Wednesday, September 09, 2009

Sangamo Surprise: Tail Wags Dog

When we checked news on health care stocks and saw that Sangamo Biosciences was up following a press release announcement of a paper pointing to the potential use of its zinc finger nuclease technology to modify human stem cells, we did a double take. It took us a little while to settle back into work mode after the long Labor Day weekend. But we could have sworn we had discussed this paper with colleagues already, several weeks ago.

Indeed, the paper's official release date was August 13, when Nature Biotechnology announced the study's advance online publication (AOP). And the study was accompanied by a press release from the Whitehead Institute at MIT, where the work was done by Rudy Jaenisch’s group. So why did Wall Street only react to it yesterday?

Because Sangamo only put out its PR on the “news” Tuesday morning, when the print edition of NBT came out. According to Sangamo, whose scientists were among the paper's coauthors (but not correspondents with the actual journal editors), the company was first alerted to the AOP the day before it went live. The company was also caught off guard because the paper had only been accepted two days before that, on August 10 – a remarkable and unexpected turnaround time.

With such short notice and summer schedules – and maybe doldrums too – they saw no reason to scramble. (And frankly, it was our view at the time that the paper, although good science and relevant to Sangamo’s platform partner Sigma-Aldrich, was not of any immediate import to drug developers.) That said, the AOP was picked up in a timely fashion by various blogs and press release cut-and-paste services.

Apparently, however, the publication escaped the attention of movers and shakers on the Street until today. There was no blip in price or volume in Sangamo’s stock in mid-August. But on Tuesday, shares rose on the opening and closed up almost 8% on 3x the average volume.

Given the timing of the original AOP, we're not accusing Sangamo of manufacturing or manipulating news. Nor was this a huge movement for a small-cap stock. Surely some trader types would make sophisticated arguments about the need to understand how momentum impels the movement of stocks more than the strength of the underlying news itself. Maybe it was just a handful of traders moving in and out.

But why did it take a company PR to trigger the attention? Aren’t analysts supposed to work hard and dig deep, and that’s why they are paid the big bucks? Or is it that common for the tail to wag the dog? We’re just sayin’.

1 comment:

Unknown said...

On August 13, the date of the original article, SGMO shares closed at $5.74. Since then, the shares have appreciated far more than the $0.61 rise yesterday. There are several factors at work.

Sigma-Aldrich announced on August 21, the opening of their new $10M Sigma Advanced Genetic Engineering (SAGE) facility, built to exploit the Zinc Finger technology licensed from SGMO. The exact quote in the SIAL press release is "Sigma-Aldrich is the premiere resource for commercial zinc finger nucleases and markets its CompoZr ZFN products and services based on an exclusive partnership with Sangamo BioSciences. Two days later, the stock was trading in the mid $7's.

Sigma-Aldrich presents tomorrow at the Thomas Weisel conference and will likely offer more color on the success to date of their relationship with SGMO.

Another SGMO boost occurred on August 21, when SGMO technology was featured in a Forbes magazine article "Lab Rats Get Chic"

And finally, there is much excitement growing about SGMO's collaborative HIV research with U of PA. That Phase I trial is well under way and so far, no BAD news. Speculators and dreamers may believe that's good news.