Will Sorrento Therapeutics Stock Recover?

Sorrento Therapeutics (OTCMKTS:SRNE) shareholders have had an atrocious year, suffering a 78% decline in their holdings.

Concerned onlookers have wondered is Sorrento Therapeutics going out of business? The short answer is Sorrento did enter bankruptcy proceedings but continues to operate.

As management attempted to exit bankruptcy, the US Bankruptcy Court gave a thumbs up approval for the pharmaceutical company to accept a $105 million bid for Scilex Holding Company.

The bid came from an Israeli firm, Oramed Pharmaceuticals, which would take ownership of Scilex, and permit Sorrento to settle its financial obligations, notably a heavy debt load.

Now the question is will Sorrento bounce back?

Why Did Sorrento Therapeutics Go Down?

The decision to file for Chapter 11 bankruptcy protection came on the heels of Sorrento’s liquidity challenges.

Even a capital infusion from JMB Capital Partners earlier in the year failed to stave off the financial turmoil that stemmed from the heavy debt burden.

It also follows legal actions by Sorrento, which claimed damages of approximately nine figures, that backfired when Sorrento was ordered to pay out north of $150 million. On a positive note, it did recuperate almost that full amount, $125 million, from NantPharma for unmet milestones.

Will Sorrent Therapeutics Stock Recover?

In spite of the bankruptcy, Sorrento has been going full steam ahead, revealing upbeat results from its Phase Ib trial for its COVID-19 treatment candidate, Ovydso. Next on the roadmap is a series of trials in Phase 2 & 3.

The company also has a strong pipelinem including immunotherapeutic solutions targeting mycosis fungoides and abivertinib maleate for acute respiratory distress syndrome, each of which is Phase 2 stage clinical trials.

Perhaps that’s why the lone analyst covering Sorrento Therapeutics has a $13 price target on the stock, which if realized would result in a 65x return. Based on existing financials, the share price has 36% upside according to a price-to-sales multiple analysis, and that’s corroborated by looking at EBIT, or operating income, comps with peers.

What Is The Future of SRNE Stock? 

Amid the chaos of financial turbulence and legal turmoil, Sorrento has managed to advance its pipeline of drug candidates successfully. The future appears to be brighter than the past for Sorrento Therapeutics if it can put bankruptcy proceedings in its rearview mirror and secure a solid bid for Scilex.

At the very least, the single analyst covering the stock has not given up hope by any means and has a sky high price target on the stock.

For now, it’s probably best to view shares of SRNE more like a call option that could result in a swing-for-the-fences win or produce a total flop that wipes out the remaining equity. In short, it’s not a stock for the faint of heart because all capital invested is at very high risk of being entirely wiped out.

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