Staff Writer

A little more than a month after signing a plant agriculture deal involving its zinc finger DNA-binding protein technology, Sangamo BioSciences Inc. has raised $20.5 million in a private placement.

The Richmond, Calif.-based company obtained commitments from a select group of institutional investors and Dow AgroSciences LLC - its recently signed partner - to buy about 5.1 million shares of common stock at $3.85 apiece, for gross proceeds of $19.5 million. The other $1 million in proceeds comes from the purchase of 235,849 shares at $4.24 each by a Sangamo director, Michael Wood.

Following the financing, Sangamo will have about 30 million shares outstanding and roughly $45 million in the bank, which should last it about three years.

The money "really does strengthen our balance sheet and means we can execute our programs in the clinic," said Elizabeth Wolffe, Sangamo's director of corporate communications.

Founded in June 1995 by Edward Lamphier, its current president and CEO, Sangamo is a biotechnology research and development company that focuses on engineering zinc finger DNA binding proteins (ZFP) for the regulation and modification of genes. It began marketing its technologies in 1998, and its third-quarter revenues for this year were $412,000, consisting mostly of payments from partnerships in enabling technologies and human therapeutics, as well as federal government research grants.

Over the years, Sangamo began to focus less on its Universal GeneTools collaborations and more on building its own therapeutic pipeline.

"Our aim was always to develop this zinc finger technology for therapeutic use," Wolffe told BioWorld Today. "The technology is broadly applicable and very robust, so we've been able to monetize it along the way."

In fact, the last time the company raised money was in April 2000, when it conducted its $52 million initial public offering.

In the first quarter, Sangamo filed an investigational new drug application and has since started a Phase I trial of a ZFP therapeutic in patients with diabetic neuropathy. Other earlier-stage programs are focused on macular degeneration, ischemic heart disease, congestive heart failure and neuropathic pain.

"We have given guidance that we will start a Phase II trial [in diabetic neuropathy] in the second half of 2006," Wolffe said. "We had cash enough to do that, but now [this financing] means we can carry on full steam with other programs that we can take into the clinic, as well."

Sangamo expects to also start a Phase I trial for HIV-AIDS in the second half of 2006 for its product based on its zinc finger nuclease (ZFN) technology. While engineering ZFPs that recognize a specific DNA sequence enable the creation of ZFP transcription factors (TFs) to control gene expression and cell function, ZFNs correct and modify genes. They can be used to treat certain monogenic and infectious diseases, such as sickle cell anemia and HIV.

"We've shown in cellular systems that we can disrupt the CCR5 receptor," Wolffe said. The receptor is recognized as a target for HIV therapies, and research has found that a certain population of people of European descent have a deletion in their CCR5 gene and do not develop the disease even when exposed to HIV on multiple occasions, Wolffe said.

Two other Phase I trials of ZFP products are ongoing for peripheral artery disease, under a collaboration with Sangamo's partner Edwards Lifesciences Corp., of Irvine, Calif. The partnership was formed in 2000.

Sangamo's ZFP technology is used to enhance the production of protein pharmaceuticals for several companies, including New York-based Pfizer Inc.; Bagsvaerd, Denmark-based Novo Nordisk A/S; Thousand Oaks, Calif.-based Amgen Inc.; and Princeton, N.J.-based Medarex Inc. The company also provides ZFP TFs or ZFP-engineered cells that overexpress a gene that partners use to develop regenerative medicine products or to generate cell lines for high-throughput compound screening.

"We try and look for targets that are not only validated and shown to be involved in a particular disease, but they are targets that can't be addressed by other modalities," Wolffe said.

Pain, for instance, represents a huge market, and a number of receptors and ion channels seem to have a direct role in pain transmission, yet "it's basically been a screening graveyard," Wolffe said, because small-molecule companies can't find anything with a high specificity.

"We have some distinct technological advantages, which enable us to go after targets that are identified more and more as undruggable," she said.

Last month, Sangamo entered a $52 million agreement with Indianapolis-based Dow AgroSciences, a subsidiary of the Dow Chemical Co., to apply ZFP TFs and ZFNs in plant agriculture. Terms of that agreement called for a $4 million investment from Dow in the financing round. (See BioWorld Today, Oct. 6, 2005.)

The closing of the private placement should occur next week. San Francisco-based JMP Securities and Minneapolis-based Piper Jaffray & Co. acted as lead placement agents, while Boston-based Leerink Swann & Co. acted as co-placement agent for the offering.

Sangamo reported a consolidated net loss of $3.7 million, or 14 cents per share, for the third quarter ended Sept. 30. Its stock (NASDAQ:SGMO) closed Friday at $4.30, unchanged.