Sorrento Ties The Knot With SmartPharm, Boosting Its Covid-19 Offering

Sorrento Therapeutics (SRNE) and SmartPharm Therapeutics have now signed a merger agreement for Sorrento to acquire SmartPharm, a gene-encoded therapeutics company developing non-viral DNA and RNA gene delivery platforms for COVID-19 and rare diseases.

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Shares in Sorrento rose 4% in Thursday’s after-hours trading.

As previously announced on July 24, SmartPharm equity holders will receive up to an aggregate of $19.4 million of Sorrento common stock, based on a price per share calculated in accordance with the merger agreement.

Sorrento and SmartPharm will also collaborate on research and development to encode and express in vivo Sorrento’s proprietary SARS-CoV-2 neutralizing monoclonal antibodies with SmartPharm’s Gene Mab plasmid nanoparticle platform.

Using SmartPharm’s technology, Sorrento has identified STI-2020dna (DNA plasmid injection), an antibody encoded DNA plasmid candidate. STI-2020dna is currently undergoing preclinical in vivo studies and has the potential to generate long-lasting anti-viral protection with a single intra-muscular administration.

“We are very encouraged by the preclinical data generated thus far by our STI-2020dna plasmid candidate against COVID-19,” said Henry Ji, Ph.D., CEO of Sorrento. “STI-2020dna has the potential to produce potent antibodies in the human body in vivo which may provide an attractive alternative to vaccines that might not be effective against the emerging and highly contagious variants of the virus.”

The transaction is expected to close in early September 2020, subject to customary closing conditions.

On a year-to-date basis, Sorrento shares have had a stellar journey soaring 223% sparked by investor hopes for its COVID-19 test. Last month, Sorrento inked a licensing deal with Columbia University giving it rights to COVI-TRACE, a fast, one-step diagnostic test that samples saliva and can detect the SARS-CoV-2 virus in 30 minutes. (See SRNE stock analysis on TipRanks).

The deal prompted H.C. Wainwright analyst Ram Selvaraju to raise the stock’s price target to $30 (174% upside potential) from $24 and reiterate a Buy rating.

“We believe that the incentive to facilitate the large-scale and indeed ubiquitous deployment of the COVI-TRACE test is extremely high and governments worldwide may seek to implement this in their respective regions,” Selvaraju told investors.

“Our current assumptions viewed in this context may be considered conservative—we utilize a $15 price per test and anticipate that roughly 56.5 million such tests could be conducted at peak annually, resulting in total sales of roughly $1 billion.”

The analyst added that the test “could conceivably be deployed at restaurants, airports, stadiums and other mass gathering areas.”

Overall, only one other analyst has rated the stock recently with a Buy rating, which provides Sorrento with a Moderate Buy consensus. At $27, the average analyst price target indicates another 147% upside potential lies ahead.