of March 31, 2023	$	117,911	$	21,231	$	139,142

Government-mandated rebates and chargebacks are the most significant component of our total gross-to-net deductions and the discount ~~percentage has been increasing. These discount percentages increased during the three~~changes over time. The most significant portion of our gross-to-net accrual balances as of March 31, 2023 and nine months ended September 30, 2017 over the comparable periods in 2016 as a result of price increases we instituted that exceeded the rate of inflation, and to a lesser extent, as a result of an increase in sales eligible2022 was for ~~government mandated rebates or chargebacks. Generally, the change in government prices is limited to the rate of inflation.~~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.~~

~~As a result of price increases and a continued increase in the percentage of our gross sales that are eligible for government mandated rebates and chargebacks, we~~factors. We expect gross-to-net deductions to increase in ~~2017~~2023 as compared to ~~2016. In recent months there has been extensive discussion~~2022, driven by anticipated growth in the United States about expanding government discount programs, including allowing Medicare to negotiate drug prices, and pressure on pharmaceutical drug pricing is expected to increase. If government discounted programs are expanded or discounts increased as a result of changes in regulations in the United States, our gross product sales.

Royalty revenues

Royalty revenues primarily reflect royalties earned under the ADCETRIS collaboration with Takeda. These royalties include commercial sales-based milestones and sales royalties. Sales royalties are based on a percentage of Takeda’s net sales of ADCETRIS, with rates that range from the mid-teens to the mid-twenties based on annual net ~~deductions~~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® (polatuzumab vedotin) and amounts from GlaxoSmithKline earned on net sales of Blenrep, 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.

Table of Contents


	Three months ended March 31,
(dollars in thousands)	2023		2022		% Change
Royalty revenues	$	30,178	$	28,181	7	%

Royalty revenues increased for the three months ended March 31, 2023 from the comparable period in 2022, due primarily to higher net product sales by our licensees in their territories. driven by Takeda’s net sales growth of ADCETRIS outside the U.S. and Canada, as well as royalties from sales of Polivy by Roche.

We expect that royalty revenues will increase ~~and our~~in 2023 as compared to 2022 primarily due to higher royalties from anticipated growth of licensees’ net product sales, ~~will be negatively impacted.~~

including sales of ADCETRIS by Takeda in its territory along with contributions from sales of Polivy by Roche.

Collaboration and license agreement revenues

Our proprietary ADC technologies are the basis of our ADC collaborations that we have entered into in the ordinary course of business with a number of biotechnology and pharmaceutical companies. Under these ADC collaboration agreements, we grant our collaborators research and commercial licenses to our technology and typically provide technology transfer services, technical advice, supplies and services for a period of time.

~~If there are continuing performance obligations, we use a time-based proportional performance model to recognize revenue over our performance period for the related agreement.~~

Collaboration and license ~~agreements are evaluated to determine whether the multiple elements~~agreement revenues reflect amounts earned under certain of our license and ~~associated deliverables can be considered separate units of accounting. To date, the pre-commercial deliverables under our~~ collaboration ~~and~~agreements. These revenues reflect license agreements have not qualified as separate units of accounting. The assessment of multiple element arrangements requires judgment in order to determine the appropriate point in time, or period of time, that revenue should be recognized. We believe that the development period in each agreement is a reasonable estimate of the performance obligation period of such agreement. Accordingly, all amountsfees, payments received ~~or due, including any upfront payments,~~by us for technology access and maintenance fees, ~~development and regulatory~~sales of drug supply to our collaborators, milestone payments, and reimbursement payments are recognized as revenue over the performance obligation periods of each agreement. These performance obligation periods typically range from one to three years. The agreements with Takeda and Genentech have performance obligation periods of ten and seventeen years, respectively. All of the remaining performance obligation periods for our active collaborations are currently expected to be completed in three years or less. When no performance obligations are required of us, or following the completion of the performance obligation period, such amounts are recognized as revenue when collectibility is reasonably assured. Generally, all amounts received or due other than sales-based milestones and royalties are classified as collaboration and license agreement revenues as they are earned. Sales-based milestones and royalties are recognized as royalty revenue as they are reported to us.

Our collaboration and license agreements include contractual milestones. Generally, the milestone events contained in our collaboration and license agreements coincide with the progression of the collaborators’ product candidates from development to regulatory approval and then to commercialization.

~~Development milestones in our collaborations may include the following types of events:~~

~~Designation of a product candidate or initiation of pre-clinical studies. Our collaborators must undertake significant pre-clinical~~ research and ~~studies~~development support that we provide to ~~make a determination of the suitability of a product candidate and the time from those studies or designation to initiation of a clinical trial may take several years.~~

~~Initiation of a phase 1 clinical trial. Generally, phase 1 clinical trials may take one to two years to complete.~~

~~Initiation of a phase 2 clinical trial. Generally, phase 2 clinical trials may take one to three years to complete.~~

~~Initiation of a phase 3 clinical trial. Generally, phase 3 clinical trials may take two to six years to complete.~~

~~Regulatory milestones in~~ our ~~collaborations may include the following types of events:~~

collaborators.

Filing of regulatory applications for marketing approval such as a BLA in the United States or a Marketing Authorization Application in Europe. Generally, it may take up to twelve months to prepare and submit regulatory filings.


	Three months ended March 31,
(dollars in thousands)	2023		2022		% Change








Collaboration and license agreement revenues	$	20,902	$	15,193	38	%

Receiving marketing approval in a major market, such as in the United States, Europe, Japan or other significant countries. Generally it may take up to three years after a marketing application is submitted to obtain approval for marketing and pricing from the applicable regulatory agency.

~~Commercialization milestones in our collaborations may include the following types of events:~~

~~First commercial sale in a particular market, such as in the United States, Europe, Japan or other significant countries.~~

Our ADC collaborators are solely responsible for the development of their product candidates and the achievement of milestones in any of the categories identified above is based solely on the collaborators’ efforts.

In the case of our ADCETRIS collaboration with Takeda, we may be involved in certain development activities; however, the achievement of development, regulatory and commercial milestone events under the agreement is primarily based on activities undertaken by Takeda.

The process of successfully developing a product candidate, obtaining regulatory approval and ultimately commercializing a product candidate is highly uncertain and the attainment of any milestones is therefore uncertain and difficult to predict. In addition, since we do not take a substantive role or control the research, development or commercialization of any products generated by our ADC collaborators, we are not able to reasonably estimate when, if at all, any milestone payments or royalties may be payable to us by our ADC collaborators. As such, the milestone payments associated with our ADC collaborations involve a substantial degree of uncertainty and risk that they may never be received. Similarly, even in those collaborations where we may have an active role in the development of the product candidate, such as our ADCETRIS collaboration with Takeda, the attainment of a milestone is based on the collaborator’s activities and is generally outside our direction and control.

We generally invoice our collaborators and licensees on a monthly or quarterly basis, or upon the completion of the effort or achievement of a milestone, based on the terms of each agreement. Any deferred revenue arising from amounts received in advance of the culmination of the earnings process is recognized as revenue in future periods when the applicable revenue recognition criteria have been met. Deferred revenue expected to be recognized within the next twelve months is classified as a current liability.

Collaboration and license agreement revenues ~~by collaborator are summarized as follows ($ in thousands):~~

   Three months ended
September 30, Nine months ended
September 30,
   2017    2016    % Change 2017    2016    % Change
Takeda
   $ 21,665    $ 12,087    79 % $ 59,158    $ 34,530    71 %
AbbVie
   17,350    8,780    98 % 21,394    19,274    11 %
Other
   429    3,107    (86 )% 2,227    10,344    (78 )%










Total
   $ 39,444    $ 23,974    65 % $ 82,779    $ 64,148    29 %

Collaboration revenues from Takeda fluctuate based on changes in the earned portion of reimbursement funding under the ADCETRIS collaboration, which are influenced by the activities each party is performing under the collaboration agreement at a given time. Collaboration revenues from Takeda increased ~~during~~for the three ~~and nine~~ months ended ~~September 30, 2017 from~~March 31, 2023 compared to the comparable ~~periods~~period in ~~2016,~~2022, due primarily ~~driven~~to higher royalties from Astellas’ sales of PADCEV in its territory.

Collaboration and license agreement revenue is highly dependent on progress by ~~an increase~~our collaboration partners and new collaborations that are difficult to predict. We expect that collaboration and license agreements revenues will decrease in ~~drug product supply activities.~~

Changes in revenues recognized from AbbVie and from our other collaboration agreements, which include our ADC collaborations and our co-development collaborations, reflect the timing of development milestones and licensing fees.

2023 as compared to 2022. Our collaboration and license agreement revenues are impacted by the term and duration of ~~our collaboration and license~~those agreements and by progress-dependent milestones, annual maintenance fees, and reimbursement of materials and support services. Collaboration and license agreement revenues may vary substantially from year to year and quarter to quarter depending on the progress made by our collaborators with their product candidates, amount of drug supplied to our collaborators, the level of support we provide to our collaborators, specifically to Takeda under our ADCETRIS collaboration, the timing of milestones achieved and our ability to enter into potential additional collaboration and ~~co-development~~license agreements. ~~We expect our collaboration~~

Collaboration and license ~~agreement revenues in 2017 to increase as compared with 2016 due to the timing of progress-dependent milestones achieved.~~ agreements

Takeda ADCETRIS collaboration

We have a significant balance of deferred revenue, representing prior payments from our collaborators that have not yet been recognized as revenue. This deferred revenue will be recognized as revenue in future periods using a time-based approach as we fulfill our performance obligations.

~~Collaboration agreements~~

~~Takeda~~

~~Our ADCETRIS~~ collaboration agreement with Takeda ~~provides~~ for the global co-development of ADCETRIS ~~by the companies~~ and the commercialization of ADCETRIS by Takeda in its territory. We ~~received an upfront payment~~recognize payments from Takeda, including progress-dependent development and ~~have received and are entitled to receive progress-dependent~~regulatory milestone payments, based on Takeda’s achievement of significant events under the collaboration, in addition to tiered royalties with percentages starting in the mid-teens and escalating to the mid-twenties based on net sales of ADCETRIS within Takeda’s licensed territories. Additionally, the companies equally co-fund the cost of selected development activities conducted under the collaboration. We recognize as collaboration revenue the upfront payment, progress-dependent milestone payments,reimbursement for drug supplied, and net development cost reimbursement payments, ~~from Takeda~~as collaboration and license agreement revenues upon transfer of control of the goods or services over the ~~ten-year~~ development ~~period of the collaboration, which began in December 2009.~~period. When the performance of development activities under the collaboration results in us making a reimbursement payment to Takeda, ~~the effect is to reduce the amount of collaboration revenue~~ that we record. We also receive reimbursement for the cost of drug product supplied to Takeda for its use and, in some cases, pay Takeda for drug product they supply to us. The earned portion of net collaboration payments is reflected as a component ofpayment reduces collaboration and license agreement revenues.

As We also recognize royalty revenues based on a percentage of ~~September 30, 2017, total future potential milestone payments to us under~~Takeda’s net sales of ADCETRIS in its licensed territories, ranging from the ~~ADCETRIS collaboration could total approximately $165 million. Of the remaining amount, up to approximately $7 million relates~~mid-teens to the ~~achievement~~mid-twenties based on annual net sales tiers, as well as sales-based milestones. Takeda bears a portion of ~~development milestones, up to approximately $118 million relates to the achievement~~third-party royalty costs owed on its sales of ~~regulatory milestones and up to approximately $40 million relates to the achievement of commercial milestones. As of September 30, 2017, $70 million~~ADCETRIS, which is included in ~~milestones had been achieved as~~royalty revenues.

Astellas PADCEV collaboration

We have a ~~result of regulatory and commercial progress by Takeda.~~

~~Astellas~~

~~We entered into an~~collaboration agreement with Agensys, Inc., which subsequently ~~acquired by~~became an affiliate of Astellas, to jointly research, develop and commercialize ADCs for the treatment of several types of cancer. ~~The~~Under this collaboration, ~~encompasses combinations of our ADC technology with fully-human antibodies developed by Astellas to proprietary cancer targets.~~

~~Under the collaboration agreement,~~ we and Astellas are equally co-funding all development and certain commercialization costs for ~~enfortumab vedotin,~~PADCEV. In the U.S., we and ~~will~~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 ~~that may come from this product candidate if successfully commercialized on a 50/50 basis. Costs associated with co-development activities are included~~realized in ~~research and development expense.~~

the U.S. Gross profit share payments owed to Astellas ~~is developing another ADC product candidate on its own, subject to paying us annual maintenance fees, milestones, royalties and support fees for research and development services and material provided~~in the U.S. under the ~~collaboration agreement. Amounts received~~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.

Table of Contents

Astellas or its affiliates are responsible for overseeing the initial manufacturing supply chain for PADCEV for development and commercial use. However, we are responsible for packaging and labeling in countries in which we sell PADCEV. In addition, we are in the process of establishing a second source manufacturing supply chain, through a combination of internal manufacturing capacity and third parties. In this ~~product candidate being developed solely by Astellas are recognized as revenue.~~

regard, our manufacturing facility in Bothell, Washington is used to support commercial production of PADCEV antibody.

Genmab

TIVDAK collaborations

We ~~entered into~~have an agreement with Genmab to develop and commercialize ADCs targeting tissue factor, under which we previously exercised a co-development option for TIVDAK. Under this collaboration, we and Genmab are sharing all development costs for TIVDAK. TIVDAK was approved by FDA in September 2021. 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 are each responsible for maintaining 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. Gross profit share payments owed to Genmab in the U.S. under the joint commercialization agreement are recorded in cost of sales. Outside the U.S., we have commercialization rights in the rest of the world except for Japan, where Genmab has commercialization rights, and certain territories where Zai Lab has commercialization rights, as further described below. In Europe, China, and Japan, we and Genmab equally share 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 ~~ADCs for~~TIVDAK in mainland China, Hong Kong, Macau, and Taiwan. Under the ~~treatment~~terms of ~~several types of cancer. Under~~ the agreement, we ~~had~~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 ~~right to exercise~~Zai Lab territory. Based on our existing collaboration with Genmab, the upfront payment, milestone payments, and royalties will be equally shared with Genmab.

Merck LV collaboration

In 2020, we entered into the LV Agreement with a ~~co-development option for tisotumab vedotin~~subsidiary of Merck. We are pursuing a broad joint development program evaluating LV as monotherapy and in ~~August 2017,~~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 ~~exercised our option. We and Genmab will share all future costs and profits for~~granted Merck a co-exclusive worldwide development and commercialization ~~of tisotumab vedotin~~license for LV, and agreed to jointly develop and commercialize LV on a ~~50/50~~worldwide basis. We ~~will be~~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 ~~tisotumab vedotin commercialization~~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.

Merck TUKYSA collaboration

In 2020, we entered into the TUKYSA Agreement with 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 ~~Mexico, while Genmab will be responsible for commercialization activities in all other territories. Each party has the option to co-promote up to~~Europe. Merck is also co-funding a ~~specified percentage~~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 ~~effort~~of TUKYSA by Merck that begin in the ~~other party’s territories. Costs associated~~low twenty percent range and escalate based on sales volume by Merck in its territory.

Table of Contents

We recognize such cost sharing proportionately with ~~co-development~~the performance of the underlying activities, ~~following the exercise~~while recording Merck’s reimbursement of our ~~co-development option are included in~~expenses as a reduction of research and development ~~expense.~~

~~Genmab~~expenses. Sales of TUKYSA drug product supplied is developing another ADC product candidate on its own, subject to paying us annual maintenance fees, milestones, royalties and support fees for research and development services and material provided under the agreement. Amounts received for this product candidate being developed solely by Genmab are recognized as revenue.

~~Unum Therapeutics~~

~~We have a strategic~~included in collaboration and license agreement ~~with Unum~~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 December 31, 2020. As joint development expenses are incurred, we recognize the portion of Merck’s prepayment as a reduction of our research and development expenses on our condensed consolidated statements of comprehensive loss. As of March 31, 2023 and December 31, 2022, $6.7 million and $15.5 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 ~~ACTR therapies incorporating our antibodies~~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 2 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 ~~Unum are developing two ACTR product candidates that combine Unum’s ACTR technology with our antibodies. Unum is obligated~~RemeGen will fund and operationalize the portion of global clinical trials attributable to ~~conduct preclinical research and~~its territory. RemeGen will also be responsible for all clinical development ~~activities through phase 1 clinical trials~~ and ~~we are obligated~~regulatory submissions specific to ~~provide funding for these activities. The agreement calls for us~~its territory. We may pay RemeGen up to ~~work together~~$195.0 million in potential milestone payments across multiple indications and products based upon the achievement of specified development goals, and up to ~~co-develop~~$2.2 billion in potential milestone payments based on the achievement of specified regulatory and ~~jointly fund programs after phase 1 clinical trials unless either company opts out. Costs associated with co-development activities are included in research and development expense.~~

We and Unum would co-commercialize any successfully developed product candidates and share any profits 50/50 on any co- developed programs in the United States. We retain exclusive commercial rights outside of the United States, paying Unumcommercialization goals. RemeGen will be entitled to a ~~royalty that is a~~tiered, high single digit to ~~mid-teens~~mid-teen percentage royalty based on net sales of ~~ex-U.S. sales, if any. The potential future licensing~~disitamab vedotin in our territory.

Other technology collaboration and progress-dependent milestone payments to Unum under the collaboration may total up to $400 million between the two ACTR programs, payment of which is triggered by the achievement of development, regulatory and commercial milestones.

~~ADC Collaboration Agreements~~

license agreements

We have other ~~active collaborations~~collaboration and license agreements for our technology with a number of ~~companies to allow them to use our proprietary ADC technology. Under our ADC collaborations, which we have entered into in the ordinary course of business, we~~biotechnology and pharmaceutical companies. We typically ~~receive or are entitled to~~ receive upfront cash payments ~~progress-dependent~~and progress- and sales-dependent milestones ~~and royalties on net sales~~for the achievement by our licensees of ~~products incorporating our ADC technology, as well as~~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 ~~as they are realized, or~~ 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 ~~agreements during which we provide limited support~~goods or services to the collaborator. Our ADC collaborators are responsible for development, manufacturing and commercialization of any ADC product candidates that result from the collaborations and are solely responsible for the achievement of the potential milestones under these collaborations.

As of September 30, 2017, our ADC collaborations and co-development agreements had generated cash of more than $375 million, primarily in the form of upfront payments. Total milestone payments to us under our current ADC collaboration and co-development agreements could total up to approximately $2.9 billion if all potential product candidates achieved all of their milestone events. Of this amount, approximately $0.4 billion relates to the achievement of development milestones, approximately $1.1 billion relates to the achievement of regulatory milestones and approximately $1.4 billion relates to the achievement of commercial milestones. customer.

Since we do not control the research, development or commercialization of any of the products that would generate these milestones, we are not able to reasonably estimate when, if at all, any potential future milestone payments or royalties may be payable by our collaborators. Successfully developing a product candidate, obtaining regulatory approval and ultimately commercializing it is a significantly lengthy and highly uncertain process which entails a significant risk of failure. In addition, business combinations, changes in a collaborator’s business strategy and financial difficulties or other factors could result and have resulted in a collaborator abandoning or delaying development of its product candidates. As such, the milestone payments associated with our ADC collaborations and co-development agreements involve a substantial degree of risk and may never be received. Accordingly, weWe do not expect, and investors should not assume, that we will receive all of the potential milestone payments described above, and it is possible that we may never receive any additional significant milestone payments under these ~~agreements.~~

~~Royalty revenues~~license and ~~cost~~collaboration agreements.

Cost of ~~royalty revenues~~

~~Royalty revenues primarily reflect~~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 paid to us by Takeda under the ADCETRIS collaboration. These royalties include commercial sales-based milestones and sales royalties. The royalty rate paid by Takeda is calculated as a percentage of Takeda’s net sales of ADCETRIS, ranges from the mid-teens to the mid-twenties depending on sales volumes, and resets annually. Takeda bears a portion of third-party royalty costs owed on our PADCEV net product sales, ofand royalties owed on global ADCETRIS, ~~in its territory. This amount is included in our royalty revenues.~~ TUKYSA, and TIVDAK net product sales.


	Three months ended March 31,
(dollars in thousands)	2023		2022		% Change




Cost of sales	$	111,776	$	87,626	28	%

Cost of ~~royalty revenues reflect amounts owed to our third-party licensors related to the sale of ADCETRIS in Takeda’s territory.~~

~~Our royalty revenues and cost of royalty revenues were as follows ($ in thousands):~~

   Three months ended
September 30, Nine months ended
September 30,
   2017    2016    % Change 2017    2016    % Change
Royalty revenues
   $ 16,670    $ 12,224    36 % $ 46,025    $ 53,743    (14 )%










Cost of royalty revenues
   $ 5,196    $ 3,748    39 % $ 13,900    $ 10,470    33 %

~~Royalty revenues~~sales increased for the three months ended September 30, 2017 as compared to 2016, driven by higher sales volumes by Takeda in its territories, as well as increases in the royalty rate which is based on sales volumes. Royalty revenues for the nine months ended September 30, 2017 decreasedMarch 31, 2023 from the comparable period in ~~2016 as~~2022, driven by higher sales of our medicines resulting in higher gross profit sharing owed to our collaboration partners, and higher product costs from sales volume increases. The gross profit share owed to collaborators totaled $64.0 million for the ~~nine~~three months ended September 30, 2016 included a one-time $20.0 million milestone payment triggered by Takeda’s exceeding $200 million in annual sales for the first time. The decrease driven by the milestone payment in the 2016 period was partially offset by increases in sales volume in the 2017 period.

~~Cost of royalty revenues fluctuates based on the amount of net sales of ADCETRIS by Takeda in its territories.~~

~~We expect that royalty revenues will decrease slightly in 2017~~ March 31, 2023, as compared to ~~2016 primarily as a result~~$52.8 million for the comparable period in 2022.

Table of the 2016 royalty revenues including the one-time $20 million sales milestone payment. We expect cost of royalty revenues to increase in 2017 primarily due to anticipated increases in sales volumes in Takeda’s territories, and to a lesser extent, increases in the applicable royalty rate.

~~Cost of sales~~

ADCETRIS cost of sales includes manufacturing costs of product sold, third-party royalty costs, amortization of technology license costs, and distribution and other costs. Our cost of sales was as follows ($ in thousands):

   Three months ended
September 30, Nine months ended
September 30,
   2017    2016    % Change 2017    2016    % Change
Cost of sales
   $ 9,019    $ 7,427    21 % $ 24,555    $ 20,272    21 %

Cost of sales increased during the three and nine months ended September 30, 2017 as compared to 2016 primarily due to increased sales volumes, and to a lesser extent, due to increases in the royalty rate payable which is based on sales volumes. Contents

We expect cost of sales to increase in ~~2017, primarily~~2023 as compared to 2022 as a result of the net product sales growth of our marketed products, contributing to higher manufacturing costs due to sales volume increases for our products sold and higher anticipated ~~increases in sales volumes.~~

gross profit sharing with our collaborators.

Research and development

~~Our research~~


	Three months ended March 31,
(dollars in thousands)	2023		2022		% Change
Research and clinical development	$	261,365	$	229,649	14	%
Process sciences and manufacturing	94,650		68,010		39	%
Total research and development	$	356,015	$	297,659	20	%

Research and clinical development expenses ~~are summarized as follows ($ in thousands):~~

   Three months ended
September 30, Nine months ended
September 30,
   2017    2016    % Change 2017    2016    % Change
Research
   $ 20,492    $ 14,509    41 % $ 55,095    $ 45,368    21 %
Development and contract manufacturing
   41,263    39,184    5 % 133,689    106,150    26 %
Clinical
   51,851    39,018    33 % 157,412    119,618    32 %










Total research and development expenses
   $ 113,606    $ 92,711    23 % $ 346,196    $ 271,136    28 %

~~Research expenses~~ include ~~among other things,~~ personnel, occupancy and laboratory expenses, technology access fees, associated with the discovery and identification of new monoclonal antibodies and related technologies, and the development of novel classes of stable linkers and cell-killing agents for our ADC technology. Research expenses also include research activities associated with our product candidates, such as preclinical translational biology andin vitroandin vivostudies, ~~and~~ IND-enabling pharmacology and toxicology ~~studies. The increase in~~studies, and external clinical trial costs including costs for clinical sites, clinical research ~~expenses~~organizations, contractors and regulatory activities associated with conducting human clinical trials. Other research and clinical development costs grew during the three ~~and nine~~ months ended ~~September 30, 2017 as compared to~~March 31, 2023 from the ~~same periods~~comparable period in ~~2016 primarily reflects increases in both internal~~2022, driven by higher employee-related costs and ~~co-development~~clinical trial costs to support our ~~growing~~early- and late-stage pipeline of product ~~candidates,~~candidates.

Process sciences and ~~to a lesser extent, increases in staffing and related occupancy costs.~~

~~Development and contract~~ manufacturing expenses include personnel and occupancy expenses, ~~external contract~~ manufacturing costs for the ~~scale up~~scale-up and pre-approval manufacturing of ~~drug~~ product candidates used in research and our clinical trials, and costs for drug product supplied to our collaborators. ~~Development~~Process sciences and ~~contract~~ manufacturing expenses also include quality control and assurance activities, and storage and shipment of our product candidates. The ~~increase in development and contract manufacturing expenses during~~increases for the three months ended ~~September 30, 2017 as compared to~~March 31, 2023 from the ~~same~~comparable period in ~~2016~~2022 primarily reflects increases in staffing and related occupancy costs. The increase in development and contract manufacturing expenses during the nine months ended September 30, 2017 as compared to the same period in 2016 primarily reflects increased drug product supplied to Takeda, and to a lesser extent, increases in staffing and other costs to support our growing pipeline of product candidates.

~~Clinical expenses include personnel, travel, occupancy~~reflected higher employee-related costs and ~~external clinical trial~~the timing of manufacturing costs including costs for clinical sites, clinical research organizations, contractors and regulatory activities associated with conducting human clinical trials. The increase in clinical expenses during the three months ended September 30, 2017 as compared to the same period in 2016 reflects increased clinical trial activity related toof our product candidates ~~primarily SGN-CD48A as it advances into clinical trials, enfortumab vedotin and 2FF, and related increases in staffing. The increase~~for use in clinical expenses during the nine months ended September 30, 2017 as compared to the same period in 2016 reflects increased clinical trial activity related to our product candidates, primarily SGN-CD33A and enfortumab vedotin, and related increases in staffing.

trials.

We utilize our employee and infrastructure resources across multiple research and development ~~projects as well as our discovery and research programs directed towards identifying monoclonal antibodies and new classes of stable linkers and cell-killing agents for our ADC program.~~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-by-project~~project basis as it relates to our infrastructure, facility, employee and other indirect ~~costs. We~~costs; however, we do ~~however,~~ separately track significant third-party costs including clinical trial costs, manufacturing costs and other contracted service costs on a ~~project-by-project~~ project basis.

~~The~~ To that end, the following table shows ~~expenses~~third-party costs incurred for research, ~~contract~~ manufacturing of our product candidates and clinical and regulatory services, ~~provided by third parties~~ as well as ~~pre-commercial~~development milestone payments for in-licensed technology for ~~ADCETRIS~~our products and ~~each~~certain of our clinical-stage product candidates. The table also presents other ~~third-party~~ costs and overhead consisting of third-party costs for our preclinical stage programs, personnel, facilities, manufacturing, and other indirect costs not directly charged to ~~these~~ development ~~programs.~~

   Three months ended
September 30,    Nine months ended
September 30,    Five years ended
September 30, 2017
Development program ($ in thousands)
   2017    2016    2017    2016
ADCETRIS (brentuximab vedotin)
   $ 23,698    $ 18,438    $ 65,626    $ 55,216    $ 326,292
SGN-CD33A (vadastuximab talirine)
   1,440    9,416    31,003    31,422    111,537
ASG-22ME (enfortumab vedotin)
   3,703    1,053    15,399    3,345    28,990
SGN-LIV1A
   4,523    1,147    8,179    3,163    22,995
Other clinical stage programs
   8,012    7,078    20,966    19,828    104,806










Total third-party costs
   41,376    37,132    141,173    112,974    594,620
Other costs and overhead
   72,230    55,579    205,023    158,162    922,446










Total research and development
   $ 113,606    $ 92,711    $ 346,196    $ 271,136    $ 1,517,066

programs, as well as cost reimbursements received from or payments made to collaborators related to our product candidates.


	Three months ended March 31,
(dollars in thousands)	2023		2022

TUKYSA (tucatinib)	$	41,126	$	43,595
PADCEV (enfortumab vedotin-ejfv)	21,374		24,769
ADCETRIS (brentuximab vedotin)	14,554		13,852
TIVDAK (tisotumab vedotin)	12,977		7,932
Ladiratuzumab vedotin	3,237		3,259
Disitamab vedotin	9,697		10,380
Other clinical stage programs	26,425		22,326
Total third-party costs for clinical stage programs	129,390		126,113

Other costs, overhead, and net cost-sharing with collaborators	226,625		171,546
Total research and development	$	356,015	$	297,659

Third-party costs for TUKYSA decreased for the three months ended March 31, 2023 as compared to the 2022 period, due primarily to lower costs to support manufacturing and clinical trials expenses.

Third-party costs for PADCEV decreased for the three months ended March 31, 2023 as compared to the 2022 period, due to the timing of clinical trials expenses.

Table of Contents

Third-party costs for ADCETRIS, ~~increased during~~ladiratuzumab vedotin, and disitamab vedotin were consistent for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 as compared to the 2022 period.

Third-party costs for TIVDAK and other clinical stage programs increased for the three months ended March 31, 2023 as compared to the 2022 period, due to the higher clinical trials expenses.

Other costs, overhead, and net cost-sharing reimbursements from or payments made to collaborators increased for the three months ended March 31, 2023 from the comparable ~~periods~~period in ~~2016, primarily due~~2022, due to an increase in drug product supplied to Takeda, offset partially by a decrease in clinical trial activities. The cost of drug product supplied to Takeda is charged to research and development expense. We are reimbursed for the drug product, which is included as a component of collaboration revenue.

~~Third-party costs for SGN-CD33A decreased during~~higher employee-related costs. During the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and 2022, net cost-sharing reimbursements from ~~the comparable periods in 2016 due to the discontinuation of our phase 3 CASCADE~~collaborators were $19.4 million and ~~other SGN-CD33A clinical trials.~~

Third-party costs for enfortumab vedotin and SGN-LIV1A increased during the three and nine months ended September 30, 2017 from the comparable periods in 2016 primarily due to an increase in drug supply activities and, to a lesser extent, clinical trial costs as we prepare to initiate additional clinical trials in 2017.

Other costs and overhead include third-party costs of our other preclinical programs, including our strategic collaboration with Unum, and costs associated with personnel and facilities. These costs increased during the three and nine months ended September 30, 2017 from the comparable periods in 2016 due to development activities to expand our product pipeline, including increases in staffing levels and the expansion of our facilities to accommodate our growth.

Our expenditures on our ADCETRIS clinical development program and on our current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. $23.3 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. ~~Likewise,~~We will also need to conduct additional clinical trials in order to expand ~~ADCETRIS’~~ labeled indications of use ~~we are required to conduct additional extensive~~for our commercial products. The outcome of our clinical ~~trials.~~trials is uncertain. The cost of clinical trials may vary significantly ~~over the life of a project~~ as a result of a variety of factors, ~~including:~~

including the number of patients enrolled, patient site costs, quantity and source of drug supply required, ~~in our clinical trials;~~

~~the length of time required to enroll trial participants;~~

~~the number~~safety and ~~location of sites included in the trials;~~

~~the costs of producing supplies~~efficacy of the product ~~candidates needed for clinical trials~~candidate, and extent of regulatory ~~submissions;~~efforts, among others.

~~the safety and efficacy profile of the product candidate;~~

~~the use of clinical research organizations to assist with the management of the trials; and~~

~~the costs and timing of, and the ability to secure, regulatory approvals.~~

We anticipate that our total research and development expenses in ~~2017~~2023 will increase compared to ~~2016~~2022 primarily due to ~~an increase in ADCETRIS costs related to drug product supplied to Takeda, as well as increased~~higher costs for the continued development of our approved products and product candidates ~~primarily enfortumab vedotin~~ and SGN-LIV1A, and the purchase of the BMS manufacturing facility. Certain ADCETRIS development activities, including some clinical studies, will be conducted by Takeda, the costs of which are not reflected in our research and development expenses. Because of these and other factors,employee retention expenses will fluctuate based upon many factors, including the degree of collaborative activities, timing of manufacturing campaigns, numbers of patients enrolled in our clinical trials and the outcome of each clinical trial event.

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 ~~the~~these risks and uncertainties, ~~discussed above,~~ 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 ~~ADCETRIS~~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,
Selling, general and administrative ($ in thousands)
   2017    2016    % Change 2017    2016    % Change
Selling, general and administrative
   $ 39,667    $ 34,841    14 % $ 118,783    $ 97,870    21 %


	Three months ended March 31,
(dollars in thousands)	2023		2022		% Change
Selling, general and administrative	$	236,441	$	174,225	36	%

Selling, general and ~~administrative~~administrative expenses increased ~~during~~for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 from the comparable periods in ~~2016 primarily due to increases in staffing~~2022, reflecting higher expenses to support our ~~continued growth. For the nine months ended September 30, 2017 as compared to the comparable period in 2016, the increase~~ongoing commercialization efforts and $30 million in expenses ~~was also driven~~associated with the pending acquisition by ~~increases in expenses for legal matters.~~

Pfizer.

We anticipate that selling, general and administrative expenses will increase in ~~2017~~2023 as compared to ~~2016 as we continue our~~2022 due to higher commercial activities into drive growth of our approved products and to support ofour overall growth strategy, acquisition related expenses associated with the ~~commercialization of ADCETRIS, as well as our support of general operations.~~

pending acquisition by Pfizer and employee retention expenses.

Investment and other income (loss), net

Three months ended March 31,
(dollars in thousands) 2023 2022 % Change
Loss on equity securities $ (237) $ (2,779) (91) %
Investment and other income, net 14,637 589 NM
Total investment and other income (loss), net $ 14,400 $ (2,190) (758) %
NM: No amount in comparable period or not a meaningful comparison.

Investment and other income, net

   Three months ended
September 30,    Nine months ended
September 30,
Investment and other income, net ($ in thousands)
   2017    2016    % Change    2017    2016    % Change
Investment and other income, net
   $ 82,218    $ 660    *    $ 84,460    $ 1,903    *

*	~~Not meaningful~~

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 ~~components~~loss on equity securities for the three months ended March 31, 2023 and 2022 was due to unrealized holding losses resulting from a decline in the share price of ~~investment~~securities held during the respective periods. Investment and other income, net ~~are summarized~~increased for the three months ended March 31, 2023 due to higher yields on our debt securities investments in the 2023 period.

Table of Contents

Provision for income taxes

Our provision for income taxes was $4.6 million for the three months ended March 31, 2023, compared with $1.3 million for the three months ended March 31, 2022. The increased provision for income taxes in the 2023 period is the result of less available tax net operating loss carryforwards to offset taxable profits in the U.S. and increased limitations on utilization of the tax net operating losses and credits.

Liquidity and capital resources


(in thousands)	March 31, 2023		December 31, 2022
Cash, cash equivalents, and investments	$	1,490,272	$	1,735,070
Working capital	1,888,683		1,984,129
Stockholders’ equity	2,723,156		2,803,819


	Three months ended March 31,
(in thousands)	2023		2022
Cash provided (used) by:
Operating activities	$	(249,643)	$	(216,812)
Investing activities	232,336		26,663
Financing activities	29,937		26,664

The change in net cash from operating activities for the three months ended March 31, 2023 as ~~follows ($ in thousands):~~

   Three months ended
September 30, Nine months ended
September 30,
Investment and other income, net ($ in thousands)
   2017    2016    % Change 2017    2016    % Change
Gain on Immunomedics warrant derivative
   $ 78,714    $ 0    N/A $ 76,699    $ 0    N/A
Income tax benefit on unrealized gain on available-for-sale securities
   2,739    0    N/A 5,415    0    N/A
Investment income, net
   765    660    16 % 2,346    1,903    23 %










Total investment and other income, net
   $ 82,218    $ 660    N/A $ 84,460    $ 1,903    N/A

~~N/A: No amount in~~compared to the comparable period ~~or not a meaningful comparison.~~

in 2022 was primarily related to an increase in net loss and increases in net working capital.

The ~~gain on the Immunomedics warrant derivative~~change in net cash from investing activities for ~~both~~ the three ~~and nine~~ months ended September 30, 2017, was driven by the change in fair value of the warrant derivative. For the nine months ended September 30, 2017, this gain was offset by the cost-basis impairment recorded in the first quarter of 2017. The income tax benefit for both the three and nine months ended September 30, 2017 was due to unrealized gains on available-for-sale securities, primarily driven by our common stock investment in Immunomedics. Investment income, net increased for both the three and nine month periods ended September 30, 2017March 31, 2023 as compared to the ~~prior year periods due to an increase~~comparable period in ~~the effective yield of our portfolio.~~

The fair value of both the Immunomedics common stock and the warrant derivative fluctuate based on changes in the stock price of Immunomedics. Furthermore, upon our adoption of ASU 2016-01 on January 1, 2018, we are required to record changes in the fair value of equity securities in net income or loss. To the extent that we continue to hold Immunomedics common stock or other equity securities, our operating results may fluctuate significantly.

~~Liquidity and capital resources~~

Selected balance sheet and cash flow data ($ in thousands)
   September 30,
2017    December 31,
2016
Cash, cash equivalents, and short- and long-term investments
   $ 470,365    $ 618,974
Working capital
   467,783    586,132
Stockholders’ equity
   659,708    634,087




   Nine months ended September 30,
   2017    2016
Cash provided by (used in):

Operating activities
   $ (116,506 )    $ (81,917 )
Investing activities
   109,982    87,282
Financing activities
   25,991    23,409

Our combined cash, cash equivalents and investment securities decreased during the nine months ended September 30, 2017 from the balance at December 31, 2016, primarily reflecting our net loss for the period, as well as purchases of property and equipment as we expand our facilities to support our growth.

The changes in net cash used in operating activities are primarily related to our net loss, working capital fluctuations and changes in our non-cash expenses, all of which are highly variable. The changes in cash provided by investing activities primarily reflect2022 reflected differences between the proceeds ~~received~~ from ~~sale and maturity~~maturities of ~~our investments~~securities and amounts ~~reinvested, and to a lesser extent, increases in our~~used for purchases of securities, the difference for purchases of property, plant, and equipment, ~~as we initiated a purchase of a manufacturing facility~~ and ~~continued to expand our facilities to support our growth. Net~~the payment for lessor-owned assets.

The change in net cash ~~provided by~~from financing activities ~~resulted~~for the three months ended March 31, 2023 as compared to the comparable period in 2022 was driven by higher proceeds from the ~~proceeds~~exercise of stock ~~option exercises~~options and ~~our~~the employee stock purchase ~~plan.~~

plan offset by employee taxes paid related to net share settlement of stock-based awards.

We primarily have ~~primarily~~ financed our operations through the issuance of ~~equity securities,~~our common stock, collections from commercial sales of ~~ADCETRIS, and by~~our products, amounts received pursuant to ~~product collaborations~~license and ~~our ADC collaborations.~~collaboration agreements, and royalty revenues. To a lesser degree, we also have ~~also~~ financed our operations through ~~royalty revenues and interest earned on cash, cash equivalents and~~ investment ~~securities.~~income. These financing and revenue sources have ~~historically~~ allowed us to maintain adequate levels of cash and investments.

Our cash, cash equivalents, and investments ~~in debt securities~~ 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 ~~investments in debt~~investment securities in our portfolio prior to their scheduled maturities, which may result in a loss. As of ~~September 30, 2017,~~March 31, 2023, we had ~~$450.4 million~~$1.5 billion held in cash, ~~and~~ cash equivalents ~~or short-term investments scheduled to mature within the next twelve months.~~

and investments.

At our currently planned spending rates, we believe that our existing financial resources, together with product and royalty revenues, ~~from sales of ADCETRIS and the fees, milestone payments~~ 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. Changes in our spending rate may occur that would consume available capital resources sooner, such as increased development, manufacturing and clinical trial expenses in connection with our expanding pipeline programs, or our undertakingmonths from the date of ~~additional programs, business activities, or entry into strategic transactions, including potential additional acquisitions~~this filing.

Table of products, technologies or businesses. Accordingly, we may be required to, or may otherwise determine to, raise additional capital to fund those obligations. Further, in the event of a termination of the ADCETRIS collaboration agreement with Takeda, we would not receive development cost sharing payments or milestone payments or royalties for the development or sale of ADCETRIS in Takeda’s territory, and we would be required to fund all ADCETRIS development and commercial activities. Any of these factors could lead to a need for us to raise additional capital.

Contents

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 ~~preclinical~~ development, ~~manufacturing~~commercialization, invest in our facilities, and ~~clinical trial activities for ADCETRIS~~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 ~~other pipeline programs, and~~plans to otherwise continue to expand ~~internationally, as well as commercialize ADCETRIS and position ADCETRIS for potential additional regulatory approvals.~~our operations internationally. Our commitment of resources to the continuing development, regulatory and commercialization activities for ~~ADCETRIS, and~~our products, the continued research, ~~continued~~ development and manufacturing of our product candidates, ~~will likely~~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 ~~substantial amounts of~~ 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 ~~any additional acquisitions.~~such transactions. We may seek additional ~~funding~~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 ~~one or more of our~~ 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 forgo 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 ~~may adversely affect~~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.

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 three months ended March 31, 2023 were $356.0 million and we expect to increase our investment in research and development expenses in 2023. Our sales, general and administrative expenses were $236.4 million for the three months ended March 31, 2023, and we expect to increase our sales, general, and administrative expenses to support our business growth in 2023. 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 ~~operations.~~

~~Commitments~~

laboratory facilities expiring in 2023 through 2042 that contain rate escalations and options for us to extend the leases. Our future minimum lease payments as of March 31, 2023 totaled $18.9 million related to short-term lease liabilities, and $148.4 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 commenced as of March 31, 2023 and is included in lease liability balances as of March 31, 2023. 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 three months ended March 31, 2023 were $38.7 million, and we anticipate these investments to grow in 2023 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 additional capital expenditures for this Everett facility to be approximately $300 million to $350 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 were reported~~commitments under these arrangements as disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016, as~~2022 filed February 15, 2023.

Table of Contents

Royalties, milestones and profit-sharing associated with ~~the SEC.~~

~~On October 1, 2017, we completed the acquisition~~our licensed technology and collaboration agreements. Some of ~~certain plant equipment~~our license and ~~improvements from BMS in exchange~~collaboration agreements provide for a payment of approximately $25.5 million. We completed the acquisition of the manufacturing facility site location in July 2017 for a purchase price of $17.8 million, which was recorded in property and equipment as of September 30, 2017.

~~In August 2017, we entered into a 36 month lease extension for approximately 50,000 square feet of facilities, which is used primarily for office space. The additional aggregate based rent due~~periodic maintenance fees over ~~the extended lease term is approximately $2.7 million. The lease has one remaining seven-year renewal option.~~

In September 2017, we entered into an operating lease for approximately 18,000 square feet of facilities, to be used primarily for office space. The additional aggregate base rent due over the 18 month lease term is approximately $0.5 million. The lease has two approximately five-year renewal options.

In October 2017, we entered into two, 72 month lease extensions for approximately 145,000 square feet of facilities which are used for laboratory and general office purposes. The lease extensions will commence on July 1, 2018. The additional aggregate base rent due over the extended lease terms is approximately $20.7 million. Each lease contains one additional five-year renewal option.

~~Except with respect to the foregoing, our future minimum contractual commitments have not changed materially from the amounts previously reported.~~

~~Recent accounting pronouncements~~

~~In May 2014, the Financial Accounting Standards Board,~~ specified time periods, profit share payments, and/or FASB, issued an Accounting Standards Update entitled “ASU 2014-09, Revenue from Contracts with Customers.” The standard requires entities to recognize revenue through an evaluation that includes identification of the contract, identification of the performance obligations, determination of the transaction price, allocation of the transaction price to the performance obligations, and recognition of revenue as the entity satisfies the performance obligations. In August 2015, FASB issued an Accounting Standards Update entitled “ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date,” which defers the effective date of ASU 2014-09 to our fiscal year beginning January 1, 2018. The FASB has continued to issue accounting standards updates to clarify and provide implementation guidance related to Revenue from Contracts with Customers, including “ASU 2016-08, Revenue from Contract with Customers: Principal versus Agent Considerations,” “ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing”, “ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients” and “ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” Our preliminary assessment of this new standard is that it will generally not change the way in which we recognize product revenue from sales of ADCETRIS. However, we expect that sales-based royalties and commercial sales-based milestones will be recorded in the period of the related sale based on

~~estimates, rather than recording them as reported~~payments by ~~the customer. In addition, we expect that~~us upon the achievement of development milestones under our collaborations will be recorded in the period their achievement becomes probable, which may result in their recognition earlier than under current accounting principles. The new standard also requires more extensive disclosures related to revenue recognition, particularly in quarterly financial statements. We will adopt the standard on January 1, 2018 and ~~intend to use the modified retrospective method of adoption. We are continuing to evaluate the impact of the standard on all~~regulatory milestones. Some of our ~~revenues, including those mentioned above, and our assessments may change in the future~~licensing agreements also obligate us to pay royalties based on ~~our ongoing evaluation.~~

~~In January 2016, FASB issued an Accounting Standards Update entitled “ASU 2016-01, Financial Instruments: Overall.” The standard addresses certain aspects~~net sales of ~~recognition, measurement, presentation~~products utilizing licensed technology. Such royalties and ~~disclosure of financial instruments. We will adopt~~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 $77.4 million for the standard on January 1, 2018 using a modified retrospective approach. The standard will require us to record changes in the fair value of equity securities in net income or loss. The implementation of this standard isthree months ended March 31, 2023 and are expected to increase in future periods. Milestone payments generally become due and payable upon the ~~volatility~~achievement of ~~net income or loss~~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 ~~extent~~year ended December 31, 2022 filed February 15, 2023.

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 ~~continue~~believe to ~~hold equity securities.~~

~~In February 2016, FASB issued an Accounting Standards Update entitled “ASU 2016-02, Leases.” The standard requires entities to recognize in~~be reasonable under the ~~consolidated balance sheet a liability to make lease payments and a right-of-use asset representing its right to use~~circumstances, the underlying asset for the lease term. The standard will become effective for us beginning January 1, 2019, with early adoption permitted. We are currently evaluating the guidance to determine the potential impact on our financial condition, results of ~~operations and cash flows, and financial statement disclosures, and expect that~~which form our basis for making judgments about the ~~adoption~~carrying values of ~~the standard will increase~~ assets and liabilities ~~related to our operating leases in our consolidated balance sheets.~~

~~In March 2016, FASB issued an Accounting Standard Update entitled “ASU 2016-09, Compensation – Stock Compensation.” The standard is intended to simplify certain elements~~and the reported amounts of ~~accounting for share-based payment transactions, including the income tax impact, classification of awards as either equity or liabilities,~~revenues and ~~classification on the statement of cash flows. In addition, the standard allows an entity-wide accounting policy election to either estimate the number of awards~~expenses that are ~~expected to vest, as currently required, or account for forfeitures when they occur. We have elected to continue estimating~~not readily apparent from other sources. Actual results may differ from those estimates. Our critical accounting policies, those with the ~~number~~more significant judgments and estimates, used in the preparation of awards that are expected to vest. We adopted the standard as of January 1, 2017. Since we have incurred annual net losses since our inception and maintain a full valuation allowance on our net deferred tax assets, the adoption did not have a material impact on our financial ~~condition, results~~statements for the three months ended March 31, 2023 were consistent with those in Part II Item 7 of ~~operations and cash flows.~~

~~In October 2016, FASB issued an Accounting Standard Update entitled “ASU 2016-16, Accounting~~our Annual Report on Form 10-K for ~~Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory.” The standard is intended to simplify~~ the accounting for intercompany sales of assets other than inventory. Under current GAAP, the tax effects of intra-entity asset transfers are deferred until the transferred asset is sold to a third party or otherwise recovered through use. Under the new guidance, a reporting entity would recognize the tax expense from the sale of the asset in the seller’s jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The standard will become effective for us beginning on January 1, 2018. We are currently evaluating the new standard; however, since we have incurred annual net losses since our inception and maintain a full valuation allowance on our net deferred tax assets, the adoption is not expected to have a material impact on our financial condition, results of operations and cash flows, or financial statement disclosures.

In June 2016, FASB issued an Accounting Standard Update entitled “ASU 2016-13, Financial Instruments: Credit Losses.” The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date, and to change how other than temporary impairments on investments securities are recorded. The standard will become effective for us beginning on January 1, 2020 with early adoption permitted. We are currently evaluating the guidance to determine the potential impact on our financial condition, results of operations and cash flows, and financial statement disclosures.

In January 2017, FASB issued an Accounting Standard Update entitled “ASU 2017-01, Business Combinations: Clarifying the Definition of a Business.” The objective of the standard is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions of assets or businesses. We adopted this standard on a prospective basis as of January 1, 2017. The adoption of this standard did not have a material impact on our financial condition, results of operations and cash flows, or financial statement disclosures.

In May 2017, FASB issued an Accounting Standard Update entitled “ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting.” The objective of the standard is to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The standard should be applied prospectively to awards modified on or after the adoption date. The Company early adopted this standard on April 1, 2017. The adoption did not have a material impact on the Company’s financial condition, results of operations and cash flows.

year ended December 31, 2022.

~~Item 3.~~

Item 3. Quantitative and Qualitative Disclosures About ~~Market Risk~~

Market ~~risks include interest rate risk, equity price risk, and foreign currency exchange rate risk. Of these risks, equity price risk could~~Risk

There have ~~a significant impact on~~been no material changes to our ~~results of operations.~~

~~Interest Rate Risk~~

~~Our exposure to~~ market risk ~~for changes~~disclosures as set forth in ~~interest rates relates primarily to our investment portfolio. We currently have holdings in U.S. Treasury securities. A summary~~Part II Item 7A of our ~~investment in debt securities subject to interest rate risk are as follows (in thousands):~~

   September 30,
2017    December 31,
2016
Short-term investments
   $ 322,258    $ 480,313
Long-term investments
   19,967    29,988




Total
   $ 342,225    $ 510,301

~~We have estimated the effect~~Annual Report on our investment portfolio of a hypothetical increase in interest rates by one percent to be a reduction of $1.4 million in the fair value of our available-for-sale debt securities as of September 30, 2017. In addition, a hypothetical decrease of 10% in the effective yield of our available-for-sale debt securities would reduce our expected investment income by approximately $0.4 million over the next twelve months based on our investment balance at September 30, 2017.

~~Equity Price Risk~~

As of September 30, 2017, we held 3.0 million shares of Immunomedics common stock and a warrant to purchase an additional 8.7 million shares of Immunomedics common stock at an exercise price of $4.90 per share. The fair value of both the common stock and warrant fluctuate based on changes in the stock price of Immunomedics. Additionally, as of September 30, 2017, the warrant met the definition of a derivative. Because the warrant is accounted for as a derivative, we record the changes in fair value in our consolidated statement of operations. We recorded a gain of $78.7 million and $76.7 million in investment and other income, net, resulting from the change in the fair value of the warrant derivativeForm 10-K for the ~~three and nine months~~year ended September 30, 2017, respectively. A hypothetical decrease of 10% in the price of Immunomedics common stock would reduce the fair value of the warrant derivative by approximately $12.1 million, thereby reducing our net income by approximately $12.1 million for the three months ended September 30, 2017, and increasing our net loss by approximately $12.1 million for the three months ended September 30, 2017.

Furthermore, upon our adoption of ASU 2016-01 on January 1, 2018, we are required to record changes in the fair value of equity securities in net income or loss. To the extent that we continue to hold Immunomedics common stock or other equity securities, our operating results may fluctuate significantly.

~~Foreign Currency Risk~~

Most of our revenues and expenses are denominated in U.S. dollars and as a result, we have not experienced significant foreign currency transaction gains and losses to date. Our commercial sales in Canada are denominated in Canadian Dollars. We also had other transactions denominated in foreign currencies during the nine months ended September 30, 2017, primarily related to contract manufacturing and ex-U.S. clinical trial activities, and we expect to continue to do so. Our royalties from Takeda are derived from their sales of ADCETRIS in multiple countries and in multiple currencies that are converted into U.S. dollars for purposes of determining the royalty owed to us. Our primary exposure is to fluctuations in the Euro, British Pound, Canadian Dollar and Swiss Franc. We do not anticipate that foreign currency transaction gains or losses will be significant at our current level of operations. However, transaction gains or losses may become significant in the future as we continue to expand our operations internationally. We have not engaged in foreign currency hedging to date; however, we may do so in the future.

December 31, 2022.

~~Item 4.~~

~~Controls and Procedures~~

Item 4. Controls and Procedures

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

effective at the reasonable assurance level.

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

(b)Changes in internal control over financial reporting.There have not been any changes in our internal control over financial reporting during the quarter ended ~~September 30, 2017~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

Part II. Other Information

~~Item 1.~~

~~Legal Proceedings~~

~~Stockholder Class Action. On January 10, 2017,~~

Item 1. Legal Proceedings

The information required to be set forth under this Item 1 is incorporated by reference to “Note 11. Legal matters” of the Notes to Condensed Consolidated Financial Statements included in Part 1 Item 1 of this Quarterly Report on Form 10-Q. In addition, from time to time, we may become involved in other lawsuits, claims and proceedings relating to the conduct of our business, including those pertaining to the defense and enforcement of our patent or other intellectual property rights and our contractual rights. These proceedings are costly and time consuming, and they may subject us to claims which may result in liabilities or require us to take or refrain from certain actions. Additionally, successful challenges to our patent or other intellectual property rights through these proceedings could result in a ~~purported securities class action lawsuit was commenced~~loss of rights in the ~~United States District Court for the Western District of Washington, naming as defendants~~relevant jurisdiction and may allow third parties to use our proprietary technologies without a license from us and certain of our officers. A consolidated amended complaint was filed on June 6, 2017, following the court’s appointment of a lead plaintiff and its approval of lead plaintiff’s counsel. The lawsuit alleges material misrepresentations and omissions in public statements regarding our business, operational and compliance policies, violations by all named defendants of Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, as well as violations of Section 20(a) of the Exchange Act. The complaint seeks compensatory damages of an undisclosed amount. The plaintiff alleges, among other things, that we made false and/or misleading statements and/or failed to disclose that SGN-CD33A presents a significant risk of fatal hepatotoxicity and that we had therefore overstated the viability of SGN-CD33A as a treatment for AML. It is possible that additional suits will be filed, or allegations received from stockholders, with respect to these same matters and also naming us and/or our officers and directors as defendants. We filed a motion to dismiss this complaint on July 28, 2017. On October 18, 2017, the Court granted our motion to dismiss with leave for plaintiff to file a second consolidated amended complaint. We do not believe it is feasible to predict or determine the ultimate outcome or resolution of this litigation, or to estimate the amount of, or potential range of, loss with respect to this proceeding. In addition, the timing of the final resolution of this proceeding is uncertain. As a result of the lawsuit, we will incur litigation expenses and may incur indemnification expenses, and potential resolutions of the lawsuit could include a settlement requiring payments. Those expenses could have a material impact on our financial position, results of operations, and cash flows.

Stockholder Derivative Action. On March 29, 2017, a stockholder derivative lawsuit was filed in Washington Superior Court for the County of Snohomish, or the Snohomish Count Superior Court. The complaint names as defendants certain of our current and former executives and members of our board of directors. We are named as a nominal defendant. The complaint generally makes the same allegations as the securities class action, claiming that the individual defendants breached their duties to us. The complaint seeks unspecified damages, disgorgement of compensation, corporate governance changes, and attorneys’ fees and costs. Because the complaint is derivative in nature, it does not seek monetary damages from us. On June 8, 2017, the Snohomish County Superior Court entered an order staying the Stockholder Derivative Action until resolution of the motion to dismiss the Stockholder Class Action. On October 18, 2017, in light of the granting of our motion to dismiss in the Stockholder Class Action, the parties in the Stockholder Derivative Action filed a joint status report with the Snohomish County Superior Court stipulating to continue to stay the Stockholder Derivative Action pending further developments in the Stockholder Class Action. As a result of the lawsuit, we may incur litigation and indemnification expenses.

venBio Action. On February 13, 2017, we were named a co-defendant in a lawsuit filed by venBio Select Advisors LLC, or venBio, in the Delaware Chancery Court, against the members of the board of directors of Immunomedics, Inc., or Immunomedics. The lawsuit, or the venBio lawsuit, alleged that the members of the Immunomedics board breached their fiduciary duties toward their stockholders by hastily licensing IMMU-132 to us. We were alleged to have aided and abetted the breach of fiduciary duties. Among other things, venBio sought to enjoin the closing of the transactions contemplated by the development and license agreement, or the Immunomedics License, we entered into with Immunomedics in February 2017 that provided for the grant to us of exclusive worldwide rights to IMMU-132, and a related stock purchase agreement. On May 4, 2017, we and Immunomedics agreed to terminate the Immunomedics License and to amend the term of the warrant Immunomedics issued to us under the stock purchase agreement to be exercisable by us only until December 31, 2017. In connection therewith, Immunomedics and venBio agreed to fully settle, resolve and release us, and we agreed to fully settle, resolve and release Immunomedics and venBio, from all disputes, claims and liabilities arising from the Immunomedics License, the stock purchase agreement and the transactions contemplated thereby, subject of the terms of the related termination agreement and settlement agreement. The termination agreement between Immunomedics and us and the settlement of the venBio lawsuit were effective August 25, 2017.

collaborators.

~~Item 1A.~~

~~Risk Factors~~

Item 1A. Risk Factors

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

~~Risks Related~~

Risk Factor Summary

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

•The consummation of our proposed acquisition by Pfizer Inc., or Pfizer, which we refer to herein as the Pfizer Merger, is subject to a number of conditions, many of which are largely outside of the parties’ control, and, if these conditions are not satisfied or waived on a timely basis, the merger agreement may be terminated and the Pfizer Merger may not be completed.

•Failure to complete the Pfizer Merger could adversely affect our stock price and future business and financial results.

•While the Pfizer Merger is pending, we will be subject to business uncertainties and certain contractual restrictions that could adversely affect our business and operations.

•The termination fee and restrictions on solicitation contained in the Merger Agreement may discourage other companies from trying to acquire us.

•Litigation against us, Pfizer, or the members of our or their respective boards, could prevent or delay the completion of the Pfizer Merger.

•If the Pfizer Merger is not consummated by March 12, 2024, or, under certain conditions, September 12, 2024, either we or Pfizer may terminate the Merger Agreement, subject to certain exceptions.

•Our ~~Business~~

~~Our near-term prospects are substantially dependent~~success depends on ~~ADCETRIS.~~our ability to effectively commercialize our products. If we ~~and/or Takeda~~and our collaborators are unable to effectively commercialize ~~ADCETRIS for the treatment of patients in its approved indications~~our products and to ~~continue to~~ expand ~~its labeled indications of use,~~their utilization, our ability to generate significant revenue and our prospects for profitability will be adversely affected.

~~ADCETRIS~~^®

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

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

•Clinical trials and product development are expensive, time consuming and uncertain, may take longer than we expect and may not be successful. Our failure to effectively advance our development programs in a timely manner or at all could have a material adverse effect on our business, results of operations, financial condition and growth prospects.

Table of Contents

•The successful commercialization of our products will depend, in part, on the extent to which governmental authorities and health insurers establish adequate coverage and reimbursement levels and pricing policies.

•The successful commercialization of our products will also depend, in part, on the acceptance of our products by the medical community, patients and third-party payors.

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

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

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

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

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

•Our collaborators and licensees may not perform as expected, which may negatively affect our ability to develop and commercialize our products and product candidates and/or generate revenues through technology licensing, and may otherwise negatively affect our business.

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

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

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

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

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

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

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

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

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

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

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

Table of Contents

Risks Related to our Proposed Acquisition by Pfizer

The consummation of our proposed acquisition by Pfizer is subject to a number of conditions, many of which are largely outside of the parties’ control, and, if these conditions are not satisfied or waived on a timely basis, the merger agreement may be terminated and the Pfizer Merger may not be completed.

On March 12, 2023, we entered into an Agreement and Plan of Merger, or the Merger Agreement, with Pfizer and Aris Merger Sub, Inc., a wholly owned subsidiary of Pfizer, or ~~brentuximab vedotin,~~Merger Sub, pursuant to which, among other things, Merger Sub will be merged with and into the Company with the Company surviving the Pfizer Merger as a wholly owned subsidiary of Pfizer. The Pfizer Merger is ~~now approved~~subject to certain customary closing conditions, including: (i) the adoption of the Merger Agreement by the holders of a majority of the outstanding common shares entitled to vote on such matter at the meeting of our stockholders held for that purpose; (ii) the expiration or earlier termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or the HSR Act, and receipt of certain non-U.S. antitrust and foreign investment approvals; (iii) no statute, rule or regulation that prohibits the consummation of the Pfizer Merger having been enacted, issued, enforced or promulgated and remaining in effect in certain specified jurisdictions, and no order or injunction of a court of competent jurisdiction being in effect that prohibits or makes illegal the consummation of the Pfizer Merger; (iv) subject to certain materiality qualifications, the accuracy of representations and warranties of the Company, Pfizer and Merger Sub, as applicable, under the Merger Agreement and the performance in all material respects by the Company, Pfizer and Merger Sub, as applicable, of their respective obligations under the Merger Agreement; and (v) no material adverse effect on the Company having occurred since the date of the Merger Agreement that is continuing.

The governmental authorities from which authorizations under antitrust and foreign investment laws, including the HSR Act, are required have broad discretion in administering the governing laws and regulations. These governmental authorities may initiate proceedings seeking to prevent, or otherwise seek to prevent, the Pfizer Merger.

The failure to satisfy all of the required conditions could delay the completion of the Pfizer Merger by a significant period of time or prevent it from occurring. Any delay in completing the Pfizer Merger could cause the parties to not realize some or all of the benefits that are expected to be achieved if the Pfizer Merger is successfully completed within the expected timeframe. There can be no assurance that the conditions to closing of the Pfizer Merger will be satisfied or waived or that the Pfizer Merger will be completed within the expected timeframe or at all.

Failure to complete the Pfizer Merger could adversely affect our stock price and future business and financial results.

There can be no assurance that the conditions to the closing of the Pfizer Merger will be satisfied or waived or that the Pfizer Merger will be completed. If the Pfizer Merger is not completed within the expected timeframe or at all, our ongoing business could be adversely affected and we will be subject to a variety of risks and possible consequences associated with the failure to complete the Merger, including the following: (i) following, or in connection with, the termination of the Merger Agreement, in certain circumstances, we will be required to pay Pfizer a termination fee of $1.646 billion; (ii) we will incur certain transaction costs, including legal, accounting, financial advisor, filing, printing and mailing fees, and substantial acquisition-related costs, including employee retention expenses, regardless of whether the Pfizer Merger closes; (iii) under the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to the closing of the Pfizer Merger, which may adversely affect our ability to execute certain of our business strategies; (iv) due to restrictions in the Merger Agreement on certain significant financing transactions prior to the closing of the Pfizer Merger, we may be unable to raise the capital required to execute certain of our business strategies; and (v) the proposed Pfizer Merger, whether or not it closes, will divert the attention of certain of our management and other key employees from ongoing business activities, including the pursuit of other opportunities that could be beneficial to us as an independent company.

If the Pfizer Merger is not completed, these risks could materially affect our business and financial results and our stock price, including to the extent that the current market price of our common stock is positively affected by a market assumption that the Pfizer Merger will be completed.

While the Pfizer Merger is pending, we will be subject to business uncertainties and certain contractual restrictions that could adversely affect our business and operations.

In connection with the pending Pfizer Merger, some of our existing or prospective customers, collaborators, vendors or other third parties may react unfavorably, including by delaying, deferring or ceasing to provide goods or services, delaying or deferring other decisions concerning their business relationships or transactions with us, refusing to extend credit to us, or otherwise seeking to change the terms on which they do business with us. These actions could adversely affect our revenues, earnings, funds from operations, cash flows and expenses, regardless of whether the Pfizer Merger is completed. In addition, due to certain restrictions in the Merger Agreement on the conduct of business prior to completing the Pfizer Merger, we may be unable, during the pendency of the Pfizer Merger, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial, and we may have to forgo certain opportunities we might otherwise pursue. The restrictions on financing

Table of Contents

transactions may also lead us to delay, reduce the scope of, or eliminate certain business activities or forgo certain opportunities to conserve cash.

In addition, as a result of the pending Pfizer Merger, current and prospective employees could experience uncertainty about their future with us. The pendency of the Pfizer Merger may make it more difficult for us to effectively retain, recruit and incentivize employees, including key management and technical, manufacturing, and other personnel, and may cause distractions from our strategy and day-to-day operations for our current employees and management.

The termination fee and restrictions on solicitation contained in the Merger Agreement may discourage other companies from trying to acquire us.

The Merger Agreement prohibits us from initiating, soliciting, knowingly encouraging or knowingly facilitating any competing acquisition proposals, subject to certain limited exceptions. The Merger Agreement also contains certain termination rights for us and Pfizer. Upon termination of the Merger Agreement in accordance with its terms, under certain circumstances, we will be required to pay Pfizer a termination fee in an amount equal to $1.646 billion, including if the Merger Agreement is terminated due to the Company accepting a superior proposal to the Pfizer Merger.

Litigation against us, Pfizer, or the members of our or their respective boards, could prevent or delay the completion of the Pfizer Merger.

It is a condition to the Pfizer Merger that there shall be no order or injunction of a court of competent jurisdiction prohibiting or making illegal the consummation of the Pfizer Merger. Four lawsuits have been filed by purported Seagen stockholders in connection with the Pfizer Merger. The complaints allege, among other things, that certain disclosures in the preliminary proxy statement we filed on April 14, 2023 in connection with the Pfizer Merger were materially incomplete and misleading. The four actions are captioned O’Dell v. Seagen Inc., et al., No. 1:23-cv-03254 (Apr. 19, 2023), filed in the United States ~~Food~~District Court for the Southern District of New York, Boyd v. Seagen Inc., et al., No. 1:23-cv-03309 (Apr. 20, 2023), filed in the United States District Court for the Southern District of New York, Wang v. Seagen Inc., et al., No. 1:23-cv-03302 (Apr. 20, 2023), filed in the United States District Court for the Southern District of New York, and ~~Drug Administration, or FDA,~~Ober v. Seagen Inc., et al., No. 1:23-cv-03378 (Apr. 21, 2023), filed in the United States District Court for the Southern District of New York. The complaints name us and the ~~European Commission~~current members of our board of directors as defendants. The complaints allege, among other things, violations of Sections 14(a) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78n(a), 78t(a), SEC Rule 14a-9, 17 C.F.R. 240.14a-9 and 17 C.F.R. § 244.100. The complaints seek, among other relief, to enjoin us from consummating the Pfizer Merger and to be awarded rescissory damages, including reasonable attorneys’ and expert fees and expenses. We believe that the allegations asserted in the complaints are without merit. We are not aware of the filing of other lawsuits challenging the Pfizer Merger or the proxy statement; however, additional lawsuits arising out of the Pfizer Merger or the related proxy statement may be filed in the future. The outcome of such lawsuits cannot be assured, including the amount of costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation of these claims. If plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the Pfizer Merger on the agreed-upon terms, such an injunction may delay the consummation of the Pfizer Merger in the expected timeframe, or may prevent the Pfizer Merger from being consummated at all. Whether or not any plaintiff’s claim is successful, this type of litigation can result in significant costs and divert management’s attention and resources from the closing of the Pfizer Merger and ongoing business activities, which could adversely affect our operations.

If the Pfizer Merger is not consummated by March 12, 2024, or, under certain conditions, September 12, 2024, either we or Pfizer may terminate the Merger Agreement, subject to certain exceptions.

Either we or Pfizer may terminate the Pfizer Merger Agreement if the Merger has not been completed by March 12, 2024, or if all conditions to closing other than those relating to antitrust and foreign investment laws and those that by their nature are to be satisfied at the closing have been satisfied, then September 12, 2024. However, this termination right will not be available to a party whose material breach of the Merger Agreement proximately caused the failure to consummate the Pfizer Merger on time. In the event the Merger Agreement is terminated by either party due to the failure of the Pfizer Merger to close by March 12, 2024, we will have incurred significant costs and will have diverted significant management focus and resources from other strategic opportunities and ongoing business activities without our stockholders realizing the anticipated benefits of the Pfizer Merger.

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

Our success depends on our ability to effectively commercialize our products. If we and our collaborators are unable to effectively commercialize our products and to expand their utilization, our ability to generate significant revenue and our prospects for three indications, encompassing several settings for the treatment of relapsed Hodgkin lymphoma and relapsed systemic anaplastic large cell lymphoma, or sALCL. ADCETRIS is our only product approved for marketing and ourprofitability will be adversely affected.

Our ability to generate revenue from product sales and our prospects for profitability are substantially dependent on our ~~continued~~and our collaborators’ ability to effectively commercialize ~~ADCETRIS for the treatment of patients in its approved indications~~our products and ~~our ability to continue to~~ expand ~~its labeled indications of use.~~their utilization. We may not be able to

Table of Contents

fully realize the commercial potential of ~~ADCETRIS~~our products, and/or commercial sales of our products may be lower than our projections, for a number of reasons, including:

•we ~~and/~~and our collaborators may be unable to effectively launch, market and commercialize our products, including in any new markets or ~~Takeda~~in any new indications;

•we and our collaborators may not be able to establish or 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;

•we and our collaborators may not be able to obtain and maintain regulatory and other required governmental approvals to market ~~ADCETRIS~~our products in any additional territories or for any additional indications in our respective territories, including for cutaneous T-cell lymphoma, or CTCL, frontline Hodgkin lymphoma or frontline mature T-cell lymphoma, or MTCL, or to otherwise continue to expand its labeled indications of use;indications;

we and/or Takeda may fail to obtain regulatory approval and may fail to commercialize ADCETRIS in either the ALCANZA and the ECHELON-1 treatment settings in our respective territories notwithstanding the positive data we reported from those trials, which would limit our sales of, and the commercial potential of, ADCETRIS;

negative or inconclusive results in, or delays in, our ECHELON-2 phase 3 trial would negatively impact, or preclude altogether, our and Takeda’s ability to obtain regulatory approvals and commercialize ADCETRIS in the frontline MTCL indication in our respective territories which would also limit our sales of, and the commercial potential of, ADCETRIS;

results from the ECHELON-1 trial or the ECHELON-2 trial, either of which could be considered confirmatory by the FDA for the relapsed sALCL indication, may fail to sufficiently confirm the clinical benefit of ADCETRIS in relapsed sALCL, which could result in the withdrawal of approval of ADCETRIS in the relapsed sALCL indication and negatively impact our potential future product sales for the relapsed sALCL indication;

•new competitive therapies ~~including immuno-oncology agents such as PD-1 inhibitors (e.g., nivolumab and pembrolizumab),~~in the approved indications for our products have been approved by regulatory authorities or may be approved or submitted ~~in the near term~~ to regulatory authorities for approval in ~~ADCETRIS’ labeled indications, and these competitive~~the near term;

•there may continue to be new adverse results, adverse events or safety concerns reported in connection with the use of our products, ~~could negatively impact our commercial sales of ADCETRIS;~~

our commercial sales of ADCETRIS could be lower than our projections due to a lower market penetration rate, increased competition by alternative products or biosimilars, or a shorter duration of therapyincluding in ~~patients in ADCETRIS’ approved indications;~~clinical trials;

~~we may be unable to effectively commercialize ADCETRIS in any new indications for which we receive marketing approval;~~

•there may be additional changes to the ~~label~~labeling for ~~ADCETRIS, including ADCETRIS’ boxed warning,~~our products that further restrict how we market and sell ~~ADCETRIS,~~our products, including as a result of data collected from ~~our required post-approval study,~~ clinical trials and/or as ~~the~~a result of ~~adverse events observed in that study or in other studies, including in~~ the ~~post-approval confirmatory studies that Takeda is required to conduct as a condition to the conditional marketing authorization~~use of ~~ADCETRIS granted by the European Commission or in investigator-sponsored studies;~~

we may not be able to establish or demonstrate in the medical community the safety, efficacy, or value of ADCETRIS and its potential advantages compared to existing and future therapeutics in the frontline Hodgkin lymphoma setting and other settings;

~~physicians may be reluctant to prescribe ADCETRIS due to side effects associated with its use or until results from~~ our ~~required post-approval study are available or other long term efficacy and safety data exist;~~products;

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

~~there~~•we may ~~be adverse results~~experience further or ~~events reported~~more severe negative impacts related to the COVID-19 pandemic, including potential future impacts on cancer diagnosis rates;

•negative impacts related to global economic instability and inflationary pressures;

•we may encounter challenges in ~~any~~joint decision making and joint execution with our collaborators that adversely affect product sales;

•co-promotion arrangements, such as the joint commercialization of ~~the clinical trials that we and/or Takeda are conducting or may~~PADCEV with Astellas in the ~~future conduct for ADCETRIS;~~

weU.S. and the joint commercialization of TIVDAK with Genmab in the U.S., may not be ~~unable to continue to effectively market, sell and distribute ADCETRIS;~~successful;

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

the ~~relative price~~cost of ~~ADCETRIS may be higher than~~ alternative treatment options or otherwise;

•we and ~~therefore its~~our collaborators may not be able to obtain favorable pricing and reimbursement approvals in additional territories in a timely manner or at all;

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

~~there~~•regulatory restrictions may ~~be changed~~change or ~~increased regulatory restrictions;~~increase;

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

•we and our collaborators may not be able to accurately predict demand for our products and obtain adequate commercial supplies of ~~ADCETRIS~~our products to meet demand or at an acceptable cost.

In December 2009, we entered into an agreement with Takeda to develop and commercialize ADCETRIS, under which we have commercial rights in the United States and its territories and Canada, and Takeda has commercial rights in the rest of the world. The success of this collaboration and the activities of Takeda will significantly impact the commercialization of ADCETRIS in countries other than the United States and in Canada. In October 2012, Takeda announced that it had received conditional marketing authorization for ADCETRIS from the European Commission for patients with relapsed Hodgkin lymphoma or relapsed sALCL, and has since obtained marketing approvals for ADCETRIS in many other countries. Conditional marketing authorization by the European Commission includes obligations to provide additional clinical data at a later stage to confirm the positive benefit-risk balance. In July 2016, Takeda announced that it had received marketing authorization for ADCETRIS from the European Commission for the treatment of adult patients with CD30-positive Hodgkin lymphoma at increased risk of relapse or progression following autologous stem cell transplant. We cannot control the amount and timing of resources that Takeda dedicates to the commercialization of ADCETRIS, or to its marketing and distribution, and our ability to generate revenues from ADCETRIS product sales by Takeda depends on Takeda’s ability to achieve market acceptance of, and to otherwise effectively market, ADCETRIS for its approved indications in Takeda’s territory.

While ADCETRIS product sales grew from 2014 to 2015 and from 2015 to 2016, and our future plans assume that sales of ADCETRIS will increase, we cannot assure you that ADCETRIS sales will continue to grow or that we can maintain sales of ADCETRIS at or near current levels. We believe that the level of our ongoing ADCETRIS sales in the United States is largely attributable to the incidence flow of patients eligible for treatment with ADCETRIS. We also believe that the incidence rate of new patients in ADCETRIS’ approved indications is relatively low, particularly when compared to many other oncology indications. For these and other reasons, we expect that our ability to accelerate ADCETRIS sales growth, if at all, will depend primarily on our ability to continue to expand ADCETRIS’ labeled indications of use. Accordingly, we are exploring the use of ADCETRIS as a single agent and in combination therapy regimens earlier in the treatment of Hodgkin lymphoma and MTCL, including sALCL, and in a range of CD30-expressing hematologic malignancies, including CTCL. This will continue to require additional time and investment in clinical trials and there can be no assurance that we and/or Takeda will obtain and maintain the necessary regulatory approvals to market ADCETRIS for any additional indications.

In particular, although we reported positive top line data in both our ALCANZA and ECHELON-1 trials in August 2016 and June 2017, respectively, there can be no assurance that either we or Takeda will ultimately obtain regulatory approvals of ADCETRIS in either of the ALCANZA or ECHELON-1 treatment settings in our respective territories, which would limit our sales of, and the commercial potential of, ADCETRIS. In addition, negative or inconclusive results in our ECHELON-2 trial would negatively impact, or preclude altogether, our and Takeda’s ability to obtain regulatory approvals in the frontline MTCL indication in our respective territories, which would also limit our sales of, and the commercial potential of, ADCETRIS. Moreover, the SPA agreement for the ECHELON-2 trial requires that the trial continue until a specified number of progression-free survival, or PFS, events designated for the trial occurs. Based on reviews of pooled, blinded data, we have observed a lower rate of reported PFS events in the ECHELON-2 trial than anticipated. We plan to discuss with the FDA the potential to unblind the trial prior to achieving the target number of PFS events specified in the SPA agreement. We cannot predict the outcome of those discussions or whether we would be able to reach agreement with the FDA. If we are unable to reach agreement with the FDA and determine to unblind the trial prior to achieving the target number of PFS events as specified in the SPA agreement, the FDA could treat the SPA agreement for ECHELON-2 trial as rescinded. In that event, we would no longer have commitments from the FDA regarding the appropriate design, size and endpoints of the study for regulatory approval, making our ability to successfully obtain regulatory approval of ADCETRIS in the ECHELON-2 treatment setting more uncertain. In addition, earlier unblinding in the ECHELON-2 trial could also negatively impact the likelihood of achieving positive results in the trial sufficient to support regulatory approval. Alternatively, if we are unable to reach agreement with the FDA, we could determine to continue the ECHELON-2 trial until the target number of PFS events specified in the SPA agreement is achieved, which could result in a substantial delay in our ability to conduct the final data analysis from the ECHELON-2 trial.

We and Takeda have formed a collaboration with Ventana Medical Systems, Inc., or Ventana, under which Ventana is working to develop, manufacture and commercialize a molecular companion diagnostic test with the goal of identifying patients who might respond to treatment with ADCETRIS based on CD30 expression levels in their tissue specimens. However, Ventana may not be able to successfully develop and obtain regulatory approval for a molecular companion diagnostic that may be required by regulatory authorities to support regulatory approval of ADCETRIS in other CD30-expressing malignancies in a timely manner or at all. Further, if a companion diagnostic requirement were included in the ADCETRIS label, such a requirement may limit our ability to commercialize ADCETRIS in the applicable setting due to potential label requirements, prescriber practices, constraints on availability of the diagnostic, or other factors.

Even if we and Takeda receive the required regulatory approvals to market ADCETRIS for any additional indications or in additional jurisdictions, we and Takeda may not be able to effectively commercialize ADCETRIS, including for the reasons set forth above.

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

If we and our collaborators are unable to successfully commercialize our products or if sales of a product do not reach the levels we expect, then our business, results of operation, financial condition and growth prospects could be adversely affected.

Our success also depends on our ability to obtain regulatory approvals for our product candidates and for our current products in additional territories, as well as our ability to expand the labeled indications of use for our current products. Our

Table of Contents

inability to do so could have a material adverse effect on our business, results of operations, financial condition and growth prospects.

We and our collaborators are required to obtain marketing approvals from applicable regulatory authorities in order to market our products or to expand the labeled indications of use for our current marketed products. However, regulatory review is a lengthy and expensive process, and approval is highly uncertain.

The U.S. Food and Drug Administration, or FDA, and other regulatory agencies have substantial discretion in the ~~future~~approval process and in determining when or whether regulatory approval will be obtained. Clinical trial data are subject to differing interpretations. Even if we believe data are promising, regulatory authorities may disagree and may require additional data, limit the scope of the approval or deny approval altogether. In addition, the approval of a product candidate by one regulatory agency does not mean that other regulatory agencies will also approve such product candidate.

Any approval that a product does receive may be more restricted than anticipated. For example, regulatory authorities may approve a product for fewer indications or narrower indications than requested. Further, regulatory agencies may impose post-marketing testing, safety monitoring, educational requirements or risk evaluation and mitigation strategies, or REMS. Regulatory authorities may also fail to approve the facilities or processes used to manufacture a product candidate or the dosing or delivery methods.

The regulatory review process may also take significantly longer than expected, which may delay or eliminate any potential revenues from sales of the affected product or product candidate. Target action dates and regulatory timelines may be subject to substantial delays. In addition, although the FDA and EMA have programs to facilitate expedited development and accelerated approval processes, these programs may not result in faster development, review or approval than conventional procedures and do not assure ultimate approval. For example, although the FDA granted Breakthrough Therapy designation to disitamab vedotin in a specified treatment setting, this designation does not provide any assurance that disitamab vedotin will receive marketing approval in the specified setting or in any other settings in a timely manner or at all. Disruptions at the FDA and other agencies due to reduced funding levels, government shutdowns, impacts associated with the COVID-19 pandemic or other factors, may also lead to delays in the regulatory review process. These disruptions may also slow our other interactions with regulatory agencies, which may slow our other product development efforts.

If a product candidate fails to receive regulatory approvals, we will not have the anticipated revenues from that product candidate to fund our operations, and we may not recoup or receive any return on our investment in that product candidate. Similarly, if regulatory authorities do not approve product labeling that is necessary or desirable for the successful commercialization of an approved product, or if they do not approve an application to expand a product's labeled indications of use or market the product in a new territory, then our anticipated revenue from that product may be adversely affected. Any of these events could have a material adverse effect on our business, results of operations, financial condition and growth prospects.

Even if regulatory approval is achieved, the launch of a new product or of an existing product in a new indication or territory is subject to a number of risks and uncertainties and may not be successful.

Sales of a new product and sales of an existing product in a new indication or territory are subject to significant risks and uncertainties and can be particularly difficult to predict. For example, the commercialization of TIVDAK is at an early stage and may not be successful. A proposed launch, including the launch of PADCEV and TUKYSA in countries where they have not yet launched, could also be delayed or impaired due to a variety of factors, including supply constraints, delays in arranging a commercial infrastructure, delays in obtaining or failure to obtain pricing and reimbursement approvals, or other factors. These risks could be heightened by impacts related to the COVID-19 pandemic. Delays or other difficulties due to any of these factors could negatively impact anticipated revenue from the affected product. In addition, prior to TUKYSA, we had no prior experience as an organization launching or commercializing a product outside the U.S. and Canada, which could adversely affect ~~ADCETRIS sales.~~

our ability to maximize the commercial potential of TUKYSA. If we and our collaborators are unable to successfully launch and commercialize any newly approved products and/or to successfully launch and commercialize our existing products in new indications or territories, then our business, results of operation, financial condition and growth prospects could be adversely affected.

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

Reports of adverse events or safety concerns involving ADCETRIS could interrupt, delay or halt clinical trials of ADCETRIS, including the ongoing FDA-required ADCETRIS post-approval confirmatory study as well as the post-approval confirmatory studies that Takeda is required to conduct as a condition to the conditional marketing authorization of ADCETRIS by the European Commission. For example, during 2013 concerns regarding pancreatitis caused an investigator conducting an independent study involving ADCETRIS to temporarily halt enrollment in the trialour products and to amend the eligibility criteria and monitoring for the trial. Subsequently, we have revised our prescribing information to add pancreatitis as a known adverse event. In addition, reports of adverse events or safety concerns involving ADCETRISproduct candidates could result in the limitation, denial or withdrawal of regulatory approval by the FDA or other regulatory authorities ~~limiting, denying or withdrawing approval of ADCETRIS~~ for any or all indications, ~~including~~ the ~~use~~need to conduct additional trials, implementation of ~~ADCETRIS for~~a REMS or the ~~treatment~~inclusion of ~~patients~~unfavorable information in ~~its approved indications. For example, there was an increased incidence of febrile neutropenia~~our product labeling and, ~~peripheral neuropathy~~ in turn, could delay or prevent us from commercializing the ~~ADCETRIS plus AVD arm of the ECHELON-1 trial, which could limit~~applicable product or narrow any approval by the FDA, or could limit prescribing of ADCETRIS in the ECHELON-1 treatment setting if approved by the FDA, both of which could negatively impact sales of ADCETRIS or adversely affect ADCETRIS’ acceptance in the market.product candidate. There are no assurances that patients receiving ~~ADCETRIS~~our products will not experience serious adverse events, including fatal events, in the ~~future.~~future, whether the

Table of Contents

serious adverse events are disclosed in the prescribing information or are newly reported. Further, there are no assurances that patients receiving ~~ADCETRIS~~our products with co-morbid diseases not previously studied, such as autoimmune diseases, will not experience new or different serious adverse events in the future.

~~Adverse events may negatively impact the sales of ADCETRIS. We may be required to further update the ADCETRIS~~

The prescribing information for each of our products includes warnings and precautions for various toxicities and reactions, including boxed warnings, based on reports of adverse events or safety concerns or implement a Risk Evaluation and Mitigation Strategy, or REMS, which could adversely affect ADCETRIS’ acceptance in the market, make competition easier or make it more difficult or expensive for us to distribute ADCETRIS. For example, thecertain fatal reactions. The prescribing information for ADCETRIS also includes ~~pancreatitis, impaired hepatic function, impaired renal function, pulmonary toxicity, and gastrointestinal complications as known adverse events as well as~~ a boxed warning related to the risk that JC virus infection resulting in progressive multifocal leukoencephalopathy ~~or PML,~~ and death can occur in patients receiving ADCETRIS. ~~Further,~~The prescribing information for PADCEV also includes a boxed warning related to the risk that severe and fatal cutaneous adverse reactions, including Stevens-Johnson syndrome and toxic epidermal necrolysis, may occur in patients receiving PADCEV. The prescribing information for TIVDAK also includes a boxed warning related to the risk that ocular toxicity may occur in patients receiving TIVDAK, and the boxed warning includes requirements for ophthalmic exams at baseline, prior to each dose, and as clinically indicated, as well as premedication and eye care. We have updated the prescribing information for our products from time to time in the past, based on ~~the identification~~reports of ~~future~~ adverse events or safety concerns, and we may be required to further ~~revise~~update the prescribing information for our products, including ~~ADCETRIS’~~ boxed ~~warning, which~~warnings, limitations of use, contraindications, warnings and precautions, and adverse reactions, or to implement a REMS in the future. Side effects and toxicities associated with our products, as well as the warnings, precautions and requirements listed in the prescribing information for our products, could ~~negatively impact~~affect the willingness of physicians to prescribe, and patients to utilize, our products and thus harm commercial sales of ~~ADCETRIS~~our products. Implementation of a REMS could advantage products that compete with ours or ~~adversely affect ADCETRIS’ acceptance in the market.~~

make it more difficult or expensive for us to distribute our products.

Likewise, reports of adverse events or safety concerns involving ~~ADCETRIS or~~ our products and product candidates could interrupt, delay or halt clinical trials of ~~such~~our products and product candidates, including the post-approval confirmatory studies that regulatory agencies have required us or ~~could result~~our collaborators to complete. There have been serious side effects and, in some cases, deaths in clinical trials for our products and product candidates that were deemed to be treatment-related by the investigators in those trials, and additional and/or unexpected side effects may be observed in these or other trials in the future. In addition, in response to prior safety events observed in our ~~inability to obtain regulatory approvals for any of our product candidates. For example,~~clinical trials, including serious side effects and patient deaths, we ~~discontinued the phase 3 CASCADE clinical trial of SGN-CD33A based on unexpected adverse events following a higher rate of deaths~~have in the ~~SGN-CD33A containing arm versus the control arm of this trial,~~past, and ~~the Investigational New Drug application, or IND, for SGN-CD33A was subsequently placed on hold by the FDA. At this time, we have no plans to initiate additional clinical trials of SGN-CD33A. In~~may in the future, ~~we may determine to discontinue our SGN-CD33A program altogether, in which case we will not receive any return on our investment in SGN-CD33A. In addition, we are planning or conducting pivotal trials~~institute additional precautionary safety measures such as dosing caps and delays, enhanced monitoring for ~~enfortumab vedotin~~side effects, and ~~tisotumab vedotin based on only limited phase 1 clinical data,~~modified patient inclusion and exclusion criteria. Additional and/or unexpected safety ~~concerns~~events could be observed in these ~~pivotal~~ or other ~~later stage~~ trials ~~which~~that could delay or prevent us from advancing the clinical development of, ~~enfortumab vedotin~~ or ~~tisotumab vedotin~~obtaining regulatory approvals for, our products and ~~may adversely affect our business, results of operations and prospects.~~

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

~~Even though~~

Clinical trials and product development are expensive, time consuming and uncertain, may take longer than we expect and may not be successful. Our failure to effectively advance our development programs in a timely manner or at all could have ~~obtained approval to market ADCETRIS in certain indications, we are subject to extensive ongoing regulatory obligations~~a material adverse effect on our business, results of operations, financial condition and ~~review, including post-approval requirements that could~~growth prospects.

Our long-term success will depend upon the successful development of new products, as well as developing our existing products for new indications. However, only a small number of development programs result in the ~~withdrawal~~commercialization of ~~ADCETRIS from certain geographic markets for certain indications if such requirements are not met.~~

~~ADCETRIS~~a product. It is approved for treating patients in the relapsed sALCL indication under accelerated approval regulations in the U.S., approved with conditions in relapsed HL and sALCL in Canada, and approved under conditional marketing authorization in relapsed HL and sALCL in Europe, in each case under regulations which allow for approval of products for cancer or other serious or life threatening illnesses based on a surrogate endpoint or on a clinical endpoint other than survival or irreversible morbidity. Under these types of approvals, we are subject to certain post-approval requirements, including clinical trials to confirm clinical benefit. In the U.S., either the ECHELON-1 trial or the ECHELON-2 trial results may be sufficient to confirm the clinical benefit of ADCETRIS in relapsed sALCL and thereby convert the relapsed sALCL to regular approval. In Canada and Europe, the ECHELON-1 results may be sufficient to confirm the clinical benefit of ADCETRIS in relapsed HL, and the ECHELON-2 results may be sufficient to confirm the clinical benefit of ADCETRIS in relapsed sALCL. Our failure to complete a required post-approval study, or to confirm a clinical benefit could result in the withdrawal of approval of ADCETRIS in the indications for which approval is conditional in certain geographical markets which would seriously harm our business. Similarly, Takeda’s failure to provide these additional clinical data from confirmatory studies could result in the European Commission withdrawing approval of ADCETRIS in the European Union for certain indications, which would negatively impact anticipated royalty revenue from ADCETRIS sales by Takeda in the European Union and could adversely affect our results of operations. In addition, under the FDA’s accelerated approval regulations, the labeling, packaging, adverse event reporting, storage, advertising and promotion of ADCETRIS for the treatment of patients with relapsed sALCL is subject to extensive regulatory requirements all of which entails significant expense and may limit our ability to commercialize ADCETRIS for the relapsed sALCL indication.

In addition, we are subject to extensive ongoing obligations and continued regulatory review from applicable regulatory agencies with respect to any product for which we have obtained regulatory approval, including ADCETRIS in each of its approved indications, such as continued adverse event reporting requirements and the requirement to have somepossible that none of our ~~promotional materials pre-cleared by the FDA. There may also be additional post-marketing obligations, all of which may result in significant expense~~product candidates will ever become commercial products and ~~limit our ability to commercialize ADCETRIS in the United States, Canada or potentially other jurisdictions.~~

We and the manufacturers of ADCETRIS are also required to comply with current Good Manufacturing Practices, or cGMP, regulations, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Further, regulatory agencies must approve these manufacturing facilities before they can be used to manufacture ADCETRIS, and these facilities are subject to ongoing regulatory inspections. In addition, regulatory agencies subject an approved product, its manufacturer and the manufacturer’s facilities to continual review and inspections, including periodic unannounced inspections. The subsequent discovery of previously unknown problems with ADCETRIS, including adverse events of unanticipated severity or frequency, or problems with the facilities where ADCETRIS is manufactured, may result in restrictions on the marketing of ADCETRIS, up to and including withdrawal of ADCETRIS from the market. If our manufacturing facilities or thosethat none of our ~~suppliers fail to comply with applicable~~existing products will obtain regulatory ~~requirements, such noncompliance could result in regulatory action and additional costs to us.~~

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

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

~~imposition of fines and other civil penalties;~~

~~criminal prosecutions;~~

~~injunctions, suspensions or revocations of regulatory approvals;~~

~~suspension of any ongoing clinical trials;~~

~~total or partial suspension of manufacturing;~~

~~delays in commercialization;~~

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

~~refusals to permit drugs to be imported into or exported from the United States;~~

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

~~product recalls or seizures.~~

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

~~If we or our~~ collaborators ~~are not able to obtain or maintain required regulatory approvals, we or our collaborators will not be able to successfully commercialize ADCETRIS or our product candidates.~~

The research, testing, manufacturing, labeling, approval, selling, marketing and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, which regulations differ from country to country. Neither we nor our collaborators are permitted to market our product candidates in the United States or foreign countries until we obtain marketing approval from the FDA or other foreign regulatory authorities, and we or our collaborators may never receive regulatory approval for the commercial sale of any of our product candidates. In addition, part of our strategy is to continue to explore the use of ADCETRIS earlier in the treatment of Hodgkin lymphoma and MTCL and in other CD30-expressing malignancies, including CTCL, and we are currently conducting multiple clinical trials for ~~ADCETRIS.~~our products and product candidates, and we plan to commence additional trials in the future. Each of these trials requires the investment of substantial expense and time. However, ~~we and/~~there can be no assurance that the design or ~~Takeda may~~conduct of these trials, or any data collected from them, will be ~~unable~~sufficient to ~~obtain or maintain~~support advancement to the next stage of development, any regulatory approvals ~~for the~~or commercial ~~sale~~viability.

Many of ~~ADCETRIS for any additional indications. Obtaining marketing approval is a lengthy, expensive and uncertain process and approval is never assured, and we have only~~our clinical trials were initiated based on limited experience in preparing and submitting the applications necessary to gain regulatory approvals. Further, the FDA and other foreign regulatory agencies have substantial discretion in the approval process, and determining whendata. Encouraging preclinical, preliminary or ~~whether~~interim data, and/or positive early-stage clinical trial results do not ensure that full, larger scale, later stage or confirmatory trials will be successful or that regulatory approval will be ~~obtained~~obtained. For example, despite the positive initial results we and Astellas reported from the dose escalation/Cohort A of the EV-103 trial and the positive results we and Astellas announced from Cohort K of the EV-103 trial, we cannot be certain that PADCEV will demonstrate sufficient efficacy or a favorable safety profile in other trials, including the EV-302 trial. Many companies in the pharmaceutical and biotechnology industries, including us, have suffered significant setbacks in late-stage clinical trials after achieving encouraging or positive results in early-stage development. We cannot be certain that we will not face similar setbacks in our ongoing or planned clinical trials, including ongoing pivotal and confirmatory trials.

There may still be important facts about the safety, efficacy, and risk versus benefit of our products and product candidates, as single agents or in combination with other agents, that are not known to us at this time and that may negatively impact our ability to develop and commercialize them. Safety events or concerns, or negative or inconclusive trial results, could adversely affect the development timeline and the regulatory approval and commercialization prospects for ~~any~~our products and product candidates, or cause us to cease further development of a product or product candidate, any of which may materially

Table of Contents

and adversely affect our business, results of operations, financial condition and growth prospects. In addition, we ~~develop, including any regulatory approvals~~may make a strategic decision to discontinue development if, for ~~the potential commercial sale of ADCETRIS in additional indications or in any additional territories. In this regard, even if~~example, we believe commercialization will be difficult relative to the ~~data collected from~~standard of care or we prefer to prioritize other opportunities in our pipeline. We also face intense competition, and it is possible that a clinical trial may meet its safety and efficacy endpoints but we may choose not to advance the development of a product or product due to changes in the competitive environment.

From time to time, the commencement, continuation and completion of our clinical trials have been subject to delays, and we are likely to experience additional delays in the future. Factors that could lead to the delay, suspension, termination or need to modify clinical trials of ~~ADCETRIS~~our products and ~~our~~ product candidates ~~are promising, such~~include:

•adverse medical events or side effects, including fatalities, in treated patients or other safety issues or concerns;

•deficiencies in the conduct of the clinical trial, including failure to conduct the clinical trial in accordance with regulatory requirements, Good Clinical Practice, or GCP, or study protocols;

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

•action by competent authorities to place a clinical hold or partial clinical hold on a trial or compound;

•the time required to determine efficacy may ~~not~~ be ~~sufficient~~longer than expected;

•unfavorable scientific results or insufficient data to support safety and effectiveness;

•inadequate supply or deficient quality of the applicable product or product candidate or of other materials necessary to complete the trials;

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

•delay or failure to obtain institutional review board, or IRB, or ethics committee approval to conduct a clinical trial at a prospective site;

•decisions by ~~the FDA~~competent authorities, IRBs, ethics committees, our collaborators or us, or recommendation by a data monitoring committee, to suspend or terminate a clinical trial for safety issues, futility or any other ~~foreign regulatory authority.~~reason or to demand variations in the protocols or conduct of clinical trials;

•changes in governmental regulations or administrative actions that adversely affect the ability to continue to conduct or to complete a clinical trial;

•budgetary constraints or prohibitively high clinical trial costs;

•difficulties in identifying and enrolling patients who meet trial eligibility criteria;

•lower than anticipated retention rates for patients who have initiated a clinical trial;

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

•risks related to the ongoing military conflict between Russia and Ukraine, and sanctions imposed against Russia by the international community.

If a product candidate or their advisors may disagree with our interpretations of data from preclinical studies and clinical trials. For example, based in part on the positive data we reported from the ALCANZA trial, we have submitted an sBLA to the FDA to seek approval of ADCETRIS for a potential new indication ~~in CTCL patients who require systemic therapy and the FDA has granted Breakthrough Therapy Designation to ADCETRIS for the treatment~~fails at any stage of patients with CD30-expressing mycosis fungoides (MF) and primary cutaneous anaplastic large cell lymphoma (pcALCL) who require systemic therapy and have received one prior systemic therapy. In addition, based on the positive datadevelopment, or if we ~~reported from the ECHELON-1 trial, in November 2017, we submitted an sBLA to the FDA for approval of ADCETRIS as part~~or our collaborators otherwise discontinue development of a ~~frontline combination chemotherapy regimen~~product candidate or indication for any reason, we will not have the anticipated revenues from that product candidate or indication to fund our operations and we may not recoup or receive any return on our investment in ~~patients with previously untreated advanced classical Hodgkin lymphoma. However, the FDA may disagree with~~that product candidate or indication. Failure to effectively advance our ~~interpretations of the data from the ALCANZA and/or ECHELON-1 trials and/or may otherwise determine not to approve our sBLA submissions~~development programs in a timely manner or at ~~all. Moreover, even though~~all could have a material adverse effect on our ~~ALCANZA, ECHELON-1~~business, results of operations, financial condition and ~~ECHELON-2 trials are being conducted under SPA agreements with the FDA, this is not a guarantee or indication~~prospects.

Table of approval, and we cannot be certain that the design of, or data collected from, any of our current or potential future clinical trials that were or are being conducted under SPA agreements with the FDA will be sufficient to support FDA approval. Further, a SPA agreement is not binding on the FDA if public health concerns unrecognized at the time the SPA agreement is entered into become evident, other new scientific concerns regarding product safety or efficacy arise, new drugs are approved in the same indication, or if we have failed to comply with the agreed upon trial protocols, including as a result of completing a clinical trial with fewer events than planned. In addition, a SPA agreement may be changed by us or the FDA on written agreement of both parties, and the FDA retains significant latitude and discretion in interpreting the terms of a SPA agreement and the data and results from the applicable clinical trial. For example, even though we believe that the data from the ALCANZA and ECHELON-1 trials are supportive of approval of ADCETRIS in the ALCANZA and ECHELON-1 treatment settings, respectively, our SPA agreements with the FDA covering the ALCANZA and ECHELON-1 trials are not a guarantee or indication of approval of ADCETRIS in either the ALCANZA or ECHELON-1 treatment settings (or in any other indications). Regulatory agencies also may approve a product candidate for fewer indications or a narrower label than requested or may grant approval subject to the performance of post-approval studies or REMS for a product candidate. In addition, the breakthrough therapy and priority review designations granted to ADCETRIS may not result in a faster review or approval process and such designations do not reflect commitments that ADCETRIS will be approved in either of the ALCANZA or ECHELON-1 treatment settings, or with any particular label. Similarly, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of ADCETRIS in additional indications, including any indications in the ALCANZA or ECHELON-1 treatment settings.

In addition, changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols and/or related SPA agreements to reflect these changes. Amendments may require us to resubmit our clinical trial protocols to institutional review boards, or IRBs, for reexamination, which may impact the costs, timing or successful completion of a clinical trial. In addition, as part of the U.S. Prescription Drug User Fee Act, or PDUFA, the FDA has a goal to review and act on a percentage of all regulatory submissions in a given time frame. In this regard, the sBLA that we submitted to the FDA to seek approval of ADCETRIS for a new indication in CTCL patients who require systemic therapy was accepted for filing and designated for priority review with a PDUFA targeted action date of December 16, 2017. However, the FDA does not always meet its PDUFA targeted action dates and if the FDA were to fail to meet the PDUFA targeted action date for our filed sBLA or fail to meet future PDUFA targeted action dates established for ADCETRIS or any of our product candidates, if any, the commercialization of the affected product candidate or of ADCETRIS in any additional indications could be delayed or impaired. Due to these and other factors, ADCETRIS and our product candidates could take a significantly longer time to gain regulatory approvals than we expect or may never gain new regulatory approvals, which could delay or eliminate any potential product revenue from sales of our product candidates or of ADCETRIS in any additional indications, which could significantly delay or prevent us from achieving profitability.

Contents

The successful commercialization of ~~ADCETRIS and~~ our ~~product candidates~~products will depend, in part, on the extent to which governmental authorities and health insurers establish adequate coverage and reimbursement levels and pricing policies.

Successful sales of ~~ADCETRIS~~our current and any future approved products will depend, in part, on the extent to which coverage and reimbursement for our products will be available from government and health administration authorities, private health insurers and other third-party payors. To manage healthcare costs, many governments and third-party payors increasingly scrutinize the pricing of new products and require ~~greater~~increasing levels of evidence of favorable clinical outcomes and cost-effectiveness before extending coverage. In light of ~~such challenges to prices,~~this pricing scrutiny, we cannot be sure that we and our collaborators will achieve and ~~continue to have~~maintain coverage ~~available~~ for ~~ADCETRIS~~our products and any ~~other~~ product ~~candidate~~candidates that we or our collaborators commercialize and, if available, that the reimbursement rates will be ~~adequate.~~adequate and grant access to all eligible patients. If we or our collaborators are unable to obtain and maintain coverage and adequate levels of ~~coverage and~~ reimbursement for our ~~product candidates,~~current and any future approved products that we or our collaborators commercialize, their marketability will be negatively and materially impacted. For example, even if we are able to obtain approval of our sBLA submission to the FDA to expand the labeled indications of use for ADCETRIS to the frontline advanced Hodgkin lymphoma setting based on our recent ECHELON-1 trial data, we cannot be certain that third-party payors will provide coverage and adequate reimbursement for ~~ADCETRIS in that indication~~PADCEV, TUKYSA or TIVDAK based on ~~the~~their relative price orand perceived ~~benefit of ADCETRIS~~benefits as compared to alternative treatment options or otherwise, which may materially harm our and our collaborators’ ability to ~~maintain~~successfully commercialize PADCEV, TUKYSA and TIVDAK in our respective designated territories. In addition, gross-to-net deduction rates are dependent on market and site of care dynamics that may continue to evolve throughout the lifecycle of each of our products. These gross-to-net deduction rates also vary by product. We have experienced fluctuations in gross-to-net deductions in the past and may experience additional fluctuations in gross-to-net deductions for one or ~~increase sales~~more of ~~ADCETRIS~~our products in the future.

In many jurisdictions, including many countries in Europe, the proposed pricing for a drug must be approved in an individual country before it may be lawfully marketed, which could delay entry of a product into a market or, if pricing is not approved, may ~~otherwise~~prevent us or our collaborators from selling a product in a country where it has received regulatory approval. In European countries where TUKYSA and PADCEV have obtained regulatory approval, we will seek additional pricing and reimbursement agreements for TUKYSA, and work with Astellas to seek additional pricing and reimbursement agreements for PADCEV, in accordance with local timelines. Further, authorities in Europe have substantial discretion in the pricing and reimbursement approval process and in determining when or whether coverage will be available for a product in its initial indication or for any additional indications or in additional territories. In addition, in some cases, they may lower the price for a medicine after the price has been established. If we or our collaborators are unable to obtain favorable pricing and reimbursement approvals in the countries that represent significant potential markets, our anticipated revenue from and growth prospects for PADCEV and/or TUKYSA in those regions would be negatively ~~affect future ADCETRIS sales.~~

~~Moreover, eligibility~~affected.

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

The unavailability or inadequacy of third-party coverage and reimbursement could have a material adverse effect on the market acceptance of ~~ADCETRIS~~our current and any ~~of our~~ future approved products and the future revenues we may expect to receive from those products. Further, in the event that our product candidates rely upon in vitro companion diagnostics for use in selecting the patients that we believe will respond to our therapeutics, we or our collaborators may be required to obtain coverage and reimbursement separate and apart from the coverage and reimbursement we may seek for our product candidates. In addition, we are unable to predict what additional legislation or regulation relating to the healthcare industry or third-party coverage and reimbursement may be upheld or enacted in the future, or what effect such legislation or regulation would have on our business. Continuing negative publicity regarding pharmaceutical pricing practices and ongoing ~~presidential~~governmental and ~~congressional focus on this issue~~societal scrutiny create significant uncertainty regarding regulation of the healthcare industry and third-party coverage and ~~reimbursement.~~reimbursement in the U.S. and other jurisdictions. If additional healthcare policies or reforms intended to curb healthcare costs are ~~adopted~~implemented or if we experience negative publicity with respect to pricing of ~~ADCETRIS~~our products or the pricing of pharmaceutical products generally, the prices that we charge for ~~ADCETRIS~~our current and any future approved products may be limited, ~~our commercial opportunity may be limited and/or~~and our revenues from sales of ~~ADCETRIS~~our current and any future approved products may be negatively impacted.

~~Healthcare law and policy changes may have a material adverse effect on us.~~

~~In March 2010, the Patient Protection and Affordable Care Act~~

Table of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively PPACA, became law in the United States. PPACA substantially changed the way healthcare is financed by both governmental and private insurers and significantly affects the pharmaceutical industry. Contents

The provisions of PPACA of greatest importance to the pharmaceutical industry include increased Medicaid rebates, expanded Medicaid eligibility, extension of Public Health Service eligibility, annual fees payable by manufacturers and importers of branded prescription drugs, annual reporting of financial relationships with physicians and teaching hospitals, and a new Patient-Centered Outcomes Research Institute. Many of these provisions have had the effect of reducing the revenue generated by our sales of ADCETRIS and will have the effect of reducing any revenue generated by sales of any future commercial products we may have.

Some of the provisions of the PPACA have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional challenges, as well as efforts by the Trump administration to repeal or replace certain aspects of the PPACA. For example, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the PPACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the PPACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. In Congress, the U.S. House of Representatives passed PPACA replacement legislation known as the American Health Care Act of 2017 in May 2017, which was not introduced in the Senate. More recently, the Senate

Republicans have proposed multiple bills to repeal or repeal and replace portions of the PPACA. Although none of these measures have been enacted, Congress may consider other legislation to repeal or replace certain elements of the PPACA. On October 12, 2017, President Trump signed another Executive Order directing certain federal agencies to propose regulations or guidelines to permit small businesses to form association health plans, expand the availability of short-term, limited duration insurance, and expand the use of health reimbursement arrangements, which may circumvent some of the requirements for health insurance mandated by the PPACA. In addition, citing legal guidance from the U.S. Department of Justice, the U.S. Department of Health and Human Services, has concluded that cost-sharing reduction, or CSR, payments to insurance companies required under the PPACA have not received necessary appropriations from Congress and announced that it will discontinue these payments immediately until such appropriations are made. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified health plans under the PPACA. While Congress is considering legislation to appropriate funds for CSR payments the future of that legislation is uncertain. We continue to evaluate the effect that the PPCCA and its possible repeal and replacement has on our business.

In addition, we anticipate that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and an additional downward pressure on the price that we receive for ADCETRIS or any future approved product, which may harm our business. For example, increased discounts, rebates or chargebacks may be mandated by governmental or private insurers or fee caps and pricing pressures could be enacted by industry organizations or state and federal governments, any of which could significantly affect the revenue generated by salessuccessful commercialization of our products ~~including ADCETRIS. In addition, drug-pricing~~will also depend, in part, on the acceptance of our products by ~~pharmaceutical companies has come under increased scrutiny. Specifically, there have been several recent U.S. Congressional inquiries~~the medical community, patients and ~~proposed federal~~third-party payors.

The degree of market acceptance among patients, physicians, and ~~state legislation designed~~third-party payors is important to ~~among other things, bring more transparency~~our ability to ~~drug pricing by requiring drug companies to notify insurers~~successfully commercialize our current and ~~government regulators of price increases and to provide an explanation the reasons for the increase, reduce theout-of-pocket~~ cost of prescription drugs, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drugs. We expect further federal and state legislation and healthcare reforms to continue to be proposed to control increasing healthcare costs and to control the rising cost of prescription drugs. These proposals, if implemented, could limit the price for ADCETRIS or any future approved products. ~~Commercial opportunity could be negatively impacted~~The degree of acceptance will depend on a number of factors including the clinical benefits of our products, the effectiveness of our marketing, sales and distribution strategy and operations, the perceived advantages and relative cost, safety and efficacy of alternative treatments, and the acceptance and degree of adoption of our products by ~~legislative action~~institutional treatment pathways and institutional, local, and national clinical guidelines. In the U.S., many oncology practices and healthcare providers rely on the National Comprehensive Cancer Network, or NCCN, Clinical Practice Guidelines in Oncology, or NCCN Guidelines, or other institutional practice pathways in decisions related to treatment of patients and utilization of medicines. To the extent that ~~controls pricing, mandates price negotiations, or increases government discounts and rebates.~~

Also, price increases on ADCETRIS and negative publicity regarding drug pricing and price increases generally, whether on ADCETRIS or products distributed by other pharmaceutical companies, could negatively affect market acceptance of, and sales of, ADCETRIS. In addition, although ADCETRIS is approved in the European Union, Japan and other countries outside of the United States, government austerity measures or further healthcare reform measures and pricing pressures in other countries could adversely affect demand and pricing for ADCETRIS, which would negatively impact anticipated royalty revenue from ADCETRIS sales by Takeda.

Other legislative changes have also been proposed and adopted since PPACA was enacted. The Budget Control Act of 2011, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes a 2% reduction in Medicare provider payments paid under Medicare Part B to physicians for physician-administered drugs, such as certain oral oncology drugs, which went into effect in April 2013 and, following passage of the Bipartisan Budget Act of 2015, will remain in effect through 2025 unless additional congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. In addition, legislation has been proposed to shorten the period of biologic data and market exclusivity granted by the FDA. If such legislation is enacted, we may face competition from biosimilars of ADCETRISour current or any future approved products ~~earlier than otherwise would have occurred. Increased competition~~are not included or positioned favorably in such treatment guidelines and pathways, the full utilization potential of our products may ~~negatively impact coverage and pricing of ADCETRIS,~~not be reached, which may harm our ability to successfully commercialize our current or any future approved products.

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

ADCETRIS, PADCEV, TIVDAK and our ladiratuzumab vedotin and disitamab vedotin product candidates are all based on antibody-drug conjugate, or ~~results~~ADC, technology, which utilizes proprietary stable linkers and potent cell-killing synthetic agents. Our ADC technology is also the basis of ~~operations.~~

~~We expect to experience pricing pressures in connection~~our license agreements with ~~the sale of ADCETRIS due to the trend toward managed healthcare, and additional legislative proposals. For example, the PPACA increased the mandated Medicaid rebate from 15.1% to 23.1%~~AbbVie Biotechnology Ltd., expanded the rebate to Medicaid managed care utilization and increased the types of entities eligible for the federal 340B drug discount program. On January 30, 2017, the White House Office of Management and Budget withdrew the draft August 2015 Omnibus Guidance document that was issued by the Department of Health and Human Services Health Resources and Services Administration, or HRSA, that addressedAstellas, Genentech, Inc., a broad range of topics including, among other items, the definition of a patient’s eligibility for 340B drug pricing. However, as concerns continue to grow over the need for tighter oversight, there remains the possibility that HRSA or other agency under the Department of Health and Human Services, or HHS, will propose a similar regulation or that Congress will explore changes to the 340B program through legislation. For example, the Centers for Medicare & Medicaid Services has issued a proposed rule that would revise the Medicare hospital outpatient prospective payment system, including a new reimbursement methodology for drugs purchased under the 340B program for Medicare patients. In addition, HHS has currently set July 1, 2018 for implementationmember of the

~~final rule setting forth the calculation of the ceiling price~~ Roche Group, or Genentech, and ~~application of civil monetary penalties under the 340B program. A significant portion of ADCETRIS purchases are eligible for 340B drug pricing, therefore an expansion of the 340B~~GlaxoSmithKline LLC and our collaboration agreements with Takeda, Astellas, Genmab, Merck and Zai Lab. Any failures or setbacks in our ADC development program or ~~reduction~~with respect to our additional proprietary technologies, including adverse effects resulting from the use of this technology in ~~340B pricing, whether in~~human clinical trials and/or the ~~form~~imposition of ~~the final rule or otherwise would likely~~clinical holds on our trials of our product candidates, could have a ~~negative~~detrimental impact on the continued commercialization of our ~~net sales of ADCETRIS.~~

~~We cannot predict what healthcare reform initiatives may be adopted~~products in the future. However, we anticipate that Congress, state legislatures, and third-party payors may continue to review and assess alternative healthcare delivery and payment systems and may in the future propose and adopt legislation or policy changes or implementations effecting additional fundamental changes in the healthcare delivery system. We also expect ongoing initiatives to increase pressure on drug pricing. We cannot assure you as to the ultimate content, timing, or effect of changes, nor is it possible at this time to estimate the impact of any such potential legislation; however, such changes or the ultimate impact of changes could negatively affect our revenue or sales of ADCETRIStheir current or any potential future approved ~~products.~~

~~Enhanced governmental scrutiny, private litigation scrutiny~~indications and ~~private litigation involving pharmaceutical manufacturer donations to patient assistance programs offered by charitable foundations may require us to modify our programs.~~

To help patients afford our products, we have a patient assistance program and also occasionally make donations to independent charitable foundations that help financially needy patients. These types of programs designed to assist patients afford pharmaceuticals have become the subject of scrutiny. In recent years, some pharmaceutical manufacturers were named in class action lawsuits challenging the legality of their patient assistance programs and support of independent charitable patient support foundations under a variety of federal and state laws. At least one insurer also has directed its network pharmacies to no longer accept manufacturer co- payment coupons for certain specialty drugs the insurer identified. Our patient assistance program and support of independent charitable foundations could become the target of similar litigation.

In addition, there has been regulatory review and enhance government scrutiny of donations by pharmaceutical companies to patient assistance programs operated by charitable foundations. For example, the Office of Inspector General of the U.S. Department of Health & Human Services, or OIG, has established specific guidelines permitting pharmaceutical manufacturers to make donations to charitable organizations who provide co-pay assistance to Medicare patients, provided that such organizations are bona fide charities, are entirely independent of and not controlled by the manufacturer, provide aid to applicants on a first-come basis according to consistent financial criteria, and do not link aid to use of a donor’s product. If we or our vendors or donation recipients are deemed to fail to comply with laws or regulations in the operation of these programs, we could be subject to damages, fines, penalties or other criminal, civil or administrative sanctions or enforcement actions. Further, numerous organizations, including pharmaceutical manufacturers, have received subpoenas from the OIG and other enforcement authorities seeking information related to their patient assistance programs and support. We cannot ensure that our compliance controls, policies and procedures will be sufficient to protect against acts of our employees, business partners or vendors that may violate the laws or regulations of the jurisdictions in which we operate. Regardless of whether we have complied with the law, a government investigation could impact our business practices, harm our reputation, divert the attention of management and increase our expenses.

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

~~We are currently conducting multiple clinical trials for ADCETRIS and~~ our product candidates and we plan to commence additional trials of ADCETRIS and our product candidates in the future. We are also conducting a pivotal phase 2 trial of enfortumab vedotin with Astellas for locally advanced or metastatic urothelial cancer patients who have been previously treated with checkpoint inhibitor therapy, and plan to conduct a pivotal phase 2 trial of tisotumab vedotin with Genmab in patients with recurrent and/or metastatic cervical cancer, in each case based on only limited phase 1 clinical data. Neither enfortumab vedotin nor tisotumab vedotin have previously been evaluated in later stage clinical trials and we cannot be certain that the design of, or data collected from, these trials will be adequate to demonstrate the safety and efficacy of enfortumab vedotin or tisotumab vedotin, or will otherwise be sufficient to support FDA or any foreign regulatory approvals.

Each of our clinical trials requires the investment of substantial expense and time and the timing of the commencement, continuation and completion of these clinical trials may be subject to significant delays relating to various causes, including scheduling conflicts with participating clinicians and clinical institutions, difficulties in identifying and enrolling patients who meet trial eligibility criteria, failure of patients to complete the clinical trial, delays in accumulating the required number of clinical events for data analyses, delay or failure to obtain IRB approval to conduct a clinical trial at a prospective site, and shortages of available drug supply. For example, the SPA agreement for the ECHELON-2 trial requires that the trial continue until a specified number of PFS events designated for the trial occurs. Based on reviews of pooled, blinded data, we have observed a lower rate of reported PFS events than anticipated. We plan to discuss with the FDA the potential to unblind the trial prior to achieving the target number of PFS events specified in the SPA agreement. We cannot predict the outcome of those discussions or whether we would be able to reach agreement with the FDA. If we are unable to reach agreement with the FDA and determine to unblind the trial prior to achieving the target number of PFS eventscandidate pipeline, as ~~specified in the SPA agreement, the FDA could treat the SPA agreement for ECHELON-2 trial~~well as ~~rescinded. In that event, we would no longer have commitments from the FDA regarding the appropriate design, size and endpoints of the study for regulatory approval, making~~ our ability to successfully obtain regulatory approval of ADCETRIS in the ECHELON-2 treatment setting more uncertain. In addition, earlier unblinding in the ECHELON-2 trial could also negatively impact the likelihood of achieving positive results in the trial sufficient to support regulatory approval. Alternatively, if we are unable to reach agreement with the FDA, we could determine to continue the ECHELON-2 trial until the target number of PFS events specified in the SPA agreement is achieved,maintain and/or enter into new corporate collaborations regarding our ADC technology, which ~~could result in a substantial delay in our ability to conduct the final data analysis from the ECHELON-2 trial.~~

Additionally, patient enrollment is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the existence of competing clinical trials, perceived side effects and the availability of alternative or new treatments. Many of our future and ongoing clinical trials are being or will be coordinated or conducted with Takeda, Astellas, Genmab and other collaborators, which may delay the commencement or affect the continuation or completion of these trials. From time to time, we have experienced enrollment-related delays in clinical trials and we will likely continue to experience similar delays in our current and future trials. We depend on medical institutions and clinical research organizations, or CROs, to conduct some of our clinical trials in compliance with Good Clinical Practice, or GCP, and to the extent they fail to enroll patients for our clinical trials, fail to conduct our trials in accordance with GCP, or are delayed for a significant time in achieving full enrollment, we may be affected by increased costs, program delays or both, which may harm our business. In addition, we conduct clinical trials in foreign countries which may subject us to further delays and expenses as a result of increased drug shipment costs, additional regulatory requirements and the engagement of foreign CROs, as well as expose us to risks associated with less experienced clinical investigators who are unknown to the FDA, different standards of medical care, and foreign currency transactions insofar as changes in the relative value of the U.S. dollar to the foreign currency where the trial is being conducted may impact our actual costs.

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

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

~~deficiencies in the conduct of the clinical trial, including failure to conduct the clinical trial in accordance with regulatory requirements, GCP or clinical protocols;~~

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

~~the time required to determine whether ADCETRIS or the applicable product candidate is effective may be longer than expected;~~

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

~~ADCETRIS or the applicable product candidate may not appear to be more effective than current therapies;~~

~~the quality or stability of ADCETRIS or the applicable product candidate may fall below acceptable standards;~~

~~our inability and the inability of our collaborators to produce or obtain sufficient quantities of ADCETRIS or the applicable product candidate to complete the trials;~~

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

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

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

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

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

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

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

In addition, we or our collaborators may experience significant setbacks in advanced clinical trials, even after promising results in earlier trials, including unexpected adverse events that may occur when our product candidates are combined with other therapies. For example, in June 2017, we suspended patient enrollment and treatment in all SGN-CD33A trials and discontinued the phase 3 CASCADE clinical trial of SGN-CD33A in frontline older AML patients, following a higher rate of deaths in the SGN-CD33A containing arm versus the control arm of this trial, and the IND for SGN-CD33A was subsequently placed on hold by the FDA. At this time, we have no plans to initiate additional clinical trials of SGN-CD33A. In the future, we may determine to discontinue our SGN-CD33A program altogether, in which case we will not receive any return on our investment in SGN-CD33A.

Negative or inconclusive clinical trial results could adversely affect our ability and the ability of our collaborators to obtain regulatory approvals of our product candidates or to market ADCETRIS and/or expand ADCETRIS into other indications. In particular, negative or inconclusive results in our ECHELON-2 trial would negatively impact or preclude altogether, our and Takeda’s ability to obtain regulatory approvals in the frontline MTCL indication in our respective territories, which would limit our sales of, and the commercial potential of, ADCETRIS. In addition, clinical trial results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. For example, although we reported positive top line data in both our ALCANZA and ECHELON-1 trials, regulatory agencies, including the FDA, or their advisors, may disagree with our interpretations of data from the ALCANZA and/or ECHELON-1 trial and may not approve the expansion of ADCETRIS’ labeled indications of use based on the results of those trials or any other of our clinical trials. Adverse medical events during a clinical trial, including patient fatalities, could cause a trial to be redone or terminated, curtail or end the development of a product candidate, and may result in other negative consequences to us. Further, some of our clinical trials are overseen by an IDMC, and an IDMC may determine to delay or suspend one or more of these trials due to safety or futility findings based on events occurring during a clinical trial. In addition, we may be required to implement additional risk mitigation measures that could require us to suspend our clinical trials if certain safety events occur.

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

We have established collaborations with third parties to develop and market ADCETRIS and some of our current and future product candidates. For example, we entered into a collaboration agreement with Takeda in December 2009 that granted Takeda rights to develop and commercialize ADCETRIS outside of the United States and Canada. In addition, we have entered into 50/50 co-development agreements with Astellas for the development of enfortumab vedotin, and with Genmab for the development of tisotumab vedotin. We are also collaborating with BMS with respect to the CHECKMATE 812 pivotal phase 3 clinical trial evaluating the combination of Opdivo (nivolumab) with ADCETRIS for the treatment of relapsed/refractory or transplant-ineligible advanced classical Hodgkin lymphoma. In addition, we have ADC collaborations with AbbVie, Bayer, Celldex, Genentech, GSK, Pfizer and Progenics, and we have entered into a collaboration agreement with Unum to develop and commercialize novel antibody-coupled T-cell receptor, or ACTR, therapies incorporating our antibodies for cancer. Our dependence on collaborative arrangements to assist in the development and commercialization of ADCETRIS and for the development and commercialization of product candidates utilizing or incorporating our technologies subjects us to a number of risks, including:

we are not able to control the amount and timing of resources that our collaborators devote to the development or commercialization of products and product candidates utilizing or incorporating our technologies, or to their marketing and distribution;

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

with respect to collaborations under which we have an active role, such as our ADCETRIS collaboration and our 50/50 co-development agreements with Astellas and Genmab, we may have differing opinions or priorities than our collaborators, or we may encounter challenges in joint decision making, which may result in the delay or termination of the research, development or commercialization of the applicable products and product candidates, including ADCETRIS, enfortumab vedotin, and tisotumab vedotin;

our current and potential future collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

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

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

~~our current and potential future collaborators may not be successful in their efforts to obtain regulatory approvals in a timely manner, or at all;~~

our current and potential future collaborators may receive regulatory sanctions relating to other aspects of their business that could adversely affect the development, approval or commercialization of the applicable products or product candidates;

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

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

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

~~our current and potential collaborators may experience financial difficulties; and~~

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

If our collaborative arrangements are not successful as a result of any of the above factors, or any other factors, then our ability to advance the development and commercialization of the applicable products and product candidates and to otherwise generate revenue from these arrangements and to become profitable will be adversely affected, and our business and business prospects may be materially harmed. In particular, if Takeda were to terminate the ADCETRIS collaboration, which it may do for any reason upon prior written notice to us, we would not receive milestone payments, co-funded development payments or royalties for the sale of ADCETRIS outside the United States and Canada. As a result of such termination, we may have to engage another collaborator to complete the ADCETRIS development process and to commercialize ADCETRIS outside the United States and Canada, or to complete the development process and undertake commercializing ADCETRIS outside the United States and Canada ourselves, either of which could significantly delay the continued development and commercialization of ADCETRIS and increase our costs. Similarly, both Astellas and Genmab have the right to opt-out of their co-development obligations relating to enfortumab vedotin and tisotumab vedotin, respectively. If either Astellas or Genmab were to opt-out of their co-development agreements with us, this would significantly delay the development of the impacted product candidate and increase our costs. Any of these events could significantly harm our financial position, adversely affect our stock price and require us to incur all the costs of developing and commercializing ADCETRIS, enfortumab vedotin or tisotumab vedotin, which are now being co-funded by our collaboration partners. In the future, we may not be able to locate third-party collaborators to develop and market products and product candidates utilizing or incorporating our technologies, and we may lack the capital and resources necessary to develop and market these products and product candidates alone.

position.

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

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

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

With respect to ADCETRIS, there are several other ~~FDA-approved~~FDA approved drugs for its approved indications. Bristol-Myers Squibb’s, ~~Opdivo (nivolumab)~~or BMS’s, nivolumab and Merck’s ~~Keytruda (pembrolizumab)~~pembrolizumab are approved for the treatment of certain patients with relapsed or refractory classical Hodgkin lymphoma, and ~~Celgene’s Istodax (romidepsin)~~Acrotech Biopharma’s pralatrexate and ~~Spectrum Pharmaceuticals’ Folotyn (pralatrexate) and Beleodaq (belinostat)~~belinostat are approved for relapsed or refractory systemic anaplastic large cell lymphoma, or sALCL, among other T-cell lymphomas. BMS’s romidepsin is approved for cutaneous T-cell lymphoma. Kyowa Kirin’s mogamulizumab is approved for adult patients with relapsed or refractory mycosis fungoides or Sézary syndrome. The competition ADCETRIS faces from these and other therapies is intensifying. Additionally, Merck ~~is conducting~~conducted a phase 3 clinical trial in relapsed or refractory classical Hodgkin lymphoma comparing ~~Keytruda (pembrolizumab) with~~pembrolizumab to ADCETRIS. IfAn interim analysis of this clinical trial ~~demonstrates that~~demonstrated a statistically significant improvement in progression-free survival for pembrolizumab compared with ADCETRIS, resulting in a label expansion to an earlier line of therapy, and pembrolizumab is ~~more effective than~~now competing with ADCETRIS in ~~that treatment setting, our sales of ADCETRIS would be negatively impacted.~~this indication. We are also aware of multiple investigational agents ~~that are~~ currently being studied ~~including Roche’s atezolizumab, Pfizer’s avelumab, and Kyowa’s mogamulizumab, which,~~that, if successful, may compete with ADCETRIS in the ~~future.~~future, such as MK-4820A, which is in a phase 2 study in relapsed/refractory classical Hodgkin lymphoma. Nivolumab, with or without chemotherapy, in a phase 2 investigator initiated trial, has demonstrated significant objective response rate in the salvage setting. In the frontline classical Hodgkin lymphoma setting, a study comparing nivolumab in combination with chemotherapy and ADCETRIS in combination with chemotherapy, and a study for pembrolizumab in combination with chemotherapy are ongoing. Depending on the outcome of these studies, nivolumab and pembrolizumab could compete with ADCETRIS in that setting. Data have also been presented on several developing technologies, including bispecific antibodies and CAR modified T-cell therapies that may compete with ADCETRIS in the future. Further, there are many competing approaches used in the treatment of patients in ADCETRIS’ ~~three~~ approved indications, including ~~auto-HSCT, allogeneic~~autologous hematopoietic stem cell transplant, ~~combination~~allogeneic hematopoietic stem cell transplant and chemotherapy, in addition to clinical trials with experimental ~~agents and single-agent regimens.~~

agents.

With respect to ~~enfortumab vedotin, treatment~~PADCEV, other treatments in ~~second~~pretreated metastatic urothelial cancer include sacituzumab govitecan (a Trop-2-directed antibody and topoisomerase inhibitor conjugate), checkpoint inhibitor monotherapy, generic chemotherapy

Table of Contents

and, for patients with select FGFR genetic alterations, Janssen’s erdafitinib. Front line metastatic urothelial cancer was traditionally treated with chemotherapy alone but is ~~limited~~evolving to ~~CPI monotherapy or generic chemotherapy. There~~include checkpoint inhibitors for cisplatin-ineligible patients with high PD-L1 expression in addition to patients who are ~~other~~ineligible for platinum therapy. Avelumab is used for frontline maintenance therapy, and several trials of investigational agents ~~that, if approved,~~in combination with chemotherapy or other novel agents are ongoing. Continued development of PD-(L)1 targeted therapies across early-stage bladder cancer and in metastatic bladder cancer in frontline combinations with chemotherapy, in frontline maintenance, and in pretreated disease, could ~~be competitive with enfortumab vedotin, including Immunomedics’ sacituzumab govitecan~~potentially impact PADCEV usage and ~~Lilly’s ramucirumab.~~

enrollment in PADCEV clinical trials.

With respect to ~~tisotumab vedotin, we~~TUKYSA, there are multiple marketed competitor products which target HER2, including the antibodies trastuzumab and pertuzumab and kinase inhibitors lapatinib and neratinib. In addition, T-DM1 is a HER2-targeted antibody and microtubule inhibitor conjugate indicated, as a single agent, for the treatment of patients with HER2-positive metastatic breast cancer who previously received trastuzumab and taxane, separately or in combination. Daiichi Sankyo and AstraZeneca have fam-trastuzumab deruxtecan-nxki, which was approved by the FDA for adults with metastatic breast cancer who received a prior treatment for HER2-positive metastatic breast cancer or have breast cancer that has come back within six months of completing treatment for their early-stage breast cancer, and was also approved by the FDA in the HER2-low metastatic breast cancer setting following chemotherapy and in the HER2-positive gastric cancer setting post-trastuzumab-based therapy. The agent was also granted conditional marketing authorization by the EMA for the treatment of adult patients with unresectable or metastatic HER2-positive breast cancer who have received one or more prior anti-HER2-based regimens. We believe that the sequence of therapies patients receive for HER2-positive breast cancer is likely to continue to change in both the U.S. and EU, with greater fam-trastuzumab deruxtecan-nxki use in second line, displacing the previous standard of care, T-DM1. This has resulted and is expected to continue to result in increased competition for TUKYSA, which is approved by the FDA for patients who have received one or more prior anti-HER2-based regimens in the metastatic breast cancer setting, including in patients with brain metastases. MacroGenics has a HER2 targeted, Fc-optimized antibody, margetuximab, which is approved by the FDA for patients who have received at least two previous anti-HER2 regimens. Additionally, Byondis released results from a pivotal trial of its antibody drug conjugate, SYD985, in metastatic breast cancer patients treated with multiple anti-HER2-based regimens and the FDA accepted a regulatory submission based on these results with a target action date in May 2023. There are a number of regimens, besides trastuzumab in combination with TUKYSA, that are included in the NCCN Guidelines for HER2-positive metastatic colorectal cancer, including fam-trastuzumab deruxtecan-nxki, which is recommended by NCCN for use as part of a combination therapy.

With respect to TIVDAK, Merck’s pembrolizumab is approved by the FDA and EC in first line in combination with chemotherapy, with or without bevacizumab, for the treatment of recurrent or metastatic cervical cancer whose tumors express PD-L1 and is approved by the FDA in second line as a monotherapy for recurrent or metastatic cervical cancer patients with disease progression on or after chemotherapy in patients whose tumors express PD-L1. In September 2022, pembrolizumab was approved in Japan as first-line therapy in combination with chemotherapy, with or without bevacizumab, for patients with recurrent or metastatic cervical cancer who are not amenable to curative treatment. We are also aware of other companies that currently have products in development for the treatment of late-stage cervical cancer which could be competitive with ~~tisotumab vedotin,~~TIVDAK, including ~~Agenus, Astrazeneca, Bristol-Myers Squibb, Immunomedics, Innovent Biologics,~~BMS, Iovance Biotherapeutics, Merck, Regeneron Pharmaceuticals and Roche. ~~In addition, several CPIs that are FDA-approved~~Regeneron’s cemiplimab received Canadian approval in ~~other treatment settings are being explored~~March 2022, EC approval in November 2022 and Japanese approval in December 2022 for the treatment of ~~late-stage~~patients with recurrent or metastatic cervical cancer following progression on platinum-based chemotherapy. These approvals will likely impact the potential future opportunity for TIVDAK in ~~ongoing phase 2 clinical trials.~~

these geographies. A supplemental Biologics License Application for cemiplimab was withdrawn in the U.S. in January 2022.

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

~~We are~~ aware of a number of other companies that have ADC and other technologies that may be competitive with ours, including Astellas, AstraZeneca, Bristol-Myers Squibb, ImmunoGen, Immunomedics, MedImmune, Mersana and Pfizer, all of which have ADC technology. ImmunoGen has several ADCs in development that may compete with our product candidates. ImmunoGen has also established partnerships with other pharmaceutical and biotechnology companies to allow those other companies to utilize ImmunoGen’s technology, including Sanofi-Aventis, Genentech, Novartis, Takeda and Lilly.ours. We are also aware of a number of companies developing monoclonal antibodies directed at the same antigen targets or for the treatment of the same diseases as our product candidates. ~~For example, we believe Amgen and Xencor have anti-CD19 programs~~In addition, our ADC collaborators may develop compounds utilizing our technology that may ~~be competitive~~compete with product candidates that we are developing.

The risk of biosimilar or generic challenges has also been increasing in our industry. In the U.S. and the EU, after a period of exclusivity for an innovator’s approved biological product ~~candidates.~~

or branded drug has passed, there are abbreviated pathways for approval of biosimilar products or generic drugs. In addition, it is not possible to predict changes in law that might reduce regulatory exclusivity. As a result, and due to uncertainties regarding patent protection, it is not possible to predict the length of market exclusivity for any particular product with certainty based solely on the expiration of the relevant patent(s) or the current forms of regulatory exclusivity. Absent patent protection or regulatory exclusivity for our products, it is possible, both in the United States ~~the Biologics Price Competition~~ and ~~Innovation Act~~elsewhere, that biosimilar, interchangeable or generic versions of ~~2009 created an abbreviated approval pathway for biological~~those products ~~that are demonstrated to~~may be “highly similar” or “biosimilar” to or “interchangeable” with an FDA-approved biological product. This pathway allows competitors to reference the FDA’s prior approvals regarding innovative biological productsapproved and ~~data submitted with a BLA to obtain approval~~marketed, which would likely result in substantial and rapid reductions in revenues from sales of a biosimilar application 12 years after the time of approval of the innovative biological product. The 12-year exclusivity period runs from the initial approval of the innovator product and not from approval of a new indication. In addition, the 12-year exclusivity period does not prevent another company from independently developing a product that is highly similar to the innovative product, generating all the data necessary for a full BLA and seeking approval. Exclusivity only assures that another company cannot rely on the FDA’s prior approvals in approving a BLA for an innovator’s biological product to support the biosimilar product’s approval. Further, under the FDA’s current interpretation, it is possible that a biosimilar applicant could obtain approval for one or more of the indications approved for the innovator product by extrapolating clinical data from one indication to support approval for other indications. The FDA approved the first biosimilar product in the United States in May 2015. In the European Union, the European Commission has granted marketing authorizations for several biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar approvals issued since 2005. We are aware of many pharmaceutical and biotechnology and other companies that are actively engaged in research and development of biosimilars or interchangeablethose products.

It is also possible that our competitors will succeed in developing technologies that are more effective than ~~ADCETRIS, enfortumab vedotin, tisotumab vedotin or~~ our products and product candidates or that would render our technology obsolete or noncompetitive, or will succeed in developing

Table of Contents

biosimilar, interchangeable or ~~interchangeable~~generic products for ~~ADCETRIS, enfortumab vedotin, tisotumab vedotin or~~ our products and product

candidates. We anticipate that we will continue to face increasing competition in the future as new companies enter our market and scientific developments surrounding biosimilars and other cancer therapies continue to accelerate. We cannot predict to what extent the entry of biosimilars or other competing products will impact potential future sales of ~~ADCETRIS, enfortumab vedotin, tisotumab vedotin~~our products and product candidates.

Risks Related to Regulatory Oversight, and Other Legal Compliance Matters

Our products and any future approved products remain subject to extensive ongoing regulatory obligations and oversight, including post-approval requirements, that could result in penalties and significant additional expense and could negatively impact our and our collaborators’ ability to commercialize our current and any future approved products.

Any product that has received regulatory approval remains subject to extensive ongoing obligations and continued review from applicable regulatory agencies. These obligations include, among other things, drug safety reporting and surveillance, submission of other post-marketing information and reports, pre-clearance of certain promotional materials, manufacturing processes and practices, product labeling, confirmatory or post-approval clinical research, import and export requirements and record keeping. These obligations may result in significant expense and limit our and our collaborators’ ability to commercialize our current and any future approved products. Any violation of ongoing regulatory obligations could result in restrictions on the applicable product, ~~candidates.~~

~~Our operating results are difficult~~including the withdrawal of the applicable product from the market.

If FDA approval is granted via the accelerated approval pathway or a product receives conditional marketing authorization from another comparable regulatory agency, we and our collaborators may be required to ~~predict~~conduct a post-marketing confirmatory trial in support of full approval and to comply with other additional requirements. For example, in connection with ADCETRIS’s conditional marketing authorization in relapsed Hodgkin lymphoma, relapsed cutaneous T-cell lymphoma, and both relapsed and frontline sALCL in the EU, Takeda is subject to certain post-approval requirements, including the requirement to conduct clinical trials to confirm clinical benefit. The FDA’s accelerated approval of TIVDAK and of TUKYSA in its colorectal cancer indication also included requirements for confirmatory trials. An unsuccessful post-marketing study or failure to complete such a study with due diligence could result in the withdrawal of marketing approval. Post-marketing studies may ~~fluctuate. If our operating results are below~~also suggest unfavorable safety information that could require us to update the ~~expectations of securities analysts~~product’s prescribing information or ~~investors,~~limit or prevent the ~~trading price of our stock could decline.~~

~~Our operating results are difficult to predict and may fluctuate significantly from quarter to quarter and year to year.~~product’s widespread use. In addition, ~~although we provide sales guidance~~the labeling, advertising and promotion of products that have received accelerated approval from the FDA, including TUKYSA and TIVDAK, are subject to additional regulatory requirements, which entail significant expense and could negatively impact the product’s commercialization. Recent legislation has given the FDA additional authority to require accountability and enforce the post-marketing requirements and commitments associated with accelerated approval.

Regulatory authorities may also impose additional post-marketing commitments, including requirements for ADCETRIS from time to time, you should not rely on ADCETRIS sales results in any period as being indicative of future performance. Such guidance is based on assumptions that may be incorrect or that may change from quarter to quarter. Sales of ADCETRIS have, on occasion, been belowcompanion diagnostics. For example, the ~~expectations of securities analysts and investors and have been below prior period sales, and sales~~FDA’s approval of ADCETRIS in the ~~future may also be below prior period sales, our own guidance and/~~frontline peripheral T-cell lymphoma indication included a post-marketing commitment to develop an in-vitro diagnostic device for the selection of patients with CD30-expressing PTCL, not including sALCL, for treatment with ADCETRIS in this indication. We and Takeda have a collaboration with Ventana Medical Systems, Inc., or the expectations of securities analysts and investors. To the extent that we do not meet our guidance or the expectations of analysts or investors, our stock price may be adversely impacted, perhaps significantly. We believe that our quarterly and annual results of operations may be affected byVentana, under which Ventana is working to develop such a ~~variety of factors, including:~~

diagnostic device.

~~customer ordering patterns for ADCETRIS, which may vary significantly from period to period;~~

~~the overall level of demand for ADCETRIS including the impact of any competitive or biosimilar products~~We and the ~~duration of therapy for patients receiving ADCETRIS;~~

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

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

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

~~changes in our cost of sales;~~

~~the incidence rate of new patients in ADCETRIS’ approved indications;~~

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

the timing, cost and level of investment in our research and development and other activities involving ADCETRIS, enfortumab vedotin, tisotumab vedotin and our product candidates by us or our collaborators;

~~changes in the price of Immunomedics common stock that affect the valuation of the Immunomedics common stock and the warrant we hold; and~~

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

In addition, we have entered into licensing and collaboration agreements with other companies that include development funding and milestone payments to us, and we expect that amounts earned from our collaboration agreements will continue to be an important sourcemanufacturers of our ~~revenues. Accordingly, our revenues~~current and any future approved products are also required, or will ~~also depend on development funding~~be required, to comply with current Good Manufacturing Practices, or cGMP, regulations, which include requirements relating to quality control and ~~the achievement of development and clinical milestones under our existing collaboration and license agreements, including, in particular, our ADCETRIS collaboration with Takeda,~~quality assurance as well as ~~entering into potential new collaboration~~the corresponding maintenance of records and ~~license agreements. These upfront~~documentation. Further, regulatory agencies must approve these manufacturing facilities before they can be used to manufacture our products and ~~milestone payments may vary significantly from quarter~~product candidates, and these facilities are subject to ~~quarter and any such variance could cause a significant fluctuation in our operating results from one quarter to the next.~~

Further, changes in our operations, such as increased development, manufacturing and clinical trial expenses in connection with our expanding pipeline programs, or our undertaking of additional programs, business activities or entry into strategic transactions, including potential additional acquisitions of products, technologies or businesses may also cause significant fluctuations in our expenses.ongoing regulatory inspections. In addition, we measure compensation cost for stock-based awards made to employees at the grant date of the award, based on the fair value of the award, and recognize the cost as an expense over the employee’s requisite service period. As the variables that we use as a basis for valuing these awards change over time, including our underlying stock price, the magnitude of the expense that we must recognize may vary significantly. Additionally, we have implemented long-term incentive plans for our employees,any approved product, its manufacturer and the ~~incentives provided under these plans~~manufacturer’s facilities are ~~contingent upon the achievement of certain~~subject to continual regulatory

~~milestones. Costs of performance-based compensation under our long-term incentive plans are not recorded as an expense until the achievement of the~~ review and inspections, including periodic unannounced inspections. Failure to comply with applicable ~~milestones is deemed probable of being met, which may result in large fluctuations to the expense we must recognize in any particular period.~~

Additionally, as of September 30, 2017, we held 3.0 million shares of Immunomedics common stock and a warrant to purchase an additional 8.7 million shares of common stock. The change in fair value of the warrant derivative from period to period is recorded to earnings and can significantly affect our operating results. For example, due to the gain of $78.7 million we recorded in investmentFDA and other income, net, during the three months ended September 30, 2017 resulting from the change in the fair value of the Immunomedics warrant derivative, we recorded net income of $50.0 million for the three months ended September 30, 2017 while our operating loss during the same period was $32.2 million. In addition, beginning in 2018, we will adopt ASU 2016-01 “Financial Instruments: Overall,” and as a result, we will record changes in the fair value of equity securities, including any Immunomedics common stock, in net income or loss, which is expected to increase the volatility of net income or loss to the extent that we continue to hold significant equity securities.

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

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

We have incurred substantial net losses in each of our years of operation. We have incurred these losses principally from costs incurred in our research and development programs and from our selling, general and administrative expenses. Although we reported net income of $50.0 million for the three months ended September 30, 2017, this was due to the gain of $78.7 million we recorded in investment and other income, net, resulting from the change in the fair value of the Immunomedics warrant derivative for the three months ended September 30, 2017, and we otherwise expect to continue to incur net losses in future periods. We have also incurred net losses in each of our years since inception. We expect to continue to spend substantial amounts on research and development, including amounts for conducting required post-approval and other clinical trials of, and seeking additional regulatory approvals for, ADCETRIS as well as commercializing ADCETRIS for the treatment of patients in its three approved indications. In addition, we expect to make substantial expenditures to further develop and potentially commercialize enfortumab vedotin, tisotumab vedotin and our product candidates. Accordingly, we expect to continue to incur net losses and may not achieve profitability in the future for some time, if at all. Although we recognize revenue from ADCETRIS product sales and we continue to earn amounts under our collaboration agreements, our revenue and profit potential is unproven and our limited commercialization history makes our future operating results difficult to predict. Even if we do achieve profitability in the future, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline.

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

~~We actively evaluate various strategic transactions on an ongoing basis, including licensing~~consequences, including:

•issuance of Form FDA 483 notices or ~~otherwise acquiring complementary products, technologies~~Warning Letters by the FDA or ~~businesses. Any potential acquisitions~~other regulatory agencies;

•imposition of fines and other civil penalties;

•criminal prosecutions;

•injunctions, suspensions or ~~in-licensing transactions may entail numerous risks, including but not limited to:~~

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

~~increased operating expenses and cash requirements;~~

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

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

~~retention of key employees;~~

~~uncertainties in our ability to maintain key business relationships~~•suspension of any ~~acquired entities;~~ongoing clinical trials;

~~strain on managerial and operational resources;~~

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

~~exposure to unforeseen liabilities~~•total or partial suspension of ~~acquired companies or companies in which we invest; and~~manufacturing;

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

As a result of these or other problems and risks, businesses, technologies or products we acquire or invest in or obtain licenses to may not produce the revenues, earnings or business synergies that we anticipated, acquired or licensed technologies may not result•delays in regulatory approvals and ~~acquired~~commercialization;

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

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

Table of Contents

•restrictions on operations, including costly new manufacturing requirements;

•product recalls or seizures or withdrawal of the affected product from the market; and

•reputational harm.

The policies of the FDA and other regulatory agencies may change and additional laws and regulations may be enacted that could prevent or delay regulatory approval of our product candidates or of our products ~~may not perform as expected. As~~in any additional indications or territories, or further restrict or regulate post-approval activities. Any problems with a ~~result, we may incur higher costs and realize lower revenues than we had anticipated. We cannot assure you that~~product or any acquisitions or investments we have made or may make in the future will be completed or that, if completed, the acquired business, licenses, investments, products, or technologies will generate sufficient revenue to offset the negative costs or other negative effects on our business. Failure to manage effectively our growth through acquisition or in-licensing transactions could adversely affect our growth prospects, business, resultsviolation of ~~operations, financial condition, and cash flow.~~

~~In addition, we may spend significant amounts, issue dilutive securities, assume or incur significant debt~~ongoing regulatory obligations ~~incur large one-time expenses and acquire intangible assets in connection with acquisitions and in-licensing transactions that~~ could result in ~~significant future amortization expense and write-offs. Moreover,~~restrictions on the applicable product, including the withdrawal of the applicable product from the market. If we ~~may~~are not able to maintain regulatory compliance, we or our collaborators might not be ~~able~~permitted to ~~locate suitable acquisition opportunities~~commercialize our current or any future approved products and ~~this inability~~our business would suffer.

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

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

The federal government has implemented reforms to government healthcare programs in the U.S., including changes to the methods for, and amounts of, Medicare reimbursement and changes to the Medicaid Drug Rebate Program. For example, in March 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. In November 2021, President Biden signed the Infrastructure Investment and Jobs Act, which included changes to the Medicare Part B program requiring rebates for some discarded drug products that are expected to increase future rebates for ADCETRIS, TIVDAK and possibly PADCEV with an implementation date in the first quarter of 2023. The Biden administration also announced an Executive Order that includes initiatives to support the implementation of Canadian drug importation and reduce drug prices. In response to President Biden’s Executive Order, on September 9, 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; (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize drug price increases that outpace inflation; and (iii) redesigns the Medicare Part D program, increasing manufacturer rebates within the catastrophic coverage phase. The IRA permits HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. HHS has and will continue to issue and update guidance as these programs are implemented. These provisions will take effect progressively beginning in fiscal year 2023, although they may be subject to legal challenges. It is currently unclear how the IRA will be effectuated but is likely to have a significant impact on the pharmaceutical industry. Further, in response to the Biden administration’s October 2022 executive order, on February 14, 2023, HHS released a report outlining three new models for testing by the Centers for Medicare and Medicaid Innovation, which will be evaluated on their ability to ~~grow~~lower the cost of drugs, promote accessibility, and improve quality of care. One of the models may create differential reimbursement for certain drugs approved under the FDA’s Accelerated Approval Pathway. More detail is anticipated in the coming year. It is unclear whether the models will be utilized in any health reform measures in the future.

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

In addition, governments in countries outside the U.S. control the costs of pharmaceuticals. Many European countries and Canada have established pricing and reimbursement policies that contain costs by referencing the price of the same or similar products ~~that may be important to~~in other countries. In these instances, if coverage or the ~~development~~level of our business. Other pharmaceutical companies, many of which may have substantially greater financial, marketing and sales resources, compete with us for these opportunities. Even if appropriate opportunities are available, we may not be able to successfully identify themreimbursement is reduced, limited or ~~we may not have the financial resources necessary to pursue them, and if pursued,~~eliminated in one or more countries, we may be unable to ~~structure and execute transactions~~obtain or maintain anticipated pricing or reimbursement in other countries or in new markets. This may create the ~~anticipated timeframe,~~opportunity for third-party cross-border trade or ~~at all.~~

~~Even if we are able~~may influence our decision whether to ~~successfully identify and acquire complementary products, technologies~~sell a product in one or ~~businesses, we~~more countries, thus adversely affecting our geographic expansion plans.

Table of Contents

We cannot assure you ~~that we will be able~~as to ~~successfully manage~~ the ~~risks associated with integrating acquired products, technologies~~ultimate content, timing, or ~~businesses~~effect of future healthcare law and policy changes, nor is it possible at this time to estimate the impact of any such potential changes; however, such changes or the ~~risks arising from anticipated and unanticipated problems in connection with an acquisition or in-licensing transaction. Further, while we seek to mitigate risks and liabilities~~ultimate impact of potential acquisitions and in-licensing transactions through, among other things, due diligence, there may be risks and liabilities that such due diligence efforts fail to discover, that are not disclosed to us, or that we inadequately assess. Any failure in identifying and managing these risks and uncertainties effectively would have a material adverse effect on our business. Additionally, we may not realize the anticipated benefits of such transactions, including the possibility that expected synergies and accretion will not be realized or will not be realized within the expected time frame.

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

Our clinical-stage product candidates include seven ADC programs, which consist of enfortumab vedotin, tisotumab vedotin, SGN-LIV1A, SGN-CD19A, SGN-CD19B, SGN-CD123A, and SGN-352A, as well as two immuno-oncology agents, SEA-CD40, which is based on our sugar-engineered antibody, or SEA, technology, and SGN-2FF, which is a novel small molecule. Other than enfortumab vedotin and tisotumab vedotin, which are in or expected to enter pivotal trials based on only limited phase 1 clinical data, our current product candidates are in relatively early stages of development. All of our product candidates will require significant further development, financial resources and personnel to obtain regulatory approval and develop into commercially viable products, if at all.

If a product candidate fails at any stage of development or we or our collaborators otherwise determine to discontinue development of that product candidate, we will not have the anticipated revenues from that product candidate to fund our operations, and we may not receive any return on our investment in that product candidate. Moreover, we still have only limited data from our early trials of our product candidates. In this regard, preclinical studies and any encouraging or positive preliminary and interim data from our clinical trials of our product candidates may not be predictive of the results of ongoing or later clinical trials. Even if we or our collaborators are able to complete our planned clinical trials of our product candidates according to our current development timeline, the encouraging or positive results from clinical trials of our product candidates in earlier stage trials may not be replicated in subsequent clinical trial results. As a result, we and our collaborators may conduct lengthy and expensive clinical trials of our product candidates only to learn that a product candidate is not an effective treatment or is not superior to existing approved therapies, or has an unacceptable safety profile, which could prevent or significantly delay regulatory approval for such product candidate or could cause us to discontinue the development of such product candidate. Also, later-stage clinical trials could differ in significant ways from earlier stage clinical trials, which could cause the outcome of the later-stage trials to differ from earlier stage clinical trials. For example, we are conducting a pivotal phase 2 trial of enfortumab vedotin with Astellas for locally advanced or metastatic urothelial cancer patients who have been previously treated with checkpoint inhibitor therapy, and plan to conduct a pivotal phase 2 trial of tisotumab vedotin with Genmab in patients with recurrent and/or metastatic cervical cancer, in each case based on only limited phase 1 clinical data. Neither enfortumab vedotin nor tisotumab vedotin have previously been evaluated in later stage clinical trials

and we cannot be certain that the design of, or data collected from, these trials will be adequate to demonstrate the safety and efficacy of enfortumab vedotin or tisotumab vedotin, or will otherwise be sufficient to support FDA or any foreign regulatory approvals. Differences in earlier and later stage clinical trials may include changes to inclusion and exclusion criteria, efficacy endpoints and statistical design. Many companies in the pharmaceutical and biotechnology industries, including us, have suffered significant setbacks in late-stage clinical trials after achieving encouraging or positive results in early-stage development. We cannot be certain that we will not face similar setbacks in our ongoing or planned clinical trials, including the ongoing and planned pivotal phase 2 trials for enfortumab vedotin and tisotumab vedotin. We have not yet completed any late-stage clinical trials for our current product candidates, and if we or our collaborators fail to produce positive results in our ongoing or planned clinical trials of any of our product candidates, the development timeline and regulatory approval and commercialization prospects for our product candidates, and, correspondingly, our business and financial prospects, would be materially adversely affected.

Due to the uncertain and time-consuming clinical development and regulatory approval process, we may not successfully develop any of our product candidates and it is possible that none of our current product candidates will ever become commercial products. In addition, we expect that much of our effort and many of our expenditures over the next few years will be devoted to the additional clinical development of and commercialization activities associated with ADCETRIS, which may restrict or delay our ability to develop our clinical and preclinical product candidates.

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

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

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

In the United States and Canada, we sell ADCETRIS through a limited number of pharmaceutical distributors. Customers order ADCETRIS through these distributors. We generally receive orders from distributors and ship product directly to the customer. We do not promote ADCETRIS to these distributors and they do not set or determine demand for ADCETRIS; however, our ability to effectively commercialize ADCETRIS will depend, in part, on the performance of these distributors. Although we believe we can find alternative distributors on relatively short notice, the loss of a major distributor could materially and adversely affect our ~~results of operations and financial condition.~~

~~We currently rely on third-party manufacturers and other third parties for production~~revenue or sales of our ~~drug~~current and or potential future products, ~~and our dependence on these manufacturers may impair the continued development and commercialization of ADCETRIS and our product candidates.~~

Although we recently acquired a biologics manufacturing facility located in Bothell, Washington, we rely and expect to continue to rely on corporate collaborators and contract manufacturing organizations to supply drug product or intermediates for commercial supply and our IND-enabling studies and clinical trials. For the monoclonal antibody used in ADCETRIS, we have contracted with AbbVie for clinical and commercial supplies. For the drug linker used in ADCETRIS, we have contracted with Sigma Aldrich Fine Chemicals, or SAFC, for clinical and commercial supplies. We have multiple contract manufacturers for conjugating the drug linker to the antibody and producing the ADCETRIS product. For our ADC product candidates, multiple contract manufacturers, including AbbVie and SAFC, perform antibody and drug-linker manufacturing and several other contract manufacturers perform conjugation of the drug-linker to the antibody and fill/finish of the drug product. In addition, we rely on other third parties to perform additional steps in the manufacturing process, including shipping and storage of ADCETRIS and our product candidates. For the foreseeable future, we expect to continue to rely on contract manufacturers and other third parties to produce, vial and store sufficient quantities of ADCETRIS for use in our clinical trials and for commercial sale. If our contract manufacturers or other third parties fail to deliver ADCETRIS for clinical use or sale on a timely basis, with sufficient quality, and at commercially reasonable prices, and we fail to find replacement manufacturers or to develop our own manufacturing capabilities, we may be required to delay or suspend clinical trials or otherwise discontinue development, production and sale of ADCETRIS. Moreover, contract manufacturers have a limited number of facilities in which ADCETRIS can be produced and any interruption of the operation ofas well as those ~~facilities due to~~

events such as equipment malfunction or failure or damage to the facility by natural disasters or as the result of regulatory actions could result in the cancellation of shipments, loss of product in the manufacturing process, a shortfall in ADCETRIS supply, or the inability to sell our products in the U.S. or abroad. In addition, we have committed to provide Takeda with their needs of certain parts of the ADCETRIS supply chain for a limited period of time, which may require us to arrange for additional manufacturing supply. Moreover, we depend on outside vendors for the supply of raw materials used to produce ADCETRIS. If the third-party suppliers were to cease production or otherwise fail to supply us with quality raw materials and we were unable to contract on acceptable terms for these raw materials with alternative suppliers, our ability to have ADCETRIS manufactured to meet commercial and clinical requirements would be adversely affected.

~~We are planning to use our own manufacturing facility to support our growing pipeline. As an organization, we have no prior experience operating a manufacturing facility.~~

In October 2017, we acquired a biologics manufacturing facility located in Bothell, Washington, which facility we intend to use to support our clinical supply needs. Under the terms of this acquisition, we are required to operate the facility and produce certain clinical drug product components for BMS under a transitional services agreement for a period of time. As an organization, we have no prior experience manufacturing for ourselves or other parties, and operating this facility requires us to comply with complex regulations and to continue to hire and retain experienced scientific, quality control, quality assurance and manufacturing personnel. We could encounter challenges in operating the manufacturing facility in compliance with cGMP, regulatory or other applicable requirements, resulting in potential negative consequences, including regulatory actions, which could undermine our ability to utilize this facility for our own manufacturing needs and/or result in a breach of our contractual manufacturing obligations to BMS. Any of these risks, if actualized, could materially and adversely affect our business and financial position. In addition, despite the acquisition of this facility, we nonetheless expect to continue to rely on corporate collaborators and contract manufacturing organizations to supply drug product and intermediates for commercial supply and our IND-enabling studies and clinical trials. Our continuing dependence on these manufacturers may impair the continued development and commercialization of ADCETRIS and our product candidates.

collaborators.

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

Our operations may be directly or indirectly subject to various ~~state and federal~~ healthcare laws, including, without limitation, the federal Anti-Kickback Statute, federal civil and criminal false claims laws, ~~HIPAA/HITECH, the federal civil monetary penalties statute,~~regulations prohibiting off-label promotions and ~~the~~ federal transparency ~~requirements under the PPACA.~~requirements. These laws may impact, among other things, the sales, marketing and education programs for ~~ADCETRIS.~~

our products and any future approved products. In addition, the number and complexity of healthcare laws and regulations applicable to our business continue to increase.

The federal Anti-Kickback Statute prohibits, ~~persons and entities from~~among other things, knowingly and ~~willingly~~willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as the Medicare and Medicaid programs. ~~Several courts have interpreted~~Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the ~~statute’s intent requirement to mean~~exceptions and safe harbors are drawn narrowly, and practices that ~~if any one purpose of an arrangement involving~~involve remuneration isnot intended to induce ~~referrals of federal healthcare covered business, the statute has been violated. Additionally, PPACA amended the intent requirement~~prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. In addition, a criminal conviction for violation of the federal Anti-Kickback Statute such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it. The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. Penalties for violations of the federal Anti-Kickback Statute include criminal penalties and civil sanctions such as fines, imprisonment and possiblerequires mandatory exclusion from ~~Medicare, Medicaid and other~~participation in federal healthcare programs.

The federal civil and criminal false claims laws, including the civil False Claims Act, prohibit, among other things, persons or entities from knowingly presenting, or causing to be presented, a false claim to, or the knowing use of false statements to obtain payment from or approval by, the federal government, including the Medicare and Medicaid programs, or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim or to avoid, decrease, or conceal an obligation to pay money to the federal government. PPACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. Suits filed under the civil False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals, commonly known as “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. Many pharmaceutical and other healthcare companies have ~~recently~~ been investigated ~~or subject to lawsuits by whistleblowers~~ and have reached substantial financial settlements with the federal government under the civil False Claims Act for a variety of alleged improper marketing, promotion or other activities, including providing free product to customers with the expectation that the customers would bill federal programs for the product; providing consulting fees, grants, free travel, and other benefits to physicians to induce them to prescribe the company’s products; and inflating prices reported to private price publication services, which are used to set drug reimbursement rates under government healthcare programs.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services. Similar to the Anti-Kickback Statute, PPACA amended the intent requirement of the criminal healthcare fraud statutes such that a person or entity no longer needs to have actual knowledge of the statute or intent to violate it.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, governs certain types of individuals and entities with respect to the conduct of certain electronic healthcare transactions and imposes certain obligations with respect to the security and privacy of protected health information.

The federal civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

The federal transparency requirements under PPACA, the Physician Payments Sunshine Act, require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to annually report to the U.S. Department of Health and Human Services’ Centers for Medicare & Medicaid Services information related to payments and other transfers of value to physicians and teaching hospitals, and physician ownership and investment interests.

There are foreign and state law equivalents of these laws and regulations, such as anti-kickback, false claims, and data privacy and security laws, to which we are currently and/or may in the future, be subject. We may also be subject to state laws that require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. Many of these state laws differ from each other in significant ways, thus complicating compliance efforts.

activities.

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

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

In addition, there has been increased scrutiny of company-sponsored patient assistance programs, including co-pay assistance programs, and donations to third-party charities that provide such assistance. There has also been enhanced scrutiny by governments of reimbursement support offerings, clinical education programs and promotional speaker programs. If we or our vendors are deemed to fail to comply with laws or regulations in the operation of these programs, we could be subject to damages, fines, penalties or other criminal, civil or administrative sanctions or enforcement actions. Further, in connection with civil settlements related to these laws and regulations, the U.S. government has and may in the future require companies to enter into complex corporate integrity agreements that impost significant reporting and other requirements.

Other healthcare laws and regulations that may affect our ability to operate include, among others, the federal civil monetary penalties statute and the healthcare fraud provisions of the federal Health Insurance Portability and Accountability

Table of Contents

Act, or HIPAA. In addition, many states and jurisdictions outside the U.S. have similar laws and regulations, such as anti-kickback, anti-bribery and corruption, false claims and transparency, to which we are currently and/or may in the future, be subject. Additional information about these requirements is provided under “Business—Government Regulation—Healthcare Regulation” in Part I Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission, or SEC.

We are also subject to numerous other laws and regulations that ~~are~~while not specific to the healthcare ~~industry.~~industry, do apply to the healthcare industry in important ways. For ~~instance,~~example, we are subject to antitrust regulations with respect to interactions with other participants in the markets we currently serve or may serve in the future. These antitrust laws are vigorously enforced in the U.S. ~~Foreign Corrupt Practices Act, or FCPA, prohibits companies~~ and ~~individuals from engaging~~ in ~~specified activities to obtain or retain business or to influence a person working~~other jurisdictions in which we operate.

In an official capacity. Under the FCPA, it is illegal to pay, offer to pay, or authorize the payment of anything of value to any foreign government official, governmental staff members, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.

The number and complexity of both U.S. federal and state laws continue to increase. In addition to enforcement by governmental agencies, we also expect a continuation of the trend of private plaintiff lawsuits against pharmaceutical manufacturers under the whistleblower provisions of the False Claims Act and state equivalents or other laws and regulations such as securities rules and the evolution of new theories of liability under those statutes. Government agencies will likely continue to intervene in such private whistleblower lawsuits and such intervention typically raises the company’s cost significantly. For example, federal enforcement agencies have recently scrutinized product and patient assistance programs, including manufacturer reimbursement support services as well as relationships with specialty pharmacies. Several investigations have resulted in government enforcement authorities intervening in related whistleblower lawsuits and obtaining significant civil and criminal settlements.

~~In order~~effort to comply with ~~these~~applicable laws and regulations, we have implemented a ~~comprehensive~~ compliance program designed to actively identify, prevent and mitigate risk ~~through the implementation of compliance~~by implementing policies and systems and by promoting a culture of compliance. ~~Although we take our obligation~~We also actively work to ~~maintain our compliance with these various laws~~revise and ~~regulations seriously and~~evolve our compliance program ~~is designed~~in an effort to ~~prevent~~keep pace with evolving compliance risks and the ~~violation~~growing scale of ~~these laws and regulations,~~our business. However, we cannot guarantee that our compliance program will be sufficient or effective, that we will be able to integrate the operations of newly formed affiliates or acquired businesses into our compliance program effectively or on a timely basis, that our employees will comply with our policies, ~~and~~ that our employees will notify us of any violation of our policies, that

we will have the ability to take appropriate and timely corrective action in response to any such violation, or that we will make decisions and take actions that will ~~necessarily~~ limit or avoid liability for whistleblower claims ~~that individuals, such as employees~~ or ~~former employees, may bring against us or that~~actions by governmental ~~authorities may prosecute against us based on information provided by individuals.~~authorities. If we are found to be in violation of any of the laws and regulations described above or other applicable ~~state and federal healthcare~~ laws, we may be subject to penalties, including significant civil, criminal and ~~criminal~~administrative penalties, damages, fines, disgorgement, contractual damages, reputational harm, administrative burdens, imprisonment, diminished profits and future earnings, exclusion from government healthcare reimbursement programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and/or the curtailment or restructuring of our operations. Any of these outcomes could have a material adverse effect on our business, results of operations, financial condition and growth prospects. Regardless of whether we have complied with the law, a government investigation could negatively impact our business practices, harm our reputation, divert the attention of management and increase our expenses. Moreover, achieving and sustaining compliance with applicable federal, state and healthcare laws outside the U.S. is costly and time-consuming for our management.

We are subject to stringent and changing obligations related to data privacy and information security. Our actual or perceived failure to comply with such obligations could lead to governmental investigations or actions, litigation, fines and penalties, a disruption of our business operations, reputational harm and other adverse business impacts.

We are subject to numerous privacy and data protection laws and regulations governing personal information, including healthcare information. In addition, the legislative and regulatory landscape for privacy and data protection continues to evolve.

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data security and breach notification laws, personal data privacy laws, and consumer protection laws. The laws are not consistent, and states frequently amend existing laws, requiring attention to constantly changing regulatory requirements. For example, the California Consumer Privacy Act, or CCPA, became effective on January 1, 2020, and the California Privacy Rights Act, or CPRA, took effect January 1, 2023. The CPRA significantly modifies the CCPA, including by expanding individual rights, especially with respect to certain sensitive personal information. We may also be subject to additional U.S. state privacy regulations in the future. In addition, at the federal level, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and its implementing regulations impose additional obligations on certain types of individuals and entities with respect to the security, privacy and transmission of individually identifiable health information. The U.S. Federal Trade Commission is also active in enforcing Section 5 of the FTC Act to assess companies’ stated privacy practices in relation to sharing of personal data for advertising and related purposes.

EU member countries and other jurisdictions, including Switzerland, the United Kingdom, or the U.K., and Canada, have also adopted data protection laws and regulations which impose significant compliance obligations. For example, the EU’s General Data Protection Regulation, or GDPR, imposes a range of requirements relating to the collection, use, handling and protection of personal data. Violations of the GDPR can result in significant penalties, including potential fines of up to €20 million or 4% of the annual global revenues of the non-compliant company, whichever is greater. The GDPR has increased our responsibility and potential liability in relation to all types of personal data that we process or that is processed on our behalf, including data from clinical trials, employees, collaborators and vendors. In addition, local data protection authorities can have different interpretations of the GDPR, leading to compliance challenges as a result of potential inconsistencies amongst various EU member states.

Among other requirements, the GDPR regulates transfers of personal data to countries that have not been found to provide adequate protection to such personal data, including the U.S. This includes transfers between us and our subsidiaries. In July 2020, the Court of Justice of the EU, or the CJEU, invalidated one of the primary safeguards enabling U.S. companies to

Table of Contents

import personal data from Europe, the EU-U.S. Privacy Shield. The same decision also raised questions about whether one of the primary alternatives to the EU-U.S. Privacy Shield, namely, the EC’s Standard Contractual Clauses, or SCCs, provide sufficient protection for personal data transfers without analyzing each transfer and implementing supplementary measures to protect the data. As a result of the CJEU’s decision, the EC issued new SCCs in June 2021 that repeal and replace the previous clauses. Following recommendations from the European Data Protection Board, we review personal data transfers from the EU and add the new SCCs and supplementary measures, when required. Since local data protection authorities can interpret GDPR and the CJEU’s decision differently, there is no definitive set of controls that can ensure GDPR compliance across our business operations. In addition, authorities in Switzerland and the U.K., whose data protection laws are similar to those of the EU, have followed the EU’s approach and CJEU decision. Additional compliance efforts may be needed to respond to evolving regulatory guidance. If our compliance solutions are found to be insufficient, we could face substantial fines under European data protection laws as well as injunctions against processing and/or transferring personal data from Europe. The inability to import personal data from Europe could restrict our clinical trial activities in Europe, limit our ability to collaborate with contract research organizations, service providers, contractors and other companies subject to European data protection laws, interfere with our ability to hire employees in Europe and require us to increase our data processing capabilities in Europe at significant expense.

In addition, we may be subject to other foreign data privacy and security laws. For example, China's Personal Information Protection Law, or PIPL, which took effect in November 2021, imposes various requirements related to personal information processing, similar to the GDPR and CCPA. In particular, the PIPL sets out personal information localization requirements, along with rules regarding the transfer of personal information outside of China. Such transfers may require assessment and/or approval by China’s Cyberspace Administration, or CAC, certification by professional institutions, or entering into contracts with and supervising overseas recipients in accordance with the requirements of the CAC’s newly finalized standard contractual clauses and regulations which will become effective June 1, 2023. Violations of the PIPL may lead to an administrative fine of up to RMB 50 million or 5% of turnover in the last year.

Any failure or alleged failure to comply with legal or contractual obligations, policies and industry standards relating to personal information, and any incident resulting in the unauthorized access to, or acquisition, release or transfer of, personal information, may result in governmental investigations or enforcement actions, litigation, fines, penalties, damage to our reputation and other adverse consequences. In addition, we expect that laws, regulations, policies and industry standards relating to privacy and data protection will continue to evolve and develop. These changes may require us to modify our practices and may increase our costs of doing business. In addition, privacy advocates and industry groups have regularly proposed, and may propose in the future, self-regulatory standards that may legally or contractually apply to us. If we fail to follow these standards, even if no personal information is compromised, we may incur significant fines or experience a significant increase in costs.

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

The testing, manufacturing, marketing, and sale of products and product candidates expose us to product liability claims. As a result, it is possible that we may be named as a defendant in product liability suits that may allege that drug products we manufactured resulted in injury to patients. For example, on March 14, 2023, a purported class action was filed in the United States District Court for the Central District of California against us, Astellas and Agensys, Inc., alleging that the defendants failed to warn of side effects to the skin that can occur when taking PADCEV. The complaint alleges claims under strict liability, negligence and fraud, and seeks damages, including punitive damages, interest, attorneys’ fees and costs. We intend to vigorously defend against these claims.

While we have obtained product liability insurance, it may not provide adequate coverage against all potential liabilities. In addition, we may not be able to maintain insurance coverage on acceptable terms or at all. A product liability claim or series of claims could result in substantial financial losses, including uninsured liabilities or liabilities in excess of insured amounts, and we may be required to limit further development and commercialization of our products, either of which could have a material adverse effect on our business, results of operations, financial condition and growth prospects. Additionally, product liability claims, regardless of their merits, could be costly, could divert management’s attention and could adversely affect our reputation and the demand for our products.

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

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

We are subject to environmental, health and safety laws and regulations, including those governing the use and disposal of hazardous materials, and we spend considerable time complying with such laws and regulations. Our business activities involve the controlled use of hazardous materials, and although we take precautions to prevent accidental contamination or

Table of Contents

injury from these materials, we cannot completely eliminate the risk of using these materials. In this regard, with respect to our manufacturing facility, we may incur substantial costs to comply with environmental laws and regulations and may become subject to the risk of accidental contamination or injury from the use of hazardous materials in our manufacturing process. It is also possible that our manufacturing facility may expose us to environmental liabilities associated with historical site conditions that we are not currently aware of and did not cause. Some environmental laws impose liability for contamination on current owners or operators of affected sites, regardless of fault. In the event of an accident or environmental discharge, or new or previously unknown contamination is discovered or new cleanup obligations are otherwise imposed in connection with any of our currently or previously owned or operated facilities, we may be held liable for remediation obligations, damages or fines, which may exceed our insurance coverage and materially harm our business, financial condition and results of operations. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or ~~regulations, even if we successfully defend against it, could cause~~regulations.

Risks Related to Our Reliance on Third Parties

Our collaborators and licensees may not perform as expected, which may negatively affect our ability to develop and commercialize our products and product candidates and/or generate revenues through technology licensing, and may otherwise negatively affect our business.

We have established collaborations with third parties to develop and market each of our products and some of our current and potential future product candidates. These include our collaborations with Takeda for ADCETRIS, with Astellas for PADCEV, with Merck for TUKYSA, and with Genmab and Zai Lab for TIVDAK. We also have established clinical trial collaborations to develop certain of our products or product candidates in combination with the products or product candidates of third parties. Our dependence on these collaboration and licensing arrangements subjects us to ~~incur significant legal expenses~~a number of risks, including:

•we are not able to control the amount or timing of resources our collaborators and ~~divert our management’s attention from~~licensees devote to the ~~operation~~development or commercialization of our ~~business. Moreover, achieving~~programs, products or product candidates;

•the interests of our collaborators may not always be aligned with our interests, and ~~sustaining compliance~~such parties may not pursue regulatory approvals or market a product in the same manner or to the same extent that we would, which could adversely affect our revenue, or may adopt tax strategies that could have an adverse effect on our business, results of operations or financial condition;

•with respect to products or product candidates under joint control, we may encounter challenges in joint decision making and joint execution, including with respect to any joint development or commercialization plans or co-promotion activities, which may delay or otherwise harm the research, development, launch or commercialization of the applicable products and product candidates;

•disputes may arise between us and our collaborators or licensees, including with respect to the achievement and payment of milestones or ownership of rights to technology developed, that could result in litigation or arbitration;

•any failure on the part of our collaborators to comply with applicable ~~federal, state~~laws, including tax laws, regulatory requirements and/or applicable contractual obligations or to fulfill any responsibilities they may have to protect and ~~foreign healthcare laws is costly~~enforce any intellectual property rights underlying our products could have an adverse effect on our revenue as well as involve us in possible legal proceedings;

•any improper conduct or actions on the part of our collaborators, licensees or other third parties could subject us to civil or criminal investigations and ~~time-consuming for~~monetary penalties and injunctions, impact the accuracy and timing of our ~~management.~~

~~As we expand~~financial reporting and/or adversely impact our ~~operations internationally, we are subject~~ability to ~~an increased risk of conducting activities~~conduct business, our operating results and our reputation;

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

•a collaborator could independently move forward with competing products, therapeutic approaches or technologies, either independently or in collaboration with others, including with our competitors; and

•our collaboration agreements may be terminated, breached or allowed to expire, or our collaborators may reduce the scope of our agreements with them.

If our collaborative and license arrangements are not successful, then our ability to advance the development and commercialization of the applicable ~~anti-bribery~~products and product candidates, or ~~anti-corruption laws. We are also subject~~ to ~~foreign laws~~otherwise generate revenue from these arrangements, will be adversely affected, and ~~regulations covering data privacy~~our business and business prospects may be materially harmed. If any of our collaborators terminates our collaboration or opts out of their obligations, we may have to engage another collaborator, or we may have to complete the ~~protection~~development process and undertake commercializing the applicable product or product candidate in our collaborator’s current territories ourselves. This could significantly disrupt or delay the development and commercialization

Table of ~~health-related~~Contents

of the applicable product or product candidate and ~~other personal information. These laws and regulations could create liability for us or~~substantially increase our ~~cost~~costs. Any of ~~doing business, any of which~~these events could have a material adverse effect on our business, results of operations, financial condition and growth prospects.

~~We are expanding~~

A substantial portion of our ~~operations internationally, and we currently have subsidiaries in the U.K., Switzerland and Canada. Though we are at an early stage~~revenue results from payments made under agreements with our ~~international expansion,~~collaborators. The loss of any of our collaborators, changes in product development or business ~~activities outside~~strategies of our collaborators, or the ~~United States are subject~~failure of our collaborators to ~~the FCPA, which is described above, and similar anti-bribery~~perform their obligations under their agreements with us for any reason, including paying license or ~~anti-corruption laws, regulations~~technology fees, milestone payments, royalties or rules of other countries in which we currently and may in the future operate, including the U.K. Bribery Act. The U.K. Bribery Act prohibits giving, offering, or promising bribes to any person, including non-U.K. government officials and private persons, as well as requesting, agreeing to receive, or accepting bribes from any person. In addition, under the U.K. Bribery Act, companies which carry on a business or part of a business in the U.K. may be held liable for bribes given, offered or promised to any person, including non-U.K. government officials and private persons, by employees and persons associated with such company in order to obtain or retain business or a business advantage for such company. In the course of expanding our operations internationally, we will need to establish and expand business relationships with various third parties, such as independent contractors, distributors, vendors, advocacy groups and physicians, and we will interact more frequently with foreign officials, including regulatory authorities and physicians employed by state-run healthcare institutions who may be deemed to be foreign officials under the FCPA, U.K. Bribery Act or similar laws of other countries that may govern our activities. Any interactions with any such parties or individuals where compensation is provided that are found to be in violation of such laws could result in substantial fines and penalties and could materially harm our business. Furthermore, any finding of a violation under one country’s laws may increase the likelihood that we will be prosecuted and be found to have violated another country’s laws. If our business practices outside the United States are found to be in violation of the FCPA, U.K. Bribery Act or other similar laws, we may be subject to significant civil and criminal penalties whichreimbursements, could have a material adverse effect on our business, results of operations, financial condition and growth prospects. WePayments under our existing and potential future collaboration agreements are also subject to ~~foreign laws~~significant fluctuations in both timing and regulations covering data privacy and the protection of health-related and other personal information. In this regard, European Union member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose significant compliance obligations. Failure to comply with these laws could lead to government enforcement actions and significant penalties against us,amount, which could cause our revenue to fall below the expectations of securities analysts and investors and cause a decrease in our stock price.

In addition to collaboration agreements, we also have ADC license agreements that allow our licensees to use our proprietary ADC technology. Our ADC licensees conduct all research, product development, manufacturing and commercialization of any product candidates under these agreements. Any delay or termination of the development and commercialization of a ~~material adverse effect on~~licensed product or product candidate by the licensee could adversely affect our business, results of operations, financial condition and growth ~~prospects.~~

~~Any failures~~prospects by reducing or ~~further setbacks in~~eliminating the potential for us to receive applicable milestones and royalties.

We currently rely on third-party manufacturers and other third parties for production of our ~~ADC development program would negatively affect our business and financial position.~~

~~ADCETRIS~~drug products, and our ~~enfortumab vedotin, tisotumab vedotin, SGN-LIV1A, SGN-CD19A, SGN-CD19B, SGN-CD123A, and SGN-CD352A product candidates are all based~~dependence on ~~our ADC technology, which utilizes proprietary stable linkers and potent cell-killing synthetic agents. Our ADC technology is also~~these third parties may impair the basis of our collaborations with AbbVie, Astellas, Bayer, Celldex, Genentech, GSK, Pfizer, and Progenics, and our collaboration agreements with Takeda, Astellas, and Genmab. Although ADCETRIS has received marketing approval in the United States, Canada, the European Union, Japan and other countries, ADCETRIS is our first and only ADC product that has been approved for commercial sale in any jurisdiction. In addition, certain of our ADC product candidates include additional proprietary technologies that have not yet been proven in late stage clinical development. Any failures or further setbacks in our ADC development program or with respect to our additional proprietary technologies, including adverse effects resulting from the use of this technology in human clinical trials and/or the imposition of additional clinical holds on our trials of any of our other product candidates, could have a detrimental impact on the continued commercialization of ADCETRIS in its current or any potential future approved indications and on our internal product candidate pipeline, as well as our ability to maintain and/or enter into new corporate collaborations regarding our ADC technology, which would negatively affect our business and financial position.

We have been named a defendant in a purported securities class action lawsuit and a stockholder derivative lawsuit. These, and potential similar or related lawsuits, could result in substantial damages and may divert management’s time and attention from our business.

On January 10, 2017, a purported securities class action lawsuit was commenced in the United States District Court for the Western District of Washington, naming as defendants us and certain of our officers. The lawsuit alleges material misrepresentations and omissions in public statements regarding our business, operational and compliance policies, violations by all named defendants of Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, as well as violations of Section 20(a) of the Exchange Act. The complaint seeks compensatory damages of an undisclosed amount. The plaintiff alleges, among other things, that we made false and/or misleading statements and/or failed to disclose that SGN-CD33A presents a significant risk of fatal hepatotoxicity and that we had therefore overstated the viability of SGN-CD33A as a treatment for AML. It is possible that additional suits will be filed, or allegations received from stockholders, with respect to these same matters and also naming us and/or our officers and directors as defendants.

On March 29, 2017, a stockholder derivative lawsuit was filed in Washington Superior Court for the County of Snohomish. The complaint names as defendants certain of our current and former executives and members of our board of directors. We are named as a nominal defendant. The complaint generally makes the same allegations as the securities class action, claiming that the individual defendants breached their duties to us. The complaint seeks unspecified damages, disgorgement of compensation, corporate governance changes, and attorneys’ fees and costs. Because the complaint is derivative in nature, it does not seek monetary damages from us.

These lawsuits and any other related lawsuits are subject to inherent uncertainties, and the actual costs to be incurred relating to the lawsuits will depend upon many unknown factors. The outcome of these lawsuits is necessarily uncertain, and we could be forced to expend significant resources in the defense of these lawsuits, and we may not prevail. Monitoring and defending against legal actions is time-consuming for our management and detracts from our ability to fully focus our internal resources on our business activities, which could result in delays of our clinical trials or our development and commercialization efforts. In addition, we may incur substantial legal fees and costs in connection with these lawsuits. We are also generally obligated, to the extent permitted by law, to indemnify our current and former directors and officers who are named as defendants in these and similar lawsuits. We are not currently able to estimate the possible cost to us from these matters, as these lawsuits are currently at an early stage and we cannot be certain how long it may take to resolve these matters or the possible amount of any damages that we may be required to pay. We have not established any reserves for any potential liability relating to these lawsuits. It is possible that we could, in the future, incur judgments or enter into settlements of claims for monetary damages. Decisions adverse to our interests in these lawsuits could result in the payment of substantial damages, or possibly fines, and could have a material adverse effect on our cash flow, results of operations and financial position. In addition, the uncertainty of the currently pending litigation could lead to increased volatility in our stock price.

~~We may need to raise significant amounts of additional capital that may not be available to us.~~

We expect to make additional capital outlays and to increase operating expenditures over the next several years as we hire additional employees, support our preclinical development, manufacturing and clinical trial activities for ADCETRIS and our other pipeline programs, and expand internationally, as well as commercialize ADCETRIS and position ADCETRIS for potential additional regulatory approvals. Our commitment of resources to the continuing development, regulatory and commercialization activities for ADCETRIS, and the research, continued development and manufacturing of our product candidates will likely require us to raise substantial amounts of 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 any additional acquisitions. We may seek additional funding through some or all of the following methods: corporate collaborations, licensing arrangements and public or private debt or equity financings. We do not know whether additional capital will be available when needed, or that, if available, we will obtain financing on terms favorable to us or our stockholders. If we are unable to raise additional funds when we need them, we may be required to delay, reduce the scope of, or eliminate one or more of our development programs, which may adversely affect our business and operations. Our future capital requirements will depend upon a number of factors, including:

~~the level of sales and market acceptance of ADCETRIS;~~

~~the rate of progress and cost of the confirmatory post-approval study that we are required to conduct as a condition to the FDA’s accelerated approval of ADCETRIS in the relapsed sALCL indication;~~

~~the time and costs involved in obtaining regulatory approvals of ADCETRIS in additional indications, if any;~~

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

the timing, receipt and amount of milestone-based payments or other revenue from our collaborations or license arrangements, including royalty revenue generated from commercial sales of ADCETRIS by Takeda;

~~the cost of establishing and maintaining clinical and commercial supplies of ADCETRIS;~~

~~the costs associated with acquisitions or licenses of additional technologies, products, or companies, as well as licenses we may need to commercialize our products;~~

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

~~expenses associated with the pending and potential additional related purported securities class action or derivative lawsuits, as well as any other potential litigation;~~

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

~~competing technological and market developments.~~

During the past several years, domestic and international financial markets have experienced extreme disruption from time to time, including, among other things, high volatility and significant declines in stock prices and severely diminished liquidity and credit availability for both borrowers and investors. Such adverse capital and credit market conditions could make it more difficult to obtain additional capital on favorable terms, or at all, which could have a material adverse effect on our business and growth prospects.

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

We have entered into agreements with third-party commercial and academic institutions to license technology for use in ADCETRIS and our ADC technology. Currently, we have license agreements with BMS and the University of Miami, among others. In addition to royalty provisions, some of these license agreements contain diligence and milestone-based termination provisions, in which case our failure to meet any agreed upon royalty or diligence requirements or milestones may allow the licensor to terminate the agreement. Many of our license agreements grant us exclusive licenses to the underlying technologies. If our licensors terminate our license agreements or if we are unable to maintain the exclusivity of our exclusive license agreements, we may be unable to continue to develop and commercialize ADCETRIS or our product candidates. Further, we have had in the past, and may in the future have, disputes with our licensors, which may impact our ability to develop and commercialize ADCETRIS or our product candidates or require us to enter into additional licenses. An adverse result in potential future disputes with our licensors may impact our ability to develop and commercialize ADCETRIS and our product candidates, or may require us to enter into additional licenses or to incur additional costs in litigation or settlement. In addition, continued development and commercialization of ~~ADCETRIS~~our products and product candidates.

We own a biologics manufacturing facility located in Bothell, Washington, which we use to support our clinical supply needs, as well as for commercial production of PADCEV antibody, for which the facility was recently approved by the FDA. We have also signed a lease for a site in Everett, Washington, where we are constructing a new manufacturing facility that we intend to use for future biologics manufacturing. We have made and plan to continue to make investments in these facilities with no assurance that these investments will be recouped. We may experience cost overruns, delays or other difficulties in construction, obtaining regulatory approvals and permits or in otherwise bringing the Everett facility online. In addition, we rely and expect to continue to rely on collaborators, contract manufacturers and other third parties to produce and store sufficient quantities of drug product for both our clinical and commercial programs. In some cases, we rely on contract manufacturers and other third parties that are single-source suppliers to complete steps in the manufacturing process. If any of the parties in our supply chain cease or interrupt production or otherwise fail to deliver materials, products or services on a timely basis, with sufficient quality, and at commercially reasonable prices, and we fail to find replacements or to develop our own manufacturing capabilities, we may bear costly losses or be required to delay or suspend clinical trials or otherwise delay or discontinue development, production and sale of our products. As a result, our business, results of operations, financial condition and growth prospects could be materially and adversely affected.

There are a limited number of facilities in which each of our products and product candidates can be produced. Any interruption of the operation of those facilities, due to equipment malfunction or failure, damage to the facility, natural disasters, regulatory actions, contractual disputes or other events, could result in delays, cancellation of shipments, loss of product in the manufacturing process, or a shortfall in supply. Further, we and our collaborators depend on outside vendors for the supply of raw materials used to produce our products and product ~~candidates~~candidates. If these suppliers were to cease production or otherwise fail to supply quality raw materials and we or our collaborators were unable to contract with alternative suppliers for these raw materials on acceptable terms, our ability to have our products manufactured to meet clinical and commercial requirements would be adversely affected. In addition, if any of the parties in our supply chain are adversely impacted by the evolving effects of the COVID-19 pandemic, such as staffing shortages, productions slowdowns and/or disruptions in delivery systems, there could be disruptions and delays in the manufacturing and supply of our products and product candidates.

While we believe that the existing supplies of our products and our and our collaborators’ contract manufacturing relationships will ~~likely~~be sufficient to accommodate current clinical and commercial needs, we or our collaborators may need to obtain additional manufacturing arrangements or increase manufacturing capability to meet potential future commercial needs, which could require ~~us to secure licenses to~~ additional ~~technologies.~~capital investment or cause delays. We ~~may not be able to secure these licenses~~cannot assure you that we can enter into additional manufacturing arrangements on commercially reasonable terms ifor at all.

Forecasting demand for a new product or for a newly-approved territory or indication for an existing product can be challenging. If demand for a product exceeds our estimates or if our commercial manufacturers are unable or unwilling to increase production capacity commensurate with demand, our commercialization of the affected product could be negatively impacted by short-term product supply challenges. Supply challenges would adversely impact our revenues and could negatively affect our relationships with patients and healthcare professionals. In addition, any failures or delays in manufacturing adequate product supplies and in putting in place or expanding our manufacturing and supply infrastructure could delay or impede our and collaborators’ ability to launch and commercialize our products, including PADCEV and TUKYSA, in additional markets where they have obtained regulatory approval.

Table of Contents

In order to obtain regulatory approval of any product candidate or regulatory approval of any product in a new jurisdiction, the suppliers for that product or product candidate must obtain approval to manufacture and supply product. In addition, the facilities utilized to manufacture the product or product candidate will be subject to pre-approval regulatory inspections. Any delay or failure in generating the chemistry, manufacturing and control data required in connection with any application for regulatory approval, or challenges in the regulatory inspection process, could negatively impact our ability to meet our anticipated regulatory submission dates, delay any approval decisions and/or negatively affect our ability to obtain regulatory approval at all. Any failure of us, our collaborators or a manufacturer to obtain approval to manufacture and supply product in a jurisdiction, or to obtain and distribute adequate supplies of the product, on a timely basis or in accordance with applicable specifications and local requirements could negatively impact our ability to successfully launch and commercialize the applicable product in that jurisdiction and to generate sales of that product at the levels we expect. We or our collaborators may also encounter difficulties in meeting the regulatory requirements applicable to the manufacturing process for these agents, in managing the additional complexity of manufacturing for a number of markets outside the U.S. or in responding to changes in the amount or timing of supply needs. Any failures or delays in meeting these requirements could substantially delay or impede our ability to obtain regulatory approvals for and to market these agents, which could negatively impact our operating results and adversely affect our business.
We are dependent upon a small number of distributors for a significant portion of our net sales, and the loss of, or significant reduction or cancellation in sales to, any one of these distributors could adversely affect our revenues and increase our costs.
We sell ADCETRIS, PADCEV and TIVDAK through a limited number of specialty distributors. Healthcare providers order ADCETRIS, PADCEV and TIVDAK through these distributors. We receive orders from distributors and generally ship product directly to the healthcare provider. We sell TUKYSA through a distribution network of specialty pharmacies, integrated delivery network hospitals and practices that dispense in the office. These distributors and distribution network partners do not set or determine demand for our products; however, our ability to effectively commercialize our products will depend, in part, on their performance. If we lost a major distributor or partner, revenue during any period of disruption could suffer and we might incur additional costs. In addition, business disruptions arising from the COVID-19 pandemic could negatively affect the ability of some of our distributors or distribution network partners to pay amounts owed to us in a timely manner or at all.
We are dependent on third parties such as contract research organizations, medical institutions and clinical investigators to assist with the design, review, management and conduct of our clinical trials and other activities.
We depend on third parties such as contract research organizations, medical institutions and clinical investigators to assist with the design, review, management and conduct of our clinical trials and other activities. Our reliance on these third parties reduces our control over these activities but does not relieve us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with regulatory requirements, GCP and study protocols. To the extent these third parties fail to successfully carry out their contractual duties or meet expected deadlines, our clinical trials and regulatory filings may be negatively impacted including possible impacts to data, results, or conclusions, increased costs, and delays to regulatory timelines, which may harm our reputation and business.
Risks Related to Intellectual Property and Litigation

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

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

The standards that the U.S. Patent and Trademark Office, or USPTO, and ~~foreign~~ patent offices in other countries use to grant patents are not always applied predictably or uniformly and can change. Consequently, our pending patent applications may not be allowed and, if allowed, may not contain the type and extent of patent claims that will be adequate to conduct our business as planned. Additionally,

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

Table of Contents

adverse effect on our business, ~~financial condition,~~ results of operations, financial condition and growth prospects.

In addition, changes to patent laws may be applied retroactively to affect the validity, enforceability, or term of our patents. Patent protection outside the U.S. is particularly uncertain and costly. The laws of some countries may not protect our intellectual property rights to the same extent as U.S. laws, and many companies in our industry have encountered significant difficulties in protecting and defending such rights in these jurisdictions.

We rely on external agents to perform certain activities to maintain our patents. Although we carefully select and oversee these agents, the failure of an agent to properly perform these maintenance activities, whether through mistake or otherwise, could adversely affect our intellectual property rights. Additionally, if we do not control all of the intellectual property rights in-licensed to us with respect to a drug candidate and the entity that controls the intellectual property rights does not adequately protect those rights, our rights may be impaired, which may impact our ability to develop, market and commercialize the in-licensed drug candidate.

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

In addition, under proposed or adopted policies in the EU, information related to clinical trials and clinical trial data that historically were considered confidential are now increasingly subject to public disclosure. The move toward public disclosure of this information could adversely affect our business in many ways, such as by requiring the disclosure of confidential methodologies for product development, preventing us from obtaining intellectual property right protection for innovations, requiring significant resources to prevent others from violating our intellectual property rights, adding complexity to compliance with applicable data privacy regulations, and enabling competitors to use our data to gain approvals for their own products.

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

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

We are or may be from time to time involved in the defense and enforcement of our patent or other intellectual property rights in a court of law, USPTO interference, inter partes review, or IPR, post-grant review or reexamination proceeding, foreign opposition proceeding or related legal and administrative proceeding in the ~~United States~~U.S. and elsewhere. For example, see the risk factor below titled, “We have been and may in the future be subject to litigation, which could result in substantial expenses and damages and may divert management’s time and attention from our business,” for information on certain disputes with Daiichi Sanyko Co. Ltd, or Daiichi Sankyo. In addition, if we choose to go to court to stop a third party from infringing our patents, that third party has the right to ask the court to rule that these patents are invalid, not infringed and/or should not be enforced. Under the America Invents Act, a third party may also have the option to challenge the validity of certain patents at the Patent Trial and Appeal Board, or PTAB, of the USPTO whether they are accused of infringing our patents or not, and certain entities associated with hedge funds,

pharmaceutical companies and other entities have challenged valuable pharmaceutical patents through the IPR process. These lawsuits and administrative proceedings are expensive and consume time and other resources, and we may not be successful in these proceedings or in stopping infringement. In addition, there is a risk that a court will decide that these patents are not valid or not infringed or otherwise not enforceable, or that the PTAB will

Table of Contents

decide that certain patents are not valid, ~~or should have a shorter term,~~ and that we do not have the right to stop a third party from using the patented subject matter. Successful challenges to our patent or other intellectual property rights through these proceedings could result in a loss of rights in the relevant jurisdiction and may allow third parties to use our proprietary technologies without a license from us or our collaborators, which may also result in loss of future royalty payments. Furthermore, if such challenges to our rights are not resolved promptly in our favor, our existing business relationships may be jeopardized and we could be delayed or prevented from entering into new collaborations or from commercializing potential products, which could adversely affect our business, ~~and~~ results of ~~operations.~~operations, financial condition and growth prospects. In addition, we may challenge the patent or other intellectual property rights of third parties and if we are unsuccessful in actions we bring against the rights of such parties, through litigation or otherwise, and it is determined that we infringe the intellectual property rights of such parties, we may be prevented from commercializing potential products in the relevant jurisdiction, or may be required to obtain licenses to those rights or develop or obtain alternative technologies, any of which could harm our business.

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

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

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

We are engaged in multiple legal disputes with Daiichi Sankyo. We have been in a dispute with Daiichi Sankyo regarding the ownership of certain technology used by Daiichi Sankyo in its cancer drug Enhertu® (fam-trastuzumab deruxtecan-nxki) and certain product candidates. On August 12, 2022, the arbitrator in this dispute ruled in favor of Daiichi Sankyo, citing statute of limitations and disagreement with us on the interpretation of the contract. On September 14, 2022, Daiichi Sankyo submitted a petition for approximately $58 million for reimbursement of its legal fees and costs associated with the arbitration. We filed an opposition to Daiichi Sankyo’s request on October 12, 2022. On November 10, 2022, we filed a motion to vacate the arbitration award in the U.S. District Court for the Western District of Washington. In addition, in October 2020, we filed a complaint in the U.S. District Court for the Eastern District of Texas to commence an action for infringement of our U.S. Patent No. 10,808,039, or the ‘039 Patent, by Daiichi Sankyo’s importation into, offer for sale, sale, and use in the U.S. of Enhertu. Daiichi Sankyo (as well as Daiichi Sankyo, Inc. and AstraZeneca Pharmaceuticals, LP, or AstraZeneca) subsequently filed an action in the U.S. District Court for the District of Delaware seeking a declaratory judgment that Enhertu does not infringe the ‘039 Patent. The Delaware action has been stayed by court order. Daiichi Sankyo, Inc. and AstraZeneca also filed two petitions for post-grant review with the USPTO seeking to have claims of the ‘039 Patent cancelled as unpatentable. On June 24, 2021, the USPTO issued a decision denying both petitions for post-grant review. On April 7, 2022, the USPTO granted a request on rehearing and instituted two post-grant review proceedings, but on July 15, 2022, the USPTO issued a new decision denying post-grant review of the claims asserted in the patent infringement action. On February 7, 2023, in response to Daiichi Sankyo and AstraZeneca’s second request for rehearing of the denial of the post-grant review to the USPTO and for Precedential Opinion Panel, or POP, review, the Precedential Opinion Panel issued an order denying the request for POP review but directing the USPTO panel evaluating the second rehearing request to make an explicit finding using its own discretion as to whether the post-grant review petition presents a “compelling” showing of invalidity as part of its ruling on the pending second rehearing request. The panel was also directed to rule on the second rehearing request within two weeks from the POP order. On February 14, 2023, the panel decided to institute the post-grant review of the claims of the ‘039 Patent asserted in the patent infringement action. On April 8, 2022, a jury in the U.S. District Court for the Eastern District of Texas found that Daiichi Sankyo willfully infringed the asserted claims of the ‘039 Patent with its Enhertu product, and also found that the asserted claims were not invalid. The U.S. District Court for the Eastern District of Texas also denied Daiichi

Table of Contents

Sankyo’s claim that the ‘039 Patent should be unenforceable under the equitable theory of prosecution laches, entered judgment in favor of us based on the jury’s verdict that Daiichi Sankyo willfully infringed the ‘039 Patent consisting of pre-trial damages in the sum of $41.8 million, and awarded us pre- and post-trial interest and costs. We have requested a royalty in the range of 10-12% on Daiichi Sankyo’s future sales of Enhertu in the United States through November 5, 2024, the current expiration date of the ‘039 Patent, as well as $12 million for reimbursement of our reasonable attorneys’ fees.
On March 14, 2023, a purported class action was filed in the United States District Court for the Central District of California against us, Astellas and Agensys, Inc., alleging that the defendants failed to warn of side effects to the skin that can occur when taking PADCEV. The complaint alleges claims under strict liability, negligence and fraud, and seeks damages, including punitive damages, interest, attorneys’ fees and costs. We intend to vigorously defend against these claims.
Four lawsuits have been filed by purported Seagen stockholders in connection with the Pfizer Merger. The complaints allege, among other things, that certain disclosures in the preliminary proxy statement we filed on April 14, 2023 in connection with the Pfizer Merger were materially incomplete and misleading. The four actions are captioned O’Dell v. Seagen Inc., et al., No. 1:23-cv-03254 (Apr. 19, 2023), filed in the United States District Court for the Southern District of New York, Boyd v. Seagen Inc., et al., No. 1:23-cv-03309 (Apr. 20, 2023), filed in the United States District Court for the Southern District of New York, Wang v. Seagen Inc., et al., No. 1:23-cv-03302 (Apr. 20, 2023), filed in the United States District Court for the Southern District of New York, and Ober v. Seagen Inc., et al., No. 1:23-cv-03378 (Apr. 21, 2023), filed in the United States District Court for the Southern District of New York. The complaints name us and the current members of our board of directors as defendants. The complaints allege, among other things, violations of Sections 14(a) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78n(a), 78t(a), SEC Rule 14a-9, 17 C.F.R. 240.14a-9 and 17 C.F.R. § 244.100. The complaints seek, among other relief, to enjoin us from consummating the Pfizer Merger and to be awarded rescissory damages, including reasonable attorneys’ and expert fees and expenses. We believe that the allegations asserted in the complaints are without merit. We are not aware of the filing of other lawsuits challenging the Pfizer Merger or the proxy statement; however, additional lawsuits arising out of the Pfizer Merger or the related proxy statement may be filed in the future.
As a result of these disputes, we have incurred and will continue to incur litigation expenses. In addition, from time to time, we may become involved in other lawsuits, claims and proceedings relating to the conduct of our business, including those pertaining to the defense and enforcement of our patent or other intellectual property rights and our contractual rights.
These and other potential future litigations are subject to inherent uncertainties, and the actual costs to be incurred relating to litigations may be impacted by unknown factors. The outcome of litigation is necessarily uncertain, and we could be forced to expend significant resources in the course of these and potential future litigations, we may be subject to additional claims and counterclaims that may result in liabilities or require us to take or refrain from certain actions, and we may not prevail. Monitoring, defending against and pursuing legal actions can be time-consuming for our management and detract from our ability to fully focus our internal resources on our business activities, which could result in delays of our clinical trials or our development and commercialization efforts. In addition, we may incur substantial legal fees and costs in connection with these and potential future litigations. Decisions adverse to our interests in these and potential future litigations could result in the payment of substantial damages, or possibly fines, or affect our intellectual property rights and could have a material adverse effect on our business, results of operations, financial condition and growth prospects. Successful challenges to our patent or other intellectual property rights could result in a loss of rights in the relevant jurisdiction and may allow third parties to use our proprietary technologies without a license from us or our collaborators. In addition, the uncertainty associated with litigation could lead to increased volatility in our stock price.
Risks Related to Our Operations, Managing Our Growth and Other Risks
The evolving effects of the COVID-19 pandemic and associated global economic instability could have further adverse effects on our business, including our commercialization efforts, supply chain, regulatory activities, clinical development activities and other business operations.
Our business is currently being adversely affected and could be materially and adversely affected in the future by the evolving effects of the COVID-19 pandemic. Our ongoing increased reliance on personnel working from home may present operational and workplace culture challenges, negatively impact productivity or disrupt, delay or otherwise adversely impact our business. This could also increase our cybersecurity risk, create data accessibility concerns and make us more susceptible to communication disruptions, any of which could adversely impact our business operations. In addition, the evolving effects of the COVID-19 pandemic appear to have negatively affected our product sales in the past and could affect product sales in the future. In this regard, impacts associated with the COVID-19 pandemic appear to have led to a reduction in diagnosis rates for the ADCETRIS frontline indications earlier in the pandemic and, while we believe these diagnosis rates have returned to pre-pandemic levels, these impacts may have adversely affected diagnosis rates of other cancers, and may adversely affect rates of cancer diagnoses or patient access to healthcare settings in the future. As we resume more travel and in-person interactions after pauses earlier in the pandemic, 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, COVID-19 variants, government
58
Table of Contents

actions, restrictions at healthcare institutions, or otherwise. Future COVID-19 related restrictions could negatively impact research and development activities or sales and marketing efforts, or could present product distribution challenges.
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 effects of the COVID-19 pandemic have increased market volatility and could result in a significant long-term disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, economic instability resulting from the effects of the COVID-19 pandemic could materially affect our business and the value of our common stock.
The extent to which the evolving effects of the COVID-19 pandemic (or any future pandemic) impact our business will depend on future developments that are highly uncertain, such as virus 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. Accordingly, we do not yet know the full extent of potential effects from the pandemic. However, these effects could materially and adversely affect our business, results of operations, financial condition and growth prospects. In addition, the evolving effects of the COVID-19 pandemic may also heighten many of the other risks described elsewhere in this “Risk Factors” section. It is also possible that future global pandemics could occur and materially and adversely affect our business, results of operations, financial condition and growth prospects.
If we are unable to manage our growth, our business, results of operations, financial condition and growth prospects may be adversely affected.
We have experienced and expect to continue to experience significant growth in the number of our employees and in the scope and complexity of our operations. This rapid growth and additional complexity places significant demands on our management and other personnel, our operational and financial resources and our third party suppliers. Our current and planned personnel, operational and financial systems, procedures, controls and suppliers may not be adequate to support our growth, and we may experience operating inefficiencies, delays, control deficiencies, compliance issues or other problems. In addition, we may not be able to achieve any necessary growth objectives in a timely or cost-effective manner, or at all, and may not realize a positive return on our investment. If we are unable to manage our growth effectively, our business, results of operations, financial condition and growth prospects may be adversely affected.
Risks associated with our expanding operations in countries outside the U.S. could materially adversely affect our business.
We have operations outside the U.S., and we plan to continue expanding our operations internationally. Consequently, we are, and will increasingly be, subject to risks and complexities related to operating internationally, including:
•the increased complexity and costs inherent in managing international operations, including in geographically disparate locations;
•diverse clinical, drug safety, drug quality, drug supply, healthcare compliance and other pharmaceutical regulatory regimes, and any future changes to such requirements, in the countries and regions where we are located or do business;
•multiple, differing and changing laws and regulations such as tax laws, privacy regulations, tariffs, trade restrictions, export and import restrictions, employment, immigration and labor laws, corporate laws, and other governmental approvals, permits and licenses;
59
Table of Contents

•differing payor reimbursement regimes, governmental payors or patient self-pay systems and price controls;
•adverse tax consequences, including changes in applicable tax laws and regulations;
•political tensions, economic weakness, including inflation, or political or economic instability in particular economies and markets;
•currency fluctuations, which could result in increased operating expenses or reduced revenues;
•challenges inherent in efficiently managing employees in diverse geographies and different languages;
•challenges in adapting systems, policies, benefits and compliance programs for different countries;
•reliance on vendors who are located far from our headquarters and with whom we have not worked previously; and
•workforce uncertainty in countries where labor unrest is more common.
For example, the U.S. government and other nations have imposed sanctions, including significant restrictions on most companies’ ability to do business in Russia, as a result of the ongoing military conflict between Russia and Ukraine. It is not possible to predict the broader or longer-term consequences of this conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, security conditions, currency exchange rates, the price and availability of energy, and financial markets. Such geopolitical instability and uncertainty could have a negative impact on our ability to continue expanding our operations internationally and to otherwise generate revenues and develop our product candidates internationally. In addition, a significant escalation or expansion of economic disruption or the conflict’s current scope could have a material adverse effect on our business, results of operations, financial condition and growth prospects. Recent strengthening of the U.S. dollar as compared to other currencies, including currencies in jurisdictions where we and our licensees sell products, has adversely affected royalty revenues and TUKYSA net product sales in Europe and could further adversely affect these sources of revenues.
Additionally, the U.S. Foreign Corrupt Practices Act, or FCPA, and the anti-bribery laws and regulations of other countries are extensive and far-reaching. We must ensure that accurate records and controls required by the FCPA are maintained with respect to the activities of our employees, distributors and service providers in all of the countries where we operate. In the course of conducting operations internationally, we interact with regulatory authorities, as well as with healthcare professionals who are often employed by governments and may be deemed to be foreign officials under the FCPA. Any interactions with any such third parties that are found to be in violation of relevant laws could result in substantial fines and penalties and could materially harm our business. Emerging-market countries may be especially vulnerable to periods of political, legal, and financial instability and may have a higher risk of corrupt business practices. As we expand our international operations, we continue to supplement and expand our global compliance program, controls, policies and procedures. However, there can be no assurance that such measures will work effectively at all times or protect us against liability. There is a risk that acts committed by our employees, agents, distributors, collaborators or third-party providers might violate the FCPA and other anti-corruption laws and that we might be held responsible. Furthermore, any finding of a violation under one country’s laws may increase the likelihood that we will be prosecuted and be found to have violated another country’s laws. Our failure, or the failure of others who we engage to act on our behalf, to comply with the laws and regulations of the countries in which we operate, or will operate in the future, could result in criminal and civil penalties, other remedial measures and reputational damage, all of which could materially harm our business, financial condition, results of operations, and prospects. As we continue to expand our footprint and activities internationally, our exposure to compliance risks under the FCPA and other similar laws will likewise increase.
As a business, we do not have significant experience conducting operations outside of the U.S. and Canada. We might not be successful in establishing and conducting commercial and other operations in these regions and may not realize a positive return on our investment. Our failure to successfully do so could have a material adverse effect on our business, results of operations, financial condition and growth prospects. These and other risks associated with expanding our international operations, as described elsewhere in these risk factors, could have a material adverse effect on our business, results of operations, financial condition and growth prospects.
We have engaged in, and may in the future engage in, strategic transactions that increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities and subject us to other risks.
We actively evaluate various strategic transactions on an ongoing basis, including licensing or otherwise acquiring complementary products, product candidates, technologies or businesses. We may spend significant amounts, issue dilutive securities and/or assume or incur significant debt obligations in connection with these transactions. In addition, these transactions, including our in-license of development and commercialization rights to disitamab vedotin and LAVA-1223, also known as SGN-EGFRd2, and any potential future acquisitions or licensing transactions entail numerous risks, including:
60
Table of Contents

•risks associated with satisfying the closing conditions relating to such transactions and realizing their anticipated benefits;
•increased operating expenses and cash requirements;
•difficulty integrating acquired technologies, products, operations, compliance programs and personnel with our existing business;
•acquired or licensed products, product candidates or technologies, such as disitamab vedotin and SGN-EGFRd2, may not perform as expected and may not result in regulatory approvals;
•failure to successfully develop and commercialize acquired or licensed products, product candidates or technologies or to achieve other strategic objectives;
•the potential disruption of our historical core business;
•diversion of management’s attention in connection with both negotiating the acquisition or license and integrating the business, technology or product;
•retention of key employees;
•uncertainties in our ability to maintain key business relationships of any acquired companies;
•difficulty implementing and maintaining effective internal control over financial reporting of businesses that we acquire;
•exposure to unanticipated liabilities of acquired companies or companies in which we invest;
•the potential need to write down assets or recognize impairment charges or significant amortization expenses; and
•potential costly and time-consuming litigation, including stockholder lawsuits.
As a result of these or other problems and risks, businesses, technologies or products we acquire or invest in or obtain licenses to may not produce the revenues, earnings, business synergies or other benefits that we anticipated, within the expected timeframe or at all. As a result, we may incur higher costs and realize lower revenues than we had anticipated. We cannot assure you that any acquisitions or investments we have made or may make in the future will be completed or that, if completed, the acquired business, licenses, investments, products, or technologies will generate sufficient revenue to offset the costs or other negative effects on our business. Further, while we seek to mitigate risks and liabilities of potential acquisitions and in-licensing transactions through, among other things, due diligence, there may be risks and liabilities that we fail to discover, that are not disclosed to us, or that we inadequately assess. Any failure in identifying and managing these risks, liabilities and uncertainties effectively, including in connection with our in-license of development and commercialization rights to disitamab vedotin and SGN-EGFRd2, could have a material adverse effect on our business, results of operations, financial condition and growth prospects. Moreover, we may not be able to identify, negotiate and close strategic acquisition or in-licensing opportunities in the future, and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business. Other pharmaceutical companies, many of which may have substantially greater resources, compete with us for these opportunities. Failure to effectively advance our business strategy and manage our operations through acquisitions or in-licensing transactions could have a material adverse effect on our business, results of operations, financial condition, and growth prospects.

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

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

For example, in May 2022, Clay B. Siegall resigned as our President and Chief Executive Officer and as a member of our Board of Directors, and Roger Dansey, M.D., our Chief Medical Officer, was appointed as our Interim Chief Executive Officer. In November 2022, David R. Epstein was appointed as Chief Executive Officer and as a member of our Board of Directors, and Dr. Dansey was appointed President, Research and Development and Chief Medical Officer. Changes to company strategy, which can often times occur with the appointment of new executive leadership, can create uncertainty. Failure to ensure a smooth transition and successfully implement our strategy could have a material adverse effect on our business, results of operations, financial condition and growth prospects.

In addition, the competition for qualified personnel in the biotechnology field is intense, and our future success depends upon our ability to attract, retain and motivate highly skilled ~~scientific, technical and managerial~~biotechnology employees. In order to continue to commercialize ~~ADCETRIS~~our products, and advance the development and commercialization of our ~~pipeline,~~product candidates, we ~~have been~~will be required to expand our

Table of Contents

workforce and management team, particularly in the areas of manufacturing, clinical trials, ~~management,~~ regulatory affairs, business development, sales and ~~marketing.~~marketing, both in the U.S. and in Europe. We continue to face intense competition for qualified individuals from numerous pharmaceutical and biotechnology companies, as well as academic and other research ~~institutions. To~~institutions, and with increasing reliance on remote work arrangements, the ~~extent~~geographic market in which we ~~are not able~~compete for talent is expanding. Our ability to attract and retain ~~these individuals on favorable terms or attract any additional personnel that~~talent in this competitive environment may be ~~required,~~further complicated by evolving employment trends arising from the COVID-19 pandemic, including an increased preference for remote, alternative or flexible work arrangements. Our failure to effectively compete for and retain talent could negatively affect our ability to achieve our business ~~may be harmed. For example, we may not be successful in attracting or retaining key personnel necessary to support our strategy to develop~~objectives and ~~commercialize ADCETRIS in earlier lines of therapy, including potentially in the ECHELON-1 treatment setting.~~

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

We have experienced and expect to continue to experience significant growth in the number of our employees and in the scope of our operations, including in connection with our recent acquisition of, and planned operation of, a manufacturing facility. This growth places significant demands on our management, operational and financial resources, and our current and planned personnel, systems, procedures and controls may not be adequate to support our growth. To effectively manage our growth, we must continue to improve existing, and implement new, operational and financial systems, procedures and controls and must expand, train and manage our growing employee base, and there can be no assurance that we will effectively manage our growth without experiencing operating inefficiencies or control deficiencies. We expect that we may need to increase our management personnel to oversee our expanding operations, and recruiting and retaining qualified individuals is difficult. In addition, the physical expansion of our operations may lead to significant costs and may divert our management and capital resources. If we are unable to manage our growth effectively, or are unsuccessful in recruiting qualified management personnel, our business, financial condition, results of operations and prospects may be adversely affected.

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

The current and future use of ADCETRIS by us and our corporate collaborators in clinical trials and the sale of ADCETRIS, expose us to product liability claims. These claims have and may in the future be made directly by patients or healthcare providers or indirectly by pharmaceutical companies, our corporate collaborators or others selling such products. Additionally, in connection with our acquisition of the manufacturing facility from BMS, we have agreed to enter into certain transitional services agreements under which we expect to manufacture certain clinical drug product components for BMS for a period of time. As a result, it is possible that we may be named as a defendant in product liability suits that may allege that drug products we manufacture for BMS have resulted in injury to patients. We may experience substantial financial losses in the future due to product liability claims. We have obtained product liability coverage, including coverage for human clinical trials and product sold commercially. However, we may not be able

to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against all losses. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured amounts, our assets may not be sufficient to cover such claims and our business operations could be impaired.

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

~~Risks associated with operating in foreign countries could materially adversely affect our business.~~

We are expanding our operations internationally, and we currently have subsidiaries in the U.K., Switzerland and Canada. Consequently, we are, and will continue to be, subject to risks related to operating in foreign countries. Risks associated with conducting operations in foreign countries include:

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

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

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

~~economic weakness, including inflation, or political or economic instability in particular foreign economies and markets;~~

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

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

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

~~workforce uncertainty in countries where labor unrest is more common than in the United States; and~~

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

For example, since a significant proportion of the regulatory framework in the U.K. is derived from European Union directives and regulations, Brexit could materially change the regulatory regime applicable to our operations and those of our collaborators, including with respect to marketing authorizations for ADCETRIS and our product candidates. We may also face new regulatory costs and challenges as result of Brexit that could have a material adverse effect on our operations. Depending on the terms of Brexit, the U.K. could lose the benefits of global trade agreements negotiated by the European Union on behalf of its members, which may result in increased trade barriers which could make our doing business, in Europe more difficult. In addition, currency exchange rates for the British Pound and the Euro with respect to each other and the U.S. dollar have already been affected by Brexit. Should this foreign exchange volatility continue, it could cause volatility in our quarterly financial results. In any event, we cannot predict to what extent these changes will impact our business or results of operations, ~~or our ability to conduct operations in Europe.~~

~~These and other risks described elsewhere in these risk factors associated with expanding our international operations could materially adversely affect our business.~~

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

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

growth prospects.

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

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

~~If we experience a significant disruption in~~ our information technology systems or ~~breaches~~data are or were compromised, we could experience interruptions to our operations, legal claims, liability, harm to our reputation, a loss of ~~data security,~~sales and other adverse impacts.

We and our ~~business could be adversely affected.~~

Wecollaborators, suppliers and service providers rely on information technology systems to keep financial and other records, capture laboratory ~~data, maintain~~and clinical trial data, ~~and corporate records, communicate with staff~~support internal and external ~~parties~~communications and operate other critical functions. ~~Our information technology~~Despite our security measures, these systems are potentially vulnerable to ~~disruption due to breakdown, malicious intrusion~~malware, cyber-attacks, security breaches, natural disasters, terrorism, software and ~~computer viruses or other disruptive events including but not limited to natural disaster.~~hardware failures, telecommunication and electrical failures, and similar issues. If wesuch an event were to ~~experience a prolonged system disruption~~occur, it could result in material interruptions to our operations, loss of data or applications, loss of sales, significant extra expenses to restore data or systems, reputational harm and diversion of funds. For example, the loss of preclinical study or clinical trial data could result in delays in our product development or regulatory approval efforts and significantly increase our costs in order to recover or reproduce the data. The effects of the COVID-19 pandemic and the transition to more remote and hybrid work schedules have intensified our dependence on information technology systems ~~or those of certain~~as many of our ~~vendors, it could delay or negatively impact the development and commercialization of ADCETRIS~~critical business activities are being conducted remotely, and our ~~product candidates, which~~increased reliance on personnel working from home could ~~adversely impact~~increase our business. Although we maintain offsite back-ups of our data, if operations at our facilities were disrupted, it may cause a material disruption in our business if we are not capable of restoring function on an acceptable timeframe.cybersecurity risk. In addition, our ~~information technology~~cybersecurity risk could be increased as a result of the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia.

In addition to traditional computer “hackers” and threat actors, sophisticated nation-state and nation-state supported actors now engage in attacks (including advanced persistent threat intrusions). Ransomware attacks, including those from organized criminal threat actors, nation-states and nation-state supported actors, are becoming increasingly prevalent and severe. To alleviate the financial, operational and reputational impact of a ransomware attack, it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including, for example, if applicable laws or regulations prohibit such payments). Similarly, supply chain attacks have increased in frequency and severity. We cannot guarantee that third parties and infrastructure in our supply chain have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our systems and networks or the systems and networks of third parties that support us.

Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are ~~potentially vulnerable~~not recognized until launched against a target, we may be unable to ~~data security breaches—whether by employees~~anticipate these techniques or ~~others—which~~implement adequate preventative measures. We may ~~expose sensitive data to unauthorized persons. Such data~~also experience security breaches that may remain undetected for an extended period. Although, to our knowledge, we have not experienced any material security breach to date, any such breach could ~~lead~~compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. While we have taken steps to protect the security of the personal data and other sensitive information that we handle, there can be no assurance that any security measures will be effective against current or future security threats. Any unauthorized or accidental access to, or disclosure, modification, misuse, or loss of, personal or other data could result in legal claims or proceedings, liability, significant regulatory penalties, and loss of trade secrets or other intellectual ~~property,~~property. In addition, such an event could disrupt our operations, damage our reputation and delay development of our product candidates.

Risks Related to Our Operating Results, Financial Condition and Capital Requirements

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

Our operating results are difficult to predict and may fluctuate significantly from quarter to quarter and year to year. We believe that our quarterly and annual results of operations may be affected by a variety of factors, including:

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

•the overall level of demand for our products, including the impact of any competitive or biosimilar products;

•the extent to which coverage and adequate reimbursement for our products is available from government and other third-party payors;

•changes in the amount of deductions from gross sales, including government-mandated rebates, chargebacks and discounts that can vary because of changes to the ~~public exposure~~government discount percentage, including increases in the discount

Table of ~~personal information (including sensitive personal information)~~Contents

percentage resulting from price increases, or due to different levels of utilization by entities entitled to government rebates and discounts and changes in patient demographics;

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

•the timing, receipt and amount of development funding and milestone, royalty and other payments under collaboration and license arrangements, which may vary significantly from quarter to quarter;

•entry into new strategic transactions, such as collaborations, license agreements or acquisitions of products, technologies or businesses;

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

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

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

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

•the timing, cost and level of investment in clinical trials, research and development, pre-commercialization, manufacturing and other activities by us or our collaborators; and

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

Sales of a newly-approved product, or sales of an existing product in a newly-approved indication or territory, are particularly difficult to predict. Sales results or trends for such products, indications or territories in any period may not necessarily be indicative of future performance. Changes in our operations, such as new or expanding pipeline programs, the continued expansion or our international operations, additional business activities, or entry into strategic transactions, including potential future acquisitions of products, technologies or businesses, may cause significant fluctuations in our expenses. In addition, stock-based compensation expense may vary significantly from period to period. The variables we use for valuing these awards, including our underlying stock price, change over time. Additionally, from time to time, we have granted performance-based equity awards to eligible employees ~~customers~~with vesting of the awards contingent upon the achievement of certain regulatory milestones. Costs of performance-based compensation for these awards are not recorded as an expense until the achievement of the applicable milestones is deemed probable, which may result in large fluctuations to the expense we must recognize in any particular period.

For these and ~~others,~~other reasons, it is difficult for us to accurately forecast future sales of our current or any future approved products, collaboration and license agreement revenues, royalty revenues, operating expenses or future profits or losses. In addition, although we provide financial guidance from time to time, such guidance is based on assumptions that may be incorrect or that may change from quarter to quarter. You also should not rely on operating results in any period as being indicative of future performance. Our operating results have on occasion been, and in in future periods may also be, below prior period results, our own guidance and/or the expectations of securities analysts or investors. Such results could cause the trading price of our common stock to decline, perhaps substantially.

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

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

Table of Contents

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

We expect to make additional capital outlays and to increase operating expenditures over the next several years as we hire additional employees, support our development and commercialization activities, 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 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 forgo strategic opportunities. Our future capital requirements will depend upon a number of factors, including:

•the level of sales of our products and any future approved products;

•the time and costs involved in pursuing regulatory approvals and the timing of any approvals;

•the costs, timing, progress and results of our research and development, including preclinical testing and clinical trials;

•the timing, receipt and amount of royalty revenue generated from commercial sales by our collaborators and licensees, as well as development funding, milestone payments and other payments under collaboration and license arrangements;

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

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

•the costs associated with past and potential future strategic transactions, including acquisitions or licenses of additional technologies, products or businesses as well as licenses we may need to commercialize our current or any future approved products;

•the terms and timing of any future collaboration, licensing and other arrangements;

•expenses associated with current or future litigation;

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

•competing technological and market developments.

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

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

Table of Contents

rising interest rates, the ongoing military conflict between Russian and Ukraine and related sanctions imposed against Russia and otherwise.

The potential future impairment of intangible assets and goodwill may negatively affect our results of ~~operations. Moreover, a security breach~~operations and financial position.

As of March 31, 2023, we carried $506.5 million of intangible assets, net and goodwill on our consolidated balance sheet. Our intangible assets and goodwill are subject to an impairment analysis whenever events or ~~privacy violation that leads~~changes in circumstances indicate the carrying amount of the asset may not be recoverable. Additionally, goodwill and indefinite-lived assets are subject to ~~disclosure or modification~~an impairment test at least annually. Events giving rise to impairment are an inherent risk in the pharmaceutical industry and cannot be predicted. Our results of personally identifiable information, could harm our reputation, compel us to comply with federal and/or state breach notification laws, subject us to mandatory corrective action, require us to verify the correctness of database contentsoperations and ~~otherwise subject us to liability under laws and regulations that protect personal data, resulting~~financial position in increased costs or loss of revenue. In addition, a data security breach could result in loss of clinical trial data or damage to the integrity of that data. If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures, our operationsfuture periods could be ~~disrupted, and we may suffer loss~~negatively impacted should future impairments of ~~reputation, financial loss and other negative consequences because of lost~~intangible assets or misappropriated information. In addition, these breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above.

~~Increasing use of social media could give rise to liability.~~

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

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

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

For example, in May 2014, the Financial Accounting Standards Board, or FASB, issued an Accounting Standards Update entitled “ASU 2014-09, Revenue from Contracts with Customers” which will replace the existing revenue recognition guidance in U.S. GAAP when it becomes effective for us on January 1, 2018. Our preliminary assessment of this new standard is that it will generally not change the way in which we recognize product revenue from sales of ADCETRIS. However, we expect that sales-based royalties and commercial sales-based milestones will be recorded in the period of the related sale based on estimates, rather than recording them as reported by the customer. In addition, the achievement of development milestones under our collaborations will be recorded in the period their achievement becomes probable, which may result in their recognition earlier than under current accounting principles. We are continuing to evaluate the impact of the new standard on all of our revenues, including those mentioned above, and our assessments may change in the future based on our continuing evaluation. Additionally, beginning in 2018, we will

adopt ASU 2016-01 “Financial Instruments: Overall,” and as a result, we will record changes in the fair value of equity securities, including our investments in Immunomedics securities, in net income or loss. In any event, the application of existing or future financial accounting standards, particularly those relating to the way we account for revenues and costs, could have a significant impact on our reported results. In addition, compliance with new regulations regarding corporate governance and public disclosure may result in additional expenses. As a result, we intend to invest all reasonably necessary resources to comply with evolving standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from science and business activities to compliance activities.

goodwill occur.

Risks Related to Our Common Stock

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

The market price of our stock has ~~in the past~~ been, and is likely to continue ~~in the future~~ to be, ~~very~~ volatile. ~~During the third quarter of 2017, our closing stock price fluctuated between $45.92 and $55.02 per share.~~ As a result of fluctuations in the price of our common stock, you may be unable to sell your shares at or above the price you paid for them. The market price of our common stock may be subject to substantial volatility in response to many risk factors listed in this section, and others beyond our control, including:

•the ~~level~~levels of ~~ADCETRIS sales in the United States, Canada, the European Union, Japan and other countries in which Takeda has received approval by relevant regulatory authorities;~~product sales;

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

~~announcements of FDA or foreign~~ •regulatory approval or non-approval of ~~ADCETRIS,~~our products or product candidates, specific label indications for or restrictions, warnings or limitations in ~~its~~their use, or delays in the regulatory review ~~or approval process, including in connection with our sBLA submissions to the FDA to seek approval of ADCETRIS in the ALCANZA and ECHELON-1 treatment settings;~~process;

•clinical trial results;

•announcements regarding the results of ~~the clinical trials we, Takeda and/or BMS are conducting or may in the future conduct for ADCETRIS, including the ECHELON-2 phase 3 trial~~discovery efforts, product development and ~~the CHECKMATE 812 trial;~~

~~announcements regarding the results of the clinical trials we and~~commercial activities by us, our collaborators ~~are conducting for enfortumab vedotin and tisotumab vedotin;~~or our competitors;

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

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

•termination of or changes in our existing collaborations or licensing arrangements, ~~especially our ADCETRIS collaboration with Takeda, our enfortumab vedotin collaboration with Astellas, and our tisotumab vedotin collaboration with Genmab,~~ or establishment of new collaborations or licensing arrangements;

•our failure to achieve the perceived benefits of our strategic transactions, including our in-license of development and commercialization rights to disitamab vedotin, as rapidly or to the extent anticipated by financial analysts or investors;

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

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

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

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

•developments regarding any litigation or potential litigation;

•the evolving effects of the COVID-19 pandemic;

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

•changes in laws, regulations or government policies, including with respect to pricing and reimbursement;

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

~~developments~~•other economic, social or ~~disputes concerning our proprietary rights;~~political conditions.

~~developments regarding the pending and potential additional related purported securities class action lawsuits, as well as any other potential litigation;~~

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

~~changes in government regulations; and~~

~~economic or other external factors.~~

The stock markets in general, and the markets for biotechnology and pharmaceutical stocks in particular, have historically experienced significant volatility that has often been unrelated or disproportionate to the operating performance of particular companies. For example, negative publicity regarding drug pricing and price increases by pharmaceutical companies has negatively impacted, and may continue to negatively impact, the markets for biotechnology and pharmaceutical stocks. Likewise, as a result of

Brexit and/or significant changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade and health care spending and delivery, including the possible repeal and/or replacement of all or portions of PPACA or greater restrictions on free trade stemming from Trump Administration policies, the financial markets could experience significant volatility that could also negatively impact the markets for biotechnology and pharmaceutical stocks. These broad market fluctuations have adversely affected and may in the future adversely affect the trading price of our common stock.

In the past, ~~class action or derivative litigation has often been instituted against~~ companies whose securities have experienced periods of volatility in market ~~price.~~price have been subjected to securities class action or derivative litigation. In this regard, we have ~~become,~~been, and may in the future again become, subject to claims and litigation alleging violations of the securities laws or other related ~~claims, which could harm our business and require us to incur significant costs. The pending purported securities class action lawsuit and any additional lawsuits~~claims. Lawsuits brought against us

Table of Contents

could result in substantial costs, which would hurt our financial condition and results of operations and divert management’s attention and ~~resources, which could result in delays of our clinical trials or our development and commercialization efforts.~~

resources.

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

Sales of a substantial number of shares of our common stock, ~~into the public market, including~~and sales by members of our management or board of directors or entities affiliated with such members, could occur at any time. ~~These sales,~~In addition, in December 2020, pursuant to a ten-year registration rights agreement we entered into with certain entities affiliated with Baker Bros. Advisors LP, or the Baker Entities, we registered up to 47,366,602 shares of our common stock for resale by the Baker Entities, and we may be required to register the resale of additional shares held by the Baker Entities from time to time in the future. Sales by our management, our directors, their affiliates, or significant shareholders like the Baker Entities, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock, perhaps substantially, and could impair our ability to raise capital through the sale of additional equity or equity-related securities. We are unable to predict the effect that such sales may have on the prevailing market price of our common stock. As of November 1, 2017, we had 143,928,341 shares of common stock outstanding, all of which shares are eligible for sale in the public market, subject in some cases to the volume limitations and manner of sale and other requirements under Rule 144. In addition, we may issue a substantial number of shares of our common stock or ~~equity- related~~equity-related securities, including convertible debt, to meet our capital needs, including in connection with funding potential future acquisition or licensing opportunities, capital expenditures or product development ~~costs, which~~costs. These issuances could be substantially dilutive and could adversely affect the market price of our common stock. Likewise, future issuances ~~by us~~ of our common stock upon the exercise, conversion or settlement of equity-based awards or other equity-related securities would dilute existing stockholders’ ownership interest in our ~~company and any sales in the public market of these shares, or the perception that these sales might occur, could also adversely affect the market price of our common stock.~~

Moreover, we have in the past and may in the future grant rights to some of our stockholders that require us to register the resale of our common stock or other securities on behalf of these stockholders and/or facilitate public offerings of our securities held by these stockholders, including in connection with potential future acquisition or capital-raising transactions. For example, in connection with our September 2015 public offering of common stock, we entered into a registration rights agreement with entities affiliated with Baker Bros. Advisors LP, or the Baker Entities, that together, based on information available to us, collectively beneficially owned approximately 32.0% of our common stock as of November 1, 2017. Under the registration rights agreement, if at any time and from time to time the Baker Entities demand that we register their shares of our common stock for resale under the Securities Act of 1933, we would be obligated to effect such registration. On October 12, 2016, pursuant to the registration rights agreement, we registered for resale, from time to time, up to 44,059,594 shares of our common stock held by the Baker Entities. Our registration obligations under the registration rights agreement cover all shares now held or hereafter acquired by the Baker Entities, will continue in effect for up to ten years, and include our obligation to facilitate certain underwritten public offerings of our common stock by the Baker Entities in the future. If the Baker Entities, by its exercise of these registration and/or underwriting rights in the future, or otherwise, sell a large number of our shares, or the market perceives that the Baker Entities intend to sell a large number of our shares, including in connection with our October 2016 registration of shares held by the Baker Entities for resale, this could adversely affect the market price of our common stock. We have also filed registration statements to register the sale of our common stock reserved for issuance under our equity incentive and employee stock purchase plans. Accordingly, these shares will be able to be freely sold in the public market upon issuance as permitted by any applicable vesting requirements.

~~Our~~company.

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

~~Our~~

Based on information available to us as of March 31, 2023, the Baker Entities collectively beneficially owned approximately 25% of our common stock. In addition, based solely on the most recent Schedules 13G and 13D filed with the SEC, reports filed with the SEC under Section 16 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and our outstanding shares of common stock as of March 31, 2023, our executive officers and directors and holders of greater than five percent of our outstanding ~~voting~~common stock ~~together with entities that may be deemed affiliates of, or related to, such persons or entities,~~ beneficially owned approximately ~~69.5%~~54% of our voting power as of ~~November 1, 2017.~~March 31, 2023. As a result, these stockholders ~~acting together,~~ are able to ~~control~~exert substantial influence over our management and affairs and matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership may result in our taking corporate actions that other stockholders may not consider to be in their best interest. For example, it may have the effect of delaying, deferring or preventing a change in control, including a merger, consolidation, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control, which might affect the market price of our common stock.

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

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

Seagen.

Our disclosures related to environmental, social and governance, or ESG, matters expose us to various risks, including risks to our reputation and stock price.

Investors are increasingly likely to factor ESG disclosures into their investment decisions. We have elevated the degree to which we manage, track and report on our ESG efforts and goals. Where provided, goal statements are aspirational, are subject to a number of risks, many of which are beyond our control, and are not guarantees. Our processes and operations may not always conform to various frameworks for identifying, measuring and reporting ESG metrics, and ESG reporting standards may change over time, either of which could result in significant revisions to reported metrics. In addition, our interpretation of reporting standards may differ from those of others. Any failure or perceived failure to pursue or fulfill our goals or to satisfy various reporting standards could have negative impacts on our reputation and stock price and expose us to litigation or government actions. Moreover, the SEC has recently proposed certain mandated ESG reporting requirements, such as the SEC’s proposed rules designed to enhance and standardize climate-related disclosures, which, if finally approved, would significantly increase our compliance and reporting costs and may also result in disclosures that certain investors or other stakeholders may deem to negatively impact our reputation and/or that harm our stock price.

Table of Contents

General Risk Factors

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

Due to economic and political conditions, various countries have made or are actively considering changes to existing tax laws, which could adversely affect our business operations and financial performance, and we cannot predict the form or timing of such changes. For example, beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures in the year incurred, requiring amortization in accordance with IRC Section 174. If this requirement is not repealed or otherwise modified, it will reduce our operating cash flows. In addition, the current U.S. presidential administration continues to pursue numerous corporate tax reform proposals to increase taxation of international business operations. Further, organizations such as the Organization for Economic Cooperation and Development have published actions plans that, if adopted by countries where we do business, could increase our tax obligations in those countries. Changes in corporate tax rates or in rules applicable to the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings or the deductibility of expenses could have a material impact on the value of our deferred tax assets, result in significant one-time charges, increase our future tax expense or otherwise have a material adverse effect on our business, results of operations, financial condition or growth prospects.

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

We conduct most of our business in a limited number of facilities. Damage or extended periods of interruption to these facilities due to fire, natural disaster, severe weather, power loss, communications failure, unauthorized entry or other events could cause significant disruption and/or delays in our research and development, manufacturing and commercial activities and could cause us to incur large expenses to repair or replace the facilities. Although we maintain property damage and business interruption insurance coverage on these facilities, our insurance might not cover all losses under such circumstances and our business may be seriously harmed by such disruption, delays and costs.

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

Future changes in financial accounting standards may cause adverse, unexpected revenue fluctuations and affect our financial position or results of operations. New pronouncements and varying interpretations of pronouncements have occurred with frequency in the past and are expected to occur again in the future. As a result we may be required to make changes in our accounting policies that could adversely affect our reported revenues and expenses, future profitability or financial position. The application of existing or future financial accounting standards, particularly those relating to the way we account for revenues and costs, could have a significant impact on our reported results.

Table of Contents

Item 6. Exhibits


Exhibit		Incorporation By Reference
Number	Exhibit Description	Form	SEC File No.	Exhibit	Filing Date
2.1†	Agreement and Plan of Merger, dated March 12, 2023, by and among Seagen Inc., Pfizer Inc. and Aris Merger Sub, Inc.	8-K	000-32405	2.1	3/13/2023
3.1	Fourth Amended and Restated Certificate of Incorporation of Seagen Inc.	10-Q	000-32405	3.1	11/7/2008
3.2	Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation of Seagen Inc.	8-K	000-32405	3.3	5/26/2011
3.3	Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation of Seagen Inc.	8-K	000-32405	3.1	10/8/2020
3.4	Amended and Restated Bylaws of Seagen Inc.	8-K	000-32405	3.1	11/17/2022
4.1	Specimen Stock Certificate.	10-K	000-32405	4.2	2/12/2021
4.2	Investor Rights Agreement dated July 8, 2003 among Seagen Inc. and certain of its stockholders.	10-Q	000-32405	4.3	11/7/2008
4.3	Registration Rights Agreement dated September 10, 2015 between Seagen Inc. and the persons listed on Schedule A attached thereto.	8-K	000-32405	10.1	9/11/2015
10.1	Voting Agreement, dated March 12, 2023, by and among Seagen Inc., Pfizer Inc., and Baker Bros. Advisors LP, on behalf of itself and certain specified persons identified therein in their respective capacities as record or beneficial owners of Seagen common stock.	8-K	000-32405	10.1	3/13/2023
10.2*	Form of Letter Agreement, dated March 12, 2023.	8-K	000-32405	10.2	3/13/2023
10.3+††	First Amendment to Development and Supply Agreement dated April 17, 2008 between Seagen Inc. and Abbott Laboratories.	—	—	—	—
10.4+††	Second Amendment to Lease dated July 1, 2008 between Seagen Inc. and B&N 141-302, LLC.	—	—	—	—
10.5+††	Letter Agreement dated December 7, 2021 between Seagen Inc. and RemeGen Co., Ltd.	—	—	—	—
10.6+††	Letter Agreement dated March 9, 2023 between Seagen Inc. and RemeGen Co., Ltd.	—	—	—	—
10.7+††	Amendment No. 2 to Commercial Supply Agreement dated January 17, 2023 between Seagen Inc. and Esteve Quimica, S.A.	—	—	—	—
10.8+††	First Amendment to Commercial Supply Agreement, dated February 7, 2023, between Seagen Inc. and Hovione FarmaCiencia SA.	—	—	—	—
10.9+*	Form of Global Stock Unit Grant Notice and Global Stock Unit Agreement under the Amended and Restated 2007 Equity Incentive Plan (approved March 30, 2023).	—	—	—	—
31.1+	Certification of Interim Chief Executive Officer pursuant to Rule 13a-14(a).	—	—	—	—
31.2+	Certification of Chief Financial Officer pursuant to Rule 13a-14(a).	—	—	—	—
32.1+	Certification of Interim Chief Executive Officer pursuant to 18 U.S.C. Section 1350.	—	—	—	—
32.2+	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.	—	—	—	—
101	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Loss, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.	—	—	—	—
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).	—	—	—	—

Table of Contents

~~Item 6.~~

~~Exhibits~~

Exhibit
Number
   Incorporation By Reference

Exhibit Description
   Form    SEC File No.    Exhibit    Filing Date
2.1+†** Asset Purchase Agreement, dated July 31, 2017, between Bristol-Myers Squibb Company and Seattle Genetics, Inc.    —      —      —      —
3.1 Fourth Amended and Restated Certificate of Incorporation of Seattle Genetics, Inc.    10-Q    000-32405    3.1    11/07/2008
3.2 Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation of Seattle Genetics, Inc.    8-K    000-32405    3.3    05/26/2011
3.3 Amended and Restated Bylaws of Seattle Genetics, Inc.    8-K    000-32405    3.1    11/25/2015
4.1 Specimen Stock Certificate.    S-1/A    333-50266    4.1    02/08/2001
4.2 Investor Rights Agreement dated July 8, 2003 among Seattle Genetics, Inc. and certain of its stockholders.    10-Q    000-32405    4.3    11/07/2008
4.3 Registration Rights Agreement, dated September 10, 2015, between Seattle Genetics, Inc. and the persons listed on Schedule A attached thereto.    8-K    000-32405    10.1    9/11/2015
10.1+† Purchase Agreement, dated June 16, 2017, between BMR-3450 Monte Villa Parkway, LLC and ZymoGenetics, Inc.    —      —      —      —
10.2+ Assignment and Assumption of Purchase Agreement, dated July 30, 2017, between ZymoGenetics, Inc. and Seattle Genetics, Inc.    —      —      —      —
10.3+† License and Collaboration Agreement, effective October 7, 2011, between Genmab A/S and Seattle Genetics, Inc.    —      —      —      —
10.4*+ Seattle Genetics, Inc. Long Term Incentive Plan for TV and EV    —      —      —      —
10.5*+ Form of Stock Unit Grant Notice for Long Term Incentive Plan for TV and EV    —      —      —      —
10.6*+ Form Stock Unit Grant Notice for Non-US Participants Long Term Incentive Plan for TV and EV    —      —      —      —
31.1+ Certification of Chief Executive Officer pursuant to Rule 13a-14(a).    —      —      —      —
31.2+ Certification of Chief Financial Officer pursuant to Rule 13a-14(a).    —      —      —      —
32.1+ Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.    —      —      —      —
32.2+ Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.    —      —      —      —
101.INS+ XBRL Instance Document.    —      —      —      —
101.SCH+ XBRL Taxonomy Extension Schema Document.    —      —      —      —
101.CAL+ XBRL Taxonomy Extension Calculation Linkbase Document.    —      —      —      —
101.DEF+ XBRL Taxonomy Extension Definition Linkbase Document.    —      —      —      —
101.LAB+ XBRL Taxonomy Extension Labels Linkbase Document.    —      —      —      —
101.PRE+ XBRL Taxonomy Extension Presentation Linkbase Document.    —      —      —      —

Filed herewith.

†

Pursuant to a request for confidential treatment, portions of this Exhibit have been redacted from the publicly filed document and have been furnished separately to the Securities and Exchange Commission as required by Rule 24b-2 under the Securities Exchange Act of 1934.

*	~~Indicates a management contract or compensatory plan or arrangement.~~

**	~~Schedules to the Asset Purchase Agreement, dated July 31, 2017, between Bristol-Myers Squibb Company and Seattle Genetics, Inc.~~Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The ~~registrant will~~Company agrees to furnish ~~copies~~supplementally to the SEC a copy of any ~~such~~omitted schedules toupon request.
††		Certain confidential information contained in this Exhibit, marked by brackets in the ~~Securities~~Exhibit, has been omitted, because it is both not material and ~~Exchange Commission upon request.~~is the type that the registrant treats as private or confidential.
*		Indicates a management contract or compensatory plan or arrangement.

Table of Contents

SIGNATURE

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


SEAGEN INC.

~~SEATTLE GENETICS, INC.~~By:			/s/ Todd E. Simpson

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

Date:			April 27, 2023

~~Date: November 6, 2017~~


	September 30, 2017			December 31, 2016
Assets
Current assets
Cash and cash equivalents	$	128,140		$	108,673
Short-term investments		322,258			480,313
Accounts receivable, net		90,432			61,928
Inventories		60,837			68,124
Prepaid expenses and other current assets		18,905			15,610

Total current assets		620,572			734,648
Property and equipment, net		82,769			62,870
Long-term investments		19,967			29,988
Other non-current assets		129,775			10,890

Total assets	$	853,083		$	838,396

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued liabilities	$	119,978		$	120,669
Current portion of deferred revenue		32,811			27,847

Total current liabilities		152,789			148,516

Long-term liabilities
Deferred revenue, less current portion		37,901			53,006
Deferred rent and other long-term liabilities		2,685			2,787

Total long-term liabilities		40,586			55,793

Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.001 par value, 5,000 shares authorized; none issued		0			0
Common stock, $0.001 par value, 250,000 shares authorized; 143,803 shares issued and outstanding at September 30, 2017 and 142,193 shares issued and outstanding at December 31, 2016		144			142
Additional paid-in capital		1,774,936			1,701,048
Accumulated other comprehensive income (loss)		17,997			(63	)
Accumulated deficit		(1,133,369	)		(1,067,040	)

Total stockholders’ equity		659,708			634,087

Total liabilities and stockholders’ equity	$	853,083		$	838,396


	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Revenues
Net product sales	$	79,177		$	70,117		$	223,841		$	194,981
Collaboration and license agreement revenues		39,444			23,974			82,779			64,148
Royalty revenues		16,670			12,224			46,025			53,743

Total revenues		135,291			106,315			352,645			312,872

Costs and expenses
Cost of sales		9,019			7,427			24,555			20,272
Cost of royalty revenues		5,196			3,748			13,900			10,470
Research and development		113,606			92,711			346,196			271,136
Selling, general and administrative		39,667			34,841			118,783			97,870

Total costs and expenses		167,488			138,727			503,434			399,748

Loss from operations		(32,197	)		(32,412	)		(150,789	)		(86,876	)
Investment and other income, net		82,218			660			84,460			1,903

Net income (loss)	$	50,021		$	(31,752	)	$	(66,329	)	$	(84,973	)

Net income (loss) per share—basic	$	0.35		$	(0.23	)	$	(0.46	)	$	(0.61	)
Net income (loss) per share—diluted	$	0.34		$	(0.23	)	$	(0.46	)	$	(0.61	)

Shares used in computation of net income (loss) per share—basic		143,357			140,928			142,876			140,369
Shares used in computation of net income (loss) per share—diluted		148,068			140,928			142,876			140,369

Comprehensive income (loss):
Net income (loss)	$	50,021		$	(31,752	)	$	(66,329	)	$	(84,973	)
Other comprehensive income:
Unrealized gain (loss) on securities available-for-sale, net of tax of $5,915, $0, 11,087, and $0, respectively		9,627			(146	)		18,044			891
Foreign currency translation gain (loss)		14			(7	)		16			7

Comprehensive income (loss)	$	59,662		$	(31,905	)	$	(48,269	)	$	(84,075	)


	Period of continuous unrealized loss
	12 Months or less					Greater than 12 months
	Fair value		Gross unrealized losses			Fair value		Gross unrealized losses
September 30, 2017
U.S. Treasury securities	$	282,236	$	(174	)	$	19,993	$	(14	)

December 31, 2016
U.S. Treasury securities	$	200,327	$	(123	)	$	NA	$	NA


	Three months ended September 30,				Nine months ended September 30,				Five years ended September 30, 2017
Development program ($ in thousands)	2017		2016		2017		2016
ADCETRIS (brentuximab vedotin)	$	23,698	$	18,438	$	65,626	$	55,216	$	326,292
SGN-CD33A (vadastuximab talirine)		1,440		9,416		31,003		31,422		111,537
ASG-22ME (enfortumab vedotin)		3,703		1,053		15,399		3,345		28,990
SGN-LIV1A		4,523		1,147		8,179		3,163		22,995
Other clinical stage programs		8,012		7,078		20,966		19,828		104,806

Total third-party costs		41,376		37,132		141,173		112,974		594,620
Other costs and overhead		72,230		55,579		205,023		158,162		922,446

Total research and development	$	113,606	$	92,711	$	346,196	$	271,136	$	1,517,066


	Three months ended September 30,							Nine months ended September 30,
Selling, general and administrative ($ in thousands)	2017		2016		% Change			2017		2016		% Change
Selling, general and administrative	$	39,667	$	34,841		14	%	$	118,783	$	97,870		21	%


	Three months ended September 30,						Nine months ended September 30,
Investment and other income, net ($ in thousands)	2017		2016		% Change		2017		2016		% Change
Investment and other income, net	$	82,218	$	660		*	$	84,460	$	1,903		*


Exhibit Number		Incorporation By Reference
Exhibit Number	Exhibit Description	Form		SEC File No.		Exhibit		Filing Date

2.1+†**	Asset Purchase Agreement, dated July 31, 2017, between Bristol-Myers Squibb Company and Seattle Genetics, Inc.		—		—		—		—

3.1	Fourth Amended and Restated Certificate of Incorporation of Seattle Genetics, Inc.		10-Q		000-32405		3.1		11/07/2008

3.2	Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation of Seattle Genetics, Inc.		8-K		000-32405		3.3		05/26/2011

3.3	Amended and Restated Bylaws of Seattle Genetics, Inc.		8-K		000-32405		3.1		11/25/2015

4.1	Specimen Stock Certificate.		S-1/A		333-50266		4.1		02/08/2001

4.2	Investor Rights Agreement dated July 8, 2003 among Seattle Genetics, Inc. and certain of its stockholders.		10-Q		000-32405		4.3		11/07/2008

4.3	Registration Rights Agreement, dated September 10, 2015, between Seattle Genetics, Inc. and the persons listed on Schedule A attached thereto.		8-K		000-32405		10.1		9/11/2015

10.1+†	Purchase Agreement, dated June 16, 2017, between BMR-3450 Monte Villa Parkway, LLC and ZymoGenetics, Inc.		—		—		—		—

10.2+	Assignment and Assumption of Purchase Agreement, dated July 30, 2017, between ZymoGenetics, Inc. and Seattle Genetics, Inc.		—		—		—		—

10.3+†	License and Collaboration Agreement, effective October 7, 2011, between Genmab A/S and Seattle Genetics, Inc.		—		—		—		—

10.4*+	Seattle Genetics, Inc. Long Term Incentive Plan for TV and EV		—		—		—		—

10.5*+	Form of Stock Unit Grant Notice for Long Term Incentive Plan for TV and EV		—		—		—		—

10.6*+	Form Stock Unit Grant Notice for Non-US Participants Long Term Incentive Plan for TV and EV		—		—		—		—

31.1+	Certification of Chief Executive Officer pursuant to Rule 13a-14(a).		—		—		—		—

31.2+	Certification of Chief Financial Officer pursuant to Rule 13a-14(a).		—		—		—		—

32.1+	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.		—		—		—		—

32.2+	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.		—		—		—		—

101.INS+	XBRL Instance Document.		—		—		—		—

101.SCH+	XBRL Taxonomy Extension Schema Document.		—		—		—		—

101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document.		—		—		—		—

101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document.		—		—		—		—

101.LAB+	XBRL Taxonomy Extension Labels Linkbase Document.		—		—		—		—

101.PRE+	XBRL Taxonomy Extension Presentation Linkbase Document.		—		—		—		—