The Truth about "Z Finger Technique"The Truth about "Z Finger Technique"
We Expose a Website's Hype - Just the Facts, Ma'am
May 26, 2006 – A subscriber has alerted us to an investor website that touts "Z Finger Technique" as the “biggest medical advance in 25 years.” According to the hype, Z Fingers is on the verge of solving just about every medical problem in the world (okay – they missed obesity, but cited just about every other affliction known to mankind). If investors sign up at the discounted price of only $2500(!), the website will clue them in to the company doing this "breakthrough" work. Returns of over 650% are oft repeated.
Well, there is no such thing as "Z Finger Technique" -- this was just the website's way of disguising an emerging but unproven technology so that potential subscribers wouldn't find out the truth by Googling the pseudo-scientific terminology. After all, the point is to make you sign up for the service, not to provide you with the facts... so we felt it was our responsibility to expose the hype and put the facts on the table for all to see! And we're doing it for only... well, for free!
Zinc Finger Proteins (ZFPs), as this technology is actually called, are the focus of Sangamo BioSciences, Inc. (SGMO), a small company based in Richmond, CA. The ZFPs function as transcription factors (TFs), a form of gene therapy that is claimed to provide technological advantages because they are naturally occurring (see Sangamo's Technology Platform Overview). The science behind gene therapy was first described in 1966 (see our report on Emerging Technologies), but it wasn't until thirty years later, in 1996, that the first breakthrough seemed imminent -- the first cure ever for "bubble boy disease," a severe immune deficiency, was attributed to gene therapy. But shortly thereafter, three cancer cases and a death occurred, shutting down interest in the area.
Finally, the promise of gene therapy resurfaced and created a great deal of buzz as the human genome was being sequenced -- in fact, our own Dr. Eeckman led the bioinformatics effort for the Human Genome Project at Lawrence Berkeley National Laboratory. But gene therapy, and ZFPs in particular, are difficult targets to work with, making progress slow and rendering any world-changing medical advances off in the somewhat distant future.
Founded in 1995 as a gene therapy company, just before the reported problems, Sangamo has been re-positioning itself as a stem cell company. Stem cells have taken the place of gene therapy as the “hot” area of biotech, but ZFPs are really a gene therapy as they turn genes on and off to create their therapeutic effect. While the work on ZFPs has proceeded over many years, it is still in its early stages. Sangamo has an ongoing Phase I trial that began in early 2005, testing a drug known as SB-509 on diabetic neuropathy and peripheral artery disease. Twelve patients were enrolled, typical for a smallish Phase I trial to test only a drug's safety and not its effectiveness.
Preliminary results from the Phase I trial were reported at the Annual Meeting of the American Academy of Neurology in San Diego in April 2006. Sangamo management commented that the drug was well-tolerated and that there is evidence that the drug was beneficial to about half of the patients -- a good but not compelling outcome. Final results from the Phase I trial will be presented at the American Diabetes Association meeting, which will be held June 9-13, 2006 in Washington, DC. A successful Phase I result is not typically a significant inflection point, so we wouldn't expect too much of a jump in Sangamo's stock price if the ADA data is positive, but there could be a negative impact should the data not meet expectations.
Even though the Phase II trials are scheduled to begin later this year, it will be many years before the Phase III results are in and FDA approval for SB-509 is assured. Remember that Phase I is just the beginning of the path that drugs must follow to win FDA approval, Phase II has only a 33% probability of success, and that even after Phase III, success is not assured (download our article from Investment Advisor magazine, Investing in Biotech: Buying the Future).
On Friday, May 26, 2006, Sangamo published positive results from pre-clinical work in the peer-reviewed journal Diabetes. The news sent the stock higher, but Sangamo also announced that it had filed a shelf registration of an additional $50 million worth of company stock, which took some steam out of the share price.
Sangamo has also done some work using ZFPs against HIV (see our article Sangamo Reports Success Using ZFNs to Fight AIDS). They expected to begin a Phase I trial for HIV early this year, but as of late May, it has not yet begun (see Sangamo's website for more on its HIV Application).
At Centient, we have nothing against the Zinc Finger Proteins technology per se. In fact, early work at Sangamo shows some interesting promise. But we would be cautious about investing in any company focused on an emerging technology, especially with only one drug in the pipeline, unless there were some strong Phase II clinical data supporting both efficacy and safety. As a point of reference, most Venture Capitalists won't invest in companies without Phase II data these days, even in more "predictable" technology areas than ZFPs.
The bottom line is that ZFPs are not likely to be the "biggest medical advance in 25 years" as claimed by the website, at least not in the immediate future. But it is a promising technology, and Sangamo's progress bears monitoring.
Disclosure: none.