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Sangamo: Hedge Fund Ownership

Marty Chilberg profile picture
Marty Chilberg's Blog
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Insider Monkey published an article in May that caught my attention-

Here's What Hedge Funds Think About Sangamo (SGMO).  In it they note that several of their "upper crust" funds reduced their stakes in Sangamo. 

The following table resulted from tagging the institutional owners in my model that were hedge funds.

While this list may not be complete, the summary is quite telling.  Hedge fund ownership was about 11% going into the August 2018 MPS clinical update.  The dataset was confusing which led to a drop to 7% by 4Q18.  This drop included the company decision to withdraw from ASH 2018 and provide their hemophilia A clinical update in 2019.  In February 2019, Sangamo updated the MPS data which led to the decision to put all in vivo gene editing trials on hold until they could improve the editing concentration with ZFN 2.0.  The result can be seen with the 50% drop in hedge fund ownership in 1Q19.  It is also quite possible that this was compounded with hedge shorting which I do not track.

In April 2019, Sangamo provided a clinical update for all programs which included upbeat data for hemophilia A and beta thalassemia cell therapy trials. Several funds including Citadel, Casdin and Renaissance bought over 3.2 million shares in the quarter. 

Hedge funds tend to move as a herd in small cap companies.  The next significant catalyst for Sangamo is expected in December at ASH 2019.  These data will primarily focus on the Pfizer (PFE) collaborated hemophilia gene therapy trial which will approach one year of durability for some patients.  It was about 52 weeks when BioMarin (BMRN) Valrox durability began to exhibit waning factor activity.  This is also likely the duration defined by Pfizer to trigger a phase 3 decision.  Pfizer appears to be anticipating good results by initiating a phase 3 lead-in study and starting the transition of manufacturing but since this process likely takes up to a year, they have little incentive to formally transition without seeing the durability data.

Clearly a pivotal update and one the hedge fund community is likely to trade.  The question is: Do they accumulate going into the event or wait for the data to act.  I'm guessing they will accumulate in anticipation given the strength of prior data and the Pfizer activity.  

Analyst's Disclosure: I am/we are long SGMO.

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