Sorrento Therapeutics, Inc. (SRNE) is a clinical-stage biopharmaceutical company developing new cancer treatment therapies. It’s also developing potential antiviral therapies and vaccines against COVID-19.
The company has an extensive portfolio of immuno-oncology platforms, including clinical stage immuno-cellular therapies (CAR-T, DAR-T), and antibody-drug conjugates (ADCs). (See Sorrento stock charts on TipRanks)
Encouraging immune response for DYAI-100
It was announced on Thursday that preclinical vaccination studies of Sorrento’s COVID-19 vaccination candidate, DYAI-100, indicated strong neutralizing immune responses in animals vaccinated against SARS-CoV-2, and other major variants of the virus.
Sorrento is developing this protein-based vaccine along with Dyadic International (DYAI) and is collaborating with Dyadic to complete the studies for the submission of an Investigational New Drug (IND) application for trials in human vaccinations globally.
Q2 Results
Earlier this month, the company reported its Fiscal Year 2021 2Q results with revenues of $13.5 million — a jump of 50% year-over-year — beating consensus estimates of $8.4 million. However, net loss per diluted share widened from $0.36 in the same quarter last year to $0.57 in Q2. Analysts were expecting a loss of $0.36 per diluted share.
Following the Q2 results, H.C Wainwright analyst Ram Selvaraju reiterated a Buy rating on the stock, but lowered his price target from $30 to $26. Selvaraju expects quarterly operating performance to improve “driven primarily by the sale of COVID-19 diagnostic products in Mexico.”
It is important here to note that the analyst’s valuation of SRNE did not “factor in any contribution from Sorrento’s COVID-19 therapeutics pipeline, which could drive meaningful upside to our forecasts.”
Stakes in Celularity, ImmunityBio
Sorrento has equity method investments in Celularity (CELU) and ImmunityBio (IBRX), the latter of which merged with NantKwest back in March. Equity method investments are usually classified as investments with a stake between 20% to 50%.
Sorrento has classified its investment in ImmunityBio as a current asset, “because the investment can be liquidated to finance the company’s current operations.”
According to Selvaraju, SRNE has sold 5.9 million common shares of ImmunityBio in 2021, netting $95.2 million. Selvaraju values Sorrento’s remaining equity in Celularity and ImmunityBio at $136 million.
Rising R&D Expenses
In Q2, Sorrento incurred research and development expenses of $54.5 million, a massive jump of 125.2% year-over-year. But Selvaraju didn’t seem worried about the jump in R&D expenses as according to him, “the company has multiple ways to generate additional capital.”
The analyst noted that the company had $111.7 million in cash and cash equivalents on its Q2 balance sheet, and that Sorrento could very well liquidate its stakes in Celularity and ImmunityBio for cash, “while the liquidity in Sorrento’s common stock — over [$50 million] in trading volume per day based on the three-month average — provides ample potential for equity-based financing.”
Selvaraju added that with “Sorrento’s COVID-19-related revenue ramps in the coming quarters, we believe the burn rate should meaningfully decline.”
Selvaraju is the only analyst covering the stock in the past three months. His SRNE price target of $26 implies 215.2% upside.
Disclosure: Shrilekha Pethe held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
