Barclays: Buy Seattle Genetics' Overlooked Pipeline, Stock Has 57% Upside

• Seattle Genetics, Inc. SGEN share are down 28 percent since January 4.
• Barclays’ Jonathan Eckard initiated coverage of the company with an Overweight rating and a price target of $51.
• Interim pipeline and platform value drivers appear to be overlooked, Eckard

The focus is currently on the approval of Adcetris in Hodgkin’s Lymphoma [HL], analyst Jonathan Eckard said, adding that approval may come in 2019 and this setting represents about 75 percent of peak US Adcetris revenues of around $1.2bn.

Eckard commented that although the "most prominent value inflection point” would be Phase 3 data for Adcetris in front-line HL, which is not expected until late-2017 or 2018, “other interim pipeline and platform value drivers appear to be overlooked.”

Leukemia drug SGN-33a, planned move into a Phase 3 in 2016, lymphoma data from SGN-19a in mid-2016, and combination data in HL for Adcetris+ PD-1 in the second half of 2016 “are all important and hold potential to broaden recognition of the depth and value of SGEN’s pipeline,” the analyst wrote.

Seattle Genetics has more than ten biopharma collaborations, which have brought in over $325M in revenue till now, “with up to $4bn in total potential milestones.” The Barclays noted, “While only a fraction of this $4bn is likely to materialize, we still expect the level of that received will not be inconsequential.”

Milestone revenues are expected to increase during 2016-2017, with 2 partnered programs in Phase 3 or pivotal studies and several others advancing in Phase 2. “We believe beyond cash, these milestones could reinforce the value of SGEN’s technology and breadth of shots on goal,” Eckard mentioned.

“Overall, we believe that SGEN’s combination of a broad and maturing pipeline, significant growth potential of its approved lymphoma drug, Adcetris, together with the significant pullback in shares offers a favorable entry point for a solid valuation story,” the analyst added.