Why Is Seattle Genetics (SGEN) Up 24.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Seattle Genetics (SGEN). Shares have added about 24.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Seattle Genetics 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.
Seagen’s Q4 Earnings & Sales Estimates Beat, Stock Up
Seagen Inc. reported a loss of 80 cents per share in the fourth quarter of 2022, narrower than the Zacks Consensus Estimate of a loss of $1.02. The company reported a loss of 95 cents per share in the year-ago quarter.
Total revenues in the fourth quarter of 2022 were $528 million, increasing 22.93% year over year. The top line beat the Zacks Consensus Estimate of $483 million. Net product revenues in the year-ago quarter were $430 million, up 22.79% year over year, driven by the strong uptake of Seagen’s portfolio of marketed cancer drugs.
Shares of Seagen rallied 6.33% in the after-market hours in response to the better-than-expected financial performance in the fourth quarter of 2022.
Quarter in Detail
Seagen’s top line mainly comprises product revenues, collaboration and license agreement revenues and royalties. The company currently markets four drugs, Adcetris, Padcev, Tukysa and the newly approved Tivdak.
Adcetris generated net sales of $238 million in the United States and Canada, up 35% year over year. The drug, which is the major contributor to SGEN’s revenues, is being evaluated in several label expansion studies.
Padcev sales in the reported quarter totaled $122 million. Sales of the drug rose 32% on a year-over-year basis.
Tukysa’s fourth-quarter net sales were $86 million, down 9% on a year-over-year basis.
The newly launched Tivdak generated sales worth $18 million in the fourth quarter of 2022, reflecting a sequential increase of 12.5%.
Collaboration and license agreement revenues were $11 million in the fourth quarter, marking a decrease from the year-ago quarter. However, collaboration and license agreement revenues for the full year of 2022 increased, compared with the same period in 2021. The uptick was primarily driven by an upfront license fee of $30 million received from Zai Lab Limited (ZLAB).
In September 2022, Seagen entered into an exclusive collaboration and license agreement with Zai Lab for the development and commercialization of Tivdak in mainland China, Hong Kong, Macau and Taiwan.
ZLAB obtained exclusive rights to develop and commercialize Tivdak in the given territory.
Royalty revenues of $53 million rose by 15.28% from the year-ago quarter’s $46 million. Seagen records royalty revenues on the sales of Adcetris from Takeda Pharmaceutical in the ex-U.S. markets, as well as from Polivy’s sales under its collaboration with Roche (RHHBY).
Polivy is an antibody-drug conjugate that uses Seagen’s technology and is commercialized by Roche.
Research and development expenses of $358 million increased 17.76% year over year, primarily driven by continued investment in the development of approved drugs and pipeline programs.
Selling, general and administrative expenses increased 2.37% year over year to $216 million, mainly on account of higher costs related to the recent commercialization activities as well as costs incurred on other corporate activities.
Cash, cash equivalents and investments amounted to $1.74 billion for Seagen at the end of the fourth quarter of 2022.
Revenues in the full-year 2022 were clocked at $1.96 billion, portraying a 24.65% increase compared with 2021 results. Sales surpassed the Zacks Consensus Estimate of $1.92 billion as well as the guided range of $1.82-$1.86 billion.
Loss per share for the full year was $3.30 which is narrower than the Zacks Consensus Estimate of a loss of $3.54.
Seagen has provided its financial guidance for 2023. Total revenues are now expected in the range of $2.14-$2.24 billion.
Total net product revenues are expected in the range of $1.93-$2.00 billion rolling into 2023.
The company expects collaboration and license revenues in the band of $45-$55 million while royalty revenues are anticipated within the $170-$185 million range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 6.21% due to these changes.
Currently, Seattle Genetics has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Seattle Genetics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Seattle Genetics belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, Illumina (ILMN), has gained 6.2% over the past month. More than a month has passed since the company reported results for the quarter ended December 2022.
Illumina reported revenues of $1.08 billion in the last reported quarter, representing a year-over-year change of -9.6%. EPS of $0.14 for the same period compares with $0.75 a year ago.
Illumina is expected to post earnings of $0.02 per share for the current quarter, representing a year-over-year change of -98.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -77.5%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Illumina. Also, the stock has a VGM Score of D.
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