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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

Commission File Number 001-36150  

SORRENTO THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

33-0344842

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification Number)

 

4955 Directors Place

San Diego, California 92121

(Address of Principal Executive Offices)

 

(858) 203-4100

 

(Registrant’s Telephone Number, Including Area Code)

Securities Registered pursuant to Section 12(b) of the Act:

 

Title of each class:

 

Trading Symbol (s)

 

Name of each exchange on which registered:

Common Stock, $0.0001 par value

 

SRNE

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated file, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  .

The number of shares of the issuer’s common stock, par value $0.0001 per share, outstanding as of July 31, 2020 was 242,026,582.

 


 

Sorrento Therapeutics, Inc.

Form 10-Q for the Quarter Ended June 30, 2020

Table of Contents

 

Part I

Financial Information

3

Item 1.

Consolidated Financial Statements (Unaudited)

3

 

Consolidated Balance Sheets (Unaudited) as of June 30, 2020 and December 31, 2019

3

 

Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019

4

 

Consolidated Statements of Comprehensive Loss (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019

5

 

Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019

6

 

Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2020 and 2019

7

 

Notes to Consolidated Financial Statements (Unaudited)

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

 

 

Part II

Other Information

32

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

33

Item 5.

Other Information

40

Item 6.

Exhibits

40

SIGNATURES

43

 

 

 

 


 

PART I. FINANCIAL INFORMATION

Item 1.Consolidated Financial Statements.

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share amounts; unaudited)

 

ASSETS

 

June 30, 2020

 

 

December 31,

2019

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

24,388

 

 

$

22,521

 

Restricted cash

 

 

 

 

 

13,098

 

Accounts receivables, net

 

 

13,801

 

 

 

14,454

 

Inventory

 

 

2,447

 

 

 

3,362

 

Prepaid expenses and other

 

 

14,365

 

 

 

14,153

 

Total current assets

 

 

55,001

 

 

 

67,588

 

Property and equipment, net

 

 

27,523

 

 

 

29,888

 

Operating lease right-of-use assets

 

 

45,070

 

 

 

46,384

 

Intangibles, net

 

 

61,324

 

 

 

63,308

 

Goodwill

 

 

38,298

 

 

 

38,298

 

Cost method investments

 

 

237,008

 

 

 

237,008

 

Equity method investments

 

 

19,978

 

 

 

25,233

 

Restricted cash

 

 

45,000

 

 

 

45,150

 

Other, net

 

 

3,866

 

 

 

4,775

 

Total assets

 

$

533,068

 

 

$

557,632

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

26,605

 

 

$

27,630

 

Accrued payroll and related benefits

 

 

17,909

 

 

 

15,914

 

Accrued expenses

 

 

19,711

 

 

 

18,728

 

Current portion of deferred revenue

 

 

4,107

 

 

 

3,643

 

Acquisition consideration payable

 

 

398

 

 

 

908

 

Current portion of derivative liabilities

 

 

 

 

 

8,800

 

Current portion of debt

 

 

19,151

 

 

 

36,261

 

Current portion of operating lease liabilities

 

 

3,460

 

 

 

3,322

 

Total current liabilities

 

 

91,341

 

 

 

115,206

 

Long-term debt, net of discount

 

 

147,027

 

 

 

199,088

 

Deferred tax liabilities, net

 

 

7,055

 

 

 

9,043

 

Deferred revenue

 

 

113,781

 

 

 

114,389

 

Derivative liabilities

 

 

41,900

 

 

 

35,000

 

Operating lease liabilities

 

 

51,200

 

 

 

52,111

 

Other long-term liabilities

 

 

549

 

 

 

39

 

Total liabilities

 

$

452,853

 

 

$

524,876

 

Commitments and contingencies (See Note 10)

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Sorrento Therapeutics, Inc. equity

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 100,000,000 shares authorized and no shares issued

   or outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value 750,000,000 shares authorized and 231,846,901 and 167,798,120

   shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

 

 

25

 

 

 

18

 

Additional paid-in capital

 

 

989,702

 

 

 

788,122

 

Accumulated other comprehensive loss

 

 

(225

)

 

 

(270

)

Accumulated deficit

 

 

(802,753

)

 

 

(659,818

)

Treasury stock, 7,568,182 shares at cost at June 30, 2020, and December 31, 2019

 

 

(49,464

)

 

 

(49,464

)

Total Sorrento Therapeutics, Inc. stockholders’ equity

 

 

137,285

 

 

 

78,588

 

Noncontrolling interests

 

 

(57,070

)

 

 

(45,832

)

Total equity

 

 

80,215

 

 

 

32,756

 

Total liabilities and stockholders’ equity

 

$

533,068

 

 

$

557,632

 

 

See accompanying notes to unaudited consolidated financial statements

3


 

SORRENTO THERAPEUTICS, INC.  

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per share amounts; unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net product revenues

 

$

5,794

 

 

$

4,699

 

 

$

11,042

 

 

$

8,058

 

Service revenues

 

 

3,213

 

 

 

1,778

 

 

 

5,686

 

 

 

4,562

 

Total revenues

 

 

9,007

 

 

 

6,477

 

 

 

16,728

 

 

 

12,620

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products sold

 

 

699

 

 

 

589

 

 

 

1,247

 

 

 

1,029

 

Cost of services

 

 

1,550

 

 

 

2,692

 

 

 

3,441

 

 

 

4,560

 

Research and development

 

 

24,150

 

 

 

24,793

 

 

 

45,304

 

 

 

50,409

 

Acquired in-process research and development

 

 

4,881

 

 

 

 

 

 

4,881

 

 

 

75,301

 

Selling, general and administrative

 

 

24,463

 

 

 

27,772

 

 

 

50,762

 

 

 

52,894

 

Intangible amortization

 

 

992

 

 

 

992

 

 

 

1,984

 

 

 

1,958

 

Total operating costs and expenses

 

 

56,735

 

 

 

56,838

 

 

 

107,619

 

 

 

186,151

 

Loss from operations

 

 

(47,728

)

 

 

(50,361

)

 

 

(90,891

)

 

 

(173,531

)

(Loss) gain on trading securities

 

 

 

 

 

(76

)

 

 

(59

)

 

 

18

 

Loss on debt extinguishment

 

 

(28,294

)

 

 

 

 

 

(51,939

)

 

 

 

Gain (loss) on derivative liabilities

 

 

1,980

 

 

 

(10,591

)

 

 

6,900

 

 

 

(25,092

)

(Loss) gain on foreign currency exchange

 

 

124

 

 

 

(411

)

 

 

(23

)

 

 

(98

)

Interest expense

 

 

(8,297

)

 

 

(9,520

)

 

 

(15,122

)

 

 

(18,600

)

Interest income

 

 

2

 

 

 

305

 

 

 

21

 

 

 

839

 

Loss before income tax

 

 

(82,213

)

 

 

(70,654

)

 

 

(151,113

)

 

 

(216,464

)

Income tax benefit

 

 

(1,919

)

 

 

(383

)

 

 

(2,195

)

 

 

(561

)

Loss on equity method investments

 

 

(4,699

)

 

 

(1,574

)

 

 

(5,255

)

 

 

(2,471

)

Net loss

 

 

(84,993

)

 

 

(71,845

)

 

 

(154,173

)

 

 

(218,374

)

Net loss attributable to noncontrolling interests

 

 

(7,253

)

 

 

(15,083

)

 

 

(11,238

)

 

 

(53,541

)

Net loss attributable to Sorrento

 

$

(77,740

)

 

$

(56,762

)

 

$

(142,935

)

 

$

(164,833

)

Net loss per share - basic per share attributable to Sorrento

 

$

(0.36

)

 

$

(0.46

)

 

$

(0.72

)

 

$

(1.35

)

Net loss per share - diluted per share attributable to Sorrento

 

$

(0.36

)

 

$

(0.47

)

 

$

(0.72

)

 

$

(1.51

)

Weighted-average shares used during period - basic per share

   attributable to Sorrento

 

 

216,956

 

 

 

122,549

 

 

 

199,782

 

 

 

122,415

 

Weighted-average shares used during period - diluted per share

   attributable to Sorrento

 

 

216,956

 

 

 

132,459

 

 

 

199,782

 

 

 

128,132

 

 

See accompanying notes to unaudited consolidated financial statements

4


 

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands; unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(84,993

)

 

$

(71,845

)

 

$

(154,173

)

 

$

(218,374

)

Other comprehensive loss (gain):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(10

)

 

 

(52

)

 

 

45

 

 

 

33

 

Total other comprehensive loss (gain)

 

 

(10

)

 

 

(52

)

 

 

45

 

 

 

33

 

Comprehensive loss

 

 

(85,003

)

 

 

(71,897

)

 

 

(154,128

)

 

 

(218,341

)

Comprehensive loss attributable to noncontrolling interests

 

 

(7,253

)

 

 

(15,083

)

 

 

(11,238

)

 

 

(53,541

)

Comprehensive loss attributable to Sorrento

 

$

(77,750

)

 

$

(56,814

)

 

$

(142,890

)

 

$

(164,800

)

 

See accompanying notes to unaudited consolidated financial statements

5


 

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except for share amounts; unaudited)

 

 

 

Six Months Ended June 30, 2020

 

 

 

Common Stock

 

 

Treasury Stock

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in

Capital

 

 

Other

Comprehensive

Income (Loss)

 

 

Accumulated

Deficit

 

 

Noncontrolling

Interest

 

 

Total

 

Balance, December 31, 2019

 

 

167,798,120

 

 

$

18

 

 

 

7,568,182

 

 

$

(49,464

)

 

$

788,122

 

 

$

(270

)

 

$

(659,818

)

 

$

(45,832

)

 

$

32,756

 

Exercise of stock options, net

 

 

925,945

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,896

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,896

 

Issuance of common stock upon exercise of warrants

 

 

13,124,042

 

 

 

1

 

 

 

 

 

 

 

 

 

38,860

 

 

 

 

 

 

 

 

 

 

 

 

38,861

 

Issuance of common stock for equity offerings

 

 

49,998,794

 

 

 

6

 

 

 

 

 

 

 

 

 

151,807

 

 

 

 

 

 

 

 

 

 

 

 

151,813

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,017

 

 

 

 

 

 

 

 

 

 

 

 

7,017

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45

 

 

 

 

 

 

 

 

 

 

45

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(142,935

)

 

 

(11,238

)

 

 

(154,173

)

Balance, June 30, 2020

 

 

231,846,901

 

 

$

25

 

 

 

7,568,182

 

 

$

(49,464

)

 

$

989,702

 

 

$

(225

)

 

$

(802,753

)

 

$

(57,070

)

 

$

80,215

 

 

 

 

Three Months Ended June 30, 2020

 

 

 

Common Stock

 

 

Treasury Stock

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in

Capital

 

 

Other

Comprehensive

Income (Loss)

 

 

Accumulated

Deficit

 

 

Noncontrolling

Interest

 

 

Total

 

Balance, March 31, 2020

 

 

204,566,004

 

 

$

23

 

 

 

7,568,182

 

 

$

(49,464

)

 

$

875,712

 

 

$

(215

)

 

$

(725,013

)

 

$

(49,817

)

 

$

51,226

 

Exercise of stock options, net

 

 

876,752

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,797

 

Issuance of common stock upon exercise of warrants

 

 

8,115,433

 

 

 

1

 

 

 

 

 

 

 

 

 

25,326

 

 

 

 

 

 

 

 

 

 

 

 

25,327

 

Issuance of common stock for equity offerings

 

 

18,288,712

 

 

 

1

 

 

 

 

 

 

 

 

 

81,532

 

 

 

 

 

 

 

 

 

 

 

 

81,533

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,335

 

 

 

 

 

 

 

 

 

 

 

 

3,335

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10

)

 

 

 

 

 

 

 

 

 

(10

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(77,740

)

 

 

(7,253

)