Why Sorrento Is a $26 Stock

Once a specialist in oncology drugs and pain management, last year, Sorrento Therapeutics (SRNE) refocused its business on addressing the threat from COVID-19. One year later, the company is viewed primarily as a COVID play.

On Thursday, Sorrento reported that in a single arm, non-randomized Phase 1b study of its human allogeneic adipose-derived mesenchymal stem cells (those are the “MSC” in the name “COVI-MSC”), “all nine patients responded rapidly with markedly reduced need for high inspired oxygen concentration and were able to be transferred out of the ICU and discharged from the hospital within several days of their 3rd COVI-MSC infusion.” Furthermore, none of the patients experienced “infusion related safety events” — and now, Sorrento is proceeding to plan for a placebo-controlled Phase 2 study of the cocktail.

Simply put, at least at this early stage in the game, Sorrento has reported that its cocktail seems both safe and 100% effective in helping to treat COVID-19.

Responding to the news, B. Riley analyst Mayank Mamtani believes the outcome “makes the case” for the U.S. Food and Drug Administration expediting approval of Emergency Use Authorization, or EUA, for the treatment.

Mamtani notes that “this study enrolled Intensive care unit (ICU) patients with C-19-induced respiratory failure, diffuse pulmonary infiltrates, and evidence of poor oxygenation” — high risk patients in other words, at an advanced stage of the disease and in need of critical care, care that COVI-MSC provided. Treated with the cocktail, these patients enjoyed “fast onset” of relief from their symptoms, and were able to be discharged from the hospital “within several days of their 3rd COVI-MSC infusion.”

This is great news. Even better news for shareholders, says Mamtani, is that Sorrento will now proceed to work with the FDA to conduct multiple placebo-controlled Phase 2 studies in the U.S., Mexico, and Brazil.

Although the analyst notes that the increasing rollout of vaccines might diminish the need for COVID-19 treatments such as the one Sorrento is working on, there’s also the risk that the vaccines currently on the market won’t be as effective at preventing “variants of concern” such as the B.1.1.7, B.1.351, P.1, B.1.427, and B.1.429 strains of coronavirus that are spreading in the U.K., Brazil, and California. The more rapidly these variants spread, and the more severe the illness they cause, the greater the need for new treatments will become. And this could prove especially true in countries such as Brazil, where vaccine rollouts have been slower than in the U.S. and U.K.

Post-COVID, Sorrento will probably pivot back to other treatments in its pipeline, such as for pain management and cancer immunotherapy — but for now at least, COVID looks like Sorrento’s fastest path to profit.

To this end, Mamtani rates SRNE a Buy along with a $26 price target. Investors stand to pocket a 222% gain should the analyst’s thesis play out over the coming months. (To watch Mamtani’s track record, click here)

Overall, Wall Street has high hopes for SRNE. As 3 Buy ratings were assigned in the last three months compared to no Holds or Sells, the consensus is unanimous: the stock is a ‘Strong Buy’. (See SRNE stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.