Early birds get the worm. The old adage is true when it comes to investing in new coronavirus-targeted biotechs. Investors who bought these shares earlier this year have already enjoyed a huge return.
That is certainly the case with Modern (NASDAQ: MRNA) en Sorrento Therapeutics (NASDAQ: SRNE). Moderna shares have risen nearly 250% so far, while Sorrento shares are 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 may be on your way. There are currently just six vaccine candidates in the late-stage tests worldwide, according to the World Health Organization. Moderna’s mRNA-1273 is one of them.
Moderna began 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 to fund 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 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 deliver 80 million doses of its vaccine.
Moderna’s pipeline also includes several other potential 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 collaborated with Moderna on mRNA-4157, while AstraZeneca license granted 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 battle. 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 gain emergency and food administration gain authorizations for its diagnostic test COVI-TRACE and anti-body test COVI-TRACK. The most advanced candidate therapeutic COVID-19 candidate is abivertinib. Sorrento received the rights to the medicine from ACEA Therapeutics in May. 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 other coronavirus-related programs are in preclinical tests. However, the biotech has recently submitted for FDA approval to launch a Phase 1 study of candidate for anti-body therapy COVI-GUARD. Sorrento hopes to move quickly with clinical trials, assuming it gets a green light from the FDA.
Abivertinib is Sorrento’s only program. The company is evaluating the drug in a phase 3 study to treat non-small cell lung cancer. It also evaluates researched pain resiniferatoxin in three phase 2 studies. The Sorrento pipeline includes five other Phase 1 programs.
The company ended the second quarter with cash and cash equivalents totaling $ 24.4 million. Sorrento also had limited cash (which is not available for general business use) of $ 45 million as of June 30, 2020.
Better pick
Sorrento’s market cap is less than one tenth the size of Moderna’s market cap. There’s a nice 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 is also a pretty good argument that Sorrento’s limited financial resources are thinly spread across multiple programs.
I think Sorrento is absolutely a stock for investors to follow well. However, my view is that Moderna is now the better choice. Certainly, high expectations are already largely baked into Moderna’s share price. But the chances that mRNA-1273 will continue to gain FDA authorization and approval seem pretty good. When that happens, Moderna can and must move significantly higher.
