• Animal model use for target identification not as a predictor of efficacy
  • COVID-SHIELD or remdesivir would not be very effective against ARDS
  • Shorts cry foul on financial grounds and manipulative language
  • Best therapeutic approach targets immunomodulators
  • Transformative journal article labels COVID-19 a RANTES disease

Sorrento’s (NASDAQ: SRNE) price catapulted on Friday after the company announced in an exclusive Fox interview that they discovered an antibody that could “shield the human body from the coronavirus and flush it out of a person’s immune system within four days.”  The strength of these statements deserves a closer look into whether this news is fact or fiction. The company also stated that they can provide “100% inhibition of COVID-19.”  This treatment could be available before the other vaccines being developed are available.  For most investors the catalyzing part was the explanation by Henry Ji, the CEO of Sorrento, when he said “we want to emphasize there is a cure. There is a solution that works 100 percent.”  On the surface this news is fantastic because many commentators like Jim Cramer of CNBC keep mentioning that drugmakers need to come up with a vaccine or a treatment that has the potential to change people’s behavior.  A cure that has Sorrento’s order of magnitude effect would surely change people’s behavior, but the lingering question is when? In light of the lukewarm acceptance of Gilead Sciences (NASDAQ: GILD) remdesivir, a treatment void still exists until a vaccine can be deployed.  The bottom line for skeptical investors revolves around timing and if this SRNE treatment even works, because viruses are tricky and not even HIV has a cure 25 years after HAART. 

Sorrento – Transformation from Cancer to COVID

Sorrento is a pharma company focused on cancer.  The company has multiple immuno-onoclogy (I-O) platform technologies including CAR-T, DAR-T, antibody-drug conjugates (ADCs), and oncolytic virus (Seprehvir).  

Sorrento Therapeutics

Early in the pandemic the company switched its focus to COVID-19 when it announced a collaboration with Celularity Inc., to develop a placental-derived Natural Killer (NK) cell therapy as a treatment against COVID-19.  Next in development was the COVIDTRAP protein, known as STI-4398, which was designed to block the COVID-19 virus from binding to respiratory cells.  This is a protein that binds to the S1 domain of the coronavirus spikes.  This is in essence an entry inhibitor but it is also theorized that it could have an impact on late stage COVID-19 patients by lowering the vasoconstriction in infected lung tissues. 

SRNE also planned a collaboration with SmartPharm to develop a gene-encoded antibody vaccine thereby using the muscle as the factory to produce a neutralizing antibody.  The company is also licensing its ACE-MAB technology to China-based biopharmaceutical company, Mabpharm Limited, which plans to test the fusion protein.  The fusion protein is going to be tested in two arms to also research its viability as a vasoconstrictor suppressor compared to a vaccine.      

Besides these therapeutics, SRNE is also working on a vaccine. About 2 months ago they launched their novel I-Cell COVID vaccine program.  This is a completely novel way of eliciting an immune response and reducing some of the risks of vaccine development such as the initiation of an enhanced form of the disease.   

Sorrento plans on using a cell line of K562 erythroid cells that was modified to not divide in the host, but is able to present the coronavirus spike protein on the K562’s cell surface.  This treatment is designed to work like a vaccine because the immune system would see the spike protein and develop antibodies against it.  The use of this well established cell line could mean rapid production should it demonstrate safety and efficacy, which would lead to approval.

COVID-SHIELD Technology

The concept behind Sorrento’s COVID-SHIELD therapy is to block the coronavirus spike with multiple antibodies.  Right now the company has claimed that STI-1499 is a perfect fit.  They said they “completely neutralized the virus infectivity at a very low antibody dose.”  When drugs have a high binding affinity this typically represents that the drug is on target.  In the upcoming journal article that SRNE characterized as coming out “soon,” it should unveil some Nuclear Magnetic Resonance (NMR) imaging that shows the binding site of the coronavirus spike with the monoclonal antibody attached. In a Biospace interview, Henry Ji, the CEO of Sorrento said

“We screened about a billion antibodies, and we found about 100 of them to characterize further. From them we selected about a dozen that had neutralizing activity.”

STI-1499 was chosen among a dozen or more candidates that were able to block COVID-19 interaction with the angiotensin-converting enzyme 2 (ACE2) in vitro.  This one in particular was able to “completely block SARS-CoV-2 infection of healthy cells in experiments.”  Although STI-1499 is to be used in the COVID-SHIELD which uses multiple antibodies it is also being developed as a monotherapy called COVI-GUARD.  The strong preclinical results allowed them to ask the FDA for an accelerated review.     

Relying on Preclinical Studies – Potential Pitfalls

Some monkeys, like the Miami monkey, were functionally cured of HIV with a combination of 2 antibodies, but this therapy didn’t translate to humans. Gilead Sciences (GILD) has been working on a cure for HIV and presented its phase 1b results in humans for a functional cure at the Conference on Retroviruses and Opportunistic Infections (CROI) 2020.  When commenting about vesatolimod, an experimental first used in 2012 for Hepatitis B, principal investigator Steven Deeks said “the effects are modest, and no one came close to any definition of a cure, but the data suggests real progress might be made when a drug is used in combination with other approaches.” 

When it comes to cancer there have been cures in mouse models but they have yet to translate to humans.  Researchers from the University of California were able to cure B16 melanoma in mice with diprovocim-adjuvanated ovalbumin immunization in combination with PD-L1  treatment.  Despite the experiment in 2018 no human trials have commenced.  University of Pennsylvania researchers tried their hand in developing a universal mRNA flu vaccine that was surprisingly effective in mice.  They used a lipid nanoparticle encapsulated mRNA that targeted the hemagglutinin (HA) protein which is universal to the coronavirus.  Once vaccinated, the mice survived lethal doses of the H1 flu and the H5N1 flu.  After their paper was published in Nature Genetics in 2018 no human trials commenced.    Animal studies in general have “mixed success” especially when it comes to viruses and vaccines.  In a 2018 journal article titled ‘What is the Predictive Value of Animal Models for Vaccine Efficacy in Humans’ Dr. Herati pointed out the discrepancies inherent in the animal models.  For example, there is a lack of natural infection in these animals so in some cases it’s hard to sustain the infection.  The pathology of the disease may be different in animals because in human viral infections the upper respiratory tract is attacked before it moves to the lower respiratory tract.  The other thing that’s difficult to emulate in mice are underlying conditions, and that is playing a central role in the race for a COVID-19 cure.  At best animal models are very good at “stratifying” candidates to facilitate the evaluation process. 

Antiviral: medicines don’t appear to work in COVID after the patient becomes symptomatic because the viral load has already peaked and is on the decline when the infected patient presents symptoms. Dr. Ralph Baric, the collaborator behind remdesivir who was able to get it into phase 1 clinical trials said in a podcast interview:

“Even in our animal models we know if we wait too long, and patients or animals develop this terrible disease called acute respiratory distress syndrome (ARDS), that once patients or animals get into that disease process direct acting antivirals will be not very effective, and a whole new class of inhibitors have to be developed to try to treat that disease.”

So if Sorrrento uses the drug in this capacity after people become symptomatic, it is likely to fail because blocking the virus doesn’t eliminate the cytokine storm.  It could definitely help create homeostasis, but cannot be called a cure.   

Regenerative medicine: is essentially an approach that the healing pathway can stimulate regrowth and repair of the body quicker than the cytokine storm is destroying the tissues.  This is a valiant approach if there are no alternatives.  Stem cells are used in burn wound healing and the reason it works is because the source of the injury is removed. Imagine how effective burn wound healing would be if after a treatment the burn area was reinjured.  Regenerative medicine as a concept only works if the body is in homeostasis and on the mend.  Recent results from Pluristem Therapeutics (NASDAQ: PSTI) showed that in 6 critically ill patients 4 demonstrated improvement in respiratory parameters and demonstrated a 100% survival rate. The difficulty in calling this a win for regenerative medicine is because there was no information with respect to the disease state of these patients.  If used earlier in the disease this might have been a failure.  If all 6 patients had biomarker levels like CD4/CD8 ratios that were at normal levels indicating homeostasis it makes complete sense that they would recover.  These could be cherry picked patients which is why a larger trial is needed and the trial must better define the inclusion/exclusion criteria.  

Oxygen therapy: is designed to keep a patients’ organs from failing due to the hemotoxic nature of the disease where the virus displaces the heme on the blood cells and leaves the body with blood that is simply not as efficient at carrying oxygen.  The virus is attracted to and binds to the sugar residue on a blood cell and attacks the hemoglobin and dissociates the iron to form porphyrin.  Without an iron atom in the porphyrin ring it cannot hold oxygen and reduces the red blood cells overall capacity to carry oxygen.  In addition, the virus affects lung functionality as the fluid levels build up in the lungs making it harder to breath.  Respirators and supplemental oxygen help to maintain levels and keep the organs from failing.  When this fails Extracorporeal membrane oxygenation (ECMO) is used to oxygenate the blood and remove the CO2.  Prolonged use of ECMO takes a toll on the blood.  This is a classic case where blood substitutes like Hemopure® should be considered, if the blood breaks down, but this has to be carefully treated for hypertension.  The virus cannot attack artificial blood which is why Hemoglobin Based Oxygen Carriers (HBOC’s) should be considered.  Along those lines, Bioxytran Inc. (OTCMKTS: BIXT) was developing a promising oxygen transport molecule that was non-toxic and provided oxygenation regardless of the fluid level in the lungs potentially eliminating the need for respirators which were in short supply.  The status of development is unknown, but the technology holds real promise.  In conjunction with ECMO Cytosorb Inc. (NASDAQ: CTSO) can filter out the chemokines causing the cytokine storm, and help restore homeostasis to the immune system so that the body can heal. CTSO recently was granted Emergency Use Authorization for use in patients with COVID-19.  

Immunomodulation: targets what is known as the cytokine storm.  A cytokine storm is described as an immune system gone wild.  In influenza or COVID-19 what happens is that the immune system is knocked out of balance called homeostasis and switches on pro inflammatory chemokines.  These cytokines trigger an immune response attracting even more immune cells to the region which increases the inflammation to the point where eventually the tissue is destroyed by the patient’s own immune system.  This leads to Acute Respiratory Distress Syndrome which could lead to death. Certain key chemokines, like IL-6, have been targeted with very limited success being demonstrated in clinical trials.  Drugs like Regeneron’s (NASDAQ: REGN) Kevzara® and Roche Holding’s (OTCMKTS: RBBHY) Actemra® are arthritis drugs being evaluated for their effectiveness.

Unfortunately Sorrento management didn’t read about the game changing breakthrough in the understanding of the disease pathogenesis was published last week in a preprint titled “Disruption of the CCL5/RANTES-CCR5 Pathway Restores Immune Homeostasis and Reduces Plasma Viral Load in Critical COVID-19 “which is expected to be released in a peer reviewed journal within the coming days.  

The major discovery was that cytokine storms from COVID-19 were due to a chemokine called RANTES (CCL5).  Blocking this disease axis using leronlimab quieted the cytokine storm in critically ill patients within 3 days and restored the immune system to homeostasis within 7 days.  The key finding was that critically ill patients had 100 times the normal level of RANTES and that in mild to moderate patients expression was 5 times normal.  Coupled with the drop in RANTES, was a corresponding drop in IL-6 albeit not on the same order of magnitude as the drop in RANTES.  The study also showed statistically significant drops in plasma viral load not to be mistaken for the viral load in the respiratory tract. This was the first study in COVID-19 to measure plasma viral load.  The adaptive immune system also started functioning again as evidenced by the CD4/CD8 ratio. The impeccable safety profile of leronlimab remained intact.  COVID-19 is a RANTES disease.  Based on this discovery, Sorrentos approach to block the virus using an antibody no matter how effective, will have little utility in controlling late stage disease progression.  

Holy Grail of COVID-19 Pathology

The RANTES journal article represents the holy grail of COVID-19 pathology in that it can account for all the anomalies presented by the disease.  The poor outcomes in people with comorbidities is based on much higher levels of RANTES in this subset of patients.  The theory can also explain why there is a quicker reaction in mild to moderate COVID-19 patients versus severe. The theory even explains why younger patients that get COVID-19 were experiencing blood clots.   It can also explain Kawasaki’s disease in infants.  The most disturbing finding is that it can even explain the possibility of early community spread through a tainted blood supply.

Key Findings 

  1. New Disease Classification for COVID-19 – RANTES DISEASE
  2. Leronlimab Mechanism of Action 
    1. Restores immune homeostasis          
    2. Quiets the cytokine storm and reduces IL-6
    3. Lowers viral load in blood
    4. Improves adaptive immune systems as measured by the CD4/CD8 ratio.
  3. Leronlimab disrupts the CCL5/CCR5 (RANTES) axis of inflammation
  4. Safety profile is confirmed in reports.  
  5. COVID-19 attacks blood that gives rise to platelet activation which leads to a coagulation cascade that increased the risk of strokes, thromboembolic events

Study Results (Sickest of Sick patients)

  • 3 of 8 (38%) critically ill intubated patients were extubated within the 14 day trial
  • Massive drop in IL-6 levels (within 3 days) returned to normal by day 7. 
  • CD4/CD8 ratio levels of suppressor cells return to normal in 3 – 7 days
  • Critically ill patients have 100 times CCL5 versus 5 times CCL5.
  • Statistically significant drops in plasma viral load

Future Considerations

  • Shapes how future deployment as a platform technology.
  • Major rethinking of the effectiveness of remdesivir and hydroxychloroquine.

Social Media Backlash

Since the announcement SRNE has been under incredible social media scrutiny.  The first reporter to break the story was the self-proclaimed “Night King of Biotech” Adam Feuerstein.  He tweeted the Sorrento press release was “nonsense news” and was surprised that Fox News would have anything to do with it.  Typically the tweet is followed by an article but it appeared he was preoccupied tweeting about Moderna (MRNA) and their promising claim of a vaccine based off of 8 patients which would require a nearly mythical leap of faith.  His friend Jim Cramer, host of CNBC’s Mad Money tweeted the warning “please be careful..very small cap.”   This initial salvo by the shorts was followed by Hindenburg Research’s article ‘Sorrento’s Pandemic Profiteering: Experts and Former Employees Speak Out on Sensational Claims of COVID-19 Cure.’ This report slams management for their comments using experts and former management. Hindenburg also dug up dirt on the company’s past history and called them insolvent.  They also highlighted the company’s recent “paperwork” to sell $500 million in stock weeks before discovering the cure.

The backlash from the announcement was promulgated by organizations with known agendas to takedown stocks with lofty valuations. Dredging up how a company went public over a decade ago reeks of desperation to prove a point.  Speaking of dredging, Hindenburg points out that the financing guy behind DryShips (DRYS) was a possible backer of a SRNE financing.  Investor’s should be more focused on the terms of the financing rather than who is doing the financing.  Pointing out the fact that SRNE was doing a big money raise was actually valuable information, but they tainted their objectiveness by not announcing their S-3 filing on March 13, 2020 for $1.0 billion.  They were clearly in money raising mode and their aggressive COVID-19 development on many fronts was in desperate need of additional funding.        

Financial Analysis

According to the latest 10-Q SRNE has $21.9 million in cash as of March 31, 2020.  However the company did raise an additional $12.4 million of stock shortly after the quarter end bringing the effective cash position to $34.3 million.  At the end of the quarter there were approximately 205 million shares issued and outstanding.  The company does have revenues, but they are clearly going to be a casualty of travel restrictions as less people traveling go in for their vaccines.  In regards to burn rate, the company’s SG&A seems under control at approximately $25 million a quarter and their R&D is likely running at $25 million a quarter as well.  With only $34.3 million in the bank investors can be sure an offering is coming.  The market cap of the company before the “cure proclamation” was $543 million.  At the stocks peak on May 18th the market cap swelled to $2.05 billion.  At the current closing price of $5.70 a $250 million offering would represent 22% dilution.           

Investment Summary

SRNE does not have a cure, but they technically never said they had one!  Many investors failed to read exactly what Dr. Ji’s comment was to Fox News.  He said “We want to emphasize there is a cure. There is a solution that works 100 percent.”  It’s very possible that Ji has been keeping tabs on the front runners in the space and he was technically referring to a competitor such as CYDY, which actually appears to have a solution that does work.  In fact CYDY’s treatment works so well that there have not been any reported deaths due to leronlimab other than the patients at Montefiore Medical Center, that Dr. Lalezari characterized as on “death’s door.”  According to CytoDyn latest video update 45 patients are enrolled in a Phase 2 trial and 32 patients in a phase 3 trial and over 60 patients were given compassionate use.  A majority of the people are out of the hospital.  Although this is anecdotal data that has been pretty much ignored by mainstream media, leronlimab has been dosed in over 100 patients including some of the sickest ones.  The mortality rate of remdesivir is 8% compared to 0% for leronlimab.  

As a SRNE shareholder the best course of action might be to avoid the drama and invest in the only drug doing a head to head comparison to remdesivir which Fauci called the new standard of care.  Although you probably never heard of CYDY it’s worthwhile to do some due diligence because leronlimab is a drug that has been used in over 800 patients in HIV, filed its BLA to likely become an approved HIV drug in 6 months, and has a non-toxic profile with no exclusion criteria for COVID-19.  There’s no downside to using it, just ask Samantha Motett who claims leronlimab saved her life.  She is not alone just Google leonlimab videos.

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