After running up more than 1,000% this year, we have to ask — where does Sorrento Therapeutics (NASDAQ:SRNE) stock go from here?
The San Diego, California-based bio-pharmaceutical company has enjoyed a spectacular run up in its stock this year. SRNE’s share price rose 1,135% from mid-March through August — vaulting from $1.57 to a peak of $19.39. The huge momentum was driven by the company’s efforts to develop ways to detect, prevent and treat Covid-19. Sorrento Therapeutics researches and develops therapeutic antibodies for the treatment of other diseases such as cancer and inflammation. Investors have been betting on its ability to bring a successful therapy to market for Covid-19.
While results to date have been encouraging, SRNE stock pulled back with the broader market in September and is now down 43% from its August peak, trading at $11.11 a share. This retrenchment has spooked many investors and caused some to dump the stock before its retreat accelerates. However, patient investors who are willing to stick with Sorrento Therapeutics, or those who buy at the current price, may be rewarded with big future returns.
More to Offer Than Just a Vaccine
While Sorrento Therapeutics tends to get lumped in with all the pharmaceutical and biotech companies that are racing to develop a vaccine against Covid-19, the reality is that the company is focused on more than just a vaccine against the disease that has sparked a global pandemic.
In fact, Sorrento Therapeutics has been referred to as a “jack-of-all-trades” when it comes to Covid-19 given that it has a diagnostic test, antibody test, multiple therapeutic candidates and a vaccine against the disease in different stages of development. In this respect, Sorrento’s work is different from the vaccine-focused research that’s being carried out by companies such as Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA) and Johnson & Johnson (NYSE:JNJ).
At the end of September, the company announced strong results from pre-clinical trials of its Covid-19 antibody therapies known as “STI-1499” and “STI-2020.” However, these trials were conducted in hamsters, not people.
That said, with a tenfold reduction in the cornavirus observed in 40% of hamsters tested, the U.S. Food and Drug Administration gave Sorrento a green light to begin a phase 1 study evaluating STI-1499 in treating hospitalized Covid-19 patients.
The company has said in a news release that its objective is to expand the study to a large clinical trial and potentially apply for emergency use authorization from the FDA as early as this December. Other companies developing antibodies against Covid-19 aren’t expected to file for regulatory approval until the end of the fourth quarter or in 2021.
Sorrento has also said it plans to file for FDA approval to begin a phase 1 study of its other therapy, STI-2020, as soon as possible.
Additionally, Sorrento hopes to soon win FDA emergency use authorizations for its Covid-19 diagnostic test and Covid-19 antibody test. If any or all of these Covid-19 related products makes it to market in the next few months, it could prove to be a home run for Sorrento Therapeutics and its shareholders. The key will be for the company to secure the required regulatory approvals.
Other Stuff Happening at the Company
While the hype surrounding Sorrento Therapeutics’ many Covid-19 products is real and appears to be justified, there are other things going on at the biotech company that investors should be aware of and weigh before taking a position in SRNE stock.
Outside of the global pandemic, for example, the company has only one other drug product that is in late stage development, a lung cancer treatment called “Abivertinib.” Sorrento is currently evaluating this cancer drug for treating non-small cell lung cancer. Beyond this, the company has a pain medication in a phase 2 trial and several drugs that are currently in the phase 1 stage of development. This indicates that Sorrento Therapeutics does not have a robust pipeline of products coming to market. In many respects, the company’s eggs are all in its Covid-19 basket.
Also noteworthy was the news in August that the company abruptly fired its Chief Financial Officer. Reasons for the CFO’s ouster weren’t given but the move was enough to rattle investors and helped to push down SRNE stock from its peak of just under $20 a share to its current level.
Investors were further rattled by claims from Hindenburg Research that Sorrento Therapeutics is engaging in a “pump and dump” scheme with its stock. Sorrento has threatened legal action against Hindenburg Research.
It’s also important to keep in mind that Sorrento Therapeutics is a comparatively small company. It ended the second quarter with cash and cash equivalents totaling only $24.4 million. Sorrento’s revenues declined 79% from $152 million in 2017 to just $31 million in 2019. If the company doesn’t knock it out of the park with its various Covid-19 products, it could run into financial straits in the not too distant future.
For now, the few analysts who cover Sorrento Therapeutics remain bullish on the company. The two analysts who have 12-month price forecasts for SRNE stock have a median price target of $24, more than double its current share price.
Be Careful With SRNE Stock
If it’s all true and all goes according to plan, Sorrento Therapeutics could be a big money maker for investors and now would be a good time to buy. But in the race to develop treatments and cures for Covid-19, there are bound to be some corporate casualties, and there has been enough negative activity surrounding Sorrento to give investors pause.
The best advice at this point would be to proceed cautiously with SRNE stock. Take a small position and build it if the company’s Covid-19 products and its stock price take off.
On the date of publication, Joel Baglole held shares of MRNA.
