Sangamo Therapeutics Inc (SGMO) 2009 Q1 法說會逐字稿

Good afternoon, and welcome to the Sangamo BioSciences teleconference to discuss first quarter 2009 results. This call is being recorded.

I will now pass you over to the coordinator of this event, Dr. Elizabeth Wolffe, Director of Corporate Communications. Please go ahead.

Thank you, Miranda.

Good afternoon, and thank you for joining Sangamo's management team on our conference call to discuss the company's first quarter 2009 financial results.

Also present during this call are several members of Sangamo senior management, including Edward Lanphier, President and Chief Executive Officer, and Ward Wolff, Executive Vice President and Chief Financial Officer.

Following this introduction, Edward will highlight the company's recent activities, Ward will briefly review first quarter financial results, and, finally, Edward will update you on our therapeutic programs and goals for 2009. 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 on 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 an obligation to provide updates in the future. Actual results may differ substantially from what we discuss today, and no one should assume at a later date that our comments from today are still valid.

We alert you to be aware of risks, which are detailed in the 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 operation to differ materially from those contained in our projections or forward-looking statements.

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

Thank you, Liz, and thank you all for joining us for our 2009 first quarter conference call.

On this call, I will briefly highlight some of our recent accomplishments and then ask Ward to update you on our first quarter financial results. I will wrap up with a brief discussion of our ongoing clinical programs, the "Nature" paper that came out earlier today, and a review of our upcoming events and objectives for the rest of 2009.

We began the year with an exciting first for Sangamo, with the opening of the Phase 1 clinical trial of SB-728-T for HIV. This is the first ZFP nuclease-based therapeutic to be taken in to the clinic. The trial is being conducted by our collaborators at the University of Pennsylvania, and I'll say more about this very important study in a few minutes.

We were also notified that two -- that the two abstracts we submitted to the American Diabetes Association Scientific Sessions have been accepted, and we will be presenting data from our SB-509-601 and SB-509-701 A trials in New Orleans in early June. I will briefly touch on these studies later in the call.

On the research reagent side of our business, we announced the achievement of an important high throughput milestone in our collaboration with Sigma-Aldrich. This achievement was over a year ahead of schedule and triggered a payment of $1 million.

Just as important, this represents a significant step in the scaling up of our ZFP production process. Sigma needs to be able to deliver on the significant increase in demand that they are experiencing for ZFP reagents, as we heard just last week from their CEO speaking on the Sigma quarterly earnings call, and I quote, "Our zinc finger nuclease product line is rapidly becoming one of our star performers with continued rapid adoption by pharmaceutical companies and university researchers. Zinc fingers are the gene-editing tool of choice, enabling researchers to delete a gene, add a" -- "add nucleotides in a gene, and perform other gene manipulation. This is likely to be a multimillion-dollar market, and we intend to take full advantage of these opportunities. So stay tuned," end quote. He couldn't have said it better if I had written it myself.

Finally, this morning I am very pleased and proud to say that we and our collaborators at Dow AgroSciences announced a fundamental publication in the journal "Nature" that has unprecedented implications for plant biotechnology, and, as the CEO of DAS put it, quote, "the potential to redefine the future of plant agriculture," end quote.

We really are, as our collaborators at Sigma like to say -- have endless possibilities for the zinc finger platform, and we at Sangamo look forward to continuing to deliver on this spectacular promise. So stay tuned.

And with that brief summary of recent activities, let me now hand the call over to Ward to review our financial results for the first quarter of 2009.

Ward?

Thank you, Edward, and good afternoon, everyone.

As you know, after the close of the market today, we released our financial results for the first quarter ended March 31, 2009, and I am pleased to review the highlights of those results.

Revenues in the first quarter of 2009 were approximately $3.2 million, compared to $2.8 million for the same period in 2008. The increase in 2009 is due to revenue from our collaboration agreements with Dow AgroSciences and Sigma-Aldrich and enabling technology agreements. There was no revenue associated with research grants in this quarter.

Total operating expenses for the first quarter of 2009 were $10.2 million, compared to $11.6 million for the same period in 2008. Included in operating expenses were noncash employee stock-based compensation costs of $1.5 million in the 2009 quarter, compared to $1.7 million in the 2008 quarter.

Research and development expenses were $7.3 million in the 2009 quarter and $8.6 million in the prior-year quarter. As noted in our press release, the decrease in research and development expenses is primarily related to lower clinical trial expenses in our ongoing SB-509 program in diabetic neuropathy as studies have progressed, partially offset by the ramp up for the Phase 1 clinical trial for HIV/AIDS, which opened in the first quarter of 2009, and expenses for our planned Phase 1 clinical trial in glioblastoma multiform.

General and administrative expenses were $2.9 million for the first quarter of both 2009 and 2008.

For the first quarter of 2009, we reported a consolidated net loss of $6.8 million, or $0.17 per share, compared to a net loss of $8 million, or $0.20 per share, for the first quarter of 2008.

With respect to the balance sheet, we ended the first quarter with $57.9 million in cash, cash equivalents, and short-term investments. Our net cash used in operating activities was $7.1 million for the first quarter.

I am pleased to say that we are on track with respect to our operating plan for 2009 through the first quarter, and we are maintaining our guidance provided at our fourth quarter and end-of-year call in February of having cash and investment balances on hand of at least $45 million at the end of 2009. As you recall, this guidance assumes no new financing or partnering, but it does include anticipated milestones in 2009 from our existing partnership agreements.

Specifically, as noted in our February call, we fully intend to continue to execute on our hybrid business model by establishing new corporate partnerships in our core ZFP therapeutics business, as well as in noncore areas. Independent of success in any of these areas, our current cash position is sufficient to enable us to fund our current therapeutic development pipeline through 2011.

In summary, we are pleased to have executed on our financial plan for the first quarter of 2009 with respect to our operating results and net cash used in operating activities. We look forward to executing on our 2009 goals as the year unfolds. We will continue to be focused on advancing our clinical and preclinical pipelines while maintaining our historical financial discipline.

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

Thanks, Ward.

We began 2009 in a strong cash position and at the end of the first quarter are on track with a financial plan which will enable us to pursue our clinical development programs, advance our preclinical pipeline, deliver on our partnered obligations, and end the year with at least $45 million in cash and cash equivalents.

Achieving this financial stability does not happen by accident. As you have heard from the CEO's at Sigma and DAS, we have an extremely robust technology platform that we have successfully and broadly applied across several different business areas. Maximizing the value of this platform, as we have done over the past several years, by establishing strategic collaborations that enable us to monetize our technology in nontherapeutic area, has enabled us to operate Sangamo in a manner that makes us very different from many other biotechnology companies that are pursuing only human therapeutics. Our business model allows us to aggressively prosecute our therapeutic programs to points of significant value inflection while maintaining a relatively modest burn rate, which, I am sure you realize, is particularly relevant in the current economic environment.

And now let me give you an update on our clinical programs.

Our newest clinical trial, Phase 1 safety trial of our ZFP therapeutic for HIV/AIDS, opened up in February by our collaborators at the University of Pennsylvania. This trial was important for several reasons, not the least of which is that it's the first human clinical study of a zinc finger nuclease. It also represents a new and very exciting approach to CCR5, our highly validated HIV target that has proven challenging to draw defectively with conventional small molecules. We believe that this makes CCR5 an ideal candidate for our ZFP therapeutic approach, an approach that functions uniquely at the DNA level.

In this study, we are taking immune system cells, specifically CD4+ T-cells, from infected HIV patients, treating those cells using zinc finger nucleases that modify the CCR5 gene so that the cells produces a nonfunctional CCR5 protein and, after fully characterizing the modified cells, infusing them back into the patient. We believe, based upon our preclinical data and work that our collaborator, Carl June, has carried out previously with other T-cell transfer approaches, that these cells will provide the infected individual with a population of modified T-cells that cannot be infected by HIV, may selectively expand, and be available to fight off both the infections normally associated with HIV and -- with AIDS and the HIV virus itself.

At the foundation of our approach are several successful experiments that have been carried out both in nature as well as in the laboratory. Briefly, CCR5 is a co-receptor that enables HIV to enter and infect cells of the immune system. Individuals that have a natural mutation in their CCR5 gene, CCR5-delta32, are highly resistant to infection by HIV but, otherwise, immunologically normal.

In addition, a patient in Germany who presented with both an HIV infection and leukemia received a bone marrow transplant from a donor carrying the CCR5-delta32 mutation. After the bone marrow transplant, doctors could not find any evidence of HIV virus up to two years after the procedure. Our ZFN technology could potentially provide an outcome similar to the German transplant procedure while simultaneously avoiding the dosing and toxicity issues associated with systemic small molecule therapies.

The Phase 1 trial ongoing at Penn is designed to evaluate the safety and tolerability of a single infusion of a patient's own CD4+ T-cells that had been modified with our CCR5 specific zinc finger nucleases. This autologous T-cell product is called SB-728-T. A total of 12 subjects with HIV will be enrolled in this trial in two treatment cohorts. These two cohorts represent two patient populations that, in addition to safety data, will give us the most information about the potential for the ZFN-modified cell to survive and expand, as well as their effective immunological potential.

While our primary interest in this trial is safety, we are also collecting data on how well the ZFN-modified cells survive in the patient, whether or not they expand preferentially, as we have seen in our preclinical animal experiments that we published in June of 2008, and evaluate their effects on both the infections normally associated with AIDS and the HIV virus itself.

As we have said previously, at this stage, we are not providing guidance regarding timing to complete the accrual of this trial or the presentation of data from the trial. However, we look forward to updating you on the progress of this open-label trial at appropriate medical meetings in the future.

Turning to our most advanced therapeutic product, SB-509, as you know, we are conducting several Phase 2 trials for the treatment of diabetic neuropathy, a major complication of diabetes in a rapidly growing market around the world. In early June, at the 69th Scientific Sessions of the American Diabetes Association meeting in New Orleans, we plan to present data from two of our three Phase 2 clinical trials, SB-509-601 and SB-509-701 Part A.

SB-509-601 is a double-blind, placebo-controlled, repeat-dosing Phase 2 trial in subjects with mild to moderate DN. In November 2008 we released neurological top-line data, which did not reveal any significant differences between treated and untreated subjects. However, as we have previously discussed, we have continued to analyze the very significant amount of data we collected from this study, and we have now completed the subgroup analysis. We plan to present these data at ADA.

We will also present the analysis of new histologic top-line data from skin biopsies that were collected during the 601 trial in order to measure the direct effect of SB-509 on the density of sensory nerve fibers in the skin and their ability to regenerate after treatment. Reduction in numbers of these sensory nerve fibers has been shown to be a sensitive indicator of both DN onset and progress and is an excellent, direct, histological measurement of neuroregenerative activity.

We will also present data at ADA from our SB-509-701 A trial, a single-blind, repeat-dosing study in a group of subjects with more severe DN. You will recall that last we expanded this trial to test a more frequent dosing regime, which we have designated 701 Part B. While we will present the complete 701 A dataset at ADA, we have previously mentioned that interim data from this trial demonstrated continued improvement in the nerve conduction velocity measurements in all nerves. Additionally, we observed clinically relevant improvements in NCV measurements in the sural nerve in SB-509-treated patients compared to placebo-treated subjects.

Finally, to update you on our progress, we expect to conclude the accrual and treatment phases of our expanded 701 Part B study in severe DN in 2009 and to present data from our stem cell mobilization study, SB-509-703, at an appropriate medical or scientific meeting later this year.

Beyond our DN programs, we expect to complete the accrual of our Phase 2 study to evaluate SB-509 for the treatment of ALS by the end of 2009. We are also on track to file an IND for our second zinc finger nuclease-based therapeutic for the treatment of glioblastoma later this year. I look forward to giving you more information on both of these programs on future calls.

We also continue to advance our ZFP therapeutic preclinical pipeline. We have ongoing studies in validated animal models of stroke, traumatic brain injury, and Parkinson's disease, and expect to publish and present preclinical data in spinal cord injury, neuropathic pain, and zinc finger nuclease-mediated gene modification throughout this year.

Turning to our partnered programs, our hybrid business model of establishing strategic collaborations that allow us to monetize our technology in noncore areas, enabling us to own and aggressively move our therapeutic programs forward, has been very successful. In the near term, the establishment of collaborations with both DAS and Sigma has been extremely useful as a source of capital and validating from a technology and commercial perspective. Going forward, as we have said before, we expect to see partnerships for our ZFP therapeutic programs at points of significant value inflection.

However, for those of you looking for even more external validation, the past few days have provided it and then some. As you have heard, the value of our technology platform and business model is becoming increasingly apparent. The CEO of Sigma-Aldrich spoke last week of the CompoZr ZFN-mediated gene editing product as becoming one of its, quote, "star performers," end quote, and likely to be, quote, "a multimillion dollar market," end quote.

This morning, in announcing the publication of data from our collaboration in plant agriculture in the scientific journal "Nature," Jerome Peribere, CEO of Dow AgroSciences, said, quote, "EXZACT Precision Technology based on utilizing proprietary zinc finger nucleases has the potential to redefine the future of agriculture, driving productivity gains globally and greatly enhancing the sustainability in a major food crop, such as maize." He went on to say, quote, "This technology provides flexibility and versatility in plant biotechnology research, enabling developers, such as Dow AgroSciences and our collaborators, to enhance the discovery and development of novel traits for the crop production industry."

The lead scientist at EXZACT at Dow AgroSciences went further. Quote, "Conventional agriculture biotechnology has been a laborious, time-consuming, and unpredictable undertaking. However, results of the EXZACT Precision Technologies show that zinc finger nucleases can be utilized in any plant species amenable to DNA delivery, including commodity crops, vegetables, ornamentals, trees, and biomass crops. This establishes a new, rapid, and efficient strategy for precise plant genetic modification in basic science and agricultural applications. Additionally, it provides a new and efficient path to market, reducing the cost and complexity of product development," end quote.

I am sure it is not lost on many of you that, in their press release, Dow Agro Sciences also makes the point that it is making EXZACT Precision Technology acceptable to all segments of the plant agricultural industry. So, as they say, quote, "Stay tuned," end quote.

As for the details of what was published today in "Nature," the paper describes the uses of zinc finger nucleases to add a herbicide-tolerance gene into a specific, predetermined address in the maize genome. Researchers chose to place the herbicide-tolerance gene into a region that resulted in the disruption of a gene that is an important in the biosynthesis of phytate to produce a herbicide-tolerant and reduced-phytate maize plant. Phytate is a natural component of corn and is economically and agriculturally important because it is difficult to digest for certain animals, such as pigs and chickens, and leads to discharge of excess phosphate in the animals' waste, a source of significant environmental pollution. In a rapid, single-step process, the gene involved in phytate production was disrupted and permanently linked with the acquisition of herbicide tolerance, i.e., stacking the two desired characteristics in the plant.

Moreover, as the paper demonstrates, this is a permanent change that is carried through into the seed of the crop. Importantly, this outcome can be replicated for any other gene with other zinc finger nucleases targeting and inserting any gene and rapidly enabling the generation of seed stocks with multiple desired traits stacked into known addresses in the plant's genome. As Dow AgroSciences points out in their release, this is a very different process compared to the current shotgun approaches that use random mutagenesis events and random insertion of genes, followed by laborious selection and breeding programs to try and sort through the products.

So, needless to say, we are very pleased and proud to share these data and, more importantly, the breadth and power of our zinc finger approach for the rapid and efficient generation of improved foods, fiber, and fuel with the world today. You should expect further visibility of this kind from both our DAS and Sigma-Aldrich partnerships, as well as further progress from our zinc finger nuclease technology in cell-line engineering and the generation of transgenic animals, during 2009.

Finally, from a balance sheet perspective, we remain in very good shape. You can expect to continue -- us to continue to carefully manage our expenses while working hard to build value through a maturing clinical pipeline and thoughtful strategic partnerships. We plan to end the year with at least $45 million in cash and cash equivalents, which we believe represents cash through 2011.

In conclusion, we remain focused on our goal of establishing ZFP therapeutics as a new and highly differentiated class of human therapeutics while developing the technology as a powerful platform for drug development and in collaboration with Sigma-Aldrich and Dow AgroSciences in research reagents and plant agriculture.

Thank you for your attention this afternoon. We will provide additional updates at the Eighth Annual JMP Securities Research Conference in May and at the Needham Eighth Annual Life Sciences Conference in June. We will also hold our annual meeting on June 4th at 9:00 a.m. Pacific time here at our company headquarters in Richmond, California.

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

(Operator instructions)

We'll go to Charles Duncan with JMP Securities.

Hey, Charles. Charles, you're on. Hello?

Why don't we go to the next question, please.

We'll take our next question from Eric [Pharma] with Leerink Swann.

Hi. Good evening, guys. Can you hear me?

Yes. Hi, Eric.

Hi. How you doing? So I have three questions. Two of them are on the "Nature" biotechnology publication. Congrats on that, first of all.

Now, looking over one of the quotes of Dow AgroSciences CEO, and it mentions "and our collaborators," when they're speaking about their crop-production industry. Do you know who they might be referring to there?

I think they're referring to both collaborators in academia, as well as collaborators in the plant biotechnology industry.

Okay. And anyone specifically for corn or for this trial that might make sense?

I don't think I would be -- it would be appropriate for me to name names beyond what Dow has said, but I think there's contact information on the Dow AgroSciences press release. So I'd refer you to that -- to Dow.

Okay. Perfect. And is there also theoretical limit for the number of genes that can be stacked in corn or any other plant?

Well, let me ask Philip Gregory, who, I think, is on the call, to answer that.

Philip?

Sure. So I think in principle one could imagine stacking a very large number of different traits into an address. I think we're probably at this stage more limited by knowledge of the types of genes that we'd like to stack together, rather than the technology's ability to stack them.

Okay. Great. And then, if you can target a specific spot in the gene, do you think, potentially, regulators would be less concerned and require less regulatory scrutiny since there's not a chance for that plant to have undesired characteristics?

Well, I think it's a very good point, Eric, and one that, I think, is talked about a great deal. And I don't -- again -- and I apologize if I sound evasive here. It's just that this is exactly the area where Dow is not only expert but also very, very active.

I would, however, maybe refer you to something that is published in -- an article on the "Nature" Web site today, which is a quote from a scientist at the Swiss Federal Institute in Technology, and he says, "One argument that's often used, in part correctly, is that, when we create transgenic plants, we insert genes somewhere in the genome, and we don't exactly know where it happens to insert." And he goes on to say, "Now you can target the transgene to a specific location." And I think conjecture -- and I'll just leave it at that -- that this could have positive impacts from a development timeline perspective and, potentially, from a regulatory perspective are consistent with the outcomes.

But, again, I would encourage you to contact the folks at Dow with exactly those sorts of questions because I think they're good ones and important.

Okay. Perfect. And then one quick question on SB-509. Can you give us any clarity on what subgroups might be looked at for the 601 A trial?

I think what we've said in recent public presentations is that, when we look at patient stratification in the 601 trial, when we look at patients that have mild disease versus patients that had more moderate disease, that that stratification is informative and that patients with more mild disease had more robust responses in the time frames -- the six-month time frame of the study. And so I think that's probably the best characterization of stratification and of subgroup analysis that I can give you at this point. Obviously, the data -- the complete dataset will be presented at ADA.

Okay. Great. I look forward to that data.

Thanks, Eric.

We'll go next to Joe Pantginis with Merriman Curhan Ford.

Hi, guys. Thanks for taking the question. If you could let me fast forward a little bit to your next anticipated IND for glioblastoma, the recent FDA Advisory Panel for Avastin, which ended up being positive, showed, at least in my opinion and some others as well, that the bar is still relatively low for glioblastoma therapeutics. Can you give us a little color again, as we're getting closer to the IND, as to how -- your approach for using a zinc finger nuclease can really add to the armamentarium?

Yes, Joe. This is Dale. So what we're using is a chimeric T-cell receptor. So we're arming cells called cytolytic T-cells to basically attack a very common antigen in glioblastoma, and these T-cells will be infused into the part of the brain after the glioblastoma has been resected. And you may not know, but one of the problems with resection of glioblastoma is that they're basically little fingers of cancer sticking into the brain, and you can't take it out completely. So what we're basically doing is turning these T-cells into antiglioblastoma -- almost like little scalpels, and what the zinc finger does is that it protects these T-cells from steroids, which is commonly used in these patients. When -- because, when they present with their glioblastoma, they often have seizures and a lot of brain edema. So we're basically allowing these antiglioblastoma cytolytic T-cells to go into the brain and kill it. So it's very different from the Avastin-type approach is, which is really looking at the blood supply or the general chemotherapy.

Great. Thanks for the update.

Thanks, Joe.

We'll go next to Charles Duncan with JMP Securities.

Hi, guys. Sorry for missing the last one. Thanks for taking my question.

I had a question regarding the T-cell by -- modified by ZFP's. I think you mentioned that it was going to be not perceived as a foreign antigen. Can you give us some additional color on that, Edward?

Sure. Again, I think we've discussed this previously.

Dale, is there anything further you want to add on that?

You mean whether the genetic modification is seen as a foreign antigen?

Yes.

So what -- basically, what we're doing is cutting the gene and actually causing a missense mutation so that the rest of the protein will not be made. So we're not really adding in any new epitopes.

Uh-huh.

We're, basically, just taking a protein and genetically cutting it at a certain position so that it's not actually altered.

Yes.

So in those types of situations, it's unlikely that you'll get a immune response, etc.

So the thesis that it might be antigenic, which has floated around the market, is probably -- doesn't make sense to you, at least scientifically, Dale?

Correct.

That's right. Let me just ask -- keep doing this back and forth because Philip's actually over in Europe and has called in.

Philip, is there anything you want to add on that?

Well, all I would say is that we, in fact, did look to see whether there were any CCR5 truncation products in T-cells that have been treated with zinc finger nucleases targeting CCR5, and that data was published in the "Nature" biotechnology paper in the supplementary information, and we, by several different approaches, did not see any truncation products that would indicate the type of antigen that could be recognized as foreign. So, as Dale says, based on what we know, the types of mutation that are generated are -- we'd find this very, very hard to understand how this would be a problem.

Okay. Thanks for the added color, guys.

Thanks, Charles.

We'll hear next from Alastair Mackay with GARP Research and Securities.

Hi. I was wondering if you could say anything about the progress with the use of the ZFN's in biopharmaceutical cell lines? There's over a half dozen companies that have expressed interest and have programs going. Any updates on any of them?

Hi, Alastair. Sure. Happy to give you an update. Just out of curiosity, where's the half-dozen companies come from?

Well, let's see. If I count a list -- one, two, three, four, five, six, seven, eight -- nine all told, maybe two not active.

It's from previous groups that we're working with. I see. I thought you were talking about pipeline.

No. I'm sorry. The agreements that have been characterized over the past couple years.

Fair enough. I -- I'll certainly respond.

And, Philip, you can remind me in a moment maybe where we are with regard to publication or presentation on some of the data, certainly the Pfizer group has been presenting a lot of this data, and maybe, Philip, you could talk about that.

But, as you saw, Alastair, this is a business unit that is something that we think we can monetize very effectively and in a way that's highly leveragable because the structure of these deals are nonexclusive. And so, while the Pfizer deal is somewhat unique, the deal we announced in December, I think, is representative of the kind of outcomes that we can create, the uniqueness of those outcomes, and the value of those outcomes.

And so, just to remind you, we license on a nonexclusive basis to Pfizer the rights to use cell lines -- a specific CHO cell line of theirs, that had a zinc finger-induced knockout of the GS gene. GS, as you know, is just a selectable marker, so a relatively low-value target, but in this case we did a $3 million, nonexclusive, all-in license. In other situations, such as our Genentech collaboration, where we're looking at targets of potentially greater value, we will lower the upfronts but will retain rights and milestone payments both in terms of their development -- ongoing development activities on a per-product basis, as well as commercial milestones. So it's a highly leveragable business and one, again, that you -- we expect to be doing more deals around.

And before I stop, Alastair, let me just ask Philip to say -- maybe characterize some of the data that have recently been presented.

Sure. So, yes, Pfizer's been out providing updates on some of the work that we've done with them specifically around the GS knockout CHO cell line. They were licensed, in fact. But the other collaborations are also going very well. There's been data presented by Genentech at conferences using our technology, and what happens in these collaborations is that the nucleases are created, the cell lines are created, and then, obviously, they go through a panel of evaluations, and those are in progress. So we're -- everything's going very well at this stage.

Very good. Thanks for the update. And any similar update on prospects for transgenic animal progress?

I think the thing I'd say there, and, again, Philip may have some more color here, but I think -- don't want to get too far ahead of ourselves -- is that that's an area of significant opportunity for the technology and significant activity, both with Sangamo and our collaborators, as well as Sigma-Aldrich and their collaborators, as well as in their business. And so it's -- I'd sort of stop and just say stay tuned.

Philip, anything you want to add to that?

Yes. Just to say that we have, of course, published on the use of the technology in zebrafish, as it was just, of course, a transgenic model that's used in drug discovery, but, obviously, what Edward's referring to is the effort that's ongoing to move that in to other species, and we look forward to updating you shortly.

Very good. And then, Edward, last, if you have any comment on the licensing agreement with Alnylam and Isis in terms of what these nucleic acid-based strategies for therapy might mean in the foreseeable future?

Alastair, this is the announcement they made this morning?

Yes.

To be perfectly honest, these days for us are somewhat hectic, and I haven't sat down and looked it, but I'm happy to talk to you maybe later in the week or next week about it.

Yes. Fair enough. Okay. Thanks very much.

Thank you.

We'll hear next from Bill Nasgovitz with Heartland Funds.

Yes. Good afternoon.

Hi, Bill.

Hi. Well, it sounds very exciting. When you talk about a star performer -- Sigma-Aldrich CEO talking about this zinc finger platform -- star performer gene editing tool of choice, did you say "rapid deployment" or "rapid uptake"?

Let me see. I said, "rapidly becoming one of our star performers with continued rapid adoption by pharmaceutical companies and university researchers." And, Bill, that -- I think you can find that language in the Sigma-Aldrich first quarter conference call transcript.

Okay. So -- but it left me a little bit cold when you said just millions of dollars. That's -- it's still pretty small market. What do you think the potential of this market is looking out years?

Yes. I'd say, Bill, the quote that I'm looking at says, "This is likely to be a multimillion-dollar market, and we intend to take full advantage of these opportunities." I'm not in a position to put a harder number on "multimillion dollar" for you.

Uh-huh. Uh-huh.

We are -- and as Alastair just asked about transgenic animal models and cell engineering, there really is a -- just to quote the Sigma advertising campaign -- endless possibilities for the application of the technology in research reagent and the life science research area, and I think Sigma is thoughtful and aggressive about how they are developing and deploying the technology commercially. So I'm --

Okay. So --

I'm very pleased with it.

That's great to hear. So how do you get paid again? I know you've gotten upfront money from them --

(Inaudible.)

-- milestone money.

Upfront monies and then milestones, both from a technical deliverables perspective and then commercial milestones, technical milestone total $5 million, and we've received $1 million of that so far. The commercial milestones total $20 million, and those are on points of -- various points of total sales -- total product sales, and then we receive a 10%-plus royalty on all product sales.

And when do you think that might be meaningful to you -- to us as shareholders?

Yes, I mean, meaningful's a -- kind of a qualitative word, Bill. I mean, I think it's going to grow over time. It's -- $10 million in sales for them is $1 million in -- or thereabouts in revenues for us on the royalty basis plus milestones. So I think it's something that will grow, but I think it's an area that is getting a lot of visibility and is going to be an area of major effort by our partner, Sigma-Aldrich. And, certainly, if you look at their transcript, as far as I can tell, it's the major area that they highlighted in their prepared remarks.

Uh-huh. Well, that sounds great. Now, just turning to -- am I mistaken in the past have -- did you not -- have you not indicated -- and maybe I missed it so clear me up here a bit. I apologize. Have you not said that you expected a major collaboration or fee -- upfront money in 2009 in the past or -- just clear me up on what you have said and where we are today.

In our Sigma-Aldrich collaboration, Bill?

No. I -- just -- I thought that was perhaps in the therapeutic area.

Okay. So we have guided to a partnership around our SB-509 program in 2009. I don't think we've characterized terms of the deal at all --

Uh-huh. Right.

Edward Lanphier -- (inaudible) or anything like that, but we've certainly -- and repeated on this call guidance that we are -- will partner our therapeutic programs at points of significant value inflection.

Uh-huh. So you still anticipate at least one new partnership in that SB-509 area in 2009?

That's right.

Do you think there's a possibility -- I guess there's always a possibility. Is it probable that you might have more than one?

Bill, I'm not going to go beyond our guidance at this point. I think we've said that we anticipate a partnership in that area in 2009.

Okay. Thank you very much, and good luck.

Thanks, Bill. Thank you.

(Operator instructions)

We'll hear next from Liana Moussatos with Wedbush.

Thank you. So how many potential partners are you talking to about therapeutic -- about SB-509? And, when you say "therapeutic partnership," you mean specifically SB-509 program; right?

Yes, hi, Liana. How are you?

Good.

Good. Yes. When I say "therapeutic partnership" -- I'm looking at David Ichikawa, who heads our Business Development program here. I'd say 99% of our discussions around therapeutic partnering are around the SB-509 program -- or at least start in -- from that.

In terms of giving you a specific number, Liana, of the companies that we're talking to, I think I'll not give you a specific number. It's certainly an area of significant activity for the Business Development activities of the company and also for Dale and his clinical team. And it's a -- the only thing I'll say is that the -- there's a lot of activity going on in the industry that -- a lot of mergers ongoing. Obviously, the Wyeth-Pfizer deal, the Merck-Schering-Plough deal, the Genentech-Roche deal, and so on and so forth. And so that creates a lot of noise in the system. But it is a priority for us and one that gets a lot of attention from our Business Development team here.

Okay. And I have some questions for Ward. Was the whole $1 million payment from Sigma included in the $3 million collaborative agreement revenue in Q1?

Actually, Liana, the -- that $1 million was in late '08. We announced it during the quarter so I think that's why it was summarized by Edward, but that was -- that particular milestone was actually in Q4, and I think, as Edward inferred, we have additional milestones that we're tracking for receipt in the remainder of '09 --

And will --

-- including -- starting with Q2.

Okay. And will those milestones be booked as collaborative agreements or licensing and royalty revenue?

They'll be in the one line there that we have for -- collaborative agreements, I think, is the --

Okay. And any research grant revenue expect in '09?

We do have -- we haven't given guidance on it, but, yes, in our internal plans we do have some grant revenue in our model.

Okay. And let's see. And R&D -- do you expect it to go up the rest of the year or go down?

Again, we've been fairly level in that category if you look at the quarter-over-quarter activities. So we've -- Q4 of '08 we did -- we dipped a bit, and part of that was a reversal of a bonus accrual, some other things. So I think that that level that you've seen over the last four quarters or so is -- could be viewed as instructive as you look at the remainder of '09.

And when will the 10-Q come out? I'm specifically looking at deferred revenue in the balance sheet since --

(Inaudible.)

-- accommodated.

The 10-Q we anticipate filing around the fifth of May, I believe.

Okay. All right. Thank you very much.

Thanks, Liana.

And we'll go next to Eric Pharma with Leerink Swann.

I have one quick follow-up on SB-728-T. Since it's an open-label trial, will you be giving us any updates on patients and how their safety and tolerability and potentially efficacy looks in this trial? And, also, if you can give us any sort of update on enrollment of the 12 patients?

All I'll do is repeat what we said in prepared text, Eric, and that is that, at this point, we're not planning to give updates on accrual or on timing for data presentations. Obviously, as time goes on, we'll have more visibility, and that might change, but, for now, we're not giving any updates on either accrual or timing to data.

Okay. Perfect. Thanks, guys.

Thank you.

And there are no further questions at this time. I'll turn the conference back over to Mr. Lanphier for any closing remarks.

Thank you.

We'd like to thank you for joining us. We look forward to speaking with you again when we release our second quarter financial information. We'll be available later today if there are any follow-up questions. Thank you.

That does conclude today's conference call. We'd like to thank you all for your participation.