Sangamo Therapeutics: Market Cap Is At A Bargain Relative To Its Cash Position – Seeking Alpha

Introduction

Sangamo Therapeutics (SGMO) is a clinical-stage biotech company focusing on the research and development of genomic medicine across 4 distinct technology platforms: gene therapy, cell therapy, in vivo genome editing, and in vivo genome regulation.

Sangamo is best-known for developing its proprietary gene-editing technology, zinc finger proteins ("ZFPs"), which is a naturally occurring class of transcription factor proteins found in humans and other species. The company has used its internal know-how and technical expertise to develop a proprietary synthetic ZFP platform with potential clinical utility in ex vivo gene-edited cell therapy, in vivo genome editing, and in vivo genome regulation.

ZFPs also can be engineered to make zinc finger nucleases ("ZFNs") which proteins that can be used to specifically modify DNA sequences by knocking in or knocking out select genes, or genome editing, and ZFP transcription-factors ("ZFP-TFs") which are proteins that can be used to selectively increase or decrease gene expression.

Sangamo is developing a series of clinical programs, which are either wholly-owned or partnered with well-established pharma and biotech companies, to focus on 3 therapeutics areas in inherited metabolic disease ("IMDs"), central nervous system ("CNS), and inflammatory and autoimmune diseases. Its full list of clinical pipeline programs is listed in Figure 1.

Figure 1 Sangamo Therapeutics' Clinical Pipeline (Source)

The company's most advanced program is an investigational gene therapy for severe hemophilia A, SB-525. SB-525 is developed under a global collaboration with Pfizer (PFE), of which the rights of SB-525 have been transferred to Pfizer to run a phase 3 trial. In December 2019, both companies announced updated initial data from the phase1/2 trial of SB-525. SB-525 was generally well-tolerated and demonstrated a sustained increase in Factor VIII activity. SB-525 has been granted RMAT, Orphan Drug, and Fast Track designation by the FDA as well as Orphan Medicinal Product Designation by the European Medicines Agency ("EMA").

Beyond SB-525, the company is also investigating 2 wholly-owned gene therapy. ST-920 is being evaluated to treat Fabry disease, a rare inherited metabolic disease, in a phase 1 study in the US and UK. SB-920 has received Orphan Drug designation by the FDA. The company also plans to advance ST-101 into clinical trials in 2021 to treat phenylketonuria ("PKU") which is a rare inherited disorder that originates from a defect in the PAH gene and results in a harmful accumulation of phenylalanine in cells throughout the body.

Sangamo is working with Sanofi (NASDAQ:SNY) to develop ex vivo gene-edited cell therapies, ST-400 and BIVV-003, for transfusion-dependent beta-thalassemia ("TDT") and sickle cell disease ("SCD") respectively. Both ST-400 and BIVV-003 are related product candidates using the same technology involving gene editing of a patient's own hematopoietic stem progenitor cells using non-viral delivery of ZFN technology.

Sangamo is the phase 1/2 study of ST-400 in 6 patients with TDT while Sanofi is recruiting the phase1/2 study evaluating BIVV-003 in patients with SCD, and Sanofi is responsible for the subsequent development, manufacturing, and commercialization of both programs.

In Dec 2009, Sangamo presented interim results for the first 3 patients ST-400. As of the data cut date, 2 more patients have been enrolled although they were not included in the interim updates. The 3 patients treated with ST-400 experienced prompt hematopoietic reconstitution, demonstrating neutrophil engraftment in 14-22 days and platelet engraftment in 22-35 days. No emerging clonal hematopoiesis had been observed as measured by on-target indel pattern monitoring in the three treated patients. The downside of the data readout is that its treatment of TDT appears to be not as efficacious as other competitors such as bluebird bio (BLUE).

Sangamo also has a global collaboration and license agreement with Kite Pharma, a wholly-owned subsidiary of Gilead Sciences (GILD), for the development of engineered cell therapies for cancer. The company is working together with Kite to design ZFNs and viral vectors to disrupt and insert select genes in T cells and natural killer cells. The first program of this agreement expected to start a clinical trial in 2020 is KITE-307, which is an allogeneic anti-CD19 CAR-T cell therapy. Given the well-documented struggles of Kite's approved autologous CAR-T, Yescarta, the success of allogeneic CAR-Ts will be very beneficial.

Lastly, Sangamo is also evaluating the potential of regulatory T-cells ("Tregs") genetically modified with a CAR ("CAR-Tregs") in solid organ transplantation. CAR-Treg cell therapies are being conducted in several preclinical studies in autoimmune and inflammatory diseases such as multiple sclerosis ("MS") and inflammatory bowel disease ("IBD"). The most advanced CAR-Treg cell therapy is TX200, which is an autologous treatment for the prevention of solid organ transplant rejection and the clinical trial is expected to be initiated in 2020.

Sangamo is only planning to start a new clinical trial for its in vivo genome editing programs. SB-913 is a second-generation ZFNs program that will be used to treat Mucopolysaccharidosis type II ("MPS II") and a new clinical trial is planned to start this year.

The company had previous programs from first-generation ZFNs that have been halted as they did not demonstrate enough clinical benefits. The company plans to use data from the SB-913 study to definite the next steps for its in vivo genome editing programs.

The company also has several preclinical programs evaluating their ZFP-TF technology as a novel therapeutic approach for CNS diseases. In December, Sangamo announced a collaboration with Biogen (BIIB) to develop and commercialize ST-501 for tauopathies including Alzheimer's disease, ST-502 for synucleinopathies including Parkinson's disease, a third undisclosed neuromuscular disease target, and up to 9 additional neurological disease targets. Under the terms of the agreement, Biogen will pay Sangamo $350M upfront, inclusive of a license fee and equity investment, and Sangamo is eligible to receive up to $2.37B in future milestones.

Sangamo also has a partnership with Pfizer and Takeda (NYSE:TAK) to develop and evaluate ZFP-TFs. The company is working with Pfizer to evaluate ALS and frontotemporal lobar degeneration ("FTLD") that are linked to the mutations in the C9ORF72 gene. In the partnership with Takeda, the company is evaluating a preclinical program for Huntington's disease in which ZFP-TF is designed to differentially down-regulate the mutated disease-causing huntingtin gene ("HTT gene") while preserving the expression of the normal version of the gene.

As of 31 December, 2019, cash and equivalents on hand was $385M. The amount is excluding the $350M injection from the collaboration with Biogen, and when factored in, cash on hand should comfortably be in the range of high $600-700M. This should give them a comfortable runway to fund all operations well into 2021, an important point given that the recent stock market crash which limits any secondary offering options.

Impressively, the company has managed to strike several high-profile partnerships with 5 global biotech/big pharma companies. Such partnerships not only validate Sangamo's technology and capabilities, but they also provide future avenues of funding with as much as $6.34B royalties on net product sales and potential milestone payments due to the company.

Figure 1 Sangamo Therapeutics' Partnerships (Source)

In terms of competition, the company competes with several players, particularly in the cell and gene therapy space. bluebird bio has more advanced programs in both TDT and SCD and, to date, has shown much better efficacy. There are also other companies such as CRISPR Therapeutics (CRSP) that are using an alternative gene-editing method, CRISPR/Cas9 in gene therapy. Other companies such as Editas Medicine (EDIT) and Intellia Therapeutics (NTLA) are also developing CRISPR/Cas9 for treatments in TDT and SCD, although it must be noted that these are not their lead programs.

In terms of allogeneic CAR-T, there are more established players such as Allogene Therapeutics (ALLO), Cellectis (CLLS), and Precision Biosciences (DTIL). The main difference among these companies is primarily the choice of gene-editing tools with Allogene and Cellectis using TALEN while Precision is using ARCUS. All these companies are, currently, in a similar stage of clinical development.

In addition to healthy donors derived allogeneic therapies, Fate Therapeutics (FATE) is developing allogeneic therapies from induced pluripotent stem cells ("iPSCs") as a renewable cell source. The advantage of this is that product consistency and potency will be improved, and the manufacturing process will be akin to the well-established biologics where they are produced from a single cell line. It is notable to note that Allogene is also investigating using iPSCs as a renewable cell source. Also, Atara Biotherapeutics (ATRA) is developing an Epstein-Barr Virus ("EBV")-based allogeneic T cell therapy platform. Their lead program is in Phase 3 and a BLA filing is expected by the second half of the year. That should put them in the lead position of commercializing an allogeneic T cell therapy and the company is gradually moving into allogeneic CAR-T space as well.

Sangamo is, currently, trading at a market cap of around $700M, which is almost as much as its cash position. While its cash position will eventually deplete to fund operations and clinical trials, the current valuation means that there is also no value for its technology and intellectual position. I consider it a good time to take up a small position in Sangamo, especially if investors have a time horizon of at least a year to weather the COVID-19 black swan event and wait for further clinical updates from the company.

It must be cautioned though that investing in clinical-stage biotech can be extremely risky, given the binary nature of the field. This is especially so, given the market turmoil from the COVID-19 pandemic. The pandemic has also led to several countries announcing lockdowns, which have disrupted supply chain and operations. Several clinical trials have already been delayed globally and this may impact Sangamo negatively, as their cash burn will continue even if clinical trials are delayed.

Disclosure: I am/we are long ATRA, BLUE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Sangamo Therapeutics: Market Cap Is At A Bargain Relative To Its Cash Position - Seeking Alpha