Early birds get the worm. The old saying is true when it comes to investing in novel coronavirus-focused biotechs. Investors who bought these stocks early this year have already enjoyed tremendous returns.
That's certainly the case with Moderna (NASDAQ:MRNA) and Sorrento Therapeutics (NASDAQ:SRNE). Moderna's shares have soared close to 250% year to date, while Sorrento stock is up 170%. But which of these coronavirus stocks is the better choice now?
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The case for Moderna
If you want to buy shares of a leader in the race for a coronavirus vaccine, Moderna could be right up your alley. There are currently just six vaccine candidates in late-stage testing worldwide, according to the World Health Organization. Moderna's mRNA-1273 is one of them.
Moderna initiated a phase 3 study of its COVID-19 vaccine candidate on July 27, 2020. This study is being conducted in collaboration with the Biomedical Advanced Research and Development Authority (BARDA) and the National Institute of Allergy and Infectious Diseases (NIAID). BARDA has committed up to $955 million in funding for the clinical development of mRNA-1273.
The COVID-19 vaccine stands to make a lot of money for Moderna right out of the gate if its late-stage testing goes well. Moderna signed an agreement with the U.S. government earlier this month to supply 100 million doses of mRNA-1273 for $1.525 billion. The biotech is also in what it refers to as "advanced discussions" with the European Commission to supply 80 million doses of its vaccine.
Moderna's pipeline also includes several other promising candidates. The company has three programs in phase 2 testing: cytomegalovirus (CMV) vaccine mRNA-1647, personalized cancer vaccine mRNA-4157, and coronary artery disease therapy AZD8601. Merck partnered with Moderna on mRNA-4157, while AstraZeneca licensed the rights to AZD8601. In addition, Moderna has 10 programs in phase 1 development.
With no approved products yet, Moderna remains unprofitable. However, the biotech's cash position is solid. Moderna reported $3.1 billion in cash, cash equivalents, and investments as of June 30, 2020.
The case for Sorrento
You could call Sorrento Therapeutics the jack-of-all-trades of the COVID-19 fight. The biotech has a coronavirus diagnostic test, an antibody test, multiple therapeutic candidates, and a COVID-19 vaccine in various stages of development.
Sorrento hopes to soon win Food and Drug Administration emergency use authorizations for its COVI-TRACE diagnostic test and COVI-TRACK antibody test. The company's most advanced COVID-19 therapeutic candidate is abivertinib. Sorrento acquired the rights to the drug in May from ACEA Therapeutics. The company is currently evaluating it in a phase 2 study as a potential treatment for COVID-19 patients with moderate to severe pulmonary symptoms.
All of Sorrento's other coronavirus-related programs are in preclinical testing. However, the biotech recently filed for FDA approval to begin a phase 1 study of antibody therapy candidate COVI-GUARD. Sorrento hopes to move quickly with clinical testing, assuming it receives a green light from the FDA.
Abivertinib is Sorrento's sole late-stage program. The company is evaluating the drug in a phase 3 study for treating non-small cell lung cancer. It's also evaluating investigational pain drug resiniferatoxin in three phase 2 studies. Sorrento's pipeline includes five other phase 1 programs.
The company ended its second quarter with cash and cash equivalents totaling $24.4 million. Sorrento also had restricted cash (which isn't available for general business use) of $45 million as of June 30, 2020.
Better pick
Sorrento's market cap is less than one-tenth of the size of Moderna's market cap. There's a pretty good argument to be made that the biotech stock has a lot more room to run if even a few of its programs are successful. On the other hand, there's also a pretty good argument to be made that Sorrento's limited financial resources are spread thin across multiple programs.
I think that Sorrento is absolutely a stock for investors to watch closely. However, my view is that Moderna is the better pick right now. Sure, high expectations are already largely baked into Moderna's share price. But the chances of mRNA-1273 going on to win FDA emergency use authorization and approval seem pretty good. If that happens, Moderna could and should move significantly higher.
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August 27, 2020 at 05:22PM
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Better Coronavirus Stock: Moderna vs. Sorrento Therapeutics - Motley Fool
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