Sangamo's Shares Drop On Rating Downgrade, Pipeline Woes

Sangamo Therapeutics, Inc.’s (NASDAQ:SGMO) shares plunged almost 12% on Nov 14. A day earlier, JPMorgan Chase & Co. (NYSE:JPM) downgraded its rating on the company to “neutral”. The rating downgrade came on the heels of Sangamo’s decision to delay presentation of data from the phase I/II Alta study, evaluating its gene therapy candidate, SB-525, for hemophilia A, which it is developing in partnership with Pfizer (NYSE:PFE) . The downgrade was done citing rising skepticism about progress of Sangamo’s pipeline, which consists of early to mid-stage candidates.

Sangamo’s stock has declined 42% so far this year compared with the industry's decrease of 19.4%.

In August, Sangamo presented encouraging preliminary data on safety and tolerability profile from the Alta study, which excited investors back then. The company had planned to present detailed data from the study in December at the American Society of Hematology (“ASH”) conference.

However, in its earnings release on November 8, the company announced that an independent Safety Monitoring Committee recommended continuation of the study to evaluate a higher dose, following an analysis in October. The company clarified that the Committee’s recommendation was based on dose-dependent efficacy on serum factor levels and favorable safety and tolerability profile of SB-525.

The company now plans to present detailed data from the study after the completion of evaluation of an escalated dose in hemophilia A patients and the study reaches the cohort expansion phase. Sangamo stated that its goal is to advance SB-525 to the pivotal stage study with a dose that has the best potential.

Although SB-525 has an encouraging safety profile and Sangamo is exploring higher dose for better efficacy, investors are skeptical that the company may fall behind in competition, given the delay in progress to the pivotal stage. The company is yet to provide efficacy (improvement) data for SB-525, which also raises concerns among investors as this suggests that the candidate may not have reached a meaningful efficacy.

However, Sangamo’s chief executive officer pointed out that none of the competitors has announced any data to support an optimal profile for their hemophilia A gene therapy candidates.

Sangamo is developing gene-editing candidates for the treatment of several indications including blood disorder, oncology and central nervous system, among others. The company is developing several candidates in collaboration with other pharma companies, which include Pfizer, Kite Pharma — a subsidiary of Gilead (NASDAQ:GILD) — and Bioverativ, a newly acquired unit of Sanofi (PA:SASY).

In September, the company had announced data from another phase I/II CHAMPIONS study evaluating its genome editing candidate, SB-913, for treating mucopolysaccharidosis type II, also called Hunter syndrome. However, investors were not impressed by the data.

In October, an independent Safety Monitoring Committee recommended initiation of cohort expansion phase with the highest dose of 5e13 vg/kg.

With no approved product and early mid-stage nature of pipeline candidates, the fate of Sangamo stock will depend on the progress of its clinical studies. Moreover, major data readouts are scheduled for next year. Therefore, any improvement in the company’s shares in the rest of 2018 or prior to any data event is unlikely.

Zacks Rank

Sangamo currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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