A thorn in the side of longs continues to be Hindenburg Research. Whenever a hot stock starts climbing, Hindenburg goes short and then they come out with their usual hit piece – XYZ stock is a fraud, going to zero, and here’s our report. XYZ stock drops. Hindenburg covers. Rinse and repeat. The latest Hindenburg target that the media talks about is Sorrento Therapeutics stock.
Sorrento Therapeutics stock has been engaged in a bull/bear war for quite some time. The bears have been led by the “Night King of Biotech” Adam Feuerstein, a writer at STAT News who has bashed the company at and its CEO every chance he has gotten. His modus operandi is spreading Fear Uncertainty and Doubt (FUD) about promising biotechs. While it is disheartening, investors need to stop reacting and instead focus on the science behind these biotechs. This is the case with Sorrento Therapeutics stock and why Feuerstein and Hindenburg need to be ignored.
Sorrento Therapeutics Stock and Hindenburg
As Sorrento Therapeutics stock was making new highs near $20, the dishonest media started reporting of all things Tweets from Hindenburg.
$SRNE is up ~120%, adding ~$2.2B in market cap on relentless CNBC hype of its COVID spit test that it bought from Columbia for just $5m + royalties.
We spoke with a senior administration official at Columbia who completely debunked the test, telling us: pic.twitter.com/vDzWk06uhE
— Hindenburg Research (@HindenburgRes) August 11, 2020
As you can tell, we have no issues posting these Tweets as our goal is to inform readers and subscribers. What the media failed to report is that this is Hindenburg doubling down on its short position from May 20th when Sorrento Therapeutics stock closed at $5.70 a share. Again, feel free to read the full report here, but it’s not worth reading. Had you read the report then, you might have gotten scared and sold, leaving a lot of money on the table as Sorrento Therapeutics stock more than tripled.
With the media reporting on Hindenburg’s Tweets, it caused weak and nervous longs to sell. Sorrento Therapeutics stock dropped almost 50% to just above $10 and allowed shorts like Hindenburg to make money. The shorts in collusion with the media are able to manipulate Sorrento Therapeutics stock to profit at the expense of shareholders.
While this is unfortunate, shareholders have a fighter in CEO Dr. Henry Ji. Sorrento Therapeutics stock issued the following:
On August 11, 2020, it was reported that an organization calling itself “Hindenburg Research” published claims regarding one of Sorrento’s COVID-19 diagnostic products. The report is believed to include false and/or misleading statements for the sole apparent purpose of negatively manipulating the company’s stock price.
Sorrento will collaborate with law enforcement and regulators to ensure that any criminal activity is investigated and rectified. Sorrento, through its legal counsel, Paul Hastings LLP, has demanded that the organization cease and desist from the illegal and wrongful activity and retract false and/or misleading statements. Sorrento is also considering legal action.
Sorrento Therapeutics Stock Bull Case
We are going to try and spell into out for the bears on why it’s suicidal to be short Sorrento stock. Unfortunately, we cannot use small words that they would understand with their limited intellect, but we will try.
First, the key to understanding Sorrento stock is realizing that at its heart, it’s an antibody company. An antibody is a protective protein produced by the immune system in response to the presence of a foreign substance. Cancer cells, bacteria, and viruses, like the one that causes COVID-19, are foreign substances and therefore, theoretically can be impeded or neutralized by antibodies. A vaccine is meant to safely expose a person’s body to a pathogen to teach it to create these neutralizing antibodies. Sorrento’s approach skips the need to teach the body and introduces the neutralizing antibodies directly in vivo. This allows the approach to be administered to healthy and infected people alike.
Second, Sorrento Therapeutics is acquiring Cambridge, MA-based SmartPharm Therapeutics, a developer of non-viral DNA and RNA gene delivery platforms for COVID-19 and rare diseases. The company plans to accelerate the development of multiple candidates for in vivo gene-encoded expression of Sorrento antibodies, starting with COVID-19 “cure” STI-1499. It says SmartPharm’s Gene Mab platform enables intramuscular delivery of low-immunogenic DNA plasmid-encoded with a therapeutic antibody for long-lasting expression.
Third, Sorrento has a licensing pact with Columbia University for the rights to a rapid one-step diagnostic test that detects the SARS-CoV-2 virus in as little as 30 minutes from a saliva sample. The test developed by Columbia’s team, to be marketed by Sorrento under the COVI-TRACE name, holds all of the testing materials in a single tube and requires no specialized laboratory equipment, making it easily deployable for point-of-care, on-site, or potentially at-home testing.
Fourth, its COVI-TRACK test could drive substantial upside. In order to conduct analytical validation, sample cohorts from healthy donors and COVID-19 patient samples were tested, with the assay showing specificity of over 97% and diagnostic sensitivity of more than 94%. Upon issuance of a EUA, the COVI-TRACK test will be available for distribution to clinical testing sites nationwide. Sorrento has secured manufacturing capacity to support the production of up to five million test kits per month.
Fifth, SRNE has evaluated billions of antibodies and identified a small group that can block the S1 protein’s interaction with human angiotensin-converting enzyme 2 (ACE2), the receptor used for viral entrance into human cells. The hope is that the cocktail will remain effective even if the virus mutates.
Sixth, Sorrento plans to accelerate the development of multiple candidates for in vivo gene-encoded expression of Sorrento’s antibodies, starting with Sorrento’s previously announced STI-1499, or COVI-GUARD, which is currently moving through preclinical and manufacturing requirements with an IND submission targeted for this month.
Seventh, the company’s stake in ImmuneOncia, a clinical-stage immuno-oncology-centric biopharmaceutical company established in 2016 as a joint venture company between Yuhan and Sorrento Therapeutics. Last month, Samsung Biologics (207940.KS) and ImmuneOncia Therapeutics have a partnership to develop and manufacture five candidate molecules, expanding upon the two companies’ existing CDO partnership first established in 2018.
Eighth, Sorrento Therapeutics has turned down at least three takeover offers that we are aware of.
Ninth, the shorts are short 24% of the float or $1 billion at today’s prices. The short squeeze will continue as the shorts cannot withstand losses in the billions.
Tenth, Chairman, CEO, and President Henry Ji, Ph.D. just pulled an Elon Musk and is set for a huge payday. He will earn options to purchase up to ~24.9M shares at $17.30 representing a 10% stake in the company if fully exercised. The award vests in 10 equal tranches starting with ~2.5M options if the company’s market cap reaches $5B. The 10th and last tranche vests if the company’s value hits $35B. Assuming full vestment and no further equity offerings, his total award will be potentially worth ~$3.3B.
Eleventh, Wall Street analysts remain bullish. H.C. Wainwright has a price target of $30 on Sorrento stock and Dawson James has a $24 target. We expect these price targets to keep getting raised as Sorrento Therapeutics stock looks set to continue its bull run.
It’s unfortunate that innocent shareholders have to deal with shorts like Hindenburg and journalists like Feuerstein. We’ve been covering small-cap biotech for a long time and it’s been part of the investment landscape. It’s not going away until some get locked up. Even then we don’t think it will go away as there’s too much money to be made manipulating stocks.
The only advice we can give is to do your own research and ask yourself – how much money would you have left on the table had you listened to Hindenburg about Sorrento Therapeutics stock back in May?
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in NASDAQ:SRNE or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article. Insider Financial is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This article is not a solicitation or recommendation to buy, sell, or hold securities. This article is meant for informational and educational purposes only and does not provide investment advice.