The United States and the world desperately needs a cure for HIV infection. Research on vaccination is progressing. Admittedly, antiretroviral therapy involving a cocktail of reverse transcriptase inhibitors and HIV encoded protease inhibitors has been remarkable, to say the least. Improvements in decreasing adverse effects of the drugs have also helped. Treatment has improved dramatically from the earliest dark days of this epidemic. But the epidemic continues, and the toll it takes continues. In the news, the International AIDS Society has released a road map for research toward a cure for HIV as did the 2012 International Cord Blood Symposium.
A functional cure for HIV infection could involve (1) transplanting HIV resistant stem cells so the immune system would continue to function or (2) using gene therapy to make the patients' own immune cells resistant to HIV. There will be investment opportunities, one already exists, Sangamo Biosciences (SGMO). There are other similar approaches with promising research, and without doubt, there will be more opportunities for biotech investment culminating from the academic research.
Sangamo is using its proprietary zinc finger DNA-binding protein technology to either activate genes or silence genes. To activate genes, the company can engineer ZFP Transcription Factors (ZFP-TF). To silence genes, the company engineers ZFP nucleases, which can cleave specific DNA sequences, which can leave the gene disrupted.
Sangamo Biosciences is developing a novel treatment for HIV infection using its proprietary ZFP technology. In Phase 2 trials, SB-728 is being tested. The patient's own immune cells are made resistant by using this proprietary technology to permanently disrupt the DNA sequence encoding CCR5, a co-receptor used by HIV to enter cells. In pre-clinical development, they are using the same approach to engineer HIV resistant stems cells. From the Sangamo website; "SB-728 is a ZFN-based approach for modification of the gene encoding CCR5, the major co-receptor used by HIV to infect cells of the immune system. Our first application is an autologous ZFN-CCR5-modified T-cell product (SB-728-T) which we are evaluating in an ongoing Phase 2, two Phase 1/2 and two Phase 1 trials in subjects with Human Immunodeficiency Virus (HIV) and Acquired Immunodeficiency Syndrome (AIDS). We also have a preclinical stage program to develop an SB-728 hematopoietic stem-cell (HSC) product and a research-stage program to develop SB-728 as an in vivo product."
However, the pipeline is deeper than just the HIV approach mentioned. Sangamo is developing SB-313 for potential treatment of Glioblastoma Multiforme. SB-313 is "an off-the-shelf cytotoxic T-cell product made resistant to glucocorticoid steroids using ZFN-mediated modification of the glucocorticoid receptor gene. Glucocorticoid-resistance enables this immunotherapeutic to function in the presence of high doses of steroids which are used post-surgery in glioblastoma treatment and ordinarily inhibit T-cell function." With their collaborators at the City of Hope, they plan to test whether they can make cytotoxic T cells, which could be used to treat Glioblastoma Multiforme, resistant to the high doses of glucorticoids also needed for therapy. The proprietary ZFN technology is used to disrupt the glucocorticoid recptor gene, thus rendering the cytotoxic T ells resistant to high dose gluccorticoids.
The proprietary ZFP TP technology is also in pre-clinical development for other indications, such as Parkinson's Disease. This application has generated revenue from grants. The company has been awarded two consecutive grants ($950,000 and $900,000) to study activation of the gene for Glial cell line-derived neurotrophic factor (GDNF) using the technology. GDNF is a neurotrophic factor that has promise in slowing or stopping progression of Parkinson's Disease. The goal is to use an engineered transcription factor to elevate the level of GDNF in the brain.
Sangamo, in January 2012, entered into a collaboration with Shire (SHPGY) to develop ZFP therapeutics for providing a genetic cure for Hemophilia. The agreement provides revenue and potential royalties. Sangamo released that it "received an upfront license fee of $13.0 million and is also eligible to receive milestone payments upon the achievement of specified research, regulatory, clinical development, commercialization and sales milestones. The total amount of such payment, assuming the achievement of all specified milestones, is $213.5 million per gene target, including a total of $8.5 million per target upon the acceptance of an IND or CTA submission. We are also eligible to receive royalty payments that are a tiered double-digit percentage of net sales of products developed under the collaboration."
Sangamo also has licensing agreements for the ZFP platform with other companies to develop products which generates revenue. Sangamo has granted Sigma-Aldrich Corporation (SIAL) exclusive rights to develop research reagents based on Sangamo's ZFP technology. Also, there is a licensing agreement with Dow AgroSciences, LLC. (DOW) to using Sangamo's proprietary ZFP technology to genetically engineer plant and plant cells.
Sangamo's lead product, SB-728, provides an exciting technological approach to a possible functional cure for HIV infection, but it seems likely Sangamo will need further funding. From the quarterly report release in May, 2012, the company expects to finish 2012 with about $75 million in cash at hand. Operating expenses are expected to be $43-47 million and revenue is expected to be $14-18 million for 2012.
Is this an investment opportunity? This is a small capitalization company ($262 million) with one product just entering phase 2 trials. However, the company does create revenue from other projects with royalty potential. If the data obtained in a phase 2 trial warrants further development, it is reasonable to suggest that either additional funding or collaboration with a larger company will be required given the current cash position. It is difficult to predict whether the HIV therapeutic product in phase 2 trials will work, let alone enter phase 3 trials culminating in approval by the FDA. Securing a source of further funding adds risk and potential dilution of share value. It will also be several years before phase 3 trials, if initiated are completed. However, there will be more information released from Phase 2 trials, which could allow a better assessment of risk.
Sangamo qualifies as a really intriguing long term speculative investment. Sangamo does use its proprietary ZFP technology to generate revenue and possible royalties. One investment strategy could be to acquire shares on sufficient dips in the stock price. Alternatively, investing right after additional funds are raised, announcements on a major partner for the HIV program could be considered, or positive phase 2 trial results could make sense. The global HIV epidemic continues, a functional cure is desperately needed, and this is a company that a long term biotech investor should pay attention to in the coming years.