Biopharma firm Sorrento Therapeutics (NASDAQ:SRNE) is up more than 12% in pre-market trading this morning, as America posted another record day of novel coronavirus diagnoses and the United Kingdom ramps up its own vaccine push. SRNE stock gained 2.73% on Tuesday.
The San Diego-based Sorrento announced today that it had received a Clinical Laboratory Improvement Amendments (CLIA) license from California for clinical sample testing. The firm intends to initially offer three diagnostic tests for Covid-19 infection. It expects to expand testing to include immuno-oncology tests to support its clinical trials.
Why does this matter? Well, the announcement comes as several states posted staggering numbers of new virus cases. Arizona on Tuesday set a new daily record with more than 12,300 additional coronavirus cases. The number of hospitalized patients is also approaching levels not seen since the peak of last summer’s surge.
Testing Seen as Important SRNE Revenue Source
Investors are likely focused on the sales potential of the testing. Revenue fell from $13 million in Q4 2019 to $7.7 million in the first quarter, and have shown modest improvement this year.
Any additional revenue couldn’t come too soon as Sorrento is burning through cash. In the first nine months of 2020, the company generated cash flow from operations of negative $118.67 million. It also shelled out another $28 million on capex, licenses and other items. That works out to an average of almost $49 million in cash burn each quarter.
“The addition of a CLIA-licensed laboratory will allow Sorrento to commence generating revenues from clinical sample testing,” said Dr. Henry Ji, chairman and CEO of Sorrento, in a press release.
Data Needed for Emergency-Use Authorizations
Sorrento plans to set up field sites for collection of samples, offering three independent tests for Covid-19 infection.
- A standard COVI-Stix test would use immediate processing and report results within three hours of the sample testing.
- A lab-developed nasal swab test, which is expected to provide a qualitative result within 20 minutes.
- A 30-minute result COVI-Trace test for detection of viral RNA using shallow nasal swab specimens.
The tests will also enable Sorrento to further generate data required for emergency-use authorizations for the COVI-Stix and COVI-Trace. The latter is a diagnostic “spit” test that Sorrento has claimed 97% accuracy for positive tests and 100% accuracy for negative tests.
“The ability to analyze clinical samples from our ongoing and future clinical trials in-house rather than out-sourcing to other CLIA facilities may also result in accelerated turn-around time, increased flexibility and potentially, significant direct savings,” Ji said.
The Bottom Line on SRNE Stock
So, what should investors do today with SRNE stock? Further gains could be an opportunity for those holding the shares to take profits. Considering the volatility that these shares have seen in recent weeks, there will likely be opportunities to enter or come back into Sorrento Therapeutics again in the $6.50-$7 neighborhood.
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups.