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Seattle Genetics: Why Are Its 1Q16 Revenues Expected to Grow?

Seattle Genetics' 1Q16 Earnings: What Can We Expect?

(Continued from Prior Part)

Seattle Genetics’ revenue estimates

Following sales of its drug Adcetris, analysts expect Seattle Genetics’ (SGEN) 1Q16 revenues to grow by 41% to ~$115.9 million. Furthermore, analysts estimate year-over-year growth of ~26%, ~22%, and ~16% for 2Q16, 3Q16, and 4Q16, respectively. Seattle Genetics’ revenues have increased over the past few years, thanks to growing Adcetris revenues and royalty revenues. These were partially impacted by collaboration and license revenues. 2015 revenues increased by 17.5% to $336.8 million, compared with $286.8 million in 2014. The estimates show an increase of ~26% for 2016 and ~18.5% for 2017.

The above chart shows Seattle Genetics’ revenues since 1Q14. There are various factors supporting the expectations for future revenues, which we’ll discuss in the coming parts of this series.

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Understanding revenue streams and expectations for 1Q16

Seattle Genetics has three revenue streams:

  • Adcetris revenues (or product revenues)

  • revenues from collaboration and license agreements

  • royalty revenues

The product revenues consist of the revenues from SGEN’s Adcetris, its leading drug. The company has entered into a collaborative agreement with Takeda Pharmaceutical, in which Takeda will commercialize Adcetris outside the United States and Canada. These revenues are expected to increase in 1Q16 due to a rise in demand for Adcetris. We’ll discuss the drug later in this series.

The revenues from collaboration and license agreements include the revenues from collaborative agreements with AbbVie (ABBV), Genentech (DNA), and Takeda Pharmaceutical (TKPYY). The revenues from collaboration and license agreements are expected to rise in 1Q16.

The royalty revenues include royalties for sales of Adcetris by Takeda Pharmaceutical. These revenues are expected to increase in 1Q16 as Adcetris’s market reach expands.

To divest risk, investors could consider ETFs such as the SPDR S&P Biotech ETF (XBI), which holds 1.0% of its total assets in Seattle Genetics, or the iShares NASDAQ Biotech ETF (IBB), which holds 0.9% of its total assets in Seattle Genetics. IBB also holds 7.0% of its total assets in Regeneron Pharmaceuticals (REGN) and 7.7% in Celgene (CELG).

Continue to Next Part

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