SEATTLE GENETICS INC /WA (Form: 10-Q, Received: 08/05/2011 16:18:51)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2011

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

For the transition period from to

Commission file number 0-32405

SEATTLE GENETICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

91-1874389

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

21823 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

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 x 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 x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

As of August 1, 2011, there were 114,730,639 shares of the registrant’s common stock outstanding.

Seattle Genetics, Inc.

Quarterly Report on Form 10-Q

For the quarter ended June 30, 2011

INDEX


		Page
	PART I. FINANCIAL INFORMATION (Unaudited)

Item 1.	Condensed Consolidated Financial Statements		3

	Condensed Consolidated Balance Sheets		3

	Condensed Consolidated Statements of Operations		4

	Condensed Consolidated Statements of Cash Flows		5

	Notes to Condensed Consolidated Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		18

Item 4.	Controls and Procedures		18

	PART II. OTHER INFORMATION

Item 1A.	Risk Factors		20

Item 6.	Exhibits		33

SIGNATURES			35

EXHIBIT INDEX			36

PART I. FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

Seattle Genetics, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except par value)


	June 30,			December 31,
	2011			2010
Assets
Current assets
Cash and cash equivalents	$	79,797		$	21,127
Short-term investments		331,322			260,682
Interest receivable		1,192			782
Accounts receivable		11,011			19,279
Prepaid expenses and other current assets		4,363			2,246

Total current assets		427,685			304,116
Property and equipment, net		12,125			12,311
Long-term investments		13,144			13,031
Other non-current assets		681			478

Total assets	$	453,635		$	329,936

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued liabilities	$	33,836		$	25,783
Current portion of deferred revenue		35,678			29,038

Total current liabilities		69,514			54,821

Long-term liabilities
Deferred revenue, less current portion		116,894			110,630
Deferred rent and other long-term liabilities		3,199			2,967

Total long-term liabilities		120,093			113,597

Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.001 par value, 5,000 shares authorized; none issued and outstanding		0			0
Common stock, $0.001 par value, 250,000 shares authorized at June 30, 2011 and 150,000 shares authorized at December 31, 2010; 114,419 shares issued and outstanding at June 30, 2011 and 101,607 shares issued and outstanding at December 31, 2010		114			102
Additional paid-in capital		811,268			624,759
Accumulated other comprehensive loss		(1,204	)		(1,373	)
Accumulated deficit		(546,150	)		(461,970	)

Total stockholders’ equity		264,028			161,518

Total liabilities and stockholders’ equity	$	453,635		$	329,936

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

Seattle Genetics, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)


	Three months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010
Revenue from collaboration and license agreements	$	13,054		$	36,878		$	25,225		$	83,333

Operating expenses
Research and development		49,643			39,287			82,077			69,603
General and administrative		15,197			6,467			27,910			11,698

Total operating expenses		64,840			45,754			109,987			81,301

Income (loss) from operations		(51,786	)		(8,876	)		(84,762	)		2,032
Investment income, net		280			553			582			1,105

Net income (loss)	$	(51,506	)	$	(8,323	)	$	(84,180	)	$	3,137

Net income (loss) per share - basic	$	(0.45	)	$	(0.08	)	$	(0.76	)	$	0.03

Net income (loss) per share - diluted	$	(0.45	)	$	(0.08	)	$	(0.76	)	$	0.03

Weighted-average shares used in computing:
Net income (loss) per share - basic		113,996			100,919			111,270			100,771

Net income (loss) per share - diluted		113,996			100,919			111,270			103,468

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

Seattle Genetics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Six months ended June 30,
	2011			2010
Operating activities
Net income (loss)	$	(84,180	)	$	3,137
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Share-based compensation expense		8,530			6,362
Depreciation and amortization		1,771			1,690
Amortization and accretion on investments		2,125			2,348
Deferred rent and other long-term liabilities		232			99
Changes in operating assets and liabilities
Interest receivable		(410	)		191
Accounts receivable		8,268			64,942
Prepaid expenses and other current assets		(2,117	)		2,855
Other non-current assets		(203	)		30
Accounts payable and accrued liabilities		8,053			1,408
Deferred revenue		12,904			(43,744	)

Net cash provided by (used in) operating activities		(45,027	)		39,318

Investing activities
Purchases of securities available for sale		(323,619	)		(210,044	)
Proceeds from maturities of securities available for sale		250,910			200,091
Purchases of property and equipment		(1,585	)		(2,257	)

Net cash used in investing activities		(74,294	)		(12,210	)

Financing activities
Net proceeds from issuance of common stock		168,053			0
Proceeds from exercise of stock options and employee stock purchase plan		9,938			3,899

Net cash provided by financing activities		177,991			3,899

Net increase in cash and cash equivalents		58,670			31,007
Cash and cash equivalents, at beginning of period		21,127			18,486

Cash and cash equivalents, at end of period	$	79,797		$	49,493

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

Seattle Genetics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of presentation and summary of significant accounting policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements reflect the accounts of Seattle Genetics, Inc. and its wholly-owned subsidiary, Seattle Genetics UK, Ltd. (collectively “Seattle Genetics” or the “Company”). The condensed consolidated balance sheet data as of December 31, 2010 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, in the opinion of management, are necessary for a fair statement of the Company’s financial position and results of its operations, as of and for the periods presented. Management has determined that the Company operates in one segment: the development of pharmaceutical products on its own behalf or in collaboration with others.

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 Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions 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 operations for the three and six month periods ended June 30, 2011 are not necessarily indicative of the results to be expected for the full year.

Revenue recognition

The Company has entered into licensing and collaboration agreements that contain multiple revenue elements including upfront payments, license fees, milestone payments, royalties, maintenance fees and payments for the delivery of supplies or services. Each agreement may contain some or all of these elements. Revenue recognition is predicated upon persuasive evidence of an agreement existing, delivery of materials or services being rendered, amounts payable being fixed or determinable, and collectibility being reasonably assured.

Agreements that include multiple elements are evaluated to determine whether the associated deliverables can be considered separate units of accounting. To date, the deliverables under the Company’s license and collaboration agreements have not qualified as separate units of accounting. Accordingly, all amounts received or due are typically recognized as revenue over the performance obligation periods of each agreement, which range from two to eight years for the Company’s current agreements. The Company generally uses a time-based proportional performance model to recognize revenue over the Company’s performance period. 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.

The Company adopted Accounting Standards Update 2009-13 entitled “Multiple-Deliverable Revenue Arrangements, a consensus of the FASB Emerging Issues Task Force” on a prospective basis in the first quarter of 2011. Adoption of this standard did not have a material impact on the Company’s financial statements.

2. Net income (loss) per share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common and dilutive common stock equivalent shares outstanding during the period.

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


	Three months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010
Numerator
Net income (loss)	$	(51,506	)	$	(8,323	)	$	(84,180	)	$	3,137
Denominator
Weighted average shares outstanding - basic		113,996			100,919			111,270			100,771
Dilutive effect of common shares from stock options and warrants		0			0			0			2,697

Weighted average shares outstanding - diluted		113,996			100,919			111,270			103,468

Basic net income (loss) per share	$	(0.45	)	$	(0.08	)	$	(0.76	)	$	0.03

Diluted net income (loss) per share	$	(0.45	)	$	(0.08	)	$	(0.76	)	$	0.03

Except for the six month period ended June 30, 2010, the Company incurred a net loss for each period presented. Accordingly, the Company excluded all warrants and options to purchase common stock from the calculation of diluted net loss per share as such securities were antidilutive. For the six month period ended June 30, 2010, the Company excluded certain options to purchase common stock from the calculation of diluted net income per share that would have resulted in an antidilutive effect. The following table presents the weighted-average number of shares that were excluded from the number of shares used to calculate diluted net income (loss) per share (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2011		2010		2011		2010
Warrants to purchase common stock		1,113		1,113		1,113		0
Options to purchase common stock		12,490		10,657		12,643		4,200

Total		13,603		11,770		13,756		4,200

3. Comprehensive income (loss)

Comprehensive income (loss) is the change in stockholders’ equity from transactions and events, other than those resulting from investments by stockholders and distributions to stockholders. The Company’s other comprehensive income (loss) is comprised of net income (loss) and unrealized gains or losses on investments as follows (in thousands):


	Three months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010
Net income (loss)	$	(51,506	)	$	(8,323	)	$	(84,180	)	$	3,137
Unrealized gain (loss) on securities available-for-sale		(40	)		(1,286	)		169			(1,042	)

Comprehensive income (loss)	$	(51,546	)	$	(9,609	)	$	(84,011	)	$	2,095

4. Common stock

In February 2011, the Company completed an underwritten public offering of 11,500,000 shares of its common stock. The public offering price of $15.50 per share resulted in net proceeds to the Company of approximately $168 million, after deducting underwriting discounts and commissions and offering expenses.

5. Investments

Short-term and long-term investments consist of U.S. treasury securities, corporate obligations and auction rate securities. The Company classifies its securities as available-for-sale, which are reported at estimated fair value with unrealized gains and losses included in accumulated other comprehensive loss in stockholders’ equity. Investments in securities with maturities of less than one year, or where management’s intent is to use the investments to fund current operations, or to make them available for current operations, are classified as short-term investments.

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


	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
June 30, 2011
U.S. treasury securities	$	331,524	$	102	$	0		$	331,626
Auction rate securities		14,450		0		(1,306	)		13,144

Total	$	345,974	$	102	$	(1,306	)	$	344,770

Contractual Maturities
Due in one year or less	$	331,524						$	331,626
Due in 2017		14,450							13,144

Total	$	345,974						$	344,770

Reported as:
Short-term investments								$	331,322
Long-term investments									13,144
Other non-current assets									304

Total								$	344,770


	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
December 31, 2010
U.S. treasury securities	$	249,580	$	10	$	(11	)	$	249,579
Corporate obligations		11,358		48		0			11,406
Auction rate securities		14,450		0		(1,419	)		13,031

Total	$	275,388	$	58	$	(1,430	)	$	274,016

Contractual Maturities
Due in one year or less	$	260,938						$	260,985
Due in 2017		14,450							13,031

Total	$	275,388						$	274,016

Reported as:
Short-term investments								$	260,682
Long-term investments									13,031
Other non-current assets									303

Total								$	274,016

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


June 30, 2011
Auction rate securities	$	NA	$	NA		$	13,144	$	(1,306	)

December 31, 2010
U.S. treasury securities	$	122,581	$	(11	)	$	NA	$	NA
Auction rate securities		NA		NA			13,031		(1,419	)

Total	$	122,581	$	(11	)	$	13,031	$	(1,419	)

6. Fair Value

The Company holds short-term and long-term available-for-sale securities 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:


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 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 investments, which include investments that are valued based on quoted market prices in active markets, consisted of U.S. treasury securities. Level 2 investments, which include investments that are valued based on quoted prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, consisted of high-grade corporate obligations as of December 31, 2010. Level 3 investments consisted of auction rate securities. The Company did not transfer any investments into or out of Levels 1, 2 and 3 during the six month period ended June 30, 2011.

The following table presents the Company’s financial assets 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 June 30, 2011:
Cash equivalents - money market funds	$	68,531	$	0	$	0	$	68,531
Short-term investments - U.S. treasury securities		331,322		0		0		331,322
Long-term investments - auction rate securities		0		0		13,144		13,144
Other non-current assets - U.S. treasury note		304		0		0		304

Total	$	400,157	$	0	$	13,144	$	413,301


	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, 2010:
Cash equivalents - money market funds	$	10,613	$	0	$	0	$	10,613
Short-term investments:
U.S. treasury securities		249,276		0		0		249,276
Corporate obligations		0		11,406		0		11,406
Long-term investments - auction rate securities		0		0		13,031		13,031
Other non-current assets - U.S. treasury note		303		0		0		303

Total	$	260,192	$	11,406	$	13,031	$	284,629

As of June 30, 2011, the Company held auction rate securities valued at $13.1 million that have failed at auction and are currently illiquid. Liquidity of these investments is subject to a successful auction process, redemption of the investment, a sale of the security in a secondary market or a negotiated or adjudicated resolution. Each of the securities continues to pay interest according to the stated terms on a monthly basis. The interest rate on these auction rate securities is no longer established based on an auction process but is established according to the terms of the issue. As of June 30, 2011, the interest rate of each of the auction rate securities was set at the 30-day London Interbank Offering Rate plus 225 basis points. The Company considers the market for these securities to be inactive and distressed. Accordingly, fair value for the auction rate securities has been determined based on a probability-weighted discounted cash flow analysis. This analysis relies upon certain estimates, including the probability-weighted term to an orderly liquidation and the discount rate applied to future cash flows. The discount rate used to determine fair value is based on the observed comparable yield of securities with similar characteristics, adjusted for illiquidity, credit risk and other factors. Investments in auction rate securities are presented as long-term investments in the accompanying condensed consolidated balance sheets.

The Company believes it is more likely than not that it has the ability to hold, and intends to hold, these investments until recovery of substantially all of the cost basis of the securities. This belief is based on a current assessment of the Company’s available cash, expected operating cash requirements, future operating plans and assessment of the individual securities and general market conditions. The Company periodically assesses this conclusion based on several factors, including the continued failure of future auctions, failure of the investment to be redeemed, further deterioration of the credit rating of the investment, market risk and other factors. Any such future reassessment that results in a conclusion that the unrealized losses on these investments are other than temporary would result in a write down in the fair value of these investments. Such a write down would be recognized in operating results.

The following table contains a roll-forward of the fair value of the Company’s auction rate securities where fair value is determined using Level 3 inputs (in thousands):


	Fair value
Balance as of December 31, 2010	$	13,031
Unrealized gain reflected as a component of other comprehensive income		113

Balance as of June 30, 2011	$	13,144

Item 2.

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

Forward-Looking Statements

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 document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Any or all of our forward-looking statements in this document may turn out to be wrong. Actual events or results may differ materially. Our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. In evaluating these statements, you should specifically consider various factors, including the risks outlined under the caption “Risk Factors” set forth in Item 1A of Part II of this quarterly report on Form 10-Q, as well as those contained from time to time in our other filings with the SEC. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

Overview

We are a biotechnology company focused on the development and commercialization of monoclonal antibody-based therapies for cancer. Our lead product candidate, ADCETRIS ^TM (brentuximab vedotin; SGN-35), is being developed for the treatment of diseases that express an antigen called CD30 present on multiple cancer types, including Hodgkin lymphoma and systemic anaplastic large cell lymphoma, or sALCL. The U.S. Food and Drug Administration, or FDA, has accepted for filing and established an action date of August 30, 2011 under the Prescription Drug User Fee Act, or PDUFA, for two biologics license applications, or BLAs, for brentuximab vedotin under which we are seeking approval for the treatment of patients with relapsed or refractory Hodgkin lymphoma and relapsed or refractory sALCL. On July 14, 2011, the FDA’s Oncologic Drugs Advisory Committee, or ODAC, voted unanimously to recommend that the FDA grant accelerated approval of brentuximab vedotin for the treatment of patients with Hodgkin lymphoma who relapse after autologous stem cell transplant, or ASCT. In addition, ODAC voted unanimously to recommend that the FDA grant accelerated approval of brentuximab vedotin for the treatment of patients with relapsed or refractory sALCL. The FDA has also provided conditional acceptance for ADCETRIS ^TM as the proposed proprietary name for brentuximab vedotin.

We submitted the BLAs to the FDA based primarily on data announced in the fall of 2010 from a pivotal trial in Hodgkin lymphoma patients who had relapsed following ASCT and a phase II trial in relapsed or refractory patients with sALCL. The Hodgkin lymphoma pivotal trial was conducted under a special protocol assessment, or SPA, with the FDA. In the pivotal trial, 75 percent of the patients achieved an objective response as assessed by an independent central review, which was the primary endpoint in the trial. The median duration of response was 29 weeks as assessed by independent central review. Thirty-four percent of the patients participating in the pivotal trial achieved a complete remission. In the phase II sALCL trial, 86 percent of the patients achieved an objective response as assessed by an independent central review, which was the primary endpoint in the trial. In June 2011, we reported that the median duration of response in the phase II sALCL trial was 12.6 months by independent central review and that 57 percent of the patients in the phase II sALCL trial achieved a complete remission. Brentuximab vedotin is empowered by our proprietary antibody-drug conjugate, or ADC, technology comprising potent synthetic drugs and stable linkers for attaching the drugs to monoclonal antibodies. In addition, we have three other clinical-stage ADC programs, which consist of SGN-75, ASG-5ME, and ASG-22ME, as well as several preclinical product candidates, including SGN-19A.

In December 2009, we entered into a collaboration agreement with Millennium: The Takeda Oncology Company, or Millennium, to develop and commercialize brentuximab vedotin. Under this collaboration, Seattle Genetics has retained commercial rights for brentuximab vedotin in the United States and its territories and in Canada, and Millennium has commercial rights in the rest of the world. In June 2011, Millennium’s Marketing Authorization Application, or MAA, submission seeking regulatory approval to market brentuximab vedotin for the treatment of relapsed or refractory Hodgkin lymphoma and relapsed or refractory sALCL in the European Union was accepted by the European Medicines Agency, or EMA, which is currently reviewing the application. We also have collaborations for our ADC technology with a number of biotechnology and pharmaceutical companies, including Abbott Biotechnology Ltd., or Abbott; Bayer Pharmaceuticals Corporation, or Bayer; Celldex Therapeutics, Inc., or Celldex; Daiichi Sankyo Co., Ltd., or Daiichi Sankyo; Genentech, Inc., a member of the Roche Group, or Genentech; GlaxoSmithKline LLC, or GSK; Millennium, Pfizer, Inc., or Pfizer, and PSMA Development Company LLC, a subsidiary of Progenics Pharmaceuticals Inc., or Progenics; as well as ADC co-development agreements with Agensys, Inc., an affiliate of Astellas Pharma, Inc., or Agensys, and Genmab A/S, or Genmab.

Although ODAC recommended accelerated approval of our two BLAs and the FDA has established an action date of August 30, 2011 for each BLA, we cannot predict with certainty when, or whether, and under what conditions regulatory approval will be received or, if approval is granted, the commercial success of brentuximab vedotin. The FDA is not bound by the recommendations of its advisory committees, and even if the FDA grants accelerated approval of either or both of our BLAs, we would be subject to post-marketing compliance requirements, including providing confirmatory evidence of clinical benefit by completing additional clinical studies on a post-approval basis. Further, we do not currently have any commercial products for sale and our other product candidates are in relatively early stages of development. As of June 30, 2011, we had an accumulated deficit of $546.2 million. Over the next several years, we expect that we

will incur substantial expenses, primarily as a result of activities related to the potential regulatory approval, commercialization and continued development of brentuximab vedotin. We will also continue to invest in research, development and manufacturing of our product candidates. Our commitment of resources to the approval and commercialization activities for brentuximab vedotin and the research, continued development and manufacturing of our other product candidates may require us to raise substantial amounts of additional capital and our operating expenses will fluctuate as a result of such activities. In addition, we may incur significant milestone payment obligations as our product candidates progress through clinical trials towards potential commercialization.

We expect that amounts earned from our collaboration agreements will continue to be an important source of our revenues. Until such time as we have successfully commercialized a product candidate, if ever, our revenues will also depend on development funding and the achievement of development and clinical milestones under our existing collaboration and license agreements, including, in particular, our brentuximab vedotin collaboration with Millennium, as well as entering into new collaboration and license agreements. 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 you should not rely on them as indicative of our future performance.

In addition, we recently announced that we have discontinued development of our dacetuzumab (SGN-40) and SGN-70 clinical-stage programs to allow us to focus resources on our pipeline of ADC product candidates. Dacetuzumab is an anti-CD40 monoclonal antibody for hematologic malignancies and SGN-70 is an anti-CD70 monoclonal antibody for autoimmune diseases. Both programs were closed to allow us to focus resources on our pipeline of ADC product candidates.

Financial summary

To date, we have generated revenues principally from our collaboration and license agreements. These revenues reflect the earned amount of upfront technology access fees, milestone payments, reimbursement for support and materials supplied to our collaborators, and development cost-sharing under our product collaborations. For the six months ended June 30, 2011, revenues decreased to $25.2 million, compared to $83.3 million for the same period in 2010. This decrease was primarily due to $70.0 million of revenue earned in the first half of 2010 related to our former dacetuzumab collaboration with Genentech that ended in June 2010. For the six months ended June 30, 2011, total operating expenses increased 35% to $110 million, compared to $81.3 million for the same period in 2010. This reflects increased pre-commercialization, clinical development and manufacturing costs for brentuximab vedotin and increased spending on our other clinical-stage and preclinical-stage product candidates. As of June 30, 2011, we had $424.3 million in cash, cash equivalents and short-term and long-term investments, and $264.0 million in total stockholders’ equity.

Results of operations

Three months and six months ended June 30, 2011 and 2010

Revenues.

Revenues by collaborator are summarized as follows:


	Three months ended June 30,							Six months ended June 30,
Collaboration and license agreement revenues by collaborator ($ in thousands)	2011		2010		% Change			2011		2010		% Change
Millennium	$	7,335	$	3,686		99	%	$	14,562	$	6,470		125	%
Genentech		1,462		30,976		(95	%)		2,881		72,815		(96	%)
Pfizer		1,000		—		N/A	(1)		2,000		—		N/A	(1)
Other		3,257		2,216		47	%		5,782		4,048		43	%

Total	$	13,054	$	36,878		(65	%)	$	25,225	$	83,333		(70	%)

(1)	No amount in comparable period.

Millennium revenues increased 99% to $7.3 million in the second quarter and 125% to $14.6 million for the first six months of 2011 compared to the comparable periods in 2010. Millennium revenues reflect amounts earned under our brentuximab vedotin collaboration agreement and our ADC collaboration agreement. Millennium revenues attributable to both agreements increased in the second quarter and for the first six months ended June 30, 2011 compared to the corresponding periods in 2010. Revenues in the second quarter of 2011 also reflect the earned portion of a $5.0 million milestone payment from Millennium triggered by the EMA acceptance of the MAA for brentuximab vedotin for the treatment of relapsed or refractory Hodgkin lymphoma and relapsed or refractory sALCL. Revenues for the six month period ended June 30, 2011 also increased over comparable periods in 2010 due to the earned portion of a payment received from Millennium upon its exercise of an option to take an exclusive license to a second antigen target under the ADC collaboration.

Genentech revenues decreased 95% to $1.5 million in the second quarter and 96% to $2.9 million for the first six months of 2011 compared to the comparable periods in 2010. During 2011, Genentech revenues reflect amounts earned under our ADC collaboration agreement. During 2010, Genentech revenues reflect our ADC collaboration and former dacetuzumab collaboration agreements. The decrease in Genentech revenues for the three and six month periods ended June 30, 2011 reflects $30.0 million and $70.0 million of revenues in the second quarter and six months ended June 30, 2010, respectively, earned under the dacetuzumab collaboration that ended in June 2010.

Pfizer revenues for the three and six month periods ended June 30, 2011 reflect the earned portion of an $8 million upfront payment under our ADC collaboration agreement that we entered into in December 2010.

Other revenues consist of amounts earned under our ADC collaborations with other companies that generated lower amounts of revenue during the periods presented. This revenue reflects the earned portion of fees and payments received under these ADC collaboration agreements, which generally include some or all of upfront license payments, renewal fees, milestones and payments for research and development support that we may provide to our collaborators. These payments are recognized as revenue over the development period of the collaboration.

Our collaboration revenues are impacted by the term and duration of our collaboration agreements and by progress-dependent milestones, annual maintenance fees and reimbursement of materials and support services as our collaborators advance their product candidates through development. Collaboration revenues may vary substantially from year to year and quarter to quarter depending on the progress made by our collaborators with their product candidates, the timing of milestones achieved, our ability to enter into additional collaboration agreements and the level of support we provide to our collaborators. We expect Millennium collaboration revenues will increase during 2011 compared to 2010 as a result of the recognition of amounts earned under the brentuximab vedotin collaboration agreement. However, total collaboration revenues are expected to be substantially lower in 2011 compared to 2010 as a result of revenue recognized in the first half of 2010 related to the dacetuzumab collaboration with Genentech that has ended. 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.

Research and development.

Our research and development expenses are summarized as follows:


	Three months ended June 30,							Six months ended June 30,
Research and development ($ in thousands)	2011		2010		% Change			2011		2010		% Change
Research	$	8,342	$	3,684		126	%	$	11,829	$	7,111		66	%
Development and contract manufacturing		22,334		17,287		29	%		33,126		27,103		22	%
Clinical		16,818		16,452		2	%		32,681		31,593		3	%
Share-based compensation expense		2,149		1,864		15	%		4,441		3,796		17	%

Total research and development expenses	$	49,643	$	39,287		26	%	$	82,077	$	69,603		18	%

Research expenses increased 126% to $8.3 million in the second quarter and 66% to $11.8 million for the first six months of 2011 from the comparable periods in 2010. The increase in research expenses is primarily the result of increasing costs associated with the advancement of our ASG-22ME clinical-stage product candidate and our SGN-19A preclinical product candidate.

Development and contract manufacturing expenses increased 29% to $22.3 million in the second quarter and 22% to $33.1 million for the six month period ended June 30, 2011 from the comparable periods in 2010. The increase reflects higher contract manufacturing costs for brentuximab vedotin and for our SGN-19A preclinical program.

Clinical expenses increased 2% to $16.8 million in the second quarter and 3% to $32.7 million for the six month period ended June 30, 2011 from the comparable periods in 2010. This increase reflects higher regulatory costs in support of our BLA submissions for brentuximab vedotin partially offset by lower third party clinical trial costs.

Share-based compensation expense increased in both the three and six month periods ended June 30, 2011 from the comparable periods in 2010. The increase was due to a higher average value per optioned share primarily attributable to increases in our stock price and a larger number of optioned shares subject to expense recognition as a result of increased staffing levels.

The following table shows expenses incurred for research, contract manufacturing of our product candidates and clinical and regulatory services provided by third parties as well as payments for in-licensed technology for each of our product candidates. The table also presents other costs and overhead consisting of personnel, facilities and other indirect costs that are not directly charged to development programs:


	Three months ended June 30,				Six months ended June 30,				Five years ended June 30, 2011
Product candidates ($ in thousands)	2011		2010		2011		2010
Brentuximab vedotin (SGN-35)	$	20,617	$	17,630	$	29,506	$	28,224	$	134,933
ASG-22ME		4,000		—		4,000		—		4,000
SGN-19A		1,012		21		2,065		30		3,598
SGN-75		803		583		1,644		958		11,764
ASG-5ME		648		357		1,040		873		5,475

		27,080		18,591		38,255		30,085		159,770
Other costs and overhead		20,414		18,832		39,381		35,722		350,904
Share-based compensation expense		2,149		1,864		4,441		3,796		33,602

Total research and development	$	49,643	$	39,287	$	82,077	$	69,603	$	544,276

Our third-party costs for brentuximab vedotin increased during the three and six months ended June 30, 2011 from the comparable periods in 2010 primarily due to higher manufacturing costs in the 2011 periods as we manufactured drug supply in anticipation of a potential commercial launch. In June 2011, we exercised an option under our ADC co-development agreement with Agensys to co-develop ASG-22ME. In addition to the payment of an option fee, we now co-fund one-half of the development costs of this program. Our third party costs for SGN-19A increased during the three and six months ended June 30, 2011 from the comparable periods in 2010 reflecting increased manufacturing activities in preparation for potential clinical trials. Third party costs for SGN-75 increased during the three and six month periods ended June 30, 2011 related to manufacturing and clinical costs incurred to support our phase I clinical trial. Our third party costs for ASG-5ME increased during the three and six months ended June 30, 2011 compared to the 2010 periods as a result of higher manufacturing costs in the 2011 periods.

Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. 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. The cost of clinical trials may vary significantly over the life of a project as a result of a variety of factors, including:

•

the number of patients who participate in the trials;

•

the length of time required to enroll trial participants;

•

the number and location of sites included in the trials;

•

the costs of producing supplies of the product candidates needed for clinical trials and regulatory submissions;

•

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.

Furthermore, our strategy has included entering into collaborations with third parties to participate in the development and commercialization of some of our product candidates. In these situations, the preclinical development or clinical trial process for a product candidate and the estimated completion date may largely be under the control of that third party and not under our control. We cannot forecast with any degree of certainty which of our product candidates will be subject to future collaborations or how such arrangements would affect our development plans or capital requirements.

We expect that aggregate development costs for our product candidates will increase in 2011 compared to 2010. However, if brentuximab vedotin is approved for commercial sale by the FDA, the costs associated with manufacturing would no longer be expensed but rather, would be recorded as inventory. Such approval would result in a decrease in research and development expenses for brentuximab vedotin. Expenses will fluctuate based upon many factors including timing of potential regulatory approvals, degree of collaborative activities, timing of manufacturing campaigns, numbers of patients enrolled in our clinical trials and the outcome of each clinical trial.

The risks and uncertainties associated with our research and development projects are discussed more fully in Item 1A—Risk Factors. As a result of the 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 a product candidate.

General and administrative.


	Three months ended June 30,							Six months ended June 30,
General and administrative ($ in thousands)	2011		2010		% Change			2011		2010		% Change
General and administrative, excluding share-based compensation expense	$	13,084	$	5,153		154	%	$	23,821	$	9,132		161	%
Share-based compensation expense		2,113		1,314		61	%		4,089		2,566		59	%

Total general and administrative expenses	$	15,197	$	6,467		135	%	$	27,910	$	11,698		139	%

General and administrative expenses, excluding share-based compensation expense, increased during the three and six months ended June 30, 2011 from the comparable periods in 2010. The increases resulted primarily from increased staffing levels and contracted activities in preparation for the potential commercial launch of brentuximab vedotin. Share-based compensation expense increased during the three and six months ended June 30, 2011 from the comparable periods in 2010. This resulted from a higher average value per optioned share primarily attributable to increases in our stock price and a larger number of optioned shares subject to expense recognition as a result of increased staffing levels.

Investment income, net.

Investment income, net decreased 49% to $0.3 million in the second quarter and 47% to $0.6 million for the first six months of 2011 from the comparable periods in 2010. The decrease resulted from lower yields on investments during 2011, partially offset by higher average balances.

Liquidity and capital resources.


	June 30,		December 31,
Selected balance sheet and cashflow data ($ in thousands)	2011		2010
Cash, cash equivalents and investments	$	424,263	$	294,840
Working capital		358,171		249,295
Stockholders’ equity		264,028		161,518


	Six months ended June 30,
	2011			2010
Cash provided by (used in):
Operating activities	$	(45,027	)	$	39,318
Investing activities		(74,294	)		(12,210	)
Financing activities		177,991			3,899

We have financed the majority of our operations through the issuance of equity securities and by amounts received pursuant to our product development collaborations and our ADC collaborations. To a lesser degree, we have also financed our operations through interest earned on cash, cash equivalents and investment securities. These financing sources have historically allowed us to maintain adequate levels of cash and investments.

Our combined cash, cash equivalents and investment securities increased to $424.3 million at June 30, 2011, compared to $294.8 million at December 31, 2010 and our working capital was $358.2 million at June 30, 2011, compared to $249.3 million at December 31, 2010. These increases reflect net proceeds from the sale of common stock in an underwritten public offering totaling $168.0 million in February 2011. During the first six months of 2011, we used $45.0 million of cash in our operating activities compared to $39.3 million generated from operating activities during the first six months of 2010. Our cash provided by (used in) operating activities included upfront payments under new collaboration agreements of $16 million and $72 million during the six month periods ended June 30, 2011 and 2010, respectively.

We have structured our investment portfolio to provide working capital as needed to fund our operations. Our cash, cash equivalents and investments are held in a variety of interest-bearing instruments and subject to investment guidelines allowing for holdings in U.S. government and agency securities, corporate bonds, taxable municipal bonds, auction rate securities, commercial paper and money market accounts. As of June 30, 2011, we held auction rate securities valued at $13.1 million that have failed at auction and are currently illiquid. Liquidity of these investments is subject to a successful auction process, redemption of the investment, a sale of the security in a secondary market or a negotiated or adjudicated resolution. Each of the securities continues to pay interest according to the stated terms on a monthly basis. The interest rate on these auction rate securities is no longer established based on an auction process but is established according to the terms of the issue. As of June 30, 2011, the interest rate of each of the auction rate securities was set at the 30-day London Interbank Offering Rate plus 225 basis points. We consider the market for these securities to be inactive and distressed. Accordingly, fair value for the auction

rate securities has been determined based on a probability-weighted discounted cash flow analysis. This analysis relies upon significant unobservable inputs referred to as level 3 inputs within the fair value hierarchy, as described in Note 6 to the condensed consolidated financial statements, including the probability-weighted term to an orderly liquidation and the discount rate applied to future cash flows. The discount rate used to determine fair value is based on the observed comparable yield of securities with similar characteristics, adjusted for illiquidity, credit risk and other factors. Investments valued based on level 3 inputs consisted of auction rate securities and accounted for 4% and 5% of total investment securities measured at fair value as of June 30, 2011 and December 31, 2010, respectively. Due to the expected time to a liquidation event, investments in auction rate securities are presented as long-term investments in the accompanying condensed consolidated balance sheets.

We believe it is more likely than not that we have the ability to hold, and intend to hold, these investments until recovery of substantially all of the cost basis of the investments. This belief is based on our current assessment of our available cash, expected operating cash requirements, future operating plans and assessment of the individual securities and general market conditions. We periodically assess this conclusion based on several factors, including the continued failure of future auctions, failure of the investment to be redeemed, further deterioration of the credit rating of the investment, market risk and other factors. Any such future reassessment that results in a conclusion that the unrealized losses on these investments are other than temporary would result in a write down in the fair value of these investments. Such a write down would be recognized in our operating results.

Our investment portfolio is structured to provide for access to cash to fund our anticipated working capital needs. However, if our liquidity needs should be accelerated for any reason in the near term, or investments do not pay at maturity, we may be required to sell investment securities in our portfolio prior to their scheduled maturities, which may result in a loss. As of June 30, 2011, we had $411.1 million held in cash reserves or debt securities scheduled to mature within the next twelve months.

At our currently planned spending rate, we believe that our financial resources, together with the fees, milestone payments and reimbursements we expect to earn under our existing collaboration and license agreements will be sufficient to fund our operations into 2013. This expectation does not take into account revenues from potential sales of brentuximab vedotin, which may extend the sufficiency of our financial resources. Although ODAC recommended accelerated approval of our two BLAs for brentuximab vedotin and the FDA has established an action date of August 30, 2011 for each BLA, we cannot predict with certainty when, or whether, and under what conditions regulatory approval will be received or, if approval is granted, the commercial success of brentuximab vedotin. The FDA is not bound by the recommendations of its advisory committees, and even if the FDA grants accelerated approval of either or both of our BLAs, we would be subject to post-marketing compliance requirements, including providing confirmatory evidence of clinical benefit by completing additional clinical studies on a post-approval basis. Changes in our spending rate may occur that would consume available capital resources sooner, such as increased development, manufacturing and clinical trial expenses, including in connection with any required post-approval confirmatory studies for brentuximab vedotin, and the increases in our sales and marketing expenses in connection with the potential commercialization of brentuximab vedotin. Additionally, we may not receive the payments that we currently expect under our existing collaboration agreements, including the brentuximab vedotin collaboration agreement with Millennium, which may shorten the timeframe through which we are able to fund operations. For example, in the event of a termination of the brentuximab vedotin collaboration agreement with Millennium, we would not receive development cost sharing payments, nor would we receive milestone payments or royalties for the development or international sale of brentuximab vedotin.

Primarily as a result of higher than expected collaborations activities, we are increasing our 2011 collaboration revenue guidance to be in the range of $45 to $50 million. These factors have also resulted in a decrease to our guidance for net cash used to fund operating activities in 2011 to be in the range of $140 to $160 million and we now expect to end the year with more than $300 million in cash and investments.

Commitments

Some of our manufacturing, license and collaboration agreements provide for periodic maintenance fees over specified time periods, as well as payments by us upon the achievement of development and regulatory milestones and the payment of royalties based on commercial product sales. We do not expect to pay any royalties on net sales of products under any of these agreements unless and until we have a product approved for commercial sale. The amounts set forth below could be substantially higher if we make certain development progress that requires us to make milestone payments or if we receive regulatory approvals or achieve commercial sales and are required to pay royalties.

In May 2011, the Company entered into an operating lease for approximately 81,000 square feet of a facility to be used for general office purposes. The lease term began on July 1, 2011. The lease includes an abated rent period and a tenant improvement allowance to be applied toward improvements to the facility. The approximate aggregate base rent due over the initial term of the lease is $7.7 million. The lease expires in June 2018 with two extension options of five years each.

The following table reflects our future minimum contractual commitments as of June 30, 2011 (in thousands):


	Total		Remainder of 2011		2012		2013		2014		2015		Thereafter
Operating leases	$	29,128	$	1,412	$	3,676	$	4,071	$	4,208	$	4,348	$	11,413
Manufacturing, license & collaboration agreements		41,170		36,661		3,311		1,198		—		—		—

Total	$	70,298	$	38,073	$	6,987	$	5,269	$	4,208	$	4,348	$	11,413

Operating lease obligations do not assume the exercise by us of any termination or extension options. A substantial portion of the minimum payments under manufacturing, license and collaboration agreements represents contractual obligations related to manufacturing our product candidates for use in our clinical trials and for future potential commercial operations. The above table excludes royalties and up to approximately $19.7 million in potential future milestone payments to third parties under license and collaboration agreements for our current development programs, which generally become due and payable only upon achievement of certain developmental, clinical, regulatory and/or commercial milestones. Milestone payments under these agreements through June 30, 2011 have totaled $6.2 million. The above table also excludes purchase commitments under manufacturing agreements to which we become obligated upon commercialization of brentuximab vedotin. These contingent payments have not been included in the above table and will not be included until the event triggering such payment or obligation has occurred.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to market risk for changes in interest rates during the six months ended June 30, 2011 has not changed significantly from those discussed in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC. Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. We currently have holdings in U.S. government securities, auction rate securities and money market accounts. Our investment securities consisted of the following (in thousands):


	June 30,		December 31,
	2011		2010
Short-term investments	$	331,322	$	260,682
Long-term investments		13,144		13,031
Other non-current assets		304		303

Total	$	344,770	$	274,016

As more fully described in Note 6 to the condensed consolidated financial statements, included in long-term investments as of June 30, 2011 are auction rate securities valued at $13.1 million that have failed at auction and are currently illiquid. Liquidity of these investments is subject to a successful auction process, redemption of the investment, a sale of the security in a secondary market or a negotiated or adjudicated resolution. No assurance can be made that further downgrades, losses, failed auctions or other significant deterioration in the fair value of our cash equivalents, short-term or long-term investments will not occur. If any such further downgrades, losses, failed auctions or other significant deteriorations occur, it may negatively impact or impair our current portfolio of cash equivalents, short-term and long-term investments and our ability to fund our planned operations.

We have estimated the effect 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 investments as of June 30, 2011. In addition, a hypothetical decrease of 10% in the effective yield of our investments would reduce our expected investment income by approximately $0.1 million over the next twelve months based on our investment balance at June 30, 2011.

Foreign Currency Risk

All of our revenues and most of our expenses are denominated in U.S. dollars and as a result, we have not experienced significant foreign currency transaction gains and losses to date. We have conducted some transactions in foreign currencies during the six months ended June 30, 2011, primarily related to contract manufacturing and ex-U.S. clinical trial activities, and we expect to continue to do so. Our primary exposure is to fluctuations in the Euro and British Pound. 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.

Item 4.

Controls and Procedures

(a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and our Chief Financial Officer have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) prior to the filing of this quarterly report. Based on that evaluation, they 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.

(b) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

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.

We have marked with an asterisk (*) those risks described below that reflect substantive changes from, or additions to, the risks described in our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC.

Risks Related to Our Business

Our near-term prospects are substantially dependent on our lead product candidate, ADCETRIS ^™ (brentuximab vedotin; SGN-35). If we are unable to successfully obtain regulatory approval for and commercialize brentuximab vedotin for the treatment of patients with relapsed or refractory Hodgkin lymphoma or relapsed or refractory systemic anaplastic large cell lymphoma, or sALCL, our ability to generate revenue from product sales will be significantly delayed. *

We currently have no products that are approved for commercial sale. We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to our lead product candidate brentuximab vedotin. The U.S. Food and Drug Administration, or FDA, accepted for filing our two biologics license applications, or BLAs, under which we are seeking approval of brentuximab vedotin in two indications and established an action date of August 30, 2011 under the Prescription Drug User Fee Act, or PDUFA. Accordingly, our near-term prospects are substantially dependent on our ability to successfully obtain regulatory approval for and commercialize brentuximab vedotin. Brentuximab vedotin was the subject of a pivotal clinical trial in relapsed or refractory Hodgkin lymphoma patients that was conducted under a special protocol assessment, or SPA, with the FDA and a phase II clinical trial in relapsed or refractory sALCL patients. On July 14, 2011, the FDA’s Oncologic Drugs Advisory Committee, or ODAC, recommended unanimously that the FDA grant accelerated approval of brentuximab vedotin for the treatment of patients with Hodgkin lymphoma who relapse after autologous stem cell transplant, or ASCT, and patients with relapsed or refractory sALCL. Although the FDA generally follows the advice of its advisory committees, it is not bound by the recommendations of any of its advisory committees and the design of these trials or data collected from either of these trials may not be adequate to demonstrate the safety and efficacy of brentuximab vedotin for the treatment of these patients, or otherwise may not be sufficient to support FDA or any foreign regulatory approval for either or both of these indications. For example, the FDA may disagree with our interpretation of the results of the trials and determine that the data from the trials are not sufficient to support approval. If we fail to obtain regulatory approval for brentuximab vedotin, we will be unable to market and sell brentuximab vedotin and therefore will not generate any revenue from product sales in the near term, if at all. If the FDA grants accelerated approval of brentuximab vedotin, we would be subject to post-marketing compliance requirements, including providing confirmatory evidence of clinical benefit by completing additional clinical studies on a post-approval basis, and we would also be required to have all our product promotional materials pre-cleared by the FDA until regular approval of brentuximab vedotin is granted, if at all. If we and the FDA are unable to reach agreement on the design, number and scope of these confirmatory studies prior to August 30, 2011, FDA approval of brentuximab vedotin in one or both of the indications we are seeking approval for may be delayed or denied. Even if we reach agreement with the FDA on these confirmatory studies and the FDA grants accelerated approval of brentuximab vedotin, failure to conduct these studies, or to confirm a clinical benefit during these post-approval studies, could result in the FDA withdrawing brentuximab vedotin from the market, which would seriously harm our business.

Even if we and Millennium receive the required regulatory approvals to market brentuximab vedotin, we may not be able to successfully commercialize brentuximab vedotin. In December 2009, we entered into an agreement with Millennium to develop and commercialize brentuximab vedotin, under which we have commercial rights in the United States and its territories and Canada, and Millennium has commercial rights in the rest of the world. The success of this collaboration and the activities of Millennium will significantly impact the potential commercialization of brentuximab vedotin in countries other than the United States and Canada. Brentuximab vedotin is not expected to be commercially available for any indication until at the earliest later in the third quarter of 2011, if at all. Further, if it is approved for commercial sale, the commercial success of brentuximab vedotin will depend upon its acceptance by physicians, patients, third party payors and other key decision-makers as a therapeutic alternative to currently available products. In addition, the indications that we and Millennium are pursuing for brentuximab vedotin have relatively low incidence rates, including relapsed or refractory Hodgkin lymphoma and relapsed or refractory sALCL, which may limit the revenue potential of brentuximab vedotin. Moreover, the FDA could require us to strengthen the warnings and precautions included in the label of brentuximab vedotin as a result of data collected from any required post-approval studies, which could further limit the revenue potential of brentuximab vedotin. If we and Millennium are unable to successfully obtain regulatory approval for and commercialize brentuximab vedotin in a timely manner or at all, our ability to generate revenue from product sales would be significantly delayed and our business would be materially affected, and we may not be able to earn sufficient revenues to continue as a going concern.

Although we reached agreement with the FDA on an SPA relating to our brentuximab vedotin pivotal trial in relapsed or refractory Hodgkin lymphoma, this agreement does not guarantee any particular outcome with respect to regulatory review of the pivotal trial or with respect to regulatory approval of brentuximab vedotin. *

The protocol for the brentuximab vedotin pivotal trial in relapsed or refractory Hodgkin lymphoma was reviewed by the FDA under the SPA process, which allows for FDA evaluation of a clinical trial protocol intended to form the primary basis of an efficacy claim in support of a BLA, and provides an agreement that the study design, including trial size, clinical endpoints and/or data analyses are acceptable to the FDA. Reaching agreement with the FDA on an SPA is not an indication of approvability. Even though we believe that the data from the pivotal trial are supportive of approval and ODAC has recommended that the FDA grant accelerated approval of brentuximab vedotin, our SPA with the FDA is not a guarantee or indication of approval for the relapsed or refractory Hodgkin lymphoma indication, and we cannot be certain that the design of, or data collected from, the pivotal trial will be adequate to demonstrate the safety and efficacy of brentuximab vedotin for the treatment of patients with relapsed or refractory Hodgkin lymphoma, or will otherwise be sufficient to support FDA or any foreign regulatory approvals for that indication or any other indication. Further, the 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 protocol for the pivotal trial. In addition, the 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 the SPA agreement and the data and results from the pivotal trial. In addition, the FDA is not bound by the recommendations of any of its advisory committees. As a result, we do not know how the FDA will interpret the parties’ respective commitments under the SPA agreement, how it will interpret the data and results from the pivotal trial, whether the FDA will require that we conduct one or more additional clinical trials to support potential approval prior to any such approval, whether we will be able to reach agreement with the FDA on the design, number and scope of any confirmatory studies required as part of any accelerated approval in a timely manner or at all, or whether brentuximab vedotin will receive any regulatory approvals at all. Our phase II clinical trial in relapsed or refractory sALCL was not conducted under an SPA with the FDA and therefore our SPA with regards to relapsed or refractory Hodgkin lymphoma will not have any bearing on the review of the protocol, data or results of the phase II clinical trial in relapsed or refractory sALCL. As a result, despite the potential benefits of the SPA agreement, uncertainty remains regarding the regulatory approval process for brentuximab vedotin for the treatment of relapsed or refractory Hodgkin lymphoma and relapsed or refractory sALCL, and it is possible that we might never receive any or might be delayed in receiving regulatory approvals for brentuximab vedotin.

Although we reported positive results in our clinical trials for brentuximab vedotin and ODAC has recommended accelerated approval of brentuximab vedotin, regulatory authorities may not approve brentuximab vedotin, the FDA may not act on our BLAs by the PDUFA date, or we may face post-approval issues that require withdrawal of brentuximab vedotin from the market. *

Although we reported positive results from our pivotal trial and our phase II clinical trial of brentuximab vedotin in relapsed or refractory Hodgkin lymphoma and relapsed or refractory sALCL, respectively, and ODAC has recommended that the FDA grant accelerated approval of brentuximab vedotin for patients with Hodgkin Lymphoma who relapse after ASCT and patients with relapsed or refractory sALCL, we might never receive any regulatory approvals for brentuximab vedotin. Regulatory agencies, including the FDA, may disagree with our interpretations and those of their respective advisors of data from preclinical studies and clinical trials of brentuximab vedotin. The FDA has substantial discretion in the approval process, and when or whether, and under what conditions, regulatory approval will be obtained for brentuximab vedotin or any other drug we develop. In addition, the FDA is not bound by the recommendations of its advisory committees and the FDA may decline to follow ODAC’s recommendations for any or no reason. If the FDA grants accelerated approval of brentuximab vedotin, we would be subject to post-marketing compliance requirements, including providing confirmatory evidence of clinical benefit by completing additional clinical studies on a post-approval basis, and we would also be required to have all our product promotional materials pre-cleared by the FDA until regular approval of brentuximab vedotin is granted, if at all. If we and the FDA are unable to reach agreement on the design, number and scope of these confirmatory studies prior to August 30, 2011, FDA approval of brentuximab vedotin in one or both of the indications we are seeking approval for may be delayed or denied. Even if we reach agreement with the FDA on these confirmatory studies and the FDA grants accelerated approval of brentuximab vedotin, failure to conduct these studies, or to confirm a clinical benefit during these post-approval studies, could result in the FDA withdrawing brentuximab vedotin from the market, which would seriously harm our business. Regulatory agencies also may approve brentuximab vedotin for fewer conditions than requested or may grant approval subject to the performance of confirmatory and other post-approval studies or REMS for brentuximab vedotin. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of brentuximab vedotin, and they could also require us to strengthen the warnings and precautions included in the label of brentuximab vedotin as a result of data collected from any post-approval studies.

In addition, changes in the regulatory approval policy or requirements during the development period, changes in, or the enactment of additional, regulations or statutes or changes in regulatory review for each submitted product application may cause delays in the approval or rejection of an application for marketing approval. For example, in 2008, the FDA announced that, due to staffing and resource limitations, it had given its managers discretion to miss certain timing goals for completing reviews of BLAs under PDUFA. Although the FDA has since publicly expressed a recommitment to meeting PDUFA deadlines, it remains unclear whether and to what extent the FDA will adhere to PDUFA deadlines in the future. If the FDA were to miss a PDUFA timing goal for brentuximab vedotin, including as a result, our inability to reach agreement with the FDA prior to August 30, 2011 on the design, number and scope of the confirmatory studies required as part of any grant of accelerated approval, development and commercialization could be delayed. Likewise, regulatory changes may require us to amend clinical trial protocols to reflect these changes.

Even if we receive regulatory approval, brentuximab vedotin may later produce adverse events that limit or prevent its widespread use or that force us or Millennium to withdraw brentuximab vedotin from the market. In addition, a marketed brentuximab vedotin product would continue to be subject to strict regulation after approval and may be required to undergo confirmatory and other post-approval studies. Any unforeseen problems with an approved brentuximab vedotin product or any violation of regulations could result in restrictions on the approved product, including its withdrawal from the market. Any delay in or failure to receive or maintain regulatory approval for brentuximab vedotin could harm our business and prevent us from ever achieving profitability.

Even if brentuximab vedotin receives regulatory approval, we will be subject to extensive ongoing post-marketing regulation. *

If we or Millennium receive regulatory approval for brentuximab vedotin in the United States or other jurisdictions, we and Millennium will be subject to extensive ongoing obligations and continued regulatory review from the FDA and other applicable regulatory agencies, such as continued adverse event reporting requirements and, in the event the FDA grants accelerated approval of brentuximab vedotin, the completion of confirmatory post-approval studies and the requirement to have all of our promotional materials pre-cleared by the FDA. There may also be additional FDA post-marketing obligations, all of which may result in significant expense and limit the ability to commercialize brentuximab vedotin in the United States or other jurisdictions.

If the FDA or other regulatory agencies approve brentuximab vedotin, the labeling, packaging, adverse event reporting, storage, advertising and promotion for brentuximab vedotin will be subject to extensive regulatory requirements all of which may result in significant expense and limit our ability to commercialize brentuximab vedotin. We and the manufacturers of brentuximab vedotin 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 brentuximab vedotin, 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. The subsequent discovery of previously unknown problems with brentuximab vedotin, including adverse events of unanticipated severity or frequency, or problems with the facility where brentuximab vedotin is manufactured, may result in restrictions on the marketing of brentuximab vedotin, up to and including withdrawal of brentuximab vedotin from the market if it is approved for commercial sale. If our manufacturing facilities or those of our suppliers fail to comply with applicable 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, either before or after product approval, if any, subject us to administrative or judicially imposed sanctions, including:

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

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imposition of fines and other civil penalties;

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criminal prosecutions;

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injunctions, suspensions or revocations of regulatory approvals;

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suspension of any ongoing clinical trials;

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total or partial suspension of manufacturing;

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delays in commercialization;

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refusal by the FDA to approve pending applications or supplements to approved applications filed by us or Millennium;

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

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restrictions on operations, including costly new manufacturing requirements; and

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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 brentuximab vedotin or further restrict or regulate post-approval activities. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are not able to maintain regulatory compliance, we or Millennium might not be permitted to market brentuximab vedotin and our business could suffer.

Other than brentuximab vedotin, our product candidates are at an early stage of development, and it is possible that none of our product candidates will ever become commercial products. *

Other than brentuximab vedotin, our product candidates are in relatively early stages of development. These product candidates will require significant further development, financial resources and personnel to obtain regulatory approval and develop into commercially viable products, if at all. Currently, we have three other clinical-stage programs, SGN-75, ASG-5ME and ASG-22ME, and several preclinical product candidates, including SGN-19A. If a product candidate fails at any stage of development or we 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. In this regard, we recently announced that we discontinued the development of dacetuzumab and SGN-70 to focus our efforts on our pipeline of ADC product candidates, and we previously determined to discontinue our lintuzumab development program following negative clinical trial results. As a result of 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 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 registration and commercialization activities associated with brentuximab vedotin, which may restrict or delay our ability to develop our other clinical and preclinical product candidates.

Our ability to commercialize any of our product candidates, including brentuximab vedotin, depends on first receiving required regulatory approvals, and it is possible that we may never receive regulatory approval for any of our product candidates. Even if a product candidate receives regulatory approval, the resulting product may not gain market acceptance among physicians, patients, healthcare payors and the medical community. Assuming that brentuximab vedotin receives the required regulatory approvals in the United States and Canada, commercial success outside of these countries will depend on Millennium’s commercialization efforts. The degree of commercial success of any approved product will depend on a number of factors, including:

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establishment and demonstration of clinical efficacy and safety;

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cost-effectiveness of the product;

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the product’s potential advantage over alternative treatment methods;

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whether the product can be produced in commercial quantities at acceptable costs; and

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marketing and distribution support for the product.

We do not expect any of our current product candidates to be commercially available until at least later in the third quarter of 2011, if at all. If we and/or our collaborators are unable to develop, obtain regulatory approval for, and commercialize any of our product candidates, if development is delayed or if sales revenue from any product candidate that receives marketing approval is insufficient, we may never reach sustained profitability.

Our clinical trials may fail to demonstrate acceptable levels of safety and efficacy of our product candidates, which could prevent or significantly delay their regulatory approval. *

To obtain the requisite regulatory approvals to market and sell any of our product candidates, we must demonstrate, through extensive preclinical studies and clinical trials, that the product candidate is safe and effective in humans. Ongoing and future clinical trials of our product candidates may not show sufficient safety or efficacy to obtain requisite regulatory approvals. Moreover, we still only have limited data from our phase I trials of SGN-75, ASG-5ME and ASG-22ME. Phase I and phase II clinical trials generally are not designed to test the efficacy of a product candidate but rather are designed to test safety, to study pharmacokinetics and pharmacodynamics and to understand the product candidate’s side effects at various doses and dosing schedules. Furthermore, success in preclinical and early clinical trials does not ensure that later large-scale trials will be successful nor does it predict final results. Acceptable results in early trials may not be repeated in later trials. The pivotal trial of brentuximab vedotin required the enrollment of approximately 100 patients and we believe that any clinical trial designed to test the efficacy of SGN-75, ASG-5ME or ASG-22ME, whether phase II or phase III, will likely involve a larger number of patients to achieve statistical significance, will be expensive and will take a substantial amount of time to complete. As a result, we may conduct lengthy and expensive clinical trials of our product candidates, only to learn that the 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.

Clinical trials for our product candidates 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 our clinical product candidates, and we expect to commence additional trials of brentuximab vedotin and our other product candidates in the future. 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, delay or failure to obtain IRB approval to conduct a clinical trial at a prospective site, and shortages of available drug supply. 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 and the availability of alternative or new treatments. In addition, many of our future and ongoing brentuximab vedotin clinical trials are being or will be coordinated with Millennium, which may delay the commencement or affect the continuation or completion of these trials. We have experienced enrollment-related delays in certain of our current and previous clinical trials and will likely experience similar delays in our future trials, particularly as we attempt to significantly increase patient size as may be required for phase III studies. 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 United States 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 and IRBs at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with supplies of our product candidates produced under cGMP and other requirements in foreign countries, and may require large numbers of test patients. We, the FDA or other foreign governmental agencies could delay, suspend or halt our clinical trials of a product candidate for numerous reasons, including:

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

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

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

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

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

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the product candidate may not appear to be more effective than current therapies;

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

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our inability to produce or obtain sufficient quantities of the product candidate to complete the trials;

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our inability 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;

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our inability to obtain IRB approval to conduct a clinical trial at a prospective site;

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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;

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our inability 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; or

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our inability 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.

In addition, we may experience significant setbacks in advanced clinical trials, even after promising results in earlier trials, such as unexpected adverse events that occur when our product candidates are combined with other therapies, which often occurs in later-stage clinical trials. For example, in September 2010, we announced the discontinuation of our lintuzumab development program as a result of the outcome in our phase IIb clinical trial of lintuzumab combined with low-dose cytarabine chemotherapy. In addition, clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. Negative or inconclusive results or adverse medical events, including patient fatalities that may be attributable to our product candidates, during a clinical trial could cause it to be redone or terminated. Further, some of our clinical trials may be overseen by an independent data monitoring committee, or IDMC, and an IDMC may determine to delay or suspend one or more of these trials due to safety or futility findings based on events occurring during a clinical trial.

In some circumstances we rely on collaborators to assist in the research and development of our product candidates and, in other situations, to utilize our ADC technology. If we are not able to locate suitable collaborators or if our collaborators do not perform as expected, it may affect our ability to commercialize our product candidates and/or generate revenues through technology licensing. *

We have established and intend to continue to establish collaborations with third parties to develop and market some of our current and future product candidates. We entered into a collaboration agreement with Millennium in December 2009 that granted Millennium rights to develop and commercialize brentuximab vedotin outside of the United States and Canada. We also have ADC collaborations with Abbott, Bayer, Celldex, Daiichi Sankyo, GSK, Genentech, Millennium, Pfizer and Progenics, and ADC co-development agreements with Agensys and Genmab.

Under certain conditions, our collaborators may terminate their agreements with us and discontinue use of our technologies. For example, in December 2009, Genentech notified us that it had elected to terminate our collaboration agreement for dacetuzumab. If we had decided to continue the development of dacetuzumab, we would have been responsible for funding any further dacetuzumab development and clinical trial activities. In addition, we cannot control the amount and timing of resources our collaborators may devote to products incorporating our technology. Moreover, our relationships with our collaborators divert significant time and effort of our scientific staff and management team and require effective allocation of our resources to multiple internal and collaborative projects. Our collaborators may separately pursue competing products, therapeutic approaches or technologies to develop treatments for the diseases targeted by us or our collaborators. Even if our collaborators continue their contributions to the collaborative arrangements, they may nevertheless determine not to actively pursue the development or commercialization of any resulting products. Our collaborators may fail to perform their obligations under the collaboration agreements or may be slow in performing their obligations. If any of our collaborators terminate or breach our agreements with them, or otherwise fail to complete their obligations in a timely manner, it may have a detrimental effect on our financial position by reducing or eliminating the potential for us to receive technology access and license fees, milestones and royalties, reimbursement of development costs, as well as possibly requiring us to devote additional efforts and incur costs associated with pursuing internal development of product candidates. In particular, if Millennium were to terminate the brentuximab vedotin collaboration, we would not receive milestone payments,

co-funded development payments or royalties for the sale of brentuximab vedotin outside the United States and Canada. As a result of such termination, we may have to engage another collaborator to complete the brentuximab vedotin development process or complete the process ourselves internally, either of which could significantly delay the development process and increase our costs. In turn, this could significantly harm our financial position, adversely affect our stock price and require us to incur all the costs of developing and commercializing brentuximab vedotin, which are now being co-funded by Millennium. Furthermore, if our collaborators do not prioritize and commit substantial resources to programs associated with our product candidates, we may be unable to commercialize our product candidates, which would limit our ability to generate revenue and become profitable. In the future, we may not be able to locate third-party collaborators to develop and market our product candidates and we may lack the capital and resources necessary to develop all our product candidates alone.

We have no experience in commercializing products on our own and, to the extent we do not successfully develop this ability, we may not be able to effectively commercialize brentuximab vedotin if approved for commercial sale.*

We recently established a sales and marketing organization, but we may not be able to successfully develop adequate sales and marketing capabilities. For example, if we receive approval for commercial sale, we intend to market brentuximab vedotin in the United States and Canada with a sales force of approximately 60 sales representatives. Although we have hired the number of employees that we believe are required to market brentuximab vedotin, this number may turn out to be incorrect and we may not be able to effectively commercialize brentuximab vedotin with such force. If we are unable to establish adequate sales and marketing capabilities and successful distribution relationships with logistics companies and wholesalers, we may fail to realize the full sales potential of brentuximab vedotin. Even if we are able to establish distribution relationships with such companies, we generally would not have control over the resources or degree of effort that any of these third parties may devote to brentuximab vedotin, and if they fail to devote sufficient time and resources to the marketing and distribution of brentuximab vedotin, or if their performance is substandard, it will adversely affect the sale of brentuximab vedotin.

We are subject to various state and federal healthcare related laws and regulations that may impact the commercialization of our product candidates and could subject us to significant fines and penalties. *

Our operations may be directly or indirectly subject to various state and federal fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and federal False Claims Act. These laws may impact, among other things, the sales, marketing and education programs for any of our product candidates that may be approved for commercial sale, including brentuximab vedotin.

The federal Anti-Kickback Statute prohibits persons from knowingly and willingly soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated. 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 possible exclusion from Medicare, Medicaid and other federal healthcare programs. Many states have also adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs.

The federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from the federal government. Suits filed under the 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. The filing of qui tam actions has caused a number of pharmaceutical, medical device and other healthcare companies to have to defend a False Claims Act action. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Various states have also enacted laws modeled after the federal False Claims Act.

Although we take our obligation to maintain our compliance with these various laws and regulations seriously and have enacted a compliance program aimed at preventing the violation of these laws and regulation, if we are found to be in violation of any of the laws and regulations described above or other applicable state and federal fraud and abuse laws, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from government healthcare reimbursement programs and the curtailment or restructuring of our operations, all of which could have a material adverse effect on our business and results of operations.

Healthcare law and policy changes, based on recently enacted legislation, may have a material adverse effect on us.

In March 2010, the President signed the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or the Healthcare Reform Act. This legislation substantially changes the way healthcare is financed by both governmental and private insurers, and significantly impacts the pharmaceutical industry. The Healthcare Reform Act contains a number of provisions that may negatively impact our business and operations, including those relating to the approvability of biosimilar products, the increased use of comparative effectiveness research on healthcare products, changes to enrollment in federal healthcare programs, reimbursement changes and fraud and abuse provisions, all of which will impact existing government healthcare programs and will result in the development of new programs. Many of the implementing regulations of the Healthcare Reform Act are currently being drafted by federal agencies, including FDA, and while it is too early to predict specifically what effect the recently enacted Healthcare Reform Act and its implementation or any future legislation or policies will have on our business, they may have a material adverse effect on our business and financial condition.

We depend on a small number of collaborators for most of our current revenue. The loss of any one of these collaborators could result in a substantial decline in our revenue.

We have collaborations with a limited number of companies. To date, almost all of our revenue has resulted from payments made under agreements with our corporate collaborators, and we expect that most of our future revenue and substantial amounts of cash used to fund our operations will continue to come from corporate collaborations until the approval and commercialization of one or more of our product candidates and even then we may still be highly dependent on the activities of a collaborator to derive revenue from the approved product. For example, if brentuximab vedotin receives the required regulatory approvals, our revenues will still depend in part on Millennium’s ability and willingness to market the approved product outside of the United States and Canada. The loss of our collaborators, especially Millennium, or the failure of our collaborators to perform their obligations under their agreements with us, 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 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 currently rely on third-party manufacturers and other third parties for production of our drug products and our dependence on these manufacturers may impair the development of our product candidates. *

We do not currently have the internal ability to manufacture the drug products that we need to conduct our clinical trials or for potential commercial sale and we rely upon a limited number of manufacturers to supply our drug products. For the monoclonal antibody used in brentuximab vedotin, we have contracted with Abbott Laboratories for clinical and potential future commercial supplies and with Piramal Healthcare to perform conjugation of our drug-linker to the antibody used in brentuximab vedotin, and we have also entered into a manufacturing and supply agreement with Pierre Fabre Medicament Production, S.A.S. for the cGMP fill/finish manufacture of commercial quantities of brentuximab vedotin. For brentuximab vedotin and other ADCs, several contract manufacturers, including AMRI and SAFC, supply us with drug-linker and other contract manufacturers, including Piramal, perform conjugation of the drug-linker to the antibody. For clinical supply of our other product candidates, we have contracted with several suppliers, including Abbott Laboratories, AMRI, Baxter, Lonza Sales AG, Laureate Pharma, and SAFC. In addition, we rely on other third parties to perform additional steps in the manufacturing process, including shipping and storage of 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 our product candidates for use in our clinical trials and for potential commercial sale. If our contract manufacturers or other third parties fail to deliver our product candidates 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 our product candidates. In addition, we depend on outside vendors for the supply of raw materials used to produce our product candidates. 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 our product candidates manufactured and to conduct preclinical testing and clinical trials of our product candidates would be adversely affected.

Although we have entered into agreements necessary for our commercial scale supply chain for brentuximab vedotin, we may not be able to establish or maintain sufficient commercial manufacturing arrangements on commercially reasonable terms. In addition, we have committed to provide Millennium with their needs of brentuximab vedotin for a limited period of time, which may require us to arrange for additional manufacturing supply. Securing commercial quantities of our product candidates from contract manufacturers will require us to commit significant capital and resources. We may also be required to enter into long-term manufacturing agreements that contain exclusivity provisions and/or substantial termination penalties. In addition, contract manufacturers have a limited number of facilities in which our product candidates can be produced and any interruption of the operation of 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 available product candidates or the inability to sell our products in the U.S. or abroad.

Our contract manufacturers are required to produce our clinical and commercial product candidates under cGMP in order to meet acceptable standards for use in our clinical trials and for commercial sale, as applicable. If such standards change, the ability of contract manufacturers to produce our product candidates on the schedule we require for our clinical trials or to meet potential sales projections may be affected. In addition, contract manufacturers may not perform their obligations under their agreements with us or may discontinue their business before the time required by us to successfully produce and market our product candidates. We and our contract manufacturers are subject to pre-approval inspections and periodic unannounced inspections by the FDA and corresponding state and foreign authorities to ensure strict compliance with cGMP and other applicable government regulations and corresponding foreign standards. We do not have control over a third-party manufacturer’s compliance with these regulations and standards. Any difficulties or delays in our contractors’ manufacturing and supply of product candidates or any failure of our contractors to maintain compliance with the applicable regulations and standards could increase our costs, cause us to lose revenue, make us postpone or cancel clinical trials, prevent or delay regulatory approval by the FDA and corresponding state and foreign authorities, prevent the import and/or export of our product candidates, or cause any of our products that may be approved for commercial sale to be recalled or withdrawn.

The FDA requires that we demonstrate structural and functional comparability between the same product candidates manufactured by different organizations. Because we have used and intend to use multiple sources to manufacture many of our product candidates, we will need to conduct comparability studies to assess whether manufacturing changes have affected the product safety, identity, purity or potency

of any recently manufactured product candidate compared to the product candidate used in prior clinical trials. If we are unable to demonstrate comparability, the FDA could require us to conduct additional clinical trials, which would be expensive and may significantly delay our clinical progress and the possible commercialization of such product candidates. Similarly, if we believe there may be comparability issues with any one of our product candidates, we may postpone or suspend manufacture of the product candidate to conduct further process development of such product candidate in order to alleviate such product comparability concerns, which may significantly delay the clinical progress of such product candidate or increase its manufacturing costs.

We rely on third parties to provide services in connection with our preclinical and clinical development programs. The inadequate performance by or loss of any of these service providers could affect our product candidate development.

Several third parties provide services in connection with our preclinical and clinical development programs, including in vitro and in vivo studies, assay and reagent development, immunohistochemistry, toxicology, pharmacokinetics and other outsourced activities. If these service providers do not adequately perform the services for which we have contracted or cease to continue operations and we are not able to quickly find a replacement provider or we lose information or items associated with our product candidates, our development programs may be delayed.

Our ADC technology has not been incorporated into a commercial product. *

Our ADC technology, utilizing proprietary stable linkers and potent cell-killing synthetic drugs, has not been incorporated into a commercial product. This ADC technology is used in our brentuximab vedotin, SGN-75, ASG-5ME, ASG-22ME and SGN-19A product candidates and is the basis of our collaborations with Abbott, Agensys, Bayer, Celldex, Daiichi Sankyo, Genentech, Genmab, GSK, Millennium, Pfizer and Progenics. We and our corporate collaborators are conducting toxicology, pharmacology, pharmacokinetics and other preclinical studies and, although we and our collaborators have conducted clinical trials of ADC product candidates, including a pivotal trial in patients with Hodgkin lymphoma and our phase II trial in patients with sALCL for which we are requesting approval for those two indications from the FDA, we may not receive any approvals and additional studies may be required before any approval of an ADC product candidate. In addition, preclinical models to study patient toxicity and anti-cancer activity of compounds are not necessarily predictive of toxicity or efficacy of these compounds in the treatment of human cancer and there may be substantially different results in clinical trials from the results obtained in preclinical studies. Any failures or setbacks in our ADC program, including adverse effects resulting from the use of this technology in humans, could have a detrimental impact on our internal product candidate pipeline and our ability to maintain and/or enter into new corporate collaborations regarding these technologies, which would negatively affect our business and financial position.

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

We have incurred substantial net losses in each of our years of operation and, as of June 30, 2011, we had an accumulated deficit of approximately $546.2 million. We expect to make substantial expenditures to further develop and potentially commercialize our product candidates and we anticipate that our rate of spending will accelerate as the result of the increased costs and expenses associated with research, development, clinical trials, manufacturing, and potential regulatory approvals and commercialization of our product candidates. Until the approval and commercialization of one or more of our product candidates, we expect our revenues to be derived from technology licensing fees, sponsored research fees and milestone payments under existing and future collaborative arrangements. In the longer term, our revenues may also include royalties from collaborations with current and potential future strategic partners and commercial product sales if any of our product candidates are approved for commercial sale. However, our revenue and profit potential is unproven and our limited operating history makes our future operating results difficult to predict.

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 and support our preclinical development, manufacturing and clinical trial activities, as well as position our product candidates, specifically brentuximab vedotin, for potential regulatory approval and commercial sale. Although some of these expenditures related to brentuximab vedotin are expected to be shared with Millennium, we may need to raise significant amounts of additional capital. We may seek additional funding through public or private financings, including equity financings, and through other means, such as collaborations and license agreements. However, the global credit and financial markets continue to experience uncertainty, which, along with current economic conditions, may make it more difficult for us to raise equity and debt financing when we need it. As a result of these and other factors, we do not know whether additional financing will be available when needed, or that, if available, we will obtain financing on terms favorable to us or our stockholders. If adequate funds are not available to us when we need them, we will 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 timing of potential receipt of regulatory approval of brentuximab vedotin and its potential commercialization;

•

the scope, number, rate of progress and cost of the confirmatory studies that we may be required to conduct as a condition to any grant by the FDA of accelerated approval of brentuximab vedotin;

•

the time and costs involved in obtaining regulatory approvals, including the preparation for product commercialization;

•

the size, complexity, timing, and number of clinical programs;

•

our receipt of milestone-based payments or other revenue from our collaborations or license arrangements;

•

the cost of establishing clinical and commercial supplies of our product candidates and any products that we and/or our collaborators may develop;

•

progress with clinical trials;

•

the costs associated with acquisitions or licenses of additional products, including licenses we may need to commercialize our products;

•

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

•

the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims;

•

the potential costs associated with state and federal taxes;

•

the timing and cost of milestone payment obligations as our product candidates progress towards commercialization; and

•

competing technological and market developments.

In addition, changes in our business may occur that would consume available capital resources sooner than we expect. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. To the extent that we raise additional funds through collaboration and licensing arrangements, we may be required to relinquish some rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us.

We rely on license agreements for certain aspects of our product candidates and technology. Failure to maintain these license agreements or to secure any required new licenses could prevent us from developing or commercializing our product candidates and technology.*

We have entered into agreements with third-party commercial and academic institutions to license technology for use in our product candidates and ADC technology. Currently, we have license agreements with Bristol-Myers Squibb, Arizona State University, CLB-Research and Development, and the University of Miami, among others. Some of these license agreements contain diligence and milestone-based termination provisions, in which case our failure to meet any agreed upon 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 our product candidates. In addition, continued development and commercialization of our 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.

If we are unable to enforce our intellectual property rights or if we fail to sustain and further build our intellectual property rights, we may not be able to commercialize our product candidates, 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 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 Bristol-Myers Squibb and Arizona State University, among others. In addition, we have licensed our U.S. and foreign patents and patent applications to third parties.

Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. In addition, the U.S. Patent and Trademark Office may issue revised regulations affecting prosecution before that office, and various pieces of legislation, including patent reform acts, have been introduced or discussed in the U.S. Senate and Congress in the past few years. If implemented, or following final resolution of pending legislation, new laws or legislation could, among other things, restrict our ability to prosecute applications in the U.S. Patent and Trademark Office, and may lower the threshold required for competitors to challenge our patents in the U.S. Patent and Trademark Office after they have been granted.

The standards that the U.S. Patent and Trademark Office and foreign patent offices use to grant patents are not always applied predictably or uniformly and can change. Consequently, our pending patent applications may not be allowed and, if allowed, may not contain the type and extent of patent claims that will be adequate to conduct our business as planned. Additionally, any issued patents we currently own or obtain in the future may not contain claims that will permit us to stop competitors from using similar technology. Similarly, the standards that courts use to interpret patents are not always applied predictably or uniformly and may evolve, particularly as new technologies develop. As a result, the protection, if any, given by our patents if we attempt to enforce them or if they are challenged in court is uncertain.

We rely on trade secrets and other proprietary information where we believe patent protection is not appropriate or obtainable. However, trade secrets and other proprietary information are difficult to protect. We have taken measures to protect our unpatented trade secrets and know-how, including the use of confidentiality and assignment of inventions agreements with our employees, consultants and certain contractors. It is possible, however, that these persons may breach the agreements or that our competitors may independently develop or otherwise discover our trade secrets or other proprietary information.

Our research collaborators may publish confidential data or other restricted information to which we have rights. If we cannot maintain the confidentiality of our technology and other confidential information in connection with our collaborations, then our ability to receive patent protection or protect our proprietary information may be impaired.

We may incur substantial costs and lose important rights or may not be able to commercialize our product candidates as a result of litigation or other proceedings relating to patent and other intellectual property rights and may be required to obtain patent and other intellectual property rights from others.

We may face potential lawsuits by companies alleging infringement of their intellectual property. Because patent applications can take a few years to publish, there may be currently pending applications of which we are unaware that may later result in issued patents that affect the commercial development of our product candidates. In addition, we are monitoring the progress of multiple pending patent applications of other companies that, if granted, may require us to license or challenge their validity upon commercialization of our product candidates.

We are from time to time involved in the defense and enforcement of our patent or other intellectual property rights in a court of law, U.S. Patent and Trademark Office interference or reexamination proceeding, foreign opposition proceeding or related legal and administrative proceeding in the United States and elsewhere. For example, we are currently involved in a pending patent opposition proceeding against our European patent, EP Patent No. 1347730, which covers the use of certain CD30 antibodies and conjugates, including brentuximab vedotin, for the treatment of Hodgkin lymphoma. These proceedings are costly and time consuming. 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. For example, the possible invalidation of our European patent or amendment of its granted claims could adversely affect our ability to restrict third party products from competing with brentuximab vedotin, if approved for commercial sale in the European Union. Furthermore, if such challenges to our rights are not resolved promptly in our favor, our existing business relationships may be jeopardized and we could be delayed or prevented from entering into new collaborations or from commercializing potential products, which could adversely affect our business and results of operations. In addition, we may challenge the patent or other intellectual property rights of third parties and if we are unsuccessful in actions we bring against the rights of such parties, through litigation or otherwise, and it is determined that we infringe the intellectual property rights of such parties, we may be prevented from commercializing potential products in the relevant jurisdiction, or may be required to obtain licenses to those rights or develop or obtain alternative technologies, any of which could harm our business.

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

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

In addition, the competition for qualified personnel in the biotechnology field is intense, and our future success depends upon our ability to attract, retain and motivate highly skilled scientific, technical and managerial employees. In order to commercialize our products successfully, we have been required to expand our workforce, particularly in the areas of manufacturing, clinical trials management, regulatory affairs, business development, sales and marketing. These activities required the addition of new personnel, including sales and marketing management, and the development of additional expertise by existing management personnel. We continue to face intense competition for qualified individuals from numerous pharmaceutical and biotechnology companies, as well as academic and other research institutions. To the extent we are not able to retain these individuals on favorable terms or attract any additional personnel that may be required, our business may be harmed.

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 pharmaceutical industries are highly competitive and subject to significant and rapid technological change. We are aware of many pharmaceutical and biotechnology companies that are actively engaged in research and development in areas related to antibody therapy or that are otherwise developing various approaches to cancer and autoimmune disease therapy. Some of these competitors have successfully commercialized antibody products or are developing or testing product candidates that do or may in the future compete directly with our product candidates. For example, we believe that companies including Allos Therapeutics, Amgen, Bayer, Biogen IDEC, Bristol-Myers Squibb, Celgene, Cephalon, Eisai, Genentech, GSK, Genzyme, Gilead, ImmunoGen, Merck, Millennium, Micromet, Novartis, Pfizer, and Pharmacyclics are developing and/or marketing products or technologies that may compete with ours, and some of these companies, including Bristol-Myers Squibb, ImmunoGen and Pfizer, have ADC technology. Other potential competitors include large, fully integrated pharmaceutical companies and more established biotechnology companies that have significant resources and expertise in research and development, manufacturing, testing, obtaining regulatory approvals and marketing. Also, academic institutions, government agencies and other public and private research organizations conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and marketing. It is possible that these competitors will succeed in developing technologies that are more effective than our product candidates or that would render our technology obsolete or noncompetitive. Our competitors may, among other things:

•

develop safer or more effective products;

•

implement more effective approaches to sales and marketing;

•

develop less costly products;

•

obtain quicker regulatory approval;

•

have access to more manufacturing capacity;

•

form more advantageous strategic alliances; or

•

establish superior proprietary positions.

In addition, if we receive regulatory approvals, we may compete with well-established, FDA-approved therapies that have generated substantial sales over a number of years. We anticipate that we will face increased competition in the future as new companies enter our market and scientific developments surrounding other cancer therapies continue to accelerate.

We face product liability risks and may not be able to obtain adequate insurance to protect us against losses.

We currently have no products that have been approved for commercial sale. However, the current and future use of our product candidates by us and our corporate collaborators in clinical trials, and the sale of any approved products in the future, may expose us to liability claims. These claims might be made directly by consumers or healthcare providers or indirectly by pharmaceutical companies, our corporate collaborators or others selling such products. We may experience financial losses in the future due to product liability claims. We have obtained limited general commercial liability insurance coverage for our clinical trials. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for any of our product candidates. 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 liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.

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 the event of an accident or environmental discharge, we may be held liable for any resulting damages, which may materially harm our business, financial condition and results of operations.

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

We conduct 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. 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 our business could be adversely affected.

We rely on information technology systems to keep financial records, maintain laboratory and corporate records, communicate with staff and external parties and operate other critical functions. If we were to experience a prolonged system disruption in the information technology systems, it could result in the delay of development of our product candidates, which could adversely affect our business. In addition, in order to maximize our information technology efficiency, we have physically consolidated our primary corporate data and computer operations. This concentration, however, exposes us to a greater risk of disruption to our internal information technology systems. Although we maintain offsite back ups of our data, if operations at our facilities were disrupted, it would likely cause a material disruption in our business.

We may engage in future acquisitions 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 acquiring complementary products, technologies or businesses. Any potential acquisitions may entail numerous risks, including increased operating expenses and cash requirements, assimilation of operations and products, retention of key employees, diversion of our management’s attention and uncertainties in our ability to maintain key business relationships of the acquired entities. In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.

Legislative actions and potential 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 may 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. 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.

Global credit and financial market conditions may negatively impact or impair the value of our current portfolio of cash equivalents, short-term investments and long-term investments, including auction rate securities, and our ability to fund our planned operations. *

Our cash, cash equivalents and investments are held in interest-bearing instruments and subject to investment guidelines allowing for investments in United States government and agency securities, high-grade corporate bonds, taxable municipal bonds, mortgage-backed securities, auction rate securities, or ARS, commercial paper and money market accounts. As a result of the uncertain global credit and financial market conditions, investments in some financial instruments, such as ARS, pose risks arising from liquidity and credit concerns. As of June 30, 2011 we held ARS valued at $13.1 million that have failed at auction and are currently illiquid. Given that future deterioration in the global credit and financial markets is a possibility, no assurance can be made that losses, failed auctions or other significant deterioration in the fair value of our cash equivalents, short-term or long-term investments will not occur. In addition, Standard & Poor’s Financial Services LLC, or S&P, recently announced that it had revised its outlook on the long-term credit rating of the United States to negative. S&P and other ratings agencies have also raised the possibility of a downgrade to the sovereign credit rating of the United States, which could impact the stability of future U.S. treasury auctions and affect the trading market for U.S. government securities. While the U.S. congress recently approved increases to the federal debt ceiling, uncertainty surrounding the credit ratings of U.S. government securities could impact the market for these securities. These factors could impact the liquidity or valuation of our available-for-sale securities, 96% of which were invested in U.S. treasury securities as of June 30, 2011. If any such losses, failed auctions or other significant deteriorations occur, it may negatively impact or impair our current portfolio of cash equivalents, short-term and long-term investments and our ability to fund our planned operations. Further, unless and until the current global credit and financial market crisis has been sufficiently resolved, it may be difficult for us to liquidate our investments prior to their maturity without incurring a loss.

Risks Related to Our 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 second quarter of 2011, our closing stock price fluctuated between $15.00 and $21.34 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:

•

announcements concerning our two BLAs that were accepted for filing by the FDA for brentuximab vedotin or any other regulatory submissions we may in the future plan or determine to make, including with respect to the number and scope of the confirmatory studies required as a condition to any grant by the FDA of accelerated approval for brentuximab vedotin;

•

announcements of FDA approval or non-approval of brentuximab vedotin, or specific label indications for or restrictions, warnings or limitations in its use, or delays in the FDA review process;

•

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

•

termination of or changes in our existing collaborations or licensing arrangements, especially our brentuximab vedotin collaboration with Millennium;

•

establishment of new collaboration, partnering or licensing arrangements, or the termination or completion of any collaborations or other arrangements, by us or our competitors;

•

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

•

our ability to raise additional capital when we need it and the terms upon which we may raise any additional capital;

•

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

•

developments or disputes concerning our proprietary rights;

•

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

•

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 stocks in particular, have experienced significant volatility that has

often been unrelated to the operating performance of particular companies. The financial markets continue to face significant uncertainty, resulting in a decline in investor confidence and concerns about the proper functioning of the securities markets, which decline in general investor confidence resulted in depressed stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects. These broad market fluctuations may adversely affect the trading price of our common stock. In the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Any such litigation brought against us could result in substantial costs, which would hurt our financial condition and results of operations and divert management’s attention and resources, which could result in delays of our clinical trials or our development and commercialization efforts.

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

Our executive officers and directors and holders of greater than five percent of our outstanding voting stock, together with entities that may be deemed affiliates of, or related to, such persons or entities, beneficially owned approximately 49.7 percent of our voting power as of August 1, 2011. As a result, these stockholders, acting together, may be able to control our management and affairs and matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership may have the effect of delaying, deferring or preventing a change in control, including a merger, consolidation, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control, which might affect the market price of our common stock.

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

Our Board of Directors has the authority to issue up to 5,000,000 shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by the stockholders, which authority could be used to adopt a “poison pill” that could act to prevent a change of control of Seattle Genetics that has not been approved by our Board of Directors. The rights of the holders of common stock may be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control of Seattle Genetics without further action by the stockholders and may adversely affect the voting and other rights of the holders of common stock. Further, certain provisions of our charter documents, including provisions eliminating the ability of stockholders to take action by written consent and limiting the ability of stockholders to raise matters at a meeting of stockholders without giving advance notice, may have the effect of delaying or preventing changes in control or management of Seattle Genetics, 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.

Item 6.

Exhibits


Number		Description

3.1(1)		Fourth Amended and Restated Certificate of Incorporation of Seattle Genetics, Inc.

3.2(2)		Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation of Seattle Genetics, Inc.

3.3(3)		Amended and Restated Bylaws of Seattle Genetics, Inc.

4.1(4)		Specimen Stock Certificate.

4.2(5)		Form of Common Stock Warrant.

4.3(1)		Investor Rights Agreement dated July 8, 2003 among Seattle Genetics, Inc. and certain of its stockholders.

10.1+†		Office Lease dated May 9, 2011 between Seattle Genetics, Inc. and WCM Highlands II, LLC.

10.2+†		Third Amendment to Lease dated May 9, 2011 between Seattle Genetics, Inc. and B&N 141-302, LLC

10.3+		Amended and Restated 2000 Employee Stock Purchase Plan, effective May 20, 2011.

10.4+		Form of Notice of Stock Option Grant and Stock Option Agreement for non-employee directors under the Amended and Restated 2007 Equity Incentive Plan.

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+(6)		XBRL Instance Document

101.SCH+(6)		XBRL Taxonomy Extension Schema Document.

101.CAL+(6)		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF+(6)		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB+(6)		XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE+(6)		XBRL Taxonomy Extension Presentation Linkbase Document.

(1)	Previously filed as an exhibit to the Registrant’s quarterly report on Form 10-Q for the quarter ended September 30, 2008 filed with the Commission on November 7, 2008 (File No. 000-32405) and incorporated herein by reference.

(2)	Previously filed as an exhibit to the Registrant’s current report on Form 8-K filed with the Commission on May 26, 2011 (File No. 000-32405) and incorporated herein by reference.

(3)	Previously filed as an exhibit to the Registrant’s quarterly report on Form 10-Q for the quarter ended June 30, 2003 filed with the Commission on August 12, 2003 (File No. 333-50266) and incorporated herein by reference.

(4)	Previously filed as an exhibit to the Registrant’s registration statement on Form S-1 (File No. 333-50266) originally filed with the Commission on November 20, 2000, as subsequently amended, and incorporated herein by reference.

(5)	Previously filed as an exhibit to the Registrant’s current report on Form 8-K filed with the Commission on May 15, 2003 (File No. 333-50266) and incorporated herein by reference.

(6)	Pursuant to applicable securities laws and regulations, the Registrant is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of the federal

securities laws as long as the Registrant has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fails to comply with the submission requirements. These interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act, are deemed not filed for purposes of section 18 of the Exchange Act and otherwise are not subject to liability under these sections.

+	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.

SIGNATURES

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.


SEATTLE GENETICS, INC.

By:		/s/ T ODD E. S IMPSON
		Todd E. Simpson
		Duly Authorized and Chief Financial Officer

Date: August 5, 2011

EXHIBIT INDEX


Number		Description

3.1(1)		Fourth Amended and Restated Certificate of Incorporation of Seattle Genetics, Inc.

3.2(2)		Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation of Seattle Genetics, Inc.

3.3(3)		Amended and Restated Bylaws of Seattle Genetics, Inc.

4.1(4)		Specimen Stock Certificate.

4.2(5)		Form of Common Stock Warrant.

4.3(1)		Investor Rights Agreement dated July 8, 2003 among Seattle Genetics, Inc. and certain of its stockholders.

10.1+†		Office Lease dated May 9, 2011 between Seattle Genetics, Inc. and WCM Highlands II, LLC.

10.2+†		Third Amendment to Lease dated May 9, 2011 between Seattle Genetics, Inc. and B&N 141-302, LLC

10.3+		Amended and Restated 2000 Employee Stock Purchase Plan, effective May 20, 2011.

10.4+		Form of Notice of Stock Option Grant and Stock Option Agreement for non-employee directors under the Amended and Restated 2007 Equity Incentive Plan.

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+(6)		XBRL Instance Document

101.SCH+(6)		XBRL Taxonomy Extension Schema Document.

101.CAL+(6)		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF+(6)		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB+(6)		XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE+(6)		XBRL Taxonomy Extension Presentation Linkbase Document.

(1)	Previously filed as an exhibit to the Registrant’s quarterly report on Form 10-Q for the quarter ended September 30, 2008 filed with the Commission on November 7, 2008 (File No. 000-32405) and incorporated herein by reference.

(2)	Previously filed as an exhibit to the Registrant’s current report on Form 8-K filed with the Commission on May 26, 2011 (File No. 000-32405) and incorporated herein by reference.

(3)	Previously filed as an exhibit to the Registrant’s quarterly report on Form 10-Q for the quarter ended June 30, 2003 filed with the Commission on August 12, 2003 (File No. 333-50266) and incorporated herein by reference.

(4)	Previously filed as an exhibit to the Registrant’s registration statement on Form S-1 (File No. 333-50266) originally filed with the Commission on November 20, 2000, as subsequently amended, and incorporated herein by reference.

(5)	Previously filed as an exhibit to the Registrant’s current report on Form 8-K filed with the Commission on May 15, 2003 (File No. 333-50266) and incorporated herein by reference.

(6)

Pursuant to applicable securities laws and regulations, the Registrant is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Registrant has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fails to comply with the submission requirements. These interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act, are deemed not filed for purposes of section 18 of the Exchange Act and otherwise are not subject to liability under these sections.

+	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.

Exhibit 10.1

OFFICE LEASE

REFERENCE DATE: May 9 ^th , 2011.

This Lease (this “Lease”) is made and entered into by and between WCM HIGHLANDS II, LLC, a Washington limited liability company (“Landlord”) and SEATTLE GENETICS, INC., a Delaware corporation (“Tenant”).

1.	BASIC TERMS.

This Section sets forth certain basic terms of this Lease for reference purposes. This Section is to be read in conjunction with the other provisions of this Lease and if there is any inconsistency between this Section and the other provisions of this Lease, this Section shall control.


Premises (see §2)		Term (see §2)
Suite #	Entire RidgePoint Building	Lease Term (months)	84
Building Address	21717 30 ^th Drive SE	Lease Commencement	7/1/2011
City	Bothell	Base Rent Commencement	4/1/2012
State	Washington	Lease Expiration	6/30/2018
Zip Code	98021	Renewal Options: See §1A


Rentable Area (SF) (see §2)	Premises: First Floor Second Floor Total	40,500 40,500 81,000
Operating Expenses (see §5)	Tenant Share of Total	100%
Permitted Uses	Scientific research and development laboratory and general office uses, and no other
Guarantors	None


Rent (see §§4,9)	Start Date	End Date	Base Rent Per RSF/Yr	Base Rent Per Month
	7/1/2011	3/31/2012	$[***] Fully Abated	$[***] Fully Abated
	4/1/2012	6/30/2012	$[***]	$[***]
	7/1/2012	6/30/2013	$[***]	$[***]
	7/1/2013	6/30/2014	$[***]	$[***]
	7/1/2014	6/30/2015	$[***]	$[***]
	7/1/2015	6/30/2016	$[***]	$[***]
	7/1/2016	6/30/2017	$[***]	$[***]
	7/1/2017	6/30/2018	$[***]	$[***]


Utilities Start Date	Mutual execution and delivery of this Lease
Full Share of Operating Expenses Start Date	July 1, 2011
Prepaid Rent	$[***]
Security Deposit	$[***]
Brokers (see §18.3):	Company	Agents
For Tenant	Jones Lang LaSalle	Bob Mooney, Hans Kemp
For Landlord	Pacific Real Estate Partners	Daniel Seger, Mark Flippo

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

Addresses for Notices & Rent (see §18.1):


Landlord:
Name		WCM Highlands II, LLC
		c/o Washington Capital Management, Inc.
Address		1301 5 ^th Avenue, Suite 1500
		Seattle, WA 98101
Phone		206-382-0825
Fax		206-340-0142


Property Manager:
		GVA KIDDER MATHEWS
Address		500 – 108 ^th Avenue NE, Suite 2400
		Bellevue, WA 98004
Phone		425-283-5778
Fax		425-283-5793


Rent Payments to be sent to:
Name		WCM HIGHLANDS II, LLC
Address		P.O. Box 34860
		Seattle, WA 98124

Tenant Notice Address:


	Prior to Commencement	After Commencement
Address	21823 30 ^th Avenue SE	At the Premises
	Bothell, WA 98021
Phone	425-527-4000
Fax	425-527-4109


Insurance – Parties to be named as Additional Insured (see §10.1):
Landlord:		WCM HIGHLANDS II, LLC
Property Manager:		GVA Kidder Mathews
Lender/Mortgagee:		None at this time
WCM:		Washington Capital Management, Inc.

Exhibits. The following exhibits are a part of this Lease.



EXHIBIT A		Legal Description
EXHIBIT B		Intentionally Omitted
EXHIBIT C		Work Letter
EXHIBIT D		Rules and Regulations
EXHIBIT E		Tenant’s ERISA Certificate
EXHIBIT F		List of Equipment Tenant is Permitted to Remove
EXHIBIT G		Proposed Space Plan
EXHIBIT H		Disclosure of Hazardous Materials

1A. Special Lease Terms, if any. The following additional Lease terms shall apply. To the extent of any inconsistency between this Section 1A and the other provisions of the Lease, this Section 1A shall control.

Required Delivery Condition . Landlord shall deliver possession of the Premises to Tenant following mutual execution of this Lease in AS-IS condition except that Landlord will spend up to $[***] (the “Repair Fund”) on repairs to building systems and structures previously identified by Tenant, specifically, repairs to the [***].

Abatement of Tenant’s Share of Operating Expenses . Notwithstanding the provisions of Section 5, during the period from mutual execution of this Lease through [***], Tenant’s share of Operating Expenses shall be abated and Tenant shall pay only for utilities provided to the Premises commencing on the date of mutual execution and delivery of this Lease.

Cap on Management Fee. The management fee included in Operating Expenses shall not exceed [***]% of net rental income of the Building.

Janitorial Services . Tenant shall separately contract and pay for all janitorial services to the Premises and shall cause such services to be provided to the standard customary in a first class office building.

Audit Rights . Landlord shall permit Tenant the right, once per operating year, to audit Landlord’s operating statement showing Tenant’s Share of the Operating Expenses for the year. The cost of such audit shall be paid by Tenant unless the audit shows that Landlord has misstated Tenant’s Share of the Operating Expenses by more than five percent, in which case Landlord shall pay all reasonable costs of audit; provided, however, that the audit not be performed on a “contingency” basis or other basis under which the auditor is paid a share of any cost discrepancy discovered.

Options to Extend. Provided that Tenant is not in default after receipt of notice and expiration of any applicable cure period at the time of exercise or at commencement of the Option Term (unless the default is cured within any applicable cure period), and provided that Tenant has not failed to pay Base Rent when due under this Lease [***] during the prior [***], regardless of whether that default was cured within the applicable cure period, then Tenant shall have [***] options to extend the Lease Term (each, an “Extension Option”) for a period of [***] (each an “Option Term”) each, upon the same terms and conditions as are set forth in the Lease, except that Base Rent shall be adjusted as described below and the provisions of this Lease regarding Base Rent, abatement of Base Rent and abatement of Tenant’s Share of Operating Expenses, TI Allowance, Lobby Area Allowance and space planning allowance shall not be applicable. The Extension Options shall be exercised, if at all, by written notice to Landlord at least [***] prior to the expiration of the then existing Term. The Extension Options are personal to Tenant (except they may be transferred in connection with related party transfers addressed below in this Section 1.A) and may not be exercised by any other assignee or sublessee and may not be exercised during any period that the entire Premises is subleased out by Tenant (unless to a related party as set forth below). The exercise of each Extension Option shall extend the Lease for the entire Premises.

Extension Rent . If Tenant exercises an Extension Option, the Base Rent schedule for the Option Term shall be equal to the then Fair Market Rent including a fair market rate of escalation during the Option Term. As used herein “Fair Market Rent” shall mean the market rent for a [***] . Fair Market Rent shall take into consideration, the improvements paid for by Landlord via the TI Allowance and the Lobby Area Allowance. Fair Market Rent shall not take into consideration the value of any tenant improvements paid for solely by Tenant except that it shall include the portion of the tenant improvements paid for by Tenant which represent the dollar value of the abated Base Rent. If there are not five comparable leases of similar size leased spaces in the Canyon Park/Bothell submarket, the market shall be expanded to include the greater Redmond/Kirkland market, as adjusted to reflect the Canyon

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

Park/Bothell submarket. Tenant’s estimate of the Fair Market Rent shall be included with Tenant’s option exercise notice. Landlord shall give Tenant notice of Landlord’s estimate of the Fair Market Rent within [***] days after receipt of Tenant’s notice and thereafter the parties shall use good faith efforts to reach agreement on the Base Rent schedule for the Option Term within [***] after receipt of Landlord’s estimate. If the parties do not reach agreement on the Fair Market Rent within [***], then each party shall select a real estate appraiser with an MAI designation and at least [***] full-time commercial real estate appraisal experience in the office/high-tech industrial market (including laboratory space) in the Bothell/Canyon Park area and those two appraisers shall meet and work in good faith to reach agreement on the Fair Market Rent. If they reach agreement, then their decision shall be binding on the parties. If the two appraisers aren’t able to reach agreement within [***] after their selection, then the first two appraisers shall (a) put in writing their determination of the Fair Market Rent (the “Landlord’s Rent Proposal” and the “Tenant’s Rent Proposal”, respectively), and (b) jointly select a third appraiser with the qualifications described above. Within [***] after the selection of the third appraiser, the third appraiser shall determine which of the first two appraiser’s determinations most closely approximates what the third appraiser believes to be the Fair Market Rent. The Fair Market Rent established by the third appraiser shall be determined no later than [***] after engagement and shall be binding on the parties. Each party shall pay the cost of its appraiser and half the cost of the third appraiser.

Early Entry for Construction. Commencing upon mutual execution of this Lease, Tenant may enter the Premises to construct Tenant’s Work (as defined in Section 2.5) in accordance with the Work Letter attached as Exhibit C to this Lease. During such early entry period, all the provisions of the Lease shall apply other than the payment of Base Rent and Tenant’s Share of Operating Expenses, however, Tenant shall pay all utilities and any costs directly related to construction and occurring during the construction period until the Commencement Date.

Related Party Transfers . Notwithstanding the provisions of Section 11.1, Tenant shall not be required to obtain Landlord’s consent to assign the Lease to (i) a company wholly owned by Tenant, or (ii) a company under common control with Tenant, or (iii) a company that acquires Tenant or into which Tenant is merged [***] (a) [***], (b) a description of the proposed use of the Premises by the Transferee, (c) a summary of the terms of the proposed Transfer, (d) past three years plus current financial statements, if not publicly available, and the most recent filed federal income tax return of the proposed Transferee, and (e) a summary of the proposed Transfer documents all prior to the effective date of the assignment unless such transaction has not been made public and in that case, within [***] after such public announcement. Notwithstanding any other provision of this Lease, a public offering, sale or transfer of equity in the Tenant entity, whether characterized as common or preferred stock or any other ownership interest conducted in accordance with Securities Act of 1933, as amended, shall not require Landlord’s consent pursuant to this Section. No such assignment shall release Tenant from its obligations hereunder except in the case of a merger or acquisition in which Tenant is not the surviving entity. Sections 11.1, 11.5, 11.6 and 11.7 shall not apply to transfers permitted under this paragraph where Landlord’s consent is not required.

Exterior Building Signage. Subject to City of Bothell rules and regulations, Canyon Park Business Owners Association Covenants and approvals and Landlord’s reasonable approval, Tenant shall have the right to a sign on the Building façade at Tenant’s expense. Tenant shall have the right to select the exterior signage size, design and application subject to local codes, the Canyon Park Business Owners Association Covenants and approvals, published sign criteria and Landlord’s reasonable approval. Any exterior sign shall be located on the portion of the Building leased by Tenant. Prior to expiration or termination of this Lease, Tenant shall remove the sign and repair the installation area so that the function and appearance of the affected area is indistinguishable from the surrounding area (including removal of adhesive materials, patching and painting (if requested) the area to achieve such condition and appearance). Landlord shall be entitled to post signage on the Building exterior and elsewhere on the Project offering any available space in the Building for lease or sale and will work with Tenant to minimize the impact to Tenant in marketing such space.

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

Tenant Improvements; TI Allowance. Subject to and in accordance with the detailed provisions set forth in the Work Letter, Landlord agrees to provide a tenant improvement allowance of up to $[***] per rentable square foot (the “TI Allowance”) to be applied toward the construction of improvements which are part of Tenant’s Work, as reasonably approved by Landlord, including a [***].

Lobby Area Upgrades and Lobby Area Allowance. Subject to and in accordance with the detailed provisions set forth in the Work Letter, Landlord shall also provide an additional allowance of $[***] (“Lobby Area Allowance”) for Landlord approved improvements to the core of the Building and the general area of the first floor of the Building which would be shared during periods that the Building is occupied by multiple tenants, including the [***] (“Lobby Area Upgrades”), all such items to be included in the Approved Final Plans.

Specialized Equipment. With Landlord approval, Tenant shall have the right to install (but shall not have the right to have the TI Allowance apply to) specialized improvements and equipment necessary for the operation of its intended use, including but not limited to, glass wash, autoclave, purified water system, central vacuum, nitrogen gas, fume hoods, cold rooms, warm rooms, freezers, and NMR, emergency generator and security systems. Any such items paid for solely by Tenant, and not by application of the TI Allowance, shall remain the property of Tenant and may be removed at the end of the Term, as it may be extended, so long as Tenant fully repairs and restores any affected portion of the Premises. The cost of the foregoing equipment shall not be included in the calculation of the amounts funded by Tenant under Section F.4. of the Work Letter.

Potential Reduction in TI Allowance. The TI Allowance is subject to reduction if Tenant does not fund its required amounts of Eligible Costs as further described in Section F.4. of the Work Letter.

Space Plan . Landlord and Tenant have agreed to the proposed space plan attached hereto as Exhibit G, which provides some information on the planned tenant improvements to the second floor of the Premises and Lobby Area Upgrades. Such proposed space plan and all details of such work shall be finalized and the Approved Final Plans described in the Work Letter.

Bidding and Approval of Contractor and Architect . Tenant shall competitively bid the costs of construction and select its own architect and union contractors and subcontractors. Such architect and union contractors/subcontractors must be reasonably approved by Landlord. The parties hereby agree that Stock and Associates, Lease Crutcher Lewis, and GLY are acceptable architects and contractors, as the case may be. Tenant shall have the right to contract directly with the general contractor and all vendors and subcontractors.

Removal of Improvements . At the time Landlord approves Tenant’s Work (as described in the “Approved Final Plans” in the Work Letter), Landlord will notify Tenant whether it will be required to remove any specialized improvements shown in those plans and restore the affected space upon vacating. If Landlord does not notify Tenant at such time, it shall be assumed that Landlord requires Tenant’s removal of such improvements. Upon expiration of the Lease or earlier termination of the Lease, Tenant shall have the right to remove its fixed equipment not funded by the TI Allowance (equipment paid for and installed by Tenant) and any other mutually agreed equipment. Exhibit F hereof is a list of equipment Tenant is permitted to remove at the end of the Term as of the date of this Lease. Tenant shall repair all damage to the Premises associated with the removal of such equipment, reasonable wear and tear excepted. Landlord’s consent, not to be unreasonably withheld, conditioned or delayed, is required to amend Exhibit F including listing any additional improvements.

Restoration of First Floor Common Areas . Prior to Tenant’s surrender of the Premises to Landlord, Tenant, at Tenant’s expense, shall install a second set of restrooms on the first floor comparable to the then existing restrooms and will reconfigure the front entry area appropriate for multi-tenant use, in accordance with plans and specifications to be approved by Landlord.

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

Hazardous Materials Storage . Tenant shall be permitted to have secured areas within the Premises and a secured area outside the Building for the storage of Hazardous Materials subject to Landlord’s approval of all aspects of such storage areas and subject to strict compliance with Section 17 below, including but not limited to any applicable federal, state or local laws, regulations or codes referenced therein.

Parking; Bike Shelter. Tenant shall have the right to use the parking areas on the Project free of charge throughout the Lease Term and any extensions thereof. Tenant shall have the right to construct a bicycle shelter near the rear of the Building in one of the parking stalls in a mutually agreeable location of the parking lot at no additional charge; provided, however, that the installation of such bicycle shelter shall not violate any zoning regulation, permit condition, or other use restriction applicable to the Project (defined in Section 2.1).

Generator . Tenant shall have the right to place a generator for stand-by power in a mutually agreeable location of the parking lot at no additional charge provided, however, that the installation of shall not violate any zoning regulation, permit condition, or other restriction applicable to the Project. The pad shall be constructed by Tenant in accordance with plans approved in advance by Landlord, which plans shall including fencing and such curbing as is necessary to contain any fuel spill. Tenant may install on the pad a backup generator and fuel tank (collectively, the “Generator”), the make, model and design of which shall be subject to Landlord’s prior approval, which shall not be unreasonably withheld. To the extent that details of the Generator, pad and other matters related to the Generator are included in the Approved Final Plans, those details shall be approved at the same time as the balance of the Approved Final Plans. The design and operation of the Generator and pad shall be such as to avoid material interference with others. The Generator shall be used only for backup power and may not be used as a primary power source, nor may it be used by any other party. The Generator and pad shall be subject to all the terms of this Lease, including but not limited to Sections 8.3, 10, and 17, provided only that the square footage of the Generator pad shall not be included in the calculation of the area of the Premises. All costs of maintenance, repairs, upgrades, licenses or other expenses arising directly or proximately from the Generator shall be borne by Tenant. Upon expiration or earlier termination of the Lease, Tenant shall remove all improvements and equipment from the Generator pad and shall provide such studies or other information as is necessary to demonstrate to Landlord’s reasonable satisfaction that there has been no environmental contamination as a result of the storage and operation of the Generator and the fuel tank. At the election of Landlord provided no later than [***] before expiration of the Lease, Tenant shall be required to remove the Generator pad and shall restore the area to a clean, paved condition. Failure of Tenant to remove all improvements and equipment from the Generator pad and restore same to the extent directed by Landlord shall be deemed a holdover of the entire Premises until such removal is complete.

Broker Commissions. All parties recognize that Jones Lang LaSalle represented Tenant in the Lease negotiations and that Pacific Real Estate Partners represented the Landlord. Landlord shall pay a market standard real estate commission to Jones Lang LaSalle in the amount of $[***] for Years [***] of the Lease and in the amount of $[***] for Years [***] of the Lease, for a total commission of $[***]. No commission shall be paid for any rent abatement periods under the Lease or any extension terms. The terms and conditions of the commission shall be confirmed in a separate commission agreement between Landlord and Jones Lange LaSalle, upon terms and conditions acceptable to Landlord. Payment of the commission shall be 50% upon mutual execution of this Lease and [***]% upon the Commencement Date. Pacific Real Estate Partners compensation shall be pursuant to its listing agreement with Landlord.

Security Deposit in Investment Account . Tenant shall be allowed to place the Security Deposit in an investment account with a third party mutually agreed upon by the parties, which shall include Kunath, Karren, Rinne & Atkin, Inc. so long as the documentation is comparable to the documentation required by the landlord on Tenant’s lease at 21823 30 ^th Avenue SE and Tenant pays all of Landlord’s out of pocket expenses in connection with such documentation. All earnings on the Security Deposit shall accrue to the benefit of Tenant and shall be added to the Security Deposit and returned to Tenant upon expiration or termination of the Lease unless Tenant is in default at the expiration or termination of the Lease, in which case such amount shall be held until such default has been cured.

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

See also: Section 17 regarding Hazardous Materials.

Landlord Repair Default . If Landlord is in default under this Lease for failing to make a required repair and if such failure results in a portion of the Premises to not be useable for a period of time during such default, the Rent shall abate on that unusable portion of the Premises for the period of the default.

2.	PREMISES

2.1. Premises. The “Premises” shall be all of the area in the Building. The Building is located on the real property described in Exhibit A (together with all improvements thereon, the “Project”). Landlord hereby leases the Premises to Tenant on the terms of this Lease, but reserving to Landlord, the right to install, maintain, use, repair, relocate and replace stacks, pipes, ducts, conduits, wire and utilities leading through the Premises in locations which do not materially interfere with Tenant’s use thereof. Tenant shall have access 24 hours per day, subject to closures for emergencies, repairs, similar matters and matters outside Landlord’s control; provided, that such closures shall be appropriate for the specific matter and limited only to the space and time reasonably required to handle such matter.

2.2. Roof and Exterior Areas. Tenant shall not store anything outside the Premises, including equipment or materials, except as expressly permitted in this Lease (for example, the Generator) and except for bicycles and company passenger vehicles located in a mutually agreeable location. Subject to any specific access provisions elsewhere in this Lease, Tenant shall not permit any employee, contractor or guest onto the roof of the Building.

2.3 Parking . Landlord grants to Tenant and Tenant’s employees and invitees during the term of this Lease, a license to use the parking areas on the Project, at no additional charge, for the parking of motor vehicles, for use for bicycle parking, the Generator Pad and outside Hazardous Materials storage during the term of this Lease. Landlord reserves the right at any time to grant use rights to others to the extent not inconsistent with Tenant’s above uses, to promulgate rules and regulations relating to the use of such parking areas, including changing the parking layout, and establishing reasonable time limits on parking, so long as such changes do not affect the number of stalls provided Tenant pursuant to the license above. Tenant shall be responsible for meeting any carpool/vanpool or other transportation obligations regarding its employees. Overnight parking for Tenant’s employees and agents shall be managed by Tenant in accordance with and subject to Landlord’s property manager’s policies and procedures for overnight parking. Landlord is not responsible for any theft of or damage to vehicles or their contents.

2.4 Acceptance of Condition. Landlord shall deliver possession of the Premises to Tenant following mutual execution of this Lease in the condition described in the paragraph in Section 1A entitled Required Delivery Condition . Subject to delivery in compliance with that paragraph, Tenant accepts the Premises in its condition as of the execution of the Lease, subject to all recorded matters, laws, ordinances, and governmental regulations. Tenant (a) acknowledges that neither Landlord nor any agent of Landlord has made any representation as to the condition of the Premises or the suitability of the Premises for Tenant’s intended use, and (b) warrants that Tenant has made its own inspection of and inquiry regarding the condition of the Premises and is not relying on any representations of Landlord or any broker with respect thereto, except as expressly set forth in this Lease, if any. By taking possession of the Premises, Tenant shall be deemed to have accepted the current condition of the Premises, subject to Landlord’s obligations described in Required Delivery Condition, and any alleged defects or deficiencies are waived.

2.5 Tenant’s Work . All initial improvements to the Premises, including Lobby Area Upgrades, are referred to as “Tenant’s Work” and shall be governed by Exhibit C.

2.6 Rules and Regulations. Tenant shall comply with the Rules and Regulations established by Landlord from time to time for the Project. The current Rules and Regulations are attached as Exhibit D. Notwithstanding anything to the contrary contained in this Lease or any Rule or Regulation, in the event of any direct conflict between the Rules and Regulations and the terms of this Lease, this Lease shall govern.

3.	LEASE TERM

The term of this Lease (the “Term”) shall commence (the “Commencement Date”) on July 1, 2011. If requested by Landlord, Tenant will sign an acknowledgement of the Commencement Date, the date(s) that Tenant’s payments of Base Rent and Tenant’s Share of Operating Expenses occur, and related information.

4.	BASE RENT

Commencing on April 1, 2012, and continuing on the first day of each month thereafter, Tenant shall pay Landlord the Base Rent stated in Section 1, in advance, without offset, deduction or demand. The Base Rent shall be paid to the address specified by Landlord. All charges payable by Tenant other than Base Rent are “Additional Rent”. Unless this Lease provides otherwise, Tenant shall pay all Additional Rent then due with the next monthly installment of Base Rent. The term “Rent” means Base Rent and Additional Rent. Rent for any partial month shall be prorated and the Base Rent for April1, 2012 shall be paid on execution of this Lease by Tenant. Landlord shall have all of the same remedies for Tenant’s failure to pay Additional Rent as for failure to pay Base Rent.

5.	ADDITIONAL RENT

5.1 Tenant’s Share of Operating Expenses. Commencing on July 1, 2011, Tenant shall pay Landlord each year Tenant’s Share of Operating Expenses for that year, prorated for any partial year in the Term. Each year, Landlord shall give Tenant written notice of the estimated amount and on first day of each month Tenant shall pay Landlord 1/12 ^th of the annual estimate. Landlord may revise its estimate during the year with subsequent payments based upon the revised estimate. After the close of each year, Landlord will provide a statement showing Tenant’s Share of Operating Expenses for such year, the payments made during the year and any balance due or credit owing. Landlord will use commercially reasonable efforts to provide the statement within [***] after the end of the year. Tenant shall pay any balance owing within [***] after receipt of the statement, and any credit due Tenant shall be credited to Tenant’s next monthly estimated payment or if the Lease has terminated or expired, it shall be promptly refunded to Tenant.

5.2 Operating Expenses Definitions. The following terms shall have the following meanings:

Operating Expenses. “Operating Expenses” shall mean all costs incurred by Landlord in connection with the Project including insurance, utilities, Real Property Taxes, Project Work (Section 7.2), repairs, operation, maintenance and replacements, management fees and including amortization of capitalized items over the useful life of such items in accordance with generally accepted accounting principles with interest at the Prime Rate published by the Wall Street Journal (the “Prime Rate”) plus [***]% per annum. Notwithstanding anything to the contrary contained in this Lease, the following shall not be included within Operating Expenses:

Leasing commissions, attorneys’ fees, and other expenses incurred in connection with negotiations or disputes with tenants, or in connection with leasing, renovating, or improving space for tenants or other occupants or prospective tenants or other occupants of the Project.

The cost of any special service provided to any tenant (including Tenant) for which a separate charge is made.

Any depreciation on the Project.

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

Except for the amortized portion thereof (using the useful life of a given capital item and interest at the Prime Rate plus [***]% per annum), costs of a capital nature, including but not limited to capital improvements and alterations, capitalized equipment, capital repairs, as determined in accordance with generally accepted accounting principles.

Overhead profit increments paid to Landlord’s subsidiaries or affiliates for management or other services on or to the building or for supplies or other materials to the extent that the cost of the services, supplies, or materials exceeds the cost that would have been paid had the services, supplies, or materials been provided by unaffiliated parties on a competitive basis.

All interest, loan fees, and other carrying costs related to any mortgage or deed of trust or related to any capital item, and all rental and other payable due under any ground or underlying lease.

Advertising and promotional expenditures.

Costs of repairs and other work occasioned by fire, windstorm or other casualty of an insurable nature to the extent Landlord has received insurance proceeds to pay for the repairs.

Any costs, fines, or penalties incurred due to violations by Landlord of any governmental rule or authority, this Lease or any other lease in the Project.

Management fees in excess of [***]% of net rental income from the Project.

The cost of correcting any building code or other violations which were violations prior to the Commencement Date of this Lease.

The cost of containing, removing, or otherwise remediating any contamination of the Project (including the underlying land and ground water) by any toxic or Hazardous Materials where such contamination was pre-existing on the Commencement Date and was not caused by Tenant Parties (defined in Section 10.3).

Costs for sculpture, paintings, or other objects of art.

Wages, salaries, or other compensation paid to any executive employees above the grade of project manager.

If the Wall Street Journal ceases publishing a Prime Rate, then the Prime Rate announced by Bank of America, or its successors shall be used.

Real Property Taxes : “Real Property Taxes” shall mean all current and future taxes, governmental charges and assessments (including local and special improvement districts) levied on the Project, or any improvements, fixtures and equipment and all other property of Landlord, real or personal, used in the operation of the Project; any taxes in addition to or in lieu of, in whole or in part, such taxes; any tax upon leasing or rents of the Project, including any sales or use taxes; any other governmental charge such as payments for transit or environmental facilities; and all costs and expenses incurred by Landlord in connection with the attempt to reduce any of the foregoing, whether by negotiation or contest but excluding any taxes assessed directly against Tenant, which shall be paid by Tenant. If the present method of taxation changes so that in lieu of or in addition to the whole or any part of any Real Property Taxes, there is levied on Landlord a tax directly on rents or a franchise tax, assessment, or charge based, in whole or in part, upon such rents or revenues, including any business and occupation tax to the extent specifically applied to the revenues of the Project, then all such taxes, assessments, or charges, or the part thereof so based, shall be deemed to be included within the term “Real Property Taxes” for purposes

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

hereof. Real Property Taxes shall not include any franchise or state income tax, estate tax, or other similar tax, and shall not include any late payment penalties if Tenant has paid the amounts due under Section 5.1 as and when due.

5.3. Intentionally Omitted.

5.4 Utilities. Tenant shall pay the cost of all utilities provided to the Premises. Prior to the date Tenant commences any construction work in the Premises, Tenant shall arrange for all utilities services from the applicable supplier.

5.5 Net Lease . This Lease and the Base Rent are intended to be fully net of expenses incurred by Landlord in connection with the Project, except as expressly set forth in this Lease.

6.	USE; TENANT’S OPERATIONS

6.1 Permitted Uses. Tenant may use the Premises only for the Permitted Uses set forth in Section 1. Tenant shall not cause or permit the Premises to be used in any way which (a) violates any applicable governmental regulations, (b) annoys or interferes with the rights of others or Landlord, (c) constitutes a nuisance or waste, or (d) adversely impacts insurance. Tenant shall not conduct or permit any auctions or sheriff’s sales at the Premises or within the Premises, except for sales related to equipment funded solely by Tenant if Landlord consents in writing to same, or permit any portion of the Premises to be used for a “call center,” any other telemarketing use, or any credit processing use.

6.2 Signs/Auctions. So long as Tenant occupies the Premises, Tenant shall have the right to have its business name displayed on any reader board located in the Project lobby and/or in the elevator lobby on Tenant’s floor, and immediately outside the Premises, all in the Project standard size, typeface, materials and locations, as determined by Landlord. Tenant shall not place any other signs on the Premises or Project or within the Premises and visible from the exterior of the Premises without Landlord’s prior written consent. If Landlord has previously approved any signage, it must be shown on a Rider or Exhibit to this Lease, initialed by Landlord. Any details of Tenant’s signage included in the Approved Final Plans shall be considered approved when Landlord approves the Approved Final Plans.

6.3 Building Penetrations . Tenant shall not make any penetrations in the Building (roof, walls, foundations, etc.) without Landlord’s prior written consent, which consent shall not be unreasonably withheld. If Tenant is permitted to penetrate the Building, the consent shall be subject to Landlord’s conditions, including (a) Landlord’s approval of plans and specifications for the penetration and the contractor to perform it, (b) arrangements to insure that the penetration will not adversely affect any warranty, (c) Tenant’s agreement to reimburse Landlord for costs incurred in connection with any later problems which develop with the penetrated area, and (d) Tenant’s agreement to remove the equipment before the end of the Lease and completely seal the penetration to Landlord’s satisfaction and in compliance with any applicable warranty. In addition, depending on the seriousness of the penetration, Landlord may require Tenant to post a deposit to guarantee Tenant’s performance. To the extent that details of any penetrations are included in the Approved Final Plans, those details shall be approved at the same time as the balance of the Approved Final Plans and Tenant shall be responsible for insuring that the penetrations do not adversely affect any Landlord warranties and for costs in connection with any later problems which develop with the penetrated areas as well as the obligation to remove and re-seal the penetration unless Landlord agrees to allow the penetration to remain. If Tenant penetrates the building without Landlord’s written consent or violates the terms of the consent, Tenant shall be in default hereunder until and unless Tenant repairs such penetration to its pre-existing condition and if not done to Landlord’s satisfaction, Landlord may repair such penetration and Tenant shall reimburse Landlord for all costs related thereto.

6.4 Telecommunications Services.

6.4.1 Tenant. Tenant, at its expense, shall arrange for all telecommunications services desired by Tenant. Landlord will have no responsibility for the maintenance of Tenant’s telecommunications equipment and/or wiring (“Telecom Facilities”), or for any infrastructure to which it is connected. Landlord may include in Operating Expenses, or may charge Tenant the portion of all costs attributable to Tenant, in which case Tenant may apply the TI Allowance to such costs, in connection with: constructing and/or installing additional risers, conduit or equipment rooms to accommodate Tenant’s Telecom Facilities; providing cable pair assignments; computer equipment and/or software for maintaining records of line connections; third party cable management fees; fees of any consulting engineers or other experts Landlord engages for the effective management of Telecom Facilities or Tenant’s compliance with this Section 6.4.

6.4.2 Telecom Problems. Landlord will have no responsibility for any claims, costs or damages (“Telecom Claims”) in connection with, and Landlord does not warrant that Tenant’s use of its Telecom Facilities will be free from all of the following (collectively, “Line Problems”): (a) any shortages, failures, variations, interruption caused by (i) any failure of the environmental conditions or the power supply for the Building to conform to any requirements for Tenant’s Telecom Facilities, or (ii) any other problems associated with any of Tenant’s Telecom Facilities; (b) any failure of any Telecom Facilities to satisfy Tenant’s requirements; or (c) any eavesdropping or wire-tapping by unauthorized parties. The occurrence of any Line Problems shall not be considered an actual or constructive eviction of Tenant or relieve Tenant from performance of Tenant’s obligations under this Lease. Notwithstanding the foregoing, if Tenant’s equipment is damaged by the gross negligence or willful misconduct of Landlord (but not including Landlord’s agents), Landlord will reimburse Tenant for the cost of the damage not to exceed the lesser of $[***] or the amount of Tenant’s applicable property insurance deductible.

6.4.3 EMF. If Tenant’s Telecom Facilities create an electromagnetic field exceeding radiation limits permitted by FCC regulations, as now or hereafter amended (“FCC Regs”), Landlord may require Tenant to take any and all steps necessary to reduce radiation to levels permitted by the FCC Regs. Tenant will indemnify and hold Landlord harmless from all liability, costs and damages arising out of Tenant’s electromagnetic emissions, including any failure of Landlord to take any action in connection with such emissions. If Tenant’s Telecom Facilities and other Telecom Facilities located in the Project together exceed the radiation limits permitted by FCC Regs, Tenant will pay its share, as reasonably determined by Landlord, of all costs associated with safety measures taken by Landlord.

6.4.4 Alternative Provider. If Tenant wishes to utilize the services of a telecommunications provider whose equipment is not servicing the Building (an “Alternate Provider”), Tenant shall notify Landlord of the name of the Alternate Provider, the type of service to be provided, the equipment Alternate Provider wishes to install in the Building and any other information that Landlord reasonably requests. No Alternate Provider may install any equipment in the Building until Landlord has given its written consent, not to be unreasonably withheld. Landlord may require that the following conditions be met: (a) the Alternate Provider entering into a written agreement reasonably satisfactory to Landlord with all terms and conditions of the Alternate Provider’s access to the Project; (b) Landlord will incur no expense, including for installation, maintenance and service; (c) Landlord’s right to approve the location, plans and installation of all equipment and wiring; (d) before commencing any work in or about the Project, the Alternate Provider (1) supplies Landlord with indemnities, evidence of insurance, financial statements and other information Landlord deems reasonably necessary; and (2) agrees to abide by rules Landlord deems reasonably necessary to protect the Project and the interests of the other tenants; (e) Landlord has reasonably determined that there is sufficient roof, riser, conduit and/or equipment space for the Alternate Provider’s equipment and cabling; (f) the Alternate Provider is licensed, qualified to do business in the state where the Premises is located and has sufficient experience and financial strength to perform its obligations; and (g) the Alternate Provider agrees to compensate Landlord in the amount

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

reasonably determined by Landlord for the space used in the Building, unless this space is included in the Premises, and all costs that Landlord may incur in Alternate Provider’s equipment within the Building. The provisions of this Section may be enforced solely by Tenant and Landlord. No telephone or telecommunications provider shall be deemed a third party beneficiary of Section 6.4.

6.5 Compliance/Permits . Tenant shall obtain and pay for all permits related to its business and/or its specific use of the Premises. At its expense, Tenant shall comply with all laws, orders, ordinances and regulations of federal, state or other governmental authorities and with any direction made pursuant to law of any public officer with respect to the Premises or the use thereof, including any obligation to make alterations in the Premises required as a condition of Tenant’s use or occupancy.

7.	MAINTENANCE AND REPAIRS/LANDLORD SERVICES

7.1 Tenant’s Repairs. Except as provided in Section 1A (Special Lease Terms), Section 7.2 (Landlord’s Obligations), Section 12 (Damage or Destruction), and Section 13 (Condemnation), Tenant shall keep and maintain all portions of the Premises in good order, condition and repair, including, interior and exterior doors and windows, floors, lighting (including bulbs) and all fixtures and equipment in the Premises as well as Tenant’s generator and bike storage. Tenant’s repair and maintenance responsibility shall include replacement of equipment and components which are Tenant’s responsibility to maintain and repair and which can no longer be brought into good operating condition with repairs. If any part of the Project is damaged by any act or omission of Tenant, its agents, employees or invitees, Tenant shall pay the cost of repairing or replacing the damage. Tenant shall maintain the portions of the Premises which Tenant is obligated to maintain in an attractive and fully operative condition.

7.2 Landlord’s Obligations. Landlord shall be responsible for the maintenance and repairs to the exterior (the exterior of the Building as well as the improvements to the portions of the Project outside the Building) and structural portions of the Building as well as those portions of the building systems which Landlord from time to time elects to control the maintenance and repairs on (the “Project Work”). Landlord agrees to maintain its portion of the Project in a manner consistent with a high quality building within the Canyon Park/Bothell area in an attractive and fully operative condition. Project Work shall include the repair, maintenance and replacement of the roof and roof membrane, life safety, electrical, plumbing and other mechanical systems to the extent that Landlord elects to control such maintenance and repairs. If any Project Work is necessitated due to damage caused by Tenant, its agents or employees, Landlord may require Tenant to pay the cost of that work within [***] of receipt by Tenant of the invoice to the extent such cost is not covered by insurance carried by Landlord. Tenant waives the benefit of any present or future law which might give Tenant the right to repair the Premises at Landlord’s expense or to terminate the Lease due to the condition of the Premises.

7.3 Basic Services. Tenant shall arrange directly with the provider for all utilities to the Premises and shall pay the costs as and when due. Landlord may provide such security for the portions of the Project outside the Premises as it deems appropriate. Tenant shall provide security against unauthorized entry into the Building. Landlord shall not be liable to Tenant for injury to its agents, employees, customers or invitees, or for losses due to theft or burglary, or for damages done by unauthorized persons.

7.4 Intentionally Omitted.

7.5 Interruption of Service. Landlord does not warrant that any utilities or services will be free from interruption including by reason of accident, repairs, alterations, or other causes. No utility interruption shall be deemed an eviction or disturbance of Tenant, or render Landlord liable to Tenant for damages or relieve Tenant from the full and complete performance of all of Tenant’s obligations under this Lease; provided only that to the extent casualty damage renders the Premises untenantable, and loss of rents arising therefrom are covered by rental interruption insurance carried by Landlord, then and to that extent, rental on the Premises shall abate in the proportion that the portion of the Premises rendered untenantable bears to the total Premises.

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

8.	ALTERATIONS

8.1 Alterations Procedures. Also see Section 1.A . Following any work performed pursuant to Exhibit C, Tenant shall not make any alterations to the Premises without Landlord’s prior written consent, which shall not be unreasonably withheld so long as the alterations do not affect the structure, the exterior appearance of the Building or the Building systems. Landlord may condition its consent on various matters, including Tenant agreeing to remove the alterations and repair any resulting damage on Lease termination at Tenant’s cost, Tenant posting security for the estimated removal/repair cost, paying a construction management fee to Landlord or its agent, Landlord’s approval of the plans and specifications for the work, and use of union-affiliated contractors and subcontractors. Landlord may require Tenant to provide commercially reasonable lien waivers prior to commencement of the work. All alterations, additions, and improvements shall be done in a good and workmanlike manner, in conformity with all applicable laws and regulations, and by a contractor approved by Landlord. Landlord’s approval of the contractor shall not be unreasonably withheld so long as the contractor or person selected by Tenant to make the alterations and all subcontractors are signatory and in good standing with local unions (Landlord will work with Tenant to identify qualifying contractors and subcontractors and shall only grant an exemption to this requirement if no qualified contractor or subcontractor is available after diligent research). Upon completion of any such work, Tenant shall provide Landlord with “as built” plans, copies of all construction permits, contracts and approvals, and proof of payment for all labor and materials. Notwithstanding the above, Landlord’s consent shall not be required, but Tenant shall notify Landlord at least [***] days in advance for alterations not affecting building systems or building structure or exterior and costing less than $[***] per alteration or $[***] aggregate per year. The parties specifically agree that change in the location and configurations of cubicles are not considered alternations. At the time of requesting Landlord’s consent to alterations (or at the time of notice of Landlord’s consent is not required), Tenant may request that Landlord elect whether to require Tenant to remove such improvement or alteration upon expiration or termination of the Lease, and Landlord shall make such election at the time of granting consent or within [***] days of request if consent is not required. If Landlord fails to make an election, Landlord shall be deemed to have elected to have Tenant remove the alteration.

8.2 Mechanic’s Lien. Tenant shall have no express or implied authority to place any lien or encumbrance upon, Landlord’s interest in the Premises or to burden the Rent for any claim in favor of any person dealing with Tenant, including those who furnish materials or perform labor for any construction or repairs, and each such claim shall attach, if at all, only to Tenant’s leasehold interest. Tenant will cause to be paid when due all sums owed for any labor performed or materials furnished in connection with any work performed on the Premises for Tenant. Landlord may require Tenant to post a notice of Landlord’s non-responsibility with respect to the work prior to starting the work and Landlord shall similarly have the right to post such notices. If any lien is filed against the Project in connection with Tenant’s activities, Tenant shall, within [***] days after notice of the filing thereof, either (a) pay the amount of the lien and cause the lien to be released of record, or (b) diligently contest such lien and deliver to Landlord a bond or other security satisfactory to Landlord. If Tenant fails to timely take either such action, then Landlord may pay the lien claim, and any amounts so paid, including expenses and interest, shall be paid by Tenant to Landlord within ten days after Landlord has invoiced Tenant therefor.

8.3 Condition upon Surrender. Also see Section 1.A . Upon the termination of the Lease, Tenant shall remove all its personal property and surrender the Premises to Landlord, broom clean and in the same condition as received except for ordinary wear and tear which Tenant was not otherwise obligated to remedy under this Lease, including without limitation all electrical, plumbing and other mechanical systems for which Tenant has responsibility under Section 7.1 above in good operating condition and shall deliver all keys to the Building and Premises to Landlord. In addition, except to the

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

extent that Landlord provided its consent for a particular alteration to remain upon the expiration or termination of this Lease, Landlord may require Tenant to remove any alterations, except for the Tenant’s Work and Lobby Area Upgrades, made by Tenant and to restore the Premises to its prior condition, at Tenant’s expense. All alterations which Landlord does not require Tenant to remove shall become Landlord’s property and shall be surrendered to Landlord on termination of the Lease, except that Tenant may remove any of Tenant’s machinery or equipment which can be removed without material damage to the Premises. Tenant shall repair, at Tenant’s expense, any damage to the Premises caused by the removal of any such machinery or equipment. Notwithstanding anything in this Section to the contrary, Tenant shall not remove any fixtures or equipment considered a part of the real property without Landlord’s prior written consent or unless required by Landlord. Such items shall include: any wiring; power panels, lighting or lighting fixtures; wall coverings; drapes, blinds or other window coverings; floor coverings. Telecommunications and data cabling shall not be considered part of the real estate and Landlord may elect either to require Tenant to remove it or leave it in place. All property required by Landlord to be removed from the Premises at the end of the Term and which remains after Tenant vacates, shall be deemed abandoned and may, at the election of Landlord, be retained as Landlord’s property, or may be removed from the Premises by Landlord at Tenant’s expense and either disposed of or stored at Tenant’ expense. Tenant waives any claim against Landlord for damage to or disposal of any personal property removed from the Premises by Landlord.

9.	SECURITY DEPOSIT

Upon execution of this Lease, Tenant shall deposit with Landlord the Security Deposit specified in Section 1, which may be deposited in an investment account in accordance with Section 1A. If a default continues beyond any applicable notice and cure period, Landlord may apply all or part of the Security Deposit to any unpaid Rent or to cure any other defaults of Tenant. If Landlord uses any part of the Security Deposit, Tenant shall restore the Security Deposit to its original amount within [***] after Landlord’s written request. Tenant’s failure to do so shall be a default under this Lease and the overdue amount shall accrue interest as any delinquent payment. If [***], late charges are assessed against Tenant by Landlord, Landlord may, by written notice to Tenant, require Tenant to pay Landlord an amount equal to [***] months Base Rent as an increase in the Security Deposit, due within [***] days after Tenant’s receipt of the notice. If Landlord transfers its interest in the Premises, Landlord shall transfer the Security Deposit to its successor in interest, whereupon Landlord shall be automatically released from any liability for the return of the Security Deposit. At the end of the Term, the remaining Security Deposit shall be returned to Tenant after Landlord has verified that Tenant has fully vacated the Premises, removed all of its property and surrendered the Premises in the condition required and otherwise Tenant is not in default in under any provision of this Lease; provided that Landlord may hold back a portion of the Security Deposit until final determination of Tenant’s Share of Operating Expenses due hereunder, whereupon any final adjustment shall be made and any remaining Security Deposit shall be returned to Tenant. Landlord’s obligations with respect to the Security Deposit are those of a debtor and not of a trustee. Unless the Security Deposit is in an investment account held by a third party, Landlord may commingle the Security Deposit with Landlord’s general funds and no interest shall be paid to Tenant on the Security Deposit.

10.

INSURANCE/INDEMNITY

10.1 Tenant’s Insurance. At its expense, Tenant shall obtain and maintain at all times during the term of this Lease: (a) commercial general liability insurance, with completed operations coverage, with limits of at least $[***] per occurrence and $[***] general aggregate, or such higher amounts as Landlord may from time to time reasonably designate on not less than [***] days’ notice to Tenant, consistent with insurance levels required by prudent landlords for similar projects and uses in the area, containing an aggregate per location endorsement during periods that Tenant’s general aggregate limit is less than $[***], a contractual liability endorsement covering the matters set forth in Section 10.3, and primary with regard to the Premises [***] and shall not contain deductibles or self-insured retentions

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

exceeding the following limits: (a) up to $[***] if Tenant’s then net worth is less than $[***], (b) up to $[***] if Tenant’s then net worth is less than $[***], (c) up to $[***] if Tenant’ net worth is less than $[***], and (d) up to $[***] if Tenant’s net worth is greater than $[***]. The policies shall contain waivers of subrogation with regard to Landlord and the other additional insureds listed in Section 1. The liability policy shall be on an occurrence form and name the entities listed in Section 1 as additional insureds, as their interests may appear. All insurers shall agree not to cancel or amend (including as to scope or amount of coverage) such policies without at least [***] prior written notice to Tenant. Tenant shall give Landlord at least [***] prior written notice of any such cancellation or amendment, unless such amendment is to increase the scope and or coverage provided under such polices. Tenant shall furnish Landlord with certificates of insurance evidencing the above coverages upon request during the Term as well as a copy of the additional insured endorsement. If Tenant manufactures on the Premises consumer goods, Tenant’s insurance shall include products liability insurance in the amounts specified for commercial general liability insurance.

10.2 Landlord’s Insurance . As part of Operating Expenses, Landlord shall maintain (a) special causes of loss form replacement cost insurance on the Building; (b) commercial general liability insurance insuring Landlord; (c) rental loss insurance; and (d) such other insurance as Landlord elects to carry. The liability insurance obtained by Landlord shall be excess, secondary and non-contributory and Tenant’s insurance shall be primary. Landlord shall not obtain insurance for Tenant’s fixtures or equipment or Tenant’s other property. Operating Expenses shall include the deductibles on Landlord’s coverage. Tenant shall not do or permit anything to be done which invalidates Landlord’s insurance policies or increases the premiums and any such increase shall be paid by Tenant.

10.3 Indemnity. Subject to Landlord’s release in Section 10.4.2, Tenant shall indemnify and defend (using legal counsel acceptable to Landlord) all Landlord Parties (defined below) from any claims, costs (including attorneys’ fees and other litigation costs) or damages (collectively, “Claims”) arising in connection with (a) the occupancy or use of the Premises by Tenant Parties (defined below) and customers, including any work undertaken or contracted for by Tenant; (b) Tenant’s breach of this Lease, (c) any negligent or wrongful act or omission of Tenant Parties or customers; (d) any accident, injury, occurrence or damage in or about the Premises but excluding claims for physical damage to persons or property to the extent caused by Landlord’s gross negligence or willful misconduct or breach of this Lease by Landlord; and (e) any Claim against Landlord by any employee or former employee of Tenant for matters arising in connection with the Premises but only to the extent that any such Claim is not caused by or the result of breach of this Lease by Landlord. Tenant agrees that the provisions of any employee injury insurance act, including Title 51 of the Revised Code of Washington, or any other employee benefit act shall not operate to release or immunize Tenant from its obligations under this Section. This indemnity is not contingent upon insurance coverage, is not limited to the amount of any insurance proceeds, and operates independently of the insurance provisions of this Lease. The term “Landlord Parties” shall mean Landlord, any mortgagees, Washington Capital Management, Inc. (“WCM”), the property manager, and their respective members, partners or other owners and affiliates, subsidiaries, successors and assigns. The term “Tenant Parties” means Tenant, Tenant’s shareholders, members, partners or other owners, Tenant’s affiliates and subsidiaries, and any directors, officers, employees, sublessees, licensees, invitees, agents, contractors and successors and/or assigns of such persons or entities.

10.4 Waivers.

10.4.1 Tenant Waiver. Tenant hereby releases, waives and discharges the Landlord Parties from any and all claims Tenant might otherwise now or hereafter possess associated with, any loss covered by insurance (or which would have been covered by the insurance Tenant is required to carry hereunder), including the deductible portion thereof, regardless of cause.

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

10.4.2 Landlord’s Waiver . Landlord hereby releases, waives and discharges the Tenant Parties from any and all claims Landlord might otherwise now or hereafter possess associated with any loss covered by Landlord’s insurance (or which would have been covered by the insurance Landlord is required to carry hereunder), but excluding the deductible portion thereof, regardless of cause. Notwithstanding the foregoing or any other provision of this Lease to the contrary, if Landlord maintains environmental insurance for which Tenant is not charged, there shall be no release or waiver of claims relating to such insurance and Tenant’s indemnities under this Section 10 shall be primary to and not released by virtue of that environmental insurance.

10.5 Limitation on Indemnity. Notwithstanding any other provisions of this Lease to the contrary, in compliance with RCW 4.24.115 as in effect on the date of this Lease, all provisions of this Lease pursuant to which a party (the “Indemnitor”) agrees to indemnify the other (the “Indemnitee”) against liability for damages arising out of bodily injury to Persons or damage to property relative to the construction, alteration, repair, addition to, subtraction from, improvement to, or maintenance of, any building, road, or other structure, project, development, or improvement attached to real estate, including the Premises, (i) shall not apply to damages caused by or resulting from the sole negligence of the Indemnitee, its agents or employees, and (ii) to the extent caused by or resulting from the concurrent negligence of (a) the Indemnitee or the Indemnitee’s agents or employees, and (b) the Indemnitor or the Indemnitor’s agents or employees, shall apply only to the extent of the Indemnitor’s negligence; PROVIDED, HOWEVER, the limitations on indemnity set forth in this Section shall automatically and without further act be deemed amended so as to remove any of the restrictions contained in this Section no longer required by then applicable law.

10.6 Survival. The provisions of this Section 10 shall survive expiration or termination of this Lease.

11.

ASSIGNMENT AND SUBLETTING

11.1 Assignment or Sublease. Except as permitted by Section 1A (“Related Party Transfers”) Tenant shall not assign this Lease or sublet the whole or any part of the Premises (each, a “Transfer” and any assignee or sublessee, a “Transferee”) without Landlord’s prior written consent which shall not be unreasonably withheld so long as the Transferee meets the transfer standards set forth in Section 11.6. To assist Landlord in determining whether to consent to a Transfer, Tenant shall submit the following to Landlord as well as any other information reasonably requested by Landlord, (i) the name, legal entity and jurisdiction of the Transferee; (ii) a description of the proposed use of the Premises; (iii) the terms of the proposed Transfer; (iv) if such Transferee is not a public entity, its three (3) most recent years plus current financial statements and its most recent filed federal income tax return; and (v) the proposed Transfer documents. The parties agree that the financial statements for periods earlier than the prior fiscal year financial statements and tax returns are not a mandatory requirement but are only factors that the Landlord may reasonably consider when deciding whether to consent to a proposed sublease or assignment. No Transfer shall affect the liability of Tenant under this Lease and Tenant and any Transferee shall be liable to Landlord for performance of Tenant’s obligations under this Lease. Consent to any Transfer shall not operate as a waiver of the necessity of a consent to any subsequent Transfer.

11.2 Entity Ownership. Except as permitted by Section 1A, the cumulative transfer of an aggregate of 50% or more of the voting interests in a Tenant entity, including by creation or issuance of new ownership interests (except as the result of transfers by gift or inheritance and except for transfers of interests in publicly traded entities) shall be deemed a Transfer of this Lease.

11.3 Assignee Obligation. Any assignee will be required to assume all obligations of Tenant and shall be jointly and severally liable with Tenant for the performance of all of Tenant’s obligations under this Lease. Any sublessee will be required to assume all obligations of Tenant to the extent they

relate to the subleased premises. Tenant shall provide Landlord duplicate originals of all instruments of assignment, sublease or assumption. If the Transferee defaults, Landlord may, without affecting any other rights of Landlord, proceed against Tenant or any Transferee or any other person liable for Tenant’s obligations hereunder. Tenant shall provide the notice address for any subtenant or assignee to Landlord prior to the effective date of the Transfer and if it is not provided, the applicable notice address shall be deemed to be the Premises.

11.4 Fees. Tenant shall reimburse Landlord for any out-of-pocket costs incurred by Landlord in connection with any request for consent to a Transfer. In addition, any request for consent to a Transfer shall be accompanied by payment of a non-refundable fee of $[***] to compensate Landlord for the administrative burden of processing the request.

11.5 Assignment/Subletting Income. Except in connection with transfers described in Section 1A, Tenant shall pay to Landlord within [***] of receiving any amounts from an assignee to Tenant which exceed the Rent payable by Tenant hereunder, [***]% of such excess, whether in the form of assignment fees or increased Base Rent or otherwise; provided that Tenant shall be permitted to deduct amortization of Tenant’s out of pocket costs for the assignment (including attorneys’ fees and brokerage commissions and any portion of tenant improvements for the assignee funded by Tenant) spread over the remaining Term. Tenant shall pay to Landlord within [***] of receiving any amounts from a sublessee which exceed, on a per square foot basis, the Rent due from Tenant hereunder, [***]% of such excess; provided that Tenant shall be permitted to deduct amortization of Tenant’s out of pocket costs for the sublease (including attorneys’ fees and brokerage commissions and any portion of tenant improvements for the sublessee funded by Tenant), amortized over the sublease term.

11.6 Transfer Standards. All of the following requirements must be met before Landlord will be required to not unreasonably withhold its consent to a Transfer:

(a) Transferee’s uses (i) are consistent with the Permitted Use in Section 1 and compatible with the other uses in the Building and with operation of a first class office building and do not create any increased risk of Hazardous Material contamination or increased cost to Landlord of monitoring or handling same; (ii) do not increase the risk of damage or wear and tear on the Building; (iii) do not require increased utility service or increased services from Landlord or changes in the Premises; and (iv) do not increase the insurance costs of Landlord; and

(b) Either (i) Tenant’s net worth is at least $[***], or (ii) Transferee’s financial status and creditworthiness is comparable to other tenants of similar amounts of space in the Building or similar buildings.

11.7 Landlord’s Recapture Right. Except in connection with transfers permitted by Section 1A, in lieu of granting consent to any proposed Transfer, Landlord reserves the right to terminate this Lease or, in the case of subletting of less than all the Premises, to terminate this Lease with respect to such portion of the Premises, as of the proposed effective date of the Transfer, in which event Landlord may enter into the relationship of landlord and tenant with such proposed Transferee or to any other third party. Such termination shall not relieve Tenant from any obligations under this Lease with regard to the time period prior to the termination. Notwithstanding the foregoing, Landlord shall not have a recapture right in the case of a sublease if the term of the sublease and any extensions end more than [***] prior to the end of the sublease term.

12.

DAMAGE OR DESTRUCTION

12.1 Notice of Damage. Tenant shall notify Landlord in writing immediately upon the occurrence of any damage to the Premises of which it becomes aware. Subject to Sections 12.2 and 12.3, if the Premises or Building is damaged by fire or other casualty, then unless this Lease is terminated as

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

hereinafter provided, this Lease shall remain in effect and Landlord shall diligently proceed to repair the damage to the Building to the condition in which existed immediately prior to such damage, to the extent that insurance plus deductibles (or if Landlord fails to maintain the insurance required by this Lease then to the extent that insurance plus deductibles would have been available had Landlord carried the required insurance), and subject to delays which may arise by reason of adjustment of loss under insurance policies and delays beyond the reasonable control of Landlord. Tenant shall repair all damage to Tenant’s property, including Tenant’s fixtures and equipment.

12.2 Decision. If (i) the insurance proceeds received by Landlord are not sufficient to pay the entire cost of repair, or if the cause of the damage is not covered by the insurance required to be carried by Landlord; or (ii) if Landlord considers the damage to be significant, then Landlord may elect either to (1) diligently repair the damage to the Building, in which case this Lease shall remain in full force and effect, or (2) terminate this Lease. Landlord shall notify Tenant of Landlord’s decision within [***] after notice of the occurrence of the damage. If Landlord elects to repair the damage, Tenant shall pay Tenant’s Share of the deductible under Landlord’s insurance policy and, if the damage was due to an act or omission of Tenant or Tenant’s employees, agents, contractors or invitees, Tenant shall also pay the difference between the actual cost of repair and any insurance proceeds. If the Lease does not terminate as a result of the damage but the damage materially interferes with Tenant’s use of the Premises, then the Base Rent shall be reduced pro rata, to reflect the portion of the Premises not useable by Tenant.

12.3 End of Term. If the damage to the Premises occurs during the [***] of the Term, and if the damage requires more than [***] to repair, either Landlord or Tenant may elect to terminate this Lease as of the date the damage occurred regardless of the sufficiency of any insurance proceeds. The party electing to terminate this Lease shall give written notification to the other party of such election within [***] after the parties have mutually agreed upon the time period required for such repairs.

13.

CONDEMNATION

If the Project is condemned or taken for any public or quasi-public purpose, including any purchase in lieu of condemnation, this Lease shall terminate as of the date of taking of possession for such use or purpose. If a portion of the Project is condemned or taken, (whether or not the Premises be affected), Landlord may, by notice to Tenant, terminate this Lease as of the date of the taking of possession. If Landlord does not terminate this Lease, and if the taking results in a reduction in the square footage of the Premises, then the Base Rent shall be reduced pro-rata, and Landlord shall perform any necessary repairs to restore the Building to a complete unit. If the condemnation causes the Premises to be unusable for Tenant’s Permitted Use, in Tenant’s commercially reasonable opinion, Tenant may terminate this Lease by giving notice within ten days after notice from Landlord or the intended extent of the taking, such termination to be effective as of the date of the taking. Landlord shall be entitled to the entire award in any condemnation proceeding, including any award for the value of any unexpired term of this Lease, and shall have the exclusive authority to settle the condemnation proceeding, and the exclusive discretion to grant “possession and use” to the condemning authority, and Tenant shall have no claim against Landlord or against the proceeds of the condemnation.

14.

INSOLVENCY AND DEFAULT

14.1 Defaults. Tenant shall be in default under this Lease if (a) Tenant fails to pay any Rent when due, or (b) Tenant fails to perform any other obligation under this Lease, or (c) a Financial Distress Default (Section 14.9) occurs. Subject to the late charges and interest due under Section 14.8, Landlord agrees that it shall not invoke its remedies under this Section 14 if Tenant cures a Curable Default (defined below) within the applicable cure period (set forth in Section 14.2 below). If a Curable Default occurs and Tenant fails to cure the default within the applicable cure period or if any other default occurs, Landlord may, immediately or at any time thereafter, and without preventing Landlord from exercising any other right or remedy, elect to terminate this Lease by notice, by lawful entry or otherwise,

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information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

whereupon Landlord shall be entitled to recover possession of the Premises from Tenant and those claiming through or under Tenant. Termination of this Lease and any repossession shall be without prejudice to any remedies Landlord has for arrears of Rent or for a prior breach of any of the provisions of this Lease. For clarification, the parties agree that any true-up of Operating Expenses that occurs within the time periods set forth in Section 5.1 although applicable to prior rent periods, shall not be considered a failure to pay Rent pursuant to this Section 14.1 so long as any true-up payments are made when due.

In case of termination, Tenant shall be liable to Landlord for all costs and expenses including the amounts due under Sections 14.3 and 14.4. Each right and remedy provided Landlord in this Lease is cumulative and in addition to every other right or remedy provided in this Lease, or now or hereafter existing at law, in equity, by statute or otherwise. The exercise by Landlord or any one or more such rights or remedies will not preclude the simultaneous or later exercise by Landlord of any or all other rights or remedies.

14.2 Cure Periods.

Monetary Default. Tenant fails to pay any Rent when due, it is a Cureable Default and the cure period shall be [***] after notice from Landlord.

Financial Distress Default (See Section 14.9). An Involuntary Financial Distress Default is a Curable Default and the cure periods are set forth in Section 14.9. A Voluntary Financial Distress Default is not a Curable Default.

Insurance Default . If Tenant fails to maintain the required insurance, it is a Curable Default and the cure period is [***] after the date the failure occurs.

Estoppel or Subordination Default . If Tenant fails to provide the requested estoppel certificate (Section 15.3) or subordination agreement (Section 15.1) within the time period provided, it shall be a Curable Default and the cure period shall be [***] from the second request.

Hazardous Materials . If Tenant breaches the provisions of Section 17 (Hazardous Materials) it shall be a Curable Default and the cure period shall be 5 business days after notice from Landlord.

Other Defaults. Any non-monetary breaches of this Lease not listed above in this Section 14.2 shall be considered Curable Defaults and the cure period shall be [***] after notice from Landlord; provided that if the default can not reasonably be cured within that time period, Tenant shall have such additional time as is reasonably necessary to cure the default so long as Tenant commences the cure within the [***] period and diligently pursues the cure to completion.

14.3 Expense Recovery. Items of expense for which Tenant shall be liable to Landlord for in connection with a termination of this Lease for default shall include: (i) all collection costs and all costs of obtaining Tenant’s compliance with this Lease, including attorneys’ fees and enforcement costs; (ii) the unamortized portion of (a) leasing commissions paid in connection with this Lease, and (b) costs incurred by Landlord to improve the Premises (amortized on a straight line basis over the initial Term with interest at the Prime Rate plus [***]% per annum); and (iii) all Landlord’s other costs proximately caused by the termination. The above sums shall be due and payable immediately upon notice from Landlord without regard to whether the cost or expense was incurred before or after the termination of this Lease. If proceedings are brought under the Bankruptcy Code, including proceedings brought by Landlord, which relate in any way to this Lease (in any of such cases a “Proceeding”), Landlord shall be reimbursed for all costs incurred in connection with the Proceedings.

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information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

14.4 Damages. Notwithstanding termination of this Lease and reentry by Landlord pursuant to Section 14.1, Landlord shall be entitled to recover from Tenant:

(a) Any unpaid Rent which had been earned by Landlord prior to the time of termination with interest at the Default Rate (Section 14.8); plus

(b) The amount by which the unpaid Rent which would have been earned after termination until the time of an award exceeds the amount of loss of Rent that Tenant proves could have been reasonably avoided, with interest at the Default Rate; plus

(c) The worth at the time of an award of the amount by which the unpaid Rent for the balance of the term of this Lease (as extended, if at all, prior to termination) exceeds the amount of such loss of Rent and Additional Rent that Tenant proves could have been reasonably avoided (including interest at the Default Rate from the date of the award until paid), discounted at the discount rate of the Federal Reserve Bank of San Francisco, or successor Federal Reserve Bank, for a period consistent with the then remaining lease term, on the date of termination; plus

(d) Any other amount necessary to compensate Landlord for all the damage proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including amounts due and payable pursuant to Section 14.3.

14.5 Non-Termination of Lease. No act of Landlord other than a written declaration of termination of Lease shall serve to terminate this Lease. If there is a default hereunder and Tenant fails to cure it within any applicable cure period, Landlord shall have the right to reenter the Premises and relet the Premises for Tenant’s account, without terminating the Lease. If Landlord reenters the Premises and does not elect to terminate this Lease, Tenant shall pay Landlord the loss of Rent by a payment at the end of each month during the remaining Term representing the difference between the Rent which would have been paid in accordance with this Lease and the rent collected from the Premises by Landlord for such month. Separate actions may be maintained by Landlord against Tenant from time to time to recover any damages which, at the commencement of any action, are then due and payable to Landlord under this Section 14 without waiting until the end of the Term of this Lease.

14.6 Reletting. If Tenant’s right of possession has been terminated (with or without termination of this Lease), Landlord may at any time, and from time to time, relet the Premises in whole or in part either in its own name or as agent of Tenant for any period equal to or greater or less than the remainder of the then-current Term. All rentals received by Landlord from such reletting shall be applied first to the payment of any amounts other than Rent due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting and of alterations and repairs; third, to the payment of Rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future Rent as it becomes due hereunder. Upon a reletting of the Premises, Landlord shall not be required to pay Tenant any sums received by Landlord in excess of amounts payable in accordance with this Lease.

14.7 Right of Landlord to Cure Defaults. If Tenant defaults under this Lease, Landlord may cure the default, at Tenant’s expense, (i) immediately and without notice if Landlord believes the default creates a risk of damage to persons, property or the interests of others, or (ii) in any other case only upon Tenant’s failure to remedy such default within the applicable cure period, if any. Tenant shall reimburse Landlord for any costs of the cure with interest at the Default Rate.

14.8 Unpaid Sums and Service Charge. Any amounts owing from Tenant to Landlord under this Lease shall bear interest at [***]% per annum (the “Default Rate”), calculated from the date due or expended until the date of payment. In addition, if any payment of Rent is not paid within [***] of its due date, Tenant shall pay a late charge equal to the greater of $[***] or [***]% of the overdue amount as liquidated damages for Landlord’s extra expense and handling of such past due account.

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

14.9 Financial Distress.

14.9.1 Definition. Each of the following shall be an “Financial Distress Default” under this Lease: (a) the making by Tenant of any general assignment or general arrangement for the benefit of creditors; the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt, or a petition for reorganization or arrangement under any law relating to bankruptcy or (b) the appointment of a trustee or a receiver to take possession of all or any part of Tenant’s assets. A Financial Distress Default shall be considered “Voluntary” if the action initiating the default was made by Tenant or a person or entity controlling, controlled by, or under common control with Tenant and otherwise shall be considered “Involuntary”. For example, a bankruptcy filing initiated by Tenant is a Voluntary Financial Distress Default and a bankruptcy filing by creditors of Tenant shall be considered an Involuntary Financial Distress Default. Tenant shall immediately notify Landlord upon the occurrence of any Financial Distress Default. Tenant shall have [***] to cure an Involuntary Financial Distress Default under clause (a) above. Tenant shall have [***] to cure an Involuntary Financial Distress default under clauses (b) and (c) above. If a Voluntary Financial Distress Default occurs or if an Involuntary Financial Distress Default is not cured within the above cure periods, then the provisions of Section 14.9.2 shall apply.

14.9.2 Filing of Petition. If a petition (“Petition”) is filed by or against Tenant (as either debtor or debtor-in-possession) under Title 11 of the United States Code (the “Bankruptcy Code”) and same is not dismissed within [***] thereafter:

(a) Adequate protection for Tenant’s Lease obligations accruing after filing of the Petition shall be provided within [***] after filing in the form of a deposit equal to two months Base Rent and Additional Rent (in addition to the Security Deposit), to be held by the court or an escrow agent approved by Landlord and the court.

(b) All amounts payable by Tenant to Landlord under this Lease represent reasonable compensation for the occupancy of the Premises by Tenant.

(c) Tenant or Trustee shall give Landlord at least [***] written notice of any abandonment of the Premises or proceeding relating to administrative claims. If Tenant abandons without notice, Tenant or Trustee shall stipulate to entry of an order for relief from stay to permit Landlord to reenter and relet the Premises.

(d) For purposes of Section 365(b)(1) of the Bankruptcy Code, prompt cure of defaults shall mean cure within 30 days after assumption and shall include cure of any defaults under any other agreements between Landlord and Tenant.

(e) For the purposes of Section 365(b)(1) the Bankruptcy Code, adequate assurance of future performance of this Lease by Tenant, Trustee or any proposed assignee of the Lease will require that Tenant, Trustee or the proposed assignee deposit two months Base Rent and Additional Rent payments into an escrow fund (to be held by the court or an escrow agent approved by Landlord and the court) as security for such future performance. In addition, if the Lease is to be assigned, adequate assurance of future performance by the proposed assignee shall require that the assignee have a tangible net worth equal to eight times the annual Rent due hereunder or that such assignee’s performance be unconditionally guaranteed by a person or entity that has a tangible net worth not less than the above amount.

(f) If Tenant or Trustee intends to assume and/or assign the Lease, Tenant or Trustee shall provide Landlord with [***] written notice of the proposed action, separate from and in

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information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

addition to any notice provided to all creditors. Notice of a proposed assignment and assumption shall state the assurance of prompt cure, compensation for loss and assurance of future performance to be provided to Landlord. Notice of a proposed sale shall state: (i) the name, address, and federal tax ID numbers of the proposed assignee; (ii) the terms and conditions of the proposed assignment, and (iii) the proposed assurance of future performance.

14.10 Default by Landlord. Subject to Section 15.4, Landlord shall not be in default under this Lease unless Landlord (or such ground lessor, mortgagee or beneficiary) fails to cure such non-performance within [***] after receipt of Tenant’s written notice (or such longer period of time as is reasonably necessary to cure the default so long as Landlord is diligently prosecuting such cure) and such notice shall also be sent in accordance with Section 15.4. If Landlord fails to cure the default within the cure period, Tenant shall have all rights and remedies available at law and in equity other than the right to terminate the Lease or any offsets against Rent.

15.

PROTECTION OF LENDERS

15.1 Subordination. Provided that Tenant is provided with a non-disturbance agreement consistent with the third sentence below, this Lease shall be subordinate to any financing now existing or hereafter placed upon the Project by Landlord, and to any and all advances to be made thereunder and to interest thereon and all modifications thereof (each, a “Mortgage”). This provision shall be self-operative. Tenant shall execute and deliver any subordination agreement required by the holder of a Mortgage, but only if any such subordination agreement provides that so long as Tenant is not in default under this Lease beyond any applicable cure period, Tenant shall have the continued enjoyment of the Premises free from any disturbance or interruption by any holder of a Mortgage or any purchaser at a foreclosure or private sale of the Project.

15.2 Attornment. If Landlord’s interest in the Premises is acquired by any ground lessor, holder of a Mortgage, or purchaser at a foreclosure sale, or transferee thereof, Tenant shall attorn to the transferee of or successor to Landlord’s interest in the Premises and recognize such transferee or successor as Landlord under this Lease. Tenant waives the protection of any statute or rule of law which gives or purports to give Tenant any right to terminate this Lease or surrender possession of the Premises upon the transfer of Landlord’s interest.

15.3 Estoppel Certificates. Tenant shall, within [***] of demand, execute and deliver to Landlord a written statement certifying: (i) the commencement and the expiration date of the Term; (ii) the amount of Base Rent and the date to which it has been paid; (iii) that this Lease is in full force and effect and has not been assigned or amended in any way (or specifying the date and terms of each agreement so affecting this Lease) and that no part of the Premises has been sublet (or to the extent such is not the case, a copy of any sublease); (iv) that Landlord is not in default under this Lease (or if such is not the case, the extent and nature of such default); (v) on the date of such certification, there are no existing defenses or claims which Tenant has against Landlord (or if such is not the case, the extent and nature of such defenses or claims); (vi) the amount of the Security Deposit held by Landlord; and (vii) any other information a mortgagee or purchaser may reasonably request. It is intended that any such statement shall be binding upon Tenant and may be relied upon by a prospective purchaser or mortgagee. If Tenant fails to provide the requested estoppel within [***] after receipt of a second request, in addition the provisions of Section 14: (a) Tenant shall be deemed to have given a certificate as above provided, without modification, and shall be conclusively deemed to have admitted the accuracy of any information supplied by Landlord to a prospective purchaser or mortgagee, and (b) Landlord may impose a fee of $[***] per day for each day of delay in providing the statement by Tenant after the 5 day period. The estoppel certificate shall run to the benefit of all those Landlord specifies as addressees.

15.4 Notice. Tenant shall give written notice of any failure of Landlord to perform any of its obligations under this Lease to Landlord and to any ground lessor, mortgagee or beneficiary under any

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information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

deed of trust encumbering the Project whose name and address has been furnished to Tenant and such parties shall have the right but no obligation to cure the default on Landlord’s behalf. Landlord shall not be in default under this Lease unless Landlord (or such ground lessor, mortgagee or beneficiary) fails to cure such non-performance within [***] after receipt of Tenant’s notice, or such longer period as is reasonably necessary for the cure.

16.

LIABILITY

16.1 Landlord’s Liability. The liability of Landlord to Tenant shall be limited to the interest of Landlord in the Project (and the proceeds thereof). Tenant agrees to look solely to Landlord’s interest in the Project (and the proceeds thereof) for the recovery of any judgment against Landlord, and Landlord and its owners shall not be personally liable for any such judgment or deficiency after execution thereon or matters related to this Lease. In addition, if Landlord sells or otherwise transfers the Project to a new owner, provided the assignee assumes the Landlord’s obligations under this Lease arising after the date of the transfer, the transferring Landlord shall not thereafter be named or sought after in any matter related to the Project relating to the time period after the transfer and responsibility for those matters shall automatically transfer to the new owner.

16.2 Tenant’s Business Interruption. Notwithstanding any other provision of this Lease, and to the fullest extent permitted by law, Tenant hereby agrees that Landlord shall not be liable for injury to Tenant’s personal property or its business or any loss of income therefrom, whether such injury or loss results from conditions arising upon the Premises or the Project, or from other sources or places including any interruption of services and utilities or any casualty, condemnation, whether the cause of such injury or loss or the means of repairing the same is inaccessible to Landlord or Tenant and including injury of loss to Tenant or Tenant’s property arising from the acts or omissions of other occupants of the Project.

16.3 WCM . If this Lease is signed by Washington Capital Management, Inc. (“WCM”), WCM signs the Lease in a representative capacity as manager of the limited liability company which is Landlord. Tenant acknowledges that WCM has no liability whatsoever under this Lease and Tenant shall have no claims against WCM, its agents or employees in connection with this Lease or the Project. WCM represents and warrants that it is authorized to execute this Lease on behalf of the Landlord.

17.

HAZARDOUS MATERIALS

17.1 Compliance . Tenant and Tenant’s officers, contractors, subcontractors, licensees, agents, servants, employees, guests, invitees or visitors, or any assignee or sublessee or other person for whom Tenant would otherwise be liable (individually, a “ Tenant Party ” and collectively, “ Tenant Parties ”) shall comply with all Environmental Laws (as defined below) in connection with Tenant’s or Tenant Parties use, production, storage or disposal of any Hazardous Materials (as defined below) on, under or about the Premises. Tenant hereby represents, warrants, covenants and agrees that all operations or activities upon, or any use or occupancy of the Premises, or any portion thereof, by Tenant or any Tenant Party of the Premises or any portion thereof, shall be in all material respects in compliance with all state, federal and local laws and regulations governing or in any way relating to the generation, handling, manufacturing, treatment, storage, use, transportation, spillage, leakage, dumping, discharge or disposal (whether legal or illegal, accidental or intentional) of any Hazardous Materials. Neither Tenant, nor any Tenant Party shall use or dispose of any Hazardous Materials in or on the Premises, the Building, the Project, or any adjacent property, or in any improvements thereto, except for such Hazardous Materials as are essential to the operation of Tenant’s and Tenant Parties’ business and reported to Landlord upon request, and then only in accordance with all applicable laws and regulation. Tenant shall, and shall ensure that all Tenant Parties shall, at all times comply with Environmental Laws and best industry standard research, medical and safety practices in connection with the use, handling, production storage or disposal of any Hazardous Material, including, but not limited, to any Medical Products (as defined below), at Tenant’s sole expense.

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information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

17.2 Definition of Hazardous Materials. As used herein, the term “ Hazardous Materials ” means any chemical, compound, substance, material, controlled substance, object, condition, waste, living organism or part thereof (including genetic materials), virus or combination or modification thereof which is or may be hazardous to human health or safety or to the environment (whether potentially injurious to persons and property and whether potentially injurious by themselves or in combination with other materials) due to its radioactivity, ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity, mutagenicity, phytotoxicity, infectiousness or other harmful or potentially harmful properties or effects, including, without limitation, petroleum and petroleum products, asbestos, radon, polychlorinated biphenyls (PCBs) and all of those chemicals, substances, materials, controlled substances, objects, conditions, wastes, living organisms or combinations thereof which are now or become in the future listed in the United States Department of Transportation Hazardous Materials Table [***], as amended from time to time, or listed, defined or regulated in any manner by any Environmental Law.

17.3 Definition of Environmental Laws . As used herein, the term “ Environmental Laws ” means any and all federal, state or local environmental, health and/or safety-related laws, regulations, standards, decisions of courts, ordinances, rules, codes, orders, decrees, directives, guidelines, permits or permit conditions, currently existing and as amended, enacted, issued or adopted in the future relating to the environment or to any Hazardous Material (including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601, et seq.), the Washington Model Toxics Control Act (Ch.70.l0SD RCW) and the Washington Hazardous Waste Management Act (Ch.70.105 RCW) which are or become applicable to Tenant or the Premises.

17.4. Definition of Medical Products . As used herein, the term “ Medical Products ” means all regulated substances, chemicals, compounds, drugs, blood, tissue, organs, serums, organisms or part thereof (including genetic materials), viruses, waste and other materials related thereto and used in connection with medical treatment, laboratory analysis, production or analysis of drugs, or other biomedical research.

17.5 Definition of Environmental Condition . As used herein, the term “ Environmental Condition ” means any release or spill of any Hazardous Materials into the environment, including surface water, groundwater, drinking water supply, sewer or storm water drain, land, soil, surface or subsurface strata or the ambient air, where such release or spill is potentially in. violation of Environmental Laws or is required to be reported to the Washington State Department of Ecology or other appropriate governmental authority.

17.6 Tenant Improvements . Tenant and Tenant Parties shall design and construct their tenant improvements, including any upgraded HVAC and plumbing systems, using best available commonly used industry technique designed to ensure that Tenant’s and Tenant Parties’ Hazardous Materials do not compromise the air quality outside the Premises or allow the possibility of water system back-up into the Building or otherwise migrate to any adjacent space. In particular, Tenant shall use, and shall require Tenant Parties’ best available commonly used industry techniques to prevent air mixing from areas of potential contamination into other areas of the Building. Tenant shall indemnify and hold Landlord harmless from and against any and all losses, expenses, liabilities, penalties or costs arising directly or indirectly from Tenant’s or Tenant Parties’ failure to isolate building systems or to cause an Environmental Condition in areas of the Project outside the Premises as a result of its design or construction of the tenant improvements.

17.7 Hazardous Materials Inventory Statement. Tenant shall deliver (or cause Tenant Parties to deliver) to Landlord (a) within [***] after Lease execution and prior to Tenant’s first draw request for the TI Allowance, and (b) on request not more often than once each year during the Term, a list specifying the type and quantity of all Hazardous Materials used or stored by Tenant or Tenant Parties on the Premises (and attached hereto as Exhibit H, as amended from time to time) together with copies of all permits, licenses and approvals required in connection with the use or storage of such materials,

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information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

together with, on request, Tenant’s and Tenant Parties’ Material Data Safety Sheets (MSDS) and any other documentation with respect to Tenant’s and Tenant Parties’ usage, storage, and disposal of Hazardous Materials that are required by the City of Bothell Fire Department. Notwithstanding the foregoing, Tenant shall respond, and shall cause Tenant Parties to respond to any written request by Landlord for confirmation whether there has been a significant increase, as evaluated in Tenant’s reasonable judgment, in the quantity of Hazardous Materials or change in the type of Hazardous Materials utilized by Tenant or Tenant Parties, provided that such request shall not be made more than once per calendar year. To the extent reasonably requested by Landlord, Tenant will provide additional documents or information with respect to its and Tenant Parties’ Hazardous Materials within a reasonable period of time after receipt of a specific written request. Tenant shall promptly notify Landlord in writing of (i) any notices of violation or potential or alleged violation of any Environmental Law which are received by Tenant from any governmental agency or any Tenant Party; (ii) any and all inquiry, investigation, enforcement, clean-up, removal or other governmental or regulatory actions instituted or threatened relating to the Premises; and (iii) all claims made or threatened by any third-party against Tenant or a Tenant Party or the Premises relating to any Hazardous Materials used by Tenant or a Tenant Party at the Premises. If any Environmental Condition occurs that is or may be a result of Tenant’s or any Tenant Party’s actions during the Term, or if Tenant or any Tenant Party has disposed of or caused a release of Hazardous Materials at, on or about the Project other than in accordance with Environmental Laws, Tenant shall promptly prepare or cause the Tenant Party to prepare a remediation plan for Landlord’s review and approval, which shall not be unreasonably withheld, provided however, that Landlord shall not require any remediation in excess of or to higher standards than would be mandated by applicable Environmental Laws. Tenant’s obligation to remediate any Environmental Condition’ shall not be contingent on an enforcement action by any governmental authority and shall be independent of any governmentally mandated remediation. If Landlord approves the plan, then Tenant shall execute or cause the Tenant Party to execute the remediation plan at Tenant’s sole cost and expense (subject to such reimbursement as Tenant may obtain from a Tenant Party). If the remediation plan is not reasonably acceptable to Landlord or if Tenant fails to execute or cause execution of the remediation plan within a reasonable period of time, then, at Landlord’s option, Tenant shall reimburse Landlord, upon demand, for the cost to Landlord of performing rectifying work provided that such work is not in excess of or to higher standards than would be mandated by applicable Environmental Laws. The reimbursement shall be paid to Landlord in advance of Landlord’s performing such work, based upon Landlord’s reasonable estimate of the cost thereof; and upon completion of such work by Landlord, Tenant shall pay to Landlord any shortfall within thirty days after Landlord bills Tenant therefor or Landlord shall within thirty days refund to Tenant any excess deposit as the case may be. To the extent reasonably requested by Landlord, Tenant shall furnish Landlord with detailed reports concerning any Environmental Condition which occurs on the Premises during the Term.

17.8 Landlord. After notice to Tenant and a reasonable opportunity for Tenant to effect such compliance, Landlord may, but shall not be obligated to, enter upon the Premises (including sub leased Premises) and take such actions and incur such costs and expenses to effect such compliance as it deems advisable to protect its interest in the Premises. However, Landlord shall not be obligated to give Tenant notice and an opportunity to effect compliance if (i) such delay might result in material adverse harm to Landlord, the Premises, the Building or the Project; (ii) Tenant has already had actual knowledge of the situation and a reasonable opportunity to effect compliance, or (iii) Landlord reasonably believes that an emergency exists. Landlord shall use good faith efforts to comply with Tenant’s reasonable requirements with respect to security to the extent such requirements have been provided to Landlord in advance. Whether or not Tenant has actual knowledge of the release of Hazardous Materials on the Premises, the Building, or the Project as the result of Tenant’s or Tenant Parties’ use of the Premises, the Building or the Project, Tenant shall reimburse Landlord for all reasonable costs and expenses incurred by Landlord relating to such Hazardous Materials or in connection with such compliance activities. Tenant shall notify Landlord immediately of any release of any Hazardous Materials on the Premises in violation of any Environmental Law of which Tenant is aware.

17.9 Indemnity . Tenant agrees to indemnify, defend and hold harmless Landlord against any and all losses, liabilities, suits, obligations, fines, damages (including diminution in the value of the Premises or Building, loss or restrictions on use of space in the Building or Project, and sums paid in settlement of claims), judgments, penalties, claims, charges, cleanup costs, remedial actions, costs and expenses (including, without limitation, attorneys’ and other professional fees and disbursements) that may be imposed on, incurred or paid by, or asserted against Landlord, the Premises, the Building, or the Project by reason of, or in connection with (i) any misrepresentation, breach of warranty or other default by Tenant or any Tenant Party under this Section, or (ii) the acts or omissions of Tenant or any Tenant Party resulting in the release of any Hazardous Materials. All of Tenant’s obligations and liabilities under this Section shall survive expiration or other termination of this Lease and shall be separately enforceable by Landlord. This indemnification is intended to constitute an indemnity agreement within the meaning of Section 9607(e)(i) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9607(e)(i). Neither the written consent by Landlord to the presence of Hazardous Materials on, under or about the Premises, nor the strict compliance by Tenant with all Environmental Laws, shall excuse Tenant from Tenant’s obligation of indemnification pursuant thereto.

17.10 Decontamination . Upon expiration or early termination of this Lease, Tenant shall at its sole cost and expense undertake and complete a thorough wash and decontamination of those portions of the Premises that have or may have been exposed to Hazardous Materials, including but not limited to scrubbing of all surfaces, equipment, cabinets, fixtures and fume hood external surfaces in the Premises, in order to remove all residues of Hazardous Materials (including chemicals and biological material). Upon completion of such wash and decontamination, Tenant shall cause, at its sole cost and expense, a reputable environmental engineering company to perform an environmental inspection of the Premises and prepare a written report for delivery to Landlord and Tenant no later than 30 days after Lease expiration or early termination, certifying that the Premises are free from all Hazardous Materials for which Tenant is responsible under the terms of this Lease.

17.11 Inspection. At its option, Landlord may once in each year, and more frequently if Landlord has reasonable cause to believe that a violation of Environmental Law or this Section 17 is occurring, monitor Tenant’s and Tenant Parties’ compliance with the requirements set forth in this Section, including without limitation obtaining an environmental assessment of the Premises from a qualified environmental engineering company of Landlord’s selection which has demonstrated industry related experience, the cost of which shall be paid by Landlord unless such assessment shows a material failure by Tenant or Tenant Parties to comply with the requirements of this Section, in which case the cost shall be paid by Tenant. Any such environmental assessment shall be performed at a reasonable time mutually acceptable to Landlord and Tenant (and coordinated with Tenant Parties). Landlord shall provide a copy of any written assessment to Tenant and, Tenant shall comply (and cause Tenant Parties to comply), at Tenant’s cost and expense (provided that Tenant may seek to have Tenant Parties bear costs so long as the work is done), with any industry-standard recommendations contained in any such environmental assessment that Landlord may reasonably require including without limitation, any recommended precautions which should be taken with respect to Tenant’s or Tenant Parties’ activities on the Premises.

17.12 Landlord’s Notices . Promptly after learning thereof, Landlord shall notify Tenant of any Environmental Condition on the Project or any release of Hazardous Materials within the Project caused by Landlord or any occupant of the Building or Project other than the Tenant. Landlord agrees to indemnify, defend and hold harmless Tenant against any and all losses, liabilities, suits, obligations, fines, damages, judgments, penalties, claims, charges, cleanup costs, remedial actions, costs and expenses (including, without limitation, attorneys’ and other professional fees and disbursements, but excluding consequential damages such as lost profits) that may be imposed on, incurred or paid by, or asserted against Tenant by reason of, or in connection with any Hazardous Materials in, on or around the Project at the time Tenant takes possession of the Premises, or brought onto the Project by any Landlord Party. All of Landlord’s obligations and liabilities under this Section shall survive expiration or other termination of this Lease and shall be separately enforceable by Tenant.

18.

MISCELLANEOUS PROVISIONS

18.1 Notices. All notices required or permitted under this Lease shall be in writing and shall be personally delivered, sent by a nationally recognized overnight courier, sent by email or facsimile with confirmation of receipt, or sent by certified mail, return receipt requested, postage prepaid. The contact information for each party is set forth in Section 1 and may be changed by written notice to the other party. All notices shall be effective upon either delivery/receipt, rejection of delivery/receipt, or 3 days after mailing in the manner described above. Tenant hereby appoints as its agent to receive the service of all dispossessory proceedings or proceedings to seize Tenant’s personal property and notices thereunder the person in charge of or occupying the Premises at the time, and, if no person shall be in charge of occupying the same, then such service may be made by attaching the same on the main entrance of the Premises. If Tenant does not provide Landlord with a forwarding address following expiration or termination of this Lease, Landlord shall be relieved of any obligation to forward any funds or items to Tenant.

18.2 Non-Waiver/Accord. Failure of Landlord to insist, in any one or more instances, upon strict performance of any term of this Lease, or to exercise any election herein contained, shall not be construed as a waiver or a relinquishment, but the same shall continue and remain in full force and effect. Landlord shall not be deemed to have waived any provision of this Lease unless expressed in writing and signed by Landlord. Tenant specifically acknowledges that where Tenant has received a notice of default (whether Rent or non-rent), no acceptance by Landlord of Rent shall be deemed a waiver of such notice, and, acceptance by Landlord of partial Rent shall be deemed to waive or cure any Rent default. Landlord may, in its discretion, after receipt of partial payment of Rent, refund same and continue any pending action to collect the full amount due, or may modify its demand to the unpaid portion. In either event, the default shall be deemed uncured until the full amount is paid in good funds. Payment by Tenant or receipt by Landlord of a lesser amount than the Rent and other charges stipulated herein shall be deemed to be on account of the earliest stipulated Rent or other charges. No endorsement or statement on any check or any letter accompanying any payment shall be deemed an accord and satisfaction, and Landlord’s acceptance of such check or payment shall be without prejudice to Landlord’s right to recover the balance of the amount due or pursue any other remedy to which it is entitled.

18.3 Brokers. Except as specified in Section 1, if any, Tenant and Landlord represent and warrant to each other, it has not engaged any broker, finder or other person entitled to any commission or fee in respect of the negotiation, execution or delivery of this Lease, and Tenant and Landlord shall each indemnify and defend the other, against any claims for such commission arising out of agreements made or alleged to have been made by or on behalf of that party. If any new leases, modifications to this Lease or other agreements are made between Landlord and Tenant for space in the Project, Landlord shall not have any obligation to pay any brokerage or finders fees to persons engaged by Tenant.

18.4 Entire Agreement; Amendment; Severability. This Lease supersedes all prior and contemporaneous understandings and agreements; the provisions of this Lease are intended by Landlord and Tenant as the final expression of their agreement; this Lease constitutes the complete and exclusive statement of its terms and no representations, promises or agreements, oral or otherwise, between the parties not embodied herein shall be of any force or effect. No provisions of this Lease may be changed, waived, discharged or terminated orally, but only by instrument in writing executed by Landlord and Tenant, or their respective successors in interest, concurrently with or subsequent to the date of this Lease. Tenant acknowledges that neither Landlord nor anyone representing Landlord has made statements of any kind whatsoever on which Tenant has relied in entering into this Lease. Tenant has relied solely on its independent investigation and its own business judgment in entering into this Lease. Any provision of this Lease which shall prove to be invalid, void or illegal shall in no way affect, impair or invalidate any other provision hereof and the remaining provisions hereof shall nevertheless remain in full force and effect.

18.5 Force Majeure. Except as specifically provided otherwise herein, time periods for Landlord’s or Tenant’s performance under any provisions of this Lease (except for the payment of money) shall be extended for periods of time during which the non-performing party’s performance is prevented due to circumstances beyond the party’s control, including strikes, embargoes, governmental regulations, inclement weather and other acts of God, war or other strife and no such delay in Landlord’s performance shall constitute an actual or constructive eviction or entitle Tenant to any abatement of Rent.

18.6 Intentionally Omitted

18.7 Heirs and Assigns. This Lease binds any party who legally acquires any rights or interest in this Lease from Landlord or Tenant. However, Landlord shall have no obligations to Tenant’s successor unless the rights or interests of Tenant’s successor are acquired in accordance with the terms of this Lease including the restriction on assignment and subletting. If more than one person or entity executes this Lease as Tenant, the liability of each shall be deemed to be joint and several.

18.8 Waiver of Self-Help. Tenant waives any statutory or common law right to self-help, including any right to make repairs to the Premises.

18.9 Personal Property Taxes. Tenant shall be liable for all taxes levied or assessed against personal property, furniture, or fixtures placed by Tenant in the Premises or Project. If any taxes for which Tenant is liable are levied or assessed against Landlord or Landlord’s property and Landlord elects to pay the same, or if the assessed value of Landlord’s property is increased by inclusion of such personal property, furniture or fixtures and Landlord elects to pay the taxes based on such increase, then Tenant shall reimburse Landlord, within 30 days following request, the part of such taxes for which Tenant is primarily liable hereunder.

18.10 Intentionally Omitted.

18.11 Right to Change Public Spaces. Landlord reserves the right at any time, without thereby creating an actual or constructive eviction or incurring any liability to Tenant, to (a) close temporarily any exterior areas to make repairs or changes or to prevent the acquisition of public rights in such areas, and (b) change the arrangement or location of public areas of the Project not contained within the Premises or any part thereof, including entrances, passageways, parking lots and other public service portions of the Project; provided that Landlord uses commercially reasonable efforts to minimize interference with Tenant’s use of and access to the Premises and such changes do not materially change the Lobby Area Upgrades or reduce Tenant’s share of parking stalls set forth in Section 2.3.

18.12 Consent. Notwithstanding anything contained in this Lease to the contrary, Tenant hereby waives any claim against Landlord for money damages by reason of any refusal, withholding or delaying by Landlord of any consent, approval or statement of satisfaction, and in such event, Tenant’s only remedies therefore shall be an action for specific performance, injunction or declaratory judgment, to enforce any right to such consent. Tenant shall pay Landlord’s out-of-pocket costs incurred in connection with any requests by Tenant for consent.

18.13 Financial Statements. The provisions of this Section 18.13 shall apply only during any period that Tenant is not a publicly traded company. Upon request by Landlord, Tenant shall provide to Landlord copies of Tenant’s most recent financial statements and tax returns (which financial statements may be supplied by reference to the electronic location from which they may be downloaded without charge if so published). Any non-public information gained from such financial statements or inspections furnished to or conducted by or on behalf of Landlord shall be confidential and shall not be disclosed

other than to carry out the purposes hereof; provided, however, Landlord shall be permitted to divulge the contents of any such statements in connection with financing arrangements or assignments of Landlord interest in the Premises or in conjunction with any administrative or judicial proceeding in which Landlord is involved and where Landlord is required to divulge such information.

18.14 No Reservation/Counterparts. The submission of this Lease for examination, or for execution by Tenant, does not constitute a reservation or option to Lease the Premises and this Lease becomes effective as a lease only upon execution and delivery thereof by Landlord and Tenant. At Landlord’s election, this Lease may be executed in counterparts and when all counterparts are executed, the counterparts shall constitute a single binding instrument.

18.15 Authority. Tenant represents and warrants that each individual executing this Lease on behalf of Tenant or its constituents is duly authorized to execute and deliver this Lease on behalf of said entity. Concurrently with the execution of this Lease, Tenant shall deliver to Landlord any entity resolutions or consents requested by Landlord to evidence such authority. Where Tenant is comprised of more than one person or entity, all covenants and obligations of Tenant hereunder shall be the joint and several covenants and obligations of each person or entity comprising Tenant. Any action permitted or required of Landlord under this Lease may, at Landlord’s election, be performed by Landlord’s property manager on Landlord’s behalf.

18.16 Intentionally Omitted.

18.17 Utility Deregulation. Tenant acknowledges that Landlord shall have sole control over the determination of which utility providers serve the Project, and Landlord shall have no obligation to give access or easement rights or otherwise allow onto the Project any utility providers except those approved by Landlord, in its commercially reasonable discretion. If, for any reason, Landlord permits Tenant to purchase utility services from a provider other than Landlord’s designated company(ies), such provider shall be considered a contractor of Tenant. In addition, Tenant shall allow Landlord to purchase such utility service from Tenant’s provider at Tenant’s rate or at such lower rate as can be negotiated by the aggregation of Landlord’s tenants’ requirements for such utility.

18.18 Clean Air Act. Tenant acknowledges that Landlord has not made any portion of the Premises or the Building accessible for smoking. If Tenant wishes to make any portion of the Premises accessible to smoking, Tenant shall make all improvements necessary to comply with all applicable governmental regulations. Tenant acknowledges that Tenant’s indemnity contained in this Lease includes claims based on the presence of tobacco smoke as a result of the activities of Tenant, its employees, agents or guests.

18.19 Choice of Law and Venue. This Lease shall be governed by the law of the state where the Project is located and the parties agree that venue shall lie in King County, Washington.

18.20 Nondisclosure of Lease Terms. Unless Landlord elects otherwise, the terms and conditions of this Lease constitute proprietary information of Landlord that Tenant will keep confidential. Tenant’s disclosure of the terms of this Lease could adversely affect Landlord’s ability to negotiate other leases and/or impair Landlord’s relationship with other tenants. Accordingly, Tenant will not directly or indirectly disclose the terms or conditions of this Lease to any person or entity other than Tenant’s employees, agents, lenders, attorneys or accountants who have a legitimate need to know such information and who also agree to keep the same confidential or pursuant to requirements of a regulatory agency, such as the Securities and Exchange Commission, in which case Tenant shall use reasonable efforts to redact confidential portions of the Lease prior to disclosing.

18.21 Regulations. Tenant shall comply with the terms and conditions of any of the following applicable to the Project and any subsequent changes thereto: (a) CC&R’s, REA’s or other covenants

recorded against the Project and any design guidelines referenced therein and any amendments thereto provided to Tenant, and (b) any transportation management plan adopted for the Project and all amendments thereto.

18.22 Landlord’s Access. Landlord or its agents may enter the Premises to show the Premises to potential lenders, tenants or other parties, to make repairs, alterations or improvements, to inspect and conduct tests in order to monitor Tenant’s compliance with this Lease and applicable law; or for any other purpose Landlord deems necessary. Landlord shall give Tenant reasonable prior notice of such entry, except in the case of emergency. Landlord may place customary “For Sale” or “For Lease” signs on the on the exterior of the Building and in the outside areas of the Project.

18.23 Quiet Possession. If Tenant pays the Rent and complies with all other terms of this Lease, Tenant may occupy the Premises for the full Term against any person claiming by, through or under Landlord, but not otherwise, subject to the provisions of this Lease.

18.24 Costs and Attorneys’ Fees. In the event of litigation between the parties hereto, declaratory or otherwise to enforce this Lease, the non-prevailing party shall pay the costs thereof and attorneys’ fees actually incurred by the prevailing party, in such suit, at trial and on appeal. In addition, if Landlord engages counsel to enforce the terms of this Lease, including for the purpose of preparing a delinquency notice, Tenant shall be required to reimburse Landlord for all costs incurred before the subject default is considered cured. Tenant shall pay Landlord’s attorneys’ fees and other out-of-pocket costs incurred in connection with any other requests for Landlord’s consent.

18.25 Interpretation. The captions of sections or subsections of this Lease are to assist the parties in reading this Lease and are not a part of the terms and provisions of this Lease. Whenever required by the context of this Lease, the singular shall include the plural and the plural shall include the singular. The masculine, feminine and neuter genders shall each include the other. In any provision relating to the conduct, acts or omissions of Tenant, the term “Tenant” shall include Tenant’s agents, employees, contractors, invitees, successors or others using the Premises with Tenant’s expressed or implied permission. References to “including” shall mean “including without limitation”.

18.26 No Recordation. Tenant shall not record this Lease without prior written consent from Landlord. However, Landlord may require that a “Short Form” memorandum of this Lease executed by both parties be recorded.

18.27 Waiver of Jury Trial . Landlord and Tenant hereby waive all rights to request a jury trial in any proceeding or counterclaim arising out of this Lease or Tenant’s right to occupy the Premises. Tenant agrees that if Landlord commences any summary proceeding for non-payment of Rent or possession of the Premises, Tenant waives all right to interpose any counterclaim in such proceeding. Tenant further waives any right to remove said summary proceeding to any other court or consolidate said summary proceeding with any other action, whether brought before or after the summary proceeding.

18.28 Survival. The obligations of each party applicable to time periods prior to the termination or expiration of this Lease shall survive termination or expiration of this Lease, including Landlord’s right to indemnification and defense from claims arising from matters occurring prior to termination even though the claim is asserted against Landlord after termination, and payment of amounts not finally calculated by the expiration/termination date.

18.29 Holding Over. If Tenant fails to surrender possession of the Premises upon termination or expiration of this Lease, and if Tenant obtains Landlord’s written consent to Tenant’s continued occupancy, then Tenant’s occupancy shall be deemed to be a month to month tenancy, with Base Rent due at a rate one and one half times the Rent payable by Tenant hereunder during the calendar month immediately preceding such termination or expiration (the “Latest Rate”) and Landlord may terminate

such month to month tenancy upon 30 days notice to Tenant. If Tenant fails to surrender possession of the Premises upon termination or expiration of this Lease and if Tenant does not obtain Landlord’s written consent to Tenant’s continued occupancy, then Tenant shall be deemed a trespasser and shall be liable to Landlord for all damages sustained by Landlord as a result thereof, together with Base Rate at a rate double the Latest Rate.

18.30 ERISA Contingency. If Exhibit E is attached to this Lease, then this Lease is contingent upon Tenant executing the ERISA Certificate set forth in Exhibit E and taking any other actions requested by Landlord to verify that this Lease is not a prohibited transaction under ERISA. Landlord will rely on the statements by Tenant contained in Exhibit E in agreeing to enter into this Lease. As a result, if Landlord later learns that any of the statements by Tenant on Exhibit E were not correct when made or are no longer correct, then (a) notwithstanding the provisions of Section 14.2, it shall be deemed an incurable default by Tenant under the Lease and Landlord may immediately terminate this Lease by notice to Tenant and Landlord shall be entitled to collect the damages described in Section 14, and (b) Tenant shall indemnify, defend and hold Landlord harmless from any and all damages, costs, or liabilities incurred by Landlord in connection with the false statements.

18.31 Intentionally Omitted

18.32 USA Patriot Act and Anti-Terrorism Laws. Landlord and Tenant each represent and warrant that neither they nor the officers and directors controlling Landlord and Tenant, nor any person or entity that directly owns a 25% or greater equity interest in it, respectively, are or are acting, directly or indirectly, for or on behalf of any person, group, entity, or nation with whom U.S. persons or entities are restricted from doing business under the regulations of the Office of Foreign Asset Control (“OFAC”) of the United States Treasury Department, including those named on the OFAC’s Specially Designated National and Blocked Person List, or are or are acting directly or indirectly for or on behalf of any person, group, entity, or nation designated in Presidential Executive Order 13224 signed on September 24, 2001 (“Executive Order”) as a person who commits, threatens to commit, or supports terrorism; or are or are acting directly or indirectly for a person, group, entity or nation in violation of the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 or the regulations or orders promulgated thereunder (the “Money Laundering Act”); and that they are not engaged in this transaction directly or indirectly on behalf of, or facilitating this transaction directly or indirectly on behalf of, any such person, group, entity or nation. Each party agrees during the Term of this Lease to comply with the Executive Order and the Money Laundering Act, and to defend, indemnify, and hold harmless the other party from and against any and all claims, damages, losses, risks, liabilities and expenses (including reasonable attorneys’ fees and costs) arising from or related to any breach of the foregoing representation and warranty.

{Signatures on following page}


LANDLORD:

WCM HIGHLANDS II, LLC a Washington limited liability company

By:	Washington Capital Management, Inc.
	its Manager

	By:	/s/ Patrick S. O’Malley
		Patrick S. O’Malley, Senior Vice President

	Date Signed: May 9, 2011

TENANT:

SEATTLE GENETICS, INC.
a Delaware corporation

By:	/s/ Clay B. Siegall
	Clay B. Siegall, President & CEO

Date Signed: May 9, 2011

Signature Page

LANDLORD’S ACKNOWLEDGMENT


STATE OF WASHINGTON		)
		) ss.
COUNTY OF KING		)

I certify that I know or have satisfactory evidence that Cory A. Carlson is the person who appeared before me, and said person acknowledged that he signed this instrument, on oath stated that he was authorized to execute the instrument and acknowledged it as President of Washington Capital Management, Inc., Manager of WCM HIGHLANDS II, LLC, to be the free and voluntary act of such party for the uses and purposes mentioned in this instrument.

Dated: May 9, 2011 .


						/s/ Jennifer Ourada
						(Signature of Notary Public)

						Jennifer Ourada
						(Printed Name of Notary Public)

						My Appointment expires 8-20-14

		(Insert notary seal here)

TENANT’S ACKNOWLEDGMENT


STATE OF WASHINGTON		)
		) ss.
COUNTY OF KING		)

I certify that I know or have satisfactory evidence that Clay B. Siegall is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as the President and CEO of SEATTLE GENETICS, INC. to be the free and voluntary act of such party for the uses and purposes mentioned in this instrument.

Dated: May 9, 2011 .


						/s/ Amy L. Olofson
						(Signature of Notary Public)

						Amy L. Olofson
						(Printed Name of Notary Public)

						My Appointment expires 10-09-14

		(Insert notary seal here)

Signature Page

EXHIBIT A

LEGAL DESCRIPTION OF PROJECT

TRACT 41-B OF BINDING SITE PLAN RECORDED UNDER AUDITOR’S FILE NUMBER 9804295003, SAID TRACT BEING A PORTION OF THE NORTHWEST QUARTER OF THE NORTHEAST QUARTER OF SECTION 29, TOWNSHIP 27 NORTH, RANGE 5 EAST.

SITUATE IN THE COUNTY OF SNOHOMISH, STATE OF WASHINGTON.

A-1

EXHIBIT B

INTENTIONALLY OMITTED

B-1

EXHIBIT C

WORK LETTER

[***]

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

C-1

EXHIBIT D

RULES AND REGULATIONS

[***]

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

D-1

EXHIBIT E

TENANT’S ERISA CERTIFICATE

[***]

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

E-2

EXHIBIT F

LIST OF EQUIPMENT TENANT IS PERMITTED TO REMOVE

F-1

EXHIBIT G

PROPOSED SPACE PLAN

[***]

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

G-1

EXHIBIT H

DISCLOSURE OF HAZARDOUS MATERIALS

[***]

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.

H-1

Exhibit 10.2

THIRD AMENDMENT TO LEASE

This THIRD AMENDMENT TO LEASE (this “Amendment”) between B&N 141-302, LLC, a Washington limited liability company (“Landlord”) and SEATTLE GENETICS, INC., a Delaware corporation (“Tenant”).

Tenant, and Landlord, as successor owner to WCM 132-302, LLC, are parties to that certain Lease dated December 1, 2000, as amended by that certain First Amendment to Lease dated May 28, 2003 and that certain Second Amendment to Lease dated July 1, 2008 (as amended, the “Lease”). Capitalized terms which are not defined herein shall have the meanings set forth in the Lease.

WCM HIGHLANDS II, LLC, an affiliate of Landlord, and Tenant are in the process of entering into a lease for the building located at 21717 30 ^th Drive SE (the “Ridgepoint Lease”). In order to induce the landlord to provide a $[***] allowance in the Ridgepoint Lease, Tenant has agreed to cancel the termination options contained in the Lease.

Landlord and Tenant agree as follows:

1. CANCELLATION OF TERMINATION RIGHTS . In consideration of the inclusion of a $[***]allowance for lobby improvements in the Ridgepoint Lease, Tenant’s termination rights set forth in Section 7 of the Second Amendment to the Lease are hereby cancelled.

2. EFFECTIVE DATE . This Amendment shall take effect upon the mutual execution and delivery of the Ridgepoint Lease.

3. NO OTHER AMENDMENTS . Except as modified by this Amendment, the First and Second Amendment, the Lease remains in full force and effect and has not been modified or amended.


DATED: May 9, 2011	Landlord :	B&N 131-302, LLC,
		a Washington limited liability company

		By: Washington Capital Management, Inc.
		Its: Manager


				By: /s/ Cory A. Carlson
				Cory A. Carlson, President


		Tenant :		SEATTLE GENETICS, INC.,
				a Delaware corporation

				By: /s/ Clay B. Siegall, PhD
				Its: President & CEO

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the

information subject to the confidentiality request. Omissions are designated as [***]. A complete version of

this exhibit has been filed separately with the Securities and Exchange Commission.


STATE OF WASHINGTON		)
		) ss.
COUNTY OF KING		)

I certify that I know or have satisfactory evidence that Patrick S. Malley is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as Senior Vice President of Washington Capital Management, Inc., Manager of B&N 141-302, LLC, a Washington limited liability company to be the free and voluntary act of such party for the uses and purposes mentioned in this instrument.


DATED: May 9, 2011.
				/s/ Jennifer Ourada
				(Signature of Notary Public)

				Jennifer Ourada
				(Printed Name of Notary Public)

				My Appointment expires 8-20-14


STATE OF WASHINGTON		)
		) ss.
COUNTY OF KING		)

I certify that I know or have satisfactory evidence that Todd Simpson is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as CFO of SEATTLE GENETICS, INC., a Delaware corporation to be the free and voluntary act of such party for the uses and purposes mentioned in this instrument.


DATED: May 9, 2011.
				/s/ Amy L. Olofson
				(Signature of Notary Public)

				Amy L. Olofson
				(Printed Name of Notary Public)

				My Appointment expires 10-9-14

Exhibit 10.3

SEATTLE GENETICS, INC.

AMENDED AND RESTATED 2000 EMPLOYEE STOCK PURCHASE PLAN

Adopted by the Board of Directors: November 16, 2000

Approved by the Stockholders: February 14, 2001

Amended and Restated by the Board of Directors: February 1, 2011

Amended and Restated by the Board of Directors: February 11, 2011

Approved by the Stockholders: May 20, 2011

The following constitute the provisions of the Amended and Restated 2000 Employee Stock Purchase Plan of Seattle Genetics, Inc.

1. Purpose . The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company. It is the intention of the Company to have the Plan qualify as an “Employee Stock Purchase Plan” under Section 423 of the Code. The provisions of the Plan shall, accordingly, be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code.

2. Definitions .

(a) “ Board ” means the Board of Directors of the Company.

(b) “ Code ” means the Internal Revenue Code of 1986, as amended.

(d) “ Company ” means Seattle Genetics, Inc., a Delaware corporation.

(e) “ Committee ” means a committee of one (1) or more members of the Board to whom authority has been delegated by the Board in accordance with Section 13(c).

(f) “ Compensation ” means total cash compensation received by an Employee from the Company or a Designated Subsidiary. By way of illustration, but not limitation, Compensation includes regular compensation such as salary, wages, overtime, shift differentials, bonuses (other than bonuses offered in connection with, and as an inducement for, the commencement of employment), commissions and incentive compensation, but excludes relocation payments or reimbursements, expense reimbursements, tuition or other reimbursements, automobile allowances, housing allowances, cash payments in lieu of sick or vacation time benefits and income realized as a result of participation in any stock option, stock purchase, or similar plan of the Company or any Designated Subsidiary.

(g) “ Continuous Status as an Employee ” means the absence of any interruption or termination of service as an Employee. Continuous Status as an Employee shall not be considered interrupted in the case of (i) sick leave; (ii) military leave; (iii) any other leave

of absence approved by the Administrator, provided that such leave is for a period of not more than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (iv) in the case of transfers between locations of the Company or between the Company and its Designated Subsidiaries.

(h) “ Contributions ” means all amounts credited to the account of a participant pursuant to the Plan.

(i) “ Corporate Transaction ” means any of the following, unless the Board provides otherwise: (i) an acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation but excluding any merger effected exclusively for the purpose of changing the domicile of the Company), (ii) a sale of all or substantially all of the assets of the Company, so long as in either (i) or (ii) above, the Company’s stockholders of record immediately prior to such transaction will, immediately after such transaction, hold less than fifty percent (50%) of the voting power of the surviving or acquiring entity or (iii) any other event specified by the Board; provided, however, that no Corporate Transaction (or any analogous term) shall be deemed to occur upon announcement or commencement of a tender offer or upon a “potential” takeover or upon shareholder approval of a merger or other transaction, in each case without a requirement that the Corporate Transaction actually occur.

(j) “ Designated Subsidiaries ” means the Subsidiaries which have been designated by the Board from time to time in its sole discretion as eligible to participate in the Plan.

(k) “ Director ” means a member of the Board.

(l) “ Employee ” means any person, including an Officer, who is customarily employed for at least twenty (20) hours per week and more than five (5) months in a calendar year by the Company or one of its Designated Subsidiaries. However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan.

(m) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

(n) “ Offering Date ” means the first business day of each Offering Period of the Plan.

(o) “ Offering Period ” means a period of six (6) months commencing on February 1 and August 1 of each year.

(p) “ Officer ” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

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(q) “ Plan ” means this Amended and Restated 2000 Employee Stock Purchase Plan.

(r) “ Pu rchase Date” means the last day of each Offering Period of the Plan.

(s) “ Purchase Price ” means with respect to an Offering Period an amount equal to 85% of the Fair Market Value (as defined in Section 7(b) below) of a Share of Common Stock on the Offering Date or on the Purchase Date, whichever is lower.

(t) “ Securities Act ” means the Securities Act of 1933, as amended.

(u) “ Share ” means a share of Common Stock, as adjusted in accordance with Section 18 of the Plan.

(v) “ Subsidiary ” means a corporation, domestic or foreign, as such term is defined in Section 424(f) of the Code, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary.

(w) “ Trading Day ” means any day on which the exchange(s) or market(s) on which shares of Common Stock are listed, including the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market, is open for trading.

3. Eligibility .

(a) Any person who has been an Employee for a continuous period of at least ten (10) days ending on the Offering Date of a given Offering Period shall be eligible to participate in such Offering Period under the Plan, subject to the requirements of Section 5(a) and the limitations imposed by Section 423(b) of the Code. Each person who first becomes an Employee during an Offering Period shall not be eligible to participate in such Offering Period, but shall be eligible to participate in subsequent Offering Periods.

(b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) if, immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any subsidiary of the Company, or (ii) if such option would permit his or her rights to purchase stock under all employee stock purchase plans (described in Section 423 of the Code) of the Company and its Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of the Fair Market Value (as defined in Section 7(b) below) of such stock (determined on the Offering Date of such option) for each calendar year in which such option is outstanding at any time.

4. Offering Periods .

(a) Offering Periods . The Plan shall be implemented by a series of Offering Periods of approximately six (6) months duration, with new Offering Periods commencing on or

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about February 1 and August 1 of each year (or at such other time or times as may be determined by the Board of Directors). The Plan shall continue until terminated in accordance with Section 19 hereof. The Board of Directors of the Company shall have the power to change the duration and/or the frequency of Offering Periods with respect to future offerings without stockholder approval if such change is announced at least five (5) days prior to the scheduled beginning of the first Offering Period to be affected. Notwithstanding the foregoing, if any Offering Date falls on a day that is not a Trading Day, then such Offering Date shall instead fall on the next subsequent Trading Day.

(b) Purchase Dates . The Purchase Date of an Offering Period commencing on February 1 shall be the next July 31 and the Purchase Date of an Offering Period commencing on August 1 shall be the next January 31. The Board of Directors of the Company shall have the power to change the frequency of Purchase Dates with respect to future purchases without stockholder approval if such change is announced at least five (5) days prior to the scheduled beginning of the first Offering Period to be affected. Notwithstanding the foregoing, if any Purchase Date falls on a day that is not a Trading Day, then such Purchase Date shall instead fall on the immediately preceding Trading Day.

5. Participation .

(a) An eligible Employee may become a participant in the Plan by completing a subscription agreement on the form provided by the Company and filing it with the Company prior to the applicable Offering Date. The subscription agreement shall set forth the percentage of the participant’s Compensation (subject to Section 6(a) below) to be paid as Contributions pursuant to the Plan. Once an Employee affirmatively enrolls in an Offering Period and authorizes payroll deductions, the Employee automatically shall be enrolled for all subsequent Offering Periods until he or she elects to withdraw from an Offering Period pursuant to Section 10 or terminates his or her participation in the Plan.

(b) Payroll deductions shall commence on the first payroll paid following the Offering Date and shall end on the last payroll paid on or prior to the Purchase Date to which the subscription agreement is applicable, unless sooner terminated by the participant as provided in Section 10.

6. Method of Payment For Purchase of Shares .

(a) This Plan shall be operated as a payroll deduction plan.

(b) A participant shall elect to have payroll deductions made on each payday during an Offering Period in an amount not less than one percent (1%) and not more than twenty percent (20%) (or such other maximum percentage as the Board may establish from time to time before an Offering Date) of such participant’s Compensation on each payday during the Offering Period. All payroll deductions made by a participant shall be credited to his or her account under the Plan. Once a participant is participating in the Plan on a payroll deduction basis, he or she may not make any additional payments into such account.

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(c) A participant may discontinue his or her participation in the Plan as provided in Section 10 or, on one occasion only during an Offering Period may decrease (including a decrease to zero percent (0%)) the rate of his or her Contributions with respect to the Offering Period, by completing and filing with the Company a new subscription agreement authorizing a change in the payroll deduction rate. Any change in rate of Contributions pursuant to this Section 6(b) shall be effective as of the beginning of the next calendar month following the date of filing of the new subscription agreement, provided the agreement indicating such change is filed at least ten (10) business days prior to such date and, if not, then as of the beginning of the next succeeding calendar month. A participant may not increase the rate of his or her Contributions with respect to the Offering Period during an Offering Period.

(d) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b), a participant’s payroll deductions may be decreased by the Company to 0% at any time during an Offering Period. Payroll deductions shall re-commence at the rate provided in such participant’s subscription agreement at the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless terminated by the participant as provided in Section 10. In addition, a participant’s payroll deductions may be decreased by the Company to 0% at any time during an Offering Period in order to avoid unnecessary payroll contributions as a result of application of the maximum share limit set forth in Section 7(a), or as a result of the limitations set forth in Section 3(b), in which case payroll deductions shall re-commence at the rate provided in such participant’s subscription agreement at the beginning of the next Offering Period, unless terminated by the participant as provided in Section 10.

(e) At the time the option is exercised, in whole or in part, or at the time some or all of the Company’s Common Stock issued under the Plan is disposed of, the participant must make adequate provision for the Company’s federal, state, or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any time, the Company may, but shall not be obligated to, withhold from the participant’s compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by the participant.

7. Grant of Option .

(a) Subject to the final sentence of this Section 7(a), on the Offering Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on each Purchase Date a number of Shares of the Company’s Common Stock determined by dividing such Employee’s Contributions accumulated prior to such Purchase Date and retained in the participant’s account as of the Purchase Date by the applicable Purchase Price. Notwithstanding the above, the maximum number of Shares an Employee may purchase during each Offering Period shall be 2,000 Shares (subject to any adjustment pursuant to Section 18 below), and provided further that such purchase shall be subject to the limitations set forth in Sections 3(b) and 12.

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(b) If the Common Stock is listed on any established stock exchange or traded on any established market, the fair market value of the Company’s Common Stock on a given date (the “ Fair Market Value ”) shall be the closing price of the Common Stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in such source as the Board deems reliable. Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value shall be the closing selling price (or closing bid if no sales were reported) on the last preceding date for which such quotation exists. In the absence of such markets for the Common Stock, the Fair Market Value shall be determined by the Board in good faith.

8. Exercise of Option . Unless a participant withdraws from the Plan as provided in Section 10, his or her option for the purchase of Shares will be exercised automatically on each Purchase Date of an Offering Period, and the maximum number of full Shares subject to the option will be purchased at the applicable Purchase Price with the accumulated Contributions in his or her account. No fractional Shares shall be issued. The Shares purchased upon exercise of an option hereunder shall be deemed to be transferred to the participant on the Purchase Date. During his or her lifetime, a participant’s option to purchase Shares hereunder is exercisable only by him or her.

9. Delivery . As promptly as practicable after each Purchase Date of each Offering Period, the Company shall arrange the delivery to each participant, as appropriate, of the Shares purchased upon exercise of his or her option. No fractional Shares shall be purchased; any payroll deductions accumulated in a participant’s account which are not sufficient to purchase a full Share shall be retained in the participant’s account for the subsequent Offering Period, subject to earlier withdrawal by the participant as provided in Section 10 below. Any other amounts left over in a participant’s account after a Purchase Date shall be returned to the participant.

10. Voluntary Withdrawal; Termination of Employment .

(a) A participant may withdraw all but not less than all the Contributions credited to his or her account under the Plan at any time prior to each Purchase Date by giving written notice to the Company. All of the participant’s Contributions credited to his or her account will be paid to him or her promptly after receipt of his or her notice of withdrawal and his or her option for the current period will be automatically terminated, and no further Contributions for the purchase of Shares will be made during the Offering Period.

(b) Upon termination of the participant’s Continuous Status as an Employee prior to the Purchase Date of an Offering Period for any reason, including retirement or death, the Contributions credited to his or her account will be returned to him or her or, in the case of his or her death, to the person or persons entitled thereto under Section 14, and his or her option will be automatically terminated.

(c) In the event an Employee fails to remain in Continuous Status as an Employee of the Company for at least twenty (20) hours per week during the Offering Period in which the employee is a participant, he or she will be deemed to have elected to withdraw from

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the Plan and the Contributions credited to his or her account will be returned to him or her and his or her option terminated.

(d) A participant’s withdrawal from an offering will not have any effect upon his or her eligibility to participate in a succeeding offering or in any similar plan which may hereafter be adopted by the Company.

11. Interest . No interest shall accrue on the Contributions of a participant in the Plan.

12. Stock .

(a) Subject to adjustment as provided in Section 18, the maximum number of Shares which shall be made available for sale under the Plan shall be 896,190 Shares. If any option granted under the Plan shall for any reason terminate without having been exercised, the shares of Common Stock not purchased under such option shall again become available for issuance under the Plan. If the Board determines that, on a given Purchase Date, the number of shares with respect to which options are to be exercised may exceed (i) the number of shares of Common Stock that were available for sale under the Plan on the Offering Date of the applicable Offering Period, or (ii) the number of shares available for sale under the Plan on such Purchase Date, the Board may in its sole discretion provide (x) that the Company shall make a pro rata allocation of the Shares of Common Stock available for purchase on such Offering Date or Purchase Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Purchase Date, and continue all Offering Periods then in effect, or (y) that the Company shall make a pro rata allocation of the shares available for purchase on such Offering Date or Purchase Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Purchase Date, and terminate any or all Offering Periods then in effect pursuant to Section 19 below. The Company may make pro rata allocation of the Shares available on the Offering Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional Shares for issuance under the Plan by the Company’s stockholders subsequent to such Offering Date.

(b) The participant shall have no interest or voting right in Shares covered by his or her option until such option has been exercised.

(c) Shares to be delivered to a participant under the Plan will be registered in the name of the participant or in the name of the participant and his or her spouse.

13. Administration .

(a) The Board shall administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 13(c).

(b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

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(i) To determine how and when options to purchase Shares shall be granted and the provisions of each Offering Period (which need not be identical).

(ii) To designate from time to time which Subsidiaries of the Company shall be eligible to participate in the Plan.

(iii) To construe and interpret the Plan and options, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.

(iv) To settle all controversies regarding the Plan and options granted under it.

(v) To amend, suspend or terminate the Plan at any time as provided in Section 19.

(vi) Generally, to exercise such powers and to perform such acts as it deems necessary or expedient to promote the best interests of the Company and its Subsidiaries and to carry out the intent that the Plan be treated as an Employee Stock Purchase Plan.

(vii) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees who are foreign nationals or employed outside the United States.

(c) The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated. Whether or not the Board has delegated administration of the Plan to a Committee, the Board shall have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan.

(d) All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.

14. Designation of Beneficiary .

(a) A participant may file a written designation of a beneficiary who is to receive any Shares and cash, if any, from the participant’s account under the Plan in the event of such participant’s death subsequent to the end of an Offering Period but prior to delivery to him

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or her of such Shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant’s account under the Plan in the event of such participant’s death prior to the Purchase Date of an Offering Period. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective.

(b) Such designation of beneficiary may be changed by the participant (and his or her spouse, if any) at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant’s death, the Company shall deliver such Shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such Shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

15. Transferability . Neither Contributions credited to a participant’s account nor any rights with regard to the exercise of an option or to receive Shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in Section 14) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds in accordance with Section 10.

16. Use of Funds . All Contributions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such Contributions. Proceeds from the sale of shares of Common Stock pursuant to options granted under the Plan shall constitute general funds of the Company.

17. Reports . Individual accounts will be maintained for each participant in the Plan. Statements of account will be given to participating Employees at least annually, which statements will set forth the amounts of Contributions, the per Share Purchase Price, the number of Shares purchased and the remaining cash balance, if any.

18. Adjustments Upon Changes in Capitalization; Corporate Transactions .

(a) Adjustment . Subject to any required action by the stockholders of the Company, the number of Shares covered by each option under the Plan which has not yet been exercised and the number of Shares which have been authorized for issuance under the Plan but have not yet been placed under option (collectively, the “ Reserves ”), as well as the maximum number of shares of Common Stock which may be purchased by a participant in an Offering Period, the number of shares of Common Stock set forth in Section 12(a) above, and the price per Share of Common Stock covered by each option under the Plan which has not yet been exercised, shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, dividend in property other than cash, liquidating dividend, combination, exchange or reclassification of the Common Stock (including any such change in the number of Shares of Common Stock effected in connection with a change in domicile of the Company), or any other increase or decrease in the number of

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Shares effected without receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, change in corporate structure or other similar transaction); provided however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an option.

(b) Corporate Transactions . In the event of a dissolution or liquidation of the Company, any Offering Period then in progress will terminate immediately prior to the consummation of such action, unless otherwise provided by the Board. In the event of a Corporate Transaction, each option outstanding under the Plan shall be assumed or an equivalent option shall be substituted by the successor corporation or a parent or Subsidiary of such successor corporation. In the event that the successor corporation refuses to assume or substitute for outstanding options, the Offering Period then in progress shall be shortened and a new Purchase Date shall be set (the “ New Purchase Date ”), as of which date the Offering Period then in progress will terminate. The New Purchase Date shall be on or before the date of consummation of the transaction and the Board shall notify each participant in writing, at least ten (10) days prior to the New Purchase Date, that the Purchase Date for his or her option has been changed to the New Purchase Date and that his or her option will be exercised automatically on the New Purchase Date, unless prior to such date he or she has withdrawn from the Offering Period as provided in Section 10. For purposes of this Section 18, an option granted under the Plan shall be deemed to be assumed, without limitation, if, at the time of issuance of the stock or other consideration upon a Corporate Transaction, each holder of an option under the Plan would be entitled to receive upon exercise of the option the same number and kind of shares of stock or the same amount of property, cash or securities as such holder would have been entitled to receive upon the occurrence of the transaction if the holder had been, immediately prior to the transaction, the holder of the number of Shares of Common Stock covered by the option at such time (after giving effect to any adjustments in the number of Shares covered by the option as provided for in this Section 18); provided however that if the consideration received in the transaction is not solely common stock of the successor corporation or its parent (as defined in Section 424(e) of the Code), the Board may, with the consent of the successor corporation, provide for the consideration to be received upon exercise of the option to be solely common stock of the successor corporation or its parent equal in Fair Market Value to the per Share consideration received by holders of Common Stock in the transaction.

The Board may, if it so determines in the exercise of its sole discretion, also make provision for adjusting the Reserves, as well as the price per Share of Common Stock covered by each outstanding option, in the event that the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of Shares of its outstanding Common Stock, and in the event of the Company’s being consolidated with or merged into any other corporation.

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19. Amendment or Termination .

(a) The Board may at any time and for any reason terminate or amend the Plan. Except as provided in Section 18, no such termination of the Plan may affect options previously granted, provided that the Plan or an Offering Period may be terminated by the Board on a Purchase Date or by the Board’s setting a new Purchase Date with respect to an Offering Period then in progress if the Board determines that termination of the Plan and/or the Offering Period is in the best interests of the Company and the stockholders. Except as provided in Section 18 and in this Section 19, no amendment to the Plan shall make any change in any option previously granted which adversely affects the rights of any participant. In addition, to the extent necessary to comply with Rule 16b-3 under the Exchange Act, or under Section 423 of the Code (or any successor rule or provision or any applicable law or regulation), the Company shall obtain stockholder approval in such a manner and to such a degree as so required.

(b) Without stockholder consent and without regard to whether any participant rights may be considered to have been adversely affected, the Board (or its Committee) shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant’s Compensation, and establish such other limitations or procedures as the Board (or its Committee) determines in its sole discretion advisable which are consistent with the Plan.

20. Notices . All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

21. Conditions Upon Issuance of Shares . Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such Shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, applicable state securities laws and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.

22. Effective Date . The Plan became effective on March 6, 2001.

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23. Miscellaneous Provisions .

(a) A participant shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, Shares subject to options unless and until the participant’s Shares acquired upon exercise of options under the Plan are recorded in the books of the Company (or its transfer agent).

(b) The Plan does not constitute an employment contract. Nothing in the Plan shall in any way alter the at will nature of an Employee’s employment or be deemed to create in any way whatsoever any obligation on the part of any Employee to continue in the employ of the Company or a Subsidiary, or on the part of the Company or a Subsidiary to continue the employment of an Employee.

(c) The provisions of the Plan shall be governed by the laws of the State of Washington without resort to that state’s conflicts of laws rules.

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Exhibit 10.4

SEATTLE GENETICS, INC.

AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

NOTICE OF STOCK OPTION GRANT

[Name of Director]

[Title]

[Company Name]

[Address]

Dear [Name]

You have been granted an option to purchase Common Stock of Seattle Genetics, Inc. (the “Company”) as follows:


Date of Grant

Vesting Commencement Date

Exercise Price per Share

Total Number of Shares Granted

Type of Option		Nonstatutory Stock Option

Expiration Date

Vesting Schedule :		This Option may be exercised, in whole or in part, in accordance with the following schedule: One hundred percent (100%) of the total number of shares subject to the Option shall vest on the day before the first anniversary of the date of grant of the Option, provided that Optionee does not experience a Termination of Employment before such date.

Termination Period :		This Option may be exercised for 90 days after Optionee’s Termination of Employment, or such longer period as may be applicable upon the death or disability of Optionee as provided in the Stock Option Agreement, but in no event later than the Expiration Date as provided above.


OPTIONEE		SEATTLE GENETICS, INC.

	By:
[Name]	Name:	Clay B. Siegall, Ph.D.
	Title:	President & CEO

[SSI Number]
Social Security Number

SEATTLE GENETICS, INC.

AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

THIS STOCK OPTION AGREEMENT (the “Agreement”) dated [Date] (“Grant Date”) between Seattle Genetics, Inc., a Delaware corporation (the “Company”), and [Name] (“Optionee”), is entered into as follows:

WITNESSETH:

WHEREAS, the Company has established the Amended and Restated 2007 Equity Incentive Plan (the “Plan”); and

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that Optionee shall be granted an option under the Plan as hereinafter set forth;

The parties hereby agree that the Company grants, effective as of the Grant Date, Optionee a Nonstatutory Stock Option (this “Option”) to purchase shares of its $0.001 par value Common Stock (the “Shares”) upon the terms and conditions set forth in this Agreement.

1. Plan Award . This Option is granted under and pursuant to the Plan and is subject to each and all of the provisions thereof.

2. Exercise Price . The exercise price applicable to this Option (meaning, the price Optionee must pay in order to purchase any Shares hereunder) shall be [$00.00] per Share.

3. Vesting and Exercise of Option . Subject to Optionee’s not experiencing a Termination of Employment during the following vesting period, Optionee shall vest in and earn the right to exercise this Option as follows: One hundred percent (100%) of the total number of shares subject to the Option shall vest on the day before the first anniversary of the Grant Date of the Option. This award may be exercised in whole or in part.

In the event of a Change in Control (as defined in the Plan), the vesting of this Option (if this Option is outstanding at such time) shall be accelerated in full such that Optionee shall have the right to exercise this Option for all of the Shares subject to this Option immediately prior to the effective time of the Change in Control.

4. Expiration . This Option will expire ten (10) years from the Grant Date, unless sooner terminated or canceled in accordance with the provisions of the Plan. This means that (subject to the continuing service requirement set forth in Section 3 above and subject to earlier termination upon certain other events as set forth in the Plan) this Option must be exercised, if at all, on or before [Expiration Date] (the “Expiration Date”). If this Option expires on a stock exchange holiday or weekend day, this Option will expire on the last trading day prior to the holiday or weekend. Optionee shall be solely responsible for exercising this Option, if at all, prior to its Expiration Date. The Company shall have no obligation to notify Optionee of this Option’s expiration.

5. Exercise Mechanics . This Option may be exercised by delivery of an exercise notice, in the form attached as Exhibit A (the “Exercise Notice”), which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The Exercise Notice must be accompanied by the payment of the full Option exercise price of such Shares. Exercise shall not be deemed to have occurred unless and until Optionee has delivered to the Company (or its authorized representative) an approved notice of exercise, full payment of the exercise price for the Shares being exercised and payment of any applicable withholding taxes in accordance with Section 8 below. Payment of the Option exercise price may be in cash (including check or wire transfer); through an approved cashless-brokered exercise program; with shares of the Company’s Common Stock (subject to the Company’s discretion to withhold approval for such payment method at any time); cashless “net exercise” arrangement pursuant to which the Company will reduce the number of Shares issued upon exercise by the largest whole number of Shares having an aggregate fair market value that does not exceed the aggregate exercise price, provided the Company shall accept a cash or other payment from Optionee to the extent of any remaining balance of the exercise price not satisfied by such reduction in the number of whole Shares to be issued; or a combination thereof to the extent permissible under Applicable Law; provided, however, that any permitted method of payment shall be in strict compliance with all procedural rules established by the Board.

6. Termination of Employment . All rights of Optionee in this Option, to the extent that it has not previously become vested and been exercised, shall terminate upon Optionee’s Termination of Employment except as set forth in this Section 6. The portion of the Option that relates to any Shares that were unvested and unexercisable as of the date of Optionee’s Termination of Employment shall terminate and expire effective immediately upon such date. With respect to the vested and exercisable portion of the Option, and subject to the final sentence of this Section 6:

(i) In the event of Termination of Employment other than as a result of Optionee’s death or disability, Optionee shall have 90 days from the date of such Termination of Employment to exercise the Option as to the Shares subject to the Option that were vested and exercisable as of the date of Termination of Employment; provided that if during any part of such 90-day period, the Option is not exercisable because the issuance of the Shares would violate the registration requirements under the Securities Act, the Option shall not expire until the Option shall have been exercisable for an aggregate of 90 days after the date of Termination of Employment; provided further that if during any part of such 90-day period, the Shares issued upon exercise of the Option may not be sold because Optionee has material nonpublic information regarding the Company or is otherwise subject to a trading blackout period under the Company’s Insider Trading Policy, the Option shall not expire until Optionee shall have had an aggregate of 90 days after the date of Termination of Employment during which Optionee can sell the Shares without being subject to such restrictions arising under insider trading laws or Company policy; and provided further that notwithstanding the foregoing, in no event may this Option be exercised more than one year after the date of Termination of Employment;

(ii) In the event of Termination of Employment as a result of Optionee’s disability (including a Total and Permanent Disability), Optionee shall have 12 months to exercise the Option as to the Shares subject to the Option that were vested and exercisable as of the date of Termination of Employment;

(iii) In the event of Termination of Employment as a result of Optionee’s death or in the event of Optionee’s death within three months following Optionee’s Termination of Employment, Optionee shall have 12 months following the Optionee’s death to exercise the Option as to the Shares subject to the Option that were vested and exercisable as of the date of death or, if earlier, the date of Termination of Employment; and

Notwithstanding the above, in no event may an Option be exercised, even as to vested and otherwise exercisable Shares, after the Expiration Date set forth in Section 4 above.

7. Transferability . This Option generally is not transferable by Optionee otherwise than by will or the laws of descent and distribution, and is exercisable only by Optionee during Optionee’s lifetime; provided, however, that this Option may be transferred by instrument to an inter vivos or testamentary trust in which the Option is to be passed to beneficiaries upon the death of the trustor (settlor) or by gift or pursuant to domestic relations orders to “Immediate Family Members” (as defined below) of the Optionee. “Immediate Family” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the Optionee) control the management of assets, and any other entity in which these persons (or the Optionee) own more than fifty percent of the voting interests.

8. Tax Matters . Regardless of any action the Company takes with respect to any or all income tax, social security, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), Optionee acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by him or her is and remains Optionee’s responsibility and that the Company (i) makes no representations nor undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this Option, including the grant, vesting or exercise of this Option, the subsequent sale of Shares acquired pursuant to such exercise and receipt of any dividends; and (ii) does not commit to structure the terms or the grant or any aspect of this Option to reduce or eliminate Optionee’s liability for Tax-Related Items. If Optionee is subject to certain withholding requirements, then prior to the exercise of this Option, Optionee shall pay or make adequate arrangements satisfactory to the Company to withhold all applicable Tax-Related Items legally payable by Optionee from Optionee’s wages or other cash compensation paid to Optionee by the Company or from proceeds of the sale of Shares. Alternatively, or in addition, if applicable and permissible under Applicable Laws, the Company may (but shall not be obligated to): (1) sell or arrange for the sale of Shares that Optionee acquires to meet the withholding obligation for Tax-Related Items, and/or (2) withhold in Shares,

provided that the Company only withholds the amount of Shares necessary to satisfy the minimum withholding amount. In addition, if applicable, Optionee shall pay the Company any amount of Tax-Related Items that the Company may be required to withhold as a result of Optionee’s participation in the Plan or Optionee’s purchase of Shares that cannot be satisfied by the means previously described, and if Optionee does not otherwise so pay the Company, then the Company may withhold amounts from Optionee’s cash compensation to satisfy such withholding obligation. The Company may refuse to honor the exercise and refuse to deliver the Shares if Optionee fails to comply with Optionee’s obligations in connection with the Tax-Related Items (including if Optionee’s cash compensation is not sufficient to satisfy such obligations). Although Optionee is being provided in the Plan prospectus a description of certain tax consequences of transactions related to the Option, Optionee remains responsible for all such tax consequences and the Company shall not be deemed to provide any individual tax advice with respect thereto.

9. Optionee Acknowledgements . By accepting the grant of this Option, Optionee acknowledges and agrees that the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time unless otherwise provided in the Plan or this Agreement. Optionee acknowledges that all decisions with respect to future grants, if any, will be at the sole discretion of the Company. Optionee’s participation in the Plan shall not create a right to his or her continued service as a Director. This Option shall not be part of calculating any severance, resignation, termination, redundancy, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments insofar as permitted by law. In the event that Optionee is not an employee of the Company, this Option grant will not be interpreted to form an employment contract or relationship with the Company or any Subsidiary or Affiliate of the Company. Optionee acknowledges that the future value of the underlying Shares is unknown, may increase or decrease in the future, and cannot be predicted with certainty. In consideration of the grant of this Option, no claim or entitlement to compensation or damages shall arise from termination of this Option or diminution in value of this Option or Shares purchased through exercise of this Option resulting from Optionee’s Termination of Employment by the Company (for any reason whatsoever and whether or not in breach of Applicable Laws).

10. Data Transfer . Optionee explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Optionee’s personal data as described in this document by and among, as applicable, the Company and its Subsidiaries and Affiliates for the exclusive purpose of implementing, administering and managing Optionee’s participation in the Plan. Optionee understands that the Company, its Affiliates and its Subsidiaries hold certain personal information about Optionee, including, but not limited to, name, home address and telephone number, date of birth, social security number (or other identification number), salary, nationality, job title, any shares of stock or directorships held in the Company, details of all options or any other entitlement to shares of stock awarded, canceled, purchased, exercised, vested, unvested or outstanding in Optionee’s favor for the purpose of implementing, managing and administering the Plan (“Data”). Optionee understands that the Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in Optionee’s country or elsewhere and that the recipient country may have different data privacy laws and protections than Optionee’s country. Optionee

may request a list with the names and addresses of any potential recipients of the Data by contacting the Stock Plan Administrator. Optionee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing Optionee’s participation in the Plan, including any requisite transfer of such Data, as may be required to a broker or other third party with whom Optionee may elect to deposit any Shares acquired upon the exercise of this Option. Optionee understands that Data will be held only as long as is necessary to implement, administer and manage participation in the Plan. Optionee may, at any time, view Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting the Stock Plan Administrator in writing. Optionee understands that refusing or withdrawing consent may affect Optionee’s ability to participate in the Plan. For more information on the consequences of refusing to consent or withdrawing consent, Optionee may contact the Stock Plan Administrator at the Company.

11. Copies of Plan Materials . Optionee acknowledges that Optionee has received copies of the Plan and the Plan prospectus from the Company and agrees to receive stockholder information, including copies of any annual report, proxy statement and periodic report, from the Company’s website at http://www.seagen.com. Optionee acknowledges that copies of the Plan, Plan prospectus, Plan information and stockholder information are also available upon written or telephonic request to the Stock Plan Administrator.

12. Entire Agreement; Plan Controls . The Plan is incorporated herein by reference. The Plan and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to Optionee’s interest except by means of a writing signed by the Company and Optionee. This Agreement is governed by the laws of the state of Delaware. In the event of any conflict between the terms and provisions of the Plan and this Agreement, the Plan terms and provisions shall govern. Capitalized terms used but not defined in this Agreement or the Notice of Stock Option Grant attached to this Agreement have the meanings assigned to them in the Plan. Certain other important terms governing this Agreement are contained in the Plan.

By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Amended and Restated 2007 Equity Incentive Plan (the “Plan”) and this Stock Option Agreement (the “Agreement”). Optionee has reviewed the Plan and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of the Plan and this Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and this Agreement.


OPTIONEE		SEATTLE GENETICS, INC.

	By:
[Name]	Name:	Clay B. Siegall, Ph.D.
	Title:	President & CEO

CONSENT OF SPOUSE

The undersigned spouse of Optionee has read and hereby approves the terms and conditions of the Plan and this Agreement. In consideration of the Company’s granting his or her spouse the right to purchase Shares as set forth in the Plan and this Agreement, the undersigned hereby agrees to be irrevocably bound by the terms and conditions of the Plan and this Agreement and further agrees that any community property interest shall be similarly bound. The undersigned hereby appoints the undersigned’s spouse as attorney-in-fact for the undersigned with respect to any amendment or exercise of rights under the Plan or this Agreement.

Spouse of Optionee

EXHIBIT A

NOTICE OF EXERCISE


To:		Seattle Genetics, Inc.

Attn:		Stock Option Administrator

Subject:		Notice of Intention to Exercise Stock Option

This is official notice that the undersigned (“ Optionee ”) intends to exercise Optionee’s option to purchase shares of Seattle Genetics, Inc. Common Stock, under and pursuant to the Company’s Amended and Restated 2007 Equity Incentive Plan and the Stock Option Agreement dated , as follows:


Grant Number:

Date of Purchase:

Number of Shares:

Purchase Price:

Method of Payment of Purchase Price:

Social Security No.:

The shares should be issued as follows:


Name:

Address:





Signed:

Date:

Exhibit 31.1

CERTIFICATIONS

I, Clay B. Siegall, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Seattle Genetics, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2011

/s/ Clay B. Siegall

Clay B. Siegall

Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, Todd E. Simpson, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Seattle Genetics, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2011

/s/ Todd E. Simpson

Todd E. Simpson

Chief Financial Officer

Exhibit 32.1

SEATTLE GENETICS, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Seattle Genetics, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Clay B. Siegall, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Clay B. Siegall

Clay B. Siegall

Chief Executive Officer

August 5, 2011

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Seattle Genetics, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

Exhibit 32.2

SEATTLE GENETICS, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Seattle Genetics, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Todd E. Simpson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Todd E. Simpson

Todd E. Simpson

Chief Financial Officer

August 5, 2011

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