Sangamo BioSciences, Inc. (1)
MARKET OUTPERFORM
Target Price $15.00
INVESTMENT HIGHLIGHTS
· Solid cash position more than sufficient to fund clinical progress, with potential upside fromindustrial collaborations, reiterate Market Outperform rating and $15 price target on Sangamo BioSciences. Sangamo reported 4Q09 EPS loss of ($0.05), ahead of our estimate of a ($0.10) loss and the Street consensus of ($0.06). The earnings beat was driven by higher-thanexpected collaboration revenues of $10.2MM, compared to our estimate of $4.1MM. R&D expenses were $8.7MM, vs. our estimate of $6MM, and SG&A expenses were $4MM, vs. our $2.9MM. A summary of estimates and actual results can be found in Figure 1, and changes to our model are shown in Figure 2. The company ended 2009 with cash of $85MM and provided guidance that it will end 2010 with cash and equivalents of at least $60MM. Our $15 price target ($13-18 range) continues to be based on a sum-of-the-parts analysis for Sangamo’s hybridbusiness, including $10-$12 per share for industrial uses, $2-$5 for current therapeutic candidates and IP, and approximately $1 in FYE10 cash and equivalents.
· Progress with SB-509 in `09 with more to come in `10. In 2Q10 we anticipate the release of results from a Phase II trial for SB-509 in diabetic neuropathy. This trial is evaluating the activity of the therapeutic in patients with at least one nerve in which conduction velocity is below the threshold of detection. Sangamo is progressing towards the initiation of a double-blinded Phase IIb trial for SB-509 in diabetic neuropathy, for which management outlined the design on the conference call. This trial will evaluate the neuroregenerative potential of SB-509 on the sural nerve, the first major nerve affected in diabetic neuropathy. Approximately 150 patients will be enrolled in the trial, which is powered to detect a statistically significant improvement in nerve conduction velocity between SB-509 and placebo. Sangamo does not anticipate an interim analysis in this trial and projected that results will be available by the end of 2011. Additionally, in 2H10, we expect results from the Phase II trial for SB-509 in ALS.
· Industrial collaborations continue to provide a solid platform with upside potential. In 2010 we anticipate that, like 2009, the industrial uses of Sangamo’s technology platform will become increasingly visible and contribute to the income statement. Specifically, we look for progress out of the Dow Ag collaboration with possible business development between Dow and other ag companies. We also anticipate scientific progress, and revenue, out of Sigma with transgenics. |
