Shares of biopharma stock Sorrento Therapeutics (NASDAQ:SRNE) rallied 28.9% in June, according to numbers provided by S&P Global Market Intelligence. Although the stock was already primed for bullishness following a steep pullback earlier in the year, a pair of drug trial updates juiced the brewing bounce.
Sorrento Therapeutics is so much more than its COVID-19 developments, but like so many other pharmaceutical companies’ stocks, its shares have been caught up in the coronavirus vaccine mania. They soared in 2020, then plunged, then jumped again in February, only to fall 60% again to May’s low.
Then things took a turn for the better again.
There was no catalyst for the bounce that took shape in May. Bullish headlines didn’t start materializing again until last month, first when the company announced a collaboration with U.S. Navy’s medical research arm to work on COVID-19 therapies, and then on the heels of news that it has been given regulatory approval by Mexico to sell COVID rapid tests in that country.
The headlines certainly punch a lot of the right buttons. And so does the recent announcement that Sorrento’s non-opioid painkiller candidate resiniferatoxin (or RTX) has been given clearance by the Food and Drug Administration to move into phase 2 trials for the treatment of knee pain in osteoarthritis patients.
Problem: The resiniferatoxin didn’t spark an immediate reversal of the pullback that started to unfurl early this month, and for that matter, the gains seemingly linked to June’s announcements were alarmingly easy to unwind.
The progress Sorrento Therapeutics is making on the drug-development and approval fronts is respectable to be sure. But the stock has behaved too inconsistently with respect to these updates to step into.
By most measures, it’s not a fair outcome for the company. The bulk of Sorrento’s current R&D pipeline is now focused on COVID-19, which is a prime opportunity to be sure, but not a permanent one. It’s also a wildly competitive arena, adding to the volatility most coronavirus-related stocks are experiencing of late. This focus also obscures the rest of Sorrento’s pipeline and portfolio, which is actually pretty compelling.
The fairness of the matter isn’t really relevant, though. Investors looking for a serious long-term pick simply can’t buy into this name because the stock is still ultimately controlled by ever-changing perceptions of the need for COVID vaccines. This could remain the case for weeks, if not months. Only speculators and gamblers can really consider it at this time.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.