Sorrento Therapeutics on Jan. 27 said it rejected a private equity fund’s acquisition bid that valued the company at as much as $1.17 billion, the third suitor the company has reportedly rebuffed in recent months.
The San Diego biotech said the offer of up to $7 per share significantly undervalued the company and was not in the best interest of shareholders. The bidder was not disclosed.
“Sorrento’s management continues to execute on the core drug development and to pursue multiple potential strategic alliances and transactions,” said the company in a statement, adding its board unanimously turned down the offer.
The company did not respond to interview requests. Sorrento has one drug on the market, with cancer programs and an opioid alternative undergoing clinical trials.
Sorrento disclosed the buyout proposal Jan. 9. In November, the company said it declined unsolicited bids from two unnamed pharmaceutical companies, which offered between $3 and $5 for Sorrento’s outstanding shares.
Analyst John McCamant, editor of the Medical Technology Stock Letter that’s geared toward investors, questioned why Sorrento passed on the latest offer.
He said the bid of up to $7 per share is well above Sorrento’s stock price, which closed at $3.88 on Jan. 27. He added that it appears Sorrento faces a cash crunch, with the company spending heavily on clinical development.
Sorrento started 2019 with $158.7 million in cash and cash equivalents.
But the company had $34.6 million in cash and cash equivalents as of Sept. 30, according to Sorrento’s latest quarterly statement. However, that total doesn’t include $25 million that the company raised through a direct stock offering in October.
Not Making Sense
McCamant said most of Sorrento’s drug candidates still have a ways to go in clinical trials. Further, he said it’s highly unusual to see three unnamed bidders.
“None of this adds up or makes a lot of sense,” said McCamant.
Analyst Donald Ellis with JMP Securities is more bullish about the company. In a research note published in mid-January, he found much to like in Sorrento’s drug development portfolio.
“We believe the buyout offers further validate the company’s pipeline,” Ellis wrote. He added competing offers could be on tap given the brisk pace of mergers and acquisitions in the biotech industry.
Alongside the acquisition denial the company gave an update on resiniferatoxin, its pain drug candidate that’s powered by a molecule found in a plant native to Mexico. In March, the company will release results from phase 1b clinical trials assessing resiniferatoxin for achy knees and cancer-related pain.
Phase 1b streamlines early-stage clinical testing by running multiple study arms in parallel.
Next, Sorrento plans to ask the U.S. Food and Drug Administration for the OK to begin late-stage clinical trials. If those go well the company could potentially seek regulatory approval.
“We believe this product candidate has the potential to rival the best-selling pain drugs on the market, and the potential to make Sorrento an industry leader in pain management,” said Alexis Nahama, head of Sorrento’s resiniferatoxin unit, in a statement.
Resiniferatoxin directly targets nerves responsible for pain, as opposed to blocking brain signals.
“It’s a completely new way of looking at pain management,” said Nahama in an interview with the San Diego Business Journal in 2018.
Sorrento and a few other San Diego biotechs are rushing to develop alternatives to opioids, dependence on which mushroomed into a national health epidemic.
Locally, Heron Therapeutics appears to be the furthest along. By March, the FDA will give a thumbs up or down to its postoperative pain anesthetic, which reduced pain and the use of opioids after surgery in clinical trials.
Along with pain management, Sorrento developed drug candidates aimed at four cancers. One of the programs, called Anti-CEA CAR-T, is slated to undergo mid-stage clinical testing for metastatic liver tumors.
The company has one approved therapy, ZTLido. It treats nerve pain stemming from shingles infection.
In addition, Sorrento has an animal health division, Ark Animal Health. Its pain drug for bone cancer in dogs is entering a late-stage clinical trial.
Buyout offers aren’t the only reason Sorrento has been in the news.
Last year, the company filed a lawsuit against Patrick Soon-Shiong and one of his companies. The biotech entrepreneur is perhaps better known as the owner of The San Diego Union-Tribune and Los Angeles Times.
The legal action alleged a “catch and kill” scheme to keep a Sorrento drug off the market to preserve Soon-Shiong’s financial interest in a competing drug. Soon-Shiong denied the accusations, calling them a “cynical attempt to deflect from their (Sorrento’s) breach of contract.”
One of the companies he helms, NantPharma, countersued for fraud and breach of contract, according to court documents filed in Los Angeles County.