Is Sorrento Stock a Buy Following ACEA Acquisition? Analyst Weighs In



Sorrento (SRNE) is not a company to rest on its laurels, particularly on the acquisition front. There have been several additions to the biotech’s ever-expanding pipeline over the past few months, and April is proving no different.

Earlier this week, Sorrento announced it is acquiring late-stage oncology company ACEA Therapeutics, in an all-stock deal worth $38 million. ACEA equity holders could also be eligible for milestone payments up to $450 million and 5-10% royalties from annual net sales. The merger is anticipated to close sometime in the second quarter.

So, what does ACEA bring to the table? The company’s principal assets include AC0058, a next generation BTK inhibitor, currently in a U.S. Phase 1b trial for Lupus patients, and pre-clinical-stage candidate AC0939, a next generation FLT-3 inhibitor. ACEA also comes with a substantial proprietary library of small molecules (more than 1,000,000 compounds). These could potentially be applied to several human disease indications, such as non-small cell lung cancer (NSCLC), B cell lymphomas, systemic lupus, rheumatoid arthritis, multiple sclerosis and viral infections.

However, for Dawson James analyst Jason Kolbert, the “gem” in the portfolio is late clinical-stage drug Abivertinib, an oral, next-gen, dual EGFR mutant and BTK inhibitor (BTKi).

“Abivertinib has the potential to improve outcomes in resistant prostate cancer, systemic lupus erythematosus, and various B cell lymphomas in addition to NSCLC, an indication for which a registrational/Phase 3 trial has been completed. It is currently being studied as a Phase 2 treatment for COVID-19-induced respiratory compromise in the US and Brazil,” the analyst noted.

The biotech will also get its hands on ACEA’s state-of-the-art cGMP facility situated in Quzhou, China. The facility is on a 23-acre campus with five buildings.

In many ways, Kolbert says, ACEA resembles BeiGene Pharma, which today boasts a market cap of $32 billion.

All in all, Kolbert rates SRNE shares a Buy along with a $19 price target. This figure implies 12-month gains of a strong 177%. (To watch Kolbert’s track record, click here)

According to Holbert’s colleagues, his forecast is rather reserved. Going by the $28 average price target, the shares will appreciate by 269% over the coming months. All 4 analysts who have recently reviewed Sorrento, rate the stock a Buy, naturally culminating in a Strong Buy consensus rating. (See SRNE stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.


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