What happened

Shares of the mid-cap biopharma Sorrento Therapeutics (SRNE.Q -26.67%) jumped by as much as 35% in pre-market trading Thursday morning. The stock is heating up today in response to the Food and Drug Administration clearing Sorrento's COVID-19 neutralizing antibody, COVI-Guard (STI-1499), for a phase 1 trial in hospitalized patients.

The trial is reportedly being designed for rapid adaptive expansion, including international sites in Brazil. By taking this approach, Sorrento hopes to have a clear line of sight on the drug's preliminary safety and efficacy features in a short period of time. 

A blood vial labeled coronavirus blood test positive.

Image source: Getty Images.

So what

The main goal of this initial trial is to lay the groundwork for larger clinical studies, which can subsequently be used to apply for emergency use authorization (EUA). What appears to have grabbed investors' collective attention this morning is that Sorrento noted in its press release that an EUA submission could be in the hands of the FDA before year's end.

That's a big deal because Sorrento is well behind both Eli Lilly and Regeneron Pharmaceuticals in the COVID-19 neutralizing antibody race. Lilly, for instance, has already launched a phase 3 trial for its COVID-19 antibody candidate LY-CoV555. Pivotal data from that ongoing study is expected by next March. 

Now what

Is Sorrento a screaming buy in the wake of this regulatory development? While it does sport a rather healthy risk profile, the company appears to be dramatically undervalued relative to its near-term growth prospects -- especially if COVI-Guard becomes one of the first antibodies on the market via an EUA later this year. Put simply, risk-tolerant investors may want to scoop up some shares of this red-hot biotech stock today.