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Why Is Seattle Genetics (SGEN) Up 13.3% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for Seattle Genetics, Inc. (SGEN - Free Report) . Shares have added about 13.3% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is SGEN due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Seattle Genetics Q1 Earnings Lag Estimates, Sales Top

Seattle Genetics reported a loss of 61 cents per share for the first quarter of 2018, wider than the Zacks Consensus Estimate of 40 cents and the year-ago quarter loss of 42 cents.

Revenues came in at $140.6 million, up 28.8% year over year, primarily driven by strong sales of Adcetris. Revenues also beat the Zacks Consensus Estimate of $112.06 million.

Quarter in Details

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 $95.4 million, up a significant 36% year over year.

Collaboration and license agreement revenues increased 35.4% to almost $29.6 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 decreased 7.7% year over year to $15.7 million due to adoption of the new accounting standards for revenue recognition.

Research and development (R&D) expenses were $152.5 million, up 29% year over year, primarily attributable to tucatinib development activities and upfront costs related to technology licensing with Pieris and PharmaMar. Also, selling, general and administrative (SG&A) expenses increased 72.4% to $66.2 million, mainly due to costs related to the acquisition of Cascadian Therapeutics and launch of Adcetris in frontline Hodgkin lymphoma.

2018 Outlook

With the launch of Adcetris in the new indication, the company withdrew its revenue expectation for 2018. Currently, Shire expects second-quarter sales to be in the range of $105 million to $110 million.

The company increased its outlook for R&D expense to the range of $530 million to $580 million from $460 million to $500 million. SG&A expense is expected in the range of $220 million to $240 million (previously $200 million to $220 million). The rise in R&D will likely be due to increased investments in development of tisotumab vedotin, ladiratuzumab vedotin and the company’s pipeline programs.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. There have been three revisions higher for the current quarter compared to two lower.

VGM Scores

At this time, SGEN has a poor Growth Score of F, however its Momentum is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stocks has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, SGEN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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