Strong Drug Platform at Sangamo

Sangamo Biosciences, Inc. (SGMO) uses a proprietary ZFP gene regulation technology to discover and develop a new class of therapeutic candidates for diabetic neuropathy, cardiovascular disease, cancer, and immune diseases. We are optimistic about this novel technology and are encouraged to hear that the company intends to bring more drug candidates into the clinic in 2008. We are also impressed by the company's strategy to monetize this ZFP technology.

We maintain our Buy rating on shares of Sangamo based on the platform technology and the progress the company has made for both its clinical and preclinical programs. Our target price is $18. Our Buy call is based on the progress the company has made for both its clinical and preclinical programs using its proprietary ZFP platform technology. Also the agreements with Dow AgroSciences, Genentech (DNA) and Sigma-Aldrich (SIAL) add value to the company.

Sangamo currently has three phase II trials under way and will add another phase II and two phase I trials in 2008. With total eight clinical programs and the proprietary platform technology, we believe it should be easy for the company to find partners in the coming quarters. We believe Sangamo will continue to form research and development agreements with major pharmaceutical and biotech companies to monetize its technology.

Our investment thesis relies on Sangamo's very intriguing, potentially powerful, product development technology. We use relative valuation metrics to value Sangamo shares. Sangamo has similar technology with Alnylam ({ALNY}, market cap $1.27 billion), Isis Pharma ({ISIS}, market cap $1.36 billion) and Sirna (acquired by Merck & Co, {MRK}, for $1.1 billion).

We believe Sangamo shares are undervalued compared to its peers. Our $18 target price corresponds to a market cap of $750 million for Sangamo.

Hitachi Takes Hit on Guidance

Growing price competition in emerging technologies, increasing cost of raw materials has hurt Hitachi, Ltd. (HIT). Moreover, its net cash balance (cash less debt) has been continuously deteriorating, which has resulted in a cut to its annual dividend. However, the company continues to make progress in implementing its management plan for cutting operating costs and achieving profitability.