UPDATE: Bank of America Reinstates Coverage on Seattle Genetics with Underperform Rating, $46 PT as High Expectations are Priced In

In a report published Monday, Bank of America analyst Steve Byrne reinstated coverage on

with an Underperform rating and $46.00 price target. In the report, Bank of America noted, “We are reinstating SGEN coverage with an Underperform rating and $46 PO. We believe the current share price reflects high expectations of significant label expansion for its key blood cancer drug Adcetris. We estimate Adcetris sales could triple from the current level by 2018 assuming several favorable data read-outs in the next 1-2 years in new indications. However, this 2018 forecast represents modest profitability by our estimates and an EV/sales ratio that is roughly twice the biotech sector median of 4x. Our DCF-derived NPV for Adcetris of $32/sh assumes $2bn of peak US risk-adj sales by the 2026 patent expiry, or 13-fold above 2013 levels. While favorable data in ~2018 from two first line studies (HL & MTCL) could drive upside, we see more downside risk from unfavorable trial results, competitive drugs in development (i.e. favorable early PD1 data in HL), or Adcetris' outlier price.” Seattle Genetics closed on Friday at $54.92.