Although the earnings season is coming to a close, few companies are yet to report their results. Late last week, Seattle Genetics, Inc. SGEN announced better-than-expected first-quarter 2014 results. The company reported a loss of 17 cents per share, narrower than the Zacks Consensus Estimate of a loss of 19 cents but wider than the year-ago loss of 13 cents.
Revenues increased 20.3% from the year-ago quarter to $82.2 million, surpassing the Zacks Consensus Estimate of $74 million, primarily driven by higher Adcetris sales and royalty revenues.
The Quarter in Detail
Total revenue comprised product revenues, collaboration and license agreement revenues and royalties. Adcetris, the only marketed product (relapsed Hodgkin lymphoma or relapsed systemic anaplastic large cell lymphoma) at Seattle Genetics, generated revenues of $48.9 million (in the U.S. and Canada), up 26.3% year over year. The increase was mainly driven by record Adcetris sales and strong royalties.
Collaboration and license agreement revenues and royalty revenues were $22.2 million (up 31.6%) and $11.1 million (down 12.8%), respectively. Collaboration revenues included revenues earned from the company’s Adcetris collaboration with Takeda Pharmaceutical TKPYY as well as ADC collaborations.
In the reported quarter, research and development (R&D) expenses were $63.4 million, up 16.3% year over year. Selling, general and administrative (SG&A) expenses increased 33.7% year over year to $32.1 million.
Pipeline Update
Seattle Genetics is working on expanding Adcetris’ label. In Apr 2015, the FDA accepted the company’s supplemental biologic license application for Adcetris for post-transplant consolidation treatment of Hodgkin lymphoma patients at a high risk of relapse or progression. With priority review status, an action from the FDA is expected by Aug 18, 2015.
Meanwhile, Seattle Genetics received FDA approval for an amendment in the Special Protocol Assessment (SPA) agreement for a phase III study on Adcetris (ECHELON-1) for frontline Hodgkin lymphoma. Per the amendment, target enrollment will be increased by 200 patients to a total of 1,240. Patient enrollment is expected to be completed in 2015.
Data from the ECHELON-1 study should be out in the 2017 – 2018 timeframe. Additionally, the SPA agreement for another phase III study on Adcetris (ECHELON-2) for frontline mature T-cell lymphoma was amended to increase target patient enrollment by 150 patients to a total of 450. Patient enrollment is expected to complete by 2016 with data from the study expected in the 2017 – 2018 timeframe.
2015 Outlook
Seattle Genetics raised its expectation for selling, general and administrative expenses for 2015 to the range of $115 million – $125 million (previous guidance: $105 million – $115 million, declared at the time of announcing fourth-quarter 2014 results). This increase is attributable to accelerated commercial activities, legal expenses and other administrative costs.
Our Take
Seattle Genetics’ first-quarter 2015 results were satisfactory on the back of strong Adcetris sales. Being the only marketed product at Seattle Genetics, the drug remains the key growth driver for the company. Moreover, Seattle Genetics is working on expanding Adcetris’ label and is looking to evaluate the drug for diseases like DLBCL and SLE. We expect investor focus to remain on updates from the company.
Seattle Genetics carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector are Actelion Ltd. ALIOF and Horizon Pharma plc HZNP. Both carry a Zacks Rank #1 (Strong Buy).
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