Seattle Genetics (SGEN +0.00%) saw sales of its only approved drug Adcetris jump substantially in the second quarter, thanks to the Food and Drug Administration approval for the frontline treatment of stage III and IV Hodgkin lymphoma, which was granted in the first quarter.
Seattle Genetics results: The raw numbers
|
Metric |
Q2 2018 |
Q2 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$170.2 million |
$108.2 million |
57% |
|
Income from operations |
($30.3 million) |
($59.3 million) |
N/A |
|
Earnings per share |
$0.47 |
($0.39) |
N/A |
Data source: Seattle Genetics.
What happened with Seattle Genetics this quarter?
- Sales of Adcetris increased 65% year over year during the first full quarter that the drug was approved as a frontline treatment for Hodgkin lymphoma.
- Royalty revenue, which is mostly from sales of Adcetris outside the U.S. and Canada by Seattle Genetics' partner Takeda, increased 66%.
- Collaboration revenue was down year over year, but that category tends to be lumpy with milestone payments. This quarter included payments from Genmab, GlaxoSmithKline (GSK 1.38%), and AbbVie (ABBV +0.68%).
- The biotech posted a net income during the quarter, but that was solely due to a $105 million increase in values of stock holdings, primarily in Immunomedics (IMMU +0.00%). The mark-to-market accounting could just as likely result in a loss in future quarters.
- The frontline Hodgkin lymphoma data was submitted to Health Canada, putting an expected approval in the first half of 2019. Takeda submitted the data package to EU authorities and expects a decision by the first quarter of 2019.
- Turning to the pipeline, enfortumab vedotin, which Seattle Genetics is developing with Astellas Pharma, completed enrollment in the pivotal trial testing the drug in patients with metastatic urothelial cancer who received a platinum-based chemotherapy agent and a checkpoint inhibitor. That puts the trial on target for data in the first half of next year.
Image source: Getty Images.
What management had to say
"This is the highest sequential quarter-to-quarter growth rate since the product was launched," said Darren Cline, Seattle Genetics' executive vice president of commercial, which shows how big the approval for frontline Hodgkin lymphoma was for the company.
Nevertheless, CEO Clay Siegall cautioned investors that the initial increase in usage might not continue at the same rate:
It takes time to build market share in a setting where the standard of care hasn't changed in 40 years. I mean, it just takes time, and we are off to a good start. Our commercial team was ready. They were ready. They jumped on this, and we got the rapid adopters in. But the rest of the time, we're going to be making stepwise moves up there.
Looking forward
Management is guiding for third-quarter Adcetris sales in the range of $130 million to $135 million, a 6.2% to 10.3% quarter-over-quarter increase.
The next growth opportunity for Adcetris will come from mature T-cell lymphoma in a clinical trial called Echelon-2, which is scheduled to read out early in the fourth quarter. The number of potential patients with mature T-cell lymphoma is about the same as frontline Hodgkin lymphoma, but the current treatment isn't particularly good. So it may be easier to get rapid adoption in mature T-cell lymphoma if the Echelon-2 results show Adcetris is substantially better than the current standard of care.
