Item 1.03. Bankruptcy or Receivership.
Ongoing Litigation
As previously disclosed, Sorrento
Therapeutics, Inc. (“Sorrento” or the “Company”) had been engaged in arbitration before the American Arbitration
Association against NantPharma, LLC (“NantPharma”) relating to alleged breaches of the May 14, 2015 Stock Sale and Purchase
Agreement entered into between the Company and NantPharma related to the development of the cancer drug Cynviloq™ (the “Cynviloq
Arbitration”). The Cynviloq Arbitration is one of several pending actions filed by the Company against Dr. Soon-Shiong and entities
he controls. As previously disclosed, in April 2019, the Company filed an action in the Los Angeles Superior Court (the “Court”)
derivatively on behalf of Immunotherapy NANTibody LLC (“NANTibody”) against NantCell, Inc. (“NantCell”) and Patrick
Soon-Shiong, among others, related to several breaches of the June 11, 2015 Limited Liability Company Agreement for NANTibody entered
into between the Company and NantCell (the “Derivative Action”). The suit alleges breaches of fiduciary duties and seeks,
among other things, a declaration that the Assignment Agreement entered into on July 2, 2017, between NantPharma and NANTibody is void
and an equitable unwinding of the Assignment Agreement. The suit calls for the restoration of $90.05 million to the NANTibody capital
account, thereby restoring the Company’s equity method investment in NANTibody to its invested amount as of June 30, 2017 of $40.0
million. The parties are currently engaged in discovery in the Derivative Action, with a jury trial likely in 2023. In 2020, the Company
additionally filed a legal action against Patrick Soon-Shiong in the Court, asserting claims for fraudulent inducement and common law
fraud alleging that, among other things, Dr. Soon-Shiong acquired the drug Cynviloq for the purpose of halting its progression to the
market.
As previously disclosed, the
Company had also been engaged in arbitration before the American Arbitration Association against NantCell and NANTibody relating to alleged
breaches of the April 21, 2015 Exclusive License Agreement entered into between the Company and NantCell and the June 11, 2015 Exclusive
License Agreement entered into between the Company and NANTibody (the “NantCell/NANTibody Arbitration”).
On December 2, 2022, the arbitrator
in the NantCell/NANTibody Arbitration issued an award granting contractual damages and pre-award interest in the amounts of $156,829,562
to NantCell and $16,681,521 to NANTibody, exclusive of post-award, prejudgment interest, which will accrue at 9% per annum (the “Nant
Award”). On December 20, 2022, the arbitrator in the Cynviloq Arbitration issued an award granting contractual damages of $125 million
to the Company, reflecting the value of lost milestone payments for the approval of Cynviloq for the treatment of breast and lung cancers.
On February 7, 2023, the Court
confirmed the Nant Award and issued a 70-day stay of enforcement of the judgment beyond $50 million. Following such confirmation, the
Company believed that NantCell and NANTibody, in an attempt to satisfy the unstayed $50 million portion of the Nant Award, would imminently
take steps to levy the Company’s assets, which would cause significant disruption and harm to the Company’s business, including
its ability to continue developing life-saving and cutting-edge drugs.
Chapter 11 Filing
To protect the Company’s
business and maximize its value, on February 13, 2023, the Company and its wholly-owned direct subsidiary, Scintilla Pharmaceuticals,
Inc. (together with the Company, the “Debtors”), commenced voluntary proceedings under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Debtors
have requested that the Chapter 11 proceedings be jointly administered under the caption In re Sorrento Therapeutics, Inc., et al.
(the “Chapter 11 Cases”). The Debtors continue to operate their business in accordance with the applicable provisions of the
Bankruptcy Code and orders of the Bankruptcy Court. The Debtors intend to seek approval of a variety of “first day” motions
containing customary relief intended to assure the Debtors’ ability to continue their ordinary course operations during the Chapter
11 Cases.
Additional information about
the Chapter 11 Cases, including access to documents filed with the Bankruptcy Court, is available online at https://cases.stretto.com/sorrento,
a website administered by Stretto, a third-party bankruptcy claims and noticing agent. The information on that website is not incorporated
by reference into, and does not constitute part of, this Current Report on Form 8-K.
