Seattle Genetics (NASDAQ:SGEN) reported solid first-quarter earnings on Thursday, but the potential expansion of Adcetris into treating patients in other cancer settings and the development of the rest of the biotech's pipeline are what investors are mainly focused on.

Metric

Q1 2017

Q1 2016

Year-Over-Year Change

Revenue

$109 million

$111 million

(1.8%)

Income from operations

($59 million)

($21 million)

N/A

Earnings per share

($0.42)

($0.15)

N/A

Data source: Seattle Genetics.

Image source: Getty Images.

Clay Siegall, Seattle Genetics' chairman, CEO, and president, explained why the company delayed filing for approval of Adcetris in patients with cutaneous T-cell lymphoma (CTCL) using the ALCANZA trial:

And then we changed our guidance at our last conference call to mid-year, and that was because of our discussions with the FDA based on other data that we've had from investigator-sponsored trials, specifically two of them, which showed strong activity in CTCL with patients that were below the histology cutoff that we used in our ALCANZAtrial, and with patients that were in other subtypes of CTCL.

In other words, the added data could result in more CTCL patients approved to take Adcetris, producing more sales in the long term that should more than make up for the short-term lost sales from the delayed approval.

Adcetris has gotten more competition for patients with refractory Hodgkin lymphoma (HL) after the recent approvals of Bristol-Myers Squibb's (NYSE:BMY) Opdivo and Merck's (NYSE:MRK) Keytruda, but Darren Cline, Seattle Genetics' EVP of commercial, doesn't see the new drugs as a threat:

Despite the recent FDA approval of a second PD-1 inhibitor in [the] relapsed Hodgkin lymphoma setting, we have seen no erosion in share in our existing relapsed-HL business. Most prescribers have indicated they view the checkpoint inhibitor agents as interchangeable and would use both in post-Adcetris later lines of therapy or palliative setting[s], if necessary.

Seattle Genetics has a lot of potential, but investors are going to have to be patient this year, with most of the value-driving events happening in the latter half of the year.

The application to treat CTCL patients with Adcetris won't come until the middle of this year, so an approval probably won't arrive until late 2017 or possibly even next year. The ECHELON-1 phase 3 trial in frontline Hodgkin lymphoma is supposed to wrap up this year, but management hasn't given any more specifics on timing -- suggesting that it's likely to come in the latter half of the year.

Two pipeline drugs -- vadastuximab talirine and enfortumab vedotin -- are progressing nicely toward potential approvals. But vadastuximab talirine is still enrolling the phase 3 trial required to gain regulatory approval, and the registration trial for enfortumab vedotin won't start until the second half of this year.

Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Seattle Genetics. The Motley Fool has a disclosure policy.

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Seattle Genetics, Inc. Earnings: Solid Quarter, but Investors Wait - Motley Fool