Sorrento Therapeutics, Inc.

SRNE Details

Positive Results for Phase 1b Study: Sorrento Therapeutics, Inc. (NASDAQ: SRNE) is a clinical-stage biopharmaceutical company that develops therapies to treat cancers and COVID-19. The market capitalization of the company as on 20 April 2021, stood at ~$2.11 billion. As per a recent update, the company has announced positive results for Phase 1b Study of COVI-MSC treatment of patients in the ICU, diagnosed with COVID-19, and has reported 100% discharge rate.

FDA Approval for ZTlido: On 9 April 2021, the company had announced that its subsidiary Scilex Holding, has received a supplemental new drug application approval from the FDA for ZTlido, in order to make efficacy labeling change with the help of clinical data.

Agreement of Merger: SRNE has entered into a merger agreement under which it will acquire ACEA Therapeutics, Inc. Through the acquisition, SRNE will have access to late clinical-stage drug Abivertinib, clinical-stage candidate AC0058, preclinical stage candidate AC0939, to name a few.

FY20 Results Update: During the year, the company reported total revenues of $39.98 million, compared to revenue of $31.43 million in the previous corresponding year. It narrowed down its losses to $314.41 million in FY20, compared to a loss of $363.01 million in FY19. There was also an improvement in the cash position of the company to $56.46 million as of 31 December 2020.

FY20 Financial Performance (Source: Company Reports)

Outlook: Moreover, the acquisition of ACEA will give a major push to the company into the formation of a large bio-pharmaceutical player in the space. It is also developing antiviral therapies and vaccines to treat against the COVID-19 virus and includes COVIGUARD, COVISHIELD, diagnostic test solutions, to name a few.

Key Risks: The company is exposed to the risk of revenue generation as there is a risk of the clinical trials not fructifying to approval or unable to meet the desired efficacy level.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Technical Overview:  

SRNE's prices are trading in a sharp bearish trend for more than the past two months. However, currently prices are sustaining around an upward sloping trend line support level, indicating the probability for an upside movement in the stock. The recent fall in the stock is not backed by the volume as well and further indicating the weakening of the current trend. The momentum indicator RSI (14-period) is trading at ~44 levels and showing a sideways to a positive direction. However, the prices are trading below the trend-following indicators 21-period SMA and 50-period SMA, acting as the resistance for the stock. A major support level for the stock is at USD 5.77 and immediate resistance is at USD 8.75 level.

Weekly Chart (Source: Eikon, Thomson Reuters)

Note:  The yellow color line represents the trend line while the purple color line in the chart depicts RSI (14-period). The green color histograms at the bottom of the chart indicating weekly volumes. The red and sky-blue color lines represent the 21-period SMA and 50-period SMA, respectively. 

Stock Recommendation: The stock of SRNE is trading below its average 52-weeks’ levels of $19.39-$2.18. The stock of SRNE gave a negative return of ~22.3% in the past one month and a positive return of ~7.07% in the past one week. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe the company can trade at a slight discount to its peer average EV/Sales (NTM Trading multiple), considering the increased R&D expenditure, prudent regulations in the industry and the continued losses. For the purpose, have taken peers such as Heat Biologics Inc (NASDAQ: HTBX), Myriad Genetics Inc (NASDAQ: MYGN), to name a few. Considering the expected upside in valuation and current trading levels, improvement in top-line, positive results of Phase 1b Study and merger agreement, we recommend a ‘Hold’ rating on the stock at the current market price of $7.42, down by 0.93% as on April 20, 2021.

SRNE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Canoo Inc.

GOEV Details

Business Update: Canoo Inc. (NASDAQ: GOEV) is a Los Angeles-based mobility technology company and is involved in the building of electric vehicles. The market capitalization of the company as on 20 April 2021, stood at ~$1.81 billion. As per a recent update, there are allegations against the company that its public statements were materially false and misleading.

FY20 Performance Update: During the year, the company completed a business combination with Hennessy Capital Acquisition Corp. IV on 21 December 2020. It reported an adjusted EBITDA loss of $108.3 million during the period, compared to a loss of $167.1 million in FY19. The net cash used in operation stood at $107.1 million, and the capital expenditure incurred during the period was at $7.6 million. It ended the period with a cash position of $702.4 million as of 31 December 2020.

FY20 Financial Performance (Source: Company Reports)

Outlook: The company has been developing technologies and functional designs to build EV’s and aims to deliver OEM’s for the full lifecycle of the vehicle and increase its revenue base. It expects operating expenses to be around $45 - $50 million in Q1FY21, and anticipates capital expenditures to be around $10-$12 million, during the period.

Key Risks: The company operates in a niche space and any regulatory change or orders might impact the business of the company. Moreover, it has to look to diversify its client base in order to deliver sustainable revenues in the future.

Technical Overview:  

GOEV's prices are trading in a bearish trend for the past 4 months and recently made a new low of USD 7.50. However, volume is decreasing for the past 3 weeks with the falling price. The momentum indicator RSI (14-period) is trading at ~38 levels, indicating a downward trend for the stock. Prices are sustaining below the trend-following indicators 21-period SMA and 50-period SMA, further supporting a bearish stance. An immediate support level for the stock is at USD 7.00 and major resistance is at USD 9.68 level.

Weekly Chart (Source: Eikon, Thomson Reuters)

Note:  The purple color line in the chart depicts RSI (14-period) and the green color histograms at the bottom of the chart indicating weekly volumes. The red and sky-blue color lines represent the 21-period SMA and 50-period SMA, respectively.

Stock Recommendation: The stock of GOEV is trading near its 52-weeks’ low level of $7.50. The stock of GOEV gave a negative return of ~26.30% in the past six months and a negative return of ~16.75% in the past one week. Considering the current trading levels, narrowing of EBITDA losses and comfortable cash position, we recommend a ‘Hold’ rating on the stock at the current market price of $7.65 down by 7.61% as on April 20, 2021. However, we will continue to keep an eye on the stock and any change in catalyst in the future will lead to the reassessment of rating.

GOEV Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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