Seattle Genetics (SGEN) Q3 Loss Widens, Revenues Top Mark

Seattle Genetics, Inc. SGEN 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.

Shares of Seattle Genetics have soared 85.7% so far this year against the industry’s decrease of 1.5%.

Quarter in Detail

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

The company’s only marketed product 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 Company Limited TAK 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 RHHBY.

Polivy, which received the FDA nod in June 2019, is an antibody-drug conjugate (ADC) targeting CD79b that utilizes Seattle Genetics’ technology.

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 other late-stage pipeline programs.

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.

Other Pipeline Updates

In September 2019, the FDA accepted the biologics license application (BLA) for enfortumab vedotin under a priority review. The company along with Japanese partner Astellas Pharma is seeking approval of the candidate 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. A decision from the regulatory body is expected on Mar 15, 2020.

Also, during September, Seattle Genetics and Astellas announced encouraging initial results from the phase I EV-103 study on enfortumab vedotin. The candidate is being evaluated in combination with Merck's MRK PD-1/L1 inhibitor, Keytruda (pembrolizumab), for addressing previously untreated patients with locally advanced/metastatic urothelial cancer, who are not eligible for cisplatin-based chemotherapy.

The platinum-free combination of enfortumab vedotin plus Keytruda met the outcome measures for safety and demonstrated a favorable clinical activity in first-line setting.

Earlier in October, Seattle Genetics announced positive top-line results from the HER2CLIMB study evaluating tucatinib in combination with Roche’s Herceptin and Xeloda compared to Herceptin + Xeloda alone for treating patients with locally advanced unresectable/metastatic HER2-positive breast cancer. The study met the primary endpoint of progression-free survival and also the two key secondary endpoints during interim analysis. The company plans to submit a new drug application for tucatinib to the FDA in the first quarter of 2020.

Also, in the same month, Seattle Genetics dosed the first patient in a phase III HER2CLIMB-02 study on tucatinib in combination with Roche's Kadcyla (ado-trastuzumab emtansine) for the treatment of patients with locally advanced/metastatic HER2-positive breast cancer.

Seattle Genetics, Inc. Price, Consensus and EPS Surprise

Seattle Genetics, Inc. Price, Consensus and EPS Surprise

Seattle Genetics, Inc. price-consensus-eps-surprise-chart | Seattle Genetics, Inc. Quote

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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