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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

For the fiscal year ended December 31, 2002

OR

For the transition period from                              to                             

Commission file number: 0-32405

Seattle Genetics, Inc.

(Exact name of registrant as specified in its charter)

21823 30^th 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:

None

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

Common Stock, Par Value $0.001

(Title of Class)

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 than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x    NO ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). YES ¨    NO x

The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $51,012,954 as of the last business day of the registrant’s most recently completed second fiscal quarter, based upon the closing sale price on the Nasdaq National Market reported for such date. Shares of common stock held by each officer and director and by each person who owns 5% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

There were 30,770,177 shares of the registrant’s common stock issued and outstanding as of March 14, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the definitive proxy statement for the registrant’s Annual Meeting of Stockholders to be held on May 14, 2003.

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SEATTLE GENETICS, INC.

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2002

TABLE OF CONTENTS

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PART I

Item 1. Business.

Overview

Seattle Genetics discovers and develops monoclonal antibody-based drugs to treat cancer and other human diseases. Our product candidates encompass three technologies: genetically engineered monoclonal antibodies, monoclonal antibody-drug conjugates (ADCs) and antibody-directed enzyme prodrug therapy (ADEPT). These technologies enable us to develop monoclonal antibodies that can kill cancer cells on their own as well as to increase the potency of monoclonal antibodies by enhancing their tumor cell-killing ability. Using our technologies and our expertise in cancer, we have constructed a diverse portfolio of product candidates.

Our two most advanced product candidates, SGN-30 and SGN-15, are currently being tested in clinical trials:

Additionally, we have three product candidates currently in preclinical development, SGN-40, SGN-35 and SGN-17/19:

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Our technologies also provide us with an opportunity to partner with other companies that are developing monoclonal antibodies. These collaborations may accelerate our ability to commercialize product candidates, leverage our technology to enhance the product candidates of other biotechnology and pharmaceutical companies and enhance our financial position by generating collaboration revenues. When establishing strategic collaborations, we select high-quality partners and endeavor to retain significant product rights. Presently, we have collaborations with Eos Biotechnology, Inc., Celltech Group and Genentech, Inc. for our ADC technology and with Genencor International for SGN-17/19 and our ADEPT technology.

We also have active discovery programs to identify and evaluate novel tumor antigens, new monoclonal antibodies targeted to tumor cells and improved highly potent, cell-killing drugs and stable linkage systems for generating ADCs. In addition to our internal discovery programs, we identify and obtain in-licenses for lead agents and product candidates from external sources, including academic institutions and other biotechnology companies. Our existing in-licenses include technology from Bristol-Myers Squibb, the University of Miami, Arizona State University, Mabtech AB and Proacta Therapeutics, among others.

Monoclonal Antibodies for Cancer Therapy

Cancer is the second leading cause of death in the United States, resulting in over 555,000 deaths annually. The American Cancer Society estimates that over 17 million new cases of cancer have been diagnosed in the United States since 1990 and that 1.3 million new cases of cancer will be diagnosed in 2003. According to the National Cancer Institute, one in three people in the United States will develop cancer in their lifetime, and half of them will die within five years. Within the next decade, it is expected that cancer will surpass heart disease as the leading cause of death in the United States.

Monoclonal antibodies have been tested for many years as cancer therapeutics. Some monoclonal antibodies have significant antitumor activity as single agents. However, many are not potent enough on their own to represent effective therapeutic agents. To address this limitation, additional approaches to using monoclonal antibodies as cancer therapies have emerged. First, monoclonal antibodies that are administered in combination with chemotherapy can achieve antitumor activity that is often greater than when either therapy is administered alone. Second, monoclonal antibodies that are directly linked to cell-killing payloads such as drugs, toxins, or radionuclides can more effectively kill cancer cells than monoclonal antibodies alone.

There are a growing number of monoclonal antibodies that have been approved for the treatment of cancer. These include three genetically engineered monoclonal antibodies (Rituxan^®, Herceptin^®, and Campath^®), a radionuclide-conjugated monoclonal antibody (Zevalin^®) and an antibody-drug conjugate (Mylotarg^®). Together, these five products generated sales of more than $1.6 billion in 2002. Sales of Rituxan alone are expected to exceed $1 billion in 2003. Additionally, there are many monoclonal antibodies in preclinical development and clinical trials that are likely to increase the number of monoclonal antibody-based commercial products in the future.

Our Monoclonal Antibody Technologies

Three distinct but related technologies form our core business and provide the potential for discovery and development of an array of monoclonal antibody-based therapeutics:

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Genetically Engineered Monoclonal Antibodies.

Some monoclonal antibodies have therapeutic potential on their own. These antibodies operate either by directly sending a cell-killing signal or by activating an immune response that leads to cell death. Antibodies such as these can be effective in regressing tumors and have the advantage of low systemic toxicity. For example, antibodies targeted to antigens such as CD20 (Rituxan), HER2 (Herceptin) and CD52 (Campath) are FDA-approved and are collectively generating over a billion dollars in annual sales.

Our monoclonal antibodies have been genetically engineered to minimize non-human sequences, thereby lowering the potential for patients to develop a neutralizing immune response and extending the duration for use in therapy. In general, there are three types of genetically engineered monoclonal antibodies being developed for human therapeutic use: chimeric, humanized and fully-human. A chimeric antibody contains a mixture of mouse and human sequences, usually 30 percent mouse and 70 percent human. Rituxan, the largest selling antibody product for cancer therapy, is a chimeric antibody. Humanized antibodies contain over 90 percent human sequences, while fully-human monoclonal antibodies contain 100 percent human sequences. We have chimeric and humanized monoclonal antibodies in our product development pipeline and have access to fully-human monoclonal antibodies for potential future product candidates through our relationship with Medarex. Our two most advanced genetically engineered monoclonal antibody product candidates are SGN-30, which is a chimeric monoclonal antibody that is currently in a phase I/II clinical trial, and SGN-40, which is a humanized monoclonal antibody that is currently in preclinical development.

Antibody-Drug Conjugates (ADCs).

ADCs are monoclonal antibodies that are linked to potent cell-killing drugs. For our ADCs, we utilize monoclonal antibodies that internalize upon binding to their cell-surface receptors. The environment inside the cell causes the cell-killing drug to be released from the monoclonal antibody, allowing it to have the desired effect. Until released, the cell-killing drug is inactive, thereby sparing normal cells. Our ADC technology can be applied to genetically engineered monoclonal antibodies that are chimeric, humanized or fully-human and that bind strongly to and internalize within cancer cells. An important component of ADCs are the conditional linkers that hold and then release the drugs from the monoclonal antibodies. We have a variety of linker technologies including enzyme-cleavable linkers that are very stable in blood. Our highly potent cell-killing drugs, such as Auristatin E, are synthetically produced and readily scaleable. Because the variants of Auristatin E that we have developed are synthetic, the drug and linker can be prepared simultaneously as a drug-linker system, significantly simplifying the manufacturing process versus natural product drugs that are more difficult to produce and link to antibodies. We are also continually evaluating a variety of new stable linkers and potent, cell-killing drugs, including additional variants of Auristatin E and a class of potent drugs called minor groove binders, for use in our ADC program.

Our lead ADC product candidates are SGN-15 and SGN-35. SGN-15, which is composed of the chimeric BR96 monoclonal antibody chemically linked by a hydrazone linker to the chemotherapeutic drug doxorubicin, is currently in multiple phase II clinical trials. SGN-35, which utilizes our next generation ADC technology, is currently in preclinical development. Additionally, we are exploring numerous other monoclonal antibodies for potential use as ADCs, both internally and in conjunction with our ADC collaborators, Eos Biotechnology, Celltech and Genentech.

Antibody Directed Enzyme Prodrug Therapy (ADEPT).

ADEPT represents a novel approach to minimize drug exposure to normal tissues through the combination of two relatively non-toxic agents to achieve potent antitumor activity specifically within tumor tissue. With ADEPT technology, we utilize non-internalizing monoclonal antibodies that remain bound to the cell surface, as distinguished from the internalizing antibodies used with our ADC technology. ADEPT administration is a two-step process. In the first step, a protein containing the cloned variable regions of a monoclonal antibody

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genetically fused to an enzyme is administered and accumulates on tumor tissue. In the second step, relatively inactive forms of anti-cancer drugs (termed prodrugs) are administered and subsequently are converted by the enzyme attached to the tumor cell into potent cell-killing drugs that can penetrate into tumor tissue and induce antitumor responses. This method of drug delivery results in higher drug concentrations within tumors relative to normal tissues, thus minimizing the toxic effects of the drug on normal tissues.

Our lead ADEPT product candidate is SGN-17/19, which we are developing preclinically in partnership with Genencor International for patients with metastatic melanoma. SGN-17/19 concentrates the potent cell-killing properties of the drug melphalan towards cells expressing the p97 antigen. Because melphalan is administered as a relatively inactive prodrug that is activated primarily at the tumor site, its effect against tumor tissue can be maximized while the toxicity to normal tissues is reduced.

Our Strategy

Our primary goal is to utilize our expertise in antibody technologies to advance our product pipeline and discover new product candidates for the treatment of cancer and other human diseases. We also license our technology and collaborate with other biotechnology and pharmaceutical companies that are developing monoclonal antibodies. Our overall corporate strategy includes initiatives to:

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Development Programs

We currently have two product candidates in clinical trials: SGN-30 in a phase I/II trial and SGN-15 in multiple phase II trials. We are conducting preclinical development of several other product candidates, including SGN-40, SGN-35 and SGN-17/19. We are also actively engaged in research and discovery of new monoclonal antibodies, antigen targets, linker systems, high-potency drugs and enzymes that can be incorporated into our development portfolio.

The following table summarizes the status of our product candidates currently in clinical trials:

In addition, we have the following product candidates currently in preclinical development:

Product Candidates in Clinical Trials

SGN-30

Preclinical Profile.

SGN-30 is a monoclonal antibody targeting the CD30 antigen that is expressed on many hematologic malignancies, including Hodgkin’s disease and some types of non-Hodgkin’s lymphoma. CD30 is an attractive target for cancer therapy because it has minimal expression on normal tissues. In preclinical models of hematologic malignancies, SGN-30 has demonstrated potent antitumor activity on its own at doses that are well tolerated in toxicology studies.

We are also investigating possible applications of SGN-30 in immunologic diseases, including lupus and multiple sclerosis. In immunologic disease, the body’s immune system malfunctions and attacks its own healthy cells. Many therapies for immunologic disease rely on suppressing the immune system to prevent further damage to normal tissues, but have the unwanted side effect of making the patient more susceptible to infection. The CD30 antigen is expressed only on activated T and B cells but is absent on these cells when in resting state. Since resting T-cells and B-cells make up 99 percent of those types of cells circulating in the body, SGN-30 may be able to prevent or reduce a damaging immune response without globally suppressing the patient’s immune system, thus leaving the patient better able to fight off infection. Preclinical studies of SGN-30 in immunologic disease are ongoing internally and with outside collaborators.

Clinical Results and Status.

The American Cancer Society estimates that 7,600 cases of Hodgkin’s disease and 53,400 cases of non-Hodgkin’s lymphoma, many of which express CD30, will be diagnosed in the United States during 2003.

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Advances made in the use of combined chemotherapy and radiotherapy for malignant lymphomas over the past half-century have resulted in durable remission rates for front-line therapy in early stage disease. However, the therapeutic options for refractory or relapsed patients are very limited, and there are significant opportunities for new treatments in this patient population.

In July 2002, we completed a single-dose phase I clinical trial of SGN-30 in patients with CD30-expressing hematologic malignancies at three sites in the United States. The objectives of this trial were to establish safety and pharmacokinetic profiles, evaluate effects on lymphocytes and to determine whether a single dose of SGN-30 induced an immune response. We treated 13 patients in this study at escalating doses of between one and 15 milligrams per kilogram of SGN-30. We did not find significant toxicities in any of the patients and observed antitumor responses in two out of ten evaluable patients, one with Hodgkin’s disease and one with anaplastic large cell lymphoma. Additionally, we found minimal immune response, no lymphocyte depletion and no infectious complications.

In November 2002, we initiated a multi-dose phase I/II clinical trial of SGN-30, again targeting patients with CD30-expressing hematologic malignancies. The objectives of this trial, which will be conducted at ten sites in the United States, are to establish safety and pharmacokinetic profiles, evaluate effects on lymphocytes, determine whether patients develop an immune response and assess antitumor activity of a multi-dose regimen of SGN-30. In the phase I portion of the study, we are treating cohorts of six patients at four predetermined dose levels of SGN-30: 2, 4, 8 and 12 milligrams per kilogram. We will use the data from the phase I component of the study to determine a dose for the phase II component. The study is designed to accrue up to 75 patients: up to 30 in the phase I component and the remainder in the phase II component. We expect to complete the phase I component and initiate the phase II component of this study during the second half of 2003.

SGN-15

Preclinical Profile.

SGN-15 is an ADC composed of a monoclonal antibody chemically linked by a hydrazone linker to the chemotherapeutic drug doxorubicin. The antibody component of SGN-15 binds to a Lewis^y-related carbohydrate antigen that is highly expressed on many solid tumors, including those of the breast, lung, pancreas, ovary and prostate, as well as on some normal cells in the gastrointestinal tract. SGN-15 works by binding to the cell and, upon internalization, releasing its payload of doxorubicin. SGN-15 has demonstrated potent antitumor activity in multiple preclinical models of solid tumors. Additional preclinical studies of SGN-15 in combination with Taxotere and Gemzar have established non-overlapping toxicity profiles and synergistic antitumor activity.

Clinical Results and Status.

Our clinical development strategy for SGN-15 is focused on designing trials for patients in whom front-line therapies have failed. This approach is intended to accelerate the development pathway as rapidly as possible toward regulatory approval. The current status of our SGN-15 clinical trials is as follows:

Prostate Cancer.    Prostate cancer is the second leading cause of cancer-related deaths among men in the United States and strikes 80 percent of males who reach the age of 80. Although surgery and radiation are established therapies for localized prostate cancer, there are no curative therapies available for advanced stage disease. Most patients with prostate cancer will receive hormone therapy sometime in the course of their disease, many of whom will eventually become resistant to such therapy and progress to hormone refractory prostate cancer (HRPC). The treatment of HRPC patients with conventional chemotherapy has been disappointing with minimal impact on the disease in terms of survival.

In November 2000, we initiated a phase II trial of SGN-15 in combination with Taxotere for the treatment of patients with HRPC. The trial was designed to evaluate the antitumor activity of the combination therapy, including measurements of tumor size, serum prostate-specific antigen (PSA) level, quality of life and disease-free and overall survival rates. Patients entering the trial were randomly assigned to one of two equal-sized groups. One group of patients receives treatment with the combination of SGN-15 and Taxotere, and the other group receives Taxotere alone.

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We have treated over 60 patients in the prostate cancer study. The study has demonstrated minimal toxicity of the combination of SGN-15 and Taxotere and objective antitumor responses in some patients, especially those whose tumors express higher levels of the Lewis^y antigen. Presently, we are not accruing patients to our prostate cancer study while we conduct an interim analysis of data to determine our future strategy for SGN-15 in prostate cancer.

Non-Small Cell Lung Cancer.    Lung cancer is the leading cause of all cancer-related deaths worldwide and accounted for an estimated 154,000 deaths in the United States during 2002. Approximately 80 percent of lung cancer is non-small cell lung carcinoma (NSCLC). Due to the lack of early symptoms, most NSCLC patients are already in the advanced stages of the disease at the time of diagnosis. Advanced stage and metastatic NSCLC remains an incurable disease with current therapies. Combination chemotherapy regimens have produced clinical response or stabilization in many cases, but have had little effect on overall survival. Response rates with standard chemotherapy are only approximately 25 percent and median survival is less than six months from time to progression. Consequently, there remains a significant unmet clinical need for patients with advanced stage NSCLC.

In August 2001, we initiated a phase II trial investigating SGN-15 in combination with Taxotere for patients with NSCLC who have failed front-line treatments. This trial was designed to evaluate safety and antitumor activity of the combination therapy, as measured by reduction in tumor size, time to progression, quality of life and overall survival rates. Two-thirds of patients enrolled in this study receive the combination of SGN-15 and Taxotere and one-third of the patients receive Taxotere alone.

We have treated over 50 patients in the lung cancer trial, none of whom have experienced any significant toxicities related to SGN-15, including no gastrointestinal toxicities. In addition, we have observed antitumor activity in multiple patients in this study. As a result of the minimal toxicity observed, we are conducting intra-patient dose escalation of SGN-15 in recently enrolled lung cancer patients to evaluate the tolerability and antitumor activity of higher doses.

Ovarian Cancer.    Ovarian cancer is the fifth most frequent cause of cancer death in women and the leading cause of gynecologic cancer in the United States. The five-year survival rate of women diagnosed with advanced disease is 25 percent. Although most advanced stage patients initially respond to front-line chemotherapy, the relapse rate is approximately 85 percent. Once relapse occurs there is no known curative therapy. Thus, there is a significant opportunity for the development of new therapeutic approaches that provide high levels of antitumor activity with little systemic toxicity.

In August 2002, we launched a phase II trial of SGN-15 in combination with Gemzar for the treatment of patients with recurrent or refractory ovarian cancer. This trial was designed to evaluate safety and antitumor activity of the combination therapy, as measured by the reduction in tumor size, time to progression and overall survival rates. Two-thirds of the patients enrolled in this study receive the combination of SGN-15 and Gemzar and one-third of the patients receive Gemzar alone. Because SGN-15 plus Gemzar is a new chemotherapeutic combination, we are currently treating an initial safety cohort of six patients. We expect to complete the safety cohort and initiate the randomized phase II portion of the study by late 2003.

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Product Candidates in Preclinical Development

SGN-40 (formerly SGN-14)

We are currently conducting preclinical development of SGN-40, a monoclonal antibody that targets the CD40 antigen. CD40 is a cell surface receptor that is highly expressed on a variety of hematologic malignancies such as multiple myeloma, non-Hodgkin’s lymphoma, many types of leukemia, as well as Kaposi’s sarcoma. CD40 is also expressed on various types of solid tumors including lung, gastric, ovarian, renal and bladder cancer. SGN-40 has been shown to induce direct antitumor activity in multiple preclinical models of human cancer at doses that are well tolerated in toxicology experiments. SGN-40 may also be applicable for the treatment of immunologic disease.

We previously partnered SGN-40 with Genentech, but in October 2002 Genentech informed us that it would not continue development of SGN-40. We entered into license agreements with Genentech in March 2003 providing us with rights to develop SGN-40 on our own. We are currently evaluating preclinical data and developing our strategy, with a goal of advancing SGN-40 into clinical trials by early 2004.

SGN-35

SGN-35 is an ADC composed of an anti-CD30 monoclonal antibody linked by our proprietary, stable linker to a synthetic variant of the highly potent, cell-killing drug Auristatin E using our next generation ADC technology. In preclinical models, SGN-35 has induced complete regressions of tumors at doses lower than 1 milligram per kilogram. We are currently conducting preclinical development of SGN-35 for the treatment of patients with hematologic malignancies such as Hodgkin’s disease and some types of non-Hodgkin’s lymphoma, and expect to initiate clinical trials in 2004. As with SGN-30, we are also considering possible applications of SGN-35 to treat immunologic diseases such as lupus and multiple sclerosis due to the limited expression profile of CD30 on activated T and B cells.

SGN-17/19

SGN-17/19 is an ADEPT product candidate that we are developing for the treatment of metastatic melanoma. SGN-17 is a fusion protein containing components of the L49 monoclonal antibody and the enzyme ß-lactamase. The L49 antibody component binds to the p97 cell surface antigen, which is non-internalizing and highly expressed on melanoma, as well as some ovarian, breast and lung carcinomas. SGN-19 is a prodrug form of the chemotherapeutic drug melphalan that has been inactivated through the addition of a chemical group that can be removed by the enzyme ß-lactamase. When SGN-17 is injected systemically, it accumulates on the tumor tissue and remains bound at the cell surface. SGN-19 is then administered systemically and converted to melphalan by the enzyme ß-lactamase, resulting in localized release of melphalan on the surface of cancer cells. Through genetic engineering efforts in 2001 and 2002, we have made considerable advances in the production of the SGN-17 component. At present, the yield of active SGN-17 is suitable for scale-up to a clinical grade manufacturing process. We have also made improvements to the formulation and chemical synthesis of SGN-19 throughout the last year.

In January 2002, we entered into a collaboration agreement with Genencor International to jointly develop SGN-17/19 and discover and develop a class of cancer therapeutics based on tumor-targeted enzymes that activate prodrugs. The collaboration utilizes our ADEPT technology along with Genencor’s targeted enzyme prodrug therapy (TEPT) platform, epitope mapping (i-mune^™) technology, and protein engineering and expression capabilities.

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Discovery and Research Programs

In addition to our pipeline of product candidates and antibody-based technologies, we have internal discovery and research programs directed towards identifying novel antigen targets and monoclonal antibodies and developing new classes of potent, cell-killing drugs.

Novel Targets.    We utilize a variety of genomic tools and biologic assays to identify novel antigen targets to which we can generate specific new monoclonal antibodies. We focus on genes that are highly expressed in cancer to identify molecules that are located on the surface of cancer cells that may serve as targets for monoclonal antibodies. In 2002, we submitted three new patent applications covering five novel therapeutic antigen targets that are expressed by cancer cells.

Novel Monoclonal Antibodies.    We are actively engaged in internal efforts to discover and develop antibodies with novel specificities and activities. We supplement these internal efforts by evaluating opportunities to in-license antibodies from academic groups and other biotechnology companies. We also have access to fully-human monoclonal antibodies through our collaboration with Medarex. These monoclonal antibodies may represent product candidates on their own or may be utilized as part of our ADC or ADEPT technologies. In 2002, we created panels of new cancer-reactive monoclonal antibodies that are currently undergoing screening to identify those with the highest cancer specificity.

New Cell-Killing Drugs.    We focus our efforts on two drug classes, antimitotic agents and DNA minor groove binders, both of which possess potent cell-killing properties. We are evaluating multiple variants of both drug classes as a component of our next generation ADC technology. Additionally, we were awarded a Small Business Innovation Research grant in September 2002 to support ongoing research on tumor-selective anti-cancer prodrugs. These prodrugs are activated by enzymes that are more prevalent in tumors than in normal tissues, which can result in tumor-selective cell-killing.

Corporate Collaborations

Part of our business strategy is to establish corporate collaborations with biotechnology and pharmaceutical companies and academic institutions. We seek collaborations to advance the development and commercialization of our own product candidates. We also utilize our technologies to improve the efficacy of other companies’ monoclonal antibodies, which may partially offset expenditures on our internal research and development activities. When partnering, we seek to retain significant downstream participation in product sales through either profit-sharing or product royalties paid on annual net sales. Our principal corporate collaborations are listed below.

ADC Collaborations

We have entered into agreements with several collaborators to allow them to use our proprietary ADC technology with their monoclonal antibodies:

Eos Biotechnology.    In June 2001, we entered into an ADC collaboration with Eos Biotechnology, pursuant to which Eos has paid us several technology access fees and service and reagent fees. In early February 2003, Eos announced an agreement to be acquired by Protein Design Labs, Inc. Following public announcement of the acquisition, we have been in communication with Protein Design Labs regarding future activities under this collaboration. This collaboration may result in additional future payments to us in the form of technology access and maintenance fees, milestone payments and royalties on net sales of any resulting products. Eos (or Protein Design Labs) will also be responsible for all costs associated with the development, manufacturing and marketing of any products generated as a result of this agreement.

Celltech Group.    In March 2002, we entered into an ADC collaboration with Celltech. Under the terms of the multi-year agreement, Celltech paid us an up front technology access fee, is paying service and reagent fees

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and may additionally make milestone payments and pay royalties on net sales of any resulting products. Celltech will be responsible for all costs associated with the development, manufacturing and marketing of any products generated as a result of this agreement.

Genentech.    In April 2002, we entered into an ADC collaboration with Genentech. Under the terms of the multi-year agreement, Genentech paid a $2.5 million up front fee, is paying technology access fees and research fees, and may pay progress-dependent milestone payments and royalties on net sales of any resulting products. Genentech is responsible for research, product development, manufacturing and commercialization of any products resulting from the collaboration. As part of the collaboration, Genentech also purchased $3.5 million of our common stock, which increased Genentech’s total equity ownership in Seattle Genetics to approximately 5.4%. If an additional benchmark is achieved under the collaboration agreement, we have an option, at our sole discretion, to sell additional equity to Genentech at fair market value.

Co-Development and Co-Funding Agreements

Genencor International.    In January 2002, we formed a strategic alliance with Genencor International to jointly discover and develop a class of cancer therapeutics based on tumor-targeted enzymes that activate prodrugs. The agreement provides for us to receive specific fees and milestones and for Genencor to receive certain milestone payments. As part of the collaboration, we also sold Genencor $3.0 million of our common stock in a private placement. Under the terms of the multi-year agreement, the two companies are utilizing our antibody-directed enzyme prodrug therapy (ADEPT) technology and are jointly developing SGN-17/19, our lead product candidate for the treatment of metastatic melanoma. In addition, the collaboration includes access to Genencor’s targeted enzyme prodrug therapy (TEPT) platform, epitope mapping technology (the i-mune assay) and protein engineering and expression capabilities. The two companies will share costs for SGN-17/19 and any other joint products that enter development. In addition, the companies may jointly use Genencor’s i-mune assay technology, which allows for the prediction of amino acid sequences that are capable of causing adverse immune responses, for any monoclonal antibody or protein therapeutic developed in the collaboration. Based on the i-mune predictions, specific sequences of ADEPT or TEPT-based product candidates can be modified, resulting in therapeutic agents that may be administered over longer durations, thus possibly leading to enhanced efficacy in cancer patients.

Medarex.    In February 2001, we entered into a collaboration agreement with Medarex to produce fully-human monoclonal antibodies to certain breast cancer and melanoma antigen targets identified by us over the following three years. As part of this agreement, Medarex bought $2.0 million of our common stock concurrent with our initial public offering in March 2001. In November 2001, we entered into an additional agreement with Medarex that allows us to immunize Medarex mice and to generate antibodies. We have the right to obtain a non-exclusive research license and/or exclusive commercial licenses with respect to antibodies developed from this program.

In-Licenses

Bristol-Myers Squibb.    In March 1998, we obtained rights to some of our technologies and product candidates, portions of which are exclusive, through a license agreement with Bristol-Myers Squibb. Through this license, we secured rights to monoclonal antibody-based cancer targeting technologies, including 26 different patents, eight monoclonal antibodies, chemical linkers, a ribosome-inactivating protein and enabling technologies. We also received a substantial supply of vialed, clinical-grade SGN-15, which has been used in our clinical trials. Under the terms of the license agreement, we are required to pay royalties on net sales of future products incorporating the licensed technology. Our obligation to pay royalties terminates on a product-by-product basis upon the later of ten years after first commercial sale or the last to expire of the licensed patents. The agreement is also subject to earlier termination upon breach of any material obligations by the other party.

Mabtech AB.    In June 1998, we obtained exclusive worldwide rights to a monoclonal antibody that targets the CD40 antigen from Mabtech AB, located in Sweden. Under the terms of this license, we are required to make

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a progress-dependent milestone payment and pay royalties on net sales of products incorporating technology licensed from Mabtech.

Genentech.    In June 1999, we licensed our anti-CD40 antibody program to Genentech, including our SGN-40 product candidate and associated technology. In October 2002, we received notification from Genentech that they would not continue development of SGN-40. Genentech has agreed to transfer the anti-CD40 technology created during the collaboration back to us, and we are currently conducting preclinical development of SGN-40 on our own. Pursuant to license agreements executed in March 2003, Genentech is entitled to receive an up front license fee, a progress-dependent milestone payment and royalties on net sales of anti-CD40 products that use Genentech’s technology.

University of Miami.    In September 1999, we entered into an exclusive license agreement with the University of Miami, Florida, covering an anti-CD30 monoclonal antibody that is the basis of SGN-30 and the antibody component of SGN-35. Under the terms of this license, we made an up front payment and are required to make progress-dependent milestone payments, certain annual maintenance fee payments and pay royalties on net sales of products incorporating technology licensed from the University of Miami for a period of ten years after the first commercial sale of a product.

Arizona State University.    In February 2000, we entered into a license agreement with Arizona State University for a worldwide, exclusive license to the cell-killing agent Auristatin E. We use variants of Auristatin E as a component of our ADC technology. Under the terms of this license, we are required to make annual maintenance fee payments, progress-dependent milestone payments and pay royalties on net sales of products incorporating technology licensed from Arizona State University until the last to expire of the licensed patents on a country-by-country basis.

ICOS Corporation.    In October 2000, we entered into a license agreement with ICOS Corporation for non-exclusive rights to use the CHEF expression system. We have used this system to manufacture SGN-30 and the BR96 antibody component of SGN-15, and we may also use it for other monoclonal antibodies in the future. Under the terms of this agreement, we are required to make progress-dependent milestone payments and pay royalties on net sales of products manufactured using the CHEF expression system until the last to expire of ICOS’ licensed patents.

CLB-Research and Development.    In July 2001, we entered into an exclusive option and license agreement for certain monoclonal antibodies that target cancer and immunologic disease from CLB-Research and Development, located in the Netherlands. In January 2003, we exercised our option to obtain a worldwide, exclusive license to the antibodies. Under the terms of this agreement, we have made up front and option exercise payments and are required to make progress-dependent milestone payments and pay royalties on net sales of products incorporating the antibodies for a period of ten years after the first commercial sale.

Proacta Therapeutics.    In October 2001, we entered into an exclusive option and license agreement with Proacta Therapeutics, based in New Zealand, for rights to a class of potent, cell-killing drugs called minor groove binders that directly target DNA. In October 2002, we exercised our option to obtain worldwide, exclusive development, manufacturing and commercialization rights to any products utilizing the drugs. Under the terms of the agreement with Proacta, we paid up front and option exercise fees, and are required to pay license fees, progress-dependent milestone payments and royalties upon commercialization of the drugs for a period of ten years after the first commercial sale.

Patents and Proprietary Technology

We seek appropriate patent protection for our proprietary technologies by filing patent applications in the United States and other countries. As of December 31, 2002, we owned or held exclusive or partially exclusive licenses to over 20 issued United States patents and 16 pending United States patent applications.

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Our patents and patent applications are directed to product candidates, monoclonal antibodies, therapeutic antigen targets, linker technologies, ADC technologies, immunotoxin technologies, ADEPT and enabling technologies. Although we believe our patents and patent applications provide us with a competitive advantage, the patent positions of biotechnology and pharmaceutical companies are highly uncertain and involve complex legal and factual questions. We and our corporate collaborators or licensors may not be able to develop patentable products or processes or obtain patents from pending patent applications. Even if patent claims are allowed, the claims may not issue, or in the event of issuance, may not be sufficient to protect the technology owned by or licensed to us or our corporate collaborators.

Our success will depend significantly on our and our licensors’ abilities to:

Our commercial success depends significantly on our ability to operate without infringing patents and proprietary rights of third parties. A number of pharmaceutical and biotechnology companies, universities and research institutions may have filed patent applications or may have been granted patents that cover technologies similar to the technologies owned, optioned by or licensed to us or our corporate collaborators. Our or our corporate collaborators’ current patents, or patents that issue on pending applications, may be challenged, invalidated, infringed or circumvented, and the rights granted in those patents may not provide proprietary protection to us. We cannot determine with certainty whether patents or patent applications of other parties may materially affect our or our corporate collaborators’ ability to make, use or sell any products.

We also rely on trade secrets and proprietary know-how, especially when we do not believe that patent protection is appropriate or can be obtained. Our policy is to require each of our employees, consultants and advisors to execute a confidentiality and inventions assignment agreement before beginning their employment, consulting or advisory relationship with us. These agreements generally provide that the individual must keep confidential and not disclose to other parties any confidential information developed or learned by the individual during the course of their relationship with us except in limited circumstances. These agreements also generally provide that we shall own all inventions conceived by the individual in the course of rendering services to us.

Government Regulation

Our products are subject to extensive regulation by numerous governmental authorities, principally the U.S. Food and Drug Administration (FDA), as well as numerous state and foreign agencies. We need to obtain clearance of our potential products by the FDA before we can begin marketing the products in the United States. Similar approvals are also required in other countries.

Product development and approval within this regulatory framework is uncertain, can take many years and requires the expenditure of substantial resources. The nature and extent of the governmental review process for our potential products will vary, depending on the regulatory categorization of particular products and various other factors. In particular, the FDA recently announced a reorganization intended to consolidate review of new pharmaceutical products within the FDA’s Center for Drug Evaluation and Research (CDER). Prior to this reorganization, the FDA’s Center for Biologics Evaluation and Research (CBER) reviewed new biological products such as monoclonal antibodies, while CDER reviewed new drug products and combination drug/biological products such as our antibody-drug conjugates and ADEPT product candidates. We do not believe the FDA’s reorganization will significantly affect the review process for our product candidates, but we are monitoring events within the FDA to keep pace with current developments.

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The necessary steps before a new pharmaceutical product may be sold in the United States ordinarily include: