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Why Sorrento Therapeutics Shares Are Tumbling Today

By Keith Speights – Jun 3, 2020 at 11:40AM

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Two factors appear to be behind Sorrento's stock decline.

What happened

Shares of Sorrento Therapeutics (SRNE -4.32%) had fallen 10.6% lower as of 11:12 a.m. EDT on Wednesday. The company hadn't reported any news, but a couple of factors may have been behind the sell-off.

First, the stocks of most drugmakers working on COVID-19 vaccines fell after Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases (NIAID), stated in an interview with JAMA editor Howard Bauchner that COVID-19 vaccines likely won't provide a long period of immunity.

Second, Sorrento has been hit with a deluge of lawsuits over the last few days. These lawsuits allege that the company made misleading statements about its clinical programs, with some of the legal filings specifically referring to public statements about Sorrento's COVID-19 program.

Man with hands on his head with a declining stock chart in the background

Image source: Getty Images.

So what

Fauci is widely viewed as one of the leading authorities on COVID-19. When he expresses concern about how well vaccines will work against the novel coronavirus, it's worth taking note. However, Fauci also stated that he's "cautiously optimistic" that there will be a safe and effective COVID-19 vaccine. 

Most of the surge in investors' interest in Sorrento has stemmed from its COVID-19 efforts. Until the drugmaker has solid results to report from clinical studies of its COVID-19 programs, the biotech stock is likely to be highly volatile and to fall on stories like the recent interview with Fauci.

What about those lawsuits? They're not unusual. Drugmakers get sued all the time. It's too soon to know how litigation will play out.

Now what

The most important thing to watch with Sorrento right now is its clinical progress in COVID-19 and in other areas. So far, the company's main achievements on the COVID-19 front have been conducting preclinical tests and forging partnerships with third parties. These are good first steps, but investors will need to see results to have confidence in Sorrento.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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