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May 27, 2020, 7:29 a.m. EDT

Sorrento Therapeutics stock is a buy on the 50% chance of a COVID-19 antidote, analyst says

Share price target of implies a near five-fold gain on expected successful development of antibody cocktail

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By Tomi Kilgore, MarketWatch

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Shares of Sorrento Therapeutics Inc. rallied Tuesday, after a Wall Street analyst suggested the biopharmaceutical company was a good bet to successfully develop an “antibody cocktail” that could shield people from the COVID-19 virus.

The stock /zigman2/quotes/205669265/composite SRNE +5.31%  rose 3.9% in active trading Tuesday. Trading volume rose to 57.8 million shares, exceeding the full-day average of about 41.1 million shares.

The gain follows a hectic week of trading, that followed up the 158% blast off on massive volume of 507.6 million shares on May 15 after the company provided an upbeat assessment of the results of a preclinical experiment of its COVID-19 virus antibody, STI-1499.

The San Diego-based company said that STI-1499 demonstrated complete inhibition of SARS-CoV-2 virus infection in an in vitro virus infection experiment at a “very low antibody concentration.” Sorrento reiterated that it aims to generate an “antibody cocktail” product that could act as a “protective shield” against coronavirus infection.

FactSet, MarketWatch

Analyst Jason Kolbert at Dawson James Securities initiated coverage of Sorrento with a buy rating, which for Dawson James means the stock is expected to produce a total return of at least 20% over the next 12 to 18 months.

But Kolbert expects a lot more than that, as he set a stock price target of $24.

He suggested the stock is a good bet for investors, as he assumes the company will successfully develop the “COVI-SHIELD” antibody cocktail that it aims to produce.

“We apply a probability of success of just 50%, but given the size of the indication, the valuation potential for COVID alone is large,” Kolbert wrote in a note to clients.

His view also includes the company’s assertion that it can produce up to 200,000 does a month, with management saying it believes it can produce tens of millions of doses in a short period.

The company has said it has determined that STI-1499 will likely be the first antibody in the COVI-SHIELD cocktail that it is developing, and could also be developed as a stand-alone therapy--COVI-GUARD-- given the high potency it has exhibited.

Sorrento has said it plans to request priority evaluation and accelerated review from regulators.

The stock has now run up 55.9% year to date, while the iShares Nasdaq Biotechnology exchange-traded fund /zigman2/quotes/206189322/composite IBB +0.65%  has gained 8.6% and the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.08%  has lost 7.4%.

US : U.S.: Nasdaq
$ 4.56
+0.23 +5.31%
Volume: 5.25M
Jan. 14, 2022 4:00p
P/E Ratio
Dividend Yield
Market Cap
$1.40 billion
Rev. per Employee
US : U.S.: Nasdaq
$ 138.95
+0.90 +0.65%
Volume: 2.70M
Jan. 14, 2022 4:00p
+3.82 +0.08%
Volume: 2.52B
Jan. 14, 2022 5:16p

Tomi Kilgore is MarketWatch's deputy investing and corporate news editor and is based in New York. You can follow him on Twitter @TomiKilgore.

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