In March 2019, running from $2 to more than $5, Sorrento Therapeutics (SRNE) seemed to seduce market participants. The market excitement was created by two stock catalyst. Firstly, it was related to the company’s presentation in Oppenheimer 29th Annual Healthcare Conference, in which nothing really was said and should have not pushed the share price up. With that, traders should understand that such type of presentations tend to create a lot of expectations and many market participants are ready to take some positions.
In addition, investors should have celebrated the most recent merger with Semnur Pharmaceuticals. It is expected to bring synergies and a new product candidate at Phase 3 of development, called S-102. This new non-opioid pain treatment for lumbar radicular is expected to be tested on 400 candidates and should increase the company’s market opportunity. With this feature in mind, the recent share price makes a lot of sense.
Having mentioned this feature, investors should study the contractual obligations of Sorrento Therapeutics closely. According to the company’s annual report, Sorrento sold convertible notes and loans worth more than $400 million payable in three to five years. In December 2018, with $212 million in cash, the company may not have sufficient liquidity to pay its contractual obligations. This feature may push the stock price down in the long term.
Currently trading with a market capitalization of $616 million and reporting annual revenue of $21 million, the most beneficial on this name is that its revenue may increase in 2019. Remember that the company was expected to launch ZTlido from 4Q 2018. This feature along with the Phase 2 clinical trial for a second-generation anti-CEA CAR-T cell therapy could make the stock price move in 2019.
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Disclosure: We hold no position in Sorrento Therapeutics either long or short and we have not been compensated for this article.