Seattle Genetics (SGEN) Up 8.4% Since Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Seattle Genetics, Inc. (NASDAQ:SGEN) . Shares have added about 8.4% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is SGEN due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Seattle Genetics Q4 Earnings & Revenues Top Estimates

Seattle Genetics reported a loss of 41 cents per share for the fourth quarter of 2017, narrower than the Zacks Consensus Estimate of loss of 43 cents but wider than the year-ago quarter loss of 39 cents per share.

Revenues came in at $129.6 million, up 23.1% year over year, primarily on the back of strong sales of Adcetris. Revenues also beat the Zacks Consensus Estimate of $112.06 million.

Quarter in Details

Seattle Genetics’ top line comprises product revenues, collaboration and license agreement revenues and royalties.

The company’s only marketed product, Adcetris, generated product sales of $83.7 million, up a significant 18% year over year.

Collaboration and license agreement revenues increased 24.5% to almost $25.9 million, mainly driven by strong demand for Adcetris in the international market. Collaboration revenues include fees earned from the company’s agreement with Japan-based Takeda Pharmaceutical for Adcetris and other ADC collaborations.

Royalty revenues increased almost 46% year over year to $20 million, attributable to higher international sales of Adcetris by Takeda Pharmaceutical Co.

Research and development (R&D) expenses were $110.5 million, up 2.1% year over year. Also, selling, general and administrative (SG&A) expenses increased 17.1% to $48.5 million. Costs were high, primarily due to investment in development of Adcetris in other indications.

2018 Outlook

The company provided its outlook for total revenues in the range of $470 million to $505 million. It expects collaboration and license agreement revenues to be in the range of $55 million to $65 million. Royalties are expected in the range of $75 million to $80 million. Net sales of Adcetris are expected in the range of $340 million to $360 million. The company has not included the impact of a potential line extension of the drug in frontline advanced classical Hodgkin lymphoma, for which approval is expected in May 2018.

The company anticipates R&D expense to be $460 million to $500 million while SG&A expense is expected in the range of $200 million to $220 million. The rise in SG&A will likely be due to the inclusion of expanded commercial activities related to potential line extension of Adcetris.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimate. There has been one revision higher for the current quarter compared to three lower.

Seattle Genetics, Inc. Price and Consensus

Seattle Genetics, Inc. Price and Consensus | Seattle Genetics, Inc. Quote

VGM Scores

At this time, SGEN has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise SGEN has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.