After Sangamo Therapeutics (SGMO) announced it was laying off about 40% of its U.S. workforce, narrowing its pipeline focus to neurology, reporting weaker-than-expected results, and raising its expense projections for this year, investors wasted little time jumping ship.
But analysts were more cautious in assessing Sangamo’s latest cost-cutting moves—until this week.
Sangamo shares have tumbled 44% since November 1, when the genomic medicines developer waited until after the close of the markets to disclose a “strategic update” consisting of its second restructuring in three years—including the job cuts, revised expense “guidance” to investors, and a pipeline pivot to proprietary epigenetic regulation therapies treating neurological diseases and novel adeno-associated virus (AAV) capsid delivery technologies.
“It’s capsids and cargo. You have to have capsid and cargo to be successful,” Sangamo CEO Sandy Macrae, MBChB, PhD, told analysts last week on the company’s quarterly earnings call. “We believe this combination of genome targeting cargo and delivery capsule will be critical to a sustainable business model with our internal programs, as well as providing important potential partnership opportunities.”
The job cuts include a shutdown of Sangamo’s 88,000-square-foot headquarters/AAV manufacturing site in Brisbane, CA, a move that will eliminate the 162 jobs based there. Sangamo will shift its HQ within the San Francisco Bay Area to its Sangamo Research Center facility in Richmond, CA, effective January 1. Sangamo had been based in Richmond—home to the company’s zinc finger editing and capsid development capabilities—until it opened the Brisbane facility in 2018.
The 162 jobs is 43% of its 375-person U.S. workforce and just over one-third (34%) of the company’s 478 full-time employees as of February 1, figures disclosed by Sangamo in its Form 10-K annual report for 2022.
Sangamo raised its GAAP operating expense guidance range to between approximately $422 million and $442 million, up from between approximately $378 million and $398 million as forecast in August.
Sangamo finished the third quarter with a $104.2 million net loss, nearly double the $53.2 million net loss of Q3 2022, which the company blamed mainly on a $44.8 million non-cash charge relating to impairment of long-lived assets due to the continued decline of its stock price and related market capitalization, the start of actions to seek external financing and reprioritize research and development programs, and continued decline in equity values in the broader biotechnology industry.
Revenues fell nearly 65% year-over-year, from $26.5 million in July–September 2022 to $9.4 million in Q3 2023, due to decreases of $9.6 million and $9.1 million related to the end of collaboration agreements with Novartis and Biogen in June, plus a decrease of $1.4 million related to reduced collaboration activities with Kite, a Gilead Company.
Deferring and investing
The company also said it was deferring additional spending on planning a future Phase III program for its Fabry disease gene therapy candidate isaralgagene civaparvovec (formerly ST-920) absent a collaboration partner or additional funding—despite trumpeting promising clinical data from the study. Sangamo says all 25 patients dosed to date in its first-in-human Phase I/II STAAR trial (NCT04046224) have continued to show sustained, elevated α-Gal A levels, up to three years for the longest-treated patient.
Likewise, Sangamo said, it will defer future spending on chimeric antigen receptor-modified regulatory T-cell (CAR-Treg) therapies absent a collaboration partner or other external funds.
Three pipeline programs are based on CAR-Tregs. One is TX200, which Sangamo advanced into the clinic last year, with four patients dosed in the Phase I/II STEADFAST trial (NCT04817774). TX200 is designed to prevent rejection in kidney transplant patients. Sangamo also has preclinical candidates for inflammatory bowel disease and multiple sclerosis, for which it presented data at the recent 30th Annual Meeting of the European Society of Gene & Cell Therapy (ESGCT 2023), held in Brussels.
Also at ESGCT, Sangamo presented data showing that its zinc finger activators can be designed to restore normal gene and protein expression of SCN2A in vitro and in vivo, in order to address neurodevelopmental disorders such as autism spectrum disorder and intellectual disability.
Sangamo says it will invest more in its neurology pipeline, now consisting of three preclinical candidates applying its zinc fingers genome engineering technology—a program designed to treat chronic neuropathic pain by inhibiting expression of the sodium ion channel Nav1.7, for which the company plans an IND submission in 2024; another program treating Prion disease; and a third for an undisclosed indication.
“The data we have shared for our Nav1.7 and Prion disease programs provide promise for our program going forward,” Macrae told analysts. “We have encouraging data from other advanced preclinical programs that we entitle for Alzheimer’s disease and Alpha-synuclein for Parkinson’s disease which were progressed extensively as part of prior collaborations and we had simply paused pending the identification of a suitable delivery capsid.”
“We strongly believe our technology is ideally suited to address a range of devastating neurological indications that have few if any treatment options available today,” Macrae added.
The effort to find partners for the CAR-Treg and Fabry disease programs will be headed by D. Mark McClung, executive vice president, COO, but only until January 2, 2024, when he and Jason Fontenot, senior vice president, CSO, depart the company in connection with the restructuring. Their positions are being eliminated, Sangamo said.
Amy Pooler, previously vice president, neuroscience, will become head of research while Gregory Davis, previously vice president, genome engineering design and technology, will be tapped as head of technology. Both new roles take effect November 17.
“Key now is to execute”
“Key now is to execute on favorable partnerships/investment and making continued progress,” Jefferies equity analyst Maury Raycroft, PhD, and colleagues wrote.
Raycroft and colleagues kept intact their “Buy” rating and 12-month price target of $8 on Sangamo shares. However, they highlighted two areas of operations that they are watching closely. One is Sangamo’s CNS pipeline, which is expected to clear its first IND for a pain candidate next year. The other is development of CNS-penetrant capsids, for which the company is set to release data in non-human primates in the first quarter of 2024.
“We believe we’ve made meaningful progress in identifying such a Blood-Brain Barrier Penetrant Capsid [which will] work with our sister platform, which we believe will open the doors for many other high value and unmet diseases that can be addressed uniquely with our editing capabilities,” Macrae told analysts.
Raycroft noted that the latest restructuring followed by six months a 27% reduction in workforce Sangamo set into motion in April, when it eliminated 120 jobs in a restructuring that included reorganizing its preclinical pipeline to focus on neurology epigenetic zinc finger regulators, as well as continuing development of isaralgagene civaparvovec and TX200. Back then, Sangamo shares were trading in the $1.60 range.
By the time Sangamo announced its latest restructuring last week, the company’s shares had sunk below $1, going from 59 cents to 33 cents on Thursday. Sangamo shares have cratered 90% year-over-year, having closed at $3.45 on November 8, 2022.
While investors were quick to dispose of their shares and have stayed in sell mode for a week, analysts were slower to react.
Sangamo’s first sign of trouble with analysts came when Luca Issi, PhD, senior biotechnology analyst with RBC Capital Markets, downgraded his firm’s rating from “Outperform” to “Sector Perform,” and slashed RBC’s 12-month target price by two-thirds, from $6 to $2 a share.
Issi was joined this week by three other analysts who downgraded their Sangamo ratings, one of whom also joined two other analysts in lowering their price targets.
Jim Birchenough, MD, Wells Fargo’s chairman of global healthcare investment banking and co-head of global biopharma investment banking, went from “Overweight” to “Equal Weight,” and shredded his firm’s price target from $4 to $1.
However, H.C. Wainwright’s Patrick R. Trucchio, a managing director whose research focuses on biotechnology—especially inflammation, fibrosis, cardio-metabolic, CNS, and rare disease—lowered his firm’s rating from “Buy” to “Hold” and chopped its price target 40%, from $5 to $3.
Truist Securities biotech research analyst Nicole Germino, MPH, downgraded Sangamo shares from “Buy” to “Hold,” while two other analysts sharply lowered their price targets: Wedbush’s emerging pharmaceutical sector analyst Andreas Argyrides, down 80% from $10 to $2; and Barclays’ Gena Wang, PhD, a managing director, biotech equity research, down 67% from $9 to $3.
Leaders & laggards
- Candel Therapeutics (CADL) shares jumped 38% on Monday, from 67.5 cents to 93 cents, after the company announced positive initial survival data from its Phase II trial (NCT04495153) assessing CAN-2409 (aglatimagene besadenovec) in advanced non-small cell lung cancer (NSCLC). Candel said the data suggested a promising extension of overall survival, consistent with an increased tail on the maturing survival curve in patients whose disease progressed despite receiving anti-PD(L)1 treatment. Data also showed 93% of patients with long survival (≥12 months) were low or negative for PD-(L)1 expression, which according to Candel supports the potential of CAN-2409 to convert patients unresponsive to immune checkpoint inhibitor treatment into long-term survivors.
- Durect (DRRX) shares plunged 80% on Wednesday, from $2.58 to 53 cents, after the company acknowledged that its severe alcohol-associated hepatitis candidate larsucosterol failed the 307-patient, Phase IIb AHFIRM trial (NCT04563026). Larsucosterol missed the study’s primary endpoint of statistically significant numerical improvement in mortality or transplant at 90 days in both 30 mg and 90 mg doses. Durect added that it achieved “a compelling and clinically meaningful trend” in the key secondary endpoint of reduced mortality vs. standard of care at 90 days, with mortality reductions of 41% in the 30 mg arm and 35% in the 90 mg arm. Those findings, Durect said, offer a “strong rationale” for advancing larsucosterol into a Phase III registration trial.
- Eli Lilly (LLY) shares rose 3% Wednesday, from $599.93, to $619.13, only to sink 4.5% Thursday to $591.32 on profit-taking plus concerns about growing competition, after the company won FDA approval to market Zepbound™ (tirzepatide) to obese or overweight adults with weight-related medical problems—such as hypertension, dyslipidemia, type 2 diabetes (T2D), obstructive sleep apnea, or cardiovascular disease. Lilly already markets tirzepatide for T2D as Mounjaro®, under an FDA approval granted last year. According to Lilly, Zepbound is the first and only obesity treatment of its kind that activates both GIP (glucose-dependent insulinotropic polypeptide) and GLP-1 (glucagon-like peptide-1) hormone receptors. A day after the approval, AstraZeneca partnered with China-based Eccogene to acquire ex-China global rights to develop ECC5004, an oral once-daily GLP-1 receptor agonist (GLP-1RA), to treat obesity, type 2 diabetes, and other cardiometabolic conditions.
- Ikena Oncology (IKNA) shares plunged 68% on Thursday, from $4.13 to $1.33, after the company disclosed that it recorded treatment-related proteinuria in 3 of the 26 patients it treated with its lead targeted oncology candidate IK-930, a TEAD1 selective Hippo pathway inhibitor, in the dose escalation portion of a Phase I trial (NCT05228015). The proteinuria was limited to grade 1–2, and did not result in dose reduction or treatment interruption, Ikena said, adding that none of the proteinuria events were considered dose-limiting and all were fully reversible. Two epithelioid hemangioendothelioma (EHE) patients with significant liver metastases experienced reversible liver enzyme elevation—of which one developed treatment-related grade 3 elevation, deemed dose-limiting, while the other experienced grade 3–4 elevation that was deemed possibly treatment related.
- Maravai LifeSciences Holdings (MRVI) shares tumbled 32% on Wednesday, from $6.88 to $4.70, after the company said it would eliminate approximately 15% of its workforce—about 100 employees—in a restructuring designed to reduce costs by $30 million annually. Maravai said the job cuts will account for approximately $23 million of the $30 million annualized target, with the rest to come from streamlining its operations and business organizational structure “enable better execution and strategic decision making.” Maravai expects to incur one-time costs of approximately $5 million in cash-related severance charges related to the workforce reduction, set to be completed in the fourth quarter.
Alex Philippidis is senior business editor of GEN.
