Sangamo's disappointment means next data is crucial

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Sangamo BioSciences was severely punished last week for the failure of its lead product, SB-509, in a phase II trial for diabetic neuropathy, with the stock more than halving in value to $2.50.

Sangamo is exactly the sort of high-risk, early-stage company that investors are dead set on avoiding at the moment, the stock had already lost 53% this year, and the negative data provided another good reason to flee. Results from a second phase II trial due early next year are now even more crucial.

SB-509 has polarised analysts, some of whom are highly confident in its activity, while others have consistently maintained its chances of success look slim. Detractors have raised questions about the suitability of the choices of endpoint in the phase II programme; for example Brean Murray analysts believe that pain-related endpoints would be more relevant, something that is not being measured.

Another event that raised eyebrows was the selective release of interim results from a sub-population in another phase II trial, in patients with moderate to severe diabetic neuropathy (DN), in September. While some analysts believed the interim analysis was encouraging, those with a more pessimistic stance questioned why only a small set of data analysis was released, making them suspicious rather than optimistic.

The failure to establish efficacy in this other trial, in patients with mild to moderate DN, means arguments for the drug’s lack of potential will certainly now hold more weight.

Optimism will not be helped by the fact that diabetic neuropathy is something of a graveyard for treatments; analysis from EvaluatePharma shows that there have been 36 products abandoned in the indication, while only seven have made it to market.

Zinc-finger proteins

Luckily, Sangamo has other things going on, most importantly its zinc finger protein (ZFP) platform technology, which can regulate or modulate genes. SB-509 is an injectable formulation of plasmid DNA, a ZFP that has been engineered to activate a patient’s own vascular endothelial growth factor-A gene. In diabetic neuropathy, the aim is to address the underlying nerve damage caused by the disease.

The technology platform has been licensed by Dow AgroSciences, covering everything from food to fuels, while Sigma-Aldrich has commenced rolling out its CompoZr zinc-finger reagent platform which should give Sangamo a modest royalty stream in the near future. It also has a collaboration with Genentech.

SB-509 is a product of the platform technology; if it fails in the second phase II trial confidence will be dented further. However, it should be remembered that the chances of failure at this stage are high, and although it would be disappointing, the technology would not be written off just yet.

For Sangamo, positive phase II data would allow it to start looking for a partner for the product, if the second phase II trial is negative the future of the drug will look even more doubtful.

The remainder of the company’s pipeline is very early stage, mostly pre-clinical, although next year the company will seek permission to move two further compounds into the clinic. Based on current cash burn and with a forecast $60m in the bank at year-end, that should last Sangamo another two years.

If the second trial fails it will certainly be back to the drawing board for Sangamo, who will need to make that $60m last, because the chances of raising any more money in the foreseeable future are very low.

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