Seattle Genetics, Inc.’s shares (SGEN) gained 4.8% following the release of second-quarter 2014 results. Seattle Genetics reported second-quarter loss per share of 14 cents, narrower than the Zacks Consensus Estimate of a loss of 22 cents but wider than the year-ago loss of 6 cents per share.
In the reported quarter, revenues declined 7.1% from the year-ago quarter to $68.3 million. Revenues, however, surpassed the Zacks Consensus Estimate of $65 million. The year-over-year decrease in revenues was mainly due to a decline in collaboration revenues.
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 $44.8 million (in the U.S. and Canada), up 25.3% year over year. This increase was due to higher demand in the approved indications (relapsed Hodgkin lymphoma or relapsed systemic anaplastic large cell lymphoma) as well as physicians’ prescriptions in areas other than these indications.
Collaboration and license agreement revenues and royalty revenues were $16.2 million (down 52.8%) and $7.3 million (up 107.2%), respectively.
Research and development (R&D) expenses increased 2.7% year over year to $53.7 million due to Adcetris’ development activities and higher investment in other antibody-drug conjugate (ADC) programs. Selling, general and administrative (SG&A) expenses increased 8.5% year over year to $25.5 million.
Pipeline Update
Seattle Genetics and partner Takeda Pharmaceutical (TKPYY) are working on expanding Adcetris’ label. Adcetris is currently in four phase III studies, including AETHERA (post-transplant Hodgkin lymphoma), ECHELON-1 (frontline therapy in patients with advanced classical Hodgkin lymphoma), ECHELON-2 (newly diagnosed CD30-positive mature T-cell lymphoma) and ALCANZA (CD30-positive cutaneous T-cell lymphoma). Top line data from the AETHERA study should be out by Oct 2014. Positive results would allow the company to go ahead with the filing of a supplemental biologics license application in the U.S. in the first half of 2015.
Additionally, Seattle Genetics is developing five antibody-drug conjugates (ADCs) – SGN-CD19A, SGN-CD33A, SGN-LIV1A, ASG-22ME, and ASG-15ME.
Adcetris Revenue Outlook Raised
Seattle Genetics increased its 2014 revenue guidance for Adcetris to the range of $160 million–$170 million (previous guidance: $155 million–$165 million). The company also reduced 2014 R&D expense guidance to the range of $235 million−$250 million.
Seattle Genetics depends on Adcetris significantly for growth. Although Adcetris performed well in the reported quarter, the company expects sales to fluctuate on a quarter-over-quarter basis.
Seattle Genetics currently carries a Zacks Rank #2 (Buy). Some better-ranked stocks in the health care sector are Actelion Ltd. (ALIOF) and Enzo Biochem Inc. (ENZ). Both stocks carry a Zacks Rank #1 (Strong Buy).
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