Several years ago, Sangamo BioSciences (SGMO -5.78%) made a big splash when it began clinical testing for its novel HIV therapy. Results so far have been promising, but this therapy is still in mid-stage development. Luckily, Sangamo's proprietary discovery platform has since attracted attention and licensing deals from the likes of Shire (NASDAQ: SHPG) and more recently Biogen Idec (BIIB 4.97%). Lets take a closer look at these partnerships and see if they can eventually allow Sangamo to advance its own pipeline.
Curing chronic blood disorders
When it comes to outcome-based medicine, Sangamo has a platform that should have a large market opportunity. The company owns a gene-editing technology based on zinc-finger proteins (ZFPs.) The fingertips can be engineered to bind a specific sequence of DNA. The company insists that it can permanently switch the expression of any gene on or off.
The whole idea sounds a little too good to be true, but innovative powerhouse Biogen has been convinced to the tune of a $20 million upfront payment. The companies recently announced a partnership to develop beta-thalassemia and sickle cell therapies. The basic terms of the deal leave Sangamo responsible for research and development activities until it can be proved to work in humans. Biogen Idec would take the reigns at that point, providing Sangamo with milestone payments up to $300 million and double-digit royalties if there are any sales.
In the laboratory, Sangamo has shown that its compound can enter the CD34 stem cells of patients with either beta-thalassemia or sickle cell and permanently knock out the BCL11A gene. This process allows those cells to produce fetal hemoglobin at therapeutic levels.
These chronic conditions require lifelong care or bone marrow transplants at a great expense. If this partnership manages to produce a functional cure, you can bet that cost-conscious health care providers will beat a path to Sangamo's door.
Curing hemophilia
In January 2012, Sangamo entered an agreement with Shire to research, develop, and commercialize ZFPs for the treatment of hemophilia, Huntington's disease, and other conditions. Similar to the recent deal with Biogen, Sangamo received an upfront fee and is eligible to receive milestone fees up to $213.5 million for each of seven specified targets. The company would receive royalties on sales as well.
Hemophilia is typically treated with regular infusions of clotting factors that patients are incapable of producing themselves. While Biogen has hemophilia therapies under review that would significantly reduce the frequency of infusions, Sangamo has therapies that may eliminate the need for infusions altogether.
At the annual meeting of the American Society of Hematology last December, Sangamo presented data from both mice and monkeys that shows its ZFNs can effectively splice a clotting factor gene next to the albumin gene in a tiny percentage of the liver cells. More importantly, the therapy results in a permanent continuous production of the required clotting factor. It's very early in the program, but there is a good chance that regulators will allow the company to go ahead and begin testing in people. This would allow it to trigger some milestone payments in the process.
Getting there
Sangamo might not be able to launch a large-scale Phase 3 program to advance its wholly owned HIV candidate in the next couple years. The good news is that it's in a financially stable position for the time being.
SGMO Revenue (TTM) data by YCharts
During the 2014 J.P. Morgan Healthcare Conference, Sangamo CEO Edward Lanphier said that the company is likely to report cash at the end of 2013 between $125 million and $130 million. If the company can just get some compounds into the clinic then it could find itself teetering on the edge of profitability solely on the strength of its current partnerships for a couple of years.
For now, it looks like Sangamo has everything it needs to maintain its cash balance while generating more attention to its discovery platform. It's certainly a speculative stock, and company has a number of years of research and development ahead of it, but it's definitely one worth keeping an eye on.
