JMP Securities ....Biotechnology�Update....November 5,2007
Sangamo BioSciences, Inc. (1)
SB509 Market Potential in Diabetic Neuropathy � Give Me a �B�! Reiterate STRONG BUY raising price target from $20 to $30
� We find that Sangamo�s diabetic neuropathy program represents a billion-dollar opportunity; reiterating Strong Buy and raising price target from $20 to $30.
With clinical data anticipated to provide further proof of concept (Phase 1b this week, Phase II in late 1H08), we conducted a thorough analysis of the diabetic neuropathy (DN) market. As a result of evaluating the competitive environment and unmet medical need, we now believe SB-509, with its novel mechanism of action and potential disease-m odifying activity, could achieve blockbuster revenues for Sangamo. While we view SB-509 as a platform unto itself, with clinical and preclinical programs in several vascular and neurodegenerative indications (i.e., spinal cord injury, amylotrophic lateral syndrome, critical limb ischemia, peripheral arterial disease), our current valuation is based only on the leading indication in DN. In addition, we excluded from our assumptions potential revenue derived from the DowAgra Sciences agriculture collaboration, the Sigma-Aldrich cell line engineering partnership, and the Genentech (DNA, $74.83, Not Rated) protein production deal, as well as commercial opportunities from Sangamo�s earlier-stage drug candidates, including ZFN CCR5 for the treatment of HIV, the IL-13 zetakine for glioblastoma, and ZFP TrkA repressor for cancer bone pain. Employing an NPV analysis based on US SB-509 revenue (discounted at 30%), we derive a $30 price target, up from our previous price target of $20, which was based on a comparable analysis of platform-enabled technology companies.
� Sharpening our pencils on diabetic neuropathy market opportunity. Type 2 diabetes mellitus is one of the fastest-growing diseases among Western cultures. In the US, it is estimated that 16 million people are living with diabetes, although only about 7.2 million have actually been diagnosed (source: National Institute of Diabetes and Digestive and Kidney Diseases [NIDDK]). DN is a common side-effect of diabetes that affects almost all diabetic patients within 10 years of diagnosis. While medications are available for diabetic neuropathy, such as pregabalin (Lyrica, from Pfizer [PFE], $23.67, Not Rated), a GABA receptor agonist, and non-steroidal anti-inflammatory drugs (NSAIDs), these treatments are only symptomatic and do not address the underlying cause of the pain. However, 2007-2011 consensus estimates project Lyrica revenues of $1.7 billion, $2.3 billion, $2.7 billion, $3.1 billion, and $3.4 billion, which in our view reflects a very large market opportunity for drugs with novel approaches to treating DN. Given SB-509�s neuroprotective and neuroregenerative effects, we believe SB-509 could become the first disease-modifying drug marketed for DN and would be entitled to this large commercial indication.
� SB-509 DN NPV analysis: RAISING PRICE TARGET TO $30. In our SB-509 DN revenue model, we are assuming product launch in late 2010, and only in the US market. Based on other novel biotechnology therapeutics (i.e., monoclonal antibodies) and the disease-modifying attributes of SB-509, we assign a $30,000 annual cost, which we believe could be a conservative estimate. We assume a peak penetration rate of 10% by 2015 and peak sales of $6.5-7.0 billion, with a gross margin of 40%. Based on some patent protection surrounding the ZFP technology expiring around 2017-2018, our NPV is composed of net revenues from SB-509 sales through 2017, discounted back at 30% to our FY08 shares outstanding estimate, from which we derive a 12-month price target of $30.
JMP reiterated this buy and target after meeting with mgt this week - and said expect a DOW PRESENTATION ON WEDS! Excellent. See reiteration below:
JMP Sec-"Expect more visibility+presentation by DowAgra @ Dec 5 analyst day next wk.2008 will be "transformational". Reiterate Strong Buy and $30 target price."
Biotechnology – Update
November 29, 2007
Sangamo BioSciences, Inc. (1)
STRONG BUY - Target Price $30.00
Expect Eventful Year in 2008 and More Visibility on DowAgra Collaboration
· Expect 2008 to be an eventful year for Sangamo with more visibility on the DowAgra collaboration at upcoming Analyst Day; reiterate Strong Buy rating and $30 price target. We sat down with Sangamo management on Tuesday night and had a chance to discuss upcoming clinical and corporate milestones. From our conversation, we anticipate 2008 could be a transformational year for the company. Specifically, we look forward to data and progress in multiple clinical programs that could broaden the market potential of lead zinc-finger protein (ZFP) therapeutic, SB-509. We believe these Phase II data could encourage would-be corporate collaborators to engage in a significant “bio-buck” drug development or technology access partnership. We anticipate results from the Phase II trials in mild to moderate diabetic neuropathy (DN) and severe DN with nerve block in 2H08 and initiations of Phase II SB-509 trials in stem cell mobilization (1Q08) and amyotrophic lateral sclerosis (ALS, 1H08), Phase I trial of IL-13 zetakine in glioblastoma (1H08), and Phase I trial of ZFN-CCR5 in HIV (2H08). We also anticipate the company to end FY08 with over $50 million in cash and equivalents, positioning Sangamo well to negotiate a drug development collaboration post-Phase II data. Our cash estimates do not assume any milestone payments from the company’s current collaborations with DowAgra Sciences, Sigma Aldrich, or Genentech (DNA, not rated), which could provide additional upside to the company’s balance sheet. In particular, we are interested in the revenue potential from the DowAgra collaboration, under which terms and commercial potential remain challenging to value.
However, at Sangamo’s Analyst Day on December 5, we could see a presentation being given by a DowAgra representative who may shed light on projects under the agreement and provide concrete bases to value potential revenues to Sangamo from milestones payments and licensing rights. Our $30 price target is based on a NPV analysis of US SB-509 revenue potential.
I am looking forward to the Dec. 5th analysts meeting.
Can't wait to hear the progress from DowAg and also how Sangamo technology will be used throughout the entire DOW family. Think Bioplastics and Biofuel. IMO this will be very BIG.
Short hedge fund puppets sell their souls for a few bucks. If you had to pick a dirty way to make money trying to hurt a company trying to help people is probably the drtiest. In this world grime like this always get their bad karma. Its coming in their real life (not this fantasy life they espouse).
They can repent by helping others here but they won't - they would rather try to knock down a company that is helping others from suffering. I have seen it many times those that do will get the very suffering they are trying to stop alleviation of. One last chance: