At times a biomedical, pharma, or a medical company has one very strong drug or product that enables the company to research and develop other new drugs while their primary drug is bringing in the necessary revenues. But when your big drug starts to see a significant decline in expected sales, no matter how good your pipeline is, it begins to negatively impact other parts of the business. This issue is compounded if operating and R&D expenses increase at the same time. These are the issues facing our Zacks Bear of the Day, Seattle Genetics (SGEN - Free Report) .

SGEN, a Zacks Ranked #5 (Strong Sell), is a biotechnology company focused on the development and commercialization of innovative antibody-based therapies for the treatment of cancer. Seattle Genetics is leading the field in developing antibody-drug conjugates (ADCs), a technology designed to harness the targeting ability of antibodies to deliver cell-killing agents directly to cancer cells. The company's lead product, ADCETRIS (brentuximab vedotin) is an ADC that, in collaboration with Takeda Pharmaceutical Company Limited, is commercially available for two indications in more than 45 countries, including the U.S., Canada, Japan and members of the European Union. Additionally, ADCETRIS is being evaluated broadly in more than 30 ongoing clinical trials.

Recent Earnings Data

On February 9th, SGEN announced earnings where they missed both the Zacks consensus earnings and revenue estimates. During the announcement management stated that their primary drug ADCETRISs annual sales would only show 9% annual sales growth in FY 17, half of what was achieved in 2016, and well below the previously expected 30% annual sales growth. Further, it was learned that one of their other key growth drivers CTCL will not get in the product label until 2018. This news caused analysts to cut their estimates through FY 2018.

Managements Take

According to Clay Siegall, Ph.D., President and Chief Executive Officer, Our accomplishments in 2016 were substantial, highlighted by strong progress with our ADCETRIS phase 3 trials: ALCANZA, ECHELON-1 and ECHELON-2. This progress positions us to potentially achieve a series of regulatory and commercial milestones in 2017 and 2018. Also during 2016 we initiated the phase 3 CASCADE clinical trial of vadastuximab talirine (SGN-CD33A; 33A) and reported phase 1 data from enfortumab vedotin (ASG-22ME) that we believe support advancement of this program into registrational trials. As we evolve into a global, multi-product oncology company, we are focused on continuing to deliver on our goals of advancing our pipeline and establishing ADCs as a key component of the future of cancer care.

Price and Earnings Consensus Graph

As you can see below, due to reduced sales guidance, we get a kind of odd graph; the stock price is up, but analysts expectations have decreased significantly.

Seattle Genetics, Inc. Price and Consensus | Seattle Genetics, Inc. Quote

Declining Estimates

Due to the reduced sales guidance, and increased operating and R&D expenses estimates for Q1 17, Q2 17, FY 17, and FY 18 have all see negative revisions over the past 30 days; Q1 17 fell from -$0.27 to -$0.42, Q2 17 dropped from -$0.27 to -$0.45, FY 17 slipped from -$0.89 to -$1.55, and FY 17 plummeted from -$0.18 to -$1.27.

Bottom Line

While the company has a nice pipeline of drugs, the big decline in revenues from their main drug ADCETRIS, and increase in overall expenses has us on the sidelines with this stock until FY 2018 when CTCL gets its product label.

If you are inclined to invest in the Biomedical and Genetic sector, you would be best served by looking into Cellectis S.A. (CLLS - Free Report) , and or Momenta Pharma (MNTA - Free Report) , both of which currently carry a Zacks Rank #1 (Strong Buy).

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Bear of the Day: Seattle Genetics (SGEN) - Zacks.com