What chief business officer Curt Herberts called a "highly competitive process, with multiple parties expressing strong interest" in Sangamo Therapeutics Inc.'s hemophilia A program ended with Pfizer Inc. emerging as the best suitor in a deal that could be worth more than $500 million for gene therapy SB-525 as well as potentially other candidates.
Shares of Richmond, Calif.-based Sangamo (NASDAQ:SGMO) closed Thursday at $7, up $2.65, or 60.9 percent, on word of the deal with Pfizer, of New York. The global collaboration and license agreement will develop and commercialize SB-525, one of Sangamo's four lead candidates, which is expected to enter the clinic this quarter.
Sangamo collects a $70 million up-front payment and will be responsible for conducting the SB-525 phase I/II study, along with certain manufacturing activities.
After that, Pfizer will be operationally and financially responsible for research, development, manufacturing and commercialization work for SB-525 and any other prospects. Sangamo could gain milestone payments of up to $475 million, including as much as $300 million for the development and commercialization of SB-525 and possibly $175 million for other hemophilia A candidates.
The deal includes tiered double-digit royalties on net sales for Sangamo, which will collaborate with Pfizer on manufacturing and technical operations that involve viral delivery vectors.
"Pfizer stood out because they were able to demonstrate a deep understanding of gene therapy and the nuances of delivering and manufacturing," Herberts told investors during a conference call. "They also have a very strong hemophilia franchise and well-established relationships with the hemophilia patient communities in the U.S., Europe and the rest of the world."
CEO Sandy Macrae echoed the sentiment, saying "the things that appealed us with Pfizer, to be honest, were really not just the money."
J.P. Morgan analyst Whitney Ijem conceded that only early data on SB-525 are available but said preclinical findings suggest the treatment could become a best-in-class approach in hemophilia gene therapy. "In non-human primates (NHPs, n=3 per dose group), peak values of 110 percent, 494 percent, and 840 percent of normal were observed at the lower dose tested, and values of 450 percent, 623 percent and 887 percent were observed at the highest dose tested," she wrote in a report. "While it is likely that levels of 10-20 percent of normal would be sufficient to significantly ameliorate disease, the supraphysiologic levels observed here could mean a lower dose could be used, which might be meaningful from an immunogenicity perspective."
Cowen & Co. analyst Ritu Baral liked the deal, too, pointing out that "management has previously noted strong patient/investigator interest in SB-525, driven by robust NHP data showing higher comparative potency at lower doses than other hemophilia A gene therapies, which Sangamo believes is due to a combination of codon optimization, the use of a proprietary liver-specific promoter and transgene modifications," she wrote in a report. "We continue to think Sangamo has a powerful gene editing platform and would be open to partnering additional programs given the right opportunity."
GENE THERAPY 'MORE FACILE'?
Piper Jaffray analyst Charles Duncan said that, along with the other benefits, the Pfizer deal strengthens Sangamo's balance sheet with the handsome up-front payment, "which we think extends cash runway into the first half of 2019 and reduces execution risk for the company as it moves into the clinic."
Analysts also showed interest in Sangamo's hemophilia B, mucopolysaccharidosis I (MPS I) and MPS II programs. Although the company offered "no real timeline or enrollment updates" for those efforts, Duncan said he was "encouraged to hear that both the MPS I and MPS II trials just recently opened in the last few weeks, and while it's too soon to tell just yet, we think enrollment updates could come in the near term, given high patient interest and unmet need here. We believe each trial will eventually open at seven or eight sites, and we could see the first safety data in early 2018."
The zinc finger nuclease (ZFN) program got air time as well. Wells Fargo's James Birchenough asked Sangamo officials about specificity, and "how you see your gene editing platform standing up to things like CRISPR technology." The firm's vice president of research, Michael Holmes, said the company's approach "truly can achieve unprecedented levels of on-target activity with undetectable levels of off-target activity," to a degree that "you just don't see from the other platforms yet, in terms of what's been presented in the various conferences." He touted Sangamo's "deep understanding of how the [zinc finger protein] actually interacts with the DNA," such "that we can actually go and essentially modify the contacts with DNA to also go back and further enhance on-target activity, as well as increasing specificity," which "is not something that the other platforms can do."
Piper Jaffray's Joshua Schimmer in March noted that gene therapy across the board "continues to advance and mature, with several programs demonstrating proof of concept and well positioned to be competitive products. As the iteration process continues in 2017, lessons from each program will continue to inform the field regarding key issues such as optimal dosing, use of prophylactic steroids (or not), and utility of animal models in predicting clinical outcomes. We believe a number of factors underlie recent 'wins' in the field, including optimized vectors, improved selection of disease indication and increasing predictability in transitioning from academic to industry development."
Momentum will continue, he predicted, since "approval paths for gene therapy may be more facile than many realize, with the Center for Biologics Evaluation and Research [as] the point of contact at the FDA (vs. the traditional Center for Drug Evaluation and Research)." He pointed out that Chicago-based Avexis Inc.'s single-arm, multicenter trial in 20 to 30 patients was deemed potentially sufficient for FDA approval in spinal muscular atrophy type 1 and "similarly modest criteria" were considered relevant for Cambridge, Mass.-based Bluebird Bio Inc.'s gene therapy Lentiglobin. (See BioWorld Today, Nov. 3, 2016.)