Seattle Genetics (SGEN) Adcetris is already a successful drug with global sales of about $600 million, but sales could climb even higher if the Food and Drug Administration approves its use in frontline Hodgkin's lymphoma. The company recently filed for a label expansion in that indication, and it will unveil comprehensive data from the pivotal study supporting its application soon. If the data is positive, it could add confidence that the FDA will give it a green light. Is now a good time to buy this biotech stock in portfolios?
What's going on?
The opportunity associated with an approval in frontline Hodgkin lymphoma is big, so investors should pay attention when Seattle Genetics trial investigators explain their findings at the American Society of Hematology (ASH) conference on Dec. 10.
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If the data is solid, then an eventual FDA approval could mark the first significant change to frontline advanced Hodgkin lymphoma treatment in nearly forty years. Currently, treatment consists of four chemotherapies, including bleomycin, which can cause life-threatening lung damage.
We don't have all the study data yet, but the data we've seen so far is encouraging. Replacing bleomycin with Adcetris reduced the risk of worsening cancer, death, or need for additional cancer treatment by 23%, and it improved disease-free survival by about 5% at the two-year mark. As long as the full data set doesn't raise any concerns, this top-line data suggests Adcetris could eventually become part of the standard-of-care regimen in stage 3 and 4 patients.
An approval in the frontline setting could significantly boost Adcetris' addressable patient pool because it's only currently approved for use in advanced Hodgkin's lymphoma patients who are refractory or relapsing following other treatments. Overall, there are about 62,000 new cases of Hodgkin lymphoma diagnosed per year globally and roughly 30% don't respond to initial treatment or they relapse within the first two years.
The financial tailwind from an approval depends on prescription volume, but because Adcetris is a pricey drug, it may not take a lot of new patients to make an impact. The actual cost per patient will depend on each patient's weight, but estimates are that it will fetch between $100,000 to $120,000 per patient in the frontline setting.
What's next
Seattle Genetics is already calling on doctors who treat advanced Hodgkin lymphoma patients, so selling it as a frontline therapy should be pretty simple. The FDA hasn't said when a decision could be made and there's no guarantee of an OK, but we should have a better idea of the likelihood of a green light following the ASH presentation.
If sales begin to roll in from the frontline indication, it would be welcome news for investors because Seattle Genetics is still losing money. It commercializes Adcetris in the U.S., but it only collects royalties on sales overseas by its collaboration partner, Takeda. Between U.S. sales, collaboration revenue, and royalties, Seattle Genetics brought in $353 million in revenue during the first nine months, but its operating costs for the period total $503 million.
Winning approval in the frontline setting could finally put the company in a position to close the gap and get into the black but, again, a lot will depend on what the company says at ASH. The potential for disappointing data makes buying Seattle Genetics right now a bit risky, but given the opportunity and Adcetris' success so far, it might make sense for risk-tolerant growth investors.
