Seattle Genetics, Inc.SGEN reported a loss of 61 cents per share for the first quarter of 2018, wider than the Zacks Consensus Estimate of 40 cents and the year-ago quarter loss of 42 cents.
Revenues came in at $140.6 million, up 28.8% year over year, primarily driven by strong sales of Adcetris. Revenues also beat the Zacks Consensus Estimate of $112.06 million.
However, Seattle Genetics' shares have lost 8.7% so far this year, compared with the industry 's decline of 8.3% in the same period.
Quarter in Detail
Seattle Genetics' top line comprises product revenues, collaboration and license agreement revenues and royalties.
The company's only marketed product, Adcetris, generated product sales of $95.4 million, up a significant 36% year over year.
Collaboration and license agreement revenues increased 35.4% to almost $29.6 million, mainly driven by strong demand for Adcetris in the international market. Collaboration revenues include fees earned from the company's agreement with Japan-based Takeda Pharmaceutical for Adcetris and other ADC collaborations.
Royalty revenues decreased 7.7% year over year to $15.7 million due to adoption of the new accounting standards for revenue recognition.
Research and development (R&D) expenses were $152.5 million, up 29% year over year, primarily attributable to tucatinib development activities and upfront costs related to technology licensing with Pieris and PharmaMar. Also, selling, general and administrative (SG&A) expenses increased 72.4% to $66.2 million, mainly due to costs related to acquisition of Cascadian Therapeutics and launch of Adcetris in frontline Hodgkin lymphoma.
With the launch of Adcetris in the new indication, the company withdrew its revenue expectation for 2018. Currently, Shire expects second-quarter sales to be in the range of $105 million to $110 million.
The company increased its outlook for R&D expense to the range of $530 million to $580 million from $460 million to $500 million. SG&A expense is expected in the range of $220 million to $240 million (previously $200 million to $220 million). The rise in R&D will likely be due to increased investments in development of tisotumab vedotin, ladiratuzumab vedotin and the company's pipeline programs.
During the quarter, label expansion of Adcetris in combination with chemotherapy in patients with previously untreated Stage III or IV classical Hodgkin lymphoma was approved in the United States. In January 2018, the drug was approved for treatment cutaneous T-cell lymphoma in Europe following an approval in the United States in November last year.
Moreover, top-line data from the ECHELON-2 study (frontline CD30-expressing mature T-cell lymphoma) should be out in 2018. A separate study is also evaluating Adcetris in combination with Bristol-Myers Squibb's BMY Opdivo in relapsed/refractory classical Hodgkin lymphoma.
In addition, the company is enrolling patients in a pivotal study evaluating enfortumab vedotin in patients with metastatic urothelial cancer patients. The candidate was granted Breakthrough Therapy Designation during the quarter.
Moreover, Seattle Genetics and Astellas Pharma are evaluating enfortumab vedotin in a phase Ib study in combination with CPI therapies, including Merck's MRK Keytruda (pembrolizumab), in patients with locally advanced or metastatic urothelial cancer, in first- or second-line setting. The companies are planning to initiate a phase III study in 2018.
Seattle Genetics and Germany-based Genmab are planning to initiate three phase II studies to evaluate tisotumab vedotin in recurrent or metastatic cervical cancer, metastatic cervical cancer in treatment-naïve women and in a range of other solid tumor types.
The company is evaluating another pipeline candidate, polatuzumab vedotin, in diffuse large B-cell lymphoma. The study is being conducted in collaboration with Genentech, a member of Roche Holding AG RHHBY .
In a bid to boost its pipeline, the company entered into a definitive merger agreement last month to acquire Cascadian Therapeutics for $614 million. The acquisition added pivotal-stage HER2-positive metastatic breast cancer candidate, tucatinib, to its pipeline. The company has initiated a pivotal study to evaluate the candidate in metastatic breast cancer.
Seattle Genetics, Inc. Price, Consensus and EPS Surprise
Seattle Genetics carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
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