Since the novel coronavirus emerged earlier this year, it has dominated the stock market. Biotech investors have been searching for the pandemic’s big winner — a firm that can create an effective vaccine. Some firms are going beyond just a vaccine though — in addition to a vaccine, Sorrento (NASDAQ:SRNE) is working on a coronavirus test as well as several treatment options. SRNE stock has been volatile, to say the least, but for investors with a strong stomach, it looks like a good coronavirus play.
This week saw SRNE stock pop on news that the Salicyn-30, one of the company’s potential Covid treatments, offered encouraging results in preclinical testing.
This particular drug could be a stand-alone therapy as or part of a “drug cocktail,” and the promising results gave investors reason to rush back into the stock.
SRNE Stock Has Upside Catalysts Ahead
On Oct. 13, the firm will reveal the progress it’s made on coronavirus “drug cocktail” treatments, and investors are excited. President Donald Trump’s coronavirus diagnosis and subsequent treatment have caused treatment stocks like Sorrento to rise on hopes that doctors may have a handle on treating the virus effectively.
While the firm’s Covid cocktail is still in the early stages of approval, it could become available as an experimental treatment sooner than later as the FDA prioritizes fighting the pandemic. On Oct. 13 investors will learn of SRNE’s progress on the treatment, and the data is expected to bode well for the stock.
Sorrento’s Testing Opportunity
Treatment options aren’t the only reason SRNE stock makes the list among coronavirus investments. The firm is also working on a saliva-based test that could become a game-changer when it comes to society functioning as-normal during a pandemic. The market for Sorrento’s COVI-TRACK, an antibody test that offers fast results, and COVI-TRACE, a rapid-result diagnostic test, looks promising once they’ve been approved by the FDA.
Notably, SRNE isn’t the only company out there working full-pelt on a range of tools to fight the pandemic. It’s also not first in line to be approved for … anything. But that’s actually a good thing for Sorrento investors, because it means the stock hasn’t ballooned to unreasonable levels on hype just yet.
When it comes to vaccines, first is best, but for everything else, the market is big enough for more than one player. That’s especially true in the testing space because the demand for coronavirus tests will ultimately continue to rise until the pandemic is under control. With that in mind, there’s still plenty of room for SRNE to break into the market and grab a slice of that pie.
Don’t Disregard the Risks
While Sorrento’s coronavirus-related pipeline looks stacked, the company has put almost all of its eggs in one basket when it comes to future revenue. There’s a real chance that SRNE’s coronavirus plays won’t pan out, which would leave Sorrento investors in a terrible position. While the company does have other therapies in its portfolio, they don’t justify its $3 billion market capitalization.
Not only that, but Sorrento is considerably smaller than most of its rivals in the race to defeat coronavirus. That means the reward will be larger if Sorrento is successful, but it also means there’s a lot of volatility on the horizon for SRNE stock.
The Final Word on Sorrento
With that said, the risks investors are facing look worth the potential rewards when it comes to SRNE stock. The firm is one of the few biotechs whose valuation hasn’t been blown completely out of proportion on hopes of a coronavirus vaccine.
It’s unlikely that all of Sorrento’s coronavirus efforts will succeed, but for now, the stock seems to have priced in low odds of any success, and that leaves the door open for an attractive entry point for investors willing to take on some risk and wait out the volatility.
On the date of publication, Matt McCall did not have (either directly or indirectly) any positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article had a long position in SRNE.
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