SEPTEMBER 14, 2007
Equity Research Pamela Bassett, DMDmo Biosciences Inc. (SGMO-$11.08)
Target Price: $17.00
Sangamo Scores - Dow AgroSciences/Monsanto Collaboration Relies on ZFP Tech
o As we highlighted in our note last week (Dow AgroSciences Signals Sangamo Alliance Positive Progress- BUY, September 5, 2007), regarding the Sangamo/Dow AgroSciences alliance, the positive progress we anticipated was confirmed today in the conference call following the Dow AgroSciences/Monsanto collaboration announced before the market open this morning.
o During the call, Dow confirmed that progress involving its collaboration around Sangamo's ZFP technology platform for gene regulation and modification of plants and plant cell cultures — the actionable step toward creating new products after the genes are identified and validated — is ahead of schedule and more powerful than anticipated.
o Both Monsanto and Dow characterize their collaboration, which brings together their respective biotechnology platforms to create the first eight-gene stack offering, branded SmartStax, as the new industry-standard.
o We think the transformative nature of the integrated DowAgro technology platform — highly reliant on Sangamo's ZFP technology, in our view — positions the company to achieve sustainable top-line and bottom-line growth involving the world's largest and most lucrative markets — food/agro, bioenergy and bioindustrials — that will flow through to Sangamo.
o We remind investors that technology-driven growth is not linear — it is market-disruptive and we consider the integration of Sangamo's ZFP technology into Dow's platform game-changing. We think SGMO is significantly undervalued and reiterate our BUY rating.
Sangamo Biosciences (www.sangamo.com) utilizes its proprietary zinc finger transcription factor technology to develop human
therapeutics, protein therapeutics manufacturing and agricultural products and has partnered with industry leaders across all of its
programs. Sangamo receives research funding and may receive milestone payments and royalties on product sales. Sangamo's
headquarters is located in Richmond, California.
Sangamo currently has numerous preclinical programs that could enter clinical development
over the next 12 to 18 months and could require increased financial and human resources to
manage this growth. Should Sangamo be unsuccessful in attracting future partners for these
programs, development could be stalled or Sangamo may be required to find other funding
sources including additional equity offerings that could dilute current shareholders. If
Sangamo's current clinical programs are not successful, this could significantly diminish the
company's ability to attract future partners for its therapeutic products. Since Sangamo has
limited experience conducting clinical trials, if the company is unable to attract partners, its
therapeutic product programs could encounter increased regulatory uncertainty.
Further, Sangamo is dependent upon its relationships with collaborative partners and their
interest and ability to commercialize products based upon Sangamo technology for its future
revenue. There are no current commercial products based upon ZFP technology; therefore,
market acceptance of such products is unknown. Sangamo product candidates could face
significant competition in the future, which could diminish its revenue potential.
Additionally, Sangamo is dependent upon its patent estate to create product value for its
customers. The company could also face competitive opposition and be required to defend its
intellectual property that could involve litigation and expenses.
EPS 1Q 2Q 3Q 4Q
2004A (0.12)A (0.13)A (0.18)A (0.12)A
2005A (0.14)A (0.13)A (0.14)A (0.10)A
2006A (0.09)A (0.11)A (0.08)A (0.26)A
2007E (0.15)A (0.15)A (0.13)E (0.13)E
FY 2004A 2005A 2006A 2007E
EPS (0.55)A (0.51)A (0.55)A (0.56)E
P/E NM NM NM NM
Note: Sum of quarterly EPS may not equal full-year total due to rounding and/or change in share count
Market Cap ($Mil) $439.4
Avg. Daily Trading Volume (3 mo.): 487,470
Shares Out (Mil): 39.658
Float Shares (Mil): 33.540
Institutional Holdings: 50.1%
Technology Value (TV): $394.815
Cash (Mil): $44.585
Short Interest (Mil): 2.835