Seattle Genetics, Inc. (NASDAQ:SGEN): Is Breakeven Near?

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Seattle Genetics, Inc.’s (NASDAQ:SGEN): Seattle Genetics, Inc., a biotechnology company, develops and commercializes therapies for the treatment of cancer in the United States and internationally. The US$11b market-cap posted a loss in its most recent financial year of -US$222.7m and a latest trailing-twelve-month loss of -US$124.3m shrinking the gap between loss and breakeven. The most pressing concern for investors is SGEN’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for SGEN, its year of breakeven and its implied growth rate.

View our latest analysis for Seattle Genetics

SGEN is bordering on breakeven, according to the 15 Biotechs analysts. They expect the company to post a final loss in 2020, before turning a profit of US$100m in 2021. SGEN is therefore projected to breakeven around 2 years from today. In order to meet this breakeven date, I calculated the rate at which SGEN must grow year-on-year. It turns out an average annual growth rate of 81% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, SGEN may become profitable much later than analysts predict.

NasdaqGS:SGEN Past and Future Earnings, July 8th 2019
NasdaqGS:SGEN Past and Future Earnings, July 8th 2019

Given this is a high-level overview, I won’t go into details of SGEN’s upcoming projects, though, keep in mind that typically a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing I’d like to point out is that SGEN has no debt on its balance sheet, which is quite unusual for a cash-burning biotech, which usually has a high level of debt relative to its equity. SGEN currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are too many aspects of SGEN to cover in one brief article, but the key fundamentals for the company can all be found in one place – SGEN’s company page on Simply Wall St. I’ve also put together a list of relevant aspects you should further research:

  1. Valuation: What is SGEN worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether SGEN is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Seattle Genetics’s board and the CEO’s back ground.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.