There are two major catalysts upcoming for Sangamo Biosciences in the second half of 2011: Top-line results from their Phase IIb study in diabetic neuropathy for SB-509 and preliminary results from their Phase I/II program in HIV for SB-728-T.  I believe each of these events will yield positive results.  In addition, I am confident that you will see continued expansion of royalty income from their partners and additional publications of pre-clinical trial results.

 

First, let's discuss the market opportunity for diabetic neuropathy and prior results and explain why I believe the Phase IIb results will be positive.  Diabetic neuropathy is a common complication of diabetes (~20% of patients) and is responsible for a large percentage of non-traumatic amputations (~70,000 per year in the US[1]).  Neuropathy is also the greatest source of morbidity and mortality in diabetes patients.   Currently the drugs available to treat neuropathy are only symptomatic.  The market opportunity for just symptomatic relief (pain mitigation) was ~$1.7 billion in 2006 and is expected to triple to ~$5.5 billion by 2015[2].  The rapid increase in market size is directly attributable to the rapid increase in the prevalence of diabetes in the United States.  Based on the size of patient population and expected cost of a first-in-class disease modifying drug for this indication, the annual sales of SB-509 would easily be in the multi-billion dollar range, if approved.

 

The initial results for SB-509 in diabetic neuropathy in the Phase 1b study were very strong[3].  The study consisted of only 20 patients (10 drug, 10 placebo).  In quantitative sensory testing (QST), which quantifies perception of vibration, patients given the drug showed a 25.9% improvement vs. 5.4% worsening in the placebo group.  There was also significant improvement in nerve conduction velocities (NCVs) of 1.02 m/s in treated group vs. -.81 m/s in placebo group.  Extrapolating these results to a larger trial should have yielded highly statistically significant results.  However, the subsequent Phase II trial yielded different results.

 

The Phase II study SB-509 601 failed to meet statistical significance.  These results put a cloud over the drug's potential and placed a question mark next to Sangamo's technology.  The details of the study's results, however, explain the reason for the negative outcome.  The SB-509 601 study had significantly milder neuropathy than in the Phase 1b study (p value=0.0001)[4].  When Sangamo analyzed the patient responses based on certain baseline measurements, they found certain measurements that were highly correlated to responsiveness to treatment.   In fact, patients that had an increase in a specific biomarker for vascular damage (plasma ICAM-1) showed a highly significant improvement (p value=.01). 

 

In a follow-on study, SB-509 701B, which recruited patients with an unmeasurable nerve, they also found that disease severity was the limiting factor in patient outcome.  Even though patients with an unmeasurable nerve would normally be considered to be moderate to severe in disease, some of the patients entering the study actually had normal sensitivity when entering the trial.  These patients who had normal sensitivity had a muted response to the drug.  The patients with clear sensory deficits responded strongly and had a strong improvement in sNCV, which is the primary endpoint in the Phase IIb study. 

 

The current Phase IIb study had very strict entry criteria.  Taking into account the lessons from the prior trials, patients were only recruited who had both sensory deficits and increased ICAM-1 levels.  Statifying patients based on these criteria should yield the best results in a clinical trial.   For a drug with significant results in this patient population and direct histologic evidence of efficacy, the pending results have a high probability for success.  Recent studies at Johns Hopkins[5] have shown that blood vessel growth, which is the primary mechanism of SB-509, is very important in diabetic neuropathy and supports this claim.

 

The second major catalyst for Sangamo this year will be the preliminary results of SB-728-T in viremic HIV patients.  Around 1% of humans have a genetic mutation that renders their CCR5 receptor unusable.  The homozygotes for this mutation are resistant to HIV.  One patient who had leukemia and HIV and received a bone marrow transplant from a person with this mutation is now believed to be functionally cured from HIV.  Trying to replicate this result, Sangamo developed the process to remove this receptor from the T-cells of HIV patients ex-vivo and re-insert these T-cells back into the patient. 

 

Earlier this year at the conference for retroviral and opportunistic infections (CROI), Sangamo's collaborators presented data from their Phase I trial[6].  They found that the modified T-cells trafficked normally and seem to be resistant to HIV.  In fact, in the presence of virus, the modified cells seemed to have a selection bias over non-modified cells and in one patient almost 100% of the cells in the major reservoir for HIV were the modified cells.  These results replicated the previous studies in animals.  However, these patients were also on concurrent treatment with anti-viral therapy and the viral load in their blood stream was already at undetectable levels.  The current Phase I/II study, which will yield preliminary results towards the end of 2011, is in a viremic population.  In a viremic population, the modified cells should behave differently than they did in pre-clinical results.

 

In the graphs to the right you can see the preclinical results of SB-728-T.  In (c), you can see that the modified T-cells expand significantly in the presence of HIV.  In initial results from 728-T in non-viremic patients they saw ~6% modified cells, much like in the pre-clinical model.  In the results presented later this year in the viremic population we may see expansion to ~40% of T-cells.  More importantly in graph (e), you can see that in 40 days the viral loads decreased significantly in pre-clinical results.  Control of viral load and decrease in this measurement will be very important for the continued development of SB-728-T. 

 

There have been recent studies by other companies that have shown tremendous pre-clinical results.  A company in the UK (SEEK) has also recently released clinical results showing some degree of viral control.  However, if Sangamo can replicate the pre-clinical results in the clinic and show significantly decreased viral load, it will be a very exciting development.

 

Contrary to the somewhat crowded field in HIV, Sangamo's drug in diabetic neuropathy is far ahead of competitors in the development of a disease modifying treatment.  The success of the current Phase IIb study should yield a very high-value partnership arrangement and propel Sangamo's visibility in the investment community.

 

In addition to the two drugs mentioned above, Sangamo and its partners (Sigma Aldrich & Dow Agrosciences) have seen a significant uptake in interest regarding Sangamo's technology.  Both of these companies have recently been quoted as seeing extremely strong demand for these products.  In an interview with DOW Agrosciences in June, Vi Shukla stated, "We’ve had an embarrassment of riches when it comes to opportunities and folks approaching us."[7].  In a July issue of Nature[8], Sangamo's CSO was quoted, “We've been asking Sigma to reduce the prices so that we could get the technology out there faster, But they claim to be overwhelmed with orders, anyway.” (sic).  Sangamo has also seen several large research grants in the last few months and has released important pre-clinical results.

 

The second half of 2011 is extremely data rich for Sangamo and based on the evidence to date, the results should be positive and yield a significant increase in Sangamo by the investment community.  I am overweight Sangamo in my portfolio and expect outsized returns, compared to the market, within the next 6 months.

 

DISCLOSURE: Long Sangamo

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