0001564590-21-006983 | 10-K | XBRL Viewer | Sorrento Therapeutics INC

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Cover - USD ($) $ in Billions	12 Months Ended
Cover - USD ($) $ in Billions	Dec. 31, 2020	Feb. 05, 2021	Jun. 30, 2020
Cover [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY
Entity Registrant Name	SORRENTO THERAPEUTICS, INC.
Entity Central Index Key	0000850261
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Interactive Data Current	Yes
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Well-known Seasoned Issuer	No
Entity Public Float			$ 1.4
Entity Common Stock, Shares Outstanding (in shares)		280,322,985
ICFR Auditor Attestation Flag	true
Entity Shell Company	false
Entity Small Business	false
Entity Emerging Growth Company	false
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	SRNE
Security Exchange Name	NASDAQ
Entity File Number	001-36150
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	33-0344842
Entity Address, Address Line One	4955 Directors Place
Entity Address, City or Town	San Diego
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92121
City Area Code	858
Local Phone Number	203-4100
Document Annual Report	true
Document Transition Report	false
Documents Incorporated by Reference	None.

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 56,464	$ 22,521
Restricted cash		13,098
Accounts receivables, net	15,506	14,454
Inventory	1,831	3,362
Prepaid expenses	8,712	11,750
Other current assets	3,721	2,403
Total current assets	86,234	67,588
Property and equipment, net	31,861	29,888
Operating lease right-of-use assets	42,052	46,384
Intangibles, net	73,675	63,308
Goodwill	43,554	38,298
Equity investments	256,397	262,241
Restricted cash		45,150
Other assets, net	2,049	4,775
Total assets	535,822	557,632
Current liabilities:
Accounts payable	24,706	27,630
Accrued payroll and related benefits	20,859	15,914
Accrued expenses	19,198	18,728
Current portion of deferred revenue	4,485	3,643
Current portion of derivative liabilities		8,800
Current portion of operating lease liabilities	3,626	3,322
Acquisition consideration payable	398	908
Current portion of debt	23,208	36,261
Total current liabilities	96,480	115,206
Long-term debt, net of discount	92,258	199,088
Deferred tax liabilities, net	6,918	9,043
Deferred revenue	113,185	114,389
Derivative liabilities	35,400	35,000
Operating lease liabilities	50,301	52,111
Other long-term liabilities	549	39
Total liabilities	395,091	524,876
Commitments and contingencies (Note 11)
Sorrento Therapeutics, Inc. equity
Common stock, $0.0001 par value; 750,000,000 shares authorized and 275,285,582 and 167,798,120 shares issued and outstanding at December 31, 2020 and 2019, respectively	28	18
Additional paid-in capital	1,172,346	788,122
Accumulated other comprehensive income	520	(270)
Accumulated deficit	(958,279)	(659,818)
Treasury stock, 7,568,182 shares at cost at December 31, 2020 and 2019	(49,464)	(49,464)
Total Sorrento Therapeutics, Inc. stockholders' equity	165,151	78,588
Noncontrolling interests	(24,420)	(45,832)
Total equity	140,731	32,756
Total liabilities and equity	$ 535,822	$ 557,632

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2020	Dec. 31, 2019
Statement Of Financial Position [Abstract]
Common stock, par value (USD per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	750,000,000	750,000,000
Common stock, shares issued (in shares)	275,285,582	167,798,120
Common stock, shares outstanding (in shares)	275,285,582	167,798,120
Treasury stock, shares (in shares)	7,568,182	7,568,182

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Revenue:
Revenues	$ 39,986	$ 31,432	$ 21,193
Operating costs and expenses:
Research and development	111,340	106,879	76,963
Acquired in-process research and development	42,992	75,301	11,304
Selling, general and administrative	116,179	103,557	63,638
Intangible amortization	4,053	3,941	3,009
(Gain) loss on contingent liabilities and acquisition consideration payable		(11,090)	9,644
Total operating costs and expenses	284,504	290,825	171,618
Loss from operations	(244,518)	(259,393)	(150,425)
Gain (loss) on derivative liabilities	6,600	(36,792)	2,830
Gain (loss) on foreign currency exchange	812	(330)	(1,243)
Other income (loss)	(1,378)	(203)	(144)
Interest expense	(20,181)	(36,139)	(57,631)
Interest income	24	1,091	921
Loss on debt extinguishment	(51,939)	(27,810)	(8,089)
Loss before income tax	(310,580)	(359,576)	(213,781)
Income tax benefit	(2,014)	(473)	(6,274)
Loss on equity method investments	(5,844)	(3,909)	(5,019)
Net loss	(314,410)	(363,012)	(212,526)
Net loss attributable to noncontrolling interests	(15,949)	(70,944)	(8,986)
Net loss attributable to Sorrento	$ (298,461)	$ (292,068)	$ (203,540)
Net loss per share - basic per share attributable to Sorrento	$ (1.30)	$ (2.20)	$ (1.92)
Net loss per share - diluted per share attributable to Sorrento	$ (1.30)	$ (2.35)	$ (1.92)
Weighted-average shares outstanding during period - basic per share attributable to Sorrento (in shares)	229,823	132,732	106,150
Weighted-average shares outstanding during period - diluted per share attributable to Sorrento (in shares)	229,823	140,514	106,150
Product
Revenue:
Revenues	$ 26,628	$ 21,974	$ 5,873
Operating costs and expenses:
Cost of products sold and services	2,149	5,933	1,476
Service
Revenue:
Revenues	13,358	9,458	15,320
Operating costs and expenses:
Cost of products sold and services	$ 7,791	$ 6,304	$ 5,584

Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (314,410)	$ (363,012)	$ (212,526)
Other comprehensive income (loss):
Foreign currency translation adjustments	790	(285)	(227)
Total other comprehensive income (loss)	790	(285)	(227)
Comprehensive loss	(313,620)	(363,297)	(212,753)
Comprehensive loss attributable to noncontrolling interests	(15,949)	(70,944)	(8,986)
Comprehensive loss attributable to Sorrento	$ (297,671)	$ (292,353)	$ (203,767)

- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income (loss) and other comprehensive income (loss), attributable to noncontrolling interests. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

+ References

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+ Details

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Public Placement	Public Offering Of Common Stock And Warrants 2019	Registered Direct Offering 2019	2019 Warrants	December 2019 Warrants	BDL Products Inc	Scilex Pharmaceuticals, Inc	Virttu Biologics Limited	Semnur	SmartPharm	Common Stock	Common Stock Public Placement	Common Stock Public Offering Of Common Stock And Warrants 2019	Common Stock Registered Direct Offering 2019	Common Stock BDL Products Inc	Common Stock Scilex Pharmaceuticals, Inc	Common Stock Virttu Biologics Limited	Common Stock SmartPharm	Treasury Stock	Additional Paid-in Capital	Additional Paid-in Capital Public Placement	Additional Paid-in Capital Public Offering Of Common Stock And Warrants 2019	Additional Paid-in Capital Registered Direct Offering 2019	Additional Paid-in Capital 2019 Warrants	Additional Paid-in Capital December 2019 Warrants	Additional Paid-in Capital BDL Products Inc	Additional Paid-in Capital Scilex Pharmaceuticals, Inc	Additional Paid-in Capital Virttu Biologics Limited	Additional Paid-in Capital Semnur	Additional Paid-in Capital SmartPharm	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Accumulated Deficit Cumulative Effect, Period of Adoption, Adjustment	Noncontrolling Interest	Noncontrolling Interest Semnur
Balance at Dec. 31, 2017	$ 206,610	$ 910											$ 9								$ (49,464)	$ 413,901											$ 242	$ (165,120)	$ 910	$ 7,042
Balance, shares (in shares) at Dec. 31, 2017													82,904,000								7,568,000
Accounting Standards Update [Extensible List]		us-gaap:AccountingStandardsUpdate201409Member
Issuance of common stock upon exercise of stock options	211																					211
Issuance of common stock upon exercise of stock options (in shares)													58,000
Issuance of common stock upon acquisition								$ 2,340	$ 13,744	$ 11,308																		$ 2,340	$ 13,744	$ 11,308
Issuance of common stock upon acquisition (in shares)																	310,000	1,381,000	1,795,000
Issuance of common stock, net			$ 83,610											$ 2									$ 83,608
Issuance of common stock, net (in shares)														13,794,000
Issuance of common stock, conversion of notes payable	50,000												$ 2									49,998
Issuance of common stock, conversion of notes payable (in shares)													22,039,000
Beneficial conversion feature recorded on convertible notes	12,006																					12,006
Warrants issued in connection with convertible notes	9,646																					9,646
Warrants issued in connection with Term Loan Agreement	21,746																					21,746
Loss on debt extinguishment	1,916																					1,916
Stock-based compensation	6,206																					6,234														(28)
Foreign currency translation adjustment	(227)																																(227)
Net loss	(212,526)																																	(203,540)		(8,986)
Balance at Dec. 31, 2018	207,500												$ 13								$ (49,464)	626,658											15	(367,750)		(1,972)
Balance, shares (in shares) at Dec. 31, 2018													122,281,000								7,568,000
Issuance of common stock upon exercise of stock options	492																					492
Issuance of common stock upon exercise of stock options (in shares)													268,000
Issuance of common stock upon exercise of warrants	8,359																					8,359
Issuance of common stock upon issuance of warrants (in shares)													3,128,000
Issuance of common stock, net			$ 990	$ 23,323	$ 23,385										$ 1	$ 1							$ 990	$ 23,322	$ 23,384
Issuance of common stock, net (in shares)														259,000	8,333,000	10,870,000
Issuance of common stock, conversion of notes payable	53,983										$ 54,591		$ 3									53,980									$ 27,991						$ 26,600
Issuance of common stock, conversion of notes payable (in shares)													22,660,000
Warrants issued in connection with convertible notes						$ 4,288	$ 6,010																			$ 4,288	$ 6,010
Adjustment to noncontrolling interest	484																																			484
Stock-based compensation	12,648																					12,648
Foreign currency translation adjustment	(285)																																(285)
Net loss	(363,012)																																	(292,068)		(70,944)
Balance at Dec. 31, 2019	32,756												$ 18								$ (49,464)	788,122											(270)	(659,818)		(45,832)
Balance, shares (in shares) at Dec. 31, 2019													167,799,000								7,568,000
Issuance of common stock upon exercise of stock options	$ 5,578																					5,578
Issuance of common stock upon exercise of stock options (in shares)	1,301,671												1,339,000
Issuance of common stock upon exercise of warrants	$ 92,773												$ 3									92,770
Issuance of common stock upon issuance of warrants (in shares)													33,091,000
Issuance of common stock upon acquisition	9,544																					9,544
Issuance of common stock upon acquisition (in shares)													1,997,000
Issuance of common stock, net	317,865												$ 7									317,858
Issuance of common stock, net (in shares)													69,228,000
Issuance of common stock, conversion of notes payable												$ 19,421																				$ 19,421
Issuance of common stock, conversion of notes payable (in shares)																				1,832,000
Changes to NCI	(55,005)																					(92,366)														37,361
Stock-based compensation	31,419																					31,419
Foreign currency translation adjustment	790																																790
Net loss	(314,410)																																	(298,461)		(15,949)
Balance at Dec. 31, 2020	$ 140,731												$ 28								$ (49,464)	$ 1,172,346											$ 520	$ (958,279)		$ (24,420)
Balance, shares (in shares) at Dec. 31, 2020													275,286,000								7,568,000

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
Consolidated Statements of Cash Flows - USD ($)	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Operating activities:
Net loss	$ (314,410,000)	$ (363,012,000)	$ (212,526,000)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization	11,007,000	10,989,000	9,494,000
Non-cash interest expense and amortization of debt issuance costs	12,897,000	22,526,000	53,391,000
Non-cash operating lease cost	3,702,000	4,053,000
Stock-based compensation	31,419,000	12,648,000	6,206,000
Acquired in-process research and development	42,992,000	75,301,000	9,895,000
Loss on debt extinguishment	51,939,000	27,810,000	8,089,000
(Gain) loss on derivative liability	(6,600,000)	36,792,000	(2,830,000)
Loss on equity method investments	5,844,000	3,909,000	5,019,000
(Gain) loss on contingent liabilities and acquisition consideration payable		(11,090,000)	9,644,000
Loss on IPR&D impairment			1,826,000
Deferred income tax benefit	(2,125,000)	(373,000)	(6,119,000)
Changes in operating assets and liabilities, excluding effect of acquisitions:
Accounts receivable	(1,051,000)	(10,622,000)	(1,623,000)
Accrued payroll	4,945,000	5,678,000	5,751,000
Prepaid expenses and other current assets	6,445,000	(314,000)	(2,660,000)
Accounts payable	(3,677,000)	10,221,000	3,578,000
Accrued expenses and other liabilities	(1,188,000)	4,061,000	6,130,000
Deferred revenue	(362,000)	(945,000)	(3,263,000)
Acquisition consideration payable			(2,020,000)
Other	(1,313,000)	(628,000)	251,000
Net cash used for operating activities	(159,536,000)	(172,996,000)	(111,767,000)
Investing activities:
Purchases of property and equipment	(6,528,000)	(11,442,000)	(11,195,000)
Purchase of assets related to Semnur, net of cash acquired		(17,040,000)
Payments related to license agreements	(31,051,000)
Other acquisitions and investments	(2,344,000)	(9,691,000)	(10,000,000)
Net cash used for investing activities	(39,923,000)	(38,173,000)	(21,195,000)
Financing activities:
Proceeds from exercises of stock options and warrants	98,351,000	8,851,000	211,000
Proceeds from issuance of Scilex notes, net of issuance costs			134,275,000
Proceeds from issuance of convertible notes			37,849,000
Proceeds from short-term debt and working capital funding arrangements, net of issuance costs	18,587,000	8,000,000	21,261,000
Payments of debt and other obligations	(205,564,000)	(3,074,000)	(42,466,000)
Payments related to Semnur Share Exchange	(55,000,000)
Net cash provided by financing activities	174,239,000	78,885,000	325,998,000
Net change in cash, cash equivalents and restricted cash	(25,220,000)	(132,284,000)	193,036,000
Net effect of exchange rate changes on cash	915,000	(277,000)	(135,000)
Cash, cash equivalents and restricted cash at beginning of period	80,769,000	213,330,000	20,429,000
Cash, cash equivalents and restricted cash at end of period	56,464,000	80,769,000	213,330,000
Cash paid during the period for:
Income taxes		13,000	6,000
Interest	3,419,000	12,738,000	1,620,000
Supplemental disclosures of non-cash investing and financing activities:
Semnur acquisition costs incurred but not paid		601,000
Other acquisitions, license agreements and investments paid in equity	9,544,000		13,648,000
Conversion of convertible notes		53,983,000	50,000,000
Loss on debt extinguishment			9,646,000
Property and equipment costs incurred but not paid	600,000	849,000	328,000
Reconciliation of cash, cash equivalents and restricted cash within the Company's consolidated balance sheets:
Cash and cash equivalents	56,464,000	22,521,000	158,738,000
Restricted cash	0	58,248,000	54,592,000
Cash, cash equivalents, and restricted cash	56,464,000	80,769,000	213,330,000
Public Offering Of Common Stock And Warrants 2019
Financing activities:
Proceeds from issuance of common stock	317,865,000	47,697,000	83,608,000
SmartPharm
Supplemental disclosures of non-cash investing and financing activities:
Acquisition consideration paid in equity	$ 19,421,000
Semnur
Supplemental disclosures of non-cash investing and financing activities:
Acquisition consideration paid in equity		54,591,000
Scilex Pharmaceuticals, Inc
Supplemental disclosures of non-cash investing and financing activities:
Non-cash consideration given			13,744,000
Oaktree Term Loan
Financing activities:
Proceeds from Oaktree Term Loans, net of issuance costs		$ 17,411,000	91,260,000
June 2018 Warrants, Amendment
Supplemental disclosures of non-cash investing and financing activities:
Loss on debt extinguishment			$ 1,916,000

Organization and Significant Accounting Policies

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Organization and Significant Accounting Policies

1. Organization and Significant Accounting Policies

Description of Business

Sorrento Therapeutics, Inc. (the “Company”) is a clinical stage, antibody-centric, biopharmaceutical company developing new therapies to treat cancers and COVID-19. The Company’s multimodal, multipronged approach to fighting cancer is made possible by its extensive immuno-oncology platforms, including key assets such as fully human antibodies (“G-MAB™ library”), clinical stage immuno-cellular therapies (“CAR-T”, “DAR-T™”), antibody-drug conjugates (“ADCs”) and clinical stage oncolytic virus (Seprehvir™). The Company is also developing potential antiviral therapies and vaccines against coronaviruses, including COVI-GUARD™, COVI-AMG™, COVI-SHIELD™, Gene-MAb™, COVI-MSC™ and COVI-DROPS™; and diagnostic test solutions, including COVI-TRACK™, COVI-STIX™ and COVI-TRACE™.

The Company’s commitment to life-enhancing therapies for patients is also demonstrated by our effort to advance a first-in-class (TRPV1 agonist) non-opioid pain management small molecule, resiniferatoxin (“RTX”), and SP-102 (10 mg, dexamethasone sodium phosphate viscous gel) (SEMDEXA™), a novel, viscous gel formulation of a widely used corticosteroid for epidural injections to treat lumbosacral radicular pain, or sciatica, and through the commercialization of ZTlido^® (lidocaine topical system) 1.8% for the treatment of post-herpetic neuralgia.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company`s subsidiaries. For consolidated entities where the Company owns or is exposed to less than 100% of the economics, the Company records net income (loss) attributable to noncontrolling interests in its consolidated statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. All intercompany balances and transactions have been eliminated in consolidation. The Company operates in two operating and reportable segments, Sorrento Therapeutics and Scilex.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management believes that these estimates are reasonable; however, actual results may differ from these estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of money market accounts and bank deposits, which are highly liquid and readily tradable. The Company minimizes its credit risk associated with cash and cash equivalents by periodically evaluating the credit quality of its primary financial institutions. The balance at times may exceed federally insured limits. The Company has not experienced any losses on such accounts.

Restricted Cash

As of December 31, 2020 there was no restricted cash in the Company`s consolidated balance sheet. Restricted cash in the Company's consolidated balance sheet as of December 31, 2019 included approximately $45.0 million of restricted cash related to the Scilex Notes in the form of both the Reserve Account and the Collateral Account (See Note 8). Restricted cash in the Company's consolidated balance sheet as of December 31, 2019 also included approximately $13.1 million of restricted cash related to the Oaktree Term Loan Agreement in the form of a Reserve Account.

Fair Value of Financial Instruments

The Company follows accounting guidance on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments:

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Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments.

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Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace.

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Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires it to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed or initial amounts recorded may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange.

The carrying amounts of cash equivalents approximate their fair value based upon quoted market prices. Certain of the Company’s financial instruments are not measured at fair value on a recurring basis, but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as accounts receivable and payable, and other financial instruments in current assets or current liabilities.

Accounts Receivable, Net

Accounts receivable are presented net of allowances for expected credit losses and consist of trade receivables from sales and services provided to certain customers, which are generally unsecured. Estimated credit losses related to trade accounts receivable are recorded as general and administrative expenses and as an allowance for doubtful accounts and accounts receivable, net. The Company reviews reserves and makes adjustments based on historical experience and known collectability issues and disputes. When internal collection efforts on accounts have been exhausted, the accounts are written off by reducing the allowance for doubtful accounts. The allowance for doubtful accounts is not material.

Inventory, Net

The Company determines inventory cost on a first-in, first-out basis. The Company reduces the carrying value of inventories to a lower of cost or net realizable value for those items that are potentially excess, obsolete or slow-moving. The Company considers the need for allowances for excess and obsolete inventory based upon historical experience, sales trends, and specific categories of inventory and expiration dates for inventory on hand. As of December 31, 2020, net inventory was $1.8 million and primarily comprised of finished goods. Net inventory as of December 31, 2019 was $3.4 million and primarily comprised of finished goods.

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which are generally three to five years. Leasehold improvements are amortized over the lesser of the life of the lease or the life of the asset. Repairs and maintenance are charged to expense as incurred.

Acquisitions

The Company accounts for business combinations using the acquisition method of accounting, which requires that assets acquired, including in-process research and development (“IPR&D”) projects and liabilities assumed be recorded at their fair values as of the acquisition date on the Company`s consolidated balance sheets. Any excess of purchase price over the fair value of net assets acquired is recorded as goodwill. The determination of estimated fair value requires the Company to make significant estimates and assumptions. As a result, the Company may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period (up to one year from the acquisition date) with the corresponding offset to goodwill. Transaction costs associated with business combinations are expensed as they are incurred.

When the Company determines net assets acquired do not meet the definition of a business combination under the acquisition method of accounting, the transaction is accounted for as an acquisition of assets and, therefore, no goodwill is recorded and contingent consideration such as payments upon achievement of various developmental, regulatory and commercial milestones generally is not recognized at the acquisition date. In an asset acquisition, up-front payments allocated to IPR&D projects at the acquisition date and subsequent milestone payments are charged to expense in the Company`s consolidated statements of operations unless there is an alternative future use.

Acquired In-Process Research and Development Expense

The Company has acquired, and may continue to acquire, the rights to develop and commercialize new drug candidates. The up-front payments to acquire new drug compounds or drug delivery devices, as well as future milestone payments associated with assets

that do not meet the definition of a derivative and that are deemed probable to achieve, are immediately expensed as acquired IPR&D, provided that the drug candidates have not achieved regulatory approval for marketing and, absent obtaining such approval, have no alternative future use. Intangible assets acquired in a business combination that are used for IPR&D activities are considered indefinite lived until the completion or abandonment of the associated research and development efforts. Upon commercialization of the relevant research and development project, the Company amortizes the acquired IPR&D over its estimated useful life. Capitalized IPR&D is reviewed annually for impairment or more frequently as changes in circumstance or the occurrence of events suggest that the remaining value may not be recoverable.

Goodwill and Other Long-Lived Assets

Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of net assets acquired. Goodwill is reviewed at the reporting unit level for impairment at least annually during the fourth quarter, or more frequently if events occur indicating the potential for impairment. During its goodwill impairment review, the Company assesses qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and the overall financial performance of the Company. If, after assessing the totality of these qualitative factors, the Company determines that it is not more likely than not that the fair value of its reporting unit is less than its carrying amount, then no additional assessment is deemed necessary. Otherwise, the Company performs a quantitative goodwill impairment test. The Company may also elect to bypass the qualitative assessment in a period and elect to proceed to perform the quantitative goodwill impairment test. The Company performed its annual assessment for goodwill impairment at the Sorrento Therapeutics and Scilex reporting unit levels in the fourth quarter of 2020, noting no indication of impairment. There were no triggering events indicating the potential for impairment through December 31, 2020.

The Company evaluates its long-lived and intangible assets with definite lives, such as property and equipment, acquired technology, customer relationships, patent and license rights, for impairment by considering the expected use of the assets and the effects of obsolescence, demand, anticipated technological advances, market influences and other economic factors. The factors that drive the estimate of useful life are often uncertain and are reviewed on a periodic basis or when events occur that warrant review. Recoverability is measured by comparison of the assets’ book value to future net undiscounted cash flows that the assets are expected to generate. No impairment charges were recorded during the year ended December 31, 2020.

Debt, Including Debt With Detachable Warrants

Detachable warrants are evaluated for the classification of warrants as either equity instruments, derivative liabilities, or liabilities depending on the specific terms of the warrant agreement. In circumstances in which debt is issued with equity-classified warrants, the proceeds from the issuance of debt are first allocated to the debt and the warrants at their relative estimated fair values. The portion of the proceeds allocated to the warrants are accounted for as paid-in capital and a debt discount. The remaining proceeds, as further reduced by discounts created by the bifurcation of embedded derivatives and beneficial conversion features, are allocated to the debt. The Company accounts for debt as liabilities measured at amortized cost and amortizes the resulting debt discount from the allocation of proceeds, to interest expense using the effective interest method over the expected term of the debt instrument. The Company considers whether there are any embedded features in debt instruments that require bifurcation and separate accounting as derivative financial instruments pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging.

If the amount allocated to the convertible debt results in an effective per share conversion price less than the fair value of the Company’s common stock on the commitment date, the intrinsic value of this beneficial conversion feature is recorded as a discount to the convertible debt with a corresponding increase to additional paid in capital. The beneficial conversion feature discount is equal to the difference between the effective conversion price and the fair value of the Company’s common stock at the commitment date, unless limited by the remaining proceeds allocated to the debt.

The Company may enter financing arrangements, the terms of which involve significant assumptions and estimates, including future net product sales, in determining interest expense, amortization period of the debt discount, as well as the classification between current and long-term portions. In estimating future net product sales, the Company assesses prevailing market conditions using various external market data against the Company’s anticipated sales and planned commercial activities. Consequently, the Company imputes interest on the carrying value of the debt and records interest expense using an imputed effective interest rate. The Company reassesses the expected payments each reporting period and accounts for any changes through an adjustment to the effective interest rate on a prospective basis, with a corresponding impact to the classification of the Company’s current and long-term portions.

Derivative Liabilities

Derivative liabilities are recorded on the Company`s consolidated balance sheets at their fair value on the date of issuance and are revalued on each balance sheet date until such instruments are settled or expire, with changes in the fair value between reporting periods recorded as other income or expense.

Investments in Other Entities

The Company holds a portfolio of investments in equity securities. Investments in entities over which the Company has significant influence, but not a controlling interest, are accounted for using the equity method, with the Company’s share of earnings or losses reported in loss on equity method investments. The Company’s other equity investments are carried at cost, less impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments.

Research and Development Costs

The Company expenses the cost of research and development as incurred. Research and development expenses are comprised of costs incurred in performing research and development activities, including clinical trial costs, manufacturing costs for both clinical and preclinical materials as well as other contracted services, license fees and other external costs. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity is performed or when the goods have been received, rather than when payment is made, in accordance with FASB ASC Topic 730, Research and Development.

Income Taxes

The provisions of the FASB ASC Topic 740 “Income Taxes,” addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC Topic 740-10, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The Company has determined that it has uncertain tax positions.

The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates.

The Company has deferred tax assets, which are subject to periodic recoverability assessments. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. As of December 31, 2020, the Company maintained a full valuation allowance against its deferred tax assets, with the exception of an amount equal to its deferred tax liabilities that are scheduled to reverse against the Company's deferred tax assets.

Leases

The Company determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company`s leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company calculates the associated lease liability and corresponding ROU asset upon lease commencement using a discount rate based on a credit-adjusted secured borrowing rate commensurate with the term of the lease. The operating lease ROU asset also includes any lease payments made and is reduced by lease incentives. The Company`s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Revenue Recognition

The Company`s revenues are generated from product revenues, the sale of customized reagents and other materials, contract manufacturing services, and other service revenues.

The following table shows revenue disaggregated by product and service type for the years ended December 31, 2020, 2019 and 2018 (in thousands):

	Years Ended December 31,
	2020		2019		2018
Scilex Pharmaceuticals Inc. product sales	$	26,331	$	21,033	$	2,606
Other product revenue		297		941		3,267
Net product revenue	$	26,628	$	21,974	$	5,873
Concortis Biosystems Corporation		7,730		6,520		5,159
Bioserv Corporation		4,976		2,450		5,992
Joint development agreement		—		—		3,333
Other service revenue		652		488		836
Service revenue	$	13,358	$	9,458	$	15,320

The Company is obligated to accept from customers the return of products sold that are damaged or do not meet certain specifications. The Company may authorize the return of products sold in accordance with the terms of its sales contracts and estimates allowances for such amounts at the time of sale. The Company has not experienced any material sales returns.

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed.

Scilex Product Sales

Revenues from product sales is fully comprised of sales of ZTlido. The Company's performance obligation with respect to sales of ZTlido is satisfied at a point in time, which transfers control upon delivery of product to the customer. The Company considers control to have transferred upon delivery because the customer has legal title to the asset, physical possession of the asset has been transferred to the customer, the customer has significant risks and rewards of ownership of the asset, and the Company has a present right to payment at that time. The Company identified a single performance obligation. Invoicing typically occurs upon shipment and the length of time between invoicing and when payment is due is not significant. The aggregate dollar value of unfulfilled orders as of December 31, 2020 was not material. Sales of ZTlido are generated within the United States. Substantially all of the Company’s product revenue and accounts receivable result from a sole customer.

For product sales, the Company records gross-to-net sales adjustments for government and managed care rebates, chargebacks, wholesaler and distributor fees, sales returns and prompt payment discounts. Such variable consideration is estimated in the period of the sale and are estimated using a most likely amount approach based primarily upon provisions included in the Company’s customer contract, customary industry practices and current government regulations.

Other Product Revenue

Revenues from the sale of materials associated with the Company's research and development arrangements are recognized at a point in time upon the transfer of control, which is generally upon shipment.

Concortis Biosystems Corporation (“Concortis”)

Contract manufacturing associated with sales of customized reagents for Concortis operations relate to providing synthetic expertise to customers’ synthesis by delivering proprietary cytotoxins, linkers and linker-toxins and ADC service using industry standard toxin and antibodies provided by customers which are recognized at a point in time upon the transfer of control, which is generally upon shipment given the short contract terms which are generally three months or less.

Bioserv Corporation (“Bioserv”)

Contract manufacturing services associated with the Company’s Bioserv operations related to finish and fill activities for drug products and reagents are recognized ratably over the contract term, which reflects the transfer of services to the customer because the manufactured products are highly customized and do not have an alternative use to the Company. As of December 31, 2020 and 2019, the estimated revenue expected to be recognized for future performance obligations associated with contract manufacturing services was approximately $3.4 million and $2.2 million, respectively.

Joint Development Agreement

In 2017, the Company entered into a joint development agreement with Celularity Inc. (“Celularity”) whereby the Company agreed to provide research services to Celularity through June 2018 in exchange for an upfront payment of $5.0 million. The revenue related to the joint development agreement of $5.0 million was recognized over the length of the service agreement as services were performed. The Company recorded sales and services revenues under the joint development agreement of $3.3 million for the year ended December 31, 2018. The Company recorded no sales and services revenues under the joint development agreement during the years ended December 31, 2020 and 2019 as such arrangement is complete.

Other Service Revenue

License fees for the licensing of product rights are recorded as deferred revenue upon receipt of cash and recognized as revenue on a straight-line basis over the license period, with the exception of license agreements with no remaining performance obligations or undelivered obligations. The Company applies judgment in determining the timing of revenue recognition related to contracts that include multiple performance obligations. The total transaction price of the contract is allocated to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance

obligation. For goods or services for which observable standalone selling prices are not available, the Company develops an estimated standalone selling price of each performance obligation.

As of December 31, 2020, future performance obligations for license revenues relate to the ImmuneOncia Therapeutics, LLC (“ImmuneOncia”) and NantCell, Inc. (“NantCell”) license agreements.

The total consideration for the ImmuneOncia license performance obligation, effective September 1, 2016, represented $9.6 million. The estimated revenue expected to be recognized for future performance obligations, as of December 31, 2020, was approximately $7.5 million. The Company expects to recognize license revenue of approximately $0.5 million of the remaining performance obligation annually through the remaining term. The Company applied judgment in estimating the 20-year contract term, analogous to the expected life of the patent, over which revenue is recognized over time given the ongoing performance obligation related to the Company's participation on a steering committee for the technologies under the agreement.

As of December 31, 2020 and 2019, the NantCell license agreement, effective April 21, 2015, represented $110.0 million of contract liabilities reflected in long-term deferred revenue. See Note 7 for additional information regarding the remaining performance obligation for the agreement.

In November 2020, the Company was awarded a contract with the Defense Advanced Research Projects Agency (“DARPA Contract”) and co-funded by the Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense, to develop a rapid countermeasure to COVID-19 using gene-encoded neutralizing antibodies. The contract provides SmartPharm Therapeutics, Inc. (“SmartPharm”) funding of up to $34.0 million for the development through Phase II clinical studies of a gene-encoded antibody that could enable rapid protection from and/or treatment of SARS-CoV-2 infection and COVID-19. The Company recognized $0.2 million in grant revenue associated with the DARPA Contract during the year ended December 31, 2020, which is included within other service revenue.

Stock-Based Compensation

The Company estimates the fair value of stock option awards and its Employee Stock Purchase Plan (“ESPP”) on the grant or offering date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires inputs such as the risk-free interest rate, expected term and expected volatility.Stock-based compensation expense is recognized on a straight-line basis, net of actual forfeitures in the period.

Comprehensive Loss

Comprehensive loss is primarily comprised of net income (loss) and foreign currency translation adjustments. The Company displays comprehensive loss and its components in its consolidated statements of comprehensive loss.

Net Income (Loss) per Share

Basic net income (loss) per share is computed by dividing net loss for the period by the weighted average number of shares of common stock outstanding. Diluted net loss per share reflects the additional dilution from potential issuances of common stock, such as stock issuable pursuant to the exercise of stock options or the exercise of outstanding warrants. The treasury stock method and the if-converted method are used to calculate the potential dilutive effect of these common stock equivalents. Potentially dilutive shares are excluded from the computation of diluted net loss per share when their effect is anti-dilutive. In periods where a net loss is presented, all potentially dilutive securities are anti-dilutive and are excluded from the computation of diluted net loss per share.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to improve financial reporting by requiring timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The ASU was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The amendments in this update were adopted using a modified retrospective transition method as of January 1, 2020, which had no cumulative impact to accumulated deficit.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, to improve the effectiveness of the disclosure requirements for fair value measurements. The ASU was effective for fiscal years and interim periods beginning after December 15, 2019. Amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty were applied prospectively as of the beginning of the fiscal year of adoption with all other amendments being applied retrospectively to all periods presented upon their effective date. The Company adopted the standard in the first quarter of 2020 with no material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350). This standard eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This update also eliminated the qualitative assessment requirements for a reporting unit with zero or negative carrying value. This guidance was effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted, and must be applied on a prospective basis. The Company adopted the standard in the first quarter of 2020 with no material impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) Topic 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance. The amendments in this update are effective for interim and annual periods for the Company beginning after December 15, 2020, with early adoption permitted. The Company has evaluated the changes from the standard update and determined any impacts would be immaterial on its consolidated financial statements. The Company will adopt the new guidance on January 1, 2021.

Liquidity and Going Concern

12 Months Ended

Dec. 31, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Liquidity and Going Concern

2. Liquidity and Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has negative working capital and recurring losses from operations, recurring negative cash flows from operations and substantial cumulative net losses to date and anticipates that it will continue to do so for the foreseeable future as it continues to identify and invest in advancing product candidates, as well as expanding corporate infrastructure.

The Company has plans in place to obtain sufficient additional fundraising to fulfill its operating and capital requirements for the next 12 months. The Company’s plans include continuing to fund its operating losses and capital funding needs through public or private equity or debt financings, strategic collaborations, licensing arrangements, asset sales, government grants or other arrangements. Although management believes such plans, if executed, should provide the Company sufficient financing to meet its needs, successful completion of such plans is dependent on factors outside of the Company’s control. As such, management cannot conclude that such plans will be effectively implemented within one year after the date that the financial statements are issued. As a result, management has concluded that the aforementioned conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

If the Company is unable to raise additional capital in sufficient amounts or on terms acceptable, the Company may have to significantly delay, scale back or discontinue the development or commercialization of one or more of its product candidates. The Company may also seek collaborators for one or more of its current or future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available. The consolidated financial statements do not reflect any adjustments that might be necessary if the Company is unable to continue as a going concern.

If the Company raises additional funds by issuing equity securities, substantial dilution to existing stockholders would result. If the Company raises additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and specific financial ratios that may restrict the Company’s ability to operate its business.

Fair Value Measurements

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	Fair Value Measurements at December 31, 2020
	Balance		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	56,464	$	56,464	$	—	$	—
Total assets	$	56,464	$	56,464	$	—	$	—
Liabilities:
Derivative liabilities - non-current	$	35,400	$	—	$	—	$	35,400
Acquisition consideration payable		398		—		—		398
Acquisition consideration payable, non-current		549		—		—		549
Total liabilities	$	36,347	$	—	$	—	$	36,347

	Fair Value Measurements at December 31, 2019
	Balance		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	22,521	$	22,521	$	—	$	—
Restricted cash		58,248		58,248		—		—
Total assets	$	80,769	$	80,769	$	—	$	—
Liabilities:
Derivative liabilities	$	8,800	$	—	$	—	$	8,800
Derivative liabilities - non-current		35,000		—		—		35,000
Acquisition consideration payable		908		—		—		908
Acquisition consideration payable, non-current		39		—		—		39
Total liabilities	$	44,747	$	—	$	—	$	44,747

There were no changes to the fair value of acquisition consideration payable during the year ended December 31, 2020.

During the year ended December 31, 2019, the fair value remeasurement adjustments related to the Company’s acquisitions resulted in a decrease to the contingent consideration liabilities by $0.7 million. The Company also recorded a $10.4 million gain related to the settlement of the acquisition consideration payable associated with the Virttu acquisition.

During the year ended December 31, 2018, the fair value remeasurement adjustments related to the Company’s acquisitions resulted in an increase to the contingent consideration liabilities by $9.6 million. The Company recorded $51.9 million in settlements of contingent consideration primarily related to such liabilities, which included the settlements of Scilex Pharmaceuticals Inc. (“Scilex Pharma”) and BDL liabilities for $38.2 million and $2.3 million, respectively, and the $11.3 million partial settlement of the Virttu financing milestone in common stock of the Company.

Contingent consideration liabilities and acquisition consideration payable are measured using the income approach and discounting to present value the contingent payments expected to be made based on assessment of the probability that the company would be required to make such future payments. The contingent consideration liabilities and acquisition consideration payable are measured at fair value using significant unobservable inputs (Level 3), which include discount rates and probabilities assigned to scenario outcomes. The following table includes a summary of the changes to contingent consideration liabilities and acquisition consideration payable during the years ended December 31, 2020, 2019 and 2018:

(in thousands)	Fair Value
Balance at December 31, 2017	$	54,272
Re-measurement of Fair Value		9,644
Settlements of contingent consideration		(51,879	)
Balance at December 31, 2018	$	12,037
Re-measurement of Fair Value		(736	)
Settlements of contingent consideration		(10,354	)
Balance at December 31, 2019	$	947
Re-measurement of Fair Value		—
Settlements of contingent consideration		—
Balance at December 31, 2020	$	947

Derivative liabilities

The Company recorded a gain on derivative liabilities of $6.6 million and a loss on derivative liabilities of $36.8 million for the years ended December 31, 2020 and 2019, respectively, which related to the compound derivative liabilities associated with the Term Loans and the Scilex Notes (as defined in Note 8). The compound derivative liabilities consist of the fair value of various embedded features as further described in Note 8. The fair value of the derivative liabilities associated with the Scilex Notes was estimated using the discounted cash flow method under the income approach combined with a Monte Carlo simulation model. This involves significant Level 3 inputs and assumptions. The key assumptions for the Scilex Notes for the year ended December 31, 2020 included a 7% risk-adjusted net sales forecast, an effective debt yield of 15% and an estimated probability of 100% of not obtaining marketing approval before March 31, 2021. The key assumptions for the Scilex Notes for the year ended December 31, 2019 included an 8% risk adjusted net sales forecast, an effective debt yield of 19.7% and estimated probabilities of 55% and 100% of not obtaining marketing approval before July 1, 2023 and March 31, 2021, respectively, and an estimated high probability of a Scilex Holding IPO that satisfies certain valuation thresholds.

Significant Level 3 inputs and assumptions for derivative liabilities associated with the Term Loans primarily included the estimated probabilities of satisfying certain commercial and financial milestones estimated using a with and without discounted cash flow approach. As explained further in Note 8, the Term Loans, which include the Early Conditional Loan, were paid in full as of December 31, 2020 and the associated derivative liabilities were relieved.

During the year ended December 31, 2019, the Company recorded a derivative liability and corresponding debt discount of approximately $7.0 million, which was attributed to a contingent acceleration feature related to the Early Conditional Loan. The debt discount was amortized over the remaining term of the Term Loans and was recorded as interest expense in the consolidated statement of operations. Additionally, the Company recorded a mark-to-market loss on derivative liabilities related to the contingent acceleration feature of the Early Conditional Loan of $1.8 million for the year ended December 31, 2019. The Company also recorded a loss on derivative liabilities of $4.3 million during 2019 associated with the 2019 Warrants (as defined in Note 8) for the year ended December 31, 2019.

The following table includes a summary of the derivative liabilities measured at fair value using significant unobservable inputs (Level 3) during the years ended December 31, 2020 and 2019:

(in thousands)	Fair Value
Balance at December 31, 2018	$	—
Additions		6,996
Re-measurement of Fair Value		36,804
Balance at December 31, 2019	$	43,800
Additions		8,800
Re-measurement of Fair Value		(17,200	)
Balance at December 31, 2020	$	35,400

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Property and Equipment

12 Months Ended

Dec. 31, 2020

Property Plant And Equipment [Abstract]

Property and Equipment

4. Property and Equipment

Property and equipment consisted of the following as of December 31, 2020 and 2019 (in thousands):

	December 31,
	2020			2019
Furniture and fixtures	$	1,349		$	1,315
Office equipment		280			700
Machinery and lab equipment		41,919			33,192
Leasehold improvements		14,295			13,161
Construction in progress		4,031			3,855
		61,874			52,223
Less accumulated depreciation		(30,013	)		(22,335	)
	$	31,861		$	29,888

Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was $7.0 million, $7.0 million and $6.0 million, respectively.

Investments

12 Months Ended

Dec. 31, 2020

Equity Method Investments And Joint Ventures [Abstract]

Investments

5. Investments

The Company’s equity method investments include an ownership interest in Immunotherapy NANTibody, LLC (“NANTibody”), NantCancerStemCell, LLC (“NantStem”) and ImmuneOncia Therapeutics, LLC, among others. The Company’s other equity investments include an ownership interest in ImmunityBio, Inc., NantBioScience, Inc. (“NantBioScience”), and Celularity Inc.

During the year ended December 31, 2020, the Company recorded an impairment loss of approximately $3.8 million related to an equity method investment for which the Company determined the investment’s value is no longer supportable. The loss is included within loss on equity method investments in the Company’s consolidated statement of operations.

NANTibody

The Company’s investment in NANTibody is reported in equity method investments on its consolidated balance sheets and its share of NANTibody’s income or loss is recorded in loss on equity method investments on its consolidated statement of operations. The Company continues to hold 40% of the outstanding equity of NANTibody and NantCell holds the remaining 60%. The carrying value of the Company’s investment in NANTibody was approximately $0.5 million and $2.5 million as of December 31, 2020 and 2019, respectively.

NANTibody recorded net loss of $0.1 million, $2.4 million and $0.7 million for the twelve months ended September 30, 2020, 2019 and 2018, respectively. As of September 30, 2020, NANTibody had $4.9 million in current assets, $3.5 million in current liabilities, $0.2 million in noncurrent assets and no noncurrent liabilities. As of September 30, 2019, NANTibody had $7.3 million in current assets, $1.0 million in current liabilities, $0.2 in noncurrent assets and no noncurrent liabilities.

The financial statements of NANTibody are not received sufficiently timely for the Company to record its portion of earnings or loss in the current financial statements and therefore the Company reports its portion of earnings or loss on a one quarter lag.

NantStem

The Company’s investment in NantStem is reported in equity method investments on its consolidated balance sheets and its share of NantStem’s income or loss is recorded in loss on equity method investments on its consolidated statement of operations. The Company is accounting for its interest in NantStem as an equity method investment, due to the significant influence the Company has over the operations of NantStem through its board representation and 20% voting interest. The carrying value of the Company’s investment in NantStem was approximately $18.1 million and $17.9 million as of December 31, 2020 and 2019, respectively.

NantStem recorded a net gain of $0.1 million and net loss of $0.9 million for the twelve months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, NantStem had $80.0 million in current assets, no current liabilities and $1.7 million noncurrent assets and no noncurrent liabilities. As of September 30, 2019, NantStem had $75.9 million in current assets, $0.2 million in current liabilities, $4.7 million in noncurrent assets and no noncurrent liabilities. A loss related to other-than-temporary impairment of $0.5 million was recognized for the equity investment in NantStem for the year ended December 31, 2018.

The financial statements of NantStem are not received sufficiently timely for the Company to record its portion of earnings or loss in the current financial statements and therefore the Company reports its portion of earnings or loss on a one quarter lag.

Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

6. Goodwill and Intangible Assets

The Company had goodwill of $43.6 million as of December 31, 2020, which increased by $5.3 million as compared to $38.3 million as of December 31, 2019 due to the Company’s acquisition of SmartPharm. The Company performed a qualitative test for goodwill impairment by segment during the fourth quarter of 2020. No goodwill impairment was recognized for the years ended December 31, 2020, 2019 and 2018.

Commencing January 1, 2019, the Company re-segmented its business into two new operating segments: the Sorrento Therapeutics segment and the Scilex segment. These segments are the Company’s reporting units and are the level at which the Company conducts its goodwill impairment evaluations. Goodwill was allocated to the Sorrento Therapeutics and the Scilex operating segments on a relative fair value basis. Goodwill for the Sorrento Therapeutics segment and Scilex segment was $36.9 million and $6.7 million, respectively, as of December 31, 2020.

Amortization for the intangible assets that have finite useful lives is generally recorded on a straight-line basis over their useful lives. Intangible assets with indefinite useful lives totaling $28.3 million are included in acquired in-process research and development in the table below. A summary of the Company’s identifiable intangible assets as of December 31, 2020 and 2019 is as follows (in thousands):

December 31, 2020

Weighted

Average

Amortization

Period

(Years)

Gross

Carrying

Amount

Accumulated

Amortization

Intangibles,

net

Customer relationships