Seeking Alpha
Special situations, micro-cap, biotech, healthcare
Profile| Send Message|
( followers)  

After some new and aggressive developments, we are once again taking a look at Sorrento Therapeutics (NASDAQ: SRNE). We believe that the acquisition of Concortis Biosystems, and the technology that the company possessed, adds significant potential to the company when combined with the G-MAB ® antibody library. This is because the company now has the ability to create its own antibody drug conjugates (NYSE:ADC). The company has also been uplisted to NASDAQ as of October 24th, which has helped liquidity of the common stock tremendously.

Cynviloq

In our last article, we glossed over the clinical-stage drug that still constitutes the bulk of the company's valuation - Cynviloq ™ (IG-001). This drug received quite a bit of attention after the company secured a 505(b)(2) approval pathway for it, because it should become a viable competitor for a very similar drug known as Abraxane. A 505(b)(2) pathway makes it significantly easier for Sorrento to get an FDA approval, since data from other clinical trials testing other paclitaxel formulations can be used to support the NDA application.

ADC Platform

Another thing that was mentioned in a previous article was the interest that Dr. Frost (of OPKO Health) may have had in the GMAB antibody library that Sorrento possessed when he bought a significant stake (~18%) of the company in 2009. This same antibody library can now be used to create novel antibody drug conjugates with the platform acquired from Concortis. According to the company's statements the library is one of the most expansive of its kind, and includes very hot antibody targets like PD-L1 and chemokine receptors.

The press release that actually announced the acquisition of the ADC platform (link) provided some specific details about the drug conjugation technology that can be used with GMAB. They are very technical, but they suggest that the platform has some unique features that may lead to better ADC

Implications

We believe that Sorrento investors will still keep their focus on Cynviloq as enrollment into the Phase III trial proceeds. The company's official strategy at this point is to bring this paclitaxel formulation onto the market as a direct competitor to the blockbuster drug Abraxane. It has already seen some success in foreign countries, which improves chances at a successful US launch.

Another potential end to this story is an acquisition by Celgene (NASDAQ: CELG), or some other company looking to target the market for paclitaxel. Abraxane has been a huge commercial success for Celgene, and it won't lose patent exclusivity until 2024. Sorrento, which is trading at a $145 M valuation at time of writing, would be a small price to pay if Celgene wanted to ensure another 10 years of success for Abraxane. Sorrento would also receive the GMAB library and the new ADC platform, which sweetens the deal.

Sorrento, as a company, has also opened a door for a partnership for the development of an antibody drug conjugate using Sorrento's new proprietary technology. If done in a traditional manner, this would allow Sorrento to out-license a drug built with the GMAB library and the new ADC platform. Although Sorrento would not be developing the drug, the other company would eventually have to pay royalties on sales of the drug to Sorrento. These types of deals may also include upfront payments, which would aid Sorrento's expansionary efforts. Then there is the potential for substantial royalty payments on sales of these partnered drugs after FDA approval, providing passive income to the company without any effort.

Although this could become the bread-and-butter of Sorrento a few years down the line, investors watching Sorrento in 2014 should pay more attention to the Phase III trial for Cynviloq. After all, this is what Celgene is watching.

Source: Opportunities For Sorrento After Acquisition Of ADC Tech