In an April 6 research note, Dawson James Securities Inc.'s Head Healthcare Research Analyst Jason K. Kolbert reported that Sorrento Therapeutics Inc. (SRNE:NASDAQ) announced that it entered into an agreement to acquire late-stage oncology company ACEA Therapeutics for $38 million in stock.
Kolbert stated that the ACEA merger will give Sorrento access to (oral) Abivertinib. The highly versatile drug candidate has already undergone wide testing in several clinical trials including a completed non-small cell lung cancer (NSCLC) registrational/Phase 3 trial, a Phase 1 B-cell lymphoma study, Phase 2 studies of COVID-19 patients with ARDS and Phase 2 studies for hairy cell leukemia, systemic lupus erythematosus and prostate cancer.
By merging with ACEA, Sorrento will now gain access to ACEA's extensive proprietary library of greater than one million small molecule compounds that could be investigated and developed for a wide range of applications in treating B cell lymphomas, multiple sclerosis (MS), NSCLC, rheumatoid arthritis, systemic lupus and various viral infections.
The analyst commented that the prized asset in ACEA's portfolio is its small molecule tyrosine kinase inhibitor (TKI) called Abivertinib, which "selectively targets both a mutant form of the epidermal growth factor receptor (EGFR) and Bruton's tyrosine kinase (BTK)."
Abivertinib offers promise for treatment across several indications including lupus, prostate cancer and several B cell lymphomas. The report mentioned that a Phase 3 registrational trial evaluating Abivertinib in treating NSCLC has already been completed. In addition, the drug is also now being studied in Brazil and the U.S. in a Phase 2 study of COVID-19-induced respiratory compromised patients.
The analyst indicated that the ACEA drug pipeline includes another clinical candidate, AC0058, that is currently being evaluated in a Phase 1b trial for lupus patients. According to the analyst's report, there may be some potential for AC0058 for use in treating MS or other autoimmune diseases.
Kolbert noted that that the acquisition of ACEA will provide additional benefits to Sorrento in that it will now have access to ACEA's state-of-the-art cGMP facility that includes five buildings across a 23-acre campus in Quzhou, China. The analyst advised that "this facility has successfully manufactured multiple batches of the active pharmaceutical ingredient (API) and final product in capsules for Abivertinib and AC0058 for clinical studies and currently has capacity to manufacture up to 5,000 kg/year of APIs and 50,000,000 capsules of final drug product." The analyst commented that in many aspects, ACEA reminds us of pharmaceutical firm BeiGene Ltd. (BGNE-NASDAQ), which as of today has a $32 billion market cap.
The Dawson James report did not specifically incorporate the ACEA purchase into its valuation model. The firm's estimates were based upon the assumption that Sorrento achieves success in developing COVI-SHIELD and RTX, a non-opioid pain medication. By applying a 50% probability and a 30% discount rate to an equally weighted average of its FCFF, EPS and sum-of-the-parts analysis forecast and factoring in the likelihood of a future capital raise, Dawson James calculated a $19.00 price target.
The analyst stated that Dawson James has a "Buy" rating for Sorrento Therapeutics. SRNE shares are trading around $6.93 per share.
[NLINSERT]Disclosure:
1) Stephen Hytha compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
6) This article does not constitute medical advice. Officers, employees and contributors to Streetwise Reports are not licensed medical professionals. Readers should always contact their healthcare professionals for medical advice.
Disclosures for Dawson James Securities, Sorrento Therapeutics, April 6, 2021
The Firm does not make a market in the securities of the subject company(s). The Firm has NOT engaged in investment banking relationships with SRNE in the prior twelve months, as a manager or co-manager of a public offering and has NOT received compensation resulting from those relationships. The Firm may seek compensation for investment banking services in the future from the subject company(s). The Firm has NOT received any other compensation from the subject company(s) in the last 12 months for services unrelated to managing or co-managing of a public offering.
Neither the research analyst(s) whose name appears on this report nor any member of his (their) household is an officer, director or advisory board member of these companies. The Firm and/or its directors and employees may own securities of the company(s) in this report and may increase or decrease holdings in the future. As of March 31, 2021, the Firm as a whole did not beneficially own 1% or more of any class of common equity securities of the subject company(s) of this report. The Firm, its officers, directors, analysts or employees may affect transactions in and have long or short positions in the securities (or options or warrants related to those securities) of the company(s) subject to this report. The Firm may affect transactions as principal or agent in those securities.
Analysts receive no direct compensation in connection with the Firm's investment banking business. All Firm employees, including the analyst(s) responsible for preparing this report, may be eligible to receive non-product or service specific monetary bonus compensation that is based upon various factors, including total revenues of the Firm and its affiliates as well as a portion of the proceeds from a broad pool of investment vehicles consisting of components of the compensation generated by investment banking activities, including but not limited to shares of stock and/or warrants, which may or may not include the securities referenced in this report.
Analyst Certification: The analyst(s) whose name appears on this research report certifies that 1) all of the views expressed in this report accurately reflect his (their) personal views about any and all of the subject securities or issuers discussed; and 2) no part of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst in this research report; and 3) all Dawson James employees, including the analyst(s) responsible for preparing this research report, may be eligible to receive non-product or service specific monetary bonus compensation that is based upon various factors, including total revenues of Dawson James and its affiliates as well as a portion of the proceeds from a broad pool of investment vehicles consisting of components of the compensation generated by investment banking activities, including but not limited to shares of stock and/or warrants, which may or may not include the securities referenced in this report.
