A Vulnerable Pipeline Continues to Weigh Down Sorrento Stock

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Sorrento Therapeutics (NASDAQ:SRNE) captured investors’ imagination by discovering an antibody that they said provided 100% inhibition against Covid-19. Sorrento stock closed as high as $18.82 in August, and it has shed 65% of its value since that point. The company’s cocktail of Covid-19 solutions lags behind the competition as the vaccine race reaches its penultimate stages. Hence, Sorrento Stock is not your best Covid 19 play by any stretch of the imagination.

floating molecules representing biotech stocks like SRNE stock

Source: Shutterstock

The company boasts one of the most comprehensive slates of Covid-19 solutions out there, including therapies, vaccines and tests. Unfortunately, it has failed to force the pace with many of its solutions in its product pipeline.

On the flip side, we look at its competition where 12 vaccine candidates are already in phase-3 trials. Moreover, a few of its candidate drugs, such as Covi-shield, are being questioned about their efficacy by investment firm Hindenburg Research. Therefore, with such a vulnerable portfolio, you can’t help but wonder whether its $1.5 billion market capitalization is justified.

Shaky Product Pipeline

Sorrento has a whole host of Covid-19 solutions, but most of them are either in preclinical stages or face stiff competition. Apart from its diagnostic and antibody tests, it has eight experimental drugs in its pipeline. Additionally, it was also investigating Covid-19 antibodies and therapeutic proteins along with a vaccine candidate.

It is clear that Sorrento’s pipeline mainly consists of tests and experimental drugs. Though it has a Covid-19 vaccine candidate in development, it is still in preclinical stages and is virtually out of the race. Sorrento’s problem is that the mass commercialization of Covid-19 vaccines will render testing and drugs dispensable.

Even if it receives approval for most of its products pipeline, it faces stiff competition from companies with much greater resources and competencies. For example, if its test receives approval, it would be up against more than 220 viral and 56 antibody tests.

Sorrento’s Covid-19 vaccine candidate T-VIVA-19 is still in preclinical stages and is a major downer in its pipeline. The vaccine race’s significant players promise a production capacity of over 8.7 billion doses by next year. Hence, if the company doesn’t pick up the pace in the next few months, it’s virtually out of the race.

Price Fluctuation

Sorrento Stock Price Fluctuation

Source: Chart courtesy of StockRover.com

Sorrento stock’s price has been volatile this year, with strong rises and falls. The continued speculation surrounding its Covid-19 program and the array of press releases from its management has contributed to such a pattern. From the chart, we can see that the stock peaked during August but declined sharply soon after. It remained steady from September to October, before spiraling downwards. The stock is currently trading at $6.65, which is significantly lower than its August highs. Hence, it’s clear that the market has become more skeptical about its prospects over time.

One of the most puzzling things about the company is its market capitalization. Its market cap is over $1.7 billion, which for a company with such a vulnerable product pipeline is unfathomable.

Weak Liquidity Position

Sorrento’s liquidity position is a significant cause for concern. Unlike its competitors such as Moderna (NASDAQ:MRNA), it hasn’t received support from third parties in advancing its portfolio. The company’s cash equivalents are only $24.4 million compared to its long-term debt balance of $147 million.

Sorrento finds itself in an inauspicious position with the impending release of the Covid-19 vaccine. It has a vast product portfolio but remains highly susceptible to the release of the Covid-19 vaccine. On top of that, many of its products remained in preclinical stages and seemed to have missed the boat on a Covid-19 breakthrough. Its financial resources remain constrained, and its debt balance continues to grow at a healthy pace.

Therefore, it’s best to avoid Sorrento stock at this time.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.


Article printed from InvestorPlace Media, https://investorplace.com/2020/11/sorrentos-vulnerable-pipeline-continues-to-weigh-down-sorrento-stock/.

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