Sorrento Therapeutics (SRNE) started the week by following last week’s pattern – rocketing up the charts. Although 25% increase seems like small fry compared to last Monday’s monster gains of 95%, the number is still pretty impressive.
To recap: Last week, Sorrento announced it had rejected unsolicited offers from two biopharmaceuticals to acquire the entire company. The offers made valued the company shares at a price between $3 and $5 and were rejected unanimously by the board on account that the offer significantly undervalued the company and would be against shareholders’ interests. The rejection was embraced by investors who saw it as a good enough reason to send the stock price soaring, causing the biotech to almost double its value in a single day.
This week's jump raises the question whether there is more going on in the background than currently meets the eye.
The coveted biotech has several assets in development; RTX, a drug with a multi-million market in its sight, is a non-opioid pain therapy ready for Phase II/III trial. Sorrento’s immune-oncology pipeline has 4 programs in development: CEA CAR-T (Metastatic Liver Tumors), CD38 CAR-T (Multiple Myeloma), Seprehvir® (Solid Tumors) and CD38 ADC. Furthermore, Sorrento has a 58% stake in Scilex, a commercial-stage company with a best-in-class topical pain product, ZTLido.
Management have stressed their belief the company’s products have long term value and pointed out they are in advanced talks with other biopharmas regarding collaboration and licensing of its products.
JMP Securities’ Donald Ellis commented, “We agree that the offer substantially undervalued the company and the extensive pipeline in immuno-oncology, pain, CBD, and animal health. We believe that the buyout offers do further validate the company, as large biopharma companies see value in SRNE’s pipeline. The current pace of M&A suggests possible additional competing offers may be possible for SRNE. SRNE is currently in discussions to license the immuno-oncology products, including the KOKI DAR-T platform, which may further advance the pipeline."
Accordingly, Ellis reiterated an Outperform rating on SRNE, along with a 12-month price target of $21. This indicates skyscraping gains of over 500% could be on the cards. (To watch Ellis’s track record, click here)
The Street is still rather quiet on this promising biotech, with only one other analyst chipping in with a bullish rating over the last 3 months. The addition, though, further enhances the stock's potential as the combined price target is $24, potentially providing 616% upside for investors who share the analysts’ undervalued thesis. (See Sorrento stock analysis on TipRanks)
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