NEW YORK (TheStreet) -- Seattle Genetics (SGEN) is having a bipolar year. Significant progress is being made to expand the use of the lymphoma drug Adcetris and on advancing the pipeline, yet the stock price is caught in a significant downtrend. Seattle Genetics bulls focus less on near-term Adcetris sales, believing more in the company's armed antibody platform as a long-term growth driver. Bears, on the other hand, argue Adcetris sales cannot support the stock's current valuation.
The end of 2014 will provide a significant test of the Seattle Genetics' bull thesis when results are announced from the "AETHERA" study of Adcetris in post-stem cell transplant Hodgkin's lymphoma patients. This new commercial market opportunity for Adcetris is not as larger as moving into front-line Hodgkin's, but it's still important as a test of confidence -- proving delayed timelines translate into study success.
As originally designed, the primary endpoint of the AETHERA trial is progression-free survival (PFS), with an analysis triggered by a predetermined number of tumor progression events. However, Seattle Genetics found the progression events were happening too slowly, which pushed the timeline for data analysis (and potential approval) too far out. To remedy the situation, the company went to the FDA and reached an agreement allowing an analysis of the PFS endpoint to be conducted at the end of the year.
Given the robust efficacy demonstrated by Adcetris in previously conducted trials, it's reasonable to assume the delay in AETHERA is due primarily to Adcetris-treated patients performing better (having fewer tumor progressions) relative to assumptions made by Seattle Genetics when designing the trial. Of course, that's only an assumption and needs to be confirmed with actual results. There is always the risk the trial's control arm patients are actually performing better, too.
If Seattle Genetics does report positive results from the AETHERA trial at the end of the year, it should raise investor confidence in two additional Adcetris trials: ECHELON- 1 in frontline Hodgkin's and ECHELON-2 in frontline mature T-cell lymphoma. Both of these trials also appear to be progressing slower than expected, and the company is considering adjustments to generate data earlier rather than later.
The weakness in Seattle Genetics' shares going into the AETHERA data is an interesting entry point for investors. Bears will insist the stock remains over-valued, but I believe positive AETHERA data is an important and bullish inflection point for the stock because it demonstrates Seattle Genetics' ability to expand use of Adcetris into new indications. Outside of Adcetris, Seattle Genetics is developing one of the deepest drug pipelines in mid-cap biotech, and possibly as strong as the pipelines managed by large-cap biotechs.