Seattle Genetics (SGEN) Q3 Loss In Line, Sales Top Mark
Seattle Genetics, Inc. SGEN incurred a loss of 27 cents per share for the third quarter of 2018, in line with the Zacks Consensus Estimate and wider than the year-ago quarter’s loss of 19 cents.
Revenues came in at $169.4 million in the reported quarter, up 25.2% year over year, primarily driven by strong sales and a recent label expansion of Adcetris (brentuximab vedotin) in Cutaneous T cell lymphoma (CTCL) and frontline Hodgkin Lymphoma. The top line also beat the Zacks Consensus Estimate of $165 million.
Shares of Seattle Genetics have rallied 22.1% so far this year against the industry’s decline of 19.6%.
Quarter in Detail
Seattle Genetics’ top line comprises product revenues, collaboration and license agreement revenues plus royalties.
The company’s only marketed product, Adcetris, generated net sales of $127 million in the United States as well as Canada, up 60% year over year. The improved sales of the drug were owing to its recent label expansions for T cell lymphoma and the frontline Hodgkin Lymphoma resulting in higher patient population.
Collaboration and license agreement revenues plunged 49.8% to almost $19.8 million. This included the amounts earned under the ADC collaboration in ex U.S. markets. Collaboration revenues include $10 million milestone payment received from Takeda following the approval of Adcetris in Japan for frontline Hodgkin lymphoma.
Royalty revenues surged 36% year over year to $22.7 million on the back of high demand and sales of Adcetris outside Canada and the ex U.S. markets by Takeda.
Research and development (R&D) expenses were $140.2 million, up 23.4% year over year, primarily attributable to higher investment across the late-stage and early stage pipeline programs of the company.
Selling, general and administrative (SG&A) expenses soared 44.1% year over year to $57.2 million, mainly due to costs related to the acquisition of Cascadian Therapeutics and the launch of Adcetris for frontline Hodgkin lymphoma (HL).
The label expansion of Adcetris for the treatment of frontline stage III/IV classical Hodgkin lymphoma and T cell lymphoma looks encouraging. Currently, Seattle Genetics expects fourth-quarter sales for Adcetris in the range of $128-$133 million.
The Company projects full-year sales of Adcetris in the band of $473-$478 million owing to its consistent label expansions as well as launch programs
In March 2018, the FDA approved Adcetris in combination with chemotherapy for treating stage III or IV classical Hodgkin lymphoma (cHL) in patients with no previous treatment history, based on data from the phase III ECHELON-1 study.
The company raised its collaborative revenue guidance to $80-$90 million compared with its past projection of $65-$75 million, backed by milestones payment received from Takeda. Royalty revenue guidance was lifted to $78-$82 from the previous projection of $75-$80, riding on strong sales of Adcetris by Takeda.
R&D expenses were updated in the range of $555-$575 million from the past guidance of $530-$580 million, based on the year-to-date results. SG&A expenses were increased to $240-$250 million from the former forecast of $220-$240 million due to continuous investment in supporting Seattle Genetics’ portfolio.
The company held stock investments worth $169.4 million in Immunomedics IMMU.
Seattle Genetics along with Takeda announced that the phase III ECHELON-2 study on Adcetris has met its primary endpoint as ell as all key secondary endpoints. Adcetris in combination with chemotherapy demonstrated a statistically significant improvement in progression-free survival as compared to the control arm. The study also achieved all key secondary endpoints and improved the overall survival in front-line CD30-expressing peripheral T-cell lymphoma. The drug is not currently approved for use in case of frontline PTCL.
The company plans to file a supplemental Biologics License Application (BLA) to the FDA in November and highlight the results from ECHELON-2 at the American Society of Hematology Annual Meeting in December this year.
The company with its partner Astellas initiated the EV-301 program for patients with advanced urothelial cancer, who previously received both a checkpoint inhibitor (PD-1/PD-L1) and a platinum-based chemotherapy. The company continues to evaluate EV combined with Merck’s MRK Keytruda in first-line setting.
Both companies also completed the cohort enrollment in EV-201 study for the same indication. The companies expect to report top-line data from this cohort during the first quarter of 2019.
Seattle Genetics and Astellas are ramping up the ongoing EV-103 phase I study for treating first-line metastatic urothelial cancer. Apart from evaluating the candidate in combination with Keytruda, the companies plan to evaluate the same in combination with platinum agents — the current first-line standard of care.
Zacks Rank & Another Stock to Consider
Seattle Genetics currently carries a Zacks Rank #2 (Buy). Another top-ranked stock in the same sector is Genmab A/S GNMSF, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Genmab’ earnings estimates have moved 1.8% north for 2018 and 11.8% for 2019 over the past 60 days.
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