Although the novel coronavirus vaccine race represented a boon for biotechnology and pharmaceutical firms, the low-hanging fruit is essentially gone. Not only are we close to the election, which represents a possible paradigm shift, we’re heading toward great uncertainties. With both Covid-19 and the flu season in the mix, the case for speculative investments like Sorrento Therapeutics (NASDAQ:SRNE) has enjoyed second wind. Nevertheless, the company has got to start gaining traction for the sake of SRNE stock.
This is both a point of encouragement and anxiety for Sorrento stakeholders.
On one hand, CEO Henry Ji basically going all-in on Covid. While I could be mistaken, I don’t think I’ve ever seen an organization pivot as hard toward the coronavirus as Sorrento Therapeutics. Additionally, I don’t think I’ve ever seen one single organization offer so many therapies for this pandemic, ranging from treatments to a vaccine to testing apparatuses.
However, in order for investors to truly feel comfortable with SRNE stock, the underlying company must distinguish itself in key competencies, especially regarding a vaccine. While there are many aspects to consider, I’m going to summarize the vaccine race into three segments: solution, approach and distribution or “SAD” for short.
Why SAD? To be completely honest with you, only a few vaccine players will likely win out in this race. Due to logistical hurdles, it just doesn’t make sense to have dozens of vaccines. Thus, before anyone decides to throw their money into this competition, you should look at the matter objectively, considering pros and cons, along with rival offerings.
Though SRNE stock certainly has high reward potential, the risks are equally high. So let’s dive in and see if Sorrento is right for you.
Solution Type
For Sorrento’s vaccine, the company is running a targeted virus vaccine, featuring a recombinant fusion protein of the SARS-CoV-2 spike protein. According to the Washington Post, this is a subunit vaccine, where fragments (subunits) of the SARS-CoV-2 proteins are injected into the body to induce a process for antibody production.
Right from the start, this is a positive for SRNE stock. Unlike other vaccine types, some of which are experimental, subunits have a track record of success. As the Post mentioned, the hepatitis B vaccine was developed through the subunit process.
So, this should give SRNE stock the all-clear, right? Well, the problem is that Sorrento is well behind the leader of this approach, Novavax (NASDAQ:NVAX). Not too long ago, Novavax initiated Phase 3 trials of its vaccine candidate in the U.K.
On the other hand, Sorrento’s candidate is still in the pre-clinical stage. Therefore, even if Sorrento has the better solution, Novavax will most likely have the first crack at delivering a subunit-type vaccine.
Approach with One or Two Shots?
One of the major challenges regarding subunit vaccines is that they typically have low immunogenicity. Therefore, these vaccine types often require a good adjuvant, along with multiple doses for longer-term immunity.
Sure enough, that’s exactly the case for Sorrento’s Covid-19 vaccine candidate. According to the company’s own website:
“T-VIVA-19 is a recombinant fusion protein of the spike protein S1-domain and the Fc portion of the human IgG1 antibody (rS1-Fc). The rS1-Fc was injected into either the vein or the thigh muscle of a mouse. The mice were given a booster shot three weeks later (by the same route as the initial injection) and immune responses to SARS-CoV-2 were examined.”
Sorrento’s study went on to state that “Antibodies were observed to be enhanced upon the administration of a booster.” This implies that two doses will be needed. Don’t get me wrong – I’m not bashing SRNE stock. As you may know, Novavax’s candidate also requires two doses to be effective.
But the problem here is that Sorrento doesn’t appear to offer a distinct advantage to Novavax with, for example, a one-dose solution. Furthermore, both Sorrento and Novavax have significant competition with Johnson & Johnson (NYSE:JNJ), which is in Phase 3 trials for its single-dose vaccine.
Distribution Could Be Make or Break for SRNE Stock
Even if an effective vaccine is developed, that’s not the end of it. Oh no — the company must then manufacture and distribute its vaccine. And if this process is cumbersome or imposes too many requirements, another vaccine with a superior distribution profile could ultimately emerge victorious. According to Sorrento’s Henry Ji:
“Due to the potentially low dose administration of T-VIVA-19, which may be one milligram per person or less, we believe our existing cGMP manufacturing facility is capable of producing bulk drug substance rS1-Fc for up to 100 million doses a month. Unlike other vaccine candidates, our rS1-Fc protein production could utilize our existing therapeutic antibody manufacturing processes, and we therefore believe it would be simple and easy to scale up.”
For the sake of those owning SRNE stock, I hope Ji is correct. However, in another story featuring Novavax, I noted that “…an unfortunate disadvantage is that subunits and Novavax’s candidate in particular may be more expensive. The manufacturing process to develop the underlying nanoparticles is more involved than producing the traditional oligonucleotides that may be used in nucleic-acid vaccines.”
Essentially, Sorrento may not be able to prove its manufacturing and distribution prowess, given its laggard clinical status. Further, Johnson & Johnson’s vaccine apparently does not need to be frozen, which adds to its ease of logistics.
Are You Prepared to Bet It All?
As I mentioned earlier, I don’t think I’ve ever seen any one company pivot so hard and comprehensively toward the coronavirus. That’s a very aggressive bet, which may suit your investing profile. But at the very least, you should be aware that we’re approaching a year into this pandemic.
At some point, you got to figure that President Donald Trump will be correct: this will all go away like a miracle.
Another factor to be aware of is that Sorrento has made very little clinical progress for many of its Covid-based products. With so many vaccines entering Phase 3, I’m surprised that Sorrento’s candidate is collecting dust in the preclinical bin.
Sure, it can make up ground, but realistically, I’m not terribly inclined to make that wager. And this hard pivot also raises another uncomfortable question: what happened to Sorrento’s primary oncology business?
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
