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 June 30, 2023


☐	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:

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 registrant’s common stock, par value $0.0001 per share, outstanding as of August 8, 2023 was 551,281,154.

Sorrento Therapeutics, Inc.

Form 10-Q for the Quarter Ended June 30, 2023

Table of Contents


Part I	Financial Information	3
Item 1.	Consolidated Financial Statements (Unaudited)	3
	Consolidated Balance Sheets (Unaudited) as of June 30, 2023 and December 31, 2022	3
	Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2023 and 2022	5
	Consolidated Statements of Comprehensive Loss (Unaudited) for the Three and Six Months Ended June 30, 2023 and 2022	6
	Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited) for the Three and Six Months Ended June 30, 2023 and 2022	7
	Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2023 and 2022	8
	Notes to Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46

Part II	Other Information	47
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	56
SIGNATURES		59

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)

Table of Contents


ASSETS	June 30, 2023			December 31, 2022
Current assets:
Cash and cash equivalents	$	69,749		$	23,634
Marketable investments		10,886			26,344
Accounts receivables, net		32,725			24,469
Inventory		9,651			9,976
Prepaid expenses		5,222			8,807
Other current assets		4,878			3,143
Total current assets		133,111			96,373
Property and equipment, net		53,237			51,971
Operating lease right-of-use assets		53,408			86,464
Intangibles, net		122,283			136,902
Goodwill		80,269			80,269
Equity investments		12,008			17,176
Other assets, net		2,376			3,685
Total assets		456,692			472,840
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	18,554		$	47,515
Accrued payroll and related benefits		6,964			7,884
Accrued expenses and other current liabilities		91,924			58,456
Accrued legal settlements		—			174,752
Current portion of deferred revenue		256			652
Current portion of operating lease liabilities		13,051			13,880
Current portion of contingent consideration		397			397
Acquisition consideration		515			7,800
Income tax payable		12,926			300
Current portion of debt		120,362			16,286
Total current liabilities		264,949			327,922
Long-term debt, net of discount		21,741			19,130
Deferred tax liabilities, net		238			591
Deferred revenue		896			7,098
Derivative liabilities		1,600			300
Operating lease liabilities		52,446			85,208
Contingent consideration		550			48,949
Other long-term liabilities		3,305			5,311
Total liabilities not subject to compromise		345,725			494,509
Liabilities subject to compromise		308,923			—
Total liabilities		654,648			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 June 30, 2023 and December 31, 2022, respectively		55			52
Additional paid-in capital		2,036,331			1,988,753
Accumulated other comprehensive income		2,240			1,501
Accumulated deficit		(2,194,275	)		(1,959,447	)
Treasury stock, 7,568,182 shares at cost at June 30, 2023, and December 31, 2022		(49,464	)		(49,464	)
Total Sorrento Therapeutics, Inc. stockholders’ deficit		(205,113	)		(18,605	)
Noncontrolling interests		7,157			(3,064	)
Total deficit		(197,956	)		(21,669	)
Total liabilities and stockholders’ equity (deficit)	$	456,692		$	472,840

See accompanying notes to unaudited consolidated financial statements

Table of Contents

SORRENTO THERAPEUTICS, INC.

(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF OPERATIONS

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenues:
Net product revenues	$	12,605		$	8,591		$	23,202		$	18,582
Service revenues		2,420			2,870			8,074			11,263
Total revenues		15,025			11,461			31,276			29,845
Operating costs and expenses:
Cost of products sold		6,564			3,393			10,445			6,270
Cost of services		1,889			2,311			3,193			5,191
Research and development		33,271			48,467			77,076			112,193
Acquired in-process research and development		—			—			—			12,272
Selling, general and administrative		48,941			48,136			103,920			92,714
Intangible amortization		1,127			1,035			2,254			2,069
Increase (decrease) on contingent consideration		—			(64,300	)		3,800			(66,400	)
Loss on impairment of intangible assets		466			90,780			12,366			90,780
Legal settlement		—			—			1,797			—
Total operating costs and expenses		92,258			129,822			214,851			255,089
Loss from operations		(77,233	)		(118,361	)		(183,575	)		(225,244	)
(Loss) gain on derivative liabilities		(20	)		(2,700	)		(1,300	)		4,800
Loss on marketable and equity investments		(1,777	)		(95,492	)		(15,460	)		(26,958	)
Loss on debt extinguishment, net		—			(471	)		(40	)		(5,732	)
Loss (gain) on foreign currency exchange		157			(561	)		153			(165	)
Interest expense, net		(2,668	)		(2,314	)		(3,800	)		(5,563	)
Other loss		(4,321	)		(700	)		(4,299	)		(683	)
Reorganization items, net		(22,003	)		—			(42,235	)		—
Loss before income tax		(107,865	)		(220,599	)		(250,556	)		(259,545	)
Income tax expense (benefit)		671			(1,050	)		12,139			413
Gain (loss) on equity method investments		—			72			(368	)		(59	)
Net loss		(108,536	)		(219,477	)		(263,063	)		(260,017	)
Net loss attributable to noncontrolling interests		(13,324	)		(718	)		(28,334	)		(443	)
Net loss attributable to Sorrento	$	(95,212	)	$	(218,759	)	$	(234,729	)	$	(259,574	)
Net loss per share - basic per share attributable to Sorrento	$	(0.17	)	$	(0.54	)	$	(0.43	)	$	(0.70	)
Net loss per share - diluted per share attributable to Sorrento	$	(0.17	)	$	(0.54	)	$	(0.43	)	$	(0.70	)
Weighted-average shares used during period - basic shares attributable to Sorrento		551,281			402,801			547,232			370,144
Weighted-average shares used during period - diluted shares attributable to Sorrento		551,281			402,801			547,232			370,144

See accompanying notes to unaudited consolidated financial statements

Table of Contents

SORRENTO THERAPEUTICS, INC.

(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands; unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Net loss	$	(108,536	)	$	(219,477	)	$	(263,063	)	$	(260,017	)
Other comprehensive income:
Foreign currency translation adjustments		414			1,060			739			837
Total other comprehensive income		414			1,060			739			837
Comprehensive loss		(108,122	)		(218,417	)		(262,324	)		(259,180	)
Comprehensive loss attributable to noncontrolling interests		(13,324	)		(718	)		(28,334	)		(443	)
Comprehensive loss attributable to Sorrento	$	(94,798	)	$	(217,699	)	$	(233,990	)	$	(258,737	)

See accompanying notes to unaudited consolidated financial statements

Table of Contents

SORRENTO THERAPEUTICS, INC.

(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands; unaudited)


	Six Months Ended June 30, 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		—		—		—		—			—			—		—			1,870			1,870
Foreign currency translation adjustment		—		—		—		—			—			325		—