J.P. Morgan Weighs in on Sangamo Therapeutics Inc’s (SGMO) Collaboration with Kite

Sangamo Therapeutics Inc (NASDAQ:SGMO) has just announced a strategic collaboration with Gilead Sciences, Inc’s (NASDAQ:GILD) company Kite, and shares are putting together a massive rally. As of this writing, Sangamo shares are up nearly 23% to $27.25.

According to the collaboration agreement, the companies will use SGMO’s gene editing technologies to advance autologous and allogenic cellular treatments in oncology. With this collab, GILD gains exclusive access to SGMO’s ZFN’s, AAV vectors, and NK cells to use in the development of ex vivo CAR T-, TCR-, and Natural Killer Receptor-based therapies. SGMO will receive $150 million payment upfront and be eligible to receive up to ~$3 billion in development and commercial milestones of which $1.75 billion relates to achievement of commercial sales-based milestones.

J.P. Morgan analyst Cory Kasimov commented, “We had a chance to catch up with GILD regarding this morning’s collaboration announcement with SGMO to gain access to the company’s gene editing capabilities. We’re not surprised to see GILD move on this emerging technology given their publicly stated interest in gene editing going back to the KITE transaction (as a way to further optimize the potential of cell therapy). The up-front commitment on GILD’s part is modest ($150M) with far more tied to potential future milestones (up to ~$3B).”

“In all, we believe the $3B milestone figure highlighted today by the media is somewhat misleading as it represents a best case scenario with recognition of all future “bio bucks”. SGMO is also entitled to receive tiered royalties in the single digits. GILD is responsible for all development, manufacturing and commercialization activities (including specific expenses incurred by SGMO),” the analyst continued.

Most on Wall Street anchor a bullish perspective on Sangamo stock, as TipRanks analytics showcase SGMO as a Buy. Based on 4 analysts polled in the last 12 months, three rate Sangamo stock a Buy, while one issue a Hold.