When I last did a write-up about Sorrento (NASDAQ:SRNE), a biotech company that has a myriad of drug and diagnostic candidates for Covid-19, SRNE stock was trading at $9.48. The stock made some nice gains after that — then gave it all back. The stock is now all the way back down to $8.
So now what? Is there still a bull thesis in place or should investors get cautious? Well, I’m still bullish. But then again, this is still very much a high-risk company, with many drugs in the early phases. After all, SRNE has seen quite a bit of volatility this year — and this will likely remain the case.
Recently, Sorrento had its Covid-19 update for its research and development efforts. The main announcement was an exclusive license agreement with Personalized Stem Cells, Inc., which involves global rights for a stem cell treatment. It is currently going into a Phase-1 clinical trial for 20 hospitalized patients with Covid-19 in California. A Phase-2 trial would include patients from other geographies.
As seen with the treatment of President Donald Trump, there has been much more attention paid to stem cells. Note that they were a key part of the testing for Regeneron’s (NASDAQ:REGN) antibody cocktail, REGN-COV2.
Here’s what Dr. Henry Ji, the CEO of Sorrento, had to say about his company’s announcement:
“Stem cells were a missing piece in our comprehensive portfolio of potential solutions against COVID-19. We now cover multiple stages of the continuum of care from prevention to potential therapeutic solutions for the most advanced stages of the disease. With PSC’s Phase 1 product candidate, we hope to move quickly through the next clinical trials, and, if successful, be able to provide a supportive therapy that may save the lives of the most advanced patients and may also ensure patients who have to undergo intensive care can benefit from a therapy with the potential to minimize the long-term effects of the disease due to the lung damage created by the virus early in the infection.”
Race for Covid-19 Treatments
It has been remarkable how swiftly Ji has refocused his company on Covid-19. Here are just some of the treatments and diagnostics: COVI-TRACE (a diagnostic test), T-VIVA-19 (a vaccine) and a variety of neutralizing antibodies like COVI-GUARD, COVI-AMG and COVI-SHIELD.
Although, the COVI-TRACE may have the biggest impact on the bottom line for SRNE stock. This is a low-cost test that is based on a patient’s saliva. The test takes only eight minutes or so.
While it seems likely a vaccine will be available within the next couple months, it will take time for a full rollout. The logistics will certainly be daunting. In the meantime, there will be a need for better testing systems.
Bottom Line On SRNE Stock
In terms of the risks, they are considerable. Except for abivertinib, which is in a Phase-2 program, there haven’t been human trials for the other Covid-19 candidates. This is certainly concerning since many other companies, such as Pfizer (NYSE:PFE), Johnson & Johnson (NYSE:JNJ) and Novavax (NASDAQ:NVAX), have drugs that are in Phase 3.
Something else: Sorrento is a relatively small company. So given its wide assortment of candidates, the company may be stretched. Does the organization really have the bandwidth?
It’s a tough call. Yet SRNE stock has the benefit of optionality. Thus, only a couple candidates need to pan out to make a difference. It also helps that the FDA has been focused on accelerating the approval process because of the dangers of the pandemic.
So again, SRNE stock is no slam dunk. But the company still has a decent chance of being a big winner.
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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