Seattle Genetics (SGEN) Q4 Loss Widens, Revenues Top Mark

Seattle Genetics, Inc. (NASDAQ:SGEN) incurred 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, Inc. (NASDAQ:IMMU) 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.

Shares of Seattle Genetics have surged 46% in the past year against the industry’s decline of 14.1%.

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.

2019 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.

Pipeline Update

In March 2018, the FDA approved Adcetris in combination with chemotherapy for treating stage III or IV classical Hodgkin's lymphoma (cHL) in patients with no previous treatment history, based on data from the phase III ECHELON-1 study.

Last November, the FDA approved Adcetris for the frontline treatment of PTCL. The drug is approved to treat patients with previously untreated systemic anaplastic large cell lymphoma or other CD30-expressing peripheral T-cell lymphomas (PTCL) including angioimmunoblastic T-cell lymphoma and PTCL not otherwise specified in combination with CHP (cyclophosphamide, doxorubicin and prednisone).

This is the sixth FDA approved indication for Adcetris and the first FDA approved regimen for frontline PTCL.

The company with its partner Astellas initiated the phase III EV-301 program for patients with advanced urothelial cancer, who previously received both a checkpoint inhibitor (PD-1/PD-L1) and a platinum-based chemotherapy. The company continues to evaluate EV combined with Merck’s (NYSE:MRK) Keytruda in first-line setting.

Both companies also completed the cohort enrollment in EV-201 study for the same indication. The companies expect to report top-line data from this cohort during the first quarter of 2019.

Last November, Seattle Genetics initiated dosing of its pipeline candidate SEA-BCMA in the phase I study. The early-stage candidate is currently being evaluated for the treatment of patients with relapsed or refractory multiple myeloma (MM).

Seattle Genetics, Inc. Price, Consensus and EPS Surprise

Zacks Rank & Other Key Pick

Seattle Genetics currently carries a Zacks Rank #2 (Buy).Another top-ranked stock in the biotech sector is Celgene Corp. (NASDAQ:CELG) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Celgene’s earnings estimates have been revised 4.7% upward for 2019 over the past 60 days.

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