Sorrento Inks Deal To Buy ACEA Therapeutics; Shares Gain 3%

Shares of Sorrento Therapeutics increased 3.3% to close at $8.27 on April 5 after the clinical-stage antibody-centric biopharmaceutical company agreed to snap up late-stage oncology company ACEA Therapeutics.

Along with ACEA’s late clinical-stage drug Abivertinib, clinical-stage candidate AC0058, pre-clinical-stage candidate AC0939, and extensive proprietary library of small molecules, Sorrento (SRNE) will also acquire ACEA’s China-based state of the art cGMP facility on 23 acres of land with five buildings.

The acquisition, which awaits regulatory approvals, is likely to close in the second quarter of 2021.

Previously in Oct. 2020, a letter of intent was signed, including the terms and conditions of the deal. Upon the closure of the merger, Sorrento will grant common stock worth $38 million to ACEA’s equity holders. Based on certain conditions, Sorrento is also liable to pay to the equity holders an additional $450 million on receipt of regulatory approvals and achievement of net sales targets related to assets acquired, along with 5%-10% of the annual net sales of certain pre-determined royalty-bearing products.

Sorrento CEO Dr. Henry Ji said, “The ACEA acquisition will bring us a step closer to developing into a major biopharmaceutical company and we look forward to welcoming the ACEA team into the Sorrento family.” (See Sorrento stock analysis on TipRanks)

On March 26, B.Riley Financial analyst Mayank Mamtani maintained a Buy rating and a price target of $26 (214.4% upside potential) on the stock following the company’s “significantly positive results in hospitalized COVID-19 induced acute respiratory distress syndrome (ARDS) patients, from its Ph. Ib single arm, non-randomized study to evaluate the preliminary safety and efficacy of COVI-MSCs (allogeneic adipose mesenchymal stem cells).”

Sorrento shares have skyrocketed almost 217% over the past year, while the stock still scores a Strong Buy consensus rating, based on 3 unanimous Buys. That’s alongside an average analyst price target of $32.50, which implies 293% upside potential to current levels.

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