Sangamo BioSciences is a good speculative buy
Published: April 8, 2011
Time posted: 7:36 am
Dear Mr. Berko: I have been told that a company called Sangamo has discovered a cure for AIDS.
It’s $8 per share, and I would buy 1,000 shares if this is true.
What do you know about this?
Would you recommend the stock? What broker should I use if I decide to buy the stock? –D.K., San Antonio
Dear D.K.: Sangamo BioSciences (SGMO, $7.77) is heavily involved in the commercialization of “zinc finger DNA-binding proteins for gene re-engineering.”
This is a finger-shaped protein formed by an amino acid that binds to a zinc ion and one of the most common transcription factors in every living cell.
The transcription factor is the protein that binds to DNA and controls the transfer of genetic information to RNA. This binding protein targets the DNA at specific points of entry, eliminating the receptor that the HIV virus needs to gain entry into the body’s cells.
It’s not a cure but a preventative for HIV and eliminates the lifelong need for daily drug cocktails that cause kidney damage, nausea, severe headaches, etc. It’s not a cure, because when this once-per-year treatment stops the virus returns.
In the process, SGMO scientists draw a patient’s blood and remove the infection-fighting white blood cells. These cells are modified with the zinc-finger proteins and then returned to the patient.
The process is a bit more complicated but, basically, that’s how it works: no sutures, caths, heart monitors or anesthesia. And according to a prominent researcher with whom I talked, it really does work.
SGMO is now in the first stage of testing this therapy in 21 people and hopes to win regulatory approval in the U.S.
But the real sex appeal of zinc-finger proteins is not only their HIV application, but their potential to treat other diseases such as neuropathy, Parkinson’s, hemophilia and similar afflictions. And SGMO’s zinc fingers also have excellent potential for spinal cord injuries, strokes and traumatic brain injuries.
There are about 1.1 million Americans, and about 34 million worldwide, with AIDS-causing HIV virus.
SGMO, a California company, has the science but certainly not the marketing skills. So SGMO will attract partnerships with other drugmakers such as Roche, Bristol-Myers Squibb, GlaxoSmithKline and Merck, to name a few who have indicated an interest. And a revenue-sharing or licensing agreement could pump billions of dollars into SGMO’s bank account.
Though SGMO will have about $20 million in research grants this year, it will not earn a profit. The company has no debt, 44 million shares outstanding with a book value of $1.35 each and $63 million in cash.
Its shares are a good speculation based upon its HIV research and the potential application of that research for other diseases.
In the past 12 months, SGMO traded between $3 and $9, and I think a 1,000-share purchase at $8 could be a lollapalooza if its research continues to shows promise in treating other diseases.
If you decide to buy the stock, ring Charles Schwab, Fidelity, E-Trade or TD Ameritrade. They will charge you about $9.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at email@example.com.