Seattle Genetics: The Long View

Feb. 25, 2015 7:56 AM ETSeagen Inc. (SGEN)CLDX25 Comments
William Meyers profile picture
William Meyers


  • Despite 1 therapy commercialized, SGEN generates net losses.
  • Label expansion and pipeline progress will eventually add revenue.
  • ADC (antibody-drug conjugate) platform has attracted large-cap partners.
  • Short-term, SGEN will fluctuate; long-term, it is highly like to rise significantly.

Seattle Genetics (NASDAQ:SGEN) is a biotechnology and pharmaceutical company with one commercially approved drug generating revenue. The drug has some distance to go to become a blockbuster. Meanwhile, SGEN generates net losses, $26.7 million in Q4 2014 alone. Despite that, it has a current market capitalization of $4.0 billion.

Why are investors paying such a high premium for SGEN? The bet is that the pipeline will materialize down the road in the form of revenue and profits. Seattle Genetics is exploiting a new technology platform that is helping to change the way cancers are treated.

I will start by explaining the nature of the technology platform. Then I will look at the proof-of-case therapy Adcetris. On top of that, I'll evaluate the SGEN internal pipeline, followed by molecules and indications licensed for development or co-development by partners. Finally, I will look at the cash balance and burn rate to verify that SGEN is in a good position to pursue its long-term strategy.

ADC (Antibody-Drug Conjugate)

The first 3 letters of Adcetris are ADC, and that is the name of the primary SGEN platform. ADC stands for antibody-drug conjugate. The production of antibodies designed to bind to specific molecular targets in the body, is one of the recent revolutions in modern medicine and is already a major source of profits for health sector investors. Most antibody therapies, typically monoclonal antibodies, simply attach to a cell surface to inactivate a particular antigen. But ADCs have a drug (the V in the illustration above) attached to the antibody, that is designed to enter and kill a cancer cell. If a cancer expresses a surface protein that is not expressed in healthy cells, its cells can be targeted for destruction.

Adcetris (brentuximab vedotin) was approved by the FDA in August 2011 and by the EMA for

This article was written by

William Meyers profile picture
I provided stock and bond research and analysis to a small cap specialist investor, Lloyd Miller, from 2002 until his death in January 2018. For my own account I invest mainly in technology and biotechnology stocks. My technology and investment web site is, where readers can view the notes I take to make decisions and to write articles for Seeking Alpha.

Disclosure: The author is long SGEN, GILD, BIIB. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The author first purchased SGEN on February 11, 2015. This article is journalism, not financial advice.

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