Sangamo's HIV Gene Therapy Is a Valuation Prop, Nothing More

RICHMOND, Calif. ( TheStreet) -- Sangamo BioSciences ( SGMO) is a gene therapy company with a single product in human clinical studies and a market value of more than $500 million. The rest of the company's pipeline is still preclinical, meaning the only testing being done is in test tubes and rats.

Preclinical-stage drug companies don't typically carry market values of $500 million, which makes Sangamo's SB-728 HIV therapy -- the product in phase II studies -- really important. Sangamo won't trade at $10 per share, like it does today, if SB-728 blows up. Without any drugs in human studies, Sangamo's market cap might easily be cut in half or more, which would be appropriate, particularly for a company trying to develop something as challenging as gene therapies.

Keep this perspective in mind when you hear Sangamo executives talk about the potential for SB-728 to be a "functional cure" for HIV. Throwing the words "cure" and "HIV" into the same sentence generates serious buzz -- and rightly so -- because there is no current curative treatment for HIV. Unfortunately, the data presented on SB-728 to date, including Wednesday, do not match the hype.

It is unrealistic to believe SB-728 will ever become a "functional cure" for HIV because the scientific and regulatory bar for any drug to warrant that label is extremely high. Current HIV medicines aren't curative, but they do drop viral loads to undetectable levels and keep them there basically forever. HIV patients can take a single pill each morning and basically never have to worry about their disease getting worse. These patients will grow old and die of something else before they succumb to AIDS. That's an amazing achievement in a disease that was a certain death sentence 30 years ago.

Sangamo's SB-728 is nowhere close to approaching the efficacy of HIV drugs like Gilead Sciences' ( GILD) Stribild or Atripla. I suspect Sangamo executives know SB-728 is unlikely to succeed, but they soldier on because without it, the company's pipeline looks very anemic and can't support the stock's current valuation.

-- Reported by Adam Feuerstein in Boston.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.