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Here's Why Seagen Jumped Higher Today

By Brian Orelli, PhD - Feb 5, 2021 at 5:50PM

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The rumor mill took hold in late-day trading.

What Happened

Shares of Seagen (SGEN -2.10%) surged in late-afternoon trading on Friday, ending up 15.2% for the day. The catalyst appears to be rumors that the biotech could be included in the S&P 500.

So what

Short-term traders will often buy companies before they enter an index because their inclusion will spark exchange-traded funds and mutual funds that follow the index to buy shares, which can put upward pricing pressure on the stock price.

If the rumor is false, it seems likely that shares of Seagen will retreat next week. Even if the rumor turns out to be true and shares jump a little higher after the biotech is included in the index, they'll likely eventually fall back down to where the valuation makes fundamental sense.

Businessman looking pleased while siting at a desk with stock charts on the computer screen.

Image source: Getty Images.

Now what

Long-term investors should ignore daily price movements and focus on Seagen's growing sales and the company's pipeline of future treatments. In the third quarter, revenue was up 60% year over year, driven by sales of Padcev for bladder and urinary tract cancers and Tukysa for breast cancer, both of which weren't on the market in the same quarter of 2019. Sales of Seagen's top-selling drug -- blood-cancer treatment Adcetris -- fell 3%, although management thinks that was due to patients not being diagnosed as they avoided seeing their doctors during the pandemic.

Investors won't have to wait too long to get an update on how well the fourth quarter went for Seagen and an update on its drug pipeline. The company is scheduled to report earnings on Thursday.

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