10-Q 1 srne-20220331.htm 10-Q 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, 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 file, 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 April 29, 2022 was 388,946,453.

 


 

Sorrento Therapeutics, Inc.

Form 10-Q for the Quarter Ended March 31, 2022

Table of Contents

 

Part I

Financial Information

3

Item 1.

Consolidated Financial Statements (Unaudited)

3

 

Consolidated Balance Sheets (Unaudited) as of March 31, 2022 and December 31, 2021

3

 

Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2022 and 2021

4

 

Consolidated Statements of Comprehensive Loss (Income) (Unaudited) for the Three Months Ended March 31, 2022 and 2021

5

 

Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three Months Ended March 31, 2022 and 2021

6

 

Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2022 and 2021

7

 

Notes to Consolidated Financial Statements (Unaudited)

8

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

 

 

Part II

Other Information

27

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.

Defaults Upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

32

SIGNATURES

35

 

 

 

 


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

 

March 31, 2022

 

 

December 31, 2021

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

111,906

 

 

$

36,665

 

Marketable investments

 

 

158,751

 

 

 

90,217

 

Accounts receivables, net

 

 

24,674

 

 

 

18,715

 

Inventory

 

 

14,086

 

 

 

8,106

 

Prepaid expenses

 

 

13,558

 

 

 

11,804

 

Other current assets

 

 

8,140

 

 

 

7,482

 

Total current assets

 

 

331,115

 

 

 

172,989

 

Property and equipment, net

 

 

41,705

 

 

 

41,325

 

Operating lease right-of-use assets

 

 

84,894

 

 

 

85,173

 

Intangibles, net

 

 

258,671

 

 

 

259,705

 

Goodwill

 

 

79,525

 

 

 

79,525

 

Equity investments

 

 

50,667

 

 

 

51,271

 

Other assets, net

 

 

9,059

 

 

 

4,830

 

Total assets

 

$

855,636

 

 

$

694,818

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

25,018

 

 

$

27,414

 

Accrued payroll and related benefits

 

 

25,391

 

 

 

21,503

 

Accrued expenses

 

 

48,149

 

 

 

37,975

 

Current portion of deferred revenue

 

 

673

 

 

 

1,108

 

Current portion of operating lease liabilities

 

 

12,451

 

 

 

11,539

 

Current portion of contingent consideration

 

 

28,068

 

 

 

397

 

Acquisition consideration

 

 

7,537

 

 

 

7,537

 

Current portion of debt

 

 

56,942

 

 

 

31,980

 

Total current liabilities

 

 

204,229

 

 

 

139,453

 

Long-term debt, net of discount

 

 

96,085

 

 

 

110,627

 

Deferred tax liabilities, net

 

 

3,512

 

 

 

2,426

 

Deferred revenue

 

 

117,667

 

 

 

118,942

 

Derivative liabilities

 

 

28,200

 

 

 

35,700

 

Operating lease liabilities

 

 

83,406

 

 

 

83,431

 

Contingent consideration

 

 

94,578

 

 

 

124,349

 

Other long-term liabilities

 

 

1,761

 

 

 

1,761

 

Total liabilities

 

$

629,438

 

 

$

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 375,168,017 and 314,573,225 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

38

 

 

 

32

 

Additional paid-in capital

 

 

1,703,610

 

 

 

1,513,758

 

Accumulated other comprehensive (loss) income

 

 

(223

)

 

 

1,026

 

Accumulated deficit

 

 

(1,427,419

)

 

 

(1,386,604

)

Treasury stock, 7,568,182 shares at cost at March 31, 2022, and December 31, 2021

 

 

(49,464

)

 

 

(49,464

)

Total Sorrento Therapeutics, Inc. stockholders’ equity

 

 

226,542

 

 

 

78,748

 

Noncontrolling interests

 

 

(344

)

 

 

(619

)

Total equity

 

 

226,198

 

 

 

78,129

 

Total liabilities and stockholders’ equity

 

$

855,636

 

 

$

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 March 31,

 

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

Net product revenues

 

$

9,990

 

 

$

7,023

 

Service revenues

 

 

8,395

 

 

 

7,232

 

Total revenues

 

 

18,385

 

 

 

14,255

 

Operating costs and expenses:

 

 

 

 

 

 

Cost of products sold

 

 

2,878

 

 

 

852

 

Cost of services

 

 

2,880

 

 

 

2,534

 

Research and development

 

 

63,977

 

 

 

43,833

 

Acquired in-process research and development

 

 

12,272

 

 

 

7,512

 

Selling, general and administrative

 

 

44,327

 

 

 

43,394

 

Intangible amortization

 

 

1,034

 

 

 

1,035

 

Gain on contingent consideration

 

 

(2,100

)

 

 

 

Total operating costs and expenses

 

 

125,268

 

 

 

99,160

 

Loss from operations

 

 

(106,883

)

 

 

(84,905

)

Gain on derivative liabilities

 

 

7,500

 

 

 

2,200

 

Gain on marketable investments

 

 

68,534

 

 

 

94,431

 

Loss on debt extinguishment, net

 

 

(5,262

)

 

 

(6,111

)

Gain (loss) on foreign currency exchange

 

 

397

 

 

 

(540

)

Interest expense, net

 

 

(3,249

)

 

 

(2,366

)

Other income (loss)

 

 

17

 

 

 

(78

)

(Loss) income before income tax

 

 

(38,946

)

 

 

2,631

 

Income tax expense (benefit)

 

 

1,463

 

 

 

(206

)

Loss on equity method investments

 

 

(131

)

 

 

(419

)

Net (loss) income

 

 

(40,540

)

 

 

2,418

 

Net income (loss) attributable to noncontrolling interests

 

 

275

 

 

 

(92

)

Net (loss) income attributable to Sorrento

 

$

(40,815

)

 

$

2,510

 

Net (loss) income per share - basic per share attributable to Sorrento

 

$

(0.12

)

 

$

0.01

 

Net (loss) income per share - diluted per share attributable to Sorrento

 

$

(0.12

)

 

$

0.01

 

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

 

 

337,123

 

 

 

280,604

 

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

 

 

337,123

 

 

 

297,909

 

 

See accompanying notes to unaudited consolidated financial statements

4


Table of Contents

 

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (INCOME)

(In thousands; unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Net income (loss) income

 

$

(40,540

)

 

$

2,418

 

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(1,249

)

 

 

(75

)

Total other comprehensive income (loss)

 

 

(1,249

)

 

 

(75

)

Comprehensive (loss) income

 

 

(41,789

)

 

 

2,343

 

Comprehensive gain (loss) attributable to noncontrolling interests

 

 

275

 

 

 

(92

)

Comprehensive (loss) income attributable to Sorrento

 

$

(42,064

)

 

$

2,435

 

 

See accompanying notes to unaudited consolidated financial statements

5


Table of Contents

 

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands; unaudited)

 

 

 

 

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

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

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, 2020

 

 

275,286

 

 

$

28

 

 

 

7,568

 

 

$

(49,464

)

 

$

1,172,346

 

 

$

520

 

 

$

(958,279

)

 

$

(24,420

)

 

$

140,731

 

Issuance of common stock under equity compensation plans

 

 

500

 

 

 

 

 

 

 

 

 

 

 

 

5,394

 

 

 

 

 

 

 

 

 

 

 

 

5,394

 

Issuance of common stock upon exercise of warrants

 

 

2,550

 

 

 

 

 

 

 

 

 

 

 

 

9,050

 

 

 

 

 

 

 

 

 

 

 

 

9,050

 

Issuance of common stock for equity offerings

 

 

3,901

 

 

 

1

 

 

 

 

 

 

 

 

 

42,208

 

 

 

 

 

 

 

 

 

 

 

 

42,209

 

Other acquisitions, license agreements and investments paid in equity

 

 

851

 

 

 

 

 

 

 

 

 

 

 

 

7,500

 

 

 

 

 

 

 

 

 

 

 

 

7,500

 

Changes to noncontrolling interests from increased ownership in Scilex Holding

 

 

2,567

 

 

 

 

 

 

 

 

 

 

 

 

(23,963

)

 

 

 

 

 

 

 

 

23,963

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,660

 

 

 

 

 

 

 

 

 

 

 

 

23,660

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(75

)

 

 

 

 

 

 

 

 

(75

)

Net Income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,510

 

 

 

(92

)

 

 

2,418

 

Balance, March 31, 2021

 

 

285,655

 

 

$

29

 

 

 

7,568

 

 

$

(49,464

)

 

$

1,236,195

 

 

$

445

 

 

$

(955,769

)

 

$

(549

)

 

$

230,887

 

 

See accompanying notes to unaudited consolidated financial statements

6


Table of Contents

 

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands; unaudited)

 

 

 

Three Months Ended March 31,

 

Operating activities

 

2022

 

 

2021

 

Net (loss) income

 

$

(40,540

)

 

$

2,418

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

3,298

 

 

 

2,918

 

Non-cash operating lease cost

 

 

987

 

 

 

759

 

Non-cash interest expense and amortization of debt issuance costs

 

 

2,906

 

 

 

2,098

 

Payment on notes attributed to accreted interest related to the debt discounts

 

 

(6,788

)

 

 

(4,548

)

Acquired in-process research and development

 

 

12,271

 

 

 

7,512

 

Stock-based compensation

 

 

20,792

 

 

 

23,660

 

Loss on debt extinguishment, net

 

 

5,262

 

 

 

6,111

 

Gain on derivative liabilities

 

 

(7,500

)

 

 

(2,200

)

Gain on marketable investments

 

 

(68,534

)

 

 

(94,431

)

Loss on equity method investments

 

 

131

 

 

 

419

 

Gain on contingent consideration

 

 

(2,100

)

 

 

 

Deferred income taxes

 

 

1,086

 

 

 

(219

)

Changes in operating assets and liabilities, excluding effect of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

(5,982

)

 

 

(803

)

Inventory

 

 

(5,979

)

 

 

51

 

Accrued payroll

 

 

3,949

 

 

 

(4,573

)

Prepaid expenses, deposits and other assets

 

 

(1,640

)

 

 

929

 

Accounts payable

 

 

(2,571

)

 

 

(76

)

Accrued expenses and other liabilities

 

 

9,122

 

 

 

11,066

 

Deferred revenue

 

 

(1,709

)