Editor’s note: A previous version of this story cited information that has since been amended.
Sorrento Therapeutics (NASDAQ:SRNE) is up over 200% for the year. And yet, until recently, SRNE stock was a laggard in comparison to other biotech stocks. That’s due, of course, to the novel coronavirus. It’s hard for investors to keep up with the dozens of biotech firms involved in the development of testing, therapeutics and vaccines to help the world grapple with Covid-19.
For its part, Sorrento is involved in all three areas. This does give the company a bit of a “jack of all trades” feel. But is that bad? Not necessarily. Some analysts are forecasting the company could have a few billion dollars of revenue in 2021.
But that forecast relies on them hitting on all of their opportunities. And time is not the company’s friend in any of those scenarios. And that’s why the case for SRNE stock is speculative at best.
The Vaccine Race Is Crowded
I’ll just cut to the chase. Sorrento’s vaccine candidate, T-VIVA-19, has not advanced to the clinical trial stage as of this writing. And when there are already at least three vaccine candidates in late-stage trials, all of which have the backing of Operation Warp Speed (OWS), it’s hard to get excited about Sorrento’s candidate.
I don’t want to sound inconsistent. I’ve said on a number of occasions that being first in the race to a Covid-19 vaccine is not critical. And Sorrento’s candidate may get through all the approvals. But without the backing of OWS, it’s unlikely that the company will be able to produce the drug at scale.
Testing May Be Readily Available, But Less Needed
Sorrento is also producing a rapid-response Covid-19 test. That’s desirable, right? It certainly would be. If the test was available. But it’s not and this is another area where time is not in Sorrento’s favor.
First of all, Sorrento’s test lags behind a competitive offering from Yale University.
Yale’s test, SalivaDirect already has an Emergency Use Authorization (EUA). Sorrento is in the process of applying for an EUA. However in the best-case scenario Sorrento will get approval by the end of the year.
I understand the premise that it could be well into 2021 before the entire population is vaccinated for Covid-19 (assuming they want the vaccine). I also acknowledge that the answer to the vaccine question may be none of the above. That would be disappointing, but that’s the nature of science. So there will still be a need for testing.
However let’s put on our optimist hats and assume there is a vaccine. And let’s go crazy and say the vaccine gets distributed in the way we hope it will. First responders are first in line. Those most at risk are next. And this will follow down the line, so that the least at risk will get the vaccine last. Sound good?
Here’s the problem then as I see it. The fundamental reason behind mass testing is to prevent asymptomatic community spread. That is, someone without symptoms unknowingly transmitting the virus to others, particularly those most at risk.
However if the community is largely vaccinated (at least the community of those most at risk) then the remainder of the population, even if they are not vaccinated, will have little need for a test unless they’re showing symptoms. This is happening today. We know there are more than the 7 million plus cases that have been reported as of this writing. So we’re already operating society with an undefined risk premium. The vaccine lowers that risk premium.
But What About a Therapeutic?
This is where I’ve always seen Sorrento’s best opportunity. Sorrento has two candidates in clinical trials. COVI-GUARD, an antibody-based treatment recently received approval to being Phase 1 testing. The company also has Abivertinib in Phase 2 trials. This drug will treat “cytokine storms” that manifest as severe respiratory distress in the most severe Covid-19 cases.
Abivertinib is moving through clinical trials as an immunotherapy for non-small cell lung carcinoma (NSCLC) treatment. However, there’s the question of whether the drug will make it through the clinical trial phase for treatment of Covid-19.
Is SRNE Stock a Speculative Bet?
That’s all SRNE stock is, in my opinion. And I understand the allure. It’s one of those stocks that if you wait until they get a drug approved, you’ve missed the train.
But the problem is that for all the progress Sorrento is making on the Covid-19 front, the company is up against the clock. And beyond its Covid-19 treatments, the pipeline appears to be years away.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.
