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

Author's Avatar
Feb 29, 2012
Seattle Genetics Inc. (SGEN, Financial) filed Annual Report for the period ended 2011-12-31.

Seattle Genetic has a market cap of $2.02 billion; its shares were traded at around $18.55 with and P/S ratio of 21.3. Seattle Genetic had an annual average earning growth of 2.5% over the past 10 years.

Highlight of Business Operations:

Although we began commercial sales of ADCETRIS in the United States during the third quarter of 2011, our revenues to date have principally come from our collaboration and license agreements. These revenues reflect the earned amount of upfront technology access fees, milestone payments, reimbursement for support and materials supplied to our collaborators, and development cost-sharing under our product collaborations. Total revenues decreased to $94.8 million in 2011, compared to $107.5 million in 2010. This decrease was due to approximately $70 million of revenue earned in the first half of 2010 under our former dacetuzumab collaboration with Genentech that ended in June 2010, partially offset by revenue earned from our other collaboration agreements and product sales of ADCETRIS. Total costs and expenses increased 36% to $239.2 million in 2011, compared to $175.7 million in 2010. This reflects increases in sales and marketing expenses and research and development activities, including clinical development activities to explore additional potential applications of ADCETRIS, as well as our activities to continue developing our ADC pipeline programs. As of December 31, 2011, we had $330.7 million in cash, cash equivalents and investments, and $218.8 million in total stockholders equity.

We generally invoice our collaborators on a monthly or quarterly basis for services that we perform or materials that we provide, based on the terms of each agreement. Amounts due, but not billed to a collaborator, if any, are included in accounts receivable in our consolidated balance sheets. Deferred revenue arises from amounts received in advance of the culmination of the earnings process and is recognized as revenue in future periods when the applicable revenue recognition criteria have been met. Deferred revenue expected to be recognized within the next twelve months is classified as a current liability.

Genentech also funded ongoing research, development and manufacturing costs for dacetuzumab under the collaboration. In December 2009, Genentech provided the requisite six-month notice to us of its election to terminate the collaboration effective June 2010. As a result, the remaining performance obligation period under the collaboration was shortened to six months. All deferred revenue, representing payments received in advance of the culmination of the earnings process was fully recognized as revenue using a time-based method over the remaining term of the agreement. During the first half of 2010, we recorded $70 million in collaboration revenue related to this collaboration. We also have an ADC collaboration with Genentech, which was unaffected by the termination of the dacetuzumab agreement. Amounts earned under our dacetuzumab and ADC collaborations with Genentech accounted for 10%, 77% and 80% of our collaboration and license agreement revenues for the years ended December 31, 2011, 2010 and 2009, respectively.

Selling, general and administrative expenses, excluding share-based compensation expense, increased 170% in 2011 from 2010, and increased 76% in 2010 from 2009. The increase in 2011 reflects cost incurred as a result of the commercial launch of ADCETRIS, including the establishment of our U.S. sales force comprised of approximately 60 employees. The increase in 2010 was attributable to costs incurred in preparation for the ADCETRIS commercial launch including higher staffing levels and third party consulting activities. Share-based compensation expense reflects the non-cash charge associated with stock options, restricted stock units and our employee stock purchase plan. The fair value of all employee share-based payments is charged to expense over the vesting period of the related share-based payment. Share-based compensation expense included in selling, general and administrative expenses increased 67% to $10.2 million in 2011 from 2010 and 34% to $6.1 million in 2010 from 2009. The increase for both years was attributable to a larger number of optioned shares subject to expense recognition as a result of our increased staffing level and a higher weighted-average grant date fair value of share-based awards expensed compared to the prior year due to an increase in our stock price. We anticipate that selling, general and administrative expenses will increase over 2011 levels as we continue our commercial activities in support of the commercialization of ADCETRIS.

We anticipate that our revenues from collaboration and license agreements will be in the range of $55 million to $65 million in 2012 and will be generated from fees, milestones and reimbursements earned through our ADCETRIS and ADC collaborations. Total research and development and selling, general and administrative expenses in 2012 are expected to be in the range of $245 million to $270 million. These expenses will be primarily directed towards commercialization of ADCETRIS, post-approval studies required as a condition of accelerated approval and development activities intended to explore potential uses of ADCETRIS in earlier lines of therapy for Hodgkin lymphoma and sALCL as well as other CD30-expressing diseases. Research and development expenses will also reflect development and clinical activities for our product candidates, including SGN-75, ASG-5ME, ASG-22ME and SGN-CD19A. Development expenses incurred by us under the ADCETRIS collaboration with Millennium are charged to expense as incurred. We and Millennium will co-fund 50% of the joint development costs incurred under the collaboration. We expect that selling, general and administrative expenses will increase in 2012 compared to 2011 as we continue to commercialize ADCETRIS. Expenses will fluctuate based upon many factors including the degree of collaborative activities, the timing of

Read the The complete Report