Sangamo’s Unique ZFP Advantage

On June 29, Sangamo BioSciences Inc. (SGMO - Analyst Report) said it will receive a milestone payment from Genentech Inc., now wholly owned by Swiss drugmaker Roche, for a key research milestone achieved under the Research and License Agreement. However, the amount of the milestone payment was not disclosed.

As a reminder, Sangamo and Genentech entered into a Research and License Agreement in late April 2007 and expanded the agreement in February 2008. Under the deal, Sangamo will provide Genentech access to its proprietary zinc finger DNA-binding protein (ZFP) technology and will design and engineer ZFP nucleus (ZFN(TM)) for Genentech to evaluate and potentially use for generation of cell lines with novel characteristics for protein pharmaceutical production purposes.

We feel that the ZFP technology provides a platform for diverse drug research and development at the DNA level. ZFP technology is unique and differentiated from other technologies. ZFP can target any gene with excellent specificity and can thus tackle classically “non-druggable” targets and address unmet medical needs.

We believe the ZFP platform technology, combined with the well advanced clinical programs, will attract strategic partners for Sangamo in the coming years. We are also impressed by the company’s strategy to monetize this ZFP technology.

The company is also developing zinc finger protein drugs to treat HIV and glioblastoma, the most common brain cancer in adults.

In June, the company announced that its drug candidate, SB-509, had been successful in substantially improving nerve function for some patients with diabetic nerve damage in a mid-stage clinical trial.

The company’s stock price had plummeted in November 2008 on the news of SB-509’s failure to improve nerve function in patients with mild to moderate diabetic nerve pain. It hit a 52-week intra-day low of $1.82 on November 21. However, the stock has recovered some lost ground since then closing yesterday at $4.91. Even then, it is well off the 52-week intra-day high of $11.84 reached on July 24, 2008.

We have a Buy rating on Sangamo based on the platform technology and its progress in clinical and preclinical programs.