Seattle Genetics Q3 Loss Narrows, Lowers FY2012 Sales Guidance Of Adcetris (SGEN)

Following a downgrade from “hold” to “sell” by Cantor Fitzgerald, the shares of biotechnology company Seattle Genetics (NASDAQ: SGEN) dropped sharply by over 13% at the opening of yesterday’s trading session. Earlier on Wednesday evening, after the market closed, Seattle Genetics reported a rise in the fiscal 2012 third-quarter revenues and a narrowed net loss compared to the corresponding period of fiscal 2011. However, the company lowered the fiscal 2012 sales guidance of Adcetris, the flagship drug and the only marketed product of the company.

The Washington-based Seattle Genetics focuses on the development of monoclonal antibody-based therapies for cancer. Seattle Genetics reported its fiscal 2012 third-quarter results after the market closed Wednesday.

Total revenues for the fiscal 2012 third-quarter increased 141.2% to $49.83 million from $20.67 million in the corresponding period of fiscal 2011. The revenue estimate of analysts was $52.66 million for the third quarter of 2012.

Adcetris sales for the fiscal 2012 third quarter increased to $33.66 million from $10.05 million in the comparable period of fiscal 2011. Analysts had estimate sales of Adcetris at $36 million for the third quarter of fiscal 2012. Royalty revenues were $1.7 million for the third quarter compared to none in the year-ago similar period.

The net loss for the reported quarter narrowed to $13.65 million, or $0.12 per share, from $40.69 million, or $0.35 per share, in the comparable quarter of 2011. The consensus estimate of analysts was a net loss of $0.15 per share for the third quarter.

Commenting on the results, Clay Siegall, President and CEO at Seattle Genetics, said, “Through significant commercial, regulatory and clinical development efforts we are continuing to bring Adcetris to patients, expanding into other territories under our collaboration with Millennium/Takeda, and advancing the evaluation of Adcetris into earlier lines of therapy and other CD30-positive malignancies.”

Seattle Genetics stated that it intends to make more than a dozen presentations highlighting the evaluation of Adcetris in numerous lymphoma types at the forthcoming American Society of Hematology (ASH) annual meeting scheduled in December. Additionally, the company plans to introduce preclinical program SGN-CD33A, which employs next generation ADC (antibody-drug-conjugates) technology.

Seattle Genetics lowered its fiscal 2012 sales anticipation for Adcetris. The company now expects revenues from Adcetris sales to be in the range of $132 million to $137 million for the full year of 2012. The previous sales guidance range was $141.5 million to $145 million for fiscal 2012.

The share price of Seattle Genetics, which was trading in the range of $18.00 to $20.00 during the first six-months of 2012, rose to $25.61 by mid-June. The uptrend in price was partially aided by the Seeking Alpha report describing the competitiveness of the company in ADC therapies. The receipt of a positive opinion from the committee of European Medicines Agency lifted the share price further to $27.58 on July 27. In the last week of August, Cantor Fitzgerald initiated Seattle Genetics with a “buy” rating along with a target price of $30.00 per share. That propelled the share price to a 52-week high of $29.83 on September 6. However, a day later, Oppenheimer downgraded Seattle Genetics from “outperform” to “perform”, resulting in a fall in the share price to $24.71 on October 11.

The news of a rating downgrade, announced just before the market opened yesterday, saw the share price of Seattle Genetics open at $21.05, down 13% from the previous close of $24.47 per share. In less than 10 minutes, the share price recovered to $23.78. However, the undeterred selling pushed the share price back to $22.50 per share by noon. For the rest of the trading session, the share price oscillated around $23.00.

Seattle Genetics ended yesterday’s trading session at $23.23 per share, down $1.24 or 5.1% on a volume of 3.17 million shares.

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.