What happened
Shares of biopharmaceutical company Sangamo Therapeutics (SGMO -4.80%) rose nearly 12% this morning after a new analyst took over coverage of the stock at Jefferies. The analyst said an impressive showing at a recent conference influenced their increased bullishness on the company's prospects and set a $17 price target on shares -- representing a nearly 100% premium to current levels.
Additionally, the analyst sees Sangamo Therapeutics as a possible hedge against the emerging gene-editing technology of CRISPR. That argument has added weight following validation by Pfizer (PFE -1.05%). As of 11:34 a.m. EDT, the stock had settled to an 8.6% gain.
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So what
Analyst recommendations aren't always a great way to gauge a company's potential, and more often add to the noise than send a clear signal. In fact, I don't bother to investigate analyst ratings for stocks I'm interested in. That said, Sangamo Therapeutics has had a pretty good couple of months, so it makes sense to see that reflected in analyst ratings.
After essentially being left for dead by biopharma investors, in May the company announced a new collaboration with Pfizer in hemophilia A. The pair will work together to develop a gene therapy called SB-525, which has received orphan drug designations from the U.S. Food and Drug Administration and the European Medicines Agency. The partnership came with an up-front payment of $70 million, the potential to receive up to $475 million in development and commercialization milestones, and up to $175 million for additional gene therapies chosen by Pfizer.
The gene therapy is based on adeno-associated viruses (AAV), which is a technology that has shown promising potential as a therapeutic class. Pfizer is a leading developer of AAV-based drug candidates, so the deal was viewed as a big vote of confidence in the tiny biopharma's platform.
Now what
Today's analyst note from Jefferies comes one day after Sangamo announced the pricing of a stock offering that will raise gross proceeds of $72.5 million before accounting for potential for additional underwriter allotments. When combined with the up-front payment from Pfizer, Sangamo Therapeutics will have doubled its cash position since the end of March. That's good news because the company will need to fund SB-525's development in a phase 1/2 clinical trial before handing it off to its partner. So, long story short, the analyst upgrade comes after several weeks of positive developments for the company, but investors are still years away from learning whether the new gene-therapy platform will be a slam dunk or a bust.
