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Is Sorrento Stock Really Worth the Speculation?

Tom Taulli
·4 mins read

Until this year, Sorrento Therapetics (NASDAQ:SRNE) was an obscure biotech operator. But this changed with the emergence with the novel coronavirus. Now SRNE stock has become one of the most controversial, and volatile, biotech stocks in the market.

A scientist holds a test tube while it is in a container
A scientist holds a test tube while it is in a container

Source: Shutterstock

From May until early August, Sorrento shares spiked from $2.60 to $19. But since then, there has been a flood of selling. Currently, Sorrento’s stock price is at $9,48. Yet the market capitalization is still a hefty $2.42 billion.

Keep in mind that Sorrento did not come public the typical way. Instead, the company pulled off a reverse merger with a corporate shell — called QuickByte — in September 2009. But like many of these types of deals, the stock price just isn’t sustainable.

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Consider that reverse mergers typically do not have capital raises. There is also the issue of its lack of coverage on Wall Street. Further, when it comes to biotech companies, it can take a considerable amount of time for FDA approval, which many biotech stocks rely on for performance.

SRNE Stock Latest Developments

Sorrento was originally focused on oncology treatments, which is certainly a complicated area of medicine. But the company has – at an astonishing pace – transformed itself into a Covid-19 fighter.

So let’s take a look at the main candidates in the pipeline:

  • COVI-GUARD (STI-1499): This is a therapeutic for Covid-19, which uses a neutralizing antibody to help decrease the risks of infection. Sorrento has recently begun the process to a Phase 1 trial.

  • Abivertinib: In May, Sorrento was granted an exclusive license to this from ACEA Therapeutics (the coverage is for all territories outside China). Abivertinib, which is in a Phase 2 trial, is targeted at those who suffer from pulmonary symptoms.

  • T-VIVA-19: This is a protein vaccine for Covid-19 that neutralizes antibodies and T-cell responses. This candidate is still in the preclinical stage.  Note that other pharma operators — like Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) — have candidates in Phase 3 trials.

  • COVI-TRACK: This is an in vitro diagnostic test kit for Covid-19.

So yes, the company has definitely been busy! But of these candidates, the one that is likely to have the most impact in the short-term is COVI-TRACK.

While there are various other diagnostic tests – such as from Abbott (NYSE:ABT) – Sorrento’s does have some advantages. The kit is quick, which can get results in about eight minutes, and is based on a person’s saliva. In fact, such a test could be a game-changer and be essential for many companies to better operate.

And even if a vaccine is approved soon, there will still be much demand for ongoing testing.

Bottom Line on Sorrento

Like any early-stage biotech company, there are notable risks with Sorrento. Let’s face it, when it comes to experimental medical advances, there are no guarantees

But Sorrento has also suffered from some unforced errors. For example, the CFO was recently terminated — and there was no reason provided. Such a move is often jarring for investors.

The CEO, Henry Ji, has also threatened legal action against short seller Hindenburg Research. But why waste time on such a thing? Especially when Sorrento is in a race to create innovative treatments? I’m not really sure.

And, of course, Ji has also stated, “We want to emphasize there is a cure. There is a solution that works 100 percent. If we have the neutralizing antibody in your body, you don’t need the social distancing. You can open up a society without fear.”

In the world of biotech, such bold statements are pretty rare! They are also something that can be a red flag for investors.

Yet despite all this, when looking at the pipeline of Sorrento, there does look like there is potential here. There is a good possibility for the diagnostic test to get approval and this could be a growth driver for SRNE. Although, for investors considering SRNE stock, the best approach is to use that part of the portfolio reserved for speculative investments.

On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Tom Taulli (@ttaulli) is an advisor/board member for startups and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. 

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