The Wisdom Of The Crowds And Sangamo's Phase II B Clinical Trial Results

| About: Sangamo Therapeutics, (SGMO)
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Would you like to be able to accurately predict the outcome of Sangamo’s (NASDAQ:SGMO) Diabetic neuropathy, Phase II clinical trial of SB-509? Given the certainty that the stock will more than double if successful and will jump again shortly thereafter when a partnership deal is announced, I will assume that you, like me, would like this information well in advance of Sangamo’s announcement. No single individual can predict the outcome of a double blinded human clinical trial. But working as a crowd, we can get very close to knowing with a high probability of success, what the results of this trial will be, well in advance of any announcement.

“You can know something, but not know that you know it.” “You can contribute information and not be aware of its relevance, significances or it’s timeliness.” Both of these quotes are by James Surowiecki, author of The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations.

In some cases, groups are remarkably intelligent and are often smarter than the smartest people in them. By soliciting a large number of individual opinions (Yours!) we can aggregate the contributed opinions and analyze them in a manner that will return to the group, the wisdom of the Seeking Alpha readership. In this case, the probability that Sangamo’s study of Diabetic Neuropathy will be successful.

There are five elements required to analytically evaluate the contributed wisdom of a crowd's information. These elements are: 1) The crowd must be as diverse as possible. Each person should have private information even if it's just an eccentric interpretation of the known facts. 2) The crowd must be large enough to guarantee this diversity. 3) Each contributor’s opinion must be completely independent. People's opinions aren't determined by the opinions of those around them. 4) Decentralization; People are able to specialize and draw on local knowledge. 5) Aggregation; Some mechanism exists for turning private judgments into a collective decision.

The internet and Seeking Alpha provides us with all of the tools required to easily meet all of these requirements with just a few clicks of the mouse.

The reason Wisdom of Crowds (WOC) works so well is not completely known. The author of the book Wisdom of Crowds believes the following explains the basics of this amazing process. As the frequency of the selections decline, those selections will more often fall into one of two categories, negative error and positive error, eliminating them from the accurate information we are seeking. When positive error cancels out negative error you are left with the information that will most likely benefit you goals and in this case that will be the most likely probability for the success of Sangamos Phase II B Diabetic Neuropathy clinical trial. See chart below.

Wisdom of Crowds pos - neg error

There is an intellectual contradiction to this process, or at least a counter intuitive element. The best decisions are a product of disagreement and contest. This is why you won’t see my research or opinions in this article. The next article providing the analytic results of your aggregated opinions will contain a thorough analysis of what I consider to be the prospects for Sangamo's success in this trial. Your WOC opinion will be more important if we meet WOC criteria cited above. I will provide both a WOC percentage number derived from the feedback received in the comments of this article and a graph that stratifies the results of the contributed opinions in the same format as the example above.

So here is your task if you choose to accept this challenge, Mr. Phelps. Make your determination of the likelihood that Sangamo’s Diabetic neuropathy Phase II B clinical trial will meet or exceed statistical significance of its clinical trial endpoints. Do all the research you desire or none at all if you feel you have an adequate understanding or feel for the question at hand. Then all you need to do is hit the comment button and submit a number between 0 and 100. Zero implies that you feel they are doomed to failure and 100 indicates that you believe that they can’t possibly fail. It should not take you 10 seconds to contribute your opinion to this Wisdom of Seeking Alpha experiment. We need to get around 200 submissions or opinions to guarantee that bashers and pumpers do not sway our results and to meet the diversification requirement.

Conclusion: My opinion is not nearly as important as yours. Please post you estimates of the probability that this clinical trial will succeed as a comment to this article. Any other information or feedback on your number is certainly welcome as well. But just a number is all we need (10 seconds of your time) to calculate the wisdom of crowd’s analysis. If you are unfamiliar with the power of WOC, check out any of the links below. I also strongly recommend Mr. Surowiecki’s entertaining and informative book.

I will post the results to this site in a follow up article as soon as we have enough responses. Hopefully, this will be well in advance of Sangamo's announcement, which is scheduled to be released in the last quarter of this year or Oct 1st through December 31st 2011. Thank you in advance for your considered opinions. The following information and links are provided as a shortcut to any further research you may wish to pursue.

The following three YouTube videos will provide you with a good, fast primer on James Surowiecki's WOC concept. This second link is a lecture given by Derek Powazek on how to apply WOC ideas to the web and other media. This last YouTube link is an interview of James Surowiecki by John Stossel about Intrade. Intrade utilizes prediction markets and incorporates WOC as an integral component.

There are five primary tests involved in this clinical trial. (1) Neuropathy Impairment Score in the Lower Limbs (NIS-LL): The NIS-LL is a validated instrument that can be used to measure a clinically meaningful change in the neurological status of patients with DN over time. NIS-LL includes measures of motor and sensory nerve heath as well as reflex testing and provides a quantifiable score from the neurologic exam. (2) Nerve Conduction Velocity (NCV): Direct measurement of the speed and amplitude of an applied electrical impulse or nerve conduction velocity in both sensory and motor nerves is a method of assessing the integrity or health of the nerve. 3) Quantitative Sensory Testing (QST): using the Vibratron II is used as a method of assessing a subject's change in vibration sensitivity. (4) Intraepidermal Nerve Fiber Density (IENFD) Skin biopsy with immunostaining is used to assess the density of epidermal (intraepidermal) nerve fibers. (5) Lower Extremity Neurological Sensory Exam (LENSE).

Here are the identified endpoints of SB-509 IIB:

Primary Outcome Measures: To compare the effect of SB-509 versus placebo in subjects with moderately severe diabetic neuropathy (DN) on (2) Sural NCV at six-months.

Secondary Outcome Measures: To evaluate the effect of SB-509 on (1) NIS-LL, motor (2) NCV, (3) QST, (4) IENFD, and (5) LENSE. [Time Frame: 12 months]

To evaluate the effect of SB-509 using a multi-endpoint analysis that includes (1) NIS-LL, (2) Sural NCV, and (4) IENFD [Time Frame: 12 months]

To evaluate the Safety of SB-509 in subjects with moderately severe diabetic neuropathy [Time Frame: 12 months].

Additional information on the study design is available here. Results of previous SB-509 clinical trials can be found in the press releases on the Sangamo website. Google results diabetic neuropathy & SB-509 can be found here.

Disclosure: I am long SGMO.