Why Is Seattle Genetics (SGEN) Up 6.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Seattle Genetics (SGEN). Shares have added about 6.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Seattle Genetics due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Seagen’s Q2 Earnings Miss, Revenues Beat Expectations
Seagen Inc. reported a loss of $1.13 per share in the second quarter of 2023, wider than the Zacks Consensus Estimate of a loss of 78 cents. The company had incurred a loss of 73 cents per share in the year-ago quarter.
Total revenues in the reported quarter were $604 million, increasing 21.3% year over year. The top line beat the Zacks Consensus Estimate of $556 million. Net product revenues in the second quarter were $544 million, up 25.9% year over year, driven by the strong uptake of Seagen’s portfolio of marketed cancer drugs.
Quarter in Detail
Seagen’s top line mainly comprises product, collaboration and license agreement revenues and royalties. The company currently markets four drugs, Adcetris, Padcev, Tukysa and the newly approved Tivdak.
Adcetris generated net sales of $262 million in the United States and Canada, up 30% year over year. The drug, which is the major contributor to SGEN’s revenues, is being evaluated in several label expansion studies. The reported figure beat the Zacks Consensus Estimate of $246 million.
Padcev sales in the reported quarter totaled $161 million. Sales of the drug rose 30% on a year-over-year basis. Padcev sales also beat the Zacks Consensus Estimate of $143 million.
Tukysa’s second-quarter net sales were $99 million, up 11% on a year-over-year basis.
The newly launched Tivdak generated sales worth $22 million in the second quarter of 2023, reflecting a year-over-year increase of 26%. Seagen commercializes Tivdak in collaboration with Zai Lab Limited.
In September 2022, Seagen entered into an exclusive collaboration and license agreement with Zai Lab for the development and commercialization of Tivdak in mainland China, Hong Kong, Macau and Taiwan. ZLAB obtained exclusive rights to develop and commercialize Tivdak in the given territory.
Collaboration and license agreement revenues were $9 million in the second quarter, marking a significant decrease (68%) over the year-ago quarter. This was primarily due to milestone payments received in the year-ago quarter, accompanied by decreased revenues from drug products supplied to collaborators.
Royalty revenues of $51 million rose by 31% from the year-ago quarter’s $39 million. Seagen records royalty revenues on the sales of Adcetris from Takeda Pharmaceutical in the ex-U.S. markets as well as from Polivy’s sales under its collaboration with Roche.
Polivy is an antibody-drug conjugate that uses Seagen’s technology and commercialized by Roche.
Research and development expenses of $400 million increased 31.6% year over year, primarily driven by continued investment in the development of approved drugs and pipeline programs.
Selling, general and administrative expenses increased 10.9% year over year to $244 million, mainly on account of higher costs related to the recent commercialization activities as well as costs incurred on other corporate activities, including $30 million in expenses associated with the pending acquisition by pharma goliath, Pfizer.
Seagen entered into a definitive agreement in March 2023 to be acquired by Pfizer for $229 per share, bringing the valuation of the company to a whopping $43 billion. The acquisition, if followed through, will add Seagen’s portfolio of antibody-drug conjugates (ADCs) and technology to Pfizer’s already robust portfolio of oncology drugs. The company will gain access to Pfizer’s resources to continue the development of its ADC technology. Pfizer should be able to bring new innovative cancer treatment options to patients by combining Seagen’s prowess in ADCs with Pfizer’s existing portfolio across both solid tumors and hematologic malignancies, bolstering its position in the market and driving growth.
Cash, cash equivalents and investments amounted to $1.3 billion for Seagen at the end of the second quarter of 2023 compared with $1.5 billion as of Mar 31, 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -9.71% due to these changes.
VGM Scores
At this time, Seattle Genetics has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Seattle Genetics has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Seattle Genetics belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, BioMarin Pharmaceutical (BMRN), has gained 4.2% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
BioMarin reported revenues of $595.28 million in the last reported quarter, representing a year-over-year change of +11.5%. EPS of $0.54 for the same period compares with $0.59 a year ago.
For the current quarter, BioMarin is expected to post earnings of $0.45 per share, indicating no change from the year-ago quarter. The Zacks Consensus Estimate has changed +0.8% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for BioMarin. Also, the stock has a VGM Score of D.
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