Seattle Genetics' (NASDAQ:SGEN) third-quarter year-over-year revenue increase was something most biotechs would happily take. But sales of Adcetris, Seattle Genetics' only drug, missed management's guidance, causing shares to fall substantially.

Seattle Genetics results: The raw numbers


Q3 2018

Q3 2017

Year-Over-Year Change


$169 million

$135 million


Income from operations

($45.6 million)

($32.2 million)


Earnings per share




Data source: Seattle Genetics.

What happened with Seattle Genetics this quarter?

  • Adcetris sales in the U.S. and Canada, where Seattle Genetics sells the drug, were up 60% year over year, thanks to its approval earlier this year to treat patients with front-line stage III and IV Hodgkin lymphoma. But the $127 million in the quarter fell short of management's guidance for sales of $130 million to $135 million.
  • Royalty revenue, which mostly comes from overseas sales of Adcetris by Seattle Genetics' partner Takeda Pharmaceutical, was up 36%. The drug was recently approved for front-line Hodgkin lymphoma in Japan, which triggered a $10 million milestone payment, and is up for expanded approval in other regions, including the EU, which should accelerate the growth of royalties next year.
  • Seattle Genetics and Takeda got another clinical trial win for Adcetris in the phase 3 Echelon-2 study in front-line peripheral T-cell lymphoma, where the drug produced a 34% reduction in the risk of death.
  • The earnings in the year-ago quarter included a large one-time accounting gain associated with warrants held by Seattle Genetics that allow it to buy additional shares of its partner Immunomedics. Investors should continue to expect a loss for the foreseeable future as the company spends the profits from Adcetris on its pipeline candidates.
Doctor with clipboard talking to women in front of a window

Image source: Getty Images.

What management had to say

"We got the early adopters, now the hard work begins," Seattle Genetics CEO Clay Siegall said of the move into front-line Hodgkin lymphoma.

Siegall thinks front-line peripheral T-cell lymphoma based on the Echelon-2 (E-2) study will be easier to crack than front-line Hodgkin lymphoma because of characteristics of the current treatments, CHOP and ABVD, respectively. (CHOP and ABVD are acronyms for chemotherapy cocktails.)

 "The difference there being that with E-2 and CHOP, CHOP is nowhere near as effective as ABVD is, so that's something I think doctors will see really fast because they know they're not getting a high cure rate like they were with ABVD," Siegall said.

Looking forward

Management guided for fourth-quarter Adcetris sales in the U.S. and Canada to be in the range of $128 million to $133 million, which isn't much more than the $127 million in the recently completed quarter. Hopefully management is sandbagging a little after missing guidance this quarter.

Seattle Genetics is shooting for submitting the data from Echelon-2 to the Food and Drug Administration in November, and investors will get to see the full data set at the American Society of Hematology meeting in December.

Beyond Adcetris, Seattle Genetics' pipeline is moving along. The most advanced drug, enfortumab vedotin for urothelial cancer, is scheduled to read out data from a pivotal trial in the first quarter of next year, which could put it on track for an approval in late 2019 or early 2020.

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