Why Sangamo Biosciences Inc. Shares Slumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Sangamo Biosciences (NASDAQ: SGMO  ) , a clinical-stage biopharmaceutical company focused on developing zinc-finger DNA-binding proteins to alter genes, fell as much as 11% after reporting first-quarter earnings results after the closing bell last night.

So what: For the quarter, Sangamo reported a 76% increase in revenue, hitting $8.1 million, driven by collaborative revenue derived from three agreements. Net loss, however, widened slightly to $7.6 million, or $0.12 per share -- from $6.9 million, or $0.13 per share, in the prior-year period -- as research and development expenses jumped to $12 million from $8.2 million. Comparatively speaking, Sangamo was only expected to produce $7 million in revenue and a loss of $0.13 per share. The company also guided full-year revenue to $45 million-$50 million, which is in line with estimates.

Now what: With the company's results more or less in line with or above estimates, you're probably wondering what has investors so down. The culprit appears to be a wider net loss (Sangamo had more shares outstanding this quarter) and merely in-line full-year revenue estimates when investors were clearly expecting more. To me, Sangamo's revenue estimates are decent given that it comes entirely from collaborative revenue. However, following such a huge run higher, investors would also like to see demonstrable progress with the company's clinical pipeline, since amortized revenue won't last forever. I consider Sangamo's proprietary technology intriguing, and I have it on my own watchlist on that accord alone; but as an investment I'd suggest sticking to the sidelines until we have considerably more concrete later-stage data to wrap our hands around.

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