Seattle Genetics has nearly 20 collaborations for its monoclonal antibody-drug conjugate (ADC) technology designed to harness the targeting ability of antibodies to deliver cell-killing agents directly to cancer cells. Companies it is collaborating with include big pharma names like: AbbVie, Bayer, Genentech, GlaxoSmithKline, and Pfizer.
Primary Mechanism of Action of ADCs: Targeted Delivery of a Potent Cytotoxic Agent
The company’s flagship product is ADCETRIS (brentuximab vedotin) which is commercially available intravenous drug approved in 2011 for two lymphoma indications and used in 50 countries. Seattle Genetics jointly developed ADCETRIS in collaboration with Takeda Pharmaceutical. Seattle Genetics has exclusive commercialization rights in the U.S. and Canada and Japan-based Takeda has the right to produce the drug in other countries.
On June 8th, the company announced an agreement to team up with Cambridge, MA-based Unum Therapeutics. SeaGen made a $25 million upfront cash payment and agreed to put up another $5 million in Unum’s next round of financing. Unum is part of the fast-moving field of T-cell therapy. Other companies in this field (aka CAR-T) include multi-billion-dollar companies Juno Therapeutics and Kite Pharma who have produced strong results on certain blood cancers in their clinical trials.
Unum’s technology is slightly different, engineering T-cells with a surface protein which helps them attach to a wide array of antibodies. The technology is referred to as “antibody-coupled T-cell receptor” technology, or ACTR. The concept of combining ADC and ACTR technologies is an approach that SeaGen hopes will have “broad applicability across a range of cancer targets,” according to SeaGen’s CEO Clay Siegall.
The market seemed less than enthusiastic about the partnership, with the stock trading down 4% on the news, but Seattle Genetics’ expansion into immuno-oncology is probably a good long-term strategic investment. SeaGen is revising its guidance for 2015 to account for the effects of the collaboration.
Seattle Genetics’ largest shareholder, owning 24% of its stock, is Dr. Felix Baker, the Managing Partner of the Baker Brothers Capital Hedge Fund. The Baker Brothers is banking on SeaGen’s success, and it has a pretty good track record of picking winners such as Pharmacyclics and Incyte, and YTD it has been a pretty good investment, up almost 45%.
Seattle Genetics’ latest collaboration adds to an already very robust product pipeline. While the company is not yet profitable, analyst estimates continue to ratchet upward. While SeaGen faces potential competition from behemoths like Merck and Bristol-Myers, its robust pipeline of opportunities, collaborative approach, and the fact that “smart money” like the Baker Brothers have skin in the game, make Seattle Genetics a good investment opportunity.But let’s give Seattle the final litmus test: how does it look as a Best Stock Now?
Seattle Genetics is a Mid Cap drug stock with an Aggressive risk profile. Its market cap is approximately $6 billion. I am long the stock for my Aggressive Growth clients.
As mentioned, the company is not yet profitable, so traditional valuation metrics are not relevant. The company’s estimated 5-year annual growth rate is 17.4%, but that is likely on the conservative side given the tremendous growth opportunity should SGEN’s cancer approach continue on its current path of success.
YTD, post the announcement of favorable data in December, SeaGen stock is up 49%. Over the last 1 year, the stock is up almost 28% earning it a Momentum Grade of A+ and a Performance Grade of A.
Out of the more than 4,900 stocks followed in the Best Stocks Now universe, Seattle Genetics ranks #3. This gives it a rating of A+ and it ranks as among the BEST stocks right now.The good news is that there are now a lot of promising cancer therapies out there in the immunotherapy and monoclonal antibody space. Obviously, this creates a lot of speculation and some premium valuations for stocks with exposure to this area. Seattle Genetics is a way to get exposure to these promising research areas, and with the collaboration and backing of some big companies, it seems less risky than many of the other plays out there.
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