The global campaign for a novel coronavirus vaccine continues. As biotech companies do their work, eager investors put their money where they see a potential achiever. Some have placed bets on Sorrento Therapeutics (NYSE:SRNE) thinking that SRNE stock provides a value route to profit.
In the end, though, several companies just won’t make the final cut.
For a variety of reasons, plenty of biotech contenders will be winnowed from the field. Maybe their method to attack Covid-19 didn’t work or the virus was too adept at mutating. Perhaps it took them too long to get there. Some likely won’t have the resources to sustain what is becoming a long-term development project.
Investors are confident there is money to be made if, to borrow phrase from the racetrack, they place a bet on the right horse.
Is Sorrento Therapeutics one of those right horses? Should you buy shares of SRNE stock? Nope. Here’s why.
A Quick Look at SRNE Stock
Sorrento was founded in 2009 and has largely focused on incorporating potential antibody cancer treatments into its operations. As the pandemic began raging, Sorrento pivoted to the global push for treatments and a vaccine.
SRNE stock has been on a lengthy downward slope. The stock’s 52-week high was $19.39, while the bottom over the last year was $1.45. That is one dollar and 45 cents.
In May 2010, shares were trading around $75. Lately, they are hovering around $9.
SRNE stock will spike occasionally when the company makes an announcement that appears to reinforce its viability. These announcements usually involve an agreement with another party. This happened in July when the company announced an agreement with Columbia University regarding a rapid saliva-based test for Covid-19. Shares reached $18, then pulled back as it became clear that others are far ahead on this type of test.
Concerns About Sorrento Therapeutics
A colleague at InvestorPlace, market analyst Thomas Yeung, recently had harsh words regarding Sorrento.
“Sorrento has a long history of puffery,” he writes. “Investors beware.”
Yeung blames the company’s executive pay structure, which he says gives managers a valuable incentive to gamble on risky and unproven drugs and therapies. Announcements on these gambles can trigger a stock move.
With SRNE stock, shareholders help to finance actions that only benefit executives, he adds.
Few investors are experts on the biotech sector. Those that do research must rely on outside reports and folks who play the markets. It is difficult to really “know” what’s going on. That’s why most investors will put their money in established companies with not only a track record of product success but also not misleading investors.
Leadership stability is another trait that investors crave in a company. Unfortunately, that is not the case with Sorrento.
The company abruptly fired its CFO, Jiong Shao, over the summer. His dismissal was announced in an August filing with regulators and came on the heels of reported stock manipulation. Obviously, the words “stock” and “manipulation” are never welcomed together by investors.
On Sept. 18, I wrote in InvestorPlace that SRNE stock had a history of volatility that was a red flag to consider. The article also cited the company’s cash burn and failure to post a profit.
My summary then was “Sorrento Therapeutics appears to be a troubled company with a sliver of potential.”
The Bottom Line
Sorrento Therapeutics often comes up when investors are researching a biotech move. At a glance, the company may come up alongside more established names developing potential Covid-19 treatments and vaccines. But that association alone does not make it a good investment.
Making knowledgeable investments in the biotech sphere can be challenging. For example, it’s quite a task for a retail investor to find a lesser-known firm with “the” golden idea. One reason is the established companies will usually buy them out or buy the product. Investors outside the industry must clear several obstacles to make that kind of discovery.
However, there is hope. Anyone looking to make a pandemic-related play has several proven – and profitable – biotech firms (and exchange-traded funds) from which to choose.
Sorrento Therapeutics isn’t one of them.
On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C.