Narrower-than-Expected Loss at Seattle Genetics - Analyst Blog

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Seattle Genetics, Inc. ( SGEN ) reported second quarter 2013 net loss per share of 6 cents, narrower than the Zacks Consensus Estimate of a loss of 18 cents and the year-ago loss of 15 cents per share.

Second quarter revenues were $73.6 million, compared with $48.8 million in the year-ago quarter. Revenues surpassed the Zacks Consensus Estimate of $57 million.

Net revenues for the second quarter included Adcetris revenues (up 3% to $35.7 million), collaboration and license agreement revenues (up 165.9% to $34.3 million) and royalty revenues (up 185.9% to $3.5 million).

Research and development expenses increased 22.3% year over year to $52.3 million driven by Adcetris development activities and higher investment in other antibody-drug conjugate (ADC) programs. Selling, general and administrative (SG&A) expenses rose by 18.5% year over year to $23.5 million. SG&A expenses increased due to Adcetris-related sales and marketing activities.

Pipeline Update

Seattle Genetics is working on expanding Adcetris' label. In May 2013, Seattle Genetics submitted a supplemental biologics license application (sBLA) for the use of Adcetris in the retreatment of patients and for extended duration of use beyond 16 cycles of therapy. The U.S. Food and Drug Administration (FDA) did not approve Adcetris in this retreatment setting. Seattle Genetics will further interact with the FDA regarding the new data required for approval.The FDA has asked to remove the limitation of 16-cycles timeframe from the label.

Adcetris is approved for the treatment of relapsed or refractory Hodgkin lymphoma (HL) and systemic anaplastic large cell lymphoma (sALCL).

Meanwhile, Seattle Genetics discontinued the development of ASG-5ME (phase I) for prostate, gastric and pancreatic cancer.

Seattle Genetics has collaborations with various companies for the development of ADCs. ADC collaborators are progressing on various programs.

Seattle Genetics and Bayer ( BAYRY ) entered into an alliance in Jun 2013. This deal will allow Bayer to gain worldwide rights to Seattle Genetics' auristatin-based ADC technology along with antibodies to several oncology targets.

Guidance

Seattle Genetics increased its 2013 collaboration and license agreement revenue guidance from $65-$75 million to $85- $95 million.

Our Take

Second quarter results were mainly driven by collaboration and license agreement revenues, forming 46.6% of total revenues. With Adcetris generating $35.7 million of revenues this quarter ($69.6 million in six months), Seattle Genetics is on track to achieve its revenue guidance of $130 million to $140 million by the end of 2013. We expect investor focus to remain on the sales ramp up of the drug. Adcetris' label expansion, pipeline advancement and ADC collaborations will drive future growth.

Seattle Genetics currently carries a Zacks Rank #3 (Hold). Right now, companies like   Actelion Ltd. ( ALIOF ) and Avanir Pharmaceuticals, Inc. ( AVNR ) look more attractive with a Zacks Rank #1 (Strong Buy).



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ADC , ALIOF , AVNR , BAYRY , HL

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