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Sorrento (SRNE) to Report Q3 Earnings: What's in the Cards?

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Zacks Equity Research
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Sorrento Therapeutics, Inc. SRNE will provide updates on its pipeline developments when it reports third-quarter 2020 results.

The company has a mixed earnings surprise history, surpassing expectations in one of the trailing four quarters while missing in one and breaking even in the other two. The average negative earnings surprise was 5.41%. In the last reported quarter, the company delivered a positive earnings surprise of 8.33%.

Shares of Sorrento have decreased 111.8% in the year so far against the industry’s decline of 6.4%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Sorrento’s revenues in the third quarter are likely to have been driven by higher contract manufacturing service revenues.

In October 2020, the company announced preliminary third-quarter sales of ZTlido (lidocaine topical system 1.8%) of $7.2 million, indicating sequential growth of 26% despite the continued impacts of COVID-19.

The company is likely to incur net losses in the third quarter due to higher research and development costs (R&D) for its pipeline development.

The company’s COVID-19 pipeline advanced rapidly in the quarter. It is conducting preclinical development of multiple therapeutic, vaccine and diagnostic candidates for the potential treatment, prevention and detection of COVID-19. These include natural killer cell therapies, neutralizing antibodies (COVIGUARD and COVI-SHIELD) and soluble recombinant fusion protein traps (COVIDTRAP) to prevent viral cell entry.

The company is also developing COVID-19 diagnostic products, including COVI-TRACK, for detecting the presence of antibodies against SARS-CoV-2 in patient blood samples and COVI-TRACE, for detecting the presence of SARS-CoV-2 in patient saliva samples. We expect the company to provide updates on its COVID-19-related pipeline candidates in the third quarter.

In October 2020, the company received clearance from the Brazilian regulatory agency (ANVISA) to proceed with a phase II study of its pipeline candidate,Abivertinib, in mild, moderate and severe COVID-19 patients. A phase II study will also start in the United States. Abivertinib is a novel small molecule tyrosine kinase inhibitor (TKI) being evaluated to treat Non-Small Cell Lung Cancer.

An important pipeline candidate is Scilex’s SP-102 (SEMDEXA),which is currently being evaluated in a pivotal phase III study in the United States, in patients with lumbosacral radicular pain/sciatica. Top-line data are expected in the second quarter of 2021. We expect updates on the candidate in the third quarter.

In September, the company completed the acquisition of SmartPharm Therapeutics, whichdevelops non-viral DNA and RNA gene delivery platforms for COVID-19 and rare diseases. With the acquisition, Sorrento will have the potential to make antibody therapy,which will be applicable for a number of indications. The acquisition adds STI-2020dna to Sorrento’s portfolio, which is a plasmid candidate against COVID-19.

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for Sorrento this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here as you will see below.

Earnings ESP: Sorrento has an Earnings ESP of 0.00%. Both the Zacks Consensus Estimate andtheMost Accurate Estimate stood at a loss of 21 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

 

Sorrento Therapeutics, Inc. Price and Consensus

Sorrento Therapeutics, Inc. Price and Consensus
Sorrento Therapeutics, Inc. Price and Consensus

Sorrento Therapeutics, Inc. price-consensus-chart | Sorrento Therapeutics, Inc. Quote

Stocks to Consider

Here are some other biotech stocks that have the right mix of elements to beat on earnings this time around:

bluebird Inc. BLUE has an Earnings ESP of +0.60% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Axcella Health Inc. AXLA has an Earnings ESP of +10.90% and a Zacks Rank of 3.

Ascendis Pharma Inc. ASND has an Earnings ESP of +13.54% and is Zacks #3

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