Five short months ago, Sangamo (SGMO) released their 2018 results, providing a program review which refocused development priorities. Gene editing trials for hemophilia B, MPS I and MPS II were put on hold. Gene and cell therapies became the more immediate opportunities. Hemophilia A became their lead program followed by gene therapy preclinical programs led by Fabry. The progress seen to date has been compelling. This article will recap the progress reported through the 2Q19 update this past Wednesday. More importantly it will highlight an approach to calculate the value created when a clinical program progresses from one phase to another. Sangamo just improved their risk-adjusted milestone payments by $100 million as they move their SB-525 program into Phase 3.
Read more at Sangamo 2018: Coming Up Short
Hemophilia A Gene Therapy: The Race Is On
A lot has changed since I published the blog post Genomic Medicine: Disrupting Hemophilia A last year. The three primary companies vying for a share of this market remain BioMarin (BMRN), Spark (ONCE) and Sangamo.
BioMarin has long been viewed as the presumptive first-mover and likely to be the eventual market leader. While they still appear likely to be the first to market, their data has raised variability and durability concerns and Pfizer has made moves to cut into their time-to-market lead.
Spark has yet to provide promised updates following disclosure of treatment immune responses which raised concerns. They have pointed to the pending Roche (OTCQX:RHHBY) acquisition as the reason. They now have slipped into third place in my view.
Sangamo has provided several updates indicating they may have the best therapy and are cutting into the BioMarin clinical head start.
- On July 6th Sangamo provided updated preliminary data at the 2019 International Society on Thrombosis and Haemostasis in Melbourne, Australia All dose cohorts were considered safe without the use of prophylactic steroids. The low dose cohorts exhibited durability preferential to published BioMarin data. All cohorts exhibited preferred intra-cohort variability to BioMarin.
- The FDA awarded SB-525 regenerative medicine advanced therapy or RMAT designation.
- The August earnings presentation indicated 1) regulatory discussions were underway for Phase 3, 2) they are in the process of transferring manufacturing to Pfizer and 3) they have completed their anticipated dosing for Phase 1/2.
- Pfizer amended their Spark collaborated hemophilia B lead-in Phase 3 study to add hemophilia A. This leverages 62 active clinical sites worldwide, accelerating this Phase 3 lead-in study by at least 6 months.
The collaboration economics include potential payments of up to $300 million for clinical development, regulatory and first-sale milestones, plus double-digit royalties on net sales. SB-525 is getting closer to the point where the estimated present value of the collaboration payments can be calculated. Sangamo has disclosed the full milestone potential of $300 million is earned upon first commercial sales as opposed to attainment of any sales tiers required in some agreements. Clinical Phase I trials pertain to safety, which arguably this program achieved in April 2018 after the safety monitoring committee reviewed cohort 2 data and determined it was appropriate to move to the higher dose cohort 3. That increased the probability-adjusted milestone cash flows by $16.8 million as the likelihood of approval moved from 9.6% to 15.2%.
The transition from Phase 2 to Phase 3 increases the risk-adjusted cash flows by $102.9 million as the likelihood of approval increases to 49.5%. (See Bio data link) The present value of these cash flows is not yet determinable because the company has yet to give specific amounts or trigger points.
Gene Therapy Next Up: Fabry Trial Initiated
Sangamo expects to leverage this platform for their next preclinical gene therapy to treat Fabry disease (ST-920). The company has discussed dosage levels with the FDA but has not disclosed whether a non-therapeutic low dose will be required to confirm the safety profile seen with hemophilia A, or if they will be starting with a higher dose that has a better efficacy profile. Sangamo expects to have patients enrolled by the end of this year.
Hemoglobinopathy Cell Therapies: Dosing Underway
The hemoglobinopathies are a group of inherited blood disorders caused by an abnormal globin chain. Thalassemias are inherited blood disorders caused by a genetic defect that impairs the production of hemoglobin. Hemoglobinopathies and Thalassemias comprise hundreds of diseases which often, but not always, overlap.
Two Sangamo hemoglobinopathy gene-edited autologous cell therapies, partnered with Sanofi (SNY), have begun dosing patients.
Management estimates that 85% of their performance obligations are now complete. Once the obligations are fulfilled, the resulting data will inform the decision whether Sanofi will take these programs into Phase 3. There are $115.8 million in development and $160.5 million of commercial milestone payments plus double-digit royalties on net sales associated with these programs.
- Sangamo is running the beta thalassemia phase I/II clinical trial (ST-400) which is projected to dose 6 patients. Four patients have now been enrolled, two of which have been treated. The next expected catalyst for this program is the end of 2019 when preliminary data is expected to be updated. Management has indicated 12 to 18 months of data will be needed to evaluate the effectiveness of the approach, even though early data on the first patient provides a source of optimism.
- Sanofi is running the sickle cell phase I/II clinical trial (BIVV003). Sanofi controls all data updates on this trial and has only stated that the first patient was dosed in June.
Cell Therapy Next Up: Oncology Allogeneic CAR-T
The development of a universal CAR T therapy, which uses a healthy donor’s immune cells, gene-edits them for immunocompatibility and then multiplies them to treat hundreds of cancer patients at once (allogeneic), is the only practical option to treat more common cancer types,” explains Macrae. The collaboration is expected to create ten different products, with the first few being targets that people will recognize.
lsipr interview ZFN: a rival to CRISPR
The Gilead (GILD) oncology collaboration for CAR-T continues to progress, though is largely under the radar until Gilead is ready to provide further updates. The agreement anticipates 10 targets. The first target is an allogeneic anti-CD19 CAR-T (KITE-037). Gilead expects to file an IND by the end of 2019 and initiate this trial in 2020. Additional targets are also in process as referenced by the above interview quote.
Gilead CSO John McHutchinson outlined their intent to be the oncology cell therapy leader by leveraging this collaboration which provides best-in-class gene editing for off-the-shelf therapy.
The per target development and commercial milestone potential is $126 million and $175 million, respectively plus single digit royalties on net sales.
Gene Regulation: Horizon Coming Into View
Genes are segments of DNA that encode information. Gene expression is the process by which this instruction is converted into a functional product, such as a protein which dictates cell function. Transcription is the first step in gene expression where DNA information is copied into messenger RNA or mRNA.
Source: Khan Academy
Regulation of gene expression or gene regulation represents the act of inducing (up-regulate) or repressing (down-regulate) the expression of a gene. Transcription factors are a family of proteins that provide essential up- or down-regulation mechanisms for gene expression.
Sangamo has developed a gene regulation platform that engineers zinc finger protein transcription factors or ZFP-TFs to mimic the natural mode of gene regulation. The therapeutic outcome is achieved by an engineered ZFP-TF that can activate or repress the expression of a targeted gene.
Sangamo is pursuing gene regulation for central nervous system or CNS diseases. They have disclosed one owned and two collaborated preclincial gene regulation programs.
- The Pfizer collaborated program progress can be evaluated by reviewing the proportionate performance completion estimates over the past few quarters.
- The Shire division of Takeda (TAK) is collaborating with Sangamo and expected to file an IND to regulate transcription of mutant HTT genes to treat Huntington's disease by the end of 2019. A July 2019 manuscript published in Nature Medicine describes the Sangamo transformative research that exhibits disease-allele specificity.
- Sangamo updated their research of the use of their gene regulation platform to down-regulate tau expression to treat tauopathies. Additional updates are expected in an undisclosed upcoming scientific conference.
In Vivo Gene Editing: Not Yet Ready For Prime Time
Sangamo provided clinical updates for the first in vivo gene editing clinical trials last February. They have now concluded that although editing occurred, transduction improvements from zinc finger nuclease and delivery enhancements are needed and are currently being developed. They now expect to resume this effort in late 2020.
Sangamo is on the verge of having their lead clinical program for hemophilia A enter Phase 3 to be run by Pfizer. This is the biggest valuation catalyst Sangamo has yet encountered. Phase 3 means the most risky clinical phase II for efficacy is in the rear view mirror, which in turn reduces the discounted program cash flows used for pipeline valuation methodologies. Biotechnology Industry Organization or Bio estimates the probability of a successful Phase II to be 30.7%. Moving to Phase III improves the program risk profile and therefore increases the value of milestones and royalties.
Read more at: Genomic Medicine: Is The Platform The FDA Product?
A second significant valuation driver of becoming a Phase 3 biotechnology company is the increased likelihood of being acquired for a premium. Evercore ISI published their gene therapy M&A playbook which included two important conclusions:
- Most acquisitions over the past several decades have included late stage (Phase 3 or later) assets. The most recent mABs biotech phase showed 64% of the deals consummated were late stage.
- Gene Therapy deal values will be maximized for companies having modular platforms with multiple clinical pipeline assets that follow a lead asset which validates it.
Disclosure: I am/we are long GILD, SGMO, PFE. 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.