Not sure the SGEN story is all that.....not defended PB the nutjob
Hey....my Merrill research put this out on Friday. Not sure SGEN is going to be the next best thing for our friends who left. read below...i copied the research report.
Panel supports approval, BUT
Panel votes for Adcetris, despite SGEN's poor showing
The FDA advisory committee voted unanimously in favor of accelerated approval
for SGEN's drug Adcetris for two rare lymphomas, including post transplant
Hodgkin's lymphoma (HL) and anaplastic large cell lymphoma (ALCL). While this
news is positive and as expected, and was driven by the fact that Adcetris is a
"wildly active" drug, there were an unexpected series of disappointing points
coming out of the panel that negatively impacts management credibility in our
view, and raises uncertainties over the timing of Adcetris approval, and the timing
of Adcetris market expansion: (1) the FDA was adamant and the panel agreed
that SGEN should have filed the marketing application under the accelerated
review process; while SGEN had guided investors to expect accelerated approval,
this approach created significant tension with the FDA, and led the FDA to state it
would work with SGEN but withhold approval until proper confirmatory studies
could be designed; (2) the FDA clearly stated its requirement that SGEN either
redesign an ongoing study (AETHERA) and/or propose new clinical studies prior
to the Aug 30 PDUFA date, implying timelines are lengthier to approve a second
indication and expand Adcetris' initial market; (3) the FDA expressed a clear
intention to approve Adcetris within the post transplant HL setting, a narrower
label than the company had guided investors to expect. Despite SGEN
management communicating high expectations for Adcetris labeling, the company
failed at the advisory meeting to put forth a strong argument why the committee
should grant a broad label and generally appeared unprepared to answer basic
questions about Adcetris clinical data.
No clear conclusion on design of next studies
The FDA noted that as part of the accelerated approval statutes SGEN must
negotiate with the FDA to come to a portfolio of trial designs that will confirm
activity to satisfy accelerated approval statutes. To our surprise, the panel
unanimously disagreed with the ongoing AETHERA trial design. On a positive
note, the FDA was willing to accept one "robust" and "well designed" randomized
clinical trial to support approval for Adcetris in both indications, and the FDA was
willing to consider a trial in a separate CD30+ indication to support full approval.
We expect SGEN to update investors on its FDA discussions by its Aug 30
PDUFA date, but until then trial design will remain uncertain.
Model implications
We calculate the contribution of <$1 to our $22 PO in the likely event that
transplant ineligible patients are pushed out to a later time (negative impact of
$15M on 2012 and $40M on 2013 annual revenues in our model). A greater
potential downside to our estimates and PO ($4/sh) would come if SGEN cannot
get the FDA to agree to a redesign of the AETHERA study.
Company Update BUY
Equity | United States | Biotechnology
14 July 2011
Rachel McMinn +1 415 676 3519
Research Analyst
MLPF&S
rachel.mcminn@baml.com
Masha Chapman +1 415 676 3575
Research Analyst
MLPF&S
masha.chapman@baml.com
Jeremiah Shepard +1 415 676 3537
Research Analyst
MLPF&S
jeremiah.shepard@baml.com
Stock Data
Price US$20.33
Price Objective US$22.00
Date Established 2-May-2011
Investment Opinion C-1-9
Volatility Risk HIGH
BofAML Ticker / Exchange SGEN / NAS
Bloomberg / Reuters SGEN US / SGEN.O
W
Seattle Genetics
14 July 2011
2
Price objective basis & risk
Seattle Genetics (SGEN)
Our $22 PO is based on the sum-of-parts DCF analysis that includes $17/share
for B-vedotin, $4/share for its ADC collaborations and $2/share for net cash. For
B-vedotin, we model: 1) WACC of 11%, 2) peak sales $850M in 2020, 3) sales
out to 2030 and no terminal value, 4) 5% dilution from potential future financing.
We see upside to our valuation from: 1) positive interim data from the pilot frontline
study in HL and clarity of the pivotal front line study design 2) positive data for
maintenance HL setting 3) positive data to support retreatment with B-vedotin.
Risks are: 1) regulatory risks ahead of approval and execution risks following the
launch in the salvage settings 2) unexpected data disappointments for
ongoing/anticipated B-vedotin trials and unexpected clinical strategy requirements
for planned B-vedotin trials.
