Agreements Boost Sangamo Biosci
We are optimistic about Sangamo Biosciences Inc.'s (SGMO) unique zinc finger DNA-binding protein (ZFP) 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. Sangamo has signed agreements with Dow AgroSciences (DOW), Sigma-Aldrich (SIAL) and Roche to utilize its technology in exchange for financial resources. The company also expanded its agreement with Genentech (DNA) to monetize ZFP.
Sangamo's SB-509 is under three phase II clinical trials for diabetic neuropathy, blocked nerve regeneration, and stem cell mobilization respectively. Another phase II trial of SB-509 for ALS disorder will be initiated soon. The company also plans to initiate two candidates into phase I trials for brain cancer and HIV in the second half of the year.
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. We believe the ZFP platform technology, combined with the well advanced clinical programs, will attract strategic partners for Sangamo in the coming years. The company's current cash will last through 2010 based on our analysis. Our target price is $18.
CryoLife Positives Accounted For
CryoLife Inc.'s (CRY) operations continue to show signs of improvement due to growing BioGlue surgical adhesive sales, the continued growth in the tissue business, and favorable margin and cost trends.
BioGlue sales have sustained the company and revenue growth could eventually receive a boost from the agreement with BioForm Medical to expand into cosmetic and plastic surgery indications. In January, CRY entered into an exclusive agreement with Trophic Solutions, LLC to develop and market products related to the cold storage and preservation of internal organs prior to transport.
As in the past, the unpredictability and/or delays in the Food and Drug Administration (FDA) approval process could result in substantial additional cost and adversely affect CRY's competitive position. The FDA requires the company to obtain a pre-market approval authorization for any CryoVein SG (human vascular tissue) marketed as an A-V access graft, which poses obstacles to growth.
At its current price of $11.13 per share, CRY is trading at 2.9x our 2008 revenue estimate of $106 million, which is at a discount to the group average multiple of roughly 3.2x. At this stage, we believe the majority of the positives that impacted growth expectations are priced in the stock.
