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JMP Research Report - February 23, 2011 JMP Research Report - February 23, 2011
· Near-term technological proof-of-concept for ZFN-engineered T-Cells should increase
visibility of Sangamo’s therapeutic pipeline; reiterating Market Outperform rating and increasing price target from $9 to $12. We anticipate positive clinical data to be presented forSangamo’s novel HIV therapy at the upcoming CROI meeting, which, in our view, provides further validation of the ZFN technology and points to broader therapeutic potential where gene therapy may be applicable to multiple hematological diseases. Over the next 12-24 months we expect value-generating clinical progress not only with key programs in diabetic neuropathy and HIV/AIDS, but also oncology, CNS, and, perhaps most importantly in our view, numerous monogenic diseases. As such, we now include in our valuation approximately $1 per share for the SB-728 program in HIV and approximately $2 per share for the therapeutic ZFN technology platform, as shown in Figure 1. Our $12 price target is based on a sum-of-the-parts analysis of Sangamo’s hybrid business, including $4 per share for industrial uses, approximately $7 for current therapeutic candidates and IP (from $2-$5 previously), and ~$1 in FYE11 cash.
· Positive data in HIV/AIDS would add weight to validation of ZFN platform. We anticipatepositive technological proof-of-concept data for Sangamo's SB-728 program in HIV/AIDS at the upcoming Conference on Retroviruses and Opportunistic Infections (CROI) (see Figure 2). As such, we believe these data will set in motion a brisk pace of newsflow for ZFN-based therapeutics in 1H11, and moreover can serve to validate the broad potential for the company's platform. Sangamo has four oral abstracts at the CROI meeting including two with data from two ongoing Phase I trials aimed at addressing key questions about the viability of ZFN-modified CD4+ T-Cells and their overall impact on a patient's immunocompetence. Through SB-728, Sangamo is aiming to mimic a natural mutation in the gene encoding the CCR5 protein in CD4+ T-Cells, which has been shown to confer resistance to HIV infection. The company is applying ZFN technology to modify CCR5 genes to stimulate resistance to HIV and generate an immune response to infected cells. · Value of ZFN's therapeutic potential extends beyond current clinical programs. In our
opinion, the CROI data should enhance investor and investigator conviction in the ZFN technology and brightline the potential breadth of the therapeutic pipeline. In our view, even a quick look at the current pipeline (see Figure 3) makes evident the diversity of applications where this technology may find use. The most advanced programs are in neurodegeneration, one program in diabetic neuropathy and another in ALS, as well as the HIV/AIDS program. This is followed by initial-stage programs in glioblastoma, Parkinson's disease, neuropathic pain, spinal cord injury, and a "catchall" monogenetic and rare-disease category that is in preclinical testing. We believe that greater long-term value from the ZFN platform may lie more broadly in the treatment of monogenic diseases and specifically rare genetic disorders. While direct gene therapy has not been a paragon of success, treatment of certain rare genetic diseases by supplemental therapies has been validated in a number of cases. One example is the treatment of lysosomal storage diseases, such as Gaucher's, which is successfully treated by IV delivery of the correct protein. Finally, we believe that the Sangamo approach will reduce or remove many of the obstacles experienced with past "gene therapy" technology platforms. · A pipeline technology with many cylinders to fire upon. At its core, the technology is
theoretically applicable to any genetic defect, as indicated by the monogenetic and rare-disease category in Sangamo's pipeline. The only requirements are knowledge of the precise genetic defect, cellular expression of the required DNA repair machinery (probably active in most every cell), and a way to get the correct DNA into the cells where the genetic defect results in the disease. The latter requirement may be the most vexing at the current state of bioscience development, as indicated by the failures to date of any RNAi therapies to have a meaningful clinical outcome, largely through limitations in developing effective delivery methods. An advantage of Sangamo's technology is that once the genetic change is made it should be permanent and that, in the ideal case, only one copy per cell of the correct DNA is needed, unlike with RNAi where many copies are likely required as is regular retreatment. We look forward to advances in Sangamo's platform technology-driven pipeline in the coming months and years, if not sooner. · Preclinical data at ASH shed light on the not-too-distant future. At the American Society of
Hematology (ASH) meeting in December 2010, Sangamo collaborators presented preclinical data supporting the use of the ZFN technology in correcting hemophilia B in mice. In that study, the genome of the mouse's cells was directly modified without needing to remove the cells from the body, suggesting that similar techniques may be feasible for correction in humans. What we and the scientists/clinicians that we spoke with were most impressed with in these presentations was that the physiological consequences of these changes were predictable and consistent with a potential therapeutic benefit. There is a significant number of genetic insufficiency diseases that may be targeted by the ZFN constructs: hemophilias, lysosomal-storage diseases, and myopathies are a few examples. We believe that the promise of the ZFN platform has only just begun to be recognized and will increase in value in investors' minds with continuing clinical validation. |
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Msg # | Subject | Author | Recs | Date Posted |
38003 | Re: JMP Research Report - February 23, 2011 | MineMan | 0 | 2/24/2011 1:52:53 PM |