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Why the Sudden Surge in Sorrento Therapeutics’ Revenue?

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Mar. 29 2018, Updated 3:17 p.m. ET

Top line

In fiscal 2017, Sorrento Therapeutics (SRNE) generated total revenue of $151.8 million compared to $8.1 million in fiscal 2016. The company receives revenues from grants, royalties and licenses, and sales and services.

Sales and services revenue rose from $3.1 million in fiscal 2016 to $11.2 million in fiscal 2017. The significant jump in the company’s total revenue was attributable to an increase in royalty and licensing revenue, which rose from $4 million in fiscal 2016 to $140.3 million in fiscal 2017 due to revenue recognition from the intangibles Sorrento transferred to Celularity under the contribution agreement between the companies in fiscal 2017.

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Operating expenses

Sorrento Therapeutics incurred general and administrative expenses of $38.3 million in fiscal 2017 compared to $24.2 million in fiscal 2016. This increase was due to higher salaries, stock-based compensation, and legal costs related to acquisitions.

The growth in Sorrento’s revenue helped it generate operating income of $25.3 million compared to its operating income of -$96.7 million in fiscal 2016. Sorrento incurred interest expenses of $5 million in fiscal 2017 compared to $1.6 million in fiscal 2016.

Bottom line

Sorrento Therapeutics’ net income in fiscal 2017 was $9.1 million compared to its net income of -$63.9 million in fiscal 2016. This translated to net income per share of $0.13 in fiscal 2017 compared to net income per share of -$1.21 in fiscal 2016.

Stock performance

Between December 28, 2017, and March 27, 2018, Sorrento’s share price rose from $3.65 to $6.30. During this period, the stock reached a high of $10 on February 28, 2018, but it took a beating amid last week’s market volatility.

Sorrento Therapeutics’ current enterprise value (or EV) is $594.5 million. Its EV-to-revenue ratio stands at 3.91, and its price-to-book ratio is 2.38.

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