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Seattle Genetics (SGEN) Up 15.7% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Seattle Genetics (SGEN - Free Report) . Shares have added about 15.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Seattle Genetics due for a pullback? 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 catalysts.

Seattle Genetics Q3 Loss Widens, Revenues Top Mark

Seattle Genetics incurred an adjusted loss of 54 cents per share for the third quarter of 2019, significantly wider than the Zacks Consensus Estimate of 37 cents and also the year-ago quarter’s loss of 27 cents.

Adjusted loss in the quarter excluded a market-to-market net investment loss related to Seattle Genetics’ common stock holdings.

Revenues of $213.3 million were up 25.9% year over year, primarily driven by an increase in the number of frontline peripheral T-cell lymphoma (PTCL) patients treated with Adcetris and sustained patients in frontline Hodgkin's lymphoma (HL). Moreover, the top line beat the Zacks Consensus Estimate of $211 million.

Quarter in Detail

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

Adcetris generated net sales of $167.6 million in the United States and Canada, up 32% year over year. Improved sales of the drug were owing to its label expansions for frontline CD30-expressing PTCL and frontline HL, leading to higher patient population.

Collaboration and license agreement revenues declined 7% year over year to $18.4 million.

Royalty revenues of $27.3 million increased from the year-ago quarter’s $22.7 million. Seattle Genetics receives royalty revenues on the sales of Adcetris from Takeda Pharmaceutical in the ex-U.S. markets and outside Canada. On third-quarter conference call, management stated that to a lesser extent, royalty revenues reflected the sales of Polivy under Seattle Genetics’ collaboration with Roche.

Research and development (R&D) expenses of $196.1 million were up 39.9% year over year, primarily due to higher investment in the late-stage pipeline consisting of the enfortumab vedotin, tucatinib and tisotumab vedotin programs as well as an upfront cost for a preclinical asset, which was acquired during the quarter.

Selling, general and administrative (SG&A) expenses rose 68.2% year over year to $96.1 million, mainly on account of costs pertaining to the launch of Adcetris in frontline setting and costs related to support.

2019 Outlook

Seattle Genetics projects Adcetris’ full-year net sales in the range of $625-$640 million, tightened from the prior guidance of $610-$640 million.

The company expects collaboration and license revenues in the band of $110-$125 million, unchanged from the previous quarter’s outlook. Royalty revenues are anticipated within $90-$95 million, lifted from the past view of $85-$90 million on the back of strong sales of Adcetris by Takeda.

Seattle Genetics raised its guidance for SG&A and R&D expenses. The company now expects SG&A expenses within $355-$370 million compared with the previous quarter’s forecast of $335-$360 million. R&D is estimated in the $690-$715 million band compared with the preceding quarter’s projection of $650-$700 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -31.85% due to these changes.

VGM Scores

Currently, Seattle Genetics has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% 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

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


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