Personal Finance

Seattle Genetics, Inc.: Double-Digit Revenue Growth, but the Best Is Yet to Come

Micrograph of stained leukemia cells

Sales of Seattle Genetics 's (NASDAQ: SGEN) Adcetris in the U.S. and Canada jumped 13% year over year in the third quarter, but it's still a relatively small seller for a cancer drug, especially considering that Adcetris has been on the market for six years. Fortunately, sales should accelerate from here with an expanded approval under review at the FDA and another one ready to be submitted soon.

Seattle Genetics results: The raw numbers

Metric Q3 2017 Q3 2016 Year-Over-Year Change
Revenue $135.3 million $106.3 million 27%
(Loss) from operations ($32.2 million) ($32.4 million) N/A
Earnings per share $0.34 ($0.23) N/A

Data source: Seattle Genetics.

What happened with Seattle Genetics this quarter?

  • Besides the aforementioned 13% increase in sales of Adectris in Seattle Genetics's territories, revenue was boosted by a 36% increase in royalties from Takeda for the territories where it sells Adcetris.
  • The rest of the revenue line comes from collaboration and licensing agreements, including a $12 million milestone from AbbVie (NYSE: ABBV) for the clinical trial progress with ABT 414 in glioblastoma.
  • Don't get too excited about the positive earnings per share; it comes entirely from an accounting benefit from warrants Seattle Genetics holds that give it the right to buy additional shares of partner Immunomedics (NASDAQ: IMMU) . In the third quarter, Immunomedics completed a resale registration statement for the shares issuable under the warrant, which made the warrants mark-to-market , resulting in a one-time accounting gain.
Micrograph of stained leukemia cells

Image source: Getty Images.

What management had to say

Darren Cline, Seattle Genetics' executive vice president of commercial, commented on doctors' reactions to the ECHELON-1 data that showed Adcetris added to older chemotherapy drugs -- adriamycin, vinblastine, dacarbazine (AVD) -- worked better than the standard of care that includes those three drugs plus another toxic chemotherapy, bleomycin (ABVD):

We are also encouraged by feedback that physicians are eager to remove bleomycin from the 4-decade-old frontline Hodgkin lymphoma regimen of ABVD. Physicians continue to share their difficult patient care experiences with bleomycin-associated lung toxicity, which sometimes can be severe and fatal.

Looking forward

It's going to be a pretty eventful couple of months for Seattle Genetics. The FDA is scheduled to make a decision about the approval of Adcetris to treat cutaneous T-cell lymphoma on or before Dec. 16. Considering the drug passed the ALCANZA phase 3 trial and two phase 2 trials run by independent investigators, an approval seems likely.

Also in December, investors will get a look at the ECHELON-1 data testing Adcetris in frontline advanced Hodgkin lymphoma at the American Society of Hematology meeting. We'll also get to see some additional data including combining Adcetris with Bristol-Myers Squibb 's (NYSE: BMY) Opdivo, which could help long-term sales of the drug.

Seattle Genetics plans to submit the marketing application for frontline advanced Hodgkin lymphoma supported by the ECHELON-1 data to the FDA soon, putting a potential approval in the first half of 2018.

And that's just for Adcetris.

The biotech has two other programs in or ready for pivotal trials: enfortumab vedotin that it's developing with Astellas, which is in a pivotal trial in patients with locally advanced or metastatic urothelial cancer, and tisotumab vedotin that Seattle Genetics is developing with Genmab, which will start a pivotal phase II trial in women with advanced cervical cancer by the first half of 2018. And further back, there are 10 earlier-stage pipeline drugs for a variety of blood cancers and solid tumors.

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Brian Orelli has no position in any of the stocks mentioned. The Motley Fool recommends Seattle Genetics. The Motley Fool has a disclosure policy .

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

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

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