The death of a lead drug for a biotech is never a good thing. And it's worse when investors aren't convinced of your technology in the first place.
The big question here is whether the failure is a knock on Sangamo's zinc-finger technology as a way to treat diseases or just a sign that diabetic neuropathy is hard to treat. I'd argue it's more of the latter, and the decline might be a slight overreaction.
Current treatments for diabetic neuropathy -- Pfizer's
Easier said than done.
There are many potential reasons for the failure, but the fact that diabetic neuropathy is a complex disease with endpoints that are somewhat subjective certainly didn't help. The company said the placebo group fared better than in the previous trial, which may have masked a positive effect.
Comparing SB-509 to Sangamo's potential cure for HIV, SB-728, isn't exactly fair. While they're both a type of zinc-finger technology, SB-509 is a transcription factor that binds to the DNA to increase production of a protein, while the HIV treatment is a nuclease that cuts the DNA and removes a gene so it can't be expressed. There are some parts of the process in common -- getting the zinc-finger protein into the cell, for example -- but I don't think we can draw too many conclusions about whether Sangamo can get SB-728 to work based on the failure of SB-509.
In my article last week about Sangamo's HIV treatment, I said the company might be a good investment if you're willing to wait. I think that still applies, but it's going to take a little longer to have a drug on the market. On the plus side, there's considerably more upside with the stock knocked down.