Many stocks have come into focus in recent months as potential ‘coronavirus plays’ and one of those is that of Sorrento Therapeutics Inc (NASDAQ: SRNE). The company came into focus after it claimed that it had managed to create an antibody that could inhibit COVID 19 by ‘100%’. Needless to say, such claims led to rising investor interest. Hence, it is important to take a closer look at the developments and figure out if it is a stock worth buying.
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Earlier on, the senior vice president at Sorrento, Dr. Mark Brunswick claimed that if the antibody is approved then people could go back to their normal lives and have no fear of catching the virus. The statement was endorsed by the company’s Chief Executive Officer as well.
However, things have not turned out as expected. These statements were made around five months ago and at this point, as many as 12 vaccines are in Phase 3 clinical trials. On the other hand, the vaccine candidates from Sorrento are only in the initial stages as far as clinical trials are concerned.
Hence, it is clear to see that even if Sorrento does manage to get approvals for its coronavirus vaccine candidates, it is unlikely that it is going to be the first to the scene. The products are also going to face stiff competition, in that case.
At this point, the company is hoping to get Emergency Use Authorization from the United States Food and Drug Administration coronavirus medicines and tests. However, the appeal of those products is far less due to the possibility of the launch of COVID 19 vaccines.
In addition to that, it is also necessary to keep in mind that even if the medicines and tests are in fact awarded the authorization, the products are going to compete with a large number of existing products.
On the other hand, investors need to note that although Sorrento commands a market cap of $2 billion, it only has $24 million as a cash balance. In Q2 2020, product revenue stood at only $5.79 million.
However, it is far more important to note that Sorrento has total debts to the tune of as much as $220.84 million. In the previous 12 months, the company has spent as much as $157.93 million and issued new shares to the tune of $79.34 million.
Considering the volume of its debts and the uncertainty about its products, it is likely that the stock will suffer if there is any market correction.
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