After years of being a one-trick pony with Adcetris, Seattle Genetics (NASDAQ:SGEN) is moving toward being a full-fledged oncology company as progress over the last few months shows. Nevertheless, investors need to keep a keen eye on Adcetris since, for the near future, it'll still be the only drug contributing sales.

Seattle Genetics results: The raw numbers

Metric

Q4 2017

Q4 2016

Year-Over-Year Change

Revenue

$129.6 million

$105.3 million

23%

Income from operations

($45.0 million

($55.8 million)

N/A

Earnings per share

($0.41)

($0.39)

N/A

Data source: Seattle Genetics.

What happened with Seattle Genetics this quarter?

  • Sales of Adcetris in the U.S. and Canada, where Seattle Genetics sells the drug, increased 18% year over year. Royalty revenue, primarily from international sales of Adcetris by partner Takeda, jumped 46% year over year. The rest of the income came from collaborations, which were up about 25% in the fourth quarter.
  • In November, the Food and Drug Administration approved Adcetris for patients with two subtypes of cutaneous T-cell lymphoma (CTCL). Some of the patients were already getting the drug off-label based on the clinical trial results, but an approval should produce a modest bump in sales with the company now able to promote Adcetris for CTCL.
  • A bigger bump will come from the approval of newly diagnosed advanced classical Hodgkin lymphoma patients based on data from the Echelon-1 trial. The FDA is expected to make a ruling on the expanded label on or before May 1, 2018, although that's not a hard-set deadline.
  • On the pipeline front, Seattle Genetics started a trial for enfortumab vedotin in patients with advanced or metastatic urothelial cancer who have failed a checkpoint inhibitor, which should be enough to gain FDA approval if positive given the unmet need of the patients.
  • A trial for the company's next most advanced drug, cervical cancer treatment tisotumab vedotin, which also could be used to gain approval, is scheduled to begin in the first half of this year.
  • Further back in the pipeline, ladiratuzumab vedotin produced promising data in a phase 1 trial in hard-to-treat triple-negative breast cancer.
  • In the quest to continue the expansion for sales of Adcetris, a phase 1/2 trial combining the drug with Bristol-Myers Squibb's (NYSE:BMY) Opdivo produced additional solid data, supporting the ongoing phase 3 Checkmate 812 trial.
  • Finally, the company announced in January plans to acquire Cascadian Therapeutics, which will add a late-stage breast cancer drug to Seattle Genetics' pipeline.
Doctor talking to patient

Image source: Getty Images.

What management had to say

There's been a lot of discussion about how doctors will respond to the Echelon-1 data that compared Adcetris in combination with older chemotherapy drugs -- adriamycin, vinblastine, dacarbazine (AVD) -- to the standard of care that includes those three drugs plus bleomycin (AVBD), but Darren Cline, VP of commercial, said market research suggests doctors are receptive to the change given the better efficacy and lack of side effects from bleomycin:

First, we see strong interest in adoption of Adcetris plus AVD following potential FDA approval. Second, most physicians are eager to improve outcomes and increase the rate of cures in their frontline advanced stage patients. Third, most physicians have experienced bleomycin-associated lung toxicity in their patients. And lastly, community physicians who treat the majority of Hodgkin lymphoma patients are particularly receptive to the ECHELON-1 data.

Typically patients are treated for fewer cycles in the real-world setting than they are in clinical trials, but Cline pointed out that since this is a potential cure, that trend might not be the case for newly diagnosed advanced classical Hodgkin lymphoma patients. He said, "I think, in this setting with a curative intent that physicians have -- again in these patients, the overall feedback that we've gotten is they intend to use the full regimen to get the results that they saw in the trial, in the ECHELON-1 trial."

Looking forward

Management gave 2018 guidance for revenue, but it's largely useless since it doesn't include the potential for increased sales after an approval for patients with newly diagnosed advanced classical Hodgkin lymphoma. Given the moving parts -- some of the newly diagnosed patients will be cured and therefore won't be treated in the later-line settings where Adcetris is approved now -- it might have been smarter to just forgo guidance altogether as Vertex Pharmaceuticals did with its pending approval in cystic fibrosis.

In addition to the potential approval based on Echelon-1 data, investors can expect data from a second phase 3 trial called Echelon-2 testing Adcetris in patients with mature T-cell lymphoma, which is due out sometime this year, although management wasn't willing to be more specific.

At the other end of the pipeline, Seattle Genetics is looking to bring three drugs for multiple myeloma into the clinic: SGN-CD48A, SEA-BCMA, and an antibody-coupled T-cell receptor therapy being developed with Unum Therapeutics.

Brian Orelli has no position in any of the stocks mentioned. The Motley Fool recommends Seattle Genetics and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.