What happened

Shares of Seattle Genetics (NASDAQ:SGEN) gained over 25% last month, according to data provided by S&P Global Market Intelligence. The company reported positive results from the HER2CLIMB clinical trial evaluating a combination therapy involving tucatinib, its lead drug candidate, to treat advanced breast cancer.

Patients taking the combination of tucatinib, trastuzumab, and capecitabine demonstrated a 46% reduction in the risk of disease progression or death compared to those taking trastuzumab and capecitabine alone. The study also met two key secondary endpoints, which bolsters the case for approving tucatinib. Seattle Genetics plans to submit a new drug application (NDA) in the first quarter of 2020. 

Rising blue and orange stock chart

Image source: Getty Images.

So what

Tucatinib is a tyrosine kinase inhibitor (TKI) that blocks the activity of HER2, a growth factor that is often overexpressed in breast cancer and other malignancies and causes tumors to grow uncontrollably. In addition to achieving a significant improvement in progression-free survival compared to the standard of care, the tucatinib arm of the study delivered a 34% reduction in the risk of death overall and a 52% decrease in the risk of disease progression or death in individuals with cancer that had spread to the brain.

The results were much better than many analysts had expected, which caused many to raise their peak sales estimates for the drug. After initially expecting a relatively paltry $250 million in peak annual sales, many on Wall Street have increased their expectations closer to $750 million or higher. 

Now what

Seattle Genetics is suddenly buzzing with activity and optimism after a lackluster past three years in which the pharma stock underperformed the S&P 500. The company expects its lead drug product, Adcetris, to eclipse $1 billion in revenue in 2019. Seattle Genetics should receive an approval decision from American regulators on enfortumab vedotin in urothelial cancer in the first quarter of 2020, while the surprisingly good results for tucatinib suggest the drug could quickly gain market traction. Investors may feel more confident once those milestones are achieved, but there's certainly reason for increased optimism.

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