Despite the severe volatility that its equity valuation has incurred in recent trades, Sorrento Therapeutics (NASDAQ:SRNE) finds itself up over 100% for the year. In my mind, there’s zero doubt that a substantial reason for the enthusiasm is due to the company’s charismatic chief executive, Henry Ji. I’ve had a chance to talk to Ji on occasion, and every time, I’m left with the impression that he’s an Elon Musk-type. I’m sure it’s had an impact on SRNE stock.
Have you heard the expression, selling ice to an Eskimo? Well, Ji is the only person I know that can sell that ice at a premium. He’s really an individual that could be successful in any area of industry. Whether he’s making antibodies, closing real estate deals or selling cars well above sticker price, this is a man you want on your team. Heck, he could be an InvestorPlace contributor and he’d eventually run the entire show.
Certainly, if I’ve learned anything from Ji, it’s that I would never play poker against him. Not only would I lose but he’d make me feel good about losing. Truly, this is a man that has a gift from God. But that also makes SRNE stock a tricky proposition.
To be fair, what I’m about to say applies to any of the novel coronavirus plays in the broader healthcare space. But I think it’s especially true for Sorrento. When you buy SRNE stock, you must do so with the knowledge that no matter what, Ji wins. Now, you can win too, that is for certain. But whether you actually will or not is definitely not for certain.
If you look at various social media posts regarding SRNE stock, you’ll likely find characterizations that defy common sense. I’m telling you, Henry Ji has a gift from God. He just has that Midas touch that is influential and organic and most importantly, legal.
But that’s why you must be careful and be sure that you want to get involved with Sorrento.
The Science of SRNE Stock Is Good But Late
Drilling into the science underlining SRNE stock, investors have reasonable assurance that it checks out. I don’t want to give the impression that Ji is a used-car salesman, which are a dime a dozen. Rather, Ji is the perfect weapon of intelligence and charisma.
When I said that Ji can be successful with any endeavor, he ought to look at human resources as a second career. He has a knack for finding brilliant talent and convincing them to work for Sorrento. So, whenever the discussion about scientific integrity comes up, you can have confidence in SRNE stock in that department.
But scientific confidence is not exclusive to Sorrento, and that’s where the story meets some skepticism as it relates to its sharp Covid-19 pivot. First, the company is in the vaccine race, specifically developing a “recombinant fusion protein of the SARS-CoV-2 spike protein.”
I’m not at all shocked that it went with this approach. Similar to traditional vaccines, Sorrento’s subunit candidate introduces the genetic profile of SARS-CoV-2 to the body’s cells, which triggers a process for antibody production. However, unlike traditional vaccines, subunits don’t use live on inactivated forms of the target virus but rather, fragments (subunits) of it.
Scientific literature demonstrates that subunit vaccines are safer than traditional vaccines in this regard. As well, subunits are appropriate for patients with weakened immune systems, a plus for the Covid-19 pandemic.
So, what’s the problem? Novavax (NASDAQ:NVAX) is the clear leader in this arena, and its vaccine candidate is in phase-3 trials. As well, Novavax has avoided the pitfalls impacting other vaccine competitors, such as Johnson & Johnson (NYSE:JNJ) and AstraZeneca (NASDAQ:AZN). That may be due to the subunit’s inherent safety profile. However, the point is, Novavax is far ahead of Sorrento, which is still in the pre-clinical stage.
As for Sorrento’s therapeutics, these are also largely behind in the game. But the lag to competition isn’t the worst part. According to the New York Times, pausing clinical trials for vaccines is a common occurrence. What isn’t so common are such hiccups for therapeutics, as was the case with Eli Lilly (NYSE:LLY) and its antibody drug.
Adding to concerns are questions regarding Gilead Sciences’ (NASDAQ:GILD) remdesivir, now marketed as Veklury. So far, physicians have been ambivalent regarding the drug’s potential. That doesn’t provide much confidence for smaller biotechnology firms, which may be laden with debt and facing a cash crunch at a desperate hour.
Probably an All-or-Nothing Affair
To be completely fair with SRNE stock, the underlying pivot to Covid-19 means that Sorrento has a solution for every stage of the coronavirus spectrum, from testing to various therapeutics to a vaccine. Theoretically, then, investors could benefit from a jackpot – all solutions being granted the green light – or a mitigated win – a few items getting the nod.
But another possibility lingers in the air, that Sorrento fails to gain traction on any of their solutions. And it’s not an unthinkable proposition either. Yes, it has something for everything as far as Covid is concerned. But none of these platforms are exclusive to Sorrento and Sorrento leads in none of its contested market subsegments.
Realistically, SRNE stock could benefit if the top dogs crumble and we have to start from scratch. But even then, who’s to say that Sorrento won’t also experience hiccups, particularly in the therapeutics department?
With all due respect to Henry Ji and team Sorrento, the more I look at the Covid arms race, the more uneasy I feel. If you’ve got the speculative bug in you, you could take a shot here with “dumb” money that you can afford to lose. But for at least 90% of investors, this is probably one you should stay away from.
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.