Despite a promising start, things haven't gone that well for Sangamo Therapeutics (NASDAQ:SGMO) so far in 2018. The biotech's share price is down year to date after jumping more than 60% by early March.
Wall Street analysts, though, remain very bullish about Sangamo's prospects. The consensus one-year price target reflects an 88% premium over the current share price. Is Sangamo Therapeutics a buy?
The good news
Sangamo pioneered the use of zinc-finger nuclease (ZFN) technology to modify genes. It boasts the most advanced pipeline of gene-editing therapies with three programs in early stage clinical testing. SB-318 targets the treatment of rare genetic disorder mucopolysaccharidosis type I (MPS I). SB-913 targets treatment of MPS II, also known as Hunter syndrome. SB-FIX targets the treatment of hemophilia B.
Sangamo's pipeline also includes two gene therapy candidates in early stage clinical testing. Gene therapies work by inserting a gene into cells to correct genetic disorders rather than editing the genes. The biotech's gene therapies have attracted attention from a couple of big drugmakers.
Pfizer (NYSE:PFE) licensed gene therapy SB-525 from Sangamo last year. Sangamo reported encouraging news in August from preliminary results for its phase 1/2 clinical study evaluating SB-525 in treating hemophilia A. The first patient in this study to receive all three planned doses of SB-525 achieved Factor VIII activity levels associated with reduced bleeding and potential elimination of bleeding caused by hemophilia A.
Bioverativ, a spin-off of Biogen that was acquired by Sanofi (NASDAQ:SNY) earlier this year, is collaborating with Sangamo on the development of ST-400, a gene therapy being evaluated in an early stage clinical study for treating transfusion-dependent beta-thalassemia. The two companies have also partnered on BIVV-003, a gene therapy targeting the treatment of sickle cell disease.
Sangamo's gene-editing technology has also attracted a major player. Gilead Sciences (NASDAQ:GILD) paid $150 million upfront to license Sangamo's ZFN technology for use in developing next-generation, off-the-shelf cell therapies for treating cancer. Sangamo is also eligible to receive up to $3 billion in milestone payments.
The bad news
As promising as Sangamo's pipeline candidates might be, it's still really early. Gene editing isn't a proven technology yet. And while there are some FDA-approved gene therapies, there's no guarantee that Sangamo will be successful with its gene therapy programs.
The biotech's update in September from a phase 1/2 clinical trial evaluating SB-913 in treating MPS II highlighted the significant risks. It was the first report from a gene-editing therapy administered inside a human. But the news disappointed investors.
Although Sangamo's chief medical officer, Edward Conner, stated that the biotech was "encouraged by the safety and tolerability profile observed to date," not everyone was so positive. Outside observers were disappointed that SB-913 failed to demonstrate clear efficacy.
Sangamo also faces competition that has a clear head start. BioMarin has a promising gene therapy in development targeting treatment of hemophilia A and expects to complete enrollment in a pivotal phase 3 study during the first quarter of 2019.
And Sangamo could see competition from other rivals that aren't quite as far along. CRISPR Therapeutics and Vertex Pharmaceuticals are working together on a CRISPR-based gene-editing therapy called CTX001 that targets treatment of both beta-thalassemia and sickle cell disease. A phase 1/2 study of CTX001 in treating beta-thalassemia is enrolling patients in Europe, while another phase 1/2 study of the gene-editing therapy in treating sickle cell disease should begin by the end of 2018.
To buy or not to buy?
Sangamo Therapeutics' high level of risk makes it an unappealing stock for conservative investors. But what about aggressive investors? I still think it's simply too early, especially with the unimpressive preliminary results for SB-913.
A first-mover advantage over other gene-editing biotechs is great, but only if Sangamo can deliver. The jury is still out as to whether or not it will. My view is that the safer way to potentially profit from Sangamo's platform is to buy shares of its partners Pfizer and Gilead.