SEC Filing - Sorrento Therapeutics

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10-Q

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 September 30, 2022


☐	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 filer, 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:

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 November 4, 2022 was 471,880,267.

Sorrento Therapeutics, Inc.

Form 10-Q for the Quarter Ended September 30, 2022

Table of Contents


Part I	Financial Information	3
Item 1.	Consolidated Financial Statements (Unaudited)	3
	Consolidated Balance Sheets (Unaudited) as of September 30, 2022 and December 31, 2021	3
	Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021	4
	Consolidated Statements of Comprehensive Loss (Unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021	5
	Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021	6
	Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2022 and 2021	8
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

Part II	Other Information	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	41
SIGNATURES		44

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share amounts; unaudited)


ASSETS	September 30, 2022			December 31, 2021
Current assets:
Cash and cash equivalents	$	70,686		$	36,665
Marketable investments		47,175			90,217
Accounts receivables, net		24,190			18,715
Inventory		17,961			8,106
Prepaid expenses		7,937			11,804
Other current assets		9,008			7,482
Total current assets		176,957			172,989
Property and equipment, net		43,634			41,325
Operating lease right-of-use assets		85,261			85,173
Intangibles, net		171,440			259,705
Goodwill		80,199			79,525
Equity investments		55,605			51,271
Other assets, net		2,518			4,830
Total assets	$	615,614		$	694,818
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	38,391		$	27,414
Accrued payroll and related benefits		29,197			21,503
Accrued expenses		59,764			37,975
Current portion of deferred revenue		281			1,108
Current portion of operating lease liabilities		13,373			11,539
Current portion of contingent consideration		397			397
Acquisition consideration		7,670			7,537
Current portion of debt		52,907			31,980
Total current liabilities		201,980			139,453
Long-term debt, net of discount		17,800			110,627
Deferred tax liabilities, net		1,744			2,426
Deferred revenue		117,224			118,942
Derivative liabilities		—			35,700
Operating lease liabilities		84,133			83,431
Contingent consideration		57,249			124,349
Other long-term liabilities		5,278			1,761
Total liabilities	$	485,408		$	616,689
Commitments and contingencies (See Note 10)
Equity:
Sorrento Therapeutics, Inc. equity
Common stock, $0.0001 par value 750,000,000 shares authorized and 468,290,927 and 314,573,225 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		47			32
Additional paid-in capital		1,916,794			1,513,758
Accumulated other comprehensive income		226			1,026
Accumulated deficit		(1,735,755	)		(1,386,604	)
Treasury stock, 7,568,182 shares at cost at September 30, 2022, and December 31, 2021		(49,464	)		(49,464	)
Total Sorrento Therapeutics, Inc. stockholders’ equity		131,848			78,748
Noncontrolling interests		(1,642	)		(619	)
Total equity		130,206			78,129
Total liabilities and stockholders’ equity	$	615,614		$	694,818

See accompanying notes to unaudited consolidated financial statements

Table of Contents

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenues:
Net product revenues	$	13,649		$	7,562		$	32,231		$	22,439
Service revenues		3,751			4,500			15,014			17,389
Total revenues		17,400			12,062			47,245			39,828
Operating costs and expenses:
Cost of products sold		7,283			1,172			15,638			2,549
Cost of services		985			2,215			4,092			7,345
Research and development		67,989			49,448			180,182			147,787
Acquired in-process research and development		—			11,125			12,272			23,608
Selling, general and administrative		50,159			48,489			142,873			142,176
Intangible amortization		1,127			1,000			3,196			3,105
(Decrease) increase on contingent consideration		(700	)		—			(67,100	)		100
Loss on impairment of intangible assets		—			—			90,780			—
Total operating costs and expenses		126,843			113,449			381,933			326,670
Loss from operations		(109,443	)		(101,387	)		(334,688	)		(286,842	)
Gain (loss) on derivative liabilities		500			(1,800	)		5,300			100
(Loss) gain on marketable investments		(16,084	)		(13,483	)		(43,042	)		17,047
Gain (loss) on debt extinguishment		33,433			—			27,701			(6,695	)
Gain (loss) on foreign currency exchange		610			(300	)		445			(841	)
Interest expense, net		(792	)		(2,900	)		(6,355	)		(7,282	)
Other income (loss)		74			97			(609	)		53
Loss before income tax		(91,702	)		(119,773	)		(351,248	)		(284,460	)
Income tax (expense) benefit		(1,015	)		386			(602	)		(461	)
Gain (loss) on equity method investments		62			164			3			(277	)
Net loss		(90,625	)		(119,995	)		(350,643	)		(284,276	)
Net loss attributable to noncontrolling interests		(1,049	)		(192	)		(1,492	)		(368	)
Net loss attributable to Sorrento	$	(89,576	)	$	(119,803	)	$	(349,151	)	$	(283,908	)
Net loss per share - basic per share attributable to Sorrento	$	(0.20	)	$	(0.40	)	$	(0.88	)	$	(0.98	)
Net loss per share - diluted per share attributable to Sorrento	$	(0.20	)	$	(0.40	)	$	(0.88	)	$	(0.98	)
Weighted-average shares used during period - basic shares attributable to Sorrento		451,621			299,276			397,601			290,029
Weighted-average shares used during period - diluted shares attributable to Sorrento		451,621			299,276			397,601			290,029

See accompanying notes to unaudited consolidated financial statements

Table of Contents

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands; unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net loss	$	(90,625	)	$	(119,995	)	$	(350,643	)	$	(284,276	)
Other comprehensive income:
Foreign currency translation adjustments		(611	)		22			(800	)		635
Total other comprehensive (loss) income		(611	)		22			(800	)		635
Comprehensive loss		(91,236	)		(119,973	)		(351,443	)		(283,641	)
Comprehensive loss attributable to noncontrolling interests		(1,049	)		(192	)		(1,492	)		(368	)
Comprehensive loss attributable to Sorrento	$	(90,187	)	$	(119,781	)	$	(349,951	)	$	(283,273	)

See accompanying notes to unaudited consolidated financial statements

Table of Contents

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands; unaudited)


	Nine Months Ended September 30, 2022
	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, 2021		314,573	$	32		7,568	$	(49,464	)	$	1,513,758	$	1,026		$	(1,386,604	)	$	(619	)	$	78,129
Issuance of common stock under equity compensation plans		438		—		—		—			132		—			—			—			132
Issuance of common stock for equity offerings		58,875		6		—		—			164,431		—			—			—			164,437
Acquisitions consideration paid in equity		1,282		—		—		—			4,435		—			—			—			4,435
Stock-based compensation		—		—		—		—			20,854		—			—			—			20,854
Foreign currency translation adjustment		—		—		—		—			—		(1,249	)		—			—			(1,249	)
Net (loss) income		—		—		—		—			—		—			(40,815	)		275			(40,540	)
Balance, March 31, 2022		375,168	$	38		7,568	$	(49,464	)	$	1,703,610	$	(223	)	$	(1,427,419	)	$	(344	)