Emergency Use Authorization filings are leading to growing expectations of a novel coronavirus vaccine. By late December or early 2021, Moderna (NASDAQ:MRNA) and BioNTech (NASDAQ:BNTX) may have a vaccine in distribution. What might that mean for the smaller vaccine developers that are behind, like Sorrento Therapeutics (NASDAQ:SRNE)?
SRNE stock tripled from its 52-week lows but is nowhere near its $19.39 high of the year. Why are investors shunning Sorrento Therapeutics stock instead of buying it as a back-stop in case BioNTech and Moderna stumbles?
Sorrento is trading in a downtrend that began in August, after shares topped $19.39. In October, SRNE stock rallied back to $12 only to trade at around half that price. On Nov. 11, the company announced an investigational new drug application for intra-nasal COVI-DROPS (STI-2099).
In pre-clinical studies, Sorrento demonstrated the high potency of STI-2099. Some 12 hours after its administration, the intra-nasal treatment prevented disease-associated weight loss in hamsters. CEO Henry Ji said, “it is now understood that COVID-19 is a local and systemic disease; therefore, we believe the best course of action would be to attack this highly contagious pathogenic virus both locally and systemically.”
Buying volume in the shares did not increase after the announcement. The Phase 1 study suggests that Sorrento is still at least a few months away from bringing a product to market. The first phase will involve healthy volunteers. In Phase 2, the study will include ambulatory Covid-19 patients with mild or moderate symptoms. Sorrento will study the nasal spray administration alone as well as together with intravenous dosing.
SRNE Stock Catching Bears Off-Guard
A fast-track for approval would catch bears off-guard and send the stock higher. At a short float of around 33%, any good news could squeeze the bears. The company needs to post high efficacy indication from the study to win a quick approval. Unfortunately, Sorrento is also behind the more than 560 drug development programs in planning stages. There are over 370 trials the Food and Drug Administration is reviewing.
The longer Sorrento is stuck in the clinical trial phase, the more cash it will burn. Shareholders have the most risk as competitors bring their products to market. Furthermore, if health agencies settle on a small handful of vaccines and antiviral treatments, Sorrento will not have a product anyone wants.
Fundamental risks remain. For example, the FDA may question the accuracy of nasal spray administration dose levels. Any uncertainties could lead to a delay or a rejection. The stock’s underperformance compared to MRNA and BNTX reflects those risks.
Sorrento filed an Investigational New Drug (IND) request with the FDA for Phase 1 study with intravenous COVI-AMG (STI-2020) on Nov. 9. The study will enroll patients with mild symptoms. It will run a separate study to evaluate the product’s safety and pharmacokinetics in healthy volunteers.
Price Target
There is scant analyst coverage of Sorrento stock, in fact, the company shows only two on its IR pages. And on Stock Rover, based on its enterprise value to sales, its fair value is $10.90. Without a product close to the commercial release phase, investors may only guess what revenues it will bring, if any. Time is running out for Sorrento and the other vaccine suppliers.
Investors who missed the climb by buying BioNTech and Moderna may look at Vir Biotechnology (NASDAQ:VIR) or CureVac (NASDAQ:CVAC) instead. CureVac, based in Germany, is ready to churn out over 100 million doses of mRNA coronavirus vaccine. Alternatively, AstraZeneca (NASDAQ:AZN) will sell the vaccine at the lowest price point. It will also distribute it to developing countries. So, while mRNA vaccines will cost over $30, AstraZeneca’s experimental vaccine will cost no more than $3 a dose.
Your Takeaway on SRNE Stock
Experienced biotechnology investors should not bet on SRNE alone. Holding several of the vaccine suppliers will reduce company risks. At least one of the companies mentioned will have a viable vaccine. It will require twice yearly administration annually. That will result in recurring revenue for those firms among the chosen.
Disclosure: On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.
