BMRN - Sangamo: Still Not Convincing Enough

Summary

• Sangamo's hemophilia A program is not convincing due to durability concerns.
• Fabry Disease program actually looks more promising.
• However, Fabry is in an early stage, and we won't see pivotal data for a while.

I covered Sangamo ( SGMO ) thrice in the last three years. The first coverage was bullish, the last two not so bullish. The stock is down 77%, 67%, and 37% since those articles, respectively. Sangamo hasn't done well.

Sangamo is a leader in Zinc Finger nucleases (ZFN) genome editing technology and has a vast pipeline, mostly early stage, with one phase 3 trial in Hemophilia A. One reason the stock hasn't done well is because since my 2018 coverage, when all its programs were in phase 1/2, the company has been able to move only one asset into a phase 3 trial - Giroctocogene Fitelparvovec in Hemophilia A. Another reason that stock hasn't done well is because the hemophilia program has been beset with problems. A third reason is more central: Sangamo did well earlier when CRISPR was in a nascent stage. But over the last few years, it has picked up pace, and Sangamo's dated but clinically more advanced ZFN technology has taken a backseat.

Herein also lies a scope of redemption, because it has now been seen that Crispr is not as perfect as a shiny Nobel prize would indicate. It has its own problems, some more daunting than others. Given that, an older but safer technology like ZFN may yet have a place.

In May 2021, I wrote that "Sangamo and licensee Pfizer's ( PFE ) SB-525 is competing with BioMarin's ( BMRN ) ValRox in hemophilia A" but that both drugs have durability concerns. Pfizer licensed SB-525 after it posted strong early-stage data from its phase 1/2 trial. All trials are now being run by Pfizer. In December 2020, the asset produced phase 1/2 data which was good on efficacy, despite its small numbers and low duration of observation. BioMarin, on the other hand, had much longer period data, but, as I noted, both drugs were at par in terms of efficacy. However, durability has been a concern for both drugs, which has been telling for the stocks of both companies.

The final data will be seen by 1H 2023, when the phase 3 trial will conclude. As I discussed earlier, the current standard of care, Factor VIII replacement, costs around $3.12mn over a period of eight years, which is the duration BioMarin claims its "one-time" treatment will last. This is the number Sangamo has to beat - unfortunately, this trial will still not give them enough data for such a long duration of response.

Unfortunately, at ASH2021, they presented two-year durability data that was so underwhelming that at least one analyst thought that the project was not viable. Data showed that at two years, mean Factor VIII rapidly declined to 25% at two years, from a peak of over 100% at 22 weeks. This is worse than BioMarin's data and much worse than the benchmark we had discussed that the data needed to cross in order to beat the standard of care, a perfectly good treatment option, just expensive.

The other face of the durability problem was that in the initial weeks, some patients produced Factor VIII over 150%, which could lead to clotting and related thrombotic problems. Overabundance of this clotting protein could easily produce too much internal blood clotting, which could dislodge and jam a blood vessel somewhere, producing thrombosis at that junction. This actually led the FDA to place a clinical hold on the AFFINE trial in November 2021. This clinical hold was removed in May 2022 and resumed dosing in November. Meanwhile, BioMarin's Roctavian was conditionally approved in the EU, but in the US, the FDA has been delaying it, after an initial rejection two years ago. Just recently, though, the FDA has indicated that there will be no advisory committee meeting for roctavian, which usually means the FDA has already made its decision. What this is, we will know soon enough. If roctavian is approved, I don't think that will have an immediate positive impact on SGMO, although the market has known all along that roctavian is 5-6 years ahead of Giroctocogene.

There's really not much else in Sangamo news, except maybe Fabry Disease. This is an indication with two approved drugs, Sanofi ( SNY ) Genzyme's enzyme replacement therapy ('ERT') Fabrazyme (agalsidase beta) and Amicus Therapeutics' Galafold (migalastat). I have discussed the pros and cons of these two drugs before. There's space for a one-time gene therapy in Fabry Disease. Recently, Sangamo posted updated preliminary results from a phase 1/2 study of its gene therapy isaralgagene civaparvovec (ST-920) to treat Fabry disease. Patients have shown strong elevated ?-Gal A activity, and one patient who was weaned away from ERT has shown elevated ?-Gal A activity 12 weeks after stopping ERT ( update - Four patients were withdrawn from enzyme replacement therapy ('ERT') and maintained significantly elevated levels of ?-Gal A activity up to 28 weeks post withdrawal). Patients have seen ?-Gal A activity, ranging from nearly 3-fold to nearly 17-fold above mean normal, after 15 months of treatment (update - nearly 2-fold to 30-fold of mean normal, for up to 23 months post dosing). The company is planning a pivotal phase 3 trial. Analysts consider this a frontrunner among early-stage Fabry Disease candidates.

Financials

SGMO has a market cap of $583mn and a cash reserve of $350mn. R&D expenses were $65mn in the previously reported quarter, while G&A was $16mn. At that rate - which is quite high, and I think they need to prioritize their pipeline and reduce their spend - they have a cash runway of some four more quarters at the most. Extra funding may come in the form of milestone payments from their partners, of which they have quite a few.

Bottom line

SGMO is a developing story, which would have been fine, except they have been developing for some three decades already. Current prices are low and there are some upcoming catalysts, however, at least one of those catalysts is not going to pan out decisively. Thus, I don't expect a lot from SGMO stock in the next few months and will stick to the periphery.

For further details see: