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Why Is Seattle Genetics (SGEN) Down 0.7% Since Last Earnings Report?

It has been about a month since the last earnings report for Seattle Genetics (SGEN). Shares have lost about 0.7% in that time frame, underperforming the S&P 500.

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

Seagen’s Q3 Earnings Miss, Revenues Beat Expectations

Seagen Inc. reported a loss of $1.15 per share in the third quarter of 2023, wider than the Zacks Consensus Estimate of a loss of 71 cents. The company had incurred a loss of $1.03 per share in the year-ago quarter.

Total revenues in the reported quarter were $649 million, increasing 27.3% year over year. The top line beat the Zacks Consensus Estimate of $640 million. Net product revenues in the third quarter were $571 million, up 33.4% year over year, driven by the strong uptake of Seagen’s portfolio of marketed cancer drugs.

Quarter in Detail

Seagen’s top line mainly comprises product, 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 $246 million in the United States and Canada, up 13% year over year. The drug, which is the major contributor to SGEN’s revenues, is being evaluated in several label expansion studies. The reported figure missed the Zacks Consensus Estimate of $268 million.

Padcev sales in the reported quarter totaled $200 million. Sales of the drug rose 89% on a year-over-year basis. Padcev sales also beat the Zacks Consensus Estimate of $181 million.

Tukysa’s third-quarter net sales were $102 million, up 16% on a year-over-year basis.

The newly launched Tivdak generated sales worth $23 million in the third quarter of 2023, reflecting a year-over-year increase of 40%. Seagen commercializes Tivdak in collaboration with Zai Lab Limited.

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.

Collaboration and license agreement revenues were $14 million in the reported quarter, marking a significant decrease (63%) over the year-ago quarter. This was primarily due to an upfront payment received in the year-ago quarter.

Royalty revenues of $64 million rose by 45% from the year-ago quarter’s $44 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. The uptick in royalty revenues was primarily fueled by royalties from sales of Polivyby Roche as well as by sales of Adcetris by Takeda.

Polivy is an antibody-drug conjugate that uses Seagen’s technology and commercialized by Roche.

Research and development expenses of $449 million increased 16.6% year over year, primarily driven by continued investment in the development of approved drugs and pipeline programs.

Selling, general and administrative expenses increased 26.7% year over year to $266 million, mainly on account of higher costs related to the recent commercialization activities as well as costs incurred on other corporate activities associated with the pending acquisition by pharma goliath, Pfizer.

Seagen entered into a definitive agreement in March 2023 to be acquired by Pfizer for $229 per share, bringing the valuation of the company to a whopping $43 billion. The acquisition, if followed through, will add Seagen’s portfolio of antibody-drug conjugates (ADCs) and technology to Pfizer’s already robust portfolio of oncology drugs. The company will gain access to Pfizer’s resources to continue the development of its ADC technology. Pfizer should be able to bring new innovative cancer treatment options to patients by combining Seagen’s prowess in ADCs with Pfizer’s existing portfolio across both solid tumors and hematologic malignancies, bolstering its position in the market and driving growth.

Cash, cash equivalents and investments amounted to $1.2 billion for Seagen at the end of the third quarter of 2023 compared with $1.3 billion as of Jun 30, 2023.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -48.32% due to these changes.

VGM Scores

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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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, Qiagen (QGEN), has gained 7.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Qiagen reported revenues of $475.89 million in the last reported quarter, representing a year-over-year change of -4.8%. EPS of $0.50 for the same period compares with $0.53 a year ago.

For the current quarter, Qiagen is expected to post earnings of $0.54 per share, indicating a change of +1.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -4.4% over the last 30 days.

Qiagen has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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