Will Seattle Genetics Stay Ahead of ImmunoGen and Celldex?

Seattle Genetics (NASDAQ: SGEN  ) will release its quarterly report on Tuesday, and investors aren't expecting profits from the biotech company in the near future. Yet shareholders have high hopes that Seattle Genetics' cancer-fighting treatments will lead to huge progress against the disease, and they're counting on Seattle Genetics being able to stay ahead of the up-and-coming Celldex Therapeutics (NASDAQ: CLDX  ) and ImmunoGen (NASDAQ: IMGN  ) in the promising niche.

Seattle Genetics has had great success in using antibody-drug conjugates to fight cancer cells. Essentially, the technology involves creating poison-filled antibodies that will specifically target cancer, avoiding the need for more broadly applied chemotherapy that hurts non-cancerous healthy cells as well as cancer cells. Seattle Genetics has one of the only FDA-approved ADC treatments on the market, but competing versions could challenge its long-term success. Let's take an early look at what's been happening with Seattle Genetics over the past quarter and what we're likely to see in its report.

Stats on Seattle Genetics

Analyst EPS Estimate

($0.22)

Year-Ago EPS

($0.12)

Revenue Estimate

$57.79 million

Change From Year-Ago Revenue

16%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

What's next for Seattle Genetics?
Analysts haven't moved much on their views on Seattle Genetics earnings in recent months, keeping their estimates for the third and fourth quarters unchanged and widening their loss estimates for 2014 by a single penny per share. The stock has pulled back slightly, falling 9% since early August.

Seattle Genetics has seen huge growth from its Adcetris antibody-drug conjugate treatment. In the second quarter, the company saw revenue rise by more than half from year-ago levels, and nearly half of its overall sales came from Adcentris. Seattle Genetics also kept seeing success from its partnerships with major drug manufacturers, producing licensing- and royalty-related revenue as well.

But Seattle Genetics doesn't have the ADC market to itself. Roche has a competing ADC called Kadcyla that it made in conjunction with ImmunoGen, building on the success of Roche's existing blockbuster breast-cancer drug Herceptin. With a big improvement in its efficacy over Herceptin's less aggressive treatment method, Kadcyla has huge potential to become Roche's next blockbuster drug in the cancer space.

Still, Seattle Genetics stands to benefit even from some of its rivals' work. Celldex has seen encouraging results in clinical trials of its rindopepimut treatment for a rare brain cancer, and its CDX-011 ADC also generated much better responses in metastatic breast-cancer patients than a placebo. Yet Celldex actually licensed technology for its CDX-011 treatment from Seattle Genetics, which should only further demonstrate the effectiveness of its intellectual property even if Celldex gets CDX-011 approved by the FDA.

The big wildcard for shareholders is whether Seattle Genetics will get a buyout bid. Pipeline-hungry major pharma companies are looking for ways to bolster their future prospects in light of major patent cliffs, and ADC technology from Seattle Genetics has huge potential. With so many agreements among big drug companies, though, the path to a buyout is much murkier than it would be if Seattle Genetics only had a single major partnership.

In the Seattle Genetics earnings report, watch to see how well Adcetris does in continuing to grow its sales. For now, Adcetris appears to be the best prospect for Seattle Genetics to become profitable, and continued success in the ADC market could be what keeps the company ahead of ImmunoGen, Celldex, and other competitors in the biotech space.

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