Sorrento Therapeutics, Inc. (Form: 10-Q, Received: 05/14/2010 17:16:22)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2010

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

For the transition period from to

Commission file number 000-52228

SORRENTO THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

33-0344842

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification Number)

6042 Cornerstone Ct. West,

Suite B

San Diego, CA 92121

(Address of Principal Executive Offices)

(858) 210-3700

(Registrant’s Telephone Number, Including Area Code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated file or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x .

The number of shares of the issuer’s common stock, par value $0.0001 per share, outstanding as of April 30, 2010 was 225,084,127.

SORRENTO THERAPEUTICS, INC.

INDEX


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Condensed Balance Sheets as of March 31, 2010 (unaudited) and December 31, 2009 (audited)	1

	Unaudited Condensed Statements of Operations for the Three Months Ended March 31, 2010 and 2009 and January 25, 2006 (Inception) through March 31, 2010	2

	Unaudited Condensed Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 and January 25, 2006 (Inception) through March 31, 2010	3

	Notes to Unaudited Condensed Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12

Item 4.	Controls and Procedures	12

PART II. OTHER INFORMATION		12

Item 1.	Legal Proceedings	12

Item 1A.	Risk Factors	12

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

Item 3.	Defaults Upon Senior Securities	20

Item 4.	Reserved and Removed	20

Item 5.	Other Information	20

Item 6.	Exhibits	20

Signatures		21

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements.

SORRENTO THERAPEUTICS, INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED BALANCE SHEETS


	March 31, 2010			December 31, 2009
	(unaudited)			(audited)
ASSETS
Current Assets
Cash and cash equivalents	$	2,681,937		$	3,429,906
Prepaid expenses and other		24,750			27,863

Total current assets		2,706,687			3,457,769
Property and equipment, net		108,791			73,305
Other assets		22,727			22,727

Total assets	$	2,838,205		$	3,553,801

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	129,738		$	285,882
Accounts payable-related parties		1,765			30,535
Accrued payroll and related		32,284			17,982
Accrued expenses		20,877			18,671

Total current liabilities		184,664			353,070
Commitments and Contingencies

Stockholders’ Equity
Preferred stock, $0.0001 par value; 100,000,000 shares authorized and no shares issued and outstanding		—			—
Common stock, $0.0001 par value; 500,000,000 shares authorized and 225,084,127 shares issued and outstanding at March 31, 2010 and December 31, 2009		22,508			22,508
Additional paid-in capital		4,291,038			4,238,367
Stockholder note receivable		—			(30	)
Deficit accumulated during the development stage		(1,660,005	)		(1,060,114	)

Total stockholders’ equity		2,653,541			3,200,731

Total liabilities and stockholders’ equity	$	2,838,205		$	3,553,801

See accompanying notes to condensed financial statements.

SORRENTO THERAPEUTICS, INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)


	Three Months Ended March 31,						Period from January 25, 2006 (Inception) through March 31, 2010
	2010			2009
Revenues	$	—		$	—		$	—
Expenses:
Research and development		316,532			—			726,703
General and administrative		284,862			—			946,662

Loss from Operations		(601,394	)		—			(1,673,365	)
Interest income		1,503			—			13,360

Net Loss	$	(599,891	)	$	—		$	(1,660,005	)

Net Loss per share – basic and diluted	$	(0.00	)	$	(0.00	)

Weighted average number of shares during the period – basic and diluted		219,373,369			102,118,537

See accompanying notes to condensed financial statements.

SORRENTO THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(A DEVELOPMENT STAGE COMPANY)

(Unaudited)


	Three Months Ended March 31,					Period from January 25, 2006 (Inception) through March 31, 2010
	2010			2009
Operating Activities
Net loss	$	(599,891	)	$	—	$	(1,660,005	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization		4,164			—		6,919
Stock-based compensation and issuance of warrants		52,671			—		107,195
Changes in operating assets and liabilities:
Prepaid expenses and other		3,113			—		(27,327	)
Accounts payable		(156,144	)		—		105,114
Accounts payable-related parties		(28,770	)		—		(28,770	)
Accrued expenses and other liabilities		16,508			—		53,161

Net cash used for operating activities		(708,349	)		—		(1,443,713	)

Investing Activities
Purchases of property and equipment		(39,650	)		—		(85,175	)
Cash acquired in connection with Merger		—			—		104,860

Net cash (used for) provided by investing activities		(39,650	)		—		19,685

Financing Activities
Proceeds from issuance of common stock, net of issuance costs		30					4,105,965

Net cash provided by financing activities		30			—		4,105,965

Net Change in Cash		(747,969	)		—		2,681,937
Cash at Beginning of Period		3,429,906			—		—

Cash at End of Period	$	2,681,937		$	—	$	2,681,937

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Income taxes	$	800		$	—	$	2,400

Non Cash financing Activities:

In March 2009, Sorrento Therapeutics, Inc., or the Company, issued 764,530 shares of common stock for a $30 note receivable, which was collected in March 2010. In March 2010, the Company purchased certain equipment from a company owned by Dr. Henry Ji, the Company’s Chief Scientific Officer, and a director and stockholder of the Company, for $1,765.

See accompanying notes to condensed financial statements.

SORRENTO THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2010

(Unaudited)

1. Reverse Merger Transaction and Accounting

Reverse Merger Transaction

On September 21, 2009, QuikByte Software, Inc., a Colorado corporation and shell company, or QuikByte, acquired Sorrento Therapeutics, Inc., a privately held Delaware corporation, 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, at an exchange ratio of 25.48433-for-1, into an aggregate of 169,375,807 shares of QuikByte common stock and STI became a wholly owned subsidiary of QuikByte. The holders of QuikByte’s common stock as of immediately prior to the Merger held an aggregate of 55,708,320 shares of QuikByte’s common stock, which consisted of: (i) 11,073,946 shares of common stock outstanding as of September 17, 2009, and (ii) 44,634,374 shares of common stock issued on September 18, 2009 in connection with a $2.0 million private placement. The accompanying financial statements share and per share information has been retroactively adjusted to reflect the exchange ratio in the Merger.

STI was originally incorporated as San Diego Antibody Company in California in 2006 and was 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, STI 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.”, or the Company.

Reverse Merger Accounting

Immediately following the consummation of the Merger, the: (i) former security holders of STI common stock had an approximate 75% voting interest in QuikByte and the QuikByte stockholders retained an approximate 25% voting interest, (ii) former executive management team of STI remained as the only continuing executive management team for the Company, and (iii) Company’s ongoing operations consist solely of the ongoing operations of STI. Based primarily on these factors, the Merger was accounted for as a reverse merger and a recapitalization in accordance with generally accepted accounting principles in the United States, or GAAP. As a result, these financial statements reflect the: (i) historical results of STI prior to the Merger, (ii) combined results of the Company following the Merger, and (iii) acquired assets and liabilities at their historical cost, which approximates their fair value at the Merger date. In connection with the Merger, the Company received cash of $104,860, other current assets of $20,150 and assumed accounts payable of $24,624.

2. Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations and Basis of Presentation

The Company is a biopharmaceutical company focused on applying and commercializing its proprietary technology platform for the discovery and development of human therapeutic antibodies for the treatment of a variety of disease conditions, including cancer, inflammation, metabolic and infectious diseases. The Company’s objective is to construct a human antibody library and, either independently or through one or more partnerships with pharmaceutical or biopharmaceutical organizations, to identify drug development candidates derived from this library. See Note 7 regarding the Company’s recent completion of an extensive library of full-length, fully human monoclonal antibodies.

As of March 31, 2010, the Company has devoted substantially all of its efforts to raising capital, product development and building infrastructure, and has not realized revenues from its planned principal operations. Accordingly, the Company is considered to be in the development stage.

The accompanying interim condensed financial statements have been prepared by the Company, without audit, in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information and footnotes necessary for a fair statement of its financial position, results of operations and cash flows in accordance with GAAP. The balance sheet at December 31, 2009 is derived from the audited balance sheet at that date which is not presented herein.

In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, which are only normal and recurring, necessary for a fair statement of results of operations, financial position and cash flows. These condensed financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2009. Operating results for interim periods are not necessarily indicative of operating results for the Company’s 2010 fiscal year.

SORRENTO THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2010

(Unaudited)

Liquidity

The accompanying financial statements have been prepared on the going concern basis, which assumes that the Company will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed financial statements, the Company has incurred operating losses since its inception in 2006, and as of March 31, 2010, had an accumulated deficit of $1,660,005. The Company has working capital of $2,522,023 and management believes the Company has the ability to meet all obligations due over the course of the next twelve months. The Company has not generated any revenue since inception.

Use of Estimates

In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods presented. Actual results may differ from these estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments, which include cash and cash equivalents, prepaid expenses, other current assets, accounts payable and accrued expenses, are generally considered to be representative of their respective fair values at March 31, 2010 due to the short-term nature of these financial instruments.

Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the assets. Such lives vary from three to five years. Leasehold improvements are amortized over the lesser of the life of the lease or the life of the asset.

Stock-based Compensation

The Company accounts for stock-based compensation in accordance with the Financial Accounting Standards Board, or the FASB, Accounting Standards Codification Topic 718, which establishes accounting for equity instruments exchanged for employee services. Under such provisions, stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense, under the straight-line method, over the employee’s requisite service period (generally the vesting period of the equity grant).

The Company accounts for equity instruments, including restricted stock or stock options, issued to non-employees in accordance with authoritative guidance for equity based payments to non-employees. Stock options issued to non-employees are accounted for at their estimated fair value determined using the Black-Scholes option-pricing model. The fair value of options granted to non-employees is re-measured as they vest, and the resulting increase in value, if any, is recognized as expense during the remaining period the related services are rendered. Restricted stock issued to non-employees is accounted for at their estimated fair value as they vest.

Loss per Common Share

Basic loss per common share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding, including the effect of common share equivalents. Potentially dilutive common share equivalents include stock options and warrants. No dilutive effect was calculated for the three months ended March 31, 2010 as the Company reported a net loss in the period and the effect would have been anti-dilutive. The Company had outstanding common share equivalents of 7,178,101 and zero at March 31, 2010 and 2009, respectively.

SORRENTO THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2010

(Unaudited)

Recent Accounting Pronouncements

In January 2010, the FASB issued Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) — Improving Disclosures about Fair Value Measurements, or ASU No. 2010-06. ASU No. 2010-06 requires an entity to disclose separately the amounts of significant transfers in and out of Level 1 and 2 fair value measurements, and describe the reasons for the transfers. Also, it requires additional disclosure regarding purchases, sales, issuances and settlements of Level 3 measurements. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the additional disclosure of Level 3 measurements, which is effective for fiscal years beginning after December 15, 2010. The adoption of ASU No. 2010-06 did not have a material impact on the Company’s results of operations or financial condition for the quarter ended March 31, 2010.

Note 3. License Agreement with The Scripps Research Institute

In January 2010, the Company entered into a license agreement, or the TSRI License, with The Scripps Research Institute, or TSRI. Under the TSRI License, TSRI granted the Company an exclusive, worldwide license to certain TSRI patent rights and materials based on quorum sensing for the prevention and treatment of Staphylococcus aureus (“Staph”) infections, including Methicillin-resistant Staph. In consideration for the license, the Company: (i) issued TSRI a warrant for the purchase of common stock, (ii) agreed to pay TSRI a certain annual royalty commencing in the first year after certain patent filing milestones are achieved, (iii) agreed to pay a royalty on any sales of licensed products by the Company or its affiliates and a royalty for any revenues generated by the Company through its sublicense of patent rights and materials licensed from TSRI under the TSRI License. The TSRI License requires the Company to indemnify TSRI for certain breaches of the agreement and other matters customary for license agreements. The parties may terminate the TSRI License at any time by mutual agreement. In addition, the Company may terminate the TSRI License by giving 60 days notice to TSRI and TSRI may terminate the TSRI License immediately in the event of certain breaches of the agreement by the Company or upon the Company’s failure to undertake certain activities in furtherance of commercial development goals. Unless terminated earlier by either or both parties, the term of the TSRI License will continue until the final expiration of all claims covered by the patent rights licensed under the agreement.

The fair value of the warrants to purchase Company common stock, issued in connection with the TSRI License, of $5,001 was determined using the Black-Scholes valuation model with the following weighted-average assumptions: Risk-free interest rate of 3.73%, no dividend yield, expected term of 10 years, and volatility of 102%. Such fair value has been included in general and administrative expenses for the three months ended March 31, 2010 and for the period from inception (January 25, 2006) through March 31, 2010.

Note 4. Stock-based Compensation Expense

Stock Incentive Plans

2009 Equity Incentive Plan

In February 2009, the Company’s Board of Directors approved the 2009 Equity Incentive Plan, or the EIP, under which 10,000,000 shares of common stock were reserved for issuance to employees, non-employee directors and consultants of the Company. The EIP provided for the grant of incentive stock options, non-incentive stock options, restricted stock awards and stock bonus awards to eligible recipients. In March 2009, the Company issued 7,403,861 restricted common stock awards to certain consultants for aggregate gross proceeds of $291. The restricted shares vest monthly over four years and the Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination of the applicable consultants. Any unvested shares immediately vest in the event of a merger, sale, or other transaction resulting in a change in control of the Company.

At March 31, 2010, 5,553,101 shares were unvested and subject to repurchase by the Company. The Company has the right of first refusal to purchase any proposed disposition of shares issued under the EIP. As a result of the Merger, no further shares are available for grant under the EIP.

2009 Non-Employee Director Grants

In September 2009, prior to the adoption of the 2009 Stock Incentive Plan (discussed below), the Company’s Board of Directors approved the reservation and issuance of 200,000 nonstatutory stock options to the Company’s non-employee directors. The exercise price and fair market value of the options granted was $0.0448 and $0.2781 per share, respectively. The outstanding options vest on the one year anniversary of the vesting commencement date, provided that each option recipient provides continuous service through the applicable vesting date. Once vested, such options are exercisable on the two year anniversary of the grant date and are generally exercisable for up to 10 years from the grant date.

SORRENTO THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2010

(Unaudited)

2009 Stock Incentive Plan

In October 2009, the Company’s stockholders approved the 2009 Stock Incentive Plan, or the Stock Plan, which became effective in December 2009 and under which 12,000,000 shares of the Company’s common stock are reserved for issuance to employees, non-employee directors and consultants of the Company. In addition, this amount will be automatically increased annually on the first day of each fiscal year, beginning in 2011, by the lesser of: (i) 1% of the aggregate number of shares of the Company’s common stock outstanding on the last day of the immediately preceding fiscal year, (ii) 1,200,000 shares, or (iii) an amount approved by the administrator of the Stock Plan. The Stock Plan provides for the grant of incentive stock options, non-incentive stock options, stock appreciation rights, restricted stock awards, unrestricted stock awards, restricted stock unit awards and performance awards to eligible recipients. Recipients of stock options shall be eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. The maximum term of options granted under the Stock Plan is ten years. Employee option grants generally vest 25% on each anniversary of the original vesting date over four years. The vesting schedules for grants to non-employee directors and consultants are determined by the Company’s Compensation Committee and generally vest either monthly over 12 months or vest 25% on each anniversary of the original vesting date over four years. Stock options are generally not exercisable prior to the applicable vesting date, unless otherwise accelerated under the terms of the applicable stock plan agreement. Unvested shares of the Company’s common stock issued in connection with an early exercise however, may be repurchased by the Company upon termination of the optionee’s service with the Company.

During the three months ended March 31, 2010, the Company’s Board of Directors awarded a total 1,305,000 options to certain employees and consultants and 10,695,000 shares were available for grant under the Stock Plan.

The Company uses the Black-Scholes valuation model to calculate the fair value of stock options. Stock based compensation expense is recognized over the vesting period using the straight-line method. The fair value of employee stock options was estimated at the grant date using the following assumptions:


Dividend yield		—
Volatility		102%
Risk-free interest rate		2.48%
Expected life of options		5.6 years

The weighted average grant date fair value per share of employee stock options granted during the three months ended March 31, 2010 was $0.055. There were no options granted during the three months ended March 31, 2009.

The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. Due to the Company’s limited historical data, the estimated volatility incorporates the historical and implied volatility of comparable companies whose share prices are publicly available. The risk-free interest rate assumption was based on the United States Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The weighted average expected life of options was estimated using the average of the contractual term and the weighted average vesting term of the options.

The total employee stock-based compensation recorded as operating expenses was $9,024, $0 and $20,150 for the three months ended March 31, 2010 and 2009 and for the period from inception (January 25, 2006) through March 31, 2010, respectively.

The Company records equity instruments issued to non-employees as expense at their fair value over the related service period as determined in accordance with the authoritative guidance and periodically revalues the equity instruments as they vest. Stock-based compensation expense related to non-employee consultants recorded as operating expenses was $38,646, $0 and $82,044 for the three months ended March 31, 2010 and 2009 and for the period from inception (January 25, 2006) through March 31, 2010, respectively.

As of March 31, 2010, unrecognized compensation cost related to the options was approximately $104,563, which will be recognized over one to four years.

SORRENTO THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

MARCH 31, 2010

(Unaudited)

Note 5. Related Party Transactions

In February 2010, the Company purchased certain equipment from a company owned by Dr. Henry Ji, the Company’s Chief Scientific Officer, and a director and stockholder of the Company, for $1,765. As of March 31, 2010, such amount is included in the accompanying condensed financial statements as accounts payable-related parties.

Note 6. Income Taxes

The Company maintains deferred tax assets that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. These deferred tax assets include net operating loss carryforwards, research credits and capitalized research and development. The net deferred tax asset has been fully offset by a valuation allowance because of the Company’s history of losses. Utilization of operating losses and credits may be subject to substantial annual limitation due to ownership change provisions of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

Note 7. Subsequent Event

In April 2010, the Company completed the construction of an extensive library of full-length, fully human monoclonal antibodies, or mAbs. See further discussion in the Overview section below.

Item 2.

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

This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, in connection with the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements Such forward-looking statements include statements about our expectations, beliefs or intentions regarding our potential product offerings, business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made and are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” or “will,” and similar expressions or variations. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission, or the SEC. Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Overview

We are a development-stage biopharmaceutical company focused on applying and commercializing our proprietary technology platform for the discovery and development of human therapeutic antibodies for the treatment of a variety of disease conditions, including cancer, inflammation, metabolic and infectious diseases.

In April 2010, we completed the construction of an extensive library of full-length, fully human mAbs. Initial analysis indicates a potential diversity of more than one trillion unique mAbs. We believe this makes our library the largest full-length, fully human antibody library available for drug discovery and development partnerships.

Our proprietary mammalian display system enables the expression and isolation of full-length human antibodies. In contrast, antibody libraries displayed in phage or yeast systems typically generate antibody fragments, which require further configuration into full-length antibodies for therapeutic development. We use fluorescence-activated cell sorting (FACS) to rapidly identify high-affinity antibody candidates from our library for immediate downstream development.

We believe the extensive diversity of our library of complete antibodies increases the likelihood of identifying candidates with optimal biological activity against validated disease targets. Our patented technology for the amplification and enrichment of the immunoglobulin variable domain sequences applies ribonucleic acid (RNA) transcription to ensure high representation of the vast diversity of the immunoglobulin gene repertoire. The library was created using an input of antibody-generating source cells from approximately 600 donors and covers all major classes of immunoglobulins (i.e. IgM, IgG1 – 4, IgA, IgD and IgE).

These libraries have been designed to facilitate the rapid identification and isolation of highly specific, antibody therapeutic product candidates that are fully human and that bind to disease targets appropriate for antibody therapy.

Our objective, either independently or through one or more partnerships with pharmaceutical or biopharmaceutical organizations, is to focus our efforts primarily in the identification and isolation of human antibody drug candidates derived from this library. In the event we are successful in developing and isolating any product candidates, we intend to actively seek partners with experience and expertise in the antibody drug development field in order to engage in any clinical development of these candidates.

The process of developing and commercializing our products requires significant research and development, preclinical testing and clinical trials, manufacturing arrangements as well as regulatory and marketing approvals. These activities, together with our general and administrative expenses, are expected to result in significant operating losses until the commercialization of our products or our partner collaborations generate sufficient revenues to cover our expenses. We expect that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial. Our ability to achieve profitability depends upon our ability to successfully complete the development of our products, obtain required regulatory approvals and successfully manufacture and market our products.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements which are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, related disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, the most critical of which are those related to income taxes and stock-based compensation. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known.

During the quarter ended March 31, 2010, there were no significant changes to the items that we disclosed as our critical accounting policies and estimates in Note 2 to our financial statements for the year ended December 31, 2009 contained in our 2009 Form 10-K, as filed with the SEC.

Results of Operations

The following describes certain line items set forth in our condensed statements of operations.

Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009

Revenue . We had no revenue during the three months ended March 31, 2010 and 2009 as we have not yet developed any product candidates for commercialization or received any licensing or royalty payments.

Research and Development Expenses. Research and development expenses for the three months ended March 31, 2010 and 2009 were $316,532 and $0, respectively. Research and development expenses consist primarily of salaries and personnel related expenses, stock-based compensation expenses, laboratory supplies, consulting costs and other expenses. The increase is attributable to salaries and lab supply costs incurred in connection with research and development activities, which commenced in the second half of 2009. We did not have such activities or costs during the three months ended March 31, 2009. We expect research and development expenses to increase in absolute dollars as we incur incremental expenses associated with continuing expansion of our development programs and efforts to identify and isolate human antibody drug candidates derived from our newly constructed library.

General and Administrative Expenses . General and administrative expenses for the three months ended March 31, 2010 and 2009 were $284,862 and $0, respectively. General and administrative expenses consist primarily of salaries and personnel related expenses for executive, finance and administrative personnel, stock-based compensation expense, professional fees, infrastructure expenses, legal and accounting expenses and other general corporate expenses. The increase is primarily attributable to costs associated with scaling operations, building infrastructure to commence operations and complying with our public reporting obligations, substantially all of which commenced in the second half of 2009. We did not have such activities or costs during the three months ended March 31, 2009. We expect general and administrative expenses to increase in absolute dollars as we incur incremental expenses associated with ongoing operations and compliance with our public reporting obligations.

Interest Income . Interest income for the three months ended March 31, 2010 and 2009 was $1,503 and $0, respectively. This increase is due to interest earned on the cash proceeds from the $4.3 million in total financings received in 2009.

Net Loss . Net loss for the three months ended March 31, 2010 and 2009 was $599,891 and $0, respectively. The increase in net loss is mainly attributable to commencement of operations in the second half of 2009.

Liquidity and Capital Resources

As of March 31, 2010, we had approximately $2.7 million in cash and cash equivalents, attributable primarily to the closing of two private placements of our common stock for aggregate gross proceeds of $4.3 million in 2009.

Cash Flows from Operating Activities . Net cash used for operating activities was $708,349 for the three months ended March 31, 2010 as compared to $0 for the three months ended March 31, 2009. Net cash used in operating activities primarily reflects a net loss of $599,891, a net reduction in accounts payable, accounts payable-related parties and accrued expenses and other liabilities of $168,406, and $56,835 in non-cash activities relating primarily to stock-based compensation expense.

We expect to continue to incur substantial and increasing losses and have negative net cash flows from operating activities as we seek to expand and support our technology portfolio and research and development activities.

Cash Flows from Investing Activities. Net cash used for investing activities was $39,650 for the three months ended March 31, 2010 as compared to $0 for the three months ended March 31, 2009. The net cash used related primarily to equipment acquired for research and development activities.

Cash Flows from Financing Activities . Cash provided by financing activities for the three months ended March 31, 2010 and 2009 was $30 and $0, respectively.

Future Liquidity Needs . From inception through March 31, 2010, we have financed our operations through private equity financing, as we have not generated any revenue from operations to date, and do not expect to generate revenue for several years, if ever. We will need to raise additional capital before we exhaust our current cash resources in order to continue to fund our research and development, including our long-term plans for pre-clinical trials and new product development, as well as to fund operations generally. As and if necessary, we will seek to raise additional funds through various potential sources, such as equity and debt financings, or through corporate collaboration and license agreements. We can give no assurances that we will be able to secure such additional sources of funds to support our operations, or, if such funds are available to us, that such additional financing will be sufficient to meet our needs.

Based on our resources at March 31, 2010, and our current plan of expenditure on research and development programs, we believe that we have sufficient capital to fund our operations for at least 12 months. Our actual cash requirements may vary materially from those now planned, however, because of a number of factors, including the pursuit of development of product candidates, competitive and technical advances, costs of commercializing any potential product candidates, and costs of filing, prosecuting, defending and enforcing any patent claims and any other intellectual property rights. If we are unable to raise additional funds when needed, we may not be able to develop any product candidates, we could be required to delay, scale back or eliminate some or all of our research and development programs and we may need to wind down our operations altogether. Each of these alternatives would have a material adverse effect on our business.

To the extent that we raise additional funds by issuing equity or debt securities, our stockholders may experience additional significant dilution and such financing may involve restrictive covenants. To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or our product candidates, or grant licenses on terms that may not be favorable to us. These things may have a material adverse effect on our business.

Additionally, recent global market and economic conditions have been unprecedented and challenging with tighter credit conditions and recession in most major economies. As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers. These factors have lead to a decrease in spending by businesses and consumers alike, and a corresponding decrease in global infrastructure spending. Continued turbulence in the U.S. and international markets and economies and prolonged declines in business and consumer spending may adversely affect our liquidity and financial condition, including our ability to access the capital markets to meet liquidity needs.

Off-Balance Sheet Arrangements

Since our inception through March 31, 2010, we have not engaged in any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

New Accounting Pronouncements

See the condensed financial statements note 2 “Nature of Operations and Summary of Significant Accounting Policies – Recent Accounting Pronouncements.”

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, as defined by Section 10(f)(1) of Regulation S-K, we are not required to provide the information set forth in this Item.

Item 4.

Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s regulations, rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by Rule 13a-15(b) promulgated by the SEC under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended March 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

To the best of our knowledge, we are not a party to any legal proceedings that, individually or in the aggregate, are deemed to be material to our financial condition or results of operations.

Item 1A.

Risk Factors .

An investment in our company involves a significant level of risk. Before you decide to invest or maintain an interest in our common stock, you should consider carefully the risks described below, together with all of the other information in this Quarterly Report on Form 10-Q. We believe the risks described below are the risks that are material to us as of the date this Quarterly Report on Form 10-Q is initially filed with the SEC. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business. If any of the following risks actually occur, our business, financial condition, results of operations and growth prospects would likely be materially adversely affected. In these circumstances, the trading price of our common stock could decline, and you could lose all or part of your investment.

Risks Related to Our Business

We are a development-stage company subject to all of the risks and uncertainties of a new business, including the risk that we or our partners may never develop or market any products or generate revenues. We are currently unprofitable and cannot assure you that we will ever become or remain profitable.

We are a recently formed development-stage biopharmaceutical company that has only recently begun operations and commenced research and development activity. There is no assurance that our recently completed library of full-length, fully human mAbs will be suitable for research, diagnostic or therapeutic use, or that we will be able to identify and isolate therapeutics product candidates, or develop, market and commercialize these candidates. We do not expect any of our product candidates to be commercially available for a number of years, if at all. Even if we are able to commercialize our product candidates, there is no assurance that these candidates would generate revenues or that any revenues generated would be sufficient for us to become profitable or thereafter maintain profitability. We have not generated any revenues to date, and we do not expect to generate any such revenues for a number of years. Additionally, we have incurred operating losses since our inception and we expect to continue to incur significant operating losses for the foreseeable future. We also expect to continue to incur significant operating expenditures in the foreseeable future as we expand our research and development activities and seek to develop our technologies and product candidates. In the event that our operating losses are greater than anticipated or continue for longer than anticipated, we will need to raise significant additional capital sooner, or in greater amounts, than otherwise anticipated in order to be able to continue development of our technologies and maintain our operations.

We expect that we will require additional financing, and an inability to raise the necessary capital or to do so on acceptable terms would threaten the success of our business.

We believe that our current cash balances and cash equivalents will be sufficient to meet our operating and capital requirements, as currently being conducted, for at least twelve months, and will provide us the financial resources to continue to develop our antibody libraries. However, because of the uncertainties in our business, including the uncertainties discussed in this “Risk Factors” section, we cannot assure you that this will be the case. Our future capital requirements will depend on many factors, including:

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the progress of the development of our core technology and any product candidates;

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the number of product candidates we pursue;

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the time and costs involved in obtaining regulatory approvals;

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the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims;

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our plans to establish sales, marketing and/or manufacturing capabilities;

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our ability to establish, enforce and maintain selected strategic alliances and activities required for product commercialization; and

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our revenues, if any, from successful development and commercialization of any product candidates.

In order to carry out our business plan and implement our strategy, including the continued development of antibody libraries, we anticipate that we will need to obtain additional financing from time to time and may choose to raise additional funds through strategic collaborations, licensing arrangements, public or private equity or debt financing, a bank line of credit, asset sales or other arrangements. We cannot be sure that any additional funding, if needed, will be available on terms favorable to us or at all. Furthermore, any additional equity or equity-related financing may be dilutive to our stockholders, and debt financing, if available, may subject us to restrictive covenants and significant interest costs. If we obtain funding through a strategic collaboration or licensing arrangement, we may be required to relinquish our rights to certain of our technologies, products or marketing territories. In addition, certain investors, including institutional investors, may be unwilling to invest in our securities since we are traded on the Over-the-Counter Bulletin Board, or the OTCBB, and not on a national securities exchange. Our inability to raise capital when needed would harm our business, financial condition and results of operations, and could cause our stock price to decline.

We have a limited operating history upon which to base an investment decision and we may be unable to successfully develop our technology on any product candidates.

We are a development-stage company and have not demonstrated our ability to perform the functions necessary for the successful development or commercialization of the technology we are seeking to develop. The successful development, and any commercialization, of our technology and any product candidates would require us to successfully perform a variety of functions, including:

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developing our technology platform;

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identifying, developing, manufacturing and commercializing product candidates;

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entering into successful licensing and other arrangements with product development partners;

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participating in regulatory approval processes;

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formulating and manufacturing products; and

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conducting sales and marketing activities.

Our operations have been limited to organizing our company and acquiring, developing and securing our proprietary technology. These operations provide a limited basis for you to assess our ability to continue to develop our technology, identify product candidates, develop and commercialize any product candidates we are able to identify and enter into successful collaborative arrangements with other companies, as well as for you to assess the advisability of investing in our securities. Each of these requirements will require substantial time, effort and financial resources.

Our antibody libraries and potential product candidates are in early stages of development.

The U.S. Food and Drug Administration, or the FDA, regulates, among other things, the development, testing, manufacture, safety, efficacy, record-keeping, labeling, storage, approval, advertising, promotion, sale and distribution of biopharmaceutical products. We are in the early stages of developing our antibody libraries and any potential product candidates that we develop will require extensive pre-clinical and clinical testing before they will be approved by the FDA or another regulatory authority in a jurisdiction outside the U.S. We have not yet developed any product candidate; if we were to do so there are a number of requirements that we would be required to satisfy in order to begin conducting pre-clinical trials and there can be no assurance that we will develop product candidates or complete the steps necessary to allow us to commence these trials. Even if we were to conduct pre-clinical trials,

we cannot predict with any certainty the results of such testing or whether such trials would yield sufficient data to permit us, or those with whom we collaborate, to proceed with clinical development and ultimately submit an application for regulatory approval of our product candidates in the U.S. or abroad, or whether such applications would be approved by the appropriate regulatory agency.

Our product development efforts may not be successful.

Our product development efforts are designed to focus on novel therapeutic approaches and technologies that have not been widely studied. We are applying these approaches and technologies in our attempt to discover new treatments for conditions that are also the subject of research and development efforts of many other companies. These approaches and technologies may never be successful.

Our failure to find third party collaborators to assist or share in the costs of product development could materially harm our business, financial condition and results of operations.

Our strategy for the development and commercialization of our proprietary product candidates may include the formation of collaborative arrangements with third parties. Potential third parties include biopharmaceutical, pharmaceutical and biotechnology companies, academic institutions and other entities. Third-party collaborators may assist us in:

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funding research, preclinical development, clinical trials and manufacturing;

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seeking and obtaining regulatory approvals; and

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successfully commercializing any future product candidates.

If we are not able to establish further collaboration agreements, we may be required to undertake product development and commercialization at our own expense. Such an undertaking may limit the number of product candidates that we will be able to develop, significantly increase our capital requirements and place additional strain on our internal resources. Our failure to enter into additional collaborations could materially harm our business, financial condition and results of operations.

In addition, our dependence on licensing, collaboration and other agreements with third parties may subject us to a number of risks. These agreements may not be on terms that prove favorable to us and may require us to relinquish certain rights in our technologies and product candidates. To the extent we agree to work exclusively with one collaborator in a given area, our opportunities to collaborate with other entities could be curtailed. Lengthy negotiations with potential new collaborators may lead to delays in the research, development or commercialization of product candidates. The decision by our collaborators to pursue alternative technologies or the failure of our collaborators to develop or commercialize successfully any product candidate to which they have obtained rights from us could materially harm our business, financial condition and results of operations.

We expect to rely on third parties to gain access to antigens.

We expect to gain access to antigens through contractual arrangements with leading academic researchers and companies involved in the identification and development of antigens or from publicly available sources. In the event we are unable to access antigens in sufficient quantities, or at all, we will be unable to execute our business plan. In addition, we may be unable to purchase or secure access to antigens at a cost favorable to us, which may have an adverse impact on our business and financial condition.

We expect to rely on third parties to conduct any clinical trials for our product candidates, and if they do not properly and successfully perform their legal and regulatory obligations, as well as their contractual obligations to us, we may not be able to obtain regulatory approvals for any product candidates we develop.

In the event we develop product candidates, we expect to rely on contract research organizations and other third parties to assist us in managing, monitoring and otherwise carrying out these trials, including with respect to site selection, contract negotiation and data management. Because we would not control these third parties, they may not treat our clinical studies as their highest priority, or in the manner in which we would prefer, which could result in delays. Moreover, if third parties did not successfully carry out their duties under their agreements with us, if the quality or accuracy of the data they obtain is compromised due to failure to adhere to our clinical protocols or regulatory requirements, or if they otherwise failed to comply with clinical trial protocols or meet expected deadlines, the clinical trials conducted on our behalf may not meet regulatory requirements. If our clinical trials do not meet regulatory requirements or if these third parties need to be replaced, our clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval of some or all of the product candidates we may develop.

If we cannot compete successfully against other biopharmaceutical companies, we may not be successful in developing and commercializing our technology and our business will suffer.

The biopharmaceutical space is characterized by intense competition and rapid technological advances. Even if we are able to develop our proprietary platform technology and additional antibody libraries, each will compete with a number of existing and future technologies and product candidates developed, manufactured and marketed by others. Specifically, we will compete against fully

integrated pharmaceutical companies and smaller companies that are collaborating with larger pharmaceutical companies, academic institutions, government agencies and other public and private research organizations. Many of these competitors have technologies already FDA-approved or in development. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs and have substantially greater financial resources than we do, as well as significantly greater experience in:

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developing product candidates and technologies generally;

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undertaking pre-clinical testing and clinical trials;

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obtaining FDA and other regulatory approvals of product candidates;

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formulating and manufacturing product candidates; and

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launching, marketing and selling product candidates.

If our technology fails to compete effectively against third party technologies, our business will be adversely impacted.

Because our development activities are expected to rely heavily on sensitive and personal information, an area which is highly regulated by privacy laws, we may not be able to generate, maintain or access essential patient samples or data to continue our research and development efforts in the future on reasonable terms and conditions, which may adversely affect our business.

We may have access to very sensitive data regarding patients whose tissue samples are used in our studies. This data will contain information that is personal in nature. The maintenance of this data is subject to certain privacy-related laws, which impose upon us administrative and financial burdens, and litigation risks. For instance, the rules promulgated by the Department of Health and Human Services under the Health Insurance Portability and Accountability Act, or HIPAA, create national standards to protect patients’ medical records and other personal information in the United States. These rules require that healthcare providers and other covered entities obtain written authorizations from patients prior to disclosing protected health care information of the patient to companies. If the patient fails to execute an authorization or the authorization fails to contain all required provisions, then we will not be allowed access to the patient’s information and our research efforts can be substantially delayed. Furthermore, use of protected health information that is provided to us pursuant to a valid patient authorization is subject to the limits set forth in the authorization (i.e., for use in research and in submissions to regulatory authorities for product approvals). As such, we are required to implement policies, procedures and reasonable and appropriate security measures to protect individually identifiable health information we receive from covered entities, and to ensure such information is used only as authorized by the patient. Any violations of these rules by us could subject us to civil and criminal penalties and adverse publicity, and could harm our ability to initiate and complete clinical studies required to support regulatory applications for our proposed products. In addition, HIPAA does not replace federal, state, or other laws that may grant individuals even greater privacy protections. We can provide no assurance that future legislation will not prevent us from generating or maintaining personal data or that patients will consent to the use of their personal information, either of which may prevent us from undertaking or publishing essential research. These burdens or risks may prove too great for us to reasonably bear, and may adversely affect our ability to achieve profitability or maintain profitably in the future.

We may be exposed to liability claims associated with the use of hazardous materials and chemicals.

Our research and development activities may involve the controlled use of hazardous materials and chemicals. Although we believe that our safety procedures for using, storing, handling and disposing of these materials comply with federal, state and local laws and regulations, we cannot completely eliminate the risk of accidental injury or contamination from these materials. In the event of such an accident, we could be held liable for any resulting damages and any liability could materially adversely affect our business, financial condition and results of operations. In addition, the federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive materials and waste products may require us to incur substantial compliance costs that could materially harm our business.

If we are unable to retain and recruit qualified scientists and advisors, or if any of our key executives, key employees or key consultants discontinues his or her employment or consulting relationship with us, it may delay our development efforts or otherwise harm our business.

We are highly dependent on the key members of our management and scientific staff, especially our Chief Executive Officer and President, Antonius Schuh, Ph.D., and our Chief Scientific Officer, Henry Ji, Ph.D. The loss of any of our key employees or key consultants could impede the achievement of our research and development objectives. Furthermore, recruiting and retaining qualified scientific personnel to perform research and development work in the future is critical to our success. We may be unable to attract and retain personnel on acceptable terms given the competition among biotechnology, biopharmaceutical and health care companies, universities and non-profit research institutions for experienced scientists. Certain of our current officers, directors, scientific advisors and/or consultants or certain of the officers, directors, scientific advisors and/or consultants hereafter appointed may from time to time serve as officers, directors, scientific advisors and/or consultants of other biopharmaceutical or biotechnology companies. We do not maintain “key man” insurance policies on any of our officers or employees. All of our employees are employed “at will” and, therefore, each employee may leave our employment at anytime.

We plan to grant stock options or other forms of equity awards in the future as a method of attracting and retaining employees, motivating performance and aligning the interests of employees with those of our stockholders. If we are unable to implement and maintain equity compensation arrangements that provide sufficient incentives, we may be unable to retain our existing employees and attract additional qualified candidates. If we are unable to retain our existing employees, including qualified scientific personnel, and attract additional qualified candidates, our business and results of operations could be adversely affected.

We will need to increase the size of our company and may not effectively manage our growth.

Our success will depend upon growing our business and our employee base. Over the next 12 months, we plan to add additional employees to assist us with research and development. Our future growth, if any, may cause a significant strain on our management, and our operational, financial and other resources. Our ability to manage our growth effectively will require us to implement and improve our operational, financial and management systems and to expand, train, manage and motivate our employees. These demands may require the hiring of additional management personnel and the development of additional expertise by management. Any increase in resources devoted to research and product development without a corresponding increase in our operational, financial and management systems could have a material adverse effect on our business, financial condition, and results of operations.

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 located 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, fire, floods and similar events. In the event that our facilities were 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.

Risks Related to Our Intellectual Property

Our ability to protect our intellectual property rights will be critically important to the success of our business, and we may not be able to protect these rights in the United States or abroad.

Our success, competitive position and future revenues will depend in part on our ability to obtain and maintain patent protection for our product candidates, methods, processes and other technologies, to prevent third parties from infringing on our proprietary rights and to operate without infringing upon the proprietary rights of third parties. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. We attempt to protect our proprietary position by filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business. We have one issued U.S. patent; examination of the European equivalent currently is in progress, and a continuation application has been filed in the U.S. and is now pending. However, the patent position of biopharmaceutical companies involves complex legal and factual questions, and therefore we cannot predict with certainty whether any patent applications that we have filed or that we may file in the future will be approved or any resulting patents will be enforced. In addition, third parties may challenge, seek to invalidate or circumvent any of our patents, once they are issued. Thus, any patents that we own or license from third parties may not provide any protection against competitors. Any patent applications that we have filed or that we may file in the future, or those we may license from third parties, may not result in patents being issued. Also, patent rights may not provide us with adequate proprietary protection or competitive advantages against competitors with similar technologies. Other patents in this industry claim “amplification” to produce antibody libraries.

In addition, the laws of certain foreign countries do not protect our intellectual property rights to the same extent as do the laws of the United States. If we fail to apply for intellectual property protection or if we cannot adequately protect our intellectual property rights in these foreign countries, our competitors may be able to compete more effectively against us, which could adversely affect our competitive position, as well as our business, financial condition and results of operations.

If any of our trade secrets, know-how or other proprietary information is disclosed, the value of our trade secrets, know-how and other proprietary rights would be significantly impaired and our business and competitive position would suffer.

Our success also depends upon the skills, knowledge and experience of our scientific and technical personnel and our consultants and advisors, as well as our licensors. To help protect our proprietary know-how and our inventions for which patents may be unobtainable or difficult to obtain, we rely on trade secret protection and confidentiality agreements. To this end, we require all of our employees, consultants, advisors and contractors to enter into agreements which prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business. These agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure or the lawful development by others of such information. If any of our trade secrets, know-how or other proprietary information is disclosed, the value of our trade secrets, know-how and other proprietary rights would be significantly impaired and our business and competitive position would suffer.

Third party competitors may seek to challenge the validity of our patents, thereby rendering them unenforceable.

Claims that we infringe upon the rights of third parties may give rise to costly and lengthy litigation, and we could be prevented from selling products, forced to pay damages, and defend against litigation.

Third parties may assert patent or other intellectual property infringement claims against us or our strategic partners or licensees with respect to our technologies and potential product candidates. If our products, methods, processes and other technologies infringe upon the proprietary rights of other parties, we could incur substantial costs and we may have to:

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obtain licenses, which may not be available on commercially reasonable terms, if at all, any may be non-exclusive, thereby giving our competitors access to the same intellectual property licensed to us;

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redesign our products or processes to avoid infringement;

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stop using the subject matter claimed in the patents held by others;

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pay damages; and

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defend litigation or administrative proceedings which may be costly whether we win or lose, and which could result in a substantial diversion of our valuable management resources.

Even if we were to prevail, any litigation could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations. Furthermore, as a result of a patent infringement suit brought against us or our strategic partners or licensees, we or our strategic partners or licensees may be forced to stop or delay developing, manufacturing or selling technologies or potential products that are claimed to infringe a third party’s intellectual property unless that party grants us or our strategic partners’ or licensees’ rights to use its intellectual property. Ultimately, we may be unable to develop some of our technologies or potential products or may have to discontinue development of a product candidate or cease some of our business operations as a result of patent infringement claims, which could severely harm our business.

Our position as a relatively small company may cause us to be at a significant disadvantage in defending our intellectual property rights and in defending against infringement claims by third parties.

Litigation relating to the ownership and use of intellectual property is expensive, and our position as a relatively small company in an industry dominated by very large companies may cause us to be at a significant disadvantage in defending our intellectual property rights and in defending against claims that our technology infringes or misappropriates third party intellectual property rights. Even if we are able to defend our position, the cost of doing so may adversely affect our ability to grow, generate revenue or become profitable. Although we have not yet experienced patent litigation, we may in the future be subject to such litigation and may not be able to protect our intellectual property at a reasonable cost, or at all, if such litigation is initiated. The outcome of litigation is always uncertain, and in some cases could include judgments against us that require us to pay damages, enjoin us from certain activities or otherwise affect our legal or contractual rights, which could have a significant adverse effect on our business.

Risks Related to Ownership of Our Common Stock

The market price of our common stock may fluctuate significantly, and investors in our common stock may lose all or a part of their investment.

The market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:

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future issuances of common stock or other securities;

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the addition or departure of key personnel;

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the results of lawsuits;

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announcements by us or our competitors of acquisitions, investments or strategic alliances; and

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general market conditions and other factors, including factors unrelated to our operating performance.

Further, the equity markets in general have recently experienced extreme price and volume fluctuations. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock. Price volatility of our common stock might worsen if the trading volume of our common stock is low.

Some or all of the “restricted” shares of our common stock issued to former stockholders of STI in connection with the Merger or held by other of our stockholders may be offered from time to time in the open market pursuant to an effective registration statement or Rule 144, and these sales may have a negative effect on the price of our common stock.

Trading of our common stock is limited, and trading restrictions imposed on us by applicable regulations and by lockup agreements we have entered into with our principal stockholders may further reduce our trading, making it difficult for our stockholders to sell their shares.

Trading of our common stock is currently conducted on the OTCBB. The liquidity of our common stock is limited, not only in terms of the number of shares that can be bought and sold at a given price, but also as it may be adversely affected by delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of us, if at all. Additionally, approximately 98.3% of our issued and outstanding shares of common stock are subject to lock-up agreements, which limit sales of such shares through September 21, 2011.

The foregoing factors may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock. In addition, without a large public float, our common stock is less liquid than the stock of companies with broader public ownership, and, as a result, the trading price of our common stock may be more volatile. In the absence of an active public trading market, an investor may be unable to liquidate his investment in our common stock. Trading of a relatively small volume of our common stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger. We cannot predict the price at which our common stock will trade at any given time.

We do not expect to pay dividends on our common stock, and investors will be able to receive cash in respect of their shares of our common stock only upon the sale of such shares.

We have no intention in the foreseeable future to pay any cash dividends on our common stock. Therefore, an investor in our common stock may obtain an economic benefit from the common stock only after an increase in its trading price and only then by selling the common stock.

Because our common stock is a “penny stock,” it may be more difficult for investors to sell shares of our common stock, and the market price of our common stock may be adversely affected.

According to the definition adopted by the SEC, our common stock is a “penny stock” because, among other things, its price is below $5.00 per share, it is not listed on a national securities exchange and we do not meet certain net tangible asset or average revenue requirements. Broker-dealers that sell penny stock must provide purchasers of such stock with a standardized risk-disclosure document prepared by the SEC. This document provides information about penny stock and the nature and level of risks involved in investing in penny stock. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchaser’s written agreement to the purchase. Broker-dealers must also provide customers that hold penny stock in their accounts with such broker-dealer a monthly statement containing price and market information relating to the penny stock. If a penny stock is sold to an investor in violation of the penny stock rules, the investor may be able to cancel its purchase and get its money back.

If applicable, the penny stock rules may make it difficult for investors to sell their shares of our common stock. Because of the rules and restrictions applicable to a penny stock, there is less trading in penny stock, and the market price of our common stock may be adversely affected. Also, many brokers choose not to participate in penny stock transactions. Accordingly, investors may not always be able to publicly resell their shares of our common stock at times and prices that they feel are appropriate.

Existing stockholders’ interest in us may be diluted by additional issuances of equity securities.

We may issue additional equity securities to fund future expansion and, possibly, pursuant to employee benefit plans. We may also issue additional equity for other purposes. These securities may have the same rights as our common stock or, alternatively, may have dividend, liquidation or other preferences to our common stock. The issuance of additional equity securities will dilute the holdings of existing stockholders and may reduce the share price of our common stock.

Directors, executive officers, principal stockholders and affiliated entities own a significant percentage of our capital stock, and they may make decisions that you do not consider to be in your best interests or those of our other stockholders.

As of March 31, 2010, our directors, executive officers and principal stockholders beneficially owned, in the aggregate, over 83% of our outstanding voting securities. As a result, if some or all of them acted together, they would have the ability to exert substantial influence over the election of our board of directors and the outcome of issues requiring approval by our stockholders. This concentration of ownership may also have the effect of delaying or preventing a change in control of our company that may be favored by other stockholders. This could prevent transactions in which stockholders might otherwise recover a premium for their shares over current market prices.

Our certificate of incorporation, as amended, and bylaws provide for indemnification of officers and directors at our expense and limits their liability, which may result in a major cost to us and hurt the interests of our stockholders because corporate resources may be expended for the benefit of officers and/or directors.

Our certificate of incorporation, as amended, bylaws and applicable Delaware law provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such person’s promise to repay us, therefore if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us, which we will be unable to recover.

Our corporate documents and Delaware law contain provisions that could discourage, delay or prevent a change in control of our company, prevent attempts to replace or remove current management and reduce the market price of our common stock.

Provisions in our certificate of incorporation, as amended, and bylaws may discourage, delay or prevent a merger or acquisition involving us that our stockholders may consider favorable. For example, our certificate of incorporation, as amended, authorizes our board of directors to issue up to 100,000,000 shares of “blank check” preferred stock. As a result, without further stockholder approval, the board of directors has the authority to attach special rights, including voting and dividend rights, to this preferred stock. With these rights, preferred stockholders could make it more difficult for a third party to acquire us.

Compliance with changing regulations concerning corporate governance and public disclosure may result in additional expenses.

There have been changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, new regulations promulgated by the SEC and rules promulgated by the national securities exchanges. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. As a result, our efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. Members of our board of directors and our principal executive officer and principal financial officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified directors and executive officers, which could harm our business. If the actions we take in our efforts to comply with new or changed laws, regulations and standards differ from the actions intended by regulatory or governing bodies, we could be subject to liability under applicable laws or our reputation may be harmed.

In addition, Sarbanes-Oxley specifically requires, among other things, that we maintain effective internal controls for financial reporting and disclosure of controls and procedures. In particular, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of Sarbanes-Oxley. Our testing, or the subsequent testing by our independent registered public accounting firm, when required, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

State securities laws may limit secondary trading, which may restrict the States in which and conditions under which you can sell shares.

Secondary trading in our common stock will not be possible in any state until our common stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, our common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a

resident of that state. We currently do not intend and may not be able to qualify securities for resale in some or all of the states that do not offer manual exemptions and require shares to be qualified before they can be resold by our stockholders. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Removed and Reserved.

Not applicable.

Item 5.

Other Information.

None.

Item 6.

Exhibits.

The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed as part of this Quarterly Report on Form 10-Q and such Exhibit Index is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	SORRENTO THERAPEUTICS, INC.

Date: May 14, 2010	By:	/ S / A NTONIUS S CHUH , P H .D.
		Antonius Schuh, Ph.D.
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

Date: May 14, 2010	By:	/ S / R ICHARD G LENN V INCENT
		Richard Glenn Vincent
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

EXHIBIT INDEX



2.1*		Merger Agreement, dated July 14, 2009, by and among the Company, Sorrento Therapeutics, Inc., Sorrento Merger Corp., Inc., the Stockholders’ Agent and the Parent Representative, filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 14, 2009 and incorporated by reference herein.

2.2		First Amendment to Merger Agreement, dated August 26, 2009, by and among the Company, Sorrento Therapeutics, Inc., Sorrento Merger Corp., Inc., the Stockholders’ Agent and the Parent Representative, filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K filed with the SEC on August 26, 2009 and incorporated by reference herein.

3.1		Amended and Restated Articles of Incorporation of the Company, filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 13, 2008 and incorporated by reference herein.

3.2		Amended and Restated Bylaws of the Company, filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on July 7, 2008 and incorporated by reference herein.

10.1+		License Agreement, dated January 8, 2010, by and between The Scripps Research Institute and the Company.

31.1		Certification of Antonius Schuh, Ph.D., Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.

31.2		Certification of Richard Glenn Vincent, Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.

32.1		Certification of Antonius Schuh, Ph.D., Principal Executive Officer, and Richard Glenn Vincent, Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.

*	Non-material schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally copies of any of the omitted schedules and exhibits upon request by the SEC.

+	Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

Exhibit 10.1

*** Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4)

and 240.24b-2

LICENSE AGREEMENT

by and between

THE SCRIPPS RESEARCH INSTITUTE,

a California nonprofit

public benefit corporation

and

SORRENTO THERAPEUTICS, INC.,

a Delaware corporation

*Confidential Treatment Requested

LICENSE AGREEMENT

This License Agreement is entered into and made effective as of this 8th day of January 2010 (the “Effective Date”), by and between THE SCRIPPS RESEARCH INSTITUTE, a California nonprofit public benefit corporation (“TSRI”) located at 10550 North Torrey Pines Road, La Jolla, California 92037, and SORRENTO THERAPEUTICS, INC., a Delaware corporation (“Licensee”) located at 6042 Cornerstone Ct., Suite B, San Diego, CA 92121, with respect to the facts set forth below.

RECITALS

A. TSRI is engaged in fundamental scientific biomedical and biochemical research including research relating to the development of antibodies and vaccines useful against infectious disease.

B. Licensee is engaged in research and development of research, diagnostics and therapeutic products for disease management and treatment.

C. TSRI has disclosed to Licensee certain technology and TSRI has the right to grant a license to the technology, subject to certain rights of the U.S. Government resulting from the receipt by TSRI of certain funding from the U.S. Government.

D. TSRI desires to grant to Licensee, and Licensee wishes to acquire from TSRI, an exclusive worldwide right and license, with the right to sublicense, to certain patent rights and materials of TSRI, subject to the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and conditions set forth herein, TSRI and Licensee hereby agree as follows:

1. Definitions . Capitalized terms shall have the meaning set forth herein.

1.1 Affiliate . The term “Affiliate,” with respect to any Person, shall mean any entity or individual which directly or indirectly controls, is controlled by, or is under common control with, such Person. For purposes of the foregoing sentence, the term “control” means (a) in the case of corporate entities, direct or indirect ownership at least fifty percent (50%) (or the maximum allowed percentage in a foreign country) of the stock or shares entitled to vote for the election of directors; or (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) (or the maximum allowed percentage in a foreign country) of the equity interest with the power to direct the management and policies of such non-corporate entities. Unless otherwise expressly specified, the term Licensee, as used in this Agreement, includes Licensee’s Affiliates.

1.2 Agreement . The term “Agreement” shall mean this License Agreement, as may be amended or restated from time to time.

1.3 Confidential Information . The term “Confidential Information” shall mean any and all proprietary or confidential information of TSRI or Licensee which may be exchanged between the parties at any time and from time to time during the term of this Agreement, including without limitation all correspondence related to intellectual property. If disclosed in writing, the Confidential Information shall be marked as confidential or proprietary. If disclosed orally, the Confidential Information shall be reduced to writing that is identified as confidential or proprietary within thirty (30) days of such oral disclosure. Notwithstanding the foregoing, information shall not be considered confidential to the extent that the receiving party can establish by competent proof that it:

(a) Is publicly disclosed through no fault of the receiving party, either before or after it becomes known to the receiving party; or

(b) Was known to the receiving party prior to the date of this Agreement, which knowledge was acquired independently and not from another party hereto (or such party’s employees); or

(c) Is subsequently disclosed to the receiving party in good faith by a third party who has a right to make such disclosure; or

(d) Has been published by a third party as a matter of right; or

(e) Has been developed by or on behalf of the receiving party independently without the use of or access to the disclosing party’s Confidential Information.

If Confidential Information is required to be disclosed by law or court order, the party required to make such disclosure shall limit the same to the minimum required to comply with the law or court order, and shall use reasonable efforts to attempt to seek confidential treatment for that disclosure, and prior to making such disclosure that party shall notify the other party, not later than ten (10) days (or such shorter period of time as may be reasonably practicable under the circumstances) before the disclosure in order to allow that other party to comment and/or to obtain a protective or other order, including extensions of time and the like, with respect to such disclosure.

1.4 Field . The term “Field” shall mean [***…***]

1.5 Licensed Biological Materials . The term “Licensed Biological Materials” shall mean the materials supplied by TSRI (identified in Exhibit A) together with any progeny, mutants, or derivatives thereof supplied by TSRI or created by Licensee. All Licensed Biological Materials shall be deemed TSRI’s Confidential Information whether or not marked as “confidential”.


		2		*Confidential Treatment Requested

1.6 Licensed Patent Rights . The term “Licensed Patent Rights” shall mean rights arising out of or resulting from (a) the U.S./PCT patent application(s) set forth on Exhibit B; (b) the foreign patent applications associated with the application(s) referenced in sub clause (a) above; (c) the patents issued from the application(s) referenced in sub clauses (a) and (b); (d) divisionals, continuations, reissues, reexaminations, and extensions of any patent or application set forth in sub clauses (a)- (c) above; and (e) all claims of continuations-in-part that are entitled to the benefit of the priority date of the application(s) referenced in sub clause (a) above.

1.7 Licensed Product . The term “Licensed Product” shall mean any product (a) covered by a Valid Claim of the Licensed Patent Rights, or (b) that utilizes or incorporates Licensed Biological Materials.

1.8 Major Market Country . The term “Major Market Country” shall mean any of the following countries: the United States of America, the United Kingdom, Germany or Japan.

1.9 Net Sales . The term “Net Sales” shall mean the gross amount invoiced by Licensee, or Sublicensees, or any of them, on all sales of Licensed Products, less (a) discounts actually given; (b) credits for claims, allowances, retroactive price reductions or returned goods; (c) prepaid freight; and (d) sales taxes or other governmental charges actually paid in connection with sales of Licensed Products (but excluding what are commonly known as income taxes and value-added taxes). Net Sales shall include all consideration charged by Licensee or Sublicensees in exchange for any Licensed Products, including without limitation any monetary payments or any other property whatsoever. For purposes of determining Net Sales, a sale shall be deemed to have occurred when an invoice therefore shall be generated or the Licensed Product shipped for delivery. Sales of Licensed Products by Licensee to any Affiliate or Sublicensee or by any Sublicensee to an Affiliate or other Sublicensee which is a reseller thereof shall be excluded from calculating Net Sales, and only the subsequent sale of such Licensed Products by such Affiliates or Sublicensees to unrelated parties shall be deemed Net Sales hereunder.

1.10 Person . the term “Person” means any individual, corporation, partnership, joint venture, limited liability company, trust, governmental body or other organization.

1.11 Sublicensees . The term “Sublicensee” shall mean any third party to whom Licensee grants a sublicense with respect to the rights conferred upon Licensee under this Agreement, as permitted by Section 2.3.

1.12 Valid Claim . The term “Valid Claim” shall mean a claim of an issued patent within the Licensed Patent Rights that has not lapsed, expired, been canceled, or become abandoned, and has not been held invalid by a court or other appropriate body of competent jurisdiction, unappealable or unappealed within the time allowed for appeal and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or

otherwise. The term “Valid Claim” shall also include the claims of a pending patent application within the Licensed Patent Rights for a period of seven (7) years from the date of first examination on the merits of that patent application.

2. Grant of License .

2.1 Grant of License for Licensed Products . TSRI hereby grants and Licensee accepts, subject to the terms and conditions of this Agreement, an exclusive license, with the right to sublicense, under the Licensed Patent Rights to make and have made, to use and have used, to offer to sell, to sell and have sold, to offer to sell and to import Licensed Products in the Field.

2.2 Grant of License for Licensed Biological Materials . TSRI hereby grants and Licensee accepts, subject to the terms and conditions of this Agreement a non-exclusive license to the Licensed Biological Materials to make and have made, to use and have used, to sell and have sold, to offer to sell and to import any Licensed Biological Materials in the Field and to create any progeny, mutant, or derivative work thereof. Except for the license and sub-license rights granted pursuant to this Agreement, TSRI shall not grant a license to the Licensed Biological Materials to any party except to other nonprofit or academic institutions (collectively, the “Research Institutions”) solely for research and educational use, provided that any such license to the Licensed Biological Materials granted to the Research Institutions shall prohibit the commercialization of such Licensed Biological Materials by such Research Institutions and shall not in any way limit Licensee’s commercialization rights under this Agreement.

2.3 Sublicensing . Licensee shall have the right to grant sublicenses to any party with respect to the rights conferred upon Licensee under this Agreement, provided, however, that any such sublicense shall be subject in all respects to the provisions contained in this Agreement (excluding the payment of a License Issue Royalty as defined in Section 3 hereof). A Sublicensee shall not further sublicense to other than an Affiliate of Licensee or an Affiliate of such Sublicensee without TSRI’s prior written consent, which approval shall not be unreasonably withheld, conditioned or delayed. Licensee shall forward to TSRI a copy of any and all fully executed sublicense agreements within thirty (30) days of execution, which agreements shall be deemed Confidential Information of Licensee.

2.4 No Other License . This Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of TSRI other than Licensed Patent Rights regardless of whether such patents are dominant or subordinate to Licensed Patent Rights.

2.5 Governmental Interest . Licensee and TSRI acknowledge that TSRI has received, and expects to continue to receive, funding from the United States Government in support of TSRI’s research activities. Licensee and TSRI acknowledge and agree that their respective rights and obligations pursuant to this Agreement shall be subject to the rights of the United States Government, existing and as amended, which may arise or result

from TSRI’s receipt of research support from the United States Government, including but not limited to, 37CFR401, the NIH Grants Policy Statement and the NIH Guidelines for Obtaining and Disseminating Biomedical Research Resources.

2.6 [***…***]

3. Royalties .

3.1 License Issue Royalty . Licensee agrees to provide and shall provide to TSRI a non-creditable, nonrefundable license issue royalty (the “License Issue Royalty”) in the form of [***…***] warrant shares to purchase common stock of Sorrento Therapeutics, Inc. pursuant to the form of the Common Stock Warrant to be attached hereto as Exhibit C (the “Warrant”). The Warrant shall have an exercise price of $ [***…***] per share, [***…***]. If the Warrant is not executed by Licensee and delivered to TSRI within thirty (30) days of the Effective Date, this Agreement shall be void ab initio .

3.2 Minimum Annual Royalty . Licensee agrees to pay and shall pay to TSRI a nonrefundable minimum annual royalty in the amount [***…***]. Such payments shall be credited against Running Royalties (as defined in Section 3.3 below) due for that calendar year and Licensee’s royalty reports shall reflect such a credit. Such payments shall not be credited against milestone payments (if any), Sublicense Payments (if any), nor against Running Royalties due for any preceding or subsequent calendar year.

3.3 Running Royalties for Licensed Products . Licensee agrees to pay and shall pay to TSRI a running royalty on a country by country basis, where the Licensed Products are sold by Licensee or Sublicensees and where there are Valid Claims in such country in the amount of [***…***] of Net Sales of Licensed Products (the “Running Royalty”). If Licensee or Sublicensee sells Licensed Product in a country in which there are no Valid Claims, but a Valid Claim exists in any Major Market Country, Licensee


		5		*Confidential Treatment Requested

agrees to pay and shall pay to TSRI a Running Royalty in the amount of [***…***].

3.4 Notwithstanding Section 3.3, in the event Licensee or Sublicensee directly or indirectly alleges in any action or proceeding that (i) any of the Licensed Patent Rights are invalid or unenforceable, or (ii) no royalties, Sublicense Payments, milestone payments, patent costs or other monies are due or required to be paid to TSRI under this Agreement because some or all of the Licensed Patent Rights are invalid or unenforceable (collectively “Challenges”), the royalty rate specified in Section 3.3 shall be increased to [***…***] of Net Sales of Licensed Products during and after the pendency of such Challenges from the date Licensee or Sublicensee first institutes or makes such Challenges and shall continue to apply after the conclusion of such Challenges in the event that at least one (1) claim of the Licensed Patent Rights being challenged that covers such Licensed Products is held to be valid and enforceble.

3.5 Arms-Length Transactions . On sales of Licensed Products which are made in other than an arms-length transaction, the value of the Net Sales attributed under this Section 3 to such a transaction shall be that which would have been received in an arms-length transaction, based on sales of like quality and quantity products on or about the time of such transaction.

3.6 Duration of Royalty Obligations . The royalty obligations of Licensee as to each Licensed Product shall terminate on a country-by-country basis concurrently with the expiration of the last to expire of a Valid Claim within the Licensed Patent Rights that covers such Licensed Product or, if no patents issue containing a Valid Claim within the Licensed Patent Rights in a given country or if no patent applications are filed in that country of sale, then ten (10) years from the first commercial sale in such country.

3.7 No Right to Recoup Royalty . In the event Licensee or Sublicensee directly or indirectly institutes or makes any Challenges, neither Licensee nor Sublicensee shall have any right to recoup, recover, set off or otherwise get reimbursement of any royalties, Sublicense Payments, milestone payments, patent costs or other monies paid hereunder during the period of such Challenges. Licensee hereby voluntarily and irrevocably waives any right to seek return of such royalties, Sublicense Payments, milestone payments, patent costs or other monies in the event Licensee directly or indirectly institutes or makes any Challenges.

4. Non-royalty Revenues .

4.1 Sublicense Payments . Any and all payments due Licensee pursuant to the grant of a sublicense to the Licensed Patent Rights or Licensed Biological Materials (“Sublicense Revenues”) shall be reported to TSRI by Licensee within thirty ( 30) days after the end of the calendar quarter in which the Licensee received payment of such Sublicense Revenue (each, a “Notice”). Licensee shall pay to TSRI a non-creditable, non-refundable percentage of these Sublicense Revenues according to the following schedule concurrently


		6		*Confidential Treatment Requested

with the delivery of the Notice relating to such Sublicense Revenue (“Sublicense Payments”):


[*...*]		[*...*]

(a) [*...*]		[*...*]

(b) [*...*]		[*...*]

(c) [*...*]		[*...*]

Any non-cash consideration received by Licensee from Sublicensees or other third parties pursuant to the grant of a sublicense to the Licensed Patent Rights or Licensed Biological Materials shall be valued at its fair market value as of the date of receipt.

4.2 Increase in Sublicense Payments . Notwithstanding Section 4.1, in the event Licensee or Sublicensee directly or indirectly institutes or makes any Challenges, the percentages in Section 4.1 shall be doubled during and after the pendency of such Challenges from the date Licensee or Sublicensee first institutes or makes such Challenges and shall continue to apply after the conclusion of such Challenges in the event that at least one (1) claim of the Licensed Patent Rights being challenged that covers such Licensed Products is held to be valid and enforceble.

4.3 Product Development Milestones . Licensee agrees to pay and shall pay to TSRI the following one-time, non-creditable, non-refundable product development milestones (each, a “Product Development Milestone Payment”) within sixty (60) days of the end of the calendar quarter in which each milestone (or its equivalent) in a Major Market Country first occurs as follows:


[*...*]		[*...*]

[*...*]		[*...*]

[*...*]		[*...*]

[*...*]		[*...*]


		7		*Confidential Treatment Requested

[***...***]

For purposes of this Section 4 and Exhibit D:

(a) the term [***...***];

(b) the term [***...***];

[***...***]

5. Royalty Payments .

5.1 Sales by Licensee . Running Royalties payable pursuant to Section 3 herein, shall be payable by Licensee quarterly, within sixty (60) days after the end of each calendar quarter, based upon Net Sales during the immediately preceding calendar quarter.

5.2 Sales by Sublicensees . Licensee agrees to pay and shall pay to TSRI, or cause its Sublicensees to pay to TSRI all Running Royalties pursuant to Section 3 herein resulting from the activities of its Sublicensees, within sixty (60) days after the end of each calendar quarter.

6. Reports on Progress, Benchmarks, Sales or Payments .

6.1 Commercial Development Plan and Benchmarks . Licensee agrees to provide to TSRI a commercial development plan within six (6) months of the Effective Date, under which Licensee intends to bring the subject matter of the Licensed Patent Rights to the point of commercial use (the “Commercial Development Plan”). The Commercial Development Plan shall incorporate the target performance benchmarks listed in Exhibit D, as may be amended from time to time (the “Benchmarks”). Upon its completion, Licensee’s Commercial Development Plan shall be executed by TSRI and Licensee and incorporated herein.

6.2 Progress Reports on Commercial Development Plan and Benchmarks .


		8		*Confidential Treatment Requested

6.2.1 Licensee shall provide written annual reports on its product development progress or efforts to commercialize under the Commercial Development Plan for the Field within sixty (60) days after June 30 of each calendar year. These progress reports shall include, but not be limited to: progress on research and development, copies of Licensed Product Data generated during that year, status of applications for regulatory approvals, manufacturing, sublicensing, marketing, importing, and sales during the preceding calendar year, as well as plans for the period ending June 30 of the following calendar year. TSRI also encourages these reports to include information on any of Licensee’s public service activities that relate to the Licensed Patent Rights. If reported progress differs materially from that projected in the Commercial Development Plan, Licensee shall explain the reasons for such differences. In any such annual report, Licensee may propose amendments to the Commercial Development Plan or Benchmarks, acceptance of which by TSRI may not be withheld, conditioned, denied or delayed unreasonably. Licensee agrees to provide any additional information reasonably required by TSRI to evaluate Licensee’s performance under this Agreement. Licensee may amend the benchmarks set forth in the Commercial Development Plan at any time upon written consent by TSRI. TSRI shall not unreasonably withhold or delay approval of any request of Licensee to extend the time periods of this schedule if such request is supported by a reasonable showing by Licensee of diligence in its performance under the Commercial Development Plan and toward bringing the Licensed Products to the point of commercial use.

6.2.2 At any time after two (2) years from the Effective Date, TSRI may terminate this Agreement if, in TSRI’s sole reasonable judgment, the progress reports furnished by Licensee do not demonstrate that Licensee is engaged in research, development, manufacturing, marketing or sublicensing activity appropriate to achieving the goals described in Section 6.2.1; provided that TSRI may not terminate this Agreement under this Section 6.2.2 in the event the Licensee has achieved the Benchmarks specified in Exhibit D.

6.2.3 Licensee shall report to TSRI the dates for achieving Benchmarks specified in Exhibit D and the first commercial sale of a Licensed Product in each country within thirty (30) days of such occurrences.

6.3 Reports on Revenues and Payments . Commencing upon the first sale of the first Licensed Product, Licensee shall submit to TSRI, no later than sixty (60) days after the end of each calendar quarter, a royalty report (the “Royalty Report”) setting forth for such quarter at least the following information:

(a) the number of Licensed Products sold by Licensee and its Sublicensees;

(b) the gross amounts due or charged for such Licensed Products;

(c) a detailed list of all deductions applicable to determine the Net Sales of Licensed Products pursuant to Section 1.9;

(d) the amount of Sublicense Revenues received by Licensee and the amount of Sublicense Payments due under Section 4.1; and

(e) the amount of royalty due on all of the above, or if no royalties are due to TSRI for any reporting period, the statement that no royalties are due and an explanation why they are not due for that quarterly period.

Such Royalty Report shall be certified as correct by an officer of Licensee.

6.4 Royalty Payments . Licensee agrees to pay and shall pay to TSRI with each Royalty Report the amount of royalty due with respect to such quarter. All payments due hereunder shall be deemed received when funds are credited to TSRI’s bank account and shall be payable by check or wire transfer in United States Dollars.

6.5 Foreign Sales . The remittance of royalties payable on sales outside the United States shall be payable to TSRI in United States Dollar equivalents at the official rate of exchange of the currency of the country from which the royalties are payable, as quoted in the Wall Street Journal for the last business day of the calendar quarter in which the royalties are payable. If the transfer of or the conversion into the United States Dollar equivalents of any such remittance in any such instance is not lawful or possible, the payment of such part of the royalties as is necessary shall be made by the deposit thereof, in the currency of the country where the sale was made on which the royalty was based to the credit and account of TSRI or its nominee in any commercial bank or trust company of TSRI’s choice located in that country, prompt written notice of which shall be given by Licensee to TSRI.

6.6 Foreign Taxes . Any tax required to be withheld by Licensee under the laws of any foreign country for any royalties or other amounts due hereunder or for the accounts of TSRI shall be promptly paid by Licensee for and on behalf of TSRI to the appropriate governmental authority, and Licensee shall furnish TSRI with proof of payment of such tax together with official or other appropriate evidence issued by the applicable government authority. Any such tax actually paid on TSRI’s behalf shall be deducted from royalty payments due TSRI.

6.7 Record Keeping . Licensee shall keep, and shall require its Affiliates and Sublicensees to keep, accurate records (together with supporting documentation) of Licensed Products sold under this Agreement, appropriate to determine the amount of royalties, Sublicense Payments, Product Development Milestone Payments and other monies due to TSRI hereunder. Such records shall be retained for at least five (5) years following the end of the reporting period to which such records relate. They shall be available during normal business hours for examination and copying by an independent certified accountant selected by TSRI and reasonably acceptable to Licensee (the “TSRI Accountant”) for the purpose of verifying Licensee’s reports and payments hereunder and its compliance with this Agreement; provided that reasonable advance notice of such examination and copying shall be given by TSRI to Licensee. In conducting examinations pursuant to this Section, the TSRI Accountant shall have access to, and may disclose to TSRI, all records which TSRI

reasonably believes to be relevant to the calculation of royalties under Section 3, non-royalty revenues under Section 4 and Licensee’s compliance with this Agreement. Except as set forth above, TSRI’s accountant shall not disclose to TSRI any information other than information relating to the accuracy of reports and payments made hereunder and to Licensee’s compliance with this Agreement. Except as otherwise expressly provided herein, such examination by the TSRI Accountant shall be at TSRI’s sole cost and expense. Notwithstanding the foregoing, if the TSRI Accountant concludes in writing that Licensee underreported or underpaid an amount in excess of five percent (5%) for any twelve (12) month period (each, an “Alleged Underpayment”), such conclusion, and the TSRI Accountant’s detail in support thereof, shall be delivered to Licensee. Licensee shall pay the cost of such examination (including without limitation TSRI’s attorney’s fees, accountant’s fees and other costs) as well as any additional sum that would have been payable to TSRI had the Licensee reported correctly (as set forth in the TSRI Accountant’s report), plus interest on said sum at the rate of one percent (1.0%) per month (pro rated for a partial month) accruing from the date such underpaid amount was initially due (collectively, the “Penalty Payment”) within thirty (30) days of Licensee’s receipt of the Alleged Underpayment.

7. Representations and Warranties .

7.1 Licensor . TSRI hereby represents and warrants to Licensee that as of the Effective Date:

(a) All corporate action on the part of TSRI necessary for the authorization, execution and delivery of this Agreement and the performance of its obligations hereunder has been taken.

(b) This Agreement is the legal, valid and binding obligation of TSRI, enforceable against it in accordance with its terms, except as such enforcement may be limited by general equitable principles or by applicable bankruptcy, insolvency, or similar laws affecting creditors’ rights generally.

(c) TSRI, to its actual knowledge, has the full right and power to enter into this Agreement and has the full rights to grant to Licensee the licenses and license rights granted to Licensee under the terms of this Agreement.

(d) Subject to the Rights of the U.S. Government as described in this Agreement, TSRI, to its actual knowledge, is the sole owner of all Licensed Patent Rights and TSRI has not granted to any third party any license, option or other rights with respect to the Licensed Patent Rights (other than any such license, option or other rights that has expired unexercised, or has been waived in writing such that TSRI is free to grant licensee the license and rights it purports to grant under this Agreement).

(e) TSRI’s general counsel has not received any written notice from a third party challenging TSRI’s right to grant the licenses to Licensee pursuant to this Agreement.

7.2 Licensee . Licensee hereby represents and warrants to TSRI that as of the Effective Date:

(a) All corporate action on the part of Licensee necessary for the authorization, execution and delivery of this Agreement and the performance of its obligations hereunder has been taken.

(b) This Agreement is the legal, valid and binding obligation of Licensee, enforceable against it in accordance with its terms, except as such enforcement may be limited by general equitable principles or by applicable bankruptcy, insolvency, or similar laws affecting creditors’ rights generally.

(c) Licensee, to its actual knowledge, has the full right and power to enter into this Agreement and to perform all of its obligations hereunder.

8. Patent Matters .

8.1 Patent Prosecution and Maintenance . From and after the date of this Agreement, the provisions of this Section 8 shall control the prosecution of any patent application and maintenance of any patent included within Licensed Patent Rights. Subject to the requirements, limitations and conditions set forth in this Agreement, TSRI shall (a) direct and control the preparation, filing and prosecution of the United States and foreign patent applications within Licensed Patent Rights (including without limitation any reissues, reexaminations, appeals to appropriate patent offices and/or courts, interferences and foreign oppositions); and (b) maintain the patents issuing therefrom. TSRI shall select the patent attorney, subject to Licensee’s written approval, which approval shall not be unreasonably withheld. Both parties agree that TSRI shall have the right, at its sole discretion, to utilize TSRI’s Office of Patent Counsel in lieu of or in addition to independent counsel for patent prosecution and maintenance described herein, and the fees and expenses associated with the work done by such Office of Patent Counsel and/or independent counsel shall be paid as set forth below. Licensee shall have full rights of consultation with the patent attorney so selected on all matters relating to Licensed Patent Rights and Licensee, and its counsel, shall have the right to review and provide comments on any and all filings, correspondence or other documents to be filed with, or submitted to, any regulatory body, including, but not limited to the U.S. Patent and Trademark Office, that relate to any Licensed Patent Rights, in each case at least ten (10) business days prior, whenever reasonably possible, to the filing or submission thereof. TSRI shall implement all reasonable and timely requests made by Licensee with regard to such matters, provided, however, that such requests are delivered within the first to occur of (a) fifteen (15) days following TSRI’s written notification to Licensee or (b) two (2) business days prior to the filing or submission thereof of any correspondence with the U.S.P.T.O. by TSRI.

8.2 Information to Licensee . TSRI shall keep Licensee timely informed in writing with regard to the patent application and maintenance processes. TSRI shall deliver to Licensee copies of all patent applications, amendments, office actions, responses, related correspondence, and other related matters in a timely matter.

8.3 Patent Costs . Licensee acknowledges and agrees that the license granted hereunder is in partial consideration for Licensee’s assumption of patent costs and expenses as described herein. Licensee agrees to pay and shall pay for all expenses referenced in Section 8.1. Licensee also agrees to pay and shall pay [***…***] according to schedule in Exhibit E, as well as all future patent expenses associated with the work on the Licensed Patent Rights performed by TSRI’s Office of Patent Counsel and/or its independent counsel selected in accordance with Section 8.1 within thirty (30) days after Licensee receives an itemized invoice therefor. Failure of Licensee to pay patent costs and expenses as set forth in this Section 8.3 shall immediately relieve TSRI from its obligation to incur any further patent costs and expenses. For the avoidance of doubt, should Licensee be more than thirty (30) days in arrears for any patent costs and expenses due to TSRI or independent counsel, TSRI shall have the right, at its sole discretion, to cease all patent prosecution and allow Licensed Patent Rights to go abandoned. Such action by TSRI shall not, by itself, constitute a breach of this Agreement. Payment can be made directly to independent counsel, or to TSRI, at Licensee’s sole election. Licensee may elect with a minimum of thirty (30) days prior written notice to TSRI, to discontinue payment for the filing, prosecution and/or maintenance of any patent application and/or patent within Licensed Patent Rights. Licensee shall remain liable for all patent prosecution and maintenance costs incurred prior to the date of notice of election and for a thirty (30) day period following date of such notice. Any such patent application or patent so elected shall immediately be excluded from the definition of Licensed Patent Rights and from the scope of the licenses granted under this Agreement, and all rights relating thereto shall revert to TSRI and may be freely licensed by TSRI.

8.4 Reversion Rights . If TSRI decides not to file, prosecute or maintain any patent included within the Licensed Patent Rights, it shall give Licensee reasonable notice to that effect sufficiently in advance of any deadline for any filing or submission with respect to any such patent to permit Licensee to carry out such activity. After such notice, provided that Licensee is not in breach or default under this Agreement, Licensee may file, prosecute and maintain each such patent, and perform such acts as may be reasonably necessary for Licensee or TSRI to file, prosecute or maintain such patent, in its sole discretion and at its sole cost and expense. If Licensee does so elect, then TSRI shall provide such full cooperation to Licensee, including the execution and filing of appropriate instruments, as may reasonably be requested to facilitate the transition of such patent activities.

8.5 Ownership . The patent applications filed and the patents obtained by TSRI pursuant to Section 8.1 hereof shall be owned solely by TSRI, assigned solely to TSRI and deemed a part of Licensed Patent Rights.


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8.6 TSRI Right to Pursue Patent . If at any time during the term of this Agreement, Licensee’s rights with respect to Licensed Patent Rights are terminated, TSRI shall have the right to take whatever action TSRI deems appropriate to obtain or maintain the corresponding patent protection. If TSRI pursues patents under this Section 8.6, Licensee agrees to cooperate fully, including by providing, at no charge to TSRI, all appropriate technical data and executing all necessary legal documents.

8.7 Infringement Actions .

8.7.1 Consultation . TSRI and Licensee shall promptly notify the other in writing of any alleged or threatened infringement of, or any challenge to the validity or unenforceability of, Licensed Patent Rights of which it becomes aware. After receiving notice from the other party of a possible infringement of the Licensed Patent Rights by a third party, the parties will consult with each other about whether and to what extent such third party’s products or activities are infringing upon the Licensed Patent Rights in that country and the extent to which the infringing products or activities are damaging sales of Licensed Products in such country; provided, however, that promptly after delivery of such notice, and in any event prior to engaging in any such consultation or discussion, TSRI and Licensee shall enter into a mutually acceptable joint defense/common interest agreement for the purpose of preserving all applicable privileges attaching to the parties’ discussion and pursuit of their mutual interest in the enforcement of the Licensed Patent Rights. In this way, the parties will attempt to reach a mutual agreement regarding what, if any, action should be taken against the third party.

If (i) such third party’s products or activities are literally infringing upon the Licensed Patent Rights in a Major Market Country, and (ii) cumulative lost sales of Licensed Products as a result of such infringing activity exceed $[***…***], then, except as otherwise mutually agreed by the parties pursuant to Section 8.7.1, Licensee shall have the obligation to prosecute such infringement (including defense of actions for declaratory relief of non-infringement) by that third party; provided that Licensee shall only have such obligation if it has standing to prosecute such infringement. If the parties cannot agree on a course of action to be taken against such third party infringer, and such third party’s products or activities are occurring in a non-Major Market Country, then Licensee shall have the first right, but not the obligation, to prosecute such infringement. Licensee may enter into settlements, stipulated judgments or other arrangements respecting such infringement, at its own expense, but only with the prior written consent of TSRI, which consent shall not be unreasonably withheld, conditioned or delayed. TSRI shall permit any action to be brought in its name and/or join in such action if required by law, and Licensee shall hold TSRI harmless from any costs, expenses or liability respecting such action. TSRI agrees to provide reasonable assistance of a technical nature which Licensee may require in any litigation arising in accordance with the provisions of this Section 8.7.1, for which Licensee shall pay to TSRI a reasonable hourly rate of compensation. In the event Licensee is not obligated to, pursuant to Section 8.7.1, and decides not to, or the parties mutually agree not to, pursuant to Section 8.7.1, prosecute any such infringement, then Licensee shall notify TSRI in writing within ninety (90) days of initial consultation pursuant to Section 8.7.1, and TSRI shall have the right, but not the


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obligation, to prosecute such infringement on its own behalf. If Licensee does not have sufficient standing to prosecute any such infringement and requests that TSRI prosecute such infringement, TSRI will prosecute such infringement under its own name on behalf of Licensee at Licensee’s cost and expense. Failure on the part of Licensee to prosecute any such infringement for which it has standing to prosecute shall be grounds for conversion of the exclusive licenses granted to Licensee hereunder to co-exclusive licenses with Licensee and with such infringing third party(ies), with respect to the country in which such infringement occurs, at the option of TSRI, provided, however, that TSRI may only subsequently enter into subsequent license agreements with such infringing third party(ies) (i.e., not any other third party) and, provided further , that such license(s) shall not contain running royalty rates lower than the rates specified in this Agreement nor grant such third parties the right to sublicense. Licensee agrees to execute any and all necessary documents and perform such acts as are reasonably requested by TSRI in order to effect such grant to such third party. All fees, royalties, payments and any other consideration to be paid by that third party under the co-exclusive license shall be paid to TSRI.

8.7.2 Allocation of Recovery . Any damages or other recovery from an infringement action undertaken by Licensee pursuant to Section 8.7.1 shall first be used to reimburse the parties for the costs and expenses incurred in such action, and shall thereafter be allocated between the parties as follows if Licensee has prosecuted the action: (i) Fifteen Percent (15%) to TSRI and (ii) Eighty Five Percent (85%) to Licensee. If TSRI, rather than Licensee, has prosecuted any such action, then any damages or other recovery net of the parties’ costs and expenses incurred in such infringement action shall be allocated: (i) Fifteen Percent (15%) to Licensee and (ii) Eighty Five Percent (85%) to TSRI. If Licensee and TSRI jointly prosecute any such action, then any damages or other recovery net of the parties’ costs and expenses incurred in such infringement action shall be allocated: (i) Fifty Percent (50%) to Licensee and (ii) Fifty Percent (50%) to TSRI.

9. Indemnity and Insurance .

9.1 Indemnity .

9.1.1 Licensee hereby agrees to indemnify, defend (by counsel reasonably acceptable to TSRI) and hold harmless TSRI and any parent, subsidiary or other affiliated entity and their trustees, directors, officers, employees, scientists, agents, successors, assigns and other representatives (collectively, the “TSRI Indemnitees”) from and against all damages, claims, liabilities, losses and other expenses, including without limitation reasonable attorney’s fees, expert witness fees and costs, whether or not a lawsuit or other proceeding is filed (“TSRI Claim”), that arise out of or relate to (a) Licensee’s or any Sublicensee’s use of any of the Licensed Patent Rights or Licensed Biological Materials, (b) alleged defects or other problems with any of the Licensed Products or Licensed Biological Materials manufactured, sold, distributed or rendered by Licensee or any Sublicensee, including without limitation any personal injuries, death or property damages related thereto, (c) any advertising or other promotion of the Licensed Products or Licensed Biological Materials by Licensee or any Sublicensees, (d) any allegations that the Licensed

Products or Licensed Biological Materials developed, manufactured, sold, distributed or rendered by Licensee or any Sublicensee and/or any trademarks, service marks, logos, symbols, slogans or other materials used in connection with or to market Licensed Products or Licensed Biological Materials violate or infringe upon the trademarks, service marks, trade dress, trade names, copyrights, patents, works of authorship, inventorship rights, trade secrets, database rights, rights under unfair competition laws, rights of publicity, privacy or defamation, or any other intellectual or industrial property rights of any third party, (e) Licensee’s or any Sublicensee’s failure to comply with any applicable laws, rules or regulations, (f) Licensee’s or any Sublicensee’s transactions with third parties or the operation of their respective businesses, and/or (g) the negligent or willful acts or omissions of Licensee or any Sublicensee. Licensee’s indemnity obligation is subject to (i) TSRI promptly notifying Licensee in writing of such TSRI Claim, (ii) Licensee having the sole control of the defense and/or settlement thereof except as provided below, and (iii) TSRI Indemnitee furnishing to Licensee, on request and at Licensee’s expense, all relevant information available to the TSRI Indemnitee and reasonable cooperation for such defense. Licensee shall not enter into any settlement of such TSRI Claims that involve TSRI admitting any liability, paying any money, taking any action that would have an adverse effect on TSRI’s reputation or business or that does not unconditionally release TSRI from all liability without TSRI’s prior written consent. Notwithstanding the above, TSRI Indemnitees, at their sole cost and expense, shall have the right to retain separate independent counsel to assist in defending any such TSRI Claims. In the event Licensee fails to promptly indemnify and defend such Claims and/or pay TSRI Indemnitees’ expenses as provided above, TSRI Indemnitees shall have the right to defend themselves, and in that case, Licensee shall reimburse TSRI Indemnitees for all of their reasonable, actual and documented attorney’s fees, costs and damages incurred in settling or defending such Claims within thirty (30) days of each of Indemnitees’ written requests, which requests shall include such documentation. This indemnity shall be a direct payment obligation and not merely a reimbursement obligation of Licensee to TSRI Indemnitees.

9.2 Insurance . Licensee shall supply copies of certificates to TSRI on any commercial general liability and product liability insurance policies maintained by Licensee, its Affiliates and Sublicensees applicable to the Licensed Products and Licensed Biological Materials.

9.2.1 Prior to the commencement of clinical trials by the Licensee relating to any such Licensed Product or Licensed Biological Material, Licensee shall, at its sole cost and expense, procure and maintain commercial general liability insurance in amounts not less than $1,000,000 per incident and $2,000,000 annual aggregate and naming TSRI or, if permitted by the insurer, the TSRI Indemnitees, as additional insured. Upon commencement of clinical trials by the Licensee relating to any such Licensed Product or Licensed Biological Material, Licensee shall, at its sole cost and expense, procure and maintain commercial general liability insurance in amounts not less than $2,000,000 per incident and $4,000,000 annual aggregate and naming TSRI or, if permitted by the insurer, the TSRI Indemnitees, as additional insured. Upon commencement of commercial distribution or sale of any such Licensed Product or Licensed Biological Material by

Licensee or by a Sublicensee, except for the purpose of seeking or obtaining regulatory approvals or for any clinical or pre-clinical trials or testing (including under third party collaborations), Licensee shall, at its sole cost and expense, procure and maintain commercial general liability insurance in amounts not less than $5,000,000 per incident and $10,000,000 annual aggregate and naming TSRI or, if permitted by the insurer, the TSRI Indemnitees, as additional insured. Such commercial general liability insurance shall provide (i) product liability coverage; (ii) broad form contractual liability coverage for Licensee’s indemnification under this Agreement; and (iii) coverage for TSRI’s litigation costs. If Licensee elects to self insure all or part of the limits described above (including deductibles or retentions which are in excess of $250,000 annual aggregate) such self insurance program must be acceptable to TSRI in its sole discretion. The insurance coverage amounts specified herein or the maintenance of such insurance policies shall not in any way limit Licensee’s indemnity or other liability under this Agreement.

9.2.2 In addition, Licensee, on behalf of itself and its insurance carriers, waives any and all claims and rights of recovery against TSRI and the Indemnitees, including without limitation all rights of subrogation, with respect to either party’s performance under this Agreement or for any loss of or damage to Licensee or its property or the property of others under its control. Licensee’s commercial general liability insurance policy shall also include a waiver of subrogation consistent with this paragraph in favor of TSRI and the Indemnitees. Licensee shall be responsible for obtaining such waiver of subrogation from its insurance carriers. Licensee’s insurance policies shall be primary and not contributory to any insurance carried by its Sublicensees or by TSRI. Upon TSRI’s request, Licensee shall deliver to TSRI copies of insurance certificates or binders that comply with the requirements of this Section 9.

9.2.3 Licensee shall provide TSRI with written notice at least thirty (30) days prior to the cancellation, non renewal or material change in such insurance. If Licensee does not obtain replacement insurance providing comparable coverage within such thirty (30) day period, TSRI shall have the right to terminate this Agreement effective at the end of such thirty (30) day period without notice or any additional waiting periods.

9.2.4 Licensee shall maintain such commercial general liability insurance beyond the expiration or termination of this Agreement during (a) the period that any Licensed Product or Licensed Biological Material relating to, or developed pursuant to, this Agreement is being commercially distributed or sold by Licensee or by a Sublicensee, Affiliate or agent of Licensee; and (b) a reasonable period after the period referred to in Section 9.2.4(a) which in no event shall be less than five (5) years.

9.3 Pre-Challenge Requirements . Licensee will provide written notice to TSRI at least one hundred eighty (180) days prior to instituting or making any Challenges. Licensee will include with such written notice a list of all prior art and a description of the other facts and arguments that supports its contention that any of the Licensed Patent Rights are invalid or unenforceable to enable the parties to attempt in good faith to mutually resolve such issues.

10. Warranty Disclaimer .

10.1 Warranty Disclaimer . EXCEPT AS SPECIFICALLY SET FORTH IN SECTION 7.1 OF THIS AGREEMENT, TSRI MAKES NO WARRANTIES CONCERNING LICENSED PATENT RIGHTS, LICENSED BIOLOGICAL MATERIALS OR ANY OTHER MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR ARISING OUT OF COURSE OF CONDUCT OR TRADE CUSTOM OR USAGE, AND TSRI DISCLAIMS ALL SUCH EXPRESS OR IMPLIED WARRANTIES. EXCEPT AS SET FORTH IN THIS AGREEMENT, TSRI MAKES NO WARRANTY OR REPRESENTATION AS TO THE VALIDITY OR SCOPE OF LICENSED PATENT RIGHTS, OR THAT ANY LICENSED PRODUCT OR LICENSED BIOLOGICAL MATERIAL WILL BE FREE FROM AN INFRINGEMENT ON PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES ARE IN ANY WAY INFRINGING UPON ANY LICENSED PATENT RIGHTS OR LICENSED BIOLOGICAL MATERIALS COVERED BY THIS AGREEMENT. FURTHER, TSRI HAS MADE NO INVESTIGATION AND MAKES NO REPRESENTATION THAT THE LICENSED PATENT RIGHTS OR LICENSED BIOLOGICAL MATERIALS ARE SUITABLE FOR LICENSEE’S PURPOSES.

10.2 IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT LIMITATION DAMAGES FOR LOSS OF PROFITS OR EXPECTED SAVINGS OR OTHER ECONOMIC LOSSES, OR FOR INJURY TO PERSONS OR PROPERTY) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER. TSRI’S AGGREGATE LIABILITY, IF ANY, FOR ALL DAMAGES OF ANY KIND RELATING TO THIS AGREEMENT OR ITS SUBJECT MATTER SHALL NOT EXCEED THE AMOUNT PAID BY LICENSEE TO TSRI UNDER THIS AGREEMENT. THE FOREGOING EXCLUSIONS AND LIMITATIONS SHALL APPLY TO ALL CLAIMS AND ACTIONS OF ANY KIND AND ON ANY THEORY OF LIABILITY, WHETHER BASED ON CONTRACT, TORT (INCLUDING, BUT NOT LIMITED TO NEGLIGENCE OR STRICT LIABILITY), OR ANY OTHER GROUNDS, AND REGARDLESS OF WHETHER TSRI HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. THE PARTIES FURTHER AGREE THAT EACH WARRANTY DISCLAIMER, EXCLUSION OF DAMAGES OR OTHER LIMITATION OF LIABILITY HEREIN IS INTENDED TO BE SEVERABLE AND INDEPENDENT OF THE OTHER PROVISIONS SINCE THEY EACH REPRESENT SEPARATE ELEMENTS OF RISK ALLOCATION BETWEEN THE PARTIES.

11. Confidentiality and Publication .

11.1 Treatment of Confidential Information . The parties agree that during the term of this Agreement, and for a period of five (5) years after this Agreement terminates or expires, a party receiving Confidential Information of the other party will (a) maintain in confidence such Confidential Information to the same extent such party maintains its own proprietary information; (b) not disclose such Confidential Information to any third party without prior written consent of the other party; and (c) not use such Confidential Information for any purpose except those permitted by this Agreement.

11.2 Publications . Each party agrees that the other party shall have a right to publish in accordance with its general policies, and that this Agreement shall not restrict, in any fashion, either party’s right to publish. Each party shall take reasonable steps to provide the other party with a copy of any manuscript related to the Licensed Patent Rights prior to publication. The parties agree to follow standard scientific practices with respect to authorship and the provision of materials on any such publication.

11.3 Publicity . Except as otherwise provided herein or required by law, no party shall originate any publication, news release or other public announcement, written or oral, whether in the public press, stockholders’ reports, or otherwise, relating to this Agreement or to any sublicense hereunder, or to the performance hereunder or under any such sublicense agreements, without the prior written approval of the other party, which approval shall not be unreasonably withheld. Scientific publications published in accordance with Section 11.2 of this Agreement shall not be construed as publicity governed by this Section 11.3. Notwithstanding anything herein to the contrary, Licensee (or any successor or parent company thereof) shall be permitted to file this Agreement publicly with the Securities and Exchange Commission and any national securities exchange, as well as the public announcement in a form of a press release of such official fillings, without the prior consent of TSRI and shall be permitted to include a summary of the material terms thereof in any filing therewith. Notwithstanding the foregoing, any such filing or announcement shall be redacted to prevent disclosure of any confidential information to the maximum extent permissible by the applicable regulatory agency. In addition, Licensee may disclose the terms of this Agreement to a third party under a duty of confidentiality in connection with the potential or actual financing or sale of any portion of Licensee’s business related to this Agreement.

12. Term and Termination .

12.1 Term . Unless terminated sooner in accordance with the terms set forth herein, this Agreement, and the license granted hereunder, shall terminate as provided in Section 3.6 hereof.

12.2 Termination Upon Mutual Agreement . This Agreement may be terminated by mutual written consent of both parties.

12.3 Termination by TSRI . TSRI may terminate this Agreement as follows:

(a) If Licensee does not make an undisputed payment due hereunder and fails to cure such undisputed non-payment (including the payment of interest in accordance with Section 14.2 hereof) within thirty (30) days after the date of notice in writing of such non-payment by TSRI;

(b) If Licensee defaults in its indemnification and insurance obligations under Section 9 and does not cure such default within thirty (30) days after the date of notice in writing of such default by TSRI to Licensee;

(c) If, at any time after two (2) years from the date of this Agreement, TSRI determines that the Agreement should be terminated pursuant to Section 6.2;

(d) If Licensee shall become insolvent, shall make an assignment for the benefit of creditors, or shall have a petition in bankruptcy filed for or against it. Such termination shall be effective immediately upon TSRI giving written notice to Licensee;

(e) If an examination by TSRI’s accountant pursuant to Section 6.7 shows a second occurrence of an underreporting or underpayment by Licensee in excess of twenty percent (20%) for any twelve (12) month period;

(f) If Licensee is convicted of a felony relating to the manufacture, use or sale of Licensed Products or Licensed Biological Materials; or

(g) Except as provided in subparagraphs (a) – (f) above, if Licensee defaults in the performance of any material obligation under this Agreement and the default has not been remedied within sixty (60) days after the date of notice in writing of such default by TSRI to Licensee;

12.4 Termination by Licensee . Licensee may terminate this Agreement by giving sixty (60) days advance written notice of termination to TSRI.

12.5 Licensed Product Data . Should this Agreement be terminated by either party prior to the expiration of the license term, Licensee hereby grants to TSRI a royalty-free and fully paid up non-exclusive license to use all animal and clinical data previously collected and owned or controlled by Licensee in connection with the Licensed Patent Rights for use with exercising the Licensed Patent Rights and to cross-reference such Licensed Product Data in any FDA filing(s).

12.6 Rights Upon Expiration . Neither party shall have any further rights or obligations upon the expiration of this Agreement upon its regularly scheduled expiration date other than the obligation of Licensee to make any and all reports and payments for the final quarterly period. Sections 2.4, 2.5, 6.3, 6.4, 6.5, 6.6, 6.7, 8.3, 8.4, 9.1, 9.2, 10, 11, 12.5,

12.6, 12.9, 13.2 and 14 and all defined terms used therein shall survive the expiration of this Agreement.

12.7 Rights Upon Termination . Notwithstanding any other provision of this Agreement, upon any termination of this Agreement prior to the regularly scheduled expiration date of this Agreement, the licenses granted hereunder shall terminate and revert to TSRI, and all sublicenses granted by Licensee shall also automatically transfer to TSRI. Except as otherwise provided in Section 12.7 of this Agreement with respect to inventory and work in progress, upon such termination, Licensee shall have no further right to develop, manufacture or market any Licensed Product or Licensed Biological Material, or to otherwise use any Licensed Patent Rights or any Licensed Biological Materials. Upon any such termination, Licensee shall promptly return or destroy all materials, samples, documents, information, and other materials which embody or disclose Licensed Patent Rights or any Licensed Biological Materials; provided, however, that Licensee shall retain one full set of aforementioned items for archive purposes and shall not be obligated to provide TSRI with proprietary information which Licensee can show that it independently developed, except for Licensed Product Data as required under Section 12.4. Any such termination shall not relieve either party from any obligations accrued to the date of such termination. Sections 2.4, 2.5, 6.3, 6.4, 6.5, 6.6, 6.7, 8.3, 8.4, 9.1, 9.2, 10, 11, 12.5, 12.6, 12.7, 12.9, 13.2 and 14 and all defined terms used therein shall survive the termination of this Agreement for any reason.

12.8 Work in Progress . Upon any such early termination of the license granted hereunder in accordance with this Agreement, Licensee shall be entitled to finish any work in progress and to sell any completed inventory of a Licensed Product covered by such license which remain on hand as of the date of the termination, so long as Licensee sells such inventory in the normal course of business and at regular selling prices and pays to TSRI the royalties applicable to said subsequent sales in accordance with the terms and conditions as set forth in this Agreement, provided that no such sales shall be permitted after the expiration of six (6) months after the date of termination in accordance with the terms hereof.

12.9 Final Royalty Report . In the event of the termination or expiration of this Agreement, Licensee shall submit a final report to TSRI within sixty (60) days of such termination or expiration, and any payments due TSRI and unreimbursed patent expenses invoiced by TSRI shall become immediately payable.

13. Assignment; Successors .

13.1 Assignment . Any and all assignments of this Agreement or any rights granted hereunder by Licensee without the prior written consent of TSRI are void, except that Licensee has the right to assign this Agreement to any entity (or a parent company thereof) that acquires all or substantially all of Licensee’s business related to this Agreement, whether by sale of assets, sale of stock, merger, consolidation, joint venture or otherwise, without the consent of TSRI.

13.2 Binding Upon Successors and Assigns . Subject to the limitations on assignment herein, this Agreement shall be binding upon and inure to the benefit of any successors in interest and assigns of TSRI and Licensee (and any parent company of such successors). Any such successor or assignee of Licensee’s interest shall expressly assume in writing the performance of all the terms and conditions of this Agreement to be performed by Licensee and such written assumption shall be delivered to TSRI as a condition to TSRI’s agreement to consent to any such assignment if TSRI’s consent is required hereunder.

14. General Provisions .

14.1 Independent Contractors . The relationship between TSRI and Licensee is that of independent contractors. TSRI and Licensee are not joint venturers, partners, principal and agent, master and servant, employer or employee, and have no other relationship other than independent contracting parties. TSRI and Licensee shall have no power to bind or obligate each other in any manner, other than as is expressly set forth in this Agreement.

14.2 Late Payments . Late payments of any and all payments due hereunder shall be subject to a charge of One Percent (1.0%) per month or the highest rate permitted by law, whichever is lower, pro rated for the portion of any month in which an undisputed payment is late.

14.3 Governmental Approvals and Marketing of Licensed Products . Licensee shall be responsible for obtaining all necessary governmental approvals for the development, production, distribution, performance, sale and use of any Licensed Product or Licensed Biological Material, at Licensee’s expense, including, without limitation, any safety studies. Licensee shall have sole responsibility for any warning labels, packaging and instructions as to the use of Licensed Products and for the quality control for any Licensed Products.

14.4 Patent Marking . To the extent required by applicable law, Licensee shall mark all Licensed Products or their containers in accordance with the applicable patent marking laws.

14.5 No Use of Name . The use of the name “The Scripps Research Institute,” “Scripps,” “TSRI” or any variation thereof in connection with the advertising, sale or performance of Licensed Products or Licensed Biological Materials is expressly prohibited.

14.6 U.S. Manufacture . To the extent required, Licensee agrees to abide by the Preference for United States Industry as set forth in 37 CFR 401.14 (I) and exemptions and exceptions thereof, each as may be amended or restated from time to time.

14.7 Foreign Registration . Licensee agrees to register this Agreement with any foreign governmental agency which requires such registration, and Licensee shall pay all costs and legal fees in connection therewith. In addition, Licensee shall ensure that all

foreign laws affecting this Agreement or the sale of Licensed Products or Licensed Biological Materials are satisfied.

14.8 Use of Biological Materials . Licensee agrees that its use of any Licensed Biological Materials shall comply with all applicable statutes, regulations, and guidelines. Licensee agrees not to use the Licensed Biological Materials for research involving human subjects or clinical trials in the United States without complying with 21 CFR 50 and 45 CFR 46, each as may be amended or restated from time to time. Licensee agrees not to use the Licensed Biological Materials for research involving human subjects or clinical trials outside of the United States without complying with the applicable regulations of the appropriate national control authorities.

14.9 Arbitration . Any controversy or claim arising out of or relating to this Agreement, or the breach thereof shall be settled by binding confidential arbitration in accordance with the Commercial Arbitration Rules of the AAA, and the procedures set forth below. In the event of any inconsistency between the Rules of AAA and the procedures set forth below, the procedures set forth below shall control. Judgment upon the award rendered by the arbitrators may be enforced in any court having jurisdiction thereof.

14.9.1 Location . The location of the arbitration shall be in the County of San Diego. TSRI and Licensee hereby irrevocably submit to the exclusive jurisdiction and venue of the AAA arbitration panel selected by the parties and located in San Diego County, California for any dispute regarding this Agreement, and to the exclusive jurisdiction and venue of the federal and state courts located in San Diego County, California for any action or proceeding to enforce an arbitration award or as otherwise provided in Section 14.9.5 below, and waive any right to contest or otherwise object to such jurisdiction or venue.

14.9.2 Selection of Arbitrators . The arbitration shall be conducted by a panel of three neutral arbitrators who are independent and disinterested with respect to the parties, this Agreement, and the outcome of the arbitration. Each party shall appoint one neutral arbitrator, and these two arbitrators so selected by the parties shall then select the third arbitrator, and all arbitrators must have at least ten (10) years experience in mediating or arbitrating cases regarding the same or substantially similar subject matter as the dispute between Licensee and TSRI. If one party has given written notice to the other party as to the identity of the arbitrator appointed by the party, and the party thereafter makes a written demand on the other party to appoint its designated arbitrator within the next ten (10) days, and the other party fails to appoint its designated arbitrator within ten (10) days after receiving said written demand, then the arbitrator who has already been designated shall appoint the other two arbitrators.

14.9.3 Discovery . The arbitrators shall decide any disputes and shall control the process concerning these pre-hearing discovery matters. Pursuant to the Rules of AAA, the parties may subpoena witnesses and documents for presentation at the hearing.

14.9.4 Case Management . Prompt resolution of any dispute is important to both parties; and the parties agree that the arbitration of any dispute shall be conducted expeditiously. The arbitrators are instructed and directed to assume case management initiative and control over the arbitration process (including scheduling of events, pre-hearing discovery and activities, and the conduct of the hearing), in order to complete the arbitration as expeditiously as is reasonably practical for obtaining a just resolution of the dispute.

14.9.5 Remedies . The arbitrators may grant any legal or equitable remedy or relief that the arbitrators deem just and equitable, to the same extent that remedies or relief could be granted by a state or federal court, provided however, that no punitive damages may be awarded. No court action shall be maintained seeking punitive damages. The decision of any two of the three arbitrators appointed shall be binding upon the parties. Notwithstanding anything to the contrary in this Agreement, prior to or while an arbitration proceeding is pending, either party has the right to seek and obtain injunctive and other equitable relief from a court of competent jurisdiction to enforce that party’s rights hereunder.

14.9.6 Expenses . The expenses of the arbitration, including the arbitrators’ fees, expert witness fees, and attorney’s fees, may be awarded to the prevailing party, in the discretion of the arbitrators, or may be apportioned between the parties in any manner deemed appropriate by the arbitrators. Unless and until the arbitrators decide that one party is to pay for all (or a share) of such expenses, both parties shall share equally in the payment of the arbitrators’ fees as and when billed by the arbitrators.

14.9.7 Confidentiality . Except as set forth below, and as necessary to obtain or enforce a judgment upon any arbitration award, the parties shall keep confidential the fact of the arbitration, the dispute being arbitrated, and the decision of the arbitrators. Notwithstanding the foregoing, the parties may disclose information about the arbitration to persons who have a need to know, such as directors, trustees, management employees, witnesses, experts, investors, attorneys, lenders, insurers, and others who may be directly affected. Additionally, if a party has stock which is publicly traded, the party may make such disclosures as required by applicable securities laws, rules and regulations.

14.10 Entire Agreement; Modification . This Agreement and all of the attached Exhibits set forth the entire agreement and understanding between the parties as to the subject matter hereof, and supersede all prior or contemporaneous agreements or understandings, whether oral or written. There shall be no amendments or modifications to this Agreement, except by a written document which is signed by both parties.

14.11 California Law . This Agreement shall be construed and enforced in accordance with the laws of the State of California without regard to its conflicts or choice of laws principles.

14.12 Headings . The headings for each article and section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular article or section.

14.13 Severability . Should any one or more of the provisions of this Agreement be held invalid or unenforceable by a court of competent jurisdiction, it shall be considered severed from this Agreement and shall not serve to invalidate the remaining provisions thereof. The parties shall make a good faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by them when entering this Agreement may be realized.

14.14 No Waiver . Any delay in enforcing a party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such party’s rights to the future enforcement of its rights under this Agreement, excepting only as to an express written and signed waiver as to a particular matter for a particular period of time.

14.15 Name . Whenever there has been an assignment by Licensee as permitted by this Agreement, the term “Licensee” as used in this Agreement shall also include and refer to, if appropriate, such assignee.

14.16 Attorneys’ Fees . In the event of a dispute between the parties hereto or in the event of any default hereunder, the party prevailing in the resolution of any such dispute or default shall be entitled to recover its reasonable attorneys’ fees and other costs incurred in connection with resolving such dispute or default.

14.17 Notices . Any notices required by this Agreement shall be in writing, shall specifically refer to this Agreement and shall be sent by registered or certified airmail, postage prepaid, or by facsimile, or by overnight courier, postage prepaid and shall be forwarded to the respective addresses set forth below unless subsequently changed by written notice to the other party:

For TSRI:

The Scripps Research Institute

10550 North Torrey Pines Road, TPC-9

La Jolla, California 92037

Attention: Director, Technology Development

Fax No.: (858) 784 9910

with a copy to:

The Scripps Research Institute

10550 North Torrey Pines Road, TPC-8

La Jolla, California 92037

Attention: Chief Business Counsel

Fax No.: (858) 784 9399

For Licensee:

Sorrento Therapeutics, Inc.

6042 Cornerstone Ct., Suite B

San Diego, CA 92121

Attention: Chief Executive Officer

Fax No.: (858) 210-3759

with a copy (which shall not constitute notice to Licensee) to:

Paul, Hastings, Janofsky & Walker LLP

4747 Executive Drive, 12th Floor

San Diego, CA 92121

Attention: Jeffrey T. Hartlin, Esq.

Fax No.: (858) 458-3122

Notices shall be deemed delivered upon the earlier of (a) when received; (b) three (3) days after deposit into the U.S. mail; (c) the date notice is sent via facsimile; or (d) the day immediately following delivery to an overnight courier guaranteeing next-day delivery (except Sunday and holidays).

14.18 Compliance with U.S. Laws . Nothing contained in this Agreement shall require or permit TSRI or Licensee to do any act inconsistent with the requirements of any United States law, regulation or executive order as the same may be in effect from time to time.

—Signatures appear on the following page—

IN WITNESS WHEREOF, the parties have executed this Agreement by their duly authorized representatives as of the date set forth above.


TSRI:		LICENSEE:

THE SCRIPPS RESEARCH INSTITUTE		SORRENTO THERAPEUTICS, INC.

By:	/s/ Thomas E. Northrup	By:	/s/ Antonius Schuh
Title:	Thomas E. Northrup, Ph.D., J.D.	Title:	Antonius Schuh, CEO
	Chief Business Counsel
	The Scripps Research Institute

EXHIBIT A

LICENSED BIOLOGICAL MATERIALS

[***…***]

1. [***…***]


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2. [***…***]

•

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		A-1		*Confidential Treatment Requested

•

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•

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•

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3. [***…***]


		A-2		*Confidential Treatment Requested

EXHIBIT B

LICENSED PATENT RIGHTS


[*…*]	[*…*]	[*…*]
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		B-1		*Confidential Treatment Requested

EXHIBIT C

THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION THEREOF MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.

COMMON STOCK WARRANT

SORRENTO THERAPEUTICS, INC.


Warrant Shares: [*…*]		Issuance Date: January 8, 2010

T HIS IS TO C ERTIFY that, for value received and subject to the provisions hereinafter set forth, T HE S CRIPPS R ESEARCH I NSTITUTE , a California nonprofit public benefit corporation ( “TSRI” ), is entitled to purchase from S ORRENTO T HERAPEUTICS , I NC . , a Delaware corporation (the “Company” ), the Number of Warrant Shares (as hereinafter defined) of common stock of the Company, par value $0.0001 per share (the “Common Stock” ), in accordance with Section 2 hereof, at the per share exercise price of $ [***…***] (the “Exercise Price” ), payable as provided herein, subject to the provisions and adjustments and on the terms and conditions hereinafter set forth. This Common Stock Warrant (this “Warrant” ) is being issued pursuant to that certain License Agreement, dated as of January 8, 2010 by and between the Company and TSRI.

1. Definitions. In addition to the terms defined elsewhere in this Warrant, the following terms have the following respective meanings:

(a) “Company Sale” shall mean the sale of all or substantially all of the assets of the Company to another corporation or entity, or the merger or consolidation of the Company into or with another corporation or entity, with the result that upon conclusion of the transaction less than fifty-one percent (51%) of the outstanding securities entitled to vote generally in the election of managers or directors or other capital interests of the acquiring corporation or entity is owned, directly or indirectly, by the stockholders of the Company as of immediately prior to such transaction.

(b) “Number of Warrant Shares” shall mean, at the time of any determination thereof (i) if no adjustments have theretofore been made pursuant to the provisions of Section 6 hereof, the Original Number of Warrant Shares, and (ii) if any one or more such adjustments have been so made, the amount to which the Original Number of Warrant Shares shall have been so adjusted pursuant to the terms of this Warrant, in each case reduced


		C-1		*Confidential Treatment Requested

appropriately by the number of shares of Common Stock theretofore purchased pursuant to the exercise of this Warrant.

(c) “Original Number of Warrant Shares” shall mean [***…***] fully paid and nonassessable shares of Common Stock (as adjusted, if applicable, pursuant to the terms hereof).

(d) “Principal Market” means The New York Stock Exchange, Inc., the American Stock Exchange, The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market, the OTC Bulletin Board or Pink OTC Markets Inc., or any successor national securities exchange to the foregoing.

(e) “Termination Date” shall mean the earlier to occur of: (i) the closing of a Company Sale; and (ii) the close of business on [***…***].

(f) “Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the stock is not trading on the Principal Market, any day on which the New York Stock Exchange is open for trading; provided that “Trading Day” shall not include any day on which the Common Stock are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).

(g) “Warrant Shares” shall mean shares of Common Stock purchased or purchasable by TSRI upon exercise of this Warrant.

2. Exercise of Warrant.

(a) Mechanics.

(i) The purchase rights represented by this Warrant are exercisable by TSRI in whole or in part, at any time on or before the Termination Date, or from time to time, by delivery of the following at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to TSRI at the address of TSRI appearing on the books of the Company): (a) this Warrant; (b) the Notice of Exercise attached as E XHIBIT A hereto (the “Notice of Exercise” ) completed and executed on behalf of TSRI; and (c) payment of the applicable Exercise Price for the shares being exercised.

(ii) [***…***]


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		C-2		*Confidential Treatment Requested


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(b) Certificates; Escrow.

(i) As promptly as practicable after the delivery to the Company of a properly completed and executed Notice of Exercise, the surrender of this Warrant to the Company and either payment to the Company of the aggregate Exercise Price as set forth above or designating on the Notice of Exercise that TSRI elects to use a Cashless Exercise, at TSRI’s sole option, a certificate for shares purchased hereunder shall be transmitted by the Company or by the transfer agent of the Company to TSRI by, upon TSRI’s instructions, crediting the account of TSRI’s designated brokerage account or otherwise by physical delivery to the address of TSRI specified on the Notice of Exercise; and

(ii) In the event that this Warrant is exercised in part, the Company will execute and deliver a new warrant of like tenor exercisable for the Original Number of Warrant Shares less the aggregate Number of Warrant Shares theretofore purchased pursuant to the exercise of this Warrant; provided, however, that this Warrant and all rights and options hereunder shall expire and be void as of the Termination Date.

3. [***…***]


		C-3		*Confidential Treatment Requested

4. Reservation of Stock. The Company covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and in reserve, and available for issuance, free of any preemptive rights, rights of first refusal or similar rights, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant in whole.

5. Compliance with Securities Act .

(a) TSRI, by acceptance of this Warrant, agrees that this Warrant and the Warrant Shares to be purchased upon exercise hereof are being acquired for investment for its own account and that TSRI will not offer, sell or otherwise transfer any Warrant Shares to be issued upon exercise hereof, in whole or in part, except under circumstances that will not result in a violation of the Securities Act or any state securities laws. The Warrant Shares shall be stamped or imprinted with legends in substantially the following forms:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT AND, IF REQUESTED BY THE COMPANY IN CONNECTION WITH SUCH A DISPOSITION PURSUANT TO AN EXEMPTION.”

(b) By acceptance of this Warrant, TSRI specifically represents and warrants to the Company as of the Issuance Date as follows:

(i) TSRI believes it has received all the information it considers necessary or appropriate for deciding whether to acquire this Warrant. TSRI further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties and financial condition of the Company.

(ii) TSRI understands that this Warrant is, and the Warrant Shares will be upon issuance, “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, TSRI represents that it is familiar with Rule 144 promulgated under the Securities Act, and understands the resale limitations imposed thereby and by the Securities Act.

(iii) TSRI (a) is an “accredited investor” as defined in Regulation D under the Securities Act, (b) can bear the economic risk of its investment in the Warrant and the Warrant Shares, and (c) has such knowledge and experience in financial or business matters that

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it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares.

(iv) This Warrant and the Warrant Shares are being acquired for investment for TSRI’s own account, not as a nominee or agent for any other person, and without a view to the distribution of this Warrant or the Warrant Shares or any interest therein in violation of the Securities Act, and neither this Warrant nor the Warrant Shares will be disposed of in contravention of the Securities Act or any applicable state securities laws.

(v) TSRI has reviewed with its own tax advisors the federal, state and local tax consequences of TSRI’s investment in this Warrant and the Warrant Shares. With respect to such matters, TSRI relies solely on such tax advisors and not on any statements or representations of the Company or its agents, written or oral. TSRI understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of TSRI’s investment in this Warrant and the Warrant Shares.

(vi) TSRI has had the opportunity to consult with its own legal counsel in connection with TSRI’s investment in this Warrant and the Warrant Shares. TSRI acknowledges that it is relying solely on its own legal counsel and not on the Company or its agents for legal advice with respect to such matters.

6. Stock Dividends, Subdivisions and Combinations. In the event that after the initial date of issuance of this Warrant the Company shall:

(a) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock or issue a stock dividend to all the holders of Common Stock; or

(b) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock;

then (y) the Number of Warrant Shares shall be adjusted to that Number of Warrant Shares determined by multiplying the Number of Warrant Shares that could be purchased hereunder immediately prior to such event by a fraction (A) the numerator of which shall be the total number of outstanding shares of Common Stock immediately after such event and (B) the denominator of which shall be the total number of outstanding shares of Common Stock immediately prior to such event and (z) the Exercise Price shall be adjusted to equal (i) the Exercise Price in effect immediately prior to such event multiplied by (ii) the quotient obtained by dividing (I) the Number of Warrant Shares as of immediately prior to such event by (II) the Number of Warrant Shares immediately after such adjustment (as calculated under clause (y) hereof). Whenever the Number of Warrant Shares or the Exercise Price is adjusted as provided herein, the Company shall provide written notice to TSRI explaining such adjustments and the calculations used to reach such adjustments.

7. Notice of Extraordinary Dividends. If the Board of Directors of the Company shall declare any dividend or other distribution on its Common Stock except out of earned surplus or by way of a stock dividend payable on its Common Stock, the Company shall mail notice thereof to TSRI not less than fifteen (15) days prior to the record date fixed for determining stockholders entitled to participate in such dividend or other distribution and TSRI

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shall not participate in such dividend or other distribution or be entitled to any rights on account or as a result thereof unless and to the extent the Warrant is exercised prior to such record date.

8. Fractional Shares. Fractional shares shall not be issued upon the exercise of this Warrant but in any case where TSRI would, except for the provisions of this Section 8, be entitled under the terms hereof to receive a fractional share upon the complete exercise of this Warrant, the Company shall, upon the exercise of this Warrant for the largest number of whole shares then called for, pay a sum in cash equal to the excess of the value of such fractional share (determined based on the closing price of the Common Stock as reported on the Principal Market or, if the Common Stock is not listed on the Principal Market, determined by the Company’s Board of Directors in good faith, in any case as of the trading day immediately prior to the date of such exercise) over the proportional part of the Exercise Price represented by such fractional share.

9. Fully Paid Stock; Authority; Taxes. The Company covenants and agrees that the shares of Common Stock issued upon exercise of this Warrant in accordance with its terms shall, at the time of such delivery, be validly issued and outstanding and be fully paid and nonassessable. The Company represents and warrants that this Warrant has been duly authorized by all necessary corporate action, has been duly executed and delivered, is a legal and binding obligation of the Company and the Company has all requisite corporate power and authority to issue this Warrant and to perform all of its obligations hereunder. TSRI covenants and agrees that it shall pay when due and payable any and all federal and state taxes (other than income taxes) that may be payable in respect of this Warrant or any Common Stock or certificates issued upon the exercise of this Warrant in accordance with its terms.

10. Restriction on Transferability of Warrant. In addition to any other limitation on transfer created by applicable securities laws, this Warrant is not transferable.

11. Noncircumvention . The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and not take any actions that would impair TSRI’s rights under this Warrant.

12. Mutilated, Lost, Stolen or Destroyed Warrant. In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue a new Warrant of like date, tenor and denomination and deliver the same in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant, or in lieu of any Warrant lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of such Warrant, and upon receipt of indemnity in favor of the Company that is satisfactory to the Company.

13. Warrant Holder Not Stockholder. This Warrant does not confer upon TSRI any right to vote or to consent as a stockholder of the Company, as such, in respect of any matters whatsoever, or any other rights as a stockholder, prior to the exercise of this Warrant as hereinbefore provided.

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14. Severability. Should any part of this Warrant for any reason be declared invalid, such decision shall not affect the validity of any remaining portion, which remaining portion shall remain in full force and effect as if this Warrant had been executed with the invalid portion thereof eliminated, and it is hereby declared the intention of the parties hereto that they would have executed and accepted the remaining portion of this Warrant without including therein any such part, parts or portion which may, for any reason, be hereafter declared invalid.

15. Notices. Any notice or other communication required or permitted to be delivered to either party shall be in writing and shall be deemed properly delivered, given and received (a) when received if hand delivered, (b) on confirmation by sender of receipt if sent by facsimile, or (c) on the first business day after being sent by registered overnight mail, return receipt requested, by overnight courier or by overnight express delivery service, to the address set forth beneath the name of such party below (or to such other address as such party shall have specified in a written notice given to the other parties hereto):

(i)

if to the Company:

C / O S ORRENTO T HERAPEUTICS , I NC .

6042 Cornerstone Ct., West, Suite B

San Diego, CA 92121

Attn: Chief Executive Officer

Fax: (858) 210-3759

with a copy to (which shall not constitute notice to the Company) :

P AUL , H ASTINGS , J ANOFSKY & W ALKER LLP

55 Second Street, 24th Floor

San Francisco, CA 94105

Attn: Jeffrey T. Hartlin, Esq.

Fax: (415) 856-7124

(ii)

if to TSRI:

The Scripps Research Institute

10550 North Torrey Pines Road, TPC-8

La Jolla, California 92037

Attn: Chief Business Counsel

Fax: (858) 784-9399

16. Governing Law. This Warrant shall be governed by and construed and enforced in accordance with the laws of the State of California, without giving effect to any choice of law or conflict of law provisions.

17. Company Sale. The Company shall deliver written notice of any Company Sale to TSRI at least twenty (20) days prior to the consummation of such Company Sale.

18. Entire Agreement. This Agreement, including Exhibit A, constitutes the entire agreement between the parties regarding the subject matter hereof and supersedes all prior or

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contemporaneous understandings between the parties, whether oral or written, regarding this subject matter. This Agreement can only be modified or amended by a written document signed by the Company and TSRI.

19. Financial Reports. In the event the Common Stock is no longer being traded on the Principal Market, from and after that time and until the earlier of (i) the Termination Date, (ii) the complete exercise of this Warrant, or (iii) the time when the Common Stock resumes being traded on the Principal Market, the Company shall deliver to TSRI within 150 days after the close of each fiscal year of the Company an audited financial statement, including an audited balance sheet and statement of changes in financial position at and as of the end of such fiscal year and an audited statement of income for such fiscal year (the “Financial Statements” ). Unless and until the Financial Statements are made publicly available by the Company through one or more filings with the Securities and Exchange Commission or otherwise, TSRI shall maintain the confidentiality of the information contained in such Financial Statements delivered to TSRI.

[R EMAINDER OF P AGE I NTENTIONALLY L EFT B LANK ]

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I N W ITNESS W HEREOF , S ORRENTO T HERAPEUTICS , I NC . has caused this Common Stock Warrant to be signed by a duly authorized officer as of the Issuance Date.


SORRENTO THERAPEUTICS, I NC .

By:
Name:		Antonius Schuh, Ph.D.
Its:		Chief Executive Officer

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E XHIBIT A

NOTICE OF EXERCISE

(1) The undersigned hereby elects to exercise the attached Common Stock Warrant for a total of shares of Common Stock of S ORRENTO T HERAPEUTICS , I NC .

(2) Payment for the Warrant Shares shall be as follows (check one):

[ ] Payment of the Exercise Price therefor is included herewith.

[ ] The undersigned elects to purchase the Warrant Shares with a Cashless Exercise pursuant to Section 2(a)(ii) of the Warrant.

(3) Please issue a certificate or certificates representing said shares of Common Stock in the name of T HE S CRIPPS R ESEARCH I NSTITUTE by (check one):

[ ]

physical delivery of a certificate to: The Scripps Research Institute at 10550 North Torrey Pines Road, TPC-8, La Jolla, California 92037.

[ ]

arranging for the credit of such shares to The Scripps Research Institute’s following prime brokerage account:

(4) Please issue and deliver a new warrant for the unexercised portion (if applicable) of the attached Warrant in the name of T HE S CRIPPS R ESEARCH I NSTITUTE .

T HE S CRIPPS R ESEARCH I NSTITUTE


By:
Name:
Its:

Date:

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EXHIBIT D BENCHMARKS


	[*…*]	[*…*]

1)	[*…*]	[*…*]

2)	[*…*]	[*…*]

3)	[*…*]	[*…*]

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		D-1		*Confidential Treatment Requested

EXHIBIT E

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				*Confidential Treatment Requested

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Antonius Schuh, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Sorrento Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Richard Glenn Vincent, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Sorrento Therapeutics, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 14, 2010


By:		/s/ Richard Glenn Vincent
		Richard Glenn Vincent
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Exhibit 32.1

CERTIFICATIONS OF

PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Antonius Schuh, Principal executive officer of Sorrento Therapeutics, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to my knowledge:

1. The Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2010 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

I, Richard Glenn Vincent, Principal financial and accounting officer of Sorrento Therapeutics, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to my knowledge:

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of these certifications has been provided to Sorrento Therapeutics, Inc. and will be retained by Sorrento Therapeutics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of Sorrento Therapeutics, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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