Please ensure Javascript is enabled for purposes of website accessibility

Why Sorrento Therapeutics Stock Slipped Today

By Keith Speights – Jul 24, 2020 at 3:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The biotech plans to make an acquisition for an undisclosed sum.

What happened

Shares of Sorrento Therapeutics (SRNE -4.32%) were slipping 5% lower as of 3:24 p.m. EDT on Friday. The decline appears to be related to Sorrento's announcement earlier in the day that it plans to acquire SmartPharm Therapeutics. In the press release announcing the deal, the company also said that it expects to file an Investigational New Drug (IND) Application with the FDA in August for approval to begin a phase 1 study of COVID-19 antibody therapy candidate STI-1499, also known as COVI-GUARD.

So what

One reason why investors might be wary of Sorrento's intended acquisition of SmartPharm is that the financial terms of the deal weren't disclosed. Sorrento isn't anywhere close to reaching profitability and had only $21.9 million in cash and equivalents as of March 31, 2020. 

COVID-19 printed on a blue background with small red models of the novel coronavirus

Image source: Getty Images.

Aside from the near-term financial concerns, though, an acquisition of SmartPharm could pay off for Sorrento over the long run. The two companies are already working together to use SmartPharm's Gene Mab plasmid nanoparticle platform in Sorrento's development of therapies for COVID-19 and other diseases.

Sorrento's plan to submit for FDA approval to begin a phase 1 study of STI-1499 is kind of a double-edged sword. The good news is that the biotech is moving forward with its COVID-19 program, which so far has included only preclinical testing. The bad news is that Sorrento is still way behind others who are already evaluating experimental antibody therapies in clinical trials.

Now what

The SmartPharm transaction is expected to close in August. However, the progress for Sorrento's COVID-19 candidates will be more important for the biotech stock. Sorrento hasn't yet announced definitive plans to advance any candidate other than STI-1499 into clinical testing.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sorrento Therapeutics, Inc. Stock Quote
Sorrento Therapeutics, Inc.
SRNE
$1.55 (-4.32%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.