Why Is Seattle Genetics (SGEN) Up 2.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Seattle Genetics (SGEN). Shares have added about 2.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Seattle Genetics Q2 Loss Narrows, Sales Top Estimates

Seattle Genetics posted adjusted loss of 24 cents per share in the second quarter of 2019, narrower than the Zacks Consensus Estimate of 39 cents but wider than the year-ago quarterly loss of 18 cents.

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

Revenues came in at $218.4 million in the reported quarter, up 28.3% year over year, primarily driven by strong sales and the recent label expansion of Adcetris for frontline stage III/IV Hodgkin lymphoma (HL) and frontline CD30-expressing peripheral T-cell lymphoma (PTCL). Sales also comprehensively beat the Zacks Consensus Estimate of $191.2 million.

Quarter in Detail

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

Adcetris generated net sales of $159 million in the United States and Canada, up 30% year over year. Improved sales of the drug were owing to its recent label expansions for frontline CD30-expressing PTCL and frontline HL, leading to higher patient population.

Collaboration and license agreement revenues climbed 32.7% year over year to $36.1 million. This included the amounts earned under the ADC collaboration in the ex-U.S. markets and a $12.5-million milestone payment received from Takeda Pharmaceutical on the additional approval of Adcetris for frontline HL.

Royalty revenues were $23.3 million compared with the year-ago quarter’s $20.6 million.

Research and development (R&D) expenses were $163.9 million, up 33.4% year over year, primarily due to higher investment in the late-stage pipeline consisting of the EV, tucatinib and TV programs.

Selling, general and administrative (SG&A) expenses rose 41.2% year over year to $82.3 million, mainly on account of costs pertaining to the launch of Adcetris in frontline setting and other infrastructure costs.

2019 Outlook

Seattle Genetics projects Adcetris’ full-year net sales in the range of $610-$640 million.

The company expects collaboration and license revenues in the band of $110-$125 million, which was raised from the past expectations of $95-$110 million, backed by milestones received from Takeda and Roche. The milestone payment from Roche was triggered by the accelerated approval of lymphoma drug Polivy (polatuzumab vedotin-piiq), an antibody-drug conjugate, which targets CD79b that utilizes Seattle Genetics’ technology. Royalty revenues are anticipated within $85-$90 million.

Seattle Genetics lifted its guidance for SG&A expenses. The company now expects SG&A expenses within $335-$360 million compared with $300-$335 million expected previously. R&D expenses are estimated in the $650-$700 million range.vvvvvvvvvvvvvvvvvv

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -12.95% due to these changes.

VGM Scores

At this time, Seattle Genetics has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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.