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Here's Why Sangamo Therapeutics Rocketed Up to 56.3% Higher Today

What happened

Shares of genome-editing pioneer Sangamo Therapeutics (NASDAQ: SGMO) soared over 56% this morning after the company announced a slew of updates from the first three months of this year and, most importantly, a new collaboration with Pfizer (NYSE: PFE) in Hemophilia A. The pair will work together to develop and evaluate SB-525, one of Sangamo Therapeutics' four lead drug candidates, as a gene therapy for treating the rare disease. There's a good amount of up-front funding and future potential milestone payments included in the deal.

Hemophilia A is rare enough to qualify SB-525 as an orphan drug, which is a designation granted by the U.S. Food and Drug Administration to treatments for diseases affecting fewer than 200,000 people that provides funding for development activities. Sangamo Therapeutics announced that the drug candidate received the designation in the first quarter. As of 12:31 p.m. EDT, the stock had settled to a 46.5% gain.

Image source: Getty Images.

So what

Once at the cutting edge of innovation, the zinc finger nuclease (ZFN) genome-editing technology developed by Sangamo Therapeutics has been overshadowed by next-generation genome-editing technologies such as CRISPR. Getting left in the dust has taken its toll on the stock, which has lingered under $15 per share since early 2015. While the company is still developing ZFN technology, it has rapidly pivoted its focus to a novel gene-therapy platform centered on adeno-associated viruses (AAV), which are used to deliver new genes into cells.

The AAV-based gene-therapy platform is at the center of the deal announced today. Not surprisingly, Pfizer is a leading developer of AAV-based technologies, so the partnership with Sangamo Therapeutics is a big vote of confidence in the tiny biopharma's recent efforts. Mikael Dolsten, president of worldwide research and development at Pfizer, even said, "We believe SB-525 has the potential to be a best-in-class therapy" that could provide stability to patients "with a single administration treatment."

As part of the collaboration, Sangamo Therapeutics will receive an up-front payment of $70 million from Pfizer. The former will be required to conduct a phase 1/2 trial -- which should begin in the current quarter -- while the latter will be responsible for any further development, manufacturing, commercialization, and marketing activities. The tiny biopharma could receive up to $475 million in development and commercialization milestones and another $175 million for additional gene therapies pursued under the deal.

Now what

The milestone payment will push Sangamo Therapeutics' cash pile to roughly $200 million, although a busy early-stage pipeline will eat away at that war chest sooner than investors realize. Either way, today's news is a promising development for investors, and demonstrates that the new focus on AAV-based gene therapies may prove valuable in the long run.

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Maxx Chatsko has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.