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Seattle Genetics Inc. Reports Operating Results (10-Q)

August 06, 2010 | About:
10qk

10qk

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Seattle Genetics Inc. (SGEN) filed Quarterly Report for the period ended 2010-06-30.

Seattle Genetics Inc. has a market cap of $1.23 billion; its shares were traded at around $12.2 with and P/S ratio of 23.7. Seattle Genetics Inc. had an annual average earning growth of 2.2% over the past 10 years.SGEN is in the portfolios of Columbia Wanger of Columbia Wanger Asset Management, Columbia Wanger of Columbia Wanger Asset Management, RS Investment Management, Bruce Kovner of Caxton Associates.

Highlight of Business Operations:

We do not currently have any commercial products for sale. While certain of our product candidates are advancing into later stages of development, such as brentuximab vedotin, significant further research and development, financial resources and personnel will be required to develop commercially viable products and obtain regulatory approvals. As of June 30, 2010, we had an accumulated deficit of $392.6 million. Over the next several years, we expect that we will incur substantial expenses, primarily as a result of activities related to the potential regulatory approval and commercialization of brentuximab vedotin, including preparation for commercial manufacturing. We will also continue to invest in research, development and manufacturing as we plan to move toward potential regulatory approval and commercialization of our other product candidates. Our commitment of resources to the approval and commercialization activities for brentuximab vedotin and the research and continued development and potential commercialization of our other product candidates will require substantial additional funds and resources, and our operating expenses will also likely increase as a result of such activities. In addition, we may incur significant milestone payment obligations as our product candidates progress through clinical trials towards potential commercialization. We expect that a substantial portion of our revenues for the next several years will be the result of amortization of payments already received and expected to be received pursuant to our collaboration agreements. Until such time as we may commercialize a product candidate, our revenues will also depend on the achievement of development and clinical milestones under our existing collaboration and license agreements, particularly our brentuximab vedotin collaboration with Millennium, as well as entering into new collaboration and license agreements. The majority of our revenues for the past three years resulted from our dacetuzumab collaboration agreement with Genentech. In December 2009, Genentech informed us of its decision to terminate the collaboration effective June 8, 2010. This resulted in a substantial acceleration of revenue recognition for amounts previously received and recorded as deferred revenue on our balance sheet. During the six months ended June 30, 2010, we recognized $70.0 million related to the dacetuzumab collaboration resulting in net income for the period. Genentech remains responsible for funding the costs to complete ongoing clinical trials of dacetuzumab as of the end of the collaboration. If we decide to conduct further development of dacetuzumab, we will be responsible for and will be required to solely fund any new dacetuzumab development and clinical trial activities. Our results of operations may vary substantially from year to year and from quarter to quarter and, as a result, we believe that period to period comparisons of our operating results may not be meaningful and you should not rely on them as indicative of our future performance.

To date, we have generated revenues principally from our collaboration and license agreements. These revenues reflect upfront technology access fees, milestone payments and reimbursement for support and materials supplied to our collaborators. For the six months ended June 30, 2010, revenues increased to $83.3 million, compared to $18.6 million for the same period in 2009. This increase was primarily due to accelerated revenue recognition during the first half of 2010 related to the termination of our dacetuzumab collaboration with Genentech, which termination was effective on June 8, 2010. For the six months ended June 30, 2010, total operating expenses increased 16% to $81.3 million, compared to $70.1 million for the same period in 2009. Our net income for the six-month period ended June 30, 2010 was $3.1 million compared to a net loss of $49.7 million for the same period in 2009. The net income for the six months ended June 30, 2010 was driven by the accelerated recognition of revenues earned under the dacetuzumab collaboration agreement with Genentech during the period. As of June 30, 2010, we had $325.3 million in cash, cash equivalents and short-term and long-term investments, and $218.6 million in total stockholders equity.

Millennium revenues reflect amounts earned under our December 2009 brentuximab vedotin collaboration agreement and our March 2009 ADC collaboration agreement. Millennium revenues increased in the second quarter and six months ended June 30, 2010 compared to the corresponding periods of 2009 primarily as a result of the recognition of the earned portion of a $60.0 million up front payment received by us in the first quarter of 2010 related to the brentuximab vedotin collaboration agreement, and includes payments to us for development activities conducted under the collaboration and reimbursed by Millennium. Millennium revenues in both periods also includes the earned portion of a $4.0 million upfront payment received in the second quarter of 2009 related to our ADC collaboration agreement with Millennium, and reimbursable support and research materials provided to Millennium by us under the ADC collaboration agreement. GSK revenues reflect the earned portion of a $12.0 million upfront payment received by us in the first quarter of 2010, and reimbursable support provided to GSK by us. These payments relate to an ADC collaboration agreement with GSK that we entered into during the fourth quarter of 2009. Daiichi Sankyo revenues increased during both the three and six month periods ended June 30, 2010 as a result of the amortization of amounts received for reimbursable support and research materials under our ADC agreement entered into in July 2008. Agensys revenues increased in the second quarter and six months ended June 30, 2010 compared to the corresponding periods of 2009. This increase primarily resulted from the recognition of the earned portion of a $12.0 million payment received by us in the fourth quarter of 2009 related to an amendment to our collaboration agreement that expanded the scope and extended the research term of the agreement.

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