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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 September 30, 2022

OR

 

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

 

For the transition period from to

Commission File Number 001-36150

SORRENTO THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

33-0344842

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification Number)

 

4955 Directors Place

San Diego, California 92121

(Address of Principal Executive Offices)

 

(858) 203-4100

 

(Registrant’s Telephone Number, Including Area Code)

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

 

Title of each class:

 

Trading Symbol (s)

 

Name of each exchange on which registered:

Common Stock, $0.0001 par value

 

SRNE

 

The Nasdaq Stock Market LLC

 

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated 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 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

3


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

4


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

5


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

)

 

$

226,198

 

Issuance of common stock under equity compensation plans

 

 

544