Sorrento Therapeutics (NASDAQ:SRNE) emerged as an early contender in the fight against COVID-19 and fast cementing its position. The company has multiple vaccine and therapy candidate trials in the works and stands to profit from at least one of them. The company’s update on progress was, at best, disappointing, however. While progress is being made there are still no ground-breaking discoveries or timelines for public availability and investors need more. When it comes to stocks, hopes for a breakthrough are enough to get the market moving, it takes results to keep prices moving. The question for me, is there more to this story than just COVID-19?
More Good News Than The COVID-19 Pipeline
Sorrento Therapeutics is a clinical-stage biopharma company with several products in early and late-stage trials. The company operates in two segments, Sorrento Therapeutics and Scilex which is a mostly-owned subsidiary. The company has several interesting technologies in its stable but the most promising of its treatments in the business-sense is the ZTLido system of lidocaine delivery. This system was first approved in 2018 but only recently seen substantial sales. Sales of the system are expected to rise more than 26% in the quarter and produce about 14% of Sorrento’s expected $58 million in 2020 revenue.
Other items of interest include
- The G-MAB Library - Sorrento Therapeutics developed a library of over 10 quadrillion unique anti-body sequences from over 600 donors. The library has already been used to identify antibodies for over 100 clinically-significant oncogenic targets and more are discovered each year. The potential within the library is vast but tapping could take generations.
- Sofusa - The Sofusa system is a delivery system for injectable medicines that works with microneedles. The microneedles deliver smaller amounts of medicine over a wider area and have been shown to produce better results than traditional injections. This system is still in development. Sofusa for migraines is in Phase I/II trials while Sofusa for Autoimmune and general use are in earlier stages.
- Anti-CD38 CART treatment for multiple myeloma. The program has so far demonstrated strong anti-tumor activity in pre-clinical test subjects. Early Phase I trials are underway. About 0.04% of the U.S. population is living with multiple myeloma today.
- Resiniferatoxin - A non-opioid pain treatment. The company recently reported positive results from a Phase 1b study of patients with moderate to severe knee pain due to osteoarthritis. Patients qualifying for a total-knee replacement saw improvement in 68% of the group versus only 20% for the control arm. An estimated 10% of U.S. adults suffer some form of osteoarthritis so this is a growth opportunity.
The Technical Outlook: Sorrento Therapeutics Is An Interesting Speculation
I’ve come to the conclusion that Sorrento Therapeutics is an interesting bio-pharma and one that is expected to grow. YOY revenue growth should top 500% from calendar 2020 to 2021 but that doesnt’ make this company more than a speculation. Yes, the ZTLido business is taking off and the pipeline is impressive but there isn’t much that’s close to coming to market. Between now and then there is more than a small chance for hiccups and setbacks and with them will come volatility if not outright bear markets. As for COVID-19, that may be the most interesting thing about Sorrento and even that is highly speculative. Sorrento is well-positioned but there is a lot of competition.
Looking at the chart, it is clear the market is interested in this stock. The question is whether it is worth the 42X next year’s earnings it is currently trading for. Technically, it looks like the stock hit a top over the last month and entered a correction. The top, a double-top, is confirmed by divergences and bearish crossovers in the indicators that point to at least a little more downside. The next target for support is near the $8.00/$8.50 level, if prices fall below there a move down to $6 is not out of the question. For those looking to get into this stock, I think the thing to do now is to wait and see how low prices will go.
