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Sangamo Therapeutics: Deciphering Valuation In The Face Of Key De-Risking Events

Apr. 11, 2018 9:14 AM ETSangamo Therapeutics, Inc. (SGMO)13 Comments
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  • Sangamo shares appear to be undervalued based on a summary of it's peer group.
  • There's a case to be made for significant undervaluation based on a conservative, albeit simplistic but fitting sum-of-the-parts analysis.
  • Mid year de-risking events will have out-sized implications on valuation and share price.


Sangamo Therapeutics (NASDAQ:SGMO) is a pure-play gene therapy company, whose researchers have worked for the last 20 years on perfecting a zinc finger gene editing platform. 2018 will mark a monumental year for Sangamo, with the initiation of several new clinical stage programs and 3 data readouts expect in mid-2018. Based on a presumptive sum-of-the-parts analysis, a platform validation catalyst (in the form of phase I/II data) would have large implications on share price and platform value.

In the early days of the aforementioned gene editing platform, the consequent technology was met with speculation, as a 2% targeting editing and a 6 month time frame to target a nucleotide on the genome wasn't very practical. Looking forward to today, however, the firm has improved it's accuracy to an impressive 99.5%, and can target any nucleotide in the genome in a matter of 10 days (8 if worked through the weekend). CRISPR is a new technology, and it's disruptive potential deserves attention. However, issues with off-target editing are a concern, and most firms are years away from taking their therapies to the clinic. With CRISPR becoming almost synonymous with gene editing, I believe that Sangamo's refined zinc finger program and robust partnered pipeline are not given as much credit as they deserve.

Given the disruptive economic implications of one-time, effectively curative treatments, it's difficult to value Sangamo and it's peers. However, with Novartis (NVS) purchasing Avexis (AVXS) for $8.7b, a conceived multiple of 3.5x peak sales, there now exists M&A precedent to base a value for the firm on. This method would constitute an M&A price target, and I'll be covering current pricing, in addition to providing a price projection in the case the firm reports positive phase I/II data later this year.


Looking at a peer group comparable, the

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WCM Equity Research is a coterie of university students with an academic background in finance, economics, mathematics, and biology. We have had experience at bulge bracket banks, managed individual credit and equity portfolios, and have built upon a  track record of discoursing shoptalk with biopharma or industry-specific management. We research and write methodically on the topics of macroeconomics, geopolitical events, biotechnology and pharmaceuticals, and novel investment vehicles and asset classes.

Analyst’s Disclosure: I am/we are long SGMO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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