Shares in Sangamo Biosciences, Inc. (NASDAQ: SGMO) hit the $10 mark last week to reach five year highs. The clinical stage biopharmaceutical company that pioneered ZFP's (zinc finger binding proteins) has had a steady rise of late. The stock is now up around 70 percent since 2011.
The good fortune for SGMO comes amidst the successful testing of T-cells and in-house advances with HIV therapies. According to one analyst, worldwide revenues for Sangamo are set to increase to over $650 million (from about $500 million) causing the broker to give the stock an outperform rating and a renewed price target of $13.
SGMO has a number of products in the pipeline including treatments for Hemophilia, Huntington's disease, Hemoglobinopathies, and Lysosomal storage disorders. But it is the Phase 2 testing of its HIV immune treatment therapies that are causing the most excitement. At the recent conference on retroviruses and opportunistic infections (CROI), held in Atlanta, Sangamo gave two presentations showing that results from its recent T-cell treatment tests show 'necessary immunologic properties to support a functional cure for HIV/AIDS'.
The data presented confirms that Sangamo's treatment, SB-728-T, meets the 'key immunologic requirements for immune reconstitution in HIV-infected individuals' and led to Co-Director & Chief Scientific Officer of The Vaccine & Gene Therapy Institute of Florida, Rafick-Pierre Sekaly to comment that ''The ability of SB-728-T to durably reconstitute the immune system in HIV-infected subjects after a single treatment has never been observed before with any other therapeutic approach.'' Furthermore, Wikipedia calls the SB-728-T treatment, 'a potential functional cure for HIV/AIDS'.
With preliminary data from further tests expected by the first half of 2013, now could be a good time to load up on the stock in anticipation of further success stories in the future.
Looking at the chart, it's clear to see SGMO, by advancing past its 2009 peak on strong volume, has broken out from a long period of consolidation and has a lot of room to move higher. If revenues are indeed capable of rising to the $650 million level, it would provide the catalyst SGMO needs to continue its recent growth.
With a market cap of just under $500m and a high beta of 2.26, this is not the kind of stock that will get sucked into any future weakness from the major indices. Furthermore, the company is operating with zero debt on its balance sheet, so potential downside is fairly limited.
Biotech companies like these are highly speculative since they often live or die by the results of clinical testing. However, it is possible to find gems in the dirt and with the market for an HIV treatment still wide open SGMO is one of only a small number of companies ready to take advantage of that gap. Preliminary testing has gone well and the market certainly believes there is a lot of potential in the company. That potential, that could see SGMO's stock triple or more, means SGMO offers a good risk/reward bet; even if it is a risky biotech.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.