Seeking Alpha
Profile| Send Message| ()  

Sangamo announced late Friday that they would be releasing the statistical analysis of their lead drug and indication, SB-509, currently in a Phase II B clinical trial for Diabetic Neuropathy. They are doing this in two stages. First with a press release at 7 AM Eastern Time and secondly they will host a conference call to discuss these results.

No single individual can predict the outcome of a double blinded human clinical trial. Certainly not the patients or the physicians participating in or conducting them. There are simply too many variables and a finely-honed edge that demarcates success over failure. This last point, the success or failure of end-points meeting their statistical significance is the largest downfall for most drugs in clinical research. Having said this all drug development companies stack the deck in their favor as much as possible. This article describes what Sangamo has done to mitigate this risk of failure and allows for the reader to come to a reasonable conclusion on the likelihood of SB-509's Phase IIB (901) clinical trials success.

Sangamo has conducted multiple pre-clinical studies and experiments utilizing SB-509 and approximately six human clinical trials leading up to the one we are focused on here.

  1. Initial Phase 1 studies (not listed here) were conducted to determine pharmacokinetics and toxicity. These studies have provided initial guidance on safety, dosage, drug distribution and possible toxicities. The other human data Sangamo has depended upon for the design of this critical Phase II study are listed here.
  2. Phase 1b study of SB-509 for mild to moderate DN (SB-509-401).
  3. Phase 2 study of SB-509 for mild to moderate DN (SB-509-601)
  4. Phase 2 study of SB-509 for moderate to severe DN (SB-509-701)
  5. Phase 2 Study of SB-509 to Evaluate Stem Cell Mobilization (SB-509-703)
  6. Phase 2B study of SB-509 in Diabetic Neuropathy (SB-509-901) is described in the slide below.

Sangamo's Lead Drug and Indication is SB-509 for the treatment of diabetic neuropathy. SB-509 (formerly ZF-434), an injectable plasmid encoding a DNA-binding zinc finger protein, transcription factor (ZFP TF). It is designed to up regulate the endogenous expression of the gene encoding vascular endothelial growth factor ((VEGF-A)). VEGF-A has been demonstrated to have direct angiogenic, neurotrophic and neuroprotective properties. Endogenous activation of VEGF-A results in the expression of all three major isoforms or slightly different forms of the same protein, all derived from VEGF-A, including (VEGF-A121, VEGF-A165, and VEGFA189) in their biologically correct proportions. Several preclinical studies suggest that the combination of all three VEGF-A isoforms may provide more potent and full biological effect. Sangamo believes that this is one of the key characteristics that differentiate their approach from others that have failed in the past.

Human clinical studies have demonstrated that VEGF expression is reduced in diabetic patients with neuropathy and that the more severe the symptoms, the greater the reduction in VEGF-A expression (Diabetes Care (2008) Vol: 31 p140-145).

This is a very important point because it has provided some potentially negative, but hopefully deceptive information about the likelihood of the success of SB-509 in future clinical trials. It turns out that the patients included in study 601 were identified as having mild neuropathy, when in fact they had very mild neuropathy. It you look at the chart above you will immediately see the problem. If your body is still producing adequate amounts of VEGF-A, the benefits of administering more may have little or no effect on the problem. Nothing scientific about the next statement, but it looks like when the severity of neuropathy crosses above the dropping levels of natural VGEF production then SB-509 will have the potential to benefit the individual, thus X marks the spot.

Inclusion of this very mild neuropathy population produced a key development twist for Sangamo because there was an inability to determine a significant difference between the treatment group and the placebo group in their mild to moderate phase II study SB-509-601.

Overall, no difference was seen at 180 days between placebo and SB-509-treated subjects in this double-blind, repeat dosing Phase 2 clinical study in the following measures of nerve health and function: Abbreviated Neuropathy Impairment Score in the Lower Limbs (A-NIS-LL), Nerve Conduction Velocity (NCV), and Quantitative Sensory Testing (QST).

However, analysis of the data demonstrated that subjects entering the SB-509-601 trial had significantly milder DN by neurologic exam and Nurve Conduction Velocity than subjects in either the Phase 1 SB-509-401 or Phase 2 SB-509-701 studies (p value = 0.0001). (source: Sangamo press release)

What has resulted from this unexpected turn of events is the current Phase II B study of SB-509, restricted patients to the upper thresholds of advanced disease in diabetic neuropathy or those individuals who were experiencing moderately severe lower limb peripheral neuropathy. Again the X chart above verifies this rational.

It was widely assumed that as a neuropathic disease progresses it becomes more difficult to treat. Conversely if you treat the disease at an earlier stage you will have better chances of changing the downstream outcome. You would certainly make this assumption when you are dealing with the degeneration of nerves. It appears that this is not the case in DN. The more severe the neuropathy the more efficacious the SB-509 appears to be. To be fair, the more advanced the disease progressed the more neurological damage has been done and the more readily the repair to these nerves or the resolution of pain they cause by their degradation could be measured.

"Data from our Phase 1 and both Phase 2 clinical trials have shown us that the dual angiogenic and neurotrophic effects of SB-509 are most effective in the later stages of DN when both diabetic microvascular disease and metabolic neuropathy are evident. The statistically significant improvement in SB-509-treated subjects across multiple independent clinical endpoints for DN has enabled definition of a responder group and is particularly encouraging for future trials in this patient population." (source: Sangamo press release)

A lot is riding on the outcome of this study for both Sangamo and their investors. If successful, the stock should double, and that's a very conservative estimate even in today's suppressed and volatile market.

There are several reasons for this. First this is a huge and growing problem worldwide affecting more than 33 million individuals. Secondly Analgesics and antidepressants designed to control pain symptoms are the only drugs currently approved to treat this condition. Third, Sangamo is also evaluating SB-509 in Amyotrophic lateral sclerosis or ALS, spinal cord and traumatic brain injury and stroke. As mentioned in a previous article, there are multiple degenerative vascular processes in human disease and SB-509 would seem to be a logical candidate for many of them. Increasing vascularization has a great deal of potential in many other indications, notably cardiovascular disease, but also any traumatic deep tissue injuries or amputations. Last, but not least, success in another very difficult to treat affliction provides another notch in their holster, validating the entire ZFP platform.

So the overriding question for the market is will SB-509 obtain statistical significance of it's defined clinical endpoints? Those end points are identified in the previous article on Sangamo titled The Wisdom Of The Crowds And Sangamo's Phase II B Clinical Trial Results

My father had three degrees in eNGINEERING AND ONE IN aRCHitecture. Whenever he was asked what he did for a living, he would always respond with a smile, that he was an expert. He would them tell whoever had asked what his definition of "expert" was. "An expert is someone who knows more and more, about less and less, until they know all about nothing!"

In a strange way this describes modern clinical trial designs at it's best. You want to first define who will respond to your treatment. You do this by learning more and more about what constitutes a responder, there by enabling you to include less and less participants in your study. Leaving just those who are most likely to favorably respond to the treatment being studied, reducing your risk of failure to as close to nothing as you can get.

If this sounds like the company is stacking the deck to guarantee their clinical trials succeed, they are. There are drawbacks for any drug development company in this process. The narrower the inclusion and exclusion criteria of their clinical trials, the narrower the indication/ prescribing label that the FDA most likely will impose. The primary endpoints often become indications statements, and secondary end points have been utilized as label claims. Indications and claims have a way of becoming promotional material, which can ultimately determine the size of the market. So there are obviously two sides to this double-edged sword. Broaden the market and increase the possibility of not meeting their end points or narrow that potential market and dramatically increase the chances of success. I will let you in on a little secret here. They actually get it both ways. Once a drug has been approved for an indication the prescribing physicians actually have the discretion to utilize that medication on the patients that they believe will benefit, even if they don't strictly meet the criteria described in the prescribing label. Third party reimbursement is another issue altogether.

There is a lot of evidence pointing to positive results in the Monday morning announcement. First they did a press release announcing the announcement to make sure the entire scientific and financial communities were watching. Do you do that if your getting ready to announce bad news? Another obvious clue is the timing. They are doing this on Monday and not Friday where the bad news could get buried over the weekend. If indeed it was marginal news or bad news they probably would have sliced and diced the data for the next several weeks or days until they could say something reasonable, but reassuring about their platform. No, they are announcing the results on the first hour of the first business day of the last quarter of 2011 after stating for months that it could come any time in the last quarter of 2011. The stock has gained 75 cents this Friday in after hours trading since the announcement or 17.25%.

Within weeks or quite possibly days of the release of successful data I expect a Major Pharmaceutical partnership to be announced. This is not speculation on my part, but a statement made many times by their CEO Edward Lanphier that there has been significant interest and discussions with potential partners surrounding their diabetic neuropathy program.

This partnering announcement will likely include a major up-front payment somewhere north of $50 million. This partner will then take on the majority of the development responsibilities including all of the following: clinical research, regulatory filings, manufacturing, marketing and distribution of "Nuroend." My marketing name not Sangamo's! It would be wholly expected that the costs for the continued development of SB-509 would be shared with this partner from that point forward. A 50/50 split is not uncommon. But there may be a disappointment or a surprise coming depending on your position. Because their CEO continues to provide year-end cash guidance that seems to disregard a large cash infusion from a major up front payment, Sangamo may instead be negotiating to retain a larger percentage of the downstream income. 60/40, 70/30 or 75/25, only time will tell, but this should not surprise us from the information provided as cash guidance thus far.

If the VGEF target sounds somewhat familiar, you may be recalling the Roche / Genentech's blockbuster cancer drug Avastin which was developed to block the function of VEGF-A, preventing tumors from growing new blood vessels, thus starving the tumor of a flow of nutrients. This process called anti-angeogenisis can, as you would expect, leads to slow or incomplete wound healing with it's accompanying pain. Exactly the opposite of Sangamo's goal here. There is a possible hint here of a potential partner. With a franchise already intimately familiar with the science of the VGEF target, F Hoffmann La Roche AG might very well prove to be a strong suitor.

Conclusion

No one can predict the outcome of a human clinical trial as there are far too many variables involved, involving the most complex biological system know to exists; humans. A high level of blood sugar that damages blood vessels feeding nerves is the root cause of diabetic neuropathy. Systemically overriding the VEGF system by elevated glucose levels may be an insurmountable problem.

The most any scientist or clinician can hope to do is narrow the inclusion and exclusion criteria to the point that everyone who meets these criteria will be responsive to treatment. Sangamo has done this utilizing every bio monitor, assay and scientifically validated pain nerve response currently recognized as a viable and clinically relevant assay.

Our Wisdom of Seeking Alpha article currently has the probability of this trial being successful at 67%. It must be pointed out that the sample size is small with only 30 individual opinions for that WOC analysis. Given the timing of this announcement, demonstrated safety and the intense focus on the stratification of responders for this phase II study, I would put the chances of success at greater that 80%.

If you would like additional information on Peripheral Neuropathy see the following link; what is Peripheral Neuropathy?

Disclosure: I am long SGMO.

Source: Sangamo's Phase II Results To Be Announced Monday - Expect Good News