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Seattle Genetics (SGEN) Down 6.1% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Seattle Genetics (SGEN - Free Report) . Shares have lost about 6.1% in that time frame, underperforming the S&P 500.

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

Seattle Genetics Q4 Loss Widens, Revenues Top Mark

Seattle Genetics reported an adjusted loss of 57 cents per share for the fourth quarter of 2018, significantly wider than the Zacks Consensus Estimate of 39 cents and also the year-ago quarter’s loss of 43 cents.

Adjusted loss included a market-to-market net investment loss related to Seattle Genetics’ common stock holdings in Immunomedics and a non-cash income tax benefit pertaining to the acquisition of Cascadian Therapeutics.

Revenues came in at $174.5 million in the reported quarter, up 34.6% year over year, primarily driven by strong sales and a recent label expansion of Adcetris (brentuximab vedotin) in frontline stage III/IV Hodgkin lymphoma and in frontline CD30-expressing peripheral T-cell lymphomas (PTCL). The top line also beat the Zacks Consensus Estimate of $166 million.

Quarter in Detail

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

The company’s only marketed product, Adcetris, generated net sales of $132.1 million in the United States and Canada, up 58% year over year. The improved sales of the drug were owing to its recent label expansions in frontline CD30-expressing PTCL and the frontline Hodgkin's lymphoma resulting in higher patient population.

Collaboration and license agreement revenues plunged 31.2% year over year to $17.8 million. This included the amounts earned under the ADC collaboration in the ex-U.S. markets.

Royalty revenues rose 23% year over year to $24.6 million on the back of high demand and sales of Adcetris outside Canada and the United States by Takeda.

Research and development (R&D) expenses were $149.8 million, up 35.6% year over year, primarily attributable to higher investment across the late-stage pipeline comprising the enfortumab vedotin (EV), tucatinib and tisotumab vedotin (TV) program.

Selling, general and administrative (SG&A) expenses soared 63.9% year over year to $79.5 million, mainly on costs pertaining to the acquisition of Cascadian Therapeutics and the rapid approval and launch of Adcetris in frontline PTCL.

 2018 Outlook

Seattle Genetics expects full-year total revenues in the range of $790-$840 million. The guidance disappointed as the Zacks Consensus Estimate stands at $861.8 million.

The label expansion of Adcetris for treating frontline stage III/IV Hodgkin lymphoma and frontline CD30-expressing PTCL looks encouraging. The company now projects full-year net sales of Adcetris in the range of $610-$640 million.

Seattle Genetics expects collaboration and license revenues in the range of $95-$110 million, backed by milestones received from Takeda. Royalty revenues are anticipated in the band of $85-$90 million.

R&D expenses are estimated in the range of $600-$650 million for 2019. SG&A expenses are forecast in the band of $280-$310 million in the current year.

Non-cash costs (primarily attributable to share-based compensation) are predicted in the band of $135-$145 million for 2019.

The company held stock investments worth $113.8 million in Immunomedics.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -21.12% due to these changes.

VGM Scores

At this time, Seattle Genetics has a poor Growth Score of F, however its Momentum Score 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 stock 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.

Outlook

Seattle Genetics has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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