Sangamo: A Fiery Biotech With A Product Poised To Go Down In Flames?

By Sonya Colberg, Senior Investigative Reporter

Sangamo Biosciences (SGMO) is on fire.

One day it's supposedly curing AIDS. A couple days later, it's selling stock.

The Richmond, Calif. company just announced another public offering. That comes just two months after execs bragged about the company being loaded with cash - $66 million - not from selling product, since it has nothing to market, but mostly from research funding.

The offering of 6.1 million shares at $10.58 per share should produce about $65 million for "working capital and other general corporate purposes." Underwriters may also pick up as many as 915,000 additional shares to cover over-allotment. Now many investors who've watched their $15 IPO shares tumble since 2000 face the prospects of more dilution. The CEO incredibly sold stock the day before the public offering was announced - peeling off 25,000 shares Monday at over $11.28 for a cool $282,000.

Meanwhile, a cure for AIDS certainly should be shouted to the moon.

Judging by its recent presentation of clinical data at a conference in Denver, SGMO ought to be shouting. After all, when it made a measly $1 million acquisition of a riches-to-rags company, SGMO blared out the news in a one hour conference.

But it implies it's pretty much got the cure for AIDS and that is not important enough for a conference? Just a little, carefully worded press release. Sort of like, "Umm, we can cure AIDS."

Why?

Maybe SGMO folks are a little worried that an outright AIDS-cure announcement would expose their company to more critical questions and analysis.

Though SGMO happily buoys investors' hopes by exclaiming about its "spectacular" and "unbelievably powerful" data, the signs say investors should get the red "Failure" stamp ready to go. Our investigation, reinforced by comments from renowned HIV doctor Joseph Sonnabend, suggests it's time for a splash of cold reality on this company that's seen its stock roughly double this year to its recent record $11.48.

SGMO's Key Product: An HIV "functional cure?"

SGMO has raised money repeatedly over many years by promoting its zinc finger nuclease (ZFN) gene modification technology, described as "molecular scissors" that cut and replace gene pieces. About 300 biotech companies are working in genetic tinkering. SGMO's key target is HIV, the virus that causes AIDs.

This is the technology that SGMO has used to entice investors since the mid-1990s. That's right. For nearly two decades since its inception, the company has done a heap of talking. But it hasn't moved a single product.

Here's what SGMO has accomplished:

It's held six public offerings now since its IPO. These offerings total about $140 million.One of 300 biotech companies working on ways to control genes. Forbes recently highlighted one.18 years of promoting an unapproved technology.18 years of raking in investors' money.18 years of operating losses, since inception in 1995.Still not one marketable product. Nothing's made it even to phase III clinical trials ... in 18 years.Previous attempted product using its technology for a diabetic nerve disorder failedin phase II testing.Consistent insider selling, including CEO Edward Lanphier's sale of 25,000 that topped all September sales. The last insider buy was in 2010 at about $3.

The evidence, we believe, indicates that SGMO keeps dragging out many of the same faulty study results as a way to keep the money flowing. TheStreetSweeper would be astounded if SGMO produces a marketable anti-HIV product - ever.

We submitted trial results and graphs via email to Dr. Sonnabend, renowned HIV researcher and retired HIV clinician. He pioneered community-based research of HIV, co-founded three AIDS organizations and received the Nellie Westerman Prize for Research in Ethics.

The esteemed doctor was not impressed. He indicated that in all the information sent to him, there's absolutely nothing to suggest SGMO's treatment works: "... I'd say that no meaningful evidence was presented to indicate that their treatment has antiviral activity," said Dr. Sonnabend.

After our review of study results with Dr. Sonnabend and another medical doctor/researcher, the trials held up as remarkable proof of success actually appear to be proof of failure.

As evidence that the gene treatment works, SGMO presented material at the recent American Society of Gene and Cell Therapy meeting. This graph shows one patient's response - an alarming one in our view - to SGMO's treatment.

In the clinical study, the HIV patient's white blood cells are withdrawn over two or three hours, then modified with SGMO's treatment over about a month and re-infused into the patient. During "treatment interruption," the patient is taken off current very effective anti-HIV meds to undergo this experiment. SGMO hypothesizes that the engineered white cells will resist HIV and reconstitute the patient's immune system.

Here's how the trial works.

The subject is infused with the treated white cells on day 0. The black line on the chart shows that subject 5-06, who has been on HIV meds called HAART, has no detectable HIV on day 0.In fact, until shortly after day 60 the virus is undetectable in this HIV patient's blood. What happened on day 60? The patient was taken off HAART.But the black line, indicating the patient's viral load, quickly spikes to extreme levels. The virus has kicked back into gear.Undoubtedly horrified by the spike, the patient goes back on the HAART meds on day 210. Thankfully, the viral load in the patient's blood drops to undetectable again.Note that the viral load was zero when the study began. It went back to zero when the patient went back on anti-HIV meds.

What does it all mean?

What does the drop to undetectable prove? It proves what doctors have known for years: patients depend on the HAART meds to keep the HIV undetectable. We believe it also proves SGMO's treatment is a failure. It allowed the virus to make a re-appearance.

Dr. Sonnabend clearly stated this graph for patient 5-06, as well as another one for patient 5-04, can't be considered positively.

"With the kind of evidence they presented one could just as easily say that the treatment didn't work as the viral load shot up to high levels and so quickly after stopping antivirals," said Dr. Sonnabend.

"Of course the fall in viral load during treatment interruption in two patients cannot be attributed to an effect of treatment," he said.

Yet, how does SGMO interpret the data?

"The HIV data are unbelievably powerful," said CEO Edward Lanphier. He added that data presented by the end of the year will put the company on track "to drive a functional cure for HIV."

The company is even gutsy enough to flaunt this "functional cure" business in its recent SEC filing, available here.

Mr. Lanphier doesn't hesitate to boldly state, "These are spectacular data ... and I don't think are as ... deeply appreciated as they should be."

Results from three other subjects in the same trial won't be released until sometime before the end of the year, dare we say stretching out the length of time investors remain engaged and possibly betting on good news.

Dr. Sonnabend also noted another problem with SGMO's trials. He said a statistically large number of treated people should be compared with untreated participants before the company should attempt to even present this type of evidence.

"Given the variability in viral load responses following interruption of treatment I suspect this would have to be a huge number of patients," he said.

This statistical problem also raises timeframe and financial issues. The company's own SEC filing notes that the Food and Drug Administration may require many research subjects to participate, "and the FDA may require that we repeat a clinical trial. Any delay resulting from our failure to enroll a sufficient number of patients on a timely basis may have a material adverse affect on our business."

Oversight Board Weighs In

Regulated by the FDA, the Institutional Review Board or IRB reviews proposed clinical studies primarily to reduce the chances of patients getting hurt in clinical testing.

"I'm surprised that this trial met with the approval of an IRB, which presumably it did," stated Dr. Sonnabend. "Exposing people to modified DNA requires a great attention to safety. One would certainly need an assurance that their technology absolutely has no effect other than on the targets they have defined."

SGMO also submitted information for review by the Recombinant DNA Advisory Committee, which expressed numerous concerns. Browse the minutes here.

Committee member Dr. David Weber said the consent form should not refer to research subjects as patients because "patient" implies they would get the benefit of therapy. And he said use of the term "treatment" should also be changed. "Dr. Weber made several suggestions, including the need for stating explicitly that the participants will receive no benefit from this study," according to the minutes.

SGMO's "zinc finger" technique involves cutting into the patient's DNA to target a base pair - just one pair out of 4 billion base pairs in the DNA. But accidentally disrupting a tumor suppression gene, for example, could give the HIV patient cancer.

Indeed, a committee member noted a major concern is that "side effects could include translocations and disruption of tumor suppressor genes."

But SGMO brushed aside the worries, saying that tests could be used to check for this and those problems can happen normally anyway.

SGMO Consent Form: Blood Cancer And Worsened HIV

Board members expressed significant worries also addressed in the hair-raising consent form available here. The forms must be signed by research subjects before they can subject themselves to SGMO experiments.

The consent form offers a scad of concerns for those about to become SGMO guinea pigs. It even asks that participants agree to an autopsy.

Reiterating board members' concerns about cancer risks, though SGMO says it has greatly reduced the risk, interested parties will find this zinger under the headline: "Potential Risk of Blood Cancer."

"The study drug makes a permanent change in the DNA of the cells you are receiving. There is a risk that genetic changes to your cells may make the cells turn into cancer."

It goes on to note a major unknown: "the risks associated with the zinc fingers expressed by the adenoviral vector is unknown."

Just as alarming, under the headline: "Risks Associated with Viral Drift," one discovers that SGMO's fiddling with the "doors" that HIV uses to get into cells might increase the level of X4 virus flowing through someone's body. X4 enhancement goes hand in hand with progression of HIV.

Research subjects are screened for the X4 virus and they are excluded from the study if it's found. But tests can't detect lower levels.

Consequently, "you may be at risk for enhancement of X4 virus," states the consent form.

In other words, the HIV may become much worse.

Risks of the testing are numerous, according to the consent form, and include possible liver damage, seizures, anemia, nausea, vomiting, fatal pneumonia, antibody response to mouse antibodies used in the procedure, and, of course, exacerbated HIV disease.

If all that makes one wonder why someone would participate, check out part of the consent form's Q&A.

Q: "What are the possible benefits of the study?"

A: "You should not expect to receive any benefit from this study. This study is primarily designed to test safety."

The Berlin Patient Cure Is Unlike SGMO's approach

SGMO has tried to tie itself to the Berlin patient, the first person who appears to have been cured of HIV.

During a 2007 bone marrow transplant in Berlin, leukemia-and-HIV patient Timothy Brown received bone marrow from a donor with an extremely rare natural HIV resistance caused by the absence of the CCR5 gene (HIV must have this to infect T-cells). The procedure involved wiping out Mr. Brown's immune system and replacing it with the donor immune system which resisted HIV. Though the bone marrow transplant process can be deadly, Mr. Brown survived, went off his HIV treatment and it's believed that any remaining pieces of virus in his body can't replicate themselves.

That's obviously far different from SGMO's approach of pulling out T-cells, mutating the genes - while hoping the patient doesn't develop another disease if the wrong gene gets accidentally cut during the process - and infusing the cells back into the patient. Also, unlike Mr. Brown's treatment, the SBMO subject's HIV-susceptible immune system remains in place.

New Studies Suggest SGMO Taking The Wrong Direction

More recently, a bone marrow transplant appears to have left two HIV patients free of the virus, suggests research presented in July by Timothy Henrich an AIDS doctor and researcher at Brigham and Women's Hospital, Boston.

But those patients received donor cells without the CCR5 mutation that SGMO's technology creates. So this new research suggests SGMO's engineered mutation is completely unnecessary.

The Mississippi Baby Case Does Not Support SGMO's Theory

The case of the Mississippi baby born with HIV also suggests genetic tinkering may not be the answer. Instead, current drugs seem to have eliminated the child's virus.

About 30 hours after the mother tested HIV-positive during labor, the newborn received an aggressive three-drug treatment. Virus levels dropped rapidly and became undetectable when the baby was a month old. Multiple tests showed the child remained virus-free after about three years even though drug therapy ceased at 18 months of age when the mother and child temporarily stopped going to the doctor. The toddler was called "functionally cured" by the National Institutes of Health.

"The best way to either eliminate the virus or allow the immune system to suppress residual virus is to treat someone as early as possible after infection so as not to allow a substantial reservoir of the virus to take hold," Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases at the National Institutes of Health, said on CNN.

One of Dr. Fauci's studies and a Richard Davey study support our contention that SGMO shouldn't claim an accurate measure is a drop in viral load to undetectable during treatment interruption.

Theirs are among numerous studies that show a seemingly random drop in virus after HIV meds are withdrawn. In fact, the Davey study was designed to see what happened when subjects went off their HIV meds but received no other treatment. They resumed their HIV meds based on T-cell count, viral load or their own preference.

One subject who received no other treatment after his HIV-meds were stopped dropped to undetectable viral levels and went without a viral relapse for nearly two months. Likewise, levels dropped to undetectable, albeit over a shorter observation period, in a Fauci study.

We show the SGMO and Fauci charts for comparison here. The conclusion can't be drawn that the SGMO treatment had an effect, Dr. Sonnabend said. He also noted that the T-cell count (shown in red) is drifting downward in SGMO's subject, a sign the HIV virus is back at work damaging the subject's T-cells.

Curing AIDS Or Cherry-Picking In Denver?

During the recent Interscience Conference on Antimicrobial Agents and Chemotherapy in Denver, SGMO presented data claiming "functional control of the virus" because some subjects' virus levels became undetectable. Once again, the proclaimed undetectable status happened during treatment interruption. Our point that the virus can sometimes drop to undetectable during treatment interruption anyway, applies once again.

SGMO claimed a subject from an earlier study also responded but didn't mention other subjects from that study that didn't. Instead, SGMO simply added the one with the favorable response to the other two subjects' data and came up with three of seven with undetectable levels.

"The fact that three of the seven evaluable CCR5 delta-32 subjects achieved undetectable levels is a major step toward immunological functional control of HIV," according to the press release.

SGMO is cherry-picking here.

And the company appears to have done more of the same with three subjects who were summarily excluded. Judging by SGMO's slide on page 24 here, those subjects developed a worse strain of the virus, the X-4. Scientists wouldn't simply exclude those that don't respond the way they hoped. Instead of pretending they didn't exist, they'd call them non-responders.

Additionally, half of six subjects evaluated did not have an undetectable virus level when they were taken off meds, one finds deep in the press release. In fact, the virus in two spiked so much that they had to go back on meds before the study ended.

Dr. Sonnabend looks critically at the response to SGMO's presentations and the HIV field in general.

"I have seen an enthusiastic report on the Sangamo presentations in Denver simply accepting the validity of an undetectable viral load following treatment interruption in a few individuals as a measure of treatment efficacy," he wrote.

"HIV medicine sometimes seems to be a field in which the broader medical community takes little interest," said Dr. Sonnabend. "So what might be noted and criticized in other fields is ignored in HIV medicine."

What's Wrong With Going Off Meds?

HIV is now considered a chronic disease often treated with just one pill a day, according to the Centers for Disease Control. Recent studies have shown that stopping and restarting these pills can cause serious health risks.

Yet SGMO embraces "treatment interruption." The company masterfully imagines spectacular promise from its brand of genetic tinkering to patients who are withdrawn from their effective HIV medication.

CEO Lanphier had this to say about research subject 5-04, who went off her medication - HAART - to undergo SGMO's experimental treatment.

"She went back on HAART temporarily when she realized or heard she was undetectable, she was back off of her HAART and she remains off of HAART, and so obviously we're very interested in this subject and we'll continue to follow her," Mr. Lanphier said.

But the Recombinant DNA Advisory Committee called out SGMO over its plan to take research subjects voluntarily off their anti-HIV drugs.

"...current evidence from the literature indicates that it is not without some risk," the document stated. "The risks associated with interrupting HAART and the lack of potential benefit should be carefully and clearly discussed in the informed consent document and process."

We believe SGMO should halt this dangerous practice of research subjects stopping their HIV-meds. Indeed, Dr. Sonnabend urged use of simian (ape/monkey) models to try to reduce risks to humans.

"I nearly died"

Can halting today's effective HIV drugs pose horrific risks for participants in these experiments? Undoubtedly. During a Food and Drug Administration public meeting in June, an HIV patient stoically described how he twice participated in treatment disruption during clinical trials several years apart. In the first instance, his CD4 cell count (also called T-cell count) dropped dramatically below the 500-1,000 range ofnormal CD4 cell counts. Less than 200 means the person's immune system is severely weakened and more vulnerable to opportunistic infections.

"Well, sure enough, with 2 T-cells, I developed PCP (a deadly pneumonia) , both my lungs collapsed and I nearly died," he said.

The more recent HIV vaccine experiment involved a treatment interruption. He said the same week he stopped his meds he got the flu.

"And when I had to go back on the regimen, I restarted my original regimen, and for some reason it didn't work ... they had to throw more pills on top to make me undetectable again," he said.

Not Much: The Ceregene Acquisition

On the business end, SGMO's acquisition of Ceregene was so inconsequential that SGMO wasn't willing to spend more than double Mr. Lanphier's yearly salary. That's about $1 million for a company that's been kept alive over its dozen years of existence with about $122.1 million in financing, according to its website.

Ceregene is testing technology that involves sticking needles full of nerve growth factor in Alzheimer's patients' brains, another risky and highly speculative matter according to another physician/researcher working with us.

Suddenly, the business people behind Ceregene are willing to sell the whole shebang for about $1 million worth of stock plus contingent payments.

Why? Well, it's sure not because they think they'll make more money if Ceregene continued to exist. These guys are not dumb. They'd stay put if Ceregene really had the solution to Alzheimer's. As for SGMO's motive, perhaps the company fears the actual prospects of its own anti-HIV candidate and hopes Ceregene's technology can keep investors happy.

Conclusion

In brief:

Dilution. SGMO's sixth public offering in eight years proves once again that it doesn't mind diluting investors' shares.Losses. Almost two decades worth.Fluff. Lots of fluff, nothing marketable.Debatable. HIV research pioneer, another M.D., charts suggest SGMO's product candidate is going nowhere.

We don't know exactly when, but at some point we believe the tragic faults of SGMO's technology and business attitude could scorch investors.

Disclosure: The owners of TheStreetSweeper hold a short position in SGMO and stand to profit on any future declines in the stock price.
Additional Disclosure: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to scolberg@thestreetsweeper.org.

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Sangamo Biosciences, Inc. (SGMO) CEO Discusses Q2 2013 Results - Earnings Call Transcript

Executives

Edward Lanphier - President & Chief Executive Officer

Ward Wolff - Executive Vice President & Chief Financial Officer

Geoff Nichol - Executive Vice President of Research & Development

Philip Gregory - Vice President of Research & Chief Scientific Officer

Dale Ando - Vice President of Development & Chief Medical Officer

Elizabeth Wolffe - Senior Director of Corporate Communication

Analysts

Roy Buchanan - Piper Jaffray

John Newman - JMP Securities

Jonathan Chang - Lazard Capital Markets

Sangamo BioSciences, Inc. (SGMO) Q2 2013 Earnings Conference Call July 24, 2013 5:00 PM ET

Operator

Good afternoon and welcome to the Sangamo BioSciences Teleconference to discuss second quarter 2013 financial results. This call is being recorded. I will now pass you over to the coordinator of this event, Dr. Elizabeth Wolffe, Senior Director of Corporate Communication.

Elizabeth Wolffe

Thank you Jonathan. Good afternoon and thank you for joining Sangamo’s management team on our conference call to discuss the company’s second quarter 2013 financial results.

Also present during this call are several members of Sangamo senior management, including Edward Lanphier, President and Chief Executive Officer; Ward Wolff, Executive Vice President and Chief Financial Officer; Geoff Nichol, Executive Vice President of Research and Development; Philip Gregory, Vice President of Research and Chief Scientific Officer; and Dale Ando, Vice President of Development and Chief Medical Officer.

Following this introduction, Edward will highlight recent activities and significant events from the past quarter. Ward will then briefly review second quarter 2013 results as well as our financial guidance for the rest of the year; and Geoff will provide an update on our ZFP therapeutic program. Finally Edward will update you on our goal for 2013 and beyond. Following that we will open up the call for questions.

As we begin, I’d like to remind everyone that the projections and forward-looking statements that we discuss during this conference call are based upon the information that we currently have available. This information will likely change over time. By discussing our current perception of the market and the future performance of Sangamo with you today, we are not undertaking any obligation to provide updates in the future.

Actual results may differ substantially from what we discussed today and no one should assume at a later date that our comments from today are still valid and we alert you to be aware of risks that are detailed in documents that the company files with the Securities and Exchange Commission, specifically, our Quarterly Reports on Form 10-Q and our Annual Report on Form 10-K.

These documents include important factors that could cause the actual results of the company’s operations to differ materially from those contained in our projections or forward-looking statements.

Now, I’d like to turn the call over to Edward.

Edward Lanphier

Thank you Liz, and thank you all for joining us for our conference call to discuss our 2013 second quarter financial results, as well as recent accomplishments and plans for development of our ZFP therapeutic pipeline.

As we emphasized last quarter, one of the areas of major focus for Sangamo this year is the advancement of our lead clinical program SB-728-T, an autologous T-cell therapy designed to provide a functional cure for HIV/AIDS.

Using our Zinc Finger Nuclease or ZFN technology, we can specifically disrupt the gene in coding CCR5, a required co-receptor for HIV infection of CD4 T-cells and thus generate a population of T-cells that are protected from this virus. The aim of the therapy is to provide a circulating population of HIV resistant cells that are available to fight opportunistic infections and the virus itself.

As you will hear in more detail later, we are evaluating the effects of SB-728-T on both the control of the virus in the blood stream, but also on the very important viral reservoir, which is not and cannot be addressed by current anti retroviral medications.

We have ongoing Phase 2 trails of SB-728-T that represent two distinct approaches, both aimed at maximizing the engraftment of T-cells, in which both copies of the CCR5 gene are disrupted, so called the biallelically modified T cells. Knocking out both copies of the CCR5 gene make these cells resistant to infection by HIV.

In May, as promised, we presented preliminary data from both of these trials at the Annual Meeting of the American Society for Gene and Cell Therapy or ASGCT, as well as a status update on these trails. Dale Ando our Chief Medical Officer presented encouraging anti-viral data from subjects that underwent a treatment interruption from their anti retroviral medications, as well as unprecedented data on the reduction of the size of the viral reservoir in subjects from earlier Phase 1 clinical trails.

These data are particularly important as they provide the first demonstration that it is possible to reduce the size of the viral reservoir while simultaneously increasing total CD4 counts in HIV infected subjects. I’ve asked Geoff to provide you with more details on these data later in the call.

ASGCT has been an important meeting for us and this year was no exception. In addition to our presentation, a preliminary clinical data from our HIV clinical programs, Sangamo scientists and our collaborators presented 12 additional abstracts, including new data from our hemophilia A program, which is partnered with Shire.

Using our In Vivo Protein Replacement Platform, we demonstrated that a single systemic treatment in a mouse enabled the successful targeted insertion of a human Factor VIII gene in the albumin locus and the efficient and stable production of therapeutically relevant levels of this clothing factor. Our goal is to file an IND Investigational New Drug application in 2014 for this program.

Later in May we announced that the California Institute for Regenerative Medicine, CIRM granted Sangamo a $6.4 million Strategic Partnership Award to advance our ZFP Therapeutic hemoglobinopathy program, specifically in beta-thalassemia. The four-year grant provides matching funds that will help offset the costs of IND enabling pre-clinical studies and a Phase 1 clinical trial in beta-thalassemia subjects.

The grant application entitled “a treatment for beta-thalassemia via high efficiency targeted genome editing from hematopoietic stem cells” won the highest scientific score and was the only application recommended for funding in this round of CIRMs Strategic Partnership Award.

This award provides valuable support for the development of this program, as well as validation of the powerful science that underpins this program. We look forward to providing you with more details on this program as we move closer to our goal of filing an IND application in 2014.

Finally, in the last week you may have seen numerous articles on the application of our technology in Down Syndrome. Results of the study, carried out with collaborators at the University of Massachusetts were published in the journal nature.

Importantly, we use the same targeted ZFN mediated gene addition technology that underpins our hemophilia and lysosomal storage disease programs to insert a copy of the exist gene, which normally functions to shut down one of the two ex-chromosomes during female development, into the extra copy of chromosome 21, the root cause of Down Syndrome.

We demonstrated that the ZFN driven gene addition enabled the whole extra chromosome 21 to be shut down or silenced. The studies were carried out in induced pluripotent stem cells or iPSCs from individuals with Down Syndrom, enabling the production of model cell systems that will allow better understanding of the genes that contribute to the pathology of this syndrome. These models may also be used for in screening drugs that could alleviate some of the symptoms of the disorder.

In addition to the direct evidence of whole chromosome silencing, this advance further demonstrates the potential or ZFN mediated gene editing to achieve unique and very powerful biological outcomes, which have significant medical and therapeutic value.

This outcome could not have been achieved with any other gene therapy approach. It required the highly specific targeting capabilities of our technology. Importantly, the very large DNA sequencing coding the exist gene is a substantially larger DNA sequence than we would typically use in our therapeutic gene editing programs and the fact that the technology enables precise insertion in a single sight in the genome, highlights the specificity and efficiency of our ZFN mediated targeted gene addition.

Before we go into more detail on or ZFP therapeutics programs and our plans for 2013 and beyond, let me hand the call over to Ward for an update on our second quarter 2013 financial results, as well as our financial guidance for 2013. Ward.

Ward Wolff

Thank you Edward and good afternoon everybody. As you know, after the close of the market today we released our financial results for the second quarter ended June 30, 2013 and I am pleased to review the highlights of those results.

Revenues in the second quarter of 2013 were $6.9 million compared to $4.6 million for the same period in 2012. The second quarter 2013 revenues were comprised of revenue from the Sangamo’s collaboration agreements with Shire and Sigma-Aldrich, as well as approximately $800,000 of revenue from research grants. As we mentioned in the press release, the increase in collaboration agreement revenues was primarily due to our agreement with Shire.

Total operating expenses for the second quarter of 2013 were $12.4 million compared to $10.3 million for the same period in 2012. Research and development expenses were $9.3 million in the 2013 quarter and $7.6 million for the prior year quarter. The increase was primarily due to increased external expenses related to our pre-clinical programs, partially offset by lower clinical trial and manufacturing expenses for our SB-728-T HIV/AIDS program.

General and administrative expenses were $3.1 million in the second quarter of 2013 and $2.7 million for the same period in 2012. Non-cash stock-based compensation expense was $1.4 million for the quarter, with $700,000 in research and development expenses and general and administrative expenses.

For the second quarter of 2013 we reported a consolidated net loss of $5.5 million or $0.10 per share compared to a net loss of $5.7 million or $0.11 per share for the same period in 2012.

Turning to the balance sheet, I am pleased to report we ended the second quarter of 2013 with $66.4 million in cash, cash equivalents and short-term investments and interest receivable, reflecting net cash usage of $3.7 million for the second quarter and $9.9 million for the year-to-date.

With respect to financial guidance for this year, we are on-track to have a cash and investment balance of at least $55 million at the end of 2013, inclusive of research funding from Shire, but exclusive of any new funding from our partnership or other sources.

We also expect 2013 operating expenses to be in the range of $46 million to $50 million and revenues to be in the range of $20 million to $24 million. This includes the research funding from Shire for internal and external research program related costs.

For the purpose of revenue guidance, we will continue to ratably amortize the upfront fee from Shire in to revenue over the initial six-year research term provided in the Shire agreement. We also expect that the spread of total revenue over the four quarters of 2013 will generally be in line with the pattern in 2012.

In summary, we are focused on advancing our clinical and pre-clinical pipeline, while maintaining our customary financial discipline and we are pleased to have realized our financial objectives for this quarter with respect to both our operating results and net cash usage.

Thank you and I will now turn the call back over to Edward.

Edward Lanphier

Thank you Ward. As you’ve heard, we ended the second quarter with just over $66 million, which relative to our historic and projected burn rate is a strong cash position and will enable us to advance our pre-clinical pipeline with the goal of filing up to seven IND applications by the end of 2015. While these are ambitious goals, our strategy has always been to use our resources aggressively, yet as efficiently as possible to bring our ZFP therapeutic pipeline into and through clinical proof of concept.

As many of you know we have three pre-clinical programs, hemophilia A and B and Huntington’s disease that are fully funded by Shire and will trigger milestone payments to Sangamo totaling $8.5 million per IND application. We intend to file two IND’s for each of the hemophilia’s in 2014 and one for Huntington’s disease in 2015. Our third prospective IND application for 2014 is our HIV/AIDS program in stem cells, which is being funded by a $14.5 million disease team award from CIRM.

Sangamo is also moving forward three additional pre-clinical programs of our own. As I mentioned earlier, we recently learned that we have been granted “matching funds” in the form of a CIRM strategic partnership award to help offset the cost of IND enabling studies and the Phase 1 trials in our beta-thalassemia, which we also expect to be a 2014 IND.

For the two remaining Sangamo programs in Lysosomal Storage Disorders or LSD’s, we are leveraging the same In Vivo Protein Replacement platform that we are developing for our Shire funded hemophilia programs.

In this platform approach, we insert in a targeted fashion a corrective gene into a so-called safe harbor site. The goal is to engineer a genetic cure for the disease by enabling replacement protein production by the patient’s own liver, which will reduce or eliminate the need for administered enzyme replacement therapies.

We are employing the albumin gene as our safe harbor site. As this gene normally produces such a large quantities of albumin, that we can safely co-opt the very small percentage of its output to produce the therapeutic protein via one of the reporting factors as in the hemophilias or replacement enzyme to correct any LSV that can be treated using enzyme replacement approaches.

So as you can see, consistent with our strategy, we are working aggressively to ensure that we efficiently maximize the value of our technology platform and therapeutic pipeline.

And now, lets turn the call to our lead clinical program in HIV/AIDS. I’ve asked Geoff to provide more detail on the preliminary detail that we presented at the ASGCT meeting in May and to outline our plans for this program for the rest of the year. Geoff.

Geoffrey Nichol

Thanks Edwards. Good afternoon everyone. The ZFN technology allows us to specifically modify or disrupt any gene at our choosing. In the case of our HIV program, we are targeting the CCR5 gene, which encodes the major co-receptor for HIV entry into CD4 cells.

CCR5 is a well-validated clinical target for ZFN approach to HIV. As you know that there was a natural mutation CCR-5 delta 32, which makes the CCR-5 protein non functional. This enables individuals who carry that mutation on both copies of their CCR-5 gene to resist HIV infection despite repeated exposure to the virus.

Our ongoing clinical program, SB 728-T is evaluating the effect of knocking out CCR5 and the CD4 T-cells of HIV infected individuals, with the aim of generating a population of these cells that will be both protected from HIV infection and capable of mounting an effective immune response against the virus and opportunistic infections.

In May at the ASGCT meeting, Dale Ando, our Vice President of Therapeutic Development and Chief Medical Officer presented a summary of the clinical data to-date from our studies, including preliminary data from our two ongoing Phase 2 clinical trials.

In these studies we are following up on an observation made in earlier Phase 1 trial, in which we saw a statistically significant relationship between the level of engraftment of ZFN modified cells, in which both copies of the CCFI gene are disrupted, so called biallelically modified cells, which are completely protected from HIV entry and reduction from initial peek in the level of virus in the blood in HIV infected subjects during a treatment interruption from their anti retroviral medication.

The trial SB-728-902 cohort 5 and SB-728-1101, both aim to maximize engraftment of biallelically modified T cells. SB-728-902 Cohort 5 is enrolling subjects that already have one of their CCR5 genes knocked out, so they are called CCR5 delta-32 heterozygotes. I should note that the first subject in which we observed the drop in viral load to undetectable levels during a treatment interruption was a delta-32 heterozygotes.

In contrast, the 1101 study is designed to treat the rest of the HIV infected population, regardless of their natural CCR5 status. In this group we are using a conditioning regiment with Cytoxan, designed to enhance engraftment of our ZFN modified cells.

In both studies while subjects remain on anti retroviral therapy or ART through the initial SB-728 treatment, which is a single infusion of approximately one to three billion treated cells, they will later undergo an interruption of their anti retroviral drugs, during which we can evaluate the relationship between the levels of engraftment of biallelicly modified cells and the affect on viral load, as well as numerous immunological parameters.

The data that we presented were preliminary and that we reported data from only those subjects that had undergone the treatment interruption or TI stage of the protocol. From the SB-728-901 Cohort 5 study in CCR5 heterozygous, we presented data from four evaluable subjects. Two out of four subjects showed consistent reduction in viral load during TI, with one of them achieving a transient undetectable viral load during this period. Notably in both cases these reductions in viral load were associated with anti HIV immunologic responses.

As Dale noted in his presentation, we have three additional subjects enrolled in this study that had not completed the TI at that time and we expect to report on these when we release the final dataset by the end of the year.

For the 1101 study, we reported on subjects that had been infused in the two last dose cohorts of the Cytoxan conditioning. The conditioning has thus now been safe and well tolerated in keeping with the initial doses used in the first two cohorts we observed some acute depletion and subsequent normalization of lymphocytes post Cytoxan treatment. However these were not yet sufficient doses to expect the significant impact on engraftment of SB-728T.

We continue to recruit and treat subjects on this trial into the third dose cohort, where subjects receive 1,000 mg of Cytoxan per meter squared, a dose at which we do expect to see enhanced engraftment. At the maximum tolerated dose we will expand the trial to treat an additional six subjects.

As Edward noted, we expect to report a full data set from all three-dose cohorts by the end of the year at an appropriate medical or scientific meeting and will update you as to venue at a later time.

As all of you know, HIV has been such a difficult virus to port, because it’s a replication to CD4 T-cell, depriving the body of an immune cell pack that is critical in the battle against infections and providing long term immunity. In addition the virus is able to integrate into the DNA of long-lived immune cells, filling a reservoir of infection.

Ant retroviral drug therapy or ART efficiently addresses the first problem, but has no effect on the second. By suppressing viral replication in T-cells, ART keeps levels of the virus in the blood below detection; however as these drugs only function during active viral replication, they do nothing to diminish the levels of the viral reservoir would exist deep in the body.

That’s why when HIV infected subjects come off their ART, the viral load in their blood rapidly rebounds as the virus emerges from these reservoirs killing many of these cells in the process. This is also why the HIV community is looking for novel approaches to clearing the HIV reservoir and while we are pursuing, what we believe is a promising immunological approach to a cure.

In addition to the preliminary Phase 2 data I just described, we presented further analysis from our Phase 1 trial SB-728-902 in immunological non-responders. This INR group is classified as such due to their relatively poor immunological response to ART. Essentially, they do not exhibit much of a rebound in their CD4 T-cell levels, even as their virus is controlled by the anti retroviral drug. INR subjects in our study came into the trial with CD4 T-cell in the range of 200 to 500 cells per micro liter and with a median duration of HIV infection of 21 years.

To summaries our findings to-date, which have been consistent across all groups tested, immunological responders and non-responders alike, SB-728-T treatment is safe and well tolerated. We see engraftment, trafficking and long term persistence of the ZFN CCR5 disruptive T-cells, as well as positive long term effects on total CD4 T-cells and CD4, CD8 ratios.

In addition, further analysis of the immunological characteristics of SB-728-T in the INI group has given us a deeper understand of the characteristics of our product and the fact that it may be important for its optimal engraftment.

The one thing that we were unable to study in the INR group is the subjects were well controlled on ART and did not undergo a TI. It was the effective of treatment on blood levels with the virus. However with the development if new more sensitive techniques to measure viral DNA, we were able to evaluate the effective SB-728-T on the viral reservoirs, the side of HIV infection that ART cannot address.

What we found was quite dramatic. In seven of the nine INR subjects on the SB-728-902 study, we measured a mass decrease in HIV pro-viral DNA, one measure of the viral reservoir and peripheral blood cells over the period of a year.

Importantly, this decrease has a statistically significant correlation with levels of CCI5 modified CD4 T-cells. This was particularly striking in a group of subjects that has been HIV infected for a very long time, and in which decreases in the viral reservoir are usually not observed. Moreover as noted by our clinical advisors and physicians who attended the meeting, this decrease in the reservoir occurred in the setting of an overall increase in total CD4 count.

In previous studies in which a transient increase in overall CD4 T-cell levels has been achieved, say with IL-7 infusions, this increased was accompanied by a concomitant increase in the size of the HIV viral reservoir. Clearly the ability to decrease pro-viral DNA reservoir, while increasing CD4 T0-cells is precisely what we would hope to achieve in an immunological approach to a functional cure for HIV.

We continue to follow these subjects and monitor their immunological health and viral reservoir and they are expanding this analysis to other groups of SB-728-T treated subjects.

In summery, we have been greatly encouraged by the data that we have generated thus far in this program and we are excited by the progress that we have made and continue to make.

If we consider the factors required for an immunological approach to a functional cure, we believe that we are successfully working through the checklist of factors that are necessary for this to be careful, are modified cells and grafts, they traffic throughout the body, they appear to be immunologicaly active, and finally they persist.

We can still detect ZFN modified cells in all of the subjects that we have treated, some of who were infused over three years ago. I didn’t dwell on this today, but we also know that our ZFNs are modifying and protecting a critical cell type, CD4 central memory T-cells, which are critically important for long term immunological response to disease and incidentally the primary cell type that houses the HIV reservoir.

So in summary, these are very exciting times in this program. Looking forward, our ongoing studies aim to answer a few very specific questions; how many biallelicly modified T-cells do we need and in what cell type, such as CD4 central memory cells?

Are the cells HIV reactors and capable of supporting a response to the virus? Here we are very interested in the control of the virus. Can SB-728-T have an impact in the TI when there is an active infection on the body? But also importantly, does it have any effect on the deeper issue. The size of the viral reservoir, which is untouched by current therapies. If so, we are definitely on the right path to creating an immunological cure for HIV.

We look forward to discussing the results of our complete HIV dataset with you later this year. And with that I’ll hand the call back to Edward.

Edward Lanphier

Thanks Geoff. As Geoff indicated, later this year we expect to complete our Phase 2 clinical trials of our SB-728-T HIV program and present the complete dataset at a medical or scientific meeting.

As we have said before, with positive clinical data and before entering pivotal studies, we plan to partner our HIV program for further development and commercialization.

As 2013 progresses, we also expect to present data from our partner programs in hemophilia and Huntington’s disease and our proprietary program in hemoglobinopathies and lysosomal storage disorders.

We are very focused on our development goals and plan to file INDs in 2014 for hemophilia A and B, Beta-thalassemia and our HIV application in stem cells. In 2015 our goal is to file IND’s for our Huntington’s program with Shire and up to two proprietary programs in lysosomal storage disorders.

In conclusion, we are very pleased with our progress during the first half of this year in the development of our ZFP genome editing and gene regulation technology platform and our plan is to create significant value, while mitigating risk via diversification and technical leverage.

Our business model has enabled us to generate both non- therapeutic and therapeutic partnerships, while retaining significant value in our proprietary programs. All of this has give us a strong financial foundation form which to peruse and ambitious, the highly disruptive therapeutic product development pipeline.

Needless to say, we have an exciting second half of the year ahead of us and we look forward to keeping you informed of our progress. In the immediate future we will be presenting at the Wedbush Securities Life Sciences Management Access Conference on August 14, which will be webcast and available of the Sangamo website.

This completes our prepared comments. I would now like to open up the call for your questions.

Question-and-Answer Session

Operator

Certainly. (Operator Instructions). Our first question comes from the line of Charles Duncan from Piper Jaffray. Your question please.

Roy Buchanan - Piper Jaffray

Hi guys, this is Roy in for Charles. Thanks for taking the question. I wonder if you could go into more detail on the partnering progress for HIV. Are you in discussions now or you waiting for a conclusion on the Phase 2? Do you think it will be HIV only or does it include a broader T-cell program or maybe the stem cell program? Thanks.

Edward Lanphier

Thanks Roy. Let me first off just reiterate our current guidance and then I’ll try and be more specific to your question. So what we said since initiating these two ongoing trials is that once we’ve achieved the kind of data that are sufficient to move in the pivotal studies, our plan is to move forward for pivotal trials and commercialization with a partner.

In terms of the status, we have, I’d say for several years been in active communication with the major HIV pharmaceutical and biotechnology companies. I think its fair to say that any of the major players, even outside of HIV and infectious diseases are well aware of this program and we regularly either have scientific meetings or otherwise and update them on our progress.

To speculate on scope of the collaboration, certainly the T-cell work would be included. I think its reasonable to assume that the HIV stem cells work will be included in HIV partnership. I’d probably take the opposite point of view about expansion to other disease areas or other targets.

Hope that’s responsive to your question.

Roy Buchanan - Piper Jaffray

Yes, perfect, thank you. And a couple of I guess detailed questions. So can we expect consistent R&D reimbursement from Shire for the rest of the year?

Edward Lanphier

By consistent do you mean, consistent with the last two quarters?

Roy Buchanan - Piper Jaffray

Yes.

Edward Lanphier

While I will answer it, but I’ll look to Ward to maybe modify if necessary. But yes, we expect to see consistent revenues from Shire over the second half of the year, consistent with the first half. Ward is that…

Ward Wolff

No, I’ll agree with that.

Roy Buchanan - Piper Jaffray

Okay, and then no revenue from down (ph) for the quarter.

Edward Lanphier

We have not had revenues from down this quarter. But we fully expect to have revenues from down in the second half.

Roy Buchanan - Piper Jaffray

Okay. Thank you.

Edward Lanphier

Thank you.

Operator

Thank you. Our next question comes from the line of John Newman from JMP Securities. Your question please.

John Newman - JMP Securities

Hi Edward. Thanks a lot for taking my question. I just wanted to ask about the data that you are planning on presenting at the end of year. If you could tell us a little bit about the types of measures that you maybe able to talk about in terms of the 902 study, and also just curious as to what we might expect to see from the 1101 study. Thanks.

Edward Lanphier

John, I’ll start, but I’m here with Geoff and Dale and they can certainly drill down deeply as we need here. From a high level perspective, the type of data that you should expect to see from us in the second half in terms of categories is exactly the kind of data you’ve seen from us thus far and I think Dale did an excellent job of highlighting during ASGCT, and that obviously is viral load measurements during treatment interruptions, but then also continued evaluation of the viral reservoir and impact on the viral reservoir and also the variety of immunological end points that we’ve looked at, including some of the polyfunctional gag analysis.

So those I would say are the buckets I would highlight in terms of data from the 902 Cohort 5 and the 1101, but Geoff or Dale, do either one of you want to add or subtract to that.

Dale Ando

Yes John, I think we expect broadly to see complete dataset from the subject in the both studies that we originally wrote in the protocols when we began. So we ought to see TI data on the 902 Cohort 5 group. That should be completed along with a bunch of other ancillary measures that Edward’s talked about.

And for 1101, for the fist three dose Cohorts, again engraftment, tolerability and TI data from those subjects. We mentioned earlier that we have the option to expand and evaluate more patients in the 1101 study and we don’t anticipate having all of those subjects available at the end of the year with possibly some of them.

John Newman - JMP Securities

Okay, and if I could ask a quick follow-up. Do you expect also to have from the 1101 study data on the viral reservoir?

Edward Lanphier

Again, I’ll start and Dale and Geoff, they can do it. The viral reservoir work to-date that we presented to-date has been on patients who have not undergone TI. Geoff said in his prepared remarks we are expanding that reservoir analysis. And whether we have those data from the 1101 subjects by the end of the year, I think is to be determined Geoff, so you…

Ward Wolff

Yes, I’d agree. John as we said, we are sort of stepwise expanding the reservoir work. Its quick technically demanding for us and we need to work very closely with collaborators to make all that happen. So at this point we don’t have any clear guidance as to how much reservoir data we will have available at the end of the year. But what we have we’ll certainly be telling you about.

Edward Lanphier

Right, and as Geoff said in his prepared comment, that we continue to expand that evaluation across multiple studies that we’ve done.

John Newman - JMP Securities

Great. Thank you very much for answering the questions.

Edward Lanphier

Sure. Thanks John.

Operator

Thank you. (Operator Instructions) Our next question comes from the line of Ryan Martin from Lazard Capital Markets. Your question please.

Jonathan Chang - Lazard Capital Markets

Hi, it’s actually Jonathan Chang stepping in for Ryan Martin. Thanks for taking my questions, hi. The first question I had is with regard to the hemoglobinopathy program, are you thinking of pursuing both beta cell and sickle cell at some point or does beta cell have priority over sickle cell.

Edward Lanphier

Again, I’ll start and to Philip and Geoff here, they can chime in. Yes, we plan to pursue both and yes beta cell is currently the one that we plan to take into the clinic first.

Jonathan Chang - Lazard Capital Markets

Okay and also just staying on the hemoglobinopathies, how does your electroporation approach compared to Bluebird Bios, HIV based approach; any general or specific comments on that?

Edward Lanphier

Sure. I mean it’s quite different, and why don’t I ask Philip to maybe use the Beta-thalassemia in hemoglobinopathies approach, to maybe compare and contract those two approaches.

Philip Gregory

Sure. So the as you know the Bluebird approach uses a lentiviral vector. This is a virus, which needs to infect and integrate itself into the genome of the stem cells to achieve its therapeutic outcome. So there is a necessity for this virus to enter the genome, to express its payload and the risks associated with that are I think relatively obvious, but you could have insertional mutagenesis associated with this virus invading into a random sequence someplace in the stem cell genome.

By contract, what we are doing using our electropration approach is to deliver zinc finger nuclease, which are highly, targeted entities. They are designed to cleave at a specific site in the human genome and we deliver them as an MRNA, so their expression is transient and will certainly would not be present I these cells when returned to the patient.

And so the real differences here are the permanent and random integrating technology that sort of supports the lentiviral methods versus this highly side specific and transient approach that we can achieve.

Just one comment of the efficient of the two approaches. I think that both approaches show incredible efficiency in research scale hypothesis, add one scale of these up to clinical approaches of clinical sale necessary for treating patients.

As you may know, the FDA restricts the number of heterogeneous. They can be integrated per cell with the lentiviral approaches and that has an impact on the amount of vector one can use and the efficiency of that process and we are able at the large scale and we have faith at the clinical scale, using the electropration technology where we’ve exceed over 50% of the deals being modified in a signal step.

And so we feel very confident. This approach has both the efficiency and the scale necessary to achieve a very targeted outcome and we think that’s going to be very important in treating disease such as Beta-thalassemia and sickle cell disease, which aren’t immediately life threatening diseases.

Jonathan Chang - Lazard Capital Markets

Sure, that’s helpful. Also, should we expect to see updates to the Huntington's program at the Society of Neuroscience, and if so should we expect to see non-human primate data.

Edward Lanphier

Well Jonathan, that’s a great question. I think I’ll duck it and just say we do plan to present the data on Huntington’s later this year. We have not guided to what specific meeting we will do that. But all in all have we guided to exactly what type of data will be presented. But it’s defiantly a program that we plan to present data on in a major scientific meeting later this year.

Jonathan Chang - Lazard Capital Markets

Okay, and maybe just one final one. One HIV for on-site toxin treatment, would you please explain the relational behind Carl June Penn testing, that’s 3000 per meter square of high toxin dose and maybe provide some color on how that dose was chosen, given that your Cohort 3 doses allow them 3 mg per meter square.

Edward Lanphier

I’ll start and again we are here with two experts in the filed, so happy to differ to them or to add on that.

I think its really a question of balancing safe dose with a dose that maximizes the kind of engraftment enhancement that we want to see in terms of generating a robust engraftment of biologically modified cells.

Without speculating I think Carl has been quite successful in the oncology setting with this kind of pre conditioning, and those does perhaps or 3 grams per meter square or the type of does one might see in an oncology setting and could well be the type of doses that are necessary to maximize engraftment of CCR5 biallelicly modified cells.

So I think we’re still and we’ve always said in the clinical research stage of this program and certainly engraftment enhancement is one of the keys that I think everybody has identified for success here, and strategies to maximize that in a safe way. I think our areas of great interest to ourselves, as well as Carl. Anybody else.

Geoffrey Nichol

Yes Jonathan, it’s Geoff. I mean I think Carl comes from a kind of an oncology background and certainly 3 milligrams is getting up into those kinds of 3 milligrams per meter squared, getting into that kind of dose rage. Certainly we currently have a Cohort going at 1 gram per meter squared. We do not rule out the possibility of a data driven increase in dose above that, but that remains to be determined by the actually data that we have seen.

Jonathan Chang - Lazard Capital Markets

Sure. Thank you. That’s very helpful.

Edward Lanphier

Sure, good questions.

Operator

Thank you. Our next question is a follow-up from the line of Charles Duncan from Piper Jaffray.

Roy Buchanan - Piper Jaffray

Hi guys, sorry; it’s Roy again. I think you just addressed it, so the expansion of the six additional patients that can see an increase in this Cytoxan dose; is that correct?

Edward Lanphier

Yes, I mean just to repeat what Geoff said, and Geoff can repeat it again himself and that is that as we complete the top dose of the dose escalation of 1 meg, we’ll be evaluating those parameters, the safety and tolerability of that does and then the impact on engraftment enhancement.

If it makes sense from a clinical, safety and efficacy perspective, we would certainly consider increasing the Cytoxan dose and that could possibly be done in the additional six subjects that we plan to treat going forward.

Roy Buchanan - Piper Jaffray

I see. Okay, perfect. Thank you.

Operator

Thank you. This does conclude the question-and-answer session of today’s program. I would like to hand the program back to management for any further remarks.

Edward Lanphier

We’d like to thank you for joining us and we look forward to speaking with you again when we release our third quarter financial information. We will be available later today if there are any follow-up questions. Thank you very much.

Operator

Thank you ladies and gentlemen for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.

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