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Seattle Genetics (SGEN) Q2 Earnings Beat, Adcetris Aids Sales

·5 min read

Seattle Genetics, Inc. SGEN  incurred an adjusted loss of 54 cents per share for the second quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of 58 cents but wider than the year-ago quarter’s loss of 24 cents.

Adjusted loss in the quarter excluded a net investment gain of $72.8 million.

Revenues of $278 million were up 27.5% year over year, primarily driven by higher sales from Adcetris, Padcev and now a third commercial product, Tukysa, following the FDA approval in mid-April for metastatic HER2-positive breast cancer. Royalty revenues also drove sales in the quarter. The top line also comprehensively beat the Zacks Consensus Estimate of $257 million.

Shares of Seattle Genetics have soared 49.7% in the year so far compared with the industry’s growth of 5.2%.

Quarter in Detail

Seattle Genetics’ top line mainly comprises product revenues, collaboration and license agreement revenues,androyalties.

Adcetris generated net sales of $167.5 million in the United States and Canada, up 5% year over year. The drug is also being evaluated in several label expansion studies. A successful development and a potential approval will be a major boost to the company.

Padcev’s sales in the second quarter were $57.2 million, an increase of 66%from the first quarter of 2020.

Tukysa’s second-quarter net sales were $15.8 million following the U.S. approval in mid-April.

Collaboration and license agreement revenues were$6.3 million, down82.5% year over year.

Royalty revenues of $31.2 million soared from the year-ago quarter’s $23.3 million. The company records royalty revenues on sales of Adcetris from Takeda in the ex-U.S. markets and outside andPolivy, to a lesser extent, under its collaboration with Roche RHHBY.

Research and development (R&D) expenses of $198.1 million escalated 20.8% year over year. During the second-quarter earnings call, management informed that R&D expenses were high, primarily due to increasedinvestments in developing the late-stage pipeline candidates.

Selling, general and administrative (SG&A) expenses shot up 52.6% year over year to $125.6 million, mainly on account of higher costs related to recently commercialized products, Padcev and Tukysa, as well as higher infrastructure costs to support the company's continued growth and international expansion.

2020 Guidance

Seattle Genetics provided its guidance for 2020. The company projects Adcetris’ full-year net sales in the range of $675-$700 million, unchanged from its last projection. The company now expects Padcev net product sales to be in the range of $215-$235 million.

The company expects collaboration and license revenues in aband of $30-$50 million, while royalty revenues are anticipated within $105-$115 million, both unchanged from the earlier provided guidance.

Seattle Genetics expects SG&A expenses of $475-$525 million,which too remained the same. R&D expenses arenow estimated to be $820-$870 million compared with the prior guidance of $860-$950 million.

Other Pipeline Updates

In July 2020, Padcev was added to Merck’s MRK study in Muscle Invasive Bladder Cancer (MIBC). In the same month, Merck expanded its ongoing phase III KEYNOTE 905 study to include an arm evaluating Padcev in combination with Merck’s Keytruda for patients with cisplatin-ineligible MIBC. The expansion is being conducted under a clinical trial collaboration and supply agreement among Seattle Genetics, Astellas and Merck.

In April 2020, the FDA approved Seattle Genetics’ oral tyrosine kinase inhibitor (TKI),Tukysa (tucatinib), in combination with Roche's Herceptin (trastuzumab) and Xeloda (capecitabine). The drug combo is now approved to treat adult patients with locally advanced/metastatic HER2-positive breast cancer, including those with brain metastases, having received one or more prior anti-HER2-based regimens in the metastatic setting.

We note that the approval of Padcev and Tukysa should reduce Seattle Genetics’ heavy dependence on Adcetris in the days ahead and significantly boost its top-line growth.

Zacks Rank & Another Stock to Consider

Seattle Genetics currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Another top-ranked stock in the biotech sector is Emergent BioSolutions Inc. EBS, carrying a Zacks Rank #1.

Emergent’s earnings per share estimates have increased from $3.14 to $4.23 for 2020 and from $3.35 to $4.63 for 2021 in the past 60 days.

Seattle Genetics, Inc. Price, Consensus and EPS Surprise


Seattle Genetics, Inc. Price, Consensus and EPS Surprise
Seattle Genetics, Inc. Price, Consensus and EPS Surprise

Seattle Genetics, Inc. price-consensus-eps-surprise-chart | Seattle Genetics, Inc. Quote

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