Can you feel the ground moving beneath your feet? Shares of Sorrento Therapeutics (SRNE) skyrocketed 85% today after the small drug maker was made an offer it could, apparently, refuse.
The biotech announced it received an unsolicited proposal by two biopharmaceutical companies to acquire all the company’s issued and outstanding shares, in cash, for a price between $3 and $5 per share. After consulting with the company’s advisors, the board rejected the offer on the basis the deal significantly undervalued the biotech and would be against stockholders’ interests. Sorrento believes its immuno-oncology products have short- and long-term value and has said it is in advanced discussions with other biopharmas for collaboration and licensing of its products.
The sought-after biopharma has a number of assets in development. Of note are RTX, a non-opioid pain therapy ready for Phase II/III. The drug has a multi-million market in its sight, and early trials showed promising results. In the immuno-oncology development pipeline are four programs: CEA CAR-T (Metastatic Liver Tumors), CD38 CAR-T (Multiple Myeloma), Seprehvir® (Solid Tumors) and CD38 ADC. Additionally, Sorrento owns 58% of Scilex, a commercial-stage company with a best-in-class topical pain product, ZTLido.
But, is Sorrento really worth 70% more today than it was yesterday? JMP analyst Donald Ellis says yes. In a recent research note to clients, Ellis reiterated an Outperform rating alongside a price target of $21. If reached, the target will provide amazing gains of 677%. (To watch Ellis’s track record, click here)
Ellis noted, “RTX’s Ph.1 final 30 ug data are expected in 4Q19. All prior active treatment groups demonstrated a rapid onset of action on the day of injection and pain reduction was maintained out to day 84. The Ph.1 data from the anti-CD38 CAR-T study are also expected in 4Q19/1Q20 [...] Near-term milestones include: a spinoff or IPO of Scilex, or lawsuit resolution with a potential windfall for shareholders; an FDA assessment on the breakthrough status for additional RTX indications by 1Q20; a full top-line data set for RTX in OA pain in 4Q19; and RTX Ph. II/III initiation in early 2020.”
On the Street, the biotech’s supporters are few but very loud. Only 2 analysts tracked by TipRanks over the last 3 months gave the stock a Buy rating. Incredibly, the average price target is $24.5, providing upside potential of about 850% from its current price of $2.58. Overall, it looks like the analysts and Sorrento are on the same page here, as both currently agree the market is undervaluing the sought after biotech stock.
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