10-Q
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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 March 31, 2023

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

 

SRNEQ

 

None

 

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:

 

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 May 8, 2023 was 551,281,154.

 


 

Sorrento Therapeutics, Inc.

Form 10-Q for the Quarter Ended March 31, 2023

Table of Contents

Part I

Financial Information

3

Item 1.

Consolidated Financial Statements (Unaudited)

3

 

Consolidated Balance Sheets (Unaudited) as of March 31, 2023 and December 31, 2022

3

 

Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2023 and 2022

5

 

Consolidated Statements of Comprehensive Loss (Unaudited) for the Three Months Ended March 31, 2023 and 2022

6

 

Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited) for the Three Months Ended March 31, 2023 and 2022

7

 

Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2023 and 2022

8

 

Notes to Consolidated Financial Statements (Unaudited)

9

Item 2.

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

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

 

 

Part II

Other Information

37

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 3.

Defaults Upon Senior Securities

44

Item 4.

Mine Safety Disclosures

44

Item 5.

Other Information

44

Item 6.

Exhibits

45

SIGNATURES

47

 

 

 

 


Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

SORRENTO THERAPEUTICS, INC.

(DEBTOR-IN-POSSESSION)

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share amounts; unaudited)

 

3


Table of Contents

 

ASSETS

 

March 31, 2023

 

 

December 31, 2022

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

37,655

 

 

$

23,634

 

Marketable investments

 

 

12,662

 

 

 

26,344

 

Accounts receivables, net

 

 

26,524

 

 

 

24,469

 

Inventory

 

 

11,308

 

 

 

9,976

 

Prepaid expenses

 

 

7,827

 

 

 

8,807

 

Other current assets

 

 

4,784

 

 

 

3,143

 

Total current assets

 

 

100,760

 

 

 

96,373

 

Property and equipment, net

 

 

54,861

 

 

 

51,971

 

Operating lease right-of-use assets

 

 

85,398

 

 

 

86,464

 

Intangibles, net

 

 

123,875

 

 

 

136,902

 

Goodwill

 

 

80,269

 

 

 

80,269

 

Equity investments

 

 

12,008

 

 

 

17,176

 

Other assets, net

 

 

2,892

 

 

 

3,685

 

Total assets

 

 

460,063

 

 

 

472,840

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

14,590

 

 

$

47,515

 

Accrued payroll and related benefits

 

 

5,314

 

 

 

7,884

 

Accrued expenses and other current liabilities

 

 

68,855

 

 

 

58,456

 

Accrued legal settlements

 

 

 

 

 

174,752

 

Current portion of deferred revenue

 

 

252

 

 

 

652

 

Current portion of operating lease liabilities

 

 

14,050

 

 

 

13,880

 

Current portion of contingent consideration

 

 

397

 

 

 

397

 

Acquisition consideration

 

 

391

 

 

 

7,800

 

Income tax payable

 

 

12,148

 

 

 

300

 

Current portion of debt

 

 

49,635

 

 

 

16,286

 

Total current liabilities

 

 

165,632

 

 

 

327,922

 

Long-term debt, net of discount

 

 

21,400

 

 

 

19,130

 

Deferred tax liabilities, net

 

 

238

 

 

 

591

 

Deferred revenue

 

 

983

 

 

 

7,098

 

Derivative liabilities

 

 

1,580

 

 

 

300

 

Operating lease liabilities

 

 

84,462

 

 

 

85,208

 

Contingent consideration

 

 

550

 

 

 

48,949

 

Other long-term liabilities

 

 

3,428

 

 

 

5,311

 

Total liabilities not subject to compromise

 

 

278,273

 

 

 

494,509

 

Liabilities subject to compromise

 

 

309,210

 

 

 

 

Total liabilities

 

 

587,483

 

 

 

494,509

 

Commitments and contingencies (See Note 10)

 

 

 

 

 

 

Equity (Deficit):

 

 

 

 

 

 

Sorrento Therapeutics, Inc. equity (deficit)

 

 

 

 

 

 

Common stock, $0.0001 par value 750,000,000 shares authorized and 551,281,154 and 522,817,137 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

 

 

55

 

 

 

52

 

Additional paid-in capital

 

 

2,021,148

 

 

 

1,988,753

 

Accumulated other comprehensive income

 

 

1,826

 

 

 

1,501

 

Accumulated deficit

 

 

(2,099,063

)

 

 

(1,959,447

)

Treasury stock, 7,568,182 shares at cost at March 31, 2023, and December 31, 2022

 

 

(49,464

)

 

 

(49,464

)

Total Sorrento Therapeutics, Inc. stockholders’ equity (deficit)

 

 

(125,498

)

 

 

(18,605

)

Noncontrolling interests

 

 

(1,922

)

 

 

(3,064

)

Total equity (deficit)

 

 

(127,420

)

 

 

(21,669

)

Total liabilities and stockholders’ equity (deficit)

 

$

460,063

 

 

$

472,840

 

 

See accompanying notes to unaudited consolidated financial statements

4


Table of Contents

 

SORRENTO THERAPEUTICS, INC.

(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

 

Net product revenues

 

$

10,597

 

 

$

9,990

 

Service revenues

 

 

5,654

 

 

 

8,395

 

Total revenues

 

 

16,251

 

 

 

18,385

 

Operating costs and expenses:

 

 

 

 

 

 

Cost of products sold

 

 

3,881

 

 

 

2,878

 

Cost of services

 

 

1,305

 

 

 

2,880

 

Research and development

 

 

43,805

 

 

 

63,977

 

Acquired in-process research and development

 

 

 

 

 

12,272

 

Selling, general and administrative

 

 

54,980

 

 

 

44,327

 

Intangible amortization

 

 

1,127

 

 

 

1,034

 

Increase (decrease) on contingent consideration

 

 

3,800

 

 

 

(2,100

)

Loss on impairment of intangible assets

 

 

11,900

 

 

 

 

Legal settlement

 

 

1,797

 

 

 

 

Total operating costs and expenses

 

 

122,595

 

 

 

125,268

 

Loss from operations

 

 

(106,344

)

 

 

(106,883

)

(Loss) gain on derivative liabilities

 

 

(1,280

)

 

 

7,500

 

(Loss) gain on marketable and equity investments

 

 

(13,683

)

 

 

68,534

 

Loss on debt extinguishment, net

 

 

(40

)

 

 

(5,262

)

(Gain) loss on foreign currency exchange

 

 

(4

)

 

 

397

 

Interest expense, net

 

 

(1,132

)

 

 

(3,249

)

Other (loss) income

 

 

(76

)

 

 

17

 

Reorganization items, net

 

 

(20,231

)

 

 

 

Loss before income tax

 

 

(142,790

)

 

 

(38,946

)

Income tax expense

 

 

11,468

 

 

 

1,463

 

Loss on equity method investments

 

 

(368

)

 

 

(131

)

Net loss

 

 

(154,626

)

 

 

(40,540

)

Net (loss) income attributable to noncontrolling interests

 

 

(15,010

)

 

 

275

 

Net loss attributable to Sorrento

 

$

(139,616

)

 

$

(40,815

)

Net loss per share - basic per share attributable to Sorrento

 

$

(0.26

)

 

$

(0.12

)

Net loss per share - diluted per share attributable to Sorrento

 

$

(0.26

)

 

$

(0.12

)

Weighted-average shares used during period - basic shares attributable to Sorrento

 

 

543,137

 

 

 

337,123

 

Weighted-average shares used during period - diluted shares attributable to Sorrento

 

 

543,137

 

 

 

337,123

 

See accompanying notes to unaudited consolidated financial statements

5


Table of Contents

 

SORRENTO THERAPEUTICS, INC.

(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands; unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2023

 

 

2022

 

Net loss

 

$

(154,626

)

 

$

(40,540

)

Other comprehensive loss:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

325

 

 

 

(1,249

)

Total other comprehensive loss

 

 

325

 

 

 

(1,249

)

Comprehensive loss

 

 

(154,301

)

 

 

(41,789

)

Comprehensive (loss) gain attributable to noncontrolling interests

 

 

(15,010

)

 

 

275

 

Comprehensive loss attributable to Sorrento

 

$

(139,291

)

 

$

(42,064

)

 

See accompanying notes to unaudited consolidated financial statements

6


Table of Contents

 

SORRENTO THERAPEUTICS, INC.

(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands; unaudited)

 

 

 

Three Months Ended March 31, 2023

 

 

 

Common Stock

 

 

Treasury Stock

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in
Capital

 

 

Other
Comprehensive
Income

 

 

Accumulated
Deficit

 

 

Noncontrolling
Interest

 

 

Total

 

Balance, December 31, 2022

 

 

522,817

 

 

$

52

 

 

 

7,568

 

 

$

(49,464

)

 

$

1,988,753

 

 

$

1,501

 

 

$

(1,959,447

)

 

$

(3,064

)

 

$

(21,669

)

Issuance of common stock for equity offerings

 

 

28,336

 

 

 

3

 

 

 

 

 

 

 

 

 

28,366

 

 

 

 

 

 

 

 

 

 

 

 

28,369

 

Other acquisitions, license agreements and investments paid in equity

 

 

128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,311

 

 

 

 

 

 

 

 

 

 

 

 

18,311

 

Scilex Holding dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,282

)

 

 

 

 

 

 

 

 

14,282

 

 

 

 

Scilex Holding equity issuances (Shares issued under Standby Equity Purchase Agreements)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,870

 

 

 

1,870

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

325

 

 

 

 

 

 

 

 

 

325

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(139,616

)

 

 

(15,010

)

 

 

(154,626

)

Balance, March 31, 2023

 

 

551,281

 

 

$

55

 

 

 

7,568

 

 

$

(49,464

)

 

$

2,021,148

 

 

$

1,826

 

 

$

(2,099,063

)

 

$

(1,922

)

 

$

(127,420

)

 

 

 

 

Three Months Ended March 31, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(40,815

)

 

 

275

 

 

 

(40,540

)

Balance, March 31, 2022

 

 

375,168

 

 

$

38

 

 

 

7,568

 

 

$

(49,464

)

 

$

1,703,610

 

 

$

(223

)

 

$

(1,427,419

)

 

$

(344

)

 

$

226,198

 

 

 

 

 

See accompanying notes to unaudited consolidated financial statements

7


Table of Contents

 

SORRENTO THERAPEUTICS, INC.

(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands; unaudited)

 

 

 

Three Months Ended March 31,

 

Operating activities

 

2023

 

 

2022

 

Net loss

 

$

(154,626

)

 

$

(40,540

)

Adjustments to reconcile net loss to net cash used for operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

3,623

 

 

 

3,298