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Seattle Genetics (SGEN) Q4 Earnings & Revenues Top Estimates

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Seattle Genetics, Inc. (SGEN - Free Report) reported a loss of 41 cents per share for the fourth quarter of 2017, narrower than the Zacks Consensus Estimate of 43 cents but wider than the year-ago quarter loss of 39 cents per share.

Revenues came in at $129.6 million, up 23.1% year over year, primarily on the back of strong sales of Adcetris. Revenues also beat the Zacks Consensus Estimate of $112.06 million.

However, Seattle Genetics’ shares have lost 11.8% in the past year compared with the industry’s decline of 0.7% in the same period.

Quarter in Detail

Seattle Genetics’ top line comprises product revenues, collaboration and license agreement revenues and royalties.

The company’s only marketed product, Adcetris, generated product sales of $83.7 million, up a significant 18% year over year.

Collaboration and license agreement revenues increased 24.5% to almost $25.9 million, mainly driven by strong demand for Adcetris in the international market. Collaboration revenues include fees earned from the company’s agreement with Japan-based Takeda Pharmaceutical for Adcetris and other ADC collaborations.

Royalty revenues increased almost 46% year over year to $20 million, attributable to higher international sales of Adcetris by Takeda Pharmaceutical Co.

Research and development (R&D) expenses were $110.5 million, up 2.1% year over year. Also, selling, general and administrative (SG&A) expenses increased 17.1% to $48.5 million. Costs were high, primarily due to investment in development of Adcetris in other indications.

2018 Outlook

The company provided its outlook for total revenues in the range of $470 million to $505 million. It expects collaboration and license agreement revenues to be in the range of $55 million to $65 million. The royalties are expected in the range of $75 million to $80 million. Net sales of Adcetris are expected in the range of $340 million to $360 million. The company has not included the impact of a potential line extension of the drug in frontline advanced classical Hodgkin lymphoma, for which approval is expected in May 2018.

The company anticipates R&D expense to be $460 million to $500 million while SG&A expense is expected in the range of $200 million to $220 million. The rise in SG&A will likely be due to the inclusion of expanded commercial activities related to potential line extension of Adcetris.

Pipeline Update

Seattle Genetics continues to work on expanding Adcetris’ label further through three phase III studies.

In November 2017, the FDA approved the expansion of Adcetris’ label to include cutaneous T-cell lymphoma. In January 2018, the drugwas also approved in similar indication in Europe. Moreover, the FDA has granted priority review for a supplemental Biologics License Application (sBLA) seeking approval to include frontline advanced classical Hodgkin lymphoma in its label. The sBLA was filed based on data from phase III study, ECHELON-1, which showed that Adcetris achieved statistically significant improvement in modified progression-free survival. A decision is expected in May 2018.

Moreover, top-line data from the ECHELON-2 study (frontline CD30-expressing mature T-cell lymphoma) should be out in 2018. A separate study is also evaluating Adcetris in combination with Bristol-Myers Squibb’s (BMY - Free Report) Opdivo in relapsed/refractory classical Hodgkin lymphoma.

In addition, the company is evaluating enfortumab vedotin in a pivotal phase II study in patients with metastatic urothelial cancer patients. Moreover, in November 2017, Seattle Genetics and Astellas Pharma initiated a phase Ib study to evaluate the candidate in combination with CPI therapies, including Merck’s (MRK - Free Report) Keytruda (pembrolizumab), in patients with locally advanced or metastatic urothelial cancer, in first- or second-line setting. The companies are planning to initiate a phase III study in 2018.

Seattle Genetics and Germany-based Genmab are planning to initiate three phase II studies to evaluate tisotumab vedotin in recurrent or metastatic cervical cancer, metastatic cervical cancer in treatment-naïve women and in a range of other solid tumor types.

The company is evaluating another pipeline candidate, polatuzumab vedotin, in diffuse large B-cell lymphoma. The study is being conducted in collaboration with Genentech, a member of Roche Holding AG (RHHBY - Free Report) .

Other Activities

In a bid to boost its pipeline, the company entered into a definitive merger agreement last month to acquire Cascadian Therapeutics for $614 million. The acquisition will add pivotal-stage HER2-positive metastatic breast cancer candidate, tucatinib, to its pipeline.

Our Take

The company’s fourth-quarter loss was narrower than estimated and sales also beat expectations. Given the positive developments for Adcetris, investors should focus on updates of its label expansion. Approval for the Hodgkin lymphoma indication his year will boost sales further. Data from clinical studies from other pipeline candidates are also expected during the year.

Seattle Genetics, Inc. Price, Consensus and EPS Surprise


Seattle Genetics, Inc. Price, Consensus and EPS Surprise | Seattle Genetics, Inc. Quote

Seattle Genetics carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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