Analyst: Seattle Genetics on Pace to Smash Wall Street Forecast with Lymphoma Drug Rollout

10/20/11Follow @xconomy

Seattle Genetics only had 30 full business days in the last quarter to sell its first drug, and at least one analyst says the company nailed the early days of its commercial rollout.

The Bothell, WA-based biotech company (NASDAQ: SGEN) won FDA approval to start selling brentuximab vedotin (Adcetris) as a new treatment for Hodgkin’s disease and anaplastic large cell lymphoma on August 18. Based on a report from market research firm Wolters Kluwer, the company appears to have generated $5.7 million in sales through the end of the third quarter, on Sept. 30, says Thomas Wei, an analyst with Jefferies & Co. That’s way above the modest $1.9 million consensus forecast on Wall Street, Wei said.

Seattle Genetics plans to formally announce its third quarter financial results on Nov. 3, so until then, there will be a lot of educated guesswork going on. Many investors try to predict quarterly sales numbers based on weekly prescription data trends from research firm IMS Health. But in this case, investors haven’t been able to get access to IMS data, Wei said. Given how many biotech drug introductions have fallen short of expectations in recent years, and the lack of tracking data, many investors have continued to hold bearish positions in the company, betting its stock will fall, Wei said.

Still, that doesn’t appear to be a majority opinion, at least today, anyway. Shares of Seattle Genetics climbed as high as $20.92 today, giving it a valuation of almost $2.4 billion. The stock is up more than 45 percent since Adcetris won FDA approval.

“We would continue to be buyers of SGEN at current levels as we and the Street have likely underestimated the near-term uptake of Adcetris,” Wei wrote in a note to clients Oct. 19.

The data from Wolters Kluwer comes from institutional sales, which are recorded from wholesalers to physician offices and hospitals, Wei said. That’s different than the usual prescription tracking method used by IMS, which is part of what the analyst said makes him bullish about how Seattle Genetics is doing. “We have heard from investors that the Wolters Kluwer institutional sales audit generally underreports actual reported sales by companies,” Wei wrote.

Seattle Genetics spokeswoman Peggy Pinkston confirmed that the company has tried to block market research firms from tracking its progress the usual ways. “We have taken steps to ensure that our distributors do not disclose our proprietary sales information. As a result, Adcetris sales data from IMS and similar services are not informative. There are other companies interested in this space, and we don’t want to enable others to use our data for competitive reasons.”

Sales of the Seattle Genetics drug can add up pretty quickly, based on its high price per infusion. The company set the price at $13,500 per dose, given intravenously every three weeks. If patients get eight infusions on average, consistent with clinical trial experience, then it will cost $108,000 per patient. If a patient gets the maximum number of 16 doses described in the FDA-approved label, it will cost $216,000 per patient.

Seattle Genetics has contended its product is worth the price because of the value it brings to patients. The drug was able to significantly shrink tumors in about 75 percent of patients with Hodgkin’s disease, and in about 86 percent of patients with anaplastic large cell lymphoma (ALCL). The treatment’s side effects include a depletion of infection-fighting white blood cells, nerve damage in the fingers and toes, fatigue, nausea, and other adverse events. About one-third of Hodgkin’s patients and one-half of ALCL patients went into complete remission in clinical trials, but researchers still don’t know how much longer patients can expect to live on the new drug, compared with existing chemo regimens.

David Miller, who covers Seattle Genetics for Biotech Stock Research, said he’s projecting $12.2 million in sales for the company in 2011, followed by $223 million next year.

“Despite the very high cost, this is a very effective drug even in late-stage disease. It doesn’t surprise me the demand would be high,” Miller says.

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  • Colonel24601

    SGEN, “I believe in miracle(s)” drug.