Seattle Genetics, Inc. SGEN reported a loss of 38 cents per share, wider than the Zacks Consensus Estimate of a loss of 23 cents and the year-ago loss of 14 cents.
Revenues increased 12.9% from the year-ago quarter to $77.1 million but missed the Zacks Consensus Estimate of $78 million. The increase in revenues was primarily driven by higher Adcetris sales.
The Quarter in Detail
Total revenue comprised product revenues, collaboration and license agreement revenues, and royalties. Adcetris, the only marketed product at Seattle Genetics, generated revenues of $55.1 million (in the U.S. and Canada), up 23% year over year.
Collaboration and license agreement revenues, and royalty revenues were $14.4 million (down 11.2% year over year) and $7.6 million (up 3.8% year over year), respectively. Collaboration revenues included revenues earned from the company’s Adcetris collaboration with Takeda Pharmaceutical TKPYY as well as other antibody drug conjugate (ADC) collaborations.
During the quarter, Seattle Genetics entered into a strategic collaboration and license agreement with Unum Therapeutics for the development and commercialization of novel antibody-coupled T-cell receptor therapies for cancer. Per the deal, Seattle Genetics made an upfront payment of $25 million to Unum and an equity investment of $5 million in the company.
On the other hand, Seattle Genetics received a milestone payment from AbbVie ABBV upon the initiation of a phase I study by the latter on an ADC for hematologic malignancies using the Seattle Genetics’ technology.
In the reported quarter, research and development (R&D) expenses were $85.7 million, up 59.7% year over year primarily due to the $25 million upfront payment to Unum. Selling, general and administrative (SG&A) expenses increased 18.9% year over year to $30.3 million.
Pipeline Update
Seattle Genetics’ supplemental biologic license application for Adcetris for post-transplant consolidation treatment of patients suffering from Hodgkin lymphoma, who are at high risk of relapse or progression, is under priority review with the FDA. A response from the agency should be out by Aug 18, 2015.
Meanwhile, the company is enrolling patients in three phase III studies on Adcetris. Patient enrollment in ECHELON-1 (frontline Hodgkin's lymphoma) and ALCANZA (cutaneous T-cell lymphoma) are expected to be completed by 2015-end and in ECHELON-2 (frontline mature T-cell lymphoma) in 2016.
The company also intends to initiate a randomized phase II study on Rituxan (plus Treanda) with or without Adcetris for the treatment of relapsed/refractory CD30-positive diffuse large B-cell lymphoma (DLBCL) and a randomized phase II study on SGN-CD19A for the second-line treatment of DLBCL. Data from ALCANZA should be out in 2016, while that from ECHELON-1 and ECHELON-2 are expected in the 2017–2018 timeframe.
Additionally, Seattle Genetics is looking to expand Adcetris’ label in the field of autoimmune diseases. In Jul 2015, the company started a phase II study on the drug for systemic lupus erythematosus (SLE).
Meanwhile, under a partnership with Bristol-Myers Squibb BMY, Seattle Genetics’ intends to conduct two studies (expected to begin in 2015) on ADCETRIS in combination with Opdivo for the treatment of relapsed Hodgkin lymphoma and relapsed CD30 positive non-Hodgkin lymphoma.
2015 Outlook
Seattle Genetics increased its Adcetris net sales guidance for 2015 to the range of $210 million – $220 million in the U.S. and Canada (previous guidance: $200 million to $210 million). R&D expenditure is expected in the range of $275 million – $300 million, primarily due to the $25 million upfront payment made to Unum Therapeutics.
Our Take
Although Seattle Genetics’ second-quarter 2015 results were disappointing with the company missing both bottom- and top-line estimates, we are pleased with the company’s efforts on expanding Adcetris’ label. The raise in 2015 Adcetris sales guidance is also encouraging.
Given that Adcetris is the cornerstone of Seattle Genetics’ business, approval for the drug in the post-transplant consolidation treatment setting should be a major positive for the company. Seattle Genetics’ efforts to develop the in other indications including SLE are also encouraging.
We expect investor focus to remain on regulatory updates on Adcetris.
Seattle Genetics carries a Zacks Rank #4 (Sell). A better-ranked stock in the health care sector is Anacor Pharmaceuticals, Inc. ANAC, carrying a Zacks Rank #2 (Buy).
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