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Why Sangamo Was Smart To Buy Ceregene

Stocks in this article: SGMO BLUE

RICHMOND, Calif. ( TheStreet) -- Sangamo Biosciences' (SGMO) most advanced pipeline product is an experimental "functional cure" for HIV, but the company's real value is the pre-clinical drug programs. To bolster these early drug development efforts, Sangamo acquired privately held Ceregene for about $1 million in stock and additional future payouts. Ceregene is developing a treatment for Alzheimer's disease but pay this high-risk drug no mind. More valuable to Sangamo -- and the driver for the acquisition -- is Ceregene's gene delivery technology.

Sangamo has a promising gene therapy platform with its zinc finger proteins (ZFP) and zinc finger nuclease (ZFN) technologies. When delivered into a cell, a ZFP or ZFN can modify the expression of a particular gene, delete it, or change it. The challenge, however, is delivering the ZFP/ZFN into the cells. Delivery is perhaps the most significant hurdle in gene therapy. If you cannot get the ZPF/ZFN into the cell, then it cannot have the desired therapeutic effect.

Sangamo currently uses an Adeno-Associated Virus (AAV) to deliver ZFP/ZFN into the targeted cells. It should be noted that Bluebird (BLUE), a recent biotech IPO, uses lentiviral vectors for gene delivery, which the company views as a comparative advantage over AAV delivery. Ceregene was similar to Sangamo in that it has been working to refine AAV to improve delivery and manufacturing practices. Ceregene has also run numerous safety studies around its AAV technology, which Sangamo can now use to speed up the start of human clinical trials for its early-stage drugs.

Sangamo R&D Chief Geoffrey Nichol spoke about the Ceregene acquisition on a recent conference call:

Ceregene has also generated a significant database of documents as part of their IND filings that cover CMC, preclinical and toxicology studies of AAV in a variety of animal models from rodents to non-human primates. We have acquired all of these submissions as well as the FDA responses to the studies. These data and documents provide us with valuable insights into the toxic studies that the FDA has previously approved for an AAV-based therapeutic. This could save us time and money and enable us to de-risk and potentially accelerate future internal program timelines.

The Ceregene acquisition bought Sangamo some expertise on AAV delivery that it can use to accelerate its early-stage pipeline efforts, more effectively deliver its ZFP/ZFN into cells, and more quickly scale up production of AAV. Sangamo accomplished all this for $1 million in stock. Not a bad deal.

But wait, there's more...

Ceregene's lead Alzheimer's drug program I mentioned above is delivered directly into the brain using a proprietary needle device. This Ceregene needle technology could also be used by Sangamo to deliver a therapy for Huntington's disease that the company is working on.

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