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What to Look For With Seattle Genetics in 2012

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This was a pivotal year for Seattle Genetics (Nasdaq: SGEN  ) ; a biotech getting its first drug approved is always a pivotal event, even when it's widely anticipated.

Expect more of the same in 2012. Instead of an approval, it'll be sales figures that are the pivotal event for 2012.

In the third quarter, Seattle Genetics racked up $10 million in sales of its blood cancer drug Adcetris, a solid showing considering that the drug was approved only in the middle of the quarter. But it'll have to ramp up fairly quickly to justify its $2 billion market cap. At a price-to-sales ratio of 5, there's about $400 million in sales built into the price, so Seattle Genetics doesn't need an instant blockbuster like Vertex Pharmaceuticals' (Nasdaq: VRTX  ) Incivek. But there isn't much room for a slip-up either; in a post-Dendreon (Nasdaq: DNDN  ) world, investors will be watching the launch very closely.

Beyond the sales of Adcetris, Seattle Genetics needs to continue working on its pipeline. Approval of a second drug controlled by Seattle Genetics is still a few years away, but there's room for Adcetris to grow sales all by itself. The European marketing application was submitted by its partner Takeda earlier this year, so an approval should be coming shortly.

There's also potential to expand Adentris into different patient populations. It's in a phase 3 trial testing it as a maintenance treatment for Hodgkin's lymphoma after stem-cell transplant; Celgene (Nasdaq: CELG  ) has used the same maintenance-therapy tactic to increase sales of Revlimid. That trial is still enrolling patients, so data won't be available until 2013. The company is also trying to move into first-line treatment in combination with chemotherapy, which could quadruple potential patients; look for a phase 3 trial to start next year.

Finally, and this shouldn't be overlooked, Seattle Genetics has licensed out its antibody drug conjugate technology to multiple partners. There's a total of 12 drugs in the clinic and more that are still in the preclinical stage, including Pfizer (NYSE: PFE  ) and Abbott Labs (NYSE: ABT  ) , which both signed up this year. Look for milestones to role in next year and another partnership or two would add to the long-term value of Seattle Genetics.

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Fool contributor Brian Orelli holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Dendreon and Abbott Laboratories. Motley Fool newsletter services have recommended buying shares of Vertex Pharmaceuticals, Pfizer, and Abbott Laboratories. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (1)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 29, 2011, at 7:34 PM, kblumbio wrote:

    Brian, Your 5 times sales market cap seems arbitrary low ALXN trades at 20 times sales and because of the potential size of the market Adcetris Market if it moves into first line etc. and the sheer # of 11 ADC's currently in the clinic along with multiple partners that 10 times future revs discounted make much more sense. kenny

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