Seattle Genetics, Inc. Earnings: Solid Quarter, but Investors Wait

By Brian OrelliMarketsFool.com

Seattle Genetics (NASDAQ: SGEN) reported solid first-quarter earnings on Thursday, but the potential expansion of Adcetris into treating patients in other cancer settings and the development of the rest of the biotech's pipeline are what investors are mainly focused on.

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Seattle Genetics results: The raw numbers

Data source: Seattle Genetics.

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What happened with Seattle Genetics this quarter?

  • While revenue fell year over year, the decline was due to a one-time $20 million milestone payment from Takeda in the year-ago quarter that Seattle Genetics couldn't completely make up for.
  • Adcetris sales were up a solid 20% year over year, putting sales on track to meet management's 2017 guidance of $280 million to $300 million.
  • Excluding the aforementioned milestone payment, royalty revenue from Takeda on sales of Adcetris in its territories increased 38% year over year.
  • The larger loss came from increased spending, mostly for research and development costs as Seattle Genetics supports the development of its pipeline.

Image source: Getty Images.

What management had to say

Clay Siegall, Seattle Genetics' chairman, CEO, and president, explained why the company delayed filing for approval of Adcetris in patients with cutaneous T-cell lymphoma (CTCL) using the ALCANZA trial:

In other words, the added data could result in more CTCL patients approved to take Adcetris, producing more sales in the long term that should more than make up for the short-term lost sales from the delayed approval.

Adcetris has gotten more competition for patients with refractory Hodgkin lymphoma (HL) after the recent approvals of Bristol-Myers Squibb's (NYSE: BMY) Opdivo and Merck's (NYSE: MRK) Keytruda, but Darren Cline, Seattle Genetics' EVP of commercial, doesn't see the new drugs as a threat:

Looking forward

Seattle Genetics has a lot of potential, but investors are going to have to be patient this year, with most of the value-driving events happening in the latter half of the year.

The application to treat CTCL patients with Adcetris won't come until the middle of this year, so an approval probably won't arrive until late 2017 or possibly even next year. The ECHELON-1 phase 3 trial in frontline Hodgkin lymphoma is supposed to wrap up this year, but management hasn't given any more specifics on timing -- suggesting that it's likely to come in the latter half of the year.

Two pipeline drugs -- vadastuximab talirine and enfortumab vedotin -- are progressing nicely toward potential approvals. But vadastuximab talirine is still enrolling the phase 3 trial required to gain regulatory approval, and the registration trial for enfortumab vedotin won't start until the second half of this year.

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