Filed Pursuant to Rule 424(b)(5)
Registration No. 333-237142
PROSPECTUS SUPPLEMENT
(to Prospectus dated March 20, 2020)
Up to $250,000,000 of Shares of Common
Stock
Common Stock
Pursuant to this
prospectus supplement and the accompanying prospectus, we are offering up to $250.0 million in the aggregate amount, or the Purchase
Shares, of our common stock, par value $0.0001 per share, to Arnaki Ltd., or the Purchaser, under a Common Stock Purchase Agreement
entered into on April 27, 2020, or the Purchase Agreement.
The Purchase Shares
may be sold from time to time to the Purchaser over the 36-month term of the Purchase Agreement. The purchase price for the Purchase
Shares will be equal to 97.5% of the daily volume weighted average price of our common stock on the Nasdaq Capital Market (or alternative
national exchange in accordance with the Purchase Agreement) for the business day on which the Purchase Shares are purchased. See
“The Transaction” beginning on page S-13 of this prospectus supplement for more details on how the price for sales
of the Purchase Shares will be determined.
Our common stock
is currently listed on the Nasdaq Capital Market under the symbol “SRNE.” On April 24, 2020, the last reported sale
price of our common stock was $2.57.
Investing in
our common stock involves a high degree of risk. You should review carefully the risks and uncertainties described under the heading
“Risk Factors” on page S-6 of this prospectus supplement, and under similar headings in the documents that are incorporated
by reference into this prospectus supplement and the accompanying prospectus.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or passed upon the
adequacy or accuracy of this prospectus supplement and the accompanying prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus supplement
is April 27, 2020.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is
part of a “shelf” registration statement on Form S-3 that we filed with the SEC, and is in two parts. The first part
is this prospectus supplement, which describes the specific terms of this offering of shares of common stock and also adds to and
updates information contained in the accompanying prospectus and the documents incorporated by reference into this prospectus supplement
and the accompanying prospectus. The second part, the accompanying prospectus dated March 20, 2020, including the documents incorporated
by reference into it, provides more general information. Generally, when we refer to this “prospectus,” we are referring
to both parts of this document combined.
This prospectus supplement
relates only to an offering of up to $250.0 million of shares of our common stock to the Purchaser. These sales, if any, will be
made pursuant to the terms of the Purchase Agreement, a copy of which is incorporated by reference into this prospectus supplement.
Before you invest,
you should carefully read this prospectus supplement, the accompanying prospectus, all information incorporated by reference herein
and the additional information described under “Where You Can Find More Information” and “Incorporation of Documents
by Reference”. These documents contain information you should consider when making your investment decision. To the extent
that any statement that we make in this prospectus supplement and the accompanying prospectus is inconsistent with statements made
in the accompanying prospectus or in any documents incorporated by reference, the statements made in this prospectus supplement
will be deemed to modify or supersede those made in such documents incorporated by reference; however, if any statement in one
of these documents is inconsistent with a statement in another document having a later date and that is incorporated by reference
herein, the statement in the document having the later date modifies or supersedes the earlier statement.
You should rely only
on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus, the documents
incorporated by reference herein and any free writing prospectus we provide you. We have not authorized anyone to provide you with
different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not
making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the
information appearing in this prospectus supplement, the accompanying prospectus, the documents incorporated by reference herein
and any free writing prospectus we provide you is accurate only as of the date on those respective documents. Our business, financial
condition, results of operations and prospects may have changed since those dates. You should read this prospectus supplement,
the accompanying prospectus, including the documents incorporated by reference herein, when making your investment decision. You
should also read and consider the information in the documents we have referred you to in the sections of this prospectus supplement
and the accompanying prospectus entitled “Where You Can Find More Information” and “Incorporation of Documents
by Reference.” The distribution of this prospectus supplement and the accompanying prospectus and the offering of the common
stock in certain jurisdictions may be restricted by law. Persons outside the United States, or the U.S., who come into possession
of this prospectus supplement and the accompanying prospectus must inform themselves about, and observe any restrictions relating
to, the offering of the common stock and the distribution of this prospectus supplement and the accompanying prospectus outside
the U.S. This prospectus supplement and the accompanying prospectus does not constitute, and may not be used in connection with,
an offer to sell, or a solicitation of an offer to buy, any securities offered by this prospectus supplement and the accompanying
prospectus by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.
Unless otherwise
indicated, information contained in this prospectus supplement, the accompanying prospectus or the documents incorporated by reference
herein concerning our industry and the markets in which we operate, including our general expectations and market position, market
opportunity and market share, is based on information from our own management estimates and research, as well as from industry
and general publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly
available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe
to be reasonable. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject
to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” in
this prospectus supplement, and the accompanying prospectus, in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission, or the SEC, on March 3, 2020, as amended, supplemented or superseded from time to time by other reports we file with the SEC in the future,
which are incorporated by reference into this prospectus supplement. These and other important factors could cause our future performance
to differ materially from our assumptions and estimates. See “Disclosure Regarding Forward-Looking Statements.”
General information
about us can be found on our website at www.sorrentotherapeutics.com. The information on our website is for informational
purposes only and should not be relied on for investment purposes. The information on our website is not incorporated by reference
into either this prospectus supplement or the accompanying prospectus and should not be considered part of this or any other report
filed with the SEC.
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights
certain information about us, this offering and selected information contained elsewhere in or incorporated by reference into this
prospectus supplement and the accompanying prospectus. This summary is not complete and does not contain all of the information
that you should consider before deciding whether to invest in our common stock. For a more complete understanding of our company
and this offering, we encourage you to read and consider carefully the more detailed information in this prospectus supplement
and the accompanying prospectus, including the information incorporated by reference into this prospectus supplement and the accompanying
prospectus, and the information referred to under the heading “Risk Factors” in this prospectus supplement on page
S-6 and in the documents incorporated by reference into this prospectus supplement and the accompanying prospectus.
The Company
Overview
Sorrento Therapeutics,
Inc. (Nasdaq: SRNE), together with its subsidiaries, or collectively, Sorrento, the Company, we, us and our, is a clinical stage
and commercial biopharma company focused on delivering innovative and clinically meaningful therapies to patients and their families,
to address unmet medical needs. We also have programs assessing the use of our technologies and products in autoimmune, inflammatory
and neurodegenerative diseases.
At our core, we are
an antibody-centric company and leverage our proprietary G-MAB™ library and targeted delivery modalities to generate the
next generation of cancer therapeutics. Our fully human antibodies include PD-1, PD-L1, CD38, CD123, CD47, CTLA-4, c-MET, VEGFR2,
CCR2 and CD137 among others.
Our vision is to
leverage these antibodies in conjunction with proprietary targeted delivery modalities to generate the next generation of cancer
therapeutics. These modalities include proprietary chimeric antigen receptor T-cell therapy, or CAR-T, dimeric antigen receptor
T-cell therapy, or DAR-T, antibody drug conjugates, or ADC, as well as bispecific antibody approaches. We acquired Sofusa®,
a revolutionary drug delivery system, in July 2018, which delivers biologics directly into the lymphatic system to potentially
achieve improved efficacy and fewer adverse effects than standard parenteral immunotherapy. Additionally, our majority owned subsidiary,
Scilex Holding Company, or Scilex Holding, acquired the assets of Semnur Pharmaceuticals, Inc., or Semnur, in March 2019. Semnur’s
SEMDEXATM (SP-102) compound has the potential to become the first Food and Drug Administration, or FDA,-approved epidural
steroid product for the treatment of sciatica.
With each of our
clinical and pre-clinical programs, we aim to tailor our therapies to treat specific stages in the evolution of cancer, from elimination,
to equilibrium and escape. In addition, our objective is to focus on tumors that are resistant to current treatments and where
we can design focused trials based on a genetic signature or biomarker to ensure patients have the best chance of a durable and
significant response. We have several immuno-oncology programs that are in or near to entering the clinic. These include cellular
therapies, an oncolytic virus and a palliative care program targeted to treat intractable cancer pain. Our cellular therapy programs
focus on CAR-T for adoptive cellular immunotherapy to treat both solid and liquid tumors. We have reported early data from Phase
I trials of our carcinoembryonic antigen, or CEA, -directed CAR-T program. We have treated five patients with stage 4, unresectable
adenocarcinoma (four with pancreatic and one with colorectal cancer) and CEA-positive liver metastases with anti-CEA CAR-T. We
successfully submitted an Investigational New Drug application, or IND, for anti-CD38 CAR-T for the treatment of refractory or
relapsed multiple myeloma and obtained approval from the FDA to commence a human clinical trial for this indication in early 2018.
We have dosed five patients and are continuing the enrollment of additional patients.
Broadly speaking,
we believe we are one of the world’s leading CAR-T and DAR-T companies today due to our investments in technology and infrastructure,
which have enabled significant progress in developing our next-generation non-viral, “off-the-shelf” allogeneic DAR-T
solutions. With “off-the-shelf” solutions, DAR-T therapy can truly become a drug product rather than a treatment procedure.
One of the approaches we have taken to develop the “off-the-shelf” allogeneic CAR-T solutions is through Celularity,
Inc., our joint venture with Celgene, United Therapeutics and others, or Celularity. Celularity focuses on developing cell therapies
with placenta-derived and cord blood T cells, which have natural allogeneic “off-the-shelf” characteristics.
Outside of immune-oncology
programs, as part of our global aim to provide a wide range of therapeutic products to meet underserved markets, we have made investments
in non-opioid pain management. These include resiniferatoxin, or RTX, which is a non-opioid-based toxin that specifically ablates
nerves that conduct chronic and inflammatory pain signals while leaving other nerve functions intact and is being studied for chronic
pain treatment. RTX has been granted orphan drug status for the treatment of intractable pain with end-stage cancer and two Phase
I trials (intrathecal and epidural routes) in that indication are concluding. A Phase Ib trial studying tolerance and efficacy
of RTX for the control of osteoarthritis knee pain was initiated in late 2018 and intermediate results have shown efficacy with
no dose limiting toxicities. The osteoarthritis trial enrolled the last patient in the first quarter of 2020. Clinical data is
expected to be available soon after the last patient enrolled completes the day 84 visit (end-point) at the end of April 2020.
Knee arthritis registrational trials are planned to start later in the first half of 2020 with an Australia/USA Phase III trial,
pending meeting with the FDA and receiving clearance to proceed.
In the area of non-opioid
pain management, we have in-house developed and acquired proprietary technologies to responsibly develop next generation, branded
pharmaceutical products to better manage patients’ medical conditions and maximize the quality of life of patients and healthcare
providers. The flagship product of our majority-owned subsidiary, Scilex Pharmaceuticals Inc., or Scilex Pharma, ZTlido® (lidocaine
topical system) 1.8%, or ZTlido, is a next-generation lidocaine delivery system which was approved by the FDA for the treatment
of pain associated with postherpetic neuralgia, a severe neuropathic pain condition, in February 2018, and was commercially launched
in late October 2018. Scilex Pharma has now built a full commercial organization, which includes sales, marketing, market access,
and medical affairs. ZTlido® has demonstrated superior adhesion in comparative head-to-head studies as compared to Lidoderm
and is manufactured by our Japanese partner in their state-of-the-art manufacturing facility.
Recent Developments
Termination of JMP Distribution Agreement
On February 10, 2020,
we voluntarily suspended our continuous offering and sale of shares of our common stock pursuant to that certain Equity Distribution
Agreement, dated October 1, 2019, between us and JMP Securities LLC, or the JMP Distribution Agreement. On April 27, 2020, we voluntarily
terminated the JMP Distribution Agreement effective immediately. As of February 10, 2020, we had sold an aggregate of 2,120,149
shares of our common stock pursuant to the JMP Distribution Agreement for aggregate net proceeds to us of approximately $7.4 million.
A total of 2,090,802 shares for aggregate net proceeds to us of approximately $7.3 million were sold pursuant to the JMP Distribution
Agreement between January 1, 2020 to February 10, 2020.
Aspire Transaction
On February 10, 2020,
we entered into a Common Stock Purchase Agreement, or the Aspire Purchase Agreement, with Aspire Capital Fund, LLC, or Aspire Capital,
pursuant to which Aspire Capital was committed to purchase up to an aggregate of $75.0 million of shares of our common stock
over the 24-month term of the Aspire Purchase Agreement on the terms set forth therein. Upon execution of the Aspire Purchase Agreement,
we issued and sold to Aspire Capital under the Aspire Purchase Agreement 2,991,027 shares of our common stock at a price per share
of $2.5075, for an aggregate purchase price of $7.5 million.
Concurrently with
the execution of the Aspire Purchase Agreement, and as consideration for Aspire Capital entering into the Aspire Purchase Agreement,
we issued to Aspire Capital 897,308 shares of our common stock as a commitment fee.
From February 10,
2020 to April 24, 2020, we issued and sold an aggregate of 34,722,318 shares of our common stock to Aspire Capital under the Aspire
Purchase Agreement for aggregate net proceeds to us of $75.0 million. On April 24, 2020, the Aspire Purchase Agreement terminated
effective immediately in accordance with its terms as we issued and sold, as of such date, the full $75.0 million of shares available
for issuance thereunder.
Repayment of Indebtedness
Between January 1,
2020 through April 7, 2020, we repaid approximately $58.0 million of outstanding principal under that certain Term Loan Agreement
that we and certain of our domestic subsidiaries entered into with certain funds affiliated with Oaktree
Capital Management, L.P., or the Lenders, and Oaktree Fund Administration,
LLC, as administrative and collateral agent, as amended, or the Loan Agreement, plus approximately $3.2 million of related prepayment
premium, exit fees and accrued interest thereon. Approximately $11.8 million of such repayment was effectuated through a release
by the Lenders of all amounts held in a debt service reserve account for the benefit of the Lenders and of all amounts in a blocked
liquidity account. We are no longer required to maintain any amounts in the debt service reserve account or a blocked liquidity
account, but committed to meet minimum capital-raising and debt repayment requirements in the first quarter of 2020, which have
been satisfied, and to pursue debt restructuring arrangements and the sale of one or more non-core assets in the first half of
2020.
Production of Preclinical Batch of
STI-4398 (COVIDTRAP™)
On March
20, 2020, we announced that we have produced a preclinical batch of STI-4398 (COVIDTRAP™), a proprietary protein that is
designed to block the SAR-CoV-2 virus from binding and infecting respiratory epithelial cells.
Binding Term Sheet for Sale of Certain
Assets Related to Operations in China
On March 31, 2020,
we and Nanjing Hongjing Enterprise Management Consulting Co., Ltd., or Nanjing Hongjing Enterprise Management Consulting, entered
into a binding term sheet, or the Binding Term Sheet, setting forth the terms and conditions by which we will sell to Nanjing Hongjing Enterprise Management Consulting
certain assets related to our operations
in China, or the Acquisition. Subject to certain conditions, at the closing of the Acquisition,
Nanjing Hongjing Enterprise Management Consulting will pay us $30.0 million. The final terms of the Acquisition are subject to the negotiation and finalization
of the definitive agreements relating to the Acquisition and the material terms of the Acquisition may differ from those set forth
in the Binding Term Sheet. In addition, the closing of the Acquisition will be subject
to various customary and other closing conditions.
Entry into Sales Agreement with A.G.P.
On April 27, 2020,
we entered into a Sales Agreement, or the Sales Agreement, with A.G.P./Alliance Global Partners, as sales agent, or the Agent,
pursuant to which we may offer and sell, from time to time, through or to the Agent, as sales agent and/or principal, or the ATM
Offering, up to $250,000,000 in shares of our common stock. Subject to the terms and conditions of the Sales Agreement, the Agent
will use its commercially reasonable efforts to sell the Shares from time to time, based upon our instructions. Under the Sales
Agreement, the Agent may sell shares of our common stock by any method permitted by law deemed to be an “at the market offering”
as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. We have no obligation to sell any shares of our
common stock under the Sales Agreement, and may at any time suspend offers under the Sales Agreement. The ATM Offering will terminate
upon (a) the election of the Agent upon the occurrence of certain adverse events, (b) three business days’ advance notice
from one party to the other, or (c) the sale of all of the shares or our common stock under the Sales Agreement. Under the terms
of the Sales Agreement, the Agent will be entitled to a commission at a fixed rate of 3.0% of the gross proceeds from each sale
of Shares under the Sales Agreement.
For a complete description
of our business, financial condition, results of operations and other important information,
we refer you to our filings with the SEC that are incorporated by reference in this prospectus supplement, including our Annual Report on Form 10-K for the year ended December 31, 2019. For instructions on how to find copies of these documents, see “Where
You Can Find More Information” and “Incorporation of Documents by Reference”.
See the section
entitled “Risk Factors” in this prospectus supplement for a discussion of some of the risks relating to the execution
of our business strategy.
Corporate Information
On September 21,
2009, QuikByte Software, Inc., a Colorado corporation and shell company, or QuikByte, consummated its acquisition of Sorrento Therapeutics,
Inc., a Delaware corporation and private concern, or STI, in a reverse merger, or the Merger. Pursuant to the Merger, all of the
issued and outstanding shares of STI common stock were converted into an aggregate of 6,775,032 shares of QuikByte common stock
and STI became a wholly owned subsidiary of QuikByte. The holders of QuikByte’s common stock immediately prior to the Merger
held an aggregate of 2,228,333 shares of QuikByte’s common stock immediately following the Merger.
We were originally
incorporated as San Diego Antibody Company in California in 2006 and were renamed “Sorrento Therapeutics, Inc.” and
reincorporated in Delaware in 2009, prior to the Merger. QuikByte was originally incorporated in Colorado in 1989. Following the
Merger, on December 4, 2009, QuikByte reincorporated under the laws of the State of Delaware, or the Reincorporation. Immediately
following the Reincorporation, on December 4, 2009, we merged with and into QuikByte, the separate corporate existence of STI ceased
and QuikByte continued as the surviving corporation, or the Roll-Up Merger. Pursuant to the certificate of merger filed in connection
with the Roll-Up Merger, QuikByte’s name was changed from “QuikByte Software, Inc.” to “Sorrento Therapeutics,
Inc.”
Our principal executive
offices are located at 4955 Directors Place, San Diego, CA 92121, and our telephone number at that address is (858) 203-4100.
Our website is www.sorrentotherapeutics.com. Any information contained on, or that can be accessed through, our website is not
incorporated by reference into, nor is it in any way part of this prospectus and should not be relied upon in connection with making
any decision with respect to an investment in our securities. We are required to file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may obtain any of the documents filed by us with the SEC at no cost from the
SEC’s website at http://www.sec.gov.
The Offering
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Common stock offered by us
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Up to $250.0 million of Purchase Shares that we may sell to the Purchaser from time to time over the next 36 months, at our sole discretion, in accordance with the Purchase Agreement.
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Common stock outstanding before this offering
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167,798,120
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Common stock to be outstanding immediately after this offering
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Up
to 306,896,113 shares, assuming the issuance of the Purchase
Shares at an assumed price of $2.57 per share, which was the closing price of our common stock on the Nasdaq Capital Market on
April 24, 2020. The actual number of Purchase Shares issued will vary depending on
the sales prices under this offering, but will not be greater than 41,917,130, representing 19.99% of the shares of our common
stock outstanding on the date of the Purchase Agreement, unless such sales are made in accordance with applicable rules of The
Nasdaq Stock Market LLC.
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Manner of offering
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Issuance of Purchase Shares to the Purchaser from time to time, subject to certain minimum stock price requirements, and daily and other caps, for an aggregate offering price of up to $250.0 million. See “The Transaction” and “Plan of Distribution.”
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Use of Proceeds
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We currently intend to use the net proceeds from this offering for working capital and general corporate purposes, which may include capital expenditures, research and development expenditures, regulatory affairs expenditures, clinical trial expenditures, acquisitions of new technologies and investments, business combinations and the repayment, refinancing, redemption or repurchase of indebtedness or capital stock. We reserve the right, at the sole discretion of our management, to reallocate the proceeds of this offering in response to developments in our business and other factors. See “Use of Proceeds” on page S-11 of this prospectus supplement.
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Risk Factors
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Investing in our common stock involves a high degree of risk. Please read the information contained in and incorporated by reference under the heading “Risk Factors” on page S-6 of this prospectus supplement and under similar headings in the other documents that are filed after the date hereof and incorporated by reference into this prospectus supplement and the accompanying prospectus.
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Nasdaq Capital Market Listing
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Our common stock is listed on the Nasdaq Capital Market under the symbol “SRNE.”
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The number of
shares of our common stock to be outstanding immediately after this offering is based on 167,798,120 shares of our common stock
issued and outstanding as of December 31, 2019, and:
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excludes 14,586,661 shares of our common
stock issuable upon the exercise of stock options outstanding under our Amended and Restated 2009 Stock Incentive Plan and our
2019 Stock Incentive Plan, as of December 31, 2019, at a weighted-average exercise price of $4.36 per share;
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excludes 7,146,200 shares of our common
stock reserved for future issuance under our 2019 Stock Incentive Plan as of December 31, 2019;
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excludes
57,556,369 shares of our common stock issuable upon exercise of outstanding warrants as of December 31, 2019 at a weighted average
exercise price of $3.13 per share; and
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gives effect to the issuance and sale of 2,090,802 shares pursuant to the JMP Distribution Agreement between January 1, 2020 to February 10, 2020;
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gives effect to the issuance of an aggregate of 5,008,609 shares of our common stock upon exercise of warrants to purchase shares of our common stock between January 1, 2020 to January 24, 2020; and
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gives effect to the issuance and sale of 34,722,318 shares pursuant to the Aspire Purchase Agreement between February 10, 2020 to April 24, 2020.
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RISK FACTORS
Investing in our
common stock involves risk. Before deciding whether to invest in our common stock, you should consider carefully the risks and
uncertainties described below. You should also consider the risks, uncertainties and assumptions discussed under the heading “Risk
Factors” included in our most recent Annual Report on Form 10-K, as revised or supplemented by our most recent Quarterly
Report on Form 10-Q, each of which are on file with the SEC and are incorporated herein by reference, and which may be amended,
supplemented or superseded from time to time by other reports we file with the SEC in the future. There may be other unknown or
unpredictable economic, business, competitive, regulatory or other factors that could have material adverse effects on our future
results. If any of these risks actually occurs, our business, business prospects, financial condition or results of operations
could be seriously harmed. This could cause the trading price of our common stock to decline, resulting in a loss of all or part
of your investment. Please also read carefully the section below entitled “Disclosure Regarding Forward-Looking Statements.”
Risks Related to Our Business and Industry
We face potential business disruptions and related risks
resulting from the recent outbreak of the novel coronavirus, which could have a material adverse effect on our business, financial
condition and results of operations.
In December 2019,
a novel strain of coronavirus, or COVID-19, was reported to have surfaced in Wuhan, China. The COVID-19 outbreak has grown into
a global pandemic that has impacted Asia, United States, Europe and other countries throughout the world. Financial markets have
been experiencing extreme fluctuations that may cause a contraction in available liquidity globally as important segments of the
credit markets react to the development. The pandemic may lead to a decline in business and consumer confidence. The global outbreak
of COVID-19 continues to rapidly evolve. As a result, businesses have closed and limits have been placed on travel. The extent
to which COVID-19 may impact our business, clinical trials and sales of ZTlido will depend on future developments, which are highly
uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak,
travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and
the effectiveness of actions taken in the United States and other countries to contain and treat the disease.
We are monitoring
the potential impact of the COVID-19 outbreak, and if COVID-19 continues to spread globally, including in the United States, we
may experience disruptions that could severely impact the development of our product candidates, including:
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delays or difficulties in enrolling patients
in our clinical trials as patients may be reluctant, or unable, to visit clinical sites;
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delays or difficulties in clinical site
initiation, including difficulties in recruiting clinical site investigators, clinical site staff and potential closure of clinical
facilities;
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decreases in patients seeking treatment
for chronic pain;
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delays in receiving approval from local
regulatory authorities to initiate our planned clinical trials;
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delays in clinical sites receiving the
supplies and materials needed to conduct our clinical trials, including interruption in global shipping that may affect the transport
of clinical trial materials;
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changes in local regulations as part of
a response to the COVID-19 outbreak, which may require us to change the ways in which our clinical trials are conducted, which
may result in unexpected costs, or to discontinue the clinical trials altogether;
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diversion of healthcare resources away
from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff
supporting the conduct of our clinical trials;
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risk that participants enrolled in our
clinical trials will acquire COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical trial,
including by increasing the number of observed adverse events;
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delays in necessary interactions with
local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced
furlough of government employees; and
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interruption
of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended
by federal or state governments, employers and others.
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Quarantines, shelter-in-place
and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations
could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party suppliers in the United States
and other countries, or the availability or cost of materials, which would disrupt our supply chain. Any manufacturing supply interruption
of materials could adversely affect our ability to conduct ongoing and future research and testing activities. For example, we
obtain our commercial supply of ZTlido and our clinical supply of SP-103 exclusively from Oishi and Itochu in Japan. The COVID-19
pandemic may result in delays in the procurement and shipping of ZTlido, which may have an adverse impact on our operating results.
The spread of COVID-19,
which has caused a broad impact globally, may materially affect us economically. While the potential economic impact brought by,
and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption
of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.
In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the
value of our common stock.
In addition, the continued
spread of COVID-19 globally could materially and adversely impact our operations, including without limitation, our sales and marketing
efforts, sales of ZTlido, travel, employee health and availability, which may have a material and adverse effect on our business,
financial condition and results of operations.
Management
is actively monitoring the global situation on our financial condition, liquidity, operations, suppliers, industry and workforce.
Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the
effects of the COVID-19 outbreak on our results of operations, financial condition or liquidity for fiscal year 2020.
Any disruption in our research and development facilities
could adversely affect our business, financial condition and results of operations.
Our principal executive
offices, which house our research and development programs, are in San Diego, California. Our facilities may be affected by natural
or man-made disasters. Earthquakes are of particular significance since our facilities are located in an earthquake-prone area.
We are also vulnerable to damage from other types of disasters, including power loss, attacks from extremist organizations, fires,
floods and similar events. If our facilities are affected by a natural or man-made disaster, we may be forced to curtail our operations
and/or rely on third-parties to perform some or all of our research and development activities. Although we believe we possess
adequate insurance for damage to our property and the disruption of our business from casualties, such insurance may not be sufficient
to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all. In the future,
we may choose to expand our operations in either our existing facilities or in new facilities. If we expand our worldwide manufacturing
locations, there can be no assurance that this expansion will occur without implementation difficulties, or at all.
In March 2020, the
health officers of San Diego County, where our principal executive offices are located, issued shelter-in-place orders, which (i) direct
all individuals living in those counties to shelter at their places of residence (subject to limited exceptions), (ii) direct all
businesses and governmental agencies to cease non-essential operations at physical locations in those counties, (iii) prohibit
all non-essential gatherings of any number of individuals, and (iv) order cessation of all non-essential travel. The shelter-in-place
orders took effect in mid-March 2020 and the shelter-in-place orders in San Diego County are scheduled to continue until at least
April 30, 2020. However, such shelter-in-place orders may be extended to a later date. In addition, in mid-March 2020, the
Governor of California and the State Public Health Officer and Director of the California Department of Public Health ordered all
individuals living in the State of California to stay at their place of residence for an indefinite period of time (subject to
certain exceptions to facilitate authorized necessary activities) to mitigate the impact of the COVID-19 pandemic. The executive
order exempts certain individuals needed to maintain continuity of operations of critical infrastructure sectors as determined
by the federal government. If the operations in our principal executive offices or other facilities are deemed non-essential, we
may not be able to operate for the duration of any shelter-in-place order, which could negatively impact our business, operating
results and financial condition.
Risks Related to This Offering
Sales
of our common stock to the Purchaser may cause substantial dilution to our existing stockholders and the sale of the shares of
our common stock acquired by the Purchaser could cause the price of our common stock to decline.
This
prospectus supplement relates to the offering of up to $250.0 million of Purchase Shares that we may issue and sell
to the Purchaser from time to time pursuant to the Purchase Agreement. It is
anticipated that shares offered to the Purchaser in this offering will be sold
over a period of up to 36 months from the date of the Purchase Agreement. The number of shares ultimately offered for
sale to the Purchaser under this prospectus supplement is dependent upon the
number of shares we elect to sell to the Purchaser under the Purchase Agreement.
Depending upon market liquidity at the time, sales of shares of our common stock under the Purchase Agreement may cause the
trading price of our common stock to decline.
The Purchaser may
ultimately purchase all, some or none of the Purchase Shares. After the Purchaser has
acquired shares under the Purchase Agreement, it may sell all, some or none of those shares. Sales to the Purchaser by
us pursuant to the Purchase Agreement under this prospectus supplement may result in substantial dilution to the interests of other
holders of our common stock. The sale of a substantial number of shares of our common stock to the Purchaser in
this offering, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in
the future at a time and at a price that we might otherwise wish to effect sales. However, we have the right to control the timing
and amount of any sales of our shares to the Purchaser and the Purchase Agreement
may be terminated by us at any time at our discretion without any cost to us.
We
have a right to sell up to 650,000 Purchase Shares per day under the Purchase Agreement, which total number of shares may be increased
by mutual agreement up to an additional 3,600,000 Purchase Shares per day. In addition, we also have the right, in our sole
discretion, to grant the Purchaser an option to purchase an additional amount of our common stock at the Purchase Price, subject
to a maximum number of shares determined by us. Pursuant to the Purchase Agreement, in no event shall the aggregate purchase price
paid by the Purchaser for Purchase Shares exceed $5,000,000 per business day, unless mutually agreed by us and the Purchaser. The
extent to which we rely on the Purchaser as a source of funding will depend on a number
of factors, including the prevailing market price of our common stock and the extent to which we are able to secure working capital
from other sources. The aggregate number of shares that we can sell to the Purchaser under
the Purchase Agreement may in no case exceed 41,917,130 shares of our common stock (which is equal to approximately 19.99% of the
common stock outstanding on the date of the Purchase Agreement), or the Exchange Cap, unless stockholder approval is obtained to
issue more or such sales otherwise would comply with the listing rules of The Nasdaq Stock Market, LLC, in which case the Exchange
Cap will not apply.
Future sales of our common stock,
or the perception that such future sales may occur, may cause our stock price to decline.
Sales
of a substantial number of our shares of common stock in the public markets, or the perception that such sales could occur, could
depress the market price of our shares of common stock and impair our ability to raise capital through the sale of additional equity
securities. A substantial number of shares of common stock are being offered by this prospectus supplement, and we cannot predict
if and when the Purchaser may sell such shares in the public markets. We cannot predict
the number of these shares that might be sold nor the effect that future sales of our shares of common stock would have on the
market price of our shares of common stock.
We will have broad discretion in
the use of the net proceeds from this offering and may not use them effectively.
We currently intend
to use the net proceeds of this offering for working capital and general corporate purposes, which may include capital expenditures,
research and development expenditures, regulatory affairs expenditures, clinical trial expenditures, acquisitions of new technologies
and investments, business combinations and the repayment, refinancing, redemption or repurchase of indebtedness or capital stock,
as further described in the section of this prospectus supplement entitled “Use of Proceeds”. We will have broad discretion
in the application of the net proceeds in the category of other working capital and general corporate purposes and investors will
be relying on the judgment of our management regarding the application of the proceeds of this offering.
The precise amount
and timing of the application of these proceeds will depend upon a number of factors, such as the timing and progress of our research
and development efforts, our funding requirements and the availability and costs of other funds. As of the date of this prospectus
supplement, we cannot specify with certainty all of the particular uses for the net proceeds to us from this offering. Depending
on the outcome of our efforts and other unforeseen events, our plans and priorities may change and we may apply the net proceeds
of this offering in different manners than we currently anticipated.
The failure by our
management to apply these funds effectively could harm our business, financial condition and results of operations. Pending their
use, we may invest the net proceeds from this offering in short-term, interest-bearing instruments. These investments may not yield
a favorable return to our stockholders.
You may experience future dilution as a result of future
equity offerings.
In order to raise
additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable
for our common stock at prices that may not be the same as the price per share in this offering. We may sell shares or other securities
in any other offering at a price per share that is less than the price per share paid by investors in this offering, and investors
purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at
which we sell additional shares of our common stock, or securities convertible or exchangeable into common stock, in future transactions
may be higher or lower than the price per share paid by investors in this offering.
We do not intend to pay dividends in the foreseeable future.
We have never paid
cash dividends on our common stock. We currently intend to retain our future earnings, if any, to finance the operation and growth
of our business and currently do not plan to pay any cash dividends in the foreseeable future.
Disclosure
Regarding Forward-Looking Statements
This prospectus supplement
and the accompanying prospectus and the documents incorporated by reference into the prospectus supplement and the accompanying
prospectus contain “forward-looking statements” by us within the meaning of Section 27A of the Securities Act of 1933,
as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including,
without limitation, statements as to expectations, beliefs and strategies regarding the future. These statements involve known
and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to
be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
These forward-looking statements rely on a number of assumptions concerning future events and include statements relating to:
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risks and uncertainties associated with our research and development activities, including our
clinical trials and preclinical studies;
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the timing or likelihood of regulatory filings and approvals or of alternative regulatory pathways
for our drug candidates;
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the potential market opportunities for commercializing our product candidates;
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our expectations regarding the potential market size and the size of the patient populations for
our product candidates, if approved for commercial use, and our ability to serve such markets;
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estimates of our expenses, future revenue, capital requirements and our needs for additional financing;
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our ability to continue as a going concern;
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our ability to develop, acquire and advance our product candidates into, and successfully complete,
clinical trials and preclinical studies and obtain regulatory approvals;
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the implementation of our business model and strategic plans for our business and product candidates;
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the initiation, cost, timing, progress and results of future and current preclinical studies and
clinical trials, and our research and development programs;
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the terms of future licensing arrangements, and whether we can enter into such arrangements at
all;
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timing and receipt or payments of licensing and milestone revenues, if any;
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the scope of protection we are able to establish and maintain for intellectual property rights
covering our product candidates and our ability to operate our business without infringing the intellectual property rights of
others;
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regulatory developments in the United States and foreign countries;
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the performance of our third party suppliers and manufacturers;
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our ability to maintain and establish collaborations or obtain additional funding;
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the success of competing therapies that are currently or may become available;
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our use of proceeds from this offering;
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our ability to integrate acquired businesses and assets with our operations, technologies, services,
and personnel;
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our planned acquisitions, the terms of any such acquisitions and the expected timing for completing
such acquisitions;
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our financial performance;
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the potential impact to our business, revenue and financial condition, including disruptions to
our laboratories, clinical trials, supply chain and operations, due to the COVID-19 global pandemic;
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our ability to take advantage of opportunities under the Coronavirus Aid, Relief, and Economic
Security Act, or the CARES Act, and the potential impact of the CARES Act on our business, results of operations, financial condition
or liquidity; and
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developments and projections relating to our competitors and our industry.
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Any forward-looking
statements should be considered in light of these factors. Words such as “anticipates,” “believes,” “forecasts,”
“potential,” “goal,” “contemplates,” “expects,” “intends,” “plans,”
“projects,” “hopes,” “seeks,” “estimates,” “strategy,” “continues,”
“ongoing,” “opportunity,” “could,” “would,” “should,” “likely,”
“will,” “may,” “can,” “designed to,” “future,” “foreseeable future”
and similar expressions and variations, and negatives of these words, identify forward-looking statements. These forward-looking
statements are based on the expectations, estimates, projections, beliefs and assumptions of our management based on information
currently available to management, all of which are subject to change. These forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated
by the forward-looking statements. Many of the important factors that will determine these results and values are beyond our ability
to control or predict. You are cautioned not to put undue reliance on any forward-looking statements. Except as otherwise required
by law, we do not assume any obligation to update any forward-looking statements.
In evaluating an investment
in shares of our common stock, you should carefully consider the discussion of risks and uncertainties described under the heading
“Risk Factors” contained in this prospectus supplement, and under similar headings in other documents, including in
our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 3, 2020, and in other filings with the SEC, which may be amended,
supplemented or superseded from time to time by other reports we file with the SEC in the future, that are incorporated by reference
in this prospectus supplement. You should carefully read this prospectus supplement together with the information incorporated
by reference in this prospectus supplement as described under the headings “Where You Can Find More Information” and
“Incorporation of Documents by Reference” completely and with the understanding that our actual future results may
be materially different from what we expect.
All subsequent written
and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety
by our cautionary statements. The forward-looking statements included or incorporated by reference herein are made only as of the
date of this prospectus supplement (or as of the date of any such document incorporated by reference). We do not intend, and undertake
no obligation, to update these forward-looking statements, except as required by law.
USE OF PROCEEDS
We
may receive up to $250.0 million in aggregate gross proceeds under the Purchase Agreement from sales of Purchase Shares we may
make to the Purchaser after the date of this prospectus supplement. We may sell fewer
than all of the shares offered by this prospectus supplement, in which case our net offering proceeds will be less. Because we
are not obligated to sell any shares of our common stock under the Purchase Agreement, the actual total offering amount and proceeds
to us, if any, are not determinable at this time. There can be no assurance that we will receive any proceeds under or fully utilize
the Purchase Agreement. See “Plan of Distribution” elsewhere in this prospectus supplement for more information.
We currently intend
to use the net proceeds from this offering for working capital and general corporate purposes, which may include capital expenditures,
research and development expenditures, regulatory affairs expenditures, clinical trial expenditures, acquisitions of new technologies
and investments, business combinations and the repayment, refinancing, redemption or repurchase of indebtedness or capital stock.
We may use a portion of the proceeds to repay indebtedness owed under the Loan Agreement. Amounts borrowed under the Loan Agreement
bear interest at a rate equal to the London Interbank Offered Rate plus the applicable margin, or 7%, and $20 million of principal
of such amounts borrowed have a probable maturity of May 3, 2020 (absent the occurrence of
certain qualifying events), with the remaining maturing on November 7, 2023.
The precise amount
and timing of the application of these proceeds will depend upon a number of factors, such as the timing and progress of our research
and development efforts, our funding requirements and the availability and costs of other funds. As of the date of this prospectus
supplement, we cannot specify with certainty all of the particular uses for the net proceeds to us from this offering. Accordingly,
our management will have broad discretion in the timing and application of these proceeds. Pending application of the net proceeds
as described above, we intend to temporarily invest the proceeds in short-term, interest-bearing instruments.
DILUTION
The
sale of our common stock to the Purchaser pursuant to the Purchase Agreement will
have a dilutive impact on our stockholders. In addition, the lower our stock price is at the time we exercise our right to sell
shares of common stock to the Purchaser, the more shares of our common stock we will
have to issue to the Purchaser pursuant to the Purchase Agreement and our existing
stockholders would experience greater dilution.
Our net tangible book
value as of December 31, 2019 was approximately $(68.9) million, or $(0.41) per share of common stock. Net tangible book value
per share is determined by dividing the net of total tangible assets less total liabilities, by the aggregate number of shares
of common stock outstanding as of December 31, 2019.
Our pro forma net
tangible book value at December 31, 2019 was approximately $27.0 million, or $0.13 per share. Pro forma net tangible book value
per share is determined by dividing the net of total tangible assets less total liabilities, by the aggregate number of shares
of common stock outstanding as of December 31, 2019, after giving effect to: (1) the issuance and sale of 2,090,802 shares of our
common stock pursuant to the JMP Distribution Agreement between January 1, 2020 to February 10, 2020 for aggregate net proceeds
to us of approximately $7.3 million, (2) the issuance of an aggregate of 5,008,609 shares of our common stock upon exercise
of warrants to purchase shares of our common stock between January 1, 2020 to January 24, 2020 for net proceeds to us of approximately
$13.5 million, and (3) the issuance and sale of an aggregate of 34,722,318 shares of our common stock pursuant to the Aspire Purchase
Agreement that were sold between February 10, 2020 to April 24, 2020 for net proceeds to us of approximately $75.0 million.
After giving effect
to (1) the pro forma adjustments described in the preceding paragraph, and (2) the sale of up to $250.0 million of Purchase Shares
(without giving effect to the Exchange Cap) at an assumed offering price of $2.57 per share, the last reported sale price of our
common stock on the Nasdaq Capital Market on April 24, 2020, our pro forma as adjusted net tangible book value as of December 31,
2019 would have been approximately $277.0 million, or $0.90 per share of common stock. This represents an immediate increase in
the pro forma net tangible book value of $0.77 per share to our existing stockholders and an immediate dilution in pro forma net
tangible book value of $1.67 per share to the Purchaser. The following table illustrates this per share dilution:
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Assumed public offering price per share
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$
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2.57
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Net tangible book value per share as of December 31, 2019
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$
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(0.41
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Increase in net tangible book value per share attributable to the issuance and sale of 2,090,802 shares pursuant to the JMP Distribution Agreement between January 1, 2020 to February 10, 2020, the issuance of an aggregate of 5,008,609 shares pursuant to warrant exercises between January 1, 2020 to January 24, 2020, and the issuance and sale of 31,491,940 shares pursuant to the Aspire Purchase Agreement between February 10, 2020 to April 24, 2020
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$
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0.54
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Pro forma net tangible book value per share as of December 31, 2019
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$
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0.13
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Increase in pro forma net tangible book value per share attributable to the Purchaser
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$
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0.77
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Pro forma as adjusted net tangible book value per share as of December 31, 2019, after giving effect to this offering
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$
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0.90
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Dilution per share to the Purchaser
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$
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1.67
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The above discussion
and table are based on 167,798,120 shares of our common stock issued and outstanding as of December 31, 2019 and excludes the following:
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14,586,661 shares of our common stock issuable upon the exercise of stock options outstanding under
our Amended and Restated 2009 Stock Incentive Plan and our 2019 Stock Incentive Plan, as of December 31, 2019, at a weighted-average
exercise price of $4.36 per share;
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7,146,200 shares of our common stock reserved for future issuance under our 2019 Stock Incentive
Plan as of December 31, 2019; and
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57,556,369 shares of our common stock issuable upon exercise of outstanding warrants as of December
31, 2019 at a weighted average exercise price of $3.13 per share.
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To the extent that
options or warrants outstanding as of December 31, 2019 have been or are exercised, or other shares are issued, investors purchasing
shares in this offering could experience further dilution. In addition, we may choose to raise additional capital due to market
conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.
To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these
securities could result in further dilution to our stockholders.
The
Transaction
General
On April 27, 2020,
we entered into the Purchase Agreement with the Purchaser, which provides that, upon the terms and subject to the conditions and
limitations set forth therein, the Purchaser is committed to purchase up to an aggregate of $250.0 million of Purchase Shares
from time to time over the 36-month term of the Purchase Agreement.
We are filing this
prospectus supplement with regard to the offering of our common stock consisting of Purchase Shares in an aggregate amount of up
to $250.0 million that we may sell to the Purchaser pursuant to the Purchase Agreement. This prospectus supplement and the accompanying
prospectus also cover the resale of the Purchase Shares by the Purchaser to the public.
Purchase of Shares under the Purchase
Agreement
On April 27, 2020,
the conditions necessary for purchases under the Purchase Agreement to commence were satisfied. On any business day over the
36-month term of the Purchase Agreement, we have the right, in our sole discretion, to present the Purchaser with a purchase notice,
each, a Purchase Notice, directing the Purchaser to purchase up to 650,000 Purchase Shares per business day, provided that the
Purchaser will not be required to buy Purchase Shares pursuant to a Purchase Notice that was received by the Purchaser on any day
on which either (i) the daily volume weighted average price of our common stock on the Nasdaq Capital Market (or alternative national
exchange in accordance with the Purchase Agreement), or the VWAP, for such day is below $1.10 (which price shall not be adjusted
for any stock splits or other similar transactions), or the Floor Price, or (ii) the purchase price (as defined below) for such
day is below the Floor Price. On any such day, the Purchaser shall have the right, but not the obligation, to purchase any Purchase
Shares at the Floor Price. We and the Purchaser also may mutually agree to increase the number of shares that may be sold to as
much as an additional 3,600,000 Purchase Shares per business day. The purchase price per Purchase Share, or the Purchase Price,
will be equal to 97.5% of the VWAP for the business day on which the Purchase Shares are purchased.
In addition, we have
the right, in our sole discretion, to grant the Purchaser an option to purchase an additional amount of our common stock at the
Purchase Price, subject to a maximum number of shares determined by us. Pursuant to the Purchase Agreement, in no event shall the
aggregate purchase price paid by the Purchaser for Purchase Shares exceed $5,000,000 per business day, unless mutually agreed by
us and the Purchaser.
The number of Purchase
Shares covered by and timing of each Purchase Notice are determined by us, at our sole discretion. The aggregate number of shares
that we can sell to the Purchaser under the Purchase Agreement may in no case exceed the Exchange Cap unless (i) stockholder
approval is obtained to issue shares beyond the Exchange Cap, in which case the Exchange Cap will not apply, or (ii) stockholder
approval has not been obtained and at any time the Exchange Cap is reached and at all times thereafter the average price paid for
all shares issued under the Purchase Agreement is equal to or greater than a price equal to $2.37, which was the arithmetic average
of the five closing sale prices of our common stock immediately preceding April 27, 2020, the date of execution of the Purchase
Agreement; provided that at no time shall the Purchaser (together with its affiliates) beneficially own more than 4.99% of our
common stock. The Purchaser has no right to require any sales by us, but is obligated to make purchases from us as we direct in
accordance with the Purchase Agreement. There are no limitations on use of proceeds, financial or business covenants, restrictions
on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement.
We did not pay any additional amounts to reimburse or otherwise compensate the Purchaser in connection with the transaction. The
Purchase Agreement contains customary representations, warranties, covenants and conditions by, among and for the benefit of the
parties.
We may suspend the
sale of Purchase Shares to the Purchaser pursuant to this prospectus supplement for certain periods of time for certain reasons,
including if this prospectus supplement is required to be supplemented or amended to include additional material information.
Events of Default
The Purchaser may
terminate the Purchase Agreement upon the occurrence of any of the following events of default, each an Event of Default:
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the effectiveness of any registration statement that is required to be maintained effective pursuant
to the terms of the Purchase Agreement lapses for any reason (including, without limitation, the issuance of a stop order) or is
unavailable for the sale of shares of our common stock in accordance with the terms of the Purchase Agreement, and such lapse or
unavailability continues for a period of 10 consecutive business days or for more than an aggregate of 30 business days in any
365-day period, which is not in connection with a post-effective amendment to any such registration statement or the filing of
a new registration statement; provided, however, that in connection with any post-effective amendment to such registration statement
or filing of a new registration statement that is required to be declared effective by the SEC, such lapse or unavailability may
continue for a period of no more than 30 consecutive business days, which such period shall be extended for an additional 30 business
days if the Company receives a comment letter from the SEC in connection therewith;
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the suspension from trading or failure of our common stock to be listed on our principal market
for a period of three consecutive business days;
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the delisting of our common stock from our principal market, provided our common stock is not immediately
thereafter trading on the New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market
or the Nasdaq Capital Market;
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our transfer agent’s failure to issue to the Purchaser shares of our common stock which the
Purchaser is entitled to receive under the Purchase Agreement, and such failure continues for five business days after an applicable
settlement date;
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any breach by us of our representations or warranties (as of the dates made), covenants or other
term or condition under the Purchase Agreement or any related transaction agreements which could have a material adverse effect
on us, subject to a cure period of five business days;
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if we become insolvent;
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any participation or threatened participation in insolvency or bankruptcy proceedings by or against
us; or
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if the Exchange Cap is reached unless and until stockholder approval has been obtained.
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So long as an Event
of Default has occurred and is continuing, or if any event which, after notice and/or lapse of time, would become an Event of Default,
has occurred and is continuing, or so long as the VWAP is below the Floor Price, we may not require and the Purchaser has no obligation
to purchase any shares of our common stock under the Purchase Agreement.
The Purchaser may
terminate the Purchase Agreement at any time when an Event of Default exists without any liability or payment to us. However, if
pursuant to or within the meaning of any bankruptcy law, we commences a voluntary case or any person commences a proceeding against
us, a custodian is appointed for us or for all or substantially all of our property, or we makes a general assignment for the benefit
of our creditors (any of which would be an Event of Default), the Purchase Agreement will automatically terminate without any liability
or payment to us without further action or notice.
Termination; Our Termination Rights
Unless earlier terminated,
the Purchase Agreement will terminate automatically on the earliest to occur of (i) the first day next following the 36-month anniversary
of the date of the Purchase Agreement and (ii) the date on which the Purchaser purchases the total $250 million of shares of our
common stock under the Purchase Agreement. We may terminate the Purchase Agreement at any time, in our discretion, without any
cost or penalty.
No Short-Selling or Hedging by the Purchaser
The Purchaser has
agreed that during the term of the Purchase Agreement, neither it, any of its affiliates or any entity managed or controlled by
it will, directly or indirectly, engage in any short sales involving our securities or grant any option to purchase, or acquire
any right to dispose of or otherwise dispose for value of, any shares of our common stock or any securities convertible into or
exercisable or exchangeable for any shares of our common stock, or enter into any swap, hedge or other similar agreement that transfers,
in whole or in part, the economic risk of ownership of any shares of our common stock.
Effect of Performance of the Purchase
Agreement on Our Stockholders
The Purchase Agreement
does not limit the ability of the Purchaser to sell any or all of the shares it currently owns or receives in this offering. It
is anticipated that shares sold to the Purchaser in this offering will be sold to the Purchaser over a period of up to 36 months
from the date of the Purchase Agreement. The subsequent resale by the Purchaser of our common stock may cause the market price
of our common stock to decline or to be highly volatile. The Purchaser may ultimately purchase all, some or none of the shares
of common stock that is the subject of this prospectus supplement. The Purchaser may resell all, some or none of the Purchase Shares
it acquires. Therefore, sales to the Purchaser by us pursuant to the Purchase Agreement and this prospectus supplement also may
result in substantial dilution to the interests of other holders of our common stock. However, we have the right to control the
timing and amount of any sales of our shares to the Purchaser and the Purchase Agreement may be terminated by us at any time at
our discretion without any cost to us.
Amount of Potential Proceeds to be Received
under the Purchase Agreement
Under the Purchase
Agreement, we may sell Purchase Shares having an aggregate offering price of up to $250.0 million to the Purchaser from time
to time. The number of shares ultimately offered for sale to the Purchaser in this offering is dependent upon the number of shares
we elect to sell to the Purchaser under the Purchase Agreement. In addition, the Purchaser will not be required to buy Purchase
Shares pursuant to a Purchase Notice that was received by the Purchaser on any business day on which either (i) the VWAP is below
the Floor Price or (ii) the Purchase Price is below the Floor Price. The following table sets forth the amount of proceeds we would
receive from the Purchaser from the sale of shares at varying purchase prices:
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Assumed Average Purchase Price
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Proceeds from the Sale of Shares to the Purchaser Under the Purchase Agreement Registered in this Offering
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Number of Shares to be Issued in this Offering at the Assumed Average Purchase Price (1)
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|
|
Percentage of Outstanding Shares After Giving Effect to the Purchased Shares Issued to the Purchaser (2)
|
|
|
$
|
1.00
|
|
|
$
|
41,917,130
|
|
|
|
41,917,130
|
|
|
|
16.7
|
%
|
|
$
|
1.50
|
|
|
$
|
62,875,695
|
|
|
|
41,917,130
|
|
|
|
16.7
|
%
|
|
$
|
2.00
|
|
|
$
|
83,834,260
|
|
|
|
41,917,130
|
|
|
|
16.7
|
%
|
|
$
|
2.57
|
(3)
|
|
$
|
107,727,024
|
|
|
|
41,917,130
|
|
|
|
16.7
|
%
|
|
$
|
3.00
|
|
|
$
|
125,751,390
|
|
|
|
41,917,130
|
|
|
|
16.7
|
%
|
|
$
|
5.00
|
|
|
$
|
209,585,650
|
|
|
|
41,917,130
|
|
|
|
16.7
|
%
|
|
$
|
10.00
|
|
|
$
|
250,000,000
|
|
|
|
25,000,000
|
|
|
|
10.7
|
%
|
|
|
(1)
|
Includes the total number of Purchase Shares which we
would have sold under the Purchase Agreement at the corresponding assumed purchase price set forth in the adjacent column, up
to an aggregate purchase price of $250.0 million, while giving effect to the Exchange Cap.
|
|
|
(2)
|
The denominator is based on 167,798,120 shares outstanding
as of December 31, 2019, adjusted to: (a) give effect to the issuance and sale of 2,090,802 shares pursuant to the JMP Distribution
Agreement between January 1, 2020 to February 10, 2020; (b) give effect
to the issuance of an aggregate of 5,008,609 shares of our common stock upon exercise of warrants to purchase shares of
our common stock between January 1, 2020 to January 24, 2020; (c) give effect
to the issuance and sale of 34,722,318 shares pursuant to the Aspire Purchase Agreement between February 10, 2020 to April
24, 2020; and (d) include the issuance of the number of shares set forth in the adjacent column which we would have sold to the
Purchaser. The numerator is based on the number of shares which we may issue to the Purchaser under the Purchase Agreement (that
are the subject of this offering) at the corresponding assumed purchase price set forth in the adjacent column.
|
|
|
(3)
|
The closing sale price
of our common stock on April 24, 2020.
|
Information with Respect to the Purchaser
Ariel Samuel Belilo
is the Director of the Purchaser, and has dispositive power over the shares held by the Purchaser.
PLAN OF DISTRIBUTION
The Purchaser is an
“underwriter” within the meaning of Section 2(a)(11) of the Securities Act. The Purchaser has informed us that it will
use an unaffiliated broker-dealer to effectuate all sales, if any, of the Purchase Shares that it may purchase from us pursuant
to the Purchase Agreement. Such sales will be made on the Nasdaq Capital Market at prices and at terms then prevailing or at prices
related to the then current market price. Each such unaffiliated broker-dealer will be an underwriter within the meaning of Section
2(a)(11) of the Securities Act. The Purchaser has informed us that each such broker-dealer will receive commissions from the Purchaser
that will not exceed customary brokerage commissions.
The shares of our
common stock may be sold by the Purchaser in one or more of the following manners:
|
·
|
Ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; or
|
|
·
|
A block trade in which the broker-dealer so engaged will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction.
|
We know of no existing
arrangements between the Purchaser and any other stockholder, broker, dealer, underwriter, or agent relating to the sale or distribution
of the shares offered by this prospectus supplement. At the time a particular offer of shares is made, a prospectus supplement,
if required, will be distributed that will set forth the names of any agents, underwriters, or dealers and any compensation from
the Purchaser, and any other required information.
We have agreed to
indemnify the Purchaser and certain other persons, and the Purchaser has agreed to indemnify us and certain other persons, in each
case against certain liabilities in connection with the offering of shares of our common stock offered hereby, including liabilities
arising under the Securities Act or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of
such liabilities. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors,
officers, and controlling persons, we have been advised that in the opinion of the SEC, this indemnification is against public
policy as expressed in the Securities Act and is therefore, unenforceable.
The Purchaser has
agreed that during the term of the Purchase Agreement, neither it, any of its affiliates or any entity controlled by it will, directly
or indirectly, engage in any short sales involving our securities or grant any option to purchase, or acquire any right to dispose
of or otherwise dispose for value of, any shares of our common stock or any securities convertible into or exercisable or exchangeable
for any shares of our common stock, or enter into any swap, hedge or other similar agreement that transfers, in whole or in part,
the economic risk of ownership of any shares of our common stock.
We have advised the
Purchaser that it is required to comply with Regulation M promulgated under the Exchange Act, to the extent applicable to this
offering. With certain exceptions, Regulation M precludes the Purchaser, any affiliated purchasers, and any broker-dealer or other
person who participates in the distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase
any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any
bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All
of the foregoing may affect the marketability of the shares offered by this prospectus supplement.
The transfer agent
and registrar for our common stock is Philadelphia Stock Transfer, Inc.
Our common stock is
currently listed on the Nasdaq Capital Market under the symbol “SRNE.”
Please also see the
information set forth under the caption “Plan of Distribution” in the accompanying prospectus, and the disclosure set
forth in the Current Report on Form 8-K that we will file in connection with this offering. For more information, please also see
the section entitled “Incorporation of Documents by Reference” in this prospectus supplement.
LEGAL MATTERS
The validity
of the issuance of the common stock offered by this prospectus supplement will be passed upon for us by Paul Hastings LLP, Palo
Alto, California.
EXPERTS
The financial statements and financial statement schedule incorporated
in this prospectus supplement by reference from the Company’s Annual Report on Form 10-K, and the effectiveness of Sorrento
Therapeutics, Inc.’s internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their reports, which are incorporated herein by reference (which reports (1) express
an unqualified opinion on the consolidated financial statements and financial statement schedule and include an explanatory paragraph
referring to the Company’s ability to continue as a going concern) and (2) express an unqualified opinion on the effectiveness
of the Company’s internal control over financial reporting). Such financial statements and financial statement schedule have
been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are a reporting
company and file annual, quarterly and current reports, proxy statements and other information with the SEC. We have filed with
the SEC a registration statement on Form S-3 under the Securities Act with respect to the securities being offered under this prospectus
supplement and the accompanying prospectus. This prospectus supplement and the accompanying prospectus do not contain all of the
information set forth in the registration statement and the exhibits to the registration statement. For further information with
respect to us and the securities being offered under this prospectus supplement and the accompanying prospectus, we refer you to
the registration statement and the exhibits and schedules filed as a part of the registration statement. The SEC maintains an Internet
site that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC, including Sorrento Therapeutics, Inc. The SEC’s Internet site can be found at http://www.sec.gov.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us
to “incorporate by reference” information into this prospectus supplement, which means that we can disclose important
information to you by referring you to another document filed separately with the SEC. The documents incorporated by reference
into this prospectus supplement contain important information that you should read about us.
The following documents
are incorporated by reference into this prospectus supplement:
|
|
·
|
Our Current Reports on Form 8-K filed with the SEC on January 27, 2020, February 11, 2020, February 27, 2020, March 6, 2020, March 20, 2020
and March 31, 2020; and
|
We also incorporate
by reference any future filings (other than current reports furnished under Item 2.02 or Item 7.01 of Form 8-K and exhibits filed
on such form that are related to such items unless such Form 8-K expressly provides to the contrary) made with the SEC pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, including those made after the date of the initial filing of the registration
statement of which this prospectus supplement is a part and prior to effectiveness of such registration statement, until we file
a post-effective amendment that indicates the termination of the offering of the securities made by this prospectus supplement
and will become a part of this prospectus supplement from the respective dates that such documents are filed with the SEC. Any
statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes hereof or of the related prospectus supplement to the extent that a statement contained herein
or in any other subsequently filed document which is also incorporated or deemed to be incorporated herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute
a part of this prospectus supplement.
Documents incorporated
by reference are available from us, without charge. You may obtain documents incorporated by reference in this prospectus supplement
by requesting them in writing or by telephone at the following address:
Sorrento Therapeutics, Inc.
4955 Directors Place
San Diego, CA 92121
Attn: Corporate Secretary
Phone: (858) 203-4100
PROSPECTUS
$1,000,000,000
Common Stock
Preferred Stock
Debt Securities
Warrants
Units
We may offer and sell, from time to time
in one or more offerings, up to $1,000,000,000 in the aggregate of any combination of the securities identified above from time
to time in one or more offerings, either individually or in combination with other securities. We may also offer common stock or
preferred stock upon conversion of debt securities, common stock upon conversion of preferred stock, or common stock, preferred
stock or debt securities upon the exercise of warrants.
Each time we offer and sell securities,
we will provide a supplement to this prospectus that contains specific information about the offering and the amounts, prices and
terms of the securities. We may also authorize one or more free writing prospectuses to be provided to you in connection with these
offerings. The prospectus and any related free writing prospectuses may also add, update or change information contained in this
prospectus with respect to that offering. You should carefully read this prospectus and the applicable prospectus supplement and
any related free writing prospectus, as well as any documents incorporated by reference, before you invest in any of our securities.
We may offer and sell the securities described
in this prospectus and any prospectus supplement to or through one or more underwriters, dealers and agents, or directly to purchasers,
or through a combination of these methods. If any underwriters, dealers or agents are involved in the sale of any of the securities,
their names and any applicable purchase price, fee, commission or discount arrangement between or among them will be set forth,
or will be calculable from the information set forth, in the applicable prospectus supplement. See the sections of this prospectus
entitled “About this Prospectus” and “Plan of Distribution” for more information. No securities may be
sold without delivery of this prospectus and the applicable prospectus supplement describing the method and terms of the offering
of such securities.
Investing in our securities involves
a high degree of risk. You should review carefully the risks and uncertainties described under the heading “Risk Factors”
on page 5 of this prospectus, the applicable prospectus supplement and in any applicable free writing prospectuses, and under similar
headings in the documents that are incorporated by reference into this prospectus.
Our common stock is currently listed on
the Nasdaq Capital Market under the symbol “SRNE.” On March 11, 2020, the last reported sale price of our common stock
was $1.85 per share. The applicable prospectus supplement will contain information, where applicable, as to any other listing on
the Nasdaq Capital Market or any securities market or other exchange of the securities, if any, covered by the applicable prospectus
supplement.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities, or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is March 20, 2020.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This prospectus is
part of a registration statement on Form S-3 that we filed with the Securities and Exchange Commission, or the SEC, utilizing a
“shelf” registration process. Under this shelf registration process, we may offer and sell shares of our common stock
and preferred stock, various series of debt securities, warrants to purchase any of such securities and/or units consisting of
any combination of such securities, either individually or in combination with other securities, in one or more offerings, up to
a total dollar amount of $1,000,000,000. This prospectus provides you with a general description of the securities we may offer.
Each time we offer
securities under this prospectus, we will provide a prospectus supplement that will contain more specific information about the
terms of that offering. We may also authorize one or more free writing prospectuses to be provided to you that may contain material
information relating to these offerings. The prospectus supplement and any related free writing prospectus we have authorized for
use in connection with a specific offering may also add, update or change any of the information contained in this prospectus or
in the documents that we have incorporated by reference into this prospectus. We urge you to read carefully this prospectus, the
applicable prospectus supplement and any free writing prospectuses we have authorized for use in connection with a specific offering,
together with the information incorporated herein by reference as described under the section entitled “Incorporation of
Documents by Reference”, before buying any of the securities being offered.
THIS PROSPECTUS
MAY NOT BE USED TO CONSUMMATE A SALE OF SECURITIES UNLESS IT IS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
You should rely only
on the information contained in, or incorporated by reference into, this prospectus, the applicable prospectus supplement and any
free writing prospectuses, along with the information contained in any free writing prospectuses we have authorized for use in
connection with a specific offering. We have not authorized anyone to provide you with different or additional information. This
prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is
lawful to do so.
The information appearing
in this prospectus, the applicable prospectus supplement or any related free writing prospectus is accurate only as of the date
on the front of the document and any information we have incorporated by reference is accurate only as of the date of the document
incorporated by reference, regardless of the time of delivery of this prospectus, the applicable prospectus supplement or any related
free writing prospectus, or any sale of a security. Our business, financial condition, results of operations and prospects may
have changed since those dates.
This prospectus contains
summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents
for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents
referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement
of which this prospectus is a part, and you may obtain copies of those documents as described below under the heading “Where
You Can Find More Information”.
SUMMARY
This summary highlights
selected information that is presented in greater detail elsewhere in this prospectus or incorporated by reference in this prospectus.
Because it is only a summary, it does not contain all of the information you should consider before investing in our common stock,
preferred stock, debt securities, warrants or units, and it is qualified in its entirety by, and should be read in conjunction
with, the more detailed information included elsewhere in this prospectus. Before you decide whether to purchase shares of our
common stock or preferred stock, or our debt securities, warrants or units, you should read this entire prospectus, the applicable
prospectus supplement and any related free writing prospectus carefully, including the risks of investing in our securities discussed
under the heading “Risk Factors” contained in the applicable prospectus supplement and any related free writing prospectus,
and under similar headings in the other documents that are incorporated by reference into this prospectus. You should also carefully
read the information incorporated by reference into this prospectus, including our financial statements, and the exhibits to the
registration statement of which this prospectus is a part. Unless the context otherwise requires, the terms “Sorrento,”
“the Company,” “we,” “us” and “our” in this prospectus refer to Sorrento Therapeutics,
Inc. and its subsidiaries.
Business Overview
Sorrento Therapeutics,
Inc. (Nasdaq: SRNE), together with its subsidiaries, or collectively, Sorrento, the Company, we, us and our, is a clinical stage
and commercial biopharma company focused on delivering innovative and clinically meaningful therapies to patients and their families,
to address unmet medical needs. We also have programs assessing the use of our technologies and products in autoimmune, inflammatory
and neurodegenerative diseases.
At our core, we are
an antibody-centric company and leverage our proprietary G-MAB™ library and targeted delivery modalities to generate the
next generation of cancer therapeutics. Our fully human antibodies include PD-1, PD-L1, CD38, CD123, CD47, CTLA-4, c-MET, VEGFR2,
CCR2 and CD137 among others.
Our vision is to
leverage these antibodies in conjunction with proprietary targeted delivery modalities to generate the next generation of
cancer therapeutics. These modalities include proprietary chimeric antigen receptor T-cell therapy, or CAR-T, dimeric antigen
receptor T-cell therapy, or DAR-T, antibody drug conjugates, or ADC, as well as bispecific antibody approaches. We acquired
Sofusa®, a revolutionary drug delivery system, in July 2018, which delivers biologics directly into the lymphatic system
to potentially achieve improved efficacy and fewer adverse effects than standard parenteral immunotherapy. Additionally, our
majority owned subsidiary, Scilex Holding Company, or Scilex Holding, acquired the assets of Semnur Pharmaceuticals, Inc., or
Semnur, in March 2019. Semnur’s SEMDEXATM (SP-102) compound has the potential to become the first Food and
Drug Administration, or FDA,-approved epidural steroid product for the treatment of sciatica.
With each of our clinical
and pre-clinical programs, we aim to tailor our therapies to treat specific stages in the evolution of cancer, from elimination,
to equilibrium and escape. In addition, our objective is to focus on tumors that are resistant to current treatments and where
we can design focused trials based on a genetic signature or biomarker to ensure patients have the best chance of a durable and
significant response. We have several immuno-oncology programs that are in or near to entering the clinic. These include cellular
therapies, an oncolytic virus and a palliative care program targeted to treat intractable cancer pain. Our cellular therapy programs
focus on CAR-T for adoptive cellular immunotherapy to treat both solid and liquid tumors. We have reported early data from Phase
I trials of our carcinoembryonic antigen, or CEA, -directed CAR-T program. We have treated five patients with stage 4, unresectable
adenocarcinoma (four with pancreatic and one with colorectal cancer) and CEA-positive liver metastases with anti-CEA CAR-T. We
successfully submitted an Investigational New Drug application, or IND, for anti-CD38 CAR-T for the treatment of refractory or
relapsed multiple myeloma and obtained approval from the FDA to commence a human clinical trial for this indication in early 2018.
We have dosed five patients and are continuing the enrollment of additional patients.
Broadly speaking,
we believe we are one of the world’s leading CAR-T and DAR-T companies today due to our investments in technology and infrastructure,
which have enabled significant progress in developing our next-generation non-viral, “off-the-shelf” allogeneic DAR-T
solutions. With “off-the-shelf” solutions, DAR-T therapy can truly become a drug product rather than a treatment procedure.
One of the approaches we have taken to develop the “off-the-shelf” allogeneic CAR-T solutions is through Celularity,
Inc., our joint venture with Celgene, United Therapeutics and others, or Celularity. Celularity focuses on developing cell therapies
with placenta-derived and cord blood T cells, which have natural allogeneic “off-the-shelf” characteristics.
Outside of immune-oncology
programs, as part of our global aim to provide a wide range of therapeutic products to meet underserved markets, we have made investments
in non-opioid pain management. These include resiniferatoxin, or RTX, which is a non-opioid-based toxin that specifically ablates
nerves that conduct chronic and inflammatory pain signals while leaving other nerve functions intact and is being studied for chronic
pain treatment. RTX has been granted orphan drug status for the treatment of intractable pain with end-stage cancer and two Phase
I trials (intrathecal and epidural routes) in that indication are concluding. A Phase Ib trial studying tolerance and efficacy
of RTX for the control of osteoarthritis knee pain was initiated in late 2018 and intermediate results have shown efficacy with
no dose limiting toxicities. The osteoarthritis trial enrolled the last patient in the first quarter of 2020. Clinical data is
expected to be available soon after the last patient enrolled completes the day 84 visit (end-point) at the end of April 2020.
Knee arthritis registrational trials are planned to start later in the first half of 2020 with an Australia/USA Phase III trial,
pending meeting with the FDA and receiving clearance to proceed.
In the area of non-opioid
pain management, we have in-house developed and acquired proprietary technologies to responsibly develop next generation, branded
pharmaceutical products to better manage patients’ medical conditions and maximize the quality of life of patients and healthcare
providers. The flagship product of our majority-owned subsidiary, Scilex Pharmaceuticals Inc., or Scilex Pharma, ZTlido® (lidocaine
topical system) 1.8%, or ZTlido, is a next-generation lidocaine delivery system which was approved by the FDA for the treatment
of pain associated with postherpetic neuralgia, a severe neuropathic pain condition, in February 2018, and was commercially launched
in late October 2018. Scilex Pharma has now built a full commercial organization, which includes sales, marketing, market access,
and medical affairs. ZTlido® has demonstrated superior adhesion in comparative head-to-head studies as compared to Lidoderm
and is manufactured by our Japanese partner in their state-of-the-art manufacturing facility.
For a complete description
of our business, financial condition, results of operations and other important information, we refer you to our filings with the
SEC that are incorporated by reference in this prospectus, including our Annual Report on Form 10-K for the year ended December 31, 2019. For instructions on how to find copies of these documents,
see “Where You Can Find More Information”.
See the section entitled
“Risk Factors” in this prospectus for a discussion of some of the risks relating to the execution of our business strategy.
Corporate Information
On September 21, 2009,
QuikByte Software, Inc., a Colorado corporation and shell company, or QuikByte, consummated its acquisition of Sorrento Therapeutics,
Inc., a Delaware corporation and private concern, or STI, in a reverse merger, or the Merger. Pursuant to the Merger, all of the
issued and outstanding shares of STI common stock were converted into an aggregate of 6,775,032 shares of QuikByte common stock
and STI became a wholly owned subsidiary of QuikByte. The holders of QuikByte’s common stock immediately prior to the Merger
held an aggregate of 2,228,333 shares of QuikByte’s common stock immediately following the Merger.
We were originally
incorporated as San Diego Antibody Company in California in 2006 and were renamed “Sorrento Therapeutics, Inc.” and
reincorporated in Delaware in 2009, prior to the Merger. QuikByte was originally incorporated in Colorado in 1989. Following the
Merger, on December 4, 2009, QuikByte reincorporated under the laws of the State of Delaware, or the Reincorporation. Immediately
following the Reincorporation, on December 4, 2009, we merged with and into QuikByte, the separate corporate existence of STI ceased
and QuikByte continued as the surviving corporation, or the Roll-Up Merger. Pursuant to the certificate of merger filed in connection
with the Roll-Up Merger, QuikByte’s name was changed from “QuikByte Software, Inc.” to “Sorrento Therapeutics,
Inc.
Our principal executive
offices are located at 4955 Directors Place, San Diego, CA 92121, and our telephone number at that address is (858) 203-4100. Our
website is www.sorrentotherapeutics.com. Any information contained on, or that can be accessed through, our website is not incorporated
by reference into, nor is it in any way part of this prospectus and should not be relied upon in connection with making any decision
with respect to an investment in our securities. We are required to file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may obtain any of the documents filed by us with the SEC at no cost from the SEC’s
website at http://www.sec.gov.
RISK FACTORS
Investing in any securities
offered pursuant to this prospectus, the applicable prospectus supplement and any related free writing prospectus involves a high
degree of risk. Before making an investment decision, you should carefully consider the risks described under “Risk Factors”
in the applicable prospectus supplement, any related free writing prospectus and in our most recent Annual Report on Form 10-K,
or in any updates in our Quarterly Reports on Form 10-Q, together with all of the other information appearing in or incorporated
by reference into this prospectus, the applicable prospectus supplement and any related free writing prospectus, before deciding
whether to purchase any of the securities being offered. Our business, financial condition or results of operations could be materially
adversely affected by any of these risks. The occurrence of any of these risks might cause you to lose all or part of your investment
in the offered securities.
DISCLOSURE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus, any
accompanying prospectus supplement and the documents incorporated by reference into this prospectus may contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E
of the Securities Exchange Act of 1934, as amended, or the Exchange Act, about Sorrento. These forward-looking statements are intended
to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are not statements of historical fact, and can be identified by the use of forward-looking terminology
such as “believes”, “expects”, “may”, “will”, “could”, “should”,
“projects”, “plans”, “goal”, “targets”, “potential”, “estimates”,
“pro forma”, “seeks”, “intends” or “anticipates” or the negative thereof or comparable
terminology. Forward-looking statements include discussions of strategy, financial projections, guidance and estimates (including
their underlying assumptions), statements regarding plans, objectives, expectations or consequences of various transactions, and
statements about the future performance, operations, products and services of Sorrento. We caution our stockholders and other readers
not to place undue reliance on such statements.
You should read this prospectus, any accompanying prospectus
supplement and the documents incorporated by reference completely and with the understanding that our actual future results may
be materially different from what we currently expect. Our business and operations are and will be subject to a variety of risks,
uncertainties and other factors. Consequently, actual results and experience may materially differ from those contained in any
forward-looking statements. Such risks, uncertainties and other factors that could cause actual results and experience to differ
from those projected include, but are not limited to, the risk factors set forth in Part I - Item 1A, “Risk Factors”,
in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 3, 2020, and elsewhere in
the other documents incorporated by reference into this prospectus.
You should assume
that the information appearing in this prospectus, any accompanying prospectus supplement, any related free writing prospectus
and any document incorporated herein by reference is accurate as of its date only. Because the risk factors referred to above could
cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our
behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only
as of the date on which it is made. New factors emerge from time to time, and it is not possible for us to predict which factors
will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All written or
oral forward-looking statements attributable to us or any person acting on our behalf made after the date of this prospectus are
expressly qualified in their entirety by the risk factors and cautionary statements contained in and incorporated by reference
into this prospectus. Unless legally required, we do not undertake any obligation to release publicly any revisions to such forward-looking
statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.
USE OF PROCEEDS
Except as otherwise
provided in the applicable prospectus supplement or in any free writing prospectuses we have authorized for use in connection with
a specific offering, we currently intend to use the net proceeds from the sale of the securities offered by this prospectus, if
any, for working capital and general corporate purposes, which may include capital expenditures, research and development expenditures,
regulatory affairs expenditures, clinical trial expenditures, acquisitions of new technologies and investments, business combinations
and the repayment, refinancing, redemption or repurchase of indebtedness or capital stock.
The intended application
of proceeds from the sale of any particular offering of securities using this prospectus will be described in the accompanying
prospectus supplement relating to such offering. The precise amount and timing of the application of these proceeds will depend
upon a number of factors, such as the timing and progress of our research and development efforts, our funding requirements and
the availability and costs of other funds. Pending application of the net proceeds as described above, we intend to temporarily
invest the proceeds in short-term, interest-bearing instruments.
DESCRIPTION OF CAPITAL STOCK
General Matters
As of December 31,
2019, our authorized capital stock consisted of 750,000,000 shares of common stock, $0.0001 par value per share, and 100,000,000
shares of preferred stock, $0.0001 par value per share. Our board of directors, or our Board, may establish the rights and preferences
of the preferred stock from time to time. As of December 31, 2019, there were 167,798,120 shares of our common stock issued and
outstanding and no shares of preferred stock issued and outstanding.
Common Stock
Holders of our common
stock are entitled to one vote per share. Our Restated Certificate of Incorporation, as amended, or our Certificate of Incorporation,
does not provide for cumulative voting. Holders of our common stock are entitled to receive ratably such dividends, if any, as
may be declared by our Board out of legally available funds. However, the current policy of our Board is to retain earnings, if
any, for our operations and potential expansion of our business. Upon liquidation, dissolution or winding-up, the holders of our
common stock are entitled to share ratably in all of our assets which are legally available for distribution, after payment of
or provision for all liabilities. The holders of our common stock have no preemptive, subscription, redemption or conversion rights.
Preferred Stock
As of the date of
this prospectus, no shares of preferred stock are issued and outstanding. Our Certificate of Incorporation provides that our Board
may by resolution, without further vote or action by the stockholders, establish one or more classes or series of preferred stock
having the number of shares and relative voting rights, designation, dividend rates, liquidation, and other rights, preferences,
and limitations as may be fixed by them without further stockholder approval. Once designated by our Board, each series of preferred
stock will have specific financial and other terms that will be set forth in the applicable certificate of designation for the
series. Prior to the issuance of shares of each series of preferred stock, our Board is required by the General Corporation Law
of the State of Delaware, or the DGCL, and our Certificate of Incorporation to adopt resolutions and file a certificate of designation
with the Secretary of State of the State of Delaware. The certificate of designation fixes for each class or series the designations,
powers, preferences, rights, qualifications, limitations and restrictions, including, but not limited to, some or all of the following:
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(a)
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The distinctive designation of such series and the number of shares which shall constitute such
series, which number may be increased (except where otherwise provided by our Board in creating such series) or decreased (but
not below the number of shares thereof then outstanding) from time to time by resolution of our Board;
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(b)
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The rate and manner of payment of dividends payable on shares of such series, including the dividend
rate, date of declaration and payment, whether dividends shall be cumulative, and the conditions upon which and the date from which
such dividends shall be cumulative;
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(c)
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Whether shares of such series shall be redeemable, the time or times when, and the price or prices
at which, shares of such series shall be redeemable, the redemption price, the terms and conditions of redemption, and the sinking
fund provisions, if any, for the purchase or redemption of such shares;
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(d)
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The amount payable on shares of such series and the rights of holders of such shares in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company;
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(e)
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The rights, if any, of the holders of shares of such series to convert such shares into, or exchange
such shares for, shares of common stock, other securities, or shares of any other class or series of preferred stock and the terms
and conditions of such conversion or exchange;
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(f)
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The voting rights, if any, and whether full or limited, of the shares of such series, which may include no voting rights, one
vote per share, or such higher or lower number of votes per share as may be designated by our Board; and
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(g)
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The preemptive or preferential rights, if any, of the holders of shares of such series to subscribe
for, purchase, receive, or otherwise acquire any part of any new or additional issue of stock of any class, whether now or hereafter
authorized, or of any bonds, debentures, notes, or any of our other securities, whether or not convertible into shares of our common
stock.
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All shares of preferred
stock offered hereby will, when issued, be fully paid and nonassessable, including shares of preferred stock issued upon the exercise
of preferred stock warrants or subscription rights, if any.
Although our Board
has no intention at the present time of doing so, it could authorize the issuance of a series of preferred stock that could, depending
on the terms of such series, impede the completion of a merger, tender offer or other takeover attempt.
Anti-Takeover Effects of Certain Provisions of our Certificate
of Incorporation, Bylaws and the DGCL
Certain provisions
of our Certificate of Incorporation and our Amended and Restated Bylaws, or the Bylaws, which are summarized in the following paragraphs,
may have the effect of discouraging potential acquisition proposals or tender offers or delaying or preventing a change in control,
including changes a stockholder might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholders
to replace or remove our management. In particular, our Certificate of Incorporation and Bylaws and Delaware law, as applicable,
among other things:
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provide our Board with the ability to alter our Bylaws without stockholder approval;
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place limitations on the removal of directors; and
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provide that vacancies on our Board may be filled by a majority of directors in office, although less than a quorum.
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These provisions are
expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking
to acquire control of our company to first negotiate with our Board. These provisions may delay or prevent someone from acquiring
or merging with us, which may cause the market price of our common stock to decline.
Blank Check Preferred.
Our Board is authorized to create and issue from time to time, without stockholder approval, up to an aggregate of 100,000,000
shares of preferred stock in one or more series and to establish the number of shares of any series of preferred stock and to fix
the designations, powers, preferences and rights of the shares of each series and any qualifications, limitations or restrictions
of the shares of each series.
The authority to designate
preferred stock may be used to issue a series of preferred stock, or rights to acquire preferred stock, that could dilute the interest
of, or impair the voting power of, holders of the common stock or could also be used as a method of determining, delaying or preventing
a change of control.
Advance Notice
Bylaws. The Bylaws contain an advance notice procedure for stockholder proposals to be brought before any meeting of stockholders,
including proposed nominations of persons for election to our Board. Stockholders at any meeting will only be able to consider
proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of our Board or
by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and
who has given the Company’s corporate secretary timely written notice, in proper form, of the stockholder’s intention
to bring that business before the meeting. Although our Bylaws do not give our Board the power to approve or disapprove of stockholder
nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting, our Bylaws may
have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed or may discourage
or deter a potential acquiror from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting
to obtain control of the Company.
Choice of Forum.
The Bylaws provide that, unless our Board consents to an alternative forum, the Court of Chancery in the State of Delaware will
be the sole and exclusive forum for: (i) any derivative action or proceeding brought by or on our behalf; (ii) any direct action
asserting a claim against us or any of our directors or officers pursuant to any of the provisions of the DGCL, our Certificate
of Incorporation or the Bylaws; (iii) any action asserting a claim of breach of fiduciary duties owed by any of our directors,
officers or other employees to our stockholders; or (iv) any action asserting a violation of Delaware decisional law relating to
our internal affairs. This provision does not apply to (a) actions in which the Court of Chancery in the State of Delaware concludes
that an indispensable party is not subject to the jurisdiction of Delaware courts, or (b) actions in which a federal court has
assumed exclusive jurisdiction to a proceeding. This choice of forum provision is not intended to apply to any actions brought
under the Securities Act or the Exchange Act. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits
brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the
exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other
claim for which the federal courts have exclusive jurisdiction. However, the Bylaws do not relieve us of our duties to comply with
federal securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance
with these laws, rules and regulations. The Bylaws also provide that any person or entity purchasing or otherwise acquiring any
interest in shares of our capital stock will be deemed to have notice of and consented to this choice of forum provision.
This choice of forum
provision in the Bylaws may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for
disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors,
officers and other employees. In addition, stockholders who do bring a claim in the Court of Chancery in the State of Delaware
could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. Furthermore,
the enforceability of similar choice of forum provisions in other companies’ governing documents has been challenged in legal
proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable.
Interested Stockholder
Transactions. We are subject to Section 203 of the DGCL, which prohibits “business combinations” between a publicly-held
Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who is a beneficial
owner of 15% or more of a Delaware corporation’s voting stock for a three-year period following the date that such stockholder
became an interested stockholder, unless: (i) the transaction is approved by the board of directors before the date the interested
stockholder attained that status; (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction
commenced; or (iii) on or after the date of the transaction, the transaction is approved by the board of directors and authorized
at a meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder. In general, the DGCL defines a business combination to include the following:
(a) any merger or consolidation involving the corporation and the interested stockholder; (b) any sale, transfer, pledge or other
disposition of 10% or more of the assets of the corporation involving the interested stockholder; (c) subject to certain exceptions,
any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
(d) any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class
or series of the corporation beneficially owned by the interested stockholder; or (e) the receipt by the interested stockholder
of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
Warrants
As of December 31,
2019, warrants to purchase 57,556,369 shares of common stock with a weighted-average exercise price of $3.13 per share were outstanding.
All of our outstanding warrants are currently exercisable, except for certain series C warrants to purchase up to an aggregate
of 6,305,334 shares of Common Stock issued on July 2, 2019, or the Series C Warrants, which are exercisable only to the extent
and in proportion to a holder of the Series C Warrants exercising series B warrants to purchase shares of Common Stock issued on
July 2, 2019. Further, the other outstanding warrants are currently exercisable, except to the extent that certain of them may
be subject to a blocker provision, which restricts the exercise of a warrant if, as a result of such exercise, the warrant holder,
together with its affiliates and any other person whose beneficial ownership of common stock would be aggregated with the warrant
holder’s for purposes of Section 13(d) of the Exchange Act, would beneficially own in excess of 4.99%, 9.99%, 19.99% or 19.9%
of our then issued and outstanding shares of common stock (including the shares of common stock issuable upon such exercise), as
such percentage ownership is determined in accordance with the terms of such warrant. All of our outstanding warrants contain provisions
for the adjustment of the exercise price in the event of stock dividends, stock splits or similar transactions. In addition, certain
of the warrants contain a “cashless exercise” feature that allows the holders thereof to exercise the warrants without
a cash payment to us under certain circumstances.
Transfer Agent and Registrar
The Transfer Agent
and Registrar for our common stock is Philadelphia Stock Transfer, Inc., 2320 Haverford Road, Suite 230, Ardmore, PA 19003.
DESCRIPTION OF DEBT SECURITIES
We may issue debt
securities from time to time, in one or more series, as either senior or subordinated debt or as senior or subordinated convertible
debt. While the terms we have summarized below will apply generally to any debt securities that we may offer under this prospectus,
we will describe the particular terms of any debt securities that we may offer in more detail in the applicable prospectus supplement.
The terms of any debt securities offered under a prospectus supplement may differ from the terms described below. Unless the context
requires otherwise, whenever we refer to the indenture, we also are referring to any supplemental indentures that specify the terms
of a particular series of debt securities.
We will issue the
debt securities under the indenture that we will enter into with the trustee named in the indenture. The indenture will be qualified
under the Trust Indenture Act of 1939, as amended, or the Trust Indenture Act. We have filed the form of indenture as an exhibit
to the registration statement of which this prospectus is a part, and supplemental indentures and forms of debt securities containing
the terms of the debt securities being offered will be filed as exhibits to the registration statement of which this prospectus
is a part or will be incorporated by reference from reports that we file with the SEC.
The following summary
of material provisions of the debt securities and the indenture is subject to, and qualified in its entirety by reference to, all
of the provisions of the indenture applicable to a particular series of debt securities. We urge you to read the applicable prospectus
supplements and any related free writing prospectuses we authorize for use in connection with a specific offering of debt securities,
as well as the complete indenture that contains the terms of the debt securities.
General Matters
The indenture does
not limit the amount of debt securities that we may issue. It provides that we may issue debt securities up to the principal amount
that we may authorize and in any currency or currency unit that we may designate. Except for the limitations on consolidation,
merger and sale of all or substantially all of our assets contained in the indenture, the terms of the indenture do not contain
any covenants or other provisions designed to give holders of any debt securities protection against changes in our operations
or financial condition or transactions involving us.
We may issue the debt
securities issued under the indenture as “discount securities”, which means they may be sold at a discount below their
stated principal amount. These debt securities, as well as other debt securities that are not issued at a discount, may be issued
with “original issue discount”, or OID, for U.S. federal income tax purposes because of interest payment and other
characteristics or terms of the debt securities. Material U.S. federal income tax considerations applicable to debt securities
issued with OID will be described in more detail in the applicable prospectus supplement.
We will describe in
the applicable prospectus supplement the terms of the series of debt securities being offered, including:
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the title of the series of debt securities;
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any limit upon the aggregate principal amount that may be issued;
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the maturity date or dates;
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the form of the debt securities of the series;
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the applicability of any guarantees;
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whether or not the debt securities will be secured or unsecured, and the terms of any secured debt;
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whether the debt securities rank as senior debt, senior subordinated debt, subordinated debt or any combination thereof, and
the terms of any subordination;
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if the price (expressed as a percentage of the aggregate principal amount thereof) at which the
debt securities will be issued is a price other than the principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof, or if applicable, the portion of the principal amount of such
debt securities that is convertible into another security or the method by which any such portion shall be determined;
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the interest rate or rates, which may be fixed or variable, or the method for determining the rate
and the date interest will begin to accrue, the dates interest will be payable and the regular record dates for interest payment
dates or the method for determining such dates;
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our right, if any, to defer payment of interest and the maximum length of any such deferral period;
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if applicable, the date or dates after which, or the period or periods during which, and the price
or prices at which, we may, at our option, redeem the series of debt securities pursuant to any optional or provisional redemption
provisions and the terms of those redemption provisions;
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the date or dates, if any, on which, and the price or prices at which we are obligated, pursuant
to any mandatory sinking fund or analogous fund provisions or otherwise, to redeem, or at the holder’s option to purchase,
the series of debt securities and the currency or currency unit in which the debt securities are payable;
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the denominations in which we will issue the series of debt securities, if other than denominations of $1,000 and any integral
multiple thereof;
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any and all terms, if applicable, relating to any auction or remarketing of the debt securities
of that series and any security for our obligations with respect to such debt securities and any other terms which may be advisable
in connection with the marketing of debt securities of that series;
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whether the debt securities of the series shall be issued in whole or in part in the form of a
global security or securities; the terms and conditions, if any, upon which such global security or securities may be exchanged
in whole or in part for other individual securities, and the depositary for such global security or securities;
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if applicable, the provisions relating to conversion or exchange of any debt securities of the
series and the terms and conditions upon which such debt securities will be so convertible or exchangeable, including the conversion
or exchange price, as applicable, or how it will be calculated and may be adjusted, any mandatory or optional (at our option or
at the holders’ option) conversion or exchange features, the applicable conversion or exchange period and the manner of settlement
for any conversion or exchange;
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if other than the full principal amount thereof, the portion of the principal amount of debt securities of the series which
shall be payable upon declaration of acceleration of the maturity thereof;
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additions to or changes in the covenants applicable to the particular debt securities being issued, including, among others,
the consolidation, merger or sale covenant;
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additions to or changes in the events of default with respect to the securities and any change in
the right of the trustee or the holders to declare the principal, premium, if any, and interest, if any, with respect to such securities
to be due and payable;
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additions to or changes in or deletions of the provisions relating to covenant defeasance and legal defeasance;
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additions to or changes in the provisions relating to satisfaction and discharge of the indenture;
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additions to or changes in the provisions relating to the modification of the indenture both with and without the consent of
the holders of the debt securities issued under the indenture;
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the currency of payment of the debt securities if other than U.S. dollars and the manner of determining
the equivalent amount in U.S. dollars;
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whether interest will be payable in cash or additional debt securities at our or the holders’
option and the terms and conditions upon which the election may be made;
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the terms and conditions, if any, upon which we will pay amounts in addition to the stated interest, premium, if any, and principal
amounts of the debt securities of the series to any holder that is not a “United States person” for federal tax purposes;
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any restrictions on transfer, sale or assignment of the debt securities of the series; and
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any other specific terms, preferences, rights or limitations of, or restrictions on, the debt securities, any other additions
or changes in the provisions of the indenture, and any terms that may be required by us or advisable under applicable laws or regulations.
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Conversion or Exchange Rights
We will set forth
in the applicable prospectus supplement the terms on which a series of debt securities may be convertible into or exchangeable
for our common stock or our other securities. We will include provisions as to settlement upon conversion or exchange and whether
conversion or exchange is mandatory, at the option of the holder or at our option. We may include provisions pursuant to which
the number of shares of our common stock or our other securities that the holders of the series of debt securities receive would
be subject to adjustment.
Consolidation, Merger or Sale
Unless we provide
otherwise in the prospectus supplement applicable to a particular series of debt securities, the indenture will not contain any
covenant that restricts our ability to merge or consolidate, or sell, convey, transfer or otherwise dispose of our assets as an
entirety or substantially as an entirety. However, any successor to or acquirer of such assets (other than a subsidiary of ours)
must assume all of our obligations under the indenture or the debt securities, as appropriate.
Events of Default under the Indenture
Unless we provide
otherwise in the prospectus supplement applicable to a particular series of debt securities, the following are events of default
under the indenture with respect to any series of debt securities that we may issue:
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if we fail to pay any installment of interest on any series of debt securities, as and when the
same shall become due and payable, and such default continues for a period of 90 days; provided, however, that a valid extension
of an interest payment period by us in accordance with the terms of any indenture supplemental thereto shall not constitute a default
in the payment of interest for this purpose;
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if we fail to pay the principal of, or premium, if any, on any series of debt securities as and
when the same shall become due and payable whether at maturity, upon redemption, by declaration or otherwise, or in any payment
required by any sinking or analogous fund established with respect to such series; provided, however, that a valid extension of
the maturity of such debt securities in accordance with the terms of any indenture supplemental thereto shall not constitute a
default in the payment of principal or premium, if any;
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if we fail to observe or perform any other covenant or agreement contained in the debt securities
or the indenture, other than a covenant specifically relating to another series of debt securities, and our failure continues for
a period of 90 days after we receive written notice of such failure, requiring the same to be remedied and stating that such is
a notice of default thereunder, from the trustee or holders of at least 25% of the aggregate principal amount of the outstanding
debt securities of the applicable series; and
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if specified events of bankruptcy, insolvency or reorganization occur.
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If an event of default
with respect to debt securities of any series occurs and is continuing, other than certain specified events of bankruptcy, insolvency
or reorganization, the trustee or the holders of at least 25% of the aggregate principal amount of the outstanding debt securities
of that series, by notice to us in writing, and to the trustee if notice is given by such holders, may declare the unpaid principal,
premium, if any, and accrued interest, if any, of such series of debt securities immediately due and payable. If certain specified
events of bankruptcy, insolvency or reorganization occur with respect to us, the principal amount and accrued interest, if any,
of each issue of debt securities then outstanding shall be due and payable without any notice or other action on the part of the
trustee or any holder.
The holders of a majority
of the principal amount of the outstanding debt securities of an affected series may waive any default or event of default with
respect to the series and its consequences, except defaults or events of default regarding payment of principal, premium, if any,
or interest, unless we have cured the default or event of default in accordance with the indenture. Any waiver shall cure the default
or event of default.
Subject to the terms
of the indenture, if an event of default under an indenture shall occur and be continuing, the trustee will be under no obligation
to exercise any of its rights or powers under such indenture at the request or direction of any of the holders of the applicable
series of debt securities, unless such holders have offered the trustee reasonable indemnity. The holders of a majority of the
principal amount of the outstanding debt securities of any series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee, with respect
to the debt securities of that series, provided that:
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the direction so given by the holder is not in conflict with any law or the applicable indenture; and
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subject to its duties under the Trust Indenture Act, the trustee need not take any action that might
involve it in personal liability or might be unduly prejudicial to the holders not involved in the proceeding.
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A holder of the debt
securities of any series will have the right to institute a proceeding under the indenture or to appoint a receiver or trustee,
or to seek other remedies, only if:
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the holder has given written notice to the trustee of a continuing event of default with respect to that series;
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the holders of at least 25% of the aggregate principal amount of the outstanding debt securities of that series have made a
written request;
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such holders have offered to the trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred
by the trustee in compliance with the request; and
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the trustee does not institute the proceeding, and does not receive from the holders of a majority of the aggregate principal
amount of the outstanding debt securities of that series other conflicting directions within 90 days after the notice, request
and offer.
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These limitations
do not apply to a suit instituted by a holder of debt securities if we default in the payment of the principal of, or the premium,
if any, or interest on, the debt securities.
We will periodically
file statements with the trustee regarding our compliance with specified covenants in the indenture.
Modification of Indenture; Waiver
Unless we provide
otherwise in the prospectus supplement applicable to a particular series of debt securities, we and the trustee may change an indenture
without the consent of any holders with respect to specific matters, including, but not limited to, the following:
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to cure any ambiguity, defect or inconsistency in the indenture or in the debt securities of any series;
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to comply with the provisions described above under “—Consolidation, Merger or Sale”;
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to provide for uncertificated debt securities in addition to or in place of certificated debt securities;
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to add to our covenants, restrictions, conditions or provisions such new covenants, restrictions,
conditions or provisions for the benefit of the holders of all or any series of debt securities, to make the occurrence, or the
occurrence and the continuance, of a default in any such additional covenants, restrictions, conditions or provisions an event
of default or to surrender any right or power conferred upon us in the indenture;
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to add to, delete from or revise the conditions, limitations and restrictions on the authorized amount, terms or purposes of
issue, authentication and delivery of debt securities, as set forth in the indenture;
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to make any change that does not adversely affect the interests of any holder of debt securities of any series in any material
respect;
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to provide for the issuance of, and to establish the form and terms and conditions of, the debt
securities of any series as provided above under “—General Matters”, to establish the form of any certifications
required to be furnished pursuant to the terms of the indenture or any series of debt securities, or to add to the rights of the
holders of any series of debt securities;
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to evidence and provide for the acceptance of appointment under any indenture by a successor trustee; or
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to comply with any requirements of the SEC in connection with the qualification of any indenture under the Trust Indenture
Act.
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In addition, under
the indenture, the rights of holders of a series of debt securities may be changed by us and the trustee with the written consent
of the holders of at least a majority of the aggregate principal amount of the outstanding debt securities of each series that
is affected. However, unless we provide otherwise in the prospectus supplement applicable to a particular series of debt securities,
we and the trustee may make the following changes only with the consent of each holder of any outstanding debt securities affected:
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extending the fixed maturity of any debt securities of any series;
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reducing the principal amount, reducing the rate of or extending the time of payment of interest,
or reducing any premium payable upon the redemption of any series of debt securities; or
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reducing the percentage of debt securities, the holders of which are required to consent to any amendment, supplement, modification
or waiver.
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Discharge
The indenture provides
that we can elect to be discharged from our obligations with respect to one or more series of debt securities, except for specified
obligations, including, but not limited to, the following obligations to:
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register the transfer or exchange of debt securities of the series;
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replace stolen, lost or mutilated debt securities of the series;
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pay principal of and premium and interest on any debt securities of the series;
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maintain paying agencies;
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hold monies for payment in trust;
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recover excess money held by the trustee;
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compensate and indemnify the trustee; and
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appoint any successor trustee.
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In order to exercise
our rights to be discharged, we must deposit with the trustee money or government obligations sufficient to pay all the principal
of, and any premium, if any, and interest on, the debt securities of the series on the dates payments are due.
Form, Exchange and Transfer
We will issue the
debt securities of each series only in fully registered form without coupons and, unless we provide otherwise in the applicable
prospectus supplement, in denominations of $1,000 and any integral multiple thereof. The indenture provides that we may issue debt
securities of a series in temporary or permanent global form and as book-entry securities that will be deposited with, or on behalf
of, The Depository Trust Company, New York, New York, known as DTC, or another depositary named by us and identified in the applicable
prospectus supplement with respect to that series. To the extent the debt securities of a series are issued in global form and
as book-entry, a description of terms relating to any book-entry securities will be set forth in the applicable prospectus supplement.
At the option of the
holder, subject to the terms of the indenture and the limitations applicable to global securities described in the applicable prospectus
supplement, the holder of the debt securities of any series can exchange the debt securities for other debt securities of the same
series, in any authorized denomination and of like tenor and aggregate principal amount.
Subject to the terms
of the indenture and the limitations applicable to global securities set forth in the applicable prospectus supplement, holders
of the debt securities may present the debt securities for exchange or for registration of transfer, duly endorsed or with the
form of transfer endorsed thereon duly executed if so required by us or the security registrar, at the office of the security registrar
or at the office of any transfer agent designated by us for this purpose. Unless otherwise provided in the debt securities that
the holder presents for transfer or exchange, we will impose no service charge for any registration of transfer or exchange, but
we may require payment of any taxes or other governmental charges.
We will name in the
applicable prospectus supplement the security registrar, and any transfer agent in addition to the security registrar, that we
initially designate for any debt securities. We may at any time designate additional transfer agents or rescind the designation
of any transfer agent or approve a change in the office through which any transfer agent acts, except that we will be required
to maintain a transfer agent in each place of payment for the debt securities of each series.
If we elect to redeem
the debt securities of any series, we will not be required to:
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issue, register the transfer of, or exchange any debt securities of that series during a period
beginning at the opening of business 15 days before the date of mailing of a notice of redemption of any debt securities that may
be selected for redemption and ending at the close of business on the date of the mailing; or
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register the transfer of or exchange any debt securities so selected for redemption, in whole or in part, except for the unredeemed
portion of any debt securities we are redeeming in part.
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Information Concerning the Trustee
The trustee, other
than during the occurrence and continuance of an event of default under an indenture, undertakes to perform only those duties as
are specifically set forth in the applicable indenture. Upon an event of default under an indenture, the trustee must use the same
degree of care as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the
trustee is under no obligation to exercise any of the powers given to it by the indenture at the request of any holder of debt
securities unless it is offered reasonable security and indemnity against the costs, expenses and liabilities that it might incur.
Payment and Paying Agents
Unless we otherwise
indicate in the applicable prospectus supplement, we will make payment of the interest on any debt securities on any interest payment
date to the person in whose name the debt securities, or one or more predecessor securities, are registered at the close of business
on the regular record date for the interest.
We will pay principal
of and any premium and interest on the debt securities of a particular series at the office of the paying agents designated by
us, except that, unless we otherwise indicate in the applicable prospectus supplement, we will make interest payments by check
that we will mail to the holder or by wire transfer to certain holders. Unless we otherwise indicate in the applicable prospectus
supplement, we will designate the corporate trust office of the trustee as our sole paying agent for payments with respect to debt
securities of each series. We will name in the applicable prospectus supplement any other paying agents that we initially designate
for the debt securities of a particular series. We will maintain a paying agent in each place of payment for the debt securities
of a particular series.
All money we pay to
a paying agent or the trustee for the payment of the principal of, or any premium or interest on, any debt securities that remains
unclaimed at the end of two years after such principal, premium or interest has become due and payable will be repaid to us, and
the holder of the debt security thereafter may look only to us for payment thereof.
Governing Law
The indenture and
the debt securities, and any claim, controversy or dispute arising under or related to the indenture or the debt securities, will
be governed by and construed in accordance with the laws of the State of New York, except to the extent that the Trust Indenture
Act is applicable.
Oaktree Loan and Security Agreement
On November 7, 2018,
we and certain of our domestic subsidiaries, or the Guarantors, entered into a Term Loan Agreement, or the Initial Loan Agreement,
with certain funds and accounts managed by Oaktree Capital Management, L.P., or collectively, the Lenders, and Oaktree Fund Administration,
LLC, as administrative and collateral agent, or the Agent, for an initial term loan of $100.0 million, or the Initial Loan, and
a second tranche of $50.0 million, subject to the achievement of certain commercial and financial milestones between August 7,
2019 and November 7, 2019, and the satisfaction of certain customary conditions, or the Original Delayed Draw Term Loan. The Initial
Loan was funded on November 7, 2018. On May 3, 2019, we, the Guarantors, the Lenders and the Agent entered into an amendment to
the Initial Loan Agreement, or the Amendment and, together with the Initial Loan Agreement, and the second amendment to the Initial
Loan Agreement entered into on December 6, 2019, the Loan Agreement. Under the Amendment, the Lenders funded $20.0 million of the
Original Delayed Draw Term Loan on May 3, 2019. The Loan Agreement contains customary affirmative and restrictive covenants and
representations and warranties, including financial reporting obligations, financial milestones and limitations on dividends, indebtedness,
liens, negative pledges, certain restricted payments, subsidiary distributions, investments, fundamental transactions, dispositions
of assets and transactions with affiliates. In addition, we have committed to meet minimum capital-raising and debt repayment requirements
in the first quarter of 2020, and to pursue debt restructuring arrangements and the sale of one or more non-core assets in the
first half of 2020. The Loan Agreement also contains other customary provisions, such as expense reimbursement and confidentiality
obligations, as well as indemnification rights for the benefit of the Lenders.
Scilex Notes
On September 7, 2018,
Scilex Pharmaceuticals Inc., or Scilex Pharma, issued and sold senior secured notes due 2026 in an aggregate principal amount of
$224,000,000, or the Scilex Notes, for an aggregate purchase price of $140,000,000, or the Scilex Offering. In connection with
the Scilex Offering, we also entered into an indenture, as amended, or the Scilex Indenture, governing the Scilex Notes with U.S.
Bank National Association, a national banking association, as trustee, or the Trustee, and collateral agent, and Scilex Pharma.
Pursuant to the Scilex Indenture, we agreed to irrevocably and unconditionally guarantee, on a senior unsecured basis, the punctual
performance and payment when due of all obligations of Scilex Pharma under the Scilex Indenture.
The aggregate principal
amount due under the Scilex Notes shall be increased by $28,000,000 on February 15, 2022 if actual cumulative net sales of ZTlido®
(lidocaine topical system) 1.8% from the issue date of the Scilex Notes through December 31, 2021 do not equal or exceed 95% of
a predetermined target sales threshold for such period. If actual cumulative net sales of ZTlido® (lidocaine topical system)
1.8% for the period from October 1, 2022 through September 30, 2023 do not equal or exceed 80% of a predetermined target sales
threshold for such period, the aggregate principal amount shall also be increased on November 15, 2023 by an amount equal to an
amount to be determined by reference to the amount of such deficiency. The final maturity date of the Scilex Notes will be August
15, 2026. The Scilex Notes may be redeemed in whole at any time upon 30 days’ written notice at Scilex Pharma's option prior
to August 15, 2026 at a redemption price equal to 100% of the then-outstanding principal amount of the Scilex Notes. In addition,
upon a change of control of Scilex Pharma (as defined in the Scilex Indenture), each holder of a Scilex Note shall have the right
to require Scilex Pharma to repurchase all or any part of such holder’s Scilex Note at a repurchase price in cash equal to
101% of the then-outstanding principal amount thereof.
The Scilex Indenture
governing the Scilex Notes contains customary events of default with respect to the Scilex Notes (including a failure to make any
payment of principal on the Scilex Notes when due and payable), and, upon certain events of default occurring and continuing, the
Trustee by notice to Scilex Pharma, or the holders of at least 25% in principal amount of the outstanding Scilex Notes by notice
to Scilex Pharma and the Trustee, may (subject to the provisions of the Scilex Indenture) declare 100% of the then-outstanding
principal amount of the Scilex Notes to be due and payable. Upon such a declaration of acceleration, such principal will be due
and payable immediately. In the case of certain events, including bankruptcy, insolvency or reorganization involving us or Scilex
Pharma, the Scilex Notes will automatically become due and payable.
Pursuant to the Scilex
Indenture, we and Scilex Pharma must also comply with certain covenants with respect to the commercialization of ZTlido®
(lidocaine topical system) 1.8%, as well as customary additional affirmative covenants, such as furnishing financial statements
to the holders of the Scilex Notes, minimum cash requirements and net sales reports, and negative covenants, including limitations
on the following: the incurrence of debt, the payment of dividends, the repurchase of shares and, under certain conditions, making
certain other restricted payments, the prepayment, redemption or repurchase of subordinated debt, a merger, amalgamation or consolidation
involving Scilex Pharma, engaging in certain transactions with affiliates, and the making of investments other than those permitted
by the Scilex Indenture.
For purposes of the
Scilex Indenture and the Loan Agreement, an event of default includes, among other things, (i) a failure to pay any amounts when
due under such agreements, (ii) a breach or other failure to comply with the covenants (including financial, notice and reporting
covenants) under such agreements, (iii) a failure to make any payment on, or other event triggering an acceleration under, other
of our material indebtedness, which would include, with respect to the Loan Agreement, a failure or acceleration under the Scilex
Indenture, and with respect to the Scilex Indenture, a failure or acceleration under the Loan Agreement, and (iv) the occurrence
of certain insolvency or bankruptcy events (both voluntary and involuntary) involving us or certain of our subsidiaries.
DESCRIPTION OF WARRANTS
The following description,
together with the additional information we may include in the applicable prospectus supplements and free writing prospectuses
we have authorized for use in connection with a specific offering, summarizes the material terms and provisions of the warrants
that we may offer under this prospectus, which may consist of warrants to purchase common stock, preferred stock or debt securities
and may be issued in one or more series.
Warrants may be issued
independently or together with common stock, preferred stock or debt securities offered by any prospectus supplement, and may be
attached to or separate from those securities. While the terms we have summarized below will apply generally to any warrants that
we may offer under this prospectus, we will describe the particular terms of any series of warrants that we may offer in more detail
in the applicable prospectus supplement and any applicable free writing prospectus we authorize for use in connection with the
specific offering. The terms of any warrants offered under a prospectus supplement may differ from the terms described below.
We will file as exhibits
to the registration statement of which this prospectus is a part, or will incorporate by reference from reports that we file with
the SEC, the form of warrant agreement, if any, including a form of warrant certificate, that describes the terms of the particular
series of warrants we are offering. The following summaries of material provisions of the warrants and the warrant agreements are
subject to, and qualified in their entirety by reference to, all the provisions of the warrant agreement and warrant certificate
applicable to the particular series of warrants that we may offer under this prospectus. We urge you to read the applicable prospectus
supplements related to the particular series of warrants that we may offer under this prospectus, as well as any related free writing
prospectuses we have authorized for use in connection with a specific offering, and the complete warrant agreements and warrant
certificates that contain the terms of the warrants.
General Matters
We will describe in
the applicable prospectus supplement the terms relating to a series of warrants being offered, including:
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the title of such securities;
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the offering price or prices and aggregate number of warrants offered;
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the currency or currencies for which the warrants may be purchased;
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if applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued
with each such security or each principal amount of such security;
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if applicable, the date on and after which the warrants and the related securities will be separately transferable;
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if applicable, the minimum or maximum amount of such warrants which may be exercised at any one time;
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in the case of warrants to purchase debt securities, the principal amount of debt securities purchasable
upon exercise of one warrant and the price at which, and currency in which, this principal amount of debt securities may be purchased
upon such exercise;
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in the case of warrants to purchase common stock or preferred stock, the number
of shares of common stock or preferred stock, as the case may be, purchasable upon the exercise of one warrant and the price at
which, and the currency in which, these shares may be purchased upon such exercise;
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the effect of any merger, consolidation, sale or other disposition of our business on the warrant agreements and the warrants;
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the terms of any rights to redeem or call the warrants;
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the terms of any rights to force the exercise of the warrants;
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any provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the warrants;
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the dates on which the right to exercise the warrants will commence and expire;
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the manner in which the warrant agreements and warrants may be modified;
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a discussion of any material or special United States federal income tax consequences of holding or exercising the warrants;
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the terms of the securities issuable upon exercise of the warrants; and
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any other specific terms, preferences, rights or limitations of or restrictions on the warrants.
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Before exercising
their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise,
including:
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in the case of warrants to purchase debt securities, the right to receive payments of principal of, or premium, if any, or
interest on, the debt securities purchasable upon exercise or to enforce covenants in the applicable indenture; or
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in the case of warrants to purchase common stock or preferred stock, the right to receive dividends, if any, or, payments upon
our liquidation, dissolution or winding up or to exercise voting rights, if any.
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Exercise of Warrants
Each warrant will
entitle the holder to purchase the securities that we specify in the applicable prospectus supplement at the exercise price that
we describe in the applicable prospectus supplement. Unless we otherwise specify in the applicable prospectus supplement, holders
of the warrants may exercise the warrants at any time up to the specified time on the expiration date that we set forth in the
applicable prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void.
Unless we otherwise
specify in the applicable prospectus supplement, holders of the warrants may exercise the warrants by delivering the warrant certificate
representing the warrants to be exercised together with specified information, and paying the required amount to the warrant agent
in immediately available funds, as provided in the applicable prospectus supplement. We will set forth on the reverse side of the
warrant certificate and in the applicable prospectus supplement the information that the holder of the warrant will be required
to deliver to the warrant agent in connection with the exercise of the warrant.
Upon receipt of the
required payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant
agent or any other office indicated in the applicable prospectus supplement, we will issue and deliver the securities purchasable
upon such exercise. If fewer than all of the warrants represented by the warrant certificate are exercised, then we will issue
a new warrant certificate for the remaining amount of warrants. If we so indicate in the applicable prospectus supplement, holders
of the warrants may surrender securities as all or part of the exercise price for warrants.
Governing Law
Unless we provide
otherwise in the applicable prospectus supplement, the warrants and warrant agreements, and any claim, controversy or dispute arising
under or related to the warrants or warrant agreements, will be governed by and construed in accordance with the laws of the State
of New York.
Enforceability of Rights By Holders of Warrants
Each warrant agent
will act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship of agency
or trust with any holder of any warrant. A single bank or trust company may act as warrant agent for more than one issue of warrants.
A warrant agent will have no duty or responsibility in case of any default by us under the applicable warrant agreement or warrant,
including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder
of a warrant may, without the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal
action its right to exercise, and receive the securities purchasable upon exercise of, its warrants.
Warrant Agreement Will Not Be Qualified Under Trust Indenture
Act
No warrant agreement
will be qualified as an indenture, and no warrant agent will be required to qualify as a trustee, under the Trust Indenture Act.
Therefore, holders of warrants issued under a warrant agreement will not have the protection of the Trust Indenture Act with respect
to their warrants.
Calculation Agent
Calculations relating
to warrants may be made by a calculation agent, an institution that we appoint as our agent for this purpose. The prospectus supplement
for a particular warrant will name the institution that we have appointed to act as the calculation agent for that warrant as of
the original issue date for that warrant. We may appoint a different institution to serve as calculation agent from time to time
after the original issue date without the consent or notification of the holders.
The calculation agent’s
determination of any amount of money payable or securities deliverable with respect to a warrant will be final and binding in the
absence of manifest error.
Outstanding Warrants
As of December 31,
2019, warrants to purchase 57,556,369 shares of common stock with a weighted-average exercise price of $3.13 per share were outstanding.
All of our outstanding warrants are currently exercisable, except for certain series C warrants to purchase up to an aggregate
of 6,305,334 shares of Common Stock issued on July 2, 2019, or the Series C Warrants, which are exercisable only to the extent
and in proportion to a holder of the Series C Warrants exercising series B warrants to purchase shares of Common Stock issued on
July 2, 2019. Further, the other outstanding warrants are currently exercisable, except to the extent that certain of them may
be subject to a blocker provision, which restricts the exercise of a warrant if, as a result of such exercise, the warrant holder,
together with its affiliates and any other person whose beneficial ownership of common stock would be aggregated with the warrant
holder’s for purposes of Section 13(d) of the Exchange Act, would beneficially own in excess of 4.99%, 9.99%, 19.99% or 19.9%
of our then issued and outstanding shares of common stock (including the shares of common stock issuable upon such exercise), as
such percentage ownership is determined in accordance with the terms of such warrant. All of our outstanding warrants contain provisions
for the adjustment of the exercise price in the event of stock dividends, stock splits or similar transactions. In addition, certain
of the warrants contain a “cashless exercise” feature that allows the holders thereof to exercise the warrants without
a cash payment to us under certain circumstances.
DESCRIPTION OF UNITS
We may issue units
consisting of any combination of the other types of securities offered under this prospectus in one or more series. We may evidence
each series of units by unit certificates that we will issue under a separate agreement. We may enter into unit agreements with
a unit agent. Each unit agent will be a bank or trust company that we select. We will indicate the name and address of the unit
agent in the applicable prospectus supplement relating to a particular series of units.
The following description,
together with the additional information included in the applicable prospectus supplement, summarizes the general features of the
units that we may offer under this prospectus. You should read any prospectus supplement and any free writing prospectus we authorize
for use in connection with a specific offering of units, as well as the complete unit agreements that contain the terms of the
units. Specific unit agreements will contain additional important terms and provisions and we will file as an exhibit to the registration
statement of which this prospectus is a part, or will incorporate by reference from another report that we file with the SEC, the
form of each unit agreement relating to units offered under this prospectus.
If we offer any units,
certain terms of that series of units will be described in the applicable prospectus supplement, including, without limitation,
the following, as applicable:
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the title of the series of units;
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identification and description of the separate constituent securities comprising the units;
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the price or prices at which the units will be issued;
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the date, if any, on and after which the constituent securities comprising the units will be separately transferable;
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a discussion of certain U.S. federal income tax considerations applicable to the units; and
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any other terms of the units and their constituent securities.
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LEGAL OWNERSHIP OF SECURITIES
We can issue securities
in registered form or in the form of one or more global securities. We describe global securities in greater detail below. We refer
to those persons who have securities registered in their own names on the books that we or any applicable trustee or depositary
maintain for this purpose as the “holders” of those securities. These persons are the legal holders of the securities.
We refer to those persons who, indirectly through others, own beneficial interests in securities that are not registered in their
own names, as “indirect holders” of those securities. As we discuss below, indirect holders are not legal holders,
and investors in securities issued in book-entry form or in street name will be indirect holders.
Book-Entry Holders
We may issue securities
in book-entry form only, as we will specify in the applicable prospectus supplement. This means securities may be represented by
one or more global securities registered in the name of a financial institution that holds them as depositary on behalf of other
financial institutions that participate in the depositary’s book-entry system. These participating institutions, which are
referred to as participants, in turn, hold beneficial interests in the securities on behalf of themselves or their customers.
Only the person in
whose name a security is registered is recognized as the holder of that security. Global securities will be registered in the name
of the depositary or its participants. Consequently, for global securities, we will recognize only the depositary as the holder
of the securities, and we will make all payments on the securities to the depositary. The depositary passes along the payments
it receives to its participants, which in turn pass the payments along to their customers who are the beneficial owners. The depositary
and its participants do so under agreements they have made with one another or with their customers; they are not obligated to
do so under the terms of the securities.
As a result, investors
in a global security will not own securities directly. Instead, they will own beneficial interests in a global security, through
a bank, broker or other financial institution that participates in the depositary’s book-entry system or holds an interest
through a participant. As long as the securities are issued in global form, investors will be indirect holders, and not legal holders,
of the securities.
Street Name Holders
We may terminate a
global security in certain situations, as described under “—Special Situations When a Global Security Will Be Terminated”,
or issue securities that are not issued in global form. In these cases, investors may choose to hold their securities in their
own names or in “street name”. Securities held by an investor in street name would be registered in the name of a bank,
broker or other financial institution that the investor chooses, and the investor would hold only a beneficial interest in those
securities through an account he or she maintains at that institution.
For securities held
in street name, we or any applicable trustee or depositary will recognize only the intermediary banks, brokers and other financial
institutions in whose names the securities are registered as the holders of those securities, and we or any such trustee or depositary
will make all payments on those securities to them. These institutions pass along the payments they receive to their customers
who are the beneficial owners, but only because they agree to do so in their customer agreements or because they are legally required
to do so. Investors who hold securities in street name will be indirect holders, not holders, of those securities.
Legal Holders
Our obligations, as
well as the obligations of any applicable trustee or third party employed by us or a trustee, run only to the legal holders of
the securities. We do not have obligations to investors who hold beneficial interests in global securities, in street name or by
any other indirect means. This will be the case whether an investor chooses to be an indirect holder of a security or has no choice
because we are issuing the securities only in global form.
For example, once
we make a payment or give a notice to the legal holder, we have no further responsibility for the payment or notice even if that
legal holder is required, under agreements with its participants or customers or by law, to pass the payment or notice along to
the indirect holders but does not do so. Similarly, we may want to obtain the approval of the holders to amend an indenture, to
relieve us of the consequences of a default or of our obligation to comply with a particular provision of an indenture, or for
other purposes. In such an event, we would seek approval only from the legal holders, and not the indirect holders, of the securities.
Whether and how the legal holders contact the indirect holders is up to the legal holders.
Special Considerations for Indirect Holders
If you hold securities
through a bank, broker or other financial institution, either in book-entry form because the securities are represented by one
or more global securities or in street name, you should check with your own institution to find out:
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how it handles securities payments and notices;
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whether it imposes fees or charges;
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how it would handle a request for the holders’ consent, if ever required;
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whether and how you can instruct it to send you securities registered in your own name so you can be a holder, if that is permitted
in the future;
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how it would exercise rights under the securities if there were a default or other event triggering the need for holders to
act to protect their interests; and
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if the securities are in book-entry form, how the depositary’s rules and procedures will affect these matters.
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Global Securities
A global security
is a security that represents one or any other number of individual securities held by a depositary. Generally, all securities
represented by the same global securities will have the same terms.
Each security issued
in book-entry form will be represented by a global security that we issue to, deposit with and register in the name of a financial
institution or its nominee that we select. The financial institution that we select for this purpose is called the depositary.
Unless we specify otherwise in the applicable prospectus supplement, The Depository Trust Company, New York, New York, known as
DTC, will be the depositary for all securities issued in book-entry form.
A global security
may not be transferred to or registered in the name of anyone other than the depositary, its nominee or a successor depositary,
unless special termination situations arise. We describe those situations below under “—Special Situations When a Global
Security Will Be Terminated”. As a result of these arrangements, the depositary, or its nominee, will be the sole registered
owner and legal holder of all securities represented by a global security, and investors will be permitted to own only beneficial
interests in a global security. Beneficial interests must be held by means of an account with a broker, bank or other financial
institution that in turn has an account with the depositary or with another institution that does. Thus, an investor whose security
is represented by a global security will not be a legal holder of the security, but only an indirect holder of a beneficial interest
in the global security.
If the prospectus
supplement for a particular security indicates that the security will be issued as a global security, then the security will be
represented by a global security at all times unless and until the global security is terminated. If termination occurs, we may
issue the securities through another book-entry clearing system or decide that the securities may no longer be held through any
book-entry clearing system.
Special Considerations for Global Securities
As an indirect holder,
an investor’s rights relating to a global security will be governed by the account rules of the investor’s financial
institution and of the depositary, as well as general laws relating to securities transfers. We do not recognize an indirect holder
as a holder of securities and instead deal only with the depositary that holds the global security.
If securities are
issued only as global securities, an investor should be aware of the following:
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an investor cannot cause the securities to be registered in his or her name, and cannot obtain non-global certificates for
his or her interest in the securities, except in the special situations described below;
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an investor will be an indirect holder and must look to his or her own bank or broker for payments on the securities and protection
of his or her legal rights relating to the securities, as described above;
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an investor may not be able to sell interests in the securities to some insurance companies and to other institutions that
are required by law to own their securities in non-book-entry form;
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an investor may not be able to pledge his or her interest in the global security in circumstances
where certificates representing the securities must be delivered to the lender or other beneficiary of the pledge in order for
the pledge to be effective;
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the depositary’s policies, which may change from time to time, will govern payments, transfers, exchanges and other matters
relating to an investor’s interest in the global security;
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we and any applicable trustee have no responsibility for any aspect of the depositary’s actions
or for its records of ownership interests in the global security, nor will we or any applicable trustee supervise the depositary
in any way;
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the depositary may, and we understand that DTC will, require that those who purchase and sell interests in the global security
within its book-entry system use immediately available funds, and your broker or bank may require you to do the same; and
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financial institutions that participate in the depositary’s book-entry system, and through which an investor holds its
interest in the global security, may also have their own policies affecting payments, notices and other matters relating to the
securities.
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There may be more
than one financial intermediary in the chain of ownership for an investor. We do not monitor and are not responsible for the actions
of any of those intermediaries.
Special Situations When a Global Security Will Be Terminated
In a few special situations
described below, a global security will terminate and interests in it will be exchanged for physical certificates representing
those interests. After that exchange, the choice of whether to hold securities directly or in street name will be up to the investor.
Investors must consult their own banks or brokers to find out how to have their interests in securities transferred to their own
names, so that they will be direct holders. The rights of holders and street name investors are described above.
A global security
will terminate when the following special situations occur:
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if the depositary notifies us that it is unwilling, unable or no longer qualified to continue as depositary for that global
security and we do not appoint another institution to act as depositary within 90 days;
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if we notify any applicable trustee that we wish to terminate that global security; or
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if an event of default has occurred with regard to securities represented by that global security and has not been cured or
waived.
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The applicable prospectus
supplement may also list additional situations for terminating a global security that would apply only to the particular series
of securities covered by the prospectus supplement. When a global security terminates, the depositary, and neither we nor any applicable
trustee, is responsible for deciding the names of the institutions that will be the initial direct holders.
PLAN OF DISTRIBUTION
We may sell the securities
from time to time pursuant to underwritten public offerings, direct sales to the public, “at the market” offerings,
negotiated transactions, block trades or a combination of these methods. We may sell the securities to or through underwriters
or dealers, through agents, or directly to one or more purchasers. We may distribute securities from time to time in one or more
transactions:
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at a fixed price or prices, which may be changed;
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at market prices prevailing at the time of sale;
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at prices related to such prevailing market prices; or
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A prospectus supplement
or supplements (and any related free writing prospectus that we may have authorized for use in connection with a specific offering)
will describe the terms of the offering of the securities, including, to the extent applicable:
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the name or names of the underwriters, if any;
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the purchase price of the securities or other consideration therefor, and the proceeds, if any, we will receive from the sale;
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any over-allotment options under which underwriters may purchase additional securities from us;
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any agency fees or underwriting discounts and other items constituting agents’ or underwriters’ compensation;
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any public offering price;
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any discounts or concessions allowed or re-allowed or paid to dealers; and
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any securities exchange or market on which the securities may be listed.
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Only underwriters
named in the prospectus supplement will be underwriters of the securities offered by the prospectus supplement.
If underwriters are
used in the sale, they will acquire the securities for their own account and may resell the securities from time to time in one
or more transactions at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the
underwriters to purchase the securities will be subject to the conditions set forth in the applicable underwriting agreement. We
may offer the securities to the public through underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Subject to certain conditions, the underwriters will be obligated to purchase all of the securities offered
by the prospectus supplement, other than securities covered by any over-allotment option. Any public offering price and any discounts
or concessions allowed or re-allowed or paid to dealers may change from time to time. We may use underwriters with whom we have
a material relationship. We will describe in the prospectus supplement, naming the underwriter, the nature of any such relationship.
We may sell securities
directly or through agents we designate from time to time. We will name any agent involved in the offering and sale of securities
and we will describe any commissions we will pay the agent in the prospectus supplement. Unless the prospectus supplement states
otherwise, our agent will act on a best-efforts basis for the period of its appointment.
We may authorize agents
or underwriters to solicit offers by certain types of institutional investors to purchase securities from us at the public offering
price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified
date in the future. We will describe the conditions to these contracts and the commissions we must pay for solicitation of these
contracts in the prospectus supplement.
We may provide agents
and underwriters with indemnification against civil liabilities, including liabilities under the Securities Act, or contribution
with respect to payments that the agents or underwriters may make with respect to these liabilities. Agents and underwriters may
engage in transactions with, or perform services for, us in the ordinary course of business.
All securities we
may offer, other than common stock, will be new issues of securities with no established trading market. Any underwriters may make
a market in these securities, but will not be obligated to do so and may discontinue any market making at any time without notice.
We cannot guarantee the liquidity of the trading markets for any securities.
Any underwriter may
engage in over-allotment, stabilizing transactions, short-covering transactions and penalty bids in accordance with Regulation
M under the Exchange Act. Over-allotment involves sales in excess of the offering size, which create a short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum
price. Syndicate-covering or other short-covering transactions involve purchases of the securities, either through exercise of
the over-allotment option or in the open market after the distribution is completed, to cover short positions. Penalty bids permit
the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased
in a stabilizing or covering transaction to cover short positions. Those activities may cause the price of the securities to be
higher than it would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time.
Any underwriters that
are qualified market makers on the Nasdaq Capital Market may engage in passive market making transactions in the common stock on
the Nasdaq Capital Market in accordance with Regulation M under the Exchange Act, during the business day prior to the pricing
of the offering, before the commencement of offers or sales of the common stock. Passive market makers must comply with applicable
volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its
bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive
market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded.
Passive market making may stabilize the market price of the securities at a level above that which might otherwise prevail in the
open market and, if commenced, may be discontinued at any time.
In compliance with
guidelines of the Financial Industry Regulatory Authority, or FINRA, the maximum consideration or discount to be received by any
FINRA member or independent broker dealer may not exceed 8% of the aggregate amount of the securities offered pursuant to this
prospectus and the applicable prospectus supplement.
LEGAL MATTERS
Unless otherwise indicated
in the applicable prospectus supplement, the validity of the securities offered by this prospectus, and any supplement thereto,
will be passed upon for us by Paul Hastings LLP, Palo Alto, California.
EXPERTS
The
financial statements and financial statement schedule incorporated in this prospectus by reference from the Company's Annual Report on Form 10-K, and the effectiveness of Sorrento Therapeutics, Inc.'s internal control over financial reporting have
been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports, which
are incorporated herein by reference (which reports (1) express an unqualified opinion on the consolidated financial statements
and financial statement schedule and include an explanatory paragraph referring to the Company's ability to continue as a going
concern) and (2) express an unqualified opinion on the effectiveness of the Company's internal control over financial reporting).
Such financial statements and financial statement schedule have been so incorporated in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are a reporting
company and file annual, quarterly and current reports, proxy statements and other information with the SEC. We have filed with
the SEC a registration statement on Form S-3 under the Securities Act with respect to the securities being offered under this prospectus.
This prospectus does not contain all of the information set forth in the registration statement and the exhibits to the registration
statement. For further information with respect to us and the securities being offered under this prospectus, we refer you to the
registration statement and the exhibits and schedules filed as a part of the registration statement. The SEC maintains an Internet
site that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC, including Sorrento Therapeutics, Inc. The SEC’s Internet site can be found at http://www.sec.gov.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us
to “incorporate by reference” information into this prospectus, which means that we can disclose important information
to you by referring you to another document filed separately with the SEC. The documents incorporated by reference into this prospectus
contain important information that you should read about us.
The following documents
are incorporated by reference into this prospectus:
We also incorporate
by reference any future filings (other than current reports furnished under Item 2.02 or Item 7.01 of Form 8-K and exhibits filed
on such form that are related to such items unless such Form 8-K expressly provides to the contrary) made with the SEC pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, including those made after the date of the initial filing of the registration
statement of which this prospectus is a part and prior to effectiveness of such registration statement, until we file a post-effective
amendment that indicates the termination of the offering of the securities made by this prospectus and such future filings and
will become a part of this prospectus from the respective dates that such documents are filed with the SEC. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof or of the related prospectus supplement to the extent that a statement contained herein or in any other subsequently
filed document which is also incorporated or deemed to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of
this prospectus.
Documents incorporated
by reference are available from us, without charge. You may obtain documents incorporated by reference in this prospectus by requesting
them in writing or by telephone at the following address:
Sorrento Therapeutics, Inc.
4955 Directors Place
San Diego, CA 92121
Attn: Corporate Secretary
Phone: (858) 203-4100
Up to $250,000,000 of Shares of Common
Stock
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PROSPECTUS SUPPLEMENT
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April 27, 2020
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