Please ensure Javascript is enabled for purposes of website accessibility

Why Sangamo Therapeutics Stock Dropped Today

By Brian Orelli, PhD - May 8, 2018 at 1:50PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Valuing early-stage biotechs is hard.

What happened

Shares of Sangamo Therapeutics (SGMO 1.73%) are down 10% as of 1:28 p.m. EDT after the biotech announced first-quarter results this morning, although there doesn't seem to be any negative news in the release that would justify a double-digit decline.

Perhaps it's the lack of something extra in the update that has short-term investors hitting the sell button. Biotech can be a what-have-you-done-for-me-lately kind of business.

Scientist working in a lab

Image source: Getty Images.

So what

Without any drugs on the market, Sangamo's revenue and earnings don't really matter. For the record, the biotech lost $20.2 million in the quarter.

The only number that really matters is Sangamo's cash balance, which came in at $234.9 million, although that doesn't include $150 million from its collaboration with Gilead Sciences that closed after the quarter ended or the $216 million Sangamo received from a secondary offering in late April. The company is guiding for having at least $485 million at the end of this year, giving it a substantial runway.

Now what

It's hard to value early-stage biotechs because much of the valuation is based on unknown risk that can change with investor sentiment, which is why the stock is trading substantially below the $16.25 per share investors paid in the secondary offering. In the short term, it's hard to know where the stock might go.

Rather than focusing on short-term gyrations, long-term investors should be watching Sangamo's pipeline of gene-editing therapies, including SB-525 in hemophilia A and SB-913 and SB-318 for two different types of a rare disease called mucopolysaccharidosis. Investors will get some additional preclinical data for Sangamo's programs at the American Society of Gene and Cell Therapy meeting later this month, but it'll be the clinical trial results that will ultimately drive the biotech's long-term valuation.

Brian Orelli has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends GILD. The Motley Fool has the following options: short May 2018 $85 calls on GILD. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sangamo Therapeutics Stock Quote
Sangamo Therapeutics
SGMO
$5.29 (1.73%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.