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Exploring Seattle Genetics’ Operational Performance

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Gross margins

Seattle Genetics (SGEN) incurred a cost of sales of $13.16 million in the second quarter—compared to $8.06 million in the second quarter of 2017. The cost of royalty revenues increased from $4.32 million in the second quarter of 2017 to $6.15 million in the second quarter of 2018. Seattle Genetics expects the increased cost of sales to continue due to an expected increase in its sales volumes.

The company’s gross margins improved from 88.56% in the second quarter of 2017 to 88.66% in the second quarter of 2018. For 2018, Seattle Genetics’ gross margins are expected at 88.16%—compared to 88.78% in 2017.

In comparison, the 2018 gross margins for Bristol-Myers Squibb (BMY), Johnson & Johnson (JNJ), and Pfizer (PFE) are expected at 70.11%, 69.64%, and 79.21%, respectively.

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Operating expenses

Seattle Genetics incurred selling, general, and administrative expenses of $58.29 million in the second quarter—compared to $40.71 million in the second quarter of 2017. The increase was due to a higher headcount and investments to launch Adcetris for patients with previously untreated stage three or four classical Hodgkin lymphoma.

The company’s research and development expenses also increased from $114.4 million in the second quarter of 2017 to $122.86 million in the second quarter of 2018 due to higher internal and co-development costs for supporting the research pipeline.

Seattle Genetics’ total operating expenses increased from $167.5 million in the second quarter of 2017 to $200.46 million in the second quarter of 2018. The increase in the company’s top line caused the company’s operating loss to decrease from $59.27 million in the second quarter of 2017 to $30.28 million in the second quarter of 2018.

Next, we’ll discuss Seattle Genetics’ bottom line and the Cascadian acquisition.

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