Sorrento Therapeutics (NASDAQ:SRNE) has given investors a wild ride this year. That’s because the company made a hard pivot to throw its hat into the Covid-19 ring. SRNE stock has closed as high as $18.82. But as of this writing, the stock is nearly 66% lower.
This is because Sorrento presents a dilemma for investors. Investors now have expectations. And those expectations are rising, as at least five companies have Covid-19 vaccine candidates in Phase-3 trials.
And that means that as an investor, you have to trust your first instinct.
My first instinct has always been that Sorrento seems like it’s almost, but not truly, a competitive player in the Covid-19 sweepstakes. And that means you need to proceed with caution regarding SRNE stock.
On the one hand, I can respect Sorrento’s pivot. I assume they saw an opportunity to support the greater good. And when Sorrento made the pivot, it went all in.
The company is coming at the virus from three angles. First, they have a rapid-response test. Second, they have a vaccine candidate. And third, they are developing a therapeutic treatment.
Is It Three Strikes And You’re Out?
However each one of these angles presents the company with different obstacles. The company’s vaccine candidate, T-VIVA-19, is not yet in a clinical trial. As the current Phase-3 vaccine trials show, it may still be a few months before we have an approved vaccine. But even if Sorrento moves at “warp speed” (pun intended), it will be well into 2021 before they could have an approved candidate. That seems like a swing and a miss to me.
On the testing front, things look a bit brighter. The company has a rapid response saliva test. This scores big on two fronts. First, it delivers results quickly. And second, it’s a saliva test that’s easy to administer and one that patients may be more receptive to taking. As positive cases continue to increase, the need for rapid testing will only increase as a way of minimizing community spread.
Larry Ramer wrote that the current “gold standard” test from Abbott (NYSE:ABT) has to be administered by a health professional or other trained individual. That’s a potential benefit for Sorrento, but for how long? As I wrote earlier this month, once a vaccine is available the need for testing will quickly diminish. And Sorrento does not have emergency use authorization (EUA) as of this writing.
That leaves the therapeutic. And that may be Sorrento’s most promising option. In fact, they have an existing cancer drug, abivertinib, which is in phase 2 trials. If the drug passes Phase 2 trials, Sorrento may be able to get an emergency use authorization.
Does SRNE Stock Pass the Smell Test?
Todd Schriber wrote a recent article that pointed out that Sorrento has given investors some optics that don’t look good. In particular, the company announced in August that its CEO Henry Ji would receive 25 million shares of stock if the company reaches a market capitalization of $5 billion.
With Sorrento’s market cap sitting below $2 billion today, that may not seem like a big deal. But when the proposal was first announced SRNE stock had a market cap of $4.6 billion. That didn’t pass the smell test. And it seems that investors reacted accordingly.
Once they have, they’ve started to look a closer look at the company’s path to help in our nation’s ability to manage the novel coronavirus. And it seems that with news from companies like Regeneron (NASDAQ:REGN) applying for an EUA for its antibody treatment, Sorrento seems a day late and a dollar short. And that means that the company has done nothing to change my first instinct, which is to avoid SRNE stock until the story turns into sales.
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.