An attempt to edit genetic flaws on the fly didn't work nearly as well as hoped for Sangamo Therapeutics, Inc. (SGMO 2.15%), and the stock just took a dip. Is it time to cut and run?

Before investors do any panic trading, there are a few things they need to understand about Sangamo's latest clinical trial results and the rest of its pipeline.

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What happened

The first look at four people with mucopolysaccharidosis type 2 or Hunter syndrome that received SB-913 was more than a little disappointing. The experimental gene therapy was the first intended to correct a faulty gene in vivo, but it failed to produce solid evidence that it works as intended.

Hunter syndrome patients suffer from the lack of a digestive enzyme called iduronate-2-sulfatase (IDS) and require constant enzyme replacement therapy to keep glycosaminoglycans (GAG) from accumulating and wreaking havoc on practically every organ in their body.

Sangamo gave two Hunter syndrome patients a starting dose and gave two others twice the starting dose. If all went according to plan, these patients would be producing IDS on their own now, but investigators couldn't detect any in their bloodstream.

It isn't over yet

Sangamo recently infused a two-patient cohort with 10 times the starting dose of SB-913, and there are reasons to be hopeful. The pair of patients who received twice the starting dose showed a 39% and 63% reduction in circulating GAG at the 16-week follow up point.

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Circulating GAG increased slightly among both patients given the starting dose, which could be a simple case of choosing an ineffective dosage to start with. If SB-913 is having a dosage-dependent effect, despite not producing measurable quantities of IDS, we'll see further evidence in about 16 weeks.

Right now, investors should probably take GAG reductions observed in the double-dose cohort with a grain of salt. All of the patients were also receiving enzyme replacement therapy at the time of their baseline readings, and at their 16-week evaluation. Since investigators couldn't detect any IDS production, it really isn't safe to assume SB-913 caused the reductions observed for just two patients.

What matters now

Sangamo's been advancing zinc finger gene editing tech for decades without a single late-stage clinical trial success to show for it. Investors' lack of faith in the unproven technology is a big reason the stock dipped only 23% on the day the company released disappointing preliminary results for SB-913.

Luckily, Wall Street's far more concerned with a program that Sangamo hasn't smudged up with zinc fingerprints. Last year, Pfizer (PFE 0.19%) licensed SB-525, a viral vector that carries a functional copy of a gene driven by a proprietary promoter designed to get liver cells to express the gene once it's been delivered. 

If SB-525 allows hemophilia A patients to produce clotting factor on their own, Sangamo could receive up to $300 million in milestone payments from Pfizer, plus a tiered double-digit royalty percentage on annual sales that could top out in the mid-nine-figure range. Treating hemophilia A with constant factor replacement infusions costs insurers a bundle.

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Of course, Sangamo's promoter needs to work as advertised during an ongoing dose-ranging study, and so far it doesn't look terrific. In August, a year after the trial began, the company told us it observed a dosage-dependent effect but didn't share any details. The first patient to be treated at the third dose level started producing enough clotting factor to avoid replacement factor infusions.

Biomarin Pharmaceuticals (BMRN -0.77%) is several steps ahead of Pfizer and Sangamo, with a hemophilia A candidate that has already been shown to reduce factor replacement usage by 96% over two years following a single treatment. We'll find out if SB-525 has a chance to overcome this potential rival when the investigators present the results at a medical conference later this year. 

Hardly time to walk away

Sangamo's far too risky to begin a position at its recent price, but I don't think it's time to cut and run just yet. The company has another partnership with Sanofi that's already enrolled beta-thalassemia patients into an early stage clinical trial with an experimental cell therapy, called ST-400.

Also, Sangamo owns two clinical-stage candidates outright, one for hemophilia B and another for mucopolysaccharidosis type I. Sangamo's recent market cap of around $1.5 billion could fall if another early clinical-stage candidate fails to impress. A diverse pipeline, though, should help the stock breeze past through this latest mishap.