February 28, 2020
BIOINVEST NEWS: Sangamo (SGMO)
BIIB Steps Up Big With Global Neuro Gene Editing Deal – BUY
After the close, Sangamo announced a worldwide deal with Biogen for gene regulation therapies in neurology. BIIB is the global leader in developing neuro biologics with the top drugs in multiple sclerosis and an extremely deep Alzheimer’s/ALS R&D pipeline, in our view there is no better partner available than BIIB. For those who have written SGMO off in gene editing/regulation, this deal absolutely validates the Sangamo zinc finger (ZNF) platform. With roughly $650 million in cash post-deal, SGMO is trading just slightly above its cash positive despite having the broadest pipeline in the gene therapy/editing/regulation field. Reiterate BUY.
Impressive Terms
Biogen will pay Sangamo $350 million upfront, including a $125 million license fee and an equity investment at a significant premium in Sangamo stock of $225 million @$9.21 per share. Sangamo is also eligible to receive up to $2.37 billion in potential milestones, including $925 million in pre-approval milestones and $1.35 billion on first product sales. Furthermore, in the blockbuster markets being developed such as Alzheimer’s and Parkisonson’s diseases, SGMO will earn high-single-to-low double digit royalties on potential sales for preclinical assets. These financial terms are impressive, but especially when one considers that the programs are all still early and in preclinical development.
Neuro Focus On The Biggest Brain Diseases
The deal will initially be focused on development of ST-501 for tauopathies including Alzheimer’s disease, ST-502 for synucleinopathies including Parkinson’s disease, and another neuromuscular target, with exclusive rights for nine additional undisclosed neurological targets. Biogen’s access to Sangamo’s gene regulation therapies complements its expanding efforts in gene therapy across diverse neurological diseases.
It Doesn’t Get Much Cheaper In Our View
Despite the Company’s clinical advances including the SB-525 hem A program starting Phase III trials with Pfizer, and an update in the gene therapy durability due by Q2/Q3, even after the post-market pop yesterday in its stock, SGMO is trading at just about ~1.4x cash. In our view, there are no gene related companies with that combined competitive profile and cash position that compare to SGMO. (For example CRSP trades at more than 3x cash.) This is a transformational deal, that validates both SGMO’s ZNF platform and the dominate IP position. SGMO now has broad deals with BIIB, GILD/KITE, PFE, SNY and Takeda – all major believers in the ZFN platform. Management will be holding its quarter conference call today at 8:00AM EST/5:00AM PST/ and we await the SB-525 data.