Sorrento Therapeutics (NASDAQ:SRNE) stock has crashed around 40% in value in just the past month, while the S&P 500 has been generating positive returns of 4%. It's been a roller-coaster ride for investors who've seen Sorrento stock climb to highs of more than $19 this year, only to fall to less than one-third of that price today.

The company's been surging on its coronavirus work, but now with Pfizer and Moderna appearing to be close to getting approval for its COVID-19 vaccine, Sorrento's decline may not be over. Today, I'll take a closer look at the company's core business, the stock's current valuation, and whether investors should considering buying the stock on its lower valuation -- or if the worst may still be to come for Sorrento investors.

Are Sorrento's COVID-19 programs too far from the finish line?

Larger healthcare companies like Pfizer, Moderna and Johnson & Johnson are working feverishly to develop coronavirus vaccines and obtain emergency use authorization (EUA) from the Food and Drug Administration (FDA) as soon as possible. To date, only Gilead Sciences has obtained full approval from the FDA, for its remdesivir drug used to treat COVID-19 patients.

Sorrento is working on many different COVID-19 programs, including its antibody cocktail COVI-SHIELD, and Abivertinib, which treats cytokine storms (when a patient's own immune system attacks the body rather than the virus). But none of its possible treatments are even in phase 3 trials. With vaccines potentially available as early as next year, there may not be a significant demand for the drugs that Sorrento is developing by the time they might obtain EUA, assuming they obtain approval at all. The lack of progress surrounding Sorrento's COVID-19 drugs is likely a key reason why the stock's been falling out of favor with investors of late. 

Bottle with a label that reads Coronavirus Vaccine

Image source: Getty Images.

What the business looks like beyond COVID-19

Sorrento's core business today isn't very strong. The company filed its third-quarter results on Nov. 9, and sales for the period ending Sept. 30 totaled just $11.8 million. While that's double last year's revenue of $5.8 million, it's still a modest amount for a company that today has a market cap of $1.7 billion. The bulk of Sorrento's revenue, $7.8 million, comes from Scilex Pharmaceuticals, a company that it acquired in 2016. Scilex's flagship product is ZTLido, which treats pain due to post-herpetic neuralgia.

With ZTLido being the only FDA-approved drug in Sorrento's portfolio, there isn't much of a reason to invest in Sorrento unless you're bullish on the company's pipeline candidates still in development. Abivertinib is in phase 3 trials for the treatment of non-small cell lung carcinoma. While it's possible Sorrento may get the drug to the finish line, given the company's financial and clinical track record and the fact that its only FDA-approved drug was developed by another company, it may be difficult for investors to be optimistic. Sorento has been around for more than a decade and has little to show thus far.

Is Sorrento's stock too expensive?

Investors also shouldn't neglect Sorrento's stock price. Although it's been falling of late, it's still up around 90% year to date -- well above the S&P 500 and its 12% returns. A lot of the optimism surrounding the stock this year has been due to COVID-19, but if the company ends up with nothing to show for those efforts (especially in terms of sales), then it could be all for naught. That optimism is baked into Sorrento's stock price today; it's trading at more than 30 times sales. Compared to other coronavirus stocks, that's a steep multiple to be paying right now:

SRNE PS Ratio Chart

SRNE PS Ratio data by YCharts

Although Sorrento's stock is not as expensive as it was earlier in the year, investors today are paying a significant premium, perhaps placing too much hope on its COVID-19 programs.

Investors should avoid Sorrento

With not much of a track record and not much time left to develop COVID-19 treatments -- and the stock already trading at a high premium -- this is a risky investment to be holding in your portfolio. Although 2020 has been a good year for Sorrento investors who bought early, those who buy the stock today or next year could be sorely disappointed. As vaccines become available for COVID-19, Sorrento could potentially miss out on the opportunity to treat patients with the disease, despite having many programs in development.