Seattle Genetics (SGEN) Q4 Earnings Top, Adcetris Drives Sales

Seattle Genetics, Inc. (NASDAQ:SGEN) incurred an adjusted loss of 22 cents per share for the fourth quarter of 2019, narrower than the Zacks Consensus Estimate of 45 cents and also the year-ago loss of 57 cents.

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

Revenues of $289.8 million were up 66.1% year over year, primarily driven by higher royalty revenues in the reported quarter and sales from the lead drug Adcetris. The top line also comprehensively beat the Zacks Consensus Estimate of $224 million.

Shares of Seattle Genetics have soared 82.5% in the past year versus the industry’s decrease of 0.7%.

Quarter in Detail

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

Adcetris generated net sales of $166.2 million in the United States and Canada, up 26% year over year. Improved sales of the drug were owing to its label expansions for frontline CD30-expressing peripheral T-cell lymphoma (PTCL) and frontline Hodgkin's lymphoma HL, which led to an increase in the number of PTCL patients being treated with Adcetris.

Newly-launched Padcev generated $0.2 million sales in the quarter. On the fourth-quarter conference call, management seemed pleased with the uptake of Padcev so far, which exceeded its internal predictions. Padcev is Seattle Genetics’ second drug to be approved by the FDA.

Collaboration and license agreement revenues of $51.1 million significantly surged year over year. In the reported quarter, Seattle Genetics received a milestone fee from GlaxoSmithKline (NYSE:GSK) and an upfront payment from BeiGene for entering into a licensing agreement to develop a preclinical product candidate to treat cancer.

Royalty revenues of $72.3 million soared from the year-ago quarter’s $24.6 million. In the reported quarter, Seattle Genetics received a one-time $40 million milestone from Japan’s Takeda Pharmaceutical as Adcetris sales crossed $400 million in the latter’s territory during 2019. The company records royalty revenues on the sales of Adcetris from Takeda in the ex-U.S. markets and outside and to a lesser extent, on the sales of Polivy under Seattle Genetics’ collaboration with Roche (OTC:RHHBY) .

Research and development (R&D) expenses of $201.1 million escalated 34.2% year over year. During the fourth-quarter earnings conference, management informed that R&D expenses were high, primarily due to higher investment in developing the late-stage pipeline candidates.

Selling, general and administrative (SG&A) expenses rose 44.9% year over year to $115.2 million, mainly on account of costs pertaining to the launch of Adcetris in frontline setting and costs related to preparations for the launches of Padcev and tucatinib.

Full-Year Results

For 2019, Seattle Genetics generated revenues of $916.7 million, reflecting 40% growth year over year.

Adcetris recognized sales of $627.7 million in 2019, up 32% year over year.

2020 Outlook

Seattle Genetics projects Adcetris’ full-year net sales in the range of $675-$700 million, denoting modest growth.

The company expects collaboration and license revenues in the band of $30-$50 million while royalty revenues are anticipated within $105-$115 million.

Seattle Genetics expects SG&A expenses within $475-$525 million. R&D is estimated in the bracket of $860-$950 million.

Other Pipeline Updates

In December 2019, the FDA granted accelerated approval to Padcev for the treatment of patients with advanced/metastatic urothelial cancer, who had received treatment with both a checkpoint inhibitor (PD-1/PD-L1) and platinum-based chemotherapy. Following this nod, Padcev became the first FDA-approved drug for treating the given patient population.

In January 2020, Seattle Genetics and Astellas together with pharma giant Merck (NYSE:MRK) initiated the phase III EV-302 study on the combination of Padcev and the latter’s PD-1/L1 inhibitor Keytruda (pembrolizumab) with or without chemotherapy compared to chemotherapy alone for treating patients with previously untreated metastatic urothelial cancer.

In the same month, Seattle Genetics and Astellas initiated the phase II EV-202 study to evaluate Padcev as monotherapy for a range of solid tumors including non-small cell lung, head and neck, gastric/esophageal as well as breast cancers.

Meanwhile, Seattle Genetics submitted a new drug application (NDA) to the FDA for its oral tyrosine kinase inhibitor tucatinib in December 2019. The NDA was submitted seeking approval of tucatinib in combination with Roche's Herceptin (trastuzumab) and Xeloda (capecitabine) to treat patients with locally advanced/metastatic HER2-positive breast cancer including those with brain metastases, having received at least three prior HER2-directed agents separately or in combination for the neoadjuvant, adjuvant or metastatic setting.

Seattle Genetics, Inc. Price, Consensus and EPS Surprise

Zacks Rank

Seattle Genetics currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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