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Seattle Genetics: Can Record Sustained Growth From Royalty

August 31, 2014 | About:
mitu77

mitu77

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Biotechnology products are identified to be 21% of the aggregate $714 billion worldwide business sector for physician endorsed medications in 2012, comparing to $150 billion of sales. The measure of the physician endorsed medications business sector is required to develop at a CAGR of 3.8% to arrive at $895 billion in 2018, and the biotechnology industry’s share of this is anticipated to grow to 25%, equivalent to $224 billion.This speaks to a CAGR of 6.9% for the biotech market, higher than the development of total pharmaceutical industry in light of the fact that biotechnology products have a less forceful rate of offers disintegration from nonexclusive medications.

This industry has witnessed a rally in the stock price in the last year. This optimism around pharma and biotech companies will continue because of innovative drugs for unmet needs. Companies in this industry are focusing on R&D, which will help these companies create new drugs in the near future. In this article, I have discussed a Bio-Med company, smaller in terms of market cap ,but worth knowing about with some innovative products that have potential to become blockbusters.

Seattle Genetics (SGEN) is a biotechnology organization concentrated on creating and commercializing inventive, enabled immune response based treatments for the treatment of cancer. The company pioneers in ADC (antibody drug conjugates), a technology designed to harness the targeting ability of monoclonal antibodies to deliver cell-killing agents directly to cancer cells.

Strong Financial results

For the six months ended June 30, 2014, total revenues increased to $136.6 million, compared to $130.9 million for the same period in 2013. The increases in sales volume in the 2014 periods were primarily driven by increased use of ADCETRIS and SALCL. Net product sales of ADCETRIS were $83.5 million for the six months ended June 30, 2014 compared to $69.7 million for the six months ended June 30, 2013.

ADCETRIS is used treatment of Hodgkin lymphoma while SALCL for treatment of other CD30-positive malignancies.

For the six months ended June 30, 2014, total costs and expenses increased to $170.6 million, compared to $154.3 million for the same period in 2013. This primarily reflects increases in clinical development efforts to explore additional potential applications of ADCETRIS, as well as investment in various ADC programs.

As of June 30, 2014, the company recorded $349.2 million in cash and short-term investments, and $225.8 million in total stockholders’ equity.

ADC collaboration influencing growth

Under the ADC collaborations, signed with the collaborators, the company receives or is entitled to receive upfront cash payments, progress-dependent milestones and royalties on net sales of products incorporating ADC technology, as well as annual maintenance fees and support fees for research and development services and materials provided under the agreements. Seattle Genetics has more than 15 ADCs in clinical development using its technology. As of June 30, 2014, ADC collaborations has generated more than $275 million, primarily in the form of upfront payments. It is expected that in the long term, once these drugs reach to their peak sales, Seattle can receive around $4.5 billion as milestones and royalties payments from these collaborations.

Clinical trial

Earlier this month, the company initiated phase 1 clinical trial evaluating SGN-CD70A for CD70-positive relapsed or refractory non-Hodgkin lymphoma (NHL) and metastatic renal cell carcinoma (RCC). SGN-CD70A is a novel antibody-drug conjugate (ADC) targeted to CD70 utilizing the company’s newest ADC technology. The phase 1 trial is designed to assess the safety and antitumor activity of SGN-CD70A. The preclinical data demonstrate that this novel ADC is extremely potent in RCC and NHL models, and is eager about starting clinical trial of SGN-CD70A in patients with a clear need for new therapeutic options.

Conclusion

The company seems to be recording growth in revenue; the sustained revenue growth is mainly due to the recurring and one time upfront payment from the collaborators using the intellectual property of the company. There can be few glitches with the clinical trials, as excessive cost and prolonged time is involved for the outcome of the clinical trials, but still worth to take a calculated risk looking into the future of growth bio-tech pharma companies.


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