Sorrento Therapeutics, Inc.

SRNE Details 

Revenues up Year Over Year: Sorrento Therapeutics, Inc. (NASDAQ: SRNE) is a biopharmaceutical company, which is focused mainly on the acquisition, development, discovery, and commercialization of proprietary oncology therapeutics.

Quarterly Highlights for the Period Ended 30 June 2020: During the quarter, the company reported total revenues of $9 million, up from the year-ago figure of $6.5 million. Net product revenues and service revenues for the quarter stood at $5.8 million and $3.2 million, respectively. Total operating cost and expenses for the quarter came in at $56.7 million, as compared to $56.8 million reported in the year-ago period. The company reported a net loss of $84.9 million during the quarter, as compared to a net loss of $71.8 million reported in the prior corresponding period. The company exited the quarter with a cash balance of $24.4 million, with long-term debt amounting to $147 million. Net cash used in operating activities for the six months ended June 30, 2020, came in at $76.1 million.

Other Recent Updates: In a recent update, the company stated that it has inked a licensing agreement with Columbia University for the rights to a rapid, one-step diagnostic test that identifies SARS-CoV-2 infection within 30 minutes from a sample of saliva. In another update, the company announced that it has entered into an agreement to acquire SmartPharm, a gene-encoded therapeutics company developing non-viral DNA and RNA gene for COVID-19 and sporadic diseases. The deal is likely to close in August 2020. Financial terms of the deal were kept under wrap. The blend of SmartPharm's Gene Mab™ gene-encoded and Sorrento's SARS-CoV-2 neutralizing antibodies is likely to offer extended, single injection safety against COVID-19 virus. Further, SRNE also received clearance from the FDA to begin a Phase 2 trial of Abivertinib in patients with COVID-19 symptoms.

Key Risks: The COVID-19 pandemic has generated ambiguities in the expected timelines for the company, involving potential postponements in clinical trials and interferences in the supply chain for raw materials used in the clinical trial work. Such setbacks could significantly affect the company’s business in the coming days. Also, the COVID-19 pandemic’s impact on its business, operations and financial condition may hinder future developments. Further, stiff competition and stringent regulations outlined by governments remain a potential headwind.

Stock Recommendation: The stock of SRNE closed at $12.28 with a market capitalization of ~$2.97 billion. The stock made a 52-week low and high of $1.39 and $19.39, respectively, and is currently trading above the average of its 52-week trading range. The stock gave positive returns of ~76.18% in the last one-month period and 88.92% in the last three months. Debt to equity ratio of the company stood at 1.97x in Mar’20, as compared to the previous half multiple of 2.99x. On the valuation front, the stock is trading at a P/BV multiple of 21.6x as compared to the industry median (Biotechnology & Medical Research) of 3.5x on TTM (Trailing Twelve Months) basis. Considering the above factors, current trading levels and price movements, we have a watch stance on the stock at the closing price of $12.28, up 1.49% on 18 August 2020.

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

Vaxart, Inc

VXRT Details 

VXRT Files IND with FDA: Vaxart, Inc (NASDAQ: VXRT) is a clinical-stage company that is engaged in developing and manufacturing of a broad range of oral recombinant vaccines based on its commercial delivery platform. On August 10, 2020, the company stated that it has filed its COVID-19 Investigational New Drug (IND) application with the US Food and Drug Administration (FDA).

2QFY2020 Financial Highlights: During the quarter, the company reported revenue of $523,000, as compared to $85,000 reported in the year-ago quarter. The increase in the top line was on the back of the reversal of the reserve for sales returns for Relenza and revenue from the Janssen contract. Net loss for the quarter stood at ~$9 million, as compared to a loss of $5.6 million reported in 2QFY19. Research and development expenses for the quarter came in at $5.1 million, up from $3.7 million reported in the year-ago period. The increase was on the heels of manufacturing expenses associated with the COVID-19 vaccine candidate. General and administrative expenses also increased from $1.4 million reported in 2QFY19 to $3.9 million, due to higher stock-based compensation costs and severance expenses. The company exited the quarter with a cash balance of $44.4 million. 

VXRT Highlight (Source: Company Report)

Key Developments: The company had entered into a manufacturing deal with Emergent BioSolutions. As per the agreement, Emergent will deliver the clinical material for VXRT’s trial oral vaccine applicants against coronavirus. Emergent intends to aid VXRT to commence a phase I clinical study in the 2H FY20 in the United States. VXRT introduced its coronavirus program in January this year and announced encouraging pre-clinical data in April and chose its lead candidate for a clinical study in May. The company has been expanding an oral vaccine, utilizing its trademarked VAAST oral vaccines platform. The vaccine became a part of the Operation Warp Speed in June 2020, an initiative by the U.S. federal government to deliver significant amounts of safe and efficient vaccine for Americans by January next year.

Key Risks: Stiff competition from peers such as Moderna, Novavax and some big pharma companies who are actively involved in creating a vaccine to fight the fatal COVID-19 pandemic remains a potential headwind. Further, higher expenditure related to the COVID-19 vaccine candidate may weigh on margins, going forward.

Stock Recommendation: The stock of VXRT closed at $9.505 with a market capitalization of ~$1.04 billion. The stock made a 52-week low and high of $0.25 and $17.49 and is currently trading at the upper band of the range. In the last one month, the stock went down by ~39.65% but went up by 231.18% in the last three months period. Notably, in the last one year, the stock went up 1,380.30%. On a TTM basis, the stock is trading at a price to book value multiple of 25.8x, higher than the industry median (Biotechnology & Medical Research) of 3.5x, and thus looks overvalued. Considering the fundamentals, returns on the stock, current trading levels and valuation, we suggest investors to wait for better entry levels and have a watch stance on the stock at the closing price of $9.505, down 6.54% as on 18 August 2020.

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

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