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Wednesday, February 8, 2023

Speculative Investors Should Buy Sorrento Stock

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Several of Sorrento Therapeutics’ (NASDAQ:SRNE) drugs have significant potential. I believe that the drugs could be approved for compassionate use by the end of this year while many people are still sick with the novel coronavirus. The valuation of SRNE stock is relatively low, making the shares attractive for long-term, speculative investors.

Image of two scientists in lab coats studying results in a lab

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Several Drugs Have Meaningful Potential

Last month, Sorrento announced that its coronavirus treatment, Covidtrap, “neutralizes the {coronavirus} and prevents infection in African green monkey kidney epithelial cells” in lab tests. And in May, the company divulged that its antibody, STI-1499, had “demonstrated 100% inhibition of” the coronavirus in a lab test.

Covidtrap works by attaching to the spike protein of Covid-19, preventing it from interfering with human respiratory epithelial cells. In lab tests, it “completely inhibited the ability of SARS-CoV-2 virus to infect … cells at a low concentration,” the company says in a statement.

As of the end of May, the company said that it planned to test STI-1499 in “a few dozen intensive care patients by the end of July or early August and move into a much broader pool of patients by October,” according to BioWorld. On June 5, the company reported that it had discussed Covidtrap with the FDA and received guidance for a clinical trial of the drug. Sorrento thinks the drug could be both a treatment for infected patients and a means of protecting uninfected individuals.

Further, Sorrento on May 21 announced that it had licensed a drug called Abivertinib from Chinese company ACEA Therapeutics. According to Seeking Alpha, “Abivertinib recently demonstrated ability to reduce inflammation associated with excess cytokine production.”

Cytokines are made by cells that are part of the immune system and cause inflammation. Since the release of large amounts of inflammatory cytokines in response to the coronavirus has been associated with organ failure and mortality, Abivertinib could theoretically prevent some coronavirus patients from dying.

Finally, the company has developed a drug called Covi-Shield that incorporates “multiple antibodies and would be more resistant to mutations in SARS-COV-2″ than STI-1499,” Seeking Alpha reported.

SRNE Stock and Covid-19

Sorrento’s CEO, Henry Ji, has called STI-1499 “a cure.” That could be true, although some data on the extent to which the drug protects humans from the coronavirus is needed before the determination can be made.

It will probably be many months before any of Sorrento’s drugs are approved for use in humans. Gilead’s (NASDAQ:GILD) remdesivir was granted emergency authorization in the U.S. several weeks into the pandemic, but its safety for humans had already been determined well before the pandemic started.

Ordinarily, a drug is not approved for a year after it’s had a successful Phase 3 trial, and the overall drug development process takes a decade. With the exception of Abivertinib, which is scheduled to enter Phase 2 trials starting in August, it appears that Sorrento’s drugs are just beginning to enter Phase I trials in July or August.

In fact, Covi-Shield as of May was not expected to start undergoing a Phase I trial until the current quarter. And, as I mentioned earlier, at the end of May, STI-1499 was to be tested in around 35 ICU patients at the end of July or early next month.

Still, if Sorrento’s drugs prove to be safe and do effectively fight the coronavirus in the patients who take them during clinical trials, the company’s treatments could conceivably be approved for emergency use at the very end of this year or in the first quarter of next year.

By that time, even if vaccines are being deployed, at least several million people in developed countries are likely to be suffering from the coronavirus. If Sorrento’s drugs prove to be meaningfully more effective than Gilead’s remdesivir, they are likely to be given to hundreds of thousands of patients with the virus.

And if Sorrento’s drugs do effectively treat the coronavirus and protect people from it, many countries will decide to buy them to prepare for the next pandemic and to treat people with the coronavirus who decided not to get vaccinated.

The Bottom Line on SRNE Stock

The company’s coronavirus drugs could easily generate a few billion dollars of revenue by the end of 2021, yet the stock currently has a market capitalization of only $1.67 billion. Consequently, I think that long-term, speculative investors should buy SRNE stock at its current levels.

Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been Roku, oil stocks and Snap. You can reach him on StockTwits at @larryramer. As of this writing, he owned shares of Gilead.

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